volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 maría inés barbero universidad de buenos aires (argentina) https://orcid.org/0000-0002-1581-1856 javier vidal olivares universidad de alicante (españa) https://orcid.org/0000-0001-6661-7925 latin american small and medium-sized enterprises: a historical perspective abstract this special issue seeks to appreciate the long-term study of smes as key players in the latin american economies, with contributions on six countries: mexico, brazil, argentina, ecuador, bolivia, and chile. this is a representative sample of the latin american subcontinent’s diversity when it comes to economy size, population, and inequality index. the articles presented spot key topics in the study of latin american smes. this introduction focus on three central issues that arise from those articles: the role of public policies in sme emergence and development, the strategies pursued by these firms to adapt to environment changes, and the links between informality and sme creation. keywords: latin america, small and medium enterprises corresponding author: e-mail: jvidal@ua.es received 4 december 2021 accepted 15 december 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-1581-1856 https://orcid.org/0000-0001-6661-7925 mailto:jvidal@ua.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 small and medium-sized enterprises (henceforth, smes) are key players in latin american economies because of their share in the total number of companies in the region as well as their contribution to job creation. including microenterprises, smes account for over 90% of all latin america’s businesses and provide jobs for nearly 67% of the region’s working population (dini and stumpo 2018). in turn, their contribution to the gdp is relatively low, as, on average, their productivity levels lag far behind large companies’, with differences much larger than those found in oecd countries. their output largely caters to domestic markets, and, as a result, a significant share of the region’s population and economy depends on their operations. at the same time, unlike their counterparts in more developed countries, latin american smes account for a small share of exports, typically around 10%, because of their lackluster competitiveness (ferraro and stumpo 2010). despite these shared general traits, it should be noted that latin america’s micro, small, and medium-sized enterprises (msmes) make up a very diverse group that spans from selfemployment, informal microenterprises to highly efficient innovative companies with exporting capabilities. while these differences become apparent inside every one of its countries, it should be underscored that latin america does not constitute a single unit: rather, it is a set of 20 countries with some shared features—like the spanish colonization or an integration to world markets based on commodities’ exports—and multiple specificities that they show in their track records and their performances, as well as in their economies, societies, and institutions. over the past thirty years, research studies and academic papers on latin american smes have grown in number, alongside promotion policies rolled out by governments, with financial and http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 technical support from international economic agencies (ferraro and stumpo 2010). the increasing interest sparked by these businesses is not only due to their relevance in regional economies, but also to their role as job creators against a backdrop of rising unemployment caused by the pro-market reforms carried out by most latin american countries since the mid1980s. while latin american business history has consolidated as an academic discipline over the past three decades, studies on smes from a historical perspective have proven infrequent and significantly fewer than those focusing on large companies, largely due to the difficulties to access sources and the fact that the information is greatly scattered (donato and barbero 2009). this special issue of jesb partly intends to fill a historiographical gap, but it mainly seeks to appreciate the long-term study of smes as key players in latin american economies with contributions on six countries: mexico, brazil, argentina, ecuador, bolivia, and chile. this is a representative sample of the latin american subcontinent’s diversity when it comes to economy size, population, and inequality index, as shown in table 1 below. table 1. selected latin american countries’ indicators country gdp at current market prices, in usd millions (2018) population, in thousands of people (2019) per-capita gdp at current market prices, in usd (2018) gini index (2019) argentina 519871.7 44780.7 11676.8 42.9 brazil 1885469.4 211049.5 8859.7 53.4 bolivia 40287.6 11513.1 3585.8 41.6 ecuador 108398.1 17373.7 6428.0 45.7 mexico 1220696.8 127575.5 9426.3 46.3* chile 298231.1 18952.0 16252.8 44.4** notes: *2016; **2017 sources: cepal (2019) and world bank (2021). http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 the articles presented in this issue focus on smes in these six different countries, looking at them from several viewpoints to spot key topics in the study of latin american smes. this introduction will zero in on three central issues that arise from those articles: the role of public policies in sme emergence and development, the strategies pursued by these firms to adapt to environmental changes, and the links between informality and sme creation. it should be noted first that these papers also offer valuable information about the share of smes in their respective economies and show different criteria used to determine firms’ economic size. several articles also refer to micro, small and medium enterprises (msmes), which, as mentioned earlier, not only include small and medium-sized businesses but also microenterprises. in some latin american economies, the latter have a notable presence both in the informal and formal sectors. the long-term scope in most of these contributions sheds a light on the scenarios where latin american smes have operated and, on the impact borne on them by changes in institutional and macroeconomic settings (bulmer thomas 2014). latin america’s countries experienced a first outward growth phase in the first global economy, with commodity exports as well as inflows of foreign capitals and immigrants playing a key role in the emergence of smes in industry and service sectors. the 1929 crisis and the end of the first globalization gave way to a new stage characterized by inward growth fueled by the advancement of import substitution industrialization and a very active engagement of the state to promote industries and economic activity. many industrial smes emerged in this period, prompted by new opportunities brought about by more diversified economies and several government initiatives and measures, as revealed by the papers from http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 armando dalla costa and naijla alves el alam on brazil; wilson araque jaramillo, roberto hidalgo flor, and jairo rivera on ecuador; antonio alcón vila on bolivia, and isabel e. torres on chile. the boundaries of substitution industrialization, the international crises in the 1970s, and the latin american debt crisis ushered in a new phase in the mid-1980s (in 1973 in chile). this new stage was shaped by the subcontinent’s integration to the second global economy and by structural reforms that led to market openings and deregulation, state-owned companies’ privatizations, an industrial setback, and deteriorated social conditions, with high rates of unemployment and informality. these conditions were partly reversed by progressive governments since the dawn of the new millennium. a noteworthy issue that may be gleaned from these articles (as well as from the specialized literature) is that, notwithstanding the adverse circumstances created by structural reforms, at the same time governments took steps to promote msmes, partly to offset rising unemployment and social inequity—albeit not always with satisfactory outcomes (zevallos 2003). starting in the late 1980s, brazil began to build institutions, legal frameworks, and tax schemes specifically intended to foster smes and effectively propelling a strong growth in the number of companies between 1985 and 2020. since then, these measures have been complemented with policies to drive innovation and technological development. in chile, the concertación administrations deployed since 1990 a wide range of promotion tools that favored smes’ emergence and that were coupled with policies to foster innovation and competitiveness in order to promote research and investment in new priority areas. http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 in other countries, like bolivia and ecuador, opening and deregulation policies did not come alongside with support measures for smes until the new millennium started. in the former, this sparked a strong informality growth. in the latter, the effects of those reforms were partly offset by efforts from local administrations and private organizations, as well as, later, by some initiatives rolled out by rafael correa’s government in 2009-2019, but these moves failed to sustain smes’ share in ecuador’s gdp. regardless of major economic cycles and as illustrated by these studies, latin american smes have had to get used to operating in settings characterized by macroeconomic instability and institutional uncertainty, amidst high volatility, recurrent crises, and sudden changes in the rules of the game. as noted by armando dalla costa and naijla alves el alam, smes faced “macroeconomic adversities and political turbulences” throughout their existence, enduring frequent shifts in public policy orientation. plenty of examples in the articles contained in this issue also reveal how this predicament has led to high failure rates and low competitiveness, but they also unveil successful experiences by enterprises that managed to formulate adequate strategies to adapt to changes. indeed, the articles written by viviana román on argentina and araceli almaraz about mexico point to two sectors where smes showed significant dynamism when facing structural reforms. in argentina, small and medium-sized publishing companies managed to develop against a backdrop of industry concentration and arrival of foreign capital that had started in the 1990s, by pursuing innovative production and marketing strategies. this paper also describes the changes undergone by argentina’s publishing business since the second half of the 19th century and over the course of the major phases in latin america’s economic history. http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 the article on mexico focuses on the case of artisanal beer brewing companies in baja california that were able to successfully avert the threat of sector concentration thanks to entrepreneurs’ innovation capabilities and creativity, as well as the support of cultural and territorial factors coupled with personal networks. with examples of smes that have proven competitive in the biotechnology sector, the paper on chile discusses public polices, value chain development, and business creativity as the drivers for their success. in turn, the study focusing on brazil contains a section on the emergence of multiple technology-based startups in the 21st century. nonetheless, for a thorough understanding of the knowledge on smes’ and msmes’ historical evolution in latin america, it is necessary to consider the structural problems brought about by high informality as a historical trait in this region. for instance, in the early 21st century, the informal sector accounted for 33% of mexico’s gdp (inegi 2003). increased informality has often been the cyclic response to regional market openings to foreign competition. while structural in emerging economies, informality has expanded differently from one country to the next. attributable to several variables (low human capital training, difficulties to access formal loans, highly segmented labor markets, underdeveloped fiscal systems), informality has become a nearly automatic reaction from microenterprises to the arrival of foreign competitors and its repercussions in domestic markets. as shown by research studies carried out in 18 latin american countries between 2004 and 2015, a high social acceptance of tax evasion reduces the moral costs of informal operations, rendering informal business ventures socially legitimate (salinas, muffato and alvarado 2018). http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 bolivia’s case shows that an economy focused on extractive operations (gas, mining) and low entry barriers for foreign competitors hit manufacturing msmes hard in the 1970s. this caused not only increased informality, with booming microstores, but also thriving smuggling. informality is not always a choice prompted by trade liberalization, the impact of fiscal policies, or credit scarcity. as some authors have suggested (maloney 2004), informal urban microenterprises should be viewed as part of a sector consisting of small firms that, due to a relaxed enforcement of labor and other laws, can choose an optimal extent of engagement in formal institutions based on their interests. the traditional dual approach (formal or informal) may prove more relevant amidst a profound recession with significant labor distortions but acknowledging that microenterprises’ choices include a voluntary component brings about significant political implications that differ greatly from the traditional variables mentioned. ultimately, the goal of public policies across latin america is to reduce the proliferation of businesses emerging out of need rather than choice, and, to that end, it is crucial to guide entrepreneurs towards institutionalizing their ventures (lópez, cobas and calderón 2014). in the study of and knowledge on latin america’s smes and msmes, informality should thus be regarded as a trait stemming from their historical evolution. the reasons for its persistence are closely associated with public policy changes and the role played by institutions. even smes clustered in specific sectors such as the metal or the textile industries owe their existence and continuity more to unfavorable macroeconomic conditions than to their business strength and development capabilities (altemburg and meyer-stamer 1999). as noted in the article about bolivia, the shift from artisanal endeavors to industrial operations was thwarted in the 1970s by a change in public policies’ orientation. the country’s wager on extractive industries (mining, gas) struck bolivia’s unsteady textile industry and its sectors associated with farming http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 products’ transformation. entrepreneurs turned to informality not so much as a viable economic solution for their business troubles, but rather as an institutional, environmental response based on deeply rooted artisanal traditions in bolivia, peru, and a large share of the other latin american countries. the research into the alternative that informality provides shows how typically informal institutions greatly influence the creation of entrepreneurial opportunities—at least, more so than formal ones. in latin america, informal factors bear a greater impact on the creation of opportunities to start a business, which in turn contributes to higher growth rates. informality (corruption practices, eluding regulations, bootstrapping or relying on one’s own abilities as the only path to ensure a livelihood) not only provides a short-term solution for household maintenance and securing an income, but also becomes a source of opportunities to build business ventures. thus, the question remains whether this may contribute to long-term economic growth and to overcoming the struggle to secure mechanisms to ensure a livelihood. only formal institutions fuel sustained growth featuring virtuous components. the fact is that smes and msmes have historically had incentives to turn to informality as a mechanism to secure an income and to ensure business continuity, with greater incidence in periods of economic crisis, altered macroeconomic stability, or changes in public policies to support formal economic operations by providing funds to secure loans, supporting fiscal treatment, and simple rules or procedures to create businesses (aparicio, urbano and audretsch 2016). as noted earlier, in the historic research on latin american companies, smes’ and msmes’ long-term evolution has barely been studied before the 1990s. indeed, the set of papers gathered in this jesb special issue intends to carry out a first assessment of the historical behavior of this kind of business organizations in several countries in this region. of course, researchers’ http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 attention has focused more on recent decades, examining from several standpoints smes’ virtues to foster economic growth and to create jobs to reduce poverty in latin america’s economies. it should also be noted that the statistical databases and assessments developed by public and private administrations have substantially improved the materials required to analyze and study smes and msmes. however, to follow up on the more recent studies conducted by regional organizations, such as comisión económica para américa latina (cepal), and multilateral financial agencies—like the international monetary fund (imf), world bank (wb), international development bank (iadb), and banco de desarrollo de américa latina (caf bank)—it is necessary to know the historical background of smes’ and msmes’ creation and performance. in this regard, the historical evolution of institutions’ actions concerning this type of businesses, the public policies rolled out in every period and with different alternatives, the business strategies pursued by smes and msmes are all key topics that must be addressed to understand how these businesses emerged and evolved in the production environment surrounding them. informality as a resource and a quasi-structural feature in most latin american countries during the 20th century and its persistence in the 21st century should be explained from a historical approach and a path dependence rationale that must take into account the characteristics of the evolution of other business organizations in the region—from large national and transnational companies organized as business groups to the historical performance of foreign multinationals and the subcontinent’s own multilatinas, which emerged in the late 20th century (lluch, monsalve and bucheli 2021). the contributions in this special issue actually underscore the fact that the business history agenda in latin america should incorporate the study of msmes and smes as a major cornerstone for the development of the types of companies that constitute an intrinsic part of this region, as well as the historical http://revistes.ub.edu/index.php/jesb volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 economic growth and stagnation periods that have unfolded over time—and especially in recent decades. references altemburg, tilman and jörg meyer-stamer.1999. “how to promote clusters: policy experiences from latin america.” world development 27(9): 1693-1713. doi: 10.1016/s0305-750x(99)00081-9. aparicio, sebastian, david urbano and david audretsch. 2016. “institutional factors, opportunity entrepreneurship and economic growth: panel data evidence.” technological forecasting and social change 102: 45-61. doi: 10.1016/j.techfore.2015.04.006. bulmer-thomas, victor.2014. the economic history of latin america since independence. cambridge: cambridge university press. cepal 2019. anuario estadístico de américa latina y el caribe 2019. santiago de chile: cepal. https://www.cepal.org/es/publicaciones/45353-anuario-estadistico-america-latina-caribe-2019statistical-yearbook-latin. retrieved december 9, 2021 dini, marco and giovanni stumpo, coords. 2018. “mipymes en américa latina: un frágil desempeño y nuevos desafíos para las políticas de fomento.” documentos de proyectos (lc/ts.2018/75). santiago de chile: comisión económica para américa latina y el caribe (economic commission for latin america and the caribbean, cepal). donato, vicente and barbero, maría inés, comps. 2009. contra viento y marea. historias de pequeñas y medianas empresas argentinas. buenos aires: prometeo/bononiae libris. ferraro, carlo and giovanni stumpo, comps. 2010. políticas de apoyo a las pymes en américa latina entre avances innovadores y desafíos institucionales. santiago de chile: comisión económica para américa latina y el caribe (economic commission for latin america and the caribbean, cepal). lópez lira, alfonso, elisa cobas and cecilia calderón valencia. 2014. “reducing smes’ informal economy through institutionalization: the mnc-academia-smes business model.” innovaciones de negocios 11(21): 101 – 115. doi: 10.29105/rinn11.21-5. lluch, andrea, martín monsalve and marcelo bucheli. 2021. historia empresarial en américa latina: temas, debates y problemas. bogotá y lima: universidad de los andes-universidad del pacífico. maloney, william. 2004. “informality revisited.” world development 32(7): 1159-1178. doi: 10.1016/j.worlddev.2004.01.008. salinas, aldo, moreno muffato and rafael alvarado. 2018. “informal institutions and informal http://revistes.ub.edu/index.php/jesb https://doi.org/10.1016/s0305-750x(99)00081-9 https://doi.org/10.1016/j.techfore.2015.04.006 https://www.cepal.org/es/publicaciones/45353-anuario-estadistico-america-latina-caribe-2019-statistical-yearbook-latin https://www.cepal.org/es/publicaciones/45353-anuario-estadistico-america-latina-caribe-2019-statistical-yearbook-latin https://doi.org/10.29105/rinn11.21-5 https://doi.org/10.1016/j.worlddev.2004.01.008 volume 7, number 1, 1-12, january-june 2022 doi.org/10.1344/jesb2022.1.j097 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 entrepreneurial activity: new panel data evidence from latin american countries.” academy of entrepreneurship journal 24(4): 1-16. world bank. 2021. “gini index (world bank estimate) latin america & caribbean.” retrieved december 16. https://data.worldbank.org/indicator/si.pov.gini?end=2019&locations=zj&name_desc=true &start=2019&view=map. zevallos, emilio. 2003. “micro, pequeñas y medianas empresas en américa latina.” revista de la cepal 79: 53-70. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://data.worldbank.org/indicator/si.pov.gini?end=2019&locations=zj&name_desc=true&start=2019&view=map https://data.worldbank.org/indicator/si.pov.gini?end=2019&locations=zj&name_desc=true&start=2019&view=map http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 francisco javier fernández-roca fernando gutiérrez hidalgo universidad pablo de olavide (spain) guest editors special issue new perspectives in family business research what is a family business?1 abstract defining the concept of family business is an ongoing challenge. the debate around it is here discussed from the point of view of business history and family business theories as developed in the last fifteen years. historians are interested in reflecting changes in family businesses at different periods and within different societies, and focus their research work on ownership and control within family firms. for their part, family business theorists still understand the concept as a compound or a circular scheme consisting of elements such as business, family and owners or power (governance and management participation), experience (generation in charge) and culture (family and business values). keywords: family firm; history; business the title of this introduction is taken from the seminal article by chua et al. (1999), which began by posing this very question: ‘what is a family business?’ and contributed to the debate by providing a compilation of the definitions and approaches on family business produced by the corresponding author: e-mail: jfernandez@upo.es received 10 may 2017 accepted 03 july 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 1 the authors wish to thank the comments of the anonymous referees of the journal and the participants in the seminar on family business held in seville on january 25 and 26, 2017. they are also grateful to the financial support provided by the research project har2014-52079-c2-1-p. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 literature. this introduction does not aim at making an exhaustive review of the literature on what family business is, but at underlining the recurrence of that question at two different points in time: the turn of the century, in relation to the debate on chandler’s work, and fifteen years later, when scholars are still discussing the topic, although not as intensely anymore. on the other hand, the answer to the question is now provided from two different fields of knowledge: business history and family business theory.2 the preoccupation to define the concept of family business was contemporary to the rising influence of chandler’s works. those were years in which the chandler’s interpretation of family business as being old fashioned, uncompetitive in world markets and lacking necessary investments in plant, marketing and organisation was commonly accepted (chandler 1977; 1990). the association of managerial hierarchies with successful modern economic growth, especially as found in the united states, contrasted with the british climacteric and the survival of family businesses, where the small scale of the market structure acted as a supposed institutional barrier to growth (lazonick 1981; 1983; mass and lazonick 1990). the neoclassical perspective did not provide a more favourable vision of family firms. in fact, it considered them as being too small and inefficient, in the sense that managers were selected from within the owner’s family rather than on grounds of merit, and growth was achieved ‘organically’ by reinvesting profits, with the use of capital markets limited to short-term financing. as a result, family businesses suffered low profitability and had long-term survival problems, as even the most prosperous firms often ended up having trouble with the descendants of the firm’s founder (buddenbrook syndrome). it is interesting to see how, years later, authors still draw on chandler’s work to explain the different behaviours of family 2 on the evolution of family business studies, see fernández pérez and puig 2013. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 businesses in the process of professionalising their structures, an essential condition for their survival (fernández pérez 2013, 36-37). when it comes to defining the concept of family business, the complex relationship between the subject and the changing political and institutional context in which it exists is always present. in fact, different authors have stressed the difficulty of providing a definition of family business from an ahistorical perspective, because a family firm is a pliable subject that adapts to changes in its legal, political or technological environment (fernández and colli 2013; lubinski et al. 2013 and fernández pérez and lluch 2016). during those years at the beginning of the 21st century, two works were published that are worth mentioning here: one from the field of business families studies –an article by sharma (2004)– , and the other from the field of business history –a book by colli (2003). each of them had a different perspective on the definition of family business, but they both showed an urgency to distinguish the subject itself. in fact, sharma (2004, 3) insisted on the importance of having clear definitions to build a corpus of knowledge in social sciences. colli (2003) devoted an entire chapter to trying to understand the nature of family businesses and to reach a definition of the term. his book, which compared family and managerial companies, was written while chandler’s work was being contested. according to this author, managerial firms are easier to discern than historically changing –both in time and space– entities like family firms. colli (2003) provided a definition of the classic family business as one ‘in which property and control are firmly entwined, where family members are involved in both strategic and day by day decision-making, and the firm is shaped by a dynastic motive’. the definition was built around those aspects that are usually considered when describing companies: ownership, control and management. in general terms, and as pointed out by http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 guillén and tschoegl (2007, 157), quite a few definitions are indeed built on those aspects, from the earliest one by jones and rose (1993) to more recent ones. in an attempt to synthesize a definition of family firm from the point of view of management, some scholars have focused on the share of ownership and/or management held by family members; others scholars have defined family firms in terms of the degree of family involvement or potential for generational transfer; finally, others have included the percentage of equity are under family control (sharma 2004; handler 1989; westhead and cowling 1998). when compared, it is possible to observe that the definitions differ mainly in the percentages of one or the other indicator meant to determine whether a company is a family business or not (handler 1989; westhead and cowling 1998; astrachan and shanker 2003). colli (2003) made an effort to describe family firms from a qualitative point of view, taking into account aspects such as the companies’ size, large/small dichotomy, degree of profitability, efficiency and conservatism of the implemented strategies, endurance and continuity. a little later, colli et al. (2003, 28) concluded that, in order to define as intangible a subject as a family business, which varies across nations and according to the historical moment and the society in which it develops, it is important to avoid rigid definitions that could disguise the impact of the family members’ intervention in strategical decision-making. consequently, the definition of family business provided by some british authors, who describe it as a firm in which ‘a family member is chief executive officer, there are at least two generations of family control [and] a minimum of five percent of voting stock is held by the family or trust interest associated with it’, cannot be said to be the most appropriate one (colli et al. 2003). twenty years after the special issue of business history edited by jones and rose, a new special issue was published by the same journal and coordinated by colli et al. (2013). as if http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 paraphrasing the lyrics of the well-known tango song (‘twenty years are nothing’), the editors acknowledged the line of continuity between the two issues, both of which took the company as unit of analysis and examined relevant issues such as the influence that family ownership and control have on the company’s competitiveness and performance. during this period, lubinski et al. (2013) found themselves at a crossroads, facing the challenge of defining both the concept of ‘multinational company’ and that of ‘family business’. their solution for the first part of the challenge is beyond the scope of the present introduction, but to solve the second one the authors went back to the usual dichotomy between ownership and control. the family exerts a significant influence over the company’s control, whether through ownership or management, although ownership can be also understood as ‘voting rights, veto rights threshold, the issuing of nonvoting shares, holding companies or complicated crossshareholding structures…’ (lubinski et al. 2013, 3). fernández-pérez (2012, 2) set forth a double idea. first, the evidence that the problem of defining the concept of family business is a persistent one. second, the fact that the older definitions of family business united ownership and control, two dimensions that in our changing world are increasingly separate. this led the author to adopt a definition from the field of business theory that combined flexibility, resources –both tangible and intangible– and continuity through several generations. eventually, colli tried to put an end to the debate by using the definition of family business provided by the european commission and trying to complete it with the inclusion of a fifth feature related to longevity (colli 2013; colli and larsson 2014): a firm, of any size, is a family business, if: (1) the majority of decision-making rights is in the possession of the natural person(s) who established the firm, or in the possession of the natural person(s) who has/ have http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 acquired the share capital of the firm, or in the possession of their spouses, parents, child or children’s direct heirs. (2) the majority of decision-making rights are indirect or direct. (3) at least one representative of the family or kin is formally involved in the governance of the firm. (4) listed companies meet the definition of family enterprise if the person who established or acquired the firm (share capital) or their families or descendants possess 25 percent of the decision-making rights mandated by their share capital. this definition includes family firms which have not yet gone through the first generational transfer. it also covers sole proprietors and the self-employed (providing there is a legal entity which can be transferred). (5) the firm must have been controlled by the same family for at least two generations.3 in the field of family business studies, which is somehow different from that of business history, the understanding and definition of family firms begins in the work of gersick (1997) and his ‘three-circle model’, in which business, family and owners were identified as the three main components. however, the article by chua et al. (1999) was a turning point in the process of defining this concept. these authors pointed out that, whatever the adopted definition, it must reflect the singularity of family businesses, which lies not in the family’s ownership or management but in ‘the pattern of ownership, governance, management, and succession [which] materially influences the firm’s goals, strategies, structure, and the manner in which each is formulated, designed, and implemented’ (chua et al. 1999, 22). this way, the authors moved away from ‘share’ or ‘percentage’ definitions to focus on the essence of family firms.4 this is how they reached the following definition: ‘the family business is a business governed and/or managed with the intention to shape and pursue the vision of the business held by a 3 http://ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/family-business/#h2-2, accessed on december 2012 and quoted in colli and larsson (2014, 40). 4 the definitions and approaches gathered by the authors in their article will not be reviewed here. for further information, see chua et al. (1999). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families’ (chua et al. 1999, 25). astrachan et al. (2002, 47) did not attempt at finding the definition that would finally put an end to the debate, but chose to describe ‘a continuum of family business’ ranging from high to low levels of family involvement. the authors proposed a model, the so-called f-pec scale, which in order to characterise this type of firm took into consideration the following three dimensions: power (governance and management participation), experience (generation in charge) and culture (family and business values), each of which affects in different degrees the configuration of a family business. the authors’ purpose was to help researchers understand the phenomenon, not to synthesise it in a single and categorical definition. astrachan and shanker (2003) provided a model that was represented in a figure with three rings defining a family business from a broader perspective to a more restrictive one. the outer ring takes into consideration the family’s retention of voting control over the strategic direction of the firm; the second mid-range ring includes as well the family’s involvement in day-to-day operations; while the inner one, which is the narrowest definition, adds to the previous two conditions the involvement of multiple generations of family members in the daily activity of the firm (astrachan and shanker 2003, 3-5). this idea of various levels of definition opened up new possibilities in understanding what a family business is, although the debate on the definition of this concept was not reopened as such. in chrisman et al. (2005) provided a new summary of the state of play in relation to this matter. more recently, sharma and nordqvist (2013) incorporated governance as a distinctive feature of family businesses, despite the difficulty of sometimes differentiating it from management. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 sharma and salvato (2013, 40) analysed the elements of participation approach, which defined family firms according to the scope and nature of the family’s involvement in the business. this approach, rather than looking for a closed definition of this kind of company, is interested in answering questions such as, for example: what is the scope of the family’s involvement in the ownership, management or governance of the business? who are the family members presently involved in the firm? will the members of the next generation also get involved in it? and if so, what role will they play? finally, some of the most recent contributions to the field of family business, like those of sharma et al. (2014) and short et al. (2016), are starting to leave aside the need to define what a family business is to focus on the firms’ time dimensions and other new lines of research. after a long discussion around the concept, the end meets the beginning and the idea of the three dimensions, rings, aspects or questions, which are more or less measurable and can be used in the common attempt to grasp an almost intangible reality like that of a family business. this special issue of jesb aims at reflecting the interest on this topic shown from different fields of knowledge like management, marketing, corporate social responsibility, accounting, delocalisation, internationalisation, and succession. the purpose is to review the existing literature, its evolution and the lines of research that, according to the various authors, are currently being developed. thus, fernando merino, in his empirical work, enters the world of family business –the very nature of which may influence its success and the type of strategies adopted–, to examine the companies’ paths to internationalisation and their decisions to offshore their activities. in order to achieve internationalisation, family firms are required not only to have a product that may be sold in foreign markets, but to overcome their risk aversion and, in some cases, their http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 limitations so as to open to the possibility of hiring managers outside the family. in this sense, delocalisation may become a key factor contributing to the firm’s better position as exporter, because of the resulting increase in productivity, growing wealth of information, implementation of better management procedures, building of an international network, familiarisation with the characteristics of foreign markets and stimulation of the firm’s international activities. the author’s conclusion is that family firms engaged in offshoring activities obtain similar profits to those of non-family firms. it is interesting to see how, in the case of small and medium-sized manufacturing companies, delocalisation is quite less common among family businesses than it is among non-family ones. it seems that a large number of family firms could exploit the advantages associated to delocalisation, which, at the same time, are linked to a greater likelihood of sale in foreign markets, although not to a larger export percentage of total sales. finally, the author suggests some new lines of research, such as delving into those characteristics of a family business that may be related to its delocalisation, as well as into other particularities (management style, family culture, socioemotional wealth, etc.). the work by casillas et al. analyses the development and success of a private initiative, the instituto de empresa familiar (ief, family business institute), which has become a promoter of research on family firms. working on the data bases of the isi web of knowledge and scopus, the authors have performed a follow-up close review of the publications by the network of chairs of family business in spanish universities, which is a unique example of professionalacademic and public-private collaboration that could serve as a model for other countries. this network has stimulated research in the fields of specialisation of the heads of the different http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 chairs, resulting in works developed from the financial, corporate governance, ownership structure, internationalisation and business orientation perspectives on family business. casillas et al. have studied the evolution of international research on management produced by this network of chairs, and have identified 109 publications, most of them in high-impact scientific journals, according to the journal citation report (jcr) developed by thomsonreuters. the conclusion is that this network has become a cornerstone for spanish research in the field of family business, to the extent that 75 percent of the scientific production is signed by researchers belonging to it. carrera’s article is an in-depth and thorough review of the literature on accounting and family business. its objective is to identify the main findings in this field and to summarise what is known about the role of accounting in family firms. carrera examines the contributions made by researchers from this field to the study of family companies in areas such as financial accounting and reporting, management accounting and management control, auditing and the history of accounting. the author reveals how research on accounting has focused on issues like the quality of financial information, performance management and accounting policy options from an agency perspective, and on how the financial information practices of family businesses differ from those of non-family firms. it is possible to observe a growing interest in family businesses from researchers specialised in auditing, accounting and management control. curiously, these researchers seem to be increasingly willing to adopt alternative theoretical approaches to the agency framework, as shown by recent works implementing the socioemotional wealth (sew) approach or the institutional theory. this study includes as well the contributions made from the history of accounting, a field that had been neglected in previous literature reviews, to http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 research on family business. the works reviewed show how rich and useful a historical perspective can be to understand the role of accounting and accountants in the survival or failure of family firms, as well as in the development of accounting and auditing in society. the article by melero-polo and lópez-pérez aims at analysing the current state of research on corporate social responsibility (csr), its theoretical framework, methodologies implemented and possible future lines of research. the work reviews in detail the most relevant journals in the fields of management, marketing, ethics, corporate governance and family business management. the authors conclude that, in the specific case of family firms, the research universe is quite limited. this thorough analysis has allowed identifying issues related to the consumers’ attitude and the market response to csr activities, financial value and risk management, proving that this is an already mature research field. all things considered, the empirical results show a positive relationship between csr initiatives and the value of the trademark. in contrast, the relationship between csr and financial performance is not always so clear and depends on the variables included in the general model, which can alter the results. however, the authors argue that the management style and particularities of family firms make it necessary to integrate other aspects into the analysis, such as their strong bond with the local communities, the transmission of values and a notable interest in preserving the reputation of the brand or the family. consequently, generalist theories based on the maximisation of economic criteria seem to lose ground, while the stewardship theory and the socioemotional wealth approach emerge as recommended and predominant in specialised literature. csr has certainly become a key issue in the agenda of spanish companies and the authors explain the advantages of implementing csr policies and practices: improved brand http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 knowledge, market share, productivity, efficiency, worker’s motivation and competitiveness, and an increasingly solid and positive corporate reputation. the next-to-last work in this special issue is that of bravo et al., who focus their study on marketing and family business. generally speaking, there are not many academic researches on marketing in the sphere of family firms and the few existing examples deal with brand management. for this reason, the authors have concentrated their efforts in analysing the concept of trademark within family businesses. in marketing research, brand management is one of the main topics and a reference concept for some of the most important research institutions and main journals in this field, where articles on this subject appear very often. in this specific case, the authors have delved into the literature published in relevant journals and have identified 15 works on marketing and family firms, 50 percent of which studied the firms’ brand management. these data suggest that, while the study of the specific marketing aspects of family businesses has not drawn much attention, brand management, sometimes understood in this context as an extension of the family’s image and identity, has spurred greater interest. after their literature review, the authors include a list of considerations that may be useful to adapt global concepts to the specific case of family firms, as well as some propositions for future researches. the last work included in this special issue on family business is a comparative study of italian and peruvian family firms confronted with intergenerational succession. in its effort to define family business, business family and intergenerational change, this interesting work includes a theoretical analysis. it also emphasises the value of knowing the potential of business families to carry out generational transfers. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 this special issue offers researchers interested in family business the possibility of updating their information on how research on topical subjects like management, corporate social responsibility, accounting, delocalisation, internationalisation, marketing, and succession is progressing in spain. the works included cover a wide range of topics, delving into some of them and suggesting new lines of research. the simultaneous publication of wilson et al. (2017) confirms the current interest on the topics here discussed. this issue is also the result of a meeting held by the authors in seville on january 25 and 26, 2017, within the framework of a seminar on family business and the new research perspectives in this field. the first drafts of these articles were discussed and contrasted during that event. the seminar was organised with the collaboration of the escuela de estudios hispanoamericanos (school of spanish-american studies) of the consejo superior de investigaciones científicas (csic, spanish national research council) and the financial support of research project har2014-52079-c2-1-p. references astrachan, joseph h., sabine b. klein, and kosmas x. smyrnios. 2002. “the f-pec scale of family influence: a proposal for solving the family business definition problem.” family business review 15 (1): 45-58. astrachan, joseph h., and melissa c. shanker. 2003. “family businesses’ contribution to the u.s. economy: a closer look.” family business review 16 (3): 211-219. colli, andrea, paloma fernandez perez, and mary b. rose. 2003. “national determinants of family firm development? family firms in britain, spain, and italy in the nineteenth and twentieth centuries.” enterprise & society 4 (1): 28-64. colli, andrea. 2003. the history of family business, 1850-2000. cambridge: cambridge u.p. colli, andrea. 2013. “risk, uncertanity, and family owership.” in the endurance of family businesses: a global overview, edited by paloma fernández pérez and andrea colli, 85-108. cambridge: cambridge u.p. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 colli, andrea, carole howorth, and mary rose. 2013. “long-term perspectives on family business.” business history 55 (6): 841–854. http://dx.doi.org/10.1080/00076791.2012.744589. colli, andrea, and mats larsson. 2014. “family business and business history: an example of comparative research.” business history 56 (1): 37-53. doi: 10.1080/00076791.2013.818417 chandler, alfred. 1977. the visible hand: the managerial revolution in american business. cambridge (mass): harvard university press. chandler, alfred. 1990. scale and scope: the dynamics of industrial capitalism. cambridge (mass): belknap press. chrisman, james j., jess h. chua, and pramodita sharma. 2005. “trends and directions in the development of a strategic management theory of the family firm.” entrepreneurship: theory and practice 29 (5): 555-575. chua, jess h., james j. chrisman, and pramodita sharma. 1999. “defining the family business by behavior.” entrepreneurship: theory and practice 23 (4):19-39. fernández pérez, paloma. 2012. la última globalización y el renacer de los grandes negocios familiares en el mundo. cátedra corona 21. bogotá: universidad de los andes. fernández pérez, paloma. 2013. “de hereus a profesionales. la transición de un modelo tradicional a un modelo moderno de gestión en la empresa familiar catalana.” in la profesionalización de las empresas familiares, edited by paloma fernández pérez, 35-72. madrid: lid. fernández pérez, paloma, and andrea colli. 2013. the endurance of family businesses. a global overview. cambridge: cambridge u.p. fernández pérez, paloma, and andrea lluch. 2016. evolution of family business continuity and change in latin america and spain. uk: edward elgar. fernández pérez, paloma, and nuria puig. 2013. “the emergence of family business studies: ahistorical approach to pioneering centers, scholars, and ideas.” in the endurance of family businesses. a global overview, edited by paloma fernández pérez, and andrea colli, 13-33. cambridge: cambridge u.p. gersick, kelin e. 1997. generation to generation: life cycles of the family business. cambridge (mass). harvard business press. guillén, mauro f., and adrian tschoegl. 2007. santander, el banco. madrid: lid. handler, wendy c. 1989. “methodological issues and considerations in studying family business.” family business review 2 (3): 257-276. jones, geoffrey, and mary b. rose, eds. 1993. “family capitalism.” special issue of business history 35 (4). http://revistes.ub.edu/index.php/jesb http://dx.doi.org/10.1080/00076791.2012.744589 volume 2, number 2, 1-15, july-december 2017 doi:10.1344/jesb2017.2.j028 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 lazonick, william. 1981. “competition, specialization and industrial decline.” journal of economic history 41 (1): 31-38. lazonick, william. 1983. “industrial organization and technological change: the decline of the british cotton industry.” business history review 57 (2): 195-236. lubinski, christina, jeffrey fear, and paloma fernández pérez. 2013. “family multinationals: entrepreneurship, governance, and pathways to internationalization.” in family multinationals. entrepreneurship, governance, and pathways to internationalization, edited by christina lubinski, jeffrey fear and paloma fernández pérez, 1-19. london: routledge. mass, william, and william lazonick. 1990. “the british cotton industry and international competitive advantage: the state of the debates.” business history 32 (4): 9-65. sharma, pramodita. 2004. “an overview of the field of family business studies: current status and directions for the future.” family business review 17 (1): 1-36. sharma, pramodita, and mattias nordqvist. 2013. “using the configuration approach to understand the reasons for and consequences of varied family involvement in business.” in handbook of research on family business (second edition), edited by smyrnios, kosmas x., panikkos zata poutziouris and sanjay goel, 142-160. cheltenham, uk: edward elgar. sharma, pramodita, and carlos salvato. 2013. “family firm longevity. a balancing act between continuity and change.” in the endurance of family businesses: a global overview, edited by paloma fernández pérez and andrea colli, 34-56. cambridge: cambridge university press. sharma, pramodita, carlo salvato, and trish reay. 2014. “temporal dimensions of family enterprise research.” family business review 27 (1): 10–19. short, jeremy c., pramodita sharma, thomas g. lumpkin, and allison w. pearson. 2016. “oh, the places we’ll go! reviewing past, present, and future possibilities in family business research.” family business review 29 (1): 11–16. westhead, paul, and marc cowling. 1998. “family firm research: the need for a methodological rethink.” entrepreneurship theory and practice (fall): 31-56. wilson, john f., steven toms; abe de jong, and emily buchnea, eds. 2017. the routledge companion to business history. new york: routledge. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 263 lluís bohigas acadèmic, reial academia de medicina de catalunya (spain) how self-government in catalonia has integrated private not for profit care in the public healthcare service abstract this study aims to analyze how the hospital policy of the catalan government during the period 19802020 was adapted to the specific situation in catalonia and how it differs from previous policies put in place by the central spanish government. the methodological approach is to present evidence found through analysis of official documents and study of changes in hospital’s affiliations during that particular period. the main contributions are to indicate that the legal status of the hospitals that, in 1980, formed part of the network of hospitals that collaborated with the public system (xhup in its acronym in catalan), has changed substantially when compared with the current situation today in 2020. each case has been studied individually. the changes show a policy that keeps local government involved in healthcare matters and improves the overall efficiency of hospitals. keywords: hospitals; hospital policies; history of hospital; healthcare in catalonia corresponding author: e-mail: bohigaslluis@gmail.com received 31 august 2020 accepted 18 november 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:bohigaslluis@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 264 1. introduction this paper will analyse the hospital policy of the catalan government1 (generalitat de catalunya) during the period 1980-2020 with special attention to the differences from previous policy put in place by the central spanish government. the paper further explains how these differences suited the catalan hospital structure. the following section presents the public hospital situation in 1980, just before the generalitat assumed its management. section 3 will be devoted to presenting the main pillars of health policy and section 4 will analyse changes in the public hospital network. the conclusions will highlight the emphasis of hospital policy and how private social initiatives have been integrated. 2. public hospital status in catalonia 1980: charity and social protection hospitals in catalonia during the dictatorship have been studied by several authors: ignasi aragó (1967) and jacint reventós, anna garcía and carme piqué (1990), and the following is a summary of the state of public hospitals in 1980 in catalonia, just before the generalitat assumed responsibility of the health sector. 2.1. charity the diputaciones2 ran hospitals in every province of catalonia providing public healthcare for the poor. barcelona was the largest province and had the largest hospital, the clinical and provincial hospital, which was managed jointly by the university of barcelona and the 1 the catalan government named generalitat was reinstated in 1977 after the return of democracy in spain. 2 catalonia is divided in four provinces: barcelona, girona, lleida and tarragona. each province has a provincial council that runs provincial services among them is provincial charity. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 265 diputación de barcelona (corbella 2006). the university appointed professors from the medical faculty and the diputación ran the economic management. in other towns of catalonia there were hospital charities. they were usually hospitals managed by a foundation built with funds from local benefactors, where the city council participated and headed the board. some municipalities had their own hospitals, for example the barcelona city council had two, the hospital del mar and the hospital de l’esperança, which both had contracts with social security to care for their patients. the hospital de la santa creu i sant pau was a medieval foundation built and maintained by private donations from barcelona and catalonia. a great benefactor was pau gil, a banker who, upon his death, left half of his fortune to the hospital, which served to build a new building in the early 20th century (net 2001). the management of the hospital was provided by the city council of barcelona and the bishop of barcelona, although they were only administrators, without any financial responsibility. the hospital had a social security contract since 1971, and by 1980, 80% of the patients were covered by social security, the rest being private patients or patients whose care was paid for by a charity (bohigas 2020). as social security had brought more patients to the hospital, the hospital had seen an increase in their income for the provision of services through this system and, due to improvements in the spanish economy, had seen a decrease in the number of poor people they treated as charity cases and a rise in workers and their family members who were part of the social security system who required care. the hospital therefore gradually changed its main focus, which was originally to provide care for the poor, and became a hospital for workers whose social security paid for the care. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 266 some religious orders ran hospitals, the largest being the hospital de sant joan de déu in barcelona. the hospital’s original focus was caring for poor children and had a contract with the social security system. 2.2. social coverage mutualism was born in the early part of the century to provide care for workers, before social security existed. the most important mutual social security association was the quinta de salud la alianza which was set up to provide medical care to the barcelona waiters’ guild. over time, it expanded to include many different professional activities and was important to self-employed workers. at one point, it insured over half a million people. in order to provide an adequate amount of care for the large number of people it insured, it had a network of several hospitals, the largest being in barcelona. other smaller insurance funds also covered groups of workers and had small hospitals. some of these hospitals had contracts with social security. the mutual insurance fund system went into crisis, as it was duplicating what was now being provided by the social security system, which became mandatory for all working citizens. some workers paid both fees for a time, but gradually withdrew from paying the mutual societies when they realised they received the same level of care just through paying for social security. social security had built and operated seven major hospitals. the oldest one was the largest: ciudad sanitaria francisco franco, a hospital of 1,500 beds that opened in 1955. the name “ciudad sanitaria” (healthy city) gives an idea of its size, as it was made up of three buildings, each with a different medical speciality: a general hospital, a maternity and children’s hospital and a traumatology unit. there were hospitals run by social security in all four volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 267 provincial capitals. there were three more in other non-capital cities: tortosa, l’hospitalet de llobregat and badalona. social security was compulsory for employed workers and their families. in 1980, social security covered 80% of the total population of 6 million people in catalonia. social security hospitals, despite their large size, were not sufficient to meet the needs of the population. consequently, social security also employed additional services from other hospitals in the area. in total, there were a hundred hospitals contracted with social security where sick people were sent when there were no beds available in the main social security funded hospitals. the two largest hospitals in catalonia, both in barcelona, had contracts with the social security system: the hospital clinico y provincial (asenjo 2017) and hospital de la santa creu i sant pau. 3. healthcare policy in catalonia 1980-2020 in 1979, the central government transferred the responsibility for public health and charity to the catalan generalitat, shortly followed by the social security health services in 1981. the trend in the early 1980s was the gradual reduction in charity care and the increase of social security. public welfare was the responsibility of the provincial and local councils and the hospitals of these institutions continued to operate, but they had fewer patients that were taken in as charity cases and more social security members. private charities and religious orders saw a reduction in both the number of patients and the income from benefactors. private insurance funds lost their beneficiaries because social security had become mandatory in catalonia and therefore their hospitals had fewer clients of their own and more social security patients. the social security system built three new hospitals in catalonia to increase its capacity, located in the cities of badalona, terrassa, and vic. when they were later transferred to the generalitat volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 268 that gave them around 2,000 more beds, but this was not enough to cater for the increased demand. 3.1. the creation of the hospital network for public use the basis of the hospital policy of the generalitat in the 1980s was the creation of the public use hospital network (xhup). this network included all hospitals that would care for patients financed by public funds. the concept for this network was set in the health plan (generalitat de catalunya 1983) and it was put into legislation by a decree issued two years later3. the social security system treated its patients in its own hospitals, but as the number of patients covered by social security increased they hired other public and private hospitals to treat this ”overflow” of patients and paid these hospitals a certain amount per stay, with these hospitals being considered as ”complementary” to the social security system, but not necessarily a part of it. the social security system continued to build hospitals to meet the growing demand of workers and when it opened a new hospital, it stopped the contract it had with the complementary hospitals. the xhup changed this dynamic as it considered all the hospitals involved in the network as equal and providing a public service. therefore, under this new system new hospitals were only built in areas that didn't have any existing hospitals. xhup hospitals, regardless of their ownership, provided stable service to all patients covered by social security (bohigas 2014). a basic condition for a hospital to be within the xhup was to be accredited, that is to pass an external assessment of the care standards in the hospital, to guarantee the user a certain level of 3 “decret 202/1985, de 15 de juliol, de creació de la xarxa hospitalària d’utilització púbica.” diari oficial de la generalitat de catalunya, july 29, 1985. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 269 care quality. previously to the xhup being set up, the social security did not require an assessment such as this to guarantee a certain standard of care across the board, and among the 100 hospital contracts they had, there were rather differing levels of quality of care. by the time the xhup came about and ran the assessments, only half of the hospitals previously associated with the social security system passed the accreditation and became integrated into the xhup. the others lost the contract and changed towards purely private care or began offering social healthcare services. social security negotiated and paid for each hospital's contract individually, which meant that two hospitals, although equal in many aspects, could have completely different contracts. later they attempted to correct this mess with a payment regulation that ranked the hospitals in more than twenty categories according to the structural characteristics of each hospital. according to the residual philosophy of the contracts, only stays were paid, as the original purpose of the contract was to cover the lack of beds in the main social security hospitals. the generalitat later reduced these twenty or so hospital categories to three and for each category allocated a set price, called a basic assistance unit (uba). the uba corresponded to an overnight stay and had a different price for each of the three types of hospital. the generalitat paid for external consultations and emergencies, it was thus recognized that the contracted hospitals were contributing all kinds of care and not only with overnight stays. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 270 3.2. the creation of the catalan institute of health in 1983, the catalan institute of health (ics)4 was created to manage the seven social security hospitals, as well as the contracts with other hospitals. when the catalan health service was created, the management of the contracts was transferred to this organisation. the ics was transformed into a public company by law in 20075. consequently, their next move was to attempt to turn each hospital into a management unit with its own legal personality for more efficient and effective management, but this was not successful, as neither the corporate structure of the ics nor the unions wanted to lose power. 3.3. the llei d’ordenació sanitària de catalunya and the creation of the catalan health service the ley general de sanidad6 made it mandatory for every autonomous community in spain to have its own regional health services. all the regions created their own regional service to manage the centres and services transferred, which was equivalent to the already established catalan institute of health. in catalonia, there were hospitals built by religious, municipal, mutual and foundation entities, independent of the social security services, but that were needed to provide assistance to citizens due to the historical lack of public investment in catalonia. in 1990, the parliament of catalonia approved the llei d’ordenació sanitària de catalunya (losc)7, which created the catalan health service (catsalut). the catalan health service would encompass both social security services and private contracted hospitals. this 4 “llei 12/1983 de 14 de juliol, d’administració institucional de la sanitat, l’assistència i els serveis socials de catalunya.” diari oficial de la generalitat de catalunya, july 15, 1983. 5 “llei 8/2007 de 30 de juliol, de l’institut català de la salut.” diari oficial de la generalitat de catalunya, august 3, 2007. 6 “ley 14/1986, de 25 de abril, general de sanidad.” boletin oficial del estado, april 29, 1986. 7 “llei 15/1990, de 9 de juliol, d’ordenació sanitària de catalunya.” diari oficial de la generalitat de catalunya, july 30, 1990. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 271 philosophy was present in the speech made by the health minister xavier trias to the parliament of catalonia in 1990 when he presented the proposal of the law: "to take advantage of the existing, varied, rich, and long-standing infrastructure, the fruit of the collective effort of catalan society." (trias 1990) the act confirmed the hospital network of public utility as the model for organising the hospital network. the funding provided by the catalan generalitat that was to be used for the xhup hospitals was managed by the catalan health service (servei català de la salut). the hospitals that belonged exclusively to the social security system were a separate case (managed by the catalan institute of health) since these centres had a budget assigned by the parliament of catalonia. 4. hospital policy 1985-2020 from xhup to siscat the public utility hospital network (xhup) created in 1985 was consolidated by the llei d’ordenació sanitària de catalunya, but only covered acute hospitalisation (departament de sanitat 1994). the xhup model was extended to two other types of hospital, psychiatric hospitals, and social healthcare centres, and in 1999, two networks were created: a) centres, services and mental health institutions8, and b) centres of services and social healthcare establishments9 the strategy was to apply the xhup formula, namely a consolidated network of hospitals with minimum care standards and information systems, to care for psychiatric patients and patients who required social healthcare services. 8 “decret 213/1999, de 27 de juliol, pel qual es crea la xarxa de centres, serveis i establiments de salut mental d’utilització pública de catalunya.” diari oficial de la generalitat de catalunya, august 3, 1999. 9 “decret 242/1999, de 31 d’agost, que crea la xarxa de centres, serveis i establiments sociosanitaris d’utilització pública de catalunya.”, diari oficial de la generalitat de catalunya, august 31, 1999. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 272 in 2000, the three networks were consolidated (acute, psychiatric and social healthcare patients) in a single list called the integrated health system (siscat).10 in addition to hospital facilities, it also included primary care centres. ten years later, in 2010, siscat was reformed and expanded, bringing all the hospitals together in a single network.11 two other networks were added: "community-level health centres and services", which included primary care centres, and "health transportation services". siscat included hospitals from the social security system, from the generalitat, public hospitals and the "privately owned centres whose services are needed to implement the provisions of the health plan of catalonia." as of august 2020 , the department of health website provides information on the composition of siscat: 68 hospitals, 434 primary care facilities, 102 social healthcare centres, 40 mental health centres, 428 basic and advanced life support ambulances (svb and sva) and 4 air ambulances, as well as over 900 emergency transportation ambulances. the following table analyses the composition of siscat’s acute hospital network as of 2020 and compares it to the hospital network in 1985. this analysis seeks to examine the evolution in the last 35 years of the hospital services that are funded by the generalitat. 10 “decret 378/2000, de 21 de noviembre, pel qual es configura el sistema sanitari integral d’utilització pública de catalunya (siscat).”, diari oficial de la generalitat de catalunya, december 14, 2000. 11 “decret 196/2010, de 14 de desembre, del sistema sanitari integral d’utilització pública.” diari oficial de la generalitat de catalunya, december 16, 2010. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 273 table 1. siscat´s hospital network 1985 and 2020 type of hospital xhup 1985 * siscat 2020 ** related to local councils 26 16 mutual funds 8 1 diputaciones 4 0 red cross 3 0 others 4 2 ics 7 8 public companies 6 consortia (generalitat-local council) 16 church 3 2 sant joan de déu 2 3 privately owned 3 2 foundation 4 7 total 64 63 sources: (*) “decret 202/1985, de 15 de juliol, de creació de la xarxa hospitalària d’utilització púbica.” diari oficial de la generalitat de catalunya, july 29, 1985; (**)departament de salut. 2020. the number of hospitals stays fairly consistent between the two dates, but their composition has changed greatly. only half of the hospitals that were open in 1985 are still in operation in 2020. others have changed legal status, building or location. 4.1. the creation of consortia between the generalitat and local councils in 1985 at the xhup there was no consortium, while in 2020 at siscat there are 16 hospitals managed by 12 consortia shared between the generalitat and local city councils. the growth of the consortium legal formula has run in parallel to the decline in hospitals linked to city councils, that reduced in number from 26 in 1985 to just 16 in 2020. the link between hospitals and local councils was generally through the legal formula of a foundation, on whose board the city had representatives, including the mayor usually as president. only a few hospitals in 1985 were truly municipal dependencies, among which were the hospitals of barcelona city council or sant joan de reus (anguera 1990). volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 274 when management of social security hospitals was taken over by the generalitat, two hospitals were still under construction, in the cities of vic and terrassa. in those cities there were hospitals managed by foundations that were linked to the respective municipalities. when the social security system transferred the hospitals of vic and terrassa to the generalitat, they were empty buildings without staff or equipment. the traditional social security system would have hired staff and equipped these hospitals and when it started them it would have discontinued the contracts with the municipal hospitals. as a result, these hospitals would have closed and their staff would have been unemployed. consortiums between the generalitat and the local councils allowed the transfer of staff from the old hospital to the new one and also part of the equipment. in this way the new hospitals were set up more quickly and without the legal constraints of social security. the old hospitals were reconverted into social healthcare centres. in both cases, the generalitat retained the majority of the governing body seats of the consortia. the consortium formula was flexible, allowing for a number of options: a) to retain existing hospitals and their staff, b) to hire staff not bound to social security legislation, c) to keep local councils linked to public health services, d) to maintain the local tradition of the hospital, and e) to initiate social healthcare programs. in the city of sabadell at the beginning of the eighties, a variety of hospitals existed that belonged to various different institutions: the university, the city council, private mutual insurance funds, etc. these hospitals were small in size with few services and were competing with each other, without being able to offer better services. to improve hospital services, all hospitals were integrated into a single legal entity to facilitate the integration of services, while avoiding duplication and encouraging specialisation. the new hospital of the autonomous university was chosen to centralise all the services of the hospitals of the city. a consortium volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 275 with a majority from the generalitat was created, with participation from the city council of sabadell and all the institutions that had originally owned the hospitals in the area. the consortium formula has been successfully applied to 16 hospitals. the biggest operation was in the city of barcelona in 2010, when the generalitat and the city council created a consortium called the parc de salut mar with the generalitat having the majority of seats on the board. the hospital clinic, which was also the teaching hospital for the university of barcelona, was transferred to the generalitat by the provincial council of barcelona. to manage the hospital, a consortium was created between the generalitat and the university of barcelona. one specific case is a consortium that was formed by two city councils without the participation of the generalitat, to jointly manage the hospitals of sant antoni abad and sant camil. 4.2. the creation of public companies public companies have been created by the generalitat to manage hospitals when there was no need to share governance with a local council. provincial councils had hospitals and services to meet their responsibilities for charity and mental health. the councils of girona, lleida and tarragona transferred their hospitals to the generalitat, which then chose to create public companies to manage these services. the spanish association against cancer (asociación española contra el cáncer, aecc) had built a hospital in l’hospitalet de llobregat near barcelona with the intention of creating a specialised oncology hospital. the association was unable to launch the hospital and gave it to volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 276 the generalitat, which created a public enterprise to manage it under the title of the catalan institute of oncology dedicated to cancer care. 4.3. mutual funds most hospitals that belonged to mutual insurance funds have disappeared, from eight in 1985 and now only one. mutual funds provided health care to their members which was similar to that of social security. after social security contribution was made mandatory, paying in addition for separate mutual insurance became an extra cost. membership was declining and the funds became unworkable. one of the most significant cases was that of the quinta de salut la alianza. at its peak, it was the most important mutual insurance society in catalonia, having been founded at the beginning of the 20th century and had a number of hospitals, four of which were integrated into the xhup. the crisis of the mutual insurance fund model that was mentioned earlier affected this entity profoundly. eventually it sold its best and largest hospital, the hospital sagrat cor, to a private company and disappeared as a mutual insurance company. the only surviving mutual insurance fund company has been the mutua de terrassa, which has diversified and survived. 4.4. church in 1985 there were five hospitals that belonged to religious orders. in 2020, there are still five but with some notable changes, especially in relation to those managed by the order of sant joan de déu. in 1985 the order operated two children's hospitals, one in barcelona and the other in manresa. in the eighties, there were five hospitals in manresa: one was a foundation chaired by the mayor, another belonged to the caixa de manresa, a third to a mutua (a private mutual fund), volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 277 a fourth to a religious order of nuns, and a fifth to the hospital order of sant joan de déu. the plan was to integrate all hospitals into a single unit to improve performance. the main unit chosen was the hospital sant joan de déu that was expanded in capacity and incorporated all the other hospitals into it. the legal solution adopted was a foundation where the order of sant joan de déu, the city council of manresa and the mutua manresana are all represented. the sant joan de déu order built a new hospital in sant boi de llobregat which is also integrated into siscat. 4.5. foundations most foundations were associated with town councils, but some did not have this municipal link and have continued as private foundations. a special case is the hospital de la santa creu i sant pau, where the generalitat invested in the new hospital and was therefore included in the new board set up in conjunction with the city council and the bishop of barcelona. 5. conclusions the main objectives of the generalitat's hospital policy between 1980 and 2020 have been: a) maintaining the participation of city councils in hospital governance; and b) improving hospital efficiency. a) retaining city council participation in hospital governance in 1980, half of the hospitals providing public health care were linked to the city council of the town where they were based. some municipalities had invested in the construction of hospitals and their maintenance, as was the case with barcelona city council, but most hospitals were private foundations. these foundations were created by local benefactors who volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 278 had donated money and property to hospitals. generally, the founders included the city hall and its mayor as members of the board of the foundation in order to ensure its continuity and to ensure that attention was paid to the poorest section of the local population (reventós 1996). by 2020, half of the hospitals linked to local foundations were still in operation, while the other half had been transformed into consortia with the generalitat in majority control and local councils, and in some cases the original foundations, holding minority stakes. if the hospital was very old and needed a major redevelopment, the generalitat invested in the construction of a new hospital and created a consortium where it had a legal majority, and kept the link to the city council and the original foundation. in many cases, the former hospital was converted into a social healthcare centre. this municipal involvement in hospitals that provide public service, be it in the form of a foundation or of a consortium, is unique within spain. in other regions local councils have no role in hospital care. b) to improve hospital efficiency hospital efficiency when hospitals were managed by social security was very poor. the hospital staff working under the social security system enjoyed a special status that was equivalent to that of civil servants and management was centralised at the headquarters in madrid. the transfer of social security services to each autonomous community made it possible to reduce the centralisation of management and bring decisions closer to the source of problems. this did not change the legal structure of the institution, in which hospitals had no autonomy and bureaucracy was a problem. the hospitals did not have legal autonomy but were treated as sections of a centralised body. studies on the efficiency of hospitals in spain volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 279 corroborate the fact that hospitals with legal autonomy had better efficiency indicators than those managed by the classic social security model (pérez romero et al. 2018). in the case of catalonia, consortia and public companies were the legal formulas chosen by the generalitat in order to preserve autonomy in the governance of the hospitals. in the last decade, some restrictions have appeared related to the management autonomy of hospitals in catalonia. a 2010 publication by the generalitat (pozo and planas 2010) explained the reasons for limiting the autonomy of management. an important milestone was the integration of consortia and public companies into the european accounting system (sec 2010), which classifies a public institution as one that, although holding a private legal status, receives most of its income from the government, and this involves applying public procurement legislation. another limitation was the budget reductions for 2010 and beyond, and the financial control imposed by the treasury department to reduce the public deficit. as a result of these measures, the bureaucratic gap between these management formulas and the classic social security policy has narrowed, but it seems that it is still room enough to enable more efficient management, especially as the staff is not subject to the staff regulations of the social security and that there is no prior control of expenditure. references anguera, pere. 1990. hospital sant joan de reus 1240-1990. reus: hospital sant joan de reus. aragó, ignasi. 1967. els hospitals a catalunya, barcelona: altés. asenjo, miguel angel. 2017. una reforma hospitalaria radical y consensuada, barcelona: universitat de barcelona. bohigas, lluis. 2014. “el model sanitari català abans de la losc.” referent. papers de la fundació unió, 14:6-12. volume 6, number 1, 263-280, january-june 2021 doi.org/10.1344/jesb2021.1.j089 280 bohigas, lluís. 2020. “la modernització de l’hospital de la santa creu i sant pau (1965-1980).” gimbernat 73: 153-167. doi: 10.1344/gimbernat2020.73.9. corbella, jacint. 2006. historia de l’hospital clínic de barcelona, barcelona: universitat de barcelona. departament de salut. 2020. accessed august 25. https://catsalut.gencat.cat/ca/coneixcatsalut/presentacio/model-sanitari-catala/siscat. departament de sanitat i seguretat social. 1994. la xarxa hospitalària d’utilització pública de catalunya. història d’una diversitat. barcelona: generalitat de catalunya. generalitat de catalunya. 1983. planificació sanitària pública a catalunya. desplegament del mapa sanitari de catalunya. barcelona: departament de sanitat i seguretat social. net, àlvar. 2001. “hospital de la santa creu i sant pau, reflexions en el seu 600 aniversari.” in l’hospital de la santa creu i sant pau 1401-2001, various authors, 234-46 barcelona: lunwerg editores. pérez romero, carmen, m. isabel ortega diaz, ricardo ocaña riola, josé jesús martin martin. 2018. “análisis multinivel de la eficiéncia técnica de los hospitales del sistema nacional de salud español por tipo de propiedad y gestión.” gaceta sanitaria 33(4): 325-332. doi: 10.1016/j.gaceta.2018.02.005. pozo, ana, and ivan planas. 2010. “les empreses públiques i els consorcis en el marc del model sanitari català.” in evolució del model de governança i gestió de les entitats participades pel servei català de la salut, directed by ivan planas, 57-79. barcelona: generalitat de catalunya, departament salut. https://catsalut.gencat.cat/web/.content/minisite/catsalut/coneix_catsalut/organitzacio/empresespubliques-consorcis/model-de-gestio-catala.pdf. raventós, jacint, anna garcía, and carme piqué. 1990. historia de la medicina catalana sota el franquisme. barcelona: editorial hacer. reventós, jacint. 1996. els hospitals i la societat catalana. barcelona: editorial hacer. trias, xavier. 1990. “discurs de presentació del projecte de llei d’ordenació sanitària de catalunya al parlament de catalunya.” diari del parlament de catalunya. june 13. de juny de 1990. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. https://doi.org/10.1344/gimbernat2020.73.9 https://catsalut.gencat.cat/ca/coneix-catsalut/presentacio/model-sanitari-catala/siscat https://catsalut.gencat.cat/ca/coneix-catsalut/presentacio/model-sanitari-catala/siscat https://doi.org/10.1016/j.gaceta.2018.02.005 https://catsalut.gencat.cat/web/.content/minisite/catsalut/coneix_catsalut/organitzacio/empreses-publiques-consorcis/model-de-gestio-catala.pdf https://catsalut.gencat.cat/web/.content/minisite/catsalut/coneix_catsalut/organitzacio/empreses-publiques-consorcis/model-de-gestio-catala.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 maría de los ángeles lucero bringasa universidad católica de córdoba (argentina) norma patricia carob universidad nacional de córdoba (argentina) protocol and its effect on the continuity of the argentinian family business through structural equation models abstract family businesses are representative of the economy in argentina. they are characterized by a strong vocation for continuity as part of the family legacy. however, their permanence has been hindered in most cases by lack of management of the business family. the high rate of disappearance is due in most cases to family-type setbacks. the family protocol is a tool that contributes to progress of family businesses, facilitating management of the company and the business family. the objective of this work is to find correlation among behaviour of family businesses and the family protocol as a management tool for the permanence of the family business. structural equations models (sem) were applied, where on the one hand, the latent variable "continuity"which indicates the perception that members of family businesses have was defined and on the other hand, if “having a protocol” has an implication on their endurance. it is concluded that having a family protocol which includes the guidelines for family and business management contributes to permanence of the family business with all the benefits that this implies both for the business family itself and for the society and economy in which it is immersed. keywords: family businesses; family protocol; structural equation models-sem corresponding author: e-mail: director.cef@ucc.edu.ar received 18 july 2018 accepted 24 oct 2018 afacultad de ciencias económicas y administración, universidad católica de córdoba; bfacultad de ciencias económicas, universidad nacional de córdoba this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 introduction presentation of the research problem according to the institute of public research (1999) cited by the inter-american development bank (2006), in argentina, 70% of the companies disappear in the first generation of families, and the same proportion is repeated in the following generations: the children inherit 30% of the firms and only 5% reach grandchildren. the memorandum of the inter-american development bank expresses that the main cause of this problem is a lack of knowledge of leaders of family businesses of the importance of having a professional management and family protocol. this statistic follows the same behavior in most of the world. from our research, we wanted to contribute to the knowledge of this tool in argentina. through exploratory research, we were able to detect that some business families had resorted to protocol to guarantee continuity. however, they also expressed not having obtained said results. in our research, we wanted to delve into the aspects that the protocol must have in order to be an instrument that contributes effectively to continuity. amat and corona (2007) defines the family protocol as a document through which the family members of the company can address the problems that affect its continuity, agreeing on principles and rules whose compliance contribute to a greater family unity and enable the continuity of the company. in this sense, this document assists problems resolution as well as their prevention. therefore, the protocol can be understood as an agreement of the wishes of family business members, designed to facilitate management of the family enterprise and to maintain the health and ultimate purpose of each of the components of the company-family system and their resultant superposition. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 in this sense, given the relevance of family businesses and their high level of disappearance; considering as well the adverse consequences that this entails for all the agents involved, our research is oriented to study the contributions of the family protocol as an ideal instrument to achieve preservation of the family business through adequate management. hypothesis family protocol contributes to management of family enterprise and business family towards its continuity. applied methodology model of structural equations: concept and contributions of the model based on our hypothesis, we searched for a statistical technique that would allow us to arrive to valid conclusions on subjective issues such as family and business management, protocol and continuity. in order to identify relationships between variables (caballero 2006), the model of structural equations was used. these models are increasingly being disseminated in studies linked to companies, making it possible to investigate areas or processes that are difficult to measure. cupani (2012) states that the main contribution of this type of models offers researchers the possibility of evaluating theoretical models, becoming one of the most effective tools for the study of causal relationships on non-experimental data in linear relationships. it clarifies that this model contributes to the selection of relevant causal hypotheses, discarding those not supported by empirical evidence. in this sense, it is important to note the theoretical frame to specify the relationship of dependence. for ruiz et al. (2010) once the model is estimated it is necessary to evaluate its quality through goodness-of-fit statistics. likewise, bojórquez molina et al. (2013) suggests that the reliability http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 of the instrument measurement is necessary and to this end he states that the alpha of cronbanch is one of the most used. method. development, analysis, and results a. exploratory investigation the first step, was to identify the management tool that could contribute to continuity. in this way we conducted an exploratory investigation. (sampieri et al. 2011). we steered individual interviews with family managers of 15 companies of different sizes and sectors which had between 20 and 1000 employees where each of the interviewees were able to express the main peculiarities of this type of company inherent in business management, family and relations between both. they expressed difficulties that were presented to them when managing competing interests between family and company and how these situations affected the continuity of the organization. they also shared in each case which actions they took to prevent disagreements that could affect the profitability of the firm and / or undermine the permanence of the company in the hands of the business family. some of these business families had already designed a family protocol to manage relationships between the parties. six (40%) of the interviewees expressed having a protocol and agreed on the fact that they had done it to guarantee the continuity of the family business. however, they expressed that it was not giving them the expected result in most cases. b. state of the art we conducted a thorough investigation of available bibliography of diverse authors from different latitudes and sources. however, we found is scarce literature on protocol, especially from a managerial point of view. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 b. 1. family protocol – concepts tápies (2011) states that the family protocol becomes a document of vital importance for the purpose of regulating the relationship between corporate and family governance bodies. the concept of family protocol comes from the hand of ward and gallo (1991) resulting from strategic planning studies in the family business taken place in the nineties as part of a research stream related to the concept of corporate governance in family businesses. tápies et al. (2011), sánchez and crespo (2009), fernández del pozo (2008), favier dubois (h) and spagnolo (2013), bermejo (2008), trevinyo rodríguez (2010), molina sandoval (2014) define the family protocol from different perspectives with similar characteristics and specific particularities for each business family. all this converges and the family protocol is defined as a tool that allows managing the family and the company, as well as the relationships that arise from them, with the main objective of ensuring the proper functioning of the family-oriented group and sustainable family business growth over time. according to the working hypothesis, the family protocol is the tool that most contributes to the continuity of family businesses. this instrument allows the parties to be managed, making it possible for each to contribute to the common goal of continuity. it is materialized in a document or agreement, through which the family members can anticipate and channel the problems that affect their permanence, through principles, rules and norms oriented to a greater family unity, perpetuity and strengthening of the company. the protocol thus constitutes an indispensable management tool for the survival of the business family. its existence and fulfilment generates greater security and trust not only for family members but also with respect to third parties, since owning it implies a code of conduct and acting towards the family and society in general. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 it is necessary to highlight the importance this instrument provides in these organizations, however, its establishment requires predisposition towards dialogue and consensus on the most critical issues, which can undoubtedly be cause of conflicts, on part of the business family. b. 2. content of the family protocol according to its reality and shared vision, each business family, given the life cycle it goes through, its family evolution and characteristics of its heritage, must take intoaccount different aspects. according to our experience, some aspects will be common to most of them, while others will be specific to each family company. this requires for them to be identified and valued. trevinyo rodríguez (2010) emphasizes the need for the inclusion of minimum key aspects such as those of a moral and legal nature, and includes aspects such as the following: the reasons for doing the protocol we want as a business family; culture and values and their projection in the organization, type of company, expectations, conflictive situations, corporate and family governance bodies, economic rights, organization in the family-company relationship, etcetera. the family protocol will guide the business family allowing planning in a strategic manner according to what was agreed upon in a timely manner. it assumes different concepts, but in essence all agree that it is, in short, an agreement on the issues inherent to the company and the family tending to the permanence and survival of the family business throughout generations. in his research regarding the keys to success of lifelong standing family businesses, gallo and amat. (2003) points out among the most important aspects, the development of rules of coexistence and a fluid, spontaneous and frequent communication starting from the family member’s childhood. as a corollary to establish the family protocol, he mentions: education of children, stimulation through experiences outside the company, the anticipated development of http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 a professional career and prevision of the family organization for the future generation. this topic highlights and reaffirms the importance of the instrument in the durability of family businesses. to sum up, the protocol as any management tool should be adapted to the type of company in question, regardless of size, generation, etcetera. as long as this instrument allows the company and the family to be managed, the growth of the organization will be possible, and therefore the patrimonial increase of the business family, as well as the family unity. this goal will be achieved through a series of agreements that must be managed and that will make it feasible to establish and delimit the areas of influence between both systems. family business protocol is the ideal instrument to manage family business. however, we highlight the importance of the manner in which this contract is elaborated and updated, as well as governing bodies capable of implementing, executing and adapting it to new circumstances. c. interview with experts. in order to obtain and deepen relevant information, we conducted in-depth unstructured interviews with experts in the field. in this way we acceded to a greater amount of antecedents, testimonies and foundations through a scheme of open questions devoid of a sequential order, vargas (2012). with the exploratory investigation, the state of art and the interview with experts, we elaborated the survey and consequently obtained data that allowed construction of models to validate the hypothesis under study. d. data collection. survey from there, we developed the survey for data collection (pimenta lastra 2000). this form was the result of the systematization of the information with questions and validation through a http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 likert scale according to the general and specific objectives proposed and the formulation of the research problem. e. sampling technique given the non-existence in our country of official statistics about family businesses population, our research has been non-probabilistic (pimienta lastra 2000). sampling technique used was casual and the questionnaire was sent by e-mail or paper. contacts were obtained through the main business chambers, professional associations, and universities to which we have had personal access in most cases. these entities, according to the established guidelines, contributed to access of family organizations. in order to consider the family business typology, we took into account, the following requirements according to the theoretical framework: ownership of the capital belonging mostly to one or more families, decisions making and control of the company in the hands of family members and a strong vocation towards the continuity of this family business in the hands of the following generations. f. models of structural equations: estimation strategy in order to corroborate the hypothesis, we elaborated a business management model and a family management model. further, we modeled the continuity construct related to the variables of the previous models, and finally we related the continuity with “the fact of having or not a protocol” for the purpose of testing the hypothesis. in all cases we selected the variables that, according to the theoretical framework, exploratory research and interviews with experts, allowed us to measure each of the models. f. 1. variables at a first stage we identified 54 variables referred to characterize the company, the generations involved, whether or not they had a protocol, its applicability, years of validity, execution. after http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 agreeing with a protocol definition, the variables were referred to the process of diagnosis, elaboration, execution and updating. furthermore, a latent variable was defined: “continuity” that reflects the perception of the family business around this intention. the perception of the phenomenon of survival influences the relevant indicators that were significant after applying dimension reduction techniques (analysis of main components). table 1 shows the indicators that depend on the latent construct. table 1. defined variables variables latent indicators continuity c21: the protocol is valid to anticipate conflicts. c22: the protocol contributes to the resolution of conflicts. c24: the protocol favours maintaining healthy bonds within the business family. c25: the protocol contributes to the prolongation of the lifecycle of the company c31: values, tradition, culture and principles are elements of indispensable importance to be reflected in the protocol. c32: it is transcendental that all members of the family agree with the type of company they want. (shared vision) c35: it is necessary to define the business and family management bodies c41: it is advisable to incorporate all types of rules that allow managing the company-family relationship. protocol (having it or not) http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 f. 2. model models of structural equations (sem) were applied in search for causal analysis between the actions of members of family businesses in relation to family protocol as a business and family management tool for continuity of the family business. sem began to extend from 1973, when the lisrel analysis program (linear structural relations, jöreskog 1973) emerged, which was the initial kick off because they are complex models that require a high computational capacity. these models are used to construct explanatory schemes, that is, theories that enable a better understanding of the reality and of the observed phenomena through quantitative tests, which determine to what extent the data of a sample supports a theoretical model of multiple relations of dependence between variables, proposed in contrast by the researcher (ruiz et al. 2010). the sem are a family of multivariate statistical models which allow estimating the effect and relationships between multiple variables. they have the advantage of providing greater flexibility to regression models, since they are less restrictive due to the fact that they allow inclusion of mean errors in both dependent and independent variables. in these models, the aim is to adjust the covariance between the variables, that is, to minimize the difference between the covariance observed in the sample and the covariance estimated by the structural model. this idea is summarized in the following equation: ho: σ = σ () where, σ: population variance-covariance matrix among the variables observed σ (): estimated variance-covariance matrix derived as a function of the parameters contained in the vector . http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 cupani (2012) states this type of models allows us to simultaneously analyse a series of dependency relationships between variables with the particularity that it allows for its study when a dependent variable becomes independent in subsequent dependency relationships. the model contributes to the selection of relevant causal hypotheses, with the theoretical support for the specification of these dependency relationships. once the model has been estimated it is necessary to evaluate its quality through goodness-offit statistics (ruiz et al. 2010). these models can be denoted through their analytical expressions or graphically. for example,1 𝑥1 = 𝛼1 + 𝛽1𝑋 + 𝑒𝑥1 𝑥2 = 𝛼2 + 𝛽2𝑋 + 𝑒𝑥2 𝑥3 = 𝛼3 + 𝛽3𝑋 + 𝑒𝑥3 𝑥4 = 𝛼4 + 𝛽4𝑋 + 𝑒𝑥4 cronbach's alpha was used as a measure of internal consistency in order to estimate the reliability of a measurement instrument through a set of items that are expected to measure the same construct or theoretical dimension. in this way, the validity of the data collection instrument was tested, which measures what it intends to measure. the measure of reliability using cronbach's alpha assumes that the items on a likert scale acquire the same construct and are highly correlated. the closer the value of alpha to 1 is, the greater the internal consistency of the items analysed is. reliability of the scale must always be obtained with the data of each sample to guarantee reliable measurement of the construct in the specific research sample. 1 source stata v.14 http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 this research is based on the assumption that the family protocol contributes to permanence of the company, it should reflect shared vision, values, culture, tradition and principles that will be a guide for business management. for the purposes of good management, it is necessary to define the corporate governance bodies that function actively according to the purpose created, as well as the family governance bodies that allow managing the business family, so that they constitute a bridge between the company and the family, preventing one of the parts of the binomials from advancing on the other. a model was built, based on the theoretical framework and expert interviews. it includes the mentioned indicators, the protocol variable and two parameters that contributed to a good fit of the model to the data set were added. the covariance between c21-c25 and c22-c35 are added. establishing norms and agreements, through the protocol, allows anticipating conflicts (c21), which will imply a contribution to the prolongation of the family business (c25) over time. this instrument will also allow, where appropriate, to resolve problematic situations (c22), for which it will be necessary to define the business and family management bodies (c35) that make it possible to carry them out concretely. the formalization of the model is: 𝐶21 = 𝛼1 + 𝛽1𝐶𝑜𝑛𝑡 + 𝑒𝐶21 𝐶22 = 𝛼2 + 𝛽2𝐶𝑜𝑛𝑡 + 𝑒𝐶22 𝐶24 = 𝛼3 + 𝛽3𝐶𝑜𝑛𝑡 + 𝑒𝐶24 𝐶32 = 𝛼4 + 𝛽4𝐶𝑜𝑛𝑡 + 𝑒𝐶32 𝐶35 = 𝛼5 + 𝛽5𝐶𝑜𝑛𝑡 + 𝑒𝐶35 𝐶41 = 𝛼6 + 𝛽6𝐶𝑜𝑛𝑡 + 𝑒𝐶41 𝐶25 = 𝛼7 + 𝛽7𝐶𝑜𝑛𝑡 + 𝑒𝐶25 𝐶31 = 𝛼8 + 𝛽8𝐶𝑜𝑛𝑡 + 𝑒𝐶31 𝐶𝑜𝑛𝑡 = 𝛼9 + 𝛽9𝑃𝑟𝑜𝑡𝑜𝑐𝑜𝑙𝑜 + 𝑒𝐶𝑜𝑛𝑡 𝜎𝑒𝐶21;𝑒𝐶25 = 𝜎𝑒𝐶25;𝑒𝐶21 = 0 𝜎𝑒𝐶22;𝑒𝐶35 = 𝜎𝑒𝐶35;𝑒𝐶22 = 0 http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 f. 3. modeling f. 3. 1. business management model. the indicators that are influenced by the perception about business management are: c25 the protocol contributes to the extension of the lifecycle of the company. figure 1. business management model c31 values, tradition, culture and principles are elements of indispensable importance to be reflected in the protocol. c32 it is transcendental that all members of the family agree with the type of company they want. (shared vision). c35 it is necessary to define the business and family management bodies. c37 succession planning is the topic of the highest hierarchy. c41 it is advisable to incorporate all kinds of rules that allow managing the relationship companyfamily. cronbach's alpha was calculated and the result was 0.8727, a very good scale to measure what is desired. the relationships (p-value) were all significant. this shows that there is a positive perception of all the variables in relation to business management. the measures of goodness of fit presented acceptable values. srmr (standardized root mean residual square) 0.022 and rmsea (root mean square error of approximation) 0.01. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 we can conclude from the data stated above: the family protocol positively affects business management as it contributes to the continuity of the company over time through the transmission of values, culture, tradition and principles. it is necessary that the shared vision of the business family be reflected in the desired organization; it becomes important to define both corporate and family governing bodies as well as planning for the generational transition and any rule that regulates family business links. f. 3. 2. family management model. the indicators that are influenced by their perception of family management are: c21 the protocol is valid to anticipate conflicts. c22 the protocol contributes to the resolution of conflicts. c24 the protocol favors maintaining healthy links within the family business.c32 it is crucial that all family members agree with the type of company they want (shared vision). c35 it is necessary to define the corporate and family governance bodies. c41 it is advisable to incorporate all types of rules that allow managing the company-family relationship. cronbach's alpha was calculated and the result was 0.9060, which indicates that the scale is adequate. pvalues were significant as well as the measures of goodness of fit. figure 2. family business model http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 the protocol is a good instrument for family management since it allows to anticipate and, when necessary, to resolve conflicts; favoring maintaining healthy family ties. through this instrument, members of the business family capture the shared vision about the type of company they wish to have. therefore, establishing all kinds of rules that regulate the family business relationships acquires special significance. to define corporate and family governance bodies will contribute positively to family management. f. 3. 3. model that includes continuity (continuity model) attending to the variables of the business and family management constructs, we elaborated the continuity construct in order to build a model that relates both managements to the vision of the prolongation of the family company. we added variable c25 to this model: the protocol contributes to the extension of the lifecycle of the company. figure 3. continuity model the cronbach's alpha was calculated and the result was 0.9338, which means that it is a good scale of measurement. all significant relationships (p-value) are observed, which means that the continuity construct is positively reflected in the defined indicators. since all measures of http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 goodness of adjustment (rmsea and the srmr) were accepted, i would affirm that the model is adequate. f. 3. 4. model for the continuity of the company with a protocol (protocol model) next, we added to the model the variable “having a protocol” and its importance for continuity. from the modeling performed, it was necessary to add two parameters in order for a better fit to the data set and contribution to the fulfillment of the hypotheses, in this case, the covariance between c21 and c25, c22 and c35 were added. establishing norms and agreements through the protocol allows anticipating conflicts (c21), which will imply a contribution to the extension of the family business (c25) over time. this instrument will also allow, when appropriate, to resolve problematic situations (c22), for which it will be necessary to define business and family management bodies (c35) that make it possible to specifically carry them out. figure 4. protocol model http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 cronbach's alpha throws a value of 0.9338, which would indicate that what is desired is measured. the measurements of goodness of fit showed that relationships are significant. that is, continuity is reflected positively in the indicators. it is important to highlight the significant relationship between having or not having a protocol with the continuity construct, which indicates that having a family protocol positively affects continuity of the company. the values of p-value shows us the approval of the hypotheses. having a family protocol contributes to the continuity of the family business. regarding the measures of goodness of fit, it shows a value affirmed by rmsea and srmr. having a family protocol which includes the guidelines for family and business management will contribute to the continuity of the family business with all the benefits that this implies for business family itself and for the society and economy in which it is immersed. the guidelines that have been defined in each of the variables should be consistent with the life cycle of the company and the size of the business family and its heritage. g. results the main variables that link instrument with continuity refer to business management in that it contributes to the extension, allows to capture values, culture, traditions and principles, including succession planning on the one hand, and family management in how much is valid to anticipate and resolve conflicts and favours to maintain healthy links, on the other hand. common to both procedures are shared vision, definition of corporate and family governance bodies and the possibility of including all kinds of rules that allow the company-family to be managed. the alpha of cronbach yields a value of 0.9338 indicating it is a very good instrument that captures what is intended to be measured. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 as shown in table 2, the relationships are significant, meaning progress is reflected positively in the indicators. it is important to highlight the significant relationship between having or not having a protocol with the continuity construct, which would indicate that investing in a family protocol positively affects the progress of the company. the probability values (p-value) show us that the observed indicators are significantly affected by the latent variable: “continuity”, which is on the other hand influenced by having a protocol. table 2. relations of the model ratio coefficient statistical p-value c21 <continuity* 1 4,23 0,000 c22 <continuity 0,8345 14,27 0,000 c24 <continuity 1,0409 14,02 0,000 c32 <continuity 1,0354 9,37 0,000 c35 <continuity 1,0195 13,9 0,000 c41 <continuity 0,8813 9,87 0,000 c25 <continuity 1,0481 13,19 0,000 c31 <continuity 1,0423 10,80 0,000 protocol <continuity 0,37 2,28 0,022 cov ( c21,c25) cov (c22,c35) -.122945 -.122014 -2,5 -2,7 0,01 0,007 test of the model vs the saturated model p = 0.05 the probability value (p) is 005, this limit value indicates the hypothesis that the data reproduces the variance and covariance matrix of the population is not rejected. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 this is confirmed with the measures of goodness of fit, the approximation of the root of the mean square error (rmsea) that measures how much error exists per degree of freedom and the root of the standardized residual mean square error (srmr) that measures how close each correlation can be reproduced, on average. the first one yields an acceptable value and the second one a good adjustment. table 3. measures of goodness of fit measures of goodness of fit value srmr 0,057 rmsea 0,048 having a family protocol which includes the guidelines for family and business management will contribute to the continuity of the family business with all the benefits that this implies both for the business family itself and for the society and economy in which it is immersed. the guidelines that have been defined in each of the variables should be consistent with the life cycle of the company and the size of the business family and its heritage. conclusions according to the stated hypothesis: "family protocol contributes to the management of the family enterprise and the business family towards its continuity" and given the results of our research we are able to affirm that the family protocol is a business and family management tool that contributes to permanence. we must clarify that this statement is valid for the companies surveyed. recall that one of the limitations of our research is not to have the population of argentine family businesses. however, the results obtained encourage us to expand our sample in the future and work on obtaining population data on family companies in our country. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 relevance of family businesses in the capitalist economies of the west is known, since they make up a high percentage of the business collective contributing to the economy, society and region in which they are immersed. likewise, it is known its high level of disappearance is generated mainly by conflicts that derive from the coexistence of the company and family systems, causing highly negative impacts at the macro, micro level and for the own business family. this work intends to contribute to the progress of these companies in the hands of the following generations promoting the growth of the organization along with healthy family ties. in that sense we proposed to demonstrate that the family protocol is the ideal tool as long as it complies with certain factors at both the business and family levels. these variables were identified by the models, affirming the proposed hypothesis. it should be noted that as any management tool, the family protocol should conform to guidelines for development, implementation, control and feedback for its proper functioning. additionally, someone in charge of management and communication and participation of those involved is essential to its proper functioning. references amat, joan, and juan fernando corona. 2007. el protocolo familiar. la experiencia de una década. barcelona: deusto editions. bermejo manuel. 2008. hacia la empresa familiar líder. españa: ft prentice hall. bojórquez molina josé, lina lópez aranda, maría hernández, and eusebio jiménez lópez. 2013. “use of cronbanch's alpha to validate the reliability of measuring student satisfaction in the use of mintab software.” cancún mexico. innovation in engineering technology and education for competitiveness and prosperty. agust 14-16. caballero domingo, antonio j. 2006. “sem versus pls: a practice-based approach.” complutense university of madrid. iv congreso de metodología de encuestas. pamplona, spain, september 20-22. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 208-228, january-june 2019 doi:10.1344/jesb2019.1.j057 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 cupani, marcos. 2012. “análisis de ecuaciones estructurales: conceptos, etapas de desarrollo y un ejemplo de aplicación.” revista tesis 1:186 -199. favier dubois, eduardo (h) and lucia spagnolo. 2013. herramientas legales para la empresa familiar. argentina: ad hoc. fernandez del pozo, luis. 2008. el protocolo familiar. españa: thomson civitas gallo, miguel angel, and joan amat. 2003. los secretos de las empresas familiares centenarias. barcelona: deusto. inter-american development bank. 2006. memorando: promover la supervivencia y competitividad de las empresas familiares de la región centro 1-8 (ar-m1020) jöreskog, karl g. 1973. “a general method for estimating a linear structural equation system.” in structural equation models in the social sciences, edited by goldberge r , and o.d. duncan, 85 -112. new york: seminar. a.s. molina sandoval, carlos. 2014. empresas familiares herramientas de planificación y profesionalización. buenos aires: erreius. sanchez, antonio, and crespo casanova. 2009. el protocolo familiar. madrid: gofer. siampietri hernandez, roberto, carlos fernandez collado, and lucio baptista. 2011. metodología de la investigación (iv edición). méxico: mcgrae hill. statacorp. 2015. stata statistical software: release14. college station, tx: stata corplp 2-34 pimienta lastra, rodrigo. 2000. “encuestas probabilísticas versus no probabilísticas. universidad autónoma metropolitana.” unidad xochimico. política y cultura 13:263-276. ruiz, miguel, antonio pardo, and rafael san martín. 2010. “models of structural equations.” papers of the psychologist 31:34-45. tápies, josep. 2011. familia empresaria. madrid: lid editorial empresarial. trevinyo rodríguez, rosa n. 2010. empresas familiares. méxico: visión latinoamericana pearson. vargas jiménez, ileana. 2012. “the interview in qualitative research: new trends and challenges.” quality magazine in higher education 3:119-139. ward, john, and miguel gallo. 1991. “nota técnica de la división de investigación del iese cátedra de empresa familiar.” revista marzo1993dgn-448. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 armando dalla costa federal university of paraná (brazil) alexandre macchione saes university of são paulo (brazil) caroline gonçalves federal university of mato grosso do sul (brazil) expansion and internationalization of business companies in brazil: theoretical and methodological contributions abstract this paper presents the special issue of the journal of evolutionary studies in business about the internationalization of brazilian companies. the text aims to shed light on both traditional and new theories of internationalization in order to analyze the trajectories of brazilian multinationals in light of the world economic scenario of recent decades. this special issue presents five cases of internationalization of brazilian companies: embraer, in the aviation sector; weg, a producer of electric motors; expocaccer, a coffee cooperative; gerdau, a company in the steel sector; and romi, a producer of lathes, machines, and equipment. this introductory article intends to recover theoretical elements about the internationalization of firms and underline the role of the state in the development of brazilian companies. keywords: firm theory; internationalization of companies; brazilian multinationals corresponding author: ajdcosta@uol.com.br received 24 january 2018 accepted 02 july 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 introduction at the beginning of the twenty-first century, brazil rose to a prominent position in the world economic scenario, both due to its growing domestic market and to the maturity of some economic groups that began to occupy space in certain sectors of the world economy. as one of the eight largest economies in the world, brazil was characterized as an emerging market with great potential for new investments, thus becoming a destination for significant flows of capital and industrialized products from both traditional partners of foreign trade, such as the united states, as well as from new partners, especially china. on the other hand, the scenario of an opening up of the foreign market along with the strengthening of some brazilian companies in recent decades has increased the presence of brazilian companies abroad. as an example, we can cite those companies that benefited from the comparative economic advantages to establish companies abroad operating in the agriculture and raw input materials sectors, and also the companies that started offering high-technology industrialized products, such as aircraft production, high complexity services in the it and tertiary sector, and civil construction. this position achieved by some brazilian economic groups was not exclusively a result of the transformations in the international economy in recent decades. in many cases, the origin of this maturation process of the firms can be traced back to the mid-twentieth century, when the brazilian economy deepened its industrialization and began to build some of the important economic groups that are currently leaders in their branch of activity. as for the internationalization experiences of brazilian companies up to the 1990s, it is possible to single out some few successful cases resulting from the initiatives of the firms themselves, without having to depend on deliberate government policies. nevertheless, we are positively sure that http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 it was not until the 2000s that brazilian companies reached positions of greater prominence in the foreign market as a result of new national policies to foster internationalization. in this sense, this introductory article does not aim to make an exhaustive review of the literature on internationalization of companies in brazil. instead, it intends to shed light on the path followed by brazilian firms in their internationalization process. we will pursue this goal by opposing traditional theories of internationalization to the specificities of both the local economic environment and the companies’ strategies in recent decades. in doing so, we follow the perspective taken by previous studies that analyzed the business history of emerging markets as an alternative business history by considering the relevance of different institutional and economic structures (austin, dávila, and jones 2017, 538-544). the emerging-economy multinational enterprise debate remains a controversial subject in the international business theory. recent studies reaffirm the central role of the internationalization theory in the emerging multinational enterprise analysis (verbeke and kano 2015, 439; casson and wadeson 2018, 1); others, however, underline differences in terms of the headquarters design and enterprise organizational structures as a result of emerging countries’ market imperfections (da silva, casson, and jones 2018). this special issue will shed light not only in the brazilian experience, which received a little attention in the international literature, but also will show the institutional specificities that allowed those companies achieved the international market. internationalization of companies: from traditional theories to present-day evidence the significant presence of brazilian companies among the ranks of internationalized firms is recent after all, throughout the twentieth century, this process of expansion to the foreign market was chiefly carried out by central economies. this type of direct investments flow on http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 foreign markets has proliferated since the 1950s, with the united states leading the way in such process since the other developed capitalist countries, just recently coming out of world war ii, were involved in policies of material and economic reconstruction. direct foreign investments of the united states were of us$ 11.7 billion in 1938, of us$ 32.8 billion in 1960, and of us$ 107.0 billion in 1973. it was a strategy of overseas investment in a phase of deepening post-world war ii industrialization for the main countries, which were experiencing the reconstruction of their economies, and for the developing economies, which were enhancing their industrial structures through deliberate protection and incentive government policies, the so-called import substitution industrialization processes. in this sense, direct foreign investment was a way for us companies to conquer markets at a time when governments in both western and developing countries protected their economies from imports1. this new trend of investments disseminated by multinationals also gradually instituted a new consumption pattern that became widespread in the developed capitalist countries, as well as in the wealthier circles of less developed countries, during the 1950s. this process led to the dissemination of the modern consumer economy, which increased access to durable consumer goods, leisure, tourism, and fashion products. it also enabled the development of infrastructure and public services and improvements in housing: it was the massification of the american way of life, in which multinationals played an important role by establishing new consumption patterns around the world (van der wee 1987, 243). it was only after the reconstruction of the european and japanese economies, already visible in the late 1950s, that a new wave of multinationals would compete in the foreign market. the 1 in order to understand this process with regard to its financial impacts, we suggest reading mira wilkins (2013) and barry eichengreen (2000). for a more general evaluation of the period: saes and saes (2013, part v). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 effects of this diffusion process of enterprises would become tangible in the following mid1970s scenario: of the 391 largest multinationals, 180 were from the usa, 135 from continental europe and the united kingdom, 61 from japan, and 15 were based in other countries (vernon 1980, 41)2. these 391 multinationals maintained a total of 9,601 subsidiaries abroad, with 6,060 active in industrialized countries and 3,541 based in developing countries. the main sectors of activity of multinationals between the 1950s and 1970s were the manufacturing industry and oil exploration; these direct investments were mainly aimed at developed economies in europe, canada, japan, and australia (about 75% of the total). latin america, the economy that received most investment among the underdeveloped regions, accounted for 14% of the total (saes and saes 2013). based on the experiences of the developed countries, the firm internationalization theories have been established since the second half of the 20th century. the first studies, which aimed directly at the internationalization process of companies, sought to demonstrate which strengths allowed for their internationalization, especially within a microeconomic perspective. penrose (1959) claims that the internationalization process was a result of the expansion and diversification of productive, technological, corporate, and administrative resources. that is, the very expansion of the company alongside its acquired profits induced its internationalization. another perspective, based on new institutionalism, considers the socalled internalization theory through the transitions costs. these costs were evidenced by the 2 the relative decline of britain, a pioneer in this type of investment during the nineteenth century, becomes clearer when its numbers are compared with those of the united states: in 1938, britain’s external investments were in the order of us$ 23 billion (twice as much as the united states); in 1980, they reached us$ 75 billion (nearly half as much as the united states). japan, which began investing abroad in the late 1960s, had just about us$ 4.5 billion in foreign investments in 1971 (kenwood and lougheed, 1992, 250-251). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 organic relationship between the involved agents, either through explicit or implicit contracts (reid 1983). in hymer's (1960) market power theory, on the other hand, the firm's monopolistic character was emphasized, since, according to his view, the firm was the main market power and collusion agent. the author developed the theory according to which firms tended to increase their share in the local market as much as possible, achieving a high degree of monopoly power. when expansion in the local market was no longer possible, a firm used profits made in its country of origin to finance operations abroad. after developing superiority in the domestic market through mergers, acquisitions. and extension of its capacities, the firm took that market power abroad. therefore, according to hymer (1960), the internationalization of companies derives from the exclusive privileges of firms obtained in the domestic market, which allow for the return on investments abroad to surpass the costs of being a multinational. such a perspective resembled the ground argument of buckley and casson's (1976) theory. after realworld case studies, these authors reached the conclusion that the larger the firm, the greater its internationalization tendency leaned to be. they verified that these multinationals tended to be horizontally diversified, producing the same commodity in different factories and, in many cases, vertically integrated, producing intermediate products of the production chain.3 from a macroeconomic view, the vernon’s (1966) company internationalization process was analyzed in view of the stages or phases of the product. even if the understanding of the 3 for buckley and casson (1976), there were four relevant factors in the companies' decision to internationalize: i) industry-specific factors: the nature of the product, the structure of the external market, and the relationship between the optimal scales of the activities that are linked by the market; ii) specific geographic factors: the physical and social distances between the involved regions, since the greater these distances, the greater the internalization costs and, consequently, the smaller the incentives for this decision; iii) specific local factors: political and fiscal relations between the involved countries; iv) specific factors of the firms: level of professionalization of their managerial frame. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 internationalization becomes directly evident in the second and third phases (growth and standardization), it is the first phase that generates the possibilities for future internationalization. according to the author, the introduction phase (the first one) only takes place in developed countries, which have the technological mastery, make large sums available for research investment, and have a developed market. from the perspective of vernon, the internationalization of a company could be verified in two moments. in the first one (product growth), the internationalization would take place in countries with same levels of development. the establishment of a subsidiary would happen due to the difference between the costs of exporting and of opening a subsidiary. in the second moment (standardization), internationalization would occur due to the fact that product and technology were standardized, with no innovation and no need for more qualified labor. thus, labor, capital and raw material costs gained importance, and, at that moment, less developed countries became attractive for the opening of branches. dunning (1977, 1988) combined some of these internationalization theories in his eclectic paradigm. the previously conceived theories had a primarily microeconomic focus, that is, the firm-specific factors. by inserting locational variables into the eclectic paradigm, dunning presents an interpretation of the internationalization process in which microeconomic and macroeconomic elements interact. in other words, dunning was evidencing variables associated with national spaces (market, exchange rate, monetary, fiscal and industrial policies, financing, trade barriers, technology, patents, etc.) that could determine the flow of direct investments. thus, the eclectic paradigm of dunning was composed of three stands: ownership, location and internalization (oli). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 in general, these authors can be classified under 'classical theories' of internationalization, since their focus is, above all, to understand the processes of firms connected to the united states, europe and japan. despite occasional criticism of the theories with economic focus, there is widespread criticism that claims they were deterministic, that is, companies would only make rational decisions seeking to optimize their results. thus, these theories would ignore aspects of learning and decision-making (the manager was seen as a passive element) and would neglect relations between participants in a market, as if companies could make autonomous decisions. on the other hand, behavioral theories of internationalization, developed in order to overcome the limits of traditional interpretations, began to adopt behavioral factors analysis as drivers of companies’ performance in foreign markets. internationalization depended, then, on the attitudes, perceptions and behavior of the decision makers, who sought risk reduction in decisions about where and how to expand into the foreign market. that way, the uppsala school sought to demonstrate that the process of internationalization would not be a result of optimal allocation of resources according to economic perspectives, but rather an incremental process. the internationalization of a company would begin when its domestic market was approaching saturation, and it needed new alternatives. overseas business would be faced by major uncertainties due to ignorance and would seek closer markets to those they are familiar with (assumption of the psychic distance). for behavioral theories, the internationalization process was presented as something gradual and, therefore, often referenced in the literature as 'stage models' or 'step models'. aside from that, they consider language, cultural differences, low speed for transport and international communication as barriers that hinder the acquisition of information about the foreign market (dib 2008). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 if there is determinism in economic approach theories, it is also present in the assumption of the gradual process of internationalization. this process could not be irregular contemplating other decisions, such as the strategic and economic ones. the criticism leveled at the uppsala model led the swedish school, especially the nordic school of international businesses, to explain the process of internationalization more consistently, focusing on the role of the entrepreneur and on the network. this perspective foresees arrangements or formal contractual character alliances between a limited number of firms linked to each other in an interrelated administrative structure, sometimes referred to as "firms" or virtual companies. this type of arrangement has played an important role in studies of new configurations of the companies considered since 1990, when the new economic opening created the need to understand both the trajectory of the internationalization of firms from 'emerging countries', and those of the firms that were born internationalized. the internationalization in emerging markets if it was natural that the placeholder for the brazilian companies on the list of large multinationals in the world was still very restricted in the mid-20th century, it began to change in recent years. multinational firms from developing economies only seem to have some expression on the foreign market in the third wave of internationalization, that is, after the first wave led by american multinationals, and the second by european and japanese companies (fleury and fleury, 2012). this third wave is a recent phenomenon of the 2000s, and is a result of the globalization phase of the economy and the very growth of those developing economies4. 4 for the internationalization of firms in emerging countries, check: lall (1983), rennie (1993), dunning and narula (1996), rasmussen and madsen (2002), matthews (2006a, 2006b), ramamurti and singh (2009), goldstein (2009), and guillén and garcia canal (2009). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 forbes magazine started to include companies from emerging countries among the 500 largest in the world only in 2005: considering the bric’s (brazil, russia, india, and china) companies, there were 27 in 2005 and 56 in 2009 in the list. under this context, studies aimed to understand this internationalization process of emerging market companies, such as the so-called multilatinas5. this occurred in order to both evaluate the experiences of those companies in light of more traditional firms, as well as to design possible strategies so that new companies could follow the path of conquest of the foreign market6. the theoretical perspectives that became representative in the analysis of the rise of multilatinas emphasize how the specificities of latin american economies induce the companies’ development. matthews (2006a, 2006b) proposed the concept of challenger multinational enterprise to designate these multilatinas, characterized by an accelerated internationalization process, their capacity for strategic and organizational innovations, and their articulation with the global economy through complex inter-firm links. the author sustained that while the "classic" multinationals operate in relatively closed markets and with subsidiaries with a high degree of autonomy, the new multinationals act in the global market in an integrated way, which favors the creation of value chains whose functions are distributed on a planetary scale. based on these findings, the author proposes the linking, leveraging and learning paradigm as the most suitable for understanding the process of internationalization of what he calls the "second global 5 according to the boston consulting group, in 2010 there were 115 latin-american multinationals, the multilatinas, with revenues of u$ 500 million. see: wells (1988), chudnovsky and lópes (1999), kosacoff (1999), martinez, souza, and liu (2003), cuervo-azurra (2007), haberer, and kohan (2007), casanova (2010), santos (2012), dalla costa (2011), and barbero (2015). 6 the list of brazilian studies is actually quite extensive, so it is noticeable that this subject has received much notoriety this past decade. some exemples are: almeida (2007), almeida and ramsey (2009), oliveira jr (2010), dalla costa (2011), ribeiro (2012), bemvindo (2014), dalla costa (2017). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 economy". the new multinationals gain from the repeated applications of leverage that must be built cumulatively, and it is this construction process that may explain their sudden emergence and success. ramamurt and singh’s (2009) interpretation is based both on the analysis of the context of emerging countries (e.g., specific advantages of a given country) and also on the specific advantages of firms, such as products suitable for emerging markets, production and operational excellence, privileged access to resources and markets, advantage of adversity and traditional tangible assets. the generic strategies apply to companies in their early stages of internationalization, whose competitive advantages are based on capabilities and assets built in their home market. as they become more internationalized, their competitive advantages are less dependent on their origins. the five generic strategies proposed by ramamurti and singh (2009) are natural resource vertical integrator, local optimizer, low cost partners, global consolidator, and global first-mover. in this context, casanova (2016, 29-30) distinguishes four phases in the multilatinas internationalization. the first step arose between 1970 and 1990, with the multilatinas emergence, taking advantage of their natural resources and expanding to neighbor countries. the second step, from 1990 to 2002, corresponds roughly to the so-called washington consensus, marked by the company’s privatizations on the continent. the third step, from 2002 to 2008, characterized another period of raw materials and agricultural exports, in the context of chinese economic increase. finally, 2010 defined changes in the multilatinas strategies because of the international crises.7 7 dalla costa, drumond, and las heras (2016, 98-122), on the other hand, discuss the situation of brazilian multilatinas throughout the 20th century, mentioning their role in the process of national development and highlighting family organization as the multilatinas origin. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 finally, rennie (1993, 45) presents a survey identifying a significant number of small and medium-sized enterprises that had not followed a slow and gradual process of international development but were already born global. as a result of the research, these peculiar companies are named born global8. according to macdougall and oviatt (1996, 49), the expression designates an organization that looks for businesses in the external market from the moment of its conception or the beginning of its activities, using its resources and the sale of its products in different countries as tools to create competitiveness. in this context, the analysis of the internationalization of brazilian companies has been widely disseminated through the appropriation of both traditional and new internationalization theories9. international experiences present in the cases of north american, european, or even japanese companies could reveal significant indications of their trajectories of success or failure in conquering new markets. however, transferring the theories originated from these experiences to the analysis of the formation of brazilian multinationals would impose at least two dilemmas: i) the conquest of the foreign market by brazilian businesses took place in a new historical block, far from the golden age of capitalism of the post-second world war generation, in a much more dynamic phase of the globalization phenomenon, and ii) the different brazilian governments, with its different economic policies, presented particular instruments for the formation and promotion of national firms. 8 for more information on the "born globals", also check: macdougall and oviatt (1996), moen and servais (2002), and knight and cavusgil (2004). matthews (2006a, 2006b), for example, launched the concept of challenger multinational enterprise to designate the multinationals characterized by a process of accelerated internationalization due to its strategic innovations and organizational capacity and to its articulation with the global economy through interfirm connections. 9 marinho (2013), for example, after having revisited traditional and new internationalization theories, elaborated a typology of these theories with their respective authors and main characteristics. the author concluded that the great majority of more internationalized companies in brazil is explained by traditional theories of internationalization. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 regarding the first dilemma, the work of além and cavalcanti is enlightening: "today, with the greater interdependence of world markets, the companies of a country are affected not only by domestic economic conditions, but also by international competition” (2005, 59). such a perspective follows evidence from studies of born globals, according which it is necessary to contemplate the new international context of the globalization period to understand the processes of internationalization of those companies. nevertheless, the authors understand internationalization as a necessary step to ensure and expand the market for the goods and services of national companies, not only as an entrepreneurial challenger, but also as a national policy: “these effects, at firm level, affect the performance of the country as a whole”, and as they justify, “a number of developing countries have been able to improve their export performance due to export-oriented activities of national multinationals and local firms associated to them” (além and cavalcanti 2005, 59). this point takes us to the second dilemma: theories of internationalization of firms, which looked mainly at the internal strategies of companies, would be insufficient to understand the global insertion of brazilian companies in a context of huge international competition. thus, a relevant determinant to be incorporated to this version of the success of brazilian companies in the external market is the role played by the state in the process. in recent decades, the brazilian government supported policies for companies in process of internationalization, such as: i) liberalization of restrictions on direct investments abroad; ii) creation of international instruments to facilitate and protect investments abroad; iii) information and technical assistance; iv) fiscal incentives; v) insurance mechanisms for investments; and vi) financing. in addition, the national bank for economic and social development (bndes) has assumed http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 a central role in to the implementation of these policies concerning the internationalization of brazilian companies (além and cavalcanti 2005, 66). the international economic policy led by bndes has been building instruments for the establishment of national companies in the foreign market. in a sense, this reflected in the process of internationalization of korean companies in the 1980s and 1990s, a successful case of foreign market conquest in which the role of the state in the promotion of the so-called "national champions" was decisive. luciano coutinho, president of bndes between 2007 and 2016, was a great enthusiast of such experience. before being appointed, he asserted: "it is argued that the internationalization of nationally based companies is important for increasing exports from already competitive sectors, as well as being a fundamental strategy for the strengthening of several other sectors" (coutinho, hiratuka, and sabbatini 2003, 3). in this sense, the policy desired – and, later, partly implemented – by coutinho sought to reconstruct the role of the brazilian economy in commerce and in the international productive structure. according to the author, the 1990s had a negative impact on the country’s positioning in the world market because, despite the open trade discourse, the brazilian government did not support national companies, and, consequently, brazil maintained a timid participation in world trade. therefore, on the way to the 21st century, the international landscape has imposed the strengthening, and in a sense, internationalization, as conditions for the survival of some national groups. if, on the one hand, the new scenario of economic opening set in the 1990s discouraged the existence of a significant number of national industrial sectors, on the other hand, it encouraged the takeoff of others sectors that, in order to compete in the national market, would build a base to place themselves in the foreign market.10 however, this multinational 10 according to andré almeida (2007), some cases in this process were: petrobras, vale do rio doce, metalúrgica gerdau, embraer, odebrecht, natura, weg, marcopolo, votorantim. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 formation process did not occur following the marks of pioneering experiences. as we mentioned above, the specificities of the brazilian economy should also be taken into account as the second relevant characteristic in the analysis of the internationalization of brazilian companies. after all, in addition to experiencing delayed industrialization, (a result of going through particular paths in order to place itself in a world economy with already industrialized countries) brazil also had to deal with a competitive scenario. this scenario was possibly much more intense, creating the need for brazilian companies to develop both technical and financial instruments to accomplish their insertion in the foreign market. the literature makes it explicit how the successful constitution of a number of brazilian companies was made possible by their relationship with the state. this either happened due to their traditionally being fully state-owned enterprises or to other experiences in which government support was decisive in the trajectory of some groups. the brazilian construction companies are good examples of business: their presence in both national and international contexts could only be understood by looking at the military government’s policies for hiring contractor’s services (campos 2014)11. alternatively, this issue could be explained by the new dimensions of the companies-government relationship, thinking about the economic landscape of recent decades through the study of the cases of petrobras, vale, and bndes. mussachio and lazzarini (2015) consider two new forms of relationship between the state and economic activities. the first one is leviathan as majority investor, in which the state remains the controlling shareholder, but new forms of governance allow for the participation of private investors. the second one is leviathan as minority investor, characterized by a lesser control of its companies in favor of private firms, but maintaining its presence through minority 11 for more information about the odebrecht case, see also: cabral and oliveira (2017). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 shareholding or pension funds and sovereign wealth funds. it is possible to perceive a breakthrough in the debate about dichotomous economy, with a polarization of the visions of state versus market. as the authors demonstrate, the privatization process of recent decades has produced varieties of capitalism, which resulted from alternative organization models and hybrids between the polarization of a leviathan as an entrepreneur and the direct performance of the private companies. in short, even though business strategies demonstrated by the theory have witnessed global aspects of firm growth and characteristics of the internationalization process present in different experiences, a lighted looking at particular issues and national contexts shows that the study of brazilian companies adds to the world literature, indicating new forms of relationship between company, state, and society. this special issue of the journal of evolutionary studies in business, about the growth and internationalization of emergent markets, assesses five relevant cases of brazilian companies. the first paper shows the relationship between growth and internationalization of embraer, the main export company of products with high added value. embraer emerged as a state-owned firm and, after a successful internationalization trajectory, was privatized in the 1990s. however, this did not interfere with its growth and occupation of the world market with small and medium-sized airplanes, always with a strong participation of the state. the second paper deals with the case of weg, which started producing electric motors in southern brazil and became one of the most successful cases of business internationalization in brazil. nevertheless, a close look at weg’s growth and internationalization process, especially during military governments and the past decade, indicates that access to government credit was essential to its expansion. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 the following two papers deal with companies that work in sectors that offer brazil with natural advantages: expocaccer, an exporter of coffee, and gerdau, a steel producer. the first paper, entitled "cooperative agribusiness history: organizational aspects for internationalization and the expocaccer case study" presents a particular model of organization, formed by a cooperative. it sheds light on the difficulties of managing these forms of business organization regarding their internationalization; the paper discusses the case of a commodity product. in turn, the paper dedicated to gerdau portrays a firm that, after long years of operation in the local and regional market, implemented industrial plants in other states and took advantage of the privatization process of the late twentieth century. in the 1980s, the company began an internationalization process that became more intense in the beginning of the 21th century. the author of the paper presents some hypotheses from a theoretical point of view to explain the phenomena. finally, in a country that used to import almost all of its industrialized products until the middle of the twentieth century, the fifth paper tells the history of romi – a company focused on the production of industrial lathes, agricultural machinery, and equipment. a few decades after its foundation, when brazil was still living according to a policy of "import substitution industrialization", romi already exported machinery and equipment, receiving great government support during the years of military dictatorship in brazil. brazilian companies’ international competitiveness was a result, therefore, in both of their internal capabilities and by the government plans – the state not only as a public investor but also by driving sector policies. more modern and complex the sector more should be the participation of the state to foster and consolidate the foreign presence of national company. this special issue presents five illustrative examples. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 acknowledgements armando dalla costa is grateful to the fea/usp and cnpq for the postdoctoral stage. the authors would like to thank the academic publishing advisory center (centro de assessoria de publicação acadêmica, capa www.capa.ufpr.br) of the federal university of paraná for assistance with english language translation and editing. references além, ana cláudia, and carlos e.s. cavalcanti. 2005. “bndes e o apoio a internacionalização das empresas brasileiras: algumas reflexões.” revista do bndes 12 (24): 43-76. almeida, andré. 2007. internacionalização de empresas brasileiras: perspectivas e riscos. elsevier. almeida, andré, and jase ramsey. 2009. a ascensão das multinacionais brasileiras. rio de janeiro: campus. austin, gareth, carlos dávila, and geoffrey jones. 2017. “the alternative business history: business in emerging markets.” business history review 91:537-569. barbero, maria inês. 2015. “a long-term 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rio de janeiro: zahar. wells, christopher. 1988. brazilian multinationals. columbia journal of world business 23 (4): 13-23. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1057/s41267-018-0156-6 volume 3, number 2, 01-22, july-december 2018 doi:10.1344/jesb2018.2.j045 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 wilkins, mira. 2013. the maturing of multinational enterprise: american business abroad from 1914 to 1970. harvard university press. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 281 ferran sabaté reial acadèmia de medicina de catalunya/societat catalana d’història de la medicina (spain) the evolution of the “catalan health model” in the twentieth century. sources for its study abstract this paper presents an overview of relevant sources for the study of the development of the “catalan health model” during the twentieth century, and the ideas and institutions influencing its evolution. the paper indicates that it is a health system configuration where the core is public universal health assistance, complemented by the private health sector. also, that it is the result of a dynamic traditional mixed model organization. the sources for the study of this health system are scattered in public or private archives and published reports. due to the disruptions of war and periods of dictatorship, the model has gaps or becomes disjointed. keywords: catalan health model; development; sources of information corresponding author: e-mail: drsabate@yahoo.es received 21 september 2020 accepted 18 november 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:drsabate@yahoo.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 282 1. introduction the nineteenth century is the origin of contemporary western society, with important social and economic changes that transformed all aspects of society – its institutions and organizational models. the industrial revolution, the urbanization of the population, the materialist and evolutionary concepts in the field of medicine, and increasingly, technology, changed the perspective of human disease as well as the delivery of health services for a group of populations (corbella and calbet 1973). the last two decades of the nineteenth century, and the first two decades of the twentieth century initiated the transition from traditional charity assistance, to a public and private coordinated network delivery of health care (sabaté 2017). the catalan health model, in this context, is the dynamic result of a variety of factors, modeling the medical and sanitary organization of catalonia (reventos 1996). it has been defined as “a mixed sanitary model, that integrates a unique network of public utilization of all the sanitary resources from public and private ownership, that follows a secular tradition of entities (religious, mutualities, foundations, cooperatives, consortiums), historically oriented to deal with health and social problems” (moreta 1975; pérez-bastardas 2014). it is a system with public financing and universal coverage, that provides free access to health care for all catalan citizens. this model is based on standards of equity, efficiency, sustainability and citizen satisfaction (vidal 2014). in the historical evolution of this system we find three stages. the first one, in the first third of the twentieth century, was characterized by the continuity of private medicine, the public beneficence (asistencia publica domiciliaria) by municipalities, benefit hospitals and mutual entities; and by the beginning of health planning and development by the regional self volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 283 government and health professionals (sabaté 2015a). the second one, in the second third of the twentieth century, saw the emergence in spain of the seguro obligatorio de salud or compulsory health insurance created in 1942 (rumeu de armas 1943) with support from the spanish ministry of labor and inspired by the bismarck german system. in this second stage ciudades sanitarias or “health residences” (so named to avoid the word hospital which was unpopular) and facilities for out-patient consultation with public funding expanded. specialized private medicine, though, persisted. in catalonia, a private cooperative health system was developed, and hospital regionalization was proposed. finally, in the last third of the twentieth century, the insalud (for the public health services) and the inserso (for the public social services) were organized in spain in 1978. in 1986 the general health law was issued, and created the national health service, inspired by the british health system. in this general framework of changes in the spanish hospital system, for the particular history of the development of the catalan health model, we should consider or distinguish three periods: 1) initial self-government by the “mancomunitat” (commonwealth) and the generalitat of catalonia (autonomous government) between 1914 and 1939; 2) franco’s dictatorship period (1940-1975); and 3) the new self-government period with the democratic generalitat of catalonia after the 1980s. each period represents a step in the evolution of the model, influenced by social, technical, political, and economic factors. important protagonists in the development and support of the catalan health system during the twentieth century were the municipality of barcelona (roca 1991), and the diputació, with their programs and institutions acting as a complimentary provider during the periods of selfgovernment, and as a substitute public authority during the dictatorship times. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 284 2. background the analysis and study of the catalan health model could be performed from different perspectives: anthropological, economical, legal, historical, institutional, and comparatively with other models. each approach has its own sources and methodology (comelles 2013) and has mainly been studied from a historical perspective. the particular history of medicine in the region should be the beginning of any research about this model (corbella 2014), as it gives a general overview of the long-term evolution, and provides clues for an objective interpretation of the data. after that, particular topics can be considered: biographical, clinical, economical, legal, sociological, technological, etc. since the backgrounds of medical institutions in catalonia are diverse, even during this century, the sources for these studies are different, relying on the origin: foundation, public, private, cooperative, municipal, religious, mixed, etc. each of them has its own legal status, economic maintenance, clinical and administrative records, etc., giving more or less relevance to the qualitative or quantitative aspects of their functioning. due to legal changes from economic crises, wars, changes in the property or administration of the institutions, the continuity and uniformity of the registers are not guaranteed, making the comparisons difficult. another concern is the preservation of this information (martínez vidal 1998). until recently, health information was written and saved in a hard-copy paper format, taking up limited space; subsequently, some of the records were discarded. sometimes, these materials have been discovered in antique shops, or in a second-hand markets. the best documented health institution along 600 years of continuous service, is the “hospital de la santa creu i sant pau” in barcelona, owned and managed without interruption by the volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 285 municipality and the cathedral chapter, by a governing body named the very illustrious administration (molt il·lustre administració in catalan or mia). their registers are split between the biblioteca de catalunya or library of catalonia (until the nineteenth century) and the historical archive of the hospital for contemporary data (catalog available by internet). their rich sources of data include information regarding the name, age, sex, origin, economic status at admission and health problem of the patients. information on maternity and orphans; psychiatric and old people are accepted. it also contains information about daily menus and diets. regarding the institution, its financial records include: donations, inheritances, payments, salaries and other income and expenses. other institutions owned by municipalities may find registers in the archives of the institution or the municipality and district (“comarcal”) archives. for programs and institutions created or sustained by the mancomunitat, or commonwealth of catalonia, researchers can find primary and secondary sources at arxiu històric de la diputació de barcelona (mancomunitat de catalunya 1923a and sabaté 1993). private institutions, as well as some personal papers can be found in the archives and libraries of arxiu nacional de catalunya, biblioteca de catalunya, museu d’història de la medicina catalana, fundació uriach 1838. the turmoil of the spanish civil war and the repression of individuals and institutions that followed, destroyed, exploited and stifled documentation. religious institutions were under assault; the library and publications of the institut de fisiologia were burned in the cloister at the medical school, and the registers of the sindicat de metges de catalunya or union of physicians of catalonia were confiscated and disappeared (sabaté 2020). information regarding the creation, development, and activity of the seguro obligatorio de enfermedad or compulsory health insurance from 1942 are in official reports from the spanish ministry of volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 286 labor and social security, the national social security institute and other spanish agencies for the period of franco’s dictatorship (el mundo del seguro de vida 2020; ministerio de inclusión, seguridad social y migraciones 2020). since the last quarter of the century, under the self-government of the generalitat de catalunya, the official information on health organization and legislation comes from the conselleria de salut or department of health (diari oficial de la generalitat). some institutions issue annual summaries of their activities, foundations must present an annual report, professional organizations give official information via announcement or bulletin. the activity and position of scientific societies can be followed in their journals and monographs. 3. biographies the influence of some personalities in the development of a particular therapy, medical technology, organizational model or health institution is clearly documented throughout history. that is the reason why biographies are a relevant source of information, more qualitative than quantitative. unfortunately, we do not have many in the field of health (physicians or pharmacists), and the scope is often not comprehensive enough. some are mentioned in the bibliography: dr. jaume aiguader (poblet 1977), dr. j. alsina i bofill (casassas 1996), dr. manuel corachan (marí 1981), dr. a. pi i sunyer (various authors 1979), dr. cinto reventos (reventos 1984), dr. josep trueta (rodrigo 1977), and others. additionally, we have auto-biographic productions, with published (broggi 2011; trueta 1978; ylla-català 2018) or unpublished materials, in the hands of the family (dr. joaquím ramis i coris), in public archives or private libraries. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 287 sources of personal and professional information include dictionaries and encyclopaedias (calbetand corbella 1981-83). directories, guides or vademecums of medical practitioners produced by professional organizations, scientific institutions, or with commercial purposes (metges de catalunya i balears. any 1930. barcelona, publicaciones lópez-brea), give some information regarding: address, specialty, year and place of work, etc. also, catalogues of medical devices, containing useful information regarding the technological development in medical fields (in museu d’història de la medicina de catalunya for instance) cannot be forgotten. 4. medical institutions only sources about general hospitals during the xx century will be noted in this section. private, specialized institutions are documented in other contributions of this issue. hospitals have a long tradition in catalonia since the middle ages (salmerón 2001). an important aspect has been their continuity until now. this allows a long term perspective and allows for comparisons (corbella and xifró 1996), and to follow-up in some aspects of their life. regarding their origin, there are a variety of status points: royal, municipal, religious, private foundation, mutual or cooperative. by the end of the xixth century, the accelerated process of urbanization in barcelona produced a clear lack of hospital beds. this was pointed out by the hygienists, and social movements. some provisional actions during epidemics were undertaken when continuity was established (ausín 2002). the enlargement and modernisation of santa creu hospital in barcelona had been proposed and discussed since the mid-xixth century, to host the patients and the medical students appropriately. at this time, the hospital del sagrat cor was created in barcelona (agustí 1991) by a group of charitable bourgeois volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 288 roman catholic women and the assistance of the bishop of barcelona. it started as a surgical centre, with a small group of qualified professionals who quickly achieved prestige in different specialities. the psychiatric institut pere mata in reus, was opened in 1900, with healthy gardens and pavilions, and a modern philosophy in the treatment of mental diseases (garcia sisó 1992). it was built and managed by a private society. l’hospital del mar or d’infecciosos in barcelona, was created in 1905 by the municipality to isolate and treat patients with contagious diseases. the second half of this century it evolved into a general hospital treating different types of diseases (venteo 2015). the hospital clínic i provincial and facultat de medicina of the universitat de barcelona opened its doors in 1906 after some years of discussion between central and provincial administrations regarding the financial responsibility to furnish and equip the centre and pay the bills of the patients. it was a public and charitable institution in the beginning, until the 1970s when it changed its legal and organizational model to a tertiary high tech medical, research and educational institution (corbella 2006). the medical and social problems of the tuberculosis outbreak had a very big impact on the health care system at the turn of the new century (garriga 1915). the inactivity of central administration, moved in 1911 the patronat de catalunya per a la lluita contra la tuberculosi, with the economic support of the caixa de pensions per a la vellesa i estalvis, to open the sanatorium of “torre bonica” in a healthy rural area near terrassa (calbet camarasa 1988). the mancomunitat de catalunya, created in 1914, soon started planning the development of public services for poor, mentally ill patients and the construction of maternities. additionally, the “casa maternal catalana” was built in barcelona. it was planned as the cornerstone of a comprehensive maternity and children services network (farré 2003). the “clínica volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 289 d’observació i hospital mental” in santa coloma de gramenet, was opened in 1930 (bernardo 1985). in 1917, the “quinta de salud la alianza. mutualidad de previsión social” opened its doors in barcelona. created by the “sociedad la alianza. hermandad de camareros de barcelona”, to give medical services for their associates. soon the quality of their services caught the attention of other social and professional groups. it experienced an important growth, with the establishment of other clinics in different areas of catalonia.1 a red cross hospital was founded in barcelona in 1920, that mainly attended to wounded soldiers who returned from the war in africa. after the spanish civil war, it became a centre for injured labour workers and surgical specialties (coll 2000). from 1980 onward, it became a general hospital. the hospital plató, founded in barcelona in 1925, was known also as clínica medico quirúrgica sant gervasi or institut policlínic. promoted by a group of five physicians with the aim to provide high quality medical services (casares and fuentes 2001), it was developed as a policlinic, with teaching activities. all of these institutions, regardless of ownership, had been providing health care to the public sector, with different modalities of agreement during this century. in the second half of the xxth century, after the spanish civil war with the onset of the “seguro obligatorio de enfermedad,” the construction of new hospitals named “residencia” or “ciudad sanitaria” was planned by the central government, to avoid the bad memories and reluctance of the citizens to the services provided by hospitals in the past. some of these hospitals were built in catalonia between 1950 and 1975, in barcelona, tarragona, girona, hospitalet del llobregat, badalona and terrassa, to care for patients sent by physicians from the seguro obligatorio de enfermedad only. 1 arxiu nacional de catalunya, fons “la alianza”. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 290 5. research institutions in the xxth century, medical research became public, and an integral part of the regional program of development and modernization setup by the mancomunitat of catalonia (barbany and granados 1978). the “societat de biologia de barcelona,” founded in 1913 by the secció de ciències of the institut d’estudis catalans, was the first step in developing autonomous biological research.2 the mancomunitat of catalonia was established in 1920, in the school of medicine the “institut de fiologia” (corbella 2009), and was led by professors august pi sunyer, and jesús m. bellido golferichs. they established scientific relationships with prominent international physiologists as walter b. cannon, and bernardo hussay. one of its members, trained in canada, did pioneering work with insulin. unfortunately, the archives of this institute were burned publicly in the cloister of the medical school at the end of spanish civil war. by the end of the century, clinical research was done in hospitals with the creation of research institutes to benefit the laboratories personnel, and patients. their work can be followed in the scientific journals of the different specialities, congresses, and medical societies. the development of the local pharmaceutical industry has had important significance. since the last century, some pharmacists working in their laboratories, prepared and sold their own pharmaceutical formulas (morell 1996). they transitioned from workmanship to industrial production (bosch, fernandez and baños 2007). this has provided a strong health and economical instrument, mainly during the autarchic period of the spanish economy (pérezbastardas 2002). some of the drugs that were invented became bestsellers, and are the origin of the local pharmaceutical industry. some of these formulas became commercial brands with 2 their works are published in the journal treballs de la societat de biologia de barcelona. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 291 great success (sinca 2011). biographies of these enterprising pharmacists and physicians show the contribution and commitment with the system (grifols 2009). one of these protagonists was the “laboratorios dr. esteve” (sinca 2015), one of the first in europe to obtain penicillin, and was visited by alexander fleming. the relationship between research, health industries, and health systems has been part of the environment were the catalan health model has developed. 6. professional institutions the professional institutions are bodies with influence in the medical practice and the organization of the health system. in catalonia there are two main entities that strongly influenced and oriented the health model, giving them its particularity, based in the secular tradition of transaction and agreement between the parts. their participation gives stability, continuity and social recognition to the catalan health model. the “academia de ciències mèdiques” is a scientific society created by a group of medical students and professors 150 years ago to introduce the experimental knowledge in the study and practice of medicine. without official recognition or assistance, they setup a laboratory for the practical study of anatomy, physiology, microbiology, and therapeutics. they also organized practical courses for students and practitioners, as a compliment to training with subjects not treated in the official university programs. they also established a library to be updated with journals from france, germany and italy. this influence and spirit of innovation has been clear over time in catalan medicine, allowing them to be in permanent contact with the latest advances in europe, in clinical practice, as well as in organization of assistance (calbet 2001). we do not have a comprehensive history of this core institution. it is possible to follow this volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 292 activity throughout the official journal digitalized “annals de medicina,” as well as in the registers of each specialized society that conform this entity (martínez and pardo 2003). the second important professional entity with real and sustained impact in the catalan health model is the “sindicat de metges de catalunya” or union of physicians of catalonia (martín 2020), created in 1920, a hundred years ago. in fact, it is the oldest medical union or syndicate in europe. it was promoted by ramon pla i armengol, an active physician, and successful entrepreneur with cultural and political involvement in the fields of catalanism and socialism.3 the aim was to protect the material and ethical interests of their affiliates in the liberal and employee practice of medicine. but since the beginning, concerns were also in social and collective medicine, and safeguarding public health interests. during this time, they had the ability and success in harmonizing both rights: caring for the interests of the physicians as well as the patients (danon 1974). its influence inspired and became pivotal in the construction of the catalan health model (sabaté 2020). 7. the elaboration of a health model the first social insurances in rural and urban areas (baselga 1957) appeared in catalonia by the second half of the xixth century. in the field of health, some societies, brotherhoods, and trade unions collected money regularly from their constituents to pay the medical or pharmacist expenses of their associates; or contracted physician or pharmacist services for their members. this existing social organization became an ideological background for the progressive 3 library universitat autònoma de barcelona, fons ramon pla i armengol. and archive of mutual médica in barcelona. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 293 elaboration of the modern catalan health system. within the catalan health system, there are three distinguishable stages. the creation of the mancomunitat of catalonia in 1914 (balcells 2015) was the first step of self-government exactly 200 years after the abolition and submission to spanish monarchy and was the beginning of the contemporary catalan health model. the mancomunitat drafted the model and began the organization (sabaté 1993). it moved from merely being legislative regarding outbreaks of epidemics, to mobilizing public resources to prevent or fight infectious or parasitic diseases. it transformed the beneficence, and charity in public social services. malaria, tuberculosis, maternity, and mental illness were the focus fields of interventions. during its short lifecycle (only 10 years), it could not fulfill all of the obligations to the programs and materialise all of the needed initiatives and endeavours. in this first stage, we can identify two sub-periods. first (1914-1919), the health intervention of the mancomunitat used three instruments: a) direct intervention, as in the creation of the “casa maternal catalana” in barcelona or the “clínica d’observació i hospital mental” in santa coloma de gramenet; b) economical donations to existing health or social private institutions giving service to the community; c) public health initiatives developed throughout the institut d’estudis catalans, a scientific official body, as the interventions to control malaria and tuberculosis (mancomunitat de catalunya 1922). the second period (1920-1924) is characterized by the: a) effective control over public health resources (provincial and district hospitals, orphans and poor or senior houses); b) subsidies to private health or social institutions, with control of services provided (manicomi of sant boi; la alianza, etc); c) development of a scheme of health districts: “divisió sanitària de catalunya” and “brigades sanitàries” (mancomunitat de catalunya 1923b). volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 294 in 1922 an important event took place, “conferencia nacional del seguro de enfermedad, invalidez y maternidad” in barcelona. in this meeting, the sindicat de metges de catalunya presented a proposal known as “sistema català de l’assegurança de malaltia”,4 trying to do a synthesis between social and liberal practice of medicine. it was based on three related concepts: 1) autonomy for the people: patients and doctors; 2) coordination between the health institutions, and 3) social solidarity to finance the system. the proclamation of the second spanish republic in 1931 brought the second period of the catalan self-government. the medical community, under the leadership of the sindicat de metges de catalunya, offered to the new government a comprehensive health organizational model for catalonia (sabaté 2020). it followed and developed the scheme planned by the mancomunitat, but with more detail (fernández pellicer 1932). the generalitat assumed all the health competences in its territory (hervàs 2012). the health law of 1933 adopted most of the proposals made by the sindicat. it defined three levels of attention: primary for the proximity services, secondary for intermediary processes, and tertiary to manage the complexity. by 1934, the regional health ministry presented an administrative health model based in the municipalities, refused by the sindicat. at a conference in zaragoza in 1935, they tried to establish the medical assurances in spain. the sindicat presented its position named “doctrina mèdica catalana de l’assegurança social de malaltia”, synthesized in ten points, harmonizing liberty with solidarity (sabaté 2015b). it was rejected by the majority of spanish medical organizations (rodríguez and ortiz 1988). 4 this proposal was presented by dr. josep girona i trius at the national conference on disability, malnutrition and illness insurance. see butlletí del sindicat de metges de catalunya, 30, november, 1922. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 295 during franco’s dictatorship, the seguro obligatorio de enfermedad (soe) was established in 1942, for workers and their families based on the bismark model with medical assistance provided by physicians paid by salary (raventos, garcia and piqué 1991). this system was the opposite of the previous proposals of catalan medical professionals and institutions. nevertheless, by 1957, doctor josep espriu castelló launched “assistència sanitària col·legial” in barcelona following the social spirit of the catalan society, to provide medical services under the cooperative model of functioning. late in 1969, the need to rationalize and sectorialize the existing hospitals in catalonia was presented again by a group of experts (soler et al. 1969). during the last quarter of the xxth century the democracy brought a new period of selfplanning and management of the health sector to catalonia, as well as in other regions of spain. immediately, the “congrés de cultura catalana,” an organization raised ad-hoc by the catalan society to analyse and create proposals in different fields for the new period, and new situation (rovira 2020), spouted a group (àmbit de salut) of citizens and health professionals that after a free discussion, drew-up an organizational proposal to adapt the former model to the new situation, in accordance with the local idiosyncrasy and tradition. in 1976, a group of medical and economic professionals, related with the partit socialista unificat de catalunya (psuc), made the proposal to create the national health service (acarin et al. 1977). other ideological options of reform the ongoing health system where presented (solé sabaris 1978). also, the col·legi de metges de barcelona, setup a working group called the “gabinete de asesoría y planificación sanitaria” (gaps), to discuss and advise the generalitat on how to organize the provision of medical services. the “xè congrés de metges i biòlegs de llengua catalana” held in 1976, had a section named: “funció social de la medicina,” where the past and future volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 296 orientation of the catalan health model was discussed in detail. first, the transition from individual to collective medicine; second on what is health?; third on present situation, and fourth about perspectives for the future (acadèmia de ciències mèdiques de catalunya i balears 1978). as explained in other contributions to this special issue, in 1978, the government of catalonia started the elaboration of the “mapa sanitari de catalunya” to asses and plan the model, with two chapters: 1) present the health situation, analysing: health status; ecological environment; health resources; legal and administrative situation; economical structure and catalan health resources. 2) territorialisation project: health areas and sectorialization; territorial health administration; health endowment of the areas (generalitat de catalunya 1980; coca 1980). the legal assumption of the health competences by the generalitat de catalunya was in 1981, after 5 years of proposals and planning by the civil and political society. the first decision was the creation of the institut català de la salut (ics) in 1983 (diari oficial de la generalitat de catalunya, july 7, 1985), as the main provider of public health services. the second important organizational and legal step was in 1985, by: a) the order of “reforma de l’atenció primària” (primary health care reform), giving them the category of first and main contact of the citizens with the health system; and b) the creation of the “xarxa hospitalària d’utilització pública” (hospital network of public use), as a functional incorporation of private hospitals in the public use network (diari oficial de la generalitat de catalunya, july 15, 1985). these strong decisions characterize the contemporary catalan health model, stressing the importance of the primary health care (preventive and community oriented), and the functional use of all health resources independent of the ownership. in 1990 (diari oficial de la generalitat de catalunya, july 9, 1990) the option of different providers for primary health care: was introduced as volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 297 professional societies or “empreses de base associativa“(eba), an association of nurses and doctors as a self-managed enterprise or cooperative society; also, the possibility of a health enterprise. a cornerstone in the catalan health system was the law 15/1990 (diari oficial de la generalitat de catalunya, july 30, 1990; vallribera 2015) called “llei d’ordenació sanitària de catalunya” (losc), that created the “servei català de la salut” (catsalut) (generalitat de catalunya, 1992), and distinguished three levels of responsibility: 1) health planning to departament de salut; 2) financing services to servei català de la salut; and, 3) provision of health by providers. it establishes a clear separation of functions in the catalan health model: the parliament assigned the budget; the department of health designed the health plan; the servei català de la salut distributed and paid the services (brosa and agustí 2010); the providers gave the health services. the catsalut contracted health services with different providers, according to the needs of the population (de la puente 2010). in 1993, “plans de salut” (health plans) was initiated and issued for specific problems that impacted the population such as: oncology, immigration, etc., called “director plan” for each problem, which is evaluated every five years. also, the “mapa sanitari, sociosanitari i de salut pública” was issued 1993(de la puente and fusté 2008; generalitat de catalunya 2008), with the creation of seven “health regions” to approach the management of the needs of the population. 8. conclusions the catalan health model in the xxth century is the result of a long autochthonous tradition, influenced by many factors in different proportions, as presented in this paper. in short, it is a public and universal system characterized by the coexistence of private institutions giving volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 298 subsidiary public assistance. it establishes a clear difference between: the administration, the provision and the financing of services. delivered under the premises of: equity, efficiency, sustainability and satisfaction. it stresses the objectives of: coordination, decentralization and citizens participation. the sources for the study of catalan health model are of two types. primary sources can be searched in: a) arxiu històric de la diputació de barcelona, reports del consell permanent a l’assemblea de diputats de la mancomunitat, crònica oficial de la mancomunitat de catalunya (1920-1923), l’obra realitzada 1914-1923 for the period of the mancomunitat de catalunya; b) arxiu nacional de catalunya, biblioteca del pavelló de la república-universitat de barcelona, butlleti oficial de la generalitat de catalunya, for the period of generalitat and civil war. boletín oficial del estado; c) archives from: instituto nacional de previsión, col·legi oficial de metges de barcelona, fundació dr. espriu, for the franco’s dictatorship. d) acadèmia de ciències mèdiques i de la salut de catalunya i de balears, fundació congres de cultura catalana, col·legi oficial de metges de barcelona, diari oficial de la generalitat de catalunya, arxiu del parlament de catalunya, for the last period. secondary sources are in historical books mentioned in the bibliography of this paper, as well as in specialized journals: estudios sobre hospitales (1956-), gestión clínica y sanitaria, gimbernat, journal of health care quality research, among others. references acadèmia de ciències mèdiques de catalunya i balears. 1978. xè congrés de metges i biòlegs de lengua catalana. perpinyà, 23-26 de setembre de 1976. barcelona: societat catalana de biologia. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 299 acarin, nolasc, ramon espasa, carme sans, and joaquim vergés. 1977. servei nacional de salut. una alternativa democràtica a la sanitat. barcelona: editorial laia. agustí peypoch, joan. 1991. historia de l’hospital del sagrat cor (1879-1980). barcelona: fundació uriach 1838. almirall pujol, jordi, xavier granero xiberta. 2018. aportació de catalunya a la història de la penicil·lina. barcelona: consorci sanitari del maresme-comb. aragó mitjans, ignasi. 1967. els hospitals a catalunya. barcelona: ariel. aragó mitjans, ignasi. 1969. la integració hospitalària i sanitària. barcelona: ariel. ausín hervella, josep lluís. 2002. hospitals provisionals a la barcelona del segle xix. les crisis sanitàries. barcelona: seminari pere mata-ub. balcells, albert. 2015. la mancomunitat de catalunya (1914). simposi del centenari. barcelona: institut d’estudis catalans. monografies de la secció històrico-arqueològica xiv. barbany, joan ramon, granados, empar. 1978. “la recerca en la medicina bàsica durant la mancomunitat i la generalitat”. in la recerca als països catalans, 51-75. barcelona, congrés de cultura catalana. baselga monte, manuel. 1957. salarich verdaguer precursor de la medicina social y del trabajo. barcelona: real academia de medicina y cirugía de barcelona (lecture). bernabeu mestre, josep. 1998. “cultura, ciencia y política: la lucha antipalúdica en la cataluña de la mancomunidad, 1914-1925.” medicina & historia, 73: 1-16. bernardo arroyo, miguel, and rafael casas esteve. 1983. història de la psiquiatria a catalunya. barcelona: edicions de la universitat de barcelona. bernardo arroyo, miguel. 1985. “l’assistència psiquiàtrica a catalunya durant el periode de la mancomunitat i la generalitat.” gimbernat 3: 87-100. baños, josep eladi, s. fernández, and francesc bosch. 2007. “el naixement de la industria farmacèutica a catalunya (ii): les empreses nacionals.” annals de medicina, 90(2): 60-67. broggi, moisès. 2011. memòries d’un cirurgià. edició completa. barcelona: edicions 62. brosa, francesc, and enric agustí, dirs. 2010. els sistemes de pagament de la salut pública de catalunya, 1981-2009. barcelona: servei català de la salut. generalitat de catalunya. calbet camarasa, josep m., and jacint corbella i corbella. 1981-1983. diccionari biogràfic de metges catalans. barcelona: fundació salvador vives casajuana-universitat de barcelona. calbet camarasa, josep m. 1988. “lluita antituberculosa a catalunya.” gimbernat 9: 41-56. calbet camarasa, josep m., and daniel montañà buchaca. 2001. metges i farmacèutics catalanistes (1880-1906). valls: cossetania edicions. volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 300 calbet camarasa, josep m. 2001. noticia de l’acadèmia de ciències mèdiques de catalunya i balears. barcelona: seminari pere mata-universitat de barcelona. carreras barnés, josep. 1998. august pi i sunyer, semblança biogràfica. barcelona: institut d’estudis catalans. casares potau ramon, and manuel de fuentes sagaz. 2001. història de la clínica plató. 75è aniversari. barcelona: clínica plató-fundació privada. casassas, oriol. 1970. la medicina catalana del segle xx. barcelona: edicions 62. casassas, oriol. 1996. josep alsina i bofill, l’exemple. barcelona: publicacions de l’abadia de montserrat. casassas i simó, oriol, and jordi gol i gurina, coords. 1976. “ii ponència: funció social de la medicina.” talk discussed in xè congrés de metges i biòlegs de llengua catalana, acadèmia de ciències mèdiques de catalunya i balears-societat catalana de biologia, barcelona, spain, september 23-26. castejón domenech, nativitat. 2007. aproximació a l’estudi de l’hospital de la santa creu de barcelona. barcelona: fundació noguera. coca ros josé. 1980. “el mapa sanitario de cataluña.” estudios sobre hospitales, 101-102: 9-11. coll colomé, francesc. 2000. evolució històrica de l’hospital de la creu roja de barcelona. barcelona: fundació uriach 1838. comelles, josep m. 2007. “catalanisme, salut mental i avantguarda: les politiques públiques de salut a catalunya (1883-1938).” in la ii república espanyola: perspectives interdisciplinàries en el 75è aniversari, edited by montserrat duch plana, 51-84. tarragona: universitat rovira i virgili. comelles, josep m. 2013. “hospitals, political economy and catalan cultural identity.” in hospitals and communities, 1100-1960, edited by christopher bonfield, jonathan reinarz and teresa huguet termes, 183-207. oxford: peter lang. corbella, josep m., and josep m. calbet. 1973. “l’evolució del pensament mèdic català en el segle xix.” anales de medicina, 59 (monograph 2): 183-206. calbet i camarasa, josep m., and jacint corbella. 1991. “bibliografia històrica de la sanitat catalana. vol. i (a-f).” gimbernat 16. https://www.raco.cat/index.php/gimbernat/article/view/44116. corbella i corbella, jacint, and josep m. calbet i camarasa. 1998. “bibliografia històrica de la sanitat catalana. vol. ii (g-mc).” gimbernat 29. 2001. https://www.raco.cat/index.php/gimbernat/article/view/44691. corbella i corbella, jacint, and josep m. calbet i camarasa. 2001. “bibliografia històrica de la sanitat catalana. vol. iii (me-ri).” gimbernat 36. 2001. https://www.raco.cat/index.php/gimbernat/article/view/44819. 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barcelona: ajuntament de barcelona. rodrigo, antonina. 1977. doctor josep trueta, héroe anónimo de dos guerras. barcelona: plaza &janes. rodríguez ocaña, esteban, and teresa ortiz gómez. 1988. “los médicos españoles y la idea del seguro obligatorio de enfermedad en el primer tercio del siglo xx.” in actas del viii congreso nacional de historia de la medicina, murcia-cartagena, diciembre 1986, vol. i, edited by m. valera, m. ángeles egea y m. d. blázquez, 488-501. murcia: universidad de murcia. rovira martínez, marta. 2020. el congrés de cultura catalana. història i balanç (1975-1977). catarroja: editorial afers. rumeu de armas, antonio.1943. “el seguro de enfermedad: sus precedentes históricos en españa.” revista internacional de sociología 1(1): 191-207. https://search.proquest.com/openview/903a6936e929e17beb4a1a58f957e749/1?pqorigsite=gscholar&cbl=1817790. rumeu de armas, antonio. 1944. historia de la previsión social en españa. madrid: editorial revista de derecho privado. sabaté casellas, ferran. 1988. “trets característics de la medicina noucentista.” gimbernat 10: 291302. https://www.raco.cat/index.php/gimbernat/article/view/44003. sabaté casellas, ferran. 1993. “política sanitària i social de la mancomunitat de catalunya (19141924).” phd diss., universitat de barcelona. sabaté casellas, ferran. 2015a. “antecedentes del modelo sanitario catalán.” medicina clínica. 145 (special issue i): 4-7. https://search.proquest.com/openview/903a6936e929e17beb4a1a58f957e749/1?pq-origsite=gscholar&cbl=1817790 https://search.proquest.com/openview/903a6936e929e17beb4a1a58f957e749/1?pq-origsite=gscholar&cbl=1817790 https://www.raco.cat/index.php/gimbernat/article/view/44003 volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 304 sabaté casellas, ferran. 2015b. política i sanitat a catalunya: professionals i polítics. manresa: pahcs. sabaté casellas ferran. 2017. “public health in catalonia between 1885 and 1939.” catalan historical review, 10: 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del llibre. https://core.ac.uk/download/pdf/159089156.pdf http://webs.academia.cat/revistes_elect/view_document.php?tpd=2&i=9195 https://www.ohsjd.es/files/referent_14_fundacio_unio_0.pdf https://www.slideshare.net/jvalaball/el-sistema-sanitari-catal-un-model https://www.slideshare.net/jvalaball/el-sistema-sanitari-catal-un-model volume 6, number 1, 281-305, january-june 2021 doi.org/10.1344/jesb2021.1.j090 305 ylla-català, miquel. 2018. pa de pessic. aproximació a les memòries d’un apotecari de vic. lleida: pagès editors. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 caroline gonçalves universidade de são paulo (brazil) uriel rotta stracta consultoria (brazil) cooperative agribusiness history: organizational aspects for internationalization and the expocaccer case study abstract the present study addresses the absence of strategic management and efficient coordination of activities, which currently is a common scenario for brazilian agricultural cooperatives. if the cooperation enforces these elements, it results in capitalization for the cooperative and valuation of any brazilian agricultural commodity for export. this study intends to present a strategy for product valuation employed by one of the main brazilian coffee cooperatives in order to stand out among the national and international environment of coffee commercialization. additionally, the process of strategic reorganization of the internal structure of the cooperative over time revealed that the cooperative adopted actions aimed at internationalization, which places our research object under theories of organization and business history as a source of interpretation of this reading. keywords: business history; coffee cooperatives; expocaccer; cerrado coffee; strategies 1. introduction historically, brazil has been known for its capacity to produce and export commodities. there may be a certain comfort in the sense of stagnation of the country within this profile. corresponding author: e-mail: goncalves.caroline@usp.br received 24 january 2018 accepted 23 may 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 zylbersztajn (2002) points out those cooperatives, like other brazilian organizations, have been satisfied with the role of supplier of undifferentiated products. this is relevant when thinking about the challenges of brazilian agribusiness. the more value is added, the more protected the product becomes, and thus more strategies are requested to add value to the national commodity product. strategic alliances with foreign markets can benefit brazil in several ways, including the promotion of the industrialization of the exported product and the facilitation of access to foreign markets, due to the vast insight shared between the parties. the representative bodies of cooperatives in brazil still lack in national policies and actions that promote these associations between national and international organizations and that focus on the valuation of the brazilian agricultural product. to this end, the organization of brazilian cooperatives (ocb) could use its permanent international missions, and we could count on the support of diplomatic missions and agricultural attachés1 in promoting national products and cooperatives. a brazilian coffee cooperative located in the city of patrocínio, in the brazilian state of minas gerais, distinguishes itself from the usual scenario of coffee marketing due to its marketing choice: the use of a label of origin. under this perspective, this article aims to understand the following question: how can a brazilian commodity cooperative advance its internationalization process? considering that the internationalization of agricultural cooperatives goes through several stages, which will be discussed throughout this study, the general objective of this article is to raise aspects of the internal organization of the cooperative and external factors that influence in its internationalization stages. especially considering consolidation of internal organizational 1 the attaché (“adido agrícola”) acts in the opening, maintenance and expansion of markets for brazilian agribusiness, contributing to the generation of foreign exchange and jobs in brazil. available in: <http://www.agricultura.gov.br/noticias/governo-define-paises-de-atuacao-dos-adidos-agricolas-brasileiros-1>. retrieved 15 nov 2017. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 structure, regarding business model, strategical planning for long time development, cooperative members and employee behavior, would the brazilian cooperatives be prepared for internationalization? from the theoretical point of view, this study is supported by theories of organizations and business history. methodologically, this study presents a qualitative analysis of research, using secondary data to compose the theoretical basis on the internationalization of cooperatives. two case studies done in the past, which address issues related to the minas gerais cooperative, were also consulted: one from the year 19972, which portrays the moments that preceded the creation of the cooperative, and the other from 20163, which explores the theme of the appellation of origin label of the “cerrado coffee”. additionally, primary data from the cooperative were consulted via the website and documents provided by cooperative employees. much of the information about the cooperative was obtained from on-site visits of the authors to the cooperative. the visits occurred during the year 2016, all of which were performed monthly. in addition to these sources, other information were obtained through the participation of the authors in a strategic planning meeting of the cooperative, held from february 17 to 19, 2017, in the city of araxá, also in the brazilian state of minas gerais. this meeting was attended by about 100 participants, among them: cooperative employees, cooperative members, commercial partners, and representatives of the cerrado federation of coffee growers (federação dos cafeicultores do cerrado). after this introduction, the following sections address, respectively: (2) the cooperative agribusiness history: some concerns and challenges, connecting the aspects of the consolidation of organizations into the brazilian agricultural scenario, characteristics of the relationships 2 see saes and jayo (1997) 3 see giordano (2016) http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 between cooperatives and cooperated members, and the adaptability and flexibility strategies in agri-systems; (3) internationalization as a strategy and a challenge for agricultural cooperatives, considering particular aspects of this kind of organization; (4) methodology of the research; (5) strategies through time: the cerrado coffee and the expocaccer case study (first step of field research – secondary data collection), in which the historical aspects of the development of the cooperative and the explanation of the “denomination of origin” label are exposed; (6) strategies through time: the cerrado coffee and the expocaccer case study (second step of field research – primary data collection the internal restructuring), exposing the main topics identified as fundamental to the success of the cooperative and aspects of the challenges of the expocaccer cooperative towards an internationalization process. (7) some conclusions for the internationalization process for cooperatives in brazil drawn by the authors. 2. the cooperative agribusiness history: some concerns and challenges the path of the business history area, starting from the environment of economic history, has developed an autonomous research and knowledge network, in a closer dialogue with economists and administrators than with historians. according to [this] argument, it was during the second half of the twentieth century that business history found its true vocation, constituting itself as a specific area of other spheres of research, continuously improving its method and its theoretical basis for research. this path, however, did not occur without losses: as the construction of its identity took a more defined format, through the economics of organizations, the research was distancing itself from its origins, i.e., from economic history (gonçalves and saes 2017) after alfred chandler’s remarkable book strategy and structure (1962) had its origins in business history rather than in organization theory, the idea that economic efficiency is not independent of internal organizational structure became clearer (williamson 1981). thus, we can interpret that the phenomena which involve organizational strategies through time is observable from the aspects of a strategic (micro)economic sense aside from the narrative http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 history of the organizations. in this case, this can be done by observing the agricultural cooperatives strategies through time. from the point of view of the economics of organization authors, the framework of significant changes and adjustments to the strategies of the organizations that operate in agroindustrial systems was consolidated at the beginning of the 21st century. this framework can be summed up into several specific assumptions and the consolidation of organizations is one of them. regarding agricultural cooperatives, this consolidation is accompanied by evidenced fragilities in the relationships between cooperatives and cooperated members4. thus, in order to deal with these assumptions and prevail, these organizations had to unveil adaptability and flexibility strategies5 through time. consolidation of organizations. the corporations operating in all stages of agroindustrial systems, as in other sectors of the economy, faced a marked process of consolidation. the trend does not differ from that observed in other sectors, and it affects each segment of agricultural-based systems. according to sikuta and cook (2001), both the consolidation and the growth of coordination throughout the agrifood sector are rapidly reshaping the role of agricultural cooperative organizations. the increase in concentration, both upstream and downstream, widens the spectrum of the cooperative's traditional role in counterbalancing market power. cooperative organizations present an advantage when faced with the increasing demands of coordination from the players in the whole agrifood system. 4 see pozzobon, d. m., d. zylbersztajn, and j. bijman (2011). 5 see zylbersztajn (1995); gonçalves (2016). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 in brazil public policies encouraging the creation of global corporations in specific sectors have emerged, such as the animal protein area6. the consolidation of large groups that specialize in production can also be observed in the agricultural input industry and the processing industry, in addition to the transportation and logistics sector, and agricultural production activity. the adequacy of agricultural-based systems depended on the existence of economies of scale to be exploited. the trend does not mean that smaller organizations have not emerged, nor that they are not structured. for example, the expansion of the grain and pork scale exploitation reflects the search for a potential cost reduction in the production process. the same is not as evident in other agricultural systems such as fruit and vegetables farming. the impact on the concentration of industrial sectors is remarkably evident, especially on suppliers of inputs targeting plant and animal health markets, and on the processing of primary products, which can exploit the scale gains present in the r&d and distribution stages. although agriculture presents scale gains in some cases, it is also increasingly exposed to the concentration results in the input and processing industries, which suggests the relevance of collective organizations, cooperatives, and other associative forms as a mechanism of market equilibrium. studies performed by hendrikse and oijen (2004) point out that the incorporation of the variable "governance structure" in diversification research seems to be a fruitful direction for future research. the initial impression is that cooperatives diversify more in unrelated activities than in related activities, different from other types of organizations. the problem of horizon7, or long-term investment, is related to diversification. 6 one example is the support of bndes to companies such as jbs, which has generated debate among the press and specialized forums. 7 this will subsequently be explained. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 the relationship between the cooperative and the cooperative member. cooperative members play the role of both users and owners of the cooperative. the contractual forms found between associates and cooperatives are rather tenuous; in addition to the free entry and exit of the members (bialoskorski neto 2003), the associate is able to transact his product with other companies, incurring in infidelity with the cooperative. while in a capital company, the right of decision taken by the shareholders depends on the number of shares each of them holds, while in the cooperative everyone has the right to one vote, respecting the principle of equality. additionally, the "leftovers" of the current year fit in with each "associate", while in the capital companies, the "profits" of the entrepreneurial activity are attributed to each "owner" or "investor" (bialoskorski neto 2003). looking at the future of agricultural cooperatives, hendrikse and veerman (2003) understand that needs change over time, and market needs are very difficult to implement because the individual interests of members are dominant in relation to the needs of the cooperative. many cooperated members may be accustomed to relatively stable situations, while changes may affect both their situation and the cooperative. this raised the problem of how to meet the interests of the cooperative in the long term and the interests of the members of the cooperative in the short term. sykuta and cook (2001) list five main property rights issues that emerge from the relationship between the cooperative member and the cooperative: the "free rider" problem, the horizon problem, the portfolio problem, the control problem, and the problem of the costs of influence. the "free rider" problem occurs when gains from cooperative actions can be accessed by people who did not invest in these gains, such as recent associated members or non-cooperatives members (sykuta and cook 2001). the horizon problem is related to the cooperative members’ http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 rejection to long-term investments, since the strategies require in the immobilization of capital to be frozen for long periods of time (zylbersztajn 2002). the portfolio problem stems from the horizon problem, due to the preference of short-term investments to the detriment of long-term investments, which incurs in more risk. the investment portfolio of cooperatives does not necessarily reflect the interest of all members, but they cannot withdraw nor reallocate their investments – also regarding specific assets (zylbersztajn 2002; sykuta and cook 2001). the control problem, in turn, reflects the fact that control and strategic decision are in the scope of the same member in the cooperative, occasionally resulting in inefficient management. the gains could be obtained by separating ownership and control (zylbersztajn 2002). finally, the problem of influence costs refers to decisions that affect distribution among members. the costs are greater when there is a wide range of interests among group members, but the potential gains also increase. additionally, it is caused by the influence of those who hold executive positions disputed by the members of the cooperative and by the nonparticipation of the cooperative in the assemblies and commissions. (sykuta and cook 2001; zylbersztajn 2002.). regarding the relations between the cooperative and the cooperative as contractual relations, the cooperative may make investments through the promise of product delivery by the cooperative member. in turn, they may either break the agreement (or contract) by negotiating their product with another organization or remain faithful to the cooperative via incentives. zylbersztajn (2002) suggests that these incentives may be penalties associated with breach of contract, in addition to other formal and informal mechanisms that can be complemented in order to encourage the loyalty of the cooperative member to the cooperative. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 adaptability and flexibility through time: plasticity. adaptation can be considered a central problem for economic organizations. this is a view shared by authors such as barnard (1938) and hayek (1945). williamson (2008) argues: which transaction costs are the more important? interestingly, the economist friedrich hayek (1945) and the organization theorist chester barnard (1938) were in agreement that adaptation was the central problem of economic organization, albeit with differences. hayek focused on the adaptations of autonomous economic actors who adjusted spontaneously to changes in the market, mainly as signaled by changes in relative prices. the marvel of the market thus resides in ‘how little the individual participants need to know to be able to take the right action’ (hayek 1945, 526–527). by contrast, barnard featured coordinated adaptation among economic actors working through administration. in addition, williamson (2008) further points out that chester barnard’s work as highlighted aspects of hierarchy that go beyond the presence of formal organizations, including those informal and spontaneous. the author specified that these formal organizations carry out coordinated adaptions of the ‘conscious’, ‘deliberate, ‘purposeful’ type. barnard (1938) elaborates on the relationship between hierarchy and formal organizations claiming that one does not exist without the other. hayek (1945) demonstrates in his study that rapid adaptation to change may be a solution, and this adaptation is grounded in knowledge developed throughout the system and available to all individuals who belong to it. even in agricultural contracts the idea of adaptation is present: "the historical evolution of contracts shows the adaptation of their design for the purpose of the economy of the transaction costs" (zylbersztajn and nadalini 2007). zylbersztajn (1996) argues that if disturbances can be anticipated, contracts may be designed with provisions for adaptive actions. this is because both technological changes which affect the levels of asset specificity and/or uncertainty in the transaction and changes in the institutional environment can affect the conditions under http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 which the transaction is occurring, in turn affecting governance costs (zylbersztajn and farina 1999). according to zylbersztajn and farina (1999), supply systems operate in environments characterized by changing levels of asset specificity. these assets are associated with different competitive strategies which can affect transactions throughout the system, such as vertical differentiation, market segmentation, innovation, stock formation, among others. after a disturbance, the adjustment will depend on the level of a specific asset and the cooperation between the parties. zeitlin (2007) assigned the term "plasticity" to the ability of the arrangement to adapt to external shocks. thus, the arrangement shapes itself into the new imposed conditions. the levels of asset specificities may, in turn, influence the flexibility of the organization, or the arrangement, and its adaptive process. the organization of institutions may still provide support for adaptive arrangements. williamson (1991) infers that there are two types of adaptation: one that does not require intervention, is market-dependent and in which adjustments occur at no cost; and another, from the organizational point of view, that has costs associated to it and a need for hierarchy. it is assumed, therefore, that more flexible arrangements have greater plasticity since they adapt quicker to unexpected shocks. the evident pursuit of internationalization as a strategy pursued by agricultural cooperatives was a step forward in agricultural-based systems, and the next topic will discuss this strategy. 3. internationalization as a strategy and the challenge for agricultural cooperatives the internationalization trend in agricultural-based systems, which is associated with consolidation, is moving towards the search for new markets, thus expand the specialized http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 performance of large corporations. there are other incentives for internationalization, such as: the search for increasingly scarce agricultural areas; the entry of financial capital into the purchase of assets especially land; and the need for supplies in countries that have lost their characteristic as primary producers; all of these incentives have made agricultural-based systems naturally transnational. zylbersztajn (2002) claims that cooperatives are very compelling to the originating companies and the corporations producing agricultural inputs, because they can solve the problem of horizontal coordination of individual suppliers by efficiently coordinating a large number of contracts, thus reducing sales costs to producers of inputs and acquisition costs to exporting companies. internationalization, seen as a strategy, may take the shape of different partnerships arrangements and associations, depending on the difficulty degree of entry into the target markets. the barriers found are present both in access to capital and access to markets, as well as in the complexity of the legal and economic environment. agricultural-based systems do not only connect processors and distributors of food, fiber, and energy on a global scale, but they also improve organizations that have expanded to outside their countries of origin. thus, these systems are no longer associated with particular countries, but they are seen as part of complex contractual mechanisms, which involve actors present in different regions throughout the world who interact among themselves in order to generate value. food processing companies have specialized in supply chain mechanisms in order to guarantee the supply of raw materials in both the quality and quantity that is desired by the markets they serve. under this scenario, some cooperatives have achieved their insertions in stable channels, forging long-term partnerships in specific markets8. 8 an example of this trend is cooxupé, the largest brazilian coffee cooperative and a major supplier to the european coffee market. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 as a natural consequence of its success in the international sector, some strategies, previously practically ignored, began to gain relevance, among them, quality control and food safety, which are concerned with international consumer trends and the problems associated with protectionism tariff or especially non-tariff. aspects of market regulation have become part of the agenda of organizations interested in participating in foreign markets in a period of protectionist growth, as characterized by the late 1990s and early 2000s (zylbersztajn 2002, our translation). in most countries, cooperatives are legally restricted to national operation. inter-cooperation can reduce the costs of transaction for the system, increase market power, or even add more value to the participants (cechin, 2014). zylbersztajn (2002) emphasizes how important the exploration of the role of inter-cooperative actions is, because it could enable strategic associations outside brazil. this perception is also shared by cechin (2014), who affirms that inter-cooperation can minimize competition difficulties for individual cooperatives with large agribusiness markets. in 2008, in a successful strategy, several cooperatives from paraná jointly exported 3,600 containers of frozen meat to the netherlands, saving r$5 million (approximated u$1.5 million) (setti 2011). the formalization of inter-cooperation in consortia represents a strategy aimed at increasing the bargaining power of cooperatives through a pool of purchases, as well as guiding the price of inputs in the market, with the objective of reducing their costs and dependence on large multinational companies that control the sector. 4. methodology of the research the present research, performed under a qualitative approach, is based on a case study of a brazilian coffee cooperative. the analysis is present in two parts, each focusing on one of the two steps followed to collect database. the first step, a secondary data collection, was performed in order to understand the path of the cooperative over time. the two case studies done in the past with the cooperative were http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 consulted: one from 19979, which portrays the moments that preceded the creation of the cooperative, and the other from 201610, which explores the theme of the country of origin labeling of the “cerrado coffee”. also, data from the website of the cooperative were consulted11. the second step was an action research. in 2012, we were invited by the cooperative to develop a consulting project in order to organize the strategic planning actions for the next four years. during this visit, we noticed that throughout the last 20 years, the cooperative presented organizational and management challenges, in addition to problems that resemble those from the 1997 scenario. the cooperative was advised to undertake our strategic planning. then, in 2016, we returned to the cooperative and noticed that some internal restructuring was made according to the past strategic plan devised by the authors, but the organization still presented difficulties in several areas. the researchers accompanied the work at the departments of the cooperative for about one year – from march 2016 to march 2017 – in order to identify fragilities and to propose solutions to reorganize internal structure. after the problems were identified, data were analyzed, and a new plan to address the problems was developed and implemented. in march 2017, a new strategic four-year plan for was conceived and presented at a meeting held from february 17 to 19, 2017, in the city of araxá, in minas gerais state. this meeting was attended by about 100 participants, and among them were cooperative employees, cooperative members, commercial partners and representatives of the cerrado coffee growers federation. the following sections will present the main results achieved in this two-steps research. 9 see saes and jayo (1997) 10 see giordano (2016) 11 see http://www.expocaccer.com.br/ http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 5. strategies through time: the cerrado coffee and the expocaccer case study first step of field research – secondary data collection in the scenario previously described in the introduction section, the cooperative, that is, the object of this study, is inside an undifferentiated market of brazilian commodities. the expocaccer cooperative is based in the cerrado region, which is located on the midwest region of the minas gerais state in brazil. this region, which is comprised of 55 municipalities, accounts for 12.7% of brazilian coffee production. the production area is of around 210,000 hectares, employs 4,500 farmers and has an average annual production of 5 million bags of coffee12. in 1992, an innovative model of organization emerged in the cerrado region: the council of associations of cerrado coffee growers (caccer). until the 1970s, the region was only known for the production of beef cattle. caccer arose with the common objective of valuing the quality of the coffee produced in the region. (saes and jayo 1997). in this way, caccer became an articulator of strategic and marketing actions, as well as a reference in the technical and commercial advisory to the coffee producers in the cerrado. the history of the expocaccer cooperative, which will be further referenced in this article, is described in its first case study, performed in 199713. throughout its history, caccer has encountered a lack of tradition and legislation over the protection and control of origin labeling in brazil, in addition to the scarce financing sources for producers. between 1990 and 1994, international coffee prices considerably declined to prices that averaged below production costs. in the city of patrocínio (mg) in august 1992, the paid amount to the producer reached the mark of u$44.90 per bag, while the cost of production in minas was around u$70.50 per 12 information retrieved from <http://www.cafedocerrado.org>. accessed on 09 nov 2017. 13 see saes and jayo (1997). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 bag. this decline in prices was reflected both in the withdrawal of producers from the coffee farming and in the decrease in coffee quality. however, the role of the italian company illycaffé is noteworthy. this company established, in 1991, the "brazil coffee quality award for espresso", awarded to several producers in the cerrado region, which in turn proved the established superiority of coffee in the region. caccer thus began to use the contest as a marketing resource to promote the cerrado coffee. in 1992, caccer defined itself as "a limited liability company consisting of associations and cooperatives of coffee growers", which "in the fulfillment of its objectives, will operate as a non-profit establishment". the objectives of caccer were directed to three areas of action: (i) to manage the marketing of cerrado coffee; (ii) to act as a political representation channel; and (iii) to provide guidance to members in all aspects of their agribusiness. one of the main actions of caccer was the registration of the brand "café do cerrado" (cerrado coffee), launched in july 1993. it was a certification of origin (similar to a “protected geographical indication pgi”). the first batch of coffee with the "café do cerrado" brand, which totaled 1,400 bags, was exported to belgium in december 1993, with a premium of about eight percent on the price that was then practiced for coffee in the region. the strategy of differentiation through brand also had a scale of quality standards for cerrado coffee, in addition to regulation for the certification of coffee producers in the region. nevertheless, the most traditional solution to achieve the objectives of caccer would be the establishment of a cooperative. as business expanded, caccer began to work more closely with producers in coffee marketing. in 1994, caccer operated future sales and exports of coffee in the name of its associates. this situation led caccer to create, two years later, a center of cooperatives for cerrado coffee named expocaccer, which included three affiliated http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 cooperatives: coocaccer araguari, coocacer patrocínio and coocaccer núcleo acarpa. the expocaccer headquarters was established in the city of patrocínio, in minas gerais. cooperatives had several advantages over associations in these commercial operations, such as lower taxes, access to advances on foreign exchange contracts (acc) in export operations, and greater credit facilities, at least, under the possibility of offering guarantees over the loans. (saes and jayo 1997). the “denomination of origin” label in december 1996, the government of minas gerais, through decree 38.559, established the regulations of the certificate of origin for the four coffee producing regions of the state of minas gerais: cerrado, jequitinhonha, south of minas, and mountains of minas, named "certicafé". this was the basis for the creation of the cerrado mineiro denomination of origin (do cerrado mineiro)14 label, later officially established in 2013. although since 2005, the region has been recognized as an "indication of provenance", it was only in 2013 that the region was officially recognized as the first coffee-producing region to obtain this status for coffea arabica green coffee species and for industrialized beans or toasted coffee. denomination of origin (do) is a form of collective protection of property rights, where there are rules for entry, exit, monitoring, and controls of the participants (giordano 2016). the do label is managed by the cerrado coffee growers federation, also originated from caccer (expocaccer is an arm of caccer, as well as the federation), a non-profit organization composed of eight cooperatives, eight associations and one foundation. the presidents of the cooperatives of producers, form the board of directors of this federation, which is a deliberative body of the internal and strategic decisions of the system. the 14 similar as in english: "protected designation of origin – pdo” http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 associations participate in the general assembly and in the institutional committee of the federation (giordano 2016). accredited producers may use the do mark in accordance with the rules to be followed by regulation, but generally this use is conditioned to the product packaging, physical facilities of the farm, media, and administrative documents. according to giordano (2016), the label "do cerrado mineiro" also offers the consumer a code similar to a qr-code that allows them to identify information about the batch of coffee, and the certificates of origin and quality. through short videos, the producer, their family, and the farm are presented to the consumer. it is also possible to trace the product, which is a requirement of foreign markets, such as the identification of the quality of the product and its sustainable production, which in turn provides information about environment and water care, ethics, and labor relations; all of which are also available through qr code. the prices of products with the do label can reach 10% more than the traditional market value for products without the label. expocaccer a history of challenges towards internationalization around 1997, new problems emerged for expocaccer. at that time, coocaccer was responsible for managing warehouses, processing, and standardization of coffee, and expocaccer or its associates commercialized the coffee. this way, once the exporter intermediation was eliminated, direct sales became commonplace for the cooperative. partly due to expocaccer's short existence, this direct selling still represented a very small percentage of the total commercialization of the region. the most important business carried out by expocaccer occurred in june 1996, when the cooperative signed an agreement along with the cafecol argentina sa, a company which would represent cerrado coffee in argentina, chile and in uruguay (saes and jayo 1997). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 in 1999, based on a strategic vision and with the purpose of better serving its cooperative and customers, coocacer patrocínio incorporated the cooperatives central, and began to adopt the business name of expocaccer cerrado coffee growers cooperative ltd. (expocaccer cooperativa dos cafeicultores do cerrado ltda). today expocaccer is the export channel of the cerrado mineiro region, for more than 30 countries, and 120 international clients. as a large and structured cooperative, some problems emerged to expocaccer: the need for greater capital infusion and financing sources, similar to other cooperatives; the overload of the board of directors that created conflict between the growth of the cooperative and with the heavily traditional bureaucratic structures of the cooperatives; the loyalty of the cooperative members in the supply of quality coffee, given the investments done by the cooperative for the international commercialization of the coffee of the cerrado and the search for actions and/or partnerships to expand commercialization to the domestic market segmented into niches for consumption of quality coffee (saes and jayo 1997). 6. strategies through time: the cerrado coffee and the expocaccer case study second step of field research – primary data collection the internal restructuring a restructuring of the internal organizational processes was necessary to support the internationalization process. in 2012, we noticed that the cooperative had some problems, and thus we carried out a survey of the strengths and weaknesses of the cooperative. the following weaknesses were identified: (i) inadequate internal information flow (internal process and it); (ii) failure to obtain information from the cooperative members; (iii) inadequate human resources area; (iv) reactive management; (v) need for professional qualification; (vi) lack of involvement and understanding of the team in relation to the company's business; (vii) need for succession for the councils of the cooperative; and (viii) need for budget review. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 therefore, the actions established in order to solve these problems were: (i) to simplify the information system and optimize its use; (ii) to improve the information capture process; (iii) to structure the human resources department; (iv) to implement a cooperative training program; (v) to prepare an action plan for the harvest; (vi) to create a profit sharing plan; (vii) to promote cooperative education; and (viii) to follow-up the budget process. the aforementioned actions were put into practice and, in 2016, when we returned to the cooperative, the scenario was already different. the cooperative was more structured, but it still needed the support of the coffee federation for the use of the original label of the "cerrado coffee". finally, five main areas were highlighted in order to expose arguments for internationalization processes and to identify required demands of the cooperative to be successful on it: (1) loyalty of the cooperative members; (2) competition; (3) business model; (4) the internal environment; (5) the role of expocaccer in the cerrado coffee growers federation: 1. loyalty of the cooperative members in order to deal with an internationalization process, expocaccer demonstrates strength in this area, ensuring the loyalty of the cooperative member, which in turn guarantees the delivery of the coffee to the customers. some highlights are: solid storage and processing structure, secure transportation, customer portfolio, trained employees, and credible business partnerships. however, it is still necessary to reinforce to the cooperated member the perception of the advantages of being part of the do system and the importance of the label. 2. competition the entry of new coffee cooperatives, or even traditional coffee cooperatives that operate in the same region as expocaccer, which often offer better benefits to producers, are a threat to http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 expocaccer. at the same time, partnerships with other cooperatives aiming at the internationalization process may possibly be established. these partnerships can be established through feasible actions such as: sharing expocaccer's physical storage and processing structures with other cooperatives or traders; using of the recognized trademark expocaccer in the foreign market, as well as the do label; enhancing existing traceability systems, an important aspect of the foreign market requirements; joint identification of the best external markets for action and entry into new markets, such as asia. 3. business model the consolidation of the business model of the cooperative leads it to act on several fronts with the producers. the focus of the cooperative should not be to act as a coffee brokerage, but rather as a trader and export organization, as well as a procurer of market niches, and possibly focus on the specialty coffee markets. however, it is possible to reach different markets by relying on the diversity of the coffee. it is important to be concerned about the succession of producers on farms. 4. the internal environment after structural changes in the cooperative, its internal environment becomes prepared for internationalization, since the internal climate is reflected in the commitment of the team of collaborators, and in the quality of service delivered to the cooperative members and clients. the cooperative must maintain efficiency in the transit of internal information and the updated means of communication. 5. the role of expocaccer in the cerrado coffee growers federation expocaccer plays a prominent role with the cerrado coffee growers federation. due to its importance, the cooperative must assume the role of commercial leader of the region for coffee http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 with do. the strategies of the cooperative and the federation should be attached to the elaboration of the international strategies of action, articulation of partnerships abroad and participation in the events of the international circuits. to continue its activities, expocaccer established a new strategic planning named "expocaccer towards 2020". the monitoring of the actions of a cooperative must be continuous, as in a traditional company, and the actions must be established in periodical plans so that the demands can be fulfilled. 7. conclusions the internationalization of brazilian cooperatives is, undoubtedly, an attractive strategy for these organizations because it promotes access (and investment) to foreign markets. in turn, the advantages obtained by these foreign markets when transacting with cooperatives are: the reduction of costs with the establishment with a smaller number of contracts with suppliers; the receipt of standardized products and/or with qualities and characteristics desired by their markets; and the reduction in uncertainty for the safety of food received; among others. cook (2000) also emphasizes the credibility offered in face of the importance of the reputation and performance of cooperatives within the dissemination of innovation processes for the producers in the field. the process of internationalization of agricultural cooperatives can go through three main stages, namely: stage 1 export: in this phase, the cooperative explores new markets and adapts to them; stage 2 exporter with alliances: in this phase, the cooperative establishes partnerships, explores unique aspects in the market, shares risks, and attracts capital for investments; stage 3 exporter and producer cooperative: at this stage the cooperative is internationalized, makes investments abroad, and manages to circumvent protectionist policies http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 (zylbersztajn 2016). in the case of the expocaccer cooperative, it can be considered that the cooperative advances its actions toward compliance with the proposal in the second stage of the internationalization process. since the cooperative has been successfully fulfilling the export task, seeking to adapt itself to the demands of the foreign market, the dedication to the use of the brand "café do cerrado" is a strength with a unique aspect in the market, aiming to differentiate and add value to the coffee commodity. however, some points still need to be addressed. the establishment of partnerships and alliances is one of them. additionally, the challenge of carry-on environmental sustainability, such as compliance with international environmental and phytosanitary – and, in some cases, animal health – standards, as well as the ethical and social values of these importing countries (cechin 2014), are challenges to be overcome by all brazilian cooperatives that aim to internationalize. national and international inter-cooperation is also a less explored step by brazilian cooperatives, and it may be an instrument to increase the possibilities and capacities of these cooperatives in the foreign market. particularly in the case of cerrado coffee, it is still a challenge for the cooperative to consolidate the importance of being part of the system "denomination of origin of coffee from the cerrado of minas gerais" in the perception of the producer. this paper sought to emphasize the changing actions in the organization or adoption of internal strategies of the cooperative, considering the internationalization phase in which it is inserted. thus, we explore the possibility of projecting possible strategies for other cooperatives that want to operate in the foreign market. the main question is: are the brazilian cooperatives prepared for internationalization? and we are thinking about internal structure and internal organizational procedures? http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 however important internal strategies are, they are not enough. the influences of the external environment or institutional support, such as the role of the state in the promotion of coffee from the cerrado and support given to brazilian cooperatives, especially in the case of coffee, are extremely relevant aspects and our perspectives of deepening research on the subject point to this direction, asking for more information. it is necessary to say, at this point, that the brazilian state should act as a facilitator in this scope of internationalization of brazilian coffee cooperatives. according to what além and cavalcanti (2005) suggest15, the necessary support policies are, adapted to the cooperative organizations and the products that are being treated, such as: i) liberalization of restrictions on the direct investments of cooperatives abroad; ii) creation of international instruments to facilitate and protect the investments of cooperatives abroad, including the promotion and facilitation of strategic partnerships abroad; iii) information and technical assistance, especially compatible with the markets with which cooperatives are transacting; it is important to reinforce the role of the brazilian state in disseminating the quality and sustainability of the national coffee, working with the purpose of international missions in the following ways: iv) fiscal incentives for cooperatives; v) insurance mechanisms for the investments of cooperatives and coffee producers; and vi) financing for cooperatives and for producers. it is assumed that the adaptation of coffee cooperatives to the demands of external markets depends on flexible mechanisms of transactions between cooperatives and cooperative producers, in a relationship that is achieved through the investments of both parties in specific assets. both cooperatives and cooperative members require technical assistance services and 15 previously cited in the opening article of this journal. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 external (and state) guarantees to do so. in cases where such relations are supported by public policies and a strong institutional environment, it is inferred that cooperatives will be more prosperous in the process of internationalization, and to guarantee this support may be the greatest challenge for the advancement of brazilian agribusiness. acknowledgements the authors would like to thank the academic publishing advisory center (centro de assessoria de publicação acadêmica, capa www.capa.ufpr.br) of the federal university of paraná for assistance with english language editing. references além, ana c., and carlos e. cavalcanti. 2005. “bndes e o apoio a internacionalização das empresas brasileiras: algumas reflexões.” revista do bndes 12 (24): 43-76. barnard, chester i. 1938. the functions of the executive. cambridge, ma: harvard university press. (fifteenth printing, 1962). bialoskorski neto, sigismundo. 2003. agribusiness cooperativo. economia e gestão dos negócios agroalimentares. são paulo: pioneira thomson learning. cechin, andrei. 2014. “cooperativas brasileiras nos mercados agroalimentares contemporâneos: limites e perspectivas.” in o mundo rural no brasil do século 21: a formação de um novo padrão agrário e agrícola, edited by buainain, a. m.e. alves, j. m. da silveira, and z. navarro. brasília: embrapa. cook, m.l. 2000. “cooperatives and globalisation.” paper presented at workshop internacional de tendências do cooperativismo: reconversão produtiva, fusões e a internacionalização de negócios, ribeirão preto. anais... ribeirão preto: fundace. expocaccer.2017. “ expocaccer website.” accessed nov 20. https://www.expocaccer.com.br/. giordano, samuel r. 2016. “estudo de caso – denominação de origem do cerrado – do cerrado mineiro – minas gerais.” in estudos de caso sobre inovação na cafeicultura brasileira, edited by zylbersztajn, d., s. r. giordano, and c. l. rezende de vita, c. l., 169. são paulo: pensa. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 gonçalves, caroline. 2016. “agro-estratégias através do tempo.” phd diss., faculdade de economia, administração e contabilidade, universidade de são paulo, são paulo. goncalves, caroline, and alexandre m. saes.2017. “surgimento e desenvolvimento da business history: da história de empresas à história de negócios.” paper presented at the xii congresso brasileiro de história econômica & 13ª conferência internacional de história de empresas, niteroi, august 28-30. hayek friedrich a. 1945. “the use of knowledge in society.” the american economic review 35 (4): 519-530. hendrikse, george w. j., and aswin a.c.j. oijen. 2004. “diversification and corporate governance.” in restructuring agricultural cooperatives, edited by hendrikse, g. w. j. rotterdam: erasmus university rotterdam. hendrikse, george w.j., and cees p. veerman. 2003. “on the future of cooperatives: talking stock, looking ahead.” erim report series research in management, january. pozzobon, daniela m., decio zylbersztajn, and jos bijman. 2011. “modeling heterogeneity and member participation in cooperative governance.” paper presented at the fifth international conference on economics and management of networks (emnet), limassol, cyprus, december 1-3. saes, maria s., and martin jayo.1997. “caccer: coordenando ações para a valorização do café do cerrado.” paper presented at the seminário internacional pensa de agribusiness, são paulo. anais... são paulo: pensa-fia-usp. setti, eloy o. 2011. “cooperativismo paranaense: ocepar 40 anos construindo o futuro.” curitiba: ocepar, dez. sykuta, michael, and michael l. cook. 2001. “a new institutional economics approach to contracts and cooperatives.” american journal of agricultural economy 83 (5): 1273-1279. williamson, oliver e. 1981. “the economics of organization: the transaction cost approach.” the american journal of sociology 87 (3): 548-577. williamson, oliver e. 1991. “strategizing, economizing, and economic organization.” strategic management journal 12 (winter): 75-94. http://www.jstor.org/stable/2486435 williamson, oliver e. 2008. “transaction cost economics: the precursors.” journal compilation institute of economic affairs. published by blackwell publishing, oxford. zeitlin, jonathan. 2007. “the historical alternatives approaches.” in the oxford handbook of business history, edited by geoffrey jones, and jonathan zeitlin, 120-140. new york: oxford university press. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 92-117, july-december 2018 doi:10.1344/jesb2018.2.j048 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 zylbersztajn, decio. 1995. “estruturas de governança e coordenação do agribusiness: uma aplicação da nova economia das instituições.” tese de livre docência em administração. são paulo, faculdade de economia, administração e contabilidade/usp. zylbersztajn, decio. 1996. “governance structures and agribusiness coordination: a transaction cost economics based approach.” research in domestic and international agribusiness management 12: 245-310.university. zylbersztajn, decio, and elizabeth. m.m.q. farina.1999. “strictly coordinated food systems: exploring the limits of the coasian firm.” international food and agribusiness management review2:249265. zylbersztajn, decio. 2002. “quatro estratégias fundamentais para cooperativas agrícolas.” in agronegócio cooperativo – reestruturação e estratégias, edited by braga, m. j, and b.s. reis. brazil: viçosa, mg zylbersztajn, decio, and lygia b. nadalini. 2007. “explaining agro-industrial contract breaches: the case of brazilian tomatoes processing industry.” revista de economia e sociologia rural 45 (4): 899-920. zylbersztajn, decio. 2016. processos decisórios: temas especiais em cooperativas. in encontro conhecer para cooperar. brasilia. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 david wong cam universidad del pacífico (peru) harold hernández lefranc universidad nacional mayor de san marcos (peru) miguel chirinos grados universidad nacional de colombia (colombia) josé manuel carrasco weston universidad del pacífico (peru) unequal growth and social capital in clothes-making enterprises in peru: 1980-2015 abstract why do some small companies in the clothing industry fail to grow while others succeed is the conundrum that this study sets out to solve. it does so by identifying and explaining four cases of enterprises with varying performance levels. on the understanding that there are structural and historical conditions that correspond to trends, these cases are explained and the question is answered. based on the evidence, the article finds that the prevailing inequality is due to the greater or lesser presence of social capital resources that come from networks and which are accessed through relationships and to institutional and structural conditions that slow growth. added to this are the differing responses of enterprises to the negative effects of poor-quality institutions. following the approach of nahapiet and ghoshal, the study explains how an actor can develop certain range of capacities for participating in networks, before stalling as a result of a diversity of conditions. keywords: social capital; informality, cloth; peru and emerging markets corresponding author: e-mail: wong_de@up.edu.pe received 27 march 2017 accepted 27 nov 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 1. introduction 1.1. small companies are not only a matter of productivity in economic theory, productivity and growth are determined by investment and the capitallabor ratio. however, different authors (arrow 1962, 155; schultz 1961, 1) point out that investment is insufficient to account for changes in the productivity of countries. indeed, it is human capital that explains why some countries are more productive than others. as such, companies devise strategies in an attempt to increase their productivity. however, most companies in the world design strategies that result in meager productivity (value added sales deducted from spending on inputs and energy – per worker). clothes-making (assembly) is an activity characterized by inherently low productivity (huynh 2015). it is just one activity out of several in the clothes industry. the industry consists of three sectors: textiles (supply of fabrics), manufacturing (production of clothing), and marketing (sale of clothing); in turn, entails pre-assembly manufacturing (implementation of design conception through the fabric, patterns, and size marking), assembly (sewing and stitching) and finishing (application of buttons, embroidery, and prints). the textile, preassembly, and marketing sectors all have high barriers to entry. assembly and finishing are the simplest activities. however, the former cannot be mechanized, while the latter can (wong 2014). on the international market, the development of enterprises in the clothing industry passes through reasonably predictable stages: the initial stage, in which the main activity is assembly; the full production package, which integrates the textile sector; and manufacturing for export under trademark. the first two stages are typically marked by low productivity insofar as the decision-makers are price-takers: in perfect competition in the first stage, and as sellers in an http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 oligopsony in the second (schrank 2004; kastelijns 2014, 53). the third stage, original-brand manufacturing, incorporates all three sectors, although an important point is that the manufacturer sells under its own brand. to our knowledge, most companies in emerging countries, as in peru, stall during the first two stages the initial stage and the full production stage package and fail to reach the original-brand manufacturing stage (gereffi 2001; wong 2014). however, some companies are moving in the complexity of this process than others. our interest concerns the factors or traits that characterize their progress in complexity and which are kept in incipient stages. productivity is not the cause but the effect of several factors. the garment industry requires quantum leaps linked to a complex know-how. every business requires two traits: 1) social capital, and 2) innovation. but the new resources are not acquired between pairs of equal power and there are schemes that may be restricted to certain groups against others. 1) social capital refers to the structures of social relations, among them the business; that also involves the capabilities that the partners can overcome these same structures. the concept does not refer to a static, defined or permanent network. in reference to the social relations linked to companies, this concept assumes that participants understand that the purpose of the possession of capital, which is accumulated work, although not necessarily stated, is the increase in value of the products or services. the capital, through the transfer of resources, is knowledge, assets or processes. there is a consensus that businesses, especially small and family-owned, have no explicit economic goals, but who in the future will be joining the economic field. while some agents manage more successfully than others; i.e., social networks can be or not be useful and functional (pirolo and presutti 2010; uzzi 1999, 481). in general, companies begin with scarce resources, managed by relatives. they possess unique advantages http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 for developing social capital. some of these advantages for these small businesses are: quicker response to customer preference, more efficient communication among the parties, and a more effective flow of communication tailored to better responses, all because of family socialization (tokarczyk et al. 2007, 23). moreover, the following must be specified: “the volume of social capital that a particular agent possesses depends, therefore, on the extent of the network of connections they can mobilize effectively and on the volume of capital (economic, cultural or symbolic) possessed by each of those to whom they are linked.” (bourdieu 1980, 2). this makes sense in reference to the idea that capital (whether economic, cultural, or symbolic) is ultimately accumulated: that is, it is power (bourdieu 2001, 131-135). and it makes sense in consideration of the notion that there is not chance or natural order in this disposition, process, structure, or strategy but, more or less conscious on the part of agents who may or may not accumulate capital in its different forms: it concerns the idea that a network of relationships is neither to natural fact nor to social detail, but the following: “[...] the product of the work of establishment and maintenance is necessary to produce and reproduce long-lasting and useful connections to provide material or symbolic benefits. in other words, the network of connections is the product of social investment strategies consciously or unconsciously oriented toward the institution or reproduction of directly usable social relations, in the short or long term [...].” (bourdieu 1980, 2). 2) innovation. an alternative combination of resources can be innovative. innovation is the "implementation of a new or significantly improved product (good or service), or process, to new organizational method in business practices, workplace organization or external relations" (kraemer-mbula and wunsch-vincent 2016, 54). this definition is broader than offered in developed countries for consideration of patentable inventions. it links to companies http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 whose genesis lies in the limits of informality, those not registered with the authorities. contrary to common sense, given certain conditions, these small informal businesses can innovate and develop intellectual property, which promotes growth. usually the informal sector is not considered a potential source of innovation and the micro-companies, most of which do not grow (kraemer-mbula and wunsch-vincent 2016). one related study (la porta and shleifer 2014) cites low productivity as one of the characteristic features of the informal sector. this sector is sizable in emerging countries, accounting for between 30 and 40 percent of all economic activity. meanwhile, in developed countries it is still present but to a lesser degree, comprising between 15 and 20 percent of the total. this same study shows that the productivity, expressed as a median, of informal companies is just 15 percent of that of their formal counterparts. peru, at 12 percent, is below the average, trailing countries such as guatemala (15 percent) and brazil (29 percent). if the overall number of formal small companies alone is taken as a basis, the result for this andean nation increases to 18 percent. this low productivity is attributed to the precarious development of innovation, infrastructure, education, and efficiency (céspedes, lavado, and ramirez 2016)1. de soto did not analyze innovation. he observed informal businesses such as obstructed business power reserve by excessive state regulation. he argues that "the informality occurs when law imposes rules that exceed the socially accepted norms. it does not cover expectations, choices and preferences of those who cannot conform to such rules, and the state does not have coercive capability to enforce these rules" (de soto 1986, 12). focusing on the strategies associated with the assembly and full production package stages, one phenomenon is particularly worthy of note. we have identified numerous enterprises that 1 the informality it may be alternatively as employment of unprotected workers, vision that we will not address in this article. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 commenced amidst precarious conditions of poverty during the period of study (1980-2015) but whose fortunes diverged in the process: some now perform outstandingly, with annual sales of hundreds of thousands of dollars; while others achieve sales that do not exceed the tens of thousands. therefore, we must ask: why, and for what reasons, do the poorer-performing enterprises not imitate the better-performing ones? might it be the case that the difference is down to not more than worker productivity? what about other companies differ in terms of social capital? 1.2. hypothesis in peru, in the clothing sector, there exists a correspondence between the greater or lesser business performance and a greater or lesser presence, respectively, of social capital (which comes from networks and resources obtained through relations). 1.3. methodology and previous research we employ to case-study methodology. here, we seek to establish the backgrounds, the processes, and the development of the enterprises: the ties that bind social participants in the company. this method is used when the aspect studied contains many variables, which hinge on multiple sources of evidence and are explained on the basis of prior theoretical propositions (yin 2008). we draw on four of the 26 cases studied by wong since 1996, all of which have their origins in the early-1980s (wong 1996; wong 2014. the selection criteria were as follows: the enterprises had to be engaged in clothes-making and to have differing economic performancelevels; and the owners had to be willing to participate in the study. three of the cases started out amidst precarious conditions, while the fourth came from a more privileged background but possessed characteristics that were valuable for the study (see table 1). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 table 1. firm size by case note: we are aware that sales are not the best indicator to determine performance, it should be return on asset (roa) or net present value (npv). but in a strongly suspicious market it is impossible to obtain these sophisticated indicators. source: compiled by authors from cavanagh 2016 the question to be answered is how and why these enterprises grow or fail to grow. the how is a description of the way in which the development occurs; the why concerns the complex and syncretic sum of economic, social, psychological, political, and, ultimately, historical factors that determine growth or non-growth. though these cases, all of them real, do not allow the enterprises to be tracked over time and throughout their history, they do at least enable a kind of anagnorisis of their history, of the factors that have determined their trajectory, whether more or less successful , faster or slower, based on the stated intentions of the actors or factors that the actors might reveal by telling their stories: social origins; initial capital; motivation; social capital; intellectual capital or formal education; affective life; and access to beneficial and nonbeneficial factors concerning the family, networks of friends, the wider community, religious ideologies, etc. this is based on our use of the abstract categories described up to this point and hereafter2. 2 rodolfo bustíos case case founder company age latest generation involved firm size education health year annual sales us $ 000 camacho first grade of high school precarious 32 years second 2015 50 sanchez high school normal 33 years first 2015 less than 8,000 bustios degree in business administration normal 26 years first 2015 68,000 rosales high school normal 41 years first 2014 250,000 http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 figure 1. value chain of clothing industry http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 for decades scholars have noticed that companies and latin american business groups are located among the largest in the world. however, investigations in this regard lack of theoretical content and their dissemination is limited because they are not written in english. these investigations focus on entrepreneur families on issues of comparative analysis, large national markets in brazil, argentina and mexico, or the relationship of these families with politics (fernández and lluch 2015). in perú, monsalve (2015) divides the evolution of the large family business into three periods that correspond to the feature of peruvian politics and the economy: a) the formation of the large family business (1896-1960), b) the family business and the formation of new economic groups during development led by goverment (1960-1990) and c) the restructuring of the large family business (1990-2012). in these periods there is attempts by the large family business, to develop the clothing industry (such as the romero group). in another research, wong (1996, 2014) studied the garment industry, but places emphasis on the evolution from the small-sized until it becomes a medium-sized company. there are three factors that allow this process; the family project, the conviction and the availability of resources and capabilities. 2. growth requires new resources through social capital 2.1. the presence or absence of networks that provide resources: the structural dimension. the unequal growth of clothes-making enterprises in peru may be associated with the presence or absence of networks. the beginnings of an explanation for this may be found in what is known as the structural dimension, which refers to: http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 “[the] overall pattern of connections between actors that is, who you reach and how you reach them." among the most import facets of this dimension are the presence or absence of network ties between actors, network configuration or morphology describing the pattern of linkages in terms of such measures as density, connectivity and hierarchy; "and appropriable organization that is, the existence of networks created for one purpose that may be used for another” (nahapiet and ghoshal 1998, 244). specifically, this resource comes from two sources: the first, bonding social capital, which stems from the network closest to the individual and involves a shared terminal network of factors such as religion, kinship, ethnicity, political affiliation, school, or occupation. the second, bridging social capital, is a product of new and numerous bonds formed in society, and, because it constitutes a continuous personal relationship, the resource is nontransferable (carney 2007). each combination of capital social bonding and bridging social capital creates an organizational form with advantages and disadvantages for defending oneself against the environment (see figure 2). in ephemeral entrepreneurship, social capital is practically nonexistent, neither inheritance nor via the creation of new connections through coming. figure 2. social capital combination and organizational forms source: caney 2007. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 this tends to be costly: there are considerable restrictions on financing, the cost of credit is high, and the horizon is strictly short-term. enterprises in sub-saharan africa tend to operate based on this type of capital. in the case of community-embedded family capital, enterprises capable of putting down roots are developed, but these can not be extended "through connections". enterprises are able to minimize transaction costs and honor contracts if the connections are between individuals from the same group. they usually succeed in creating small enterprises in highly liquid lines of business involving non-specific assets sold without loss of value, such as retail sales or clothes-making. fashion case is an example of this type of family business (wong, hernández, and chirinos 2014). hugo is an asian immigrant who arrived in peru in 1935. he married a highly motivated lady of humble origins named grimanesa. their first daughter ana was born in 1952. these three individuals composed a cohesive group that made progress its first successful business, a store in paramonga, a small town outside peru’s capital. the mother’s hopes lay in their chances of the business growing in the capital, 200 km. away. hugo met an asian countryman who proposed a clothing manufacturing business. the family (bonding social capital) is still helping. these two businesses are the basis for the development of a family business that today manages a chain of 50 stores in all of peru now in its third generation, including the university-educated children of ana. thus this illustrates the concept of extended social relations (bridging social capital). in the case of transnational trading network capital, enterprises form connections with a greater number of social participants (suppliers, customers, banks, etc.), but the agents of the family business do not integrate into the immediate community. this wider linking allows entrepreneurs to carry out bigger operations that require larger inventories, fixed assets, and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 investments. they develop medium-sized enterprises, but given their paucity of group spirit, they migrate elsewhere after reaching a certain level of development. this group provides a reasonable explanation of the chinese case guided by "life raft values" (the group does not put down roots in the territory). finally, the family business group develops "connections through inheritance", and through the "creation of new connections". given the vigor with which they have developed their networks of trust, they obtain financing at a low cost, form cohesive organizations, hire loyal workers, and have access to information about business opportunities. enterprises with this kind of capital attain first move advantages,increasing returns to scale, and inclusion in internal capital markets --those involving enterprises from a single group. this allows them to gain business on a large scale and operate on the basis of a distinguishing factor. in peru, (monsalve 2015, 382) the formation of the large family businesses born at the beginning of the 20th century concentrates in the agro-industrial sector (sugar and cotton). due to a weak capital market, bank credit became a comparative advantage because of contacts with a financial institution like the italian bank. 2.2. resources that promote shared language between parties: the cognitive dimension the cognitive dimension refers to the resources that allow networks of contacts to communicate accordingly through language, vocabulary, and collectively shared narratives. a possible lack of meaning can be shared among participants of potential networks of credits, inaccessibility of relevant information, contacts for optimal transactions, business opportunities, etc. this is more explicit in the following quote from these authors, who defended orr, they say the following: orr (1990) demonstrates how narrative in the form of stories, full of seemingly insignificant details, facilitates the exchanging of practice and tacit experience between technicians, thereby http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 enabling the discovery and development of improved practice. the emergence of shared narratives within a community thus enables the creation and transfer of new interpretations of events, doing so in a way that facilitates the combination of different forms of knowledge, including those largely tacit. (aforementioned in nahapiet and ghoshal 1998, 254). here it is pertinent to synthesize certain ideas of p. bourdieu. psychological and social factors are at the will of the individual. the theory of bourdieu (2000), which is not confined to the cognitive dimension, can be explained from the categories of habitus and field. structuralist constructivism as theory understands that social reality is a bridge between the individual and the collective: social is objective, but internalized in the individual, at the same time. thus, there are circumstances in which one choose a set course of action, yet with very limit freedom of action. this intermediate space is called habitus: schemes and provisions, not rules made explicit, objectified consciously, that the individual should respect, but provisions incorporated in the individual, which offer limited capacity. it is not the consciousness and unlimited freedom; it is not the unconscious mechanicity and the bondage of the will. it is an open system of provisions of the person who makes him act or to act in certain way, but with some possibility of movement or freedom. this is linked with the concept of field, because the provisions operate in medium or highly different spaces – at least in modern society. the field is a network of relations arranged hierarchically and where actors play, understanding awareness of its capabilities of assumption of capital. this is social capital and more referenced dimensions above. specify the provisions to feed or enhance with the biographical history of agents and therefore the greater or lesser access to capital. there are structural restrictions, even outside the consciousness of the actors; but potential for enrichment or access to power, which is accumulated labor or capital. (bourdieu 2000). however, according to bourdieu, there are conditions that are more rigid inside these fields: gender bias, degree of support from relatives, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 level of formal education, health issues. these fields have a major impact on a diverse society as in peru. 2.3. type of personal relationships developed within networks through a history of interactions: the relational dimension. there are types of personal relationships that facilitate or do not facilitate the transfer of resources between parties. in the first type, the agents are at the initial stage of the business; their reputation is fragile because their objective is survival; they lack critical resources and competencies, the products they sell and the routines through which they run the business are uncertain. in the second type, the agents have gained legitimacy and reputation, and have developed important resources. the former characteristics correspond to the type of relationships in the first stage of an enterprise's life cycle, that of emergence growth. the latter group correspond to the second stage, that of early growth (hite and hesterly 2001;wong, parodi, and monsalve 2014). a life-cycle model holds that enterprises pass through five stages: emergence, early growth, later growth, maturity, and death. during the course of the emergence growth and early growth stages, social networks are used extensively. initially, access to resources takes place, given the dearth of trust (fukuyama 1995), between peers in the same group, even when the transaction is not economically worthwhile. as collegiality increases, the exchanges become colder and more calculated in the sense that enterprises seek arm´s length connections that constitute a characteristic of early growth (hite and hesterly 2001). arm´s length connections are defined as follows:3 “basis of determining fair market value (fmv), it is dealing between independent, unrelated, and well informed parties looking out for their individual interests. transactions involving 3 business dictionary, s.v. "arms length transaction", check 29-october-2016, http://www.businessdictionary.com. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 family members, and parent companies and subsidiaries, are deemed arm-in-arm dealings. to qualify as an arm's length transaction, neither of the involved parties may have any interest in the transaction's consequences to the other party”. the factors that determine the conversion from emergence to early growth can be developed more specifically. some authors propose three such factors. first, competition: that is, free trade and barriers to entry and exit. one example of how low competition encumbers entry to the early growth stage is the following: if production costs in a given network are similar to those of producers outside that network, empirical evidence shows that in the case of low economic movement, the network tends to close itself off in perpetuating its high prices. conversely, if competition is high, compelling those outside the network to lower their prices, such a situation will promote more arm´s length transactions with external parties. second, the performance of the legal system. high transaction costs due to litigation discourages personal exchange. lawsuits in developed countries usually take one year, while in latin america they can take anything from two to five years. third, the more collectivist the laws and values are, the greater the likelihood of remaining in the emergence growth stage (zhou and peng 2010). thus, unequal growth could be down to poorer-performing companies operating in the emergence growth stage, and the better-performing ones in early growth stage. 3. empirical evidence: narration and analysis of four cases let's see the figure 3. if we understand that each case corresponds to a phase of the improvement process, we can know the different strategies adopted by the garment industry. a strategy may be more sophisticated than other and therefore generate higher added value (wong 2014). this evolution needs new resources that are obtained from the various stakeholders. in the structural, it depends on the number of contacts in the bonding and bridging capital; the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 cognitive, if the power of those who dominate the network of relations allows the entrepreneur to get resources; and the relationship, if the economic subjects prioritize trust, cohesion and the spontaneous decision front to promote the rational, utility and the rational decision. a direct relationship between the sophistication of the strategy and the maturity of the dimensions of social capital can be observed. 3.1. ana camacho woman born in 1967 in huancavelica, a poor region of peru; 49 years of age. she had no contact with her father, and suffered abuse at the hands of her mother's subsequent partner. at the age of nine she was employed as a domestic worker in lima, the capital of peru, where she remained until she was 13. she then returned to her place of origin for two years before coming back to lima, studying at high school there for just one year. after going to huancavelica, she returned to lima, where she studied in a public school for a year. there she met (at 18) the father of her first son. she worked as a street vendor in the gamarra strenuously area of lima, dividing her time between the sale of ice cream in the mornings and in the afternoons and evenings meals. at the age of 20 she got involved in peddling clothing accessories. she ran two roadside stalls, and then went on to open a store with another vendor. in 1997, at the age of 30, she took out a bank loan to purchase a retail unit in a gallery. after paying off that initial loan she bought another five units over the years, continuing to sell clothing and rent out the units alongside her eldest daughter. at present, her second daughter runs the business. she has five children from two relationships: the eldest is 31, married, and has business interests in the same line as her mother; the second is 28 and works alongside ana; the third is studying to be an air hostess; the fourth, aged 13, studies at the school and wants to be a lawyer; and the youngest, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 7-year-old girl. neither of her partners assisted her in her business ventures. "nobody ever helped me"; “it's all down to my intelligence and my effort." figure 3. strategy sophistication by social capital source: compiled by authors fifty-year old ana, involved in the clothing business for thirty years, had only limited marketing of accessories and the ownership of five small stores in malls, some of which she rented. despite its impetus and motivation, there are structural factors that have decided her business limitations and her accumulation of social capital. ana is an andean peasant lacking in economic resources, raised without a father. her mother offered her as a housemaid when she was young, limiting her formal schooling, as well causing emotional distress. thus, a sum of handicaps restricted her potential. she had poor social origins. she lacked: formal education, emotional relationships, family, friends, and community networks. even her social capital strategy camacho sánchez bustios rosales export market development: own label * private label * vertical integration local market development * market penetration * resources obtained by social capital estructural: bonding and bridging cognitive: habitus and field relational: quality http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 bonding is precarious, since the trusted network is restricted to other traders of limited capacity of accumulation. because of her background, she did not belong to any association that offers her the possibility to exploit social capital and transform it extensively to economic capital. even her emotional life impeded her development: two males with whom she had offspring were obstacles to their development, not only were they not entrepreneurs, but were wasteful money men. ana had five children. motherhood is a challenge by itself. for a mother who is a business entrepreneur, even more precarious conditions exist: time, health, and the distraction of incipient capital care. the dimensions of social capital are limited. the structure of relations is limited to street vendors and peddling merchants; the knowledge of ana’s situation does not allow communication and trust with other stakeholders. the relationship does not exist because there is no common interest beyond the immediacy of marketing of smallscale business. an anecdote of this story shows evidence of these limitations. when she was 20 years old, she lost the card linked to her savings account. not knowing how to access her savings account, she abandons it. despite cognitive and relational limitations with potential agents of exploitable networks, assume a discipline: saving to invest, uses language. however, oblivious to networks that may exceed its local space, someone recommended to her that she should start saving: "there was a friend who advised me.” “the hen does not eat all at once. you give the hen food and she walks around, eats a bit, leave her some more food, she eats a little bit more, so that at the end of the evening, she is full. that promotes the understanding that if one saves in the bank, the money is there to accumulate. and so, i was saving my money and i no longer needed to be in the business of selling pork sandwiches. but i suffered enough, and it was not easy." habitus in ana, given her biography, limits her actions: woman, mother, emotional dependence on male guidance at the start of her young life, and her maternity and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 childbearing years. however in her case there is awareness that, in the absence of objective conditions of extensive and solid networks, she was able to achieve five local stores whose value in the market is significant. 3.2. juvenal sanchez man born in huancavelica in 1949; 67 years old. one of ten children, he worked in a number of fields before moving into clothing. after the failure of a small-scale cattle trading business he decided to move to lima in 1980. a number of his siblings already lived in lima and worked for it, moving in with a sister in the gamarra area. he decided to buy a small batch of garments to sell as a street vendor, and enjoyed relative success. he also opted to venture into clothesmaking, and, taking an empirical and self-taught approach, began to buy sewing machines and hire operators. he had extended his business by selling in the peruvian interior, and two of his siblings joined the enterprise in 1984. they and others pooled resources to service large orders, retaining their independence for smaller ones. loans between the siblings took the form of verbal agreements. from a very young age, juvenal followed in the footsteps of three of his siblings and became a jehovah witness. he credits this with helping improve his self discipline. moreover, the family retained ties with their home community, and at the outset many of their operators were young relatives from huancavelica with whom relations of trust were formed. today, juvenal is scaling down his participation in the business: the running of his clothes-making and sales activities are soon to be taken over by his son, andrew, born in 1995, aged 21, who have completed a degree in business administration at a private university in lima. juvenal himself has remained in assembly stage, the first of three phases of the garment industry, in spite of more than thirty-five years in the business. his company at large performs http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 pre-assembly, assembly, finishing, and marketing, but only at the local or national level in some instances. despite belonging to a social and regional space with very limited growth (a mountainous rural area where peasant families had limited access to schools), the use of family and local networks, the sustained confidence by religious beliefs (jehovah's witness) and an emotional life that refine his career, allowed some growth. in the structural dimension of social capital, contacts are limited to their bonding capital. the company operates from embedded ties to arm´s length ties, but in a very luke-warm way. to sell at a very competitive market, because they are simple garments, he is forced to join his brothers for large orders. third parties are engaged in different phases of the process of production through the market mechanism (williamson 1985). there are limitations in the cognitive dimension of social capital for access to a space of arm´s length ties. these ideas should be anonymous in nonexistent relationships with banks. it is protected with family relationships, religious ideology4, and relationships face-to-face with business transactions. it is financed only with suppliers and follows a strategy determined rationally. the company made garments and learned how to use sewing machines, and handle sewing patterns. to save transportation costs, they rented a warehouse in a downtown district of lima and hired workers as demand grew. however, these factors do not lend to maturity in the dimensions of the capital. being male from a large extended family, having good relations with residents from one’s village of origin, and membership in a organized church, all enhance one’s social capital. but this enhancement has certain limits to achieve the status of the bridging social capital. these do not include: extended 4 there is evidence of lima, peru that indicates if the religious ideology of the jehovah's witnesses is strongly ethical, means a systematic and rational ascetic, and which is willingness to work, this is not privileged as ascetic means, as in the historic calvinist protestantism, because, at least in the peru, regarded as limits the need to assemble and preach; there is also some suspicion with regard to become too involved with the world, for example, in professional life (hernández 2000). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 services of banks, with their technical sophistication; nor access to transactional nature of arm's length ties. (see wong 1996, 290). 3.3. rodolfo bustios man born in lima in 1966; 49 years old. his father was a graduate of state university of prestige in peru and worked as an agriculturalist. rodolfo studied at a prestigious religious school. i went on to attend pre-university academy with a view to gaining entry to either one of two private universities in prestige in the peru. decided to choose to study business administration in one of them. before graduating, he and a classmate started a business selling alpaca fiber. their supplier was the arequipa-based michell group, which i have learned of through his close friendship with the founder's are. the enterprise lasted one year as the basis of his thesis defense. the crisis of 1990 prompted the michell group to offer him work with the aim of acquiring his portfolio of customers as well as his services; rodolfo accepted, so instead of selling fiber through his own enterprise, i would do so via his erstwhile supplier, to customers in brazil and colombia. but in 1993 the company invited him to work in another field, as sales manager of the ford dealership in peru. in 1995, rodolfo was offered a job with the us-based kansas a catalog merchant of exclusive clothing with annual sales of usd 15 million internationally, and which bought fiber from him when i worked for michell in this field. rodolfo has been sales manager of that company for 21 years, buying its main raw material from michell and its competitors in peru, for production in the united states. fifty-year old rodolfo at the end of his studies of business administration became involved in the establishment of a small company selling alpaca wool to makers of handicrafts, supplied by an important group of this wool distribution network. rodolfo’s small business was profitable partially because of the friendly relationship with the son of one of the shareholders of the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 company that provided him with his initial social capital. rodolfo, beside his social connections, had other significant advantages that come into play: advantageous social circles, intellectual family capital, formal education, healthy emotional life, family, and a network of friends. “a network of friends” does not determine his business trajectory, but constitutes a fundamental structural support. given his state of mind and his motivations, a positive inertia was created for structural, relational and cognitive dimensions to his chosen field. having manipulated the social networks towards trade relations since the establishment of the fledgling company when young, he promoted it’s activity rapidly towards bridging social capital. alternative to his corporate work, he chose to be employed as a manager in different areas. the passage of the embedded ties to arm´s length ties was a natural process, given these advantageous conditions of the field and habitus willing biographically, not without personal effort. 3.4. alberto rosales man born in 1955 in huancavelica, huaytara, rural andean region and poor; 62 years old. following the death of his father when he was 15, alberto decided to move to lima with his four siblings, where, with limited resources, they started hawking clothes. in 1975, at the age of 22 and under peru's protectionist government, have decided to take advantage of the absence of imports and venture into clothes-making. on the back of his efforts, i have bought machinery and the business grew. having only completed secondary education, his initial experience was entirely empirical: he was guided by demand. in the 1980s he began to export on a small scale to bolivia. but following relatively rapid growth in the 1990s, he came to understand that human capital was essential and that investment in it was necessary. his company's growth continued into the 2000s, when he started to combine production with local http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 retail sales, with considerable success. alberto built a 50,000 m2 factory in the district of ate, hiring a vastly experienced general manager from abroad, a financial manager from the banking sector, and two more foreigners with experience from the transnational falabella. all five siblings were active in the company, but on the basis that professional decisions would prevail. from the beginnings, have acquired services from his wife's companies, which remain independent from those of alberto. the couple have four children together: the eldest, 38, works in fashion; the second, 33, born in 1983, studied business administration at a university's prestige of lima; the third has an engineering degree from a particular university; and the fourth studied at the university of arkansas. the second child, who currently works for his mother's business, is likely to take over from his father. alberto owns the most successful company of the four recorded, even though he and his family have a social origin of the underclass. in thirty-five years, the family business has achieved much in the clothing industry from a street seller with meager capital to selling their product not only all over peru but also to foreign markets. (alberto was a street-seller). in terms of the process of the garment industry, alberto not only manufactured textile garments, but he went into textile production and marketing as evidenced by his fifty retail stores in peru. this family business is the one that had grown the most of the four cases. this family’s success is linked to its social capital, despite these factors: social origins with scarce resources; andean peasant family origins; an economy in a depressed area of the peru; and beginning as a street vendor. the base of bonding social capital is sustained by the family brothers, extending rationally towards bridging social capital. from rational decisions pursuant to the company's growth, sophisticated investment by performance oriented professional agents who allow access to banks and investment. in the structural dimension, networks extend rapidly in accordance with http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 growth. in the cognitive dimension, public relations are delegated to professionals, who have the full trust of the company. as relations practiced equally, so the arm´s length connections unfold without having to protect themselves in relationships of trust at the level of bonding social capital. this mode helps move in terms of business growth from the emergence growth to the early stages. from interviews (e.g. wong 2014, 140), there is evidence that decisions have been taken from the demands of the growth of the company from has a parent base. this reaches out, but is not limited to, social networking to extended family and spouses of brothers. after a reading of bourdieu-habitus one can tell the protagonist, i.e., brothers, wives of the brothers and the children, have been able to break widely with constraints of social conditions. they also have access to new resources as a function of the qualitative extension of social capital in all its dimensions. one aspect that sets each of the four cases apart is the level of social capital (see table 2). in the case of the enterprise, that smallest of camacho, this resource is practically nonexistent. while in the case of rosales, the provision of expertise is abundant. this latter case has drawn on the capacities of outsiders, symbolic capital accumulated, and attain the trust of the social participants. the structural dimension analyzes from whom and how the resources are obtained. camacho, on the other hand, does not obtain capacities through bonding or bridging capital either: her parents abandoned her, her partners did not help her, and she does not know anyone else involved in the field. sanchez obtains them through bonding capital: two siblings and other acquaintances join him to honor large orders. bustios obtains them through bridging capital: he engages in the kind of commerce typical of a transnational trading network, and all of his business activities have stemmed from a new non-family connection with corporate enterprise. finally, rosales obtains them from both sources: five of his siblings http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 are active in the business. all management posts are occupied by third-parties; most notably, his enterprise attracted the ex-general manager of nettalco, the leading peruvian clothesmaking company. table 2. social capital by case source: compiled by authors 4. conclusions 1. growth differences are explained by the different availability of social capital. a company cannot imitate another because a segment of this resource is decided by heritage and this is not the same for all companies. 2. a company has this resource, or not, depending on several conditions: the level of formal education (primary, high school and university); gender (and the correlative of each condition linked to sexism and machismo extended collectively); health issues; emotional health relationships; and extended family support (number of siblings; parents who are deceased, separated, or who have abandoned their children). case dimensions structural cognitive relational (stage achieved) habitus capital field camacho ephemeral entrepreneurship paucity of discourses and codes symbolic capital without recognition absence of significant contacts emergence growth sanchez embedded family community limited discourses and codes symbolic capital with limited recognition paucity of contacts that are limited to family and religious group emergence growth bustios transnational trading network discourses and codes with a cosmopolitan vision symbolic capital with recognition in the usa presence of useful and valuable contacts early growth rosales family business group: discourses and codes that are delegated to professionals outside the family to achieve a cosmopolitan vision symbolic capital with recognition in the national market, but not in the international market presence of useful and valuable contacts early growth http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 3. there is evidence of differential social capital in four cases. in the structural dimension: ana camacho, had objective conditions of distinctly precarious social capital: not brothers, not father figure, to limited relationship with her mother and a male partner, and an absence of formal education in the formative years. by contrast, the potential growth of the company of juvenal sanchez is greater, given these better conditions: a business supported by brothers, employees from his native town, company's functional farming community relationships, and religious ideology that endorses to discipline. further development exists in rodolfo bustios, whose objective conditions from the beginning, open the company to an environment of professional spirit to the bridging social capital. in the optimal business development, alberto rosales, who consistently, and despite humble beginnings, exploited precarious conditions. with the family as the base, he has consciously overflows the bonding social capital and access to the bridging social capital lays. the concept of habitus, available to act in a certain way, allows to better understand the differential social capital. ana camacho operates in a geographically small informal commercial business market; juvenal sanchez has a somewhat more sophisticated vision, works in commercial business but also manufacturing; rodolfo bustios and alberto rosales have cosmopolitan vision that lets you operate in complicated international markets. the concept of field, space where competition for economic capital accumulation involves social relations of confidence basis, helps to explain the difference of social capital: while ana camacho does not possess these relationships alberto rosales has managed be linked to powerful groups that will facilitate business. finally, in the relational dimension, both ana camacho and juvenal sanchez related pairs of the same group, i.e. customers in the area of gamarra. while rodolfo bustios and alberto rosales relate independent, unrelated and informed subjects, in developed international markets. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 198-225, january-june 2018 doi:10.1344/jesb2018.1.j042 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative 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“condicionamiento de los valores en la competitividad, superación de conflictos y performance en las empresas familiares peruanas.” in grupos económicos y mediana empresa familiar en américa latina, edited by martin monsalve, 145-175. lima: universidad del pacífico. wong, david, carlos parodi, and martin monsalve. 2014. “la mediana empresa familar peruana y la creación de ventajas competitivas.” in grupos económicos y mediana empresa familiar en américa latina, edited by martin monsalve, 177-199. lima: universidad del pacífico. wong, david. 2014. empresas familiares: camino de exportación competitiva en mercados emergentes. lima: universidad del pacífico. wong, david. 1996. los grandes pequeños negocios: empresarios y finanzas. lima: universidad del pacífico. yin, robert k. 2008. case study research: design and methods. los angeles: sage publication. zhou, jessie, and mike w peng. 2010. “relational exchanges versus arm’s-length transactions during institutional transitions.” asia pacific journal of management 27:355–70. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 patricia palma maria montt strabucchi pontificia universidad católica de chile (chile) chinese business in latin america and the caribbean: a historical overview abstract this article provides a historical background of chinese presence in latin america and the caribbean from the arrival of the first chinese workers in the 1850s until the great depression. the objective is to demonstrate that chinese businesses and investment in the region is far for being a recent phenomenon. methodologically, this article explores an extensive bibliographic corpus and analyzes the international chinese business directory of the world of 1913, one of the most important sources on chinese businesses in the region. by focusing on the early migration patterns, the establishment of chinese businesses and transnational economic networks, this article reveals how chinese businesses were part of the urban landscapes of several latin american and caribbean cities, establishing historical commercial ties which continue, if in different forms, to this day. keywords: chinese businesses; china-americas relationship; china; latin america and the caribbean; coolie trade corresponding author: pnpalma@uc.cl received 05 december 2018 accepted 05 march 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 introduction within the growing context of chinese businesses and investments in the global arena today, and as chinese firms and economic agents continue to expand in latin america and the caribbean, it is necessary to contextualize this trajectory and move away from narrow interpretations that confine this expansion to the last decades. while the last decades of the twentieth and first decades of the twenty-first centuries have witnessed the intensification and growth of chinese businesses across the americas, there is still a lack of knowledge regarding the historical origins of chinese businesses in the region. indeed, most of the bibliography is centered around contemporary commercial exchanges. however, since the pioneering works of hu-dehart on mexico, peru and the caribbean, recent years have seen a renewal in historiographical studies, mainly in english, that have valued diverse social, cultural and economic aspects of the chinese diaspora in the americas, focusing on their social and economic transnational ties. within this context, this article provides a historical background of chinese presence in latin america and the caribbean from the arrival of the first chinese workers in the 1850s until the great depression. considering that the development of chinese businesses in the region was a phenomenon related to the presence of a large chinese diaspora in the americas, the history of chinese migration to the continent is a key aspect. as soon as the first chinese newcomers contracted as coolies or free workers ended their contracts in rural zones in the 1870s, many of them moved to urban areas. given the inclination of the chinese community to open small shops in many of these cities, they became local suppliers of both national and imported products for the local population. both the chinese community and local population were also able to acquire products beyond the capitals or large cities; chinese companies even reached the most remote towns in the americas. soon, members http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 of the community with capital and networks created large import-export firms and became an economic elite with significant influence in local matters for the ethnic community. this article aims to highlight the early history of the strong presence of chinese trans-pacific businesses in the americas by taking advantage of recent scholarship produced in english and spanish. while previous studies on chinese businesses in the americas have focused on specific case studies, such as exploring specific geographical locations as case studies (chao romero 2010; gonzález 2017; hu dehart 2017; lin chou 2004a; among others), this article builds on the scholarship (such as hearn and león-manríquez 2011) to take a broader regional perspective in its aim to demonstrate that chinese businesses and investment in the region are far for being a recent phenomenon. by providing a better understanding of the economic roots of chinese businesses in the americas, this article aims to shed light on the lesser-known connections between china and latin american societies, as well as the networks that were forged over decades, and that provide the basis for contemporary chinese businesses in the region, and beyond, today. this work is divided in three parts. firstly, it provides a brief description of the early migrations to latin america and the caribbean, characterized by a majority of unskilled laborers during the nineteenth century who suffered of hard living conditions, partly due to the lack of diplomatic protection from china. secondly, it explores the development of chinese businesses in countries where the diaspora had an important presence. the development of these businesses occurred during a period of hostility towards chinese immigration and their commercial presence in the region. finally, we analyze chinese transnational networks, focusing on one of the richest historical sources to study the chinese business in latin america and the caribbean. through a quantitative and qualitative analysis of the international chinese business directory http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 of the world of 1913, we show the geographical presence and the main areas of development of chinese business, and therefore, of chinese migrant communities in the region. early migration: overseas chinese and the “coolie” trade in one of the most important books published in the last years about chinese diaspora, cheebeng tan (2013) points out that currently scholars have estimated the total population of chinese overseas between 30 and 45 million. of these, around 75% of chinese overseas are living in asia (especially southeast asia), while the second largest concentration of chinese can be found in the americas, accounting for 19% (tan 2013, 4; li and li 2013). if the present annual rate of growth continues, experts indicate the numbers of chinese overseas in the americas will account for about 33% in 2030, and 38% in 2040 (tan 2013, 4; li and li 2013, 26). the massive presence of chinese in the americas was part of a larger diasporic movement that started in the mid-nineteenth century and involved millions of chinese immigrants that occupied a subordinate status in the world market, destined to labor in mines, railroad, fields of cotton and sugar, where only a few fortunate ones rose to become entrepreneurs and tradespeople (tong 2003, 21). this global chinese migration was result of multiple internal and external events. the main source of american immigration came from guangdong, a province that saw a dramatic rise in population between 1787 and 1850 (almost 80%). this overpopulation led to a struggle for limited cultivable land, without capital and technological improvements to absorbe this population (tong 2003, 20). simultaneously, the country experienced multiple uprisings, including the taiping rebellion (1850-1864) and red turban rebellion (1854-64). natural calamities and famine declined living conditions in the coastal province of guangdong, exacerbating the difficulties of poor peasants and proletarian families http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 (tong 2003, 20), leading to an oversupply of cheap labor and thus triggering a desire for overseas emigration (yen 2013, 73–74). at an international level, european imperialism precipitated the opium wars (1839-42 and 1856-60), which hampered industrial growth through an overabundance of cheap, massproduced foreign goods that flooded the domestic market and limited demand for local products. the war also altered the relationships between china and the rest of the world. indeed, under the pressure of britain and france, the qing dynasty allowed for their subjects to work and live abroad. because the colonial world required cheap labor, the coolie trade developed and expanded, with large numbers of chinese being shipped abroad between 1845 and 1874 (goutu 2013, 33; yen 2013, 76). chinese migration to latin america and the caribbean in the modern era occurred in two moments. the first moment took place in the second half of the nineteenth century, characterized by chinese workers being forced into slave labor known as the coolie trade. between 1840 and 1900, around 225,000 (mostly male) traffic laborers arrived in cuba and peru. a second moment took place during the first decades of the twentieth century because of the law of exclusion in the united states (us) (1882): due to the law, many chinese in the us moved to other countries in the americas. unlike the first wave, this period was characterized by free movement, with the chinese population settling in cities and developing mainly commercial activities (hu-dehart and lópez 2008, 14-16). the coolie traffic has been extensively analyzed by specialists of chinese diaspora in the americas (steward 1951; rodríguez 1989; hu-dehart 1989; yen 2013). after the abolition of slavery in the early nineteenth century, latin american and caribbean (british and spanish) looked for an alternative source of cheap and unskilled manual labor. in 1806, british contracted http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 and transported 192 chinese to work in the island of trinidad, a pattern followed by other countries in the region. despite slavery being legal until 1886 in cuba, spaniards also turned to chinese workers for sugar plantations in the middle of a boom of this product in the international market (hu dehart 2009, 58). between 1847 and 1874, cuban planters conducted what has been known as the “yellow trade,” importing around 125,000 chinese coolies and establishing eight-year contracts with them. in south america, the peruvian economy was strongly affected by the slave ban, and in november 1849, the congress passed a new immigration law that allowed the introduction of chinese laborers into the country (yen 2013, 77). peruvian landowners imported near 100,000 coolies during 1847-1974 to work the coastal guano mines and cotton plantations (hu dehart 2009, 58). coolies suffered greatly, not only during their transportation to foreign lands, but also when in foreign territories. in the case of peru, for example, the coolie trade was similar to the sale of african slaves and followed similar procedures; the open sale system of coolies was also common in cuba, as was witnessed by the cuba commission sent by the qing empire (yen 2013, 82). because of the extreme cruelties suffered by the coolies in the americas between 1868 and 1972 – and especially after a peruvian plantation owner in callao marked his coolies with a hot iron as if they were slaves – an international anti-coolie movement emerged. in addition to this, the publication of the cuba commission report in 1872 made the chinese aware of the real conditions suffered by overseas chinese. under mounting international pressure, and the actions of qing officials, the coolie trade came to an end in march 1874 (yen 2013, 85– 87). the hard life and labor conditions of chinese migrants overseas were hard in part because of the absence of protection of their government, as the country had no policies regarding overseas chinese before the mid-nineteenth century. the lack of legal protection for chinese http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 migrants allowed for the deception, enslavement and inhuman treatment experienced by coolies (tan 2013, 4). between the end of the coolie trade and the great depression, free chinese migrant laborers were recruited to different parts of the americas. the us became the main destination of chinese immigrants; by 1880, there were 105,000 chinese in the united states. while most of the diaspora was part of the international migration of labor, an important group of mostly young cantonese men departed for the us – known as gold mountain – to achieve upward social mobility and riches, planning on later returning to their villages (tong 2003, 23). most chinese settled on the west coast (california) and the borderland of mexico and the us, working in the mining regions, helping build the transcontinental railroad, and clearing land for commercial agriculture (hu-dehart 2013, 90). the second wave of chinese immigrants to latin america was the consequence of the chinese exclusion act in the us in 1882. as erika lee (2003) states, chinese immigrants in the us were targets of racial hostility, discrimination laws, and violence. local and national politicians raised many arguments in favor of restricting chinese immigrants, ranging from their sexual ambiguity to the need of self-preservation. finally, the country closed its gates to chinese through the chinese exclusion act, barring all chinese laborers from entering the country for ten years and prohibiting chinese immigrants from becoming naturalized citizens (lee 2003, 30). while laborers were prohibited, merchants, teachers, students and diplomats were ‘exempt’ from the exclusion (lee 2003, 3-4). the exclusion act redirected the immigration to other countries in the region, especially to the north of mexico, and continued haltingly despite chinese immigration restrictions passed by some latin american countries (hu-dehart and lópez 2008, 15). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 while early chinese migrants were predominantly young men, the second wave of immigration reduced the disparity of gender. early male immigrants worked in mines, on railroads and in the fields, workplaces that owners considered incompatible with the need for wives and children (tong 2003, 27). with the second migration wave, women got involved in productive labor in the diaspora, and especially in the business and service sectors (tan 2013, 6). women had an active role in charity activities and transnational aid to china during the sino-japan wars (19371945), as palma and montt (2017) have demonstrated for the chilean case. establishment of chinese businesses in consequence, in the first decades of the twentieth century, chinese shops and services were an important part of the urban landscape in several cities in latin american and the caribbean. chinese grocery and dry goods stores were found virtually everywhere from the mexican border to chile. however, the increase of chinese stores and services provoked mixed reactions among the local population. a relatively small, but not less important, group acknowledged the contribution of chinese stores and restaurants where the working class could acquire products and services at reduced prices. as drinot (2005) has studied for the case of lima, in the middle of the food riots of 1909, a group of anarchists stated that far from undermining the economy, asian business had become an integral and necessary part of the working-class economy, by providing not only the cheapest food available, but also a number of goods and services at affordable prices. however, a majority considered the presence of chinese business as an economic and social threat to the interests of the local population. as hearn (2016) points outs for the case of cuba and mexico – and we can extend this to the rest of latin america and the caribbean – resident chinese communities were confronted by the common perception that their commercial http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 activities were strongly linked to ethnic favoritism and therefore threatened the national interest. because of this, an important part of society responded fiercely to the increase of chinese immigration and their establishing of businesses. anti-chinese riots took place in diverse cities, such as lima (1909), mexico (1911) and jamaica (1918), transforming the vandalization of chinese stores into a symbol of racial hatred. as johnson (1983) notes in the case of jamaica, riots and violence were addressed toward the property of chinese immigrants rather than at persons themselves. economic hardship had direct consequences regarding the anti-chinese feeling, which made their businesses particularly vulnerable to attacks throughout latin america and the caribbean. the great depression and its consequences exacerbated popular protests, causing forced closures of chinese businesses in some countries, while other cases were much more dramatic. as an example, we find the sonoran (mexico) looting, boycotts, massacres and racist legislation that banned chinese-mexican intermarriage and ordered the segregation of chinese into racially restricted neighborhoods (chao romero 2010). as hu-dehart (2009) concludes, sinophobia in latin america and the caribbean had economic roots and economic competition is central to explaining the anti-chinese atmosphere in the first decades of the twentieth century. racist xenophobia provided the rationale for eliminating chinese immigrants as competitors in the local economy or singling them out for blame in times of economic crisis (hu-dehart 2009, 85; lópez-calvo 2014, 28). while the establishment of businesses was a characteristic of all the chinese diaspora in the americas during this period, their development was conditioned by specific contexts and legislation. for the case of mexico, chinese immigration and prosperous commercial activities can be traced back to 1876, but accelerated after the 1882, when the exclusion act barred legal http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 immigration of male chinese laborers to the us (hu-dehart 1989). the exclusion act had as consequence the movement of an important group of chinese immigrants to mexico, and especially to the states bordering the us, with the migrants hoping to enter to the us eventually (hu-dehart 2004b, 54). however, many of these immigrants remained in mexico, ultimately settling throughout the country – mainly in the northern cities of tijuana and mexicali – and participating actively in local commerce as small traders. as chao romero (2010) explains, although the chinese were initially recruited to serve as agricultural contract laborers, many of them transitioned into employment as merchants in the grocery and dry goods trade. a small group went to mexico with capital to set up merchant houses along the sonoran railroad and mining towns. in mexico, chinese merchants and skilled artisans enjoyed a higher social status in comparison to chinese agricultural and unskilled labors, thus having greater possibilities of assimilation (chao romero 2010). and within this group of businessmen, there existed two levels regarding commercial activity: while an upper level dedicated themselves to the shoes and clothing industry, importing and exporting products from asia and the us, a lower level of smaller companies dedicated themselves to the domestic trade (hu-dehart 2004b, 57). indeed, the chinese had an important presence in the mexican market, particularly in laundry, restaurants, grocery and general merchandise. in 1919, of the 6,078 chinese residents in sonora, 70 percent of them were merchants, including store owners (hu-dehart 1989, 100). within this context, and according to the conservative and xenophobic press, the chinese in mexico held the monopoly of the small commercial sector, practically excluding mexicans. indeed, already towards the end of the nineteenth century, a part of the press had begun a campaign that sought according to them to warn the mexican population about the monopolization that the chinese businesses were to small (mexican) enterprises and how they could damage the local economy. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 for example, the newspaper el tráfico, of the city of sonora, regularly published editorials accusing the chinese commercial bourgeoisie of harming mexican merchants (hu-dehart 2004b).according to hu-dehart’s research (1989), one of the characteristics of chinese businesses in mexico was their low presence among large enterprises, with chinese merchants only being part of the petit bourgeoise in sonora and their companies having much smaller capital than mexican, european and north american companies present in the north of mexico. the chinese store owners encouraged a climate of solidarity among their compatriots; large merchants exclusively fellow chinese in stores and factories (hu-dehart 1989, 98). the important presence of the chinese in the commercial sector was considered a threat in racial and economic terms; many mexicans reacted with violence towards them, especially during the mexican revolution (1910-20) and the early 1930s. the anti-chinese movement and the consequences for the chinese community in mexico has largely been analyzed by historians in recent years (schiavone 2012; hu-dehart 2009, 2010). in terms of chinese businesses, during the 1910s, thousands of chinese were victims of violence against property and their persons, especially in sonora, while in the torreón (coahuila) massacre in may 1911 over 300 chinese residents were killed, and their properties looted and destroyed (hu-dehart 2013, 102-103). some groups of mexicans vilified the chinese, arguing that they had usurped resources that belonged to mexicans. as a result, associations were founded, such as the commercial association of businessmen in 1916, which aimed to defend ‘mexican’ merchants from chinese business owners (schiavone 2012, 41). despite the antichinismo, other mexicans kept shopping at chinese stores, continuing their friendship and kindship despite legal repercussions. the expulsion of the chinese from sonora in the 1930s had a large impact among the community, and also in the economy. the sudden closure of chinese businesses caused a http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 shortage of essential supplies, and the exodus of capital reduced the state revenues from taxes. as schiavone (2012) explains, the sonora government nearly went bankrupt after the removal of the chinese. while in mexico the chinese immigration was a direct consequence of the us policy, in the caribbean islands and continental enclaves of belize and guianas (french, british and dutch), the presence of chinese laborers responded to the need of a new cheap and unqualified workforce after the abolition of african slavery. the presence of chinese persons in cuba is one of the most emblematic cases of the region due to the large number of chinese workers that entered the island within a few years: more than 125,000 chinese coolies arrived in cuba in the space of twenty-five years (1847-1874) (hu-dehart 2004a, 20). after the original eight-year service as captive labor force alongside slaves on plantations, chinese migrant laborers moved away from the plantations to provincial towns and to havana, where they established the first barrio chino (chinatown). in the cities, they were employed as workday employees or set up their own small businesses, and married and formed families (hu-dehart 2017, 354). in the twentieth century, a second wave of chinese migrants arrived in cuba. during the 1920s, a particularly prosperous time fueled by prodigious sugar harvests, cuba attracted some 20,000 free immigrants from guangdong — mainly the siyi counties — at a time when china’s economy was racked by continuous civil war and social calamities. chinese migrants, mostly men, set up small businesses in havana and the sugar-rich provinces, sending money home regularly through established remittances channels. eventually, women and families migrated as well, so that the chinese communities took on the semblance of a traditional community life, with schools, newspapers, recreation centers and clubs. the growth in families was much the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 result of chinese men and cuban wives leading to mixed-race chinos cubanos or chinos mestizos (hu-dehart 2017, 357). cuba was one of the many islands and caribbean territories that hosted a chinese community in the second half of the nineteenth century. as hu-dehart (2004a) points out, during this century around 18,000 chinese workers in semi-slavery condition arrived in guianas, trinidad, jamaica, belize and the bahamas. but, unlike cuba where chinese were part of the agricultural workforce until the 1880s, in guiana, trinidad and jamaica, the chinese used diverse strategies to leave the fieldwork and settle in cities. thus, in the twentieth century few chinese as agricultural laborers could be found; rather, they had established their own small business (hudehart 2004a, 19). in trinidad, for example, during the 1880s and 1890s chinese shops sold fruits and vegetables throughout the island, especially in its capital (puerto españa). these businessmen also established commercial networks in the local cacao industry, investing and becoming intermediaries between small producers and big exporters (hu-dehart 1989; 2004a, 24). a less analyzed case study of the chinese diaspora in the caribbean is puerto rico. josé leeborges (2015) has studied the influence of chinese in the country, showing how it helps to understand the circulation of people, and social and economic networks. in the mid-nineteenth century, puerto rico was a spanish colony like cuba and other caribbean islands. an important part of the first wave of immigration came from cuba, where most were people condemned for homicide in cuba and dominican republic. during the period of confinement, the chinese became the workforce in the construction of the central highway and also participated in other complex infrastructure works. many of them died during their confinement, but 134 of 350 served their sentence and decided to stay in puerto rico. of those who stayed, many of them http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 dedicated themselves to the food industry, opening their own restaurants or fondas chinas, similar to other cities such as lima, san francisco or havana. however, their commercial presence decreased in the first decades of the twentieth century, when the country was ruled by the us and the exclusion law applied to the island. from mid-twentieth century, the chinese presence gained importance again. in the 1950 puerto rico lived through a process of industrialization, modernization and economic development, attracting a diverse group of immigrants – mostly merchants and professionals – including chinese people. in south america, peru became the main destination of chinese workers in the mid-nineteenth century. during the early period of migration (1849-1909) they worked principally on plantations, in the processing of guano beds, in the mines and on the railroads. lasting until 1874 – when a treaty of friendship, commerce and navigation was signed in tianjin – the coolie trade brought more than 100,000 single chinese men to peru (lausent-herrera 2011, 70). after eight years of servitude, approximately 80 percent of all coolies imported ended up working on plantations, while a small group moved to cities – mainly lima and el callao – mostly working as domestic servants, artisans and unskilled laborers (hu dehart 1989, 106). following the 1869 business record of lima, hu de-hart (1988) points out that all chinese were humble merchants, the main working sector being fondas or small restaurants. during the following years, the number of stores increased and congregated near the central market on capón street. this neighbourhood was identified as lima’s chinese quarter, and in the twentieth century as chinatown (lausent-herrera 2011). the period between 1905 and may 1909 marked the golden years of free migration to peru, with as many as 3,000 chinese arriving in el callao each year. similar to other countries analyzed before, the growth in chinese migration was accompanied by a rise in local antihttp://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 chinese activities (mckeown 2001, 45). as mckeown (2001) analyzes, urban working-class dissatisfaction and hatred of chinese resulted the riot of 1909. competition for jobs and excessively inflated prices in stores caused attacks against the chinese. despite of the presence of other foreigners (such as italians) in the commercial sector, the chinese became the symbol of economic threat to the local population. during the riots, people shouted “down with the chinese” and, in diverse part of the cities, mobs attacked and looted chinese shops. a commission of chinese merchants counted 24 looted stores after the riots. as mckeown (2001) points out, the president of peru sacrificed the interests of the chinese in his attempt to smooth over relations with the laboring classes, establishing that no chinese would be allowed to arrive in peru unless they could show cash resources equal to 500-pound sterling in their possession. then, in 1909, chinese immigration became strictly regulated and, in 1930, prohibited. in the 1910s a new wave of migration with a very different immigrant profile started; it included several professionals, relatives of chinese immigrants living in peru and working in the main cities, and chinese businessmen. as wong (1978) analyzes, the immigration policy of 1909 favored the chinese merchants particularly because the peruvian middle class believed that their participation in commercial activities would contribute to the economic welfare of the country. many former chinese laborers and newcomers started small business units, such as bodegas, grocery shops, furniture and repair stores, providing for the daily needs of peruvians. the arrival of chinese traders, merchants and professionals in the following years further diversified their economic pursuits in peru. indeed, in the early twentieth century, the chinese in peru were rising in the social hierarchy (mckeown 2001, 55). consequently, lima saw the emergence of a chinese merchant elite that claimed social recognition through their economic position. they reinforced a self-image of the chinese as a http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 cosmopolitan commercial community in peru and developed a strategy to become known as ‘foreigners’ rather than merely as chinese (mckeown 2001, 137-9). thanks to their high economic success and social prestige, they were able to move up socially and gain entrance to affluent neighborhoods and prestigious clubs and associations (wong 1978, 351). this elite not only had financial power and social connections, but also sought the appreciation of the local population though generous philanthropy. they also cooperated in the project of modernizing peru, willing and able to fulfill president augusto leguía’s (1919-1930) demand for progress, international commerce and the full utilization of peru’s natural resources. the final two cases we explore here are chile and brazil, currently two emblematic countries regarding commercial exchange with the people’s republic of china (prc). chile was the first country in the region to recognize the prc (1970) and to give its support for its entry to the world trade organization (wto) (lin chou 2004a). it was also the first country outside the association of southeast asian nations (asean) to sign a free trade agreement with the prc in 2005. however, at the beginning of the twentieth century the presence of chinese businesses was small or marginal in comparison to other pacific ports. as lin chou (2004a) has studied, the presence of the chinese community in the north of chile increased after the takeover of the territories of tarapacá and antofagasta from peru and bolivia in 1883. despite the importance of mining and the saltpeter industry in chile, very few chinese were engaged in work in the mines. the majority preferred trade to get more money in less time and return to their homeland. as of the 1895 census, there were 242 chinese merchants in the country, most of whom had stores around saltpeter offices or provided groceries to these stores. a minor number were dedicated to other sectors, such as restaurants or “chinese coffee shops” (cafés chinos), described as places of “vices,” where prostitution was practiced. in 1891, there http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 were more than twenty of these cafés chinos in santiago, damaging the reputation of chinese merchants (lin chou 2004a:170-179). during the following decades, the number of chinese immigrants and shops decreased, and commercial exchange was only reactivated in 1970 after the establishment of diplomatic relations, and in 1980, with the growth of taiwanese migration to the country (lin chou 2004b). brazil is the country of the region where the prc has invested the most, and são paulo is home to the largest chinese population in latin america. however, in contrast with other countries, chinese migration to brazil was minimal until the first decades of the twentieth century. while 174,000 japanese immigrants “asianized” brazil between 1908 and 1935, no large-scale immigration from china was approved even though it was a widely discussed (lesser 2013, 159; stenberg 2012, 105; conrad 1975, freitas 2004). brazil was the first country to recognize formally the republic of china in 1912, which allowed the migration of people from qingtian. in brazil, these new migrants developed peddling and commercial activities (lee 2018, 5). as araujo (2015) states, chinese from qingtian established businesses and sales points near commercial or immigrant centers. this trade was characterized by traditional products from china brought by suppliers. over time, and after a trajectory of privations and hard work, the traveling cavalrymen became bazaar owners. as lee (2018) explains, the establishment of social aids and cultural centers (by merchants and businessmen such as restaurant and laundry owners, for example), are revealing of the small waves of chinese immigration to brazil throughout the twentieth century. until 1974, when brazil recognized the prc, immigration became very difficult, with migrants from taiwan predominating. indeed, contemporary mainland migration and investment is very recent, beginning in early 1990s (stenberg 2012, 108). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 transnational economic networks: the 1913 international chinese business directory as can be seen, since their establishment in latin america and the caribbean, in response to the adverse commercial and living conditions, chinese communities encouraged in-group solidarities and loyalties over time in order to protect their cultural and economic security (hearn 2016, 60). as hearn (2016) analyzes, family ties and local networks played a key role in the establishment of chinese business in the americas; these networks benefited from the raising of capital, market access, a flexible labor force, a loyal customer base and informal advice about opportunities. thanks to these connections, chinese merchants developed a strong local and transpacific commerce. in addition, for those living in the americas, transnational commerce was a symbol of prestige, as commercial advertisements published in the press demonstrate (kin 1913). in the last decades of nineteenth century, hong kong-based transnational firms established branches in major diasporic cities in the americas, such as san francisco, lima, and la havana (lópez 2013, 104). in the case of cuba, lópez (2013) states that these transnational merchants transformed the urban landscape, altering social classes within communities and modifying the image of the chinese for cubans. chinese firms imported luxury products – such as silk, food and medicines – and installed wealthy restaurants, theaters, ethnic associations and newspapers. in the economic field, these transnational merchants opened banks, became moneylenders and financed gambling on a large scale. inside the chinese community, merchants of large import firms played an important role in cultural terms, aiming to transmit chinese culture and education to their cuban born children, and remaining connected to their homeland (lópez 2013, 83, 110). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 similarly, lausent-herrera (2011) has analyzed the influence of california in the chinese local market in lima (peru). at the end of the 1860s the first chinese merchants from california settled in the market la concepción (which later became known as chinatown), opening big commercial houses, importing manufactured and food products from china and the united states. the stores in the market brought multiple products, and also portrayed specific representations of china as “exotic” and “full of culture”. lausent-herrera exemplifies with wing on chong stores, which exhibited signs and decorations imported from china, and sold luxury products such as chinese dishes, porcelain ornaments, furniture and ivories projecting a specific exotic image of chinese culture. the transnational networks were also reflected in these commercial houses’ workers. in lima, the employed managers, stockholders and many workers from hong kong and california also incorporated chinese who, freed from their contracts, moved to cities (lausent-herrera 2011, 72). the young generations of chinese-born and tusán (chinese-peruvian) intensified social and commercial networks during the twentieth century. the transnational commercial links among chinese merchants overseas strengthened in the first decades of the twentieth century. to promote the commercial relationship among chinese businesses in china and around the world, wong kin published in 1913 – on behalf of the international chinese business directory co. inc. based in san francisco – a comprehensive list of prominent chinese firms and individuals in parts of china, japan, the united states, south america, and other countries overseas. as his editor explained, the international chinese business directory of the world (directory) was not simply an ordinary directory: “it is designed of inestimable value to the chinese race at home or abroad, as well as importers, business men anywhere and to those who come in contact with the chinese” (kin 1913). the project responded to the need to collect and arrange data of chinese commerce in san francisco, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 records destroyed after the great earthquake and fire that devastated the city in april 1906. but it also sought to facilitate the communication between businesses in china and others part of the world, where a large proportion of business letters sent from china to the rest of the world were not properly directed due to issues spelling names of cities and countries. the directory aimed to promote transnational trade at a time of change for china. for many, especially chinese overseas, the republic – established in 1912, a year before the publication of the directory – would bring modernity and progress to the nation. as kin states in the text, the chinese were rapidly assimilating western ideas, and adopting the business methods of occident, an advancement that opened up a great commercial field in expansion; in his words, “it opens up new fields and avenues of business to the chinese merchants, and they will not be slow to take advantage of any opportunity presenting itself” (kin 1913). this document is one of the most complete sources of information about chinese businesses in latin america and the caribbean, although it may – of course – include many imprecisions. as liu (2005) suggests, it is possible that the directory under-registered some of the chinese businesses. for example, in his research about chinese herbalists in california, he realizes that in los angeles (california) an important number of these practitioners were not listed, maybe because some herbalists were afraid of being persecuted by the justice system (liu 2005, 54). in other cases, the directory did not provide information from some cities. for example, in the case of brazil, only businesses in rio de janeiro are listed, despite the existence of a small trade community in são paulo. the directory was organized by country and the respective cities arranged alphabetically. in each city, it provided the name (店名), type of business (生意) and their address of commerce (門牌街道名稱). among its more than 1800 pages, the directory included an “advertisement http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 section,” written in chinese, english or both languages, where some companies published their services and goods. some of these advertisements included images of products, and in few cases a photograph of a businessmen. this was the case of chinese herbalists such as dr. wong him, who practiced in san francisco. unlike others, the advertising was written only in english because many chinese herbalists sought to reach to the american population. although there is no advertising of companies or products from latin america and the caribbean, within the directory some businesses stand out above others. in the listings, there are some business written with a larger font size than the rest, and in some cases highlighted in bold. image 1. dr. wong him advertisement, 1913 source: wong kin (comp.) international chinese business directory of the world (san francisco, 1913)1 1from hathi trust, digital library – note public domain : there are no restrictions on use of text transcribed from the images, or paraphrased or translated using the images. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 the directory listed 2,166 chinese business in latin america and the caribbean, present in 242 cities. considering the total of chinese businesses, peru was at the top with 557 establishments, followed by mexico (554) and panama (499). below in the list were french guiana (4), venezuela (4) and argentina and brazil (with only 5 commercial establishments each). map 1. number of chinese business in latin america and the caribbean, 1913 source: designed by the authors from wong kin (comp.) international chinese business directory of the world (san francisco, 1913). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 the analysis of the directory demonstrates the relevance of the pacific in transnational commerce; most countries with a greater presence of chinese shops had ports on the pacific coast. the pacific rim thus emerges as playing a key role in the commerce between china and the americas, while also allowing interregional commerce between ports throughout the west coast of the americas. regarding the “kind of business,” the directory listed 37 commercial establishments, societies and professionals; over 98% of the list included this information. eighty percent of all the chinese businesses corresponded to the sale of groceries, general merchandise and silk goods, followed by the management of restaurants and laundries. the sale of general merchandise was the main sector in chile, venezuela, british guiana, nicaragua, panama, cuba and mexico; while in peru, dutch and french guiana, and trinidad the sale of groceries was the main sector. in a third group we find countries that specialized in the sale of luxury products such as silk; these were argentina, ecuador, guatemala, and el salvador. graph 1. distribution of chinese business in latin america and the caribbean, 1913 source: wong kin (comp.) international chinese business directory of the world (san francisco, 1913) 23% 45% 5% 4% 4% 19% groceries general merchandise silk goods restaurants laundry others http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 although there was a certain homogeneity in the type of commercial establishments, some countries stood out for some sectors. for example, in peru many merchants engaged in the sale of beans and rice, a sector that did not exist in other countries. the chinese commerce in mexico saw a large sector that provided services to the community, with an important number of laundries, hotels and restaurants. in jamaica, chinese merchants focused on the trade of salt goods, while in cuba the trade of dry goods was one of the most important sectors. it is also possible to observe the presence of infrequent businesses and professions in the directory. for instance, j. harris carr & co. was a business specialized in the sale of ice cream in jamaica; in the canal zone in panama, wing wo & co. managed a saloon, while in colon (panama) wo hing lung & co. was a company that specialized in soda and water. in lima (peru) twelve chinese physicians practiced in three establishments in charge of drugs sale. also in lima, tan chong long was the only merchant in latin america and the caribbean who specialized in the sale of bamboo ware; while in el callao (peru) the only company of photographers in the region could be found, chaired by jose achin. the directory provides only a small sample of the number and growth of chinese businesses overseas in the early twentieth century, which would expand in the following decades among the second and third generations of chinese descendants in the americas. conclusion as hearn (2016) states, overseas chinese communities in latin america and the caribbean are uniquely positioned to broker trans-pacific cooperation. it is projected that in 2020 the prc will increase its attention to the region as a destination for their exports, and it is very likely that it will replace the european union as the second commercial destination for all latin america, second only to the united states (chang-rodríguez 2015, 16). these privileged http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 economic and trade relations have led china to adopt deep and comprehensive free trade agreements with several of the countries in the region and have been accompanied by a growth in chinese migration to the region. however, within the background of the growing economic relationship between china and latin america, and with chinese investments in the region growing exponentially, it is still possible to see how many of the experiences of the chinese people and their businesses in latin america and the caribbean during the past continue up to today. not only are chinese shops and services important parts of the urban landscapes in cities of latin america and the caribbean today, but the notion of the chinese as a threat to local economic enterprises still feeds many of press reports that appear in local newspapers today, accompanied by images of tentacles or threatening dragons (montt strabucchi 2018). indeed, as hearn (2012) explains regarding chinese communities in contemporary mexico, during periods of economic hardship, chinese are still accused of and made to feel a threat to national interests. as we have seen above, the new historiography that this article builds upon demonstrates is that trade relations between china and latin america and the caribbean have a long history, which originated as a result of the massive migration of chinese workers to the americas since the mid-nineteenth century. in some cases, these relationships have remained through time, as is the case of peru. indeed, peru had the largest number of chinese businesses according to the international chinese business directory of the world of 1913; at present, china is its main foreign investor in one of its main economic areas, mining (chang-rodríguez 2015, 16). in other cases, commercial relations are recent, as is the case in brazil. this article thus reveals how chinese businesses were part of the urban landscape of several latin american and caribbean cities, establishing historical commercial ties that continue, if in different forms, to http://revistes.ub.edu/index.php/jesb volume 4, number 2, 175-203, july-december 2019 doi.org/10.1344/jesb2019.2.j064 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 this day. within this context, the history of the commercial links between china and latin america and the caribbean appear as necessary, as it provides insight into the hardships and histories that inform such relationships, shedding light into the possibilities and challenges that they hold today. acknowledgments this work was funded by the fondecyt postdoctorate program under grant 2019-3190403. references araujo, marcelo. 2015. “chineses no rio de janeiro: o século xx e migração em massa.” encontros 13: 68-82. accessed november 2, 2018. http://www.cp2.g12.br/ojs/index.php/encontros/article/view/660 chang-rodríguez, eugenio. 2015. diásporas chinas a las américas. lima: fondo editorial pontificia universidad católica del perú. chao romero, robert. 2010. the chinese in mexico. tucson: university of arizona press. conrad, robert. 1975. “the planters and the debate over chinese immigration to brazil, 1850-1893.” the international migration review 9: 41-55. drinot, paulo. 2005. “food, race, and working-class identity: restaurantes 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barros aranainstituto de historia. lin chou, diego. 2004b. “chile. de culies a profesionales.” in cuando oriente llegó a américa. contribuciones de inmigrantes chinos, japoneses y coreanos, edited by interamerican development bank, 35-51. washington, dc: banco interamericano de desarrollo. liu, haiming. 2005. the transnational history of a chinese family. new brunswick: rutgers university press. lópez, kathleen. 2013. chinese cubans: a transnational. history. chapel hill: university of north carolina press. lópez-calvo, ignacio. 2014. dragons in the land of the condor. writing tusán in peru. tucson: the university of arizona press. mckeown, adam. 2001. chinese migrant networks and cultural change: peru, chicago, hawaii, 1900-1936. chicago: university of chicago press. montt strabucchi, maria. 2018. “encuentros con la comunidad china en buenos aires: un análisis de dos novelas.” working paper series (wps) de redcaem 4: 1–26. palma, patricia, and maria montt strabucchi. 2017. “la 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north carolina press. tan, chee-beng. 2013. “introduction.” in routledge handbook of the chinese diaspora, edited by chee-beng tan, 1–12. abingdon: routledge. tong, benson. 2003. the chinese americans. boulder: university press of colorado. yen, ching-hwang. 2013. “chinese coolie emigration, 1845-74.” in routledge handbook of the chinese diaspora, edited by chee-beng tan, 73–88. abingdon: routledge. wong, bernard. 1978. “a comparative study of the assimilation of the chinese in new york city and lima, peru.” comparative studies in society and history 20 (3): 335-358. accessed november 2, 2018. doi: 10.1017/s0010417500009038 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 268 alessandra giglio hirtenkauf la salle-url (spain) https://orcid.org/0000-0002-7532-0936 kerem gurses la salle-url (spain) https://orcid.org/0000-0001-6465-4757 llewellyn d w thomas iese business school (spain) https://orcid.org/0000-0002-2090-0490 on the naming of innovation districts abstract name plays a fundamental role in defining and differentiating a company within a category. in this paper we identify how the leaders of 7 innovation districts (22@barcelona, ann arbor spark, eeci, porto digital, ruta n – medellín, sk-skolkovo and tuspark) understand the construction of the names of their innovation districts. we take an inductive approach utilizing two types of data: exploring the innovation district directors' understanding through direct semi-structured interviews and analyzing secondary data consisting of website and brochures. we show how innovation district leaders use more than one classification name for their organization and that these names either tend towards a more strategic or institutional posture. we contribute by extending existing naming theory to include innovation districts, a complex organization composed by actors of the triple helix. we also contribute by providing managerial guidance to assist in understanding the importance of the role of their organization's name in long-term positioning. keywords: innovation districts; naming; branding; triple helix; complex organizations. els noms dels districtes d’innovació resum el nom juga un paper fonamental en la definició i la diferenciació d'una empresa dins d'una categoria. en aquest document ide ntifiquem com els líders dels 7 districtes d'innovació (22@barcelona, ann arbor spark, eeci, porto digital, ruta n – medellín, sk-skolkovo i tuspark) entenen la construcció dels noms dels seus districtes d'innovació. adoptem un enfocament inductiu que utilitza dos tipus de dades: d’una banda, explorar la comprensió dels directors de districte d'innovació a través d'entrevistes semiestructurades directes i, d’altra banda, analitzar les dades secundàries que consisteixen en pàgines web i fullets. demostrem com els líders dels districtes d'innovació utilitzen més d'un nom de classificació per a la seva organització i que aquests noms tendeixen a una postura més estratègica o institucional. contribuïm ampliant la teoria de nomenclatura existent per incloure districtes d'innovació, una organització complexa composta per actors de la triple hèlix. també proporcionem ajut per a entendre la importància del paper del nom de la seva organització en el posicionament a llarg termini. paraules clau: districtes d'innovació, nomenclatura, marca, triple hèlix, organitzacions complexes. los nombres de los distritos de innovación resumen el nombre juega un papel fundamental en definir y diferenciar una empresa dentro de una categoría. en este trabajo identificamos cómo los líderes de 7 distritos de innovación (22@barcelona, ann arbor spark, eeci, porto digital, ruta n-medellín, sk-skolkovo, y tuspark) entienden la construcción de los nombres de sus distritos de innovación. adoptamos un enfoque inductivo que utiliza dos tipos de datos: por un lado, la comprensión de los directores de distrito de innovación a través de entrevistes semiestructuradas directas y, por otro lado, el análisis de datos secundarios de páginas web y folletos publicitarios. demostramos cómo los líderes de los distritos de innovación utilizan más de un nombre para clasificar su organización, y que estos nombres tienden a una postura más estratégica o institucional. contribuimos ampliando la teoría de nomenclatura existente, para incluir distritos de innovación, una organización compleja compuesta por actores de la triple hélix. también proporcionamos ayuda para entender la importancia del papel que juega el nombre del distrito en su organización y en el posicionamiento en el largo plazo. palabras clave: distritos de innovación; nomenclatura; marca; triple heílice; organizaciones complejas. corresponding author: e-mail: ale.hirtenkauf@gmail.com received 1 october 2021 accepted 12 april 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-7532-0936 https://orcid.org/0000-0001-6465-4757 https://orcid.org/0000-0002-2090-0490 mailto:ale.hirtenkauf@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 269 introduction the name of an organization plays a key role for identifying and differentiating an organization from others (muzellec, doogan and lambkin 2003; schmeltz and kjeldsen 2016). beyond simply identifying the organization, it can indicate the organization’s purpose, such as its specialization or value proposition (schmeltz and kjeldsen 2016). these names are usually decided through the consensus of company's owners or by the board of directors who have the same objectives for their organization. a key assumption behind these naming processes is that there is a clear understanding of the mission of the organization. however, from the 1950’s onwards, an increasing number of complex and collaborative organizations with derivative and hybrid missions, collectively known as areas of innovation (aoi), have been founded by entrepreneurial universities, governments, or industry to drive regional development (lima et al. 2021). according to wainova, an alliance between 24 aoi associations, there are close to 2000 aois, distributed in 76 different countries (wainova 2021). aois are embedded in complex evolving relationships between government, academia, and industry known as the triple helix (champenois and etzkowitz 2018), as they have sought synergies for greater regional economic and innovative development. as each entity has differing missions which are synthesized into an aoi name, aois often exhibit a wide variety of descriptive names, such as science parks, technology parks, science and technology parks, technology and science parks, technopoles, innovation parks, and innovation districts. there are only few studies that specifically consider how aois are named. in one study that does consider aoi names, engel, van werven and keizer (2020) investigated the naming http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 270 strategies used by entrepreneurs within aois to achieve resonance (the ability to connect with words, see lockwood, giorgi, and glynn 2019) with their audience, identifying both cognitive naming and emotive naming as differing strategies. others have focused on the variety of category labels that typify aois, rather than the naming processes themselves (belenzon and chatterji 2014; chan, park, and patel 2018; granqvist, grodal, and woolley 2013). other studies have considered how science parks and incubators became good “brands” for spin-offs (salvador 2011), showing that science parks are often recognized for projecting a positive image for their tenant companies. in probably the most closely related study, yigitcanlar et al. (2016) investigated the role of planning and branding an aoi, evaluating the effectiveness of these strategies in knowledge and innovation environments. however, none of these studies consider a typology of names nor how aoi organizations themselves build legitimacy and distinctiveness. as such, the goal of this paper is to investigate: how are areas of innovation named? to address this question, we extended schmeltz and kjeldsen’s (2016) model of corporate name classification to explore the motives behind their naming. we focused on a subset of aois known as innovation districts, which are organizations within a geographic area of a city that have been established to encourage social and economic development. they coordinate clusters of universities, anchor companies, startups and other innovation-driven organizations that share. through an inductive approach, we investigated the understanding of 7 innovation district leaders of the name of their organizations. to do so, we used direct semi-structured interviews and analyzed secondary data longitudinally (when it was available). we found that innovation district leaders choose names that encompass more than one classification type, and that early in the life of the innovation district they use a tagline with the business name to http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 271 explain who they are. however, as the innovation district evolves, there is no clear evidence of the relationship between the entities that comprise the innovation district. furthermore, we show that names vary towards either a strategic or institutional posture. we contribute both academically and to practice. we extend theory, as this study is the first time that the model of schmeltz and kjeldsen (2016) has been applied to this type of complex organization. furthermore, we begin to uncover the relationship between aoi names and institutional and branding theories. we also provide empirical guidance by helping managers with a clear guidance to better understand what kind of direction can be taken both in the initial construction of the name, as well as in the case of wanting to modify it to keep up as their sector evolves. this should make it easier to tailor the best naming strategy for that hybrid organization. we first review the theory background, presenting naming definitions, the classification name models of schmeltz and kjeldsen, 2016, the context about the area of innovation and innovation districts. we then describe our methodology. the findings then follow where we present our results. we conclude with a discussion, limitations, and directions for future research. theory background naming an organization a brand is “a name, term, sign, symbol, or design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors” (kotler and armstrong 2014, 255). corporate branding is a process that creates and maintains a company's image and its respective reputation, by shaping the communication processes with the stakeholders (muzellec, doogan and lambkin 2003). most identity and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 272 corporate branding theory focus on the characteristics of the brand itself, such as ‘name, term, symbol, design’ or those aspects all together that could differ from another competitor (muzellec, doogan and lambkin 2003; schmeltz and kjeldsen 2016; kotler and armstrong 2014). place branding is the application of marketing strategies to differentiate a place in terms of economic, sociocultural, spatial, and political aspects. those strategies seek to create emotional and psychological associations with a place. in addition, spatial cognition studies indicate that a positive image of a place is shaped by how much the area is known abroad (yigitcanlar et al. 2016). this explains why leaders pay attention to investing time in a geographically specific brand. integral to a brand is the name used to describe the organization. name plays a key role in creating strategic marketing advantage (muzellec, doogan and lambkin 2003) by both identifying and differentiating the organization from others (schmeltz and kjeldsen 2016). chirianjeev kohli and douglas w. labahn (1995, 5) argue that name is important so that “brand managers realize that a carefully created and chosen name can bring inherent strength to the brand”. name also has additional functions beyond solely identifying the company or brand, as it can indicate the type of organization, a particular specialization, a promise of experiences, etc. names “crystallize reputation”, tie up “perceptions about a company and its products and activities”, and “evoke images, convey personality, and impart identity” (schmeltz and kjeldsen 2016, 311). put differently, it is as the “prism through which each stakeholder perceives the company” (muzellec 2006, 305). there are three different types of names (sokolova 2012): “trade names” are the creative name used on the brand to get the attention of the target; the “legal business name” is the name used for registration and that comes with the type of organization, often exhibiting showing words http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 273 or legal phrases, such as corp, llc, etc.); and the “business name” is often the same as the trade or legal one, but without the legal words in the end. for this paper, we focus on the trade name, although occasionally mention the business name when it is used in a tagline. an integrative framework of name changes in seeking to understand how names are selected for organizations, muzellec, doogan and lambkin (2003) analyzed a database of 166 companies that had been renamed, proposing a classification of names model in which companies classify their names in six different ways, within a spectrum, from the most descriptive to the most creative. derived from muzellec, doogan and lambkin (2003), schmeltz and kjeldsen (2016) propose a corporate brand name model that integrates characteristics from identity and corporate branding theory and institutional theory, and which presents different typologies distributed throughout a spectrum. schmeltz and kjeldsen’s (2016) model is presented in figure 1 below. figure 1. naming as strategic communication: outline of an integrative framework source: schmeltz and kjeldsen (2016). figure 1: naming as strategic communication: outline of an integrative framework. schmeltz and kjeldsen. 2016, p 317. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 274 integral to this model are six specific types of names derived from muzellec, doogan and lambkin (2003): descriptive names describe the product or service, and they are used by the agency to make the communication task easiest; geographic names usually present the name of a city, region, or folklore of some place; patronymic (person-based brand) names bear the name of owners, partners, or key individuals in the brand name; acronym names, historically used for corporate names, are the initials of concepts or the name of the company; associative (or suggestive) names are explicit or implicit associations with a set of corporate values; freestanding names could be standalone, abstract, or invented, and are more creative and have more possibilities to be registered as a brand (and often the word has no relation to the product or service it represents). figure 1 illustrates the link between institutional theory and corporate branding theory on naming. this theory introduces the notion of “posture” which shapes distinctiveness or similarity claims. deriving from social psychology, this is driven by the insight that an individual's social behavior is motivated by two needs — assimilation and differentiation (baumeister and leary 1995). assimilation reflects an individual's desire for inclusion and belonging in relation to other relevant ones (brewer 1993) “because a sense of similarity validates a person's self-concept” (baumeister and leary 1995). in contrast, the need for differentiation, considers the desire to present a distinct and unique image in relation to other relevant ones (lopez and snyder 2002) supporting the sense of self-individualization and selfdefinition (vignoles, chryssochoou and breakwel 2000). in figure 1, schmeltz and kjeldsen (2016) integrate institutional theory to show that names claiming similarity (being part of a category and seeking legitimacy) is an institutional posture. alternatively, it could be indicative of an institutional posture in which the organization wants http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 275 to claim membership in a group of organizations in the same line of business. in these cases, the organization often has lower status since it may not yet be as well-known or legitimate in its category. thus, low legitimacy organization generally tends towards the first three name classifications of muzellec, doogan and lambkin (2003): descriptive, geographic, and patronymic. thus, changing to a descriptive name for the business category could be a desire to be recognized as a member of that business category. schmeltz and kjeldsen (2016) also integrate corporate identity and branding theory, showing that acronyms, associative and freestanding names are a more strategic posture because the organizations that use them already have higher status, and therefore more legitimacy, and hence seek uniqueness and differentiation. this model suggests that the name change can be as much a strategic posture, as the organization wants to differentiate itself from similar organizations or want to have a different line of business; in this case, choosing a freestanding name can be a way to differentiate itself from others. to decide a name, it is vital to start thinking about the consumer's opinion, that is, the name should give some benefit and generate value for the audience (schmeltz and kjeldsen 2016). according to a more strategic approach, the name must be thought of in a purposeful way to achieve the organization's objective. considering a more integrated approach, naming should consider internal and external stakeholders. although there is no consensus among professionals specializing in branding on the ideal properties of a brand name, they generally follow the idea as the name must be unique or unusual, to the point of attracting the attention of external audiences (muzellec, doogan and lambkin 2003). on the other hand, according to institutional theory, descriptive or suggestive names about what the attributes of the product or http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 276 service are about are more likely to be remembered and appreciated (chiranjeev and rajneesh 2000), and the name must depict the corporation’s personality or mission. areas of innovation the world’s first university research science park was created near stanford university (usa) in 1951. according to zhang (2005), by the end of the 1960s the number of science parks had grown to 21, eventually reaching 39 at the end of the 1970s. with the positive economic results of some science parks, such as stanford research park and triangle park, and industrial clusters such as silicon valley and route 128, in the united states, and the cambridge phenomenon, in the united kingdom, during the 1970s, led to government initiatives with the objective of boosting the economies of developed and developing countries, to increase the number of planned industrial clusters, and recreating the dynamics of these parks (zhang 2005). the real growth took place in the 1980s, reaching more than 270 science parks around the world. and by 2000, there were almost 900. since then, according to wainova (2021), an alliance of 24 science park associations there are within its network more than 2,000 distributed in 76 different countries. the international association of science parks (iasp) eventually coined the collective term areas of innovation (“aoi”), understanding this definition as “places designed and curated to attract entrepreneurial-minded people, skilled talent, knowledge-intensive businesses and investments, by developing and combining a set of infrastructural, institutional, scientific, technological, educational and social assets, together with value added services, thus enhancing sustainable economic development and prosperity with and for the community”.1 1 see piqué, miralles and berbegal-mirabent 2019 for a discussion of the rationale for aois. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 277 aois are founded by entrepreneurial universities “as the source of new information and technology, the generative concept of knowledge-based economies”, governments “as the source of contractual ties that ensure secure interactions and exchanges” or industry “as a locus of production” (lima et al. 2021, 1-2). such organizations are hybrid in the sense that they emerge through the relationships between government, academia, and industry (champenois and etzkowitz 2018), and “the interaction in university-industry-government is the key to improving the conditions for innovation in a knowledge base society” (etzkowitz 2003, 295). the interaction between these entities illustrates the transformation of roles and relationships in the university-industry-government triad, which are defined as spirals intertwined with different relationships to each other in classical innovation regimes and known as the “triple helix model” (etzkowitz 2003). in some instances, industry is the driving force, with the other two spirals acting as support structures (laissez-faire triple helix regime); in others, the government plays the main role, driving academia and industry (in a state regime). as noted by etzkowitz (2003, 303) the “spirals are rarely the same, usually one serves as the driving force, the organizer of innovation around the others.” research focus taken together, extant research emphasizes the importance of the role of the name in the brand, as well as how a strong brand could be an important asset for a place. however, these studies have only considered names of organizations with a simple structure where the consensus on the choice of name is usually given by the company's owners or by the board of shareholders, who had the same purpose or objective. as such, we do not know much about how the names of organizations that are built with different institutional actors such as universities, government, and industry with evolving relationships typified by the triple helix model. as http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 278 such, we adapt the schmeltz and kjeldsen (2016) model for more complex and collaborative structures which are composed of different entities that have different purposes. we seek to identify whether having multiple actors participating in the decision of the name can shape the choice of the name and whether a predominant type of actor can push towards a more strategic or institutional posture. in doing so, we can also identify the typology of names for these organizations and whether there is a tendency towards an institutional or strategic posture. consequently, the goal of this paper is to investigate how areas of innovation are named. methodology we investigate innovation districts. katz and wagner (2014, 1) define innovation districts as “geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. they are also physically compact, transitaccessible, and technically-wired and offer mixed-use housing, office, and retail." innovation districts are appropriate empirical context as they vary by both levels of formal planning as well as history, in that they are an older form of aoi that has many examples around the world. seven innovation districts from around the world were investigated: 22@barcelona (spain), ann arbor spark (usa), eeci (thailand), porto digital (brazil), ruta n medellín (colombia), skolkovo (russia), and tuspark (china). these districts were chosen because they are amongst the largest in each region. table 1 presents the innovation district names, their respective countries, the profile of the interviewee, the year of the innovation district creation and the respective owner. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 279 table 1. trade name of the innovation district and its descriptive data name id participant number profile year country owners* 22@barcelona interviewee 1 director 2000 spain g ann arbor spark interviewee 2 ceo 2005 usa u + g + i eeci interviewee 3 director 2019 thailand g porto digital interviewee 4 director 2000 brazil g + i ruta n medellín interviewee 5 director 2009 colombia g + i sk technopark interviewee 6 manager 2010 russia g tuspark interviewee 7 director 1994 china u + i source: own elaboration based on interviewees. notes: this table shows the trade name of the innovation districts (id), the respective participant, their profile, the year the id was created, country and who owns it. *‘i’ denotes industry, ‘g’ denotes government, and ‘u’ denotes university. this classification is derived from the triple helix concept. we used an inductive approach as it is a systematic procedure for analyzing qualitative data. data analysis was guided by the research objectives (thomas 2006). the research design was based on two types of data: (1) direct semi-structured interviews with seven innovation district managers, and (2) an interpretation of the secondary data collection (when it was available) as a website and brochures given by the participants. the semi-structured interviews were initially undertaken by the first author in person during the iasp nantes congress 2019 and after by skype or teams. the average of each interview was 40 minutes, and they were recorded and transcribed. to facilitate the understanding, the language used was either english, portuguese, or spanish, according to the preference of the interviewee. for consistency, the portuguese and spanish transcripts were translated to english. the semi-structured questionnaire was divided into four parts. the first part aimed to get to know the interviewees better, to know their role within the innovation district, and what their area of expertise is. the second part concerned the organization itself. the key idea was to know who the owner or shareholders were, what their goals were in building an innovation http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 280 district, what was the mission, vision, and objectives of the entity itself. the third part concerned the name of the innovation district. they were asked what the innovation district name was, if they were aware of why it was called that, if there was any previous or future change in the name, if they considered the name important and why, and finally what they believed the name meant to its stakeholders. a key question was to define the meaning of an innovation district. the final part of the questionnaire was related to the communication strategy. we asked if they believed their communication was clear and if their stakeholders understood what the innovation district was, how they communicated their activities/services, and what was the emphasis on digital communication. we also provided an opportunity for interviewees to add something that had not been discussed before. all interviews and secondary sources were imported into qda miner lite software for subsequent analysis. the analysis only considered the name within the logo on the website that was current at the time of the interview. this is important to mention because there are differences in the way these innovation districts present themselves, not only the name in the logo, but also when it is described as text. some organizations presented their logos with different textual information, depending on the channel and audience, such as website, business card, brochures, social media, etc. furthermore, if any of the innovation district interviewed changed their name, before or after this interview, the analysis was carried out based on the name that appears in the logo, presented on the website on the day of each interview (2019 and 2021). the first analysis focused on identifying the perspective of each leader in the construction of their name, and to discover if there may be a trend according to the main organizational actor, leaning towards legitimacy or to distinctiveness. this first analysis supported the second analysis which was the application of the muzellec, doogan and lambkin (2003) and schmeltz http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 281 and kjeldsen (2016) name classification models. this enabled us to understand where the name was within a spectrum from the most descriptive to the most creative. the first step was to analyze each textual information contained in the logo, classify it according to the spectrum of muzellec, doogan and lambkin (2003) and to justify the classification. this classification was then triangulated with the interview data from each respondent from the first analysis. the findings were cross-checked with the latter two co-authors and other scholars to confirm the classification. the second step involved identifying the classification used, whether what relationships it has with a particular triple helix actor, and if the name has more strategic or institutional posture. the final step was to visualize these classifications in a graph, so a scale was created in which each type of name received a value, such as: -100 (for descriptive), -70 (for geographic), -30 (for patronymic), 30 (for acronym), 70 (for associative) and 100 (for standalone). this scale was constructed to investigate which strategy was followed, using the model of schmeltz and kjeldsen (2016). findings table 2 presents the results of innovation districts’ leaders understanding of the respective names of their organizations, and shows the justification given by the leaders of the innovation districts regarding the importance of the name. building on the posture approach of muzellec, doogan and lambkin (2003) and schmeltz and kjeldsen (2016), they were classified on how they can generate identity of the place, help to create reputation, or provide curiosity, confirming what the theory says about the important role that the name plays in the positioning of a company. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 282 as can be observed in table 2, managers varied on their emphasis on identity, reputation, and curiosity. for instance, for 22@barcelona’s manager, the name was important because it represented identity as they felt it gave verbal tangibility to a project that is difficult to make tangible. furthermore, because the name is complex (particularly with the number 22 in it), they felt it provided a strong reputation and evidence of a long-term vocation. for the ann arbor manager, the name was important because they believed was fundamental to the identity of the organization; they also believed that the word “spark” caught the attention of the audience, inspiring curiosity. for the eeci manager, the name was also important for identity because it reflected the mission and vision of the organization; they also felt the name led to curiosity as it sounded modern and innovative, catching people’s attention. for the porto digital manager, the name generated identity due to its links with the related brand and territory; in doing so they believed it helped attracting investments both within and to the territory. the porto digital manager also felt that the name had an important reputational aspect, as it signaled to smes that there was more value to be located there. the manager of ruta n – medellín believed that the use of the name of the city medellín helped reputationally, as medellín has become a city known for business and innovation. they also believed that it led to curiosity because, although the name is sonorous, it does not explain exactly what it is, providing an opportunity to explain it and sell its benefits. for the sk technopark manager, the name was fundamental to identity due to the brand relationships, where people have associate themselves with the location where they work and as their second home. and, finally, for the tuspark manager, the name meant identity as they believed it was the way that people identified the organization; this conviction that naming was important meant that they had invested significantly in the naming process. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 283 table 2. id leaders’ opinion about the importance of the name source: own elaboration based on interviewees notes: table 2 shows the understanding that the leaders of the innovation districts interviewed have of the importance of the respective names of their organizations. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 284 table 3 presents the naming typologies contained in the logo, on the day of analysis and interview excerpts that justify the classification selected for each district. as can be observed, all innovation districts used more than one naming classification. many of the managers understood their names to be primarily geographic, with other classifications for emphasis. for instance, the manager at 22@barcelona understood the name to be primarily geographic because it contains barcelona in the name and that positions the city well, and freestanding, due to the code 22a come from a city code that identify the type of soil, that means “industrial zone”. as they wanted to make a technological and knowledge-based district, they switched from a to @, so it became 22@barcelona. similarly, the manager at ann arbor spark understood the name to be primarily geographic because the main thing for them was to be associated with ann arbor. this emphasized the association with the university of michigan, making it easier for people to understand that ann arbor spark is an area of innovation. however, it also included a freestanding aspect because the word “sparks”, which for the manager was claimed this was an early selection of an aspirational name. the manager at ruta n – medellín also understood the name to be primarily geographic because it is in medellín, colombia, today is becoming a very well-known city. however, it also had a freestanding aspect because the word ‘ruta” (route in english) has a meaning of road, path, and the "n", in the way it was used, means an exponent within a power, saying that this route is elevated to the power of “n” times. the manager at sk – technopark understood the name to be primarily geographic because it is its location. however, it also had a patronymic classification because there is a connection with the parent company sk skolkovo foundation. this “sk” could also be considered freestanding, because if the person is not from there, it is not easy to do a direct association with the letters sk as a place called skolkovo. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 285 table 3. name typology of the innovation districts descriptive geographic patronymic acronymic associative freestanding @22 barcelona “geographic because you place the city well.” “because 22@ came from the city codes that identify the soil type. the economic zone that existed before 22@ was an industrial zone and was called 22a. the name was born from an almost spontaneous exercise in creativity in which garcía bragado, the architect of the time, proposed to say: 'since we are in 22a, we are going to be 22@’. therefore, we went from an industrial land code to a based on the knowledge industry.” ann arbor spark “what is more important to us is the association with ann arbor than with spark. therefore, in america, not necessarily globally, ann arbor is known as a community because of its association with the university of michigan, a renowned athletic university, and our teams are on our national tv all the time. people in the united states know the university of michigan at ann arbor. so, our brand is closely linked to ann arbor and the university of michigan and that allows people to think ann arbor spark is an area of innovation within this area.” “sparks doesn't mean anything. they already had the notion of what they were going to do to spark this area of innovation. so, they chose the name spark, which now in the world in the marketplace that we’re in, people associate ann arbor spark with an area of innovation. they make that connection, but in the beginning, it was an aspirational selection of a name. there was a tagline at the beginning 'ann arbor spark in area of innovation' in the ann arbor region.” http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 286 eeci “we want to be the innovation hub of the eec. so, we wanted to use eec. if you search in google, eec tile is the flagship project of the thai government. so, they promote the eec everywhere, when the prime minister goes to other countries. they also mention eec, so eec is a very well-known term. then, we use eec and we add the “i” to highlight the innovation in the eec.” “eeci brand highlights the acronym to which the eastern economic corridor of innovation refers.” porto digital “the word “porto'' came up with the choice of the area. the city of recife was born from the port of recife. and the port of recife, including the name of the neighborhood, where the park is located, is bairro do recife. so, this area where porto digital is located was a symbolic territory, because it had its peak with the export of sugar, being one of the main economically active cities in the 18th century, and where its decay also happened in the late 90s with the abandonment from the port area and the commercial center of the city, where everything worked, both the economic and the financial center. and “digital” came precisely to transform this old area into a strategy to attract and strengthen the information and communication technology chain. so, this ‘porto digital' came as the explanation of what we are: a vision of economic and urban recovery to a new sector of information and communication technology.” http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 287 ruta n – medellin “it is happening in a city like medellín, which today is becoming very well known, (...). so, there is as much interest in medellín and when the story is told. it's like "wow", that name is perfect.” although the word ‘ruta” (route in english) has a meaning of road, path, and the "n", in the way it was used, means an exponent within a power, saying that this route is elevated to the power of “n” times, does not have a direct association with the organization. “it is a very loud name and very easy to understand in any western language, at least. so, in english it is not so different, and it could be translated. people in english end up by saying route n, as is”. so, i still think the name is a hit. i am not an expert in that, but in marketing, with this type of name that does not tell you exactly what it is and what it does, you should explain it later, (...) in any scenario, where the name came from. so, it generates curiosity and an opportunity to explain it, “you give a lot of information about history, storytelling, which is very inspiring”, and considering “it is a very sonorous name”, everyone keeps the story behind.”. sk technopark “it is the geographical name of the place where the innovation center was built. it was previously called the village of skolkovo.” “this brand could be classified as patronymic, because it’s also clear the connection with the parent company (sk skolkovo foundation) and what we do.” “sk came from the name of the place: skolkovo.” “if the person is not from there, a direct association with the letters sk as a place called skolkovo will not exist.” http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 288 source: own elaboration based on interviewees and muzellec, doogan and lambkin (2003) and schmeltz and kjeldsen (2016) name labeling model. tuspark “at the very beginning we didn't have this short word; we had the full name tsinghua university science park.” “about 2007, during a branding study, we invited a consultant to come in. i was the leader of this project, and we shortened the name to tpark, but when i showed this name to my colleagues from thailand, they said no, because they already had the thailand science park, and used tpark. so, we tried with u and s in between t and park (tuspark).” “tus means tsinghua university science park." http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 289 table 4. scales of name types source: own elaboration based on interviewees and muzellec, doogan and lambkin (2003) and (schmeltz and kjeldsen 2016) name labeling model notes: 1‘des’ means descriptive, 2‘geo’ means geographic, 3‘pat’ means patronymic, 4‘acr’ means acromyn, 5‘ass’ means associative, 6‘fre’ means freestand. this classification is based on muzellec et al. (2003). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 290 in contrast, the manager at eeci understood the name to be primarily patronymic because they want to be the innovation hub from the eec that is the main project of the thai government, meaning that eec is a very familiar term in thailand. however, it also had an acronym aspect because eec means eastern economic corridor; to emphasize this this they added the “i” to highlight “innovation”, so as to become the eastern economic corridor of innovation. the manager at porto digital understood the name to be primarily associative due to the word “porto'' came up with the choice of the area, that is located in port of recife, and “digital” came the idea to transform this old area into a new sector of information and communication technology. the manager at tuspark understood the name to be primarily descriptive because tuspark in chinese means tsinghua university science park, which is also patronymic table 4 and figure 2 present the results of our scale, which indicates whether a name tends more towards a strategic or institutional posture. by taking a weighted sum of the names used by each district, it was possible to observe in figure 2 both the position of each district, that is, if it tends more towards “claim for similarity (cs)” or “claim for distinctiveness (cd)”. figure 2 also provides insight into the relationship with the actors of the triple helix. this suggests that when industry participation is the main vector, the name tends towards a more strategic posture (they are more to the right side of the graph), compared to those that have government participation as the main vector. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 291 figure 2. innovation districts’ naming typology strategy source: own elaboration based on interviewees notes: this figure shows the trade name of the innovation districts (id), the year the id was created, and who owns it. *‘i’ denotes industry, ‘g’ denotes government, and ‘u’ denotes university. this classification is derived from the triple helix concept. discussion and conclusion considering the important role of a name in defining and differentiating an organization among others, in this paper we have reviewed and integrated the literature on organizational names, theories of name change, and areas of innovation to investigate how innovation districts are http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 292 named. we used an inductive approach exploring innovation district directors' perspective through direct semi-structured interviews and analyzing secondary data consisting of website and brochures. we identified new insights into how innovation district leaders create their names by uncovering that they usually use more than one classification name for their organization and that these names either tend towards a more strategic or institutional posture. we contribute by extending existing naming theory to include innovation districts, a complex organization composed of actors of the triple helix (champenois and etzkowitz 2018). to do so we have applied the model of schmeltz and kjeldsen (2016) to this type of complex organization. using this model, we found that the names of the organizations mostly take more than one classification (in that they have more than one strategy behind its name). the use of mixed strategies has been observed since the creation of the first science parks. stanford research park used patronymic strategy when carrying the name of the stanford university and descriptive when describing the research park label. another example of mixed strategies was the research triangle park in north carolina, us. its name came from its founders, the research triangle foundation, when “research triangle” generally refers to the geographic area berthed by the research universities of duke university in durham, north carolina state university in raleigh, and the university of north carolina at chapel hill. thus, it could be classified as patronymic and associative. given this trend, and our finding of dominant naming strategies, a fruitful direction for further research is to see if there are naming trends. we also observed that the decision to use a logo with simply trade name or to use a trade name with the tagline describing their organization varies according to the channel and target audience. this was supported by the leader of porto digital who commented that he varies taglines, which he views as temporary according to the needs of those he is going to http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 293 communicate with. these align with the findings of engel, van werven and keizer (2020) relating to different naming strategies achieving resonance with different audiences. furthermore, these results extend the literature on names and place branding (yigitcanlar et al. 2016), showing that when there are multiple stakeholders, managers are aware of the importance of developing a brand with a strong name to inspire loyalty. it would be interesting to further investigate the relationship between institutional or strategic postures with cognitive and emotive naming strategies. we also found evidence of name evolution, although this was not the focus of our research. many innovation districts had already changed their names at least once and for many a tagline had also been adopted, consisting of a (descriptive) business name. we also found that as the innovation district, its constituting entities, and participants in the district evolved over time, this tagline was no longer used in most communications. additionally, while innovation district leaders added to their trade name the tagline that presented the business name or attributes, over time this evolved so that many withdrew the descriptive part, corroborating the theory. an important exception is porto digital, which has never had a tagline. furthermore, during their interview, some leaders commented that at the time of the creation of the innovation district, many brands came up with a tagline, which, in turn, was adopted as the business name, to describe what it was (innovation district, innovation city, etc.). these findings suggest that the temporal evolution of innovation district names is another interesting area of further research. in terms of practitioner contributions, we show that innovation district leaders are aware of the importance of a name, confirming extant scholarly insights into the relevance of name in defining and differentiating an organization from others. when creating a name for the first time or changing it, an organization can show its interest in an organizational field “claiming http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 294 similarity” (navis and glynn 2010) or both try to be part of new ones or just change the field to which it belongs (vignoles, chryssochoou and breakwell 2000). furthermore, we help managers understand the importance of thinking about the role of their organization's name in its long-term positioning. this is important in the context of the evolving industrial, political, and technological climate, typical of the triple helix, in which they are based, so that managers can have a sense of how to modify or update their name to better fit in their evolving landscape. there are some limitations to our study. first, innovation districts, our focus of study, are only one type of the wide variety of aoi organizations. while they are fairly typical of aois, our findings may not be appropriate to all aois. second, we analyzed a relatively small number (seven) of innovation districts, perhaps limiting the generalizability of the findings. third, we examined the typology of the name presented through only one channel (the web). it is possible that some aois may be using different names depending on the channel, suggesting some intriguing future research directions. finally, since a pre-existing scale was not readily available as the basis for this study, we have developed a scale from existing literature (schmeltz and kjeldsen 2016). while on the one hand this is a minor methodological contribution, we also acknowledge that it may not be appropriate for use beyond our study. in conclusion, names of innovation districts vary. taken together, the results of this research have important contributions for scholars and practitioners. on the one hand, this article sheds light on theory, as it is the first time that the proposed model is applied to this relatively new type of complex organization. it also suggests a promising line of research to understand if there is any evolutionary trend towards more strategic or institutional postures during organizational evolution. second, it also helps managers understand the importance of thinking about the role of the organization's name and its evolution in long-term positioning. finally, we have shown http://revistes.ub.edu/index.php/jesb volume 7, number 2, 268-297, july-december 2022 doi.org/10.1344/jesb2022.2.j113 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 295 that there are important insights that can be gleaned from researching them in a structured manner. we hope we inspire others to research this important phenomenon in more depth. references baumeister, roy f., and mark r. leary. 1995. “the need to belong: desire for interpersonal attachments as a fundamental human motivation.” psychological bulletin 117 (3): 497–529. doi: 10.1037/0033-2909.117.3.497. belenzon, sharon, and ak chatterji. 2014. “eponymous entrepreneurs.” working paper 107 (6): 1638– 55. doi: 10.1257/aer.20141524. brewer, marilynn b. 1993. “social identity, distinctiveness, and in-group homogeneity.” social cognition 11(1): 150–64. doi: 10.1521/soco.1993.11.1.150. champenois, claire, and henry etzkowitz. 2018. “from boundary line to boundary space: the creation of hybrid 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wainova. 2021. “world alliance for innovation.” accessed august 22. https://www.wainova.org/. yigitcanlar, tan, mirko guaralda, manuela taboada, and surabhi pancholi. 2016. “place making for knowledge generation and innovation: planning and branding brisbane’s knowledge community precincts. journal of urban technology.” journal of urban technology 23(1): 115146. zhang, yuehua. 2005. “the science park phenomenon: development, evolution and typology.” international journal of entrepreneurship and innovation management 5 (1–2): 138–54. doi: 10.1504/ijeim.2005.006341. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb file:///c:/users/kerem.gurses/downloads/10.1080/1553118x.2016.1179194 file:///c:/users/kerem.gurses/downloads/10.2143/ono.47.0.3085149 file:///c:/users/kerem.gurses/downloads/10.1177/1098214005283748 file:///c:/users/kerem.gurses/downloads/10.1207/s15327957pspr0404_4 https://www.wainova.org/ file:///c:/users/kerem.gurses/downloads/10.1504/ijeim.2005.006341 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 ademola samuel sajuyigbe landmark university (nigeria) anthony abiodun, eniola landmark university (nigeria) https://orcid.org/0000-0001-6120-6908 adebanji ayeni landmark university (nigeria) nwoye james obi caleb university (nigeria) https://orcid.org/0000-0002-2409-0835 employee relationship management and organizational agility: mediating role of employee empowerment in consumer goods sector abstract the study examines the mediating role of employee empowerment in the relationship between employee relationship management and organizational agility. the survey method was used in the study using a closed-end copy of the questionnaire to collect data from three hundred and fifty-eight (358) respondents via the google document platform. structural equation modeling was used to analyze the data using the process macro program as a regression-based software package. the results show that employee relationships have a significant impact on organizational agility. it was also found that mana ging relationships with employees improves employee empowerment because it helps them achieve their organizational goals directly by allowing them to make decisions. finally, there is a good link between employee empowerment and organizational agility. the results also indicate that employee empowerment has a posit ive and important relationship with employee relationships and organizational agility. this study establishes a strong role for employee empowerment as an intermediary between employee relationship management and organizational management. this means that all employers have the greatest competitive advantage of always empowering their staff with recognized world-class talent. the study has contributed to the body of knowledge by demonstrating the rbt's adaptability in a pandemic period to optimize employee motivation at the expense of acknowledging the instinct of organizational agility in a challenging era where change occurs without warning. keywords: employee relationship management, organizational agility, employee empowerment gestión de las relaciones con los empleados y agilidad organizativa: papel mediador del empoderamiento de los empleados en el sector de bienes de consumo resumen el estudio examina el papel mediador del empoderamiento de los empleados en la relación entre la gestión de las relaciones con los empleados y la agilidad organizacional. en este trabajo se ha utilizado el método de encuesta mediante una copia cerrada del cuestionario para recopilar datos de trescientos cincuenta y ocho (358) encuestados a través de la plataforma de documentos de google. se utilizó el modelo de ecuaciones estructurales para analizar los datos utilizando el programa macro process como un paquete de software basado en regresión. los resultados muestran que las relaciones con los empleados tienen un impacto significativo en la agilidad organizacional. también se detecta que la gestión de las relaciones con los empleados mejora el empoderamiento de los empleados porque les ayuda a alcanzar sus objetivos organizacionales directamente al permitirles tomar decisiones. finalmente, existe un estrecho vínculo entre el empoderamiento de los empleados y la agilidad organizacional. los resultados también indican que el empoderamiento de los empleados tiene una relación positiva e importante con las relaciones con los empleados y la agilidad organizacional. este estudio establece un papel importante para el empoderamiento de los empleados como intermediario entre la gestión de las relaciones con los empleados y la gestión de la organización. esto significa que todos los empleadores tienen la mayor ventaja competitiva de empoderar siempre a su personal con talento reconocido de clase mundial. el estudio ha contribuido a la acumulación de conocimiento al demostrar la adaptabilidad del rbt en un período de pandemia para optimizar la motivación de los empleados a expensas de reconocer el instinto de agilidad organizacional en una era desafiante donde el cambio ocurre sin previo aviso. palabras clave: gestión de las relaciones con los empleados, agilidad organizacional, potenciación de los empleados gestió de les relacions amb els empleats i agilitat organitzativa: paper mediador de l'apoderament dels empleats en el sector dels béns de consum resum l'estudi examina el paper mediador de l'apoderament dels empleats en la relació entre la gestió de les relacions amb els empleats i l'agilitat organitzacional. en aquest treball s'ha fet servir el mètode d'enquesta mitjançant una còpia tancada del qüestionari per recopilar dades de tres -cents cinquanta-vuit (358) enquestats a través de la plataforma de documents de google. s’ha usat el model d'equacions estructurals per analitzar les dades utilitzant el programa macro process com a paquet de programari basat en regressió. els resultats mostren que les relacions amb els empleats tenen un impacte significatiu a l'agilitat organitzacional. també es detecta que la gestió de les relacions amb els empleats millora l'apoderament dels empleats perquè els ajuda a assolir els seus objectius organitzacionals directament en permetre'ls prendre decisions. finalment, hi ha un estret lligam entre l'apoderament dels empleats i l'agilitat organitzacional. els resultats també indiquen que l'apoderament dels empleats té una relació positiva i important amb les relacions amb els empleats i l'agilitat organitzacional. aquest estudi estableix un paper important per a l'apoderament dels empleats com a intermediari entre la gestió de les relacions amb els empleats i la gestió de l'organització. això significa que tots els ocupadors tenen l'avantatge competitiu més gran d'apoderar sempre el seu personal amb talent reconegut de classe mundial. l'estudi ha contribuït a l'acumulació de coneixement en demostrar l'adaptabilitat de l'rbt en un període de pandèmia per optimitzar la motivació dels empleats a costa de reconèixer l'instint d'agilitat organitzacional en una era desafiant on el canvi passa sense avís previ. paraules clau: gestió de les relacions laborals, agilitat organitzativa, empoderament dels empleats corresponding author: e-mail: sajuyigbeademola@yahoo.com received 20 october 2021 accepted 17 november 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-6120-6908 https://orcid.org/0000-0002-2409-0835 mailto:sajuyigbeademola@yahoo.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 1. introduction the destructive nature of the rise of covid19, coupled with the rapidly changing and highly competitive business environment, huge changes in customer preferences, and rapid technological changes, pose a threat to the survival of the global consumer goods sector (oecd, 2020). according to anca-ioana munteanu, nicolae bibu, marian nastase, nicoleta cristache and cosmin matis (2020), no organization in the world is immune to today's highly competitive and rapidly changing business environment and rapid technological change. therefore, consumer goods companies find it very difficult to design high-quality, low-cost products with the shortest delivery time (baškarada and koronios 2018). this proves that consumer goods sector has been unable to keep up with market demands, especially in emerging economies (ibidunni et al. 2018). this unpleasant situation has weakened consumer confidence in manufacturers and they are more likely to look to other sources for future demand (samwel 2018). this means that if companies want to survive and roar in this cruel business environment, they must adapt to possible changes in the future (nafei 2016). organizational agility is documented in key concepts in the business literature, enabling companies to respond quickly to changes and uncertainties in the environment to overcome obstacles and seize opportunities. according to doz and kosonen (2008), agility means learning how to make the right decisions and change while updating the company without losing sync. baškarada and koronios (2018) define organizational agility as the ability to respond to changing environments through the design of high-quality products and the rapid delivery of services to achieve sustainable competitive advantage. similarly, lu and ramamurthy (2011) turn organizational agility into the ability to take action in response to market needs using continuous monitoring. manufacturing agility requires employee approval and employee relationship management agility (kitur 2020) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 employee relationship management is essential for organizational agility and achieving sustainable competitive advantage (rahman and taniya 2017). singh and kumar (2011) assume that employee relationship management is a necessary condition for all companies operating in a highly competitive business environment. employee relationship management aims to build a first-class successful company by building relationships with employees. it is found in the literature that employee empowerment is a structure that links organizational agility and employee relationships (nouri and mousavi 2020). according to el mouallem and analoui (2014), employee empowerment equips employees with a variety of strategic skills to achieve organizational goals in today's cruel and dynamic business environment. the existing literature emphasizes that without friendly labour relations and skilled labour, organizational agility cannot be achieved. the agility of employee relations and authorization is believed to provide benefits such as improved high-quality products, better customer service, and better delivery (salajeghe and nasrollahpoor 2016; nafei 2016). employee relationship management, organizational agility, and employee empowerment have been independently investigated and conceptualized in different ways. however, empirical results show that few studies have investigated the role of mediating employee empowerment in the relationship between employee relationship management variables and organizational agility. since there is little literature that focuses on the connection between employee relationship management, organizational agility, and employee empowerment, this research will help to better understand this relationship and the goal of evaluating employee relationships, thereby filling the gaps in the literature. based on this gap, the research questions put forward are: what extent does employee relationship management has a significant effect on organizational agility and employee empowerment? what extent does employee empowerment has a significant effect on organizational agility? and does employee http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 empowerment mediates the relationship between employee relationship management and organizational agility? this current research is expected to provide stakeholders and policymakers with the importance of organizational agility through employee relations and empowerment to accelerate the manufacturing and industrial development and regeneration of the african economy through the achievement of the sustainable development goals and the african union agenda of 2063. 2. theoretical framework the theoretical framework of this study is based on the resource-based theory (rbt) derived from previous empirical studies. resource-based teory (rbt) is a management framework used to determine the strategic resources that an organization can use to maintain a competitive business environment and achieve sustainable competitive advantage (barney 1991; salder et al. 2020). this theory argues that companies need to use their internal resources effectively and efficiently to cope with the ever-changing business environment. according to ali and anwar (2021), rbt requires firms to adapt to changes in the business environment and gain a competitive advantage by using the internal resources available (assets, functions, organizational characteristics, etc.). despite the general acceptance of the theory in strategic management for persuading organizations to gain competitive advantage through internal resources, capabilities, and competencies for more than a decade, resource-based theory (rbt) has been criticized for not being able to give clear guidance to companies on how to apply these internal resources and transform them into a sustainable competitive advantage (rashidirad, soltani and salimian 2015). despite these criticisms, from a theoretical and empirical point of view, we argue that rbt has the potential to transform internal resources into a sustainable competitive advantage. the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 theory believes that human resources are difficult to replace due to the diversity of capabilities to operate in a dynamic environment. to support this argument, el mouallem and analoui (2014) believe that the most valuable internal resource of any company is its human resources because the development of human resources capacities allows employees to possess a range of modern skills to achieve organizational objectives. tennant (2001) also believes that an agile company is characterized by a highly trained and loyal workforce that believes in the mission of the organization. similarly, nikbakht et al. (2014) confirm that the empowerment of human resources, such as training and employee relations, provides the necessary foundation for employees to perform their functions in a modern way, which will increase organizational agility. horabadi farahani and salimi (2015) also reiterate that relationships and employee empowerment enable companies to respond faster and easier in a competitive business environment. recently, consumer goods industries all over the world, especially those on the african continent, are struggling to cope with today’s fiercely competitive and ever-changing business environment and rapid technological changes, bringing many consumer goods industries to the brink of extinction (sajuyigbe, ayeni and inegbedion 2021). the theory suggests that if the consumer goods industry is to remain agile and competitive in a dynamic business environment, it must develop its human resources (chigara 2021). 3. organizational agility the concept of agility dates back to the manufacturing business strategy report presented by roger n. nagel in 1992. its purpose is to rejuvenate america's competitiveness by adopting agile manufacturing strategies. this concept began to gain momentum in management theory after the agile manifesto in 2001. this means that the concept of organizational agility is still http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 in its infancy in the management literature. recently, organizational theorists have considered the important role of agile performance in helping organizations to survive and thrive in a hypercompetitive environment via accelerated response to changing business environment (kitur 2020; marjerison, andrews and kuan 2022; nouri and mousavi 2020). academics and researchers do not have a consistent definition of agility. agility is defined from a different perspective. for example, dove (2005) regards agility as the ability to improve survival in unpredictable environments. sharifi and zhang (2001) also define agility as the use of change as a unique opportunity in an unpredictable environment. erande and verma (2008) also view agility as the ability to respond quickly and constantly to change in profitability. in another study, hanssen (2010), views agility as an organization's ability to respond quickly and effectively to a rapidly changing business environment. according to doz and kosonen (2008), agility means learning to change and update companies to make the right decisions without losing motivation. baškarada and koronios (2018) define organizational agility as the ability to respond to changes in the environment and realize sustainable competitive advantage through the rapid delivery of high-quality product designs and services. similarly, lu and ramamurthy (2011) regard organizational agility as the ability to respond to and respond to market demands through continuous monitoring. thus, according to the definition above, organizational agility can be defined as an organization's ability to apply competitive technologies, including flexibility to respond to changes in the business environment and the speed of delivery of products and services for customers. in today's cut-throat competitive business environments, the agility of the organization is germane for the african consumer goods sector to understand market changes (kotter, 2012). if the prediction of africa’s manufacturing sector to be doubled in size, with an annual output http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 of 1 trillion dollars in 2025 and be regarded as the world’s next great manufacturing center in 2030 to come to pass, human resources have to be well equipped with modern skills such as acquiring and analyzing latest information, appropriate using latest electronic devices and professional software and be trusted in making agile decisions. empirical studies show that organizational agility requires organizational flexibility, adaptability, and internal capabilities to identify opportunities and threats, capitalize on opportunities and minimize threats, and include rapid response to changes in the environment (sharifi and zhang 2001; nafei 2016). this study shows two ways to create organizational agility, consisting of building relationships with and empowering employees. 4. employee relationship management the concept of employee relationship management is based on the customer relationship management platform. according to swarnalatha and prasanna (2013), the concept of customer relationship management focuses on the external reaction of the "why" of a company's business, while the concept of employee relationship management focuses on the internal reaction of "how". employee relationships have demonstrated one of the key pillars and functions of human resource management that can lead to effective employee outcomes and organizational agility (albro and mcelfresh 2021; xia, yan and zhong 2020). managing relationships with employees strengthens relationships between employees and employers, allowing everyone to enjoy healthy relationships within the organization (alhashedi et al. 2021; onyango, 2014). samwel (2018) believes that employee relationships are an organizational effort to build and maintain happy relationships with employees. by maintaining a positive and constructive relationship with our employees, it is believed that organizations can maintain employee loyalty and increase their participation in the work (salajeghe and nasrollahpoor 2016). singh and kumar (2011) assume that employee relationships are a necessary condition for any company http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 that works in a radical environment. employee relationship aims to build a successful worldclass organization by building relationships with employers and employees. both empirical and theoretical studies agree that employee relationship management is considered an essential management tool for companies operating in a dynamic environment (magdalene 2016; kanana 2016; al-khozondar 2015; kuzua and ozilhan 2014; wargborn 2008). armstrong (2010) believes that the employment relationship is to manage the relationship between employers and employees with the ultimate goal of achieving organizational agility. the work of donohoe (2015) reiterates that if organizations want to respond quickly to dynamic markets, design high-quality products in the shortest time, and quickly provide services to achieve sustainable competitive advantages, they must implement relationship management with customers. get the support of employees, provide opportunities to suggest improvements to working methods, make decisions with mutual trust and allow freedom of association. in addition, pearce and robinson (2009) believe that agile companies should strive to satisfy their employees through good guidance, full participation in decisionmaking, motivating good work, and providing employees with advantageous important information. research conducted by ivancevich (2001) confirms that the relationship with employees increases the power of employees because it directly contributes to the achievement of organizational goals by empowering employees to make decisions. carlsen (2022) confirms that organizational agility is strongly influenced by employee relationships. from the same point of view, menon and suresh (2020) reaffirm that there is a significant linear relationship between employee relationships and organizational agility. a study conducted by choong and islam (2020) shows that employee relationships are the driving force behind an organization's agility. similarly, salciuviene, buenaventura, and lee (2019) reflect previous findings that http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 employee relationships are an alternative paradigm for organizational agility. based on the above empirical findings, the following hypotheses are proposed: h1: employee relationship management has a significant effect on organizational agility. h2: employee relationship management has a significant effect on employee empowerment. 5. employee empowerment the best way to achieve organizational objectives in today’s dynamic and unpredictable business environment is human resource empowerment (ibidunni et al. 2017; nouri and mousavi, 2020). ghafuri, farhadi, and mansouri (2014) also affirm that workforce is the most valuable asset organizations have to achieve a competitive advantage in the dynamic and unpredictable environment. employee empowerment refers to how firms equip their employees with an array of modern tools, training, and authority they have to operate in a dynamic environment. according to akbari, gilaninia and mousavian (2012), employee empowerment means the acquisition of a spectrum of skills that will enable employees to add value to the organization. previous studies demonstrate that there is a direct relationship between employee empowerment and organizational agility. for example, nouri and mousavi (2020) identify in their work that employee empowerment is directly related to organizational agility and collaborative management. in a similar study, fanodi, okati, and keikha (2014) confirm that empowerment and its aspects have a positive and significant relationship with organizational agility. in addition, research done by heydari (2013) shows that there is a positive relationship between employee empowerment and organizational agility. in a similar study, muduli (2016) also stated that employee empowerment is directly related to organizational agility. in another study, ivancevich (2001) reaffirmed that employee empowerment improves employee relationships and organizational agility. similarly, kitur (2020) shows that organizational agility is a platform for employees to develop their skills for organizational sustainability. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 another study conducted by marjerison, andrews, and kuan, (2022) evident that organizational agility makes work groups and teams perform vital tasks for organizations to survive and prosper in a cut-throat business environment. a study by harsch and festing (2020) also concurs with the previous studies that organizational agility is a strong predictor of employee empowerment. based on the empirical and theoretical findings, the following hypothesis emerged: h3: employee empowerment has a significant effect on organizational agility. h4: employee empowerment mediates the relationship between employee relationship management and organizational agility. 6. conceptual framework the conceptual framework for this current study is presented (see figure 1) figure 1. conceptual framework source: own elaboration with heydari (2013). in the above model, employee relationship management is taken as independent while employee empowerment is the mediator and organizational agility as a dependent variable. 7. research method this study used a survey study because it is very convenient to manage via mobile devices, email, or online phone (defranzo, 2012). pz cussons was selected using an intentional sampling http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 procedure while using simple random sampling techniques to select three hundred and fiftyçeight (358) respondents from a total population of 3,500 staff. the sample size is determined by the formula suggested by yamane (1967). the choice of pz cussons was based on the fact that the company operates in both developed and emerging markets. therefore, it assumes that the company has the strategic agility to react quickly to dynamic markets. due to the second phase of the increase in covid-19 in the country, close-ended copies of the questionnaire were utilized to collect data from the respondents through the google document platform from 8th november 2021 to january 16th, 2022. 8. measurement of scale spss version 25 was used to test hypotheses and evaluate parameters in this study. structural equation modeling (sem) using the process macro program was used for mediation analysis.; it is one of the latest mediation tools, used as a regression-based software package, capable of analyzing more than 70 different mediation and adjustment models (preacher and hayes, 2004). the questionnaire included a demographic section (age, marriage, educational background, position, and years of professional experience) as well as scales measuring variables of the study. the employee relationship management scale was adopted from the works of al-khozondar, (2015), horabadi and salimi (2015), kuzua, and ozilhan (2014), and magdalene (2016). the scale was designed in a 10-item likert scale from 1 = disagree, to 4 = strongly agree. the employee empowerment scale was derived from the works of nikbakht, nawabakhsh, jadidi, and fakhimi (2014), heydari, (2013), and fanodi, okati, and keikha (2014). the scale was designed in an 8-item likert scale from 1 = disagree, to 4 = strongly agree. while the organizational agility scale was adopted from the studies of erande and verma (2008), hanssen (2010), and nafei (2016). the scale was designed in a 10-item likert scale from 1 = disagree, to 4 = strongly agree. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 the regression formulae for the analysis are as stated below. conditional effect of x on y = b1 + bk+1m1 +… + b3k-1m3k-1 conditional effect of erm on oa = b1 + bk+1emp1 +… + b3k-1emp3k-1 conditional effect of x on y = bi + b3m conditional effect of erm on oa=bi+b3emp indirect effect of x on y through mi = ai bi indirect effect of erm on oa through emp= ai bi direct effect of x on y = c' direct effect of erm on oa = c' conditional effect of x on y = bi + b4m conditional effect of er on oa= bi+b4emp table 1. summary of results of the measurement instruments validation code details er ee oa employee relationship – cronbach alpha – (emr = 0.841) er1 employees meet voluntarily to identify operational issues relevant to the organization. .760 er2 employees trust the promises made by their supervisors. .699 er3 the employees trust the promises provided by managers .760 er4 the organization treats employees fairly and without discrimination .764 er5 the manager holds regular meetings to discuss employee performance .752 er6 the manager uses various communication methods to clarify his ideas. .705 er7 the compensation offered by the organization corresponds to the expectations of the employees. .612 er8 the manager advises employees on strategic decisions. .712 er9 the manager encourages and supports employees in a way that creates a high level of confidence in their abilities. .642 er10 the manager assigns or nominates employees for challenging tasks that facilitate their professional development. .689 employee empowerment– cronbach alpha – (ee = 0.798) ee1 training courses increase my work performance and enable me to achieve my goals. .729 ee2 management encourages teamwork .694 ee3 my boss gives me authority .678 ee4 management encourages employees to come up with creative and innovative ideas. .582 ee5 i am in control of the aspects of my work for which i am responsible. .620 ee6 i am free to change my job whenever i want. .813 ee7 i have the authority to fix problems as they occur. .554 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 code details er ee oa ee8 i do not need management approval before dealing with issues. .711 organizational agility – cronbach alpha (cs = 0.886) og1 my organization has a well-developed change capability and ability. .706 og2 my organization has a mindset of developing flexibility strategies. .756 og3 my organization has a value culture that accommodates change as normal. .657 og4 management spends a lot of time and resources on the future of the organization. .737 og5 in my organization, employees are aware of the external environment especially our customers and competitors. .741 og6 in my organization, there is a free flow of information from the outside to units and groups. .726 og7 my organization embraces innovation. .662 og8 my organization always shifts its structure quickly to accommodate new opportunities. og9 my organization has a flexible budget that accommodates new product development. .689 og10 my organization has a common purpose apart from profitability and market share. .608 eigenvalue 2.978 2.520 3.512 percentage of variance 56.612 58.789 59.812 kmo .811 .778 .807 bartlett’s test of sphericity 395.65 245.08 651.12 reliability test (cronbach alpha) .801 .798 .836 significance .000 .000 .000 source: own elaboration. from table 1 above, the factor weight of all indicators is greater than 0.5 which indicates that the questions explain the variability of their variables. this means that the measurement model is suitable for analysis. 9. results of data analysis basic demographics of the respondents in order to get an idea of the basic demographics of the respondents, questions about age, marriage, educational background, position, and years of professional experience were included in the study. the results showed that 30% of those surveyed were between 20 and 35 years old, 43% between 36 and 45 years old, 18% between 46 and 55 years old and only 9% are over 56 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 years old. the average age of the majority of respondents was deemed to be 45, meaning the majority of employees were in the productive age category. the implication of this finding is that pz cussons can still play a central role in the nigerian economy. it was also found that the majority of respondents were married with 65% while singles were made up of 35%. it was found that there were no divorcees among those surveyed. this implies that the married couple will have a great sense of responsibility, since marriage seems to be correlated with a sense of responsibility. the results also show that 54.3% of the respondents had bsc/hnd certificates; 28.3% had nd/nce certificates, 11.7% had a master's degree. furthermore, 7.5% had undergone vocational training with professional certificates such as cipm, nim and icsa, aca, etc. the study showed that 5.2% had other certificates but were in-service training. therefore, it could be implied that respondents had formal training with human resource background and should therefore be able to answer questions asked. furthermore, it was also observed that 68.4% of the respondents are men and 38.7% are women. this trend suggests that the male workforce at pz cussons was larger. this distribution may be due to the fact that in most third world countries men have culturally more access to education than women. however, the distribution shows that pz cussons is gender sensitive. implicitly, both men and women have relatively equal opportunities to work for the company. the results also show that about 44.9% of the respondents have more than nine years of experience, while 30.3% of the respondents stated that they had been with the company for six to eight years. 16.7% of those surveyed had three to five years of experience and only 8.1% had been with the company for less than three years. therefore, a higher percentage of respondents had more than nine years of experience and therefore should be aware of the mediating role of employee http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 empowerment between employee relationship management and organizational agility. additionally, years of organizational experience show that most of them understand the organizational structures and managerial backgrounds that inevitably dictate the coping strategies they choose. the conclusion of this result is that the years of experience of these employees is a key factor for the agility of the company. it also showed that 48% of the respondents were junior employees; while the senior were 52%. this means that most of the employees are senior executives. the implication of this finding is that pz cussons management needs to drive at organizational agility knowledge. table 2. employee relationship management effect on organizational agility source: data computation. the results of the effect of employee relationship management on organizational agility are shown in table 2. a significant regression equation was found (f = 138.9327, p <0.000), and the r-square of the employee relationship management was 0.3324. the results show that the general model is significant and can explain more than 33% of the differences in organizational agility measures. the coefficient obtained by in the emr path is .7898, the statistical coefficient test = 11.7870 and p = 0.0000 (p <0.05). the lower limit confidence interval (llci) is 0.6579, the upper limit confidence interval (ulci) is 0.9217, based on the output of the p-value (p <0.05), and the llci and ulci values ≠ 0 indicate that the employee relationship management has a significant effect on organizational agility. this study is consistent with the studies carried out by kanana (2016); kuzua and ozilhan, (2014) and wargborn, (2008) that employee outcome: organizational agility r r2 mse f df1 df2 p .5766 .3324 .4196 138.9327 1.000 279.000 0.000 main model coeff se t p llci ulci constant 0.5674 0.2767 2.0505 .0412 .0227 1.1121 emr .7898 .0670 11.7870 0.000 0.6579 0.9217 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 relationship management has a significant linear relationship with organizational agility. in a similar study, carlsen (2022) confirms that organizational agility is strongly influenced by employee relationships. from the same point of view, menon and suresh (2020) reaffirm that there is a significant linear relationship between employee relationships and organizational agility. a study conducted by choong and islam (2020) also attests that employee relationships are the driving force behind an organization's agility. additionally, salciuviene, buenaventura, and lee (2019 ) reflect previous findings that employee relationships are an alternative paradigm for organizational agility. this finding implies that employee relationship is being considered as a necessary managerial tool for firms operating in a dynamic environment. likewise, for the organizations to respond quickly to the dynamic markets, to design highquality products at the shortest lead time, and fast delivering services to achieve a sustainable competitive advantage, they need to implement employee relationship management by putting more emphasis on gaining support from employees, providing an opportunity to suggest improvements in the way things are done, having mutual trust and confidence to make decisions, and allowing freedom of association. therefore, h1 is supported. table 3. employee relationship management effect on employee empowerment source: data computation. the results of the effect of employee relationship management on employee empowerment are shown in table 3. a significant regression equation was found (f = 100.277, p <0.001), and the r-square for the employee relationship management was 0.264. the results show that the outcome: employee empowerment r r2 mse f df1 df2 p 0.5142 .2644 .3685 100.2774 1.0000 279.0000 0.0000 main model coeff se t p llci ulci constant 1.585 0.2593 6.112 0.000 1.075 2..095 emr 0.629 0.063 10.014 0.000 0.5052 0.7524 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 general model is significant and can explain more than 26% of the differences in employee empowerment measures. the coefficient obtained in the emr path is 0.629, the statistical coefficient t-test = 10.014 and p = 0.0000 (p <0.05). the lower limit confidence interval (llci) is 0.5052, and the upper limit confidence interval (ulci) is 0.7524, based on the output of the p-value (p <0.05), and the llci and ulci values ≠ 0 indicate that the employee relationship management has a significant effect on employee empowerment. the result is consistent with the research of ivancevich (2001), who pointed out that the employee relationship improves employee empowerment because it directly helps to achieve organizational goals by empowering employees to make decisions. in the same direction, a study conducted by magdalene (2016) established that employee relationship is linearly associated with employee empowerment. a study by alkhozondar (2015) reiterates that maintaining pleasant relationships with employees has a significant influence on employee empowerment. this connotes that employee relations should be part of the organization`s efforts to establish and maintain pleasant relationships with employees through good guidance, full participation in decision-making, good motivational work, and important information that gives advantages. thus, this will go a long way to maintain the loyalty of employees and participate more in their work. hence, h2 is confirmed. table 4. employee empowerment effect on organizational agility source: data computation. outcome: organizational agility r r2 mse f df1 df2 p 0.621 0.423 0.314 110.570 2.000 288.000 0.000 main model coeff se t p llci ulci constant -0. 1843 0.2644 0.7770 0.4864 0.5049 0.3252 emp 0.4916 0.0701 8.2721 0.0000 0.3356 0.5296 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 the results of the effect of employee empowerment on organizational agility are shown in table 4. a significant regression equation was found (f = 110.570, p <0.000), and the r-square of employee empowerment was 0.423. the results show that the general model is significant and can explain more than 42% of the differences in organizational agility measures. the coefficient obtained in the emp pat is 0.4916, the test of the statistical coefficient is = 8.2721, and p = 0.0000 (p <0.05). the lower limit confidence interval (llci) is 0.3356, and the upper limit confidence interval (ulci) is 0.5296. the output is based on the p-value (p<0.05). the llci and ulci values ≠ 0 indicate significant effects between employee empowerment management and organizational agility. the result is consistent with the result of heydari (2013), which shows that there is a positive correlation between employee empowerment and organizational agility. similarly, ivancevich (2001) reiterates that employee empowerment can improve employee relationships and organizational agility. similarly, kitur (2020) shows that organizational agility is a platform for employees to develop their skills for organizational sustainability. another study conducted by marjerison, andrews, and kuan, (2022) evident that organizational agility makes work groups and teams perform vital tasks for organizations to survive and prosper in a cut-throat business environment. a study by harsch and festing (2020) also concurs with the previous studies that organizational agility is a strong predictor of employee empowerment. this implies that employee empowerment equips employees with an array of strategic skills to achieve organizational objectives in today’s cut-throat and dynamic business environment. without a cordial employee-employer relationship and skillful workforce, organizational agility cannot be achieved. it is shown that agility in employee relations and empowerment may provide such benefits as improvement in high-quality products, better customer service, and better delivery. thus, h3 is supported. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 table 5. direct and indirect effects of the study model of employee relationship management and employee empowerment on organizational agility source: data computation. the results of the measurement of direct and indirect effects on organizational agility are presented in table 5. a significant regression equation was found (f = 120.470, p = 0.000) with an r-square of 0.464 for the direct and indirect effects of the measurement. the results indicate that the overall model is significant and can explain over 46% of the variance in the organizational agility measures. the mediation coefficient along the emr is 0.4916, p = 0.0000 (p 0.05), t = 7.0115, and the lower and upper confidence intervals (llci and ulci) obtained along the emr are 0.3536 and 0.6296, respectively. the result shows that there are considerable effects and that the second criteria of mediation have been met (baron and kenny, 1986). furthermore, the second result in table 5 shows that the emp coefficient is 0.4743, p = 0.0000 (p > 0.05), and the llci and ulci are 0.3614 and 0.5871, respectively. along with emp, pvalue of 0.05 has substantial effects. as a consequence, the first and fourth conditions of mediation were met by getting substantial effects between emp and oga after including emr in the model, as shown in table 5 (hayes, 2013; baron and kenny, 1986). this result conforms to the study of fanodi, okati, and keikha (2014) that confirm that empowerment and its dimensions have a positive and significant relationship with organizational agility. thus h4 is accepted. outcome: organizational agility r r2 mse f df1 df2 p 0.681 0.464 0.334 120.470 2.000 278.000 0.000 main model coeff se t p llci ulci constant -0. 1843 0.2644 -0.6970 0.4864 -0.7049 0.3362 emr 0.4916 0.0701 7.0115 0.0000 0.3536 0.6296 emp 0.4743 0.0573 8.2722 0.0000 0.3614 0.5871 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 10. conclusion the foundation of resource-based theory (rbt) was able to be supported by existing evidence. this was further demonstrated by the graphing of the various estimated degrees of correlation between each of the study's variables. as a result, empirical evidence is being used to test the plausibility of a relationship between employee relationship management and employee empowerment on organizational agility's indirect and direct consequences. the degree of its applicability by firms on having quick responses by investing in their staff instead of the perception of material accumulations is hugely influenced by the entangled niches based on multiple levels of impacts cum interaction. evidence shows that empowering employees has a positive and significant relationship with organizational agility, stemming from established relationship management between employers and employees before the need for ingenuity to propel the organization. furthermore, the finding of the study reveals that employee empowerment mediates employee relationships and organizational agility. this implies that employee empowerment equips employees with an array of strategic skills through full participation in decision-making, and important information to achieve organizational objectives in today’s cut-throat and dynamic business environment. 11. theoretical implication employee relationship management and organizational agility were linked in this study, which also mediated the perceived importance of employee empowerment in the manufacturing industry. this was done with the covid-19 timeframe in mind. as a result, a limit on the management applicability in a pandemic era has been established. using the sem tool for employee relationship management and organizational management, the study was also able to establish the powerful role of employee empowerment as a mediator. as a result, the resourcebased theory's adaptability is suitable for the study's synchronization with the stated variables. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 the radiality of the theory in actuality is due to the many linkages with the factors in the trio. the concept is based on utilizing what is already available in the home to achieve the desired result. it's worth noting that characteristics like the organization's flexibility, as well as internal competence, are among the study's potent ingredients for the applicability of turning the adopted theory into reality. we may affirm that the provided theory is entirely applicable to the entire study to comprehend the full scope of this effort in achieving organizational agility with positive employee relationship management. as a result, seeking external assistance in difficult times should be the last alternative, as the lifeblood of any firm (its people) must be the primary point of contact, even if fine tuning is required to get the desired result when problems develop. 12. practical implication the study has contributed to the body of knowledge by demonstrating the rbt's adaptability in a pandemic period to optimize employee motivation at the expense of acknowledging the instinct of organizational agility in a challenging era where change occurs without warning. as a result, companies must have a dexterity attitude to succeed in a dynamic environment with a high level of unpredictability engulfed by globalization, which necessitates consistently empowering her staff with identified world-class talents. this means that it is to every employer's best advantage to keep a good attitude toward their staff. though not at the expense of the organization's established standards (alhashedi et al. 2021). furthermore, the study was able to connect to the organization's positive achievement of empowering people as opposed to a developing view of the 21st century of training employees for other organizations based on employee turnover in some firms. furthermore, as previously demonstrated by research conducted by a developed country, it was able to impose the adoption of rbt across the whole economic sector. this was important because the resource-based theory (rbt) reacts to a http://revistes.ub.edu/index.php/jesb volume 8, number 2, 50-76, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36938 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 system's substantiality with its available resources and capacities development and development for constantly changing settings. 13. limitation and recommendation for further studies the study constraint was the evaluation of specific characteristics such as adaptability and organizational-related parameters with an emphasis on differentiating the identification of opportunities and threats. the lack of a qualitative measurement underlined this even more. as a result, subsequent research can use the above-mentioned factors to adopt a mixed technique across manufacturing enterprises to ensure a generalized perspective. other sectors, such as the food and beverages, cement, automobile, oil and gas, mining and service industry, can be explored in future studies, as this study focused on consumer goods. the resource-based theory (rbt) was the only theory used in the study. other studies, such as the linking instrumental theory (lit) and theory of planned behavior (tpb), will be taken into account as an extra frontier to knowledge, with empirical validations. this will allow for the theory's transferability and redevelopment in related disciplines by other investigations. furthermore, because this study was focused on the quantitative establishment of the target variables, considering relevant studies along the stage of comparison can be taken up by other studies. references akbari, bahman, shina zinali, sharam gilaninia and seyyed javad mousavian. 2012. “determine the effectiveness of assertiveness training on student achievement and happiness.” journal of basic and applied, scientific research 2(1), 415-417. albro, maggie, and jenessa m. mc elfresh. 2021. “job engagement and employee organization relationship among academic librarians in a modified work environment.” journal of academic librarianship. 47(5):102413. doi:10.1016/j.acalib.2021. 102413. alhashedi, aref abdulkarem ali, barjoyai bardai, maged m. mahyoub al-dubai, and mohammed abdulrazzaq 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(in chinese) yamane, taro. 1967. statistics: an introductory analysis new york: harper and row (2nd edition). this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 marta fernández rmit (australia) https://orcid.org/0000-0002-9301-094x tom bentley rmit (australia) https://orcid.org/0000-0002-4407-6440 early evolution of an innovation district: origins and evolution of mid and rmit university’s social innovation precinct in melbourne’s city north abstract the development of an urban innovation district requires a unique, densely populated site connecting knowledge-intensive institutions with public spaces, large businesses, startups and smes, social hubs, and cultural institutions. based on conceptual frameworks in the field including urban development theory, quintuple helix model, entrepreneurship and open innovation models, this paper uses a case research study approach, the melbourne innovation district. the context is melbourne’s city centre immediately prior to and during covid-19 recovery. the work analysed the vision and ambitions for the innovation district, the role of technology and enterprise in placemaking and the impact of the pandemic in driving social innovation, the acceleration of demand for a ‘wellbeing economy,’ and incentives for collaboration between institutions. this work contributes to existing literature by examining the evolution and progress of melbourne innovation district as a case, and the influence of the 22@ district in barcelona, highlights practical and strategic insights into how the melbourne innovation district formed and built capability for collective strategy in a knowledge-intensive urban settings, and the role of innovation ecosystems to develop dynamic, inclusive urban economies in the pandemic recovery era. through this work we observed the key elements for the success in the early development of an innovation district including: the consideration of the real costs of collaboration; the establishment early on of a common vision and a long-term aspiration; the importance of achieving critical mass; the scattered evidence base; the need for ‘anchoring’ project and backbone organisation; the fragmented governance environment; the need for persistence with an integrated vision, that is connected to the overall city strategy; the identification of practical innovations that feed each other and create momentum. keywords: innovation districts, urban development, social innovation, innovation ecosystem, mid universities, technology, melbourne els inicis d'un districte d'innovació: orígens i evolució del recinte d'innovació social de la universitat mid i rmit a la ciutat nord de melbourne resum el desenvolupament d'un districte urbà d'innovació requereix un lloc únic i densament poblat que connecti institucions intensives en coneixement amb espais públics, grans empreses, startups i pimes, centres socials i institucions culturals. basat en marcs conceptuals que inclouen la teoria del desenvolupament urbà, el model de quíntuple hèlix, l'emprenedoria i els models d'innovació oberta, aquest article utilitza un enfocament d'estudi de cas, el melbourne innovation district. el context és el centre de la ciutat de melbourne immediatament abans i durant la recuperació de la covid-19. el treball analitza la visió i les ambicions del districte de la innovació, el paper de la tecnologia i l'empresa en la creació de llocs i l'impacte de la pandèmia a l'hora d'impulsar la innovació social, l'acceleració de la demanda d'una "economia del benestar" i els incentius per a la col·laboració entre institucions. aquest treball contribueix a la literatura existent examinant l'evolució i el progrés del districte d'innovació de melbourne com a cas, i la influència del districte 22@ a barcelona, destaca els coneixements pràctics i estratègics de com el districte d'innovació de melbourne es va formar i construir la capacitat per a l'estratègia col·lectiva en un entorn urbà intensiu en coneixement i el paper dels ecosistemes d'innovació per desenvolupar economies urbanes dinàmiques i inclusives en l'era de la recuperació de la pandèmia. a través d'aquest treball hem observat els elements clau per a l'èxit en el desenvolupament primerenc d'un districte d'innovació que inclouen: la consideració dels costos reals de la col·laboració; l'establiment d'una visió comuna i una aspiració a llarg termini; la importància d'aconseguir una massa crítica; la base d'evidència dispersa; la necessitat de consolidació del projecte i l'organització vertebradora; l'entorn de govern fragmentat; la necessitat de persistència amb una visió integrada, connectada amb l'estratègia global de la ciutat; la identificació d'innovacions pràctiques que s'alimenten mútuament i creen impuls. paraules clau: districtes d’innovació, desenvolupament urbà, innovació social, ecosistema d’innovació, mid, universitats, tecnologia, melbourne los inicios de un distrito de innovación: orígenes y evolución del recinto de innovación social de la universidad mid y rmit en la ciudad norte de melbourne resumen el desarrollo de un distrito urbano de innovación requiere un lugar único y densamente poblado, que conecte instituciones intensivas en conocimiento con espacios públicos, grandes empresas, startups y pymes, centros sociales, e instituciones culturales. el artículo utiliza un enfoque de estudio de caso, el melbourne innovation district, y se basa en marcos conceptuales que incluyen la teoría del desarrollo urbano basado en conocimiento, el modelo de hélix quíntuple, el emprendimiento y los modelos de innovación abierta. el contexto es el centro de la ciudad de melbourne inmediatamente antes y durante la recuperación del covid-19. el trabajo analiza la visión y las ambiciones del distrito de la innovación, el papel de la tecnología y la empresa en la creación de espacios, y el impacto de la pandemia en incentivar innovación social, acelerar la demanda de una “economía del bienestar”, e incentivos para la colaboración entre instituciones. este trabajo contribuye a la literatura existente sobre el tema, examinando la evolución y el progreso del melbourne innovation district como estudio de caso, y la influencia del distrito 22@barcelona. se resaltan aspectos clave prácticos y estratégicos sobre cómo el melbourne innovation district se formó y creó capacidades de estrategia colectiva en entornos urbanos intensivos en conocimiento, y el rol de los ecosistemas de innovación en el desarrollo de economías urbanas inclusivas, dinámicas, durante la era de recuperación de la pandemia. a través de este trabajo observamos los elementos clave para el éxito de estadios iniciales de desarrollo de un distrito de innovación, incluyendo: la consideración de los costes reales de colaboración; el establecimiento temprano de una visión común y una aspiración de largo plazo; la importancia de conseguir una masa crítica, la base de evidencia empírica dispersa; la necesidad de consolidar el proyecto y la organización vertebradora, el entorno de gobernanza fragmentado; la necesidad de lograr persistencia con una visión integrada conectada con la estrategia urbana general; la identificación de innovaciones prácticas que se retroalimenten y creen impulso. palabras clave: distritos de innovación, desarrollo urbano, innovación social, ecosistema de innovación, mid, universidades, tecnología, melbourne corresponding author: e-mail: marta.fernandez@rmit.edu.au received 30 september 2021 accepted 22 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-9301-094x https://orcid.org/0000-0002-4407-6440 mailto:marta.fernandez@rmit.edu.au http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 1. introduction urban innovation districts have grown to be critical tools for economic development for urban planners and local authorities. this approach to urban development has shown to provide a mechanism that enables job creation, entrepreneurship, and acceleration of knowledge transfer (kayanan 2021). the success of the 22@ innovation district in barcelona, medellin innovation district in colombia and boston have paved the way to an innovative approach for city making. brooking institution policy paper in 2014 defines innovation districts as “geographic areas where leading-edge anchor institutions and companies cluster and connect with startups, business incubators and accelerators. they are also physically compact, transit-accessible and technically-wired and offer mixed-use housing, office and retail” (wagner 2014). therefore, the purpose of the innovation district is to drive sustainable, effective, and inclusive development. innovation district success is predicated in the need to create spaces suitable to live, work and play, which is what differentiates them from the more traditional concept of a business cluster. innovation districts are established in well-defined geographical areas (kayanan 2021) which could be formalised through legislatively approved boundaries such as 22@ in barcelona (ajuntament de barcelona 2020) or through more lose planning such us detroit innovation district (new economy initative 2014). they are close to urban centres to benefit from the advantages of city life, infrastructure, place identity, high density, walkability, diversity, and authenticity. (esmaeilpoorarabia et al. 2020) the case analysed in this work is the initiation and early strategy to create an urban innovation district in a specific area of melbourne. the work studied the conditions of success and the need http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 for urban and social innovation in a wider international context. the case of mid considers the emergence and evolution of an innovation district formed by three institutional partners, and the conditions necessary for it to achieve progress towards its goals in the context of rapidly changing economic, technological, and urban conditions, influenced by the impact of the pandemic. this research aims to consider the practical lessons learnt from the experiences of barcelona’s 22@ district and draw conclusions for future strategies and collaboration between different cities and districts. the city of melbourne melbourne is the capital of the state of victoria in south-east australia. a diverse international city of more than five million, its high quality of living has attracted people from around the world, with an economy powered by migration, real estate, healthcare, finance, and international education (city of melbourne 2022). the city’s evolution since its foundation has created a compelling mix of factors which have contributed to its urban economy, social mix, and urban infrastructure — with a classic “grid” central business district (cbd), and widely distributed suburbs and local government areas (city of melbourne 2022). before the pandemic, melbourne was one of the world’s fastest-growing industrialised cities, with an average annual growth rate of 100,000-250,000 people per year over the last eight years (population australia 2022). from the 1950s onwards, melbourne and victoria began to see a second significant wave of overseas migrants whose various cultures, networks and languages contributed to the growth of a dynamic and creative urban economy. furthermore, the industrial restructuring of the 1980s http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 allowed the city to successfully self-renew the economy through education, the arts, healthcare, finance, and retail industries. (victoria state government 2021) although now internationally known for its quality of life, by the 2010s melbourne was already facing globally recognised challenges related to the environment, inequality, economic renewal, and social needs. population growth, construction and urban infrastructure development are key drivers of economic development for melbourne’s economy, but also pose challenges related to the balance, sustainability, and inclusiveness of the path of growth (sgs lab 2022). in 2017 the victorian state government set out an ambitious strategic metropolitan growth plan (victoria state government 2021). plan melbourne 2017-2050 aims to integrate long-term land use, infrastructure, and transport with its vision to support jobs and growth, while building on melbourne's city brand of distinctiveness, liveability, and sustainability. in addition, large-scale infrastructure investments including a metro rail tunnel, the suburban rail loop connecting existing stations with new regions in the city’s suburbs, and an under-river road tunnel to better connect western suburbs with the central city are also in planning phase. over the last three decades, melbourne’s city centre, based around the relatively small population in the “grid”, and surrounded by a cluster of inner-city neighbourhoods, has undergone a real-estate and culture-fuelled transformation, with large-scale development of apartment housing and commercial real estate (hotels, offices, retail shopping) dominating the central core of the city, and surrounding neighbourhoods transformed by the redevelopment of former textile, manufacturing, warehousing and logistics precincts into a varied mix of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 increasingly expensive, urban neighbourhoods connected by the creative, digital and food economies (victoria state government 2021). figure 1. melbourne urban growth source: victoria state government (2016). australian cities have increasingly begun to invest and brand themselves with the help of innovation districts, to establish a knowledge and innovation economy and project a distinctive international reputation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 2. methodology innovation districts can be transformative and impactful places and have the potential to address a wide range of socio-economic challenges. innovation districts require the combination of many disparate elements and a long period of time for developing a well-formed vision, for planning and for the consolidation of the district as a successful area for productive, sustainable, and inclusive development. given their early stages of development in many cases it is difficult to make definitive quantitative assessment of their success or failure. this paper adopts a qualitative case-based approach to explore the early evolution and development of the melbourne innovation district. rmit university is one of the three founding partners of the mid since its inception and as such the university has been instrumental in developing the vision and advancing the establishment of the district. this work analyses the journey and evolution from 2016 to 2022 and the key elements that came into play from as well as the challenges identified during the early stages of development. to illustrate this journey, we use a case-oriented research approach. insights are drawn from research conducted by rmit university. 3. the melbourne innovation district (mid) case 3.1. overview the early history of the mid shows that creating the conditions for innovation to thrive requires a complex mixture of risk taking, technical expertise, opportunity, social and economic context, and a clear vision that motivates the range of stakeholders required to create capability, legitimacy, and momentum for the project. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 the focus of our project is a district in melbourne’s city north, adjacent to the cbd grid and spanning across four local government border lines, whose net area incorporates a unique collection of institutions and public realm infrastructure, including: • the royal melbourne institute of technology (rmit university) began as a working men's college dedicated to developing a “skilled hand and a cultivated mind.” it was founded in a single building on the city edges in 1878 and now occupies more than one hundred buildings and around 6% of melbourne’s city centre real estate. rmit currently has almost 100,000 students from melbourne to vietnam and barcelona. • the university of melbourne — australia’s leading academic institution — has a classic university campus as well as buildings in the surrounding neighbourhoods. • royal melbourne hospital, the royal women’s hospital, royal children’s hospital, comprehensive cancer centre, parkville biomedical precinct, the walter, and eliza hall institute of medical research in parkville. • royal exhibition building (world heritage cultural precinct), state library victoria. • victorian trades hall and labour movement sites. • queen victoria market, the largest open-air market site in the southern hemisphere, is melbourne’s most visited attraction. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 figure 2. melbourne central city source source: victoria state government (2017). the city north area is in fact a collection of distinct, specific campuses, including some created in melbourne's original mid-19th urban plan and others which have developed more organically and recently. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 figure 3. city north along with other key urban districts source: city of melbourne (2019). this public and academic presence interacts with a changing set of relationships with the private sector, another key ingredient for successful innovation as defined by the triple helix model. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 figure 4. city north source: author’s own. 3.2. combination of innovation assets this district has combined and connected a range of activities and innovation assets that would never all be planned alongside each other today, but collectively represents enormous potential to generate innovation with economic, social, and public value. the important question is ‘how?’ http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 a challenge to urban development is whether the default path of economic and infrastructure growth by reshaping the city over time will coherently address the long-term needs and potential of the victorian community, by generating innovation that will help to create new jobs and enterprises and also develop the services, solutions and shared environments needed to meet growing social needs and environmental pressures. in 2016 the city of melbourne, rmit and university of melbourne began discussion about the potential to work together as three “anchor institutions”, given their significant presence, activity, and infrastructure in the city north area, to form a joint vision and goal to focus the evolution of the district and serve as a catalyst for economic and community activity. a driver of this approach was the growth of commercial real estate development, building apartment towers and dedicated student accommodation, and changing the mix of activities in the city north neighbourhoods, while replacing many buildings which had, in past decades, housed a broader mix of civil society, non-profit, small and medium sized enterprises (city of melbourne 2022). as universities with large numbers of international students and high concentrations of research and technology-intensive innovation became a growing part of the city economy, knowledgeintensive industry sectors including finance, media, law, and health also intensified their demand for skilled workers, innovation capability, and fit-for-purpose urban environments. the three partners saw the potential to influence the future shape of the city for the benefit of the common good, and to strengthen partnerships and shared platforms that would extend melbourne’s ability to innovate amidst changing economic and social conditions. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 3.3. barcelona 22@ as inspiration innovation districts are an example of an economic development strategy that brings together the concept of open innovation, highlighting the positive impact that organisations derive from collaboration in research and development with other external parties (chesbrough 2004), with the financial and economic advantages evident from sustainable real estate (read and sanderford 2017) development. innovation districts connect the theory of innovation to the practice of economic development, infrastructure investment, urban design, and land use planning (read 2016). a key point of stimulus and intervention for melbourne’s innovation district is the formation and evolution of barcelona’s innovation district, 22@, and the evolving mix of university, technology, industry and civic partnerships within it. the 22@ district was established at the end of the 20th century, in two hundred hectares of formerly industrial land in the eastern part of the city. the industrial heritage of the area has been preserved and now hosts the core of the first urban innovation district in the world (22@network 2022). over the last 20 years the 22@ has evolved to become an exemplar of urban development that seeks to attract the key actors of the knowledge economy, private sector, public sector, universities, and the community. key features of the district that inspired the mid include: promoting mixed land use for residential, commercial, research, startup, and green infrastructure connecting to the city centre and major transport nodes through solid public transport infrastructure http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 including a strong presence of academic institutions promoting research and development and knowledge intensive activities creating the conditions for the development of an innovation ecosystem supporting digital infrastructure rmit, as an anchor institution of the melbourne innovation district, has experienced first-hand in barcelona the impact on growth and development through immersion in an innovation district thanks to its hub in europe in the heart of 22@ innovation district and has worked to apply the lessons and connections back into melbourne. the mission of rmit europe is to make a positive economic and social contribution to the people, communities, and region where it operates. sustainable urban development is one of rmit europe’s areas of focus (rmit europe 2022). the australian university hub moved to the 22@ district in 2017. since then, it has doubled in size and attracted more than eur15m of research income. rmit europe has established deep links with stakeholders in the district to develop projects that drive inclusive growth and connect melbourne, vietnam and barcelona in topics related to sustainable urban development. an example of such projects is recetas, a project led by is-global which is a private-public research centre in the district. the five-year project focuses on re-imagining environments for connection and engagement and testing social prescription of natural spaces. the project will address loneliness for urban dwellers by encouraging access to nature and providing social structures to improve health and mental wellbeing and reduce loneliness. the project is encouraging investments in nature-based solutions and green infrastructure which not only address the adverse consequences of urbanisation on environmental systems in our cities but http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 also promote health and wellbeing (eu publications office 2021). the project will run demonstration projects both in barcelona and melbourne1. projects such as recetas illustrate the possibilities enabled by proximity to key stakeholders, government, industry, academia, and community. the project was born in the innovation district and capitalises on the local network and reach of project partners to drive international cooperation and widespread impact. recetas exemplifies the ‘quintuple helix’ innovation model, which considers not only the presence of key stakeholders but also places the natural environment and the economy as drivers of knowledge production and innovation (carayannis, barth and campbell 2012). the global networks of the district organisations can enrich local innovation ecosystems while these organisations make their presence in the district a core part of their global strategy. innovation districts have a key role to play in driving the socioecological transition of society and the economy that is now required, particularly as society and governments embark on the post-covid recovery journey. economic factors are consistently emphasised as the primary driver of innovation district success; however, we are increasingly also seeing the importance of social and environmental factors. the vision despite melbourne’s history of visionary urban thinking and planning during specific moments, the city collectively did not have the level of integrated, urban planning as is illustrated by barcelona’s 22@ experience. 1 recetas is supported by european commission funding and the national health and medical research council in australia http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 melbourne has a city administration elected to govern the central metropolitan area of the central business district, the docklands, and surrounding areas, including the riverfront district and sports precinct incorporating the city’s world-famous cricket, tennis, and football facilities. the victorian state government also plays a powerful, long-term role in shaping and funding public infrastructure and urban planning across the whole state. as the shape and mix of the city have changed, in particular as former industrial sites and locations dotted around the edges of the city centre have been repurposed, regenerated and moved away from their 20th century industrial uses, strategic urban planning by both state and city governments has played an increasingly important role (boddy 2000) . since 2014 the victorian government has pursued a long-term metropolitan plan for the wider city area using major infrastructure investment as a driver of growth, jobs, and quality of life across the whole city and the broader region. a new set of major transport infrastructure investments — metro rail networks and road links — has created new opportunities for the innovation economy in melbourne (infraestructure victoria 2016). however, in relation specifically to the city north area of melbourne, for accidental reasons, the governance, planning and strategic pursuit of innovation and development across the district area were not ‘joined up’ or coherent, despite the clustering of highly significant institutions, development sites and activities. the scope of the wider ’innovation district’ runs between different institutions and actors, and across varying civic and administrative responsibilities. these actors include the city government, major universities, public and private healthcare, biomedical and pharmaceutical research institutes, community sector non-governmental organisations, private corporations, and state agencies. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 for some decades, the victorian government and other actors have been investing in the development of a university, health, and biomedical research precinct around parkville, adjacent to city north. but while these sectors and domains have seen growth in reputation and activity, it was not so clear how the full constellation of activities and connections would feed a future innovation strategy for victoria’s broader economy. this challenge was intensified further by the impact of the covid-19 pandemic as it amplified the demand for technologies, services and enterprises that could meet community needs for wellbeing and safety, alongside sustainable livelihoods, and essential services. the role of the two major melbourne universities, rmit and the university of melbourne, in the development of the district is critical for its success, as universities play a key role in placemaking for an innovation district (pancholi et al. 2020). recent studies reveal that universities: a) have a role of facilitators through societal integration in innovation districts. b) function as platforms for collaboration and exchange of knowledge by adopting extroverted and collaborative approaches. c) help in developing a sense of trust within the community and establishing innovation districts as democratic, cohesive, and prosperous localities. d) contribute to socio-cultural and organisational maturity of innovation districts. by 2015 there was a compelling opportunity for the city north district to function as a driver for a more ambitious shared innovation strategy. it was also clear that existing urban development pressures, focused on the development of commercial real estate and apartment http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 towers for inner city residents and international students, were at risk of overtaking and distorting the wider conditions and diversity of spaces and uses required for innovation systems to flourish. in this context, the task was to generate a shared strategy to identify, connect and grow the innovation ecosystem of the various institutions, players, and assets, and to win collective support and participation for a longer-term development process. over time this would build a shared framework at a district-wide level and help to bring about key investments and planning interventions designed to enhance the long-term potential of the area when the opportunity arose. 3.4. the strategy informed by this context, and by the lessons and example of 22@, the melbourne innovation districts partnership was established in august 2017, initiated by the two universities together with the city of melbourne, and launched by the lord mayor and two vice chancellors at a busy cafe in the shared city north neighbourhood. the partnership relied on the principles of collaboration and co-development, and evolved from discussions, workshops, and exploratory dialogues conducted during 2016-17 (including visits from former and current directors of 22@ josep-miquel piqué and david martinez, to act as expert provocateurs for the process). the initial strategy used the profile and connections of the three partner institutions to help forge a visible agenda and encourage interest and momentum for the medium-term objectives of ‘mid city north’ to develop. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 from its inception the agenda intentionally put the potential of research-intensive, technologydriven sectors of the economy such as biomedical, engineering, computing and “deep technology” alongside the public realm and social innovation dimensions of the district, focusing on the future skills and the societal needs required for an inclusive, innovation-driven economy that could contribute to wellbeing and sustainability. while these were unfamiliar components of an innovation economy agenda in australia at the time, in the years since 2017 they have become increasingly central to the discussion, intensified by the impacts of the pandemic, and changing societal priorities. the mid strategy pursued a visible presence, building shared intent, and using public conversation and programming to connect different activities and spaces together across the district. these actions also encouraged the formation of networks and shared opportunities, feeding an appetite for more structured and scalable collaboration over time. a partnership board with two members from each of the three founding institutions, supported by a small, flexible team of project officers, was the minimal organisational structure for this initial phase. the mid partnership made active use of student, creative and academic project networks, regularly undertaking studio projects and cross-institutional studio collaborations to stimulate imagination about the possible futures of the district and the ways in which public design, science, art, and technology innovations could stimulate new possibilities for the future of the city. during this early stage of exploration, mapping and connecting, it quickly became apparent that a pathway to a more structured, medium-term set of commitments was needed, supported by http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 evidence, international reference points and economic data. a fit-for-purpose institutional structure would be needed to help drive a distinctive, robust strategic direction and actively facilitate the innovation ecosystem relationships that would flesh out the initial vision and develop capabilities to support its evolution. after some months of initial exploration and mapping of innovation activities, the partners decided to pursue this structured approach to strategy development by participating in an international collaboration program, curated by the massachusetts institute of technology (mit), the regional entrepreneurship acceleration program (mit office of innovation 2022). alongside its global profile and network reach, this program had the virtue of offering connections to an international network of cities and regions pursuing similar pathways for innovation and entrepreneurial growth, and promoted a cross-sector, “systems perspective” on the mix of policies, entrepreneurial institutions and private sector involvement that could successfully mature and scale innovation ecosystems in 21st century city regions. joining this program required a joint commitment by the three founding mid partners to participate in a two-year program of work, including series of week-long workshops with teams from a wide range of other countries, along with analysis, capacity-building and team planning in melbourne. the approach also required the inclusion of entrepreneurs, corporate partners, and policymakers to construct an effective ecosystem for melbourne’s strategy. these roles were addressed by partnering with launch vic, the state government’s startup innovation agency, and through connections and collaboration with leading firms with a growing interest in melbourne’s digital and innovation economy, including salesforce and cisco. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 during 2018 to 2019 period, mid formed a connection the global institute for innovation districts (giid), formed by julie wagner out of her program of work on urban innovation districts at the brookings institution, to further test, sharpen and benchmark melbourne’s evolving approach. during the same period, the city of melbourne collaborated with the mid partners and other local stakeholders to develop a city north opportunities plan (city of melbourne 2019). this public realm activation plan focused on the characteristics and potential of the area, the mix of tenures, uses and public spaces, and the importance of encouraging diverse participation and activities in the building and shared precinct spaces, along with the importance of developing public transport and active transport opportunities to encourage community access and participation across the district. 4. the results and discussion 4.1. prototyping as a pathway to scale building on these foundations, the mid partners created a series of “working prototypes” of the innovation environments, teams and collaborations that could shape, influence, and realise the full-scale possibilities of the wider innovation district. for example, the early stages of the mid partnership saw many discussions of the potential for testing new technologies and data analysis methods, and the city of melbourne established a 5g technology testbed in the district area aligned with a broader testing network extending to the eastern part of the central city (city of melbourne 2019). the university of melbourne also explored a series of activities that would feed into its establishment of a science gallery in the district as part of a dedicated precinct building, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 melbourne connect, which the university built and launched on the site of a former women’s hospital. this site forms a crucial point in the growing, district-wide network of innovation activities. all of these activities formed part of an intentional approach to the activation, prototyping, network-building and showcasing of best practice examples across the world, designed to flesh out and build on the original vision for the innovation district which was to promote an innovation system that underpins an inclusive, sustainable urban development while adapting to changing opportunities and evidence base about which activities, investments and interventions could best create value at specific moments. this stage of the strategy was focused on creating test beds, forums, entrepreneurial programs, and hubs that could successfully co-exist and connect with each other and grow into broader organisations over time. an example of this prototyping approach is the open talent program, conceived in boston during the reap program, and created by the two melbourne universities with launch vic to help prepare science and technology graduates for entrepreneurial pathways. this generated incredibly positive initial outcomes and encouraged further collaboration among the universities, state agencies and technology industry partners. as a final example, during 2018, rmit established a social innovation hub in a building formerly occupied by red cross australia and now by the university of melbourne, located near university square in the heart of the district area, to provide a shared, prototyping space and co-location for various teams working on rmit’s social innovation and precinct program. teams and initiatives housed here include the centre for innovative justice, which generates new service designs, policy reforms and educational interventions through collaboration with http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 legal service providers, citizens and users of justice services, governments, and justice system partners. another example is the health transformation lab, co-funded with cisco, which experiments with new interventions, possibilities, and breakthrough collaborations in health. overall, these phases led to a strategic framework grounded in the distinctive history of this urban district of melbourne and its potential to apply and leverage its assets and capabilities in key domains of innovation. there was a clear opportunity in melbourne to develop a compelling and coherent innovation district across an urban area already highly populated with activity and infrastructure but whose potential had been underutilised due to an absence of connections, coherence, and innovative shared leadership. urban and university innovation districts around the world are often associated with city-edge greenfield sites, or with the redevelopment of large-scale, self-contained former industrial sites such as manufacturing centres. in this case, melbourne’s innovation district in city north represented a distributed collection of activities, the results of the reap program work confirmed both the need for a clear, distinctive identity and focus on innovation capabilities and the opportunity to put these at the heart of melbourne’s cbd north innovation strategy. analysis and discussion of these assets led to a shared focus on three specific areas, and their potential combination in a melbourne-based innovation ecosystem: http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 • deep tech (biomedical, engineering, data science, digital infrastructure). • social innovation (community needs). • wellbeing-focused economy (addressing health and wellbeing, creating pathways and opportunities for inclusive economic development). this focus created a clear opportunity to articulate the potential for inclusive economic growth and the need for innovations that will be scaled through commercial, social, and public pathways to increase the resilience of victoria’s and melbourne’s economies. following the completion of the reap program in 2019, the clear conclusion and call-out arising from the shared work was the need for a dedicated resolute “backbone organisation” to progress the next phase of work and develop the capability for implementing the activities, infrastructure and connections that would lead to cumulative impact and investment in the north of the cbd. at the end of 2019, the partners worked together on a business case and proposals for modest investment in this backbone organisation. 4.2. dealing with disruption – impact of the covid 19 pandemic in early 2020, global disruption intervened. the arrival of covid-19 prompted widespread economic and social crisis together with pervasive uncertainty about the future environments for social and economic life. all three mid partners were thrown into emergency management, making crisis decisions in real time, transferring tens of thousands of staff and students to remote working, closing city campus sites, providing emergency support to businesses, stranded international students, homeless people, and many others, and working to restructure budgets and infrastructure plans to reflect an unknown set of conditions. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 the city of melbourne lost an estimated 15% of its jobs during 2020, compared to 9% across the state of victoria (faculty of business and economics 2022). universities, one of the key employers and drivers of wider economic activity in the city, lost thousands of jobs as national borders closed, existing international students were unable to access campus and new students stopped enrolling, and universities were forced to restructure their budgets and operations and lay off thousands of workers in response to plunging revenues (city of melbourne 2022). melbourne’s lockdown in 2020-2021, one of the longest and most severe anywhere in the world (bbc 2021), had dramatic effects on the cbd, including shop and hospitality venue closures resulting from the decline in citizens able to visit, access and spend time or money in them. as in all other cities around the world, the extended impact of covid-19 transmission and the measures put in place to contain and counter it widened social and economic inequality, through factors such as a higher risk for people with underlying health conditions; increased financial risk of those in insecure employment and housing; varying impact of local lockdowns and physical restrictions on people working in exposed, service-intensive occupations, and the compounding effects of restricted learning, access to technology, and social strain on mental health and relationships. as the pandemic has progressed, the challenges of economic inequality have become even more apparent, and the role of our institutions in addressing it is beginning to be debated more urgently (kpmg 2021). in the face of the initial emergency, the three mid partners agreed to keep their partnership using existing financial resources while suspending any further investment in the shared organisation or infrastructure. they continued to meet regularly, share experiences, and identify http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 practical opportunities to support each other to meet the immediate pressures caused by the pandemic. as 2020 progressed, questions about how to shape the future re-emerged. the importance of the long-term issues and focus with which mid began – social innovation, inclusive economic development, and the application of deep technology and scientific knowledge to collective problems – was reinforced by the challenges exposed by the pandemic. rather than relying on finance-driven real estate development and open channels of international migration to fuel urban development, cities now face the challenge of attracting people back into their centres; they need to offer safe, interesting, and valuable experiences that create a reason to travel out of the neighbourhood and home-based routines adopted by tens of millions of people. melbourne’s health and biomedical infrastructure was pressed into more intensive service, and the infectious disease expertise accumulated over decades in melbourne’s parkville and city north precincts became crucial to mobilising vaccination campaigns and guiding public health measures. at the same time, the city of melbourne mobilised to ensure homeless people were not left on the streets during the emergency, and the two universities worked together with local charities to help stranded international students unable to access emergency national welfare payments to find food and mental health support through victoria’s extended periods of lockdown. moving into 2021 the underlying themes and challenges posed by mid’s early agenda became increasingly urgent and widespread for the “recovery” agenda of victoria’s economy and society, including meeting collective needs, supporting adaptive, cross-community http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 collaboration, creating jobs and lifelong learning opportunities under changed economic and physical conditions, developing innovations that apply deep technology expertise and digital service infrastructure to meet shared needs. as the crisis developed, the role of governments in underpinning economic security and innovation systems also became clearer. the victorian state government committed $350m to an investment fund for universities (premier of victoria 2021) designed to support infrastructure, innovation, and applied research to help weather the effects of the crisis and contribute to recovery. 4.3. a breakthrough – rmit social innovation precinct in this context, rmit put forward a proposal to create a “social innovation precinct” in the heart of the city north innovation district, designed to build on its distinctive location and mix of capabilities, and to adapt and develop rmit’s established strengths by combining expertise, technology, industry partnerships and cross-community collaborations to develop an innovation cluster to create solutions for future wellbeing and opportunity for future generations. building on the work of the mid partnership, rmit proposed a two-year work program to the state government based on shared master-planning for the future of a whole city block, offering a vital missing piece in the evolution of the wider district, with a dedicated long-term focus on social innovation, connecting industry hubs and social innovation teams with the growing ecosystem of lifelong learning and community participation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 figure 5. rmit social innovation precinct source: author’s own. the vision outlined in the proposal is for an innovation precinct, the size of a city block, which acts as a key jigsaw piece in the wider district, able to function as a catalyst and critical mass for social innovation and bring together wider partnerships, create inclusive pathways to lifelong learning and industry development. this vision is possible because of the unique mix of buildings, tenures and activities on this site and the mix of accidental and shared purpose that has influenced its development, along with its proximity to critical campus and precinct infrastructure. the set of buildings and public spaces contained within this block are owned respectively by rmit and the victorian government and has been maintained for the purposes of vocational training, research, student, and community support. many of these buildings are now in need of modernisation or replacement, and the block offers the opportunity to redesign and progressively redevelop welcoming and accessible spaces and infrastructure for a diverse connecting and transforming cbd north cbd north social innovation precinct engineering & the future of manufacturing social innovation: health, justice & community services digital & business transformation designing for future urban environments proactive community outreach in victoria t h e v i s i o n the outcome: new skills, knowledge, ventures, and jobs in sectors that are crucial to victoria's future. • deep connection to place-based socio-economic impact • powerful industry partnerships with leading cross-sectoral players • distinctive rmit innovation capabilities and networks • inclusive workforce development, with applied/vocational skills and future industry skills • linking cbd north, bundoora, docklands, and brunswick, and to se asian region through our strong regional connections. 44 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 community to access opportunities for lifelong learning and be involved in developing future wellbeing solutions. figure 6. rmit precinct mix and connection to ‘green spine’ and public transport networks source: author’s own. in late 2021, despite the challenges and uncertainties caused by the covid pandemic, the mid partnership has evolved into a coherent shared identity brought together by a compelling collective challenge. the social and wellbeing dimensions of urban development have been brought to the forefront of the innovation agenda by the pandemic, alongside the development of new enterprises and workforce skills driven by scientific and technical innovation. it will be some years before we see the full realisation of melbourne’s city north innovation district and the unfolding vision of the rmit social innovation precinct. the progress of the agenda over the last five years illustrates some of the lessons and challenges in developing innovation districts and systems in complex urban environments. rmit classification: trusted 5 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 5. conclusions innovation districts can be transformative and sustainable urban places and have the potential to address a wide range of social, environmental, and economic opportunities. national and regional governments are investing capital and resources in them, and public-private partnerships are being used to fund high density, mixed-use, urban development projects. the early history of the mid shows that creating the conditions for innovation to thrive requires a complex mixture of risk taking, technical expertise, opportunity, social and economic context, and a clear vision that motivates the range of stakeholders required to create capability, legitimacy, and momentum for the project. some of the key lessons learnt in the development of the mid include: a) costs of collaboration current networked and data-rich environments create opportunities for ‘ecosystem’ strategies that link together different organisations and participants. however, effective collaboration still requires focused, persistent effort and careful, disciplined work overtime. these are genuine costs and must be borne consistently by the leading organisations in any innovation strategy to make progress. b) common vision and long-term aspiration forming a common vision and long-term aspiration that drive all stakeholders in the same direction can be critical to overcoming transactional costs and fragmentation of the status quo. a long-term commitment to social purpose and civic identity can play an influential part in http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 driving collaborative behaviour, but this needs to be expressed and defined in terms that go beyond institutional function and status. c) difficulty of achieving critical mass the social and physical systems needed for innovation in urban places can be difficult to gather and despite proliferating network connections, establishing critical mass is difficult and challenging. a clear understanding of the scale required for critical mass in innovation ecosystems, and the different levels of scale that can be connected and combined within, is vital to developing strategies for their development. visibility and status among industry and institutional leaders and in public policy decision-making is necessary to form the coalitions and investment proposals that enable precinct development. however, without critical mass of participation in key domains of practice, including community participation, innovation ecosystems will not develop or flourish in designated precinct locations. d) dispersed evidence base the diverse sources of specialist knowledge and evidence relating to an innovation district of this kind are disparate and dispersed, making it challenging to unite and deploy them in pursuit of a coherent strategic agenda. many innovation districts focus on startups and commercialisation, while social innovation and placemaking draw on different bodies of knowledge and skill. bringing together the skills, evidence and evaluation methods needed to build credibility and insight for such an agenda requires dedicated entrepreneurial effort and expertise. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 e) need for “anchoring” project and backbone organisation as found in other urban district scale developments, successful evolution of the long-term agenda requires “anchor” partners who can provide long-term confidence and orientation to the agenda while also encouraging interaction and connections between a diverse network of players and participants. forming a dedicated ‘backbone’ organisation, even if it is lean and light touch, to provide proactive curation, shared knowledge, programming of shared discussion and decision-making and a focal point for community awareness and participation, is vitally important. without it, the costs of shared decision-making and coordination are far higher for the institutional partners involved. f) dealing with fragmented governance environment the opportunity to create an effective innovation district in a densely populated, highly connected urban environment emerges in part because of the lack of unified control or established institutional hierarchy. however, the fragmented and distributed governance environment creates its own steep challenges of authorisation, investment, and coherence. while each set of players — state, city, universities, private sector, and community partners — bring their own specific forms of power and autonomy, the work of constructing coherent forums for collaborative decision-making and authorisation is intensive, and the pervasive pressures of time and information management can undermine the pursuit of clear decision making and momentum. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 g) need for persistence with an integrated vision, including how it fits in the overall city strategy as a result of the factors outlined above, progressing the vision requires a persistent pursuit of an integrated vision which prioritises collaborative development of the long-term goal while pragmatically taking short-term opportunities to solve problems, win resources and create momentum. clarifying how specific precinct and district capabilities can align and contribute to the overall city strategy is also crucial for creating momentum and confidence in the wider agenda. shaping the city of melbourne’s economic strategy with active contributions from the two universities assisted in this task. h) look for practical innovations which feed each other and create momentum at every point in the development of mid, practical measures that support people and teams to do better, work better, live better, or access new opportunities have supported the growth of the shared strategic objectives and encouraged the formation of trust, capability and a shared repertoire of activities and methods supporting the development of the wider ecosystem. we believe this work contributes to understanding the ingredients required and the challenges to overcome in the early development of an innovation district. to do that we have analysed the origins, the vision, the strategy, the partners, the governance and what are the triggers of success. we have shown that specific activities which encourage community participation in public spaces, experiment with applications of innovative technologies for everyday use, support the sharing of knowledge and ideas among the anchor partners and stimulate conversation and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 184-218, july-december 2022 doi.org/10.1344/jesb2022.2.j111 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 knowledge exchange across the wider district support both the community relevance of the district’s activities and the sense of trust, legitimacy and optimism maintained by the network of participants. we suggest as a future research line to consider the development of a model with quantitative data analysing the early phases of development of different innovation districts. references 22@network. 2022. “22@ network barcelona.” https://www.22network.net/. ajuntament 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ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 victoria state government. 2017. “plan melbourne.” https://planmelbourne.vic.gov.au/__data/assets/pdf_file/0004/376663/map_4_melbourne_centr al_city.pdf. victoria state government. 2021. “planning.” 6 october. https://www.planning.vic.gov.au/policy-andstrategy/planning-for-melbourne/plan-melbourne. wagner, katz. 2014. “the rise of innovation districts: a new geography of innovation in america.” metropolitan policy program at brookings. metropolitan policy program at brookings, may. http://www.brookings.edu/about/programs/metro/innovation-districts. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 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number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 william muñoz marticorena catholic university sedes sapientiae (peru) sustainability of a community-based enterprise through shared value. case: mallay communal company abstract the relationship of a community-based enterprise (cbe) and a mining company was reviewed from the perspective of shared value creation. specifically, through the study of the mallay cbe and its interaction with the buenaventura mining company, the opportunity to create economic value by creating value for the community was verified. the cbe is an organizational innovation whose management is oriented towards the market, integrating its activities with the operative dynamics of the mining company through the provision of services. cbe focuses on member’s economic benefit and the social welfare of the broader community. there are, however, barriers that limit the growth and optimization of the desired impacts caused by this articulation. despite this, the economic and social value generated is significant and the defined growth model under certain circumstances could be replicable and scalable. keywords: community-based enterprise; shared value; economic value; social value; value chain; peasant communities corresponding author e-mail: wmunoz@ucss.edu.pe received 11 may 2017 accepted 11 january 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 introduction as referred to by soviana (2015) and, orozco-quintero and davidson-hunt (2010), in the last decades cbes have emerged as an alternative to the paternalistic approach in solving communal issues, such as environmental and poverty problems, in developing countries. cbes have increased their recognition as a sustainable way of maintaining community autonomy and adapting to economic and political changes (handy et al. 2011). given the potential of the cbe model to create value and be sustainable, it is useful to review its organizational design (soviana 2015), as well as how cooperation can create economic or sociocultural value for its members. these observations raise some questions that are relevant to academy, policy makers and those responsible for the management of community relations in companies. is there a detailed research on cbe that shows definitions, its organizational architecture and its critical success factors? under what conditions could there be a relationship of mutual benefit between a cbe and a mining company? how can the government of a cbe be reconciled with the peasant community? certain authors have attempted to construct a conceptual framework of cbe. among them, peredo and chrisman (2006), based precisely on a case in the andean highland of peru. as well as, somerville and mcelwee (2011), they reach detailed characteristics of the cbe in relation to its multiple strategic objectives, the improvement of the value created by the community and its critical activities to reach their goals. also in peru, according to the institute of common good (2016), there were 10,529 communities (peasants and natives) that control 63 million hectares of the country's surface (49.1% of the territory) and 35 million hectares of forest (47.3% of the national forest area). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 both are significant magnitudes. then, of the total communities, 6,230 would be peasant communities, which would house approximately 1'106,690 families and 4'560,000 people. it is known that these peasant communities are located, especially in the andean highland, more than 3,000 meters above sea level. they also present the following characteristics: (a) deficiencies in basic services and infrastructure; (b) limited income derived from its main economic activities, such as low productivity and livestock farming, and (c) its population has a poverty level of 49.0% and extreme poverty of 16.5% (national institute of statistics [ inei], 2016). in contrast, the great mining potential of peru is internationally recognized. thus, behre dolbear, the prestigious us consultant in his report: where to invest 2015, placed peru in the sixth place in its ranking of best destinations for mining investment. similarly, the fraser institute, a leading canadian think tank, in its 2016 survey of mining companies (jackson and green 2016) ranked the country 28th out of 104 jurisdictions (countries and provinces) on its list of most attractive places for mining investment. valuing, among other aspects: (a) mining potential, (b) political stability, (c) environmental regulation and (d) energy costs. however, the fraser institute warned that future investment would be postponed if the government does not uphold the agreed land access agreements between mining companies and communities (jackson and green 2016). furthermore, the publication pwc mining survey 2016 perceptions on risks and opportunities of investing in peru's mining sector (pwc 2016), identified as the main challenge for the growth and development of the mining sector in peru the relationship with the local communities, and the definition of strategies for the management and reduction of social conflicts. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 equally, it is important to mention that, according to the ombudsman's office (2017), 144 out of a total of 212 social conflicts identified, correspond to a socio-environmental nature (67.9%). these confronted, basically, peasant communities with mining operations. the fundamental reasons were the breach of commitments, or environmental damages. on the other hand, the political constitution of peru of 1993 recognizes the autonomy of the peasant communities. thus, the government grants these people, in an extraordinary way, the status of legal entities. in addition, they are empowered: (a) by the private investment law for the development of economic activities in national territory and at the lands of the peasant and native communities (law no. 26505, 1995) and (b) through the supreme decree n. 045-93ag (1993) to carry out economic activities through communal and multi-communal enterprises. in this context, emerge the mallay peasant community, which is located in the district and province of oyon, lima region. it has property titles since 1712 and owns a total area of 6,803 hectares. according to a census carried out by the national institute of statistics and informatics (inei) in november 2007, the population of the mallay community was 522 inhabitants, of this amount, about 50 percent were in some state of poverty (extreme or non-extreme). also, the level of educational achievement was moderate, due to the fact that the majority of settlers only have accessed to basic education. 24 percent of their residents lacked their own housing, and 42 percent of the working-age population (eap) does not constituted an economically active population (eap). the main economic activities in oyon were agriculture, livestock and mining (muñoz 2012; figueroa 2016). for its part, buenaventura is a major mining company producing precious metals and holder of mining rights in peru. since its inception in 1953, it has focused on the exploration and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 exploitation of its own operations and through projects developed in partnership with third parties. buenaventura also has a significant shareholding in minera yanacocha s.r.l., the largest gold producer in latin america (compañía buenaventura 2016). this article aims to clearly identify the characteristics of a cbe (structure, values and critical success factors) and, secondly, in the case of mallay, discover, through the shared value criteria, those aspects that have achieved develop jointly with the buenaventura mine that has allowed them to create economic and social value, as well as, barriers to growth and diversification. these questions will try to solve both the theoretical part (section 2) and the descriptive part of cbe mallay (sections 3 and 4), sections 5 and 6 will detail the opportunity to relate with buenaventura and the strategy followed from the perspective of shared value. finally, we will discuss the case and reach certain conclusions (sections 7 and 8). theoretical framework for research regarding the categorization of cbe, knudsen and erikson (2002) have suggested that the perspective of organizational economics should be used, in the same sense, gibbons and roberts (2012) have recommended using economic logic and methodology to understand existence, nature, design and performance of organizations. then, in line with greenwood and miller (2010), the types of organizations can be differentiated according to their different purposes, interest groups, strategies and reasons. for their part, hannan and freeman (1986) argued that four dimensions reflect the long-term strategy of an organization and, therefore, can be used as a basis to classify organizational forms: (1) stated objectives, (2) forms of authority, (3) basic technology and (4) marketing strategy. in addition, as pointed out by puranam, alexis and reitzing (2014, 163), organizations always share common features: (a) a multi-stakeholder system with (b) identifiable boundaries and (c) http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 a set of objectives towards which (d) the efforts of the interested parties are oriented. now, two aspects would be fundamental to classify an organization, namely the objectives of the organization and the architecture (soviana 2015). the evaluation of the cbe models is difficult since a comprehensive understanding of the organizational structure of cbe is quite incipient (soviana 2015). consequently, therefore, the support of relevant examples is required, this document will examine the architectural varieties available under the cbe terminology in an attempt to define a model. thus, according to peredo and chrisman (2006, 310), a cbe would aim to pursue the economic and social objectives of their community, both individually and as a group, in the short and long term. however, the empirical evidence would show a variety of objectives. in this way, some cbes would aim to achieve multiple objectives. for example, ugandan cbes aimed to generate additional income, develop strategic alliances between cbe and external persons, and develop products that respect the environment (fao 2005). meanwhile, cbe of karnataka in india (handy et al. 2011) would pursue purely economic objectives and the alleviation of poverty. however, tourism cbes in kenya have evolved as an extension of the conservation agenda to increase community cooperation on the development agenda (manyara and jones 2007). however, some cbes are oriented towards the benefit of their members and others extend their services to the local community in general. thus, cbe san juan in mexico considers forest as a common good, whose exploitation should benefit all members of the community, generating social development by appropriating the economic value of the forest (orozco-quintero and davidson-hunt 2010). nonetheless, the ugandan cbe benefits only the members of the company (fao 2005). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 like any other company, cbes would be destined to be sustainable and durable. however, some cbes achieve their autonomy quickly and for many years and others do not survive without outside help. such is the case of cbe san juan, which is profitable and has been for more than 28 years (orozco-quintero and davidson-hunt 2010). on the contrary, a cbe from botswana needed donations from collaborating agencies to overcome their break-even point after 16 years (stone and stone 2011). another characteristic of cbe is to provide, as an additional benefit for its members, education and training. the same ones that are intended to increase the operational capacity of the company. in this way, the mexican cbes contract technical and marketing assistance (humphries eta al. 2012), african cbe trains its members in marketing and development (fao 2005), as well as sustainable management of resources and social organization (thoma and camara 2005). as for the architecture of a cbe, it defines a community as an aggregation of people who share a geographical location, a culture, an ethnic origin or other relational characteristics (peredo and chrisman 2006, 315). it can be constituted by some members of the community, in the whole community or by several communities (handy et al. 2011). in reference to the participation of the community in the accomplishment of the tasks, this can vary and the members could assume functions of owners, managers and employees of cbe. in the same way, the degree of participation and the type of activities dealt with could vary among the members of the community (peredo and chrisman 2006). the organizational structure of the cbe could be similar to that of the community directive (thoma and camara 2005) or be clearly separated between administrative and institutional structures (orozco-quintero and davidson-hunt 2010). the limitations of human capital would force strategic tasks to be carried http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 out by external persons or local groups of leaders or elites, while the operational tasks would be carried out by the majority of the members of the community (timsina 2005; manyara and jones 2007). as suggested by soviana (2015), a cbe model would show certain characteristics: (a) in the first place, it would refer to people who share a common geographic area and culture; (b) then the membership may be open and voluntary for all members of the community; (c) thereafter, a cbe could have one or multiple objectives; (d) the beneficiaries could be only for some members of the cbe or for the community as a whole; (e) the economic participation of the members could consist of financial capital (not very frequent) or share communal assets (usually common natural resources) and, (f) in terms of decision making, this can be complete, when the cbe, is planned and managed in its entirety by the community; with active participation, when the cbe provides community goods and financial capital and resources are foreign. after describing a cbe, we will present a strategy of growth and diversification for the communal enterprise, the same one that focuses on the development of a supplier relationship with a large company, a mining company, for example, for this purpose will be useful the conceptual framework of shared value, which we will discuss. as highlighted by porter and kramer (2006; 2011), successful companies need a healthy society. in this sense, the educational, health and equal opportunities aspects would be basic elements for a productive workforce, competitive suppliers and an innovative community. the researchers considered that good governance, the rule of law and property rights are essential for efficiency and innovation. in addition, they added that a healthy society would create a http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 growing demand for the company, satisfying more human needs and growing aspirations (porter and kramer 2006). in relation to extractive activities on poor community lands, it can be inferred that the more closely related a social problem is to the business of the enterprise, the greater the opportunity to take advantage of the company's resources to benefit society (porter and kramer 2006). moreover, if one considers that there is a very wide perception that companies prosper at the expense of the rest of the community and generate social, environmental and economic problems (porter and kramer 2011). along these lines, sachs (2008) pointed out that the essence of corporate social responsibility is that companies make their technologies available to those who can benefit from them, which is called technological transferences; it also suggested that, in contexts of limited resources and low human capital, activities should be concentrated in order to save money. this will alleviate constraints on skills, management capabilities or infrastructure in the economic sphere. similarly, porter and kramer (2011) suggested, in turn, that many corporations maintain an obsolete approach to value creation. these organizations prioritize the optimization of short run financial performance, thereby avoiding relevant aspects. these are as follows: (a) the most important needs of customers, (b) the depletion of natural resources vital to the business, (c) the viability of their key suppliers, or (d) the economic poverty of the communities where they produce and sell. to reiterate, the researchers pointed out that the purpose of the corporation should be the creation of shared value, which implies creating economic value, while generating value for society in addressing its needs and challenges. they affirmed that companies must link business http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 success with social progress. in this way, the concept of shared value would recognize social needs and not only the conventional economic needs as the determinants of the market. they also said that the evils of society create internal costs for companies, such as wasteful energy and raw materials, accidents, training needs and low productivity due to inadequacies in education. therefore, correcting the damages and limitations of society does not necessarily increase the costs of corporations; since it can be innovated through the use of technologies, operational methods and advanced management approaches. this would raise productivity and expand markets. from the standpoint of the company, brabeck (2016), chairman of nestlé, defined the creation of shared value. he proposed it as the long run sustained commitment to create greater shareholder value. to this, social problems are integrated into the business strategy itself. shared value is defined as policies and operational practices that strengthen a company's competitiveness while helping to improve economic and social conditions in the communities where it operates. it focuses on identifying and expanding the links between economic and social progress. then, the value is defined by the difference between benefits and costs. it is observed, then, that companies can create economic value creating social value. there are three ways to do this: (a) reconcile products and markets, (b) redefine productivity in the value chain and (c) build support clusters for the sector around the company's facilities. as a result, many ways of meeting new needs, gaining efficiency, creating differentiation and expanding markets are opened (porter and kramer 2011). recognizing that products and markets, in the line worked by porter and kramer (2011), diaz (2014), del valle (2015), mutis (2011), bertini and gourville (2012) and shared value initiative (2014), involves the multidisciplinary work of the areas of research and development, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 design, engineering and marketing; by rethinking the product, processes and markets served, marginal and potential. it is executed by evaluating the possibility of making an improvement in some social condition in the community where it is acted. a cost estimator will determine the relevant costs and revenues of the identified alternatives that could comprise different activities of the extended value chain. bertini and gourville (2012) suggested using the pricing policy to generate shared value. these authors affirmed that the value does not originate or belong exclusively to the company. the consumer is no stranger to the process of creating value. in the case of a well-designed discount, for example, not only do sales and referrals increase, but the brand is also promoted and loyalty is built. from this perspective, different forms of value created in business can be identified. these are as follows: (a) increase in market share through expansion, (b) deepening customer and consumer relationships, (c) expansion of differentiation, and (d) innovative developments. likewise, there are ways to create value in the social arena: (a) ability to meet a specific need, (b) transform customer valuation through their own needs, and (c) ability to substitute inferior goods for superiors. redefining the productivity of the value chain entails the creation of social value for the different companies that are part of the value chain and for society as a whole. this will be achieved through proposals that increase the competitiveness, productivity and profitability of the various participants in the value chain. likewise, this level promotes synergies between suppliers and the company in the search for greater productivity and the generation of social progress. in addition, value management will involve the use of the activity based costing (abc) model and its activity based management (abm) and performance based acquisition http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 (pba) variants to predetermine, manage and control the costs of activities. according to shank and govindarajan (1995), the strategic management of the value chain costs must comprise, in one hand, the management of the structural costs and, on the other hand, the control of the costs of execution. in this dimension you can define modalities of creating business value. these are as follows: (a) to ensure timely and quality supply, (b) integral reduction of costs in the value chain, (c) innovation synergies transferable to the customer and (d) development of competitive advantage through the value chain. analogously, different ways of creating social value can be specified: (a) transformation of inter-company relations in the value chain, seeking synergies and collective competitiveness; (b) integrated development of the competitiveness of supply chains, distribution and associated services, and (c) sustainability and collective efficiency in the value chain. the development of clusters with local companies aims to constitute an institutional support that allows them to improve their productivity. additionally, it will make it possible to address flaws or gaps in the structural conditions that affect the cluster. to this end, programs for the development and strengthening of suppliers are used. the cluster should not only comprise other companies, but also institutions of various kinds, such as schools, universities, chambers of commerce and associations. in this dimension, the forms of creation of business value are as follows: (a) improvement of the various factors and constraints of territorial competitiveness; (b) guarantee of local supply with quality and opportunity; (c) guarantee of human capital in the long run and consolidation of learning curve and experience, and (d) development of territorial competitive advantage. in terms of creating social value, the alternatives will be: (a) competitive integration of http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 communities into human capital and the chain of territorial value, (b) training, management and support of projects to develop competitive factors, (c) the territory as client and (d) development of entrepreneurial capacities in the territory (porter 1998). another critical definition is that of peasant communities, which according to article two of the general law of peasant communities1 are organizations of public interest, with legal existence and legal status. they are composed of families that inhabit and control certain territories; linked by ancestral, social, economic and cultural ties. these ties are expressed in communal land ownership, communal work, mutual aid, democratic government and the development of multisector activities. its aims are aimed at the full realization of its members and the country. on the other hand, one of the ways in which peasant communities could exercise their business is the format of the communal enterprise (cbe). this form allows them to use their legal status and organize and manage their economic activities in a business way, through the generation of productive units of communal goods and services. this was explained by the general law of peasant communities in its article 26 (law 24656/1987). also, in article 28, there is a promotional regime that makes it possible for peasant communities, their communal enterprises and other associative forms to be unaffected by any direct tax created or created to tax land ownership or tenure, as well as tax the rent. however, according to the law on private investment in the development of economic activities in the lands of the national territory and of the peasant and native communities2 (law 26505/1995), without prior agreement with the landowner, mining rights cannot be established 1 congress of the republic of peru, law 24656/1987. general law of peasant communities. 2 congress of the republic of peru, law 26505/1995. law of private investment in the development of economic activities in the lands of the national territory and of the peasant and native communities. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 (article 7). thus, the mining company is conditioned to sign a bond contract with the peasant community. it is, in this sense, a very favorable circumstance for the latter. mallay community the opportunity to serve buenaventura peru is one of the countries with the greatest mining potential. in 2016, it became the world's second largest producer of silver, the third largest producer of copper and zinc, fourth of lead, fifth of tin and sixth of gold. mining also contributed 57% of total national exports during the period 2001-2015. in addition, in the same period, total investments in the sector amounted to us $ 57 billion. likewise, the sector is present in 17 of the 26 regions of the country. it has contributed more than s / 80 billion to the national treasury for taxes and royalties. as well as, the portfolio of mining projects in force amounts to us $ 56 billion. then, the mining sector acquires 14% of the total production of the local manufacturing sector and, for each direct job it generates, nine indirect ones created in other sectors (national society of mining, oil and energy, 2016). peru is also the country with the largest silver reserves in the world, concentrating 21% of the estimated precious metal reserves in a total of 570,000 metric tons ("snmpe: peru" 2016). beside to the above attributes, its macroeconomic stability, geological potential and energy cost, the country is truly attractive for investment in metal mining. hence, it was in the interest of buenaventura mining company, the main national silver producer (ministry of energy and mines 2016), to exploit the generous reserves of this metal from mallay's subsoil. buenaventura is also in a position to formulate a strategy that generates economic value and social value for both its mining operation and for the peasant community and its communal enterprise (buenaventura mining company 2016). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 mallay, like most of the peasant communities of high poverty in peru, had deficiencies in infrastructure, health, education and employment; affecting this circumstance in particular to women, children and the elderly (muñoz 2012; figueroa 2016). thus, 91% of the floor of the houses was of land, only 19% of the houses accessed the drinking water network, 56% of the population did not have health insurance, 15% of the population did not have a level of educational instruction and 50% of the population was unemployed. subsequently, with the entrance of the mine, most of these indicators would improve significantly. on the other hand, following the approach based on the valuable resources proposed by collis and montgomery (2007), it could be said that for mallay's case, its valuable resources, those that would allow the growth and diversification of its cbe, would be the following (a) the longterm mining reserves in its territory, (b) the fleet of vehicles and heavy machinery (assets), (c) the tax exemption, (d) its consistent capacity to generate income through the services provided to the mine and (e), its ability to add new business units related to mining services. according to collis and montgomery, the three characteristics of a valuable resource are: (1) demand, (2) shortage and (3) appropriability. as mentioned in 2016 by humberto ríos, an accountant for the mallay cbe, a census sponsored by the peasant community was carried out in order to identify certain economic and social impacts as a result of the mining presence in the territory. the results revealed that, although the integral characteristics of the dwellings varied little, the improvement in the sanitation and connectivity was significant. in contrast, the educational and health aspects did not show significant changes, although the most noticeable and favorable evolution was evidenced in the employment indicators. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 according to buenaventura mining company (2016)’s annual report, in mallay there would be silver reserves that would justify a mining period of approximately twenty years, with possibilities for expansion as a result of discoveries of new reserves through explorations in the area. this range of time would correspond to the window of opportunity that mallay cbe would have to develop services to buenaventura, accumulate surpluses, redistribute, develop human capital and diversify its businesses. at present, the negotiating power of the communal enterprise lies in the conditions agreed in the bonded contract signed with the mining company and in the recent findings of new reserves. both circumstances define a favorable negotiating framework for the improvement of the offer of services to buenaventura. mallay cbe the organizational architecture given the presence of the mining company buenaventura and the opportunity to provide services, general extraordinary meeting of march 14, 2010, to establish the cbe with the denomination mallay communal enterprise multiservice, which would be subject to the current legal regulations and their status. its purpose is to organize and manage the economic activities of the community under a business format, through the generation of productive units of communal goods and services. it must also ensure the well-being of its members and contribute to the development of the community as a whole (mallay cbe statute 2010). in addition, as a result of interviews conducted in january 2017 to the main people in charge of organizing the cbe of mallay: mr. aníbal tolentino (president of the peasant community during the period 2010-2011) and humberto ríos (counselor and accountant of the cbe ), identified the organizational change that had to take place within the peasant community, in order to progressively improve, from being an organization that managed limited agricultural and livestock resources towards a market-oriented organization. during this transit, it was http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 possible to develop organizational and dynamic capacities, such as the management of human resources and the negotiation with suppliers and the mining company. likewise, they were able to improve the conduct of the assemblies and the development of consensus on economic and social aspects of interest to the community. now, given the compliance with international quality standards demanded by the buenaventura company. the cbe had to consider in its initial organization the hiring of a manager, who should coordinate the operations of the business units, as well as the administrative and accounting ones. the operations derived from the civil works business unit were managed by a resident engineer. likewise, the activities of the transportation business unit were directly supervised by the manager, and the accounting and administrative tasks were carried out by an accounting advisor. as expected, the arrival of foreign professionals and technicians would generate some conflicts, either with the leadership of the peasant community or with members of the community, related to decision-making or to the levels of authority assigned. the limitations to the human capital of the members of the rural community and the requirement of buenaventura to contract services with suppliers that have qualified work teams were two of the main reasons why the presence of specialized external personnel was accepted. thus, to provide the transportation service that was provided to the mining company, foreign drivers had to be hired, since the community members did not have a driver's license. it should be noted that the assets owned by the communal enterprise are valuable resources that facilitate management and income generation. among these are the communal premises of more than 500 square meters, which houses administrative offices, warehouses and a hall for assemblies. as well as the fleet of vehicles for transport of personnel and cargo, composed of http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 15 units. the valuation of these assets amounts to us $ 779,620.00, which have made possible an average annual income of approximately us $ 807,125.00, and an average annual operating profit of us $ 181,840.00. the cbe’s main client is buenaventura mining company mallay operations. the enterprise basically provides transportation services to buenaventura’s personnel and services of civil works, which basically consist of the maintenance of roads, the repair of environmental liabilities, caused by the mine and, eventually, civil infrastructure works. the management of these activities is carried out through projects, which are assigned to work teams which are generally composed of a supervisor or foreman, a security officer and a contingent of personnel. in addition, averages of 51 workers work in the cbe. this figure includes administrative and management staff, drivers and operators. mallay community the strategy as suggested by the shared value strategy, the communal enterprise will be oriented towards the creation of economic and social value for the peasant community as well as for its stakeholders, in particular for the buenaventura mining company. there are three ways to do this: (a) relate products and markets, (b) redefine productivity in the value chain and (c) build support clusters for the sector around the company's facilities. in this way, opportunities are opened to meet new needs, gain efficiency, create differentiation and expand markets (porter and kramer 2011). in order to link products and markets, rethinking the products, processes and markets served, marginal and potential, the cbe will be able to improve the products and processes through the following actions: (a) training, (b) hiring professionals and (c) the acquisition of high http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 performance equipment and machinery. likewise, a diversification strategy (collis and montgomery 2007) will define new business units that will allow access to new markets. during 2012, a panel of experts3 was consulted in order to identify constraints to the development of the cbe. in this survey, the low productivity of the communal enterprise and the low participation of the community in the activities of the mine were identified as the main restrictions. thus, it was recommended the training of community members and their managers in management and planning, so that improvements in income, sanitation and habitat can be obtained. the results would be greater surpluses to redistribute. considering that its base of valuable resources has allowed the cbe to provide civil works and transportation services to buenaventura, and that even its organizational structure could be strengthened in the short term by hiring competent professionals and technicians, there is the possibility of diversification towards a new business unit. with this, the company would develop a synergistic network together with the existing business units; as well as it would share indistinctly to drivers and professional engineers (economies of scope). the strategy would focus on developing in the short term a new business unit to provide services in the oyon territory and the lima region. then, in the medium and long term, it would be included in forestry, agricultural and tourist activities. in accordance with the coordination made with the previous manager of the mining unit, consulting the opinions of experts in earthmoving and mining, and assuming stability in the levels of profitability reached by the cbe, it is projected that, as of 2017, the acquisition of a 3 engineer rómulo mucho (president of the institute of mining engineers of peru, former deputy minister of mines), engineer isaac rios (cetemin general manager, former rio pallanga general manager), engineer noel barrenechea (community relations coordinator cmbsaa operation mallay), engineer alex hermoza (vice president of social and environmental affairs cmbsaa), engineer nilo ríos (mining expert). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 group of heavy equipment machines for earth movements would be carried out. this will consist of a front loader and two dumpers. these economic initiatives, coordinated in their execution with the mining company, will improve the performance of the cbe services and, therefore, the value created for their clients. then, with the improvement in income and the distribution of the surplus, a greater number of needs will be satisfied. the redefinition of the productivity of the value chain will imply the creation of social value for the different companies that are part of the value chain and for society in general. all this will be achieved through proposals that increase the competitiveness, productivity and profitability of the different participants in the value chain. therefore, mallay cbe and buenaventura should promote synergies within the framework of a supplier development strategy, aimed at the search for greater productivity and the generation of social progress.it should be noted that the experts consulted indicated that the cbe had weak technical direction and a limited use of technological tools, technical assistance and technological transfers. it also showed an absence of innovative projects. due to the operational interdependence between the mallay cbe and the mining company, coordination has been carried out to intensify the technical assistance and technology transfer from buenaventura to the cbe. likewise, the cbe must improve the selection of its technical and managerial cadres in order to assure greater achievements in performance and productivity. in this way, the various activities in the value chain will optimize their contribution to the benefit generated. in addition, the development of clusters with local companies aims to provide support institutions that allow them to improve their productivity, while addressing failures or gaps in the structural conditions that affect the cluster. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 through the stakeholder theory of mitchell and agle4 (mitchell, agle, and wood 1997; agle and mitchell 2008), it was verified that, among the different interest groups related to the community of mallay, only two stood out. these are as follows: (a) the mining company, and (b) both the mallayan peasants and the directors of the cbe. this circumstance is typical of the andean communities, generally isolated from urban areas, with weak links with local governments and with different sectors such as health, education, justice, housing, telecommunications, security and the interior, among others. in addition, the presence of ngos and multilateral projects is minimal. in that context, a desired situation, which contributes to sustainable development, would imply that these institutions, particularly those of the government (particularly sectorial one’s health and education), have more presence in these areas and provide both services and development projects. considering this reality and a remote probability that, in the short term, the government for budgetary and management capacity issues closes these gaps, the presence of a mining company that comes to the territory with a long run investment project. as well as with resources that could improve the income and employability of the mallayan peasants. meanwhile, the community does not have an institutional support, which is why it should be developed. in this sense, recently, they have initiated contacts with sedes sapientiae catholic university (ucss), citemin (a technical training center in mining), regional and local governments; and pending ties with the various sectors of the government and neighboring peasant communities. on the other hand, the vast experience of buenaventura operating a wide portfolio of mines, allows the company to ponder and recognize the importance of involving peasant communities 4 the mitchell theory allows, through the participation of experts and the use of certain criteria (degree of power, legitimacy and urgency), to classify according to their capacity of incidence and availability to the main actors in a scenario. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 that own the land under the mining veins. thus, after having agreed hundreds of servitude, it has developed a type of strategy that includes not only the payment for these services, but a package of actions. some are related to the redefinition of the productivity of the value chain; including: (a) development of supply for the mine, initially with transportation and civil works services to repair environmental liabilities and roads; (b) employment for the mallayan peasants in the mine and in the contracting companies of the mine, and (c) improvement of the community habitat and the water and sanitation system. as for the creation of a local cluster, as roque benavides, chairman of the board of buenaventura (institute of mining engineers of peru, 2013) stated, social responsibility must be shared between the state, companies and communities; so each one fulfills its role to achieve common objectives of sustainable development. in this sense, the mining company has developed infrastructure (roads, water) and allocated funds to international cooperation for economic development and procurement programs (pra program). currently, it sponsors the development of a development plan for the peasant community and the cbe. the achievement of shared value implies adequate leadership by the mallay cbe and also by buenaventura. a factor that has to mitigate conflicts within the community has to do with the policy of distribution of the surplus recorded in its statutes. this ensures fixed percentages to be distributed for community training, reinvestment in the business of the cbe, social assistance to women, children and the elderly, and dividends. considering that the cbe comprises all the active members of the community, the redistributive impact of the dividend policy would be very important (muñoz 2012; figueroa 2016). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 mallay cbe results on business value and social value the synthesis of shared value is the creation of economic value and social value for both the company and its relevant stakeholders. now, this generation of value is obtained through the following actions: (a) reconceiving products and markets, (b) redefining value chain productivity and (c) cluster development. in terms of reconceiving products and markets, the cbe has developed two business units: civil works and transportation. to this end, they had to hire professional chauffeurs, engineers and technicians from outside the community. with the technical assistance of buenaventura, processes and sequences have been defined for the different projects to be implemented. in addition, a new business unit, heavy machinery, it will involve making significant investments. however, they will ensure sustained income throughout the year. once the new business unit is fully operational, annual revenues will double. currently billing an annual average of us $ 807,125.00, the average annual benefit is us $ 181,840.00. the cbe is going to fulfill seven years of activity, and by generating income and profits, it allowed to employ an average of 51 people. it has even made it possible to redistribute profits in training, social assistance and reinvestment. in this way, a significant part of the peasant community has improved its consumption and quality of life by attending to a greater number of needs. regarding the redefinition of the value chain, the communal enterprise has established itself as a provider of civil works and transportation services. in order to complement synergistically the operations developed by the mining activity, they have had to establish processes and sequences, conforming to the rules and standards of buenaventura. this has progressively improved performance and efficiency. thanks to the increased productivity of the communal http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 enterprise and the absence of conflicts and delays, the mining company has been very effective in its operations. thus, buenaventura presented the average annual cash cost of us $ 9.92 / oz. silver, one of the most efficient of all buenaventura mines. this improvement is attributable, among other things, to the following: (a) the availability of human capital and contractors that can be hosted and fed by the peasant community; (b) the correct management of the community relations that gave fluidity to the exploration activities, in this way a new exploration target has been identified, and (c) the 29% increase of the tonnage of ore processed in the plant from mallay, which allows to increase the production of ounces of silver by 27%. this performance was facilitated by the minimal concurrence of conflicts between the mine and the community, as well as the collaboration of the cbe in the maintenance of the tracks (company of minas buenaventura 2016). as for the social value created, three can be mentioned. first, there is the creation of the cbe, which serves to provide the service provision to the mine and in the medium run diversify its services in products and markets. second, there is employment generated, which improves income, quality of life and equity. finally, there is the improvement of the habitat, roads and the water system; which not only provides well-being to the community members, but also to the workers of contractor companies housed in the community. in relation to the development of the cluster, a starting point is the formulation of the development plan, which in addition to the habitat would include a strengthening of the capacity of supplying the cbe in order to offer services of greater complexity, among them, buildings and civil works. the presence of the mine and the dynamics of its officials, specifically community relations, join and support local institutions in addition to the initiatives of the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 mayor, the regional government, communities and neighboring mines, which will progressively mature the territorial cluster. after the beginning of the operations of the cbe, the economic and social indicators of the community improved significantly, thus, the houses with water in their interior went from representing 19% to 60%; households with bathrooms increased from 3% to 61%, people without health insurance were reduced up to 53% and the population without work was reduced to 30%. it could be affirmed that the benefits to the interior of the community were translated in improvement of the feminine employment and of the adult men, as well as in their indicators of infrastructure, health and employment, then the cbe developed an organizational learning that allowed them to acquire dynamic and organizational in terms of contributions to the rest of society, the cbe generated employment, more than 50% of its workers are foreigners, it also provided a quality supply to buenaventura and is progressively doing so to neighboring communities. compared with other important communal companies in peru, such as the huaraucaca and rancas cbe, unlike these, the mallay cbe includes 100% of the community members of the peasant community, seeks to diversify into businesses outside the mining environment and has good corporate governance. discussion the correct implementation of the shared value demands that the managers of the cbe know and adhere to this new vision. thus, they would assume the necessary sponsor role of this strategy. in the case of buenaventura, it is not perceived that the company integrates in key http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 processes the members of the peasant community. according to the review of the presented literature, this should be at the center of decisions. regarding the development of suppliers, there is no evidence of a specific program or project, as well as actions aimed at strengthening capacities and replacing suppliers by the communal enterprise. it distorts, in this context, possible maneuvers of intermediate controls of the mining company, which could obstruct these processes by specific questions. although the promoters of a major technical training institution for mining (citemin) have close ties with the mallayan community, no concrete efforts are being made to develop strong connections and define training activities. likewise, there is no value relationship with universities and research centers, with the exception of a discreet contact with the ucss, which allowed them to conduct agricultural soil studies and prepare a situational diagnosis. however, security, environment and community relations are adequately managed. furthermore, the cbe lacks the proactive and competitive leadership that leads the organization to negotiate with greater ambition services, technical assistance and technological transfers with the mine. however, the economic results achieved have been significant, allowing the redistribution of the surplus through training, social assistance, reinvestments and dividends. in addition, they have agreed a diversification plan for related sectors, such as works with heavy machinery and ecotourism as they have thermal springs on their land. conclusion the peruvian case of the relationship between peasant communities and extractive industries shows the collision of cultural and economic dimensions that conclude in social conflicts. these, on one hand, do not finish solving the shortcomings and poverty of the communities. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 on the other hand, they do not allow the realization of the business activity and, with it, the creation of economic value. the shared value proposal, which puts the community at the center, evidences gaps and spaces for improvement in the relationship between companies and communities. this is not given from the perspective of philanthropy or the provision of a portion of the surplus. rather, it presents itself by jointly building economic and social value, redesigning products and markets, redefining value chain productivity and creating or strengthening territorial clusters. in the identification of a sustainable cbe model, this document advances knowledge about the organizational architecture of a cbe. the findings of this document show a sustainable performance of the cbe, while improving economic, social and environmental conditions in the mallayan community. however, in the specific case it is noted that this sustainability depends in the short term on the intervention of external human capital, precisely because of the absence of this in the peasant community. given the local gaps, efforts must be made to find the right mix of community and external workers. thinking for the medium and long term in closing training gaps through training and articulation with universities and training centers. in the case of the mallay cbe and buenaventura mining company, it could be said that shared value initiatives were developed, through the generation of employment, the development of supply with the cbe and the improvement of habitat, roads and water. in spite of this, the following tasks remain: (a) greater involvement of peasant community leaders with the strategy, (b) improving capacity building initiatives, and (c) endowing the cbe with an executive and operational level, that allows to propitiate and capitalize business in the relationship with the mining company, and even to diversify products and markets. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 167-197, january-june 2018 doi:10.1344/jesb2018.1.j041 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 on the possibilities of escalating the mallayan experience, it is necessary to consider some critical aspects of success. first is the establishment of a cbe that includes the entire community and that implements a relevant surplus distribution policy. the second includes the training and synergistic work between the leaders of the peasant community and the cbe. the third is the installation of a culture that privileges performance, solidarity and innovation. finally, there is the willingness of a mining company to create economic value through the creation of social value. references agle, bradley, and ronald mitchell. 2008. “introduction: recent research and new questions.” business ethics quarterly 18 (2): 153-59. behre dolbear. 2015. where to invest mining. denver: behre dolbear group. bertini, marco, and john gourville. 2012. “pricing to create shared value.” harvard business review 90:96-104. accessed september 4, 2017. brabeck, peter. 2017. nestlé in society creating shared value and meeting our commitments 2016. switzerland: public affairs. collis, david, and cynthia montgomery. 2007. corporative strategy. madrid: mcgraw hill. communal enterprise of mallay. 2010. statute of the communal enterprise of mallay. oyon: cc mallay. company of minas buenaventura. 2016. annual report 2016. lima: cmb. daily management. 2016. snmpe: peru accounts for 21% of the world's silver 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doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 somerville, peter, and gerard mcelwee. 2011. “situating community enterprise: a theoretical exploration.” entrepreneurship & regional development 23:317-30. accessed september 1, 2017. doi:10.1080/08985626.2011.580161. soviana, soviana. 2015. “toward a sustainable community-based enterprise: organizational architecture and performance.” management and organizational studies 2 (1): 1-15. accessed july 30, 2017. doi:10.5430/mos.v2n1p72. stone, lesego, and tibabo stone. 2011. “community-based tourism enterprises: challenges and prospects for community participation, khama rhino sanctuary trust, botswana.” journal of sustainable tourism 19:97-114. accessed september 5, 2017. doi:10.1080/09669582.2010.508527. supreme decree 045-93-ag. 1993. they empower the constitution of communal and multicomunal companies of agricultural services by initiative of peasant communities and rounds, native communities and other rural populated centers. ministry of agricultural of peru. thoma, wolfgang, and kanimang camara. 2005. community forestry enterprises: a case study of the gambia. rome: fao timsina, netra. 2005. supporting livelihoods through employment: the chaubas-bhumlu community sawmill, nepal. washington: itto, rri, and forest trends. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 david wong cam universidad del pacifico (peru) harold hernández lefranc universidad nacional mayor de san marcos (peru) josé manuel carrasco weston universidad del pacifico (peru) gringo entrepreneurship in latin america. the thorndikes of peru, 1901-1938 abstract this article studies with a business history framework the history of immigrant entrepreneurship of a north american family in peru, whose origin goes back to the second half of the nineteenth century and its development takes place in the first forty years of the twentieth century. the origins go back to ernesto thorndike, a north american businessman whose business trajectory was situated principally in peru. at the end of his life, he saw the decline of his fortune despite his social and intellectual capital, of being part of the economic and social elite of lima at the end of the nineteenth century and the beginnings of the twentieth, and of the diversification of its businesses. the article analyzes this evolution and indicates driving factors of success and decline: intellectual capital un-exploitable because of peru´s political and economic instability (the construction of railroads was paralyzed at the end of nineteenth century); the lack of speed to produce the necessary tacit technical knowledge to diversify of its businesses; and the lack of bonding social capital, which prevented the constitution of a family business group that capitalized contacts and relationships that extends in time the existence of firms beyond a generation. keywords: business history; management; railroads corresponding author: e-mail: wong_de@up.edu.pe received 06 june 2018 accepted 09 nov 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 1. introduction business history has flourished in recent decades to study the history of immigrant entrepreneurship in the united states before world war ii, focusing in the arrival and varied fortunes of european, asian, and african immigrants. however, literature for this chronological period very rarely has paid attention to the history of north american emigrants in other regions of the world. latin america was an important destination of multinationals in the first half of the twentieth century as demonstrated by works, among others, of mira wilkins, geoffrey jones, andrea lluch, erika salvaj, norma lancioti, marcelo buchelli, mario cerutti, eva rivas, armando dalla costa, martin monsalve, javier vidal, maría inés barbero, and paloma fernández. studies about multinationals in latin america have studied knowledge transfer, partnerships, patents, brands, investments, institutional connections with political powers and the local elites. yet, there is almost no literature about north american entrepreneurs remaining in latin america, and about families in business established in the region by north american entrepreneurs. this study aims to contribute to filling this gap with a case study: the thorndike family. this paper develops the business dynamics of the engineer, businessman, financier and constructor ernesto thorndike (valparaíso 1859 – lima 1938), son of the north american engineer john larkin thorndike (1834-1901). this case study is, besides, also important for the peruvian economic history of the late nineteenth century and early twentieth century because of the singular, uncommon profile, of thorndike. he was a cosmopolitan businessman born in chile, son of a north american railway engineer who was hired by henry meiggs to work in the modernization of the region in the construction of railways, first in chile and later in peru, and whose career was affected by the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 grace contract after the pacific war. ernesto diversified his capital from the accumulation of his father´s capital. he joined the bourgeois upper peruvian class, especially in lima. he pretended to extend financial and business interests in london for projects in peru and bolivia, thanks to his north american citizenship, being english-speaker, and the social capital cultivated since the generation of his father. he operated in a complicated political context: the pacific war (1879-1883), the subsequent national bankruptcy, the grace contract (1889), the national reconstruction and the first world war. he finally entered in the agriculture business, although late in his life. despite having six brothers, being married and having nine children, the businesses founded by his father, john larkin, never became something even similar to a family business group due to familiar contingencies. only ernesto stood out as a businessman and followed his father´s trajectory. this paper aims to answer the following question: why and how the fortune of ernesto declined in the last decade of his life, if he had enjoyed from the very beginning many positive advantages to build successful businesses? may the history of this singular entrepreneur illustrate about the driving factors that led to decline and failure to other immigrant ventures in the region before world war ii, particularly those created by north american immigrants? this paper presents some answers with a study case, and a business history approach. the case method is relevant because it shows facts and a process that has a revelatory nature, with historical transcendence. also, because it shows a problem or issue not well known or studied previously (yin 2003). in this case, it is the biography of a north american immigrant with sophisticated technical and academic skills, who migrated towards latin america. in peru, he developed his professional career and had an offspring that integrated with the native society. we present, therefore, a detailed analysis of the skills of an entrepreneur who migrated from a http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 developed country to an undeveloped one (an example of the poorly studied case of northsouth migration), where he diversifies his investments. the relevant literature details few cases of north american entrepreneurs who made fortune in latin america. it is well known the case of steve aronso fletcher in costa rica, a north american economist, who founded the firms linked to the britt group, a coffee producer. he later entered in the chocolate, theater, tourism and gift shop businesses (leiva and guillén 2015, 311). north american entrepreneurs in lima were very few: in a detailed research of big peruvian fortunes during 1916-1960, portocarrero (2010) only found seven north americans who died in peru and left a testament to his inheritors. however, the details of their businesses and their lives remains unstudied. the structure of the paper is like this. first, a brief biography of john larkin and ernesto thorndike. second, the theoretical approaches used to analyze the case. finally, an analysis of the decline of ernesto´s fortune using the theoretical concepts presented before. in regards to the sources for the reconstruction of the business career of ernesto thorndike, we have used the private family archive of “ricardo wiesse thorndike.” the mentioned archive is composed of: personal correspondence, balance sheets, testimonies of deeds, leases, property purchase and sale contracts, articles of incorporation from commercial companies, list of inventories and books from the “buenavista” fund diary (chao valley, trujillo), and stocks and bonds from banks and companies. these sources of information will be contrasted and complemented with the “probate records” of ernesto thorndike, which contains his will and property inventory list from different years prior to his death. also, we were able to find information in the public notary archive and the archive of the peruvian foreign office concerning some of the investments of john and ernesto thorndike. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 2. the thorndike case background: the vicissitudes of politics and the economy in mid-19th-century peru some eleven million tons of seabird excrement resolved the economic and political crisis that beset peru a few short decades on from its independence: from 1840 to 1880, the country sold around us$ 700 million of guano, the nitrate-rich fertilizer required for agriculture the world over (klaren 2012, 203). however, by the mid-1870s, reserves had run out, guano had started to be replaced by saltpeter, and a vast external debt had been built up entirely due to loans tied to the commodity. general diez canseco was installed as interim president in 1868, entering into agreements with the contractor henry meiggs during his brief term in office. josé balta became president in august 1868. balta's appointment as finance minister was nicolás de piérola, who quiroz says “took the country to the brink of financial disaster by signing nine agreements for exporting guano, obtaining sizable foreign loans, and lavishly constructing railroads and other public works of dubious origin” (2016, 161).1 quiroz makes reference to the dreyfus contract, signed by the peruvian government and dreyfus, the french-owned trading house. despite being an open tender, piérola had already approved dreyfus's offer, which entailed the advancement of funds against guano wealth. the railway project consisted of ten lines started almost simultaneously in all the peruvian territory. it was manuel pardo (1834-1878) who inspired the railroad system as a nationwide political project, and that system’s role as the rational and integrational basis of an organic project for developing the country. pardo, influential public figure, son of the notable writer felipe pardo y aliaga, founder of the country’s first modern and organic political party, and first civilian and 1 translation by authors. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 democratically-elected president of peru, publicized this developmental philosophy widely and accommodated it in his role as head of state. in 1860, he noted that the revenues from the exploitation of guano were being squandered, and condemned this occurrence. he called for three transversal lines throughout peru, connecting cusco, lima, and cajamarca with the coast. he also referred to the extraordinary potential for mining in the highlands and for agriculture in the jungle region, all of which more than justified the urgency of this modern means of communication and transport, the train. in making this argument, he drew technical inspiration from the polish engineer ernest malinowski (1818-1899) (malinowski 1869). john larkin thorndike: the father john larkin thorndike was born in 1834 in malone, capital of franklin county, located in the northern part of new york state. he studied engineering at a prestigious school in new york city (camacho 1871, 165). in 1852, at the age of 18, he began his career working on the ogdensburg and lake champlain railroad2 in his native new york. four years later, in 1856, he moved to canada to take part in the construction of the london and port stanley railway (american society of civil engineers 1908, 590). john larkin moved to michigan to work on the construction and maintenance of the detroit– milwaukee railroad; during his time there he met the engineer and rail entrepreneur walton w. evans.3 years later, in 1857, evans would offer him an attractive contract to work in chile as part of his team of engineers; john larkin accepted, and immediately relocated to that country. his first job was assistant engineer on the copiapó-chañarcillo railroad, then, in 1858, 2 this line belonged to the northern railway of canada (1849), and it was this very 200-kilometer section that was leased to central vermont railroad in the late 19th century. 3 in later years, evans also worked as a consultant to the la oroya railway works. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 he became resident engineer on the san antonio railroad and the tongoy section. that same year, john larkin got married to genoveva mathieu, a chilean of french descent. the couple had seven children: ernesto, juan, alfredo, aurora, inés, carlos and luis samuel. now established in chile, john larkin thorndike’s efforts saw him gain recognition among the group of foreign engineers; he assumed responsibility for one of the most complicated sections in the construction of the valparaíso-santiago line. it was on this project that he met henry meiggs, who had signed a contract with the chilean government (alliende 1993, 29). henry meiggs invited john larkin to join his team of engineers to execute a number of contracts for peru's great railroad project. in 1868, john larkin and his family moved to arequipa, peru. his initial responsibilities were to prepare the drawings and routes of the railroad that would join arequipa and puno. once construction of the line was underway, meiggs placed john larkin in charge of machinery before naming him chief engineer of the railroad of the south (ferrocarril del sur). in late december, 1869, meiggs signed the contract for the construction of the so-called transandean railroad (ferrocarril transandino) from callao in lima to cerro de pasco, jauja, and huancayo, as part of the dreyfuss contract, the execution of which began on january 1, 1870 with the laying of the first stone at monserrate station, lima (bartkowiak 1998, 170-172). in this context, john larkin was sent by meiggs to supervise certain sections of the central railroad, given his experience with bridges and in mountainous areas (gallegos 2001, 82). in may 1873, on the back of 20 years of professional experience, john larkin gained entry into the prestigious american society of civil engineers. he moved his family to lima, and they settled in the district of chorrillos (wiesse 2011, 28). once there, he got involved with the most select groups of contemporary lima society. in 1879, just before the war of the pacific, john http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 larkin teamed up with a group of north american and british immigrants – some of them former workmates – to found the phoenix club4 (phoenix club 1936, 3-4). during the final decades of the 19th century, larkin was also one of the most active members of the club nacional – an organization associated with the lima aristocracy. these clubs5 played an important role in bringing together different groups in society, but also functioned as spaces for closing trade deals and building entrepreneurial networks. however, works were suspended in 1876. october 1877 saw the passing in lima of the controversial henry meiggs, an individual who was forever surrounded by his closest circle, made up of ernesto malinowski, eduardo c. dubois, jacobo backus, carlos h. watson, guillermo h. cilley, howard johnston, and john larkin thorndike (hampe 2010, 87). added to this was the dramatic war of the pacific in 1879, in which chilean troops were posted in the peruvian capital for almost three long years between january 1881 and october 1883. in the final decades of the 19th century, john larkin thorndike fell victim to the disastrous consequences of peru's defeat in the war, which caused the slump in the peruvian economy – already underway since 1876 – to hasten, resulting in an annual downturn of 3.48% (seminario and alva 2013, 149). from 1885, after meiggs’s death, larkin assumed ownership of the railroad of the south concession; these rights were transferred to him6 by charles watson, the owner of the venture until then (salinas 2007, 107). however, in 1888 the government of president andrés avelino 4 with the aim of ensuring that lima’s british community would not be denied a point of encounter following the closure of the club de viajeros, a meeting was arranged in a café close to calle mercaderes which culminated in the decision to establish the phoenix club. this club is one of the few immigrant-founded institutions that remains active to this day. 5 according to carlos forment, at least 600 associations emerged in peru between 1830 and 1879. fifty-five were founded 1845 and 1855; 164 between 1856 and 1865; and 371 between 1866 and 1879 (forment 1999, 202-203). 6 we do not have knowledge of the details of this operation. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 cáceres7 annulled the agreement following the signature in 1889 of the grace contract: the outcome of a highly complex political process in which creditors, for the most part british, who had financed railroads and other works sought to recover their money; the contract was the means of regulating the reimbursement process. as part of this agreement, the railroads were handed over to the creditors for a 66-year period, during which time they repaired the damage inflicted by the conflict through the company they set up, peruvian corporation (contreras and cueto 2009, 178-180). this served to negate the agreements signed by the government prior to the grace contract. john larkin was directly and adversely affected by this situation given his rights and interests in relation to the railroads. indeed, he was left on the brink of financial ruin, but was spared by his son, ernesto thorndike, and his efforts at diversification. however, john larkin’s investments in railroad construction and administration were not confined to the peruvian sphere, as he extended his interests to bolivia in 1890. in that country, john larkin was granted a 20-year concession to build railroads and tramlines on the banks of the desaguadero river and lake poopó, to the population centers and mining sites.8 despite these adversities, john larkin decided to remain in peru but to withdraw from all business activities, passing the baton on to his sons before he did so. he saw out the rest of his days in the tranquility of his home in chorrillos, lima, in the company of his wife, genoveva mathieu (wiesse 2011, 31). he died on october 12, 1901, he was 67 years old. 7 see decree of may 1, 1888, the peruvian state “dismiss the administrator of the railroad of the south, juan l. thorndike, and appoint ladislao folkierski.” translation by authors. 8 see decree law of december 2, 1891, government of bolivia, “navigation of the desaguadero river— extension of the term of privilege conceded to juan l. thorndike” (translation by authors) and archivo de rree, series: correspondence b.7.4.1, box: 348, file: 7, year: 1893, folio: 163. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 ernesto thorndike, son of john larkin, and the diversification of their wealth ernesto thorndike was born in valparaíso, chile, in 1859. just like his father, he studied engineering in new york. in 1889, he married maría carmela galup. they had nine children together: maría, carlos, jorge, felipe, roberto, victoria, juan, alicia and augusto. he accumulated considerable social capital; from the age of nine, he accompanied his father to social gatherings and meetings. and as an adult, according to a family tradition, transmited by father ricardo wiesse thorndike, ernesto thorndike became acquainted in london to a jewish financier and entrepreneur. some clues in the narrative (the fact that thorndike and this gentleman had both interests in the indian railways, or the name of future lady mountbatten, cassel granddaughter) point out to -but this is an just an educated guesssir ernest cassel, one of the richest men in the world and friend and financier of the future king of britain, edward vii. ernesto’s contacts included s. pearson & son ltd, bolivian development syndicated limited, and anglo-swiss industrial syndicated limited, the most important engineering firms of their day. ernesto and his family lived in london from 1903 to 1910. as such, it is pertinent to infer that his possible ties to a prominent entrepreneur, his contact with major contractors, and his london residence would have assured ernesto of an international-scale portfolio of investors. however, as we will see later, the only extant evidence concerns his ventures that were based primarily in peru. ernesto died in lima in 1938. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 3. factors of wealth and growth: environment and resources. in the following section we present the concepts that can explain the historical sequence of john larkin and his son ernesto. an entrepreneur grows if he finds an auspicious environment and have the pertinent resources and capabilities. some theoretical approaches help to explain this evolution. concerning the environment, it´s pertinent the approach of mcgahan and porter (1997). regarding the resources, the following approaches help: resource-based view, the concept of tacit knowledge and learning curve economy. a business prospers if it encounters adequate political, socioeconomic, cultural, and environmental environments. mcgahan and porter (1997) maintain that these factors represent 19% of a business profitability. nonetheless, this study is located in the north american, a market that, unlike peru, has a developed financial market and institutions functions reasonably well (carney 2007). mcgahan and porter (1997) also maintain that resources and capabilities explain 32% of profits. resource-based view is one of the most influential approaches in management. resources must be valuable (they exploit opportunities and neutralize threats), rare and scarce (uncommon), non-imitable (they pose intangible barriers that limit the entrance of competitors), and nonreplaceable (it´s difficult that an alternative strategy would outcompete it). all of these competences must generate a valuable, rare, non-imitable, and non-replaceable strategy (barney 1991). there are two type of resources. first, human capital: acquisition of knowledge, abilities, and capabilities in a person. knowledge can be of two types: tacit, which can´t be expressed, formulated or transmitted easily; and formal, which can be expressed, formulated and http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 transmitted. we are interested in the first one because it´s distinctive of the business and can be converted in a key factor of competitiveness: “tacit knowledge is non-codified and non-patentable knowledge. it is accumulated in an organization through business activities that include the production and marketing of goods or services. compared with codified or formal knowledge, tacit knowledge is ineffable or inexpressible.” (jaskiewicz et al. 2013). the second type of resource is social capital, which consists of contacts accessible by relationships. business evolution is dynamic and needs new information that secures businesses or to facilitate loans obtained by those deals. concerning social capital, there are three dimensions (nahapiet and ghosal 1998) (wong et al. 2018). first, the structural, which refers to “the overall pattern of connection between actors, who you reach and how you reach them”. this resource comes from two sources: bounding social capital, which “stems from the network closest to the individual”; the second, bridging social capital, “is a product of new bonds formed in society”. different combinations of these sources generate different organizational forms until reaching family business group, which maximizes contacts. for the ends of this paper, we must explain the case of transnational trading networks, a combination of high bridging social capital and low bounding social capital. the advantages of bridging social capital have its origins in the role of the broker, which is the intermediary between seller and buyers of goods and services (carney, 2007: 295). the second dimension, the cognitive, refers to “the resources that allow networks of contacts to communicate accordingly through language, vocabulary, and collectively shared narratives”. the third and last dimension, the relational, refers to the possibility of qualifying a transaction an arm´s length transaction, where you are sure to receive a product or service according to specified (hite and hesterly 2001). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 about the theoretical approach of learning curve: a firm grows by harnessing economies of scale. it is supposed that learning leads to reducing the unitary cost of production. this theory say that “increases in cumulative production have been associated with the improvement of work methods, a fine-tuning of the production operation, and detailed learning about how to make the production of products as efficient as possible” (barney 2001, 240). 4. investment portfolio of ernesto thorndike and the reasons for his fortune´s fall the investment portfolio of ernesto thorndike we show the composition of the investment portfolio of ernesto. later, with the information provided by the archive of the thorndike family and his property distribution inheritance file9, we analyze the factors that allowed the scope of the portfolio and its subsequent deterioration. to understand the portfolio, a starting point is the research of portocarrero (2010), who analyzes eight-hundred testaments from 1916 to 1960 of the peruvian economic elite. landowners (hacendados) and rentiers abound. portocarrero (2010) typify ernesto as a hacendado. table 1. composition of the main fortunes in peru 1916-1960 number % merchants 117 15 hacendados 277 35 industrialist 86 11 miners 25 3 rentiers 274 34 urban developers 14 2 bankers and financiers 7 1 total 800 100 source: from portocarrero f. (2010) 9 archivo general de la nación (agn), archivo de sucesiones de lima, expediente no 9306. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 however, a detailed analysis clarifies the real economic situation of ernesto. in table 2 we summarize the information of his fortune for nine years. his wealth is concentrated in real estate and not in his agricultural terrains (farms) of chao. one of the reasons for this concentration of assets in real estate, 18 in total (10 inherited from his father, john thorndike), is related to the context of the time of urban expansion of the city of lima, where it experienced a growth in the real estate market. the price of the land rose which, in turn, made owning these urban properties a lucrative business (portacarrero, 2010:88). table 2. portfolio of ernesto thorndike years (%) 1908 1912 1914 1916 1918 1920 1924 1926 1929 real estate (without chao) 54.6 54.5 56.4 48.1 51.9 56.1 63.4 61.8 61.1 chao valley 13.3 27.0 22.8 18.0 17.1 16.7 credits 3.1 0.0 0.0 0.0 1.0 0.6 2.1 3.2 1.8 cash 7.0 6.7 4.2 0.7 1.5 5.6 2.0 1.6 1.4 securities, stocks 30.2 30.9 28.1 23.6 12.6 1.1 1.7 1.5 4.6 source: estate of ernesto thorndike 1908-1929, inheritance file no. 9306, notary manuel iparraguirre (1902) and portocarrero (2010), private archive thorndike family in lima, peru. it´s important to note that, by the time of his death in 1938, the family fortune was reckoned in 10,356,047 soles (following ernesto´s calculations). according our own estimates, this amounted to 8,800,000 of 1990 dollars. the family occupied the 18th place in the ranking of the biggest fortunes in peru (portocarrero 2010). ✓ railroads after john larkin’s retirement, following on from the war of the pacific and the grace contract, ernesto thorndike, his eldest son, persisted in the railroad field: on july 5, 1899, the peruvian government awarded him, as the sole bidder, the contract for the construction of the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 railroad between la oroya and cerro de pasco (samamé 1979, 167). on july 13, the contract was enacted by public deed. however, that same year, ernesto transferred his rights to the railroad to the cerro de pasco corporation; in payment, he received 300,000 dollars’ worth of shares in the compañía del ferrocarril de cerro de pasco. in 1907, ernesto sought to initiate new railroad projects, the first of these covered the paita-marañón (port of manseriche) route in peru; while the second, in bolivia, covered the guaqui-la paz route (98 km). then, in 1926, ernesto, in partnership with his children, founded compañía del ferrocarril y muelle de chao, for the purpose of constructing a wall along the chao inlet as well as a 15 kmlong industrial railroad. the aim was to transport and load products from the family business through a company created for that purpose, the sociedad agrícola de chao10, and from neighboring haciendas. this entailed a total investment of 5,000 peruvian libras11. ✓ imports and exports from a young age, ernesto embarked upon business ventures that would earn him a small fortune. he developed a timber marketing business, importing cedar from nicaragua12 and selling it in peru as an input for the shipand railroad-building sectors. all indications suggest that these activities were significant, as towards the end of the 19th century the nicaraguan government appointed ernesto its consul in peru. this activity constituted a significant new means of accumulation. 10 archivo ricardo wiesse thorndike, “papeles de e. thorndike,” “compañía del ferrocarril y muelle de chao, 1926,” folios 3-5 11 copy of the articles of incorporation of the company, signed before notary carlos sotomayor. archivo general de la nación, archivo notarial. 12 archivo ricardo wiesse thorndike, papeles e. thorndike, “discurso de felipe thorndike beltran: thorndike in perú, 1980.” http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 ernesto went on to export cocaine13 and then cotton, in both cases for the european export market. cocaine, obtained from coca leaves grown in peru and bolivia, peaked between 1860 and 1910 (gootenberg 2003). on the development of that industry, alejandro garland stated that at the beginning of the 20th century, cocaine exports easily covered worldwide demand (garland 1905); it should be noted that the industry was, at that time, legal. companies specializing in its production emerged, such as pinillos, vergil, durand, and san miguel. the latter firm and ernesto thorndike had exclusive rights to exporting the product, in an operation that yielded a two percent margin on the price.14 between 1897 and 1904, average annual cocaine exports totaled six and a half tons (garland 1905, 144). as to cotton, ernesto exported the product under the bolognesi brand, and starting from 1910 marketed it on behalf of the compañía mercantil de lima, of which he was general manager and shareholder. ✓ agriculture and basic water services in 1914, having amassed a considerable fortune, ernesto engaged in the purchase of haciendas in northern peru. he acquired a complex of haciendas from a ms. gilda larco de ganoza, for 120,000 silver soles, as per the notarized deeds of sale.15 this land was comprised of the buenavista, chao, coronado, la victoria, el porvenir, entre-ríos, montegrande, and huamanzaña haciendas, which together covered an expanse of 8,450 hectares. in this complex, also known as the “buenavista and annexes” hacienda, ernesto undertook an ambitious irrigation project in an attempt to channel water from the santa and chuquisaca rivers and the lakes of santiago de chuco, and transport it to the small dams he had built on the hacienda. 13 the alkaloid was used medicinally, associated with healing mental and nervous disorders, as well as industrially, as a raw material in the preparation of syrups and soft drinks. 14 archivo ricardo wiesse thorndike; papeles ernesto thorndike (1903). 15 archivo general de la nación, fondo documental aguas de regadío; section: distribución de aguas; box: 34, record no. 67, 1915. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 this vast majority of this huge expanse of land was used for the production of cotton, alfalfa, corn, and beans, as well as for rearing cattle and poultry.16 the provision of water on the coast of peru, where the family engaged in agriculture, is important. as such, ernesto first carried out irrigation works in the port of lomas17 (arequipa), and then, in 1900, founded the empresa de agua de lomas (with a 50% stake); in 1904, he became a minority shareholder of the sociedad de irrigación de piura. ✓ finances and mining the thorndike family sensed that their proximity to certain sectors could render them a strategic resource. thus, they were minority shareholders in the banco de arequipa. then, in the mining sector, they acquired silver mines in copiapó (chile), and purchased 300 shares in the montebello-orcco mining company in the department of puno, peru, in 1908. ✓ real estate we deduce that the family sought to reduce the level of risk in their investment portfolio by investing in real estate. as such, they owned a dozen properties distributed across chorrillos in lima and callao, lima’s port region. these properties were valued at 5,786,336 constant soles of 1950, and accounted for 70% of the total inheritance of the second generation of thorndikes (portocarrero 2010). in addition, ernesto was a minority shareholder in the compañía mercantil de la oroya and in the compañía de obras publicas de lima, of which his father had been a director. 16 archivo ricardo wiesse thorndike, papeles e. thorndike, “inventarios de la hacienda,” several years. 17 for having executed these irrigation works in the locality of lomas, arequipa, in 1891 the peruvian government transferred a plot of land totaling 3,000 square meters to ernesto in perpetuity, in recognition of his work for the community and the port of lomas (archivo ricardo wiesse thorndike, “papeles ernesto thorndike.”) http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 ✓ senior management positions finally, ernesto also occupied senior posts in companies across the banking, industrial, and basic service sectors. he was on the first board of directors of the banco internacional del perú (1897), alongside elías mujica, jorge a. vigors, demetrio olavegoya, pedro oliveira, ismael aspillaga, and augusto b. leguía (basadre 1961, 3621). moreover, he was manager and shareholder of the compañia mercantil de lima, and liquidator of the empresa de gas de lima. reasons of ernesto´s fortune fall there are two reasons why ernesto saw the decline of his fortune: the peruvian government insolvency that limited its options to fund new railroads (the management of this type of projects were ernesto´s principal expertise); and ernesto´s inability to generate competencies to enter in new lucrative ventures. now we analyze the first reason. ernesto suffered the shocks of a negative environment, product of the economic crisis that followed the pacific war. his main know-how was the construction and management of railway projects. he was an engineer graduated from an north american university. his father influenced in this learning process. however, around 1910, at the advanced age of 51 years, he realized that his possibilities to continue linked with railway projects were scarce. this conclusion comes from three important circumstances: a. the difficulty to build railways in peru, because of its rugged geography; b. railway´s profitability; and c. the negative credit rating of the peruvian government. the construction of railroads’ know-how was centered in flat territories. european and american experiences maintained the consideration that this transport fostered development (miller 2011). manuel pardo retook this idea for peru. however, in peru, the benefits were minor: with a mountain range that reaches five thousand meters high, it was necessary a http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 sophisticated innovation for a railway to be installed in very steep slopes. for example, in the 20 km that separate matucana and san mateo, the route of the central railway, the terrain elevates 800 m. (dóriga 1993). it´s not the purpose of this paper to make an economic or social evaluation of peruvian railways, because of lack of information. around 1892, there were intentions to build railways after the constructions of the central railway (the stretch of la oroya ended around this time). after the grace contract of 1889, the peruvian government tried to promote the construction of new railways (aside from the ones the peruvian corporation was committed to build). in 1904 a law was passed with a complementary one in 1905 for the construction of new railways: oroya-huancayo, sicuani-cuzco, ilo-moquegua, and yonán-magdalena (dávalos y lissón 1919), and for the section between oroya-cerro de pasco to a navigable point of any tributary of the ucayali river (basadre 1961). new attempts for railways occurred in 1918 and 1919. a contract with robert william dunsmuir was signed for 6 new railways (kemp 2002). the government never executed most of these projects. about the profitability of some of them, there are some appreciations: basadre (1961) says about the railway to the ucayali river that was correctly discarded due to technical and economic difficulties, high construction costs and the lack of a fluvial fleet worth the investment. on the other side, according to estimates by miller (2011), the rate of return of peruvian railway projects only surpassed five percent in the 1920s. this rate, according to miller, suggested that the railways were not very profitable. ernesto lived in london from 1903 to 1910. it is presumed that the reason for his stay in england was to obtain funding for new railway projects. letters show the communication between him and british firms. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 the attempts of ernesto to get railway contracts matched with the new version of the grace contract (1907), which was signed originally in 1889 to solve the peruvian debt with the council of peruvian bondholders. peru gave up the use of railroads in exchange to pay their debt. table 3. communication between ernesto and british contractors director of s. pearson & son limited contractors the director rejects ernesto´s proposal to build a railway between paita (piura) and the marañón river, to transport rubber. reasons: high taxes; the price of rubber will fall by the time the railways would be finished because of rising global production; the certified rubber production is not optimum. they could reconsider their position if the government undertakes to invest 8,000 pounds per mile. ethelburga syndicate limited the firm tells ernesto why they didn´t fund the paita-marañón river project in the past: the government wasn´t disposed to pay for exploratory and research costs if the project wasn´t approved. in addition, the firm already had a concession (lima-huacho) that apparently had problems with the government, and were not disposed to initiate a new business with them until that one got resolved. they agreed to talk about the matter in a future appointment. bolivian development syndicate letter that confirms the hiring of ernesto as a lawyer by the firm, to obtain contracts with the peruvian and bolivian governments, among other duties of representation for the firm. frederick j. benson & co. rejection of an ernesto´s proposal to build a railway (doesn´t say which one), because they weren´t interested at that moment. r. w. peirs mr. peirs gives his impressions about a railway project proposed by ernesto, but can´t assure if their partners would agree. r. w. peirs mr. peirs rejects ernesto´s proposal for lacking a better investment profile. director de s. pearson & son limited contractors a financial advice to ernesto: the peruvian government must ensure certain quantity of money to pay the bonds they´re about to emit for funding a railway. the peruvian government has been in default for several years and it will not be credible unless it mortgages a great quantity of revenues. source: compiled by authors http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 the council created a firm called peruvian corporation, which gained the concession for some railways. in 1907, the peruvian government couldn´t pay an annual sum accorded in the contract, so they gave the railways for 17 more years, but they still had to pay some money to the council. in 1924, the railways became property of the peruvian corporation because of the government´s inability to pay the annual sums. these three factors: the geographical difficulties to build railways; their probably low profitability; and the peruvian government´s insolvency, convinced ernesto that, probably, business opportunities might have ended in this sector. the letters in table 3 show that british firms saw several difficulties to fund railway projects in peru. a reason mentioned in various letters was the inability of the government to co-fund projects. it happened that by 1906, the government had signed a contract with the german transatlantic bank in lima and with the french bank for trade and industry in paris to secure a loan to enable the continuation of the railroad company. the means had to be acquired by loans in europe and the united states. but the conditions of the european market changed to such an extent that the banks asked to postpone the bonds of the debt in the market, in addition to conditions that the government could not accept, thus stopping the loans (kemp 2002, 71). the second reason of ernesto´s fortune fall was his inability, due to his old age, to acquire tacit knowledge of new businesses. a detailed profile of ernesto could offer the scope and limitation of his fortune´s size. he could not build a family organization (bonding social capital) that could enable differential elements in his businesses beyond himself. his strength rested in his bridging social capital contacts. business knowledge that he acquired was linked to railways, because of his father´s influence. however, the business opportunities in this sector ended because of the government´s insolvency after the pacific war. at and advanced age, he tried to start in an axis business: northern “haciendas” agriculture. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 table 4. business activities of ernesto thorndike year business 1888 cáceres canceled previous railway contracts because of the grace contract. ernesto returns from nicaragua. 1897 he joins the financial sector: becomes part of the first board of directors of the banco internacional del perú. 1899 construction of la oroya-cerro de pasco railway. he gives his rights to the cerro de pasco corp. in exchange of stocks (we don´t know his exact role). 1899 ernesto is appointed consul in nicaragua (we ignore the reasons). 1900 foundation of lomas water company, in arequipa, which owned 50% (he had equity, but we don´t know his exact role). 1903 cocaine exports (probably in management). 1904 minority shareholder of sociedad de irrigación de piura. 1907 hired as a lawyer for the bolivian development syndicate. functions: represent the firm in the search of new contracts with the peruvian and bolivian governments, and other legal activites. 1908 300 shares in cia. minera montebello-orcco mining co. (shareholder). 1910 cotton exports (raw materials) and cottom item imports (bolognesi brand), with cia. mercantil de lima (he was ceo and shareholder). 1914 purchase of haciendas: buenavista farm and annexes (landowner and manager of ventures related with chao) 1915 chao´s irrigation project. 1922 inauguration of chao´s dock. 1925 el niño phenomenon causes destruction in chao. 1926 cia. del ferrocarril y muelle del chao 1928 liquidation of cia. del muelle y ferrocarril de chao. still, the family augments the capital of the company. cedar import from nicaragua (probably a manager) owner of silver mine lands in copiapó, chile. owner of a real estate company (according to ricardo wiesse) liquidator of empresa de gas de lima source: compiled by authors http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 the table 4 offers precise data of ernesto´s fortune size. this businessman was successively or alternatively, a broker, merchant, rentiers and hacendado. he was a broker in the adjudication of the construction of cerro de pasco´s railway (he gave the rights to the cerro de pasco corporation), and in his role as a lawyer in the bolivian development syndicate, to search new contracts and to represent the firm in the search of railway projects in peru and bolivia in 1907. probably, his role as a broker might had been more extensive if his attempt to find funding in london would had paid off. as a merchant, ernesto imported cedar and cotton item, exported cotton (as raw material) and cocaine. in addition, the exported some agricultural goods while in chao. he was a manager in cia. mercantil de lima, a trade related firm. as a rentier, he owned a real estate company (wiesse 2011). after his stay in london, ernesto analyzed what to do. in 1915, with 55 years old, he decided to buy an hacienda called chao. at the beginning of twentieth century, big foreign firms dominated mining, while agricultural businesses like sugar, cotton, and wool were operated by peruvian families (thorp and bertram 2013). in interviews made to ernesto´s great grandchildren, they say, according to the testimonies of parents and grandparents, chao was never profitable. irrigation projects of chao, virú, moche and chicama were declared of public necessity by the government, but they never materialized. labor was scarce and it was necessary to hire japanese workers (wiesse 2011). in order to achieve success, the large landowners of the peruvian north coast acquired political and social prominence in the peruvian government. most of them joined the civil party in the early years of the 20th century, which gave them a platform and the necessary influence to implement policies that favored foreign investment, ensured low tariff rates (both export and import), promoted a centralized government and suppressing popular participation in politics http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 (gonzales 1985, 41). on the other hand, the success of the landowners is also partly due to the technological development they could implement to their production, since it was useless to have large quantities of harvest if they were not able to process and transport it. this progressive mechanization of agricultural work made it necessary to pay attention to other variables, such as the choice of seeds and fertilizers, the use of groundwater currents, simplifying harvesting techniques, hiring teams of agronomists and having laboratories in the same haciendas (gonzales 1985, 58). if the cases of the cotton farms are analyzed, as was in buenavista & anexos, it is observed that their production had a constant growth in the first decades of the 20th century. however, prosperity stopped in the mid-1920s due to the recovery of the u.s. cotton market (after the 1921 weevil plague) and the disastrous floods of the el niño phenomenon of 1925. to these factors, consider that the cotton farmers did not play an important role in the promotion of large projects, unlike those dedicated to sugar production. this is because their profits did not reach the same level as the large sugar estates and because, in contrast to these, they concentrated their investments at a local level instead of operating on the large scale (thorp and bertram 2013, 88-9). ernesto did not generate the necessary expertise to raise production, improve work methods, neither generate an efficient production. the limits of ernesto´s wealth were the lack of a familiar organization of support, the ending of opportunities for railway projects, joining shortterm businesses, and lack of agricultural knowledge. 5. conclusions the case of ernesto thorndike, an immigrant businessman of american origin, who developed ventures in peru during the end of nineteenth century and the beginning of the twentieth century, http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 found a limit in his fortune´s growth, and a subsequent fall, despite his intellectual, social, and human capital, due to worth considering factors. this factors relate to the changing and unpredictable environment; the crisis after the pacific war; the inability of the peruvian government to generate trust and solvency to comply with commitments; and the inadequacy of ernesto´s capital accumulation methods, expertise, bonding capital, and tacit knowledge of alternative businesses. ernesto´s alternative was venture diversification. but considering that, in order to be successful, resources must be valuable, non-replaceable, and hard to be replicated by competitors; and the entrepreneur must have accumulated expertise and trusting relationships from bonding social capital; one can infer that this was not the case. even more, the bet on agriculture, in his advanced age, was not supported by his siblings or offspring (lack of a family business group). ernesto, a bourgeois businessman, with accumulated intellectual capital, of american origin, well integrated with lima society, finally got his fortune dissolved in his last years, because of an unstable environment, lack of bonding social capital, lack capabilities or expertise that had to be learned rapidly due to the diversification he was forced to do, and to lack of expertise in his last venture: agricultural exploitation. primary sources archivo ricardo wiesse thorndike, “papeles de e. thorndike”. lima, peru. archivo general de la nación, fondo documental aguas de regadío. archivo de la legislación peruana. archivo de la legislación boliviana. archivo del ministerio de relaciones exteriores. archivo notarial. archivo de sucesiones de lima. contract between the peruvian government and enrique meiggs fulfilled february 3th, 1877. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 references alliende, maría. 1993. historia del ferrocarril en chile: capítulos de la modernidad. santiago de chile: phuen. american society of civil engineers. 1908. transactions of the american society of civil engineers. new york: secretary of the american society of civil engineers. barney, jay. 1991. “firm resources and sustaining competitive advantage.” journal of management 17:99-120 barney, jay. 2001. gaining and sustaining competitive advantage. second edition. new jersey: prentice hall. bartkowiak, danuta. 1998. ernesto malinowski, constructor del ferrocarril trasandino. 1818-1899. lima: bcr. basadre, jorge. 1961. historia de la república del perú. historia de la república, v. 7. ediciones historia. camacho, simon. 1871. el ferrocarril de arequipa: historia documentada de su origen, construcción é inauguración. arequipa: imprenta del estado. carney, michael. 2007. “minority family business in emerging markets: organization forms and competitive advantage.” family business review 20:289–300. contreras, carlos, and marcos cueto. 2009. historia del perú contemporáneo. desde las luchas por la independencia hasta el presente. lima: instituto de estudios peruanos. dávalos y lissón, pedro. 1919. la primera centuria. lima: librería e imprenta gil. dóriga, enrique. 1993. desarrollo humano estudio general y aplicado al perú. lima: universidad del pacífico. empresa de los ferrocarriles. 1887. ferrocarriles de arequipa, puno y cuzco o distancias y alturas de las estaciones, 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de la droga entre estados unidos y el perú, 1860-1980. documento de trabajo. lima: instituto de estudios peruanos. hampe martinez, teodoro. 2010. meiggs, grace y la obra del ferrocarril central andino (1870-1885). arequipa: universidad nacional san agustín. hite, julie m., and william hesterly. 2001. “the evolution of firm networks: from emergence to early growth of the firm.” strategic management journal 22:275–86. jaskiewicz, peter, klaus uhlenbruck, david b. balkin, and trish reay. 2013. “is nepotism good or bad? types of nepotism and implications for knowledge management.” family business review 26:121–39. kemp, klaus. 2002. el desarrollo de los ferrocarriles en el perú. lima: universidad nacional de ingeniería. klaren, peter. 2012. nación y sociedad en la historia del perú. lima: instituto de estudios peruanos. leiva, juan, and erick guillén. 2015. “de un escenario dominado por una elite de familias a uno disperso con presencia de múltiples protagonistas. el capitalismo en costa 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historia de la corrupción en el perú. lima: iep. salinas, alejandro. 2007. estudio socio-histórico del epistolario meiggs (1866-1885). lima: seminario de historia rural andina. samame, mario. 1979. historia: el perú minero. lima: incitemi. seminario, bruno, and nikolai alva. 2013. “el pbi, tres siglos pasados y media centuria venidera.” in cuando despertemos en el 2062: visiones del perú en 50 años, edited by bruno seminario, cynthia sanborn, and nikolai alva, 117-192. lima: universidad del pacífico. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 180-207, january-june 2019 doi:10.1344/jesb2019.1.j056 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 thorp, rosemary, and geoffrey bertram. 2013. peru, 1890-1977: crecimiento y política de una economía abierta. lima: universidad del pacífico. wiesse, ricardo. 2011. culebra, memorias de familia. lima: ricardo wiesse. wong, david, harold hernández, miguel chirinos, and josé carrasco. 2018. “unequal growth and social capital in clothes-making enterprises in peru: 1980-2015.” journal of evolutionary studies in business 3 (1): 198–225. yin, robert k. 2003. case study research. design and methods. london: sage. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 1 paloma fernández pérez universitat de barcelona (spain) alfons zarzoso museu d’història de la medicina de catalunya (spain) introduction. a mixed model of hospital services: catalonia, 1870s-2010s abstract this special issue aims to contribute to current knowledge held on mixed hospital systems from a historical perspective, as there is nowadays much debate on the sustainability and efficiency of public and private healthcare systems in the world in the covid-19 pandemic. by focusing on the evolution of mixed hospital systems through the case study of the history of such systems in catalonia in the last century, the authors of this special issue show that mixed hospital systems take a long period of time to be used, and trusted, by the population. it is also considered how public healthcare regulators can create a diversity of mechanisms that facilitate access by the population to healthcare services in times of external shocks such as pandemics. this introductory text begins with a section about the international context which explains the relevance of mixed hospital systems, which is followed by a summary of the main historical points regarding the catalan model of mixed hospital provision since the 19th century. it also highlights the most significant contributions of the seven articles of this special issue, which consider how the catalan society confronted social, economic, and political changes and how those actions led to configure a distinctive mixed model of hospital system. finally, this text also sheds light on areas of research regarding the rich history of hospital healthcare that still need to be addressed. keywords: mixed hospital systems; catalonia; history of health care corresponding author: e-mail: palomafernandez@ub.edu received 23 december 2020 accepted 23 december 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:palomafernandez@ub.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 2 1. hospital systems in the world healthcare systems are complex networks with actors that cooperate and often have conflicting interests: suppliers of public and private health insurances, manufacturers and distributors of healthcare equipment and pharmaceutical products, patients with diverse socioeconomic backgrounds, scientific researchers, healthcare staff, and private and public institutions that sponsor healthcare centres (donzé and fernández pérez 2019). despite its complexity in terms of organisation, health expenditure represents an increasing share of the total gross domestic product in the world, between 2 and 40 per cent depending on the country. in 2015 health expenditure varied enormously between countries, from 17 us dollars per capita in the central african republic in 2015, 2,354 us dollars per capita in spain to the 9,818 us dollars per capita in switzerland that same year (who 2020c). more health expenditure does not always denote a better position in the world rankings of life expectancy (who 2020a). between the 1960s and the 1980s there was an increase in public health expenditure worldwide. this subsequently changed and after the 1990s private healthcare expenditure began to take up an increasing share of total healthcare expenditure in the world.1 world health organisation statistics indicate that most of the health expenditure in the world is on hospitals, including infrastructure, equipment, pharmaceutical products, and staff. 1 according to the world health organization, “globally, there is too much reliance on direct payments as a source of domestic revenue for health. the obligation to pay directly for services at the moment of need – whether that payment is made on a formal or informal basis – prevents millions of people receiving healthcare when they need it” (who 2010). volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 3 after the 1990s up until today, public plans of reform of health expenditure have called attention to a persistent problem of the sustainability of health systems established after world war ii. governments and institutions have indicated with concern the need for cost contention and more efficiency and productivity within hospital and healthcare systems, due to the increase in life expectancy, the aging population, and the rise in chronic illnesses and cancer that require greater healthcare resources and expenditure that governments or private healthcare companies are not ready to absorb efficiently. the last reforms of health systems in the world in the first years of the twenty first century had budgetary control as one of the key aims as well as increasing the efficiency of existing resources (who 2020b). in this context, there has been extensive academic research into two relevant processes involved in expanding the access to health services and centres in the last century: the increase of public and private health insurance systems, and the consolidation of hospitals as hubs around which access to health services, technology, and products, has been concentrated and coordinated. policymakers and international organisations have been aware of the relevance of hospitals as resource hubs in their communities and the need to improve cooperation on domestic and international levels since the times of the league of nations a century ago up until today, as indicated by the international hospital federation (formed in 1929) in the occasion of their 90th anniversary this year in 2020 (international hospital federation 2020). economic and business historians and management scholars have studied the development of health insurance systems in the last century fairly extensively but have relatively neglected the long-term emergence of hospital systems as relevant actors in the improvement of wellbeing. most academic literature focusing on health systems with a very long-term perspective has approached the context that created the welfare system in the united kingdom and the nordic volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 4 countries after world war ii with a strong influence from public pressure. scholars has also studied the weaknesses of the private-led healthcare systems and hospitals in the united states and japan (donzé and fernández pérez 2019; thomson et. al. 2011; saltman, busse and figueras 2004; busse, shreyögg and gericke 2007; ellis, chen and luscombe 2014; european observatory on health systems and policies 2020; who 2020d). there is relatively less published from a historical perspective about the history of mixed hospital systems, where public and private actors have coordinated their attention to healthcare issues in their communities with varying levels of success over centuries. catalonia is an excellent example of historical resilience of a mixed hospital system, which resists the impact of external shocks relatively well due to the significant use of private health insurance (more than 40 per cent of holders of health insurance in catalonia have both public and a private health insurance) in a territory with universal access to a public healthcare system. this special issue aims to contribute to current knowledge held on mixed hospital systems from a historical perspective, as there is currently much debate on the sustainability and efficiency of public and private healthcare systems in the world in the covid-19 pandemic. by focusing on the evolution of mixed hospital systems through the case study of the history of such systems in catalonia in the last century, the authors of this special issue show that mixed hospital systems take a long period of time to be used, and trusted, by the population. also, that public healthcare regulators can create a diversity of mechanisms that facilitate access to healthcare services in times of external shocks such as pandemics, by maintaining the legal autonomy of private institutions and associations under the umbrella of the public service, which are efficiently complementing services and products that the public system can be unable to provide especially when there is a sudden increase in demand. volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 5 catalonia, certainly, is not alone in having a long history of mixed hospital systems. there were many regions in western europe where the mixed type of hospital system has existed since the middle ages and after the modern times (donzé and fernández 2019; fernández pérez 2021). during the nineteenth century british voluntary and municipal hospitals had established a very decentralised service model up until the national health service (the nhs) came into existence in 1948. after the 1942 beveridge report on social insurance and allied services, a proposal presented to parliament that established universality in access to health services, free at the point of delivery, paid for by central funding. but even since the nhs came into existence, voluntary hospitals and philanthropic charity have remained very much alive and part of the english healthcare system today (able-smith 1964; boyle 2011; gahan and burbidge 2010).2 in germany, there were strong local traditions of science-based healthcare centres, especially in former prussia, and it was after the impact of the wars with france during the 19th century that the prussian army established the need to order the sustainable access of science based medicine with the 1883 bismarck health insurance act, which for many historians is considered as the first social health insurance in the world that helped to finance the development of the german hospital system. this system is world-renowned and firmly established in the country, having its foundations in science, clinical analysis, a dense network of health centres and staff across the territory, and a dense population who have access to high quality and affordable healthcare insurance (fernández 2021; busse et. al. 2017). as in the united kingdom and germany, france learnt from difficult experiences when providing 2 john mohan and martin powell, with research assistance of martin gorsky, led a very important project that has studied the history of voluntary hospitals in the united kingdom between the 1890s and the 1940s, with open access databases and statistics (mohan and powell 2020): http://www.hospitalsdatabase.lshtm.ac.uk/thevoluntary-hospitals-database-project.php (access 7th december 2020). martin gorsky is leading now a research project that studies the resilience in our days of this voluntary hospital system. http://www.hospitalsdatabase.lshtm.ac.uk/the-voluntary-hospitals-database-project.php http://www.hospitalsdatabase.lshtm.ac.uk/the-voluntary-hospitals-database-project.php volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 6 healthcare for the military and civil population in the many wars affecting western europe from the mid-19th century until the mid-20th century. moreover, they learnt how important it was for the state to promote coordination between modern scientific institutions, large hospitals, the different health insurance schemes allowing a larger chunk of the population to receive modern healthcare, above all in cities and gradually in rural areas too after the mid-20th century. the united states, aware of the weaknesses of their medical education and the coordination of healthcare services, particularly after their civil war in the 1860s and the war against spain in cuba in 1898, sent several missions of thousands of physicians to western europe to learn how to improve their medical education (1910 flexner report) and their medical practice (with the integration of research and laboratories and the importance of the faculty having a direct link to a large hospital with the example of the johns hopkins faculty and hospital of medicine in the late 1890s). between the 1910s and the 1930s, franklin martin and malcolm maceachern, along with hundreds of physicians involved in the american hospital association and the american surgeon association, elaborated a model of modern hospital organisation that would be frequently imitated worldwide after world war ii, with three major components: an standardisation of medical practice, professionalisation of medical staff, and quality control systems of accreditation of standard hospital service. this model was followed and imitated in many regions and countries during the 20th century (fernández pérez 2021). there were alternative models of modern hospital organisation created before world war ii that endured later, as in russia. the communist revolution, with the leadership of the first people's commissar of health n.a. semashko, created between 1918 and 1930 a different model of hospital organisation and management, being very centralised, that in a very short period of time aimed to achieve something close to universal coverage of basic healthcare services, with volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 7 a very modern structure of primary, secondary, and tertiary types of healthcare centres that were very coordinated and centralised, that received strong investments from the public sector during 1918 and 1930. however, these institutions declined in financial strength, efficiency and quality of coordination and quantity of resources during the second half of the 20th century (arsentyev and reshetnikov 2017).3 spain was, in this context, a good example of a peripheral european country in transition from traditional to modern models of hospital organisation and management. it was also a good example of how path dependent regional experiences of healthcare organisation influenced different outcomes in recent times. in the mid-19th century, most regions of spain were forced to transfer private healthcare property to the state, but in the basque country and catalonia local institutions and elites joined forces to maintain the legal property and the control of the huge assets accumulated (mostly by donations) in their private healthcare institutions and centres. in this way, catalonia became a significant example of european traditions of regional coexistence of public and private interests in regional healthcare systems (barceló and comelles 2020). catalonia had a medieval tradition that has survived until recent times under different regulatory frameworks, with the coexistence of few relatively large hospitals with a variety of private institutions that provided healthcare insurance coverage, pharmaceutical products, and service. the traditional low health expenditure of the central government made unavoidable to maintain the willingness to remain independent of institutions that existed since medieval times like the hospital de la santa creu, the largest in the city of barcelona during centuries, with a large 3 see also the interview of fiona fleck to igor sheiman, in bulletin of the world health organisation (fleck 2013). volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 8 patrimony from private donors that could not just be expropriated by the central state in madrid. the historical existence of self-governing institutions like the mancomunitat de catalunya in the first third of the 20th century, and the generalitat de catalunya after franco's death in the last decades of the 20th century, reinforced the self-governing character of many of the private healthcare clinics and hospitals. self-governance has long been the preference of the catalan elites and institutions, who have often preferred to put healthcare institutions under private management and view them as private property and resources. this is not as often seen in other regions of spain or western europe where the central government has a much more relevant power than in catalonia and where health is much more considered a public area of policy that affects society, under the hands of the central government. there are relatively few publications in economic and business journals about the evolution of the mixed catalan hospital model, and the institutional and political context that made its continued existence possible over the centuries. this is a major gap that this special issue aims to fill. 2. a distinctive catalan health model the so-called catalan health model based on a mixed network of public and private hospital services was set up from the end of the 18th century. the importance of the city of barcelona was crucial in this process. however, the progressive implantation of factories along the main rivers and in the metropolitan towns surrounding barcelona expanded the geographical scale of this model to most of catalonia. until the 18th century, poor relief and healthcare had followed a pattern similar to that of the other territories of the crown of aragon. since medieval and early modern times, the positive consideration of individual and collective health and the development of charitable formulas in the face of poverty turned into support of civil and religious authorities for university medicine – medical galenism – and paved the way to two volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 9 fundamental institutions: a general hospital known as hospital de la santa creu and the house of mercy (arrizabalaga 2014). concepts of responsibility and management of the res publica guided those institutions that were financed in a complex way through public resources and a growing estate based on donations and testamentary bequests. although the city of barcelona had the largest general hospital, a great network of small hospitals in towns and villages around catalonia was also established. along with this type of charitable hospital devoted to the “poor patient,” representatives of medical galenism – medical practitioners, surgeons, apothecaries – spread slowly but progressively across the country through a contract – “conductes de comú” – that allowed them to remain and take root in certain labour and socioeconomic conditions. indeed, those who could afford the payment had a patronage relationship with the aforementioned medical practitioners. due to the urban and demographic changes experienced in 18th century barcelona, which were tied to a growing industrial process, these kinds of contracts were increasingly cultivated by urban working population, mainly attached to guilds and brotherhoods. in the genesis of the modern catalan world, a remarkable process of medicalisation took place through different models of mutual aid associations and friendly societies, which intensified in the first half of the 19th century (zarzoso 2005). a new stage began in the 1830s as the ancien régime collapsed in spain and a new liberal state ruled by the bourgeoisie made its way with great difficulty. in this period, the industrialisation of the catalan urban networks, led by the city of barcelona, meant dramatic demographic changes. this social transformation happened along with the strengthening of liberal values and features, such as the professionalisation of medical practitioners. they produced the main criticism against the old general hospital and the asylum condition of that healthcare institution. however, the response of the new spanish liberal state to policy a new volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 10 hospital model was rather conflicting and chaotic. on one hand, it was based on the privatisation – “desamortización” or confiscation – by force of land and other properties of the catholic church and then made available to a developing real-estate market as part of a strategy to obtain money to pay off public debt, as well as to increase national wealth and liberalise the market by creating a class of land-owning farmers and businessmen. this resulted in negative effects in the funding government of both small and big hospitals in catalonia. on the other hand, the enactment of new legislation, such as the poor law of 1842 and the health law of 1855, arrogated to the liberal state itself the right to decide who could receive healthcare – henceforth the “impoverished patient” – and how to govern and fund the hospital as a charitable state and liberal institution. next to these features, the new territorial division of the state through a system of provinces turned its capital and provincial cities into centralised places of healthcare institutions. in most cases and due to the lack of state funding, this resulted in the creation of public provincial hospitals that depended on provincial or municipal and private investment in order to survive. in other cases, such as the hospital de la santa creu or small urban hospitals such as those of vic or tarragona, its governors managed to retain control both of its heritage and traditional sources of funding and to avoid a provincial competence on behalf of a purportedly legal trait due to its private condition as a charity. therefore, this resulted in a distinctive privatisation of some medieval public hospitals, which remained in the hands of the conservative bourgeoisie. moreover, in a growing industrial context, the local bourgeoisie also invested in new private hospitals that offered medical services as a charity both on a free basis for those patients without resources and in an increasing pay per service basis that was tied to the urban extension of the mutual aid movement. these healthcare institutions transformed the medieval concept and organisation of the hospital as an asylum into a “domestic hospital”. that volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 11 is, the introduction of a growing number of medical practitioners along with an intense presence of religious orders, especially sisters that acted as nurses. this resulted in frequent conflicts about how to manage the hospital, and also asserted an image of the hospital as a charitable project (barceló-prats and comelles 2018 and 2020). significantly, this progressive transformation of the old regime model of hospital provision crystallised along with the emergence of several private initiatives in the hands of representatives of the local bourgeoisie and of medical entrepreneurs that met a growing demand of medical services in an open medical market. in the second half of the 19th century the city of barcelona and its hinterland was the place of the settlement of both new institutions for the mentally ill and new private surgery clinics. these healthcare institutions were not only devoted to the affluent, but they also took advantage of the impressive extension of mutual associations, friendly societies, and insurance companies in 1900s barcelona. this resulted in the consolidation of a process of medicalisation of the catalan society (pons-pons and vilarrodríguez 2017; zarzoso 2017). in the first third of the 20th century, demographic changes due to industrialisation intensified and marked a growing urban catalan society. this coincided with important political movements in the government of spain that had consequences in the management of healthcare policies and institutions. in barcelona two new and relatively large hospitals were established. on the one hand, the old hospital de la santa creu was transformed into the new hospital de la santa creu i sant pau in a new establishment built in the eixample district in 1902 and partially in operation since 1916. this hospital was marked as representative of the local bourgeoisie and politically committed with catalanism. it functioned as a private charity funded through a large medieval heritage and also to private donations and bequests. medical volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 12 practitioners had an important role there as they ran the medical services, organised by speciality. they were either not paid or only received very small salaries for their work, but they built a public prestige in those positions and contributed to the economic health of the hospital by succeeding in channelling investments from their private practice in surgery clinics or home-office medical consultations. they also taught students of medicine there, under the supervision of the religious administrator of the hospital. however, the acceptance of patients was not based on medical decisions but was in the hands of the hospital administration and mainly devoted to the “patient without resources” (fernández pérez 2018). in 1906 the hospital clínic was also inaugurated in barcelona. this was a public hospital, the first of those provincial institutions designed by the liberal legislation of the previous century and devoted to the recipients of public charity. it was also marked as a “spanish institution”. despite its public funding and government in the hands of representatives of the town council and the provincial authorities, its services also depended on the local bourgeois practices of donations and bequests. next to these big hospitals, the local authorities of the city of barcelona promoted a range of medical services and small hospitals such as the maritime hospital for infectious diseases and hospital de la esperanza (reventós and piqué 1990). it has been estimated that in catalonia there were around 50 hospitals, mainly small and medium sized, in the first third of the 20th century (barceló-prats and comelles 2020). interestingly, in those years there were two periods of self-governing institutions in catalonia that designed and developed the first hospital administrative and organisation reforms on a regional basis. those plans were promoted and led not only by political representatives of the catalan bourgeoisie but also by medical representatives eager to participate in the political transformation of that society. in the years of the mancomunitat de catalunya (1914-1924), volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 13 reforms were planned under the idea of a rationale efficiency stemming from the unification of the local healthcare resources in the more than 50 small hospitals into a new hospital division based on the “comarca,” a new political and territorial concept. meanwhile, this self-governing institution defrayed a portion of the healthcare costs through the public investment in 28 of those small hospitals, but without any kind of intervention in the direction of those institutions. despite the suppression of the mancomunitat de catalunya by the dictatorship of general primo de rivera in 1924, its policies and plans regarding hospitals were executed by the diputación de barcelona with the establishment of public hospitals, such as the clínica mental in santa coloma de gramenet (1926) and the comarcal hospitals of vilafranca del penedès (1928), igualada (1929) and vic (1931). a second stage of self-governing institutions started in the years of the new spanish republican government (1931-1939) that allowed the reestablishment of the old institution of the generalitat de catalunya. the recovery of plans was reinforced with powerful and reflective medical reports and this allowed a new legislation in 1934 that planned new comarcal hospitals, while still observing its jurisdiction and autonomy in the management of those hospitals. the political situation in the country impeded a whole application and only the hospital de sant bernabé in berga acquired the condition of a comarcal hospital (1936) with the obligation to attend patients of that area in exchange of a public investment. the outbreak of the spanish civil war (1936-1939) and its result led to abandoning those hospital plans and reforms, which were the first experience in spain to organise the whole healthcare system in a hierarchy that included somatic and mental illnesses alongside social work (sabaté 2017). in the interwar years, an important novelty appeared in barcelona that was related to the already consolidated process of private surgery clinics and laboratories. in contrast to those institutions, volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 14 some of which were family businesses but all governed by a single owner that acted as a medical entrepreneur, the new institut ginecos (1924) and institut policlínic (1926), also known as clínica platón because of the name of the street where it was located, were mercantile societies, organised by specialties, integrating a management and architectural design inspired by the american hospital model (casares and de fuentes 2001). the instauration of the franco dictatorship (1939-1975) did not bring about general hospital reform, regarding the provincial and municipal hospital. that meant the persistence of the domestic hospital organisation throughout that period. francoist families divided up healthcare responsibilities. falangists, a fascist party that supported franco’s coup d’état, developed a healthcare system – so called soe that stands for seguro obligatorio de enfermedad (a compulsory sickness insurance) – since 1942. it was ruled through a social welfare institution under the control of the ministry of labour and covered general medical consultations, delivery care and some surgical operations for the working classes. despite a theoretical proposal based on an institutional hierarchy of outpatient centres (ambulatorios) and hospitals (residencias), a profound lack of funding to build a network of resources and even to overcome a negative image of them once inaugurated forced the soe managers to contract medical services with private clinics and with private and public local hospitals. moreover, military, monarchic, and catholic families took control of the general health board – the dirección general de sanidad – under a different government office. they oversaw the charitable provincial and local institutions as well as state hospitals devoted to specific diseases, such as tuberculosis and mental disorders. in the end, there was no coordination, and frequent conflicts between those families and institutions. beyond this, between 1942 and the implementation of the new social security healthcare in 1967, the hospital became the cornerstone of the state healthcare model, volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 15 but the lack of funding and human resources delayed its general acceptance by the spanish population (vilar-rodríguez and pons 2018a). in catalonia, middle-classes in cities and the rural countryside embodied a healthcare culture that put full trust in private clinics as a resolute medical institution and that meant a growing affiliation for private mutual insurance companies and associations. so, despite the number of medical problems solved in the private medical consultation at a doctor’s surgery or at the patient’s home, surgical problems and delivery care reinforced the medicalised behaviour of lay people through the recognition of effectiveness in private clinics (barceló-prats and comelles 2020). since the 1950s criticisms of the francoist healthcare model grew among medical doctors of the college of physicians of barcelona. they worked as a think-tank to propose a major healthcare reform with the hospital as its cornerstone. this meant the introduction of international hospital theory and practice and the production of reports and studies both for specific hospital cases and for the whole region of catalonia. some of those scholars were trained in the united states and could adapt that knowledge to the main big hospitals of barcelona in the 1960s and early 1970s (fernández pérez 2021). this resulted in the establishment of a hierarchical model of organising the hospital and the creation of new medical services, such as the emergency care, coronary and intensive care units (barceló-prats, comelles and perdiguero-gil, 2019). this happened first in several hospitals in barcelona: the hospital de la santa creu i sant pau served as a model for the reforms in hospital clínic i provincial de barcelona and hospital del mar (bohigas 2020). this new understanding under scientific and technical management of the hospital was also introduced in the hospitals created by the social welfare institutions – which were known under the name of residencias – such as those of vall d’hebron in barcelona, joan xxiii in tarragona or verge de la cinta in volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 16 tortosa. this process coincided with other demographic changes that took place in catalonia – in small cities this resulted in the end of contracts with private local hospitals and in some cases even its closing – and barcelona – grassroots associations had a fundamental role forcing changes in healthcare areas related to community medicine – and that required a reform of the healthcare system and not only of the hospital care provision (pons-pons and vilar-rodríguez 2019). a new period of democracy started in the spanish society following the death of franco. in the late 1970s a growing number of voices from the medical profession, regardless of their ideological differences, claimed an extensive right to health that went beyond hospital reform and included other issues such as primary care, disease prevention, and health education. however, the importance of the hospital and its effectiveness was a determining factor in the spanish health reform that led to the new general health act of 1986 (perdiguero-gil and comelles 2019). primary care had a decisive role in the new legislation, but under a hierarchical model where all the healthcare system depended on the hospital, in regional terms -local and comarcal – and conceding a central role to the city of barcelona (vilar-rodríguez and ponspons 2018b) –. the introduction of a national health service was implemented by the generalitat de catalunya that was restored in 1977. social and health responsibilities were transferred to the catalan government in the following years. in 1980 an initial survey of the hospital situation in catalonia was designed and in 1981 the new institutions that were to regulate and manage healthcare in catalonia were created: institut català de la salut (catalan health institute) and xarxa hospitalària d’utilització pública (the public use hospital network). in the 1980s, the catalan healthcare model acquired a definitive mark of hospital centrism with primary care and other medical services subordinated. the generalitat de volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 17 catalunya was in the hands of a nationalist and conservative political party between 1980 and 2003 and in those years this healthcare system was developed in a distinctive way. not only did the hospital continue to play a central role, but it was necessary to rationalise and adequate the provision to the different needs according to demographic, territorial and economic issues. as the public provision of hospitals was insufficient, a decisive measure was to use the old network of public and private local hospitals and turn them into new and hierarchically organised health and social resource through contracts. remarkably, the historical genealogy elaborated by the government of the generalitat de catalunya in the process of building the so-called catalan health model considered the policies and plans designed in the first third of the 20th century as a precedent of the new model, which was understood as “a mixed healthcare model that integrates a unique network of public utilisation of all the healthcare resources from public and private ownership” (reventós and piqué 1990; sabaté 2015). 3. contributions to the literature on the history of the catalan mixed model of hospital system in this special issue this special issue summarises the historical evolution of the mixed catalan model of the hospital system. contributors of these articles provide a range of arguments that allow a clear understanding of the nuances of the catalan model as part of the spanish political frame from the end of the 18th century to the first decade of the 21st century. such distinctive evolution has historical roots. some of them originated in the distant past of the 13th and 14th centuries when local authorities of barcelona started to define and shape an extraordinarily strong hospital system. a model based on a public management that went to public and private funding to cope with social and health problems. not only was this model replicated in other catalan towns and villages in the following centuries, but it also remained intact until it was threatened from the volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 18 end of the 18th century in the context of an incipient capitalism. in the 19th century, industrialisation was a driving force that changed the catalan society alongside the liberal creed of the new spanish state. a final determining historical factor comes from the ideas and actions planned or developed throughout the three periods of self-governing institutions that featured contemporary catalonia. how the catalan society confronted that social, economic, and political changes and how the responses configured a distinctive catalan mixed model of hospital system constitutes the aim and contributions of this special issue. in the first article, economic historians jerònia pons and margarita vilar try to statistically understand the roots of the hospital system in catalonia between the years 1870s and 1930s. what were the historical reasons for the greater importance of private hospitals in catalonia compared with spain as a whole? or why municipal hospitals predominated in the public sphere? they find answers both in the long-term and in the features of an industrial society and this allows them to describe an almost complete configuration of that model of hospital care in the 1930s. interestingly, they add new arguments to the answers developed by most municipal hospitals as a reaction to the liberal legislation regarding beneficence in the last third of the 19th century. thus, strategies of privatisation allowed members of the elite and professionals to not only keep the governing bodies of hospitals and the proximity of healthcare premises, but also “maintaining ownership of the entity and evading public scrutiny and auditing”. they also observe that the first political attempts to shape a sustainable hospital network were based on those existing and economically fragile local institutions planned by the self-governing catalan administrations in the 1910-1920s and in the 1930s. two military dictatorships doomed to failure those plans that tried to rationalise the territorial hospital provision according to political, volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 19 economic and professional criteria, “but without altering the prevailing model of the private hospital system”. the establishment of private surgery clinics in late 19th-century barcelona and its impressive growth in the first decades of the 20th century is the issue raised by historian alfons zarzoso. here, it is shown that this happened in an open medical market where surgeon-entrepreneurs developed several commercial strategies to meet a growing demand. private surgery clinics participated in the shaping of a model that transformed the clinical practice in technological terms and fostered a process of medical specialisation and contributed to stimulating the medicalisation of the catalan society – mainly in the urban popular classes – on behalf of medical effectiveness. the surgical clinical care model was an alternative to the non-profit, charitable public and private hospital, and thus played a fundamental role in the establishment of a private medical care model, based on payments for surgical interventions and hospital stays, and paid for by private insurance companies, mutual aid associations or individuals. in line with the idea of how new sites of science played a key role in the building of effectiveness and the process of medicalisation, paloma fernández-pérez and cristina sans focus on the grifols laboratories as an excellent case-study that allows to see the early integration of a small modern laboratory in the healthcare district of barcelona since the 1880s until the mid-1950s. the loss of archival evidence about these kinds of institutions makes the extent of this contribution even greater. by studying the foundations of the scientific and business practices of this family firm, they demonstrate how intangible assets related to early embedded high standards in knowledge creation, knowledge transfer and outward looking attitudes are crucial when attempting to transfer entrepreneurship in the long run, and make a small business become a large company in the competitive field of health activities. volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 20 words are always burdened with ideology and those such as clinics, institutes, polyclinics, or residences – that is, the institutions that acted as hospitals since the late 19th century but avoided the negative connotations of the name through this communication strategy – not only were clear examples of medicalisation but also of the shaping of a popular medical culture that made the hospital a nuclear institution of health. josep barceló and deborah bekele offer insights into the roots of hospital centrism in 20th century catalonia. this approach also situates in a historical context why primary care, prevention of disease and health education had a subordinated position. they show that all attempts made by catalan reformers in this period to transform the healthcare model had in common decentralisation policies as a key factor to make the hospital a cornerstone in the provision of health services. the contribution by paloma fernández is the first research paper that proposes using hospital beds as a long-term indicator to compare the evolution of hospital systems in the world. it confirms that the beginning of the modern increase in the number of hospital beds per capita in catalonia did not take place during the franco regime or the golden age of growth of capitalism in the world, but before the civil war and before world war ii. such growth was maintained throughout the 20th century up until the 1980s. after the 1980s, the article demonstrates that in barcelona, as in the rest of the world, there was a reduction in the number of hospital beds per capita that took place in most countries of the world except for a good number of communist countries, germany, japan, and a small number of other countries. even if still fragmentary, the reconstruction of comparable figures on hospital beds, as shown in the case of barcelona, suggests that for the earliest period between the 1900s and the 1930s there was initially a rise in the number of hospital beds per capita in the western world. as this process took place in times of sharp mortality decline, demographic growth, and improvement volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 21 of life expectancy, the article suggests that there was a connection between these changes and the increase in hospital beds in the new modern large hospitals that needs to be further explored with more research into hospital archives. that hospitals are not isolated entities, or the result of patronage of elites and institutions, is clear in the study by carmen vila on the origins of the emergency service at the hospital de santa creu i sant pau after 1967. in this article the contribution of the community, of associations of neighbours, and the influence of networks of physicians and nurses with a clear willingness to introduce modern management practices from other countries in the hospitals of barcelona are visible. carmen vila highlights, with a variety of historical sources, how the needs and the strength of the neighbourhood of the hospital were a driving force in the origins of the emergency service in this large hospital. she also emphasizes the figure of carles soler durall who was in charge of organising the team that would establish that first emergency service. he was the son of a bacteriologist from the hospital d’infecciosos (known today as hospital del mar) who had gone into exile to the united states. he had wanted to specialise in microbiology at yale, but the untimely death of his father made him switch focus onto hospital planning and management techniques. once he returned to spain, the president of the provincial council of asturias, josé lopez muñiz (1916-2005), took him on as manager at the general hospital of asturias where he carried out the duties of both manager and medical director by applying american techniques of hospital management. the influence of local forces in the modernisation of hospitals in some european regions through the example of catalonia is thus one of the most important general findings of this special issue. as in the other articles, lluís bohigas studies this feature from a legal perspective, by studying how self-government in catalonia and the healthcare policy of the generalitat de volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 22 catalunya has integrated private not for profit care in the public healthcare service after the 1980s. the main objectives of the generalitat's hospital policy between 1980 and 2020 have been, according to bohigas, to keep the participation of city councils in hospital governance and to improve hospital efficiency. in 1980, half of the hospitals providing public healthcare were linked to the city council of the town where they were based. some municipalities had invested in the construction of hospitals and their maintenance, as was the case with barcelona city council, but most hospitals were private foundations. by 2020, half of the hospitals linked to local foundations were still in operation, while the other half had been transformed into consortia with the generalitat in majority control and local councils, and in some cases the original foundations, holding minority stakes. consortia and public companies were the legal formulas chosen by the generalitat to preserve autonomy in the governance of the hospitals. however, bohigas indicates that in the last decade, some restrictions have appeared related to the management autonomy of hospitals in catalonia, due to the integration of consortia and public companies into the european accounting system (sec 2010), and to budget reductions for 2010 and beyond with the financial control imposed by the treasury department to reduce the public deficit. finally, ferran sabaté´s study about the sources for the study and research of the catalan health model indicates that despite fragmentation of sources there are abundance of them because of the wealth of institutions and centres that have developed modern medicine and hospital practice in catalonia since medieval times up until today. sabaté suggests that the diversity of approaches makes it necessary to consider that the analysis and study of the catalan health model could be performed from different perspectives: anthropological, economical, legal, historical, institutional, and comparatively with other models. sabaté presents a definition of volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 23 the catalan health model, divides its main evolution in the 20th century in three different chronological stages, and organises the identification of main archives, libraries, and sources of study for each stage, thus providing an organised research agenda for scholars. 4. further research a fruitful history of the catalan healthcare model has been produced in the last decade. there are a growing number of studies that have outlined a big picture for catalonia as a whole. contemporary historians interested in economic, social, political, and cultural aspects have established the main lines of that research. this special issue is a good example of such results. however, there is much work ahead. given the importance of historical records and the loss of a great number of sources about healthcare provision in catalonia, an important aim should be the construction of a catalogue of materials, the identification of gaps and the search for and preservation of private historical records. it should also constitute a main objective in this area the recovery of oral accounts that can explain what happened in the last third of 20th century catalonia. in recent years, the catalan medical history museum has made available through digitization several medical and professional journals that were published by surgeonentrepreneurs and by medical institutions (such as the college of physicians of barcelona). but much remains to be done in this area. it is necessary to remember the usefulness of this type of digital resource to understand medical practices and strategies, visual resources or debates on health service provision policy in catalonia and spain in the 20th century. despite the number of studies on local hospitals, it seems necessary to foster this kind of research across the country to understand the relationship of local elites and professionals and to outline their attitudes before liberal legislation and their position before the population that volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 24 resorted to this type of healthcare provision. local history is a useful resource to approach the countryside for a better understanding of a world wrongly considered as monolithic. there are several subjects that could be raised in this area such as the relationship between towns and villages, responses to technological change, degrees of medicalisation, strategic uses of provisions resources, funding, architecture, and so on. mutuality and its associated aspects of friendly societies and insurance companies is an issue that has received great but sporadic attention in recent decades. however, there seems to be some research pending on this subject. a systematisation of sources and approaches would be desirable, especially throughout the 19th and early 20th centuries, not only in barcelona and its industrial districts, but also in the industrial cities surrounding the capital. thus, it could be remarkable to understand the relationship between these mutual aid associations and doctors and to see how private surgery clinics contributed to a growing medicalisation of the urban working classes. in this sense, it would be useful to establish relationships between these sources and the historical medical records of the surgical clinics. in the same vein, clinics and small hospitals established by factory owners throughout the country need intensive research. a good example is the case of the radiator manufacturer roca, which established a hospital in the 1950s in viladecans-gavà, near barcelona (alcaide 2013). in addition, this case is also useful for considering grassroots movements in medium-sized towns and cities as driving forces for changes in the provision of hospitals and public medical services in the 1970s. much remains also to be done in the network of locally developed planning centres, mainly in the industrial metropolitan area of barcelona (fajula 2017). technology is also a dramatic key factor in this area of research. it is a topic with many analytical perspectives, but there are two sides to it. on the one hand, we see the introduction volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 25 of technology in the hospital as a sign of progress and an investment in better health care. on the other hand, the growing technological medicine not only contributed to the dehumanisation of the doctor-patient relationship, but its high cost put the survival of the health care model at risk. there is much research to be done in these areas. technology also means the circulation of knowledge, adapting it to the local context and training personnel. this indicates the need to study networks of medical equipment suppliers and local technical concerns at different geographical scales, their relationship with the academic environment not only in terms of training but also as part of their communication activities through conferences and exhibitions. technology is also crucial to understand the new ways of understanding human diseases and this is of utmost importance to study the relationship between clinical rooms and laboratories that were established in the city as family or individual businesses. along with technology is architecture, and the design of comfortable spaces as well. there is a lot to do in this field of study. the archives of the college of architects of catalonia are extraordinarily rich and, likely, will be able to provide arguments as to how science informs design, how healthcare spaces are built and transformed, how these places are negotiated between professionals, contractors and managers, etc. a general survey of the medical records of the hospitals in barcelona shows rather poor results (fajula 2021). this is disappointing as far as the large hospitals are concerned, especially the hospital clínic or the hospital del mar. in the case of the surgical clinics, as well as for many small laboratories and diagnostic sites, the situation of the archives is even worse. a large number of these small medical centres disappeared, and their records were not kept. without doubt, the most important and complete archive belongs to the hospital de santa creu i sant pau. the research options there are enormous. one of them is related to the development of the volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 26 administration and organisation of the hospital since the 1920s, which has been rather neglected until now. in contrast, the introduction of scientific management in the 1960s and 1970s has received considerable attention. the records of this archive also allow consideration for the introduction of engineering and information technology policies to study changes in both medical practice and management administration. along these lines, cost control efforts and health care rationing are also areas that need further research. this hospital could also be an excellent case study of how local elites, but also many ordinary citizens, showed their charity by donating money or even medical equipment. this practice was publicly acknowledged in the medical press and there are interesting photographic collections that can complete this type of approach. the relationship between politics and the development of public and government health policies that began in catalonia in the 1980s is also an area that needs to be explored. during this period, the consolidation of a politically peaceful health model – praised for the excellence of its medical professionals and for the range of quality of medical services – has run parallel to the reporting of scandals and cases of corruption throughout the country that took advantage of the blurred lines of the public and private model (sánchez bayle 2013). references able-smith, brian. 1964. the hospitals 1800-1948. london: heinemann. alcaide, rafael. 2013. “la història de l’hospital de sant llorenç de viladecans.” retrieved on december 15. https://ics30anys30veus.wordpress.com/?s=viladecans. arrizabalaga, jon. 2014. “asistencia, caridad y nueva ética de la responsabilidad colectiva ante la 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1(4): 529–534. doi: 10.1007/s13167-010-0050-1. international hospital federation (2020). special anniversary issue: a bold vision for future of hospitals and health services in the 21st century https://www.ihffih.org/home?document=resources. mohan, john, and martin powell 2020. http://www.hospitalsdatabase.lshtm.ac.uk/the-voluntaryhospitals-database-project.php (access 7th december 2020). perdiguero-gil, enrique, and josep m. comelles. 2019. “the defence of health. the debates on health reform in 1970s spain.”. dynamis 39(1): 45-72. https://revistaseug.ugr.es/index.php/dynamis/article/view/8666. pons-pons, jerònia, and margarita vilar-rodríguez. 2017. “the genesis, growth and organisational changes of private health insurance companies in spain (1915–2015).” business history 61(3): 558-579. doi: 10.1080/00076791.2017.1374371. pons-pons, jerònia, and margarita vilar-rodríguez. 2019. “el sistema hospitalario catalán entre 1880 y 1986: el predominio de lo privado sobre lo público.” farmacia, medicina e historia, 1: 4-33. reventós, jacint, anna garcía, and carme piqué. 1990. història de la medicina catalana sota el franquisme i les seves conseqüències. barcelona: hacer. sabaté i casellas, ferran. 2015. “antecedentes del modelo sanitario catalán.” medicina clínica 145 (supl. 1): 4-7. doi: 10.1016/s0025-7753(15)30030-0. sabaté, ferran. 2017. “public health in catalonia between 1885 and 1939.” catalan historical review 10: 43-57. https://dx.doi.org/10.2471/blt.13.030513 https://dx.doi.org/10.1007%2fs13167-010-0050-1 https://www.ihf-fih.org/home?document=resources https://www.ihf-fih.org/home?document=resources http://www.hospitalsdatabase.lshtm.ac.uk/the-voluntary-hospitals-database-project.php http://www.hospitalsdatabase.lshtm.ac.uk/the-voluntary-hospitals-database-project.php https://revistaseug.ugr.es/index.php/dynamis/article/view/8666 https://doi.org/10.1080/00076791.2017.1374371 https://doi.org/10.1016/s0025-7753(15)30030-0 volume 6, number 1, 1-29, january-june 2021 doi.org/10.1344/ jesb2021.1.j082 29 saltman, richard b., reinhard busse, and josep figueras, eds. 2004. social health insurance systems in western europe. maidenhead: open university press. https://www.who.int/health_financing/documents/shi_w_europe.pdf. sánchez bayle, mariano. 2013. la contrarreforma sanitaria. madrid. catarata. thomson, sara, robin osborn, david squires, and sara jane reed. 2011. international profiles of healthcare systems. washington: the commonwealth fund. vilar-rodríguez, margarita; and jerònia pons. 2018a. “el sistema hospitalario público y privado en españa en las primeras décadas del franquismo.” in un siglo de hospitales entre lo público y lo privado (1886-1986), edited by margarita vilar-rodríguez and jerònia pons, 179-261. madrid: marcial pons. vilar-rodríguez, margarita, and jerònia pons. (2018b). “el debate en torno al seguro de salud público y privado en españa: desde la transición política a la ley general de sanidad (1975-1986).” historia y política 39(1): 261-290. doi: 10.18042/hp.39.10. who-world health organization. 2010. health systems financing: the path to universal coverage, chapter 5 “an agenda for action.” downloaded in december 3rd. https://www.who.int/whr/2010/10_chap05_en.pdf?ua=1. whoworld health organization. 2020a. the global health observatory. statistics. retrieved on december 3rd. https://www.who.int/data/gho/publications/world-health-statistics. whoworld health organization. 2020b. “the global health observatory. database.” accessed december 3rd. https://www.who.int/data/gho. who. world health organization. 2020c. “global health expenditure database.” retrieved december 7th. https://apps.who.int/nha/database/select/indicators/en. who. 2020d. “observatory of health systems and policies/world health organisation europe”. retrieved december 2nd. https://www.euro.who.int/en/aboutus/partners/observatory/publications. zarzoso, alfons. 2005 “healthcare and poor relief in 18th and 19th century catalonia and barcelona.”. in healthcare and poor relief in 18 th and 19 th century southern europe, edited by ole peter grell, andrew cunningham, and bernd roeck, 121-141. aldershot: ashgate. zarzoso, alfons. 2017. “privatización de la medicina y profesionalización de la gestión.” in al servicio de la salud humana: la historia de la medicina ante los retos del siglo xxi, edited by alfons zarzoso, and jon arrizabalaga, 509-514. sant feliu de guíxols: sehm. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. https://www.who.int/health_financing/documents/shi_w_europe.pdf https://doi.org/10.18042/hp.39.10 https://www.who.int/whr/2010/10_chap05_en.pdf?ua=1 https://www.who.int/data/gho/publications/world-health-statistics https://www.who.int/data/gho https://apps.who.int/nha/database/select/indicators/en https://www.euro.who.int/en/about-us/partners/observatory/publications https://www.euro.who.int/en/about-us/partners/observatory/publications http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 patrick cohendet hec montréal (canada) https://orcid.org/0000-0002-2697-6963 richard chenier centech montréal (canada) https://orcid.org/0000-0003-0002-4849 laurent simon hec montréal (canada) https://orcid.org/0000-0002-9286-0061 lucy stojak hec montréal (canada) https://orcid.org/0000-0003-4972-0722 centech, a world-class business incubator based in the montréal innovation district, inspired by barcelona 22@ abstract the objective of the paper is to highlight the process behind the design and development of centech, a world-class incubator located in montreal and recognized as one of the most successful university incubators in the world. centech is housed in a cultural heritage building, the old dow planetarium, situated in the heart of the innovative district of montréal, the “quartier de l’innovation” (qi). based on a methodology using different sets of data (interviews, series of reports made for the montréal-barcelona summer school on management of creativity and innovation, etc.), the paper shows how the development of centech was in large part inspired by 22@barcelona. the conclusion highlights the importance of an iconic collaborative place in the building of a local ecosystem of innovation. keywords: innovation district, space of collaboration, incubator, creative city centech, una incubadora de negocis d’escala mundial amb seu al districte de la innovació de montreal, inspirat pel 22@ barcelona resum l'objectiu de l’article és destacar el procés que es troba al darrera del disseny i desenvolupament de centech, una incubadora d’escala mundial situada a montreal i reconeguda com una de les incubadores universitàries més exitoses del món. centech es troba en un edifici que és patrimoni cultural, l'antic dow planetarium, situat en el cor de l'innovador districte de montreal, el "quartier de l'innovation" (qi). l'article mostra com el desenvolupament de centech va ser en gran part inspirat pel 22@barbarcelona, a través d'una sèrie d'informes fets per a l'escola d'estiu montreal-barcelona sobre gestió de la creativitat i la innovació. paraules clau: districte d'innovació, espai de col·laboració, incubador, ciutat creativa centech, una incubadora de negocios de escala mundial con sede en el distrito de innovación de montreal, inspirado por el 22@barcelona resumen el objetivo del artículo es arrojar luz sobre el proceso existente tras el diseño y desarrollo de centech, una incubadora de alcance mundial situada en montreal, y reconocida como una de las incubadoras universitarias más exitosas del mundo. centech se encuentra en un edificio que es patrimonio cultural, el antiguo do w planetarium situado en el corazón del distrito innovador de montreal, el “quartier de l´innovation” (qi). el artículo muestra cómo el desarrollo de centech fue en gran parte inspirado por el ejemplo del 22@barcelona, a través de una serie de informes realizados para la escuela de verano montreal-barcelona sobre gestión de la creatividad y la innovación. la conclusión subraya la importancia de un lugar colaborativo icónico en la construcción de un sistema local de innovación. palabras clave: distrito de innovación, espacio de colaboración, incubadora; ciudad creativa corresponding author: e-mail: patrick.cohendet@hec.ca received 20 september 2021 accepted 24 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-2697-6963 https://orcid.org/0000-0003-0002-4849 https://orcid.org/0000-0002-9286-0061 https://orcid.org/0000-0003-4972-0722 mailto:patrick.cohendet@hec.ca http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 1. introduction the project of developing an innovation district in the heart of montréal (“le quartier de l’innovation”, hereinafter “qi”) started in 2009 under the leadership of an engineering school, l’école de technologie supérieure (éts). the qi was incorporated as a non-profit organization in may 2013 by éts and mcgill university, and later joined by concordia university and the université du québec à montréal (uqam). this alliance aimed to combine each institutions strengths and complementarities in research, training, innovation and entrepreneurship, as well as their regional and international networks. in addition to its member universities, the qi is financially supported by the city of montreal, the government of québec and the government of canada, and 25 corporate and academic partners. the “quartier de l’innovation” of montréal is located in griffintown, an historic neighborhood of montréal that played an important role in the industrial revolution which started in the 19th century, both as an industrial neighborhood with small businesses, artisans, and factories, and as a residential neighborhood for workers. to a large extent, the idea of developing the qi in montréal was inspired by similar innovation districts in the world such as the boston innovation district, but by far the main source of inspiration was undoubtedly the 22@barcelona district. the director of éts at this time was convinced that 22@barcelona was a model to follow, and he commissioned a series of studies to be carried out by the participants of successive “summer schools of creativity and innovation” (from 2010 to 2014) organized by hec montréal and the university of barcelona, to explore the 22@barcelona district and capture the main factors of success for developing the montréal qi. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 one of the main lessons drawn from 22@barcelona was the importance of developing an emblematic location, as a node to foster, incubate and accelerate entrepreneurial projects, like barcelona activa, to raise the profile of the innovation district. the location of the old montréal planetarium quickly becomes the best option. its central location in the neighborhood and its proximity to éts, makes it an ideal space for developing quality interactions between the business, academic, scientific, and artistic communities, and for connecting academic competences with industrial practices. the former dow planetarium was thus selected to house centech, éts’ technological entrepreneurship center. this business incubator, dedicated to deep-tech companies with high growth potential, is a non-profit organization open to everyone and offers two support programs for startups: the acceleration program (12 weeks), where the biggest potentials are selected to then move on to the propulsion program (24 months) which oversees the actual launch of the company and focuses on the execution of the plan, and a collision program, to foster collaborations between large firms and start-ups on emerging technologies. in 2019, centech was recognized by the ubi global world rankings report of business incubators and accelerators as one of the most successful university incubators in the world (meyer and sowa 2019). the aim of the paper is first to highlight, through the different reports made for the montréalbarcelona summer school on management of creativity and innovation (see box 1), how barcelona activa and barcelona 22@ provided major sources of inspiration for the montréal qi. after briefly reviewing the significance of incubators in urban innovation systems, we introduce the conceptual framework of the “middleground” (simon 2009, cohendet, grandadam and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 simon 2010, grandadam, cohendet and simon 2013) as a lens to analyze the functioning and positioning of centech in the innovation district. then we focus on the story of the design and development of the centech, which acts as a magnet to attract startups and as a cultural heritage for montrealers, as well as a place to couple academic competences with industrial practices. we argue that centech plays a unique role of “middleground” for the innovation district by being an innovative platform that connects the companies and organizations of the “upperground” (firms like thales, dassault systèmes, deloitte, national bank or amazon web services…, and institutional funding programs like prompt, a provincial public fund for innovation, etc.) with the talents, creative collectives and entrepreneurial communities of the “underground”. we then discuss the present limitations of the project and point to potential paths for future developments, to enhance its role in the qi and the community, over and beyond pure business outputs. 2. conceptual framework innovation models and practices are evolving along with the socio-economic context. as the “open innovation” paradigm emerged at the end of xxth century, it rapidly became the dominant design of innovation (chesbrough 2003). in the context of cities and regions, innovation systems increasingly appear as rich ecosystems, shifting from a double, to triple, to quadruple “helix” (carayannis and campbell, 2009 and 2012), inaugurating new models of open collaboration for innovation involving a wide array of diverse stakeholders: academic research, public organizations, private organizations (large firms, smes and startups) and citizens — as users and contributors —, through associations and “the plural society”. in this context, mérindol and versailles argue than many different versions of “open labs” are http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 emerging and flourishing as an organizational solution to the integration of multiple heterogenous stakeholders, at different steps of the innovation value-chain (mérindol and versailles 2017; mérindol et al. 2016). among these “open labs” and initiatives of connection and co-location of stakeholders, incubators appear to generate the most significant economic results in the context of regional systems of innovation, in terms of new firms creation, innovation projects for established firms, and overall economic results (madaleno et al. 2018, harper-anderson and lewis 2018). analyzing the roles and activities of incubators, van rijnsoever also concludes they play a key connecting role as intermediaries in innovation systems, and that their “systemic benefits (…) also greatly enhance their societal value proposition” (2020). in a series of papers questioning the flow of knowledge and ideas that feed entrepreneurial endeavours and innovation in the context of the “creative city” (landry 2000, florida 2002), cohendet, grandadam and simon introduced the concept of “middleground” (simon 2009, cohendet, grandadam and simon 2010, grandadam, cohendet and simon2013). the authors suggest that the dynamic of an innovative district relies on the interactions between three layers of stakeholders, activities, and knowledge bases: the upperground, the middleground and the underground. new innovative ideas emerge, circulate, expand and find their way to the market through the constant interactions between these three layers and transit from an informal microlevel to a formal macro-level, and vice versa. the upperground is the level of formal institutions such as large corporations, creative or cultural firms or institutions, whose specific role is to bring creative ideas to the market (howkins 2001). conversely, the underground is constituted by creative individuals such as individual entrepreneurs, passionate scholars, techno-geeks, artists or other knowledge workers, who are individuals not immediately linked to the commercial and industrial world: underground culture lies outside the corporate logic of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 standardization (arvidsson 2007). in between the upperground and the underground, a key role is played in an innovative district by the middleground, which is the level of common platforms necessary for the exchange, transmission and learning of knowledge that enables innovative ideas to reach the market. according to grandadam, cohendet and simon (2013), the dynamic of the middleground as a platform of interactions relies on the following mechanisms: “place”, “space”, “events” and “projects”. each one of these layers intervenes with specific characteristics in the creative process and enables innovative ideas. • places: as physical locations — a building, a lab, an artistic venue, a public square…— open and accessible to different stakeholders, places can be defined as “the realm of near, intimate, and bounded relations” (amin and cohendet 2004). they activate the linkages between different people, enabling them to co-opt shared understanding or to interpret particular performances on the basis of their own tacit and codified knowledge. in addition, they favor not only the diversity of creative communities, but also provide continuous and ever-renewed opportunities to intertwine communities, transfer knowledge across and within communities, and accelerate the translation of ideas and practices. places also bear a symbolic dimension, through the significance of their location, the history of the building or its architectural features. their offer a reference point to go to for external stakeholders interested to connect with experts and/or contribute to the key challenges addressed by the middleground community. • spaces: spaces are “the realm of far, impersonal, and fluid relations” (amin and cohendet 2004). in other words, while places should be considered as physically established, spaces, on the contrary, appear as cognitive constructions. they are constituted by the epistemic questions around which the stakeholders of the middle http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 ground gravitate and their associated knowledge bases and exploratory practices. spaces provide the local milieu with cognitive platforms of knowledge, where different communities can get together, exchange views, and generate new ideas both locally and more globally. an active middleground translates, transforms and confronts local ideas with knowledge and practices issued from different local experiences and potentially different parts of the world. it is a node of multiple connections of varying intensity and geographical distance. spaces are necessary to give a consistency to the middleground and nurture the debates between stakeholders, to activate the cognitive role of local places, to widen the local buzz to other communities, to strengthen the global pipelines, and to help bring the local underground to the surface. • projects: projects usually target local communities, for them to produce and promote work from its members, foster diverse reactions and comments, and stimulate renewed inspiration. this drives the communities’ members to engage in conversations and work together. in these communities, members communicate regularly with each other about their practices through informal cognitive spaces with more or less open boundaries, where people meet and trade knowledge in a not-so-organized way. • events: events are essential to revive and refresh the creative process by opening these small worlds to new global influences. in turn, this phenomenon stimulates a process of institutionalization aimed at bringing the project or event to potential producers or consumers (bathelt, malmberg and maskell 2004). the buzz may also expand and reach out to other more distant communities. local communities often interact on the outside world with specialists of the same focus of knowledge, sometimes even with members of competing firms who share the same interest for a given practice. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 from this conceptual framework, we analyze the case of centech as a “middleground” for the innovation district of montreal, along the following parts: in part 3, we expose the methodology relying on a series of several research reports from the summer school on creativity between montreal and barcelona; in part 4, we highlight how the innovation district of montréal was inspired by barcelona 22@; in part 5, we expose the history of the dow planetarium which is the location of centech; in part 6, we detail the current development of centech; followed by a discussion in part 7. 3. methodology this paper draws from a diverse set of data. in 2010, the director of éts mandated mosaic to organize a first co-design session on the emerging idea of an innovation district in montréal, inspired by 22@, leveraging the second edition of the creativity summer school between montréal and barcelona (see box 1). this first event led to the production of several research reports from 2010 to 2014 (langlois and pawlak 2010, capdevila et al. 2011, buisson et al. 2013, oliveira et al. 2013, rhimbassen et al. 2014). the authors also developed direct relationships with 22@ promoters and introduced 22@ as the topic of roundtables, field visits, and action-research projects in the following editions of the summer school, giving it the status of a longitudinal case-study. data sets were complemented with regular consultation of the website and institutional documentation. the authors also stayed regularly informed about the developments of montréal qi, through direct connections and institutional documentation. for the specific data collection on centech, the authors performed a series of interviews with the executive team and with different stakeholders of centech. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 box 1: the montréal-barcelona summer school on management of creativity and innovation the summer school on management of creativity in an innovation society was initiated by hec montréal, in collaboration with the university of barcelona. launched in 2009, the summer school offers a unique program for the creation and transfer of knowledge that is innovative and appropriate to the changing socio-economic reality. since its launch, it has witnessed the creation of an international community (over 900 alumni from 40 different countries). the summer school fosters interdisciplinary knowledge sharing of best practices on creativity and innovation, engages with actual challenges with firms and institutions, and co-creates well beyond the end of the summer school itself. this 2-week intensive program was designed to compare creative approaches and practices from a diversity of disciplines, cultures and backgrounds. the participants represent a mix of professionals and managers from diverse industry sectors, graduate students from different fields of study, academics from leading research institutions, and decision-makers. the interdisciplinary, international, and intergenerational nature of the course encourages comparative reflection on organizational, economic, institutional, and political best practices. the summer school adopts an interactive approach with emphasis on professional visits — both in montreal and in barcelona — to creative industries and organisations, to innovative places and spaces, as well as creativity workshops and lectures. it is very much a learn by doing program: a living lab for generating and experimenting with new ideas, new concepts, and new innovative processes. in addition to the faculty from hec montréal and the faculty of economics and business at the university of barcelona, participants learn from academics from leading research centres in creativity and innovation management from the catholic university of lille, cass business school, city university of london, osaka university, toyo university, université de strasbourg, among others. leaders from creative companies and prestigious speakers from a wide array of sector supplement the faculty. the program also draws and builds on the experience of its participants to illustrate learnings and facilitate the link between theory and practice. the iterative nature of the program enables the progressive collective production of a codebook for the best practices of management of creativity for business, social, and institutional innovation. the dynamics of learning at the summer school is enriched by the collective experience of field visits in two countries and direct exchanges with innovation managers and creative professionals. one of the strengths of the summer school experience is that it takes participants to the very places of innovation and creativity. these journeys foster emotion, leverage diversity to elicit sharing, and confront discourse with actual field experiences. during the different editions of the summer school, a consistent specialization has emerged in accommodating business, social, cultural or environmental challenges that require new forms of approach and analysis. such was the case for the quartier de l’innovation de montréal during the 2010-2013 editions of the summer school, and other challenges submitted to subsequent editions of the program. the value of working on a challenge — an actual project with deliverables, sponsored by one or several partners — within the summer school context is the exposure to new perspectives and new ideas that one would not otherwise have been exposed to in the regular course of one’s job. such challenges could be considered as forms of “action research” (reason and bradbury 2001, rowell et al. 2015), a methodology of research and of critical reflection seeking transformative change through the simultaneous and iterative process of doing research and engaging with action. thus, the summer school acts as an accelerator of creativity and innovation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 4. the montréal innovation district inspired by 22@barcelona in 2010 the director of éts suggested to the summer school organized by mosaic-hec montréal and the university of barcelona to explore and investigate the 22@barcelona district. his vision was that a similar district could be designed in the griffintown district, which shared strong similarities with the 22@barcelona district. a team of participants of the 2010 edition of the summer school (which included faculty members from éts) inspired by their visit at the 22@ barcelona district came back and wrote a report on the possibility to develop an innovation district in montréal. the impact of the report was such that the director of éts commissioned three more consecutive studies to the 2011, 2012 and 2013 editions of the summer school (langlois and pawlak 2010, capdevila et al. 2011, buisson et al. 2013, oliveira et al. 2013, rhimbassen et al. 2014). in particular, the 2012 report suggested that the former dow planetarium could become the emblem of the innovation district. the vision was that instead of being dedicated to the popularization of astronomy and space exploration, the dow planetarium could be dedicated to the generation and diffusion of creative and innovative ideas. the following results are issued from these reports. city similarities when comparing montréal and barcelona, it becomes clear that there are important similarities between the two cities and their neighborhoods. both are the economic capitals of their respective provinces and operate within an autonomous government from the central government. the question of catalan identity is similar to that of quebec: both have a different official language and both demand recognition of their distinct status. in terms of geography and territory, there are also several commonalities between the two cities. although montréal is three times larger than barcelona in area (365 km2 vs. 101 km2), the population of the two http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 metropolises is almost identical with 1.6 million inhabitants. even when considering the large agglomerations, the populations are similar in proportions (4.4 million for barcelona and 3.6 million for montreal). moreover, both cities are near a border with a major country and thus serve as a hub for imports and exports (from the us and france). with regards to the two concerned areas, respectively 22@ barcelona and griffintown montréal, these neighborhoods are similar in size (2 km2) and are located on the waterfront, near the port and very close to downtown. both areas are former industrial areas that have marked the development of their city: • poblenou in barcelona where the current 22@ district is concentrated, experienced the great years of industrialization from 1860 to 1960. one of the reasons for this was the establishment of the first spanish railroad, which passed directly through the neighborhood. the metal, textile, food and wine industries as well as construction were the main activities of the neighborhood. however, agriculture is not to be neglected, as it has always coexisted with heavy industry. the deindustrialization of the 1960s was caused by the appearance of the free zone, which replaced poblenou as the new industrial center. the desertion of the neighborhood by heavy industry left many factories and buildings in disrepair. between 1963 and 1990, 1300 companies left the area (capdevila et al. 2011). manufacturing activity was mainly replaced by transportation-related activities, which further contributed to the desertion of the district by its inhabitants. • griffintown, montreal's sud-ouest district has followed a similar path. “originally a rural community, the neighborhood became an emblem of the history of industrialization and a precursor to the transportation revolution in canada with the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 first opening of the lachine canal in the late 19th century. this factor led to the establishment of several industries, notably metallurgy and manufacturing, on the banks of the canal, and the neighborhood grew rapidly. however, the increase in the size of ships forced the maritime traffic to reorient itself: the size of ships forced the maritime traffic to be redirected towards the saint lawrence river in 1970, and it is from this moment on that the district experienced the exodus, industrial and demographic exodus that still characterizes the district today.” (capdevila et al. 2011). another point of convergence between the two districts is the strong involvement of some major university establishments (pompeu fabra university and university of barcelona in the case of 22@barcelona, éts and mcgill in the case of the montréal qi). in both neighborhoods, it is clear that the university presence plays an important role and that a great deal of effort must be put into inter-university and university/business synergies. however, this role will be much more central in montréal since the initiative for the project comes from éts and mcgill, with the goal of becoming a dynamic player in the montreal economy. some differences between the two districts: if the industrial boom followed by the decline of the neighborhoods is similar, the recovery enjoyed by poblenou is very different from the early recovery in southwest montréal. poblenou became connected to the barcelona metropolitan area, the port and the airport through the construction of the infrastructure necessary for the 1992 olympic games, including the construction of ring roads. the creation of the olympic village on the mediterranean coastline of this district gave barcelona its first coastal residential area and rekindled public interest in this former industrial area. finally, the opening of the extension of avinguda diagonal in 1999 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 accelerated the debate about the future of the neighborhood and led to the plan known as 22@ in july 2000. thus, the neighborhood has been completely transformed in the span of a decade. this is not the case in montreal’s griffintown neighborhood. no concrete plan or large-scale events have been carried out to promote the revitalization of the neighborhood. éts moved into the area in 1997 and despite efforts to build an integrated campus, the neighborhood as a whole has not been able to take advantage of the new infrastructure. though the bonaventure expressway refurbishment project has been discussed for many years, nothing has yet been done. yet, the revitalization of the district must inevitably go through this operation, in order to connect the area to the rest of downtown, from which it is currently isolated. thus, rather than being propelled by an international event, the quartier de l' innovation de montréal project will have to draw its resources from a collective strategy of re-urbanization and development. to sum-up, when comparing barcelona 22@ and montréal qi, some important similarities could be highlighted. first, in terms of geographical scope the two districts have a comparable size and location on a waterfront, near the port and very close to downtown. second, in terms of socio-economic contexts, both districts are former industrial areas that have marked the development of their city. third, in terms of support from universities, both districts host prestigious universities. however, with regards to the urban regeneration plan, the two districts differ: while a coherent public program accompanied the development of the district in barcelona (including the building of some major infrastructures), the development of the griffintown area surrounding the innovation district of montréal was essentially led by private real-estate promoters, without a publicly organized strategy of re-urbanization. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 5. the dow planetarium as the core of the montréal qi one of the main lessons from barcelona 22@, that was already noted by the 2010 summer school participants, was the importance of having an emblematic structure in the heart of an innovation district, as an inspiring platform to encourage collaboration, social diversity and sharing knowledge. the participants were inspired by the role of barcelona activa in the core of the 22@ district as a local vibrant development agency fostering quality employment, boosting entrepreneurship, and supporting sustainable business fabrics. sharing this view, the director of éts was convinced that the old planetarium of montréal, close to downtown in the innovation district and surrounded by buildings from éts, was potentially a perfect strategic location. the planetarium was inaugurated in 1966, just before the international and universal exposition expo 67. it welcomed 6 million visitors and thousands of exhibits between 1966 and 2011. the structure closed in october 2011 and was left abandoned, waiting for a new purpose. thus, the director of éts commissioned teams of participants of the 2012 and 2013 editions of the summer school to work on a project of transforming the old planetarium into a hub of creativity and innovation as an emblematic building, inspired by barcelona activa. the vision was that a central architectural structure was needed: 1) to build the identity and the visibility of the innovation neighborhood; 2) to shape its image, and 3) to allow the communities living and working in the neighborhood to develop a sense of pride and belonging. the summer school teams worked firstly on the history of the old planetarium. the dow planetarium was the first public planetarium in canada. its creation in 1966 was made possible by the financial support of the dow brewery to contribute to the education and promotion of science, especially space and astronomy. as an example, the exterior structure which is inspired http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 by the planet saturn takes the form of a parallelepiped topped by a cylinder. the upper part reveals the existence of the dome, characteristic of the projection spaces of modern planetariums, with a circular geometry for the presentation of original productions dedicated to the popularization of astronomy and space exploration. classified as an historical site of montréal, the city of montréal did not allow the planetarium building to be modified from the outside. secondly, the teams of the summer schools, while insisting on the priority to preserve the memory of this emblematic montréal location, suggested that its rehabilitation should accommodate the main values and principles that guide the development of barcelona activa: a platform to encourage innovation, creativity, collaboration and social diversity; a hub where diverse participants could experiment advanced tools and technologies; a laboratory of ideas and uses that brings together people from different backgrounds (companies, engineers, social science researchers, scientists, artists, etc.). besides designing a space to promote cross-fertilization between the academic and industrial milieux’, the reports of the summer school underlined the importance for such a platform to be open to the general public, including the griffintown residents, so that they find a space they are motivated to visit, either to meet with neighbors or with other visitors. although there is a considerable daily influx of students around the planetarium, griffintown in general and chaboyer square specifically (where the planetarium is located) are not places where montreal residents and visitors are used to wander and stroll. the attraction of visitors is important to give life, recognition, and dynamism, not only to the emblematic building or to the innovation district, but to montréal which aims at being a creative city recognized worldwide. in the creative economy, montréal seems to have indeed all the right ingredients to become a global http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 leader: creative industries, smart and talented people, renowned universities and amazing events. in such a perspective, the reports emphasized that the city needs to identify, valorize and support a physical space — a creative hub — in which this potential can be put to use, and the old planetarium can be such a venue. to a large extent, the architects that carried out the rehabilitation of the old planetarium have taken into account the values and principles that have been detailed above. the former dow planetarium is now home to centech, a non-profit incubator to support technology and entrepreneurship of the école de technologie supérieure (éts). as underlined by the architects of the firm msdl in charge of the transformation of the old dow planetarium, the center of the building is accessible on all sides, with a circulation path leading to glass-walled meeting rooms, as well as a café, other meeting spaces, and an ideation room. thus, the center of the building is clearly designed to be the heart of the incubator, destined for unexpected encounters, for the serendipity that is often the source of great discoveries. the use of glass partitions creates transparency and openness in the spaces, allowing users to benefit from natural light throughout the building and to see the activities taking place there, creating a synergy that favors exchanges. most of the interiors of these spaces are light and bright, with white walls and concrete floors, while black ceilings create a dramatic contrast. structural concrete pillars and posts reveal the original construction and are left uncovered for an industrial feel the formal architectural language used to renovate the building makes the principle of openness and evolution perceptible: from the walls composed of a juxtaposition of vertical slats to the concentric circles that are superimposed on the plane, everything is a rotation mechanism. the exploration of the site revealed how interesting the concrete framework of the circular space http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 overhanging the projection dome was, and how the height and truncated spherical shape of the roof structure made the space unique. these observations led to the decision to work with a mezzanine not attached to the existing structure in order to leave the space in its original form and integrity. inspired by the perpetual motion of the universe and the curious complexity of ancient instruments, such as the astrolabe or the orrery machine, the architectural intervention transforms the former dow planetarium into a dynamic space that utilizes cosmic motion, rather than explaining it. 6. centech: the current development founded in 1996, centech is one of the oldest incubators / accelerators in canada. it’s a nonfor-profit organization and its mission is to accelerate and power high technology businesses called deep-tech startups. deep-tech startups are companies that require lengthy research and development and large capital investment before successful commercialization (de la tour et al. 2019). traditional incubator at the start, centech made a major shift in 2016 to increase the number of companies created and accelerate the launch of these. saving time for innovators started to be an important key performance indicator for centech. as centech’s ceo underlines, centech aims at transforming "technopreneurs" having high potential innovative ideas into a true company having commercial successes with a product well connected from the onset to market needs. in 2021, along with velocity in waterloo, on, centech was considered as the strongest incubator for the internet of things (iot) and deep tech in canada. centech is recognized as a pragmatic incubator that works with entrepreneurs who address specific industry needs and thus contributes to the success of these entrepreneurs. centech performs particularly well in subsectors such as medical devices, industry 4.0, telecoms, electronic, energy, aerospace and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 other sectors using deep technologies. these domains were a natural selection because centech is surrounded by many engineers and scientists in these fields. its mandate is to support talented innovators who apply new technologies to develop tangible products that can solve real challenges. therefore, centech adopts more of a problem-solving approach rather than a “techno-push” approach, too often seen in the start-up world, especially in deep-tech. entrepreneurs in centech mainly focus on deep technologies in domains where the time to market is often longer and more expensive to launch than in pure software activities. centech offers two main programs: first, the acceleration program, which lasts 12 weeks and serves to substantiate several elements of the business project including: the strength of the team, the traction of the product on the market and the scalability. during the last week, the best candidates are able to present their product and their business project in front of investors and angels in a private demo day. a week later, they give their final presentation with the goal of being selected for the propulsion program. second, the propulsion program oversees the actual launch of the company and focuses on the execution of the plan. the selected entrepreneurs are supported for two years, with everything they need to launch the business and accelerate the product development. everything is on the line: shareholder agreement, accounting structure, incorporation, trademark registration, financing, strategies for sales, design, regulation, production and distribution, etc. the main goal of these two programs is to create real smes with a product on the market, a starting sales pipeline and ready for growth. since 2018, centech has its own open innovation lab, collision lab, where large corporations are supported to integrate technology projects thanks to the agility of startups and the entrepreneurial ecosystem. the large corporations are interested to connect to the centech ecosystem, for two main reasons: the first is attracting talent. the second is how to do tech http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 scouting more easily. so far, the port of montréal, ericsson, siemens, servier, thales, lotoquébec and cae have begun to collaborate with centech startups through the collision lab program. results came fast with strategic innovation projects between these large corporations and some startups in portfolio. after one year, one of these won a major global prize for the best innovative project in the subsector. more recently, centech launched boreal ventures, the first early-stage venture capital fund dedicated to deep-tech companies in quebec. this fund will support the development of preseed and seed-stage companies based on science and engineering. with an investment capacity of $26 million, boreal ventures will support companies that have emerged from centech and the québec innovation ecosystem. boreal ventures will be able to count on the expanded multidisciplinary team of centech to help with due diligence, operations and the outreach of the fund and the companies it supports. the companies targeted by this new fund operate in applied science sectors such as artificial intelligence, medical technologies, industry 4.0 and connected objects. since 2016, 1175 projects have been supported by centech with a net creation of more than 45 new smes still growing, more than $ 400 milions of capital has been raised by these new smes with more than 1000 jobs created, mainly in science, technology, engineering and mathematics (stem). the survival rate after five years exceeds 65%. this unique value proposition, combined with the fact that centech’s services are free, and they take no equity or ip, means that entrepreneurs from all over canada, and from different regions of the world are interested to gain acceptance into these programs. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 7. discussion the above developments have highlighted the dynamic of formation of centech, inspired by the experience of the development of 22@barcelona. as a world class incubator in the heart of an innovation district, centech exhibits the following major characteristics: first, centech is located in a cultural heritage building for all montrealers and visitors. the recent expansion in 2018 into montréal’s old dow planetarium has helped centech make its mark on both the canadian and the global innovation stage. this unique position helps to explain the power of attraction of centech for multiple stakeholders, and its capacity to permanently create collisions and synergies with startups, corporations, researchers and professors, and to bridge academic competences with industrial practices. this power of attraction of a cultural heritage building has been enhanced by the architects of the firm msdl in charge of the rehabilitation of the old dow planetarium. the architects have developed the project around the concepts of revolution (about an axis) and the circle, transforming it into a dynamic place that becomes a generator, accelerator and source of inventions with a variety of new facilities: spaces to encourage encounters, collaboration and reflection linked to tools and advanced technologies; and spaces of social diversity and exchange platforms for sharing knowledge. with reference to the perpetual movements of the universe and the curious complexity of ancient instruments such as the astrolabe or the orrery machine, the montréalbased architects transformed the former planetarium not only into a place that visualizes the cosmic movement, but into a dynamic place which uses it. as we have underlined above, an open circular space accessible on all sides is located at the center of the building and is intended for unplanned encounters and opportunities that are often at the origin of the greatest discoveries. the proximity of centech with the laboratories and equipment of éts adds to the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 power of attraction of the incubator. the startups have indeed access to equipment that is sometimes worth up to more than one million dollars, which they can utilize to develop their projects. this unique location as a cultural heritage, confirms the key role played by an emblematic location in the development of an innovative district. in barcelona, jean nouvel's agbar tower and the "green building" have thus become part of the city's identity and the dynamic of 22@barcelona. in toronto, frank gehry's new art gallery of ontario and libeskind's royal ontario museum contribute to the image of a dynamic and creative downtown. second, the dynamic of the incubator strongly relies on a community of passionate scholars and entrepreneurs who support the ceo of centech and his staff. there is no vibrant hub of innovation without a community of active members who takes care of the common platform of interactions between participants, who establishes interdisciplinary boundary crossing collaboration, who gathers the ideas, the skills, and the diverse types of knowledge required for the incubator, and who facilitates the work of younger entrepreneurs by connecting them with potentially helpful contacts from their personal networks. third, beyond the emblematic location in the heart of the innovation district of montréal, centech can also be considered as a “middleground” according to the definition given by cohendet, grandadam and simon (2010). we analyze the role of centech as a platform of interactions supporting the following mechanisms: “place”, “space”, “projects”, and “events”: • centech as a place: the above developments have highlighted the power of attraction of centech as an emblematic location that can be considered as the realm of near, intimate, and bounded relations, physically established. the rehabilitated old dow brewery planetarium facilitates not only meetings between professionals who are used to http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 working together, but unexpected encounters providing the serendipity that is often the source of diverse processes of innovation. • centech as a space: centech, as a cognitive space, translates, transforms, and confronts local ideas with knowledge and practices issued from different parts of the world. the incubator is becoming a reference, which is an important source of inspiration for other incubators and intermediaries of innovation. the values, the vision and the activities of centech are regularly diffused through publications, interventions in different types of broadcast, and in social medias. as a key element of the middleground, space activates the cognitive role of the local place, contributes to nurture the reputation of the incubator, widens the local buzz to other communities in the global world (bathelt, malmberg and maskell 2004), and helps to bring the local underground to the surface. • centech as a platform of projects: through its two main programs, (the acceleration program and the propulsion program), centech activates numerous projects that involve diverse participants. these projects usually target entrepreneurs and researchers for them to produce and promote work from their members, foster diverse reactions and comments, and stimulate renewed inspiration. such collaborative forms of experience and collective learning drive the different communities’ members to engage in conversations and work together. these learning experiences help to build trust and the desire to cooperate between participants which in turn could give rise to new projects and unexpected forms of collaboration. • centech as a platform of events: as is the case in barcelona, where the existence of events such as the hit barcelona conference, the 22@breakfast, the 22@network or the different events organized by infonomia are essential to the development of innovation http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 in the neighborhood, centech organizes numerous events , such as the “networking events”, “start a tech-business events”, the “age of ai”, etc. these events favor interactions between all the communities participating to the activities of the incubator, tighten the connections between the local and the global, and contribute to open the small local worlds to new global influences. this key role of middleground played by centech at the core of the innovation district of montréal thus promotes a clear collaborative dynamic which enhances the reputation of the qi. as grandadam, cohendet and simon (2013, 1703) emphasize, “within the middleground, agents do not compete against each other. instead, they are expected to cooperate with one another voluntarily in closely knitted clusters and share their knowledge, thus boosting their creative power and that of others (rosenberg 1982)”. 8. conclusion and futures lines as much as centech can be considered a success as a deep tech incubator, acknowledged by international rankings (ubi global) and positive comments from entrepreneurs and industrial partners, the scope of its activities and their impact is still a matter of debates, especially with regards to the original quartier de l’innovation vision, inspired by 22@ (expressed in figure 1). even if centech would be recognized as a core component of the innovation district, the district can’t be limited to the incubator, however, the activities of the incubator could be leveraged further to increase its contribution and impact on the district. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 figure 1. the conceptual frame of the quartier de l’innovation (source website, quartier de l’innovation) source: website quartier de l’innovation: https://quartierinnovationmontreal.com/en/about/who-weare/ . beyond the economic, industrial, innovation, and technological dimensions benefiting to firms and entrepreneurs, three perspectives deserve to be considered here: the connections with the academic stakeholders, the openness to and outcomes for citizens, in the urban milieu, and the social and cultural impacts. through interviews, academic stakeholders communicated a very positive appreciation of the work of centech:on the one hand, they emphasize the role of centech in the absorption and mobilization of scientific and technical knowledge. on the other hand, they also expressed expectations that the incubator would include more students for training purpose, as part of regular courses either on the applications of deep tech and on entrepreneurial and innovation processes, and for research purpose, on the best practices of incubation and innovation management. one thing that was mentioned was that the incubator could become a powerful http://revistes.ub.edu/index.php/jesb https://quartierinnovationmontreal.com/en/about/who-we-are/ https://quartierinnovationmontreal.com/en/about/who-we-are/ volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 platform to relaunch éts “24h for innovation”, an ideas competition for students, organized from the mid-2000s to now, and losing a bit of traction because of the covid situation. as mentioned, in the middleground framework, events are playing a significant role to support the actualization of projects, to showcase and promote the activities of the incubator, and to allow the regeneration of knowledge bases through openness and attraction of new stakeholders. one scholar also mentioned that with respectively, 10,000 students at éts, over 40,000 at mcgill university, and over 45,000 at concordia university, the innovation district could be used as a testbed for emerging so-called “edtech”, technologies applied to learning and education improvement, which they recognize presents a huge emerging market1. in terms of social impacts and social inclusion, centech has the highest ratio of startups in the cleantech field, not counting those that improve the quality of life for people in the medical technology field. the incubator is currently workzing with youth fusion, which supports young entrepreneurs from disadvantaged backgrounds at the elementary and high school levels and has lent its premises to groups such as queerintech, women in tech and others. also, over the past few years, the companies supported by centech have facilitated the integration and creation of jobs for foreign students as well as qualified immigrants without work experience related to their qualifications in canada. in terms of issues of connection with the urban milieu, the redevelopment of the griffintown district was essentially led by private real-estate promoters, independently from the project of qi. as the city received major criticisms for having let promoters take charge, it supported the settlement of “la maison de l’innovation sociale” just behind éts. “la maison de l’innovation sociale” is an independent organization acting as an incubator for projects with significant 1 https://www.grandviewresearch.com/industry-analysis/education-technology-market http://revistes.ub.edu/index.php/jesb https://www.grandviewresearch.com/industry-analysis/education-technology-market volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 social impacts and promoting best practices in social entrepreneurship, and project management for social endeavors. it also helps social entrepreneurs in applying to public or private funding programs. actions of “la maison” aimed at mitigating some side-effects of the urban revitalization of the griffintown area, with projects supporting accessible housing, or social and cultural inclusion. the proximity between centech and “la maison” could have been a good opportunity to include citizens further in hi-tech project and educate social entrepreneurs about the possibilities of deep-tech, in order, for instance, to monitor pollution in the district for public health, to develop stronger arguments about mobility issues by using measures and big data, or to inspire kids with stem education. unfortunately, “la maison” moved two years ago to another district of montréal. for these reasons, centech envisages to develop projects in connection with the urban milieu with two institutions that recently established themselves next door to centech, in the former rodier building 50m away: “la piscine” (an accelerator for creative and cultural businesses) and l’”esplanade” (an accelerator for social and environmental impact entrepreneurs). a last perspective, reflecting some of the original objectives of the 22@ project, touches upon the recognition of the place and role of artists and cultural activities in the district, emphasizing the importance of art and culture in the daily life of citizens. though a staple of the discourse of public authorities on urban regeneration since the turn of the century, the place of artists and culture doesn’t appear as a priority in actual projects. in the griffintown district, arts and culture obtained a significant recognition over the years through the work of some grassroots associations, the participation of citizens to local events, and the opening of several art galleries. one of these art galleries, l’arsenal, of international fame, is dedicated to contemporary art, with a focus on digital practices in the arts. when discussing the potential role of centech, one manager of l’arsenal envisions potential collaboration on “entertainment tech” and rapidly http://revistes.ub.edu/index.php/jesb volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 growing technological solutions for the digital diffusion of arts, like nfts. another significant stream of work could explore collaborations with local cultural and creative industries on the potential of deep-tech for the metaverse, as it appears as the “new frontier” for the development of new value-propositions and new business models2. these elements point to some specific challenges centech could engage with to reinforce its legitimacy and impacts in the district and in the wider context of montréal. through the examination of the emergence and development of centech, as a key middleground in the innovation district of montréal, we have highlighted how barcelona 22@ has inspired the vision of the promoters of the incubator, which is recognized today as one of the most successful university incubators in the world. the study confirms how such a collaborative platform for innovation plays a central role in an innovation district, adding to the creative image of montréal, attracting to its emblematic location visitors from all over the world, developing projects that involve entrepreneurs, researchers as well as students, and creating events that contribute to bring together different types of communities. 2 https://www.ces.tech/articles/2019/8-entertainment-tech-trends.aspx; https://www.pwc.com/gx/en/industries/tmt/media/outlook.html http://revistes.ub.edu/index.php/jesb https://www.ces.tech/articles/2019/8-entertainment-tech-trends.aspx https://www.pwc.com/gx/en/industries/tmt/media/outlook.html volume 7, number 2, 40-69, july-december 2022 doi.org/10.1344/jesb2022.2.j106 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 references amin, ash, and patrick cohendet. 2004. 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ville.” management international/gestiòn internacional/international management 13: 37-51. van rijnsoever, franck. j. 2020. “meeting, mating, and intermediating: how incubators can overcome weak network problems in entrepreneurial ecosystems.” research policy 49(1): 103884. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://en.wikipedia.org/wiki/doi_(identifier) https://doi.org/10.1080%2f09650792.2014.990987 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 poh kam wong national university of singapore (singapore) https://orcid.org/0000-0001-9121-9638 an evolutionary analysis of the development of the one north innovation district in singapore abstract first conceptualised in singapore’s first national technology plan in 1991, the idea of creating a new integrated r&d and innovation hub in singapore languished until it was incorporated into a broader technopreneurship 21 (t21) strategy announced in 1998, and was officially launched in late 2001. in the 20 years since, the innovation district has made significant development progress, but not quite in the manner as presented in a number of prior studies that have adopted a “topdown rational planning” narrative. taking an evolutionary view, we argue that the actual development of one-north was significantly shaped by a number of critical actors as well as external environmental factors, and its evolutionary trajectory deviated from its original plan. our evolutionary narrative provides insights on the role of champions in large scale innovation projects, and the need to integrate physical space development within a co mprehensive innovation ecosystem development strategy. keywords: innovation hub; singapore; biomedical sciences; technology entrepreneurship una anàlisi evolutiva sobre el desenvolupament del districte d’innovació one north a singapur resum conceptualitzada per primera vegada en el primer pla nacional de tecnologia de singapur del 1991, la idea de crear un nou centre integrat de r+d i innovació a singapur es va frustrar fins que es va incorporar a una estratègia més àmplia de technopreneurship 21 (t21) anunciada el 1998, i presentat oficialment a finals de 2001. des de 20 anys ençà, el districte d'innovació ha fet un progrés significatiu en el desenvolupament, però no tal i com es presentava en una sèrie d'estudis previs que adoptaven una narrativa de “planificació racional de dalt a baix”. utilitzant una visió evolutiva, argumentem que el desenvolupament real de one-north ha estat format significativament per un nombre d'actors crítics, així com per factors ambientals externs, desviant la seva trajectòria evolutiva del seu pla original. la nostra narrativa evolutiva proporciona informació sobre el paper de les empreses exitoses en els projectes d'innovació a gran escala, i la necessitat d'integrar el desenvolupament espacial físic dins d'una estratègia de desenvolupament d'ecosistemes d'innovació integral. paraules clau: centre d'innovació, singapur, ciències biomèdiques, tecnologia un análisis evolutivo del desarrollo del distrito de innovación one north en singapur resumen conceptualizada por primera vez en el primer plan nacional de tecnología de singapur de 1991, la idea de crear un nuevo centro integrado de i+d+i en singapur fue un esfuerzo frustrado, hasta que se incorporó una estrategia más amplia de technopreneurship 21 (t21) en 1998, presentada oficialmente a finales de 2001. desde hace 20 años el distrito de innovación ha hecho un progreso significativo en el desarrollo, pero no como se presentó en estudios previos que adoptaron una narrativa de “planificación racional de abajo arriba”. utilizando una perspectiva evolutiva, el artículo argumenta que el desarrollo real de one-north ha estado integrado básicamente por un número de agentes críticos, y factores ambientales externos, que han desviado su trayectoria evolutiva del plan original previsto. nuestra narrativa evolutiva proporciona información sobre el papel de las empresas con éxito en los proyectos de innovación a gran escala, y sobre la necesidad de integrar el desarrollo espacial, físico, en una estrategia de desarrollo de ecosistemas de innovación integral. palabras clave: centro de innovación; singapur; ciencias biomédicas; tecnología. corresponding author: e-mail: pohkam@nus.edu.sg received 15 september 2022 accepted 24 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-9121-9638 mailto:pohkam@nus.edu.sg http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 1. introduction the development of innovation districts, or more generally physical urban spaces designated to support innovation activities, has been on the rise over the last 20 years (katz and wagner 2014, nikina and pique 2016, wagner, katz and osha 2019, catapult,2021). while the majority of such innovation hubs are still in the advanced economies of north america and europe, an increasing number have emerged in asia. occupying 200-hectare (2 square kilometers), one-north — so named to reflect singapore’s geographical location one-degree north of the equator — has emerged as the largest innovation district in singapore and arguably one of the leading government-led physical hubs for innovation in asia that seeks to integrate research, innovation and startup activities with educational institutes, residences, commercial and recreational amenities into an all-inclusive “work-live-play-learn” environment. first breaking ground in 2001, one-north’s development has reached an advanced stage by 2021, comprising eight precincts (see figure 1) that can be grouped into three distinct forms of land-use: a) four research/innovation parks – biopolis, fusionopolis, mediapolis and ayer rajahtech hub b) one startup hub – launchpad@one-north c) three mixed commercial/residential areas – vista, wessex and nepal hill http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 figure 1. map of one-north source: killen, palladino and gonzález (2021). as of 2021, one-north was estimated to house 400 leading companies and global institutions in high tech and knowledge-intensive industries, 16 public research institutes, six institutes of higher learning and corporate universities, 50 incubators with approximately 800 startups, and 3,900 residents. together, they have a working population of about 50,000. (jtc 2021). by all accounts, both locally and internationally, one-north has been recognized as a relatively successful innovation district development. for example, in a recent review of innovation hubs around the world, catapult (2021, 28) cited one-north as a successful example of suburban http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 innovation park development, highlighting its “masterplanning to accommodate multiple value chains”, and giving it “full or nearly full marks for anchor tenants, identity building, land development, and effective use of zoning and tax powers.” of the three major innovation clusters being promoted in one-north — biomedical sciences (bms) in biopolis, physical sciences/engineering and ict in fusionopolis and ayer rajah, and digital media in in mediapolis — it is biopolis that has garnered the most international attention. for example, a recent study by cambridge university (killen, palladino and gonzalez 2021) credited the development of biopolis as a major contributor to singapore’s attractiveness as a biomedical innovation hub. the integration of commercial and residential spaces, and its proximity to the national university of singapore (nus) and the national university hospital (nuh) were also cited as positive contribution factors. 2. towards an evolutionary understanding of one-north’s historical development: research objectives and methods the aim of this paper is to provide a historical analysis of how the two most prominent innovation clusters of the one-north innovation district — the biopolis and the launchpad@one-north start-up hub -— came to be what they are today: how they were initially conceptualized, and how they subsequently developed over time. in contrast to prior historical research that has adopted a rational planning perspective, we adopt an evolutionary approach to studying the historical development of these two cases, highlighting the role of key actors and their dynamic interactions with changing external environmental factors at different stages of development. besides drawing on similar publicly available archival documents as past historical studies, we incorporated additional public information sources, including http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 statements by the key actors involved and relevant independent media reports, that provided the evidence for our alternative interpretations. the historical development of one-north has been examined earlier by several researchers from public policy and urban development perspectives (chia 2018; clc 2018). in particular, the recent study by the centre for livable cities (clc), a research centre within the ministry of sustainability and the environment (mse) of singapore, has provided the most comprehensive review of one-north’s development, with detailed historical development milestones, extensive archival references and interviews with leaders of the various government agencies involved (clc 2018). despite its comprehensive coverage, the study’s narrative appears to be guided by a top-down, rational planning perspective, where developments occurred more or less in accordance with original plan, or where initial planning options were selected through relevant governance committees and pre-established decision-making processes. a similar topdown rational planning view is adopted by chia (2018) in her review of the historical development of one-north, as well as by a number of less in-depth accounts (prasad 2015; hang, low and thampuran 2016). the rational planning process as a ‘top down’ viewpoint has been challenged by a ‘bottom up’ viewpoint of actors ‘on the ground’ (barrett and fudge 1981), and the linear model of the rational policy making process has been increasingly challenged by conceptions of policy development as an interactive process, continuously evolving over time and drawing in different actors at different stages (healy, 2001). in particular, we believe that an evolutionary analysis approach that focuses on the dynamic interactions of critical actors that often lead to unforeseen variations from original plan, or unexpected selections from initial planning options, is more useful in understanding how major public innovation projects like innovation district http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 developments actually happen on the ground (aldrich, ruef an lippman 2020). in particular, the innovation literature has highlighted the championing actor role in radically new and risky innovation projects (schon 1963; howell and higgins 1990). taking an evolutionary view, this paper argues that the actual development of one-north was significantly shaped by a number of critical actors in dynamic interaction with changing external environmental factors. to support our argument, we selected the two most widely recognized projects in one-north — biopolis and launchpad@one-north — for in-depth case studies using our method. besides providing causal explanations for some unusual developments that were accurately chronicled but not explained in the rational planning narrative, our evolutionary analysis also highlights a number of developments that did not occur as originally planned. in particular, the abnormally fast pace of the early development phase of biopolis would not have been possible without the extraordinary and entrepreneurial championing by a maverick senior government official who had the political sponsorship of the powerful former and founding prime minister. in addition, the transformation of part of onenorth into the largest start-up entrepreneurial hub in southeast asia was actually off-script, and was the result of “bottom-up” championing by the leader of a government digital media startup micro-funding program and the leader of a university entrepreneurship support organization. 3. research findings 3.1 re-cap of findings from the rational planning narrative to better appreciate the contribution of the evolutionary perspective, we will first recap the key development milestones of one north as presented from the rational planning view by clc (2018). table 1, column 2 reproduces the major milestones provided by clc (2018), while http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 column 3 highlights relevant information on several key actors that had significantly influenced some of the development outcomes listed in column 2, but their roles have been missing or glossed over in clc (2018)’s narrative. table 1. major development timeline of one-north date key development milestones in the rational planning narrative relevant contributing factors in the evolutionary development narrative 1991 concept of a tech corridor next to nus included in singapore land use concept plan 1991 1998 technopreneurship 21 announced by dpm dr tony tan 1999 buona vista science hub (later renamed one-north) announced as a key thrust of the technopreneurship 21 initiative. 2000 the jtc appointed lead agency for developing one-north philip yeo was appointed chairman of nstb and renamed it astar, and he made the development of biopolis astar’s top priority 2001 phase z.ro technopreneur park developed as a pilot. one-north officially launched by dpm tony tan. zaha hadid architects appointed as master plan consultant. groundbreaking ceremony of biopolis in dec 2001. nus established nus enterprise and established an incubator on campus and the nus overseas college (noc) program to provide experiential entrepreneurship training in overseas tech start-up hubs philip yeo started recruiting top biomedical researchers from overseas to come to do research in singapore, and started the astar biomedical phd scholarship program (“whales and guppies” strategy) philip yeo struck a build and lease agreement with jtc to begin construction of biopolis, without seeking approval from mof 2002 first noc program launched in silicon valley 2003 biopolis phase one opened [in oct 2003] media 21 plan launched by mda 2006 biopolis phase 2 (neuros and immunos) opened the national research foundation (nrf) was established 2007 mda launched the ijam micro-funding scheme for digital start-ups http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 date key development milestones in the rational planning narrative relevant contributing factors in the evolutionary development narrative philip yeo stepped down as astar chairman and became chairman of spring 2008 fusionopolis phase one (connexis and symbiosis) completed. phase z.ro technopreneur park was demolished, after extended period of low occupancy and activities 2009 development of mediapolis started 2010 fusionopolis phase 2b (solaris) and biopolis phase 3 (synapse and amnios) completed. 2011 development of mediapolis phase zero (later renamed launchpad @one-north) and fusionopolis 2a started one-north mass rapid transit (mrt) station on the circle line opened. block71 was initiated by mda, nus enterprise and singtel innov8 philip yeo (as chairman of spring) struck agreement with jtc to construct the one north mrt, after lta refused as it was not in its original mrt station development plan 2013 fusionopolis phase 3 (nexus) and biopolis phase 4 and 5 (p&g singapore innovation centre and nucleos) completed. mda asked the tenant startups in block 71 to vacate before its 3-year lease with jtc expired. after social media protests by the tenant start-ups, this eviction decision was stopped by minister-in-charge of entrepreneurship 2014 official opening of launchpad @ onenorth. fusionopolis phase 4 (sandcrawler) and phase 5 (galaxis) completed. infinite studios at mediapolis opened jtc reversed decision to redevelop the old ayer rajah industrial estate into high rise office buildings, and redevelop it into a start-up hub instead 2015 fusionopolis phase 2a (innovis, kinesis, and synthesis) completed. mediacorp moved into mediapolis as anchor tenant. launchpad@one-north (covering block 71, 73 and 79) was officially launched by prime minister in jan 2015. redevelopment of another three buildings (75, 77 & 91) was announced. source: “rational planning narrative” column: extracted from clc(2018); “evolutionary development narrative” column: by author. in broad terms, the rational planning narrative of clc (2018) started with the recognition that, as far back as 1991, when singapore’s first national technology plan was launched, the idea of a new integrated r&d and innovation hub had been mooted (nstb 1991). in the same year, a land use concept plan had identified a cluster of mostly government owned land in the vicinity of the then new buona vista mass rapid transit (mrt) station and directly opposite the national university of singapore (nus) across a major highway, as a potential site for such http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 a new hub. however, the idea appeared to have stayed dormant, until a major new economic development strategy called technopreneurship 21 (t21 for short) was unveiled in late 1998 by the then deputy prime minister, dr. tony tan. as part of the t21 initiative, the buona vista science hub (bvsh) project was also announced, with the mission to achieve three goals positioning singapore for high-tech industrial activities, creating a focal point for r&d and high-tech activities, and developing an innovation milieu in the country (clc 2018). the narrative went on to identify the formation of a steering committee for the project, comprising of representatives from the various key government agencies and ministries, to provide strategic direction and to resolve policy-related issues and inter-agency conflicts. it was chaired by the minister for the environment and its members included the chairmen of the economic development board (edb) (the government agency responsible for attracting foreign investments), spring singapore (the government agency responsible for local sme development), as well as the ceos of the urban redevelopment authority (ura) — in charge of land-use planning—, and the land transport authority (lta) — in charge of urban land transport. the narrative then pointed out that a decision was made to appoint a government agency, jurong town council (jtc), as the master-planning and development agency, given its track record in industrial estate development for the last 35 years, and the fact that the land in the one-north was mostly public. a number of operation-level committees were subsequently set up to provide inter-agency coordination (one-north review committee), to select the master planning architect firm (master plan selection committee) and to tap advisory inputs from relevant experts (resources and advisory panel). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 in line with the rational planning perspective, the subsequent major developments of one-north were narrated as largely being decided and executed through these governance structures and planning/implementation coordination mechanisms. the key physical development stages of each of the three major innovation clusters were then separately narrated in their chronological order, starting with biopolis (ground-breaking in late 2001), then fusionopolis (around 2006) and lastly mediapolis (2009), with the implicit assumption that this was a deliberate strategic sequencing decision. the development of biopolis and mediapolis were presented as being directed by their respective designated lead government agency — the national science and technology board (nstb, later renamed agency for science, technology & research (astar)) for biopolis, and media development authority (mda) for mediapolis. for fusionopolis, no lead government agency was mentioned, but jtc itself appeared to have taken the lead role in earlier phases, while later phases were opened to private sector developers. there was little inkling of major policy debates or conflicts in this rational planning narrative. while some disputes among the different government agencies were noted on a number of occasions (e.g. urban redevelopment authority (ura), which had general policy oversight on permissible commercial space allocation in land use, initially objected to jtc’s plan for commercial space in some mixed use precincts in one-north, these did not appear to be major, and were resolved through the above mentioned planning coordination mechanisms (clc 2018). indeed, throughout the narrative, it was implicitly assumed that broad consensus were achieved on most if not all major decisions through these rational planning processes, and actual development outcomes were implicitly interpreted as planned outcomes, with little mentioning of mistakes being made and recognized, and that resulted in subsequent policy changes or reversals. thus, while the use of one-north as a test bed for new policy innovations was http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 mentioned quite a few times, there was virtually no mentioning of any new policy ideas that were trial-tested and failed. 3.2. findings from the evolutionary analysis perspective while comprehensive in its review, the above rational planning narrative appears to be inadequate in two ways. firstly, by glossing over possible debates and conflicts among key actors, that could have arisen as part of the development process, we have little insights on how the eventual development policy choices were arrived at. secondly, by implicitly attributing the development outcomes to be the original envisioned outcomes, we are not able to assess how much the eventual development outcome actually deviated from original intent, whether positively or negatively, and what roles individual actors or other unforeseen factors could have contributed to this difference. using the analytical lens of evolutionary theory, and adopting an actor-level analysis, we provide an alternative historical narrative on two major developments in one-north that offers substantially different explanations and interpretations from the rational planning perspective. a) the genesis and initial development of biopolis as the first innovation cluster to be developed in one-north, biopolis is strikingly unusual in terms of its remarkably fast development from ground-breaking to a very substantial hub with near full occupancy in its first two phases (2000-2006). this remarkable achievement was the result of one key championing actor — philip yeo—, widely recognized as the brainchild and champion of singapore’s strategy to become a leading biomedical sciences (bms) hub in the world. the development of biopolis was an important part of his overall bms strategic thrust, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 and cannot be understood without taking into consideration the vital contribution of the other key elements of this strategic thrust. after completing his engineering degree overseas on a government scholarship, yeo returned to serve in the singapore administrative service from june 1970 to march 1999, taking on various appointments in the ministry of defence (mindef), including permanent secretary for logistics, technology research & development and defence industries. during his time in mindef, he became known to, and highly trusted by, the then prime minister lee kuan yew, deputy prime minister goh keng swee and defence minister howe yoon chong through his outstanding, if maverick, track record of taking on challenging assignments and getting things done, including creatively breaking rules if necessary (peh 2016). the trust of the top political leaders, coupled with his reputation for integrity, had protected him from being sanctioned for repeated rule-breaking. from 1980-87, he also served as the first chairman of the national computer board (ncb), and is credited for his leadership role in formulating and executing singapore's first national computerisation plan. in 1986, he was appointed as chairman of economic development board (edb), the lead government agency responsible for attracting foreign investment into singapore to generate economic growth and create high value adding jobs. through his leadership, edb successfully shifted the focus of investment attraction from more established industries to new areas of business, including internationally exportable services, semiconductors, aerospace, speciality chemicals, and pharmaceutical manufacturing. yeo is credited with making singapore a leading global petrochemical processing hub by merging seven small islands through land reclamation to form an integrated complex, as well as pioneering singapore's participation in overseas infrastructure development projects such as http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 those in the bintan industrial estate in indonesia and the wuxi-singapore industrial park in china (peh 2016). in the late 1990s, yeo became convinced that biomedical sciences (bms) innovation was the next big high value creating industry that singapore needed to shift towards, and became a passionate champion for greater government investment in this new area. prior to 2000, while singapore had already become an important manufacturing hub for global pharmaceutical companies, there was little private sector biomedical r&d activities being performed in singapore. although nus medical school had some applied biomedical research activities, and a number of public research institutes in life sciences (institute of molecular & cell biology, imcb) and bioprocessing technology institute (bti) had been established prior to 2000, the overall scale of biomedical research was small, and little commercialization resulted from it yet (finegold, wong and cheah 2007, wong 2007). following the first public announcement of the technopreneurship 21 strategy in late 1998, the plan to establish a science hub in buona vista area (the land area near to the national university of singapore) to provide new space for integrated research, innovation and entrepreneurial start-up activities was unveiled in 1999. while biomedical sciences was highlighted as one of several key innovation clusters to be promoted in this new buona vista science hub (bvsh), few details were provided at that stage. through yeo’s championing, the government unveiled an ambitious strategy to make singapore a leading global hub for biomedical sciences (bms) innovation in june 2000 (beh 2004). the strategy involved three prongs: industrial development (to be led by edb’s biomedical sciences group, edb bmsg), strategic investments in companies (to be led by edb’s new $1 billion venture capital fund bio*one capital) and substantially increasing http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 funding of public sector and university research in bms (to be led by nstb’s biomedical research council, bmrc). integral to this bms strategy was the creation of a major bms innovation cluster in bvsh (which by then has been renamed one-north), to be led by nstb’s bmrc. yeo, who as chairman of edb had been championing the attraction of bms manufacturing investment by foreign pharmaceutical mncs, got himself appointed as chairman of nstb just before the bms strategy was unveiled, while still retaining a co-chairmanship role at edb overseeing bmsg and bio*one capital. through this joint appointment, yeo was thus able to assume a holistic leadership role over the entire bms innovation strategy. upon taking on nstb’s chairmanship role, yeo promptly renamed the organization as agency for science, technology and research (astar), and made the development of biopolis its top priority. in effect, although the overall t21 initiative was led by the other co-chairman of edb, teo ming kian (who reported to the then deputy prime minister), and was not primarily about bms, yeo had seized upon it to advance his bms agenda. yeo’s championing role not only made bms the first innovation cluster to be built in onenorth, but also explained the extraordinary speed at which it got built. firstly, rather than the traditional route of writing an elaborate plan to seek funding from the ministry of finance (mof), yeo struck an unusual build-and-lease deal with jtc, the government agency in charge of one-north development master planning (peh 2016). as part of the inter-agency agreement, astar was initially given 60% ownership of the public land lease for biopolis, with jtc owning the other 40%. yeo offered to transfer astar’s share to jtc as construction payment, and convinced jtc (as the landlord) to construct the building and lease it back to astar (as the tenant) for a 10-year lease (peh 2016, 156). through this creative arrangement, yeo not http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 only bypassed the lengthy process of seeking funding approval from mof, but also the associated lengthy tender process for public construction projects. besides speeding up the commencement of construction, yeo also pushed jtc hard to speed up the construction process, resulting in the completion of phase 1 of biopolis, comprising of a cluster of seven interconnected buildings, within 14 months (aw 2015), and the full commissioning of the buildings for occupation by october 2003, less than 2 years from the initial ground breaking in december 2001. in parallel, as chairman of astar from 2000, yeo quickly funded the establishment of three new bms-related institutes (genome institute of singapore, gis, in 2000, bioinformatics institute, bii, in 2001, and institute of bioengineering and nanotechnology, ibn, in 2003). together with the two existing research institutes imcb and bti, these five new public research institutes (pris) became the first anchor tenants of biopolis. leveraging his leadership position in edb-bmsg, yeo was also able to simultaneously deploy edb’s various investment incentives to attract a strong pipeline of global bms companies to move into biopolis as soon as it was ready. these included novartis institute for tropical diseases, vanda pharmaceuticals, illumina, paradigm therapeutics, waseda-olympus bioscience research institute and johns hopkins university medical school. in addition, the health sciences authority (has), the regulatory body for healthcare sciences and services in singapore, also moved into biopolis (beh 2004). as highlighted by killen, palladino and gonzalez (2021), the co-location of major bms pris within biopolis provided the initial critical mass to enable the continued attraction of major global biomedical multinationals. the high initial occupancy rate of phase 1 also bolstered jtc’s confidence in attracting more players to biopolis, and led to the early follow-on http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 development of biopolis phase 2 (neuros and immunos, opened in 2006), as well as phase 3 (synapse and amnios, opened in 2010). as can be seen from the timeline in table 1, the first fusionoplis building did not get completed until 2008. in parallel with funding new pris and attracting foreign biomedical companies, yeo also created and executed an audacious program to attract the critical talents to staff these organizations. calling his two-prong talent attraction strategy “whales and guppies”, yeo sought to attract top scientists in the world (the “whales”) to head up the pris in singapore, and simultaneously recruiting many young researchers (the “guppies”) to work with and be trained by them. leveraging a relationship he had earlier developed with nobel laureate dr. sydney brenner, yeo convinced brenner to be an advisor to his bms strategy. with brenner’s help, yeo compiled a list of 100 top biomedical scientists in the world and personally went to meet most of them to try to attract them to come to singapore to lead major bms research programs (hang, low and thampurant 2016). the first top scientist he attracted was dr. edison liu, former director of clinical sciences at the u.s. national cancer institute, who became founding executive director of genome institute of singapore. other prominent catch followed within the next 3 years, including dr sir david lane, from the university of dundee, scotland to become the executive director of imcb; dr alan colman, formerly from uk-based ppl therapeutics, to become the chief scientific officer of es cell international, a biotech startup funded by edb bio*one; dr jackie ying, an mit professor, to become the executive director of ibn; and dr yoshi ito, from the university of kyoto in japan, to become a principal investigator at imcb (beh 2004). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 for the second prong of his talent attraction strategy, yeo launched an ambitious astar scholarship program to fund bright singaporean undergraduates or recent graduates to pursue phd education in bms fields in leading universities around the world. the generous scholarship not only covered all tuitions and living expenses, but included an additional monthly cash top-up to compensate for their forgone earnings while doing their phd studies. in return, the young phds were to be bonded to work in singapore’s bms sector (especially in biopolis) for several years. such unusually generous scholarship was not only unheard of among public sector organizations, but yeo actually did not have an approved budget in astar to do so. without asking for approval, yeo diverted astar’s research budget to fund the scholarship instead. yeo deliberately offered the scholarship to only singaporeans, as he was concerned that many of the researchers in his bms research institutes were foreigners, and he wanted to groom a future generation of singaporean bms scientists and innovators. yeo’s orchestrated, multi-prong approach to bms innovation cluster development, by complementing the physical infrastructure development of biopolis with public-private sector co-location, investment incentives, public research funding and venture capital, and the recruitment of top scientists and young phds, significantly accelerated singapore’s move towards becoming a leading global bms innovation hub. the creation of biopolis in one-north benefited significantly from, but also contributed significantly to, his overall bms strategy: besides the physical infrastructure, biopolis also provided an early iconic brand for the whole bms strategy, as well as a credible signal of singapore government’s long-term strategic commitment to bms (killen, palladino and gonzalez 2021). yeo’s imprint is manifested in the distinctive physical form of biopolis itself as well. inspired by what he learned from highly innovative places he saw in silicon valley and elsewhere, yeo http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 wanted the physical layout and design of biopolis to facilitate physical connectivity and social interactions among the building occupants, and this requirement was well reflected in the distinctive architectural and landscape design made by the architect zaha hadid. the seven buildings of biopolis phase 1 are interconnected with sky-bridges, and share a common underground carpark and a continuous roof carpet. to maintain vibrancy at street level, the buildings were built closer together than conventional setback standards, with reduced road reserves and narrow streets. the height of kerbs was also reduced to make it easy for pedestrians to cross roads, and the curved road layout created enclosed and walkable spaces that maximize outdoor, street-level social interactions (clc 2018). in contrast, because the same insistence on connectivity among buildings was not made in the later development of fusionopolis and mediapolis, the physical layouts of these two precincts reverted back to conventional setback standards for typical business parks (clc 2018). in summary, our actor-level analysis strongly suggests that, absent a strong entrepreneurial champion like yeo, it is highly unlikely that a committee of senior civil servants from multiple government agencies could have developed and executed a similar strategy in an equally short time. the significant imprinting of dominant actors on the early growth trajectories of business organizations and industries has been extensively documented in the business research literature.1 our analysis of biopolis in one-north suggests a similar dominant actor imprinting, albeit in the public sector context. 1 see e.g. marquis and tilcsik 2013 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 b) the genesis and development of launchpad@one-north in contrast to the biopolis case where a dominant actor exerted extraordinary influence on the early development of a plan, our analysis of the development of the tech start-up hub in onenorth suggests what may happen when such a dominant champion is absent. as its name suggests, the technopreneurship 21 (t21) initiative’s primary goal was on promoting technology entrepreneurship in general, rather than start-ups in specific technology sectors. indeed, the key impetus for the t21 initiative was the dotcom boom in the us in 199798, which led to heightened interest in the “silicon valley” model for wealth creation through tech startups and venture capital investment among the political leadership of singapore, particularly dr tony tan, the then deputy prime minister (wong 2001). tan chose to announce the new t21 initiative at the annual techventure conference in 1998, an event for the tech startups and venture investment community that was started by nstb to promote technology startups (tan 1998). the subsequent prioritization of three technology clusters — biomedical, physical sciences/engineering/ict, and digital media — occurred to facilitate the delegation of lead responsibility to different government agencies, and in the context of one-north’s initial concept plan, to guide strategic spatial clustering —biopolis, fusionopolis, mediapolis— (clc 2018). in spite of such sectoral prioritization, however, the core policy focus of t21 remained on promoting technology entrepreneurship in general, as can be seen from various new policies that tan subsequently announced in 2002 (tan 2002). these range from promoting interest in entrepreneurship among university students, promoting angel investments for early stage startups, a technopreneur home office (tho) scheme to allow technopreneurs to use public housing as home offices, a technopreneur pass scheme that relaxed immigration rules to allow http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 foreign entrepreneurs to stay in singapore without a confirmed job, and making it easier for directors of bankrupted businesses to start new businesses. unlike the case of bms hub strategy, however, the implementation responsibilities of technology entrepreneurship promotion under t21 was fragmented among different government agencies. while nstb was designated the main agency to lead the multi-agency t21 initiative when it was first launched in 1999, that role was transferred to edb in jan 2001 (tan 2002). however, edb’s lead role also diminished over time. for example, a business angel co-investment scheme was launched by edb in 2002, but it was later shifted to spring, the government agency in charge of sme promotion (wong and singh 2012). a $1 billion technopreneurship investment fund (tif) was created as a fund-of-fund to invest in venture capital funds, but it reported to the ministry of finance and invested mostly in venture capital funds overseas, with minimal impact on the local venture capital industry. modest funding was channelled to the local universities and polytechnics to promote entrepreneurship education and start-up activities among tertiary students, but the institutions were free to develop their own programs as they saw fit. in this decentralized policy environment, jtc started a pilot project called “phase z.ro” in 2001 to provide temporary office space (made out of ship containers) for early stage tech startups at the northern corner of one-north. occupancy rate was initially high due to its low rent (clc 2018), but in later years it appeared to have declined significantly (theunchartedwater 2016), and the facility was demolished in 2008. in 2006, a new national research foundation (nrf) was created under the prime minister’s department to provide central coordination of research, innovation and enterprise startup policies, and t21 was quietly disbanded. by then, a number of the t21 tech startup promotion http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 programs had completed their gradual transfer to spring. nevertheless, technology entrepreneurship policies continued to be fragmented. as an example, spring had an early stage startup funding program called seeds, but mda also launched a seed funding program (called ijam) in 2006 for digital media startups, while nrf launched a technology incubation scheme (tis) in 2009 that co-funded 16 early stage investment groups to invest in startups. all three funding schemes ended up overlapping substantially, as most of the tech start-ups during that period were in the internet/mobile/it space (wong 2019). in contrast, there was little public co-funding support for early stage venture investment in “deep technology” start-ups, because these types of start-ups entailed higher risks and higher quantum of investment even at the seed stage, and required venture investors with specialized technical domain knowledge that singapore lacked (wong 2019; world bank, 2021). despite the growing amount of public seed funding for tech start-ups from the second half of 2000s, the number of funded tech start-ups remained relatively small throughout the decade of 2000s, because the supply of tech entrepreneurs was actually still quite limited. an initial wave of tech start-ups in the late 1990s in tandem with the global dotcom boom was followed by a big drop in start-ups in tandem with the dotcom crash in early 2000s. in this regard, by the time that t21 policies were rolled out, the global environment for tech start-ups had turned negative, making it harder for these policies to have substantial immediate impacts. we suspect phase z.ro was adversely affected for this reason as well, leading to its closure in 2008. it was only from early 2010s that a second wave of tech start-up emerged (wong and ho 2017; wong 2019). while the increase in seed funding in the second half of 2000s may have contributed, a more important driver was the growing number of university students and young graduates, especially from nus, choosing to become tech entrepreneurs. a decade earlier, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 nus had set up an entrepreneurship support program called nus enterprise (wong, ho and singh 2007 and 2014). right from the start, nus enterprise launched an experiential entrepreneurship education program called nus overseas colleges (noc), through which it sent two cohorts of undergraduate students each year to do full-time internship at early stage tech start-ups for up to a year in leading entrepreneurial hubs across the world to learn first hand about tech entrepreneurship (wong, ho and ng 2019). starting with around 50 students in silicon valley in 2002, the program was progressively expanded over the years to over 300 students per year spread across 9 locations covering silicon valley, new york city and toronto in north america, shanghai, beijing and shenzhen in china, and israel in the middle east, stockholm and munich in europe. returnees from these programs were found to have much higher propensity to engage in start-up activities than normal graduates from nus (wong, ho and ng 2019). as more and more of these students returned, the number of start-ups by such noc alumni began to climb, contributing a disproportionate share of tech startup formation in singapore from the late 2000s onwards. a study in 2018 found that noc alumni founded startups accounted for over 8% of tech start-ups in singapore that have received external funding, even though such alumni accounted for less than 0.5% of graduates from local institutions of higher learning (wong, ho and ng 2019). in 2020, the three most successful noc alumni startups were estimated to have accounted for over 40% of the total value of start-ups in singapore (nus enterprise academy 2021). in the first decade (2000-2010), nus enterprise operated an incubation support program, including co-working space, within its campus (wong, ho and singh 2014). with growing demand, however, the ceo of nus enterprise, dr. lily chan, started to look for additional incubation space outside the campus. coincidentally, michael yap, the director of mda’s ijam http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 program, also started to look for space to accommodate the increasing number of stat-ups it funded. although mediapolis would have been an ideal place to accommodate these start-ups, its development had been repeatedly postponed, and was expected to be opened only in 2014. being well acquainted with each other through their active role in the start-up community (as well as through yap’s ijam funding of several nus enterprise incubated start-ups), the two decided to join force to find a larger common space.2 as it so happened, jtc owned an old industrial estate comprising of several somewhat rundown multi-storey factories for smes within the ayer rajah precinct of one north, just a short distance away from nus campus. coincidentally, beginning in 2000, jtc started to terminate the leases of these smes en-masse with a plan to progressively demolish the vacated buildings to make way for building new high rise offices and retail spaces, as an extension of fusionopolis. sensing the opportunity, yap offered to take a 3-year lease for one of the 7-storey buildings that was only slated for demolishment in 2014, and invited chan to share the leased space and cost. around that time, a common acquaintance of both, yvonne kwek, was heading up a new corporate venture capital (cvc) fund (innov8) of singtel, the largest telco in singapore, so they persuaded her to join in taking up part of the space. after some minimal renovations (to keep cost low), the building was opened in 2001 as a no frill, affordable space for start-ups. although officially named as phase zero of mediapolis, the place became widely known instead as block71 (its original building block number) (chew and neo 2017). serving as anchor tenants, the three founding organizations (mda ijam, nus enterprise and innov8) were able to fill only about half of the spaces with their own offices and about 120 of 2 chan, personal communication. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 their incubatee start-ups. to fill up the remaining spaces for another 160 startups, nus enterprise extended most of its own on-campus start-up events, training workshops and networking meet-ups to block71 to create buzz and to market the place to start-ups, investors and incubators from across singapore. within a year, block71 began to reach near full occupancy, and became widely known as the most vibrant start-up hub in singapore. block71’s growing popularity as a start-up hub prompted the economist magazine to dub it “the world’s most tightly packed entrepreneurial ecosystem” (the economist 2014). a recent study suggests that start-ups that grew out of block71 accounted for almost one-quarter of the total value of start-ups in singapore in 2020 (nus enterprise academy 2021). besides its low cost and the critical mass of diverse start-ups, investors and incubators colocated in one dense building, the attractiveness of block71 was also boosted by the opening of a mass rapid transit (mrt) station at nearby fusionopolis phase 1 in 2011, making it much more accessible by public transport. this development was actually not according to plan, and was the result of an intervention by philip yeo, who had stepped down as chairman of astar in 2007 and moved to become chairman of spring, which moved into fusionopolis in 2008. the original plan for a new mrt line (circle line) by lta was to connect the existing buona vista station at the northern end of one-north to the new station at nus medical school, with the line running through one north but no station in between. yeo felt strongly that an mrt station should be built within one-north, but lta refused as it did not have the budget for the extra station, so he negotiated with jtc to pay for the cost of construction (peh 2016). three months before the 3-year lease for block71 expired in feb 2014, mda notified the early tenants of block71 to move out by the expiry date. this created an uproar among the affected tenant companies, and the social media storm led to a prominent coverage of the issue in the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 mainstream media (chng 2014). this caught the attention of the then minister-in-charge of entrepreneurship as well as the leadership at jtc and spring. after a series of inter-agency deliberations and dialogue with the wider start-up community that voiced their strong support for maintaining and expanding the block71 hub, jtc announced a major decision to reverse its earlier plan to demolish the old ayer rajah industrial estate to make way for a new extension of fusionopolis; instead, it would turn the entire industrial estate into a low-cost start-up hub, by renovating the blocks adjacent to block71 — block 73 and 79 — to accommodate more start-ups, investors and incubators. the new expanded start-up hub was officially launched by the prime minister in january 2015 under the new name of launchpad@one-north, and a further expansion of the hub to include the remaining buildings in the old estate (block 75, 77 and 91) was announced (chew and neo 2017). fully completed in 2019, the hub was estimated to have a total floorspace of 600,000 sq ft and accommodated over 800 startups and other start-up ecosystem players (jtc, 2021). from an evolutionary perspective, the t21 initiative that catalysed the one-north innovation district development did not actually realize its initial plan to incorporate a vibrant technology start-up ecosystem within one-north until a decade later, and in a manner that was not as originally envisaged: jtc’s initial start-up hub phase z.ro was abandoned in 2007, only to resurface several years later in a different location that it had originally slated for other purposes. to its credit, jtc leadership responded well to the new, unplanned development at block71, and managed to change course to co-opt the externally championed initiative into its fold. 4. conclusion and general implications for innovation district development taking an evolutionary view and using an actor-level analysis of the development process of two major innovation clusters in one-north, we have offered proximate explanations of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 timing and evolutionary trajectory of these two clusters that differ from, or are missing/glossed over in the rational planning narrative of prior work (clc 2018, chia 2018). in the case of biopolis, the key development milestones and their timing are not in dispute, but the pivotal role of a dominant actor was glossed over or downplayed, leaving its extraordinary development outcomes unexplained. in the case of launchpad@one-north, the (implicit) inference that the start-up hub was a pre-planned outcome in terms of choice of location and development timing was at significant variance with the actual evolutionary process. our actor-level analysis findings are consistent with considerable prior entrepreneurship and innovation research that show that the passionate championing roles of key individual actors often exert disproportionate influence on the outcome of new, uncertain undertakings (schon 1963, howell and higgins 1990); schon’s early observation that "new idea either finds a champion or dies. no ordinary involvement with an idea provides the energy required to cope with the indifference and resistance that change provokes" (schon 1963) appear to be valid for public innovation projects as well. unlike many other governments where political factional fights and bureaucratic gridlocks are rife, singapore has a dominant political party and a relatively efficient state bureaucracy with a generally pro-business regulatory regime, a meritocratic civil service ethos and a wellfunctioning multi-agency coordination approach to policy making and implementation (wef 2020). nonetheless, our analysis of one-north has found that, even with such an efficient and meritocratic civil service, top-down rational planning still has its limits when it comes to radically new public innovation endeavours, and the roles of individual champions with passionate vision are still critical to overcome bureaucratic roadblocks. in more complex environments where power is more decentralized and factional interest groups are more http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 entrenched, it is all the more important for researchers to adopt an actor-level analysis to analyse the evolution of major new, innovative public projects such as innovation district development. our analysis findings on biopolis development also clearly highlighted that the development of physical spaces for innovation must be part of a holistic innovation ecosystem development policy that includes other complementary support elements such as talent development, risk financing, and investment incentives for private sector actors. in contrast, our analysis findings on the development of start-up hub suggests that fragmentation of policy implementation, while empowering a larger number of actors and experimentation, could lead to less coherent evolutionary outcome, if no strong champions emerge to act as a strong selection mechanism on the greater variations generated. in closing, we acknowledge a number of limitations of our research on singapore’s one-north development history that in turn could suggest possible future research directions. firstly, our research has relied almost entirely on secondary data and archival records that are available in the public domain. future research could benefit from additional primary data gathering, including in-person interviews with the various actors concerned to corroborate, or to add nuance to, our reported findings. another limitation of our research is that it has focused on studying only two of the innovation clusters in the broader innovation district development plan. future research should therefore broaden the scope of study to cover the other innovation clusters as well. last, but not least, future research could apply our actor-level, evolutionary analysis methodology to develop more case studies of major public innovation projects, in singapore or elsewhere, thereby enabling comparative research on the role of key actors and their championing process in radical public innovation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 70-99, july-december 2022 doi.org/10.1344/jesb2022.2.j107 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 references aldrich, howard e., martin ruef and stephen lippmann. 2020. organizations evolving. chentelham: edward elgar (3rd ed.). aw, a. 2005. “singapore: the one-north project.” keynote address at the 41st isocarp congress, bilbao, spain, october 17-20. barrett, susan, and colin fudge. 1981. “examining the policy-action relationship.” in policy and action, edited by susan barrett and colin fudge, 3-32. london: methuen. beh, swan gin. 2004. “singapore: the biopolis of asia.” sma news 36(11): 10-12. catapult. 2021. “hubs of innovation: the role of districts, corridors and quarters as hubs of the covidadjusted innovation economy.” last modified march 22. https://cp.catapult.org.uk/news/hubs-ofinnovation-report/ clc — centre for livable cities. 2018. one-north: fostering research, innovation and entrepreneurship. clc: singapore. chew, hui min, and boon siong neo. 2017. “blk71: growth of a singapore startup ecosystem.” 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wagner, julie, bruce katz and thomas osha. 2019. “the evolution of innovation districts: the new geography of innovation”. https://www.giid.org/wp-content/uploads/2019/05/the-evolution-ofinnovation-districts.pdf wong, poh kam. 2001. “leveraging multinational corporations, fostering technopreneurship: the changing role of s&t policy in singapore.” international journal of technology management 22(5/6): 539-567. doi: 10.1504/ijtm.2001.002977. wong, poh kam. 2007. “commercializing biomedical science in a rapidly changing «triple-helix» nexus: the experience of the national university of singapore”, journal of technology transfer 32: 367-395. doi: 10.1007/s10961-006-9020-0. http://revistes.ub.edu/index.php/jesb https://doi.org/10.5465/19416520.2013.766076 https://www.nas.gov.sg/archivesonline/data/pdfdoc/2002112003.htm https://www.nas.gov.sg/archivesonline/data/pdfdoc/1998091502.htm https://www.economist.com/special-report/2014/01/16/all-together-now 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yuen ping ho and ng su juan crystal. 2017. growth dynamics of high-tech startups in singapore a longitudinal study. singapore: nus entrepreneurship centre. wong, poh kam, yuen ping ho and ng su juan crystal. 2019. nurturing entrepreneurial talent: the nus overseas college program, findings from the inaugural survey of noc alumni. singapore: nus entrepreneurship centre. wong, poh kam, yuen ping ho and annette singh. 2007. “towards an entrepreneurial university model to support knowledge-based economic development: the case of the national university of singapore.” world development 35(6): 941-958. doi: 10.1016/j.worlddev.2006.05.007. wong, poh kam, yuen ping ho and annette singh. 2014. “toward a global knowledge enterprise: the entrepreneurial university model of national university of singapore.” in building technology transfer within research universities: an entrepreneurial approach, edited by thomas j. allen and rory p. o’shea, 281-306. cambridge: cambridge university press. wong, poh kam, and annete singh. 2012. “innovation financing schemes in singapore.” in towards effective policies for innovation financing in asia: a comparative study of singapore, taiwan, malaysia and thailand, edited by patarapong and jarunee wonglimpiyarat, 5-60. bangkok: idrc. wef — world economic forum. 2020. global competitiveness report 2020. wef: geneva. world bank. 2021. the evolution and state of singapore’s start-up ecosystem: lessons for emerging market economies. washington d.c.: world bank this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1016/j.worlddev.2006.05.007 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 lourdes casanova anne miroux cornell s.c. johnson college of business, cornell university (usa) chinese companies conquering the world: a descriptive analysis of the rapid rise of chinese acquisitions1 abstract in this article, we study the global acquisition trends of chinese companies. we look at the countries and sectors they are investing in and the factors driving those investments. we consider the inflexion points and the changes before and after the global financial crisis. the focus of the paper is the evolution of mergers and acquisitions (m&a), but we also consider greenfield investments and overall outward foreign direct investments. to that end, we use longitudinal data from three sources: the united nations conference on trade and development (unctad), the standard & poor’s capital iq, and financial times fdi markets. we note that m&a activity was key for the rapid growth and the fast internationalization pace of chinese companies. while m&a is the entry mode of choice for chinese firms to approach the developed world (europe and the u.s.), greenfields are more common for expansion in asia and africa. the paper also provides comparisons with data from other emerging markets and the u.s. keywords: chinese multinationals; emerging markets; mergers and acquisitions; internationalization; global expansion; outward foreign direct investment; entry mode; greenfield corresponding author: e-mail: lourdes.casanova@cornell.edu received 20 january 2019 accepted 08 may 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:lourdes.casanova@cornell.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 1. introduction china is often depicted as an economic miracle. less attention has been paid to the growth of chinese companies which has been parallel to the growth of its economy. one indicator of this power is the presence in the rankings of the fortune 500 global (casanova and miroux 2018) where the number of chinese firms grew considerably after the global financial crisis. in 2008, there were only 20 chinese firms, while in 2018 there were 10 times more at 111. as chinese companies grew, they also became major cross-border investors. this article examines both modes of entry in foreign markets: greenfield and m&a deals for chinese firms, their evolution over time based on available data from standard & poor’s capital iq2. 2. china’s role in global investment flows since 2000, china has been the second destination for global foreign direct investment (fdi), receiving $136 billion of fdi flows in 2017, as compared to $275 billion for the u.s. china is an outlier compared to other emerging markets, in particular with what we call the e20 (casanova and miroux 2016), the 20 largest emerging markets by nominal gross domestic product (gdp)3. china’s outward foreign direct investment (ofdi) has been unduly overlooked: according to mofcom (2017) china is among the 10 biggest world investors since the 2008 global financial crisis (gfc) and amongst the top three countries in yearly flows since 2012. in addition, china ranked second in ofdi stock (accumulated investments over the years) in 2016 and 2017. in 2017, china invested $158 billion and was the third biggest investor in the world after the u.s. ($342 billion) and very close to the second economy, that of japan ($160 billion). by 2017, china’s ofdi represented 11.1% of the world total flows and 5.9% of the world’s ofdi stock. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 according to mofcom 2017, the main destination of china’s investments is its ”natural market”, asia (63% of its ofdi stocks lie there). the other destinations are in decreasing order: latin america (21%), europe (6.1%), north america (almost 5%) and africa and oceania (2.5%). china focuses primarily in “south-south” investments, which account for almost 86% of the total chinese ofdi as compared to 12.7% to the developed world. regarding the developed world, and from the above figures, it is evident that china invests more in the european union than in the u.s. china’s ofdi stock (as the flow) is also higher in the european union than in the u.s. (hanemann and rosen 2012; nicolas 2014). m&a data show a similar pattern. the same source shows that china’s investments are diversified into six main industries that represent 86% of the total ofdi stock: leasing and business services (34% of ofdi stock), wholesale and retail trade (12.5%), it and technical services (13%), financial services (11%), mining (8.7%), and manufacturing (7%). if we compare both fdi and ofdi, china was a net exporter of capital in 2015, 2016 and 2017. in 2017, the country invested $50 billion more abroad than what it received in fdi. this investment spree is due mainly to the actions of 39,000 chinese companies in 189 countries, with total assets of $6 trillion and an accumulated ofdi (stock) of $1.8 trillion according to mofcom 2017. regarding ownership of companies, it is often claimed by experts that state-owned companies (morck et al. 2008; luo et al. 2010; ramasamy et al. 2012) represent the bulk of overseas investments but their participation in ofdi continue to decrease. in 2017, they represented about 50% of total investments abroad, a 5% decrease with respect to 2016. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 greenfield investments and m&a transactions have been the main catalysts for growth for chinese firms. m&a are a significant tool for acquiring knowledge, technical expertise, natural resources, customer base and talent—all of which can be difficult and time-consuming to develop internally (buckley et al. 2007; chen 2008; deng 2009; luo and tung 2007; wang et al. 2012). hence, m&a is key for chinese firms to catch-up with western global multinationals. with the help of government initiatives, and regulatory revisions more chinese companies have been investing in new industries in a growing number of countries. policies such as the belt and road initiative (bri, also known as the one belt one road, obor) launched in 2013, and fewer restrictions for state-owned enterprises (soes) to invest overseas have significantly aided growth (luo et al. 2010). let’s look at greenfield data first to compare it with m&a in the next sections. 3. chinese greenfield investment in greenfield fdi, a company initiates an investment from scratch; this may include building a manufacturing plant, a new distribution hub, offices or living quarters. in this definition of the term, we include brownfield projects, i.e., those that modify or upgrade existing investments. since 2008, china has increased announced greenfield fdi projects all over the world.4 in the subsequent decade, the value of such projects has doubled in asia (to $245 billion), more than tripled in africa (to $60 billion) and europe (to $70 billion), and experienced an eight and tenfold increase respectively in the u.s. (to $44 billion) and latin america (to $80 billion). while china’s overall investments are primarily in their natural markets—in this case, in asian neighboring markets with geographical or cultural proximity—its greenfield projects increasingly target countries in developed markets and latin america. north america’s share http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 of chinese ofdi greenfield projects quadrupled in the post-2008 crisis period; that of latin america’s investment increased by 66% (figure 1). comparing china’s outward greenfield projects preand post-2008, figure 1 shows that metals and coal and oil & natural gas industries have become less important in china’s portfolio compared to other/new industries. both sectors saw their shares halved from their pre-crisis period levels. the sectors that have most benefited from china’s greenfield ofdi are less traditional sectors. the sectors include real estate as confirmed by ofdi data above, and notably, business services and renewable energy. the latter two registered a nine and twofold increase respectively in their portfolio shares. figure 1. china’s outward greenfield fdi preand post-2008 gfc. periods compared are 2003-2008 and 2009-2016. source: authors based on data from fdi markets accessed by september 2017. note: data include greenfield fdi projects from china and hong kong. 61% 6% 6% 9% 11% 2% 4… 47% 7% 7% 15% 12% 9% 4% asia-pacific western europe emerging europe latin america & caribbean africa north america middle east pre-crisis (jan.03 --> dec.08) post-crisis (jan.09 --> dec.16) 13% 24% 18% 1% 3% 4% 4% 1% 5% 4% 1% 7% 7% 1% 2% 7% 21% 12% 9% 9% 8% 6% 4% 3% 3% 3% 3% 2% 2% 2% 2% 11% real estate coal, oil and natural gas metals business services alternative/renewa ble energy automotive oem communications warehousing & storage hotels & tourism financial services electronic components transportation food & tobacco industrial machinery,… chemicals other pre-crisis (jan.03 --> dec.08) post-crisis (jan.09 --> dec.16) http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 4. chinese m&a activity in the term “m&as”, we include mergers, one company acquiring another, assets purchases or management acquisitions. the goal of a m&a is to grow fast to gain one or more of the following benefits: economies of scale, market access, a new brand, technology and know-how. while in 2000, china barely registered any m&a activity (figure 2), in 2015, the value of its announced outbound m&as ($138 billion) placed it in the fifth position overall, between singapore ($121 billion) and the netherlands ($171 billion)but still far behind the #1 ranked u.s., $488 billion. according to mofcom 2017, firms from china participated in 431 m&a transactions in 56 countries. not only has china become a major global acquirer, it has also been increasingly involved in very large transactions. appendix 1 lists the top 100 outbound m&a transactions globally between july 1, 2015 and june 30, 2016. this list excludes announced transactions made by a consortium of investors from multiple countries. seventeen of the top 100 global transactions originated from china, the largest number of deals by a single country. the $43 billion announced acquisition of syngenta by china national chemical corporation (“chemchina”) in february 2016 was the fourth biggest overseas deal by any company in the world between july 1, 2015 and june 30, 2016. after china, the countries most active in the largest transactions during this period were the u.s. (with 15 of top 100 announced deals), canada (12 announced deals), germany (seven announced deals), followed by the u.k. and france (six announced deals each). in the next sections, we will present data regarding the growth of m&a volumes, geographical destination of m&as and industry sectors acquired. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 4.1 rapid rise in m&a volumes preand postglobal financial crisis m&a is a significant mode of entry to quickly expand internationally. in 2016, china emerged as the second biggest global acquirer after the u.s., (figure 3), at which time chinese m&a deals represented 18% of the m&as of the top 10 investor countries. this is a remarkable development if one considers that china was hardly visible as a global acquirer in the early 2000s (xu et al. 2012). the sudden and remarkable increase that took place in chinese m&as in 2016 in particular when the value of announced m&a deals reached an estimated $224 billion contributed to chinese authorities’ reaction to curtail capital outflows (more on this in section 5.1), targeting m&as in particular. despite the decline in m&a activity that ensued, china was still a leading global acquirer by mid-2017, accounting for 9% of m&a deals and ranking third (following the u.s. and the u.k.) in terms of m&a activity for the first semester of 2017. figure 2. chinese m&a activity: announced outbound m&a deals (2003-q2 2017) source: authors’ analysis based on data on announced m&a transactions from standard & poor’s capital iq accessed by january 2018. 00 50 100 150 200 250 300 350 400 450 $ $50000,0 $100000,0 $150000,0 $200000,0 $250000,0 a v e ra g e m & a d e a l v a lu e ( u s $ m ) t o ta l m & a d e a ls v a lu e ( u s $ m il li o n s) total transaction value in $usdmm average deal value http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 the gfc was the trigger for china’s m&a activity which increased 380% post-gfc relative to pre-crisis levels (table 1 and figure 4), much more than for other emerging countries. china has a similar impressive growth in greenfield activity (181%) post 2009. among emerging markets, korea saw similar increases as china in m&a activity, india also grew in both variables while brazil decreased by 3% in m&a. this compares to a more modest increase for the leader, u.s. (47%), which retains by far its number one position in the world. table 1. changes in china compared to most active emerging markets brazil, india, korea and the u.s. of announced outbound m&a deals and greenfield investments: comparing pre-gfc (2003-2008) and post-gfc (2009-2016) investor outbound m&a (total amount in millions) growth: + 380% rank precrisis: rank post-crisis: no 4 (no 2 in 2016) korea pre-crisis period: $26,324 post-crisis period: $111,165 growth: +322% india pre-crisis period: $63,250 post-crisis period: $79,165 growth: +25% brazil pre-crisis period: $60,767 post-crisis period: $28,866 growth: -3% china pre-crisis: $166,325 post-crisis: $798,013 growth: +380% u.s. pre-crisis period: $1,518,855 post-crisis period: $2,186,658 growth: +44% source: authors’ analysis based on data on m&a transactions originating from china and hong kong ($ value in millions) from standard & poor’s capital iq. 2017 data deals announced through june 30, 2017. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 figure 3. top 15 economies, other selected e20 by announced outbound m&a deals (in millions) in 2016 source: authors’ analysis based on data on announced m&a transactions from standard & poor’s capital iq accessed in january 2017. excludes financial centers in the caribbean. as shown in casanova and miroux 2018, together u.s., canada, the u.k., the netherlands, china, singapore, ireland, france, japan and switzerland accounted for $1.6 trillion of crossborder m&as in 2015. the total value of deals that originated in china as a percentage of the total value of deals that originated from the top 10 global acquirer increased from less than 1% in 2000 to 10% in 2017. the u.s. accounted for 30% of the total value of outbound m&a by these top 10 countries, followed by the u.k. at 14%, canada at 12%, netherlands at 11% and then china at 9%. 311.433,14 224.469,18 189.372,98 139.857,67 124.524,99 75.255,63 64.287,74 56.103,59 56.017,48 32.617,62 24.320,98 21.121,47 16.073,51 15.320,89 10.151,66 7.076,69 5.452,40 3.527,71 3.118,78 1.243,65 1.149,44 $ $50.000 $100.000 $150.000 $200.000 $250.000 $300.000 $350.000 united states china uk canada germany japan ireland france singapore switzerland sweden netherlands luxembourg mexico korea india uae russia malaysia brazil turkey http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 4.2 europe leads the u.s. in geographical destination for chinese m&as following the 2008 global financial crisis, chinese m&as have increasingly targeted developed countries, unlike the destination of its overall ofdi which targets emerging markets. in 2012, a peak year for such transactions, developed countries accounted for an estimated 80% value of acquisitions and for more than 60% during the 2015-2017 period. among developed countries, europe was the most important destination, accounting for about 37% of the value of all transactions from 2015-2017 (figures 5, 6a and 6b). in some ways, china’s outbound m&as mirrored the geographical breakdown of the u.s. outbound acquisitions: indeed, europe accounted for about 78% of all u.s. outbound m&as over the same period (figures 7). surprisingly, asia the main recipient of ofdi (63% of the ofdi stock lies there) does not occupy a prominent place in the m&a activity of chinese firms. china’s m&a activity in europe and latin america has increased steadily over the years (buckley et al. 2007; nicolas 2014). although from a much lower level, we see a similar pattern in other emerging countries (figure 5) where the acquisitions target the u.s. pre gfc and move more to europe after that. if we consider china, europe accounted for about 33% of the total value of m&a deals between 2009 and mid-2016, compared to about 19% between 2000 and 2008, i.e. in the pre-crisis period (figure 6b). the share of latin america in the total value of outbound m&a deals from china increased from about 8% (in the pre-crisis period) to 15% (post-crisis) – see figure 6a. this shift towards europe, u.s. and latin america has primarily been driven by cheap currencies (relatively low euro rates and currency devaluations in latin america), opportunities due to the financial hardships of many companies after the global financial crisis (both in europe and the u.s.), the desire of chinese firms to seek advanced technologies (mainly in europe) and new markets for their products/services (buckley et al. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 2007); nicolas 2014). africa and the middle east remain much less important target regions for chinese m&as. it is important to note that there have also been m&as in europe by financial investors from china, which are not accounted for in figure 4. for example, in one of the biggest acquisitions in 2016, a consortium of chinese financial investors consisting of beijing jianguang asset management co., ltd (“jac capital”) and wise road capital ltd (“wise road capital”) announced the purchase of standard products business from netherlands-based semiconductor company, nxp semiconductors n.v. for $2.75 billion. prominent recent m&as in europe besides the above-mentioned syngenta deal were the purchase of swiss air-travel logistics company gate group holding ag for $1.5 billion by china based hna group co., ltd. in april 2016 and the sale by south african/british anglo american plc (“anglo american”) of its niobium and phosphates businesses in brazil to china molybdenum co. ltd (“cmoc”) for a reported total cash of $1.5 billion in april 2016. figure 4. total value of announced m&a deals by e20 firms 2003-2016, pre-gfc (20032008) and post-gfcs (2009-2016) (u.s. millions) source: authors’ analysis based on data on announced m&a transactions from standard & poor’s capital iq accessed on january 2017 0 100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 china others e20 korea india russia mexico brazil malaysia 2003-2008 2009-2016 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 figure 5. geographical distribution of announced m&a deals from china versus other e20 countries pre(2003-2009) and post-gfc (2009-2016). top figure pre-gfc (20032008) and bottom figure post-crisis (2009-2016) source: authors’ analysis based on data on announced m&a transactions from standard & poor’s capital iq accessed on january 2017. figure 6a. destination of chinese announced outbound m&a value by region 2003-q2 2017 ($ millions) source: authors’ analysis based on data on announced m&a transactions originating from china and hong kong ($ value in millions) from standard & poor’s capital iq. 2017 data deals announced through june 30, 2017. accessed on september 2017. 0% 20% 40% 60% 80% brazil china india korea malaysia mexico russia us europe united states and canada asia / pacific latin america and caribbean africa / middle east 0% 20% 40% 60% 80% brazil china india korea malaysia mexico russia us europe united states and canada asia / pacific latin america and caribbean africa / middle east 0 50.000 100.000 150.000 200.000 250.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 q2' 2017 africa / middle east latin america and caribbean asia / pacific united states and canada europe http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 figure 6b. destination of chinese announced outbound m&a value by region pre(20032009) and post-gfc (2009-2016 in $ millions) source: authors’ analysis based on data from standard &poors’ capital iq accessed by september 2017 figure 7. u.s. announced cross-border m&a value by region 2014-2017 ($ millions) source: authors’ analysis, based on data from standard & poor’s capital iq accessed july 2018. note: data as in all the m&a graphs refers to announced deals. accessed on january 2018. $0 $100.000 $200.000 $300.000 $400.000 $500.000 $600.000 2014 2015 2016 2017 unespecified africa / middle east latin american and caribbean asia / pacific united stated and canada europe http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 4.3 china’s increased focus on services the industry distribution5 of chinese outbound m&a has also changed in recent years. prior to the global financial crisis, the majority of chinese investments abroad were focused on the energy and materials6 sectors: together they accounted for 52% of total transaction value of all announced chinese m&a between 2000 and 2008. in comparison, industrials7 (6%), financials (10%) and consumers (15%) sectors transactions were smaller in value. after 2009 the m&a deals made through the second quarter of 2016 have had a more uniform distribution across industries. energy (17%) and materials (18%) accounted for 35% of the total value of deals between 2009 and 2016, while other sectors such as industrials (14%), financials (17%) and consumer (19%) have all increased as a percentage of total deals (figure 8). furthermore, according to capital iq data in 2015, over 80% of the chinese outbound deals were in consumer, industrials, financials and information technology sectors. energy, industrials, materials and it accounted for about half of the acquisition value from 2014-2017 (standard & poor’s capital iq data for m&a). this sectoral focus not only closely tracks u.s. outbound acquisitions (for which it and materials are important sectors – see figure 9), but also foreshadowed the sectors that the made in china 2025 strategy would focus on. due to such widespread acquisitions by china in these sectors, some countries feared that their native technology sectors would fall under foreign control, leading to distrust from several developed nations towards chinese m&as (further details provided in section 5.2). at the same time, real estate was the largest target sector for china in 2017, and would soon face new restrictions from the chinese government (more on this subject in section 5.1), which was wary that transactions in this sector were driven by speculative motivations. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 figure 8. sector distribution of chinese announced m&a deals (2014-2017) source: authors’ analysis, based on data from standard & poor’s capital iq accessed july 2018. figure 9. sectoral distribution of u.s. announced m&as deals (2014-2017) source: authors’ analysis, based on data from standard & poor’s capital iq accessed july 2018. 4.4 increasing size of m&a deals from china in the post gfc phase, along with the increase in the overall value of m&a deals as we saw in 3.1, the average deal size also increased from $211 million in 2000-2008 to $275 million in 2009-2016 (figure 10). in addition, as the value of deals has increased, they have also become more expensive, and chinese companies have been willing to pay a higher price for the targeted assets. some valuation metrics commonly used in m&a transactions are tev/revenues8 and real estate 20% consumer related 19% energy & utilities 13% industrials 12% information technology 12% materials 11% financials 4% healthcare 3% telecommunication services 1% unespecified 5% otros 13% healthcare 35% consumer related 18% information technology 11% materials 11% industrials 7% real estate 6% financials 6% energy & utilities 4% telecommunication services 1% unespecified 1% otros 18% http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 price/earnings ratios (average premium). tev and price (in case of public companies) are measures of the total value of the firm. put simply, the higher these ratios, the higher an acquirer is willing to pay for the target. we analyzed the tev/revenue ratios for chinese overseas transactions for the periods mentioned above. the average tev/revenue ratio increased from 5.7 in 2000-2008 to 9.9 in 2009june 2016 (figure 10). as well, for the publicly traded m&a targets, average acquisition premium (based on prior week price of the publicly traded target company) increased from 27.6 percent to 36.4 percent. figure 10. price and valuation of chinese outbound m&a deals (2000 – q2’16) (in millions) source: authors’ analysis based on standard & poor’s capital iq data on m&a transactions accessed on january 2017. we also compared the chinese outbound m&a deals with the u.s. ones (figure 11). while the m&a deals china has done in the past years have been bigger than in the past, they are still small on average compared to the u.s. outbound deals. for instance, the average deal size for the u.s. in 2015 was $592m compared to $269m for outbound chinese deals. average acquisition premiums paid by both chinese and u.s. companies were more comparable, with a premium between 25 to 30 percent in 2015 (29.8% for chinese and 26.2% for american firms). the higher average tev to revenue ratio for chinese deals could reflect the mix of deals. indeed, smaller deals tend to have higher revenue ratios and china had a higher percentage http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 (70%) of smaller deals (less than $100 million) than the united states (63%). furthermore, higher chinese premiums could be due to the fact that chinese companies are likely to be less known compared to u.s. companies and therefore may be facing some resistance from sellers demanding higher premiums as it happens sometimes with other emerging markets multinationals. besides, given the increased scrutiny and regulatory hurdles to which chinese acquisitions are submitted at home and in host developed countries (more on this subject in sections 5.1 and 5.2), completing a transaction with a chinese buyer tends to be perceived as increasingly more complex, subjected to more regulatory scrutiny, and riskier – leading to demands of higher prices on the part of sellers. figure 11. price and valuation of china and u.s. outbound m&a deals (2015) source: authors’ analysis based on standard & poor’s capital iq data on m&a transactions accessed on january 2017. 5. adjusting to a new paradigm since 2016, when china’s m&a activity rose to the forefront, surpassing some western companies and countries for the first time, u.s. foreign policy under president trump administration shifted to a more rigorous scrutiny of fdi into the country and more specifically chinese investments in the u.s. chinese acquisitions started facing restrictions not only in the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 u.s. but also increasingly in the western world. this was accompanied by pressures at home to reduce acquisitions and fdi forays in foreign markets. these issues are described in more detail in the following sections. 5.1 policy changes at home since the 1990s, chinese government policies have been instrumental in the country’s emergence as a powerhouse global investor. the policies progressively evolved from restriction, to liberalization and then to outright support and encouragement, as we analyzed in casanova and miroux 2016, 2017 and 2018. the “go global” strategy, launched in 2000, marked the beginning of a phase of significant proactive support aimed at encouraging chinese firms’ expansion abroad. in subsequent years, the strategy gained strength as part of china’s five-year plans. today, the ministry of commerce, the national development and reform commission, the export-import bank of china, the china development bank and china export and credit insurance corporation all provided a network of administrative, financial and commercial support. the country has also engaged in active investment diplomacy, marked by the chinese president xi jinping visiting both latin america and africa three times since he took office (latin america in 2013, 2014 and 2016 and africa in 2014, 2016 and 2018). finally, other government-led initiatives, such as the belt and road initiative – bri, also known as one belt and one road” (obor)”9 – launch in 2013 has and will likely fuel further china’s ofdi expansion. according to mofcom 2017, chinese investments in the bri countries has increased from 12.63 billion in 2013 to 20.17 in 2017, an overall increase of 59.6% and represents right now 12.7% of china’s ofdi flows. a dramatic surge of outbound m&as in 2015-2016 prompted the chinese government, eager to maintain financial stability, to quickly shift course in order to tame the massive capital http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 outflows that took place during those years. authorities also feared that speculative rather than economic reasons motivated a number of those transactions and worried about the stability of the renminbi. of special concern were cases of acquisitions outside the buyer’s core area of business—in real estate and entertainment, for instance, two industries that had seen a flurry of large deals. hence, in the fall of 2016 the government announced stricter approval requirements for m&a deals10 and restricted real estate purchases abroad by state-owned enterprises (soes). later on, in august 2017, the national development and reform commission (ndrc) issued “guidelines on overseas investment” that classify overseas investments into three main categories: 1) encouraged investments; 2) restricted investments; and 3) prohibited investments. the guidelines for instance restrict investment in real estate, hotels, entertainment, and sport clubs and prohibits them in inter alia, gambling and ’lewd industries’ as well as those that provide access to sensitive sectors such as core military. on the other hand, encouraged investments include those that promote the belt and road initiative (in particular in infrastructure and connectivity projects, see increase noted earlier in chinese ofdi in those countries), or that strengthen cooperation with overseas high-tech and advanced manufacturing companies. subsequently, in december 2017, the national development and reform commission, along with four other agencies, released a code of conduct for private companies investing abroad. several highly leveraged and risky outbound acquisitions appeared to motivate this code, particularly targeting chinese firms with a history of mega deals, such as the conglomerate wanda owner of a private developer and various cinema chains, the conglomerate and investment company fosun, which bought among others france’s club med, and british thomas cook and canada’s cirque du soleil besides the u.s. insurer meadowbrook in 2014 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 and in 2016 the english football club wolverhampton wanderers. another targeted company was the tourism conglomerate (hna) which owned among other assets almost 10% of deutsche bank and 30% of nh hotel group and the insurance anbang which boght the emblematic hotel waldorf astoria in new york city among other hotels. the code calls upon chinese firms to avoid high leverage financing and stay within their core area of activities, as well as respect local laws, including social and environmental standards. the new guidelines also require firms to report investment plans to the government and to seek approval for investments in “sensitive” countries or industries.11 while some observers note that the code of conduct does not consist of hard and fast rules,12 the warning to chinese foreign investors has been clear. as of december 2018, a code of conduct for soes was said to also be in the works. these policy shifts have not only tempered the acquisition fervor of chinese investors, but also affected the confidence of their financiers. thereafter, financing became harder to obtain, revealing in some cases that firms had overextended themselves. one such example is hna, which was forced to rid itself of high-prized recent acquisitions. the chinese airline conglomerate was one of the most prominent chinese acquirers from 2015-2016, and was obligated to sell off assets in 2017-2018, including major real estate properties in the u.s., hong kong, and australia, and some of its equity stakes in deutsche bank and other firms. this ofdi policy shift is partly responsible for the above-mentioned drop in chinese outbound m&as in 2017 and early 2018.13 in the medium term, however, the net effect of the new measures is uncertain. while speculative deals will likely face higher hurdles, the underlying economic motivations for increased outbound chinese m&as remain the same. for companies, these motivations include easier access to resources, and in acquisitions in developed countries, access to markets, international brands, technology and expertise, as well as better return on http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 assets. on the government’s side, the overall objective is still that of an economy with high value-added sectors and a strong focus on innovation, as illustrated by the made in china 2025 plan. for instance, transactions that are “economically” sound or fall in line with the government policy of “strengthening cooperation” in high tech and manufacturing will likely benefit from the above mentioned guidelines on overseas investment. 5.2 increased scrutiny in host countries serious obstacles also lie on the receiving end of chinese outward investment as a number of developed countries, wary of chinese investment, have introduced restrictions of their own on acquisitions by foreign investors. many countries have instituted mechanisms for screening foreign investments. while such mechanisms have often been motivated by national security concerns, they increasingly reflect other considerations such as the protection of strategic industries, critical infrastructure and key technologies.14 in recent months in particular, developed countries have strengthened their screening mechanisms, partly as a reaction to the wave of chinese investments in high tech and advanced manufacturing industries and in strategic sectors. for instance:  in germany, the chinese firm midea’s 2016 acquisition of the robotics firm kuka sparked strong objections from politicians and eu representatives. in response to concerns, germany introduced changes in its foreign trade and payments ordinance in 2017, and as a result, the german government can now block certain acquisitions more easily based on security reasons.15 as of september 2018, the government was reportedly considering lowering the threshold of participation by a non-e.u. buyer for deals that can be subject to government veto, which would subject more transactions to security reviews.16 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34  in france, the government introduced legislation in june 2018 to tighten screening mechanisms, specifically by extending the scope of sectors under consideration to better cover strategic industries. this legislation was still under review as of early september 2018.17  following a 2017 green paper on national security and infrastructure investment review, the government of the united kingdom introduced legislation to parliament in 2018 that would strengthen the state’s ability to scrutinize foreign investment in innovative technology sectors on national security grounds.18  after france, germany and italy called for a debate on control and scrutiny of foreign takeovers in sensitive industries, the european commission put forward a proposal in september 2017 for a regulation establishing a framework for screening fdi inflows into the eu on the grounds of security or public order. this proposal was still under discussion as of late 2018.  in august 2018, the united states enacted the foreign investment risk review modernization act (firrma), a legislation that expands the jurisdiction of the committee on foreign investment in the united states (cfius) to address growing national security concerns over investment traditionally falling outside of cfius jurisdiction. considered the most significant overhaul of the committee since 1988, firrma enlarges the scope of transactions reviewable by cfius, lengthens its review period, and mandates a separate process to review the export of sensitive u.s. technologies.19 cfius has the mandate to scrutinize companies and determine those which should not be sold as they are strategic assets for the country due to positive technological spillovers and creation of jobs. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 since january 2017, illustrating the changes currently under way, a number of foreign acquisitions by chinese firms have been blocked or abandoned. in 2017, 11 m&a deals worth $100 million or more were withdrawn for regulatory or political reasons, three of which were for explicitly stated national security concerns. two of those related to the acquisition by chinese buyers of u.s. companies in semi-conductors and digital mapping and software services (lattice semiconductor corporation and here international b.v., an it-related company). during the first half of 2018, the trend accelerated with four mega acquisitions failing in the u.s. for clearly-stated national security reasons.20 three of these acquisitions directly involved chinese buyers: the takeover of moneygram international (financial services), cogint inc. (data services), and xcerra corporation (semi-conductor testing equipment). in addition, three deals were prohibited between december 2016 and march 2018 by u.s. presidential order—a practice little used in the past21—following recommendations by cfius (the deals were takeovers of aixtron,22 lattice and qualcomm). outside the u.s., the australian government rejected high-profile transactions in 2016, such as the sale of a majority stake in ausgrid, an electricity provider, to state grid corporation of china on national security grounds, too.23 6. conclusion the dollar value of total chinese outbound m&a transactions has increased significantly over the last decade, and especially since the global financial crisis (gfc) of 2007-08. this increase has been driven by vibrant m&a activity of large chinese companies. this surge in m&a activity has been fueled by technology and knowledge-driven acquisitions in developed markets, as well as natural resource driven acquisitions in latin america at first and now more http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 and more in electricity sector and other parts of the world. other factors driving chinese investments abroad have been a desire for market diversification and adding international valued brand names (as it was the case of lenovo’s acquisition of ibm’s personal computer’s division in 2005) to their portfolio. outbound m&a also helps chinese firms establish new marketing and distribution channels. lastly, cheap currency valuations in many developed markets, especially in europe after the crisis in 2011, also made the valuations of foreign targets cheaper, boosting the chinese outbound m&a activity from less than $40 billion in 2007 to over $140 billion in 2016 (year to date). the surge was such that, in fact, by june 2016, the value of announced m&as already exceeded the value achieved for the full 2015 year ($138 billion). the above analyses point to the following:  the global financial crisis, has been an inflexion point for chinese m&as which gained importance as a mode of entry for chinese multinationals.  overall, both chinese greenfield ofdi and outbound m&as have gained prominence. the u.s. and other major developed countries are not keeping up with the dynamic pace of growth in outbound m&a deals that we observe in asia and in africa.  china’s greenfield investments remains predominantly of a south-south nature. though the share of developed countries has especially increased post-crisis, about 70% of china’s ofdi are still directed towards developing and emerging economies in asia, africa and latin america. this is in contrast to chinese m&as, which from the beginning were largely directed towards europe and north america (about 60% of the value of the m&a deals) and have remained so over the years. the volume of m&a deals by chinese firms targeting these regions has increased remarkably in value terms since the global financial crisis. in http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 the process, europe has taken the lead as the primary target of m&as by emerging market multinationals, followed by north america.  in both greenfield fdi projects and m&as, available data suggest the growing attractiveness of service based and consumer related industries for chinese companies, while heavy or more traditional industries such as energy (oil, coal and gas) or materials (such as metals) either stagnated or declined in importance. this suggests a broader trend in the overseas expansion that will increasingly prioritize consumer markets around the world. it illustrates a shift in chinese multinationals’ investment strategies. the emergence of alternative and renewable industry as a significant part of the china’s ofdi project portfolio is also worth noting. all combined, these trends point to the new ambitions of chinese multinationals, both in terms of markets and industries, and to the capabilities these firms have been building—and will most likely continue to build—over the years. as we close this analysis of china’s outbound m&a activity, we can see that chinese companies have come a long way since the early 2000s, becoming major global acquirers. to reach this status, they have been willing to pay a relatively higher price in recent years (especially in the post global financial crisis period) for overseas acquisitions. following their 2015-2016 buying spree, however, a significant slowdown in chinese m&as has taken place in 2017. this reflects the double blow which they have been facing: at home, the chinese government has shifted towards increased scrutiny while abroad, especially in developed countries host governments have been making efforts to strengthen the control and supervision of foreign acquisitions, often citing national security concerns. yet, the long-term overall trend in chinese m&as – and broadly speaking outward direct investmentremains to be seen. all of the factors that led to the fast expansion of chinese http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 overseas activities still remain in play. on the one hand, chinese firms continue to look for new and innovative ways to expand into global markets. on the other, and despite increasing scrutiny, the chinese government still encourages outbound investment in line with its overall strategy for the transformation of the chinese economy. combined, these factors are powerful drivers for continued chinese m&a, at a possibly lower but more sustainable level. notes 1 this article draws upon casanova, l.; miroux, a. 2016, 2017 and 2018. emerging market multinationals report. emerging markets institute. cornell s.c. johnson college of business. cornell university. http://bit.ly/emncreport. the contribution of kunal garg, abdel bouhamidi, mba students and research assistants is gratefully acknowledged as well as the copyeditors: eudes lopes and jennifer wholey. 2 data relate to investment projects or mergers that have been announced and not necessarily projects actually completed or undertaken. 3 we consider e20 countries: argentina, brazil, chile, china, colombia, egypt, india, indonesia, iran, malaysia, mexico, nigeria, philippines, poland, republic of korea*, russia, saudi arabia, south africa, thailand and turkey. gdp varies and the list may vary accordingly (casanova and miroux 2018). 4 in this article all data about china’s greenfield investments and m&as include hong kong as well. 5 industry distribution analysis based on standard & poor’s capital iq’s primary industry sectors classification, including industrials, consumer, financials, information technology, healthcare, utilities, materials and energy sectors 6 materials includes primarily natural resources, but also chemicals and container & packaging companies. 7 industrials includes primarily manufacturing goods and services, but also commercial/professional services. 8 total enterprise value, defined as total market capitalization, preferred stock value and total debt less cash and cash equivalents. for more details, see casanova, l. and a. miroux, emerging market multinationals report 2016, chapter 5; and, casanova and miroux 2017, chapter 2. 9 the chinese government launched the belt and road initiative (bri), formerly known as one belt, one road, in 2013. the bri aims to foster integration and cooperation by building infrastructure, developing cultural exchange, and increasing trade among countries in asia, the middle east and north africa along two axes: the silk road economic belt (essentially the original silk road) and the 21st century maritime silk road. for more information on the initiative, see d. dollar, 2015, “china's rise as a regional and global power: the aiib and the “one belt, one road” http://www.brookings.edu/research/papers/2015/07/china-regional-globalpower-dollar, and s. kennedy and d. parker, “building china’s 'one belt, one road’”, center for strategic and international studies (csis), april 2015, https://www.csis.org/analysis/building-china’s-“one-belt-one-road”. 10 in fall 2016, chinese authorities announced stricter approval requirements for m&a deals worth more than $10 billion (or $1 billion if the acquisition fell outside the investor’s core business area). see casanova and miroux 2017, chapter 2, p. 41. http://revistes.ub.edu/index.php/jesb http://bit.ly/emncreport http://www.brookings.edu/research/papers/2015/07/china-regional-global-power-dollar http://www.brookings.edu/research/papers/2015/07/china-regional-global-power-dollar volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 11 china tightens overseas investment to reduce risks, forbes, december 22, 2017, https://www.forbes.com/sites/sarahsu/2017/12/22/china-tightens-overseas-investment-to-reducerisks/#c790bc772cfd. 12 china issues code of conduct for private firms investing overseas. japan times, december 10, 2017 https://www.japantimes.co.jp/news/2017/12/19/business/china-issues-code-conduct-private-firms-investingoverseas/#. 13 using m&a microdata, such as those of the american enterprise institute, some observers estimate that 2018 chinese outbound m&as may have been larger that indicated by official outflow data, and perhaps higher than in 2017. the increasingly important role that overseas subsidiaries of chinese corporations have played in acquiring assets abroad could explain the divergence between china’s official outward fdi and such microdata. official data would not capture such activities. source: alicia garcia herrero and jianwei xu, “china’s overseas mergers and acquisitions may not have slowed down in 2017 and will probably boom in 2018”, natixis research, july 19, 2018. 14 see unctad, world investment report 2016. 15 source: https://www.bakermckenzie.com/en/insight/publications/2017/10/germany-tightens-rules. 16 as of now, the government can block deals involving the purchase of at least 25 per cent of the equity of a german company by a non-eu entity if it endangers public order or national security. under the new legislation, the threshold would be reduced to 15 per cent. source : https://www.ft.com/content/6ff764e8-9a1c-11e8-ab77f854c65a4465?ftcamp=crm/email/_2018___08___20180807__/emailalerts/keyword_alert/product and foreign investment control in eu becomes more stringent”, by y. makarova,o. rochman and f. helmstadter, august 9, 2018 at https://www.mofo.com/resources/publications/180808-foreign-investment-controleu.html?utm_source=mondaq&utm_medium=syndication&utm_campaign=view-original 17 http://lcp.fr/actualites/loi-pacte-vers-un-controle-accru-des-investissements-etrangers-en-france 18 a white paper by the u.k. department for business, energy and industrial strategy was presented to parliament to further protect national security “from hostile actors using ownership of, or influence over, businesses and assets to harm the country. (“national security and investment: a consultation on proposed legislative reforms presented to parliament by the secretary of state for business, energy and industrial strategy by command of her majesty”, july 2018, ref: cm. 9637p. 9). 19 source: https://www.treasury.gov/resource-center/international/documents/summary-of-firrma.pdf 20 based on data from unctad, world investment report 2018, tables iii.2 and iii.3. 21 the 2016 presidential order was the third order in about 25 years since 1990. 22 the presidential order blocked the sale of the u.s. portion of aixtron se, a german chipmaker. 23 https://www.nytimes.com/2016/08/12/business/dealbook/australia-china-ausgrid-nsw-sydney.html. references buckley, peter j., jeremy clegg, adam r. cross, r., xin liu, hinrich voss, and ping zheng. 2007. “the determinants of chinese outward foreign direct investment.” journal of international business studies 38 (4): 499–518. casanova, lourdes, anne miroux. 2018. emerging markets report 2018. emerging markets reshaping globalization. 9 november 2018. isbn-13: 978-1-7328042-2-7. https://www.johnson.cornell.edu/emerging-markets-institute. http://revistes.ub.edu/index.php/jesb https://www.ft.com/content/6ff764e8-9a1c-11e8-ab77-f854c65a4465?ftcamp=crm/email/_2018___08___20180807__/emailalerts/keyword_alert/product https://www.ft.com/content/6ff764e8-9a1c-11e8-ab77-f854c65a4465?ftcamp=crm/email/_2018___08___20180807__/emailalerts/keyword_alert/product http://lcp.fr/actualites/loi-pacte-vers-un-controle-accru-des-investissements-etrangers-en-france https://www.nytimes.com/2016/08/12/business/dealbook/australia-china-ausgrid-nsw-sydney.html https://www.johnson.cornell.edu/emerging-markets-institute volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 casanova, lourdes, anne miroux. 2017. emerging market multinationals report: emerging multinationals in a changing world. emerging markets institute in collaboration with the oecd development center. s.c. johnson school of management. cornell university. http://bit.ly/emncreport. isbn: 978-1-7328042-1-0. casanova, lourdes, anne miroux. 2016. emerging market multinationals report: the china surge. emerging markets institute in collaboration with the oecd development center. s.c. johnson school of management. cornell university. http://bit.ly/emncreport. isbn-13: 978-1-73280420-3. chen, shih. 2008. “the motives for international acquisitions: capability procurements, strategic considerations, and the role of ownership structures.” journal of international business studies 39:454-471. deng, ping. 2009. “why do chinese firms tend to acquire strategic assets in international expansion?” journal of world business 44:74–84. garcia herrero, alicia, and jianwei xu. 2018. china’s overseas mergers and acquisitions may not have slowed down in 2017 and will probably boom in 2018. natixis research, july 19, 2018. hanemann, thilo, and daniel rosen. 2012. china invests in europe. rhodium group. luo, yadong, qiuzhi xue, and binjie han. 2010. “how emerging market governments promote outward fdi: experience from china.” journal of world business 45 (1): 68–79. luo, yadong, and rosalie l. tung. 2007. “international expansion of emerging market enterprises: a springboard perspective.” journal of international business studies 38 (4): 481–498. ministry of commerce of the people’s republic of china (mofcom). , national bureau of statistics. state administration of foreign exchange (2017). 2017 statistical bulletin of china’s outward foreign direct investment. china statistics press. http://unctad.org/en/pages/diae/world%20investment%20report/annex-tables.aspx morck, randall, bernard yeung, and minyuan zhao. 2008. “perspectives on china’s outward foreign direct investment.” journal of international business studies 39 (3): 337–350. nicolas, françoise. 2014. “china’s direct investment in the european union: challenges and policy responses.” china economic journal 7:103-125. ramasamy, bala, yeung, matthew, and sylvie laforet. 2012. “china’s outward foreign direct investment: location choice and firm ownership.” journal of world business 47:17–25. standard & poor’s capital iq database. https://www.capitaliq.com/ united nations conference on trade and development -unctad. united nations. new york and geneva. unctad data for fdi and ofdi. http://revistes.ub.edu/index.php/jesb http://bit.ly/emncreport http://bit.ly/emncreport http://unctad.org/en/pages/diae/world%20investment%20report/annex-tables.aspx https://www.capitaliq.com/ volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 wang, chengqi l., junjie hong, mario kafouros, and mike wright. 2012. “exploring the role of government involvement in outward direct investment from emerging economies.” journal of international business studies 43 (7): 655–676. xu, ting, thieb petersen, and tianlong wang. 2012. cash in hand: chinese foreign direct investment in the u.s. and germany. gütersloh: bertelsmann stiftung. world investment report. 2018. investment and new industrial policies. united nations conference on trade and development. united nations. new york and geneva. isbn 978-92-1-112926-7. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 appendix 1. biggest m&a announced m&a deals from july 1st, 2015 till june 30th, 2016 by decreasing value transaction announcement date target total transaction value ($usdmm) buyers hq country [target] hq country [buyers] 11/23/2015 allergan plc (nyse:agn) 190,971 pfizer inc. (nyse:pfe) ireland united states 09/17/2015 sabmiller plc (lse:sab) 113,215 anheuser-busch inbev sa/nv (enxtbr:abi) united kingdom belgium 05/18/2016 monsanto company (nyse:mon) 66,321 bayer ag (db:bayn) united states germany 02/03/2016 syngenta ag (swx:synn) 43,000 china national chemical corporation switzerland china 07/27/2015 allergan plc, global generic pharmaceuticals business 40,279 teva pharmaceutical industries limited (nyse:teva) united states israel 11/17/2015 norfolk southern corporation (nyse:nsc) 37,039 canadian pacific railway limited (tsx:cp) united states canada 01/11/2016 baxalta incorporated 36,220 shire plc (lse:shp) united states ireland 07/01/2015 the chubb corporation 31,551 chubb limited (nyse:cb) united states switzerland 08/04/2015 baxalta incorporated 30,908 shire plc (lse:shp) united states ireland 01/25/2016 tyco international plc 16,758 johnson controls international plc (nyse:jci) ireland united states 02/23/2016 london stock exchange group plc (lse:lse) 15,783 deutsche boerse ag (xtra:db1) united kingdom germany 12/07/2015 keurig green mountain, inc. 14,253 acorn holdings b.v. united states netherlands 09/08/2015 power assets holdings limited (sehk:6) 13,596 assets global international limited hong kong british virgin islands 11/17/2015 airgas, inc. 13,459 air liquide sa (enxtpa:ai) united states france 09/08/2015 oil search limited (asx:osh) 12,529 woodside petroleum ltd. (asx:wpl) papua new guinea australia 12/15/2015 sanofi, animal health business 12,457 boehringer ingelheim international gmbh france germany 02/09/2016 itc holdings corp. (nyse:itc) 11,478 fortis inc. (tsx:fts) united states canada 08/25/2015 rsa insurance group plc (lse:rsa) 10,934 zurich insurance group ag (swx:zurn) united kingdom switzerland 09/04/2015 teco energy, inc. 10,422 emera incorporated (tsx:ema) united states canada 07/02/2015 k+s aktiengesellschaft (db:sdf) 10,401 potash corporation of saskatchewan inc. (tsx:pot) germany canada 03/21/2016 ihs inc. 10,339 ihs markit ltd. (nasdaqgs:info) united states united kingdom 02/10/2016 meda ab 10,071 mylan n.v. (nasdaqgs:myl) sweden united kingdom 04/28/2016 medivation, inc. (nasdaqgs:mdvn) 9,543 sanofi (enxtpa:san) united states france 03/30/2016 sgs tool company 9,046 kyocera corp. (tse:6971) united states japan 12/18/2015 nanyang commercial bank limited 8,771 china cinda asset management co., ltd. (sehk:1359) hong kong china 06/21/2016 supercell oy 8,600 tencent holdings limited (sehk:700) finland china 03/16/2016 strategic hotels & resorts, inc. 8,275 anbang insurance group co., ltd. united states china 08/06/2015 oci n.v., european, north american and global distribution businesses 8,000 cf industries holdings, inc. (nyse:cf) netherlands united states 09/02/2015 polyus gold international limited 7,693 wandle holdings limited united kingdom cyprus 09/03/2015 avolon holdings limited 7,656 hna group co., ltd. ireland china 02/17/2016 ingram micro inc. (nyse:im) 7,254 tianjin tianhai investment co., ltd. (shse:900938) united states china 07/28/2015 elster group se 6,524 honeywell international inc. (nyse:hon) germany united states 07/28/2015 italcementi spa (bit:it) 6,473 heidelbergcement ag (db:hei) italy germany 07/29/2015 cytec industries inc. 6,350 solvay sa (enxtbr:solb) united states belgium 05/19/2016 fmc technologies, inc. (nyse:fti) 6,301 technip sa (enxtpa:tec) united states france 11/02/2015 dyax corp. 5,886 shire pharmaceuticals international united states ireland 11/03/2015 king digital entertainment plc 5,831 activision blizzard, inc. (nasdaqgs:atvi) ireland united states 09/08/2015 ms amlin plc 5,643 mitsui sumitomo insurance co., ltd. united kingdom japan 12/07/2015 neptune orient lines limited 5,560 cma cgm s.a. singapore france http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 transaction announcement date target total transaction value ($usdmm) buyers hq country [target] hq country [buyers] 01/15/2016 ge appliances inc. 5,400 qingdao haier co., ltd. (shse:600690) united states china 11/27/2015 china tietong telecommunications corporation 5,357 china mobile limited (sehk:941) china hong kong 01/26/2016 terex corporation (nyse:tex) 5,230 zoomlion heavy industry science and technology co., ltd. (szse:000157) united states china 03/14/2016 tuxiana corp. and citic real estate co., ltd. 5,146 china overseas land & investment ltd. (sehk:688) china hong kong 09/29/2015 reynolds america subsidiaries and trademarks for natural american spirit outside u.s. 5,007 jt international company netherlands b.v. japan netherlands 12/03/2015 komi oil ltd 5,000 gaetano llc russia united states 08/11/2015 terex corporation (nyse:tex) 4,633 konecranes plc (hlse:kcr1v) united states finland 09/20/2015 atmel corporation 4,446 dialog semiconductor plc (xtra:dlg) united states united kingdom 08/11/2015 symetra financial corporation 4,414 sumitomo life insurance company united states japan 05/18/2016 kuka aktiengesellschaft (db:ku2) 4,386 mecca international (bvi) limited germany british virgin islands 07/29/2015 industrial income trust inc. 4,279 global logistic properties limited, investment arm united states singapore 06/29/2016 privatebancorp, inc. (nasdaqgs:pvtb) 4,131 canadian imperial bank of commerce (tsx:cm) united states canada 11/23/2015 edra global energy bhd 4,011 china general nuclear power corporation malaysia china 12/17/2015 acerta pharma b.v. 4,000 astrazeneca plc (lse:azn) netherlands united kingdom 12/22/2015 99.81% stake in finansbank, 0.2% stake in yatirim and portföy and 29.87% stake in finans finansal 3,935 qatar national bank s.a.q. (dsm:qnbk) turkey qatar 05/06/2016 air products and chemicals, inc., performance materials division 3,800 evonik industries ag (db:evk) united states germany 09/08/2015 amdipharm mercury company limited 3,531 concordia international corp. (tsx:cxr) united kingdom canada 08/26/2015 betfair group plc 3,502 paddy power betfair plc (ise:ppb) united kingdom ireland 01/11/2016 legend pictures, llc 3,500 dalian wanda group co ltd united states china 04/25/2016 ball corporation, select metal beverage can assets, support and functions in europe, brazil and us 3,420 ardagh group s.a. united states luxembourg 06/21/2016 dematic group s.à r.l. 3,250 kion group ag (xtra:kgx) luxembourg germany 03/11/2016 portfolio of 19 hotels assets in china 3,234 amare investment management china singapore 10/22/2015 meglobal b.v. 3,200 equate petrochemical company (k.s.c.c.) united arab emirates kuwait 08/03/2015 here holding corporation 3,124 daimler ag (xtra:dai); bayerische motoren werke aktiengesellschaft (db:bmw); audi ag (db:nsu) united states audi ag (db:nsu) (germany); bayerische motoren werke aktiengesellschaft (db:bmw) (germany); daimler ag (xtra:dai) (germany) 02/22/2016 brake bros limited 3,100 sysco corporation (nyse:syy) united kingdom united states 06/16/2016 hermes microvision, inc. (gtsm:3658) 3,091 asml holding nv (enxtam:asml) taiwan netherlands 03/28/2016 100% of dell systems corporation and dell technology & solutions limited and dell services pte. ltd. 3,055 ntt data, inc. singapore united states 04/19/2016 sabmiller plc, european business 2,901 asahi group holdings, ltd. (tse:2502) united kingdom japan 12/09/2015 frhi holdings limited 2,897 accor s.a. (enxtpa:ac) canada france 11/13/2015 skyway concession company, llc 2,836 omers administration corp.; canada pension plan investment board; ontario teachers' pension plan united states canada pension plan investment board (canada); omers administration corp. (canada); ontario teachers' pension plan (canada) 07/30/2015 swissport international ltd. 2,818 hna group co., ltd. switzerland china 06/30/2016 interoil corporation (nyse:ioc) 2,817 exxon mobil corporation (nyse:xom) singapore united states 11/02/2015 medassets, inc. 2,775 pamplona capital management llp, private equity united states united kingdom 05/09/2016 tf holdings ltd. 2,770 cmoc limited africa hong kong 06/14/2016 nxp semiconductors nv, standard products business 2,750 beijing jianguang asset management co., ltd.; wise road capital ltd. netherlands beijing jianguang asset management co., ltd. (china); wise road capital ltd. (china) 12/08/2015 fairchild semiconductor international inc. (nasdaqgs:fcs) 2,694 china resources microelectronics limited; hua capital management ltd. united states china resources microelectronics limited (china); hua capital management ltd. (china) 07/16/2015 getrag getriebeund zahnradfabrik hermann hagenmeyer gmbh & cie kg 2,670 magna international inc. (tsx:mg) germany canada 01/19/2016 rouse properties, inc. 2,576 brookfield asset management inc. (tsx:bam.a) united states canada 04/06/2016 glencore plc, agricultural products business 2,500 canada pension plan investment board united kingdom canada http://revistes.ub.edu/index.php/jesb volume 4, number 2, 13-44, july-december 2019 doi.org/10.1344/jesb2019.2.j059 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 source: based on standard &poors’ capital iq data accessed by september based of announced outbound m&a transactions july 1, 2015june 30, 2016. authors have excluded manually domestic transactions and those global ones where a consortium of investors/companies from multiple countries were involved. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. transaction announcement date target total transaction value ($usdmm) buyers hq country [target] hq country [buyers] 06/05/2016 asia square tower 1 2,499 qatar investment authority singapore qatar 05/20/2016 interoil corporation (nyse:ioc) 2,488 oil search limited (asx:osh) singapore papua new guinea 06/02/2016 als limited (asx:alq) 2,478 advent international corporation; bain capital, lp australia advent international corporation (united states); bain capital, lp (united states) 07/13/2015 alent plc 2,351 platform specialty products corporation (nyse:pah) united kingdom united states 12/03/2015 9.01% stake in grupo financiero inbursa, s.a.b. de c.v. and 17.3% stake in the bank of east asia 2,322 criteria caixa, s.a., single-shareholder corporation mexico spain 11/25/2015 petrochina kunlun gas co., ltd. 2,321 kunlun energy company limited (sehk:135) china hong kong 10/01/2015 representaciones e investigaciones medicas, s.a. de c.v. 2,300 teva pharmaceutical industries limited (nyse:teva) mexico israel 07/15/2015 shred-it international inc. 2,300 stericycle, inc. (nasdaqgs:srcl) canada united states 07/27/2015 sirius international insurance group ltd. 2,235 cm international holding pte. ltd. bermuda singapore 12/31/2015 priory group limited 2,224 acadia healthcare company, inc. (nasdaqgs:achc) united kingdom united states 04/15/2016 polycom, inc. (nasdaqgs:plcm) 2,160 mitel networks corporation (nasdaqgs:mitl) united states canada 12/16/2015 pacific hydro pty ltd. 2,160 state power investment corporation australia china 09/23/2015 landmark aviation, l.l.c. 2,065 bba aviation plc (lse:bba) united states united kingdom 10/21/2015 viom networks limited 2,064 atc asia pacific pte. ltd. india singapore 10/17/2015 wincor nixdorf aktiengesellschaft (xtra:win) 2,053 diebold, incorporated (nyse:dbd) germany united states 05/10/2016 rhp western portfolio group and american home portfolio group and amc portfolio and mhc portfolio iv 2,035 brookfield property group llc united states canada 04/11/2016 gategroup holding ag (swx:gate) 2,016 hna group co., ltd. switzerland china 05/23/2016 wmf group gmbh 1,916 seb sa (enxtpa:sk) germany france 02/19/2016 home retail group plc 1,916 steinhoff international holdings n.v. (jse:snh) united kingdom south africa 11/09/2015 fidelity & guaranty life (nyse:fgl) 1,897 anbang insurance group co., ltd. united states china 09/18/2015 veda group limited 1,873 equifax inc. (nyse:efx) australia united states 03/31/2016 smcp s.a.s. 1,861 shandong ruyi technology group co. ltd. france china http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 nahashon nzioka nthenya graduate school of economics, osaka university (japan) https://orcid.org/0000-0001-5742-1613 knowledge transfer and the development of airline business in africa: kenya airways, 1977-2017 abstract this article examines the development of strategic alliances in the airline industry through the participation of koninklijke luchtvaart maatschappij (hereafter klm) in a joint venture with kenya airways (hereafter kq). based on the literature on knowledge transfer in international business and organization studies, the study focuses on the evolution of cooperation between both partners over time, from capital seeking to joint marketing, legitimacy, knowledge seeking, and revenue and cost sharing. in particular, it demonstrates how the features of the two firms and their boundaries affect inter-organizational knowledge transfer. keywords: knowledge transfer, strategic alliance, joint ventures, foreign capital, airline industry, kenya airways transferencia de conocimientos y desarrollo del negocio de las aerolíneas en áfrica: kenya airways, 1977-2017 resumen este artículo examina el desarrollo de alianzas estratégicas en la industria de las aerolíneas a través de la participación de koninklijke luchtvaart maatschappij (en adelante, klm) en una empresa conjunta con kenya airways (en adelante, kq). basado en la literatura y en los análisis sobre transferencia de conocimiento en negocios y organizaciones internacionales, el estudio se enfoca en la evolución de la cooperación entre ambos socios a lo largo del tiempo, desde la búsqueda de capital hasta el marketing conjunto, la legitimidad, la búsqueda de conocimiento y la distribución de ingresos y costos. en particular, demuestra cómo las características de las dos empresas y sus límites afectan a la transferencia de conocimiento entre organizaciones. palabras clave: transferencia de conocimiento; alianzas estratégicas; empresas conjuntas, capital foráneo, industria de las aerolíneas, kenya airways transferència de coneixements i desenvolupament del negoci de les aerolínies a l’àfrica: kenya airways, 1977-2017 resum aquest article examina el desenvolupament de les aliances estratègiques a la indústria de les aerolínies a través de la participació de koninklijke luchtvaart maatschappij (klm, d’aquí en endavant) en una empresa conjunta amb kenya airwaiys (kq, a partir d’ara). basat en la literatura i les anàlisis sobre transferència de coneixement als negocis i organitzacions internacionals, l’estudi s’enfoca cap a l’evolució de la cooperació entre ambdós socis al llarg del temps, des de la recerca de capital fins al màrqueting conjunt, la legitimitat la recerca de coneixement i la distribució d’ingressos i costos. particularment, l’article demostra com les característiques de les dues empreses i els seus límits afecten la transferència de coneixement entre organitzacions. paraules clau: transferència de coneixement, aliances estratègiques, empreses conjuntes, capital forà, indústria de les arolínies, kenya airways corresponding author: e-mail: nnahashonnzioka@gmail.com received 2 march 2021 accepted 4 october 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-5742-1613 mailto:nnahashonnzioka@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 1. introduction global competition between large multinational enterprises (mnes) is a major characteristic of the airline industry, a sector as of may 22, 2020, the international air transport association (iata) listed on its website that employs 65.5 million people globally. this industry facilitates mobility of capital, goods, and people from one city to another, thus contributing to the growth and success of nations (bowen 2002; leinbach and lin 1989). over the last four decades, the airline industry has been transformed through deregulation, privatization, mergers, and acquisitions (m&as), and the emergence of hub-and-spoke networks and low-cost carriers (kim and singal 1993; bailey and williams 1988) leading to the rapid growth of mnes. m&as have helped these firms to buttress their market power through cost reduction to enhance their competitiveness and survival (brueckner and spiller 1991; kim and singal 1993; merkert and morrell 2012; ryerson and kim 2013). debbage (1994) contends that in the 1990s, iberia airlines embarked on inorganic growth through the acquisition of latin american airlines, and bought 30% stakes in aerolineas argentinas in 1990, 45% and 35% shares in venezuelan international airways (viasa) and ladeco (chilean airline), respectively, in 1991. this strategy foundered leaving iberia grossly leveraged and with massive losses (vidal 2019). according to de man, roijakkers and de graauw (2010), in europe and north america, some airlines have integrated a portion of their network for specific routes through joint ventures, as did, for example, klm and northwest airlines. gudmundsson (2018) also explores case of air france and klm that merged in 2004 to create a group that is one of the largest european airline companies today. moreover, the formation of global horizontal alliances such as the star alliance (in 1997), oneworld (in 1999), and skyteam (in 2000) was a way to avoid overcompetition and organize the global market. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 these international organizations (mnes and alliances) have various important objectives, including gaining global competitiveness (fuller and porter 1986), attaining economies of scale, and mitigating risk (buckley and casson 1998; hennart 1988), increasing market share, learning new know-how, and accessing strategic resources (kogut 1988; inkpen 2000). collaborations in the airline industry take many robust forms, such as joint ventures, crossshareholding, technical cooperation, marketing, and code-sharing covenants (beyhoff 1995). these strategic alliances result in synergy creation, enhanced profitability, service differentiation, diverging flow of people, and access to new markets (doganis 2006; agusdinata and de klein 2002; ramaswamy 2006). however, most of the literature and empirical research focus on airlines in the united states and europe (esposito 2004; evripidou 2012; de man, roijakkers, and de graauw 2010). little is known about strategic alliances involving companies from emerging countries 1, except for a few pioneering works of debbage (1994) on iberia in latin america, and study on west african companies, focusing on the collapse of the multi-state carrier air afrique in 2002 and state-owned ghana airways in 2004 (amankwah-amoah and debrah, 2010; amankwahamoah and debrah 2014). vidal (2019) recently demonstrated that iberia's successful expansion in latin america between the 1930s and 1975 was supported by spanish foreign policy objectives. it continued its internationalization strategy in the same region in the 1980s in a context of airline liberalization and privatization. most of the dominant mnes have been engaged in various kinds of alliances with airline companies from asia, africa, and latin america since the 1990s. why did they cooperate with local companies in emerging countries? 1 “emerging countries” is used to refer to lower-middle income and low-income classification by world bank for simplicity purposes. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 how were they able to establish themselves in these countries? what kind of spillover effect can be observed in these alliances? these issues are still unaddressed. this article explores these issues through a case study of the collaboration between koninklijke luchtvaart maatschappij (hereafter klm) and kenya airways (hereafter kq). the choice of this case was informed by two points: kq was the first state-owned airline in sub-saharan africa to be privatized and to enter an international alliance. in addition, documentary evidence on the joint venture from inception to date is available and accessible by the public. the article’s focuses on knowledge transfers that accompany foreign capital. specifically, it explores how the features of klm, kq, and their respective boundaries affect inter-firm knowledge transfer. it builds on the growing theoretical literature on international business by presenting empirical evidence from a horizontal alliance between an mne and local enterprise from an emerging economy. the remainder of the paper is structured as follows: section 1 provides a review of the literature on strategic alliances and knowledge as a source of competitive advantage, and on knowledge transfer in the airline industry. section 2 describes the methodology adopted, and section 3 presents the historical development of kq from its inception to 2017. section 4 discusses the impact of knowledge transfer from klm on the development of kq between 1996 and 2017 which is then followed by the conclusion. 2. knowledge transfer in strategic alliances two kinds of academic literature are relevant to analyze knowledge transfer within kq after the injection of capital by klm. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 2.1. strategic alliances and knowledge as a source of competitive advantage strategic alliances have been a central subject in international business literature. traditionally, transaction cost theory (williamson 1975 and 1985) focuses on product cost minimization, and strategic motivation theory (porter 1985; hamel 1991) focuses on competitive positioning of firms to explain the economic grounds of why firms come together to share complementary resources. although these theories present convincing economic rationale, they offer a limited view into the process of skill development and knowledge-creation and -transfer, which are part of firms’ core competencies (hamel 1991, 83). alternative explanations for the formation of alliances include a knowledge-based view (kogut 1988; nonaka 1991) where firms seek to learn and retain capabilities. sveiby (1997) defines knowledge as the ability to act, and comprises skills, facts, and routines, while inter-firm knowledge transfer is a process by which firms or their agents can exchange, internalize, and be transformed by experience and knowledge from other firms (van wijk, jansen and lyles 2008). the knowledge-based view outlines two kinds of knowledge: explicit and tacit. according to nelson and winter (1982), explicit knowledge can be codified and communicated through written and verbal mediums. this type of knowledge is common, easier to transfer, and replicable by competitors; hence, it does not form core competency. a firm’s competitive advantage lies in its ability to integrate and use tacit difficult-to-explain knowledge in its operations (nonaka 1991; conner and prahalad 1996; argote and ingram 2000; tsai 2001). knowledge is useful when there are mechanisms of transferring it from one unit of a firm to another, or between firms. knowledge transfer is a complicated process, such that even within the boundaries of a firm, its effectiveness is influenced by several factors (szulanski 1996). the complexity of knowledge transfer in an inter-organizational context is further compounded by knowledge characteristics such as tacit and ambiguity and organizational factors such as http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 corporate, cultural, and national boundaries (easterby-smith, lyles and tsang 2008; inkpen and tsang 2005). moreover, the willingness to share inter-firm knowledge is determined by the embeddedness of existing organizational designs and relationships between organizations (lin 1999). strategic alliances are voluntary collaborations in which two or more firms pool their capabilities and resources to pursue common goals while concurrently retaining their entities and independence. organizations enter strategic alliances to ward off new entrants (chen and ross, 2000), consolidate networks, minimize costs, and mitigate risks (williamson 1991; hennart 1988). firms are more willing to share knowledge within strategic alliances such as equity ownership and joint venture structures than outside such a set up (kogut 1988). previous studies have asserted that knowledge plays a significant role in determining organizational performance (prahalad and hamel 1990; nonaka and takeuchi 1995). argote and ingram (2000) argue that successful inter-firm knowledge transfer is evident when the recipient’s performance improves. competitive landscapes in industries demand that organizations constantly seek new knowledge from within or by externally tapping it from other firms (huber 1991). inkpen (2000) argues that a firm acquires know-how from cooperative venture partners when it deems the knowledge/skill valuable and crucial. success of knowledge transfer is determined by several factors, including intent to learn and the magnitude of the efforts the recipient firms input (hamel 1991, 87). cohen and levinthal (1990) argue that absorption capacity affects innovation and learning in a firm. they define absorption capacity as one's ability to recognize, integrate, and exploit knowledge commercially. absorption capacity at both the individual and group levels will determine the absorption at the organizational level. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 cohen and levinthal further suggest that organizations enhance their absorptive capacity by investing in research and development or by sending part of their workforce for advanced technical training. for instance, firms involved in international joint ventures or other strategic alliances send their staff to partner firms. another form of alliance is equity ownership across organizations. cross-border equity ownership gives firms greater leverage to communicate, control, monitor, and gain sticky tacit knowledge from partners than any other contractual transaction (mowery, oxley, and silverman 1996). this is mainly due to the advantages that firms possess in terms of controlling their interests and involvement in the decision-making process, which are blurred in other arrangements. mowery, oxley, and silverman (1996), in their study on strategic alliances and inter-firm knowledge using partner firm citations in the united states, find that equity owner relationships promote deeper levels of knowledge transfer than other forms of alliances, such as licensing or other contractual agreements. chang, gong and peng (2012) find that successful knowledge transfer is embodied in competencies of expatriate staff moderated by the subsidiaries' ability to absorb it to improve their performance. these expatriate competencies enhance knowledge transfer provided subsidiaries have superior absorptive capacity, leading to improved performance. 2.2. knowledge transfer in the airline industry the airline industry is a globally competitive one and requires firms to internalize new knowledge and unlearn obsolete methods to stay afloat in business. when mne airlines expand internationally, their investment comes as a package, and local partners experience varying spillover effects, such as technological and managerial know-how, depending on the relationship between the firms (keller 1996). the existence of incumbent airlines with extensive experience in the industry and emerging nascent firms is indicative of the existing http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 knowledge asymmetries. this can be bridged through knowledge transfer, which is a dyadic process that involves exchange and interaction between two entities or individuals. airlines interact through various kinds of alliances, such as joint ventures, mergers and acquisitions, and codeshare for marketing merits (bamberger, carlton, and neumann 2004), with goals such as deterring competition and new entrants (chen and ross 2000), and efficiency rationale (brueckner and spiller 1991), pooling resources, and risk diversification. (baxter 2018). since airlines operate in an oligopolistic market due to the high barriers of entry instituted by the government (friedman 2014), competition from major airlines and entrenched global networks, a balance between competition and cooperation is desirable. the aviation industry is vertically integrated globally, where location and market are insignificant factors (niosi and zhegu 2005). strategic alliances are complex and thus difficult to manage successfully, and some notable alliances have disintegrated, such as swissair/delta and alitalia/klm alliances due to misunderstandings between partners. the extant literature has evaluated alliance performance in terms of resource complementarity (das and teng, 2000), duration of the alliance (beamish 1987), profitability for members in the alliance (reuer and miller 1997), and competitiveness and learning from partners (doz, hamel and prahalad 1989). based on the study of the joint venture between air france-klm, delta air lines, and virgin atlantic using porter's five forces model, baxter (2018) finds that the setup provided partners with access to new markets, synergistic benefits, comprehensive route coverage, and competitive positioning in service delivery. learning occurs within contexts such as organizational and external environments (glynn, lant and miliken 1994). external contexts include competitors, governments, institutions of learning, and interrelationships between organizations such as partnerships, joint ventures, and http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 strategic alliances. the organizational context encompasses endogenous features such as strategy, culture, goals, structure, and incentives (argote 2013). these contexts vary, and thus they either facilitate or hinder knowledge transfer. local firms with high absorption capability can benefit from knowledge by integrating new know-how with their existing knowledge (rogers 2004; keller 1996). a firm’s absorption capacity is determined by the human capital endowment at its disposal (chen, su and tsai 2007). knowledge is embedded in individuals, and hence transfer of tacit and advanced skills can be achieved in firms through interaction between individuals. human capital accumulation in local firms is made possible by the labor mobility of expatriate or already trained locals into the industry (spencer 2008; meyer 2004; chang, gong and peng 2012). this implies that the mobility of employees from one firm to another is a conduit for sharing know-how, provided there is adequate social capital. airlines, like any other business, are in learning races, and the inherent risk is that airlines that learn faster dominate, and this may eventually lead to termination of alliance (hamel 1991). fan et al (2001) outlines various types of airline cooperative relationships, including equity exchange, outsourcing of logistics, code share agreements, reciprocal frequent flyers, joint marketing entities, and exclusive membership. as local airlines integrate knowledge acquired from these cooperative relationships, there could be an improvement in their performance metrics such as operating revenues, net incomes, passenger load factors, and available seats per kilometer, which are best suited for evaluating the efficiency of the organization in utilizing its assets to generate revenue (iatrou and alamdari 2005). niosi and zhegu (2005) find that regional knowledge spillover in the aerospace is minimal and variable because of the global value chain that facilitates sourcing airplane components from overseas suppliers. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 consequently, this study contributes to the literature through the analysis of knowledge transfer from klm to kq since 1996. it addresses the following research questions: how did the transfer of knowledge from klm and kq occur? what kind of knowledge was transferred, and what role did it play in the development of kq? why did the knowledge transfer end up in relative failure after 2012? 3. sources and methodology to answer these research questions, this study adopts an approach that merges international business, and business history. it uses the intensive and longitudinal case study method recommended by buckley (2009). according to yin (1994 and 2017,167), case study method is suitable for an in-depth analysis of the question of "how" in this relationship. he further argues that case study is useful for the contextual analysis of events within a time frame to better understand complex issues, to present new insights, or build on previous research. the qualitative process approach is crucial in explaining how and why events happen over a certain period (mintzberg 1979), and in accurately locating their contexts. the scope of analysis necessitated a multi-approach data collection from three sources. first, archival data which included company reports, and presentations were collected mainly from kenya national archives. second, print media data were essential in identifying events that led to changes in the dynamics of the alliance. third, semi-structured interviews were conducted with managers of airlines who were conversant with the alliance. accessing the primary archives of kq was not possible, because the company does not have a corporate archive as is often the case in most of the companies from emerging countries. therefore, oral history is a good alternative to access information (jones and comunale 2019). langley (1999) observes that interviewing executives is effective in extracting insights and beneficial nuances on sensitive organizational issues that might otherwise be missed. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 in total, twenty-three participants were interviewed through face-to-face meetings between 1 march and 30 april 2020, of whom thirteen work at the managerial level and ten are nonmanagerial staff. the interviews lasted between oneand one-half hours each. two of the executives interviewed were representatives of klm in the partnership arrangement and the rest were drawn from the human resource, finance, marketing, operations, customer service, and alliance departments (see table 1). the author posed open-ended questions regarding the alliance. the participants in the study were chosen through snowball sampling, which is suitable for exploratory studies (tayeb, 1994; amankwah-amoah, ottosson and sjögren, 2017). this sampling technique was advantageous in identifying the relevant participants familiar with the alliance. in each interview, the author began by understanding each participant's general duties in the companies, and then handwrote and transcribed all the responses. the completed interview data were analyzed using content analysis (yin, 2003) to identify common themes, as summarized in section four. table 1. list of interviews conducted organization position, department place, and date (duration in minutes) 1 kq manager, alliance department nairobi, 1 march 2020 (60) 2 kq assistant manager, alliance department nairobi, 2 march 2020 (90) 3 kq commercial manager, marketing nairobi, 6 march 2020 (70) 4. kq (10) interviews (various non-managers) nairobi, 9 march 2020 (90) 5. kq assistant manager, sales nairobi, 12 march 2020 (60) 6. klm manager, alliance department nairobi, 13 march 2020 (90) 7. klm coordinator, alliance department nairobi, 13 march 2020 (80) 8. kq supervisor, alliance department nairobi, 15 march 2020 (60) 9. kq manager, flight operations nairobi, 16 march 2020 (60) 10. kq assistant manager, finance nairobi, 18 march 2020 (70) 11. kq manager, personnel department nairobi, 3 april 2020 (75) 12. kq management accountant nairobi, 13 april 2020 (60) 13. kq supervisor, customer service nairobi, 24 april 2020 (70) 14. kq manager, ground handling service nairobi, 30 april 2020 (60) source: own elaboration. see text. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 according to buckley (2009), the historiographical approach puts firms' decisions in international business in the proper historical context of that period. buckley further asserts that combining international business and business approaches enhances sequencing and contextual analysis of events. annual reports and newspapers were analyzed in conjunction with the retrospective interviews, and this was useful for triangulation. collection of time series data and construction of chronologically key occurrences over time related to this alliance was essential for understanding the “temporal embeddedness” of the organizations (langley 1999; yin 2017, 73), and the evolution process (welch 2000). 4. historical development of kenya airways kq was founded as a state-owned enterprise (soe) in 1977, as it used to be in many independent african states at that time (amankwah-amoah and debrah, 2010; amankwahamoah and debrah, 2014: irandu 2008). its development can be divided into three main phases: formative years (1977-1995), expansion and maturity (1996-2007), and decline (2008 onwards). 4.2. state-owned company (1977-1995) kq was established in january 1977 as a national flag carrier after the collapse of multi-flag east african airways that was jointly operated by tanzania, uganda, and kenya. this was actuated by the existing market opportunities, increasing number of tourists visiting the country, and mne employees who were operating from nairobi. the government of kenya (hereafter gok) keen on projecting a positive national outlook commenced kq operations by leasing two aircrafts to operate the nairobi-frankfurt-london route. the initial phase was characterized by setbacks such as inadequate financial resources, incompetent technical experts, absorbing staff and assets of the defunct east african airways, and high cost of foreign debt obligations (debrah and toroitich 2005; van de krol, 1995:32). most of the appointees for top http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 management and board of directors were political proxies deficient in business acumen and expertise, thus plunging the airline into turbulence. the high turnover of chief executive officers (10) within this span had a destabilizing effect (debrah and toroitich 2005). for instance, the company recorded a net loss of ksh11.53 million and ksh1,169.7 million (currently equivalent to $51 million and $380 million respectively) for the fys 1977/78 and 1980/81, respectively, and a net profit of ksh393.814 million (currently equivalent to $106 million) in 1982/83.2 in 1986, the gok published sessional paper no. 1 titled "economic management for renewed growth," outlining measures to cede control of state corporations such as kq in favor of private sector leadership (kibazo 1995, 33). this was to minimize the government's involvement in entrepreneurship and curb wastage of financial resources in events of defaulting guaranteed loans and bailouts after years of perennial losses. in 1991, a policy paper on public enterprise reform and privatization was issued, and kq was on the forefront of privatization. in fy 1991/92, the company recorded a net loss of about $50 million (currently equivalent to $95 million) (kibazo 1995, 33; financial times 1996,15). in 1991, philip ndegwa, a former governor of the central bank of kenya, was appointed as the chairman of the board of directors and tasked with commercialization and eventual privatization of the airline. in 1992, brian davies, a former general manager of british airways, was appointed as the managing director and malcolm naylor as the finance director (he was a chartered accountant who had previously worked with brymon airways uk as the managing director). gok contracted speedwing consulting (autonomous airline consulting arm of british airways plc) to review and recommend ways of improving airline performance and to assist in the transition process. speedwing consulting made recommendations such as introducing 2 kenya airways. annual report, 1983/84, 9. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 changes in financial controls, reevaluating fleet utilization, reviewing revenue per route, introducing a service standard management system, restructuring the balance sheet that involved the gok assuming outstanding external debt obligations, converting the government’s outstanding debt to equity, and redesigning the management framework with clear accountability for results to be implemented by the new management team.3 for instance, in 1993, the gok assumed external debts amounting to $82 million (currently equivalent to us$151 million) and converted the us$35 million (currently equivalent to $65 million) loan owed by kq to shares.4 this marked the beginning of the commercialization of the airline that preceded privatization. the privatization process commenced in 1995 with appointment of international finance corporation (ifc) as the lead adviser of gok in privatization, evaluation of proposals from global leading and experienced airlines, and preparation of the airline for listing (kibazo, 1995:33). political goodwill from the government of the day played a significant role in the process (interview no. 9). the strategic partner would bring on board much needed private capital injection and skills to improve the airline’s performance, as kq’s managing director brian davies noted: an overseas partner will help us gain links to a global distribution system and networks. it will also assist with management expertise and help provide enhanced purchasing power when it comes to replacing our aircraft. but they in turn will receive access to a well-developed regional network in africa and work with a viable airline. (kibazo 1995, 33). 3 kenya airways. annual report, 1994/95, 14. 4 kenya airways. annual reports, 1994/95, 16. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 figure 1. passenger traffic and passenger load factor for kq, 1990-2017 source: kenya national archives, kenya airways, annual reports, various years. figure 2. key performance indicators for kq, 1990-2017 source: kenya national archives, kenya airways annual reports. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 the objective of this alliance was initially global expansion and acquisition of knowledge and additional capital for kq. in 1995, kq served 24 international destinations, 7 in europe, 11 in sub-saharan africa, and 6 in north africa, asia, and the middle east.5 4.2. a competitive african airline company (1996-2007) in the competitive bidding process, klm's proposal emerged as the best one due to its extensive experience in developing a global network through equity and marketing alliances with northwest (united states), garuda (indonesia), and air uk, among others, and its long history of operating flights from nairobi since 1969 (interview no. 2). klm was initially established by private investors who convinced the dutch government to back the firm financially based on the prospects of being the national flag carrier, connecting the country with its far east colonies. after world war ii, klm benefited from state-support in negotiating landing rights and pushing for open skies. the small size of its domestic market made it necessary to adopt a global expansion strategy. klm consolidated its northern routes through a series of partnerships, mergers, and acquisitions in the heavy traffic business class routes such as united states, france, japan, united kingdom, and in the growth markets such as china. for instance, klm acquired a 14.9% stake in air uk in 1988, a 20% stake in northwest airlines in 1991, entered into a codeshare agreement with china southern airlines in 1996, and merged with air france in 2003 to form the largest carrier by revenue (dierikx 1998, 126-154; bouwens and ogier 2019, 65-71; gudmundsson 2018). the expansion in africa was done in this global context, where it had partnered with nigerian airways in 1972. 5 kenya airways. annual reports, 1996/97, 20. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 in 1996, kq was privatized, and klm acquired 26% stake for $26 million (currently equivalent to usd44 million) including a technical assistance deal; 14% was acquired by overseas institutional investors, 14% by kenya institutional investors, 20% was open to the kenyan public, 3% to kq employees, and 23% was retained by the gok (kibazo, 1995:33; financial times, 1996:15; white & bhatia, 1998). although klm had a minority stake, it was the largest shareholder. it could appoint two directors to the board of kq, nominate future candidates for managing director and finance director positions, and no major strategic decisions on acquisition of new fleet, route changes or disposal of gok’s equity would proceed without prior approval by klm appointed directors. the privatization was an opportunity for a multinational company to acquire a stake in kq. the impact of this investment led to a new dynamic of control over the relationships between klm, gok and private investors to realign the operations of the privatized kq. for example, while all board members were appointed by the government until 1995, the share of government representatives fell to 18% in 1996, the same proportion as for klm. the remaining 64% of the board was allocated to internal managers promoted to director level and to external directors, all of whom were drawn from the business community, which includes international and kenyan institutional investors such as pension funds and hedge funds. klm's industry experience and presence as a strategic investor in kq has strengthened the confidence of local institutional investors, international institutional investors, and the public in rationalizing kq to make it commercially viable (the three categories have acquired a combined 48% stake). the objectives of the gok were to reduce the tax burden on public enterprises, develop the private sector, and increase economic efficiency (white and bhatia 1998). the diverse interests of stakeholders, such as institutional investors and the public, who favor long-term, high-yielding http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 investments, the government's need to privatize the entity, and klm's interests in the joint venture, placed klm in the pole position in the decision making. march 1996 marked the successful flotation of kq on the nairobi stock exchange to raise additional capital for acquiring extra fleet to meet domestic and african regional demand. the positive financial results and the amelioration of service levels are attributed to commercialization of kq, the management (financial standard 2001), and the marketing skills provided by klm (financial times 1996, 15). between 1995 and 2007, kq experienced both a general growth of passengers and gross sales and an improvement in profitability. this expansion was backed by the acquisition of fifteen boeing aircrafts between 1996 and 2007.6 it was one of africa's most consistently profitable airlines, and the firm supported by klm was admitted as an associate and then a full member of the skyteam alliance in 2007 and 2010, respectively. 4.3 crisis and return of the state (since 2008) the global financial crisis affected all companies regardless of the sector, and the losses recorded were beyond management's scope of control. kq recovered from the crisis backed by increased passenger traffic of 29% from 2.8 million in 2008 to 3.5 million in 2011 (see figure 1). in 2012, the firm launched an ambitious project mawingu adding several international destinations and acquiring nine bigger boeing fleets with high leverage. despite the expansion and consistent surge in the number of passengers (3.7 million in 2012 to 4.8 million in 2017), the firm's performance worsened (see figures 1 and 2) compounded by the retirement of the long-serving ceo titus naikuni in november 2014 (njau 2014). 6 kenya airways. annual reports, 2006/07, 47. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 moreover, kq lacked a consistent management at its helm. the new ceo appointed in 2014, mbuvi ngunze lasted for only two years and seven months. in june 2017, the board of directors appointed sebastian mikosz as the ceo (the second foreigner to hold such position) after the recruitment process was finalized by spencer stuart, an american global executive and leadership consulting firm. capital restructuring in 2017 resulted in klm's equity dilution from 26.7% to 7.8%. the gok converted its debt to equity raising the stake from 29.8% to 48.9%. kq lenders company 2017 ltd. (a special purpose vehicle) consisting of ten local banks agreed to convert their outstanding debts amounting to about $0.5 billion to an equity equivalent of 38.1%, and 5.2% is owned by individuals.7 klm’s representation in the kq board was reduced from two to one director, and consequently lost absolute authority of approving any sale of government-held stock (kamau 2017; interview no. 1). renationalization of the airline signifies a major change in the business model. 5. knowledge transfer between klm and kq the evolution of kq over time clearly shows that the arrival of klm in the form of foreign capital was followed by a decade of growth and profitability. however, the new strategy adopted after the global financial crisis was disastrous and led to a major withdrawal by klm. based on the literature on knowledge transfer in international business, two major points are discussed here: first, how knowledge contributed to improving the competitiveness of kq; and second, why it did not prevent the firm from failing after 2012. 5.1 knowledge transfer in 1996-2008 the strategic joint venture goals for klm and kq evolved from foreign capital supply/seeking to improving marketing, branding, networking, management skills, and revenue and cost 7 kenya airways. annual reports, 2017/18, 124;150. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 sharing. this finding is consistent with baxter (2018), who found that the air france-klm, delta airlines, and virgin atlantic joint venture delivered analogous synergetic value. at the outset of the strategic alliance in 1996, there was need for capital injection and management skills to enhance the performance of kq. management ineffectiveness and the incompetence of staff, especially those hired through political patronage, adversely affected the firm's performance. human capital accumulation in the local firm is possible when there is labor mobility of expatriate or already-trained locals into the industry because tacit knowledge resides in individuals (spencer 2008; meyer 2004). moreover, mnes dispatch their expatriate personnel to partner firms based on technical skills rather than their competencies in knowledge transfer (chang, gong and peng 2012). the two organizations transferred some experienced staff from klm to kq to provide technical assistance as part of the joint venture deal. this started with the consolidation of the kq and klm sales office in nairobi, a complete overhaul, and the standardization of the reservation system. kq switched from their gabriel reservation system in favor of the klm reservation system, corda, which could link seat inventory and the revenue management system to provide yield-based capacity distribution and to ensure that different market segments are allocated capacity relative to the agreed-upon pricing structures (interview no. 7). this improved the firm's efficiency and better served joint customers. moreover, the experienced personnel from klm trained their counterparts in areas such as customer service, cabin service, and engineering to ensure that service levels were standardized (interview no. 14). personnel from kq were sent for further training to klm facilities in the netherlands. ownership changes and employee training saw the organization’s performance metrics, such as turnover, operating profit, and net profit margin, improved from 1996 onwards. this confirms the findings of http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 argote and ingram (2000) and iatrou and alamdari (2005), who argue that knowledge transfer is evident when the performance of the recipient firms improves. moreover, the presence of two representatives of klm in the kq board of directors with powerful influence on strategic decisions, such as the acquisition and disposal of fleets as per the joint venture agreement meant that crucial decisions could not proceed without their unanimous approval. these directors held senior positions such as managing director, chief finance officer, and executive vice president in klm and had extensive experience in purchasing, evaluation of route capacity, and expansion requirements. these skills were gradually transferred to local directors as kq expanded its fleet from eight in 1996 to twentyeight in 2008 (interview no. 6). although klm had been operating flights from nairobi since 1969, it was facing the liability of foreignness and different institutional environments in other african markets. the alliance committee that comprised personnel from both airlines deliberated on issues such as co-branding and market intelligence to assist klm and kq to gain legitimacy and expand their footprint in africa and europe, respectively (interview no. 7). at the initial stages of a joint venture, idiosyncratic inter-firm factors (willingness to share knowledge, trust, collaboration structure, and organizational culture) determined the extent and type of knowledge transferred (interviews no. 1, 8, and 13). collaboration involving equity offers opportunities for knowledge transfer (mowery, oxley and silverman 1996; fan et al 2001) because of mutual trust, although cultural differences must be bridged to ensure that willingness to share knowledge translates to successful knowledge transfer. 5.2. knowledge transfer since 2008 kq established strong internal structures buttressed by knowledge gained from the collaboration. a major challenge faced by the firm was the volatility of fuel prices and foreign http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 currencies. the escalating cost of fuel accounted for 27% of total expenditure in 2008 (interviews no. 10 and 12). to mitigate this risk, the finance team implemented fuel hedging as part of the supply chain management skill acquired (interview no. 10). in 2012, the company embarked on an ambitious expansion plan by proposing the purchase of nine larger, modern fleets. the purchasing decision was approved by two representatives of the klm and kq board of directors, although this investment turned out to be disastrous because the company booked loss in that financial year (interview no. 8). this decision raised questions from gok about the motives and interests of klm resulting in discontentment and distrust in the joint venture, with the top kq management calling for amendment of the joint venture agreement to curb klm’s extensive powers in decision-making (interview no. 10). klm helped kq to improve its organization and operations during the first phase of cooperation, but had a negative impact on the long-term development of the company due to the strategic choice made in 2012. however, this strategic decision was not the only problem within the joint venture. three distinct features (absorption capability, quality of employees, and organization design) of kq were identified as key hindrances to effective knowledge transfer. persistence of neopatrimonialism meant that employees with basic qualifications and low absorption capacity struggled to internalize and make use of knowledge from expatriates, trainings, and seminars, while the top-down approach created distance in knowledge transfer between kenyan employees in the firm and boundaries in communicating issues such as feedback from customers and lessons from past accidents (interview no. 4). furthermore, the novelty of technology, quality of expatriates, and motivation to teach on the klm side also affected knowledge transfer. klm hardly transferred novel proprietary technology to its partners and had higher incentives to retain this within the firm before transferring it to partners (interview no. 14). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 learning and exchange of industry information occurs via the alliance committee meetings, whose motivation is to enhance mutual benefits. although very knowledgeable, some experienced expatriates lacked demonstration skills, and communication failure emerged between the firms (interview no. 11). finally, the negative effects of the power imbalance within the company should be noted. for example, in the context of asymmetric ticket sales, klm is kq's agent in europe, but kq is not granted the same status in the african market, resulting in low load factors and traffic (interview no. 3). frosty relations between the partners also caused a mass exodus of engineers and pilots to competitor middle east airlines since 2015. in addition, revocation of the existing costly contracts with suppliers and brokers was met with resistance for obvious reasons (interview no. 14). distrust and resentment between partners, coupled with internal sabotage by staff, dissipated the gains from knowledge transfer, leading to poor organizational performance. klm's influence was massively diluted, as previously discussed, but the collaboration was maintained because it was deemed profitable in areas such as route network connections and marketing. in 2015, kq forged new partnerships for corporate training with general electric (ge) to enhance leadership skills and is also collaborating with local universities (jomo kenyatta university of agriculture and technology and technical university of kenya) to improve the operational training of the airline’s personnel and to prepare local talents for industry jobs (interview no. 11). hence, the need to cooperate with klm for general management knowledge was no longer felt. 6. conclusion this study explored the strategic joint venture between klm and kq and how the features of the two organizations and their boundaries affected inter-firm knowledge transfer between 1996 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 and 2017. the analysis suggests that strategic joint venture goals varied from foreign capital seeking to marketing, branding, networking, management skills, and revenue and cost-sharing goals. moreover, the participation of klm in the joint venture from 1996 to 2007 coincides with improvement in profitability and passenger load factors. the author does not contend that knowledge transfer was the only factor that contributed to improving the performance of kq, but it certainly had a significant positive impact on the company's performance metrics. the collaborative structure of equity ownership in the alliance initially brought a high degree of trust and created a safe space, as evidenced by the transfer of experienced staff from klm to kq, to train their counterparts in areas such as marketing, branding, and customer service. this led to improved turnover and passenger traffic. knowledge flow was bidirectional in terms of understanding the diverse operational contexts of the two firms. klm assisted kq in stretching their foothold in europe, while the latter was resourceful in providing the former with institutional knowledge of the african markets. moreover, the two organizations initially enhanced interactions between employees to understand diverse corporate cultures, because knowledge is embedded in corporate culture, and transferring it to different contexts could make it obsolete. using strategic alliance as the idiosyncratic context of knowledge transfer, this research has shown how specific factors within the boundaries of organizations and inter-firm factors combined to facilitate or hinder effective knowledge sharing. despite the initial improved performance of kq, the results later deteriorated due to distrust between the partners, internal sabotage by staff, and litigations that provided a hostile milieu for sustaining sound financial performance. the contribution of this research to theory stems from exploring why a joint venture exists between klm and kq. although many researchers recognize the salience of strategic alliances, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 1-31, july-december 2023 https://doi.org/10.1344/jesb2023.8.2.33989 online issn: 2385-7137 cope committee on publication ethics 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31 yin, robert k. 1994. case study research: design and methods. thousand oaks: sage publications. yin, robert k. 2003. case study research: design and methods. thousand oaks: sage publications. yin, robert k. 2017. case study research and application: design and methods. london: sage publications. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 francisco betancourt castillo universidad bernardo o'higgins, centro de estudios históricos (chile) defending the nation and searching for wealth: merchants and privateers of chile, 1817-1820 abstract permanent warfare marked the independence process in hispanic america, and was evident on the high seas between the newly for med states and forces loyal to the spanish crown. faced with persistent maritime threats, some independent governments encouraged privateering to help the newly formed national navies secure the seas and harass the enemy. this also helped make international merchandise trade safer, which was vital for the good progress of internal markets and the public treasuries: in short, for the “national” economy. privateering brought about new and unique business opportunities for many traders established in chile to intervene in and boost merchandise trade, and, by its very nature, encouraged diversification. moreover, it involved traditional inter-regional or terrestrial trade and “peaceful” shipping activities, as well as, in some cases, contracts with the state. corsairs were able to obtain unexpected revenues by attacking their “spanish” competitors trading with the peninsula. using documents from the chilean ministry of the navy, case-studies will show how this type of business developed in the years of its apogee and its implications on the consolidation of independence and the subsequent construction of the republican state. keywords: independence of chile; privateers; merchants; colonial trade; navigation defender la nación y buscar riqueza: comerciantes y corsarios de chile, 1817-1820 resumen la guerra permanente marcó el proceso de independencia en hispanoamérica, lo que fue evidente en alta mar, entre los nuevos estados y las fuerzas leales a la corona española. enfrentados a persistentes amenazas marítimas, algunos gobiernos independientes promovieron el corso para ayudar a las nuevas armadas nacionales a proteger los mares y expulsar al enemigo. este proceso contribuyó a hacer más seguro el comercio de mercancías, algo vital para el buen avance de los mercados internos y los tesoros públicos: en definitiva, para la economía “nacional”. la actividad corsaria, por su propia naturaleza, promovió la diversificación y aportó nuevas y extraordinarias oportunidades de negocio a muchos comerciantes establecidos en chile, que intervenieron así en, e impulsaron, el comercio de mercancías. además, esta actividad involucró al comercio tradicional tanto interregional como terrestre y a iniciativas de navegación “pacíficas”, así como en algunos casos conllevó contratos con el estado. los corsarios fueron capaces de obtener inesperados ingresos al atacar a sus competidores “españoles” en el comercio con la península. utilizando documentos del ministerio de marina chileno, los estudios de caso muestran cómo este tipo de negocio se desarrolló en los años de su apogeo, y sus implicaciones en la consolidación de la independencia y la construcción del estado republicano. palabras clave: independencia de chile; corsarios; comerciantes; comercio colonial; navegación defensar la nació i buscar riquesa: comerciants i corsaris de xile, 1817-1820 resum la guerra permanent va marcar el procés d’independència a hispanoamèrica, el que va ser evident a alta mar, entre els nous estats i les forces lleials a la corona espanyola. enfrontats a amenaces marítimes persistents, alguns governs independents van promoure el cors per ajudar les noves armades nacionals a protegir els mars i expulsar-ne l’enemic. aquest procés va contribuir a fer més segur el comerç de mercaderies, que era vital per al bon desenvolupament dels mercats interns i els tresors públics: en definitiva, per a l’economia “nacional”. l’activitat corsària, per la seva pròpia naturalesa, va promoure la diversificació i va aportar noves i extraordinàries oportunitats de negoci a molts comerciants establerts a xile, que d’aquesta manera van intervenir a, i impulsar, el negoci de mercaderies. a més, aquesta activitat va involucrar el comerç tradicional tant interregional com terrestre, així com les iniciatives de navegació “pacífiques”, fet que en alguns casos va compo rtar contractes amb l’estat. els corsaris van ser capaços d’obtenir ingressos inesperats en atacar els seus competidors “espanyols” en el comerç amb la península. fent servir documents del ministeri de marina xilè, els estudis de cas mostren com aquesta mena de negoci es va desenvolupar en els anys del seu apogeu, i les seves implicacions en la consolidació de la independència i la construcció de l’estat republicà. paraules clau: independència de xile; corsaris; comerciants; comerç colonial; navegació corresponding author: e-mail: efejotabetancourt@gmail.com received 12 march 2021 accepted 18 may 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:efejotabetancourt@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 1. introduction historical analyses of the political independence processes in hispanic america usually focus on a series of military events seen as consequences of dramatic incidents that transcend the times under examination. in other words, the independence processes have been understood firstly as revolutions; secondly as political events from which different types of violence sprang; and, finally, as a generalized global war that ended up crumbling the presumed union of american societies, which were the stage of the conflict. a relatively well-explored dimension – though more work needs to be done – is that of economic undercurrents of independence (ramírez 1959; villalobos 1968; stein and stein 1970; bonilla 1980, 13-46; prados and amaral 1993; marichal 2014). in the short term, wars constituted an unprecedented context for local societies, which shaped a difficult material horizon for the new states. in the long term, these wars implied the consecration of longengineered economic interests, in some cases of ancient origins, which reflected, above all, the power projection of the spanish-creole wealthy ruling classes. independence from spain, reached through war, allowed these classes to achieve a crucial position, sanctioned by the new context, and privateering activities and the business opportunities that they entailed strengthened such position. another important aspect relative to the economic dimension of the wars of independence arises when distinguishing some fundamental historiographic questions, namely the historical problem of the short-term and long-term causes behind the desire for political emancipation; and that of the consequences unleashed by the separation from the catholic monarchy. the phenomenon of the independence wars as scenarios of new business possibilities and potential changes – in other words, as platforms for business and windows of opportunity for old and new interests – remains understudied, because the focus has been on political and sociocultural http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 causes and consequences. the historiography on the chilean independence process has also suffered from this particular myopia, especially when focusing on its maritime projection: trade and naval warfare (lópez 1971; arancibia, jara and novoa 2005). the lack of such historiographic studies – either descriptive or analytical – is even more remarkable when focusing on the emergence of corsair activities, which are poorly studied in economic terms. 2. privateering in chile at the time of independence revolutions privateering was not an unusual phenomenon on the chilean coasts, since it traces back to the spanish foundation of the first population centers in the territory. however, the war to defend junta autonomies (later motivated by the desire for independence) represented a stimulating context for such activity (gámez 2004, 262-265). inspired by an ideal of republican and liberal virtue, the new governments, which led to new republics theoretically formed by “soldiercitizens”, called for the defense of the new system, i.e., the patria, which was sprouting from the struggle against the old regime (fernández abara 2004; pinto and valdivia 2009, 243). citizens in a position to participate in corsair activities – either by joining the crews going to sea, or, above all, by investing capital in a vessel to be fitted for war – were urged to do so. this had been previously done in the north american thirteen colonies (patton 2008, 15), which were a source of inspiration for independence leaders. in addition to nationalist inspirations, the recourse to privateers resulted from pragmatic reasons. the new hispanic american governments took advantage of this resource, in the same way in which the spanish monarchy used to employ privateers to support royal navy services (ortíz 2015, 305-314). in both situations, the cause was shortage in public monies which ruled out the organic financing of regular naval forces’ implementation, in addition to the “fiscal indigence” suffered by the region’s nascent states during several years (alegría 2013, 136-137; moutoukias and t’hart 2021, 285-288). in chile, privateering activity was also developed in http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 the middle of a long-lasting economic process; the commercial competition between the peruvian port of callao and the chilean port of valparaíso (cavieres 1996, 77-100; ortiz 2001, 198). the state’s necessity to wage war in the neighboring sea went beyond the minimal function of ships guarding the coasts it sought to control. like other requirements of the chilean “patriot” governments, such needs had induced the political authorities to seek permanent collaboration with the main businessmen of the day. entrepreneurs and traders of some importance, who can be identified after february 1817 (that is, when a new, independent, “patriot” government was installed in central chile), were individuals of different origins who were, of course, aligned with the new political authorities. they thus replaced the former colonial traders, who like most of their counterparts in other places in hispanic america (brading 1975, 149-151) had mostly come from the basque provinces (zaldívar, vial and refingo 1998) and a region called la montaña – today burgos and cantabria, spain (cavieres 2003, 102-108). this new multinational group of entrepreneurs came to dominate the most relevant sectors, such as merchandise trade and the general financial market. they naturally became the social group that could best serve as financiers of the state under construction. in addition, at least in chile, the argentine provinces, and peru, this same social group tended to concentrate import-export trade and government loans as well as formal contractual relations with the state. several needs of the state, especially the need to develop the capacity to engage in maritime warfare, depended on the support of these entrepreneurs. they were virtually the only ones holding enough capital to make naval warfare possible. this was also due, among other reasons, to their presence in the import-export maritime trade. such trade focused mainly on the peruvian coasts, an activity that had involved, in practice, the formation of a large and http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 scattered “merchant navy” in private hands.1 the largest traders and importers were also the main stakeholders interested in securing the continuation of overseas trade. such trade was threatened by forces loyal to the king as well as by contracted vessels based in the viceroyalties of peru and new spain (that included the capitanía general de cuba) which allowed them to involve almost the entire american continent and the atlantic and pacific oceans. using this capacity, they tried to block valparaíso (uribe 1910, 55; ortiz 2015, 344-350). why is knowledge of such details relevant to understanding the historical period of the independence wars? in chile’s particular case, the evolution of corsair activity shows the extent to which many of the most active traders took advantage of the new circumstances arising from war against the monarchy. they increased and consolidated their business by resorting to naval engagements as a stable basis for these lucrative affairs. at the same time, they used privateering to harm their commercial competitors in the importation business of manufactures of atlantic origin on the south pacific coast. as will be shown, peninsular merchants and, above all, creole merchants from peru, were the group most affected by the chilean-flagged privateers’ activities. the peruvians were linked, through commercial agents and credit intermediaries, with spain, as well as with the northern coasts of the viceroyalty and central american pacific. the peak of chilean privateering analyzed here was but a brief period of adjustment or transition between the colonial past and the independent government’s first steps. this is also significant. many initiatives of privateers took place between 1817 and 1819 – at most until 1820 – when the newly installed government of bernardo o’higgins was being institutionally 1 merchants established in chile, especially those in ports such as valparaíso and talcahuano, acquired ships for commercial purposes, many of which were being built in the country itself, especially at the mouth of the maule river, in the town of nueva bilbao de gardoqui, present-day constitución. in the early nineteenth century, the chilean mercantile cluster was longer dependent on peruvian shipping companies. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 set up and trying to administer the country and consolidate its power with great difficulties. the state was weak, and in certain administrative sectors even somewhat uncertain or only partially structured. in this sense, the merchant-privateers’ brief apogee was a consequence of the slow and incremental nature of the construction of a new independent state. it was stopped once the new state had a formally established navy and the expected workings of a new economic base (a new economy), with stable rules that it controlled and/or supervised, filling the initial vacuum that had allowed for the activities of chile’s privateers. 3. the improvised beginning of patriot privateering in the few chilean studies on naval history (uribe 1910; arancibia, jara and novoa 2005; woods 2016, 87-97) it has always been affirmed that some businessmen’s first impulse to participate in the naval war was motivated by the action of two foreigners: william mackay and james budge. on october 23rd, after the independence triumph in chacabuco and the subsequent occupation of chile’s central area, mackay and budge – two british seamen based at the time in the port of valparaíso – captured the spanish frigate minerva in arica, which was unloading crates of goods shipped from cádiz as part of a larger convoy. they had received information of the minerva’s arrival and had carefully planned this action for at least a month, preparing a schooner that they fitted for corsair war with a license from the chilean government: the death or glory, also called nuestra señora de mercedes, alias la fortuna. budge and mackay’s crew stealthily assaulted the spanish ship, boarded it, and, after a brief battle seized it along with its valuable cargo, and immediately placed the minerva – a larger and much better equipped vessel than the poor “barge” la fortuna – in service. continuing on their way to callao, they looted another spanish merchant, the santa maría. finally, this group of seamen – a mixed crew of british and chileans – returned to valparaíso, sold the minerva to the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 government, which intended to use it as a cargo ship, and sold the prize cargo “at a good price” (uribe 1910, 58-59). although these britons’ journey encouraged many fellow traders – and also, it must be said, adventurers in search of material fortune – to invest in fitting privateers, the truth is that their raids were not the first in this period. neither was their request the first made to the chilean government for a patent. despite the war, spanish trade in the pacific, linked to peruvian markets, was as vital as ever, and caught the attention of entrepreneurs who saw this situation as an opportunity for direct profit (alfonso 2014, 501). as early as september 1817, manuel antonio boza along with “otros vecinos” of valparaíso asked the independent government for a letter of marque for a ship owned by the group and named nuestra señora del carmen, alias el furioso. this ship was described as a small “lancha vieja” (old boat), which had belonged to the state. evidently, the group of prominent residents had invested some capital in repairing the ship, which had originally been in a poor condition. with this boat, they planned to harass the peruvian coasts, combining their profit-making interests with patriotic motivations. they also requested help in equipping the ship with specific arms: one cannon to be mounted on the boat and more than 15 muskets for the small crew, with 1,000 cartridges.2 the project to fit boza and associates’ small ship in the port of valparaíso may have been influenced by the precedent of another privateer, already active under the chilean flag for several months, which had actually started such activities before mackay and budge had seized the minerva in arica. in october, these seamen – crewmembers of the armed brigantine called el águila – legalized their position. although they formally belonged to the army of the andes, the navy did not yet exist, and thus they had embarked on operations at sea while they were 2 archivo nacional histórico de chile (hereafter anch), archivo del ministerio de marina, vol. 6, ff. 4-6 and 21. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 not waiting for orders. commanded by irishman raymond morris, the documentation shows that these improvised navigators privately distributed their first capture as a prize of corsair war among the crew. the booty in question was the spanish frigate perla and its cargo, captured after its boarding by seven members, all chilean, of el águila.3 4. privateer traders in action these early examples were soon followed by the efforts of a major santiago de chile merchant, felipe santiago del solar. when the british set sail in search of the minerva – but had not yet captured it – solar applied to the authorities for a permit to act as a privateer with a brigantine he had procured, which he named el chileno. within a few days of his request, on november 20th, 1817, he received a letter of marque. the vessel, 232 tons, had previously sailed under the french flag and the name adeline. as an indication of the comparatively large size of the ship, it can be pointed out that solar had equipped it with 12 artillery pieces – which he, however, believed insufficient to the scope – and engaged a crew of 90 men, and appointed a chilean captain, enrique santiago, as commander. this type of investment, representing a strong initial outlay, required an amount of capital in cash that merchants often did not have. this is why solar had to borrow from paulino campbell, a briton who was by then doing business in the country’s capital.4 manifesting his political commitment and profit expectations, the plan solar illustrated to the chilean authorities conformed to the patriotism of this historical context: to plunder the “enemies of america”, and to burn, destroy or seize all the ships of such adversaries. solar seemed to believe that he needed further support from the state to carry out his intent, namely 3 anch, archivo del ministerio de marina, vol. 6, f. 7. 4 anch, archivo del ministerio de marina, vol. 6, ff. 12-14. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 additional material and human resources: 12 artillery pieces, 15 pairs of pistols, 20 spears, 30 quintals of gunpowder, as well as 20 veteran soldiers.5 profits expected from el chileno activities were not regulated by current laws on prizes, but actually by the clauses of a private contract. in this instance, moreover, the documents made no reference to the rules on privateering established in the recopilación de leyes de indias, the legal instrument in force until the promulgation of the first chilean reglamento provisional de corso, which was published precisely at the end of november 1817, just after the delivery of the license to solar (alegría 2013, 137). in his application, approved by the government, together with the concession of the patent, it was established that booty would be distributed in accordance with the agreement solar had made with the commander and crew of the brigantine – which soon produced high profits for solar. less than two months after receiving the patent, el chileno captured the brigantine saeta on the southern peruvian coast. this was a merchantman carrying a large shipment of distinct tropical produce: 400 bags of cocoa, 300 quintals of rice, 100 quintals of lentils, 400 hats, 200 coconuts, 4 bottles of tamarind liqueur, various crates of chocolate, and unrecorded amounts of cloth, blankets and silver utensils. affected by this capture were tomás and juan antonio lopategui, father and son, who were both ship owners and merchandise traders from callao. they were the owners of the saeta and of all the goods that it carried from guayaquil to the coast of tacna, with the exception of 80 bags of cocoa belonging to a guayaquil merchant.6 the goods were sent to valparaíso in the seized ship itself, this being the usual chilean privateers’ modus operandi after seizures. felipe santiago del solar made large profits thanks to the fact that his privateer el chileno sailed far north, in central american waters, near sonsonate (acajutla, el salvador). on 5 anch, archivo del ministerio de marina, vol. 6, ff. 12-14. 6 anch, archivo del ministerio de marina, vol. 6, f. 12v. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 february 6th, 1818, it seized the san ignacio de loyola, alias el diamante, a 50-ton spanish packet boat transporting goods from guayaquil. before sending their prey to valparaíso, solar’s privateers were forced to spend several days resupplying on one of the galápagos islands because they were running out of drinking water, and there they met several british whalers with whom they hoped to trade. the san ignacio arrived at its final destination only on may 10, as reported in the gazeta ministerial de chile of may 16th, 1818.7 on this occasion, the booty included various european goods (tin boxes, crates of steel, flemish knives, utensils, hats, european wines), as well as 502 bags of cocoa and other local products. in the san ignacio case, the identity of the injured merchants is also provided: josé del pozo y tejada, the seller who shipped the goods from guayaquil and who at the time of the capture was traveling aboard the san ignacio with his wife and a servant; and the buyers who were waiting for the cargo in sonsonate, the basque merchants juan bautista marticorena, manuel maría cambronero, and juan emeterio de echeverría.8 the el chileno continued its hunt. at the end of february 1818, it captured a brigantine named mercedes, of which, unfortunately, further information is lacking. in april, at the mouth of the tumbes river, the chilean corsairs seized another frigate, the inspector, formerly owned by the british but spanish property at the time of the capture – the only known fact about it. el chileno crossed paths twice with a spanish warship: a vessel described as a “frigate” carrying 22 cannons. the first meeting took place in front of the port of callao and the second near the 7 archivo de don bernardo o’higgins. vol. 11. santiago de chile: archivo nacional, imprenta universitaria, 1952, 24-25. 8 anch, archivo del ministerio de marina, vol. 6, unnumbered. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 mouth of the guayaquil river.9 in both cases, the privateer preferred to flee, going straight on his way and thus avoiding engagement (cárdenas 1984, 56-59). after the last of the aforementioned seizures, el chileno made its way back to valparaíso for repairs. on the way, in early december, in front of huanchaco (peru), it crossed paths with the brigantine san antonio and took the opportunity to seize it. the extent of the private interests affected is undetermined, although it is known that part of the cargo taken by the privateer’s armador, felipe santiago del solar, included rice, wheat, beans and chickpeas in unspecified quantities. these goods, indeed, certainly arrived in valparaíso. the presence of the el chileno privateer in pacific waters ended with a last expedition northward some time later. between may and june 1819 its crew captured the frigate cazadora, anchored in the bay of acapulco. the cazadora’s crew was preparing to transport “frutos, efectos y caudales” (local produce, bills and specie) from that coast to lima and guayaquil. the stolen goods belonged to pedro juan de olasagarre and josé cristóbal y ramos, the merchants who awaited the cargo in the ports to which it was being shipped.10 according to a letter sent by the governor of valparaíso, luis de la cruz in june 1819 to the chilean minister of state, joaquín de echeverría, the cargo stolen from the cazadora consisted of undetermined quantities of tallow, timber and leather.11 although the exact number of prizes the el chileno privateer was able to capture is unknown – and therefore the exact amount of the value, which, in good part, enriched the merchant felipe santiago del solar – bernardo o’higgins himself, then chile’s supreme ruler, believed that this 9 archivo de don bernardo o’higgins. vol. 11. santiago de chile: archivo nacional, imprenta universitaria, 1952, 25. 10 anch, archivo del ministerio de marina, vol. 6, unnumbered. 11 archivo de don bernardo o’higgins. vol. 12. santiago de chile: archivo nacional, imprenta universitaria, 1953, 250. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 private vessel’s activities had been considerable. in a letter to josé de san martín of june 3, 1819, he claimed that the privateer had seized or destroyed more than ten ships.12 5. rise around 1818 there was a real explosion of the privateering phenomenon. we have seen the activities of men such as william mackay, the valparaíso vecinos group – with manuel antonio boza at its head – and santiago merchant felipe santiago del solar. the previous years had seen very few letters of marque granted, and among them, the most significant were those issued on december 4, 1817, for two ships – one of which was the schooner congreso – both owned by buenos aires citizen juan pedro de aguirre, represented in chile by merchant tomás rosales, a relative of felipe santiago del solar. like aguirre, rosales was from buenos aires, though he had settled in valparaíso. these traders sought to bring the war northward, on the route to panama used by peruvian traders. they claimed that lima royalists now naturally avoided the trip around cape horn, preferring to send their goods and capital by this other way. as a result, in early july 1818, the brigantine el empecinado, carrying 479 bottles of pisco brandy, was seized in the city of pisco by the congreso.13 on january 27th, 1818, shortly after el chileno had made its first capture, the buenos aires merchant estanislao lynch, the argentine grandson of an irishman, arrived in chile with the independence troops. being on good terms with san martín, he requested 6 privateering patents for 6 different vessels, expecting to obtain, as collateral for the investment in such licenses, the right to import privateering booty duty-free in all ports of the country.14 but despite his relevant position in maritime trade of the time — later he would be one of the lenders to the nascent 12 archivo de don bernardo o’higgins. vol. 8. santiago de chile: archivo nacional de chile, imprenta universitaria, 1951, 111-112. 13 anch, archivo del ministerio de marina, vol. 6, ff. 39 and 41. 14 anch, archivo del ministerio de marina, vol. 6, f. 16. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 peruvian state (mazzeo 2011, 249) — lynch was not able to realize his project of having his own small privateering fleet. however, his request shows a very clear commitment to participate in the sector and thus to extend his business interests.15 the leading presence and participation in the privateering business of several foreigners, especially british traders with some maritime experience, continued in 1818. this year was characterized by a clear increase in privateering activities based in valparaíso. charles higginson and “diego” o’brien, two british merchants in the port, took over as apoderados (legal representatives) for a new corsair ship called mercedes de la fortuna, a schooner bought by william mackay – one of the owners of the aforementioned death or glory, renamed nuestra señora de mercedes, alias la fortuna – in association with john hurrell, who had already served as commander of mackay’s former privateer. the mercedes de la fortuna, formerly the catalina, was purchased from another british merchant installed in valparaíso: samuel haigh. hurrel paid haigh about 18,000 pesos in cash for the vessel, leaving him as a guarantee half of the cargo which the first privateer, la fortuna, had seized from the frigate minerva (haigh 1829, 186-189). corsair activity in chile went beyond valparaíso. in may 1818 in the port of coquimbo, located next to la serena, in the north-central region of the country, gregorio cordovés applied for a license to equip a brigantine of his property, the santiago bueras. the latter was a 200-ton vessel on which 18 cannons could be conveniently mounted. cordovés named the ship after grenadier colonel santiago bueras avaria (1786–1818), a patriotic combatant who had recently 15 estanislao lynch remained linked to naval warfare, and above all, to the economic profits generated by the conflict. in july 1819, lynch, together with merchant ignacio izquierdo, was denounced by a group of sailors from the newly established chilean national squadron, members of the ships’ crews who participated in the capture of the spanish warship maría isabel (action of 29 october 1818). lynch and izquierdo were the crews’ apoderados – representatives appointed by the ship captains to the government-constituted prize court. in that capacity, they had kept for themselves thousands of pesos that were due to the complaining sailors, who had excelled in combat. see: anch archivo del ministerio de marina, vol. 26, ff. 209-209v. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 perished in a famous cavalry charge on the battlefield of maipú (april 5, 1818).16 this would not be the only chilean privateer that paid homage to the victory of the independence forces at maipú. cordovés provided the santiago bueras with 10 cannons, hoping to contract 70 men. he also financed the ammunitions for each man of the crew. in a similar vein to other private ship owners, this vecino of coquimbo and local trader asked the government for 2 others cannons, gunpowder, and ammunitions for the 12 artillery pieces that he would have, in addition to 40 muskets, 40 pairs of pistols, 40 sabers, and 40 chuzos (a kind of shiv). he mentioned as precedent the permission and help felipe del solar’s el chileno of had obtained from the government. gregorio cordovés also hoped for help with qualified personnel. namely, he asked that the government appoint an officer named john browne as commander of his brigantine, along with 4 assistants. the entrepreneur also intended to complete his privateer’s crew by hiring 30 seamen from buenos aires. the government authorities, however, decided that this time the path should be different and, in an early stage, established the first restrictions on privateers’ activity. on august 5th, 1818, manuel blanco encalada, commander of valparaíso, ordered that the crew of the santiago bueras be completed in the port of coquimbo itself, adding that cordovés should not contract more than twelve seamen from valparaíso.17 eventually, the santiago bueras made at least two preys from which the entrepreneur and armador was able to obtain a good part of the riches seized. the first capture took place in november, when the crew burned and looted the schooner los ángeles, on the coast of southern 16 today there is in santiago de chile metro station named santiago bueras. 17 anch, archivo del ministerio de marina, vol. 6, ff. 22-22v., 38v. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 peru. the other was on december 2nd, in the same area. this time the privateer’s crew seized the spanish brigantine resolution (cárdenas 1984, 62). the relevance of the merchant gregorio cordovés in la serena and the port of coquimbo is considerable. on the same day in which he applied for the patent for the santiago bueras, he presented a petition for another letter of marque, in his own name and on behalf of his partners, who were “vecinos” of the region, for the corvette nuestra señora del carmen alias coquimbo. this was “el primer buque corsario qe. arma la venemerita prova. de coquimbo”,18 and was characterized by its outstanding size and power: it was a 450-ton vessel built especially for the war. cordovés was the main shareholder in this collective company. naturally, he was the direct armador of the boat and its representative and agent before the authorities at the moment of claiming and sharing prizes. in the coquimbo case, the traders and investors committed themselves to assisting the government by transporting infantry equipment (rations, weapons, and ammunitions), troops, and collaborating with a possible military expedition to callao. in return, as in all the other cases we know, they expected from the state the assurance of obtaining tax benefits at customs, in particular for the cargo that their privateer obtained as a result of its war actions.19 in this sense, as in any business activity of the time involving the state, investors in privateering expected permanent preferential treatment from public institutions. collaboration with the government was understood in this opportunistic way: a service provided for which some kind of payment was due. however, economic opportunism was apparently threaded with patriotic fervor, as shown by other references to the independence forces’ triumph in the plains of maipú in corsair activity. 18 anch, archivo del ministerio de marina, vol. 6, ff. 24-24v. “the first privateer equipped by the province of coquimbo”. 19 anch, archivo del ministerio de marina, vol. 6, ff. 24-24v. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 josé maría manterola, a resident of valparaíso, owned a schooner he named maipú lanza fuego (also called el diamante), with which, in july 1818, he intended – for a period of only 6 months – to sail the pacific harassing the “enemies of america”.20 we know that manterola contracted juan lafaya as the ship’s captain but no further information on lafaya is available. the schooner – under that combative name – was forced to postpone the beginning of its activities for several months. it was at sea only from the end of that year and during the first months of 1819. on the ecuadorian coast, in december 1818, it seized the brigantine san antonio, which carried a composite cargo owned by guayaquil merchant simón vega.21 the following month, in front of pacasmayo (peru), it seized the brigantine providencia, owned by “limeño” paulo torre. within days, on their way back to valparaíso, the crew of the maipú lanza fuego captured a third “royalist” vessel: the frigate buena esperanza, anchored in the port of callao. another brigantine maipú – sometimes registered as maipo – was ready to sail at the time. its property was collective. it was waiting to weigh anchor from coquimbo, where some chileans and britons had participated in purchasing and financing it. one patrick brown was appointed as its captain. thomas r. claredge acted as the representative of such a “company” before the government. during the months of june and july 1818, he requested the necessary privateering patent, in addition to the usual material and human resources needed to equip the vessel: 20 armed infantry personnel (one corporal, one sergeant, and eighteen troop soldiers), 50 muskets 20 anch, archivo del ministerio de marina, vol. 6, unnumbered. 21 the san antonio carried the following cargo: 136 sugar loaves, 5 candy boxes, 4 balls with 4 cots, 2 chests of cigars, 3 boxes with id., 13 rolls of cotton wool, 2 bags of anise, 1 pisco earthenware box, 1 sack of agave hats, 2 balls of cordovan leather, 32 pieces of cordovan leather, 6 ordinary cotton quilts, 4 cowhides, 110 panamá coconuts, 35 cocoa sacks, 1 sack of saltpeter, 7 wine bottles, plus minor items. the detailed list is dated valparaíso, 8 january 1819. this reveals that the ship had been captured many days earlier. ricardo lindsay, in charge of the seized ship, pointed out that the brigantine flew the spanish flag, had not encountered any combat, and that his ship’s capture had taken place at the mouth of the guayaquil river. see: anch, archivo del ministerio de marina, vol. 6, unnumbered. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 for the crew, 200 cartridges, 500 flints, 500 cannonballs of different calibers, and 20 quintals of gunpowder.22 6. decline almost all of the privateers entering the scene in 1817 and 1818 – whom we may define as commercial entrepreneurs of theft and looting – ceased to go to sea from 1819 onward, from the very moment in which the chilean navy was entering into operations. there were, however, a few exceptions. felipe santiago del solar’s brigantine el chileno was at mid-year still making incursions into the waters of acapulco. the aforementioned maipú lanza fuego continued harassing trade on the peruvian coast during the first months of 1819. another exception was that of the schooner terrible, owned by merchants josé manuel cea and francisco javier urmeneta, who in addition were financiers and contractors in the chilean state’s service (betancourt 2020). during 1820, it conducted corsair attacks against the spaniards, with modest results. in fact, the terrible was active until at least 1826 (unfortunately, however, no details of its further incursions are known). that year, cea and urmeneta decided to move the terrible to the coast of manila, in order to trade goods and with the complementary idea of having it continue to harass spanish ships there.23 as we can see, the decay in privateering did not signify the immediate cessation of corsair activity, which in 1818 had had such a boom. the case of a “mixed” company under the wings of the state, no less, emerges from documentation. in march 1819, the merchant antonio arcos, an andalusian liberal who had served as an officer of engineers in the liberation army of the andes (betancourt 2019), submitted a request to the government to fit privateers. arcos intended to obtain the letter of marque in association with a partner, the british william 22 anch, archivo del ministerio de marina, vol. 6, ff. 31-37. 23 documents on the terrible schooner: anch, archivo del ministerio de marina, vol. 6, unnumbered. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 henderson, who had served lord thomas cochrane as his private agent (rector 1976, 252253). the partners requested the patent based on the precedent of felipe santiago del solar and the favorable conditions he had obtained. namely, they sought to introduce the goods they seized duty-free (letelier 1886, 398). the senate, which evaluated the request, denied the privilege at the time, although it later changed its policy. the vessel used by the associates was a 400-ton corvette of british manufacture and flag, the rose, named los andes in chile. months earlier, henderson had sold it to the united army of the andes. the government had decided to put it to sea as a corsair vessel but army officers bought an insufficient number of shares, and it was necessary for private investors to equip it. arcos and henderson saved the situation by acquiring more than half of the shares, becoming the privateer’s armadores, representatives for the crew and agents of the privateer’s shareholder officers (uribe 1910, 77). arcos and henderson furnished the weaponry, salaries, equipment and food necessary for the men onboard (including about 58 convicts provided by the government).24 the british john illingsworth hunt was contracted as the corvette’s captain, together with a whole set of british officers (gámez 2004, 129). in addition, they hired an accountant and a secretary, who were chilean, as were most of the seamen and armed troops (uribe 1910, 65-67). profits derived from the los andes’ privateer activities were significant. after the traders had requested some further weaponry, it finally set sail on april 24th, 1819. on may 4, the privateer captured the merchant los tres hermanos (alias la vascongada) coming from the spanish port of santander, off the coast of tarapacá. both the ship and cargo belonged to a few merchants from bilbao whose names do not appear in the documents. its shipment consisted of 24 anch, archivo del ministerio de marina, vol. 6, f. 43. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 the usual european manufactures imported from spain at the time: clothing, fabrics, earthenware, iberian wines, glassware and hardware.25 this first capture was soon followed by others, which the privateer was able to effect in the seas of peru, ecuador, colombia, and even panama, during 1819 and early 1820. los andes’ corsairs also undertook military actions against the spanish presence on these coasts: the takeover of some coastal defenses and of a village in royalist hands in the region of iscuandé, present-day colombia.26 frustrated attempts did occur: the capture of the large spanish war frigate piedad (uribe 1910, 68-73). details of the corvette los andes’ captures, as well as of all the other seizures made by chilean privateers analyzed here, are outlined in the following table, which accounts for 26 capture episodes of at least 28 ships: table 1. preys made by chilean privateers privateer vessel (name) class shipowner prey (place and date of capture) death or glory, nuestra señora de mercedes (a) la fortuna lanchón or schooner william mackay, jame, budge and co. frigate minerva (arica, perú, 11/24/1817); brigantine santa maría de jesús (tarapacá, 11/29/1817); el mercurio (arica, date unknow) el chileno brigantine felipe santiago del solar osorio brigantine saeta (puertos intermedios, 01/07/1818); brigantine mercedes (perú, 02/27/1818); frigate inspector (río tumbes, perú, 04/08/1818); packet-boat san ignacio de loyola (a) el diamante (sonsonate?, el salvador, 06/?/1818); brigantine san antonio (a) el bolero (huanchaco, perú, 12/?/1818); frigate cazadora (acapulco, méxico, 06/?/1819) congreso schooner tomás rosales (juan pedro aguirre) brigantine el empecinado (pisco, perú, 06/?/1818) águila war brig --frigate la perla (no information) nuestra señora del carmen (a) el furioso schooner manuel antonio boza and other residents of valparaíso frigate nuestra señora de dolores (perú?, 03/1818); brigantine machete (perú?, 03/1818) 25 archivo de don bernardo o’higgins. vol. 12. santiago de chile: archivo nacional, imprenta universitaria, 1953, 235-236; anch, archivo del ministerio de marina, vol. 26, ff. 42-47, 69 and 121. 26 archivo de don bernardo o’higgins. vol. 13. santiago de chile: instituto geográfico militar de chile, 1955, 285-287. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 privateer vessel (name) class shipowner prey (place and date of capture) merced de la fortuna or catalina “boat” carlos higginson and diego o'brien packet-boat pensamiento (pacocha, ilo, perú, 02/15/1818); brigantine el gran poder, packetboat pensamiento and schooner rosario (golfo de panamá, 06/21/1818) (in addition to a dozen looted and burned ships between peru, ecuador y panama). santiago bueras brigantine gregorio cordovés looting and burning of schooner los ángeles (intermedios, perú, 11/?/1818); brigantine resolución (intermedios, perú, 12/02/1818) maipú lanzafuego (a) el diamante schooner josé maría manterola schooner or brigantine san antonio (guayaquil, ecuador, 12/?/1818); brigantine providencia (pacasmayo, perú, 01/?/1819); frigate buena esperanza (callao, perú, 01/?/1819) rosa o los andes, rosa de los andes frigate antonio arcos and guillermo henderson frigate los tres hermanos (a) la vascongada (tarapacá, chile, 05/04/1819); schooner sophia (ecuador, 06/?/1819); brigantine cantón (panamá, 07-09?/?/1819); brigantine resolución (bahía de caraquéz, ecuador, 10/31/1819); “dos mercantes españoles” (iscuandé, colombia, 03/02/1820) terrible (a) la sociedad schooner francisco javier urmeneta and josé manuel cea brigantine carmen (no information) source: compiled by author using the ministry of the navy papers (requests, marquees and reports): anch, archivo del ministerio de marina, vol. 6. in addition to corsair activity engaged in by los andes, arcos also invested in peaceful shipping activities. arcos needed to do business with peru, notwithstanding the insecurity derived from the presence of spanish forces at the port of callao. in august 1819, he associated with charles renard, a napoleonic soldier in the service of chile’s patriotic army (puigmal 2013, 234-236; berguño 2015, 329). with renard, arcos bought a small boat for the journey between valparaíso and constitución, and started embarking timber, to be shipped northward (letelier 1887, 209-210). in a patent register for commercial navigation covering the period 1817-1823, arcos registered at least one vessel as his property: the brigantine cornelius, also called aquiles (cárdenas 1984, 55; betancourt 2019, 24). moreover, in 1820 arcos undertook a similar initiative with francisco ramón vicuña, a member of the well-known chilean family that was http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 tremendously influential in both the political and the economic sphere. the idea was to use one or two neutral ships loaded with country produce and european goods destined for reexportation, with a value recharged at the customs office of valparaíso, all to be shipped to peru bypassing the port of callao (betancourt 2019, 24). in exchange for this permission, arcos offered the government a 200% customs duty on the estimated value of the local products he intended to export.27 arcos and vicuña applied for six licenses, which were granted on the condition that they provide some service to the planned expedition to peru (letelier 1887, 254). the government reserved the type of service requested from the merchant according to the type of merchandise that the ships transported, clearly distinguishing between national production or imported merchandise. table 2. trade navigation patents. chile, 1817-1823 vessel (name) class / tonnage shipowner patent (date) other information mercedes de la fortuna or minerva frigate francisco ramírez 06/26/1818 san antonio schooner andrés blest 03/02/1819 previously captured by maipú lanza-fuego congreso schooner pedro dautant 04/14/1819 carmen brigantine josé matías lópez 05/17/1819 mercurio americano frigate / 260 felipe santiago del solar 05/27/1819 emprendedora frigate josé joaquín larraín 07/14/1819 carmelo brigantine antonio arcos 07/22/1819 dolores frigate / 300 josé antonio echavarría 07/27/1819 cazadora frigate felipe santiago del solar 08/05/1819 santiago bueras brigantine gregorio cordovés 09/04/1819 privateer ship carmen or compañera frigate agustín eyzaguirre 09/22/1819 carlota o mackenna frigate francisco ramón vicuña y cía. 10/04/1819 maipú lanzafuego schooner pedro adams 10/18/1819 formerly a privateer ship constancia schooner tomás rosales 11/08/1819 27 anch, archivo de la capitanía general, vol. 1050, pieza 117, f. 463. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 vessel (name) class / tonnage shipowner patent (date) other information concordia brigantine felipe santiago del solar 12/09/1819 buenaventura brigantine carlos wooster and pablo garriga 03/27/1820 previously captured by a privateer. formerly called rosita rosa del pacífico brigantine carlos wooster 04/25/1820 previously captured by los andes. formerly called resolución terrible (1) schooner josé joaquín larraín 06/06/1820 pacífico brigantine / 170 carlos higginson and w. taylor 09/22/1820 previously captured by a privateer. formerly called trinidad betsy schooner / 84 carlos wooster 11/03/1820 el rosario brigantine juan de dios castro y cía. 02/21/1821 huerta alias la san ignacio frigate josé ignacio izquierdo 03/28/1821 minerva alias la gertrudis (1) buque / 300 gertrudis rosales 05/01/1821 perpetua alias la rosario schooner / 60 josé vicente ovalle 05/18/1821 perla frigate / 280 felipe santiago del solar 05/25/1821 jerezana frigate / 300 felipe santiago del solar 05/25/1821 gaditana frigate / 250 felipe santiago del solar 05/25/1821 terrible (2) schooner josé joaquín larraín 06/06/1821 nd buque agustín eyzaguirre 10/10/1821 juana candelaria brigantine ramón allende 07/20/1821 hermosa chilena or nuestra. señora del carmen frigate / 360 diego portales y cía. 08/16/1821 preciosa sloop / 36 pedro gonzález de cándamo 10/11/1821 ceres frigate felipe santiago del solar 12/11/1821 tomás brigantine manuele sousa duarte 12/11/1821 formerly british flag mercedes frigate juan nepomuceno boza 01/25/1822 océano frigate josé manuel cea 04/03/1822 formerly us-flaged. cea was represented by felipe santiago del solar misisipi sloop / 120 onofre bunster 04/09/1822 colombian-flagged. ship built in guayaquil http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 vessel (name) class / tonnage shipowner patent (date) other information queche alias todos los santos de coquimbo brigantine / 150 josé antonio subercaseaux 04/19/1822 anchored in the port of coquimbo esmeralda alias bergantín goleta brigantine estanislao lynch 04/23/1822 bought in peru. shipowner represented by olof liljevalch la maría boat / 15 josé domingo otaegui 04/23/1822 ship built in maule. shipowner added: “i wish to send it to pisco and callao with a small cargo of country products the exportation of which is not prohibited” orion schooner / 100 manuel valledor 05/14/1822 prepared to travel to huasco “with effects and productions of the country” nd sloop / 60 pablo garriga 05/18/1822 pablo garriga, merchant of coquimbo. represented by francisco ramón vicuña. the sloop had a one single mast nd archibald erskine robson 05/21/1822 blank patent. robson did not yet own a ship but hoped to purchase one resolución frigate ramón errázuriz 06/22/1822 previously captured in the port of callao by lord thomas cochrane san francisco de paula brigantine carlos ovalle 07/30/1822 boat which had belonged to josé vicente ovalle, father of carlos, but it had been bought by the latter in callao aurora frigate juan josé mira 07/30/1822 republicana schooner / 45 josé domingo otaegui y cía. 08/07/1822 la hibernia boat josé domingo otaegui 08/07/1822 pez volador frigate enrique trece 08/22/1822 represented by felipe s. del solar serpiente del mar schooner casto sáenz valiente and julián gómez 09/?/1822 represented by felipe s. del solar minerva alias la gertrudis (2) buque / 300 gertrudis rosales 09/13/1822 she applied for a new patent because she lost the old one heros buquecito / 50 pablo garriga 11/06/1822 represented by pedro nolasco mena. anchored in the port of coquimbo sttanmore frigate agustín eyzaguirre 12/10/1822 eyzaguirre appeared also on behalf of “the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 vessel (name) class / tonnage shipowner patent (date) other information compañía de calcuta’s other partners.” he pointed out that he had already received a patent for the sttanmore the previous year. as this patent only lasted for a year, he needed to renew it nd schooner / 30 roberto henson 01/?/1823 “having built the goleta in this port [valparaíso]” carolina schooner 02/04/1823 represented by josé joaquín larraín source: compiled by author using papers from the ministry of the navy: anch, archivo del ministerio de marina, vol. 11, ff. 1-87v. table 2 shows 55 commercial navigation patents issued during bernardo o’higgins’ government. trader-privateer antonio arcos’ presence at sea, with his merchant brigantine carmelo, was no exception among the merchants installed in chile during those years, whether they were nationals or foreigners. other businessmen who invested in privateering also stood out among those who had the means to establish a regular carrying trade in the south pacific. it emerges clearly that the possibilities opened by the maritime war allowed the chilean commercial conglomerate to create a stronger merchant navy, which consolidated chile’s local commercial and geostrategic hegemony. as shown in the table, the case of antonio arcos parallels that of the merchant felipe santiago del solar, owner of the el chileno privateer and important shipping entrepreneur of the period as well. these merchants not only purchased ships from foreign owners and ordered ships to be built in chilean shipyards, such as coquimbo or nueva bilbao de gardoqui (constitución). a significant part of their commercial fleet had been seized from enemies during corsair activity. privateer raids had thus allowed the increase of traders’ naval and commercial capacity. in addition, privateering allowed chilean maritime dominance over the entire region by eroding the shipping capacity of the great merchants active http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 or based in peru, the natural competitors of chilean entrepreneurs in the traffic of goods imported from the atlantic. 7. conclusions two essential trends about chilean privateering between 1817 and 1820 transpire in the data shown above. first, the timing of chilean privateering activity is intimately related to particular historical circumstances related to the chilean state’s construction. its beginning dates back to shortly after the arrival of the patriotic forces in central chile in february 1817, and an expansive phase continued during the military consolidation of the independence forces, to the detriment of royalist forces in that territory, up to the moment in which the new chilean state’s navy started its activities. this sealed the end of the glorious age of chilean privateering. and although this did not imply the absolute disappearance of chilean-flagged corsair vessels – as evidenced by the terrible case – and not even the end of the phenomenon in the south pacific, it did mark, however, the end of its apogee and its importance in maritime trade and war. secondly, we have brought to light the imprint this activity left in this historical parenthesis. chilean-flagged privateering allowed a small but important group of entrepreneurs and traders to consolidate their own commercial space. this space was increasingly “exclusive” in the american south pacific, and although they did not fully establish a commercial monopoly, they definitely obtained commercial hegemony in the region. the main victims of chilean privateering were peruvian merchants of lima-callao, who were dominant on southern peru’s coasts – the natural exit-port by sea for the high-peruvian riches. merchants from other important markets in the north of the viceroyalty (such as guayaquil) were injured as well, and in general, the royalist trade in colombian or central american waters. in short, through maritime warfare, traders based in chile were able to gain an advantage over their spanishamerican competitors during a relatively brief yet crucial conjuncture. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 finally, some domestic aspects can be observed, especially those related to the chilean economy in the independence period. the small group of entrepreneurs who participated in privateering, chiefly by financing it, was likewise able to dominate the south american pacific’s circuit of import-export trade, thanks to their ownership of commercial vessels a significant part of this ownership also derived from privateer activity. they were therefore able to contribute to the construction of a national merchant navy that was no longer dependent on external investors. finally, the business trajectory of some of the privateers’ owners reveals their politically strategic intervention as the first financiers and contractors of the nascent chilean state. in other words, they were a driving force of its economic construction. therefore, the activities of the chilean privateers between 1817 and 1820 – the moment in which this type of business could prosper – had consequences that, in the long term, went beyond the events that made up the independence process. references alegría miranda, carla. 2013. “el gibraltar de las costas americanas. marinería chilena y extranjera: valparaíso, 1811-1840.” master thesis, universidad de chile. alfonso mola, marina. 2014. “el tráfico comercial hispano en el pacífico en tiempos de las independencias.” in el mar del sur en la historia. ciencia, expansión, representación y poder en el pacífico, edited by rafael sagredo baeza and rodrigo moreno jeria, 493-554. santiago de chile: dibam, centro de investigaciones diego barros arana. arancibia clavel, patricia, isabel jara hinojosa, and andrea novoa mackenna. 2005. la marina en la historia de chile. siglo xix. santiago de chile: sudamericana. berguño hurtado, fernando. 2015. los soldados de napoleón en la independencia de chile (18171830). santiago de chile: ril editores. betancourt castillo, francisco. 2019. “negocios e influencias informales. la red de poder en el gobierno de bernardo o’higgins, 1817-1823.” diálogo andino 60: 21-33. doi:10.4067/s071926812019000300021. betancourt castillo, francisco. 2020. “negocios y política en la construcción de la república de chile. comerciantes, contratistas y financistas del estado en una época de transición, 1795-1831.” phd diss., universidad de chile. http://revistes.ub.edu/index.php/jesb http://dx.doi.org/10.4067/s0719-26812019000300021 http://dx.doi.org/10.4067/s0719-26812019000300021 volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 bonilla, heraclio. 1980. un siglo a la deriva: ensayos sobre el perú, bolivia y la guerra. lima: instituto de estudios peruanos. brading, david a. 1975. mineros y comerciantes en el méxico borbónico, (1763-1810). mexico city: fondo de cultura económica. cárdenas gueudinot, mario. 1984. “corso y guerra marítima en chile, 1797-1824.” master thesis, universidad de chile. cavieres figueroa, eduardo. 1996. el comercio chileno en la economía-mundo colonial. valparaíso: ediciones universitarias de valparaíso. cavieres figueroa, eduardo. 2003. servir al soberano sin detrimento del vasallo. valparaíso: ediciones universitarias de valparaíso, pontificia universidad católica de valparaíso. fernández abara, joaquín. 2004. “los orígenes de la guardia nacional y la construcción del ciudadanosoldado (chile: 1823-1833).” mapocho. revista de humanidades 56: 313-327. gámez duarte, feliciano. 2004. “el desafío insurgente: análisis del corso hispanoamericano desde una perspectiva peninsular, 1812-1828.” phd diss., universidad de cádiz. letelier, valentín, comp. 1886. sesiones de los cuerpos lejislativos de la república de chile. 1811 a 1845, tomo ii (senado conservador 1818-1819). santiago de chile: imprenta cervantes. letelier, valentín, comp. 1887. sesiones de los cuerpos lejislativos de la república de chile. 1811 a 1845, tomo iii (senado conservador 1819-1820). santiago de chile: imprenta cervantes. lópez urrutia, carlos. 1971. la escuadra chilena en méxico: 1822. buenos aires-santiago de chile: editorial francisco de aguirre. marichal, carlos. 2014. historia mínima de la deuda externa de latinoamérica. mexico city: el colegio de méxico. mazzeo de vivó, cristina. 2011. “comerciantes en conflicto. la independencia en el perú y la transformación de la elite mercantil 1780-1830.” anuario del instituto de historia argentina 11: 243-258. moutoukias, zacarias, and marjolein ’t hart. 2021. “fiscal crisis, forced loans and unintended institutional consequences in wartime buenos aires, 1800-1820.” revista de historia económica / journal of iberian and latin american economic history 39(2): 265-296. doi:10.1017/s021261092000004x. ortiz sotelo, jorge. 2001. “el pacífico sudamericano, punto de encuentros y desencuentros.” in perú: el legado de la historia, edited by luis millones and josé villa rodríguez, 207-219. seville: promperú, universidad de sevilla, fundación el monte. ortiz sotelo, jorge. 2015. la real armada en el pacífico sur. el apostadero naval del callao 17461824. mexico city: bonilla artigas editores, unam, instituto de investigaciones históricas. http://revistes.ub.edu/index.php/jesb http://doi.org/10.1017/s021261092000004x volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 patton, robert h. 2008. patriot pirates. the privateer war for freedom and fortune in the american revolution. new york: pantheon books. pinto vallejos, julio and verónica valdivia ortiz de zárate. 2009. ¿chilenos todos? la construcción social de la nación (1810-1840). santiago de chile: lom ediciones. prados de la escosura, leandro, and samuel amaral, eds. 1993. la independencia americana: consecuencias económicas. madrid: alianza editorial. puigmal, patrick, comp. 2013. diccionario de los militares napoleónicos durante la independencia. argentina, chile y perú. santiago de chile: centro de investigaciones diego barros arana. ramírez necochea, hernán. 1959. antecedentes económicos de la independencia de chile. santiago de chile: editorial universitaria. rector, john. 1976. “merchants, trade, and commercial policy in chile: 1810-1840.” phd diss., indiana university. stein, stanley j., and barbara h. stein. 1970. the colonial heritage of latin america: essays on economic dependence in perspective. new york: oxford university press. uribe orrego, luis. 1910. nuestra marina militar. su organización y campañas durante la guerra de la independencia. valparaíso: talleres tipográficos de la armada. villalobos rivera, sergio. 1968. el comercio y la crisis colonial: un mito de la independencia. santiago de chile: universidad de chile. woods, david j. 2016. destino: ¡valparaíso! pioneros europeos en la costa oeste de sudamérica. santiago de chile: librería y editorial ricaaventura. zaldívar, trinidad, maría josé vial, and francisca rengifo. 1998. los vascos en chile: 1680-1820. santiago de chile: editorial los andes. printed sources 1951. archivo de don bernardo o’higgins. vol. 8. santiago de chile: archivo nacional de chile, imprenta universitaria. 1952. archivo de don bernardo o’higgins. vol. 11. santiago de chile: archivo nacional, imprenta universitaria. 1953. archivo de don bernardo o’higgins. vol. 12. santiago de chile: archivo nacional, imprenta universitaria. 1955. archivo de don bernardo o’higgins. vol. 13. santiago de chile: instituto geográfico militar de chile. haigh, samuel. 1829. sketches of buenos ayres and chile. london: james carpenter and son. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 152-180, january-june 2023 https://doi.org/10.1344/10.1344/jesb2023.8.1.34142 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 archives consulted archivo nacional histórico de chile, archivo de la capitanía general, vol. 1050, pieza 117. archivo nacional histórico de chile, archivo del ministerio de marina, vol. 6. archivo nacional histórico de chile, archivo del ministerio de marina, vol. 11. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 gema alcaraz-mármol universidad de castilla la mancha (spain) francisco j. medina-albaladejo universitat de valència (spain) adapting marketing strategies: a linguistic analysis of wine advertising in spain, 1970-2010 abstract the spanish wine sector has undergone a series of changes in the last decades, particularly due to the decreasing domestic demand and the growing international competence. consequently, spanish wineries have had to adapt to this new situation by adopting new marketing policies. the aim of this study is to explore to what extent these new policies have been applied by means of the linguistic analysis and comparison of different types of advertisement in specialized printed media, focusing on the specific frequency of the most used word families in adverts from the 70s to present day. a corpus of 640 adverts has been compiled. we have particularly paid attention to the words that have been used in those messages. results reveal that the spanish wineries started their adaptive process during the 90s. they evolved from simple no picture messages related to the production system to more elaborated and pictured ones with the introduction of new visual support and terms related to tradition, exclusiveness and quality. keywords: wine industry; marketing strategies; advertising; word frequency corresponding author: e-mail: gema.alcaraz@uclm.es received 13 sept 2018 accepted 17 nov 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 1. introduction the spanish wine sector has undergone a series of important changes. the decreasing demand, the new eating habits and the growing international competence due to the emerging competitors have pushed the spanish sector to adapt to this new situation. in order to carry out this initiative the spanish wineries have introduced new technology, have promoted the professionalization of their managers, have adopted marketing policies and have carried out the product diversification. the aim of this study is to know to what extent this new marketing policy has been applied by spanish wineries. we analyze different types of advertising, focusing on the specific frequency of the most used word families in adverts from the 70s to present day. a corpus of 640 adverts has been compiled. adverts have been taken from specialized wine magazines. they have been linguistically analyzed both from a quantitative and a qualitative perspective. we have paid particular attention to the words that have been used in those messages. accordingly, we have explored the trade image offered by the wine sector and its effect on demand. the paper is organized as follows: after the introduction, the second chapter delves into the analysis of new trends in the international and domestic wine consumption, through a literature review. besides, the company structure of the spanish wine sector and new marketing strategies are described. in the third chapter sources and methodology are described. finally, results are discussed to finish with some conclusions. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 2. general approach and literature review 2.1. evolution and change of wine demands in the mediterranean europe in global terms, the wine demand has experienced a constant decline during the last four decades, falling from 280 million hectolitres between 1971-1975, to 226 in 2000, meaning 20% less. despite these figures, in 20111 wine consumption increased up to 244 million hectolitres. figure 1, shows this evolution organized in geographical areas. we can observe that the mediterranean europe – which is the main consumption area2 (pinilla and serrano 2008; unwin 1991) – has undergone a decrease in the last years. figure 1. wine consumption in the main regions (litres per capita), 1970-2010 notes: mediterranean europe: france, italy, spain and portugal; rest of europe: germany, sweden, austria, belgium, denmark, switzerland, united kingdom, the netherlands; new world: australia, united states, chile and argentina. source: organization for economic co-operation and development (1970-1984); international organisation of vine and wine, in <http://www.oiv.int/oiv/ info/esstatistiquessecteurvitivinicole> [accessed june 15, 2018]. 1 international organisation of vine and wine, in <http://www.oiv.int/oiv/ info/esstatistiquessecteurvitivinicole>. [accessed 15 june 2018]. 2 international organisation of vine and wine, in <http://www.oiv.int/oiv/ info/esstatistiquessecteurvitivinicole>. [accessed 15 june 2018]. 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-10 mediterranean europe new world rest of europe http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 at the same time, this fact has brought about a global decline in wine demands, as the new consumers from the northern europe and the “new world” cannot score an equalizer (anderson 2004; banks and overton 2010). we can observe that the mediterranean europe – which is the main consumption area3 (pinilla and serrano 2008; unwin 1991) – has undergone a decrease in the last years. at the same time, this fact has brought about a global decline in wine demands, as the new consumers from the northern europe and the “new world” cannot score an equalizer (anderson 2004; banks and overton 2010). some authors warn about the scarce predictive power of the simplified models of demand, which rely on the cost and rent in the case of wine. this is due to the fact that this product tends to differentiation, market regulations, moral, legal or social obstacles and irreversible demand curves (morilla 2001). therefore, we have to find explanations for these changes, other than rent or costs. reasons should be looked for in social and cultural factors (bardají 1992; barber et al. 2008; golan and shalit 1993; labys 1976; lecocq and visser 2006; mosher and johnsson 2005; oczkowski 1994; tapli and ryan 1969; troncoso and aguirre 2006; st james and christodoulidou 2011). among the possible causes for this evolution, we have to highlight, in the first place, the increase of rent and living standards in these countries, something which is necessarily linked to their industrialization and infrastructures towards modernity. this is not related to higher purchasing power, but –as previously mentioned – to people who are concerned about healthy 3 international organisation of vine and wine, in <http://www.oiv.int/oiv/ info/esstatistiquessecteurvitivinicole>. [accessed 15 june 2018]. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 life and, consequently, are less prone to drinking alcohol. there are other factors such as age and the existence of new drinks which are better adapted to the population’s demands. these changes have affected lifestyle and consumption habits, as well as the likes and preferences of the contemporary wine consumer. nowadays, the daily consumption of table wine has been replaced by sporadic drinking of “quality wine”. this type of wine is less fermented, fresh, young and kindly presented4 (morilla 2001). today, the profile of the average consumer in the mediterranean europe is represented by people under 50 with high cultural level, university formation and standard or high income. for these people buying wine is a meditated process and its consumption relies on a gastronomic ritual that is occasionally practiced (martín 2006; millán and yagüe 1997). this profile contrasts with the traditional wine consumer who preferred plain and cheaper, more fermented wine, which was consumed on a daily basis (bernabéu and olmeda 2002). 2.2. spain: a paradigmatic case of new consumption trends spain can be considered a good example of this situation. one of the reasons for the falling consumption has been attributed to a series of drinks that are replacing wine in the southern europe, namely beer, soft drinks, sparkling drinks, fabs (flavoured alcoholic beverages), fruit juice, mineral water, etc. spain is one of those countries where beer and other drinks have experienced an extraordinary increase, as they are better adapted to young and urban people than wine is (see figure 2). 4 we observe significant changes that show a tendency towards high-quality wines. in 1987, 85.2% wine that was drunk in spain was table wine and only 14.8% had a designation of origin. by contrast, in 2010 the consumption of table wine decreased to 51%, whereas high-quality wine has increased up to 49%. the decreasing tendency in wine consumption is mainly due to this decrease in the consumption of table wine. spanish ministry of agriculture, fishing and foodt, in < https://www.mapa.gob.es/es/alimentacion/temas/consumo-ycomercializacion-y-distribucion-alimentaria/panel-de-consumo-alimentario>. [accessed 15 june 2013]. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 figure 2. drinks consumption in spain (litres per capita), 1970-2010 source: spanish ministry of agriculture, fishing and food, in https://www.mapa.gob.es/es/alimentacion/temas/consumo-y-comercializacion-y-distribucion-alimentaria/panelde-consumo-alimentario/ [accessed june 15, 2018]. these changing habits are partly due to the modernization process, but there are other factors that may also lead to this situation. for instance, the high temperatures in the south of spain may favour the consumption of cold drinks such as beer or soft drinks (resa 2002), which are supported by important advertising campaigns. on the contrary, the wine sector shows a more humble commercial influence, and we should not forget legal restrictions for the consumption of alcohol (millán and yagüe 1997) which leads the consumer to confine wine consumption, especially drivers. indeed, spanish and southern european people nowadays drink less wine than their parents, and much less than their grandparents. marketing studies carried out by the spanish wine 0 10 20 30 40 50 60 70 80 0 10 20 30 40 50 60 70 80 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-10 beer natural juice mineral water soft drinks wine http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 association (federación española del vino-fev)5 shows that hardly eight percent of respondents under 24 drink wine. it seems that spanish youngsters see this drink as old and unattractive. they also think that you have to be an expert in order to enjoy wine, so that wine consumption is restricted to expertise (martín 2006). we can also mention the important changes in the eating habits. wine is part of mediterranean life style, as it is stated by the vine and vine law established in 2003 (martín and vidal 2004), and as it is admitted by experts (moreno 2000), but, unfortunately, the mediterranean diet is being replaced by fast food (rodríguez artalejo et al. 1996). therefore, at the beginning of the 20th century new models of wine consumption start to appear within a framework of new eating habits that have being built during these forty years (mili 2005). the changes that have been described above about consumption do not constitute an isolated case. they are part of the global change in food and beverage consumption. 2.3. company structure in the spanish wine sector the wine sector has been traditionally dual and highly fragmented. small wineries, cooperatives and big companies are part of the same market (yagüe and jiménez 2002; huetz de lemps 1967), although they are very different. the spanish sector is dominated by small wineries and cooperatives which operate at the local and regional level. they lack adequate marketing strategies, sales network and registered brands. that is why they depend on the distribution sector, which is strongly concentrated and it tends to the vertical integration and brand creation. this is something negative for wineries because of a bigger competence and the excess of supply and decreasing consumption (gamble and taddei 2007; yagüe and jiménez 2002). 5 http://www.fev.es http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 by contrast, the new markets, especially the united states and australia, have big wineries. these companies produce massively, using different types of grape but with homogeneity in variety. this allows an important economic scale, and a high quality product at a good price (bardají 1993; cambolle and giraud-héraud 2003; folwell and volanti 2003; gokcekus and fargnoli 2007; medina-albaladejo, martínez-carrión and ramon-muñoz 2014). prices are partly due to heavy investments in technology, advertising and marketing (aylward 2003; geraci 2004; green, rodríguez zuñiga and pierbattisti 2003; jordan, zidda and lockshin 2007; mora and castaing 2006), taking into consideration the effect of the latter on wine consumption (bardají 1992; franke and wilkox 1987; woodside 1999). thus, these new wineries are more market-oriented than the spanish ones, which are too focused on their own product, especially cooperatives (cambra 2006; lópez and cambra 2005-2006). wine companies in the european countries are concentrated and oriented towards international markets. in addition, it seems that the situation of small wineries has improved due to the role of institutions. several designations of origin started to develop their marketing activity individually in the last decades of the 20th century. they were collective solid brands with restricted access, letting companies develop their own strategies (bardají 2003; carbone 2003; johnson and bruwer 2007; mccutcheon, bruwer and li 2009; remaud and lockshin 2009; schamel 2009; yagüe and jiménez 2002). these politics of image were developed by the designations of origin. this origin, together with tradition, quality and other positive aspects, were the basis for these campaigns. consequently, many small wineries have developed national promotion and marketing strategies, something that would have been difficult to carry out individually. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 it is also remarkable that at the end of the 90s collective marketing strategies such as “vinos de españa” were developed by the spanish institute of external trade (instituto español de comercio exterior-icex). the main aim of these strategies was to transmit the european consumer the distinguishing attributes of the spanish wines, with a great variety and quality. these strategies pursued to avoid the consumer’s confusion produced by the different designations of origin which appear separately (espejel and fandos 2009). 2.4. changes in the marketing strategies the first spanish companies that adopted these marketing strategies were located in jerez. they have used advertising from the end of the 19th century pursuing increasing sales. they resorted to several artistic resources such as painting, graphs or photography in order to elaborate labels or posters; literature was the basis for the messages; music was used for radio or tv advertising; architecture showed the rest of the world jerez wineries and their elaboration process; even cinema was used. a great variety of elements – some of which have marked the contemporary culture of the country – have become part of the spanish cultural patrimony from 1994. the osborne bull is one of them (rouzet and seguin 2004; nuñez 1997). the case of the jerez wineries was the exception. the reason why they were so precocious is the type of product at offer. jerez wine was oriented both to the spanish and the international market – particularly the british, where this product was bottled and labelled under different brands. in general terms, the rest of the spanish wineries did not adopt these strategies because they did not need it. the big cooperatives produced great amounts of homogeneous and low-quality wine. despite of that, this type of wine was in the line of the likes of that moment and it was easily sold. this situation was given during the 50s, the 60s and the first half of the 70s, as the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 spanish wineries were clearly oriented to the product, not the market (cambra 2006; lópez and cambra 2005-2006; fernández 2012; martínez-carrión and medina-albaladejo 2013). the situation started to change at the end of the 70s and the spanish wineries had to adapt to the new trends. they renewed their organization, distribution and trade structures. the wine companies got immersed in the process described above. they had to adapt themselves to the new marketing strategies and the new marketing line. professionalization will not be the only measure to increase sales. another challenge in the 80s was the opening of new markets. exports helped increase sales and contributed to obtain bigger benefits as international consumers demanded high quality products, and spanish companies started their opening process to international markets. this fact was accompanied by an improved wine elaboration and bottling process. what is more, brand policies and diversification strategies were adopted, a different modus operandi from the 70s where wine was massively produced without paying attention to quality. it is from the 70s onwards when wine started to be classified according to quality levels – age, designation of origin, flavour, etc. which contributed to improve competitiveness and increased sales and benefits. all these new brands were characterized by images and designation of origin, as well as type, age, etc., which helped identify the quality of the product (ríos 2003). as for the introduction of specific marketing and advertising strategies, companies started to participate in wine testing festivals and advertising campaigns in the media. they also started to travel around in order to promote the product directly. in the 90s other strategies were adopted, namely direct marketing, tasting, wine tours, etc. (rouzet and seguin 2004). the written media is the most used among all these resources, rioja wines being the ones that have http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 invested more money on these strategies (albisu, domínguez and alejandre 1989; albisu and martín 1990; martín and albisu 1992). we should not forget the role of the already mentioned designations of origin, which have accompanied the brand. demand increased by means of the image of a product that is well defined (albisu, domínguez and alejandre 1989; albisu and martín 1990; martín and albisu 1992). despite these marketing classic plans, there is recently a deficit in the acquisition of new strategies6. the strategies adopted by the spanish wineries are not as developed as those in the united states7 or australia8 (mahlau and mili 2003; nowak and newton 2008; thach 2009). there is no doubt that relational or direct marketing through new technologies will be the second big step that spanish wineries will have to take in order to maintain their position in the domestic and international markets (lynch and ariely 2000; rivera 2003). 3. sources and methodology 3.1. sources adverts were taken from five spanish wine and gastronomy magazines: apicius, la semana vitivinícola, mi vino, sobremesa and vitivinicultura. adverts selected belong to a time span of approximately 30 years, from the 70s – when the wine consumption starts to change to the beginning of the 21st century. all the consulted magazines are published monthly except for la semana vitivinícola which is a weekly publication. as for 6 in 2000, only five percent spanish wineries were announced on the internet, that is only 200 out of the 3700 registered wineries in spain. other techniques such as the email are still unexplored, as most webpages are just informative (gómez-limón, san martín and peña 2000). in 2009 percentage had increased to 37.4% (259 out of 692) in the case of la rioja and aragón. however, only 65 of those 259 (25.1%) used the online trade (marzonavarro, pedraja-iglesias and vinzón 2010). 7 mainly california, as there are other regions that are less well known and whose wineries have similar problems to the spanish ones, for instance, texas (rasch and gretzel 2008). 8 in 2001 10% australian wineries had their own webpage, doubling the number of spanish wineries that had one. besides, most of them were mainly based on online trade (sellito, wenn and burgess 2003). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 the monthly magazines, six to eight issues per year were consulted. in the case of the weekly magazine la semana vitivinícola three issues per month were selected. this selection system does not belong to a specific criterium. it was established in order to cover the entire period of study, and therefore avoiding time constraints in the process of source consulting. our corpus contained 640 adverts out of which 560 corresponded to companies, whereas 80 belonged to designation of origin. adverts were classified according to the magazine, year of publication, brand, name and type of the marketing company, as well as place, province and designation of origin. additional information such as the existence of pictures or no text in the advert was also taken into consideration. table 1 shows the number of adverts organized in terms of publication year and magazine where they appear. table 1. number of adverts per magazine and publication year publication decades registers apicius 2000s 6 la semana vitivinícola 70s, 80s, 90s, 2000s 254 mi vino 2000s 142 sobremesa 80s, 90s, 2000s 194 vitivinicultura 90s 44 source: own elaboration. 3.2. methodology: word frequency in textual analysis word frequency can help us understand the importance of a word in discourse. when a word frequently occurs in certain context, it is highlighted and becomes what is known as keyword. leech et al. (2001) call “keyword” as a salient lexical item in text, that is, an item occurring with high frequency in certain discourse contexts. already in the 80s, williams tried to define the concept of keyword as contention to certain ideas or values in a specific era or social time. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 in fact, some words get to acquire especial relevance in certain discourse, reflecting possible social, economic or political changes (williams 1983; kipnis 2006). the first studies about frequency are found in the 19th century. nevertheless, it is at the beginning of the 20th century when frequency gains importance within the linguistic scope. the general service list (west 1953) the lob (francis and kucera 1982) have contributed to this relevant position. these two corpora were a referent in frequency studies as they were built on the most frequent words in the english language taken from different written sources. we can also find corpora based on the oral language (deulofeu and blanche-benveniste 2006), as well as others combining written and oral sources such as the british national corpus. yet, all these corpora rely on the so called general frequency, that is to say, the number of times a word occurs in general discourse. traditionally, general word frequency has been the basis for lexicography, specifically dictionary compilation (kilgarriff 1997; mcdonnald and shillock 2001; rychly 2008). in fact, nowadays dictionaries are usually built upon a descriptive basis. that is to say, dictionaries define words in terms of use, so that the meaning or meanings of a word are organized and considered in terms of people’s use. general frequency is to be distinguished from the specific frequency, that is to say, the number of times a word occurs in a given text, and it is the latter that is important for our analysis. specific frequency has been used as an instrument of analysis in different disciplines and fields of study. in second language teaching and learning. scholars such as meara (2005), waring and takaki (2003) or pigada and schmidt (2006) have investigated how many times a word is necessary to be encountered by a learner so that it is acquired. within this field of study, there is also an interest in vocabulary found in l2 textbooks and their frequency of occurrence (alcaraz-mármol 2011; scholfield 1991). other disciplines have recently taken advantage from http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 word frequency in their studies. one of them is critical discourse analysis, which has a qualitative tradition, but it has found in corpus linguistics and particularly word frequency a new tool for analysis. word frequency has been applied by cda in studies about mass media, especially the written press (taylor 2014; wodak and meyer 2009; orpin 2005). despite their multiple applications, word frequency is not so commonly used in the field of marketing and advertising. in our study word frequency is used for the linguistic analysis of wine advertising. advertising has traditionally been linked to the fields of socioeconomy (sutter 2002; zeng et al., 2009) and even psychology (fennis and stroebe 2015; verweijmeren et al. 2011). however, in the case of applied linguistics and especially regarding word frequency, there is a gap in how language can show certain patterns in the way certain products such as wine are meant to appeal potential consumers. the linguistic software range (nation 2001) has been used for our analysis. range allows us to quantify the number of words in a text as well as the occurrences of each word in a text (specific frequency) and in general discourse (general frequency). we focused our analysis on content words, namely nouns, verbs, adjectives and adverbs, leaving aside prepositions or determiners whose lexical content is less informative than the first ones. nevertheless, the personal pronouns “tú” (informal way of “you”) and “usted” (a formal and polite way to say “you”) were taken into account as they indicate the way the potential consumer is addressed by the advertiser – something that we considered relevant for our analysis. the analysis was carried out considering all adverts together, and per decades, so that five different archives were obtained: four corresponded to each analysed decades and number five http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 corresponded to a general one. the software offers three types of data: tokens – the number of words in the text-, types or the number of different words in the text, and finally, word families, including both inflected and derived forms. words occurring under ten times were not analysed. some adverts consisted just of a picture representing the product or something that evoked that product. this type of adverts was labelled “no message” (nm) and were also included in the corpus so that we could quantify the number of adverts that did not have linguistic support. the quantitative analysis was completed with a qualitative analysis by classifying the content words into word families. the list of word families was designed ad hoc and it was based on the vocabulary found in the adverts. up to fifteen categories were identified, among which some traditional and expected ones are found such as “family” or “quality”, but also others which are more innovative and unexpected such as “the supernatural” or “art”. table 2 shows the list of word families. table 2. word families word families food art quality the unknown family the modern nature personality social relationships sensations senses the supernatural status time tradition source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 the category “food” encompasses words denoting not only food as such but also things related to food such as cutlery and kitchenware; as for the category of “art”, we have identified different manifestations and artists, among others; the category of “quality” is based on words denoting different quality degrees; “the unknown” category refers to what it is to be found out, and it normally requires audacity. it is important to highlight that “the unknown” is to be distinguished from “the supernatural”, as the latter contains words related to religion, especially to the mystical. in this respect, a country may be unknown to someone, but is not be necessarily mysterious. that is why “the unknown” and “the supernatural” constitute two different categories. the category “family” is mainly based on family members, although it also includes particular actions that are linked to the family environment. the rest of relationships are included in the category “social relationships”. the categories “the modern” and “tradition” encompass everything related to innovation and customs, respectively. these categories should be distinguished from “time” which focuses on the quantity and organization of the latter. within the category of “nature” we find natural landscapes. as for “personality”, it is curious to find several adjectives that are not normally attributed to the inanimate. it is also necessary to distinguish between the categories of “senses” and “feelings”, as the former are related to the physical whereas the latter evokes emotions. therefore, an analysis of linguistic data can help us reach conclusions about the development of marketing strategies within the wine world from the 70s to present day. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 4. results and discussion 4.1. general results as previously mentioned our corpus consists of 640 wine adverts that appeared in several spanish wine magazines. the number of adverts is not strictly related to a linguistic analysis, but we consider it can nicely complement it. thus, we can observe the following: in the first place, capitalist wineries have used more advertising techniques than cooperatives despite the great production of the latter. as table 3 shows, adverts corresponding to capitalist wineries have grown from 67.7% in the 70s to 91.9% in the last decade, while advertising in cooperatives has fallen from 32.2% down to 8.1%. these figures show that cooperatives have not adapted to the new market situation and the new trends of consumption9. table 3. adverts according to the type of company and brand (%) decade company presence of brand capitalist company coop. capitalist company coop. total 70s 67.7 32.3 20.0 12.9 17.7 80s 77.7 22.3 50.8 25.0 44.4 90s 80.6 19.4 84.0 66.6 80.6 00s 91.9 8.1 87.1 80.7 86.6 total 84.4 15.6 72.7 42.5 68.0 source: own elaboration. 9 in 2008 cooperatives produced up to 70% of the total wine produced in spain (cogeca 2010). most of these cooperatives were created during franco’s dictatorship and they massively produced homogeneous lowquality wine. from the 80s onwards they found it traumatic to adapt to the new trends (martínez-carrión and medinaalbaladejo 2010; medina-albaladejo 2015). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 if we pay attention to the percentage of messages that include a brand, we can observe that both types of company have improved. however, capitalist wineries have more adverts of this kind. in fact, 20% adverts of capitalist companies had already a brand in the 70s, whereas this percentage has increased dramatically in the last decade up to 87.1%. we can also observe an increase in the use of this technique on the part of cooperatives (from 12.9% to 80.7%), although in a minor scale. another aspect to be highlighted in the spanish wine sector is the late implementation of all measures and techniques. indeed, in the 80s only 44.4% adverts included a brand. regarding designation of origin, rioja is the most advanced in the use of advertising techniques with 25% of the adverts analysed in the last decade, although it was already the most advanced in the 70s (see table 4). table 4. adverts according to designation of origin (%) designation of origin 70s 80s 90s 00s rioja 7.2 17.2 8.0 24.6 navarra 9.3 1.2 11.2 5.9 valencia 5.2 8.6 3.2 3.4 la mancha 4.1 2.4 8.0 4.3 jerez-manzanilla 3.1 4.9 0.0 2.8 ribera del duero1 1.2 1.6 13.0 rueda2 2.4 3.2 2.8 valdepeñas 1.0 4.9 3.2 3.1 cava3 1.2 9.6 5.6 utiel-requena 0.0 6.1 4.8 1.2 taroconte-acentejo4 4.8 3.7 rias baixas5 1.2 6.4 2.4 montilla 10.4 4.9 1.6 0.3 notes: 1: created in 1982; 2: created in 1980; 3: created in 1986; 4: created in 1992; 5: created in 1988. source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 navarra, valencia and la mancha are very traditional wine areas with very active companies and cooperatives, as well as a big territorial extension especially in the case of la mancha (panmontojo 1994, medina-albaladejo and menzani 2016). jerez differs from the ones above. its adverts targeting the spanish market were surprisingly few, although it was the first to use marketing techniques. the main reason is that jerez wine has been traditionally oriented to international markets such as great britain (sherry) (montañés 2000; fernández 2010). as for the rest, we can observe different situations. for instance, the remarkable presence of the designation of origin montilla-moriles in the 70s and 80s or other which are more recent and appear in the 90s such as rías baixas, taroconte-acentejo, cava (internationally known with freixenet and codorniu), rueda and especially ribera del duero. the latter is the spanish designation of origin that has experienced the greatest growth in all aspects, with up to 13% adverts in the wine advertising campaign of the last decade, and it is to be placed in the second place after rioja. valdepeñas or utiel-requena should also be remarked. they are traditional spanish designations of origin which have known how to incorporate marketing policies since 1980. by contrast, the designation of origin penedés has had a surprising scarce occurrence in our corpus – although it is fair to say that many penedés wineries can be included in the cava designation of origin. the designation of origin of jumilla presents very few adverts and they are not very sophisticated. it is also worth mentioning generic advertising based on collective brands. in the case of the spanish wine, we refer to designation of origin when exclusively focused on a specific region. in the first place advertising techniques started to be used very late in the 80s, and with very simple messages. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 their evolution is similar to that in the corporate sector with more complex messages, and the use of images and icons which have evolved throughout the years. these techniques have been mostly used by several designation of origin such as la mancha (8), navarra (8), jerez (7), valencia (6), rioja (5), rueda (4), montilla-moriles (4) and utiel-requena (4). that is to say, those regions where wine corporations are more active in the use of advertising techniques coincide with those with collective brands. therefore wine companies have adapted to the new situation with wineries that indicate their designation of origin and advertise these wineries are advertised through a collective brand. 4.2. most frequent word families: the 70s and the 80s the 70s mark the beginning of the use of marketing techniques for the spanish wineries, but with very simple adverts. many wineries used no picture adverts where only the company name appeared. this is the expected modus operandi of a type of company that is mainly oriented to the product, not to marketing (cambra 2006). in fact, our results show that most word families are related to the product itself, its elaboration process and trading. this is observed in the most used word families in this period, which include “vino” (wine), “exportación” (export) and “elaboración” (elaboration). it was during these two decades when the spanish wine sector started to adapt to the new market situation where more and more bottled high-quality old wine was demanded (mili 2005; martínez-carrión and medina-albaladejo 2010). that is why there is a predominance of the word families such as: “criar” (grow) and “embotellar” (to bottle). this shows that the spanish sector is not very diversified, where traditional red wine is the one that outstands. it is interesting to pay attention to the frequent use of the word family “exportación” (export) during this period. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 exports had been very limited in former decades but they would significantly increase in these years due to the international demand of new consumers from northern-europe countries. table 5. word families used in wine adverts in the 70s and 80s (<10 frequency) word family members frequency vino [wine] vino, vinos, vinícola 134 exportar [export] exportación, exportador, exportadores 43 elaborar [elaborate] elaboración, elaborado, elaborador, elaboradores, elaborados 32 tinto [red] tinto, tintos 27 criar [grow] criador, criadores, crianza 25 embotellar [to bottle] embotellado, embotelladores, embotellados, embotellar 14 empresa [company] empresa 14 fino [fine] finos 10 source: own elaboration. 4.3. most frequent word families: the 90s and the 2000s the 90s were a landmark in the spanish wine advertising with the use of new marketing techniques and consumption patterns (martínez-carrión and medina-albaladejo 2010). as opposed to the picture found in the 70s and the 80s – where most words in adverts were related to wine and the elaboration process itself – in the last two decades adverts have shown a significant increase of words which are not directly related to wine. we find up to ten words which occurring over 10 times in our corpus. the reason for this might point to an intention to identify the product with concepts other than those related to the elaboration process, which is normally unattractive to the consumer. table 6 shows the most used word families in this period. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 table 6. word families used in wine adverts in the 90s and 2000s (<10 frequency) word familiy members frequency grande [great] grande, gran, grandes, grandeza 39 aroma [aroma] aroma, aromas, aromático 30 tierra [land] tierra, tierras 25 tradición [tradition] tradición, tradicional, tradiciones, tradicionales 22 vino [wine] vino, vinos 21 tiempo [time] tiempo, tiempos 20 arte [art] arte, artesanos, artesanía, artista 19 pasión [passion] pasión, pasiones, apasionados 18 vivir [to live] vida, viva, vive, vives, vivirlas, vívelo 17 familia [family] familia, familiares familiar 16 mundo [world] mundo, mundos 15 placer [pleasure] placer, placeres 14 sensación [sensation] sensaciones, sensación, sentir 13 naturaleza [nature] naturaleza, natural, naturales 13 disfrutar [enjoy] disfruta, disfrutan, disfrutar, disfrutarlo, disfrute 13 calidad [quality] calidad 13 descubrir [discover] descubierto, descubra, descubrimiento, descubrir, descúbralo 12 sabor [taste] sabor, sabores 12 historia [history] historia, histórica 11 obra [work] obra, obras 11 momento [moment] momento, momentos 10 saber [to taste] saber, sabe, sabemos, sabes, sabias, sabido, sabiduría, sabios 10 soñar [to dream] soñar, sueño, sueños, sueña 10 source: own elaboration. the top word family in these years is “grande” (great). wineries start to insist in the fact that their wine is high-quality, a product that is far from common, but something that the consumer buys in special occasions. this idea is reinforced by the use of two word families, “quality” and “flavour”. whereas in the 50s or 60s wine was appreciated by its graduation, new trends rely on soft and natural wine with new flavor (morilla 2001; martín 2006). the second most frequent word family is “tierra” (place of origin, land). as previously stated, spanish models of production are based on small or mid-size wineries. the high frequency of http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 the word family “land” indicates that this strong link between hand-making versus industrial production. by contrast, the strategy used in the rest of europe is different. the new producers elaborate a simple, modern, fun wine that is promoted by strong advertising campaigns which offer competitive products (aylward 2003; medina-albaladejo, martínez-carrión and ramonmuñoz 2014). terms such as “tradición” (tradition) “tiempo” (time) and “historia” (history) are also highly frequent in adverts. time has to pass slowly in order to get high quality products and elaboration has to take place in traditional areas, indicating that tradition is a mark of distinction in spain. other terms are closely related to the word family “art”. they describe wine as a very ancient mediterranean product, as a work of art that can only be produced in special areas under specific weather conditions and elaborated by means of ancient techniques. it reinforces the idea of wine as something exclusive, of high quality, a “work of art” that is unique and is only drunk in special moments. most part of the wine business in europe belongs to families, especially in the case of spain (martínez-carrión and medina-albaladejo 2010). in fact, big corporations also use this term to define themselves and to link their product to tradition and parental heritage. that is why the word family “familia” (family) is one of the widely used in wine adverts. finally, it is also important to mention words related to the word family “pasión” (passion), one of the 10 most frequent families in adverts in the 90s and the beginning of the 21st century. traditionally, the production systems have not been very sophisticated as the tendency was to produce table wine. at present, the production system has changed in order to be adapted to the new trend. production is rigorously controlled so that grape is adequately selected and bred http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 (martínez-carrión and medina-albaladejo 2010). that is to say, the wine process requires passion and dedication to obtain a high quality product. to conclude, we have observed that wine advertising has been adapting to the new consumption models, where the product is no longer considered the basis of our diet but something closer to enjoyment, which some authors identify with social position (capanaga 2004). 4.4. other linguistic aspects of interest adverts with no message, or just a picture follow a more or less constant pattern during the four analysed decades. the number of these adverts is slightly higher in the 90s – which may be related to the predominating minimalist type of message of that decade. although we can find some examples of this type of adverts in the 70s and the 80s, it was in the 90s where the use of images starts to proliferate, which at the same time could have been one of the reasons for the word cutting off, giving priority to the image than to the word to communicate the message. the last decade (2000-2010) brought about the definite use of modern marketing techniques, with the generalized adoption of powerful images, which would reduce the use of words once again. table 7. summary of data, period and decades decade no message (%) wink to audience lexical variation (%) 70s 6 (6.2) *tú 0 / **utd. 0 31.4 80s 3 (3.7) tú 0 / utd. 3 41.4 90s 8 (12.9) tú 1 / utd. 5 52.4 2000s 22 (6.8) tú 38 / utd. 9 32.4 total 39 (7.0) tú 39 / utd. 17 28.6 * a formal and polite way to say “you”; ** informal way of “you”. source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 as for the direct appeal to the audience, during the 80s and 90s, the potential buyers are called “usted” (a formal and polite way to say “you”). by contrast, the 2000s are a turning point where “usted” is replaced by “tú” (informal way of “you”). the wine consumers have been traditionally considered old people – that is why “usted” was traditionally used. however, nowadays the new potential consumers are younger (between 30 and 50). they drink wine occasionally but this wine is normally of high quality and more expensive and exclusive than the wine a regular consumer over 50 may drink every day. the use of “tú” instead of “usted” is also a way of calling the attention of young people. as previously mentioned, people under 30 do not normally drink wine. they identify themselves with other types of drink. that is why the use of “tú” might be an attempt to address this sector which is the most reluctant to wine drinking. as for lexical variation, spanish wineries continuously make use of the same number of words. terms have changed along the years, but lexical density seems to be constant. this is related to the advertiser’s aims, which are clearly defined, so that lexical variation is expected to be reduced. the product has been described in the same line along the years – with specific words related to quality, tradition and designation of origin. conclusion we have observed that the type of vocabulary used in spanish wine adverts have evolved from words which are more concrete and directly related to wine in the 70s and 80s, to more symbolic and abstract terms which don’t primarily belong to the wine world from the 90s onwards. this change is notably observed in capitalist companies, but the process has been slower in cooperatives, where they do not seem to adapt to the new marketing strategies. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 109-141, january-june 2019 doi:10.1344/jesb2019.1.j054 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 the evolution of the spanish wine advertising starts in the 70s. but it is in the 80s and especially in the 90s when this evolution is consolidated. thus, simple picture-less adverts are replaced by elaborated and complex messages with the image as one of the main resources, exploring semantic fields other than those related to production. therefore, at present wine adverts aim to transmit a high quality, well elaborated product that the consumer will enjoy. spanish wineries seem to distinguish themselves from the rest by transmitting the idea of mediterranean cultural tradition. all in all, this research has sought to observe the ability of spanish wineries to adapt to market changes, together with strategies undertaken in recent decades in order to stand out in an increasingly competitive and globalized market such as that of wine. the linguistic analysis has helped in the case of spain, but future research must overcome these geographical limitations and include other cases from traditional producer countries (france, italy) to check if they present similar trends. likewise, it would be interesting to establish a comparative analysis with the strategies undertaken by the wineries from the "new world". acknowledgments this work was supported by the spanish ministry of science, innovation and universities under grant har2016-76814-c2-1-p and har2015-64076-p (aei/feder, eu). references albisu, luis m., josé a. domínguez, and josé l. alejandre. 1989. actitud del consumidor español ante la publicidad del vino. madrid: instituto nacional de investigaciones agrarias. albisu, luis m., and dolores martín. 1990. “la publicidad de vino en españa.” in publicidad en el sistema agroalimentario. un análisis comparativo internacional, edited by julián briz, 101-122. madrid, ediciones mundi-prensa. 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valdepeñas.” revista de estudios agro-sociales y pesqueros 197:179-204. zeng, fue, li huang, and dou wenyu. 2009. “social factors in user perceptions and responses to advertising in online social networking communities.” interactive advertising 10:1-13. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 carina rapetti innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0001-6423-7478 montserrat pareja-eastaway university of barcelona (spain) https://orcid.org/0000-0002-4031-0949 josep miquel pique innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0002-4031-0949 didier grimaldi innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0002-1027-1176 measuring the development of innovations districts through performance indicators: 22@barcelona case abstract innovation districts are rising as the banners of the new urban, economic, and social paradigm and as a solution to the renaissance of inner cities since they expedite the creation and commercialization of new ideas which leverage the city goals and its technologic and economic attributes. the configuration of accurate indicators to measure the degree of achievement of the innovation district goals is one of the main requirements to ensure district proper development. even when the study of innovation districts is a topic that is increasingly under study, little is still known about the insight, and it is still needed tools that favor their evolution and development. the aim of this paper is two-fold: on the one hand, it seeks to collect and analyze the indicators that have been used in literature to measure the degree of maturity over the course of the 20-year existence of the 22@barcelona, an area of innovation that transformed an old industrial district into a knowledge-based one. on the other hand, guided by the four dimensions of the knowledge base urban development theory and the main actors that make up triple helix approach, the paper designs a framework of indicators in the four spheres that shape the regeneration of the district, that is, urban, economic, social and governance. as we shall see, a total of 47 indicators are proposed, indicating for each of them: the environment in which it is applied, the main purpose to which it responds, and the main actor with the greatest power of action over it. keywords: innovation district, indicator, triple helix, knowledge base urban development, 22@barcelona, development, sustainability, evolution entenent el desenvolupament de districtes d'innovació a través d'indicadors: el cas del 22@barcelona resum els districtes d'innovació estan augmentant com a abanderats del nou paradigma urbà, econòmic i social i com a solució al renaixement del centre de les ciutats ja que acceleren la creació i comercialització de noves idees que aprofiten els objectius de la ciutat i els seus atributs tecnològics i econòmics. la configuració d'indicadors precisos per mesurar el grau d'assoliment dels objectius dels districtes d'innovació és un dels principals requisits per garantir el desenvolupament adequat del districte. fins i tot quan l'estudi dels districtes d'innovació és un tema cada vegada més estudiat, encara es coneix poc sobre la seva execució, i calen eines que analitzin i afavoreixin la seva evolució i desenvolupament. l'objectiu d'aquest document és doble: d'una banda, tracta de recollir i analitzar els indicadors que s'han utilitzat en la literatura per mesurar el grau de maduresa durant el transcurs dels 20 anys d'existència del 22@barcelona, una àrea d'innovació que va transformar un antic districte industrial en un de coneixement. d'altra banda, guiat per les quatre dimensions de la teoria del desenvolupament urbà basat en el coneixement i els principals actors que componen l'enfocament de la triple hèlix, l’article dissenya un marc d'indicadors en les quatre esferes que formen la regeneració del districte, és a dir, la urbana, econòmica, social i de governança. com veurem, es proposen un total de 47 indicadors que indiquen per a cadascuna d'elles: l'entorn en el qual s'aplica, l'objectiu principal al qual respon, i l'actor principal amb el major poder d'acció sobre aquest tema. paraules clau: districte d'innovació, indicador, triple hèlix, desenvolupament urbà basat en el coneixement, 22@barcelona, desenvolupament, sostenibilitat, evolució la medición del desarrollo de distritos de innovación a través de indicadores de resultados: el caso del 22@barcelona resumen los distritos de innovación están aumentando, como abanderados del nuevo paradigma urbano, económico y social, y como solución al renacimiento del centro de las ciudades, ya que aceleran la creación y comercialización de nuevas ideas que aprovechan los objetivos de la ciudad, y sus atributos económicos y tecnológicos. la configuración de indicadores precisos para medir el grado de desarrollo de los objetivos de los distritos de innovación es uno de los principales requisitos para garantizar el desarrollo adecuado del distrito. incluso cuando el estudio de los distritos de innovación es un tema cada vez más estudiado, sabemos poco sobre su acción, y se precisan herramientas que analicen y favorezcan su evolución y desarrollo. el objetivo de este documento es doble: de un lado recoger y analizar los indicadores que se han utilizado en la literatura para medir el grado de madurez durante los últimos 20 años de existencia del 22@barcelona, un área de innovación que transformó un antiguo distrito industrial en un polo de conocimiento. por otro lado, y guiado por las cuatro dimensiones de la teoría del desarrollo urbano basado en el conocimiento, y los principales actores que componen el enfoque de la triple hélix, el articulo diseña un marco de indicadores en las cuatro esferas que forman la regeneración del distrito, es decir: la urbana, la econòmica, la social, y la de la gobernanza. como veremos, se proponen un total de 47 indicadores que indican, para cada una de ellas: el entorno en el que se aplica, el objetivo principal al que responde, y el actor principal con mayor poder de acción sobre este tema. palabras clave: distrito de innovación, indicador, triple hélice, desarrollo urbano basado en el conocimiento, 22@barcelona, desarrollo, sostenibilidad, evolución corresponding author: carina.rapetti@salle.url.edu received 19 november 2021 accepted 22 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-6423-7478 https://orcid.org/0000-0002-4031-0949 https://orcid.org/0000-0002-4031-0949 https://orcid.org/0000-0002-1027-1176 mailto:carina.rapetti@salle.url.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 1. introduction in recent years, changes in market demands have seen a drive towards products and services with high customer and technology orientation. this, together with increasing confluence of populations in large cities has led to revaluation of urban spaces. the innovation spaces become the “highest and best use” to enhance urban competitiveness according to many land-use policies and urban planning practices (jiwu wang 2021) and from here, innovation is a key driver of economic growth and competitiveness, and innovation clusters house much of the innovation generating high-tech and creative industries (yigitkanlar et. al. 2020). the behaviour of critical actors in innovative territories and the domains in which urban ecosystems are specialised have been analysed within theories such as the knowledge base urban development model (kbud) (sarimin and yigitcanlar 2012), and the triple helix (th) theory (etzkowitz and leydesdorff 2000) to understand the generation of wealth and value in the knowledge economy. innovation districts and their static territorial impact have been largely studied. over the past two decades, studies have been conducted on how cities manage to adapt to the global economy (e.g. (grimaldi and fernandez 2017). this ranges from general analyses of the development and organization of inner cities (sassen 1991,1998 and 2002; knight, 1995; gospodini 2006), to more specific topics such as sustainable development (hall 1997), health and urban ecosystem (mcmichael 2000), gentrification effects (atkinson 2004), competitiveness of cities (brotchie et al. 1995; jensen-butler, sharchar and van weesep 1997; lever 1999; strambach 2002), to urban regeneration policies (marcotullio 2003; atkinson 2004; thomson et al. 2006). improvement in the development of a new economy in inner cities has awakened a deep interest (hutton 2000 and 2004), as well as urban parks of knowledge (bugliarello 2004), creative and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 knowledge cities (lever 2002, florida 2005, costa et al. 2008, pratt 2008) and knowledgebased urban developments (carrillo et al. 2014). however, evaluation of the process by which these kinds of districts are transformed and their degree of maturity, deserves more attention and it is time to indicate which parameters are the most required or frequent, so that good practices can be repeated in future developments of the innovation district. this literature gap becames the research question that this paper seeks to answer, which is: what indicators are necessary to assess performance in innovation districts. understanding how innovation districts evolve is the starting point to accomplish their vision and goals. as point of departure, measuring where they are today and identifying the next milestone is essential. to do this, it is necessary to define a set of indicators from a holistic perspective to collect the information to be analysed (ramírez et al. 2021). answering this research question becomes the main objective of the present research. this piece of research sheds new light on the main indicators used in an innovation district to guide its development. taking as a fundamental idea the main domains proposed by kbud theory, and the actors anticipated by the triple helix model, exploratory work has been carried out on the case study of the 22@ innovation district of the city of barcelona (22@barcelona), analyzing the existing bibliography over the course of its twenty years of evolution. the 22@barcelona innovation district has largely been studied in academia ( pareja-eastaway and pique 2011; cohendet, grandadam and simon 2011; casellas and pallarès 2009; gianoli and palazzolo-henkes 2020; charnock and ribera-fumaz 2011 and 2014; leon 2008; piqué, miralles, and berbegal-mirabent 2019; pareja-eastaway and piqué 2014; dot-jutgla and pallares-barbera 2015, paül, 2017; bottero et al. 2020). international stakeholders such as the international association of science parks and areas of innovation (iasp) consider http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 22@barcelona as a reference source for policy transferability and experience-based knowledge. as testament to its popularity, the 22@ received more than 354 delegations from all continents (piqué, miralles and berbegal-mirabent 2019). 2. theorethical framework the theoretical framework that provides the basis for this research comes from two models that frame and structure the environment under analysis. we have chosen two theoretical models, firstly, the knowledge-based urban development theory (kbud), that propose the existence of four dimensions to explain the knowledge-based development of cities and the triple helix (th) model (etzkowitz and leydesdorff 2000) which seeks to explain the operation of r&d&i systems from the perspective of the interaction between three main actors: government, industry and academia. they become a way of contextualizing the dimensions that make up an innovation district (kbud) and within them the main actors present and their most relevant functions (th). organizing the ecosystem of the innovation district (id) in domains and knowing the main actions carried out in them, becomes a necessity for proposing indicators, since indicators, by definition, measure how close actions bring us to the objectives established for each of the main stages of a project (development of an id). this way of modeling the reality under analysis facilitates our understanding of it and helps to give it a structure that orders the work. therefore, it is necessary to be able to set out the foundations of these areas and their concomitant activity, so that they guide the proposal of indicators in a comprehensive and effective way. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 2.1. triple helix model the triple helix thesis emerged in the mid-1990s, a time when universities and industries were exhorted by policy makers to work together more closely for the benefit of society, generating an upward trend in the commercialization of new knowledge. the thesis became articulated as a confluence between henry etzkowitz’ long-term interest in the study of university-industry relations and loet leydesdorff’s focus on an evolutionary model in which there is an overlay of communications between different and independent spheres of activity (lawton smith and leydesdorff 2012). the triple helix model is formulated as a model for helping with the explanation of a phenomena. in this sense, it is a methodological tool: the focus on the recursive overlay of communications among universities, industries, and governments allows for the organization of research questions in relation to the various models and metaphors (leydesdorff and etzkowitz 1998). the triple helix model postulates that interaction among university-industry-government is the key to improve conditions for innovation in a knowledge-based society (piqué 2018). from this perspective, the role played by each actor in this model is crucial for the development of an innovation district. academia is considered as generators of new programs and knowledge to guarantee the transfer of technology and innovation. it is also regarded as providers and attractors of talent, essential for sustained and sustainable development. the industry acts as a source of investment and as center of production and development of products and services according to the requirements of the environment. it is the main actor in the creation of economic value. the government behaves as a generator of incentives and policies to guarantee stable contractual relationships between the different interest groups (grimaldi and fernandez 2017). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 as interactions within this framework increase, each component evolves to adopt some characteristics of the other institution, resulting in hybrid institutions. in this sense, in the case of interaction between the university and the industry, it focuses on two main elements: education and research, where the university provides the research on which industry will base production of commercial goods and therefore transmission of people between university and industry constitutes a very important knowledge transfer. and since innovation is increasingly based on scientific knowledge, the role of universities as creators of knowledge is more valuable. in the case of the interaction of the university with the government, it depends on the particular involvement of the government in general education policies. that is, in cases where higher education is largely public, the government has a greater influence as the main source of funding. but in cases where higher education institutions are mostly private in origin, greater economic independence can be achieved. although the presence of the state can continue to exert synergies based on its policies, legislation that favors the birth of companies within the universities themselves or could be a good facilitator by financing strategic disciplines. finally, interaction between the industry and government depends to a great extent on the degree of government intervention in the market, but in any case the government is the main party responsible for the creation of a clear and efficient regulation that streamlines and promotes economic development projects. other authors added a fourth sphere to the triple helix model, that of civil society, relabelling it as the quadruple helix (carayannis and campbell 2009). in this research, the social sphere is included in the kbud dimension. another transformation of the initial model adds a fifth dmension, now a quintuple helix model, which adds the environment as a key agent in knowledge and innovation models (carayannis, barth and campbell 2012). in the same http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 manner, for the purpose of this research, we include the enviroment in the urban dimension of the kbud. to summarize, the successful management of triple, cuadruple and quintuple helix models implies an effective long-term strategic direction taking into account the role played by each actor or institution. a comprehensive analysis of the value chain in each of the stages needs to be assesed. in addition, government might acts as a facilitator, where spaces for interaction and exchange are favored, through the design and application of instruments that allow alliances between actors to turn the scenario into an advantageous one. 2.2. knowledge base urban development knowledge based urban development (kbud) is spurred by the growth of knowledge economy, which refers to the generation of income through the creation, production, distribution and consumption of knowledge and knowledge based products (yigitcanlar, velibeyoglu and baum 2008a, and 2008b). the outputs of the knowledge economy are not necessarily raw materials and production of quantified goods, but also highly skilled and educated labour force producing abstract goods such as information, software and management, and transferring skills and knowledge particularly via the internet and other online vehicles (yigitcanlar and sarimin 2010). kbud involves contemporary understanding and management of value dynamics, capital systems, urban governance, development, and planning (yigitcanlar and velibeyoglu 2008). several models have been proposed for the conceptualisation of kbud (sarimin and yigitcanlar 2012), yet, they all include the governance development (e.g. public and/or private bodies that manage the urban transformation and the process of citizen participation), the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 economic development (e.g., r&d centres, knowledge based companies and start-ups), the social and cultural development (e.g., housing, community facilities, education, social capital and knowledge workers) and the environment and urban development (e.g. green areas, green infrastructures—mobility, energy, waste, water—and green building) (piqué 2018). kbud transcends many areas of economic, social and urban policy, and two of its main broad purposes (yigitcanlar, velibeyoglu and baum 2008a) are directly linked to the substrate that is intended to be established in this theoretical framework since they are: firstly, in kbud perspective instrumentation of the knowledge-based development of cities is critical to bring together all of the key actors and sources, organize and facilitate necessary knowledge-intensive activities and plan strategically for knowledge city transformation. secondly, kbud builds a strong spatial relationship among knowledge community precincts for augmenting the knowledge spillover effect that contributes significantly to the establishment and expansion of creative urban regions and supports linkages and knowledge transfer between these precincts (yigitcanlar, velibeyoglu and martinez-fernandez 2008). 2.3. case of study: innovation district 22@barcelona the vision to create the first innovation district in europe was conceived in barcelona in 1998 as a way to enhance the competitiveness of the city, betting on innovation, creativity, design and technology. in 2000, the 22@barcelona, aimed at transforming 198.26 ha in the industrial area of the poblenou district, became one of the most ambitious and visionary projects in the city. this large project was not merely a planning initiative but signalled a new way of understanding the city (oliva 2003); its main objective was to transform barcelona into a leading knowledge society, in particular by encouraging new-generation activities related to http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 and requiring education, creativity and innovation (crossa et al. 2010). in the last thirty years the 22@barcelona has played a pivotal role in the rebirth of the city. to achieve these goals, the “modification of the general metropolitan plan (mpgm) for the renovation of the industrial areas of poblenou” was approved in 2000, which aimed at restructuring the urban concept of the city; protecting and promoting access to housing, redeveloping industrial land in poblenou to provide adequate infrastructures for businesses and activities, and defining the characteristic activities of the district that would enhance their development. thus 22@barcelona was shaped around three axes: the urban, economic, and social renewal of an area, all framed within the overall transformation of the east of the city together with the la sagrera station, the vila olímpica (olympic village), and the forum (pareja-eastaway 2017). the main objectives to be achieved with the development of the three pillars were: • urban pillar, that seeks to respond to the need to recycle an obsolete industrial fabric, creating a compact, diverse and balanced environment, in which productive spaces coexist with protected housing, facilities and green areas that improve the quality of life and work (urbanism22@barcelona 2012). this axis focuses on the reconditioning of streets (115 blocks), with a comprehensive approach that includes energy, mobility and urban planning aspects. it also involves the renovation of existing houses and the construction of new units. also in generating the appropriate space and the consequent construction of new facilities and green areas, this includes facilities for the productive fabric (for example, the mediatic building or the business incubator almogàvers business factory). considering the subsequent economic transformation that the area would experience, it was necessary to provide a critical mass of high-density office http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 buildings, appropriate to a central business district that aimed to be competitive on a global scale, capable of competing in the real estate market and of attracting new economic activity (mur and clusa 2014; pareja-eastaway 2017) • economic pillar, this axis is supported by backing a model characterized by the ‘internationalization of the economy, the tertiarization of activity, the growing productive flexibility, and the emergence of a new technological paradigm around information and communication technologies’ (trullén 2011; pareja-eastaway 2017). in this field, focus was placed on the development and attraction of new businesses to the district, thus generating recruitment of professionals of all kinds, focusing on freelance workers with high training levels and also promoting exports and the positive result of the trade balance. • social pillar, that is characterized by the creation of space for professionals and citizens, trying to favor the interrelation between the different professionals who work in the area and to promote and support innovative projects that encourage collaboration between companies, institutions, neighbors and entities from social, educational and cultural spheres (urbanism22@barcelona 2012). for this purpose, the development of formal and informal relational networks was endorsed, this included collaborative projects, use of new information and comunication technologies and participation of citizens and companies with social, educational and cultural organization in the district. this led to an increase in the population of the district, with a strong presence of residents of foreign nationality, due to the internationalization of the businesses, which has also generated an increase in household disposable income. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 in 2016, a citizen participation movement began to jointly rethink a strategy in the face of the current social, economic and urban challenges of poblenou and 22@. the local government launched “repensem el 22@” with the will to develop, through a open and inclusive methodology that guarantees real participation of citizens, shared diagnosis of challenges and needs and a strategic proposal to rethink 22@. 3. methodology this study reports on an analysis conducted to start filling the knowledge gap generated around the smart and sustainable development of innovation districts and provides insights into what indicators innovation districts should consider assessing performance when approaching the design and implementation of strategies for smart development. since the first step in defining a strategy is to make a diagnosis, and from that, to guarantee the accomplishment of the objectives, controlling the evolution of main factors is essential and key indicators become a factor for success. to meet this aim, twenty years of evolution of 22@ innovation district in barcelona are analysed (from its beginning to its maturity) and main variables of analysis are collected, clustered and detailed. the clustering process is conducted by means of the theoretical approach: first, to understand how cities are transformed with respect to different dimensions: urban, economic, social and governance the knowledge based urban development (kbud) approach is considered (yigitcanlar, velibeyouglu and martínez-fernandez 2008; yigitcanlar 2008). second, considering the triple helix model (etzkowitz and leydesdorff 2000) which focuses on the relationships between universities, government and industry, used as a framework that helps to better understand how ecosystems of innovation develop in cities. from these two theories, kbud leads to the definition of four innovation dimensions (urban, economic, social and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 governance) where indicators will be organized (table 1). and triple helix model actors (university, government, and industry) are considered to indicate the main action agents of each indicator (table 2). table 1. knowledge base urban development dimension kbud dimension description a. urban green areas, green infraestructures —mobility, energy, waste, water— and green building b. economic r&d centres, knowledge-based companies and startups c. social housig, community facilities, education, social capital, and knowledge workers d. governance public and/or private bodies that manage the urban transformation and the process of participation citizens source: own elaboration. table 2. triple helix action agents kbud dimension description i. university including institutes of technology and research centres, which are the magne for international talent, stimulate the development of local talent, and are sources of scientific and technological knowledge for business. ii. government large corporations, smes and startups, which are the key for the creation of economic value. entrepreneurship is what translates the knowledge and talent of the individuals, teams and companies into innovation. iii. industry local, regional, national and international, which becomes the third party providing an active role in scientific, technological, business, and land use policy making. source: own elaboration. the literature review focuses on the science interested to date in 22@barcelona innovation district over the course of its lifecycle, in the areas of business economics and urban studies. for this purpose, the articles published under these criterions were analyzed (web of science and scopus databases were used as sources of information). secondary data was collected from barcelona city council and reports from other local bodies that were focused on planning and evolution of this district. this results in 25 documents (table 3) on which the main concepts for the development of the district have been documented and the indicators found were grouped into the 4 proposed dimensions and ordered by frequency of appearance, from the most http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 named to the least. these concepts come from the same literature review, based on the notions that science and public administration have used to measure evolution or propose as important to guarantee the development of the district. table 3. sources of information & analysis doc no. doc name source authors year 1 modification of the pgm (general municipal plan) for the renovation of the industrial areas of poblenou barcelona city council barcelona city council 2000 2 poblenou infrastructures special plan barcelona city council barcelona city council 2000 3 real estate and urban planning impact of 22 @ 2000-2010 future perspectives until 2020. the future central business district of barcelona barcelona city council mur, sara; clusa joaquím 2012 4 10 years of 22@: the innovation district barcelona city council barcelona city council 2012 5 rec64 (economic magazine of catalonia nº 64) college of economists of catalonia college of economists of catalonia 2014 6 22@barcelona plan barcelona city council barcelona city council 2012 7 22@barcelona 2000-2015 barcelona city council barcelona city council 2012 8 asssessment of the impact and socioeconomic function of 22 @ per to the city of barcelona cerdà institute cerdà institute 2018 9 agreement towards a more inclusive and sustainable 22@ within poblenou fundació barcelona institute of technology for the habitat fundació barcelona institute of technology for the habitat 2019 10 place making facilitators of knowledge and innovation spaces: insights from european best practices web of knowledge/scopus srurabhi pancholi, tan yigitcanlar and mirko guaralda 2015 11 city of rents: the limits to the barcelona model of urban competitiveness web of knowledge/scopus greig charnock, thomas f. purcell and ramon riberafumaz 2014 12 a new space for knowledge and people? henri lefebvre, web of knowledge/scopus greig charnock and ramon riberafumaz 2011 http://revistes.ub.edu/index.php/jesb mailto:22@barcelona%20plan mailto:22@barcelona%202000-2015 volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 doc no. doc name source authors year representations of space, and the production of 22@barcelona 13 attract and connect: the 22@barcelona innovation district and the internationalisation of barcelona business web of knowledge/scopus nick leon 2008 14 the production of urban competitiveness: modelling 22@barcelona web of knowledge greig charnock and ramon riberafumaz 2014 15 areas of innovation in cities: the evolution of 22@barcelona web of knowledge/scopus josep miquel pique, francesc miralles and jasmina berbegal-mirabent 2019 16 aplication of the triple helix model in the revitalisation of cities: the case of brazil web of knowledge josep miquel pique, francesc miralles, clarissa stefani tteixeira, jadhi vincki gaspar and josé roberto branco ramos filho 2019 17 spain: creating ecologies of innovation in cities the case of 22@barcelona web of knowledge/scopus montserrat parejaeastaway and josep m. piqué 2014 18 industrial heritage, economic revitalization and urban compactness in the poblenou-22@barcelona a new barcelona model? web of knowledge/scopus esteve dot jutgla and montserrat pallares-barbera 2015 19 the 22@barcelona district as part of the businesses relocation process in the city. an analysis of the old and new locations of the corporate headquarters web of knowledge daniel paül i agustí 2017 20 experimenting community impact evaluation (cie) for assessing urban regeneration programmes the case study of the area 22@ barcelona web of knowledge/scopus marta bottero, francesca bragaglia, nadia caruso, giulia datola, federico dell’anna 2020 21 innovation districts as turbines of smart strategy policies in us and eu. boston and barcelona experience web of knowledge bruno monardo 2019 22 for a productive city: urban diversity in post industrial transition web of knowledge/scopus ana luisa barrios and pedro brandao 2013 23 governance, public participacion and economic evelopment: local adaptations to global estrategies web of knowledge antònia casellas 2007 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 doc no. doc name source authors year 24 barcelona from province to metropolis: a cogent strategy for branding the city web of knowledge ksenia piątkowska 2016 25 city as a product. architecture as an economic instrument. are global cities people-friendly places? web of knowledge/scopus ksenia piątkowska 2014 source: own elaboration. 4. results the analysis of the 22@barcelona district literature allows us to summarize the main aspects that were identified as weight paramenters in this district. considering the 4 dimensions proposed by the kbud model, it could be said that the economic domain is the one that received more attention, in terms of amount of variables of interest detected. social and urban domains follow, while governance indicators are by far, less developed. the different findings are presented below for each of the dimensions as follow: 4.1. urban sphere parameters related to the urban sphere, 13 parameters could be identified as relevant according to the literature review. results show that on the one hand, importance is given to the measurement of the areas dedicated to green spaces, which seeks to make the living space more livable and sustainable and, on the other hand to the square meters dedicated to development of new facilities (schools, hospitals, incubators, etc). the intervention surface also was shown to be important and the amount of investment that comes from all these constructions (investment in infrastructure). another investment that was frequently found was the investment in real estate with a view to the construction of houses, hotels, and residences in the area. on the other handthe definition of the square meters that can be built, meaning, the construction potential, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 the degree of occupancy, which provides information on housing availability and the latent cost in terms of supply and demand, the degree of implementation of construction, as a way of measuring the maturity level of the district, and finally, it was also of interest not only to know the number of dwellings, but also their typology, that is, number of hotels, student residences and the new value of the property in the district driven by the revaluation of the space due to its technological development (table 4). table 4. parameters of the urban sphere nº dimension concept analysed sources urban 1 square meters of a stationary or floating district created by a local government to promote sustainable practices, to help reduce environmental impacts, and to help revitalize an area (green zone, green area or green space) [17] 2 intervention surface: total area in which a modification of the urban space can been carried out (area) [17] 3 investment in infrastructure [14] 4 square meters of spaces or buildings dedicated to special activities for the community (hospitals, schools, business incubator, etc.) (facilities) [13] 5 houses (household or housing units). [12] 6 investment in real estate [12] 7 constructive potential: square meters that can be built. (potential floor, potential ground). [11] 8 number of hotels [10] 9 linear kilometres of street or road. [9] 10 how much have been achieved, in terms of construction implementation, with respect to the objectives set. [7] 11 number of student residences [7] 12 square meters that are actually occupied or rented (degree of occupability, occupancy rate) [6] 13 existing houses prices [3] source: own elaboration. 4.2. economic sphere parameters the economic sphere resulted in the identification of 16 parameters of interest, first of all those that provide information on available jobs and the number of companies, to measure the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 evolution of job and business creation. secondly, the generation, type and number of business clusters in the district begins to take relevance quickly, as well as the investment and development of start-ups, the turnover, size and quantity exported by these companies. in a similar vein, other concepts were identified that measure generation and attraction of new companies, the number and type of companies that have left, size and intensity of knowledge of these companies, and those that differenciate the companies that are knowledge-based ones, the number of papers written, the number of innovation projects generated and patents registered by this organizations, wich contribute to the strategic positioning. finally, other indicators of relevance were the creation of technological, research and innovation spaces in the district and the number of freelance workers. (table 5). table 5. parameters of the economic sphere nº dimension concept analysed sources economic 14 number of jobs [16] 15 number of companies [15] 16 number of clustered companies [13] 22 number of start-ups created in the district [12] 18 types of existing clusters [11] 21 number of companies that have been attracted, and therefore, relocated in a year. [11] 17 % companies or businesses with a higher share of knowledge for production of goods and services compared to other factors. an institute with a minimum of 75% of its assets in intangible form. [10] 20 % companies according to their size in terms of the number of employees [10] 23 % companies or businesses according to knowledge intensity in the district [10] 19 money taken by a business in a particular period (turnover). [9] 24 % companies that export products [7] 25 number of innovation projects generated [5] 28 papers written by district organizations [5] 26 freelance workers (or freelance professional) [4] 27 patents registered by district organizations [4] 29 investment received by start-ups of the district [1] source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 4.3. social sphere parameters 14 aspects were identified in social domain. concepts like the number of inhabitants, number of students were identified as a way to measure talent creation. the number of university centers and the percentage of workers with higher education were identified. other aspects were also considered in the literature like the number of innovation centres, the number of research centres, and the number of international workers in the district. additionally,the number of events to develop the community of professionals, the number of cultural activities and the number of people who have participed in cultural activities were taken into account. (table 6). table 6. parameters of the social sphere nº dimension concept analysed sources social 30 research centres or institutions [12] 31 social housing built [11] 33 universities centres [9] 34 technologies centres [9] 35 cultural activities (or cultural offering) [9] 32 number of inhabitants (or citizens) [8] 36 percentage of workers with higher education [8] 37 innovation centres or hubs [7] 38 international workers who are in the district [7] 39 number of students [5] 40 people who have participated in district events [5] 41 people doing internships. [4] 42 events to develop the community of professionals [4] 43 people who have participated in district cultural activities [3] 44 people who have used the district portals to promote their vocation [3] source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 4.4. governance sphere parameters governance sphere, as mentioned at the beginning of this section, is the least developed in terms of the number of registered concepts. but even so, the importance given to the creation of crosscutting organizations is evident, which enable and increase co-creation and cooperation, with their inherent synergies. paramenters such as the number of neighbourhood and cluster associations and the number of members of horizontal associations were established here (table 7). table 7. parameters of the governance sphere nº dimension concept analyzed sources governance 45 neighborhood associations (or neigborhood group) [9] 46 members of horizontal associations [5] 47 cluster asociations [4] source: own elaboration. 5. discussion innovation districts are urban areas that host a high concentration of technology companies, research centers, specialized scientific agencies and technology transfer support platforms. because of this it is of paramount importance for them to have a tool that allows them not only to direct their efforts and actions toward creating this environment, but also to ensure that those actions bring the district closer to its goal on a sustained basis over time. based on the results obtained in the 22@barcelona case study, this section proposes and describes a set of indicators to evaluate the process of development of an innovation district. also analysed here is the ultimate purpose of the indicator proposed and the main agent of the triple helix model involved in its implementation and development. this can help in implementation of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 roadmap for development of the innovation district, shedding light on which aspects must be monitored. the following table (table 8) presents the indicators proposed for each dimension of the kbud model. table 8. set of indicator for the development of an innovation district dimension nº indicator description aim main th action agent urban 1 area intervention surface: total area in which modification of the urban space can be carried out establishing the dimensions of the intervention project, affects the amount of investment and the impact of the initiatives. government 2 potential floor constructive potential: square meters that can be built. gives an idea of the economic value of the land. government 3 degree of occupability how many square meters are currently occupied or rented provides information on housing availability and the potential cost in terms of supply and demand industry 4 streets linear kilometres of street gives an idea of the necessary investment and dimensioning services (for example: mobility, energy, etc). government 5 green zones square meters of a stationary or floating district created by a local government to promote sustainable practices, to help reduce environmental impacts, and to help revitalize an area make living and workspaces more liveable. quality of life. government 6 households number of houses offer spaces for workers and their families. attract and retain talent government/ industry 7 hotels units number of hotels attract and retain talent industry http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 dimension nº indicator description aim main th action agent 8 student residences units number of student residences attract and retain talent university 9 real estate investment investment in real estate indicator of investment received in the district. the more investment, the more development, which provides insight into the development of the district. industry 10 infrastructure investment investment in infrastructure an indicator of investment received in the district. the more investment, the more development, then it provides insight into the development of the district. government 11 construction implementation degree how much has the district achieved, in terms of construction implementation, with respect to the objectives set. degree of maturity of the district development industry 12 new facilities square meters of spaces or buildings dedicated to special activities for the community (hospitals, schools, business incubator, etc.) meters available to improve quality of life in the district government 13 second-hand houses price existing home prices indicates how the area was revalued when developing the innovation district. industry economic 14 jobs number of jobs evolution of job creation industry 15 companies number of companies evolution of business creation industry 16 turnover amount of money taken by a business in a particular period market position – competitiveness industry 17 companies size percentage of companies according to their size in terms of the number of employees cost barriers to entry industry http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 dimension nº indicator description aim main th action agent 18 clusterization of companies number of clustered companies strategic positioning competitiveness leveraging innovation capacity industry 19 companies clusterization type types of existing clusters strategic positioning competitiveness leveraging innovation capacity industry 20 exporting companies number of companies that export products trade balance competitiveness industry 21 knowledge-based companies number of companies with the higher share of knowledge for production of goods and its services compared to other factors. institute with a minimum of 75% of its assets in intangible form. strategic positioning competitiveness leveraging innovation capacity industry 22 companies knowledge intensity percentage of companies according to knowledge intensity in the district strategic positioning competitiveness leveraging innovation capacity industry 23 relocated companies number of companies attracted, and therefore, relocated in a year. business attraction industry 24 freelance workers number of freelance workers industry 25 number of startups number of startups created in the district strategic positioning competitiveness leveraging innovation capacity industry 26 startups investment amount of money amount of money dedicated to the development of startups strategic positioning competitiveness leveraging innovation capacity industry 27 research development number of papers written by district organizations r&d&i leverage the innovation capacity university 28 technology created number of patents registered by district organizations r&d&i leverage the innovation capacity industry/university 29 innovation pilots number of innovation projects generated r&d&i leverage the innovation capacity industry/ university http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 dimension nº indicator description aim main th action agent social 30 citizens number of inhabitants government 31 students number of students talent creation university 32 university centres number of universities centres talent creation university 33 technology centres number of technologies centres talent attraction strategic positioning competitiveness leveraging innovation capacity university / industry 34 innovation centres (private sector) number of innovation centres talent attraction strategic positioning competitiveness leveraging innovation capacity industry 35 research centres number of research centres talent attraction university 36 higher education qualification percentage of workers with university education strategic positioning competitiveness leveraging innovation capacity industry 37 international workers number of international workers in the district talent attraction industry 38 social housing units number of social housings built diversity and inclusion government 39 internship’s participation number of people doing internships. talent development industry 40 professional development events number of events to develop the community of professionals talent retention industry 41 social events participation number of people who have participated in district events talent retention quality of life diversity and inclusion industry 42 cultural activities number of cultural activities talent retention quality of life diversity and inclusion government 43 cultural activities participation number of people who have participated in district cultural activities talent retention quality of life diversity and inclusion government 44 job’s vocations number of people who have used the district portals to promote their vocation promote the vocation of young talent industry http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 dimension nº indicator description aim main th action agent governance 45 horizontal association size number of members of horizontal associations social network creation government / industry / university 46 cluster associations number of cluster associations government / industry / university 47 neighbourhood association number of neighbourhood associations social network creation. improve quality of life government source: own elaboration. 5.1. urban domain the urban sphere mainly seeks to convert infrastructure and with it, to provide more amenities that improve quality of life and thus attract talent to the district. indicators proposed here must satisfy these requirements and information as the total area in which modification of the urban space can be carried out becames essential, since it helps to establish the dimensions of the intervention project, and define the impact of the initiatives and the amount of investment required in infrastructure. other mandatory information is the constructive potential: square meters that can be built, since it gives an idea of the economic value of the land and the potential uses of the space. the linear kilometres of street, that in addition to the investment, also provide guidance on the dimensioning of services (for exemple: mobility, energy, etc). additionally, to satisfy the requirement of attraction and retention of talent, it is necessary to provide metrics that promote the development of healthy, harmonious and sustainable living spaces, for this it is fundamental to to have indicators that offer information about square meters of a stationary or floating district, to promote sustainable practices, to help reduce environmental impacts, and to help revitalize an area (green areas). also about areas for new facilities, which can be measured as the square meters of spaces or buildings dedicated to special activities for the community (hospitals, schools, business incubator, etc.), which are also elements that improve the quality of life in the district, making it more attractive. the number of houses, number of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 hotels, number of student residences also acquires relevance for contributing to the same purpose. it is also worth discussing whether the incorporation of indicators that measure operational aspects of these ecosystems gives differential value. aspects related to energy consumption, generated waste, transportation or facility management could also be included as a way to improve the efficiency of services ofered by the district, and with it, quality of life of its inhabitants. another discussion that should be addressed is the inclusion of more concepts related to the environment, such as air quality, noise pollution, degree of recycling, energy savings, percentage of companies that use green energy, business carbon footprint; since sustainability is practically inherent in any smart development to ensure its continuity over time, so to include and measure this aspects could generate greater value to improve living conditions by promoting and guaranteeing these practices based on their monitoring. additionally, the urban domain presents a clear differentiation between the indicators, according to the life cycle of their use, which is not as noticeable in the other domains. this difference shows two groups, on the one hand, the group made up of indicators typical of urban regeneration projects, which has a beginning and an end in its use, such as the measures that analyze the area of exploitation, the kilometers of streets, the degree of progress of the structural actions implemented, etc; where the use of the indicator begins and ends with the particular project of which it is part. on the other hand, is the group of indicators that analyze the exploitation actions of the district, so that its life extends during the entire time that the district is in activity. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 in terms of the main actor involved in the urban sphere, the government emerges as key, given that urban planning measures predominate here, where its interference and investment is mandatory. its actions are complemented by the industry as a materializing actor of the planned measures. 5.2. economic domain this domain looks for the internationalization of the economy, the productive flexibility and the emergence of new technological paradigms around information and communication technologies. the set of indicators should be good at offering information about these aspects as a way to ensure compliance. the indicators such us the number of knowledge-based companies, the number of companies with knowledge intensity, the number of start-ups and the number and type of clustered companies, reinforce these objectives and help to improve strategic positioning, competitiveness and to leverage innovation capacity. indicators such as the number of innovation pilots and technology created, similarly, contribute to increasing the innovation capacity, but also to developing the research and development potential, so necessary for the promotion of continuous improvement through research and technology. the number of international workers, as a talent attraction meter, also contributes to these purposes. indicators which measure number of job positions, number of companies and turnover help to control and improve, when necessary, the evolution of jobs and business creation, and to define and expand market positioningand competitiveness. additionally, in order to know the number of relocated companies, provides a clearer picture of of the performance or capacity of the district in terms of business attraction. knowing the investment in startups serves to guarantee that the district takes actions to promote their proliferation, essential to achieve the goal of developing an economy based on knowledge and innovation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 in terms of the main actor, industry has emerged as a lead player in the economic sphere. even so, its association with the university takes on vital importance as a fundamental partner for the development of research that enables the creation of technology. 5.3. social domain social domain attempts to create networks of social contentment which boost professional and personal development. indicators that measure the number of students and university centers intended as spaces for talent creation are key. then, to visualize the number of innovation, research and technology centres and the number of international workers, attracts new and competitive talent, and also contributes to strengthening the muscle necessary to generate the foundations of development, which begins with individuals, but with them, increases the maturity of the district as a whole. additionally, knowing the percentage of workers with university education favors t strategic positioning, competitiveness and leverage innovation capacity. furthermore, to measure the number of professional and social events, the participation of people, their integration and the cultural activities, constitues a way to improve the talent development and retention, the quality of life, the diversity and the social inclusion. finally, the internship participation and the job vocation indicator promote the vocation and development of young talent in the district. as mentioned in the theoretical framework, a fourth actor is proposed by an evolution of the triple helix towards the quadruple helix model. this fourth participant is civil society, which is covered precisely by the social domain of the kbub theory, as a field. of course, civil society, as an actor, has a strong influence in this field, but the model of three main actors has been maintained, since they are the ones who adopt a role that is mainly a provider of solutions and services, while the social player takes a position of receiving or demanding these solutions. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 as regards main actors in the social sphere, a confluence of players is evident. while in all areas there are hybrid situations, in this particular domain, an even more efficient coordination and joint work is necessary, given the transversality of the social figure. 5.4. government domain being the main roles of the government leadership, generating environments and clear rules that favor exchange and promote participation, value would be added by the development of direct or indirect measurement that can infer the progress of this role, and to enhance the crosspromotion function of governance. also, acting as a facilitator or meeting point for different organizations, including measurements that analyze the result of their actions in this area could provide differential value for the development of this type of ecosystems. indicators that measure horizontal, cluster and neighbourhood associations, help to develop and improve this aspect? however other successful innovation district could still be considered to complement this analysis. 6. conclusions innovation districts are home to economic, physical, intellectual and networking assets. they seek to incorporate all the elements that foster a knowledge-based development economy, which include, shared working spaces, community colleges advancing specific skill sets, tech transfer offices, proof-of-concept centers, accelerators and incubators. their development requires the coordinated and organized joint action of all actors present in the ecosystem in order to achieve a successful? result, superior to what would be achieved by the mere sum of individual actions. being able to count on a set of indicators that establishes the main parameters and, consequently, the actions and actors linked to them, entails a source of support for the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 organization and functionality required, and works as a control and evolution guide for future development of innovation districts. through analysis of the bibliography generated over 20 years of evolution of the 22@barcelona innovation district, this work proposes to provide urban innovation ecosystems, which are those that develop innovation districts, with a set of indicators that serve to identify and establish feasible and measurable objectives in the four main dimensions proposed by the knowledge base urban development theory (urban, economic, social and governmental). thus, 47 indicators are proposed. the urban domain consists of 13 indicators which aim to guarantee good design and correct development of infrastructures and appropriate urban spaces for development of the necessary services. the economic domain consist of 16 indicators, which aim to guarantee good performance and improvement of the aforementioned products and services. the social domain consist of 14 indicators, which aim to guarantee that the necessary conditions are met not only for the creation of human talent, but also for its attraction, development and retention. the last three indicators point to the reinforcement of the governance activities, as a link between cross-cutting organizations. the urban domain also presents a clear differentiation between indicators that are activated and deactivated with infrastructural projects, compared to exploitation indicators that remain active throughout the entire life cycle of the innovation district and are predominant in the other domains (economic, social and governmental). additionaly, every indicator belonging to each domain defined by the knowledge base urban development theory, is linked to the different actors of the triple helix model and its main role in the development of a knowledge economy, which is the driving force in an innovation district. with this, not only is the indicator itself provided, but also the environment to which it http://revistes.ub.edu/index.php/jesb volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 is applied,the main purpose to which it responds, and the actor with the greatest power of action over it. with this, the districts could be helped to develop actions that respond to their objectives and implement a system of continuous improvement to enhace their virtues. even though the discussion section reveals a certain relationship between indicators and moments in which an indicator can be activated or deactivated throughout the district development process, it would add value to delve into these issues in future research to provide tools that complement the entire planning process of this type of ecosystems. references atkinson, rowland. 2004. 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"the evolution and adaptive governance of the 22@ innovation district in barcelona." urban science 4(2): 16. doi: 10.3390/urbansci4020016. gospodini, aspa. 2006. "portraying, classifying and understanding the emerging landscapes in the." cities 23(5): 311–330. doi: 10.1016/j.cities.2006.06.002. grimaldi, didier, and vicenç fernandez. 2017. "the alignment of university curricula with the building of a smart city: a case study from barcelona." technological forecasting and social change 123: 298-306. doi: 10.1016/j.techfore.2016.03.011. hall, peter. 1997. "the future of the metropolis and its form." regional studies 31(3): 211–220. doi: 10.1080/00343409750134647. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1068%2fd17009 volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 hutton, t.a. "reconstructed production landscapes in the postmodern city: applied design and creative services in the metropolitan core." urban geography 21, no. 4 (2000): 85–317. hutton, thomas a. 2004. "the new economy of the inner city." cities 21(2): 89–108. doi: 10.1016/j.cities.2004.01.002. jensen-butler, chris, arie sharchar, and jan van weesep, editors. 1997. european cities in competition. aldershot: avebury, 1997. jiwu wang, chengyu tong, xuewei hu. 2021. "policy zoning method for innovation districts to sustainably develop the knowledge-economy: a case study in hangzhou, china." sustainability 13(6): 3503. doi: 10.3390/su13063503. knight, richard v. 1995. "knowledge-based development: policy and planning implications for cities." urban studies 32(2): 225–260. doi: 10.1080/00420989550013068. lawton smith, helen, and loet leydesdorff. 2012. "the triple helix in the context of global change: dynamics and challenges." prometheus 32(4). doi: 10.2139/ssrn.2177331. leon, nick. 2008. 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"how can contemporary innovation districts be classified? a systematic review of the literature." land use policy 95: 104595. doi: 10.1016/j.landusepol.2020.104595. http://revistes.ub.edu/index.php/jesb https://doi.org/10.21138/bage.2450 http://dx.doi.org/10.1504/ijkbd.2019.098227 https://doi.org/10.1111/j.1468-0467.2008.00281.x https://doi.org/10.1016/j.scs.2021.102713 https://dx.doi.org/10.1504/ijkbd.2012.047035 https://doi.org/10.1080/09654310120114508 http://dx.doi.org/10.1136/jech.2005.038885 https://doi.org/10.1016/j.landusepol.2020.104595 volume 7, number 2, 6-39, july-december 2022 doi.org/10.1344/jesb2022.2.j105 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 yigitcanlar, tan, r. adu-mcvia, and i. erol. “how can contemporary innovation disticts be classified? a systematic review of the literature.” land use police, 2020. yigitcanlar, tan, koray velibeyoglu, and cristina martinez-fernandez. 2008. "rising knowledge cities: the role of urban knowledge precincts." journal of knowledge management 12(5): 820. doi: 10.1108/13673270810902902. yigitcanlar, tan, koray velibeyoglu, and scott baum. 2008a. knowledge-based urban development: planning and applications in the information era. hershey: igi global. yigitcanlar, tan, koray velibeyoglu, and scott baum. 2008b. creative urban regions: harnessing urban technologies to support knowledge city initiatives. hershey: igi global. yigitcanlar, tan, and koray velibeyoglu. 2008. "knowledge-based urban development: the local economic development path of brisbane, australia." local economy 23(3):195-207. doi: 10.1080/02690940802197358. yigitcanlar, tan, and muna sarimin. 2010. orchestrating knowledge-based urban development: lessons from multimedia super corridor, malaysia. hershey: igi-global. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1108/13673270810902902 https://doi.org/10.1080%2f02690940802197358 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 alexandre macchione saes guilherme grandi fábio faria de moraes university of são paulo (brazil) the internationalization of weg abstract although there are a considerable number of research papers dedicated to understanding the weg internationalization process, we believe that the existing case studies are still extremely restricted to the counterpoint of the institutional narrative and international theories of internationalization. our perspective, on the other hand, points in the direction of assessing the company’s trajectory within the political economy of the sector. that is, it is not possible to analyze the process of transformation of a company over decades without understanding the institutional aspects of the whole sector and of the national policy that regulates and foments it, as well as the transformations in the international economy, in general. in this sense, this paper seeks not only to present weg's trajectory based on the company’s internal strategies and innovations, but also to relate these characteristics to the brazilian institutional environment, especially during the military government, which seems to have been decisive both for the rise of the group nationally and for its later entry into the international market. keywords: weg electric motors; internationalization; brazil introduction weg electric motors, originally named eletromotores jaraguá ltda, is a recognized brazilian company, which successfully internationalized. corresponding author: e-mail: @ub.edu received 29 january 2018 accepted 14 may 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 founded in the early 1960s as a small manufacturer of electric motors in jaraguá do sul, in the state of santa catarina, within a few decades the company showed amazing growth. today, it has commercial subsidiaries in 29 countries and 37 industrial parks in 12 countries, selling its products to 135 economies, with an annual production of 13.5 million electric motors, according to its 2016 report.1 reinforcing the company’s recognized success, a 2014 boston consulting group report highlighted weg’s role as one of the one hundred most globalized companies in the world. in view of its trajectory, weg has recently become a recurrent object of investigation among researchers who seek to identify the strategies that have led the company to achieve its place in the international market. one quite common research profile in these studies seeks to compare weg’s history with internationalization theories that have already been duly established in the academic community. such studies compare the brazilian company’s particular experience with theories that have been developed to understand the process used by north american and european multinational companies to conquer international markets. germana melo, for example, replicates the uppsala model, arguing that weg has undergone progressive internationalization, first establishing commercial subsidiaries in order to later build production units in the foreign market. however, according to the author, once internationalization is achieved, dunning's eclectic paradigm seems more suitable for continuous analysis of the process of conquering new markets (melo 2010, 124). in similar perspectives, while silva et al. (2010, 17) defend weg's internationalization as having followed the “classic strategy” of implementing dynamic and gradual learning processes based on experience, floriani et al. (2009) propose an “integrative framework” of dunning's economic 1 weg, integrated annual report, 2016, p. 9. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 and behavioral theories, considering the advantages of firm ownership and significantly emphasizing the organizational competence and dynamic abilities of the company studied. marson and dalla costa (2014, 16), on the other hand, construct a narrative of internationalization phases that resembles the uppsala model, even though they do not specify the norwegian model’s phases. following the company's official history, as displayed on its website, they argue that a first phase “occurred in a more casual rather than planned manner. latin american consumers from countries such as paraguay, uruguay, ecuador, and bolivia showed interest in the products and weg responded to this demand”. for the authors, the second phase is characterized by the growth of the representative network in various countries; and, finally, the third phase, underway in the last few decades, would be internationalization itself, with the establishment of branches and industrial plants abroad (marson and dalla costa 2014, 17-21). looking at the company’s internal strategies, jayme moraes (2004, 123) emphasizes the management knowledge accumulated by the company, through the training of human resources: “the founders had a decisive influence on the training of human resources, based on their boldness, entrepreneurial judgment and ability to identify and attract talent”. in a similar perspective, predebon identifies the success of weg's internationalization from 1998-2010 as being the result of an assertive internal policy of adapting the company's strategies to regional integration, generating structural and organizational evolution within the industry. the limits of the internal market would have conditioned the expansion to the foreign market, according to the author, “with the great cycle of technological and economic changes and, within these changes, the new global economic spaces, the organizational geostrategy was unable disregard the analysis of regional integration processes within the internationalization processes, since http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 the social, political and economic relations resulting from these global movements will form the pathways of future global integration” (predebon 2010). also concerning the company’s strategies, the author asserts that since the company was founded, its business has been based on the creation of a highly qualified technical service network, aimed primarily at building customer loyalty, as well as on advertising its products through the accreditation of the first technical service professionals in the early 1960s. through a wide network of distributors and commercial representatives, the company started supplying its products to more than 60 countries in the 1970s, proving its ability to gain significant economies of scale. according to fonseca and bruno (2009), the adoption of a participatory management model in 1969 was of decisive importance for weg to begin exporting electric motors to small markets in latin america. in 1973, the company expanded its products sales to 20 countries, including canada, the united states and countries in europe; while in 1975, the expansion reached 41 countries, including japan. the fact is that the company’s systematic presence in international markets started to demand a business plan with a more daring attitude in order to guarantee competitive strategies within the electrical equipment sector. in highly competitive environments, the development of more aggressive business strategies and a proximity to customers become key aspects for “penetrating new markets or maintaining positions in international trade” (coutinho and ferraz 1994, 237). although the internationalization process for latin american companies occurred in the 1990s, as the result of financial and commercial openness and restructuring of production in their economies, it must be noted that the industrial sector has undergone a vigorous process of structural change in global terms since the late 1970s. in 1969, weg, which had just completed its eighth anniversary, entered into a massive financing agreement with bndes (brazilian http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 development bank) to modernize its plants and incorporate german know-how with the support of the engineering ernest braun. this investment plan allowed the company to triple its production in its first phase of internationalization, in order to meet the foreign market’s needs. the project also provided for cooperation with other motor manufacturing companies and was approved by the executive group of the electric and electronic industries (or geinee, its acronym in portuguese), which operates under the industrial development committee at the ministry of industry, foreign trade and services.2 parallel to brazil's industrial policy goals in the 1960s and 1970s, which prioritized the creation of capital-intensive sectors, amsden (2001) notes that the competitive advantage of business groups in late industrialization countries is primarily linked to their planning strategies, management, logistics and exports, rather than any other specific ability that such groups may have, given that their operational sectors do not generally feature modern technologies. the objective here is to understand how, even in the face of this competitive barrier highlighted by the author, weg became the largest manufacturer of electric motors in latin america and the leading brazilian exporter in this industrial segment. although there is a considerable amount of research devoted to understanding weg's internationalization process, this paper is based on a belief that the existing case studies are still extremely circumscribed to the counterpoint of institutional narrative and international theories of internationalization. the perspective held by the authors, on the other hand, points in the direction of assessing the company’s trajectory within the political economy of the sector. that is, it is not possible to analyze the process of a company transformation occurring over decades 2 “financiamento do bnde triplica produção para o mercado interno e joga a weg no mercado externo” o estado de s. paulo, september 26, 1969, 18. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 without understanding the institutional aspects of the whole sector and of the national policy that regulates and foments it or the transformations in the international economy in general. in this sense, this paper seeks not only to present weg's trajectory based on the company’s internal strategies and innovations, but also to relate these characteristics to the brazilian institutional environment: first, during the military government, a decisive period for the rise of the group and for its entry into the international market; and secondly, during recent decades, when the company received great financial support from the bndes to pursue its goal of internationalization. the development of the electrical equipment sector in brazil, 1950-19603 the founding of weg dates back to the early 1960s and was part of a phase of profound transformation in the industrial structure of the brazilian economy. starting with the targets plan established by president juscelino kubitscheck, the brazilian economy began to accelerate its process of forming a production assets sector, with the participation of the multinationals that would be established from that point forward. over the following two decades, what peter evans called a "triple alliance" was created, which is the division of the brazilian market between multinational corporations, national enterprises, and the government (evans 1982). national companies, especially in sectors demanding large volumes of capital and modern technology, were therefore left with limited or supporting roles in the industrial development led by the multinational heavy industry established in the country. the electricity sector, in this sense, would be one of those sectors that would undergo great transformation in this period. the government was becoming responsible for providing 3 for more on the operations of eletrobrás in relation to commissioned production within the electrical goods sector, see: sasse (2015). the following discussion was based on sasse and saes (2016). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 services, whether through regional government enterprises in the 1950s or through the federal government in the 1960s. eletrobrás, a company providing commissioned production of electrical equipment, was beginning to be established in the country, with consumption that had up to that point been supplied through imports now being internalized. the targets plan put in place during the kubitschek administration therefore made the energy sector a priority for the government, with this sector receiving 43 percent of all investments made between 1957 and 1961. if the goal was to achieve growth in annual energy output of more than 10 percent a year, certainly the demand for equipment represented a bottleneck to be overcome. after all, the country's industry only supplied electrical equipment for domestic use, electrical installations, wires and conductors, while it depended on imports for generators, turbines and transformers (lessa 1975, 18-9). illustrating the government’s new tone in 1956, one of the main characters in the development of the targets plan, lucas lopes, pointed out the need to “integrate forces” in order to respond to the demand for electrical materials. lopes also indicated the option of incorporating international private capital into the production of capital goods in the brazilian economy.4 in order to overcome the limits of payment balance and allow the industrialization process to continue, the development strategy employed by the kubitschek administration was to encourage multinationals to enter the brazilian market. in this sense, while the state fostered economic growth through investments in infrastructure, international private initiative introduced industries through multinational companies that were more technologically sophisticated reducing the pressure to import products central to industrial development and 4 “o estado de minas e o plano de eletrificação do governo federal. declarações do sr. lucas lopes sobre a participação do capital estrangeiro neste empreendimento”. o estado s. paulo, november 21, 1956. general, 5. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 national private groups developed on the fringes of these new industries in order to provide basic equipment and material to those multinational companies (evans 1982; lago et al. 1979, 100). the government’s presence was fundamental to articulate investments in infrastructure, opening up favorable horizons for negotiations and for attracting direct investment in the durable consumer goods and production goods industries, within the international scenario of multinational companies’ expanding to late industrialized countries (lima 1995, 76). among the government’s tools for encouraging foreign industries to come to the country, the most relevant was currency and credit board instruction no. 113, which fostered the opening of the market and, consequently, increased the participation of the capital goods industry in national economic production as a whole, in addition to causing changes in the sector's configuration. according to venilton tadini’s survey on the structure of the brazilian industrial sector, the capital goods sector, which accounted for five percent of the manufacturing industry’s gross production value in 1949, accounted for approximately 10 percent in 1959. in addition, regarding company capital sources, 75 percent of these companies relied mainly on national capital at the beginning of the period, while in 1961 this share fell to 61 percent (tadini 1986, 24-26; lago et al. 1979, 113). this trend would be even more pronounced in modern sectors, since these national companies mostly worked with the production of less technologically complex equipment.5 on-demand capital goods from the power sector, such as turbines and generators, could take years to be produced if they had to be adapted to the specific aspects of 5 leff states that half of the firms that allowed the capital goods industry to diversify in brazil, with "the most complex product lines," were subsidiaries of foreign companies (leff 1968, 24). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 each project. this process required a financial and technological structure that was not available to private national groups.6 with space open for companies from abroad to now operate in the brazilian market, there was a notable trend during the period of foreign companies setting up power sector plants. according to data from the brazilian infrastructure and heavy industry association (abdib – associação brasileira para o desenvolvimento da indústria de base), the companies formed in brazil in the period, or the ones that had set up plants to produce capital goods, were: sade – sul americana de engenharia. s.a. (italy), in 1953; ibrave – i. b. válvulas e equipamentos ltda. (usa), in 1954; cbc indústrias pesadas s.a. (japan), in 1955; mecânica pesada s.a., from the schneider group (france), in 1955; ind.el. brown boveri s.a. (switzerland), in 1957; coemsa eletromecânica s.a. (italy), in 1960; general electric (usa), in 1962; and siemens (germany), in 1963. (tadini 1986, 131-3).7 regarding this data, until the mid-1950s brazil essentially relied on imported equipment to meet the increased demand for power generation. however, with multinationals arriving in the country in the early 1960s, it is possible to affirm that there was already developed production in the country, which was available to the new hydroelectric projects under construction (table 1). the 29th goal of the targets plan was then fulfilled: domestic production of equipment such as hydraulic turbines, generators, transformers and motors above 20hp. this equipment was mainly produced as a result of multinational participation in the national economy. 6 cf. lessa (1975); leff (1968); lago et al. (1979) and erber (1974). 7 general electric and siemens had already been producing goods in brazil since the 1920s, but their plants were designed for the production of small-scale products or consumer goods, such as small appliances. with the general electric factories in campinas and the siemens factories in são paulo, these companies began to offer more complex products, such as hydro generators and higher power transformers (cachapuz 2006, 252). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 table 1. imports as a percentage of domestic consumption (1949-1961)8 sector 1949 1958 1961 metallurgical 22 12 12 electrical material 45 13 17 transport equipment 57 31 19 chemical and pharmaceutical 29 20 17 paper 10 4 4 rubber products 10 5 7 textiles 6 1 1 mechanical products 64 42 46 source: leff 1968, 145. thus, there was an increase in the relative share of domestic production in the domestic market; based on this, from 1958 to 1961, imports in us dollars were 11.7 percent higher, while real domestic output rose by 93.4 percent (lago et al. 1979, 110). in other words, the targets plan allowed the heavy electrical materials industry to flourish in the 1960s through foreign exchange instruments and by making the government an important consumer (leff 1968, 22, 104).9 it is worth noting that nationalization of production by establishing capital goods industries in the country did not mean nationalization of the control of these companies. development of the sector, with government support, was based on stimulus for multinational 8 leff’s data regard the general consumption of goods in each sector. in relation to the power sector, when solely considering data on the consumption of capital goods in this sector, average imports in the early 1960s is between 30 percent and 40 percent (lago et al. 1979, 133). 9 according to fabio erber: “between the postwar period and the 1960s, the public sector's share in gross capital formation in the country rose from 22 percent to 55 percent, which provides an idea of the state’s demand for equipment” (erber 1974, 18). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 companies to enter the brazilian market, such as voith, brown boveri, siemens and general electric (table 2). table 2. main suppliers of turbines and hydro generators (1969-1986) share of national companies supplying turbines in the brazilian market (%) share of national companies supplying hydro generators in the brazilian market (%) voith 60.0 brown boveri 44.7 mecânica pesada 31.3 siemens 33.6 coemsa-ansaldo 3.8 coemsa 3.9 villares 3.6 general electric/villares 17.8 bardella 1.3 total 100.0 total 100.0 source: strachman 1992, 251 and 266. this was the context in which the metalworking industry in santa catarina, especially in northeastern santa catarina, reached the southeastern market in brazil.10 driven by government policies, these industries were consolidated in the 1950s, supplying the automotive and public services sectors, such as sanitation and the electrical grid formation. industrialists in the joinville region, who maintained close ties with europe and especially with germany (for technological research, specialized labor and professional qualification), used their own 10 in jaraguá do sul, local development was linked to that of other nearby cities, such as joinville and blumenau. in its home city, weg, in a sense, shared the market with kohlbach, which emerged in 1945 from an electrical appliances repair shop run by rodolfo kohlbach that had been operating since at least the late 1930s. this company began to manufacture dynamos and alternators in the 1950s; later, in the 1960s, it began small-scale production of electric motors. kohlbach was acquired by nova motores e geradores elétricos ltda. in 1996 (a notícia, august 3, 1938). these electrical equipment sector companies, along with malwee, wiest, marisol and other important companies in the city, had substantial needs in terms of manpower. in order to supply this demand, workers in jaraguá do sul were to a large extent brought in from the state of paraná (where weg was especially well-known), attracted by the strategies of local firms, such as advertising (schörner 2006; moretti 1988). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 resources to make investments, but also took advantage of financing, such the finame and bndes/badesc lines. therefore, weg, along with companies such as hansen, embraco and nielson, expanded their activities from the 1950s to the 1980s by setting up units abroad. this led to completion of a new development model for the national power sector in the 1960s, which would last over the next two decades. the government, through federal and state government-run companies, was responsible for investing in infrastructure through construction of hydroelectric power plants. the result was that from 1962 to 1980, the electricity generation increased from 5.729 mw to 31.147 mw. there had been a time when private international capital contributed to building the sector, both in the provision of services and in exporting equipment to brazil. however, at that time, this capital was used to internalize production, ensuring these companies maintained their market shares and taking advantage of government support, whether to establish companies in the country or to be the consumer of products. national capital remained at the edges of the market, through industries that would provide inputs to the newly-installed multinationals or that served to produce less technologically complex goods. the founding and growth of weg during the military government scholars have pointed out that the military government managed to intensify the process of import-substituting industrialization that had been increased since the early 1950s. this movement led to unprecedented industrial growth that was stimulated by a set of economic policies, such as quantitative import restrictions, tariffs, direct exchange control, fiscal subsidies, and easier access to credit. a substantial structural change was also evident and the vertical integration of the intersectoral relationships in industry was another striking feature of http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 the brazilian economy during the military period, between 1964 and 1985 (macario 1964; baer, fonseca and guilhoto 1987). modern industries, like electrical goods manufacturing, were greatly benefited by duties and charges applied being to imports that would be considered high by international standards. according to serra (1984, 81), the brazilian government gave industrial development a big push in two different ways: (i) by arranging and financially supporting investments that would determine the main structural changes in the economy; and (ii) by creating infrastructure and direct production of intermediate goods that were crucial for the heavy industrialization process. these features express hirschman’s (1968) late-latecomers tenet: countries that have a technological gap in relation to more advanced economies. in this regard, weg has modified its technology management standard since 1968. while improvements prevailed based on practical knowledge of the workforce and the founding members, german technology was acquired in the late 1960s in a way that boosted production from 1968 to 1974. investments in machinery, equipment and new materials grew 415 percent from 1967 to 1969, considering the company’s resources and the financial support of the bndes. the main changes that occurred at the company during this period are therefore technical in nature, such as the hiring of engineers and consultants, creation of a training center and laboratories (which would later spawn centroweg), and structuring of technical commissions to resolve production problems. the period of 1968 to 1973 characterized a phase in which the government ended up establishing loan agreements based on supplier credit as the result of its need to find new sources of funds to finance the construction of hydroelectric power plants. that is, foreign loans targeting major hydroelectric power plant projects were contingent upon the purchase of http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 imported equipment specified by creditors. yet, this policy would have little effect on weg, as it entered the electrical equipment market with no resistance from the biggest players, whose focus was on producing turbines and generators. put another way, weg focused on a portfolio of less sophisticated products, such as engines and transformers. even when it started to produce turbines, the company emphasized the small hydro market instead of businesses that were already dominated by established multinationals in the country. a second moment of this phase began in 1971. once again, government resources were fundamental for investments to expand production: together, support from fundec, brde, and bndes financed 50 percent of the company’s investment (coutinho 1995). moreover, the company went public this same year and its shares began to be traded on stock exchanges. in 1973, construction started on the second plant, which was completed four years later. during this time, weg began to strengthen its business and it soon cast engine housings, produced copper wires and developed its own precision tooling; even its wooden packaging received investments (vidigal 2011; fonseca and bruno 2009). in the second half of the 1970s, the company's management underwent professionalization that resulted in technology being developed to produce medium-sized engines and in consolidation of the technological center. this was therefore a period of gains of scale and technological improvements that led to production being restructured through the creation of specialized operational units (specialization with intrasectoral diversification) and to initial movement towards intersectoral productive diversification (coutinho 1995). at that time, the company had already reached markets in 20 countries, mainly in latin america. in addition, in 1976, it opened an office in germany whose good results were due to the company’s relationship with local producers. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 in germany, the company started to hire technical advisors to develop technology, installing a subsidiary in the country years later. however, it did not establish a direct association with foreign capital, which gave the company greater autonomy. the subsidiary allowed weg to approach the international market, providing consulting services and maintenance services for exported products. once established in the international market, weg went through a profound transformation from 1975 to 1985, the period when it reached maturity. this can be seen in substantial growth in the number of workers, as a result of the expansion of industrial plants and the diversification of its products (graph 1). graph 1. number of workers employed by weg (1965-2000) source: ternes (1997); goularti filho (2016); coutinho (1995) movement towards diversification of the production structure, first as a result of the targets plan and later due to the second national development plan (ii pnd), supports some of the arguments made by dani rodrik (2007) about the “externalities” that decisively interfere in the implementation of new productive sectors in the economy. such externalities, which the author calls information and coordination externalities, are important concepts that lead to a belief that 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1988 1992 1994 1996 2000 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 diversification is unlikely to be carried out without the direct intervention of the government or without any other governmental action to encourage private industrial investment. in the case of information externalities, entrepreneurs should make small adjustments according to the technologies adopted by foreign producers and adapt them to local conditions. this process is called “self-discovery”, according to hausmann and rodrik (2003). it can be applied to the fact that, in 1979, weg announced the formation of a joint-venture with asea, a swedish company, in order to develop of engineering, manufacturing, sales, assembly, and technical assistance projects for electrical products and systems. the association with the swedish company gave rise to the weg/asea industrial ltda. company. on the one hand, the activities of the eletromotores weg company, which worked exclusively with national capital, continued to focus on the production of ac and dc motors as well as alternators. asea, on the other hand, focused on the production of transformers and relays, in addition to electricity generation, transmission and distribution services.11 another challenge inherent to the process of diversification is associated with coordination externalities. failures in the coordination of investments are common when new industries find advantages in importing their main inputs, thus making the coordination of simultaneous investments unnecessary. in general, it is difficult to predict whether an entrepreneur’s individual investment decision will be accompanied by other complementary initiatives. the government must therefore foster the viability of certain production chains by working with the private sector to coordinate the investments required to ensure an individual return on each project. otherwise, these projects would fail to generate returns if they were implemented in an isolated manner (almeida 2013, 278). 11 “weg e asea comunicam”. o estado de s. paulo, november 20, 1979, 28. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 unsurprisingly, the industrial policy implemented during the period of the “economic miracle” was characterized by significant subsidies for exporting manufactured goods. among the results of this policy is an exceptionally high growth rate (20.5 percent per year) on domestic production of capital goods from 1967 to 1973, which rose from 9.0 million to 27.7 million cruzeiros (bonelli and malan 1976, 386-387). granting of government subsidies, in addition to other incentives such as tax exemptions for certain companies and sectors, can be interpreted as government efforts to facilitate the identification of goods whose production the country could efficiently internalize. given that such incentives were usually aimed at new production activities, the industrial policy of the military governments of the late 1960s and 1970s assumed the role of determining the pace of the import substitution process. in order to illustrate the topics addressed above, in 1981 weg received funding from the industrial development council (cdi – conselho de desenvolvimento industrial), which approved almost one hundred industrial projects in that fiscal year. the company was then able to develop its projects geared towards the eletromotores weg s.a plants, which took over the activities of weg acionamentos s.a. and weg máquinas s.a (created in 1980 and located in jaraguá do sul, santa catarina), making up the electronic core of the group.12 the company, which became the biggest producer of electric motors in latin america in the 1980s, started to maintain commercial representatives in the largest cities in southern and southeastern brazil, in addition to creating three manufacturing units exporting to over three dozen countries. during that same decade, its production and employment figures grew at an extortionate rate, based on the creation of weg transformadores (1981), weg energia (1981) and weg química (1983), in addition to its own research center (1980), allowing for production of the first high power 12 “cdi aprova 97 projetos este ano”. o estado de s. paulo, december 29, 1981, 30. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 engines (100-200kw). weg’s movement towards diversifying production included the manufacturing of transformers, large electric machines, and paints and varnishes. this expansion of the company's production schedule was facilitated by the acquisitions of ecemic transformadores de blumenau, which became weg transformadores, quimicaflora de joinville and tintas michigan de guaramirim (santa catarina), which became weg química (ternes 1997; vidigal 2011).13 this growth in the company and diversification in production were the result of the government policy implemented in the mid-1970s under the auspices of the second national development plan, which sought to strengthen national companies’ production capacity for intermediate and capital goods, aimed at promoting the import substitution process. this policy intended to relieve the short-term pressures on balance of payment accounts, especially after the first international oil crisis. among the plan’s proposals was transformation of smalland mediumsized companies in these two sectors into large companies, which would then serve to supply government-owned companies with machinery and raw materials. in fact, the spread of government-owned enterprises was seen as the key to raising the rate of capital accumulation in brazil during the second half of the 1970s. considering all levels of government (federal, state, and municipal), nonfinancial public-sector expenditures as a ratio of gdp increased from 42.7 percent in 1975 to 52.7 percent in 1980, and investments by government-owned enterprises as a ratio of gdp rose from 18.6 percent from 1974 to 1978 to 25.6 percent from 1979 to 1981 (bulmer-thomas 2014, 378). the geisel administration (1974 13 in addition to these activities, weg florestal ltda was created in 1980, which is a supplier of wooden packaging to the group's companies. in 1984, the group acquired shareholding control of indústria de pescados penha (in santa catarina), and weg penha pescados was created. the creation of these companies was brought about by the absorption of tax exemptions. other acquisitions outside of the core business were made in the agribusiness sector, such as a stake in perdigão and teka agroindustrial between 1987 and 1989, as well as in the insurance services sector, with weg seguros, founded in 1987. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 79) was marked by not only high investment rates and output growth, but also by government expenditures and policies designed to accelerate industrial development, improve private sector profitability, and encourage new private sector initiatives. these were the main goals of the second national development plan (fonseca and monteiro 2007). according to strachman (1992), the rate of “nationalization” of turbines and hydrogenerators – that is, production within the country, including through multinationals – reached an approximate average of 60 percent from 1969 to 1985. tadini (1986, 83) even claims that in 1985 this rate reached 90 percent. in the on-demand capital goods sector, an area in which weg excels, the substitution process was already evident between 1973 and 1981, as shown by albert fishlow (1986, 521). the import coefficient of this segment in particular fell noticeably: from 0.66 in 1973, it reached 0.37 in 1979 until leveling out at 0.40 in 1981. although sectorial indices were indicating a drop in the share of imports in total supplies, it was only after 1977 that the aggregate import coefficient fell below its 1973 level (fishlow 1986, 520). at any rate, judging by the main goal of the geisel administration, which was to expand and diversify the production capacity of the industrial inputs sector, the government stimulated demand through ambitious infrastructure projects that it was unable to finance. the alternative of pursuing accelerated growth through external debt was only a short-term solution for the issue of adjusting the balance of payments. at the same time, internal imbalances soon proved to be the evident limitations of the monetary correction instruments that had been implemented since the early years of the military regime. the conquest of the international market from the beginning of the exportation of electric motors in 1970 up until the mid-1980s, weg benefited from the protectionism practiced by brazilian economic policy, which allowed the http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 company to take the lead in the domestic market, with improvements in scale and scope, which are key aspects in becoming internationally competitive. it is also important to mention that weg's main competitors in the domestic market were búfalo, motores elétricos do brasil, and ge — three companies that withdrew from the market in the late 1980s — as well as the eberle and arno companies. in addition to producing engines, weg máquinas and weg acionamentos expanded considerably in the 1980s as the result of a typical policy of incentives to create new areas for the brazilian domestic economy. these so-called “novelty” areas, according to rodrik (2007), refer both to products considered to be new in the national economy as well as to new production technologies for products that were already being manufactured in the country. in contrast to the poor performance of the brazilian economy, companies producing electrical equipment in the 1980s and 1990s in northeast santa catarina saw growth in sales. in the field of electric motors in particular, weg motores and kolhbach gained space, to the detriment of their domestic competitors: arno (sp), búfalo (sp), motores elétrico brasil (sp) and general electric (sp). smaller companies, such as mega transformers (oil transformers) and waltec (low voltage transformers), both from blumenau, also performed well in the period. silva (1997) highlights the positive effects of the geisel administration’s economic policy and the investment program in basic inputs and capital goods, the already mentioned second national development plan. in addition, it highlights the role of production financing vehicles during this same period, such as fundesc14, procape15 (which would replace fundesc after 14 fundo de desenvolvimento do estado de santa catarina, which used budgetary resources to acquire shares and debentures of companies in santa catarina, later, by law sc 4.225/68, was modified to operate under a tax incentive scheme. 15 programa especial de apoio a capitalização de empresas, law sc 5.159/75, state authority that participated in the shareholding of companies with investments in santa catarina, and worked until 1983. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 1975), prodec16 and the brde (regional bank for the development of the extreme south) and badesc17 (development bank of the state of santa catarina). in this context, “weg managed to make heavily subsidized investments” (silva 1997, 484). even so, after a phase of production growth during the second national development plan, the company had relatively stagnant production in the first half of the 1980s. in the opinion of abinee, there was significant domestic demand in the months following the launch of the cruzado plan that would allow for recovery in the sector, especially with regard to electronic components manufacturers. regarding the electrical equipment industry, there was an expectation that recovery would be limited, since its sales were credited to the period preceding introduction of the monetary package. according to the newspaper: “in terms of sales, the businessmen in this segment [electrical equipment] which is already chronically dependent on supplying government-owned companies saw their prospects limited even further with the issue of the economic reform.”18 in 1985, weg sa became a holding company and created weg motores to take over the operational functions of the group’s main activity, which at that time was responsible more than 70 percent of its revenues. from that point forward, the second half of the 1980s would see a sharp increase in the company’s production, and only weg motores would more than double its revenues in the period. completing the diversification process within the electronics division, weg automação ltda was created in 1986, based on the experiences of weg acionamentos, which aimed to broaden the group’s core business (table 3). this strategy of 16 programa de desenvolvimento da empresa catarinense, law sc 7.320/88, created to operate with the granting of credit. 17 created in 1973. together with brde, it was financial agent of federal funds, such as funcene, fipeme and finame. 18 “freio no consumo”. o estado de s.paulo, july 25, 1986, 96. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 seeking to engage in activities with great potential to create new areas of specialization made the company the undisputed leader in the electrical equipment sector, a situation that also had positive outcomes from the financial point of view, according to research based on the financial statements of the companies in this branch of the industry.19 table 3. revenue at weg group companies (in millions of us$) 1985, 1989 to 1992) production units 1985 1989 1990 1991 1992 weg motores 87.8 186.6 198.26 146.21 135.38 weg máquinas 7.6 26.9 35.03 18.54 20.19 weg acionamentos 7.3 20.1 24.37 18.71 12.72 weg transformadores 7.2 17.5 19.22 13.93 13.54 weg automação 0.3 0.86 1.88 2.52 weg química 4.6 14.4 15.16 14.11 16.29 weg pescados 6.0 13.3 na na na weg florestal 0.1 2.2 na na na total 121.2 281.4 na na 215 caption: na – not available source: coutinho (1995); ternes (1997) nevertheless, the concession of the petrobras qualidade-86 award to weg showed the importance of the public sector as a customer for the electric motor company. in his acceptance speech, ozires silva, president of petrobras, highlighted the quality of weg’s products, whose electric motors with a capacity of up to 5000 hp were used in the company’s pipelines, trucks and, especially, at oil production platforms.20 weg motores was also awarded the cacex 19 “indústria repete desempenho satisfatório”. o estado de s. paulo, july 25, 1986, 97. 20 “petrobrás dá prêmio à odebrecht e à weg”. o estado de s. paulo, october 16, 1986, 35. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 market achievement award (troféu conquista de mercado) for its export performance in 1988, which reached us$ 27 million, and the high share that the company’s foreign market sales represented (graph 2). the company exported to 54 countries at the time, making it the fifth largest company in the world and the largest in latin america.21 graph 2. share of foreign market sales (1970 to 1997) source: weg (2000) given the facts and specificities pointed out so far, it is clear that weg was one of the companies whose good economic and financial performance was largely due to the government’s role as an entrepreneur during the 1970s and 1980s. this role is not exercised exclusively, but it is exercised fundamentally by government-run enterprises, which are at the same time political and economic agents. according to philippe faucher (1982, 96): “this presupposes that a whole process of mediation is carried out between competing interests, as well as a conciliation effort to determine the modalities of distribution of costs and advantages in the short and long term”. in other words, once state intervention in the brazilian economy reached its peak during the 1970s (musacchio and lazzarini 2014), the government’s intention 21 “sc amplia exportações”. o estado de s. paulo, july 11, 1989, 18. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 to not only aid economic growth but, above all, to maximize it became clear. in order to guarantee continued upward growth in the brazilian economy, which was being limited by structural and economic factors, particularly after 1973, the government was forced to increasingly occupy private sector spaces of economic activity. the period that began with the collor administration (1989-1992) and continued with the fernando henrique cardoso administration (1994-2002) was characterized by a policy of opening up to the international market. even with a more competitive scenario, the company took advantage of tax and credit benefits in order to more aggressively internationalize. therefore, as the company could depend less on government purchases than the previous decades, it could access funds from the bndes to buy machinery, equipment and input materials exempt from import taxes (up to one-third of the firm’s exports) and use the investments to increase its international market share. all of the companies in the group were negatively impacted by a recession in the early 1990s. weg pescados was sold in an effort to focus on the core business of electric machines. another change came in 1993, when weg automação (which at the time of its formation was located in florianópolis, santa catarina, in order to enter partnerships with the federal university of santa catarina) was moved to jaraguá do sul, near manufacturing plant ii, also incorporating the electronics line of weg acionamentos (coutinho 1995). along with the resumed brazilian economic growth in the second quarter of the 1990s, the company significantly grew its exports, adopting an aggressive commercial strategy that point forward, with the opening of subsidiaries in argentina, the united states, europe, australia and japan. to achieve this objective, weg was targeted by prodec (program for the development of the business sector of santa catarina) from 1998 to 1999, receiving huge http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 incentives of around r$173 million, or about 12.2 percent of the program’s total resources. although weg's internationalization is considered an intentional element that came from top management at the company (from founders eggon joão da silva, werner voigt and geraldo werninghaus as well as from the company’s directors), the company could not have fulfilled this goal without government support. however, unlike in the 1970s and 1980s, when the government and domestic market demanded large quantities of equipment, it was the international market that had the best opportunities in the 1990s (table 4). table 4. weg exports in us$ millions, 1978-2017 year weg exports in millions of us$ year weg exports in millions of us$ 1978 5.1 2002 119.8 1979 7.5 2003 173.2 1986 7.6 2004 243.8 1989 22.9 2005 306.0 1990 29.0 2006 434.0 1991 30.0 2007 552.3 1992 37.0 2008 658.3 1993 42.0 2009 518.9 1994 63.0 2010 524.9 1995 78.0 2011 760.8 1996 89.0 2012 625.2 1997 107.0 2013 740.6 1998 113.1 2014 762.3 1999 97.7 2015 581.8 2000 84.0 2016 585.7 2001* 135.7 2017* 545.4 *values estimated by multiple linear regression, using 19 observations of the exports of jaraguá do sul-sc and the average exchange rate of the year. relevant statistics: multiple r: 0,9822; r² adjusted: 0,9603; f of http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 significance: 2,39677e-12; coefficients: intersection: -94,4636 (valor-p: 0,0516); exports of jaraguá: 1,2528 (valor-p: 5,31817e-13); exchange rate (us$/r$): 40,5147 (valor-p: 0,0333); 95 percent confidence interval. standard error: us$ 49.94 million. source: vegini, leite, fiates (2011); valente júnior (2016); rocha (2004); revista exame (2016). after its first acquisitions of industrial plants abroad in argentina and mexico (2000), and later in portugal (2002), weg picked up a more intense pace of acquisitions. between 2004 and 2006, control was acquired over three additional foreign factories: two in mexico and one in china. as of 2009, a global insertion strategy had already been outlined, in which weg is an important brazilian player in the international market. during this phase, the company opened its the fourth factory in mexico (2009). it built its first plant in india (2010). it made new acquisitions in argentina (pulverlux paint factory), austria (watt drive, gearboxes and geared motors) and the united states (electric machinery, high voltage rotating machinery) in 2011. it acquired zest group of south africa in 2012 and expanded activities in south africa with the acquisition of hawker siddeley electric africa pty in 2013. it also acquired württembergische elektromotoren (electric motors and geared motors), antriebstechnik katt hessen (electric motors manufacturer) in germany, as well as the sinya group and the cmm group in changzhou, china, and the ftc energy group (automation) in colombia in 2014; more acquisitions were made with transformadores suntec, of colombia, and autrial s.l. (electrical panels for industrial plants), of spain, in 2015. finally, in 2016, the company bought bluffton motor works, llc. (electric motors) in the united states and cg power usa inc, specialized in distribution transformers. major industrial investments were made in asia, africa, north america and europe (figure 1). 22 in brazil, during this same period, the company’s industrial asset also added important manufacturing units, reaching 14 manufacturing units in 2017. since 2010, weg has continued 22 weg, 2012a; weg, 2013a; weg, 2014a; weg, 2015a; weg, 2016a; weg, 2017a. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 its internationalization efforts, promoting a series of acquisitions that have made its industrial park more robust outside of brazil. figure 1. weg subsidiaries and manufacturing units (1995-2005-2017) source: prepared by the authors from weg (2018); weg (2017a); silva (2010); weg (2000); vidigal (2011). in brazil, during this same period, the company’s industrial asset also added important manufacturing units, reaching 14 manufacturing units in 2017. since 2010, weg has continued its internationalization efforts, promoting a series of acquisitions that have made its industrial park more robust outside of brazil. acquisitions abroad were therefore combined with acquisitions in brazil, as in the case of mesba motores elétricos de guarulhos (a major producer of electric motors for household appliances), acquired in 1997, and more recently hisa (hidráulica industrial ltda., of joaçaba, santa catarina, which has produced turbines and other hydromechanical equipment for small hydro power stations since the 1950s) (vidigal 2011; http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 hisa 2017).23 this movement was apparent from the growth in the weg group's net operating revenue. as of 2012, revenues coming from outside of brazil have outperformed the domestic market (table 5). table 5. net operating revenue (millions of us$ average sales for the period) year domestic market % foreign market % total 2010 1.501 63 870 37 2.371 2011 1.733 56 1.365 44 3.098 2012 1.543 49 1.615 51 3.159 2013 1.591 50 1.574 50 3.165 2014 1.647 49 1.684 51 3.332 2015 1.269 43 1.661 57 2.930 2016 1.147 43 1.537 57 2.684 2017 1.317 44 1.667 56 2.984 source: weg. annual reports. 2011-2016; weg. financial statements. 2011-2017. again, these results in the international market would not have been reached without government support. weg’s place as a government darling was reaffirmed during the luiz inácio lula da silva administration (2003-2010). using the bndes as an instrument to boost national companies, the policy undertaken by the brazilian government was to finance national companies so that they could achieve the best position possible in the global market. this was done, for instance, through the internationalization line, through which the bndes supported 23 acquisitions: hisa (turbines for small hydro), in 2007; trafo (transformers) and instrutech (electronic sensors) in 2010; equisul (critical power) in 2011; stardur tintas, weg-cestari (geared motors) and injetel (sockets and switches), in 2012; paumar (paints) in 2013; efacec energy service (maintenance of electrical equipment), pernanbubo, in 2014; and tgm (turbines and transmissions) in 2016 (weg, 2012a; weg, 2013a; weg, 2014a; weg, 2015a; weg, 2016a; weg, 2017a). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 construction of the weg plant in india (bndes 2017, 293). from 2003 to 2016, the company received investments of r$ 1.486 million from this development bank. graph 4. direct and indirect non-automatic investments (amount contracted in millions, brl) source: bndes, portal da transparência: cnpj: 07.175.725/0001-60 weg equipamentos eletricos s/a. additionally, weg has been a traditional customer of export financing lines, essentially the pre-shipment financing lines, where bndes finances part of the company’s production destined for export, helping in competitive cost formation so that the company can operate in the international market, offering more favorable prices and conditions to clients, compatible with international competitors. bndes has therefore helped the company to conquer new markets and consolidate its position as one of the largest brazilian exporters of capital goods and one of the largest players in the world in its industry. the development of new weg products and processes is also supported by bndes through its funds, which contributed to the frequency and consistency of the group's investment in innovation (bndes 2017, 319-321). in short, there were three international insertion strategies, as usually recalled in the literature aimed at understanding company’s internationalization: distribution and commercial representation by third parties; creation of dedicated companies for distribution and after-sales service; and establishment, or acquisition, of manufacturing plants abroad. these models were 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 combined and used in parallel. unlike traditional historiography, the availability of public resources was what permitted such a quantitative and qualitative leap forward by weg, giving less prominence to the figure of the “innovative entrepreneur”. final considerations at the beginning of 2010, weg celebrated its fifty-year anniversary. it started as a small electric equipment production company and moved forward to conquer the international economy, becoming a market leader. the history of weg is filled with elements ripe for an analysis based on the company’s strategy and the internal decisions that would allow for possible internationalization. its founders have been concerned with the issue of knowledge management, not only by training their employees, but also by establishing international partnerships to keep abreast of technological innovations. the company, in addition, followed with the usual route to internationalization noted in the literature, initially exporting to neighboring markets and expanding its operations with offices and commercial branches abroad, until, in recent decades, conquering the market by building and acquiring plants in a variety of countries. notwithstanding these effective achievements at the company, which also highlight relevant decisions made internally by the company’s management, this paper sought to emphasize a dimension that is not widely remarked upon in the literature: the fundamental relationship between the company and the government. as demonstrated, each of the company’s development phases was also marked by an approximation with governmental policies, which catapulted the company from its local operations into becoming a leading company in the sector. its origin is perfectly articulated with the structure of the division of national markets among national, foreign and government capitals, established by import substitution programs http://revistes.ub.edu/index.php/jesb volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 since the kubitschek administration. its development depended substantially on government demands during the military government, central to which was a project to expand the supply of energy based on eletrobras. even in the 1980s, when the brazilian economy entered a profound crisis scenario, the company was continued to benefit from state programs, in a vicious cycle that would allow its continued positioning among the leaders of the national electric sector. more recently, the company has depended on bndes policy to finance its production and ensure its remarkable market share in the international trade. in short, if the internal decisions of the company are to be considered, understanding their due correctness, the dimension of the development of the sector as a whole cannot be dismissed. such analysis allows for a more far-reaching and less heroic comprehension of the weg's achievements. primary sources bndes. portal da transparência (transparency portal). available at: https://www.bndes.gov.br/wps/portal/site/home/transparencia bndes. 2017 livro verde: nossa história tal como ele é. rio de janeiro: bndes. hisa (joaçaba-sc). hisa: uma trajetória de sucesso. available at: http://www.hisa.com.br/historia. accessed on: 17 nov. 2017. jdv. casa kohlbach pode se tornar patrimônio histórico da cidade. available at: http://www.jdv.com.br/noticia/6484/casa-kohlbach-pode-se-tornar-patrimonio-historico-da-cidade. accessed on: 19 nov. 2017. o estado de s. paulo, newspaper. select years. revista exame. melhores & maiores: weg equipamentos. 2016. available in: http://mm.exame.abril.com.br/empresas/perfil/2016/weg-equipamentos. accessed on 24 abr. 2018. revista exame. melhores & maiores: weg drives & controls – automação. 2016. available at: http://mm.exame.abril.com.br/empresas/perfil/2016/weg-drives-controls-automacao. accessed on: 24 abr. 2018. weg (jaraguá do sul). 2000. histórico de vendas físicas. jaraguá do sul: tabela. weg (jaraguá do sul-sc). relatório anual 2011. jaraguá do sul-sc: [s.n.], 2012a. available at: https://ri.weg.net/ptb/887/relatorioanual_2011_portugues.pdf. accessed on: 21 abr. 2018. http://revistes.ub.edu/index.php/jesb https://www.bndes.gov.br/wps/portal/site/home/transparencia http://www.hisa.com.br/historia http://www.jdv.com.br/noticia/6484/casa-kohlbach-pode-se-tornar-patrimonio-historico-da-cidade http://mm.exame.abril.com.br/empresas/perfil/2016/weg-equipamentos http://mm.exame.abril.com.br/empresas/perfil/2016/weg-drives-controls-automacao https://ri.weg.net/ptb/887/relatorioanual_2011_portugues.pdf volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 weg (jaraguá do sul-sc). relatório anual 2012. jaraguá do sul-sc: [s.n.], 2013a. accessed on 21 abr. 2018. available at: https://ri.weg.net/ptb/739/annual_report_portuguese_2012.pdf weg (jaraguá do sul-sc). relatório anual 2013. jaraguá do sul-sc: [s.n.], 2014a. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/622/relatc3b3rioanualintegrado20131.pdf weg (jaraguá do sul-sc). relatório anual 2014. jaraguá do sul-sc: [s.n.], 2015a. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/455/relatc3b3rioanualintegrado2014.pdf weg (jaraguá do sul-sc). relatório anual 2015. jaraguá do sul-sc: [s.n.], 2016a. accessed on: 21 abr. 2017. available at: https://ri.weg.net/ptb/1421/relatc3b3rioanualintegrado2015.pdf weg (jaraguá do sul-sc). relatório anual 2016. jaraguá do sul-sc: [s.n.], 2017ª. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/1420/relatc3b3rioanualintegrado2016.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2011. jaraguá do sul-sc: [s.n.], 2012b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/878/demonstrac3a7c3b5esfinanceirasde2011completa.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2012. jaraguá do sul-sc: [s.n.], 2013b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/746/demonstrac3a7c3b5esfinanceirasde2012completa.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2013. jaraguá do sul-sc: [s.n.], 2014b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/627/demonstrac3a7c3b5esfinanceirasweg.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2014. jaraguá do sul-sc: [s.n.], 2015b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/453/demonstrac3a7c3b5esfinanceirasweg2014.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2015. jaraguá do sul-sc: [s.n.], 2016b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/304/demonstrac3a7c3b5esfinanceiras2015weg.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2016. jaraguá do sul-sc: [s.n.], 2017b. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/167/demonstrac3a7c3b5esfinanceiras2016.pdf weg (jaraguá do sul-sc). demonstrações financeiras 2017. jaraguá do sul-sc: [s.n.], 2018. accessed on: 21 abr. 2018. available at: https://ri.weg.net/ptb/1906/demonstraes%20financeiras%202017%20weg.pdf http://revistes.ub.edu/index.php/jesb https://ri.weg.net/ptb/739/annual_report_portuguese_2012.pdf https://ri.weg.net/ptb/622/relatc3b3rioanualintegrado20131.pdf https://ri.weg.net/ptb/455/relatc3b3rioanualintegrado2014.pdf https://ri.weg.net/ptb/1421/relatc3b3rioanualintegrado2015.pdf https://ri.weg.net/ptb/1420/relatc3b3rioanualintegrado2016.pdf https://ri.weg.net/ptb/878/demonstrac3a7c3b5esfinanceirasde2011completa.pdf https://ri.weg.net/ptb/746/demonstrac3a7c3b5esfinanceirasde2012completa.pdf https://ri.weg.net/ptb/627/demonstrac3a7c3b5esfinanceirasweg.pdf https://ri.weg.net/ptb/453/demonstrac3a7c3b5esfinanceirasweg2014.pdf https://ri.weg.net/ptb/304/demonstrac3a7c3b5esfinanceiras2015weg.pdf https://ri.weg.net/ptb/167/demonstrac3a7c3b5esfinanceiras2016.pdf https://ri.weg.net/ptb/1906/demonstraes%20financeiras%202017%20weg.pdf volume 3, number 2, 57-91, july-december 2018 doi:10.1344/jesb2018.2.j047 online 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doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 247 mercedes cabrera universidad complutense de madrid (spain) jesús de polanco and the prisa group abstract the main goal of this article is to present jesús de polanco’s (1929–2007) successive business initiatives that culminated in the expansion of the prisa group (promotora de informaciones s.a.), which was the leading spanish multi-media group of its time. as well as the interest that his career triggers, polanco’s biography allows us to address the relationship between the company and politics during the closing decades of the franco dictatorship and the transition to democracy from a concrete perspective. those were years marked by profound transformations, not only in the political life of the country but also in its economy, society and business structures that affected the entire communications media sector. keywords: entrepreneur biography; media; politics and economy businessmen and politicians the relationship between economics and politics, between businessmen and politicians, between economic interests and political power in capitalist societies was already a worry of the classical philosophers and in more recent times, historians, political experts and economists of various theoretical schools or methodological currents – who have accumulated different ways to approach the topic. corresponding author: e-mail: mercedes.cabrera@cps.ucm.es received 06 sept 2017 accepted 31 oct 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 248 for a time, structural interpretations were defended, on occasion, from very different presuppositions, some marxist, others liberal, where businessmen and politicians defended interests derived almost naturally and inevitably from their positions. the goal of the former was usually to get to the bottom of an obvious communion of interests or an assumed subordination of politics to economic power, while the latter insisted on a more or less radical autonomy of the two. in both cases, there was hardly any need to stop to analyse those relationships; it was enough, at most, to confirm the assumptions of the original ideas. debates such as those on the subject of the responsibility of the big industrialists and german bankers in the rise and arrival to power of the nazism in germany gave way to an ample bibliography that questions the simplest interpretations. on the fiftieth anniversary of the end of the second world war, the topic exceeded the strictly academic framework and it was the governments themselves who promoted the creation of international commissions to explain the responsibilities of companies and banks during the second world war, the benefits that were obtained by the expansive policies of the hitler state and the availability of manual labour in the labour camps of the occupied countries. the bergier commission and the volcker committee made abundant documentation public which led to voluminous reports (turner 1985, hayes 2001, james 2001, james and turner 2002, wiesen 2001). it is surely an extreme case. in spain, business history has experienced considerable development over the last decades thanks to the works of economists and economic historians who have taken the time to analyse the trajectory of businessmen and businesses, both public and private (martin aceña 2002; carreras, tafunell, and torres 2003). social and political historians have made relevant contributions to the study of the economic elite relative to politics, for example, in the analysis of clientelism and caciquismo in the 19th century. the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 249 franco dictatorship, the workings of the networks and corporate groups inside the union structures of the regime and their relationship with an interventionist state were also studied. for the early years of the transition to democracy, it was the sociologists and the political scientists who started to analyse the adaptation of these organisations to the new political and social context. the historians joined later. the important part of the study of the conflict gave way to diversification in the fields of study, in some cases relative to culture and social areas, to some extent abandoning the traditional concern about power relationships (pérez díaz 1987, baena 1999, del rey 2003, pan–montojo 2007, cabrera and del rey 2011, toboso 2017). however, dialogue between economic historians and political historians has not been common, therefore, on many occasions the relationship between businessmen and politicians has normally found itself out of the spotlight of the advances in investigation. that allowed them to keep their reductionist vision and left a space free for the proliferation of accusatory literature, inclined to exploit scandals demonstrating that “the usual faces” were behind the political scenes, the hidden interests who pulled the strings to perpetuate over avatars, changes, crises and political failures throughout time (cabrera 1997, juliá 1997, pérez ledesma 1997, pro ruiz 1997). as the knowledge of the past and the present grows and improves, we are able to confirm the complexity of this topic and, above all, the need to leave simple ways of thinking behind. it is necessary to consider not only the type and the degree of economic development, and the peculiarities of the business structures but also the state itself as regards its building progress and the strength of its institutions as well as the existence or not of political and corporative representation channels in each case. it is not the same to address the question from the study of economic elites and their informal networks as it is from individual cases or to approach it http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 250 from organised economic interests and their relationship with the political institutions. you do not establish the same links between businessmen and politicians in a liberal 19th century society with a “minimum” state and the notables politics, where everyone probably shares spaces, as those in a developed capitalist society with an extended state and mass politics with a professional and separate political class. those relationships are not the same in a plural society with political power as in an authoritarian, interventionist state, although the levels of economic development are similar and the business structures as well. one of the fields that is most favourable to dialogue between economic historians and political historians is biographies of businessmen. it has coincided with a more general revision, not free from debate, about the contribution of the biographic genre to historiographic knowledge, to the various forms of understanding and their capacity to show discontinuity, contradictions and the uncertainties of reality (ruiz torres 2010). the addition of biographies allowed them to nuance, delve deeper and even review assumptions that had been generally accepted about the supposed absence of businessmen in spanish history or their deeply rooted inclination to look for state protection vis-a-vis the development of competitiveness (tortella 2000, torres 2000). but beyond this, biographies are indispensible to study the complexity of relationships between economics and politics and they should be incorporated into the analysis of the more general processes of social and political development. the addition of biographies would be key for a reflexion on the generational changes in the business class, the surge or crisis of certain business cultures and the relationship with the development of the institutions of the state, as well as the consolidation or crisis of the political systems (fernández clemente 2004). the elaboration of biographies of businessmen on many occasions depends on the availability of information, the existence, or not, of a personal archive and the access to business sources. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 251 teresa tortella, the director of the archives of the bank of spain in the 80’s, called on all spanish companies and spanish banks to preserve and make their economic archives available to the public for investigators. her request proved to be quite successful and it led to the publication of some business histories. it is not always easy, nor is the work of an investigator free from the suspicions that the results could be conditioned by the directives handed out by the company itself. the pages that follow correspond to some of these questions and refer to an entrepreneur, jesús de polanco, in his historical context (cabrera 2015). the information that is handled here was found in his personal archive; in the minutes of the founders’ meetings, the board of administration and shareholders' meetings of the prisa group, and in personal interviews with people who knew him, who worked with him or who were his friends. his personal archive is different from a business archive. it is not catalogued so as to be available to the public. it is a mountain of papers and documents all varying in character that the family has roughly conserved by subject matter. a large part of the archive is his personal correspondence. the letters are irregular in rate of recurrence however significant in understanding his character, his way of acting and his relationships with family and friends. for the development of his business initiatives they are relevant in relation to the introduction and creation of santillana, the publishing house, his first great company, especially in its beginnings and its expansion throughout latin america because it allowed him to work out his relationships with other members of the publishing world, as well as with politicians in many different countries. nonetheless, we must keep in mind that after a certain point in time, that material is no longer a decisive source because the majority of his relationships were already taking place over the phone or in meetings and there is no longer any proof of them available. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 252 something similar can be said about the minutes of the founders’ meetings, the board meetings and the prisa shareholders’ meetings. the prisa minutes are especially explicit and interesting for the very complicated early years: from the time of its creation in 1972 until the moment when they could begin publishing el país and while the so-called “shareholders war” where political interests collided with business interests lasted. in the end, polanco’s control over the group became clear and the expansion began. it was a period when legal regulation of the press, the radio and the television were subject to big reforms and progressive liberalisation, not free of political pressure (fernández and santana 2000). the existing bibliography about polanco was not very extensive (imbert and vidal beneyto 1986, cruz 1996, martínez soler 1998, garcía ruiz 2000, soeane and sueiro 2000), although it could be bigger if the other scandalous literature were to be included – the literature where polanco appears alone or as part of the hypothetical political-economic conspiracies (díaz herrera and tijeras 1991, cacho 1994, gonzález duro 2011). from the book to the written press jesús de polanco did not come from a family of great businessmen. he was born in madrid in 1929. he was the youngest of six children. his father, who was from santander, was the manager of a small company that sold products of the region of santander in the capital. he also owned the granja de henar, a café on alcalá street that many of the intellectuals of the time visited regularly. he was in santander when the civil war broke out but his wife stayed in madrid for a few months until she was able to leave with her children. she fled to valencia where they boarded a british hospital ship that took them to marseille. the trip to get back into national spain was complicated but they were finally able to join the rest of the family in the cantabrian capital where they stayed until the end of the war. when the war ended they returned http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 253 to madrid. the polancos were a middle class family and they experienced hardships after the father’s death in 1942. jesús had memories of all of those years: the war front in madrid, the rhetoric and political propaganda of those who led the revolt, the hard post-war years along with his mother’s austere and repressed mind-set. in that spain, as was fitting for a very conservative family such as his, jesús went to a school that belonged to claretiana cleric order. he was catholic, falangist and was a member of both the juventudes de acción católica and the falange juveniles de franco. polanco studied law at the university of madrid. it took him longer than normal to finish his studies and he was never interested in practising law. he started to work young and he married in 1954 before graduating. he also did his obligatory military service. he juggled various jobs that provided him with experience in the world of publishing magazines and books. first he worked at the instituto de cultura hispánica on a catholic magazine aimed at latin america. after that, he worked editing theatre plays at alfil, a publishing house that was later sold to another publishing house, escelicer, where jesús became the commercial manager. at the same time, he was the editor of aduanas. aduanas was a magazine founded by a group of civil servants from the customs corps, one of whom was his friend germán anlló. he was the administrator of the magazine ateneo as well. ateneo was a political publication that participated in one of the debates of the time that the various “families” of the regime were having on “the problem of spain.” these jobs afforded him the possibility to meet writers and politicians of the dictatorship manuel fraga iribarne, josé maría pemán, florentino pérez embid, gonzalo fernández de la mora and dionisio ridruejo to name a few. polanco struck up a friendship with dionisio ridruejo that gradually distanced him from the regime. the friendship also led to his meeting http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 254 with many of the exiled spaniards in latin america once he had started up santillana, his own publishing house. in fact, polanco confessed on more than one occasion, that in 1962 he could not attend the meeting of the europe council called “the munich conspiracy” by franco regime, where liberals, christian democrats and socialists all from the opposition to franco both from spain and in exile attended. many of those attending were banished and exiled. although he had had inclinations as a young combative journalist and wrote in a few catholic union publications that had social leanings, he soon realised that he had a penchant for undertaking projects. he decided to leave escelicer to start up a distributor of his own books. he named it “j.p.” using his own initials and he was the sole employee. he ordered the books, packaged them up and sent them. however he had something more ambitious in mind. his experience as a distributer to a mexican bookstore came in handy. this path was opened up to him by one of his brothers who had emigrated to that latin american country. it did not take long for polanco to turn “j.p.” into another company, santillana. he was the majority stock holder as well as the president of the board of administration, ceo and manager. the decisive event was when francisco pérez gonzález, pancho, joined the company. pancho was a bookseller and distributor from santander, founder of the publishing house taurus and importer of books from latin america. a lot of the books imported from latin america were forbidden in spain and had to be sold under the counter even though pancho himself was quite conservative. in addition, he knew the trade of editors and booksellers well both in barcelona and madrid – the two book capitals – as well as the ins and outs of the vertical union and the instituto nacional del libro. the combination of jesús’ entrepreneurial spirit and pancho’s capacity to network was crucial for the success of santillana. likewise, the end of the autarchy and the relative opening that http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 255 followed the stabilisation plan with the beginning of economic growth and subtle social modernisation along with an increase in the middle class also contributed. it was the beginning of the 1960s and business initiatives in the spanish publishing sector were multiplying after the regression that had taken place during the post-war period. some of the traditional publishing houses were revived and new ones born. the latin american market that had been important throughout the first decades of the century began to recover and was now indispensable to enlarge the still limited spanish market. the exile of intellectuals, writers and publishers to those countries had contributed to the growth of important publishing houses in mexico and argentina. through their accumulated knowledge they now were helping the spanish houses to reawaken although their competition did complicate expansion to those countries. the spanish publishers managed to add their commerce to the pressing interests of the first plan de desarrollo (development plan) to include concessions of increasingly important official export credits. pancho pérez gonzález was the person in the company who had to obtain it from minister lópez rodó (martínez martín 2015, fernández moya 2015, sánchez illán 2015). jesús de polanco and pancho pérez travelled the route back and forth across the atlantic several months a year to visit the various latin american countries. their suitcases were full of books and they signed contracts with booksellers and publishers and expanded the credit system of payment that polanco knew well. it was hard work that their letters to each other clearly reflects. santillana distributed books to other publishing houses but it soon began to publish its own books, mainly to the somewhat easier market of books for children and young people. their big opportunity came with the expansion of educational books for the adult literacy campaigns, first in spain and then in latin america, and afterwards with the education system reforms fostered by unesco. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 256 polanco later said they were living a “legitimate education psychosis.” he saw it coming and ran the risk to take an important business jump. santillana leaped into the production of text books in a modern format that was very different from the old notebooks and scholarly encyclopaedias. these new text books had attractive designs and were put together by their own interdisciplinary groups. they used marketing campaigns, visited schools, held meetings with teachers and directors of schools, visited people responsible for education, educators, ministers and even heads of state. it was exhausting. it was not easy to crack the competition they faced from some of the latin american publishing houses that had official protection. polanco decided to create publishing companies in those countries instead of branches of the spanish central office. these companies were independent and employed people from the country they were set up in, but their key to success lay in the fact that they adhered to spanish ways of working. at the end of the 60s they were firmly established in chile through santillana del pacífico and had managed to get contracts in other countries. when a new general education law was passed in spain in 1970, their soundness and experience allowed them to quickly respond to the new study plans with a competitive offer. thousands of books left their offices and warehouses on elfo street every day testing the strength of the company. polanco signed on adolfo valero and javier baviano who had studied law and economics with the jesuits. this was not the usual type of training for the staff of publishing houses of the time. by the beginning of the 70’s polanco was already a recognised publisher thanks to the success of santillana. in a meeting with directors at the end of 1971 polanco told them that they should continue working to make it the number one publishing group in education in the latin american world. ten years had passed since it had been founded. the success of school books http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 257 threatened to make the rest of the company’s activity disappear so polanco decided to separate it from the rest of the company’s activities. he left it under the management of his indispensable colleague emiliano martínez. martínez was a pedagogue who had been a valuable collaborator right from the beginning. polanco founded a new company called timón that was in charge of designing the more general strategy. 49.9% of timón’s shares went to the polanco family, 32.78% to the pancho pérez gonzález family and the remaining shares went to other lesser partners including emiliano martínez. in the 80’s a real publishing group was created from timón through the purchase of other companies that were having trouble: taurus, alfaguara and lastly aguilar. not all of the acquisitions had good economic results. the base for economic solvency was always santillana while the others provided polanco with prestige and consequently greater importance among spanish and latin american writers and intellectuals. by then, however, he was devoting the greater part of his efforts to another company; one that he had entered as just one more of so very many modest shareholders. in 1972 josé ortega spottorno had asked him, just like he had asked other publishers, to join the recently created prisa. they knew each other because josé ortega was also a publisher and had enjoyed great success founding alianza and its collection of paperbacks. ortega had been mulling over the idea to launch a daily newspaper for a long time. the timing was perfect: the end of the franco dictatorship was in sight and the daily papers were not reporting on that political and intellectual excitement. the newspaper madrid experienced the arbitrariness of the press law when it was applied to them in 1966 because of its blunder they had made. weekly magazines such as triunfo, cambio 16 and cuadernos para el diálogo or newspapers like informaciones barely covered the space that an economic, independent, quality, modern newspaper with european aspirations like the french paper le monde could fill. that is what ortega thought. he felt that http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 258 his family’s liberal, 19th century experience, and the intellectual role of his father, the philosopher josé ortega y gasset known from the first decades of the century, backed him. his son now enjoyed enough prestige among those in the publishing world, intellectuals and politicians to give this adventure a try. so prisa was born. polanco was one of the people ortega spottorno called on for money; not much at first because the independence of the future newspaper had to be based on dispersion (cabrera 2016). when prisa’s first shareholders’ meeting was held in january 1972 the registration of el país in the registry had already been requested. governmental authorisation was an indispensable requirement at that time to publish a newspaper and in the case of el país that authorisation was delayed for almost four years. to justify the delay the authorities demanded an increase in capital. it had been difficult to go from the 500.000 pesetas initially requested to 15 million pesetas and the government was demanding 150 pesetas. it was not easy to get the money because many were convinced that the newspaper wouldn’t get published unless franco died. the group of three co-founders, josé ortega spottorno and the journalists darío valcárcel and carlos mendo looked for help in the circles that they moved in. ortega sought help from publishers, writers and intellectuals, valcárcel, from political monarchists and mendo from amongst fraga’s supporters and other liberals in the regime. well known names of moderate enemies to the regime, professionals, (lawyers, architects, doctors, engineers), writers and some businessmen were slowly added to the list of contributors. polanco´s implication in the project came in steps. mendo, in pectore director of the newspaper, went to london following fraga who had been named ambassador. ortega asked polanco to join him and valcárcel on the executive committee. polanco accepted. it was the first step. they had bought a lot and had started to build on it but despondency spread as they faced the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 259 government’s silence and they even considered abandoning the project. polanco kept hope alive but insisted on the need to use the resources and machinery available in the meantime to avoid damage and so that they would be ready when the authorization finally arrived. the authorization finally arrived in september 1975 shortly before the dictator died with the condition attached that they wait until the moment of franco’s death before making it public. only then did jesús de polanco agree to become ceo as ortega had asked. from that time on and until its release date on may 14, 1976, it was all hands on deck. polanco made the decision to change the printing press they had bought for one with greater capacity in order to print more copies. the newspaper that polanco envisioned coincided with ortega’s idea in many aspects but polanco wanted it to have the widest circulation of all newspapers. with that idea in mind polanco went to yuste street every day where he received visits from many of the outstanding politicians of the time, who he had invited, and explained the project to them; supervised the works and designed the structure of the company that was going to have two fundamental pillars: javier baviano, who he brought with him from santillana to be the manager and juan luís cebrián as director. the executive committee discussed a long list of candidates for the job of director until the three of them agreed on cebrián. cebrián was not well known however he was a young journalist with an important career path already to his name. he had been chief editor at pueblo, a newspaper belonging to the movimiento, he had also worked at informaciones and he had been director of the public television’s news programmes in 1974. the radio and the television it did not take long before el país became the newspaper of reference, “the organic intellectual of the transition” as the philosopher josé luis lópez aranguren called it. but the road was http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 260 not easy, the first years accumulated losses and polanco loaned it money even to pay salaries. the result was not guaranteed either. in fact, the majority of newspapers experienced great economic difficulties and many of them that had appeared ended up shutting down. the success of el país was the consequence of the configuration of a modern business model designed by polanco and a journalistic line that cebrián set and whose independence polanco guaranteed. some cadavers were left along the way. both josé maría de areilza and his monarchists and fraga and his followers saw the appointment of adolfo suárez as president of the government and the results of the first democratic elections, the victory of unión de centro democrático, (ucd), and the emergence of the socialist party (psoe), as the leader of the opposition as troublesome setbacks to their aspirations. they fought the political battle in the newspaper and they lost in a succession of tempestuous general shareholder meetings that lasted for hours and were a real show. the support that polanco and cebrián received from the president of the company, ortega spottorno, after doubts and debates was fundamental. the increasingly positive results of the newspaper’s daily circulation (reaching 250,000 copies in 1981), and the benefits, (384 million pesetas that year), although the dividend sharing took a while in coming because polanco reinvested, played towards the final victory. some of the early shareholders criticised him because they considered the growth of the company to be excessive considering the initial project, but polanco fought to make el país the leading newspaper without detriment neither to its quality nor to its independence. cebrián was his best ally here. polanco bet and risked but in a controlled way. as he said on many occasions, he was “an old school” businessman whose culture was based on austerity, reinvestment of benefits and paying off credits immediately. that had also been the philosophy of santillana. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 261 polanco brought a tireless rhythm to el país with the successive increases in capital, a multiplication of the number of presses and the incorporation of all of the technological novelties. on the fifth anniversary of the paper they inaugurated a second building and generalised the use of computers. they had also launched an edition of el país in barcelona. prisa used the subsidies that the state had arbitrated to facilitate the modernisation of newspaper companies, but as polanco sharply pointed out to those who criticised him, they all had equal access to the subsidies. while the rest of the press carried serious problems derived from their obsolete installations and personalisation of their business structure, el país grew and became an object of desire and also a centre of attacks. the newspaper presuming about its success certainly did not help to defuse tension. proof of the tough battle can be found in the minutes of the meetings and board meetings. it did not take long for important buying and selling of shares to take place. these movements were not always transparent nor did they always meet the prerequisites set out in the company’s statutes. antonio garcía trevijano underhandedly attempted a coup to take over the newspaper, even trying to involve cebrián. but jesús de polanco was also buying up shares using propusa and presa, two companies owned by his family and friends. this was announced in the founders’ meeting of the newspaper in may 1983. that is where the “shareholders war” ended. polanco gained control of the majority of the shares. he later said that that had not been his intention but that it was the only way to guarantee the survival and independence of the newspaper. the initial model of capital distributed among many small shareholders no longer existed and prisa’s horizons expanded. that is how josé ortega spottorno understood things when he resigned to become the president of honour. jesús de polanco became the executive president. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 262 in an article published in el país entitled “a worthwhile adventure,” (“una aventura que mereció la pena”, june 20, 1984), ortega explained that he left because there was someone who could replace him, someone younger and with greater ability, polanco, “a leading business temperament” who had led el país to a position envied by many of the world´s greatest newspapers. the company was going to access other communication media such as radio and television and polanco was the right person to lead this process. meanwhile, an important twist took place in political life. the psoe won the general elections in 1982 by an overwhelming majority. hence began what was going to be the socialists prolonged stay in power because they ratified their majority in 1986 and 1989 albeit losing some votes. they reached power promising “change” and spain changed for sure. once they got past the economic crises of 1973 and 1979 they finished the fiscal reform that ucd had started, they propelled a reorganisation of the bank, and industrial reconversion that not everyone agreed with and they started privatising public companies; there was a reform of the labour market that cost the government a general strike that paralyzed the country; the socialists revised their previous position so as to keep spain in nato and finished off by incorporating spain into the european economic community. regarding the media, the psoe continued along the path initiated by the first governments of the transition and established a new legal regulation for the media, from the definitive demolition of the network of state newspapers to the concession of new radio stations, the elaboration of a statute for public television and the liberalisation that the appearance of autonomous and private television stations meant for the country. none of these actions were free from controversy and if there seemed to be a good relationship between the socialists and the media at first that first impression gave way to growing confrontation. the sector http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 263 experienced accelerated competition where the political battle interfered with business intentions. in this context of change and controversy, prisa entered into the radio. the first attempt proved insufficient after the concession of a station in madrid, radio el país, polanco decided that the right route to follow was to take control of one of the already established stations. he found his opportunity in one of the most renowned stations in the private sector, the ser (sociedad española de radiodifusión). the director was antonio fontán; the president was antonio garrigues díaz cañabate. the station was experiencing serious financial difficulties. the purchase of two packages of shares allowed polanco and other representatives from prisa to become members of the board of administration and they started to clean up the company and ended up owning the majority of its shares. it was a tough fight and publicly controversial, especially for the fontán family, although antonio garrigues supported polanco. they created programmes that reached maximum audiences in their time slots and once augusto delkader took over management the station paid special attention to the news programmes. in 1987 the results showed benefits and the modernisation of the station ended two years later once the remodelling of the building that housed the central headquarters on madrid’s gran vía finished. by that time, there was yet another turn in the long and complex road that was the process of legal regulation of private television. it was a question that especially worried the political world because control of the television had a much greater political impact than the newspapers or radio did. they did not know much about the matter not just in spain but also in europe where they were living that same process of the proliferation of private initiatives. in spain there was soon news of negotiations and projects from various media companies and publishing houses, among them prisa who had created a new company, sogetel. el país http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 264 continued to show increasingly greater profits but a television station would need many more resources and a different business structure as well. polanco closely followed the political debates and had access to those who could keep him informed about the mood inside government where not everyone was in agreement. the concession of private television stations had not been in the psoe’s electoral programme and now they at least wanted to try to guarantee pluralism by avoiding the concentration of property especially in the hands of the news media. polanco had also gotten hold of reports on the viability of private television stations in relation to the advertising market. the law regulating private television was finally passed in april 1988 but polanco announced that prisa was not going to appear. in his opinion, the law was behind the times technologically because it did not contemplate the development of satellite or cable television; it imposed unjustified restrictions especially on the news media and it obliged them to compete at a disadvantage with public television in the advertising market. what polanco did not say was that he had not abandoned the idea but rather that he was contemplating another alternative and was preparing, in parallel, a restructuring of the group. he presented a change in the structure of prisa to the board in october 1988. it was passed by the shareholders’ board in the spring of the following year. juan luis cebrián became the ceo while polanco stayed at the helm as executive president. cebrián left the direction of the newspaper and joaquin estefanía took over. polanco explained to the shareholders that the change was necessary so that prisa could continue developing in the sector, alone or in the company of others, and at the same time preserve the influence and prestige el país had obtained. it was necessary to separate it from the other activities and to do that he constituted el país s.a. keeping the same advisors as in prisa. he created two divisions in the group; one http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 265 audiovisual where he included the ser, sogetel and canal+, and another publishing division that grouped various book publishers and magazines together: edipaís, progresa (el globo, claves de razón práctica) and estructura, (cinco días, mercado). prisa had become a holding company. some months later when the tendering process for the allocation of the, expected, three private television channels became public, the surprise took place. the awardees were telecinco (the once, the publisher anaya and berlusconi’s fininvest participated), antena3 (lead by count godó with the participation of antena3 radio and prensa española that published the abc newspaper), and canal+, the new company owned by prisa. the surprise was that canal+ was proposing pay tv. they had been preparing this from the time they had received the offer to collaborate from canal+ france. prisa and canal+ france held 25% of the capital which was the maximum allowed by law; the bilbao vizcaya bank held 15% each and bankinter, caja madrid, construcciones y contratas and eventos s.a. (a company linked to el corte inglés) held 5% each. it did not take long for the comments to start. the newspaper abc, that had been leading a campaign against the prisa group and they had nicknamed el país “the government’s” newspaper, said that it was “a prize for services rendered” to the government from the “devotee” newspaper. the spokesperson for the pp party in congress, the main opposition party, voiced comments to the same effect. however, those same people who were criticising prisa also predicted a categorical failure because nobody in spain was going to pay to watch television, especially when there were other choices available such as those the public autonomous channels and the new private channels were offering. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 266 juan cueto was the director of canal+. he was enthusiastic about pay tv and had convinced polanco and cebrián. in his opinion, five general, public channels and three private channels were a lot and that there was not enough advertising to keep them going. pay tv already had several million subscribers in europe. it was an additional ticket window to movie theatres, sports arenas or bullrings. that is just what canal+ did. it devoted its’ programming to all types of sports including soccer. broadcasting football had to be negotiated with the professional football league and broadcasting gave football a face-lift. broadcasting premiere cinema was another programming initiative that had to be negotiated with the large production companies and the worldwide film distributors, especially the american ones. none of these wagers were cheap. nevertheless, three years later, in the spring of 1992, canal+ had 665,000 subscribers and polanco could tell the shareholders that it was a success and that they had already reached financial balance. in the eye of the hurricane jesús de polanco had reached a place that he had never dreamed of reaching. prisa was the most powerful media group in the country. without a doubt polanco was proud and he did not exercise discretion when speaking. he liked power and he showed it, although he said that he liked power because it let him undertake new projects. he was a passionate follower of the changes that were taking place in the media world. he saw the increasingly harsher and more numerous attacks directed at him as proof of how jealous people were of his success and a consequence of the corporate competition in the sector. he was outraged that they had labelled him a servant of the socialist government because he was zealous about his independence. from a personal and generational point of view, he felt closer to the politicians in ucd although he was friends with many socialist politicians. but he was not a socialist. the fact that his readers http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 267 and listeners voted socialist was, in his opinion, a coincidence, a result of social transformation and the success of his media. that was one thing and quite another that the successive, successful business initiatives he had set up were the result of government favours. el país was certainly not a result of government favours and neither was the purchase of the ser as the fact that the socialist government refused to sell him 25% of the state owned shares for several years demonstrates. this was a measure that had been introduced in the early years of the transition. the vice president of the government, alfonso guerra did not think highly of polanco and it was not until guerra resigned that polanco obtained the state shares. polanco knew very well that the concession of a licence to canal+ had caused controversy at the heart of the government because vice president guerra and his followers were flatly opposed to strengthening prisa’s power. polanco had an audience in felipe gonzález but they did not become personal friends until after gonzález left power. el país and afterwards the ser defended very critical opinions about some of the government’s policies, especially those related to media policies and public order. in fact, the minister of the interior, josé barrionuevo, took them to court. polanco and prisa had had confrontations with the so-called guerrista sector of the party who were suspicious of his power and had placed polanco on the list of those people who they referred to as “the beautiful people;” a group of bankers, entrepreneurs and businessmen who had become prosperous thanks to the country’s economic growth and who had been supposedly protected even by some socialist politicians with whom they had tight connections. the psoe won the 1989 election by a slim majority against a partido popular under the new leadership of josé maría aznar who had anticipated better results. the outbreak of a series of scandals that especially affected the socialists set off a period of escalating political tension. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 268 talk of corruption inflamed the air waves of the radio talk shows and led to what was referred to as “investigative journalism” and scandalous tales that revealed alleged plots of interests between businessmen and politicians. in the summer of 1992 a new intervention by the prisa group fired up the air waves again. many rumours started circulating about antena3. the company was in a bad economic situation because of its’ multimillion peseta debt with the caixa bank and there was considerable speculation about the consequences when it was announced that prisa and the godó group had reached an agreement for the ser and antena3 radio to collaborate. some of the radio stars of the time left antena3 slamming the door in polanco’s face while denouncing what they called an “antenna suicide,” (antenicidio). they found homes either at the cope, the radio station owned by the episcopal conference, or at el mundo, a new newspaper under the management of pedro j. ramírez. el mundo was notorious for its grievances and criticism of both the socialists and the prisa group. that year, prisa turned 20 years old and polanco celebrated that anniversary as a combination of an intellectual project and a business reality in full development. that year, they billed 90,000 million pesetas. when they announced the merger of the ser and antena3 radio into unión radio in november their critics took the case to the ministry of the economy because they considered it an economic concentration that threatened freedom of speech and the competition defence tribunal (tribunal de defensa de la competencia), imposed severe conditions on the merger. against the odds of most, the psoe won the 1993 election even though they lost their absolute majority. the tension grew. prisa’s board of administration went to the defence of its president and polanco himself, always reluctant to do so, felt obligated to grant several interviews but always to media unaffiliated with his group. he defended his actions and denied the majority of the accusations: that prisa had a monopoly in the media. there were no large http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 269 companies in spain; they were nothing more than a “big dwarf,” (un enano crecedito), in comparison to the large companies in other countries. he said this because there were the companies that he was comparing his to and his horizon was the spanish-speaking world. el país celebrated its 20th birthday a few days after the partido popular won the 1996 general elections. the anniversary was celebrated in style. the outgoing president of the government, felipe gonzález, and several of his ministers attended plus the incoming president, josé maría aznar, with some of the prominent figures of his new government. jesús de polanco showed off prisa’s economic strength as well as its independence and professionalism. a few months later they announced the launch of a digital pay platform, canal satélite digital, by means of the creation of a company, sogecable. it was another forward leap that arrived after tough negotiations and agreements that concluded in an agreement with antena3 televisión. the government reacted by promoting the creation of another platform, vía digital, backed by the telephone company, telefónica. in addition, they accelerated approval of the cable television law, approved a royal decree that established a series of technical demands along with the registration of decoders and announced another law that declared football to be “of general interest” thereby striking down the exclusive rights to broadcast matches on pay per view tv. el país repeatedly reported measures that they considered to be aimed against the prisa group. the last straw was when judge gómez de liaño accepted the lawsuit filed by jaime capmany, a journalist working at the abc newspaper, against sogecable’s chief executive officers accusing them of irregular use of the subscribers’ money. jesús de polanco, juan luis cebrián and the members of the boards of sogecable, the banco bilbao vizcaya, the march group, caja madrid and all of the other participating companies had to appear in the national high court. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 270 there was a sharp turnaround in the case and the judge ended up being sentenced for perversion of justice by the supreme court as a result of the lawsuit filed by the defendants. nonetheless, 1997 was a dreadful year for jesús de polanco. it had been a corporate battle but above all, political battle, where a private company had measured its forces with a government. prisa and polanco withstood but they paid a high economic price but by putting el país and the ser to the service of what many considered purely corporate interests, and sacrificing the neutrality that was owed to their readers and listeners their credibility all but disappeared. the accusations of arrogance hurled against prisa’s media and polanco himself hit home, pressure from above made antena3 televisión change alliances. they joined the government’s digital platform leaving prisa and telefónica in a position of confrontation. telefónica had incomparably greater resources, plus, its president, juan villalonga, was a personal friend of the president of the government. telefónica launched a limitless expansion policy. “acquire size:” the number one spanish media, culture and entertainment group in 1998 polanco closed the “sogecable case” and flexed his muscles: he bragged that prisa’s business figures had increased 17%, that net profit was a consolidated 10% and that there was a distribution of dividends equal to their social capital. he affirmed that he continued betting on growth, but not at any price and not unpredictably; but rather on diversification of investment through internationalisation and new technologies and he wanted “strong, stable partners with a deep understanding of the sector.” first with canal+ and much later with canal satélite digital, prisa had entered the era of alliances with large companies and banks and credit resources and indebtedness. some began to call this “financiarización” (almirón 2006). the spanish economy was going through a period of euphoria and the government of the partido popular was imposing a new style. the privatisation of the large public companies http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 271 allowed the government to place people of their confidence at the head of the companies; one might say a new business class targeting foreign markets, especially the latin american market. at the same time the government boasted about fomenting “popular capitalism” through the sale of shares on the stock exchange, which by volume placed, reached a historic record between 1997 and 2000. in july 1999 polanco decided the initial public offering, ipo, of sogecable which triggered a campaign against him by the usual critics, about the sogecable’s hypothetical insolvency. it is true that sogecable had 94,000 million pesetas in credits. however, the ipo went well because they were still living in the bubble created by the technological companies, the so-called dotcoms. it was a risky bet because they were the number one telecommunications company to do that but they did it successfully and abc calculated that the shareholders earned 60,000 million pesetas in capital gains. some months later, the partido popular won the elections and this time they won an absolute majority “against all odds” as el país dared to write. only five days later, polanco announced more changes at a time that he said was of “historic importance”. the old formulas were useless already because the challenge that faced them demanded fast and accurate answers. to compete in a globalised world and meet the challenge of international projection and the new media technologies they had to “acquire size”. to this end he proposed to integrate santillana into the group and take prisa public. integrating santillana meant gaining size and an important projection in latin america which would make prisa a “media, culture and entertainment group.” on the other hand, by going public they would become stronger, attract more resources and they would be in better shape to safeguard their independence. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 272 with that proposal polanco changed his business philosophy definitively. he was always reluctant to include santillana because it had always been his safe haven and because he thought that it was enough that the relationship between prisa and santillana was channelled through timón. it was cebrián who convinced him to do it. santillana was valued at 18,000 million pesetas and that figure raised criticism from some advisors who thought that it was overvalued. there was also criticism of the bonus given to cebrián – the equivalent of one point of the shares in portfolio, 18,562,000 pesetas. the decision to go public broke away from the culture of the group because it meant unknown shareholders, who could gain control of the company, could enter. after much debate, they decided that the company, diario el país, would not be included, that it would become a limited liability company and would be subject to the fundación santillana. that foundation created by polanco years before and controlled by the family and their closest friends, would always own shares that would give them the right to vote. thusly polanco ensured that the autonomy of the newspaper would be preserved “from any foreign or hostile invasion of equity.” furthermore, polanco also decided that it was necessary to institutionalise prisa. he approved the appointment of his eldest son, ignacio de polanco, to the position of deputy president, thereby joining the corporate centre of the group. his daughter isabel was also a member of the board of administration and one year later his other son, manuel, would also become a member. in the middle of prisa going public the supreme court found that the licence to merge the ser and antena3 radio, granted years earlier, could be annulled thereby forcing unión radio to get rid of the 79 stations owned by antena3. the media commotion was such that prisa was about to back out the decision of going public. the obligatory information about it attributed prisa a market value between 3,774 and 4,704 million euros. the demand for shares http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 273 was eighteen times greater than the initial offer. it was a total success. polanco appeared in magazines as the wealthiest man in spain, even ahead of the banker emilio botín. he told a friend that it obviously was not true. they attributed the value of the shares he controlled not those that were actually his. one of those magazines correctly ran the headline “polanco’s dilemma”: prisa could be too big for spain and too small for the global market. before going public they had carried out some significant operations. they were the first group among the spanish media groups at the time and the group that had undertaken a more aggressive expansion strategy. they multiplied participation and acquisition of companies in spain, portugal and latin america, not in the written media, but in radio and television, although prisa’s most solid base still lay in their “mature” businesses, in santillana, in el país and in the ser. polanco insisted that they would have to “acquire size” if they did not want to languish. in may 2002, the president of telefónica, césar alierta and jesús de polanco announced a merger of their digital platforms. the transaction was made through a capital increase of sogecable of almost 58,000,000 euros, subscribed integrally by via digital. telefónica became the most important share holder with 22.23% of the shares. prisa and canal+ francia only held 16.38% but had equal representation on the board of administration. as a consequence, the “war of the platforms” ended. although the most radical wing of the press said that the government had sold itself out and that it was the biggest success of polanco’s career, sogecable’s absorption was long and costly. the stock markets were punishing telecommunication companies and what's more, they discovered that vía digital had been overvalued. its number of subscribers and business figures were much lower than those that they had shown during the merger process. despite that, polanco stuck to his conviction that http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 274 the base would stay strong if they acted with “realism” and if the necessary adjustments and disinvestments were undertaken. in march 2004 he announced that he was leaving the presidency of sogecable. his resignation was part of the deal to reach an agreement with telefónica. nonetheless, he left with the satisfaction of a job well done. a few days later, on march 11, madrid suffered the most tragic terrorist attack in its history in the atocha, santa eugenia and el pozo del tío raimundo train stations. one hundred ninety two people died. the aznar government was adamant that eta had been responsible. that fatal mistake was the last straw and it cost them the election. the socialists won and the new general secretary of the psoe, josé luis rodríguez zapatero, became president of the government. in his electoral programme he had included the commitment of a new legal regulation for the audiovisual media both for public television to ensure political neutrality as well as for private channels to face the reality of digital tv. there was a new law in june 2005, a real revolution starring digital terrestrial television, tdt, and the authorisation of two new analogical channels: the sexta and the cuatro. the cuatro was part of the prisa group, the result of a modification of the contract with sogecable to eliminate restrictions on free-to-air programming. polanco already had what he had always dreamed of: free-to-air national television. soon the voices that accused him of favouritism were heard again but the fact is that the cuatro had to compete hard and the relationship with the rodríguez zapatero government was not an easy one. jesús de polanco’s farewell in 2004, jesús de polanco celebrated his 75th birthday. prisa had been organising the ortega y gasset awards for journalism since 1984. a few months earlier polanco had missed the award ceremony for the very first time. he had been in boston getting treatment for a problem he was http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 275 experiencing in his cervical vertebrae. the problem required a long treatment. nonetheless he travelled to latin america in 2005, something that he had not done since the early days of santillana. however, in 2006 he missed the foro iberoamericano (the ibero-american forum), a space for debate among businessmen, intellectuals and politicians which, as his friend the mexican writer carlos fuentes said, polanco had been the “backbone” of the forum. polanco had a multiple myeloma, a cancer of plasma cells, that very few people knew about and something from which he always thought that he would recover. in november they announced the appointment of his son ignacio as vice president. ignacio would occupy his place in case polanco resigned or for any other circumstance hence guaranteeing “the future stability of the society represented by his family” and support for the management team led by juan luis cebrián. in march of the same year, the securities exchange commission had authorised a takeover bid of prisa on 20% of the shares of sogecable to acquire a majority sufficient to guarantee control. with this, prisa also managed to double its billing although to do so it was necessary to resort to a 1,600 million euro credit attained by syndicating forty banks. it was necessary to use all the capacity of the group’s indebtedness but polanco thought the economic results would allow them to face it. at the ortega y gasset award ceremony polanco said that “if one day we were the newspaper of the transition, today we are the hispanic reference point of the globalisation”. in the shareholders meeting later that year he boasted about independence regardless of the doubts some of the shareholders had and the new accusations from the right about favouritisms from the socialist government: he was old enough had been impertinent enough.” but what frightened him the most was the right wing’s “thirst for revenge,” that they http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 276 felt historically legitimised to always exercise power. the reaction to his words was not long in coming and the partido popular boycotted the prisa media. it was one of his last public appearances. on july 19th, 2007 his son ignacio announced to prisa’s board of administration that for the first time his father could not come to a meeting. two days later he died. politicians from all of the political parties, bankers and entrepreneurs, spanish and foreign journalists from all of the communications media, journalists from his media group, writers, actors and artists all paid their respects at the funeral chapel. his friend the jesuit martín patiño, who had nicknamed him, “jesús del gran poder,” presided over his burial. a few months earlier, already very ill, he had sent a taped greeting to the annual directors’ meeting held in lisbon that year. it was his business will and testament. he told them that they faced difficult challenges ahead but that they could overcome them. they had all the technological, organisational and financial advances they needed. prisa had not been created to make money nor to gain power, they were just a communications and entertainment company. “we are what we are and we have to take into account not just size but also quality.” he also reminded them that it was a “family” company which did not mean that they were self sufficient or that they did not need outside capital or outside directors. but that for more than thirty years it had been a family company vis-a-vis shareholders and family-like regarding the managers, and that had worked. there was no reason to change. conclusions jesús de polanco belonged to a generation of businessmen who started their professional life in the context of the francoist economic development in the 60’s and reached their peak in the final decades of the century. their business culture, that of those who he referred to as “the old http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 277 school,” evolved towards vertical and horizontal integration and the formation of a holding, which he referred to as “acquiring size”. he introduced efficient business criteria to some sectors of the activity – publishing books and newspapers – that until then, except for rare exceptions, did not have one. despite changes in its business structure, the growth of prisa, the fact that it had gone public and the indebtedness it faced, polanco hoped that his family would keep control of the company and maintain the culture that it had been born into until the very end. the transformations in prisa’s structure at no time meant that he would abandon the executive presidency. he was always very conscious of the worldwide technological revolution that took place in the world of journalism and communications. it was something that he was passionate about and that he tried to include in prisa’s evolution: from the inclusion of computers to the newspaper to the development of the television and the digital platforms. he was very aware of the impact of that revolution on the business structure of the sector worldwide. he lived the emergence and the consolidation of the media empires. the size of the publishing company, santillana, as well as the media holding – prisa – was not just the demand of the market in spain but also the latin american market. that limit was met for santillana but not so much for prisa. the attempts to expand throughout europe both in the world of journalism as well as television did not advance. polanco’s goal was to become the biggest entertainment and communications group in spain and latin america but prisa was never able to compare itself to the big international conglomerates. spanish political evolution always interfered with his activities. he lived the ins and outs of the francoist institutions, watched their dismantling and saw them replaced by a plural democratic system, progressively conformed by a party system and a new political class. polanco knew and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 278 had contact with almost all of the politicians of his time, old francoists and also the principal actors of the transition. he never held a political position but he became “jesús del gran poder” an epithet that was later used against him by those who accused him of building his economic empire thanks to political favours and then putting it at the service of those who had made it possible. although he spared no effort in influencing decision-makers when legal changes occurred in the regulation of the multimedia world, his strength stemmed from his capacity to turn something that until then had not been a business into one: the press, the radio, the television. the extreme confidence in independence and credibility that granted him did not let him foresee the actions that a government bent on destroying him could come to adopt. the media and political wars clashed with the unleashed entrepreneurial competition in the communications sector; a sector that was especially sensitive to the decisions of the political powers. references almirón, nuria. 2006. “poder financiero y poder mediático: banca y grupos de comunicación. los casos del sch y prisa (1976-2004)” phd diss., departament de periodisme i ciències de la comunicació, universidad autònoma de barcelona. baena del alcazar, mariano. 1999. elites y conjuntos de poder en españa (1939-1992). un estudio cuantitativo sobre parlamento, gobierno y administración y gran empresa. madrid: tecnos. cabrera, mercedes. 1997. “la modernización política. los empresarios en la historia de españa.” papeles de economía española 73:272-284. cabrera, mercedes. 2015. jesús de polanco (1929-2007) capitán de empresas. barcelona: galaxia gutenberg. cabrera, mercedes, ed. 2016. josé ortega spottorno. un editor, puente entre generaciones (1916-2016) madrid: alianza editorial. cabrera, mercedes, and fernando del rey. 2011. el poder de los empresarios. política y economía en la españa contemporánea (1875-2010) barcelona: rba. cacho, jesús. 1994. m.c. un intruso en el laberinto de los elegidos. madrid: temas de hoy. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 279 carreras, albert, xavier tafunell, and eugenio torres. 2003. “business history in spain.” in business history around the world, edited by f. amatori, and g. jones, 332-354. cambridge: cambridge university press. cruz, juan. 1996. una memoria de el país. barcelona: plaza y janés. díaz herrera, josé, and ramón tijeras. 1991. el dinero del poder. la trama económica en la españa socialista. madrid: cambio16. fernández, isabel, and fernanda santana. 2000. estado y medios de comunicación en la españa democrática. madrid: alianza. fernández clemente, eloy. 2004. “las biografías de empresarios en españa.” estudos do século xx (4):59-112. fernández moya, maría. 2015. “la internacionalización de los editores. los mercados exteriores.” in historia de la edición en españa (1939-1975), edited by j. martínez martín, 575-595. madrid: marcial pons. garcía ruiz, josé luis. 2000. “jesús de polanco gutiérrez (1929)” in los 100 empresarios españoles del siglo xx, edited by eugenio torres, 539-543. madrid: lid. gonzález duro, enrique. 2011. polanco. el señor de el país. barcelona: península. hayes, peter. 2001. industry and ideology. ig farben in the nazi era. cambridge: cambridge university press. imbert, gerard, and josé vidal beneyto, eds. 1986. el país o la referencia dominante. barcelona: mitre. james, harold. 2001. the deutsch bank and the nazi economic war against the jews. cambridge: cambridge university press. james, harold, and jakob turner, eds. 2002. entreprise in the period of fascism in europe. uk-usa: ashgate. juliá, santos. 1997. “sobre el reduccionismo.” papeles de economía española 73:285-288. martínez martín, jesús a., ed. 2015. historia de la edición en españa 1939-1975. madrid: marcial pons historia. martínez soler, josé antonio. 1998. jaque a polanco. la guerra digital: un enfrentamiento en las trincheras de la política, el dinero y la prensa. madrid: temas de hoy. pan-montojo, juan, ed. 2007. “poderes privados y recursos públicos.” ayer 66:11-173. pérez díaz, víctor. 1987. “los empresarios y la clase política.” in el retorno de la sociedad civil, 125174. madrid: instituto de estudios económicos. pérez ledesma, manuel. 1997. “empresarios, políticos e historiadores.” papeles de economía española 73:289-291. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 247-280, january-june 2018 doi:10.1344/jesb2018.1.j044 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 280 pro ruiz, juan. 1997. “de empresarios modernos y malvados patronos en la españa del siglo xx.” papeles de economía española 73:294-305. rey, fernando del. 2003. “la historia empresarial y la historia política en la españa contemporánea.”,ayer 50:333-353. ruiz torres, pedro. 2010. “biografía e historia”. “teoría y práctica de la biografía.” network, parís, college d’espagne. sánchez illán, juan carlos. 2015. “los editores españoles en el exterior. el exilio.” in historia de la edición en españa (1939-1975), edited by j. martínez martín, 549-573. madrid, marcial pons. seoane, maría cruz, and susana sueiro. 2000. una historia de el pais y del grupo prisa. de una aventura incierta a una gran industria cultural. barcelona: plaza y janés. toboso, pilar. 2017. “redes y grupos empresariales en el sindicato vertical franquista.” ayer 105:102128. tortella casares, gabriel. 2000. “prólogo.” in los 100 empresarios españoles del siglo xx, edited by eugenio torres, 13-17. madrid: lid. torres, eugenio, ed. 2000. los 100 empresarios españoles del siglo xx. madrid: lid. turner, henry ashby jr. 1985. german big business and the rise of hitler. oxford: oxford university press. wiesen, jonathan. 2001. west german industry and the challenge of the nazi past, 1945-1955. carolina: university of north carolina press. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 minerva estruch-rectoret blanch institut barcelona estudis internacionals-ibei (spain) do chambers of commerce have an added value in the web 2.0 era? commercial missions by the barcelona chamber of commerce as an internationalisation tool for catalan firms in a digital world abstract this study goes through the history of chambers of commerce, analysing some of the reasons for their appearance as well as their role throughout time. it moves forward to analyse the history and development of the barcelona chamber of commerce (bcc), founded in 1886. emphasis on the international department of the bcc is made to evaluate whether the internet and the web 2.0 era have jeopardised the internationalisation services offered to catalan firms. through five case studies of firms having participated in commercial missions of the bcc, the strategic added values of this service are analysed. the study concludes that the differential traits and added values are: the status of public law entity, the built-in worldwide chamber network, the affordable price, and the direct channel with governmental entities to obtain subsidies for catalan firms. keywords: chambers of commerce; barcelona chamber of commerce; internationalisation; international department; commercial mission; added value, internet; web 2.0 corresponding author: e-mail: estruchrectoret@gmail.com received 07 oct 2017 accepted 31 july 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 introduction1 chambers of commerce are entities present in almost any country of the world that have been offering services to firms for centuries. nowadays, they tend to be government partners, since their activities are beneficial to the whole business community. nevertheless, the main financing instrument for chambers in spain and catalonia -the so-called recurs cameral or compulsory membership feewas eliminated in 2011 by the spanish government.2 this manoeuvre seemed to question the chambers’ usefulness in the contemporary world. parallel to this, the web 2.0, which implies the rise of the internet as a reliable source of information and as an alternative to physical presence, seems to put under threat the role of business specialist that chambers have undertaken so far, especially in the field of internationalisation. the aim of this paper is to find out what the main added values are of the internationalisation services by chambers of commerce in the 2.0 society. due to the vastness of the topic, this work will focus on the international department of the chamber of commerce of barcelona, to which 2,400 firms hired internationalisation services in 2015.3 the work is divided into two areas, the first one covering the history and evolution of chambers of commerce and the chamber of barcelona and the second one analysing five case studies of firms having hired commercial missions, the main internationalisation service of the barcelona 1 this paper is a revised version of the original dissertation “do chambers of commerce have an added value in the 2.0 era?” by minerva estruch fully digitalised by the university of barcelona in august 2017. this version has been proof-read by anthony nicholson in august 2018. 2 àlvarez, d., “les cambres negocien amb economia un nou sistema de finançament,” la vanguardia, (july 16, 2012, 44). economy section. 3 cambra oficial de comerç, indústria i navegació de barcelona. (2015). memòria d'activitats. barcelona: cambra oficial de comerç, indústria i navegació de barcelona. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 chamber of commerce, in order to identify the strengths of this service and its usefulness in the internet era. the hypotheses are: hypothesis 1. the status of public law entity and the role of defence of the business interest of the barcelona chamber of commerce, which induces trust among firms, is regarded as valueadded by firms hiring their international services. hypothesis 2. the built-in worldwide chamber network, which implies a net of experts, homologous entities abroad is regarded as value-added by firms hiring ccb international services. hypothesis 3. the price, lower than market equivalents, is regarded as value-added for firms hiring international services. hypothesis 4. the direct channel that the chamber of commerce of barcelona has with governmental entities for obtaining subsidies to help finance firms’ commercial missions, is regarded as value-added by firms hiring international services. general history of chambers of commerce the first chamber of commerce was founded in marseille in 1599.4 although it had a precursory role, it was an isolated case. it was not until the end of the 18th century that chambers of commerce started appearing in both sides of the atlantic -mainly north america and the united kingdomin a generalised way.5 later on, throughout the 19th century chambers of commerce spread to other regions including catalonia and spain. 4 lee m. friedman. bulletin of the business historical society.vol. 21, 5 (nov., 1947, 137-143) 5 chamberme. history of chambers of commerce. consulted april 2018 http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 at the beginning, the phenomena of chambers of commerce followed a clear and logical pattern. such business associations appeared mainly in coastal cities or cities with large populations6 since they were home to a port or concentrated a great amount of businesses and exchanges. chambers emerged as entities outside the governmental spectrum to exert business interest representation through petitions and memorials.7 the chambers’ bundle of services grew rapidly. apart from voicing interests, they also offered information through publications, commercial arbitration, reading rooms and services to promote local business nationally and internationally.8 nowadays, chambers have become government partners as providers of business support services such as training courses to unemployed, business training or management of public funds9. despite this government-chamber cooperation, which started between 1917-37 and became generalised in the 80s, chambers maintain a certain level of autonomy and political non-alignment. in terms of status chambers follow two main models.10 in the continental model, chambers are considered public law entities and are therefore governed by public law. in such cases, membership tends to be compulsory for firms under the geographical scope of the chamber. on the other hand, there is the anglo-saxon model where chambers are considered private business associations and are ruled by private law. membership is, therefore, voluntary. 6 boston (1785), new york (1786), charleston (1773), liverpool (1774), jersey (1768) 7 bennett, r. (2012). born out of anger: a history of chambers [recorded by association of chamber of commerce executives]. usa. 8 federation of belgian chambers of commerce. about chambers of commerce. consulted april 2018. 9 see figure percentage of chambers offering a given service at each time, robert bennett, 2012 10 international chamber of commerce (icc). history of the chamber movement. consulted april 2018. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 there are parallelisms in terms of funding in both models. the resources underpinning the early chambers were mainly obtained through subscriptions but shifted progressively to include users’ fees and after the 70s and 80s were supplemented by government contracts. figure 1. summarised timeline of main periods on history of chambers of commerce. source: own elaboration history of the barcelona chamber of commerce in spain chambers of commerce, industry and navigation were created on 9th april 1886 according to a royal decree signed by the queen maria cristina.11 chambers would be politically non-aligned institutions representing economic interests of cities having a port or relevant commercial activity. 11 boe. real decreto de 9 de abril de 1886. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 manuel girona, founder of the bank of barcelona, was elected first president of the chamber of commerce, industry and navigation of barcelona in 1886 which started off with few resources, few members, and a low degree of responsibility. it is said that the chamber of barcelona was kept alive because it was the successor of the junta de comerç (the board of trade) a historical and highly respected entity that disappeared in 1847. when it was founded, the membership was voluntary, members were scarce and therefore revenues low. these facts, together with the death of the charismatic manuel girona in 1901 and the lack of cooperation with the central government, which seemed to ignore chamber’s willingness to cooperate, caused a decline in members and an anaemic and pitiful life for the corporation, as salvador poggio, member of the navigation section stated.12 table 1. table summarising membership and collected annual fees for the barcelona chamber of commerce. year members income from annual fees (in pesetas) 1886 336 4005 1887 378 8510 1888 331 8300 1889 303 8400 1890 220 6810 1891 290 8945 1892 291 8595 1893 259 9325 1894 223 10990 1895 220 9995 1896 207 9935 1897 192 9795 1898 202 10525 1899 256 10525 1900 239 11085 source: from cabana i vancells (1994), “la cambra i els seus presidents” 12 cabana i vancells (1994). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 in 1901, a royal decree13 was meant to reorganise spanish chambers, increasing their attributions and resources, allowing them to receive subsidies, issue certificates of origin or acquire real estate properties. unfortunately, due to a government crisis, the degree never came into force. thus, forcing the chamber of barcelona to issue a respectful complaint to the ministry of agriculture, industry and public works both in 1901 and 1903.14 since the complaints did not have an effect, the activities of the chamber of barcelona during its first 20 years of existence were reduced to composing reports about economic topics and publishing a periodical magazine analysing national and international opportunities -called butlletí de la cambra. later, in 1911 the law of reorganisation of chambers entered into force, introducing two major changes. first, chambers of industry would be separate entities from chambers of commerce, something that caused misunderstandings in terms of scope of action, and second two percent of the contributions paid by merchants and industrials would be devoted to chambers, thus following the german and french model of obligatory participation. the years that followed were somewhat unstable, going from primo de riveira (1923-1930) to franco’s dictatorship (1939-1975) passing through the proclamation of the second republic (1930-1936) and the civil war (1936-1939). during riveira’s dictatorship the chamber remained still, the protest reports became just lamentations with one exception published in 1926 in response to the royal order from 4th november 1926 by which no society could be constituted, nor its facilities enlarged without 13 boe. real decreto del 21 de junio de 1901. 14 butlletí from the chamber of barcelona, april 1903. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 authorisation. such statement was an attempt against the economic liberalism for which the catalan bourgeoisie had fought during the second half of the 19th century. the second republic was welcomed by the chamber of barcelona which stated that its services were at the orders of francesc macià. in its publication la industria española the chamber of industry cites that the second republic together with the estatut d’autonomia are great news for catalonia.15 in addition, the first texts in catalan are published. this situation led to a boycott campaign by spain towards catalan products. the generalitat de catalunya, the catalan government, took control of the chamber of barcelona during the civil war as many of its responsible officers were not available to manage the entity. in a meeting organised in 1938 in san sebastián -franco ruled territorythe representatives of the catalan chambers had to declare the nullity of all the acts dating from the republic period as they had been written at the service of an illegitimate service -republican catalonia. in addition, a staff depuration of non-like-minded workers was carried out. during franco’s dictatorship (1939-1975) chambers in spain were declared legitimate entities16 and had to vow loyalty to franco’s regime. their tasks would be to keep register of export and imports, deliver certificates of origin, and keep track of the businesses in the economy. throughout the dictatorship we can highlight three main actions by the chamber of barcelona. the first were several electricity-related complaints that jeopardised industrial production. a complaint sent to the ministry of public works in 1952 denouncing the alarming delay in the electrification -planned in 1946 but still not real in 1952of the railway connecting maçanet 15 literally: “ momento de júbilo para cataluña” 16 ley de jefatura del estado from 9th march 1939. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 and portbou and, therefore, europe. furthermore, there were electricity restrictions taking place in catalonia for which more favourable timetables were attained thanks to the chamber’s negotiations. finally, since hydraulic energy was not enough, the state distributed coal and oil throughout the spanish territory. however, catalonia did not receive a proportional amount of resources considering it agglomerated 40% of the economic potential of the state. thanks to a reclamation signed by the chamber of barcelona, campsa settled an extraordinary share of 1000 litres of oil to barcelona. the second major role played by the chamber was as organiser of the fira de mostres (trade fair) which allowed some catalan firms to make brief contact with firms from abroad and acquire the urgently needed equipment from foreign sales stands. organising such an ambitious fair was a courageous action considering that spain was in a post-war environment and other european countries were involved in the world war ii. the third notable contribution of the chamber during the dictatorship was the creation of the common market committee in 1959 to ask for a liberalisation for commercial exchanges and the convertibility of the peseta. overall, the chamber proposed measures to integrate spain in the common european market. a short time later, in 1967, the chamber of commerce and the chamber of industry were unified by unanimity thanks to the boosting of felix escala and became again the chamber of commerce, industry and navigation. after franco’s death in 1975 the chamber of commerce stated in a publication that a new era was about to start. and so it did. josep maria figueres was elected president of the chamber of barcelona, becoming the first president of the institution who was not from the catalan bourgeoisie. also, in 1980 the economic report of catalonia was published in catalan for the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 first time in history. lastly, in 1986 spain entered the economic european community and the chamber gathered the momentum to increase its array of services notably regarding foreign trade, thus offering certificates of origin, studies of foreign markets, consultancy services and commercial missions to attractive destinations. the chamber of barcelona was co-financed by service fees and by a percentage funding that came from business taxes collected by the government since 1911, thus following the continental model. in catalonia and spain, a percentage of the corporate tax is aimed at chamber activities and it is called quota or recurs cameral.17 this source of revenue lowered with the crisis, since only firms with positive profits were paying it.18 in addition to that, in 2011 the royal decree-law 13/201019,20 entered into force by which the quota cameral was removed and membership became voluntary which meant that chambers saw their main revenue source and survival threatened. due to this modification in the basic financing rules, now spanish chambers can only cover 30% of their activities thanks to the membership fees, compared to the more than 70% before the restructuration.21 17 compulsory membership fee. no english literal translation is found in literature since in anglo-saxon countries membership has never been compulsory. 18 chambers of commerce in spain have always collected the membership fees corresponding to two years earlier. in 2008, they collected the revenues from 2006 that accounted for a total of €283 million. in 2011, they collected the revenues from 2009, which had decreased to €191 million. 19 boletín oficial del estado 20 literally: “la reforma hace voluntaria la pertenencia a las cámaras y la contribución a la ahora denominada cuota cameral. su eliminación liberará de recursos [...] a dos millones y medio de empresas activas en el mercado [...]. la voluntariedad de la pertenencia a la cámaras debe ser un incentivo para que cumplan sus funciones con mayor eficiencia[...]. real decreto-ley 13/2010 from the 3rd december. 21 díaz-varela, m. les cambres negocien amb economia cofinançar els seus serveis a pimes. la vanguardia, (august 1, 2011, 53). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 figure 2. timeline of relevant events for the chamber of commerce of barcelona source: own elaboration. era 2.0 one of the main roles of chambers of commerce is helping smes to internationalise or start their exporting activities. chambers initially did so by providing information and reports about foreign markets that were otherwise out of reach. nowadays, chambers still aim to promote national firms abroad. nevertheless, the society in which they operate has radically changed. information about foreign markets that once was only available to a few institutions, is now at the reach of everybody and just a click away using the internet to which everybody can have access. the situation in which information online is complemented and enriched by other users’ comments has been called crowdsourcing22, a phenomenon belonging to the web 2.023 revolution. 22 the concept of crowdsourcing is used to describe a process whereby the power of many, often amateur and co-creators is used to undertake tasks that were once preserve of a few specialist. (howe 2006) 23 web 2.0 is an expression that was first used and popularised by the editorial group o’reilly media in a conference in 2004. it has been widely used since 2006. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 there are several studies that prove that the internet has revealed new paths for exporters to access foreign markets particularly for smes (sinkovics, sinkovics, and ruey-jer 2013; bell and loane 2010). the benefits of the internet as an internationalisation tool lie in the fact that web access is available to all firms regardless of their economic resources. the fact that the internet makes a firm instantly global reduces the importance of economies of scale, the marketing costs, improves contact opportunities, contact between buyers and sellers and, most importantly, changes intermediary relationships.24 throughout the centuries, it took time for firms to engage in international activities. they normally did so after mastering the local market25 or as a resource to overcome a national decrease in demand. nevertheless, in the web 2.0 society, a growing number of firms engage in international activities since the beginning, these being called born-global firms. the ease by which firms find, thanks to online tools, fewer barriers to access a foreign market may call into question the utility of the traditional international services of chambers of commerce. in fact, as howe (2006) stated, that crowdsourcing in the web 2.0 whereby the power of many, often amateur and co-creators, is used to undertake tasks that were once preserved to a few specialists -such as chambers. in the following sections we will analyse what the added values are of the internationalising services offered by the barcelona chamber of commerce in an era in which the role of the specialists is being called into question. 24 (chatell 1998); (quelch and klein 1996) 25 johanson, jan and vahlne, jan-erik, 1977. "the internationalization process of the firm—a model of knowledge development and increasing foreign market commitments," journal of international business studies, palgrave macmillan;academy of international business, vol. 8 (1): 23-32, march. also known as uppsala model. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 international department of the chamber of barcelona to analyse the usefulness of chambers of commerce in the 2.0 society, and due to the abundance of such institutions worldwide and the wideness of their actions which make it impossible to analyse them entirely, this study focuses on the commercial missions carried out by the international department of the chamber of commerce of barcelona, through an in-depth case study to test the four hypotheses of this dissertation. the international activities of the chamber of barcelona involve the internationalisation of firms, diplomacy and mediation, commercial missions abroad, customs reports, export support, market analysis and other such tools,26 all under the responsibility of the international department. the service bringing in a greater percentage of revenues are commercial missions which are grouped business trips to countries showing major commercial potential for economic exchanges. such missions are categorised geographically latin-america, north africa, subsaharan africa, middle east, and europe. over the past 10 years, the international department of the chamber of barcelona has carried out an average of 13.4 commercial missions annually,27 the countries to which these missions are carried out vary according to the interest shown by firms and on the market attractiveness. the destinations of grouped missions also adapt to global economic events rather than following a regular pattern. for instance, throughout 2017, extraordinarily five commercial missions to cuba were carried out, thus taking advantage of the historical moment of economic openness of the country, whose government is organising several trade fairs by sector to attract foreign investors. 26 retrieved from the official website of the chamber of commerce of barcelona ( www.cambrabcn.org ) as well as from the official catalogue of services. (cambra de comerç de barcelona, 2016) 27 own calculation with data retrieved from memòria d’activitats de la cambra de barcelona (2006-2015) http://revistes.ub.edu/index.php/jesb http://www.cambrabcn.org/ volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 when a commercial mission is planned, the international department oversees the publication of the news both in the diari oficial de la generalitat de catalunyadogc,28 in the website of the chamber of barcelona29 and in the unified website of the net of catalan chambers. later, the marketing department continues the diffusion in social networks as well as with mass mailings to firms in chamber’s databases. dates, cost of the service, objectives, target firms and potential subsidies are all detailed in the brochure and informative pdf. interested firms then reach out to the officer responsible for the mission, who organises individualized meetings to analyse the viability of the firms in the country where the mission is taking place as well as to better explain the functioning of the trips. the inscription to the mission is confirmed by the firms after the payment and the filling-in of a form that details information of the firm's area of business, turnover, exportation, product characteristics, competence, to mention but a few. after that, the international department sends out information about the participating firms to their interlocutors in the destination. those interlocutors may be the chambers of commerce of the destination country, with which they have direct contact, independent consultancies, or delegations of acció -the catalan agency of competitiveness-. guided by explanations on the ideal customers and typology of contacts that firms want to find in a market, the preparation of a working agenda starts. when the mission takes place, the representatives of the firms fly together with the expert designated by the chamber to the country. previously, each firm has been handed a detailed 28 diari oficial de la generalitat de catalunya 29 cambra oficial de comerç, indústria i navegació de barcelona, (2017). cambra barcelona. doing business. retrieved 2017, from http://www.cambrabcn.org/ http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 plan of the meetings arranged for them. those meetings will take place during the days of the trip. in the following figure, we can see the number of firms hiring any of the international department services in the chamber of barcelona during the period from 2006 to 2015. the peak in 2006 may be attributed to a different method of counting that did not avoid duplications. later, the figures seem to stabilize with difficulties that can be associated to both economic and financial factors. the decrease in 2008 can be associated to the financial crisis that hit almost all kinds of enterprises but had a devastating effect on smes which tend to be the target firms for international department services in the chamber of barcelona. seeing their revenues decrease, fewer firms hired international services. figure 3. number of firms contracting services to the international department of the barcelona chamber of commerce. source: own elaboration with data collected from memòria d’activitats de la cambra de barcelona 2006-2015 the decrease in 2011 was caused by the removal of the compulsory membership in 2010, due to which the chambers suffered a dramatic decrease in revenues and were forced to increase their service prices and decrease their bundle of offers, which deterred firms from hiring them. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 ever since the removal of the so-called quota or recurs cameral, the number of firms hiring international services from the chamber of barcelona has remained low compared to previous years. this fact is an evidence that allows us to state that one of the differential features of chamber services is the affordability of good quality services. added value to test the hypotheses, knowledge acquired during my internship in the international department together with public writings, laws, regulations, and official material from chambers of commerce will be used. corporate websites and promotion material from the chamber of spain, the chamber of barcelona and the international department will be analysed to find out which differential traits are highlighted when promoting their services. conversations with experts from the international and marketing department of the chamber of barcelona will be considered. the testimony of the chamber clients: case studies to have an external perspective, several firms having hired services to the international department will be interviewed to analyse the reasons that pushed them to work together with the chamber of commerce, which values they consider more relevant and to discover what role the internet plays in their internationalisation process. some of the firms interviewed were suggested internally by chamber experts. other firms were contacted using public information available online. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 the five interviewed representatives30 belong to catalan firms that hired an international mission with the chamber of barcelona. the firms belong to different sectors, are at different stages of the business cycle and some have an international department and others do not. these are the interviewed representatives organised in chronological order of interviews. rok design – antón garcía – commercial mission to saudi arabia 2016 antón garcía is the founder of rok design a firm specialized in the design of spaces, more specifically in the domain of industrial design. the firm was founded in 2012 in barcelona; although the founder comes from galicia where he started his studies of industrial engineering, which he complemented with a specialized master's degree in urban furniture design in barcelona. in the search of growth possibilities, antón garcía, contacted the chamber of commerce to receive advice on how he could expand his business. from the chamber of barcelona, he was redirected to the international department which suggested joining the commercial mission to saudi arabia and kuwait, although specifically concentrating on saudi arabia. that was in 2016. being a start-up made him trust a public entity rather than a private one and look for affordable services. although rok design had already had several international sales, most them were reactive sales of specific contacts made in trade fairs or by word-of-mouth. in general terms, it can be stated that the mission to saudi arabia was the first active action undertaken to find international customers. 30 garcía, antón, ceo rokdesign barcelona, (april 2017). gelado, mireia, export manager of j. vilaseca barcelona, (april 2017). massés, helena, export manager of gorgy timing spain barcelona, (april 2017). rodríguez, rafael, founder of freeway logistics barcelona, (april 2017). vidal, marta, export manager for telic group barcelona, (april 2017). all interviewees were contacted by minerva estruch-rectoret and have given permission to appear in this work. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 telic group – marta vidal – commercial mission to morocco and algeria 2015 marta vidal is the export manager of telic group, a firm from the hospital sector. they commercialise several product lines for pharmacies, sports people, and physiotherapists. nevertheless, 90% of their turnover comes from hospital material. they have been exporting for 25 years and have sales to 70 countries. therefore, they are used to travelling and organising commercial missions on their own. their main criteria when hiring the commercial mission to morocco and algeria with the chamber in 2015 was that the dates fitted in perfectly with their internal calendar, in which they have already-planned trips that cannot be avoided. gorgy timing – helena massés – commercial mission to mexico 2016 helena massés is the export manager from the spanish division of gorgy timing31 a french firm that employs 45 people in catalonia and that commercialises tools for time measurement in the industrial sector. among their products we can find both analogical and digital clocks for industrial use, time servers, electronic screens and almost anything has to do with time measurement to be applied in factories and industries in a wide range of sectors. since the french parent company had already used several internationalisation services from french chambers of commerce and embassies, they decided to look for equivalent institutions in catalonia. 31 gorgy timing. (n.d.). gorgy timing corporate website. retrieved april 2017, from http://www.gorgytiming.es http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 j. vilaseca – mireia gelado – commercial mission to saudi arabia and kuwait 2016 mireia gelada, export manager for j. vilaseca, a paper factory established in catalonia since 1714 specialised in manufacturing of paper products aimed at the stamping markets, advertising, security, labelling, to mention but a few. j-vilaseca had participated in missions to kazakhstan, romania and egypt organised by the chamber. in the specific case of saudi arabia and kuwait, the support was needed as it is a very complex market both culturally and economically. there are difficulties in obtaining the visas and women are deprived from freedom in many areas. that is the main reason the mission was appreciated and hired by j. vilaseca. freeway logistics – rafael rodríguez – commercial mission to mexico 2016 rafael rodríguez is the founder of freeway logistics, a firm created in 2009 by professionals from different sectors of logistics and transportation. their business activity is to act as a global logistics operator, so, advising their customers on services and transportation means better suiting their needs. normally they make do with the contacts in an independent forwarders’ network to cover asia and middle east. however, their resources do not cover the markets of latin america. that is why they decided to hire the commercial mission to mexico with the chamber in 2016. public law entity hypothesis 1 (h1) reads: the status of public law entity and defence of the general interest of the chamber of commerce of barcelona, which induces trust among firms, is regarded as an added value by firms hiring international services. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 formal approach it needs to be analysed whether the affirmation is true according to objective documents. on the one hand, laws regulating chambers are considered to see how chambers are defined in official texts. secondly, corporate documents and promotion material belonging to the chamber are analysed to see how they introduce themselves to firms and to value whether they consider their own status to be a value-added. literature on the topic literature on the topic recognises that, at least in the beginning, there was a characteristic trust behind chambers that implied low-risk (vidal olivares 2010)32 first, because the advisor was not trying to make money out of it as a market service and secondly because the service maintained an autonomy, meaning that it was carried out voluntarily and in the willingness to help the whole business community (bennet 2011). official public writings in the public texts33 regulating chambers in catalonia, chambers of commerce are corporations of public law, which maintaining a political non-alignment, are under the scope of the government, which has legislative competence over them. chambers of commerce are consultation bodies of the public administration and have their own legal status. chambers also have autonomy and independence to manage their monetary resources as well as the bundle of services they offer. by law, in catalonia there needs to be at least one chamber in each province (girona, lleida, tarragona) and two in the province of barcelona. in addition, in each province there can be 32 literally: “las cámaras constituyeron [...] plataformas de confianza, disminuyendo los riesgos de los comerciantes e inversores españoles” 33 llei 14/2002, de 27 de juny, de les cambres oficials de comerç, indústria i navegació de catalunya i del consell general de les cambres http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 other delegations belonging to the main chamber. each chamber has a geographical scope, to which firms are subscribed depending on their constitution address. as far as the promotion of the internationalisation is concerned, each chamber is free to offer the services it considers appropriate to fulfil the goal. as seen before, commercial missions are one of the main tools by which chambers help catalan firms go abroad. chambers corporate presentation from the chamber of barcelona perspective, we consider that corporate websites and catalogues and videos are the showcase for their services. in a corporate video concerning the whole entity34, they define themselves as trustful because the chamber represents all kinds of businesses; from self-employed, small business owners, medium-sized businesses to large corporations. the chamber offers services to all sorts of businesses regardless of type, size, or sector; since 1886 they have been working for the defence of the business activity. somehow, chambers must offer their services to any kind of firm without discrimination due to their type. hence, the potential profitability of the business hiring the service is not relevant. the chamber offers a neutral position that consultancies, private firms, or banks that may offer similar services cannot offer because of their private nature, which forces them to have profitmaking as the main goal. this means that firms that would probably be rejected by private entities due to low-return on investment can be assisted by the chamber of commerce. 34 cambra de barcelona. (2016, march 29). barcelona chamber of commerce 2016. retrieved april 2017, from youtube: https://www.youtube.com/watch?v=z9crkchfyva http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 empirical approach four out the five firms to which the follow-up was carried out state that the status of public law entity of the chamber conveys a message of trust. only one of the firms states that the relevant matter is that dates of the mission match with their firm’s agenda, regardless of who organises it. some state that they feel -as a firmautomatically represented by the chamber of commerce because they know it is the entity defending business activity in their geographical scope. firms value the neutrality of the chamber's status. years of experience as a historical entity since 1886is also considered relevant. the fact that the chamber is partner to the public administration is also considered a characteristic that helps convey the message of trustworthiness. one of the firms mentions how private consultancies are too profit-oriented and selling their service is the only thing that matters and, in addition, may sell the firm’s data to third parties, something they understand the chamber will not do because of their status. in line with this, some highlight that they value how, thanks to being a public law entity, the chamber provides help and services to firms that have less guarantees of success (lower roi) or to not-yet-profitable start-ups that would not find support in the private sector. as stated by several interviewees, when firms seek help to develop their business activity, and this includes internationalising, the first thing they do is to consult public entities that offer a service that may help them in a less profit-oriented way than private consultancies. this is why they consider essential the fact that the chamber is labelled as a public law entity that defends the general business interest regardless of the type, size, or turnover. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 only one of the interviewees questions whether the proposal of participating in a mission was suitable for its firm and to what extent it was only sold as a business opportunity for the chamber. being aware that commercial missions are useful when you have a clear decision of which market to go for. if you are not sure about it, the chamber may advise enrolling in a mission and this might not be the appropriate market for the firm, states the interviewee. in general firms value the positioning of respect that its status provides, they would rather hire services to an institution than to a firm such a consultancy. therefore, we can state that hypothesis 1 is supported both formally and empirically. firms hiring commercial missions in the international department of the chamber of barcelona regard the status of public law entity as value-added. worldwide network hypothesis 2 (h2): the built-in worldwide chamber network, which implies a net of experts, homologous entities abroad is regarded as value-added by firms hiring international services. formal approach official public writings the government tries to encourage chambers to build up a network of contacts both at regional, national, and international level. from the catalan government, we see that article 14 of the law 14/2002 about chambers in catalonia considers that it is important that chambers establish agreements with other institutions in order to better fulfil their goals and activities. therefore, by law35, chambers are allowed and encouraged to establish cooperation agreements with other chambers and also with private and public institutions in the national territory and 35 article 14. llei 14/2002, de 27 de juny, de les cambres oficials de comerç, indústria i navegació de catalunya i del consell general de les cambres http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 also abroad.36 in addition of contacts and networks chambers may build with other entities nationally and internationally, they may also decide to create their own delegations abroad. chambers are considered social networks that contribute to the decrease of transaction costs (vidal olivares 2010) this is covered by the royal decree 1717/2004 of 23rd july which modifies the royal decree 786/1979 of 16th march which establishes the rules for spanish chambers of commerce established abroad. basically, the modification mentions that the creation of spanish chambers abroad will be made easier in order to respond to the growing number of spanish of firms wanting to internationalise and in need of this service. the original decree recognises the work carried out by spanish chambers abroad in paving the way for spanish exports to increase. furthermore, it highlights the collaborations there have been between spanish chambers and spanish embassies. the decree emphasizes that cooperation is important between national chambers and their international representations; being advised with a coordination plan on issues of general interest. international delegations of spanish chambers are in charge of providing general commercial information to interested spanish firms, promote spanish products abroad, assist spanish exporters, intervene in solving international disputes through mediation, and issue of certificates of origin, to mention but a few. chambers’ corporate presentation at a corporate level, we can show how the network of contacts of chambers of commerce is a relevant characteristic by analysing official promotional material and websites. 36 literally: “per complir millor llurs finalitats, les cambres poden establir convenis o altres instruments de col·laboració entre elles […] amb les administracions publiques i amb altres ens públics o privats d’àmbit nacional o internacional.” http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 starting at a spanish level: the chamber of spain declares on its website that it counts on a global network formed by 180 offices in over 31 countries for the convenience of firms hiring their services. in fact, in spain alone, there are 86 chambers of commerce that maintain relationships among them. there are also 47 local offices in spain to overcome distances by acting as a network of local economic observatories. plus, there are 35 chambers of commerce abroad (camacoes), regulated by the mentioned royal decree.37 at a catalan level, the entity managing the group of chambers in the territory is the so-called consell de cambres de catalunya. we do not have direct information about the entities with which they have agreements abroad but in their corporate web there is a map summarising all the commercial missions that catalan chambers organise. as we mentioned in a previous chapter, organising a commercial mission means that there is an interlocutor in the country where it is carried out, who organises the agenda of firms. therefore, we can consider the map of commercial missions of catalan chambers clear evidence proving the network of contacts chambers have abroad38 which include missions to north, central and south america, europe, middle east, northern africa, sub-saharan africa, asia and oceania. lastly, at a local level, the chamber of barcelona states in its corporate video (cambra de barcelona, 2016) that chambers of commerce comprise a worldwide network operating in 130 countries, with the chamber of barcelona playing an active and important role. they claim to maintain exchanges and have agreements with other chambers, firms, and key institutions at an international, national, and regional level. 37 see map of delegations of spanish chambers abroad at www.camara.es 38 see map of countries to which commercial missions by catalan chambers are carried out at www.paicambres.org http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 one of the interlocutors at destination for the catalan chambers is the entity of acció, belonging to the generalitat de catalunya and labelled as agency for competitiveness. we can see in its website a display of its 36 delegations abroad; whose function is to promote catalan business internationally and attract foreign investment to catalonia.39 empirical approach all the interviewees consider the global chamber network to be an added value. one of the facts they value unanimously is that the chamber has interlocutors that are physically at the destination. they find this a key strength and an essential characteristic that allows them to create high quality agendas. some interviewees underline how you can go much further in negotiations to set up a meeting when the chamber does it on your behalf. speaking on behalf of the chamber of commerce, not only opens doors to contact their homologous entities abroad but also private firms which may be a firm’s potential client. this fact may be linked to the previous hypothesis. as one of the interviewees states that being a public entity makes it easier to be listened to, both at public and private level, as the figure of chamber of commerce has equivalents worldwide. one of the firms underlines, specifically, how delegates at destination working for the chamber of barcelona are much more qualified than those working for icex, a public entity with which they hired a mission in the past. apart from valuing the usefulness of delegates abroad and the network of contacts they can establish, responsible for the firms interviewed also find interesting the fact of having access to contacts inside the chamber of barcelona itself. this type of networking helps them to have somebody they can refer to when in need in the future. 39 see map of delegations of acció at www.gencat.cat/accio http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 in fact, several firms stated that they do not consider it essential for the chamber to carry a post follow-up of the mission, as this seems to be internal task for the firm. what they do highly value is that the representative of the chamber of barcelona who accompanied them to the mission, continues to be available and easily reachable when the mission ends. they also find it relevant to be able to talk with the delegate at destination and carry-out an interactive preparation of agendas. visiting physically, when in the mission, the offices where those delegates work is also regarded positively; as well as the visits or interviews they may carry out with the embassy or the country’s chamber of commerce. the physical presence in the country where the agenda is carried out is essential for arranging quality meetings. however, some of the interviewees state that not all of the contacts were the perfect profile of customer they wanted. also, that the contacts of the chambers can very effectively arrange the meetings but that, as it is comprehensible, success is not ensured. normally, the meetings are useful to establish a first contact to which the follow up will be done in a virtual way. it is rare that agreements are closed in the first visit. nevertheless, this first visit seems to be essential to show interest and contact and orders are later organised via email without problem. in general, representatives interviewed value the network the chamber has abroad, especially the physical presence of delegates of cooperative entities in countries and being able to exchange ideas with those representatives to build up a good planning of interviews appropriate to the needs of the firm. also, they are glad to have contacts inside the chamber of barcelona once the mission finishes and to have access to future services of the chamber. some state that after participating in the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 mission with the chamber they discovered many other services of the chamber itself and of complementary entities such as foment (the main employers' association of catalonia). public law both at spanish and catalan level has been analysed to prove how institutions allow and encourage the creation of a global chamber network. also, the geographical dispersion of delegates belonging to the chamber of spain, chamber of barcelona and acció has contributed to visualise the international reach of the network. parallel to this, firms agree unanimously that the network and contacts the chamber has access to, was a decisive in justifying their purchase decision. hence, we can state that h2 is supported both formally and empirically and that the global network of contacts the chamber has access to is value-added for the international department. affordable prices hypothesis 3 (h3): the price, lower than market equivalents, is regarded as an added value for firms hiring international services. official public writings according to the royal decree 1717/2004 of 23rd july, chambers of commerce receive subsidies assigned by the government so as to encourage the promotion of services that serve the general business interest. moreover, in article 19 of the same decree40, where sources of financing for chambers of commerce are listed, subsidies of the ministry of commerce and tourism are considered the third source of income. 40 royal decree 1717/2004 of 23rd of july http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 this economic help are sunk investments made by the government that help decrease the market price of the services chambers offer and therefore make them more affordable to smes, the main customer for internationalisation services. chambers corporate presentation the chamber of barcelona is aware that affordable prices is an attractive characteristic of their services. in fact, in their corporate video, they state that the chamber of barcelona works to offer affordable and quality services.41 prices for commercial missions with the chamber of commerce of barcelona vary according to the market but are normally around €1,350+vat, €550 being the enrolment fee and €800 the cost of the preparation of the working agenda and meeting plan. final prices end up being around €1,630, including vat. this price includes meetings with the person responsible for the market in the chamber of barcelona, individualised agenda, contact and feedback from interlocutors at destination, logistic support, and post mission follow-up. there are market equivalents organised by other entities and sector associations such as cecot or acció itself, all of them tend to be equivalent in terms of price. in the private market, however, prices are much higher as commercial missions tend to be individual and receive no public funding. empirical approach four out of the five interviewed firms find the affordable price a defining characteristic for hiring the mission. there was one firm that stated that dates were more relevant than price when hiring a commercial mission. 41 cambra de barcelona. (2017, april 10). internacionalitza’t amb cambra de barcelona. retrieved april 2017, from youtube: https://www.youtube.com/watch?v=cjgwxqcsu5o http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 among the other four firms there was unanimity in declaring that the service had a very competitive price. the firms with international experience valued how cost-effective the service was and how it helped them externalise the activity of agenda planning in a very time-saving way. on the other side of the spectrum, the start-up interviewed and firms with no export department mentioned how they knew they could count on the chamber for a service that they could not afford in the private sector. hence, medium-sized firms with an export department consider the price lower than the cost of doing the same work internally; while firms with no export department value consider they could not have had access to that service otherwise. also, one of the interviewees states that she knows market equivalents in the private sector are much more expensive, since she used a consultancy just for advice on international issues and the price was greater than what the chamber charges for commercial missions abroad, which implies an active and personalised research. the spanish law regulating chambers of commerce regulates the allocation of subsidies to chamber in order to encourage them to provide affordable services. in addition, the chamber uses this strength when promoting their services. empirically, four out of the five firms state how the affordable price was an issue of paramount importance when hiring the service. hence, we can state that h3 is supported both formally and empirically and that the affordable prices of the commercial missions are an added value for firms hiring international services. direct channel for subsidies hypothesis 4 (h4): the direct channel that the chamber of commerce of barcelona has for obtaining subsidies to help finance firms’ commercial missions, is regarded as value-added by firms hiring international services. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 formal approach official public writings according to the catalan law regulating chambers,42 they are assigned the role of managing subsidies and public funds aimed at firms to foster their activities. basically, the catalan government identifies the chamber as an official intermediary to channel subsidies towards firms. chambers corporate presentation at a spanish level, the chamber of commerce of spain publishes on its corporate website how they have the legal role to manage european structural funds, as they are the intermediary that channels european funds towards spanish smes. most of the programmes they manage are grouped in the european regional development fund43which aims to pave the way for internationalisation to take place and to promote technological development. in fact, on their corporate site they number the programmes that chambers are legally entitled to manage during the period from 2014 to 2020, these being: programa operativo de crecimiento inteligente, innocámaras, support to eco-innovation for smes, ticcámaras, fomento de la eadminsitración en la pyme, plan integral de apoyo a la competitividad del comercio minorista en españa, tourism programme, xpande, xpande digital, international promotion programme, business support programme to women, formación profesional dual, españa emprende, support the entrepreneurial spirit. 42 llei 14/2002, de 27 de juny, de les cambres oficials de comerç, indústria i navegació de catalunya i del consell general de les cambres 43 european regional development fund (erdf) http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 at a regional level, the council of catalan chambers also states how they are responsible for managing the enterprise europe network which involves a series of opportunities and services, ranging from open source databases, to subsidies to promote competitiveness. lastly, at a local level, in the official website of the chamber of barcelona, the posts promoting each of the missions contain information about the subsidy the chamber will manage on behalf of the firm. as mentioned above, these subsidies can mainly come from three sources: european enterprise network at european level, camara de españa at the spanish level and acció at the catalan level. the amount of the subsidies varies according to the market and the cost of the trip. however, it tends to be around €700 for closer countries such as morocco or tunisia and €1,200 for further countries such as cuba or the dominican republic. empirical approach there is unanimity in considering that the help and direct channel to obtain subsidies are a very attractive characteristics of chamber’s services. not only do firms value the fact of receiving money from the government to finance their internationalising activities, they consider of a greater importance the fact that the chamber deals with all the bureaucracy involved. according to some interviewees the subsidy helps to cover travel costs and represents a financing of around 30% of the mission, including enrolment price, agendas, flights, and hotels. all of the firms consider the direct channel for obtaining subsidies to be a differential point for the chamber. two firms state that they would not have hired the commercial service if there was not the subsidy. another firm states that the subsidy is an incentive, and that they would not have had time to manage the paperwork on their own. although this aspect is highly valued, there are two firms that express some criticisms. one of them was, in the end, not able to receive the subsidy for problems at the chamber of spain http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 level. although the chamber had never guaranteed it 100%, the firm not receiving the subsidy felt disappointed at receiving the news, as this financial help was essential for them. another firm also complains about the unjustified time it takes to receive the subsidy, which they consider should be payable the same year the mission was carried out and not so many months later. however, both of them express understanding when saying that this is not the chamber’s fault but a governmental issue. hence, h4 is supported both formally and empirically and it can be stated that the direct channel chambers have for obtaining subsidies and the management of red tape involved are regarded as added values by firms hiring international services. nevertheless, there is still room for improvement concerning the liquidation time for subsidy reimbursement and guarantees for obtainment. is the internet a threat to chamber services? strengths and weaknesses firms were asked about the role of the internet in their internationalisation process to see whether it was a threat to the chamber’s international services, especially commercial missions. three out of the five firms stated that they used the internet as a source of information both about the market and contacts proposed in the mission agenda parallel to the information proposed by the chamber during the preparation of the mission. they made use of the internet mostly to get to know firm profiles as well as to obtain general economic information about markets, growing sectors, economic situation, on-going investments, and the politics of the country they were travelling to. one of the firms with more international experience and with its own export department stated that in parallel to the mission they carried out a market study of the country on their own, using internet information as a main source. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 all firms stated that during the agenda creation process, while they exchanged information with interlocutors at destination they used the internet to contrast whether some of the contacts suggested suited their needs. the internet is regarded as a wide source of information by all the interviewees. four out of the five firms studied declare that, using the internet, they could have managed to prepare an equivalent agenda of meetings to the one they received from the chamber. nevertheless, it would have been so time-consuming and costly that it would not have been worth it. especially, all the firms recognise many of internet's disadvantages. first of all, the internet gives you access to consulting profiles of firms and especially to forums where those firms are valued and ranked in their sectors. however, it is very hard to define the search especially when you are seeking contacts in an unknown market. secondly, all of the firms highlight that they could have found the contact of firms online but that they would not have managed to arrange a meeting as the chamber and their delegates did. this feeling is common to all the interviewees which think that the internet gives you access to contact details and opinions on a firm but does not guarantee you to be heard. thirdly, the group of firms think that the physical presence of chambers’ delegates in the country is of paramount importance in explaining the success of the service. although further contact and management of invoices and commands can be made virtually, the first contact needs to be face to face for things to work more smoothly. as one of the interviewees stated, the mission, and therefore the physical visit to the market, marks a turning point in the internationalisation process of the firm. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 firms also value other aspects of the commercial missions that were not dealt with in the hypothesis. they unanimously consider the format of a group mission and the logistic support to be of great help. on the one hand, the fact that an expert from the chamber of barcelona travels with the firms together with the fact that they advise which flight and hotel to take and give logistic support throughout the journey is regarded as very helpful. interviewees highly appreciate the help in dealing with visas, hiring a driver when abroad and translators when needed. the chamber also puts at availability their travel agency for a less problematic organisation of the trip. this sensation of on-going support and logistical assistance is considered to be a distinctive characteristic. many firms recognise that the experience of the chamber is made obvious throughout the organisation of the mission and that it is of enormous help. on the other hand, and most importantly, interviewees state that being accompanied by other firms in the group mission is much more enriching than travelling on your own, for it represents a form of both emotional and professional support. the number of firms attending a mission can normally be from 5 to 12. all of the interviewees are delighted with the company of the other participants and they recognise it makes the trip easier both at a personal and professional level. at a personal level because there is emotional support in an unknown country, there is an exchange of information during dinners in the hotel -which is the same for all participantsand many networking opportunities. at a professional level, it is fruitful because most of the missions are pluri-sector and this leaves room to learn from others, for synergies to take place among participants as well as to discover new business opportunities. as an example of how this can be a positive exchange, we have the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 case of one of the firms which, while exchanging ideas during a dinner, realised that one of the meetings that had not been interesting for them could be a profitable contact for another firm taking part in the mission. also, among participants, new business opportunities were created, for instance logistics firms caught the attention of companies in need of export experts. innovation networks the information and feedback obtained through the study of these cases can be useful to further study the topic of chambers role in the 2.0 society and can be object of use to improve international services of the chamber of barcelona. according to users’ innovation theory and the study of innovation and entrepreneurial networks in europe (fernández pérez and rose 2010), collecting information from the consumer is a very important source of innovation ideas. in fact, what the consumer wants is a reflection of what is needed in the market (fernández pérez and rose 2010). firms need to look into consumer feedback and analyse whether it is possible to develop modifications to improve the service or product offered. this is why the case study carried out for this thesis can be of use to improve the quality of the bundle of services offered by the international department. as interactions are an essential part of the development of innovations. it has been suggested that upstream and outward-looking innovative environments have helped transform successfully the products and services offered by many firms (fernández pérez and rose 2010). hence, it can be useful for the chamber of commerce to use the characteristics stated in the hypothesis as a differential strength to promote their services, for it has been shown that the legal public entity status, the global network, the price and the intermediation for the chanelling of subsidies are regarded as key added values by target firms. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 moreover, using user feedback obtained through interviews, it can be useful for the chamber to underline as a differential characteristic the logistic support offered throughout the whole process of the commercial mission as well as the positive fact that missions are grouped. along the same line, this work suggests to the chamber of barcelona the development of a strategy to better take advantage of networking possibilities among participants in missions. an exchange of information among groups participating in missions is regarded as a very positive asset both personally and professionally, the chamber should be aware of how this can be of use before, during and after missions. thus, proposing both an exchange of information between firms in a pre-mission environment and leisure activities during commercial missions where participants can naturally interact and easily take advantage of the group knowledge and experience. conclusions the history of chambers has been analysed, thus learning that chambers of commerce were born from protest and willingness to be heard by governments. despite their generalised initial lack of the resources, with time, they became an honourable brand associated with the promotion of trade, the improvement of legislations on defence of the business interest and the supply of information to firms. voicing business interests was their initial goal. however, this was soon supplemented with coffee and reading rooms, commercial arbitration, advice, and information. later, their bundle of services continued evolving as employment bureaux and commercial examiners. then came export certifications and an increasingly relevant role of business advisor for internationalisation. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 the turning point for chambers was, however, the fact of becoming a partner of the government, from the 1980s onwards, which meant increasing the bundle of services to apprenticeships and workforce training. in particular, it has been analysed how the barcelona chamber of commerce 44 (1886) after more than two decades relying on the sole financing of voluntary membership fees, in 1911 a decree stated that membership to chambers in spain would become compulsory, these receiving a narrow percentage of the corporate tax. from then on, the catalan chambers have belonged to the continental model of chambers of commerce, in which membership is compulsory for all firms in their geographical scope. on the contrary, we talk about the anglosaxon model where membership is voluntary. a twist in the plot arrived with the removal, in 2011, of the compulsory membership fee; which represented 70% of revenue and now accounts for 30% of the financing of chambers of commerce in catalonia and spain. this unforeseeable change, sunk the economic resources of the chamber of barcelona, and added to the growing weight of the internet, may be a threat to the services of the barcelona chamber of commerce, especially the international department. in this work, it has been analysed how crowdsourcing in the web 2.0 – that is, the process whereby the power of many, often amateur and co-creators used to create free content online, might be commonly used to undertake tasks that were once reserved for a few specialists, such as the chamber. due to a lack of time and resources, this work focuses on the analysis of the commercial missions by the international department of the barcelona chamber of commerce. to know 44 permission has been given by the international department of the chamber of barcelona to use this information for this paper. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 how to better position the international services and to analyse whether the web 2.0 poses a threat to them, the differential traits of commercial missions were sought. through the study of official texts, corporate promotional materials, and the development of five case studies, it has been demonstrated that what the web 2.0 has to offer is complementary to the commercial missions undertaken by the international department of the chamber of barcelona. this is true, especially for internationalisation processes in long-distance markets. the four hypotheses of this work have been supported. first, the status of public right entity is key to project an image of trust and neutrality, as it represents the general business interest. plus, firms would rather go to a semi-public entity since it is not exclusively guided by profit-making as may happen with private consultancies. second, the worldwide chamber network and the existence of interlocutors that are physically at destination is a trait of paramount importance that determines the quality of the international services. the network is useful both at public and private level. it offers contact with the homologous entities in other countries -that is, other chambers of commercebut also to open doors to set up meetings with potential clients in the private sector that would otherwise be out of reach for firms at an individual level. third and fourth, the concepts of price and direct channel for obtaining subsidies represent the same advantage for firms: affordable internationalisation services. for small firms and startups, normally without many financial resources, the price is a key feature. these firms do not tend to have an export department and rely on the externalised service the chamber for a relative low price. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 for larger and more experienced firms, that employ their own export managers, the service of commercial mission presents competitive prices that are both time-saving and costadvantageous. the direct channel for subsidy obtainment is highly valued but there are also some criticisms concerning the lack of guarantees for ensuring the allocation from public calls or bids and the length of time it takes to get them reimbursed, as small firms may lack financial resistance to wait for reimbursements to arrive at the due date. throughout the analysis of the case studies, other added values for the commercial missions have been highlighted unanimously by interviewees. these being: on-going logistical support and the fact that missions were grouped. the chamber of barcelona can use this information to better position their services. inspired by the case studies, this thesis suggests that the chamber of barcelona develops a strategy to take advantage of networking possibilities among participants in commercial missions. exchange of information among groups participating in missions is regarded as positive both personally and professionally. the chamber should be aware of how this can be of use before, during and after missions. thus, proposing the exchange of information between participants in a pre-mission environment and leisure activities during commercial missions where participants can naturally interact and easily take advantage of the group knowledge, experience, and create enriching synergies. although younger and born-global firms tend to rely on internet as a source of foreign market information, the web 2.0 seems a complementary tool to commercial missions. the role of the chamber is justified as it has been shown through the five case studies that the internet provides reachable data but, obviously, does not help the firm to act and set up a meeting. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 nowadays, online presence is necessary to spread the image of a brand and keep track of already-tied-up agreements. nevertheless, in the internationalisation process, physical visits continue being the master key for developing fruitful and trustworthy business relationships internationally. it can be stated that commercial missions by the chamber make sense because they put at reach of all the firms' actual market experience and contacts. thus, helping firms avoid falling in the virtuality gap by misreading online information, something that would be detrimental to their own export activity. oral sources garcía, antón. 2017. “ceo rokdesign.” interview by minerva estruch-rectoret. barcelona, april 5, 2017. gelado, mireia. 2017. “export manager of j. 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"the internationalization process of the firm—a model of knowledge development and increasing foreign market commitments." journal of international business studies, palgrave macmillan; academy of international business 8 (1): 23-32. magallón, eduardo. 2016. “la generalitat fa el primer pas per canvair les cambres de comerç.” la vanguardia, october 17, 2016, 59. quelch, john a., and lisa r. klein. 1996. “the internet and international marketing.” sloan management review 37 (3): 60-75. rokdesign. 2017. “rokdesign corporate website.” accessed april, 2017. http://www.rokdesign.es/ salvat, jordi. 2017. “una referència en l'obertura de mercats a l'àfrica.” diari ara camp de tarragona, april 27, 2017, 6. se7c. 2010. “ja no és obligatori pertànyer a les cambres de comerç.” set-c. accessed april, 2017. www.set-c.com/ca/noticies/55/ja_no_es_obligatori_pertanyer_a_les_cambres_de_comerc/ sinkovics, noemi, rudolf sinkovics, and ruey-jer b. jean. 2013. “the internet as an alternative path to internationalization?” international marketing review 30 (2): 130-155. doi:10.1108/02651331311314556 telic group. 2017. “telic group corporate website.” accessed april, 2017. http://telic.es http://revistes.ub.edu/index.php/jesb http://www.parlament.cat/document/cataleg/48110.pdf http://www.gorgy-timing.es/ http://www.gorgy-timing.es/ http://archive.wired.com/wired/archive/14.06/crowds.html http://lab.cccb.org/ca/web-2-0-deu-anys-despres/ https://iccwbo.org/chamber-services/world-chambers-federation/history-chamber-movement/ https://iccwbo.org/chamber-services/world-chambers-federation/history-chamber-movement/ http://telic.es/ volume 4, number 1, 26-69, january-june 2019 doi:10.1344/jesb2019.1.j052 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 vidal olivares, javier. 2010. “sirviendo a las empresas en el mercado int.: las cámaras españolas de comercio en argentina y méxico (1888-1936).” revista de la historia de la economía y de la empresa 5:241-259. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 227 carmen vila-gimeno universidad ramon llull (spain) origin and evolution of the emergency service of the hospital de la santa creu i sant pau (1967 to 1986) abstract this paper aims to present the origin and evolution of hospital emergency services through the emergency service of the hospital de la santa creu i sant pau de barcelona, as it is the centre that has best preserved information about its own process, its evolution as a hospital and its adaptation to social change. a very particular characteristic of this hospital is that it managed to integrate its users as part of the management board at a time when the country was in the middle of a democratic transition after forty years under a dictatorship. for the realization of this paper, we have used the qualitative methodology has been used, in particular, heidegger's hermeneutical phenomenology, so as to triangulate documentary analysis with open interviews with relevant people about the historical process being studied, and to obtain the resulting document. a descriptive work, with a completely objective, historical account. the existence of this article cannot be explained without considering the importance of certain documentary sources that remain, so far, largely unexplored, such as the archives of the neighbourhood associations of barcelona and the impact of social movements in achieving the creation of new health services, their maintenance and surveillance, and the promotion of their development according to the needs of each historical moment. that would be the main conclusion. keywords: hospital emergency services; hospital evolution; social movements corresponding author: e-mail: carmevigi@gmail.com received 15 september 2020 accepted 20 november 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:carmevigi@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 228 introduction once the world war ii was over, between the 50s and especially during the 60s of the 20th century, most european countries started reforming healthcare to adapt to the social, economic and health-related changes that had taken place. thus, most of them were building new hospitals or rebuilding those that could still continue to function. all these efforts were aimed at achieving healthcare reform; to make them more suited for the times to come (“evolución de la organización hospitalaria en los países de la c.e.e.”, estudios sobre hospitales, 1969, 38: 35-36; sitjes 1962b).,1 it was understood that all around, there should be general university hospitals which contained all existing medical specializations, lower-grade hospitals with most specializations, and local hospitals with the capacity to serve most people in the region. all of them should have an emergency service. changes of this kind were taking place in france, england, ireland (“los hospitales en irlanda.” estudios sobre hospitales 1971, 48: 9), switzerland, the ussr, romania, finland, belgium and portugal, among others (alegre 1962a and 1962b; artigas 1975 and 1976; department of health edingburg 1963; jaén 1964; ramis and torres 1973; sitjes 1962; torre 1964; villamarín 1971). also during the 60s – in parallel to what was happening in europe – the united states and canada began working on “the forgotten diseases of modern society"; not just traumatology related to work and traffic accidents, but also their numerous consequences and side effects, which exponentially increased the cases of disability in the civilian population. these trauma centres began to be developed in the united states in 1966. the traumatology services would 1 since the advent of the industrial revolution, accidents related to work injuries and new forms of transport had sharply risen, constituting a new epidemiologic context where it became commonplace for a physician to rutinely deal with medical and surgical emergencies. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 229 benefit from out-of-hospital care by adding specialized personnel to their teams (evans 2007; mulllins 1999; “la situación hospitalaria en las américas” 1975 73: 42-57; trunkey 2000). they would also manage to include other medical specializations, such as neurosurgery, that would help in the treatment and recovery of head trauma (trunkey 2007). but both countries had a problem in common; the great extension of their territory, which made it necessary to regionalize their emergency services and trauma care in most of the large cities. this would be achieved in canada in 1980 (evans 2007), while in the united states it began in the 1970s. at the same time, the involvement of surgeons in the care of traumatic patients came to be considered necessary, since the increase in stab wounds and gunshot wounds with ruptured spleen and liver increased the mortality of these patients. while regionalization was still spreading throughout the north of the united states until well into the 1980s (beuran et al. 2011; boyd 2010; mehrotra et al. 2010; phillips et al. 2005; rockwood et al. 1976), on the other side of the world, in japan, already the 60s, a law had been passed to implement emergency services in certain hospitals, which would be designated by the government, and which were put into operation without singular specializations, having doctors that were experts in the acutely ill be the ones in charge of emergencies (hori 2010). in the same decade – the 60s –, in spain, this concern was also present, and it was then that a group of doctors, taking advantage of the fact that spain was beginning to open up to the rest of the world, started traveling to other european cities to attend and participate in conferences and other events about hospitals, and bringing back the articles they found, later translating and publishing them in the journal estudios sobre hospitales y beneficencia, bringing their knowledge to the country. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 230 thanks to this resource, we know that in europe, at the time, each country’s emergency services were being organized according to their specific needs and health policy. thus, in the united kingdom they created hospitals dedicated to emergency treatment and care, but in scotland, it was recommended that district hospitals offer a service to tend to accidents 24 hours a day, and that it be staffed by an in-house physician (departament of health edinburgh 1963; stewart 2008). meanwhile, in the ussr, the existing practitioner/midwife stations – of which there was one per every nine hundred people – were in charge of giving first aid to those who needed it, and referred the sick to the hospital when necessary (jaén 1964). in romania, emergencies that happened during the night, or during hours that the dispensary was out of service, were tended to in the first care unit that was part of the hospital. all general practitioners, specialists from the polyclinic, even from the hospital, had to go through this service (ramis and torres 1973). in finland, in order to lower health costs, they first promoted primary care centres, where they included emergency care (artigas 1976). in belgium, the emergency system was perhaps one of the most innovative; knowing that the immediate assistance of a patient or injured person on the public highway or at home was a great problem, the belgian government had perfectly coordinated emergency resources, both in terms of transport and the facilities available for immediate assistance. this efficiently organized setup used a single phone number for the whole country (900) which everyone could call in case of emergency, and which provided information about the nearest ambulance centre available to the patient, and immediate access by the ambulance to the nearest health centre where the patient could be transferred. this way, at any time of the day or night, whoever needed it could be transferred to the facility that was best suited to treat them. this system was completed with legal regulations that guaranteed the economic coverage of the services volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 231 provided in any centre. this coverage was laid out in such a way that, ultimately, in the case of a disadvantaged person, the financial responsibility for this assistance was directly entrusted to their municipality or the state (artigas 1975). in portugal, the ministry of health and social assistance began its hospital organization in 1946, while in 1963 it drew up a health coordination program in which all the health services were integrated into the same functional plane, including emergency relief services. additionally, it expanded its disaster relief program with the expressed awareness that it’s proper functioning relied heavily on effective emergency response. a good example of this was the distribution of emergency services in the lisbon area in 1963. the emergency care facilities were distributed in two regions so that the population volume was proportional to the number of beds. there were eight civil hospitals with a total of four thousand beds. meanwhile, the specialized emergencies were distributed by areas. this assistance was completed by emergency aid stations within several hospitals, clinics and companies, as well as private medical and nursing facilities, which offered permanent care. the two most important hospitals had two different setups. while the banco de soccorro (emergency service) of the san josé hospital based their assistance mainly on their surgical team and was directed by a surgeon, the hospital de santa maría was organized by services, co-directed by an internal medicine doctor and a surgeon. its wards were reinforced by an analyst, an anaesthetist and a radiologist, demonstrating that a multi-headed approach was also very effective and not as supervisory as when it relied on a single person. this scheme was a recommendation of the portuguese ministry of health to plan emergencies in the capital, but new emergency centers specialized in traumatic brain injuries and burns had yet to be opened, as well as the creation of mobile units for care at the scene of the accident (aragó 1968; torre 1963 and 1964). volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 232 in france, in 1961, there were around 500,000 injuries a year, of which 200,000 were caused by accidents at work. another similar figure was caused by accidents on public roads, while the remaining 100,000 were due to sports or due to home accidents. because of this, in the paris area, the cochin hospital, a trauma centre attached to a general university hospital, had 200 beds, an emergency room, an orthopaedic service, a laboratory, a burned victims ward, and a radiology ward. it offered permanent care 24 hours a day, with a surgical team, a resuscitation room, laboratories, radiology, a cast room, etc. it was inside a general university hospital to facilitate access to other specializations related to accidents, such as neurology, orthopaedics, surgery, ophthalmology, maxillofacial surgery, urology, etc. it also had an outpatient service to be able to do a complete follow-up until the injured person was reintegrated into work. in the emergency service there was a treatment room, a cast room, operating rooms, radiology..., and short-stay hospital beds that were emptied daily. its mission was to treat minor traumas and classify the injured according to the affected region in order to direct them to the corresponding department. this facility also had a septic department for infected cases that required isolation measures (dunan 1974; poirson-sicre 2000; sitjes 1962a). but the concept that really led to the development of emergency services in the modern era was “cardiopulmonary resuscitation” (safar, escarraga and elam), which did not appear until the early 1960s with the publication of mouth-to-mouth ventilation techniques developed by james o. elam (1918-1995) and his collaborators in the 1950s (elam 1977; elam, brown and elder 1954), together with external cardiac compressions, the study of which corresponds to william b. kouwenhoven (1886-1975) and collaborators, in 1960 (kouwenhoven, jude an knickerbocker 1960). it was during this same time that the techniques for external cardiac defibrillation were perfected (lown, amarasingham and neuman 1962; zoll et al. 1956). all volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 233 this laid the foundations for what would be modern “cardiopulmonary resuscitation”. also, during the 60s, emergency services grew considerably, beginning their development, incorporating new technologies, facilitating their access to vehicles that transported patients and, above all, with the popular realization of the importance of tending to cases of vital urgency, or emergency, with maximum efficacy (lloret and aregall). it was in this context that the emergency service of the hospital de la santa seu i sant pau was developed and created, including four ambulances for the transfer of patients to the facility. in general, the spanish state raised to the challenge, and with few geographic and demographic disparities, began building health centres to cover these new forms of harm; until that moment, the public health system had depended economically and legislatively on municipalities, through the health and charity boards (lain 1973; placer and urkia 1993), and the health system promoted by the franco dictatorship, with the establishment of the seguro obligatorio de enfermedad (1942), and its construction of care facilities known as residencias, which were mainly surgical hospitals and did not contemplate urgent care. in a study on the hospitals of madrid published in 1961, and commissioned by the dirección general de sanidad, it became clear that hospital reform was essential for the subsequent evolution of spanish healthcare, and to achieve the humanization of care. most of the problems encountered in the capital also applied to the rest of the spanish hospital network (garcía gonzález 2011). the same report also discussed the advisability of having full-time doctors.2 it did not consider to emergency services, although it later states: “home care of patients from 2 at the time, doctors generally weren’t hired by hospitals. they visited patients in the morning and sometimes in the afternoon, but were mostly private practitioners. it was commonly said that they only visited the hospitals to learn from the various illnesses of people there, who were mostly poor and disenfranchised. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 234 public hospitals is totally non-existent, so it is recommended that a home care programme be developed and implemented, along with emergency facilities” (martínez gonzález 1962). therefore, we can assume that, as in catalonia, the existence of emergency services was very scarce or reduced. in barcelona it was a little different, because since the end of the 19th century there had been a permanent medical-sanitary system under the control of the city council, which was obliged to tend to the population in the event of medical emergencies, injuries or accidents. there was a casa consistorial, or casa de socors (relief house), in each district of the municipality, with a total of ten. the staff working there, doctors and practitioners, had to take special measures in the care of patients suffering from infectious diseases, which had to be compulsorily declared with the corresponding notification to the municipality. they were responsible for vaccinations and revaccinations free of charge, of all disenfranchised individuals, and were required to assist and care for the injured at any time of the day or night (ajuntament de barcelona 1885). the kind of healthcare provided at the cases de socors came to cover needs that would otherwise go untreated for those who had no health insurance. in some spanish capitals, these relief houses were necessary due to the lack of hospitals, and included milk banks for infant children (gotas de leche); in others, the hospitals were not prepared to deal with these problems in an optimal way (placer and urkia 1993). this was the case of the hospital de la santa creu i sant pau (hscsp) de barcelona, which, since beginning operations in the new location of the guinardó district – from june 30th, 1916 until july 15th, 1927 – did not provide any service with these characteristics. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 235 this work is mainly based on the results of the research carried out for the preparation and defence of a doctoral thesis by the author of this article, entitled: “el servei d’urgències de l’hospital de la santa creu i sant pau de barcelona (1967-1986)”, defended in january 2014 at the universitat autònoma de barcelona. before starting this research, we wondered about the origins of hospital emergency services, and thus several questions arose: what were the origins of hospital emergency services? what phenomena led to the appearance of these services? what was previously in place at the hospital de sant pau to provide emergency care? this is how the main objective of the study came about: to carry out an investigation on the origin, evolution and development of the emergency service in the “modern” era at the hospital de la santa creu i sant pau de barcelona, and its development over time, with special emphasis on the political, social, economic and/or demographic changes that occurred in the period studied. methodology and documentary sources the methodology used in this work is heidegger’s (1889-1976) hermeneutic phenomenology. this method seeks the comprehension of reality with the objective of increased awareness. it is a method of historicist and dynamic conception, which takes into account human beings in their biological, psychological and social context (cònsola 2008). hermeneutic phenomenology considers what people say, their words, and the meaning they have, as an invaluable resource (gálvez 2007). in historical studies, the use of the scientific method must be aimed at answering questions, testing hypotheses through the evaluation and interpretation of the phenomena studied, through historical evidence, dealing with the past. the collection of data must be systematic and its volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 236 interpretation must be rigorous, so as to facilitate the correct reconstruction of the facts. the researcher must verify the authenticity of the sources and clarify the meaning of the text following the hermeneutic methodology (arratia 2005). the unit of analysis of the study is the emergency service of the hospital de la santa creu i sant pau de barcelona (catalán 2012). the participants are people who collaborated in this study with their testimonials. they were selected using non-probabilistic criteria of an intentional nature, following the snowball method as well as according to convenience (gerrish and lacey2008; salamanca and martín-crespo 2007; vasilachis de gialdino et al. 2006). therefore, the sampling was partly intentional; participants were chosen on the basis of their relevance to the investigation, so as to compare their statements with the documentation consulted and conforming to the researcher’s accessibility (gerrish and lacey 2008). the criteria for the inclusion of the participants was that they be involved with the emergency service of hscsp in barcelona at the time of its inauguration, so as to have direct and reliable information about the evolution in the functioning of the emergency service from its conception. different techniques were used for data collection; open-ended interviews were performed when the subject of study couldn’t be observed, as they are often used in historical studies (hernández, fernández and baptista 2010). while to get documentary sources he went to: josep laporte library of barcelona, historical archive of the city of barcelona, historical archive of the hospital de la santa creu and sant pau, and contemporary municipal archive of barcelona. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 237 a second documentary source was books; the sample of the books read was chosen for their generalist as well as specific content on the history of hscsp. books were also read that contained relevant information about the social customs of our country, as well as the demographic changes that accompanied the great political changes that occurred in the period studied; the dictatorship, the transition period, and the arrival of democracy. thirdly, press articles were consulted and read as documentary sources: a sample of press from different ideologies and political tendencies was taken, even though during the dictatorship, published news underwent a censorship process, especially on issues related to politics. the criteria for the inclusion of press articles was that they either ratified or corroborated the information obtained in relation to the hscsp and that their content referred to issues or conflicts dealt with in our study. also considered were articles that provided information about local social movements which took place during the time period studied. all in all, we reviewed articles from the following outlets: diario de barcelona, la hoja del lunes, solidaridad nacional, tele/expres, la vanguardia, el observador, el noticiero universal, el correo catalán, mundo diario, la prensa, abc, el país, el periódico and avui. the fourth source of documentation was the private documents provided by one of the sons of the first director of the emergency service, dr. vicenç artigas i raventós, and the first governing board of the hospital. the minutes books of the mia (molt il·lustre administració, very illustrious administration, in english), the instrucciones permanentes del servicio de urgencias (868 articles), the internal publications of the hospital itself – annals de sant pau (1919-1936), annals de sant pau (1951-1977), butlletins interns de l’hospital de sant pau (1971-1996), sant pau (1980-1990), fulls informatius (1999-2000) – as well as the private volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 238 archives of the neighbourhood associations of the clot-camp del arpa, sagrada familia, and guinardó areas. the fifth source came from journals specialised in the sector such as medicina clínica (19671968), estudios sobre hospitales y beneficencia (1961-1967), its complete collection, as well as estudios sobre hospitales (1968-1980),3 noticias médicas (1969-1970), articles from different medical and nursing journals (alonso et al. 2003; aranaz et al. 2006; berlango et al. 2000; bueno and sánchez 2005; cabrer 1991; castells 2006; corbella et al. 2001; duaso and lópez-soto 2009; hoyle 1995; lucas et al. 2011; mckenzie 1991; moreno 2004 and 2008; nellessen 2009; ortiz 2010; oterino et al. 1999; pasarín et al. 2006; pearn 1998; peña and snyder 1995; roig and baró 2006; safar 2001;sánchez, salgado and miró 2008; trabacchi 1997; varon and sternbach 1991 [these works are a sample]), as well as annals de medicina by the academia de ciencias médicas (monographic) on the emergency service (2002). finally, some web pages were consulted: pubmed; isoc; isis; dialnet; eureka; and tdx. all of them provided some valuable information. the emergency service of the hospital de la santa creu i sant pau the origins on the 30th of june 1916 began the transfer of patients from the old hospital de la santa creu de barcelona to the new location in the district of guinardó. this process of transferring patients and services would take about 12 years. it wasn’t until july 15th, 1927, a couple of years before the full transfer was completed, that an emergency care service was created, when 3 both were found in the archives of the hospital del sagrat cor in barcelona. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 239 the molt il·lustre administració (mia)4 assigned an in-house team (named cos de guàrdia), staffing it with four doctors5. the doctors on duty were there to provide emergency care to the hospital’s patients as well as those who came through the entrance stations.6 at first, they were located on the right wing of the administration building,7 but they later relocated to the basement floor of the central operating pavilion, near the delivery room. towards the end of 1949, however, at the request of the mare general, it was decided that, to aid the proper functioning of the service, it should be moved from the basement to the second floor of the same operating pavilion. it was set up as the “emergency room” of the other existing hospitals, – at that time, the hospital de los infecciosos and the hospital clínic –. so even though there was a minimal emergency service, it was not nearly enough to fulfil the needs of the city (lópez i gibert 1977). this new medical service, the cos de guàrdia, operated as a de-facto emergency service, but it was not until the end of 1950 that we can find a document in which the emergency service is first called by this name (cornudella 1971).8 on october 6th, 1950, the administration of the hscsp, in acknowledgement of his merits, granted dr. enric ribas isern (1897-1975)9 the direction of the servei de guardia, at that time 4 the molt il·lustre administració (mia) was an administrative organization in charge of the hospital de la santa creu since its creation in 1401. it was formed by two canons and two city councillors, an inheritance of the old consell de cent. the real power, however, was wielded mostly by the canons until well into the 1960s, as the councillors didn’t concern themselves with the daily workings of the hospital. this gave the canons more weight in the decision-making processes, where the nuns and the priest had great influence. 5 the doctors working at the cos de guàrdia were: enric lience, vicenç arnaldich serradó, manuel negre balet and vicenç jordán navarro. 6 the entrance police station was part of the existing hospital admission system at the hospital. 7 annals de l'hospital de la santa creu i sant pau (13),1-13, may 1927; hospital de la santa cruz y san pablo barcelona: 1930. 8 see also “nombramiento de médicos auxiliares. (1927)”, anales del hospital de la santa cruz y san pablo iv: 231. 9 enric ribas isern was an abdominal surgeon. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 240 still located in the basement of the central operating pavilion. however, three years later he would resign from the post due to what he claimed was a lack of support from the mia. while the hscsp was deteriorating due to a clear lack of medical involvement and the cos de guàrdia was still without a head of service, startling news arrived in the form of an article published in the annals de l’hospital in 1964, which spoke of an anglo-saxon and nordic contribution that had been gaining ground throughout europe and the world, about the degree of medical involvement and dedication in hospitals. there was talk of full-time medical care within the hospital, that is, exclusive or full-time care within the same facility, something unthinkable until then. this fact reaffirmed that hospital management had to change, and the hscsp had already begun to do so with the arrival at mia of canonge lluís de despujol ricart (1895-1981) in 1958. canonge despujol wanted to change the management of the hospital, introducing great shifts in the functioning of the institution and in the remuneration of the staff. he proposed doctors should receive proper remuneration for the first time, – it had been very small before, as after distributing the profits between the administration and the subordinate staff and other services, there was only a small part left for the head of each service to distribute with the collaborating doctors –. this was not enough, and he would quickly understand that he alone could not make the changes that were necessary, so he got in touch with carlos soler durall, manager of the general hospital of asturias.carles soler durall was the son of a bacteriologist from the hospital de los infecciosos (now hospital del mar) who had gone into exile, to the united states. he had wanted to specialize in microbiology at yale, but the untimely death of his father made him switch focus, onto hospital planning and management techniques. once he returned to spain, the president of the provincial council of asturias, josé lopez muñiz (1916-2005), volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 241 took him on as manager at the general hospital of asturias where he carried out the duties of both manager and medical director. there, he would start applying certain techniques of hospital management still unknown in our country; this would make the local doctors reject him outright. carlos soler, according to reventós, “was surely for a time the most important man, not only in the catalan health system, but also in the spanish health system. both in oviedo and at sant pau, he led hospitals down paths previously unknown in our country.” hospital management (alvarez 2009), then, was a relatively new concept in the health institutions of the time; the lack of any hospital policy under the franco dictatorship forced hospitals throughout the country, and especially in catalonia, to remain under the model of the domestic hospital,10 pretty much until the transition to democracy. this was why the first hierarchisation of a large hospital in catalonia was that of the hscsp. dr. soler justified it by stating that the 20th century would be the century of hospitals, that the evolution towards the modern concept of hospitals would soon take place. in fact, he based his argument on the flexner report (1910), which had proposed a new way of understanding the economy, administration and organisation of american hospitals (barceló and comelles 2020). this management led to a great revolution at the national level, as different hospitals in the country, including the hospital clínico in madrid, followed its guidelines during the reform of spanish hospitals in the 1960s (morán 2011). dr. soler incorporated the economy into the hospitals, he promoted monolithic hospitals and the centralisation of general services as a measure to save on hospital costs, as this meant savings in consumables, personnel and 10 this is the name that was given to hospital facilities when, at the beginning of the 20 th century, they began incorporating treatments that had previously been done at home. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 242 equipment. he also took part in the commission that would draw up the training programme for medical interns and residents to facilitate their medical specialization and professional development within the country. he was appointed as general director of hscsp and in november of 1969, discussions began on the draft of new regulations for the hscsp's facultative body, which would, among other things, discuss salary issues, bringing to light once again the disastrous existing criteria behind hscsp's funding (pedret 1969). carlos soler was entrusted with the construction of a new emergency service. the great responsibility involved in providing this type of care and its social repercussions meant that the appropriate provisions had to be made to guarantee the maximum level of care at all times. the director general himself proposed the appointment of the oldest deputy director of general surgery, dr. vicenç artigas riera (1908-1975), as director of the new service. he would devote six hours a day to supervising and coordinating the service, making it compatible with his other duties. he would be the one to organise the setting up of the new emergency service (mia 1966). in the regulations of the new service, the main objective was the assistance of patients who, susceptible to an alteration of their health, needed immediate assistance, whatever the nature of their illness. to this end, it was equipped with the adequate personnel and material means as well as a functional structure that would allow it to deal with those situations with maximum efficiency. additionally, this service was aimed at any person affected by a condition that would be worsened if they did not receive immediate assistance, as well as those people who needed assistance because they could not find it elsewhere. people could come in, safe in the knowledge volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 243 that they wouldn’t be discharged until the doctors had made sure there was no health risk in them doing so. as for hospitalised patients who had an emergency and who, due to the structure of their ward, could not be tended to, they would be transferred to the emergency service of the same hospital. its inauguration took place on october 5th, 1967.11 human resources the emergency service would be an example of functional integration of all hospital services, since in addition to the specific structures of the emergency service, other specialised services and departments, doctors, medical-administrative and administrative staff would also work together in cooperation with the emergency service. it also had the permanent support of the biochemistry and haematology laboratory, blood bank and radiodiagnosis facilities. the general services of the hospital directly involved would be the departments of nursing and ambulance service, social assistance, admissions, billing, and finally the conservation department and the hospital workshops. in its organisation chart, the emergency service was made up of a unitary management and according to its director vicente artigas “... with four doctors in charge of general surgery, traumatology, general medicine and anaesthesia, with a total of sixteen doctors assisted by a similar number of resident doctors. in addition, the emergency service has a medical team of more than fifty specialist consultants who are available to consult or operate, as the case may be, within less than an hour.” (llull 1968) in this way, all the specializations of the hospital were involved in the new project. 11 as noted in “inauguración del servicio de urgencias del hospital de san pablo.” la vanguardia, january 23, 1968; “la urgencia de las urgencias.” la vanguardia, october 10, 1967, and in “nuevo servicio de urgencias en el hospital de la santa cruz y san pablo.” la vanguardia, october 5, 1967. see also puig 1977; and servicio de urgencias 1967 hospital de la santa cruz y san pablo. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 244 the executive committee of the emergency service was presided over by an administrator assigned by the mia, and was made up of the general director, the director of the emergency service, the head of the hospital's administrative division and the head of the medicaladministrative division. the objective of this commission was to periodically review and monitor the evolution of the emergency service, so there was awareness at the highest level of management of the realities of the department. at the same time, this first-hand knowledge of their needs as they arose allowed for the adaptation of their policy according to their situation and guaranteed that any problems within the service were known within the mia (soler 1967). the staff that made up the crew of the new service at the time of its inauguration was composed of its director, vicente artigas riera, and together with him, four internal medicine doctors, four traumatology doctors, four general surgery doctors and four anaesthesia doctors; the same number of resident doctors for each speciality, plus three radiology doctors. as for the nursing staff, which depended on the nursing department, there was a general supervisor, thirty nurses, eighteen assistants, four radiology technicians, six radiology assistants, four receptionists, one secretary, ten sanitary personnel and seven cleaners. in total, it was a team of 121 people, who were at the service of the citizens of barcelona and the rest of catalonia (vila 2014). dynamics of the emergency service for the proper functioning of the service, the functions of each professional category that was part of the team had to be properly delineated and described. to this end, the instrucciones permanentes del servicio de urgencias were drawn up and presented by carles soler durall to the mia. this way, carles soler repeated what he had already done at the general hospital of volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 245 asturias (garcía gonzález 2011), where he had had the permanent instructions of the services and departments of the centre drawn up. the first thing a person found upon arriving at the emergency service was the admissions area; an entrance door for ambulances and cars that ended up in a corridor where, on the right side, were the authorities and press department and different waiting rooms for patients and families, while on the left side, was the reception and social worker. in the event of detecting any social problems, the latter tried to find solutions while the patient was being visited by the emergency team. on the same side, on the left, were the doors of four first aid cubicles, where the patients entered directly from the vehicle into the cubicle, the purpose being that medical assistance could begin without delay. these cubicles were equipped with all the necessary tools for assistance of any kind.12the operating theatre area consisted of an operating theatre anteroom, two operating theatres, an anaesthetic induction room and an air-conditioning and machine room. in the clinical area was the intensive care unit, where seriously ill patients were placed. it had a semi-circular shape with a total of six individual sections arranged around a central control point from where both the medical and nursing staff had a direct view of all of them. in this way, variations in their physiological state were easily monitored and detected, since the pulse, breathing, blood pressure, temperature and electrocardiogram were electronically controlled with continuous graphic records for each of the patients, with pre-established alarms on an individual basis (vila 2014). 12 according the interview to m.t. forner, december 3, 2007. see also soler (1967). volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 246 the main entrance to the hospital gave way on the right-hand side for the entrance to the service, an exclusive entrance for the new emergency service, located in a preferential area of the hospital, easily accessible from avenida gaudí itself, which guaranteed the fluidity of vehicle traffic, with an entrance permanently open to the interior of the service with a perfect connection with the rest of the hospital. this was an advanced service in the technology of its time, with an intensive care unit shared with the rest of the hospital. thanks to the good press it generated, for a few years it was one of the most crowded emergency services in the city of barcelona.13 in spite of being a leading service, there was a grave mistake in its design: it didn’t take into account the patients who arrived on foot to the emergency service. they did not have a parallel entrance circuit but had to access through the same door as the motor vehicles. only once they got inside could they find the reception counter, where the desk clerk and the social worker were located. this led to criticism from other centres which had a minimal emergency structure and saw in the new service at sant pau an important rival; one that with its technology, was changing public perception and would force them to provide new approaches in terms of care and operation. however, various media sources from the era considered it one of the best emergency services at the time.14 13 as noted in “barcelona celebró el xxix aniversario de su liberación con importantes inauguraciones y entregas de medallas y premios de la ciudad.” abc, january 27, 1968. see also reventós 2003; soler 1967. 14 pointed in “el nuevo servicio de urgencias.” la vanguardia, january 26, 1968; “barcelona celebró el xxix aniversario de su liberación con importantes inauguraciones y entregas de medallas y premios de la ciudad.” abc, january 27, 1968; also soler 1967. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 247 economic resources the economic costs and income of the service would be the object of specific departmental accounts, maintained by the economic department of the hospital, in which everything that had occurred on each date would be recorded, classified by general budgetary concepts, and a monthly summary would be established. they would also include an unrelated part of the hospital's general expenditure, which would be established in a fixed amount for an entire financial year, at the beginning of the year. depreciation costs would also appear as expenses, calculated by dividing the price of each depreciable asset by the expected duration of each material element. all receipt or collection of money from patients treated in the emergency service was exclusively made by the sub-cashier that existed next to the hospital's billing section on the same floor as the emergency service, controlled by personnel specifically authorised by the billing section itself, at times when the cashier desk was closed (vila 2014). cases of total or partial charity, agreements or third party liabilities were managed by the appropriate charity or agreement sections, following normal procedure. for this purpose, the invoicing section connected the interested parties with other sections. users were charged for the services in accordance with previously established tariffs. in the light of practical experience and accounting data, the tariffs were revised, incorporating any possible modifications, duly signed by the general manager. the express ideal to strive for was that the tariffs per unit of service should coincide exactly with the real cost, regardless of the economic qualification of the patient. from the day of its inauguration, the service was adapted according to the needs of the demand that existed, but it was not until 1980, with the inauguration of the paediatric and the volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 248 gynaecologic branches of the emergency service, that the hospital achieved its goal of providing all kinds of specialized emergency care. continued training, the basis for good care dr. artigas was a highly regarded teacher by his students, both the students of the hscsp school of medicine and the students of the hscsp school of nursing. his passion for teaching and learning made him a traveller who went looking for what he could learn where he could be taught. this meant that throughout his life he developed research studies with his surgical teams and invited them to make them public in different events around the world, and in this way he got a whole team – and at the same time a whole emergency service – to understand the need for good continuous training; necessary at the beginning, with the opening of the service, and necessary over time, to ensure all its professionals were at the highest level, as the times demanded (benito 1977; puig 1977). appearance of emergency service collapses on january 28th, 1975, due to a flu epidemic, the hospital was saturated and once the provincial health department had been notified, it closed its doors for a few hours. this fact was considered unfathomable by barcelona society, as an emergency service was supposed to be kept open 24 hours a day. but the lack of beds in the catalan capital meant that permanent care became a difficult objective to achieve. this serious situation was publicised on a national level,15 since it was the first time that an emergency service in barcelona had collapsed in such a visible way. 15 as noted in “el hospital de la santa cruz, saturado.” abc, january 31, 1975; “el hospital de san pablo, saturado.” diario de barcelona, january 30, 1975; and pedret 1975. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 249 this highlighted the lack of hospitalisation beds in the city of barcelona and the lack of emergency services. this lack of healthcare resources in the city produced great concern among the population and in the hospitals which were overloaded with work and without sufficient resources. this was clearly a problem for the community, which, through the media, called for an increase in the amount of both public and private hospitals and therefore an increase in the number of beds in the city.16 this press release was drawn up by josep jover, director of the hscsp emergency service, a position he held until 1990.17 he had been one of the founding members of the emergency service and therefore marked and guaranteed the continuity of the task carried out by dr. vicenç artigas, who was transferred a few days after the first collapse. the new director's leadership developed at a time of great political, social and economic change. in february 1975, an article was published in the press announcing that the hospital was once again experiencing financial problems. in spite of everything, the sant pau hospital had made a great effort to update all its services and found that when it came to asking for help from the instituto nacional de previsión (inp), the latter did not take responsibility, because it gave priority to the two other facilities it had built in the region, which it considered a benchmark on an international scale.18 in june of the same year, 1975, a strike by hospital workers once again put the capacity of the emergency service to the test. this was the only service that maintained its normal activity, despite the labour conflict, without presenting any additional problems (capdevila. 1975).19 16 see “déficit alarmante.” la vanguardia, january 31, 1975. “el hospital de la santa cruz, saturado.” abc, january 31, 1975; “hospitales: toque de alerta.” la vanguardia, november 1, 1975; and pedret 1975. 17 see “sensible pérdida.” boletín del hospital de la santa cruz y san pablo, 1975). 18 pointed in “el hospital de san pablo, saturado.” diario de barcelona, january 30, 1975. 19 see also the article “paro en el hospital de san pablo.” la vanguardia, june 3, 1975. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 250 during the months of march and april 1976, two more closures of the hscsp emergency service due to collapse occurred. specifically, on march 23rd, due to overcrowding, those with minor injuries were asked to go to other health centres in the city, while the press continued its denunciation of barcelona's hospital deficit .20 the same thing happened again on the april 3rd of the same year, with its corresponding denunciation in a press release.21 as a result of these repeated incidents, a social movement began to spread to all the neighbourhoods of the catalan capital. a committee was formed by the neighbourhood associations (aavv) of the areas around the hospital, along with josep jover, head of the hscsp emergency service, and dídac amat, head of public relations at the same centre, working as secretary of the committee (servicio de relaciones públicas 1976). this committee drafted a document that was sent to the director of the provincial delegation of barcelona of the instituto nacional de previsión (inp), joaquín busquets ducet (1916-1998), at its headquarters in barcelona, with a copy sent to the civil governor, rodolfo martín villa, and to the mayor of the city, joaquín viola sauret (1913-1978), inviting the inp to carry out a plan for the viability and improvement of emergency medical care in the city.22 the document mentioned the serious lack of hospital centres in the city of barcelona to care for emergencies, which caused the collapse of the few existing ones, and that this problem could not be solved as long as it continued to lack 20.000 beds (servicio de relaciones públicas 1976). the commission therefore proposed that, as urgently as possible, public assistance in the city should 20 as pointed in “no ha habido aumento significativo de la gripe este año.” la vanguardia, march 25, 1976; “notable déficit hospitalario en barcelona. cierre provisional del servicio de urgencias del hospital de san pablo.” la vanguardia, march 24, 1976. 21 noted in “barcelona: nuevo cierre provisional del servicio de urgencias del hospital de san pablo.” la vanguardia, april 4, 1976. 22 see “interesante programa de colaboración entre asociaciones de vecinos y el hospital de san pablo.” la vanguardia, april 4, 1976; and “preocupación por la situación sanitaria de barcelona.” abc, may 26, 1976. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 251 be zoned and that this zoning should be public, making this information available to all citizens, so that each person could know which centre to go to when they required urgent attention. during the following months, until july 1976, other citizens with important positions in civil society joined the project for the improvement and coordination of the city's hospitals, with the express objective of preventing another the collapse of the emergency services 23 in october 1976 the aavv, together with representatives of the hospital clínic and the hscsp, sent a letter similar to the previous one. this new letter, however, was to be sent to the management of the inp, in madrid. nine months before, the letter had been sent to the barcelona delegation, which responded that the matter raised was beyond their competence and had to be sent to the central services. so, for a second time, this time at the onset of winter, with the addition of the hospital clínic and twenty-two other associations, it was delivered again (servicio de relaciones públicas 1976). barcelona did not stand still, until finally, on june 3rd, 1977, most likely as a result of the awareness campaign carried out through the neighbourhood associations, a response was received from the central services of the inp.24 it stated that they had instructed the provincial delegation of barcelona, as well as the rest of spain, to take the necessary measures to structure the coordination and sectorisation of the emergency services of the health institutions belonging to the social security and in the semi-private hospitals with increased functionality.25 23 noted in “más adhesiones ciudadanas al proyecto de urgencias.” boletin del hospital de la santa cruz y san pablo, 1976, 14. 24 as pointed in “respuesta favorable del inp a la propuesta de mejora y coordinación de las urgencias.” butlletí de l'hospital de la santa creu i sant pau.,1977, 3. 25 see “al habla con gerència.” boletin del hospital de la santa cruz y san pablo, september 1, 1977; “coordinació de les urgències.” butlletí de l'hospital de la santa creu i sant pau. 1977, 23. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 252 at the beginning of march 1979, the first steps were taken in the project of the sectorisation of barcelona, assigning each emergency centre a specifically delineated area to provide care for. excluded from the sectorisation were vital emergencies, which would be tended to in the nearest centre possible. to establish each area, the natural setting, road traffic and access to the facilities, the capacity of the hospitals and the number of emergencies generated by each area per thousand inhabitants were taken into account (servicio de relaciones públicas. 1979).26 at the same time as the above events, soler durall left in 1970 and mrs. elvira guilera soler joined as manager. despite being a continuator of the task set out by her predecessor, she opened the concert with the social security in order to survive and deal with the payroll of the new staff and doctors who, being of a different generation, demanded to have a payroll at the end of the month. as a result of all this, a serious conflict arose with the inp, which even endangered the continuity of the hospital itself. during this crisis, the management of the hospital was changed and a governing board was formed to take charge of the hospital's management, leaving only the management of assets in the hands of mia. the governing board was to start work immediately, with the aim of transforming the hospital into a public service entity (“junta de govern de l'hscsp. butlleti de l'hospital de la santa creu i sant pau, 1978: 1 ater, the consell d’usuaris (people's council) would be created, and immediately get to work. the first thing it did was to set itself some objectives that would represent its values, its reason for being, its seriousness and above all the need to be an entity that was representative of a population that was starting to be the protagonist of an important change in the whole country. 26 see also “por teléfono podrá consultarse cualquier tema médico-sanitario.” la vanguardia, october 28, 1979. volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 253 the hscsp’s consell d’usuaris was based on the principles of the inalienable defence of the patients’ rights, support for the transformation of the hospital into a public service with an internal democratic, participatory structure and with total transparency in management. without doubt, the two most important actions carried out by the council in its first period were the drafting of the “declaration of patients’ rights” and the creation of the suggestions and complaints service. in the same year, 1978, the ministry of health created the national institute of health (insalud), a body that would replace the inp. its main purpose was healthcare management. this body’s purpose was to modernise the country's health system, decentralising health services to the autonomous communities, as soon as the general health law was passed in 1986, but this transfer was extended until 2001, when the body disappeared for good (catalán 2012). conclusions the new epidemiological paradigm of medical-surgical emergencies that appeared as a consequence of the industrial revolution, most developed in our country in the mid-20th century, arose before the health system was prepared to assume these new challenges, and it was, at first, the cases de socors that were forced to take on that responsibility, entrusted to alleviate the existing deficiencies in spanish society at the time. this new epidemiological paradigm would be the main phenomenon which would lead to the appearance of the emergency services in the new era which was beginning. the saturation and temporary closure, in 1975, of the city's new emergency service was the first warning sign about the shortage of hospital beds in the catalan capital. this social volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 254 emergency was denounced by the media and supported by the press release signed by the director of the hscsp emergency service. when another collapse situation arose the following year, a social movement started which, in its inception, was formed by the neighbourhood associations of the areas around the hospital, as well as the head of the emergency service and the head of public relations of the same facility. this commission would prepare a document that would be sent to the director of the barcelona provincial delegation of the national institute of forecasting (inp), at its barcelona headquarters, with a copy to the civil governor, and to the mayor of the city, inviting the inp to carry out a plan for the viability and improvement of emergency medical care and the zoning of the city. while waiting for the response, the citizens' mobilisations and the workers' labour protests to strengthen their healthcare demands were spread throughout the city, and after a few months of waiting for a response, a new document was drafted, this time to be sent to the inp's headquarters in madrid, which was signed by the previous groups, as well as hospital clínic and twenty-two other associations. this movement spread to other cities in spain, until the state’s reply finally arrived, stating that they had sent instructions to the provincial delegation in barcelona, as in the rest of spain, to take the appropriate measures to be able to structure the coordination and sectorisation of the emergency services of the health institutions belonging to the social security and in the subsidised hospitals with added functionality. the management promoted by dr. soler contributed to the change of paradigm of the hospitals, which went from being daytime reception centres to being considered a decisive health resource accessible 24 hours a day for the whole population, which turned current society into a hospitalcentric one. but his training in a completely private healthcare system, such as the one present in united states, where everything has a price, made him totally distrustful of the inp. this volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 255 contributed to the economic problems of the hospital and the projects it presented to the mia board. simultaneously, the social movements were beginning to carry a lot of weight, which led to the departure of dr. soler, with mrs. elvira guilera soler as the new manager, who despite being a continuist, opened the concert with the social security to be able to survive and provide the much-needed payroll for the new staff and those doctors who demanded to have a payroll at the end of the month. however, a series of serious conflicts began to appear, which led to changes in the management of the hospital, with a governing board being set up to take charge of hospital management, leaving only the handling of patrimonial assets in the hands of mia. it was the first time that, at a state level, an organism created by the patients and users of a healthcare centre had come to have representation within a public organization, a change the effects of which would ripple out well into the future. documentary sources minute books mia. 1966. llibre d'actas de les sessions celebrades a l'hospital de la santa creu i sant pau. barcelona, october, 20. mia. 1967. llibre d'actas de les sessions celebrades a l'hospital de la santa creu i sant pau. barcelona, march 3. interviews vicenç artigas i raventós, head of service of the hospital de la santa creu i sant pau (april 5th, 2009). maria teresa forner, hospital del mar de barcelona (december 12th 2007). volume 6, number 1, 227-262, january-june 2021 doi.org/10.1344/jesb2021.1.j088 256 references ajuntament de barcelona. 1885. servicio médico-sanitario permanente de la ciudad de barcelona. barcelona: establecimiento tipográfico de los sucesores de n. ramírez y cª. alegre marcet, c. 1962a. “plan para el futuro de los hospitales britanicos.” estudios sobre hospitales y beneficència 12: 27-29. alegre marcet, c. 1962b. “supresión de las salas comunes en el hospital. la experiencia del centro hospitalario de belfort.” estudios sobre hospitales y beneficencia 9: 58-60. sánchez, miquel, òscar miró, blanca coll-vinent, ernest bragulat, gerard espinosa, elisenda gómezangelats, sònia jiménez, carme queralt, josep hernández-rodríguez, josep r alonso, josé millá. 2003. “saturación del servicio de urgencias: factores asociados y cuantificación.” medicina clínica.121(5): 161-172. aranaz andrés, jesús, rafael martínez nogueras, maría teresa gea velàzquez de castro, vicenta rodrigo bartual, pedro antón garcía, fernando gómez pajares. 2006. “¿por qué los pacientes utilizan los servicios de urgencias hospitalarios por iniciativa pròpia?.” gaceta sanitaria 20(4): 311-315. http://scielo.isciii.es/scielo.php?script=sci_arttext&pid=s0213-91112006000400010. arratia f., alejandrina. 2005. “investigación y documentación histórica en enfermería.” 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(2007). “the emerging crisis in trauma care: a history and definition of the problem.” clinical neurosurgery 54: 200-205. varon, joseph, and george l. sternbach. 1991. “cardiopulmonary resuscitation: lessons from the past.” journal of emergency medicine 9(6): 503-507. doi: 10.1016/0736-4679(91)90224-4. vasilachis de gialdino, irene, coord., aldo r. ameigeiras, lilia b. chernobilsky, verónica giménez béliveau, fortunato mallimaci, nora mendizábal, guillermo neiman, germán quaranta, and jorge soneira, 2006. estrategias de investigación cualitativa. barcelona: editorial gedisa. vila gimeno, carme. 2014. “el servei d'urgències de l'hospital de la santa creu i sant pau de barcelona (1967-1986).” phd disc., universitat autònoma de barcelona. villamarin vazquez, josé luis. 1971. “organización hospitalaria y planificación sanitaria en la u.r.s.s.” estudios sobre hospitales 47: 27-43. zoll, paul m., arthur j. linenthal, william gibson, milton h. paul, and leona r. norman. 1956. “termination of ventricular fibrillation in man by externally applited electric countershock.” new england journal of medicine 254: 727-732. doi: 10.1056/nejm195604192541601. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. https://doi.org/10.1016/0736-4679(91)90224-4 https://www.nejm.org/doi/full/10.1056/nejm195604192541601 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 wilson araque jaramillo universidad andina simón bolívar, sede ecuador (ecuador) https://orcid.org/0000-0002-2626-8705 roberto hidalgo flor universidad andina simón bolívar, sede ecuador (ecuador) https://orcid.org/0000-0003-2369-3666 jairo rivera vásquez universidad andina simón bolívar, sede ecuador (ecuador) https://orcid.org/0000-0003-3528-5969 small and medium-sized enterprises in ecuador: evolution and challenges abstract the main objective of this article is to analyze the evolution of ecuadorian small and medium-sized enterprises (sme), their contribution to the national economy, institutional framework, and internal operating characteristics. to this end, the focus is on companies related to the manufacturing sector in ecuador. the main periods of the analysis are: i) the 1990s, ii) 2000-2008 and iii) 2009-2019; however, the decades of the 1970s and 1980s have been included in the first part of the article for their relevance. literature review is the main data collection methodology, and the databases used are from official sources. data from the banco central del ecuador (bce, central bank of ecuador), the instituto nacional de estadística y censos (inec, national institute of statistics and census), regulations and research around the sme sector have been used. the main findings are that smes are crucial within the ecuadorian industrial fabric, because of its specialization in products that contribute to satisfying basic needs, but also because they provide parts and supplies to other companies. the quantitative contribution of smes, however, has been declining over time, both in number of establishments, staffing, and production, which reveals the increasing relevance of large industries. in this process, the institutional framework has had an influence in the evolution of smes, with certain strengths and weaknesses in terms of supporting the development of smes. in turn, in regards to internal operation, it becomes apparent that despite some improvement, there has not been significant progress during the period under analysis. in short, this work contributes to the larger discussion about the relevance of smes in ecuador, their history, and whether there might be grounds for public policies to support their development. keywords: small and medium-sized enterprise; small and medium-sized industry; ecuador corresponding author: e-mail: wilson.araque@uasb.edu.ec received 16 september 2020 accepted 2 june 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-2626-8705 https://orcid.org/0000-0003-2369-3666 https://orcid.org/0000-0003-3528-5969 mailto:wilson.araque@uasb.edu.ec http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 1. introduction in latin america, there is a significant contribution from small and medium-sized industries in terms of employment and production, which is linked to the development models implemented by the countries in the region (cepal 2013; peres and stumpo 2002). the same can be said about the ecuadorian case. however, we have yet to know the history, evolution, environment, and characteristics that have influenced their dynamism and survival over time. the article focuses the analysis on companies related to the manufacturing sector in ecuador. the main objective of the study is to understand the evolution of small and medium-sized industries (sme, or pymi for its initials in spanish) in ecuador. in this document, an sme is characterized according to the number of workers, due to the availability of information, and taking as reference comunidad andina de naciones (can, andean community of nations) decision 702 of 2008,1 which was formally adopted by the country through the código orgánico de producción, comercio e inversiones (copci, organic code of production, commerce and investment) and later in executive decree 757 of 2011. the methodology used in this document is based on a documentary review; data from the banco central del ecuador (bce, central bank of ecuador), the instituto nacional de estadística y censos (inec, national institute of statistics and census), regulations and research around the sme sector were used in this process. in this analysis, the main characteristic of this study is the use of timeframes, which organizes the presentation of the evolution of smes into three 1 according to resolution 702, smes (pymis) are defined by two variables: the personnel employed and the gross value of sales. in terms of the personnel employed, a small business has up to 49 workers and medium businesses have up to 199 workers (can 2008). the use of sales or personnel employed does not have a statistically significant difference (rivera 2018). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 main periods: i) the 90’s, ii) 2000 -2008, and iii) 2009-2019. it should be noted that the first part of the article includes the 70s and 80s because they are important for background. the document is structured as follows: the second section presents the study methodology; the third section analyzes institutional characteristics related to smes, highlighting the laws and organizations related to the sector; the fourth section presents some characteristics of the evolution in the study of the sector over time; the fifth section establishes the importance of the industry within ecuador and the contribution of smes to the country, highlighting their contributions in the number of establishments, personnel employed, and production; the sixth section indicates the operating characteristics of the sme sector, its progress, and challenges. finally, the seventh section presents the conclusions of the document. 2. methodology as a technique for data collection, this paper uses the analysis of historical documents that, as part of historiography—a key space of the historical profession (ayala 2014b)—focuses on identifying, reviewing, and studying specialized literature, studies, and research already generated by public and private, national and international organizations throughout the economic history of ecuador. these contain a significant component such as the history of the evolution and transformation of the fabric of production. considering that history, from the viewpoint of the time variable, is a fairly wide space, this study takes timeframes as a method to help the approach to reality, based on the specific organized analysis of duly classified data collected (ayala 2014a). the investigative effort has focused on three periods starting in 1990 since, due to the occurrence of certain historical events, these become references for understanding the economic history of smes. however, in http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 the institutional segment, an earlier period is included; the decades of the 70s and 80s, as a necessary background to understand the sector. the periods chosen for the historical study of smes are the following: ▪ 1990 to 1999, a period of searching for an economic opening, given that between the 60s and 80s, ecuador took as reference a model of inward industrialization promoted by the comisión económica para américa latina (cepal, economic commission for latin america). ▪ 2000 to 2008, implementation of dollarization as the monetary model of ecuador. ▪ 2009 to 2019, evolution of the economy, from an economic boom, with restrictions on private productive development—emphasis on the presence of the state in all spaces—to a final scenario of economic austerity. 3. institutional evolution and change in regard to small and medium-sized industries (smes) in the analysis of the institutional framework related to smes, the definition established by institutional theory is considered, for which institutions are the norms, regulations, and actions of people and entities that set conditions and/or limit the behavior of involved social actors (north 1991; dimaggio and powell 1999). in contrast, organizations are groups of people who act on the basis of a structure and guidelines to achieve a specific purpose or objective, thus, “formal organizations are generally understood to be systems of coordinated and controlled activities that arise when work is embedded in complex networks of technical relations and boundary-spanning exchanges” (meyer and rowan 1977, 340). with this perspective, this section identifies laws and regulations, public and private entities, business associations, and organizations directly related to smes in ecuador, whether with a regulatory, representative, or academic approach to the sector. as previously stated, the timeframe of analysis in this http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 section presents four periods since, from the institutional perspective, the 70s and 80s are relevant as background. in each period, certain facts that determined changes in the economic situation and the administration of the country are presented as points of reference, and graphs of relevant economic variables that reflect the context of these situations are also presented. figure 1. average annual price of oil 1972 2019, by type, in 2015 dollars note: deflated series using the united states consumer price index adapted from british petroleum. 2020. source: observatorio de la energía y minas de la universidad de las américas 2020. the periods are: i) the 70’s and 80’s, ii) the 90’s, iii) 2000-2008, and iv) 2009-2019. an important reference in all these stages is oil and its price variation, which, since 1972, has been a determining factor in the country's economy, so that below (figures 1 and 2) the evolution of the oil price and the variations in gdp and gdp per capita are presented. this information and its specific relevance is taken up in each period. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 figure 2. percentage change in gdp and gdp per capita (1970-2019) note: gdp per capita based on data from years of population censuses and with projections in intercensal years. source: own elaboration with bce and inec data. the evolution of gdp per capita in constant monetary values, shown in figure 3, also allows us to visualize the economic situation described in the aforementioned stages, specifically, growth in the 1970s, stagnation in the 1980s, the crisis at the end of the 90s and growth from 2004 to 2014-2015, when the decline in oil prices began to impact the economy (figure 1) and the further deterioration in growth (figure 2). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 figure 3. gdp per capita evolution 19702019 (2007 dollars) note: gdp per capita based on data from years of population censuses and with projections in intercensal years. source: own elaboration with bce and inec data. 3.1 the 70s and 80s in ecuador, the manufacturing industry began to have relevance in the 1960s, as it was considered an alternative for growth and economic development in light of the crisis of the agro-export model. this gained momentum from 1972, mainly due to the application of the import substitution model, which had started in the 1960s, and due to the availability of resources from oil exports, channeled as credits or fiscal stimuli. this was complemented by the creation of the andean group, through the signing of the cartagena agreement in 1969, in which venezuela, colombia, ecuador, peru, bolivia, and chile came to participate, with an initial vision of integration, geographical planning of manufacturing production and a community market (insotec 1986, 19). however, the crisis of the 80s occurred, known http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 internationally as the debt crisis, a period in which the terms of trade deteriorated, external investment declined significantly and export growth was slow (samaniego 1993). the effect of oil resources and the import substitution model is shown in figures 4 and 5, the first of which shows the evolution of the gdp of various sectors of economic activity. in the case of the manufacturing industry, significant growth can be seen in the 1970s; it should be noted that oil extraction and refining data has been consolidated in a single item and oil refining has been removed from the manufacturing industry, in order to visualize the growth and contribution of other manufacturing activities. with this consideration in mind, the stability of the manufacturing industry not related to oil in contributing to the economy is presented (figure 5). in recent years it has contributed the most and has always been among the top two or three industries, with an average of 11.9% between 1965 and 2017. figure 4 confirms the growing evolution that manufacturing had from the oil boom; between 1965 and 1972 the average growth rate was 4.8% while between 1973 and 1981 (before the new crisis) it was 8.4%. in any case, in this period, “industrialization, urbanization, the expansion of the middle classes, and the strengthening of the state profoundly changed ecuadorian society” (larrea 2000, 89). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 figure 4. gdp evolution in several economic sectors, 1965 2017, in 2007 dollars note: oil refining has been removed from manufacturing industries, to be added to oil extraction, in order to portray the contribution of the manufacturing industry independent of oil. source: own elaboration with bce data. figure 5. gdp contribution structure between 1965 and 2017 (in %) note: oil refining has been removed from manufacturing industries, to be added to oil extraction, in order to portray the contribution of the manufacturing industry independent of oil. source: own elaboration with bce data. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 the legal framework to promote small industry was generated in 1965 with the small industry and handicraft promotion law, which had several modifications in the 70s, aimed at better serving the sector. specific regulations were issued for the application of the law, the promotion of the sector, the categorization and qualification of companies' access to a differentiated salary, and access to special credit lines such as fopinar and fondos financieros. in 1975 the centro nacional de promoción de la pequeña industria y artesanía (cenapia, national centre for promotion of small industry and handicraft) was created. it gives way to the formation of interministerial committees to support the sector and reorganizations to better meet the needs of companies (fernández 1990, 48-annex 1).2 additionally, at this stage, the industrial development law is issued and organizations such as the centro de desarrollo industrial (cendes, industrial development centre), corporación financiera nacional (cfn, national financial corporation), ministerio de industrias, comercio e integración (micei, ministry of industry, commerce, and integration) are created and “as complementary measures, amendments are made to the tariff system, seeking to protect the production of the existing industry and the tax system in order to promote investment and capital accumulation in the industry” (insotec 1986, 43). in the business associations sphere, as of 1969, provincial small industry associations were formed; in 1971 a national federation of these associations was organized, in 1979 it was approved that the associations be considered as chambers of production and they were renamed cámaras de pequeña industria (small industry chambers); and in 1982 amendments were approved so that the federation of associations be called federación nacional de cámaras de 2 in fernandez's (1990) document there is a detailed list of all the standards issued between 1965 and 1989. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 pequeña industria (fenapi, national federation of small industry chambers) (insotec 1986, 81). from the private sector, in 1980 instituto de investigaciones socioeconómicas y tecnológicas (insotec, socioeconomic and technological research institute) was created at the initiative of business owners and technicians related to smes (some of this entity’s activity is described in section 4.2). it started researching to support proposals for the benefit of the sector, with support for small industry chambers’ development through training for entrepreneurs who held management positions in small industry associations. the result of insotec’s actions is, in part, to influence the chambers of the provinces with greater economic development, to develop services and mechanisms so that their members could have better levels of competitiveness, “among them the following can be mentioned: credit guarantee corporations, savings and credit cooperatives, fair and exhibition corporations, training institutes, sectoral technical assistance programs, etc.” (lanusse 1993, 41). the model of promotion and protection within a closed market, applied since the 1960s but promoted since the 1970s thanks to oil resources, along with “restrictive economic policy measures have meant a great [negative] weight for the industrial sector due to the [excessive] dependence of the sector on domestic demand” (samaniego 1993, 122), which ultimately led to a lack of productivity and quality by local companies and a lack of options and convenient prices for consumers. 3.2 the 90s “since the late 1980s, but especially since 1990, a series of measures were adopted in ecuador to modernize the state's management and favor the country's insertion into international markets” (hidalgo 1999, 10). there were changes related to fiscal management, monetary http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 policy, labor policy, financial policy, foreign trade, and also in public institutions related to the productive sector (insotec 1996, 9). up to 1994, the tax reform introduced in 1990 gradually dismantled all the exemptions that the development laws had established. tariffs were reduced, subsidies were removed that were intended to favor the development of the industrial sector but that, in reality, ended up being harmful due to not having considered a temporary validity term from the beginning. figure 4 shows that in the 90s the growth rate of the manufacturing industry decreased. ecuador transitioned to an outward development model promoting the export sector. over the first five years of that decade, several government entities that had been created in previous years as instruments of the state to promote industrial development under the previous scheme, were closed or restructured. among those that were closed were cenapia, cendes, comisión ecuatoriana de bienes de capital (cebca, ecuadorian commission of capital goods), fondo nacional de preinversión (fonapre, national pre-investment fund). the following were restructured: ministerio de industrias, instituto ecuatoriano de normalización (inen, ecuadorian institute for standardization), servicio ecuatoriano de capacitación (secap, ecuadorian training service), consejo nacional de ciencia y tecnología (conacyt, national science and technology council), and cfn. but also as part of the national productive transformation process, government bodies were created such as the consejo nacional de modernización del estado (conam, national council for state modernization) which, among its main objectives, sought to restructure the operation of state entities. thus, the goals were to present said entities as direct contributors to the strengthening of the economic opening of the country towards a global context. the intensive development of information and communication technologies (ict), began to demand a more innovative profile from the country’s production fabric, with a highly adaptive capacity to new http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 challenges. it is clear that, in the case of smes, corporate guilds had their role in joining this transformative process (lanusse 1993, 38). in this context, the minister of industry in office in 1992, according to words transcribed in lanusse's document (1993, 44), expressed no interest in introducing sectoral (industrial) policies and even less for specific strata (small industry), but ministry maintained lines of credit and technical assistance programs. from the private sphere and with the support of international cooperation (germany, switzerland, canada, usa, inter-american development bank – iabd), two institutions, which began their activities in the 1980s, continued with programs aimed at the sme sector (hidalgo 1999, 71). these institutions were insotec (with research, dialog, support for business associations development, generation of proposals, and some direct services to companies: technical training and assistance) and swisscontact (technical assistance, training, support for credit guarantee programs). in the second part of this decade, there was a deep political crisis, even with the promulgation of a new constitution in 1998, which in terms of trade liberalization gave a predominant role to the private sector (ayala 2012). during this period there were five changes of president between 1996 and 2000, as a result of the implementation of certain unpopular measures and the lack of respect for the constitutional order, which was influenced by the difficult economic situation, whose main causes were the war with peru in 1995 and the decrease in the price of oil (see figures 1 and 2). this led to high inflation rates, high interest rates (which distorted the investment priorities of individuals and companies), devaluation of the national currency (micip 2002, 20), a deposit freeze in march 1999, and, faced with the risk of hyperinflation, the national government opted for a currency change to the dollar. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 an important characteristic to consider is that, in ecuador, the representation of small industries is in the cámaras de pequeña industria, while the medium-sized industries are instead affiliated with the cámaras de industrias (industry chambers) which also group the large ones. the latter are “those that most influence and weigh on the decisions made in matters of economic and social policy” (lanusse 1993, 39). the limited influence of the small industry can be explained by the fact that they do not represent strong economic groups, there are internal divisions in fenapi, but also that “they continue to analyze the current situation with schemes and approaches that were typical of the oil boom times and that can be associated with a concept of a protective and paternalistic state” (lanusse 1993, 39). 3.3 2000 to 2008 as stated above, this period begins with the implementation of the dollar as the official currency in ecuador in january 2000. this occurred due to the serious economic situation of the last years of the nineties. in any case, during the first years of this period, the framework of economic opening and export promotion was maintained, without an explicit industrial policy and much less one aimed towards small industry. symbolically this was reflected in maintaining the new name that had been given to the ministerio de industrias (ministry of industries) in previous years, when it was renamed as ministerio de comercio exterior, industrialización y pesca (ministry of trade, industrialization and fisheries), together with the issuance of the foreign trade and investments law (issued in 1997), which led to the creation of consejo de comercio exterior (comexi, exterior commerce council) and corporación para la promoción de exportaciones e inversiones (corpei, export and investment promotion corporation). in addition to this, several projects with international support (usaid, gtz, cbi-holland, aladi), all with emphasis on exports, were executed. unfortunately, in a similar http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 way to what happened in other latin american countries, “institutions typically focus on their own goals without coordinating and implementing policies with other institutions” (urmeneta 2018, 83). the first six years of the 2000s were focused on how to strengthen the monetary model of dollarization and recover what was lost, in productive terms, by the financial crisis at the end of the previous decade. at this stage, there is a consolidation of the new monetary model, in which “the growth of the ecuadorian economy has improved […] due largely to high oil prices, increased remittances, the depreciation of the dollar, low international interest rates” (bce 2010, 72). in this first half of the decade, a more active role of local governments in productive development is observed; a good example of this is what has been done by the municipio de quito (municipality of quito) and the consejo provincial de pichincha (provincial pichincha council), in order to generate spaces for competitive improvement of the local economy. in this line of action, an instance that stands out is conquito—the agency for the economic development of quito (araque 2010). something similar happened in ambato (with corpoambato corporation) and in cuenca (with acudir agency), initiatives that were later replicated in other cities. also noteworthy are the efforts made to strengthen the technical education system for company workers, through the action of the so-called consejo nacional de capacitación y formación (cncf, national training and education council), which was proposed to replace the secap in promoting this type of service for the private sector. unfortunately, the implementation model was modified in the second half of the decade, the expected results were not achieved, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 and it became a failed project. however, with the access to the presidency of ecuador by rafael correa in 2007, a change of vision begins in the development model that will finally be based on the guidelines of the new constitution promulgated in 2008. at the level of the small industry guilds, in this period one of the most important chambers, that of pichincha (quito), had a fracture that affected the influence of smes in public policies, since the national association, fenapi, was also affected. when the situation was resolved, the guild was weakened anyway. since the end of the 90s, the main private entities that support smes (insotec and swisscontact) had expanded their scope of action to the provision of direct services to microenterprises, as a result of the importance that this segment was taking in public policies and international cooperation. but there was also a change in focus in order to encourage small industry chambers to generate their own business service initiatives or that they be undertaken by those chambers, after a boost from the aforementioned entities. for instance, in the case of insotec, an entity was created to provide training services to the textile clothing industry, with support from the iadb and the participation of the municipio de quito (municipality of quito) and cámara de pequeña industria de pichincha (capeipi, small industry chamber of pichincha); the latter institution was left in charge of the entity once the project with the iadb was completed. additionally, insotec promoted the creation of the aforementioned local development agencies: conquito, corpoambato, and acudir. in the case of swisscontact, there was important work to strengthen savings and credit cooperatives, some of them started in the provincial chambers of small industry, and to promote professional training programs (they supported the creation of the above-mentioned cncf and generated other initiatives), additionally they supported local development agencies in various provinces. 3.4. 2009 to 2019 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 with the new development plan, the plan nacional del buen vivir 2009 2013 (national plan for good living), issued after the re-election of rafael correa due to the validity of the new constitution of 2008, a strategy towards an internal and sustainable economy is proposed “through a process of selective import substitution, promotion of the tourism sector and strategic public investment [...] the foundations are laid to build a domestic industry and produce substantial changes in the energy matrix […] in this period, the protection of generating sectors that are intensive in work and employment will be a priority” (senplades 2009, 96). economically, thanks to the high price of oil, gdp maintained positive growth rates until the beginning of 2015, although at a decreasing rate. in 2015 2016 the economy decreased, the following year of it showed slight recovery and then it fell again and became stagnant (see figure 2). a change of the productive framework was proposed in the development plan—inserted within the agenda para la transformación productiva presented in 2010 (ministerio de coordinación de la producción, empleo y competitividad. 2010)—but it did not materialize in terms of achieving its main objective, which was to reduce the ecuadorian economy’s dependence on products such as oil and other traditional non-oil products as much as possible. the idea was to develop an innovative industry, with sophisticated products, with greater added value, capable of being sold in the different markets of the world. as part of this agenda—which generated great expectations in the national productive sector—at the end of december 2010, the copci was approved; however, it would be of little use if a long-term strategy was not adopted to insert the national production fabric in a real way into the international context, which meant changes to the focus of the productive and commercial policies of the current administration http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 (luna 2014, 26), which did not happen because the government maintained an anti-business discourse. at this stage, some initiatives to support the sme sector were generated, but always under the control of the state. international cooperation was centralized and controlled, which made some initiatives from private foundations and even from the corporate guilds themselves extremely limited. the protection of national production, through tariffs on imports, favored some sectors, but affected others and ultimately harmed the final consumer by not providing the option to choose higher quality. this return to import substitution, without a clear definition of its temporary duration, determined an approach between the government and certain leaders of small industry, micro-enterprises, and the social and solidarity economy. figures 3 and 4 show that the growth rate of the manufacturing industry and the economy, in general, has resumed. due to the aforementioned policies and the new oil price bonanza (figure 1), the average growth rate of manufacturing was 4.8% between 2009 and 2014, while in the 1990s it had been 1.4%. at the guild level, the government managed to formally divide the small industry sector (which also happened in other areas of national institutions). only a few provinces remained in fenapi, while the others formed a national chamber, close to the government. despite this and the calls for agreement and dialogue to define policies, one of the representatives of the sector close to the government (interview with the executive director of capeipi, in november 2017) recognized that they had little actual influence on the final decisions made by the government. ultimately, as in other latin american countries, “the absence of a clear analytical framework has favored the shift of policy emphasis towards objectives focused on reducing poverty and increasing employment, causing export competitiveness and development http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 objectives to lose relevance. the segment of medium-sized enterprises runs the risk of being marginalized within the support policies” (cepal 2013, 57). the slowdown in the economy as of 2015 (figures 2 and 3), due to the decrease in oil prices, the strong earthquake of 2016 and the wrong economic policies (excessive debt, lack of control over spending, lack of an emergency fund, regulations unattractive for private and foreign investment, lack of stability regarding tax regulations) affected the support initiatives that the government had proposed. 4. evolution of analysis of the sector in the historic periods referenced in 1965, through the issuance of the first small industry and handicraft promotion law, the legal life of this sector formally begins, establishing in the codification and reform issued in 1973, that “small industry is considered to be that in which there is a predominance of machinery operation over manual activity; it is devoted to transformation activities, including casting, raw materials or semi-finished products, into final or intermediate articles” (ec 1973, art. 5) and reference is made to a certain investment value in fixed assets, excluding land and buildings, a value that has changed over time. for research and analysis purposes, some public and private institutions have taken the number of employees as a reference and on some occasions, the sales value or the level of investment have accompanied that reference. sometimes it has happened that, in the same period, two government institutions have had different definitions. with the issuance of executive decree 757 in 2011 (ec 2011, art. 106) a single definition was established. the historical use of the number of employees, as the main reference, originates from the fact that the information from http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 the inec was easier to process, especially in previous years when digital support was scarce, but also for ease of comparison with other countries with similar situations. 4.1 initial state research into the sector in the 1970s, the public entities related to productive development: cenapia, cendes, fonapre, and cebca, were the ones that generated information about and for the small industry sector, especially the first of those, whose direct objective was focused on small industries. it can be stated that this information was descriptive of the sector and supportive to the entrepreneur, for example, with certain investment profiles. however, the scope of action of all these entities covered other topics (training, technical assistance, marketing support) so the study of small industry was limited. 4.2 research from the private sector, insotec 1980-2005 due to the limitations stated about the need to know the sector and its needs in-depth, in 1980 insotec was created on the initiative of a group of small industry entrepreneurs and technicians connected to this issue, for the purpose of contributing to ecuador’s economic, social, technological and educational development, with an emphasis on small industry requirements, for which it had the support of the konrad adenauer foundation. lines of research, support for business associations development, proposals, and policy dialogue for the sector were generated and, later, also direct action projects. between 1980 and 2005 there was relevant insotec activity with studies on small industry of a general, descriptive type, focusing on productive subsectors by branch of activity, on issues of technology, human resources training, policies for the sector, and occasional environmental http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 issues, for specific geographic regions, cities or provinces, but also for the country as a whole, on current issues and time-sensitive issues. support along these lines was received from other cooperative entities such as idrc of canada, the inter-american foundation, iadb, usaid, caf, oas (organization of american states). nearly 100 publications and internal documents were generated at the request of the small industry chambers or state agencies or to guide these institutions’ courses of action, and those of insotec or other entities. in the aforementioned years, especially until 1995 when the institutional framework created under the import substitution approach was dismantled (which was partially justified because some of these entities became a bureaucratic burden instead of supporting the productive sectors), there was also some research activity on the sector by cenapia and secap. as of the year 2000, with the new institutional framework and the role of local governments, other research initiatives on the sector were generated, e.g. in the capital of the country with the conquito corporation; this was also done in some chambers of small industry, but not with the same volume and significance as insotec’s efforts. 4.3 sme observatory and its influence from 2010 the gap left by insotec from approximately 2005, when it became an entity providing direct services to companies, was compensated for in september of 2010 by the creation of the observatorio de la pyme (also “sme observatory”) of universidad andina simón bolívar, sede ecuador (uasb-e). this made it possible to strengthen the institutional framework with the presence of an organization that, from the realm of research and generation of information, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 supports all the actors who, from different perspectives, are interested in the situational improvement of such a key sector of the national production fabric as smes. with the launch from the uasb-e’s sme observatory, as a key element of the university’s strategic action was “breaking down the walls that, for years, have prevented the generation of a fluid and interconnected true link between universities and the other actors that integrate and coexist in a society” (araque 2019). something to be highlighted in the operation of the sme observatory is that, from its beginnings, it took the tenets of systemic thought and action as a major philosophical referent, thereby allowing the work to be oriented towards the collection, analysis, and socialization of information ranging from macro variables to micro information regarding the sectoral and organizational behavior of entrepreneurs and msmes. additionally, to achieve an integrated understanding of the sector, information of a social, political, technological, legal, and cultural nature is processed and disseminated (araque 2019). the observatory’s strategic model of operation is summarized in seven thematic courses of action: discussion spaces on the problems of entrepreneurship and smes; activities on the exchange of knowledge and domestic and international experiences related to entrepreneurship; windows into business reality intended to motivate entrepreneurs; specialized training programs in the field of entrepreneurship and business creation; training programs for entrepreneurs and small enterprises; bibliographic production specialized in entrepreneurship and the productive sector; spaces for the development of research and the generation of information on entrepreneurship and smes (observatorio de la pyme uasb-e 2014). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 5. contributions of smes to the country’s socioeconomic development in this section, the analysis focuses on companies related to the manufacturing sector in ecuador. to do this, the importance of small and medium-sized industries in the ecuadorian economy is analyzed, based on their contributions in the number of establishments, employed personnel, and production. the data used comes from the bce’s national accounts and the inec’s manufacturing and mining survey.3 5.1 the 90s the 1990s are characterized by the economic opening of the latin american region and the liberalization of markets, which had repercussions on the countries’ industrialization processes, affecting the participation of the industry within total production (geymonat 2020). it comes after a lost decade for latin america due to economic and social deterioration, driven by the fall in oil prices, the external debt crisis, and the fall in investment. this fact affected ecuador, with a brake on the industrialization process that took place in the seventies, generating instability in the behavior of the national industry (durán and others 1992); along these lines, the evolution of the manufacturing industry had some limitations during the eighties (samaniego 1993). during the nineties, the contribution of the manufacturing industry to gdp averaged 12% (removing the processing of oil products), where for 1990 the share was 12.4%, with slight drops and a close of 11.7%. thus, there was a certain 3 the data that comes from the bce’s national accounts uses base year 2007 as a reference. the data that comes from inec’s manufacturing and mining survey uses data available from the 1998 to 2015 surveys. it must be noted that, standardizing with the figures presented above, manufacturing has excluded the manufacture of oilrelated products in order to ensure the analysis is not influenced by the oil-related industry, which has a different dynamic. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 stability in the share of the manufacturing industry during the 1990s (araque 2002), as presented in the following figure. figure 6. manufacturing industry’s contribution to the gdp 1990-1999 in constant prices (2007=100) source: own elaboration with bce data. the structure of the manufacturing industry according to the number of establishments reflects the importance of smes in the national industrial fabric. in the 1998-1999 period, on average, small industry represented 66% of all establishments, medium industry 25%, and large industry 9%. that is, nine out of 10 industries are smes, as shown in the following figure. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 figure 7. structure of the manufacturing industry by business size 1998-1999 source: own elaboration with inec data. regarding the employed personnel, during the nineties, smes contributed about 49% of the total. small industry generates employment for 19% of all workers, medium industry 30%, and large companies 51%. with this, one out of every two workers works in an sme, as presented in the following figure. taking into account production, smes contribute 40% of the total. small industry contributes 11%, medium 29% and large businesses 60%; thus, this indicator is where smes have the lowest share, as shown in the following figure. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 figure 8. employment by business size 1998-1999 source: own elaboration with inec data. figure 9. production by business size 1998-1999 source: own elaboration with inec data. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 5.2 2000 to 2008 the new century in ecuador begins after a social and economic crisis that affects the well-being of the population, with the presidential overthrow of jamil mahuad in january, the product of “economic deterioration, a social crisis, and a popular uprising” (larrea 2008, 215). this period is characterized by the change of official currency in the country, dollarization, which brings economic stability, although there is still political instability within the state. the contribution of the manufacturing industry to gdp in the 2000-2008 period remains on average at 12% (removing the processing of oil products). it begins in 2000 with a 12.1% share, reaching its lowest point in 2004, due to an increase in the share of the oil sector, and is at 12.2% in 2008. in that sense, during this period, there was relative stability in the share of the manufacturing industry in gdp, as shown in the following figure. figure 10. manufacturing industry’s contribution to the gdp 2000-2008 in constant prices (2007=100) source: own elaboration with bce data. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 the main components of the manufacturing industry show dynamic behavior within their shares in the sector. over the period, the five main subsectors are; food processing and manufacturing (32.1%), the manufacture of chemical substances and products (10.6%), the manufacture of textile products, clothing, leather manufacture, and leather articles (9.6%), the manufacture of metal products, furniture, machinery and equipment (8.8%), the manufacture of paper, printing and paper products (7%). figure 11. structure of the manufacturing industry by business size 2000-2008 source: own elaboration with inec data. during this period of the new century, the importance of smes is slightly reduced in terms of the number of establishments, personnel employed, and contribution to production. this is related to a concentration process of large companies, which have higher rates of profitability and stability within a competitive environment such as that of the manufacturing industry, reducing volatility in terms of their entering and leaving the sector, where in this country “when a company matures it achieves a relevant share in the market” (coello 2017, 66). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 with this, the importance of smes within the manufacturing industry is close on average to 88% of all establishments, which represents a slight decrease of 3 percentage points in comparison to the previous decade. small industry on average represents 61% of all establishments, medium industry 27% and large industry 12%, as shown in the following figure. in reference to employed personnel, during the 2000-2008 period, smes contributed close to 40% of the total, which represents a decline of 9 percentage points in comparison to the 1990s. with this, small industry on average generates employment for 14% of total workers, medium industry for 26%, and large companies for 60%, as shown in the following figure. figure 12. employment by business size 2000-2008 source: own elaboration with inec data. concerning production, in the 2000-2008 period, smes represent around 30% of the total, with a reduction of 10 percentage points in comparison to the nineties; small business contributes http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 9%, medium-sized businesses 21%, and large business 70%, as shown in the following figure. this reflects improved productivity in larger establishments. figure 13. production by business size 2000-2008 source: own elaboration with inec data. 5.3 2009 to 2019 latin america had significant economic growth and improvement in social indicators, reducing gaps and increasing the provision of services related to well-being. this fact was promoted by an economic bonanza due to the increase in the prices of primary products, called commodities, generated by a period of world expansion and growing demand from china. in 2008 ecuador passed the latest constitution of the republic, within a favorable economic environment, driven by high oil prices. similarly, during this period there was political stability, with the same party at the helm of the national government. the manufacturing industry’s contribution during this period is close to 11.8% (removing the processing of oil products), with a slightly lower share of gdp than in previous decades. it begins the year 2009 with a contribution of 12.0%, reaches its lowest point in 2016, and stands at 11.7% for the year 2017. thus, the share of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 manufacturing industry within the national production remained relatively stable, as shown in the following figure. figure 14. manufacturing industry’s contribution to the gdp 2009-2017 in constant prices (2007=100) source: own elaboration with bce data. in accordance with the previous paragraph and as has been presented in previous sections, it can be said that since 1975 manufacturing has been among the three sectors of economic activity (figure 5) with the highest contribution to gdp and since 2010 it has been the sector that contributes the most, in contrast to the oil extraction and refining sector which, despite having had the highest share in several periods, has declined in others and, as of 2010, the average contribution to gdp is 10.6%. something similar has happened with the trade sector which, since the year indicated above, has contributed 10.2%. in this period five major subsectors of the manufacturing industry are; food processing and manufacturing (33.2%), manufacturing chemical substances and products (10%), manufacturing of non-metallic mineral products (9.1%), manufacturing of metal products, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 furniture, machinery, and equipment (8.9%), manufacturing of textile products, clothing, manufacture of leather and leather goods (7.7%), revealing some changes in comparison to the prior period. according to the number of establishments, the participation of smes within the structure of the manufacturing industry is close to 83%, which is an important percentage but reflects a reduction in its contribution when compared to the two previous decades. in the 2009-2015 period, on average, small industry represents 52% of all establishments, medium industry 31%, and large industry 17%, as shown in the following figure. figure 15. structure of the manufacturing industry by business size 2009-2015 source: own elaboration with inec data. if we take employed personnel as a reference, smes contribute 29% of the total, which is a reduction of 11 percentage points in comparison to the previous period. small industry generates employment for 8% of all workers, medium industry for 21%, and large companies for 71%, as shown in the following figure. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 figure 16. employment by business size 2009-2015 source: own elaboration with inec data. finally, the share of smes within production has also reduced its magnitude, contributing 23% of the total, being 7 percentage points lower than the previous period, where on average small business contributes 6%, medium-sized business contributes 17% and large businesses contributes 77%, as shown in the following figure. the information in the three previous figures and the comparison with prior periods reflects the concentration of companies within the manufacturing industry, favoring the larger ones since there has been a growing trend of their share in terms of the number of establishments, employed personnel, and production (coello 2017). in addition to improvements in productivity, this occurs due to market power, which creates entry barriers and has been enhanced by accumulation processes (solano, camino and alvarado 2017). this process is associated with greater efficiency of large companies and greater liberalization of the economy that could affect the survival of smaller companies (aguiar 2013). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 figure 17. production by business size 2009-2015 source: own elaboration with inec data.. however, despite the above, the contribution of smes to the development of ecuador's provinces as a whole should be recognized, since large companies are mainly in the economic attraction poles, while in intermediate and small cities it is the smes that generate employment and income for the population. thus, according to the directorio de empresas—company directory (inec 2019)—, the number of companies per 10,000 inhabitants tends to be higher in smaller provinces. another important issue is that traditionally (hidalgo 1999) the sector specialization coefficient shows that smes carry out activities related to satisfying basic needs (food, clothing),4 to providing inputs for households (cleaning and simple chemical products, wooden furniture), but they are also suppliers of other companies with inputs and parts (chemical products, general metal products, and some electrical machinery). 4 for a specific subsector it is calculated as the ratio between its share in the value added of smes and the share of the same subsector in the value added of the total industry. if the result is greater than 1, it means that smes have a specialization in that subsector and, the larger the result, the greater the specialization. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 6. characterization of the evolution of internal operations in small and medium-sized enterprises (smes) the internal functioning of ecuadorian smes throughout the three periods of this study shows a series of evolutionary characteristics that have adapted to certain national and international historical milestones, as described in the previous sections. as in other countries, the share of smes in industrial development processes is seen as “the hope of growing dynamism” (cardozo 2005, 118). in the ecuadorian case, even industrial development policies have tended to remain stable in the national development plans of the 1970s and early 1980s (insotec 1987). among the main effects felt at the beginning of the 1990s was the lag in institutional matters accumulated in the country as a result of having operated based on a productive model of industrialization that, rather than promoting exports a key requirement for a secure opening— prioritized the substitution of imports using tariff barriers to prevent the entry of products from foreign markets. this legal framework and public policies rather had an anti-export bias and an oversizing of the state role that, in the end, limited sme's competitive potential (fernández 1990). with the changes in institutions and policies detailed in section 3, among the positive effects of this decade was the improvement in exports of non-traditional products, where small and medium-sized companies played an important role together with the support that was offered by the cfn, corpei and non-governmental organizations at the time, through programs such as the promoción de exportaciones agrícolas no tradicionales (proexant, promotion of non-traditional agricultural exports). in any case, the small and medium industry sector had an orientation to increase its presence more in the local market, hence the export levels http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 registered did not reach more than 5% of the total establishments (universidad eafit, insotec and caf 1996) and only four out of ten ecuadorian smes had knowledge about the key factors behind the management of foreign trade. for this reason, the scant trend towards internationalization, despite government efforts to open the economy to new markets with products other than oil and other traditional ones such as bananas, coffee, and cocoa, was held back by smes internal operations; their behavior limited the possibilities of insertion in foreign markets. for example, significant weaknesses were found in fields such as the creation of competitive advantages, due to the lack of concern for incorporating good organizational practices aligned with competitive improvement requirements such as; quality, productivity, and innovation. in terms of quality management, there was a trend towards little widespread use of certification processes through international quality standards. during this decade only 13% had been concerned about using iso 9000 series standards (universidad eafit, insotec and caf 1996). therefore, as expected, “the quality standards of their products are relatively low, if not deficient, in the absence of genuine competition, both internal and external” (lanusse 1993, 32). regarding the concern for innovation as a permanent practice to face the challenges of a changing and increasingly globalized market, there was a trend of high weakness, since only 14% of smes indicated that they were doing any kind of investment in research and development; this is later reflected in scant product innovation about 4 out of every 10 smes tend to make changes in what they produce and in processes, only 21% tend to make efficiency-oriented improvements (universidad eafit, insotec and caf 1996). this weak quality and innovation behavior ended up influencing the value registered in terms of productivity, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 which, in the ecuadorian case, shows a heterogeneous behavior when comparisons are made between different company sizes, while in countries like colombia productivity is more homogeneous when companies of different sizes are compared (araque 2002). finally, in the last year of the 90s, with the freezing of the population's deposits and the serious crisis of the financial system, which, as expected, had an impact on the lack of money circulating and caused a drop in consumption, the sme sector was one of the most affected, despite its flexible capacity for productive adaptation. this macroeconomic blow even dismantled the availability of workers who began to migrate in large numbers to countries such as spain, italy, and the united states. during the next historical period—from 2000 to 2008—chosen as the object of study for understanding the evolution of ecuadorian smes, began with a series of economic policy decisions that sought to stop the rampant inflation and devaluation that was destroying the currency in effect in ecuador up to that date, the sucre, and determined the adoption of dollarization as the monetary model. this macro decision had a direct impact on the behavior of mesoand micro-realms; where companies, specifically smes, felt the effects of the change in the monetary model in their cost structure and in the price-setting process. this began to cause havoc over time, above all in those smes oriented towards exports, faced with the impossibility of a monetary devaluation to improve the competitive position of national products in international markets, they saw an increase in the price of their export products in relation to those of other countries; testing adaptive and creative flexibility that generally characterizes a company classified within the size of sme. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 in the context of that time and concerning the operation of smes in the financial field, a need that remained unmet in that period was that of specialized financial products for the sector. thus, a healthy structure of business finances was hindered, since the definition of terms, interest rates, and amounts—on the part of public and private financial institutions—was established without considering the real profile of small and medium-sized companies’ productive needs. therefore, oftentimes, that profile matched the reality of micro-enterprises with products such as microcredit or that of large companies with products such as corporate credit. this excluded small and medium-sized enterprises from access to financial products specialized for their productive and business needs (araque 2010). the aforementioned is ratified in the report prepared by oecd (2019) on policies for sme development in which it stated that “ecuador has one of the lowest scores in the la7 in the dimension of access to finance, which finds that it is particularly important to address financial education initiatives and strengthen procedures for dealing with bankrupt businesses” (oecd 2019, 394). something important to highlight is that, as of 2007, a change of focus took place in government matters, with the inauguration of rafael correa as president of the republic, in terms of supporting the country's productive actors. great emphasis was placed on strengthening the sme sector and what began to be made visible and known as the social and solidarity economy. at this historical moment in the country, the national development plan also recognized the importance of supporting smes. unfortunately, at the time of putting written plans into action, a series of obstructing distortions appeared, linked, above all, to the implementation efforts regarding ecuador’s productive policies. regarding the third period (2009 to 2019) of this historical study of ecuadorian smes, despite the fact that a large amount of money circulated in the domestic economy as a result of the new http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 oil boom—2011 to 2014—the real strengthening of industrial production—which includes smes—unfortunately, remained as merely good intentions written in the national development plan. hence, according to the quarterly survey of smes of the observatory of universidad andina simón bolívar, national smes’ concerns with making new investments, growth, and innovation were left on hold until support to strengthen the sector improves. thus, during this period, in the end, certain indicators have remained largely unchanged within the evolution process of domestic small businesses. for instance, the export trend remains similar to that registered in the mid-1990s—between 2017 and 2019—exporter smes accounted for around 5% of total smes (observatorio de la pyme uasb-e 2019). this can be explained by the fact that—according to a study on the internationalization of latin american smes in the european market, carried out by cerale (2017)—in countries with weak economies, such as ecuador, smes depend more on export support programs to achieve internationalization. additionally, ecuadorian smes indicate that what they most require is access to information and communication technologies, information on foreign markets, and validity of free trade agreements, among a list of eleven factors (cerale 2017, 34). incidentally, free trade agreements with the usa and europe was one of the issues opposed by the government that was in power between 2006 and 2016. along the same lines of identifying issues in which there is stagnation, in the use of operating capacity—measured by the hours of daily work and by the weekly days worked—the trend for 2019 is similar to that recorded at the beginning of 2000: 8 hours a day and 5 days a week, which indicates the underutilization of operating capacity, generating a drop in productivity levels (lanusse 1993). on innovation issues, the oecd report determines that “the industrial strategy of ecuador […] notes the particularly important role of innovation in the diversification http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 and productivity efforts of the country. however, there are few support schemes for innovation in smes and start-ups, compared to other countries” (oecd 2019, 395), corroborating the weakness and need for coherent policies in the country. finally, this last period in the history of smes amid periods of prosperity and scarcity of state resources as drivers of economies with profiles similar to the ecuadorian can be defined as a segment in the economic history of ecuador where perceptions and pro-growth actions of sectors such as small and medium-sized industry were put into the maintenance category; the expectations were that the conditions of the political, economic, social and legal environment would change and, thus, perception would stimulate growth in investments by business owners. this trend is reflected in smes pro-investment passivity—between 60 and 70% of businesses indicate that they have not invested (observatorio de la pyme uasb-e 2019). this means they have kept their internal productive structure without major changes, despite the positive perception of sectoral variables such as ease of access to production factors nearly 90% view access to raw materials and machines and equipment as positive (observatorio de la pyme uasb-e 2019). on the other hand, a negative perception which influences passivity for productive investment is observed in the behavior of macro variables such as; the country’s general economic performance, legal certainty, the business and investment climate, and the political climate (sme observatory uasb-e 2019). the uncertainty observed in smes is understandable because “ecuador has yet to develop a complete sme policy, including the design of programs for direct sme and entrepreneurship support, such as business development services (bds). because the country’s strategies are geared to capital-intensive industries, they contain few specifics on bds for smes and entrepreneurs” (oecd 2019, 395). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 7. conclusions within the three periods analyzed, the manufacturing industry sector reveals one of the greatest contributions to ecuador’s gdp, with an average 12% share (removing the processing of oil products). this share has remained relatively steady, with a slight, though not significant, reduction. since 1975, manufacturing has been among the three sectors of economic activity with the highest contribution to gdp, and since 2010 it has been the largest contributor, in contrast to the oil extraction and refining sector which, despite having had the largest share in several periods, has declined in others and, as of 2010, the average contribution to gdp is 10.6%. something similar has happened with the trade sector which, since the year indicated above, has contributed 10.2%. the structure of the manufacturing sector, according to the companies’ size, makes it possible to highlight the contribution of smes to ecuador's social and economic development; on average, smes have contributed 87% of the number of establishments, 37% of staffing, and 29% of total production. in this sense, considering the sector specialization coefficient, it contributes with products that help to satisfy basic needs (food, clothing), to provide inputs for households (simple cleaning and chemical products, wooden furniture), but it also provides other companies with supplies and parts (chemical products, general metal products, and some electrical machinery), to which is added their contribution in generating employment in the provinces of lower economic development. however, their relative share has been decreasing over time, in favor of large companies, as a result of a process of improved productivity and greater concentration of market power by large companies and because of the lack of coherent public policies for smes, as recognized in the oecd report (2019). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 in the periods analyzed, the operational performance of smes reveals structural situations that, for years, have been highlighted as opportunities for integrated improvement of the sector, but which in practice have remained unfortunately unchanged. as an example, the exporting trend of smes has varied little over the past 20 years, despite a series of programs and projects to this end, which have been promoted from several public and private entities, domestic and international, but which unfortunately have not been accompanied by proper international trade policies—for example, by not promoting free trade agreements with the main commercial partners. in the end, the greater or lesser availability of state resources, in an economy that is highly dependent on oil prices, and the lack of stability and priority in terms of policy and support mechanisms, has affected the drive of smes. yet, this sector has shown its ability to be flexible to adjust to ever-changing and negative conditions, in addition to its ability to innovate perhaps not at higher levels—in light of adverse circumstances. from the perspective of their contribution to the economy as a whole, we may highlight the important presence of smes throughout the country, which contribute jobs and fulfil the basic needs of the population, because the main economic activities where smes have relevant participation are in the food, beverage and clothing sectors. thus, it is a catalyst for development within the country. we should not ignore the role of the sector as an important part of production chains, where it has a role as a supplier of parts and intermediate raw materials. smes are a relevant participant in the domestic economy, which requires clear and coherent policies and support mechanisms, with mediumand long-term vision to promote entrepreneurship and innovation while avoiding overprotection. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 references aguiar, víctor. 2013. “análisis de la evolución del sector manufacturero 1990-2008.” in estudios industriales de la micro, pequeña y mediana empresa compiled by hugo jácome and katiuska king, 23-44. quito: flacso. araque, wilson. 2002. competitividad de las pequeñas empresas de la confección de quito. quito: insotec. araque, wilson. 2010. plan de mejoramiento competitivo de las pequeñas y medianas industrias del sector de la confección textil de la provincia de pichincha. quito: escuela politécnica del ejército (espe). araque, wilson. 2019. “observatorios como medio para poner en interacción a la docencia, investigación y vinculación con la colectividad.” in observatorios de turismo: conceptualización y experiencias prácticas, thiago duarte et al., 55-75. quito: editorial ute. ayala, enrique. 2012. resumen de historia del ecuador. quito: corporación editora nacional. ayala, enrique. 2014a. historia, tiempo y conocimiento del pasado estudio sobre periodización general de la historia ecuatoriana: una interpretación interparadigmática. quito: corporación editora nacional. ayala, enrique. 2014b. el oficio de historiar: estudios sobre historiografía nacional. quito: corporación editora nacional. british petroleum. 2020. statistical review of world energy. last modified september 11 https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-worldenergy.html can – comunidad andina de naciones. 2008. decision 702: sistema andino de estadística de la pyme. lima: can. cardozo, alejandro. 2005. pequeña y mediana empresa, intuición y método. buenos aires: editorial temas. cepal. 2013. perspectivas económicas de américa latina 2013: políticas de smes para el cambio estructural. santiago de chile: cepal – ocde. cerale. 2017. the internationalisation of latin american smes and their projection in europe. hamburg: eu-lac, cerale, institute des amériques. coello, david. 2017. “¿poder de mercado o eficiencia? determinantes de la rentabilidad del sector manufacturero ecuatoriano durante el periodo post-dolarización.” x-pedientes económicos 1(1): 56-77. dimaggio, paul, and walter powell. 1999. “introducción.” in el nuevo institucionalismo en el análisis http://revistes.ub.edu/index.php/jesb volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 organizacional, edited by paul dimaggio and walter powell, 33-75. mexico: fondo de cultura económica. durán, fidel, pablo mateus, roberto hidalgo and carlos palán. 1992. opciones de la pequeña y mediana industria en la apertura económica. quito: insotec. ec. 1973. decreto supremo 921. registro oficial # 372, agosto 20. ec. 2011. decreto ejecutivo 757. registro oficial # 450, suplemento, mayo 17. fernández, fernando. 1990. condiciones del entorno de la pequeña industria en el ecuador. quito: fundes-insotec. geymonat, juan. 2020. “industrial business groups in a context of deindustrialization. the uruguayan case, 1980-2015.” journal of evolutionary studies in business 5(2): 150-176. doi: 10.1344/jesb2020.2.j079. hidalgo-flor, roberto. 1999. evolución y situación actual de la pymi en el ecuador. quito: insotec. inec – instituto nacional de estadísticas y censos. 2019. directorio de empresas y establecimientos 2018. quito: inec. inec – instituto nacional de estadísticas y censos. 2019. directorio de empresas y establecimientos 2018. quito: inec. insotec. 1986. pequeña y mediana industria en el ecuador, situación y políticas de fomento 19781982. quito: insotec. insotec. 1987. la gestión tecnológica de la gerencia en la industria ecuatoriana. quito: insotec. insotec. 1996. diagnóstico de la pequeña industria en la provincia del guayas. quito: insotec. lanusse, josé. 1993. diagnóstico de la pequeña y mediana industria en el ecuador. quito: insotec– fundación konrad adenauer. larrea, carlos. 2000. “la transición hacia una economía post-petrolera en el ecuador.” in el ecuador post petrolero, edited by alberto acosta, alexandra almeida and milton balseca, 89-105. quito: acción ecológica. larrea, carlos. 2008. “crisis, dolarización y pobreza en el ecuador.” in retos para la integración social de los pobres en américa latina, edited by carlos barba, 215-233. buenos aires: clacso. luna, luis. 2014. lecturas sobre macroeconomía, desarrollo y comercio internacional. quito: colegio de economistas de pichincha. meyer, john and brian rowan. 1977. “institutionalized organizations: formal structure as myth and ceremony.” american journal of sociology 83 (2): 340-363. micip – ministerio de industria, comercio, integración y pesca. 2002. diagnóstico de la pequeña y mediana industria en el ecuador 2002. quito: micip ministerio de coordinación de la producción, empleo y competitividad. 2010. agenda para la http://revistes.ub.edu/index.php/jesb https://doi.org/10.1344/jesb2020.2.j079 volume 7, number 2, 121-165, january-june 2022 doi.org/10.1344/jesb2022.1.j101 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 transformación productiva. quito: ministerio de coordinación de la producción, empleo y competitividad. north, douglas. 1991. “institutions”. journal of economic perspectives 5 (1): 97-112. observatorio de energía y minas de la universidad de las américas. 2020. last modified september 11. http://www.observatorioenergiayminas.com/ observatorio de la pyme de la universidad andina simón bolívar, sede ecuador (uasb-e). 2014. catorce años de contribución al fomento del emprendimiento y las mipyme. quito: uasb. last modified september 11. https://www.uasb.edu.ec/web/observatorio-pyme/ observatorio de la pyme de la universidad andina simón bolívar, sede ecuador (uasb-e). 2019. encuesta de conyuntura de la pyme -con énfasis en la pymi-. quito: uasb. last modified september 11. https://www.uasb.edu.ec/web/observatorio-pyme/ oecd. 2019. latin america and the caribbean 2019: policies for competitive smes in the pacific alliance and participating south american countries. last modified september 11. https://www.oecd-ilibrary.org/development/latin-america-and-the-caribbean-2019_d9e1e5f0-en peres, wilson, and giovanni stumpo. 2002. las pequeñas y medianas empresas industriales en américa latina y el caribe. mexico: siglo xxi editores. rivera, jairo. 2018. “pequeños toques hacen grandes rasgos: análisis de los determinantes de las micro, pequeñas y medianas empresas, pyme.” revista empresarial 46: 42-51. doi: 10.23878/empr.v12i46.141. samaniego, pablo. 1993. situación de la industria ecuatoriana en los 80. quito: insotec. senplades. 2009. plan nacional de desarrollo 2009-2013. quito: senplades. solano, javier, segundo camino and maría alvarado. 2017. “análisis del entorno competitivo en el que operan las mismes del sector manufacturero en ecuador.” revista empresarial 11(4): 54-63. doi: 10.23878/empr.v11i44.115. universidad eafit, insotec and corporación andina de fomento. 1996. la gestión de la pequeña y mediana industria en los países andinos. mimeo insotec. urmeneta, roberto. 2018. “policies, institutions and instruments supporting the internationalisation of smes in latin america.” in innovation and sme internationalization in korea and latin america and the caribbean, edited by sebastián herreros, keiji inoue and nanno mulder, 8196. santiago de chile: cepal. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.23878/empr.v12i46.141 https://doi.org/10.23878/empr.v11i44.115 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 30 jerònia pons-pons universidad de sevilla (spain) margarita vilar-rodríguez universidad de a coruña (spain) the historical roots of the creation of the catalan privatepublic hospital model: c. 1870-1935 abstract this paper analyses the roots of the creation of the catalan hospital model, based on a preponderance of privately owned hospitals and beds over those of public provision. in particular, on the basis of new statistical and documentary sources and a review of the existing historiography, this study reinterprets the keys that shaped this historical model during what is considered to be a strategic period of the process, 1870-1935. in the late nineteenth century, hospitals dependent on provincial authorities became private charity institutions in the provincial capitals, under the control of the medical and economic elites (a decisive process in the case of the city of barcelona). later, during the dictatorship of primo de rivera and the second republic, institutional impetus helped foster a system of district hospitals intended to meet the public demand for a network of public utility hospitals. this network was made up the few publicly owned hospitals and numerous privately owned ones. the philosophy of this model was taken up again during the transition to democracy after responsibility for healthcare was devolved to the government of catalonia 1981. keywords: hospital; healthcare; catalonia; 19th-20th centuries corresponding author: e-mail: mvilar@udc.es received 18 september 2020 accepted 7 november 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:mvilar@udc.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 31 introduction this paper analyses the factors that have contributed to the historical creation of the hospital system in catalonia, on the basis of new statistical and documentary sources and the reinterpretation of some already known.1 this process has been characterised by the numerical preponderance of privately owned hospitals and beds over those of public provision, in contrast to other spanish regions (comelles 2006; comelles, alegre-agís and barceló 2017; vilar and pons 2018, pons and vilar 2019a, and vilar and pons 2019; barceló and comelles 2020). a detailed analysis of the first hospital catalogue drawn up with a criterion of proprietorship, for 1963, makes it possible to establish different territorial models and determine the historical weight of different public and private institutions. privately owned hospitals and beds only predominated in four regions: the basque country, galicia, cantabria and catalonia.2 the catalogue allows us to verify the greater weight of private hospitals in catalonia compared with spain as a whole, both in terms of the number of hospitals and the availability of beds. while in catalonia four out of every five hospitals were privately owned (80%), in spain this percentage was only three out of five (60%). this imbalance was even greater with regard to 1 the backwardness of the spanish hospital system, which the catalan model was part of, during the period analysed in this paper, is evident if compared to the british or french systems. the most studied case is that of the united kingdom, where most works have analysed the voluntary hospitals, hence cherry (1997); gorsky, mohan and powell (2002), and gorsky, mohan and willis (2006). a look at the hospital system from a regional perspective can be found in doyle (2014) and for an analysis of the integration of regional hospital services, see gorsky (2004). with regard to the incorporation of voluntary hospitals into the national health service (nhs) the works of berridge (1999) and sturdy (2002) are very interesting. among the most outstanding contributions on the development of french hospitals, we can cite the works of domin (2008) and chevandier (2009). for the development of america’s hospital system, the work of rosenberg (1987) is a classic. for asia, see the studies on the creation of the japanese and chinese hospital systems by donzé (2016) and xi (2016), respectively. there is an interesting compilation of articles on the history of hospitals in the mediterranean region, northern europe and america over many centuries (300-2000) in henderson, horden and pastore (2007). 2 these regions also show a greater weight of beds in private hospitals, but with different characteristics to the situation in catalonia. thus, for example, the state of affairs in the basque country was studied by pérez castroviejo (2002); in the case of cantabria, the data are conditioned by the large size of hospital de valdecillas, studied by salmón, garcía ballester and arrizabalaga (1990); or the circumstances in galicia, where the data are also conditioned, this time by the great capacity of private hospitals devoted to caring for the mentally ill, such as conxo, in santiago de compostela. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 32 the number of beds, with the provision of public hospitals being preponderant in spain, whereas private provision was more prevalent in catalonia. from this initial overview, it seems clear that the catalan hospital model displayed a clearly different format to the country as a whole in 1963. two types of institution set the pattern in the creation of the catalan hospital system: the considerable weight of municipal hospitals in the public sphere and the predominance of private hospitals; private charity hospitals, meanwhile, were far less common in the private sector. this model was developed in the long term on a diverse substratum of charitable institutions, both public and private, inherited from the old regime and from liberal beneficence, on top of which would be added a large number of private clinics and sanatoriums from different sources: friendly societies, industrial accident insurance companies and mutuals, and specialist doctors.3 the interaction between hospital institutions of different origin varied over time depending on different periods of political and/or economic history. overall, however, this heterogeneous base enabled catalonia to benefit from a bed capacity and availability of private hospitals well in excess of the average figures for other spanish regions. the thesis put forward by this paper, using official administrative sources and information from the media during this period, is that the basis of this hospital map was already laid out before the civil war. the social and economic forces that promoted this model of private predominance sought and found, in key and critical periods, strategies to continue with their prevalence. in particular, this paper argues that there were two critical moments that made it possible to lay the foundations of this model before the passage of compulsory sickness insurance in 1942. the 3 for further details on the friendly societies, see castillo and ruzafa (2009); vilar-rodríguez and pons-pons (2012); or the approach from social capital by largo and pujol (2016). for private health companies in spain from a historical perspective, see ponsand vilar-rodríguez (2019b). for a broader analysis from a regional perspective, see vilar and pons (2018, 250). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 33 first turning point was in the 1870s, as a result of the laws on disentailment and charity passed by the state. the former forcibly expropriated large properties of both lay and ecclesiastical origin, including hospitals, hospices and religious charitable institutions known as obras pías, and put them up for public auction (vilar and pons 2019). via the latter, the state transferred responsibility for the management of, and the costs of funding, public charity to municipal and provincial authorities. in the case of catalonia, the managing elite created hospital trusts to drive processes that led hospitals to be classified as private charity, in order to maintain ownership of hospital property under their control, and thereby evade the process of liquidation of property in exchange for public debt that other hospital institutions underwent in other parts of the country. within this context, and after a long lawsuit, the trust administrators of hospital de la santa creu, one of the main and most prestigious hospitals in catalonia, managed to revoke its classification as a “public and provincial” hospital, established in 1853, and convert it into a private charity hospital. hence, on 18 june 1874, the dirección general de beneficencia, sanidad y establecimientos penitenciarios (directorate general for charity, health and penitentiary establishments) revoked the public classification and declared hospital de la santa creu a private charity establishment.4 the claim was based on the grounds for exception included in the royal decree of 1853: a) ongoing compliance with the purpose of its foundation; b) to be paid for with its own donated or bequeathed funds; c) management and administration entrusted to patrons designated by its founder (barceló and comelles 2020, 38 4 gazeta de madrid, 51, february 20, 1876, 429. its private charity statute continued until 1978, when it started to serve as a service provider for the catalan health institute within the framework of the xarxa hospitalària d'utilització pública de catalunya network. see josep m. comelles’ works on hospital santa creu, particularly comelles (2006) where he provides a complete analysis demonstrating exactly this for hospital santa creu i sant pau. moreover, there is a new book by barceló and comelles (2020) that provides a precise summary of previous works of these authors on the evolution of the private-public hospital system in catalonia and advances new findings. these works are based on archival sources from hospital santa creu i sant pau, which makes it possible to supplement, compare and contrast his theses with those established in this paper on the basis of official statistical sources. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 34 42). these were grounds that could be identified with a large number of hospitals throughout spain but, however, very few used them. this reclassification enabled the hospital’s patrons to regularly apply for exemption from paying the taxes levied on the assets of legal entities, which contributed to the preservation of their considerable property, beyond the control of the public authorities.5 these assets were further increased by means of bequests and raffles. this strategy of the leading hospital in barcelona at this time paved the way for other catalan hospitals. this was the case of the hospitals of tarragona6, lleida and vic, which also followed the path towards pseudo-privatisation.7 in exchange, these provinces and cities ceased to have provincial hospitals under public control, since these hospitals, although they received subsidies from the municipal and/or provincial authorities, were privately managed. thus, they were not directly accountable to these public authorities, and these institutions also had little influence over their investments, recruitments or administrative and healthcare practices, which in practice effectively meant privatisation of their management.8 this process has been identified by barceló and comelles (2020, 43), who affirm that “these privatisation strategies differentiated the catalan case during the period under analysis”. the aforementioned authors interpret this decision not only as response arising from fear of losing control of the governing bodies of local hospitals but also as a strategy in view of the risk of losing proximity care services, and they lean more towards this second factor. they also affirm that catalonia was an exception to the process of centralising care resources in the capitals or large cities of a province (barceló and 5 see for example the exemptions granted in the gaceta de madrid, 106, april 16, 1913, 147 and in the gaceta de madrid, 234, august 21, 1920. 6 for the history of the hospital of tarragona, see barceló (2017) and barceló and comelles (2020). 7 for further details, see barceló and comelles (2018, 115) and barceló and comelles (2020). 8 for the evolution of hospital management, see fernández and sabaté (2019) and fernández (2018) and the articles of the special issue of the journal business history 61(3) published in 2019 and entitled “health industries in the 20th century”. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 35 comelles 2020, 38). our thesis is more inclined towards an explanation that focuses on the interest of the elites and the professionals concerned in controlling the management and maintaining ownership of the entity and evading public scrutiny and auditing. the fact that during a large part of the twentieth century hospital santa creu i sant pau effectively functioned as a provincial hospital, concentrating a large proportion of patients from the entire province and even from the rest of catalonia, does not support the decentralisation thesis. it was therefore managed as a private hospital with a ‘centralising’ function that received subsidies from public institutions, but without direct supervision by these institutions (fernández i pellicer 1932, 392). it is certainly true that many hospitals of a local scope survived, but these were mainly privately owned, and consequently they were not a viable option for the poorer sectors of the population with few resources.9 the second turning point started with the creation of the mancomunitat (1914-1925), a federation of the four catalan provincial councils, which was accompanied by the start of a debate on the design of the catalan hospital model, its proprietorship and its territorial organisation. the new institution tried to move towards the regionalisation of healthcare services in this territory. the primo de rivera dictatorship, however, aborted the project. as barceló and grau (2014) point out, the idea was to integrate all surviving charitable and hospital institutions in a single healthcare network. these institutions were in a very precarious economic situation due to the chronic lack of state investment in the health sector. it was an attempt to establish a mixed-ownership model of healthcare institutions, consisting in a mutual relinquishment of power between the old administrators and the new representatives of the 9 see the statistical annex in pons-pons and vilar-rodríguez (2019a, 27-29). there were 143 private hospitals and only 24 public ones in the province of barcelona in 1963. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 36 mancomunitat (fernández i pellicer, 1932). the republican generalitat or government of catalonia (1931-1939) replaced the mixed-ownership model with another that concentrated the healthcare institution’s decision-making power in the hands of political representatives and attempted to promote an investment plan to modernise hospitals, but without altering the prevailing model of the private hospital system. however, the outbreak of the civil war made it necessary to shelve the plan and attend to more urgent needs (sabaté, 1993; pons and vilar, 2019a). as a result, catalonia missed the opportunity, at this time, to create an efficient and sustainable hospital network on the basis of the structure of existing local institutions. 1. barcelona and the shortfalls of public charity: the role of private provision (c. 18701935) in the early twentieth century barcelona was one of the principal urban and industrial centres in spain with a population of over one million inhabitants by 1930, which accounted for more than half of the total population of catalonia.10 industrial growth and migratory flows evidenced the lack of healthcare infrastructures.11 furthermore, the concentration of business and population required greater efforts in terms of individual and collective hygiene as a necessary means of guaranteeing a healthy workforce and maintaining social order. despite this, the main demographic indicators showed a changing trend, with a rapid fall in mortality rates first and then in the birth rate, an increased life expectancy and progress in the urbanisation process.12 moreover, an improvement in eating habits and personal and public hygiene also reduced the 10 the figure for catalonia comes from idescat (statistical institute of catalonia). estimaciones de población, https://www.idescat.cat/pub/?id=aec&n=245&lang=es. for the city of barcelona: anuario estadístico de la ciudad de barcelona (statistical yearbook of the city of barcelona), https://www.bcn.cat/estadistica/castella/dades/anuari/cap02/c020101.htm. 11 as recorded in the anuario estadístico de barcelona for 1902 (ayuntamiento de barcelona 1903, 335). 12 urban areas became crucial in the fight to reduce the mortality rate in the early 20th century, see pérez moreda, reher and sanz (2015). https://www.idescat.cat/pub/?id=aec&n=245&lang=es https://www.bcn.cat/estadistica/castella/dades/anuari/cap02/c020101.htm volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 37 propensity to catch infectious diseases. nevertheless, the process was slow and the accumulated backwardness considerable. although it is true that the public authorities launched informative and educational health campaigns and promoted the vaccination of the population, the public provision of healthcare at the beginning of the twentieth century continued to be dispersed in multiple entities, most of them of a charitable nature, local in scope and poorly financed. the influenza pandemic of 1918-1920 (also known as the spanish flu), which occurred in several outbreaks, aggravated the country’s health situation and led to a temporary increase in the mortality rate.13 the influenza and its indirect effects in the form of infectious and parasitic diseases, such as diarrhoea, gastritis and enteritis, increased mortality to levels similar to those at the beginning of the twentieth century. meanwhile, periodic outbreaks of typhus, tuberculosis or smallpox highlighted the need to introduce urgent improvements in the country’s healthcare policy. under these circumstances, public health and medical care were synonymous with charity. in this field, provincial and municipal councils carried out an essential task in two ways:14 the provincial authorities mainly took responsibility for the hospitalisation of the sick and accommodating orphans and the destitute in hospices, while the local authorities concentrated their efforts on charitable work and helping the needy and providing medical assistance to poor families. according to the few sources available, barcelona had twelve15 hospitals in 1898, although only two of them were publicly owned, and neither of these was municipal or 13 for more information on this phenomenon see, for example, echeverri (1993), huertas (1993, 94) and nicolau (2005). 14 for more on the regulations that governed public charity, see anuario estadístico de la ciudad de barcelona. 1913 (ayuntamiento de barcelona 1915, 308-309). in the anuario estadístico de la ciudad de barcelona for 1914 (ayuntamiento de barcelona, 1915, 380) it is acknowledged that the healthcare and charity services in the city are intertwined and become indistinguishable “as the former are basically charitable and free”. 15 see vilar and pons (2020, in press), table 1. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 38 provincial: hospital clínico, linked to the faculty of medicine – in the process of being built and whose inauguration would take place in 1906 – (ayuntamiento de barcelona. 1923, 448), and the military hospital, which enjoyed a special status.16 the rest were all privately owned: three belonging to the church, one to the cruz roja (spanish red cross) and six were classified as private charity hospitals, although they were managed by foundations which in some cases had the participation of municipal institutions.17 hospital de la santa creu i sant pau, belonging to private charity, was one of the oldest hospitals in the catalonian capital.18 during the nineteenth century, there were frequently complaints from doctors about the poor functioning of this institution, which was the only noteworthy hospital available in the city of barcelona. these complaints were noted during municipal inspections.19 in 1903 the hospital treated more than five thousand sick people and by 1918 the figure was now over six thousand.20 building work was initiated at the start of 1902 to erect a new hospital, a project that was possible thanks to the legacy of the banker pau gil, and its inauguration took place in 1930 (venteo, 2016). nonetheless, the molt il·lustre administració (mia, very illustrious administration), the managing body of this hospital, controlled by the bishopric and the city council, was radically and repeatedly opposed throughout the 1920s to the introduction of new scientific criteria and the professionalisation of the medical staff due to “fear of losing power, fear of losing control and fear of scientific innovation”.21 16 for a study on military hospitals in spain, see gutiérrez (2018, 367). 17 a compilation of historical data on the creation of hospitals in catalonia can be found in aragó (1973, 57-74) and a study on hospitals in barcelona, taking into account the business management, in fernández and sabaté (2019). 18 arrizabalaga (2006, 203-309). on its origins, see also hospital de la santa creu i sant pau (2016). 19 the shortcomings of the old building are noted in many sources from this time, for example, anuario estadístico de la ciudad de barcelona (1903, 376). 20 anuario estadístico de la ciudad de barcelona (1918-1920, 449). 21 as revealed in hospital records from the 1920s, see fernández pérez (2018, 146). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 39 in 1879, a draft was started for the project of the future hospital de nostra senyora del sagrat cor, as a charitable initiative of a group of women belonging to the local bourgeoisie and under the auspices of the church (agustí, 1991). it was funded with public and private donations, care of the sick was left in the hands of the daughters of charity of saint vincent de paul and the hospital's governing board was presided by an ecclesiastic. the success of the initiative prompted the purchase of some land in the neighbourhood of les corts in order to build their own facilities; the new hospital started operating in 1883 under the control and management of a private trust. according to the figures of the anuario estadístico de la ciudad de barcelona (statistical yearbook of barcelona), in 1903, the hospital treated 777 sick people (men and women) with general medicine, surgery, gynaecology, urinary tract treatment and ophthalmology. it is also worth noting that during this period hospital sant joan de déu was founded in barcelona in 1867 by l'orde hospitalari de sant joan de déu (brothers hospitallers of saint john of god).22 it was the first children’s hospital in spain, and originally treated sick children for rickets and scrofula. it changed sites several times as earlier premises became too small. the hospitaller order also founded a mental health and psychiatric hospital in saint boi de llobregat (barcelona) in 1895 and a general hospital in manresa in 1932.23 meanwhile, new initiatives linked to doctors were implemented. this was the case of the clinic and dispensary for poor children run by the doctor of cuban origin francisco vidal solares (1854-1922). this doctor founded a hospital for poor children in 1886, with care provided by sisters of the 22 for a more detailed account, see sjd (2020). 23 see plumed (2009, 503). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 40 daughters of charity of saint vincent de paul.24 this hospital had a laboratory for microbiological and chemical analysis and also distributed free medicines to the city’s poorest children. more than 44,000 cases were treated in this hospital in 1903.25 the inadequate hospital provision in barcelona became even more evident in the first decades of the twentieth century. in this respect, a significant milestone was the founding of hospital clínic i provincial de barcelona in 1906, the first publicly managed hospital in the city. its work was initially focused on providing healthcare to the poorest, but it had very limited financial resources. thus, for example, the doctors working at this hospital were not paid and nursing tasks were carried out by nuns. the situation was so abject that sometimes the first directors had to use their own money to buy basic supplies.26 some years later, in 1923, hospital dos de maig was inaugurated by the spanish red cross.27 the work of the small hospital del mar, inaugurated in barcelona in 1905, also deserves a mention. another significant novelty lies in the fact that in 1913 the statistics now clearly distinguished between institutions devoted to care for the sick that were classified as belonging to private charity, those of religious associations and private clinics.28 despite the predominance in this field of private institutions, both profit-making and not-for-profit, it should not be overlooked that municipal councils actually bore the main burden of family medical care at this time. this responsibility was not reflected in a significant budget allocation, as the portion destined to 24 see álvarez-uría (1986). this experience is considered by some authors to be a forerunner of the paediatric institutions gotas de leche, which were organised in spain as from 1902 (rodríguez ocaña 1986, 236). 25 data obtained from the anuario estadístico de la ciudad de barcelona for the year 1903 (ayuntamiento de barcelona 1905, 378). 26 for further details, see: http://www.hospitalclinic.org/es/el-clinic/100-anos-de-salud (accessed in october 2016) and corbella (2006). see also broggi (2006). 27 data obtained from consorci sanitari integral (2019). 28 see vilar and pons (2020, in press), table 1. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 41 charity barely accounted for 3-5% of total municipal spending (table 1). even so, the municipal services became the key link in treating the sick, either through subsidies to charitable establishments via municipal budgets (more than 40 institutions subsidised in 1903) or through direct municipal medical services. in the latter case, the municipal medical corps stood out, the council’s main item of expenditure on charity and a fundamental element of these services. in fact, after paying the municipal doctor’s salary, as required by law, the ability to spend on any other charitable cause was almost non-existent (esteban 1992, 123). table 1. charitable expenditure in the municipal budget of barcelona, 1903, 1913 and 1918 item 1903 (pesetas) item 1913 (pesetas) 1918 (pesetas) municipal medical corps 415,345.14 municipal medical corps 718,535.60 1,143,302.16 charity 329,040.00 domiciliary aid 8,730.00 6,230.00 subs. charitable establishments 110,000.00 charitable aid 427,663.17 449,400.00 aid and transport for poor non-residents 2,000.00 2,000.00 aid to poor emigrants 500.00 500.00 subsidies charitable establishments 204,800.00 255,800.00 municipal asylums 199,362.00 260,615.00 hospitals for the infectious 47,652.50 charitable expenditure 854,385,14 charitable expenditure 1,561,590.77 2,165,499.66 total budget expenditure 27,825,873,86 total budget expenditure 42,695,342.40 43,287,955.90 % charity 3.07% % charity 3.66% 5.00% source: ayuntamiento de barcelona (1905, 311), (1915, 309) and (1925, 532). the municipal medical corps was created in barcelona in 1885 and from then comprised twenty doctors, ten designated primary and ten secondary, one of each category being destined to each of the ten districts that made up the city (ayuntamiento de barcelona 1905, 321). this first team was fundamental in tackling the cholera epidemic that ravaged the city at this time. one year later, the microbiological laboratory was set up and then, in 1891, the municipal medical corps volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 42 was reorganised, increasing the number of members and dividing the services into four sections: medical attention and health policy, practical hygiene, laboratory and special hygiene. by 1913 the municipal medical corps in barcelona had grown considerably, but was still insufficient to meet the health and medical care needs of a city of over half a million inhabitants (table 2). table 2. municipal medical corps, barcelona 1913 director: dr. d. josé macaya y gibert budget pesetas one director 5,000 one assistant doctor 2,000 a keeper of dispensary materials 1,860 first section staff: 12 doctors (dispensary heads); 80 permanent staff doctors; 30 assistant doctors; 2 intern assistant doctors; 4 stretcher-bearers for ambulances; 1 caretaker; 52 dispensary assistants and 24 midwives 337,180 free breastfeeding service: 1 director, 1 paediatrician sub-director; 1 obstetriciangynaecologist; 1 domiciliary service inspector; 1 assistant in charge of statistics; 1 chemical analysis laboratory director; 1 administrator-inspector; 1 machinist; 1 caretaker; 4 junior assistants and 1 woman in charge of cleaning service 31,045 second section 1 chief director of urban sanitation; 3 sub-directors-heads of section; 3 doctors; 5 foremen; 1 night foreman; 4 machinists; 7 coachmen; 1 storekeeper; 73 operators and 1 electromechanical machinist 160,725.6 third section chemical analysis laboratory subsection: one director; one assistant; two interns and one junior assistant 10,100 vaccination subsection: one director; one sub-director; one assistant; one intern; two junior assistants and one stable boy 13,530 bacteriology subsection: one director; two assistants; one intern; one junior assistant and one caretaker 12,395 fourth section health demographics, statistics and census; one medical technical director; seven assistants for demographic work; four auxiliaries and one assistant 23,440 otorhinolaryngology section: one medical director; one secondary doctor; one intern auxiliary and one medical assistant 6,750 others 129,500 source: taken from the ayuntamiento de barcelona (1915, 336). overall, barcelona had thirteen municipal medical dispensaries and a first-aid post in 1903; six were located in the old municipality of the city and the rest in neighbouring towns that had recently been incorporated into the city limits. the dispensaries offered a permanent medical volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 43 service, organised by duty shifts. their multiple functions included providing emergency care to any injured or accident victims; expert medical attention at home; daily consultations for the poor; a nursing service; medical check-ups for children before attending schools or asylums sponsored by the municipality and vaccinations. moreover, all the dispensaries ran a stretcher service, mainly using the old models with arms and only a few already had more modern services using stretchers with wheels. each of these dispensaries had a staff of auxiliaries or junior assistants to deal with the so-called “mechanical services” (cleaning, porter duties, transfer of the injured, medical reports, etc.). meanwhile, the first-aid post was located in the neighbourhood known as casa antúnez and was only manned by a doctor’s assistant. the lack of resources made it necessary for private charitable actions to be undertaken intermittently and selectively.29 the main work of the municipal medical corps, however, was the provision of domiciliary medical care to the sick. this service had grown substantially in recent years. in 1892, municipal doctors in barcelona carried out almost fourteen thousand home visits; then there were over one hundred and twenty thousand visits in 1897; and by 1903 this figure was now approaching one hundred and eighty thousand (ayuntamiento de barcelona 1905, 331). in some of these cases, when the social or medical conditions of the patient required admission to hospital for medical or surgical treatment, the doctor had to issue an admission certificate and the municipal stretcher-bearers went to pick up the individual in question, if necessary. when the doctors prescribed some medicine, the patient had to acquire it obligatorily from one of the registered pharmacies authorised to supply the medicines prescribed by the municipal charity 29 the royal order of 27 october 1908 denounced the state of abandonment of many of these private foundations which did not even keep files due to the lack of resources or competent staff. gaceta de madrid, 302, october 28, 1908. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 44 services. these establishments, through their official professional association, had a contract for this service with the city council, which also established the prices that were to be charged. details of medicines and their maximum doses were provided in the same leaflet that indicated the price rates. only anti-diphtheritic serum and vaccine lymph were prepared and supplied directly by the municipal microbiological laboratory. as well as these direct services, the city council used its budget to subsidise a large number of public and private charitable organisations. many of these also provided medical care. worthy of note was the work of the four charitable establishments in barcelona in 1903 known as casas de socorro (san beltrán, san pedro, palacio and gracia), under the auspices of the asociación de los amigos de los pobres (association of friends of the poor). they had four main objectives (ayuntamiento de barcelona 1905, 360): a) a medical-surgical service to cover all accidents or urgent medical or surgical cases; b) a free public consultation for those that could prove that they were poor; c) vaccinations for all who requested them; d) provision of all the services that directors and doctors considered appropriate in particular cases and that were normal in this type of establishment. their medical staff was made up of a president (the most senior director), and a director and three permanent staff doctors in each casa, and the supernumeraries that were available in accordance with budgets and needs.30 each casa also had a caretaker, a nurse and two stretcher-bearers. the medical attention provided in the casas de socorro for accidents were free for all, but home visits were only free for pobres de solemnidad (the officially 30 the body of supernumeraries was made up of doctors without a salary whose main job was to cover any absences and illnesses of the permanent staff and they had the right to fill any vacancies that came up in the municipal medical corps, which was done by turn according to both seniority and merit (ayuntamiento de barcelona 1905, 345). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 45 registered poor). many more of the establishments subsidised by the city council also had a medical care service (ayuntamiento de barcelona 1905, 364). on the other hand, the data available for barcelona confirm that very few changes were introduced into provincial charity services provided by the provincial authorities, known as diputaciones, in the early twentieth century (table 3). it should be noted that, after the passage of the reglamento general de beneficencia (general charity regulations) in 1822/1836, each province was required to have a casa de maternidad y expósitos (maternity and foundling home), another charitable institution known as a casa de socorro y misericordia and a publicly owned hospital (esteban 1992). the insufficient spending on provincial charity in the first decades of the twentieth century was limited to care provision for the oldest, most traditional sectors of the poor in a precarious manner. their main efforts were concentrated on providing the poorest families with food, clothing and hospital treatment, and on the confinement of the old, vagrants and foundlings in hospices and children’s homes. their income came from their own sources; bequests, alms, and donations from individuals and aid from the state and local authorities (water rates, cemeteries, etc.). the income that came from some of those who were taken in by these charitable institutions, either in money or in kind, from the mid-nineteenth century onwards, should also not be overlooked, (marín de la bárcena 1909, lxv). in this case, the meagre resources also limited spending possibilities, which was naturally detrimental to the quality of the charitable services offered. with regard to barcelona, the casa provincial de caridad (a provincial “house of charity”), the casa provincial de maternidad y expósitos and the hospital de dementes pobres for poor mental patients absorbed almost all provincial charity expenditure (table 3). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 46 table 3. budget of provincial charity expenditure in barcelona, 1913 general treatment pesetas spending of the provincial charity board 4,750.00 casa provincial de caridad 150,000.00 casas de misericordia casa provincial de caridad 1,058,718.52 casas de maternidad y expósitos casa provincial de maternidad y expósitos 511,384.10 hospitals hospital clínico 127,000.00 dementes pobres 447,500.00 for the medical examination of the mentally ill 3,000.00 private charitable establishments subsidies 79,000.00 source: ayuntamiento de barcelona (1915, 309). overall, healthcare and public hospital services in barcelona during the period under study were synonymous with traditional charity: free for the poor and to be paid for by those considered to be comfortably off. the attention and coverage for both groups was clearly insufficient for a growing population and with limited financial means. the city council, rather than barcelona provincial council, made the greatest effort in this area, despite having an even more limited budget. hence, the data for 1913 reveal how the provincial council’s maternity home had a similar budget to that for the city’s entire municipal medical corps. both municipal and provincial institutions, however, devoted a significant part of their spending on charity to subsidising private charitable institutions, where they did not control either the management or the results. so where were the main changes in barcelona’s public hospital provision during this period? the concentration of companies and workers also stimulated the creation of employers’ mutuals, private clinics and other forms of protection based on workers' associationism. the anuario financiero y de sociedades anónimas yearbook published in 1935 includes at least volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 47 fourteen private clinics created as joint-stock companies in the province of barcelona at this time. there was also one in lleida and another in tarragona.31 it is also important to highlight the important role played by friendly societies in a city housing one of the country’s main concentrations of workers.32 according to the data available, most friendly societies (not dependent on any company) in spain at this time were concentrated in catalonia, where 73.39% of these entities and 56.26% of members were to be found in 1915 (national welfare institute, inp 1927, 99). in the meantime, the employers’ industrial accident mutuals, created from 1900 onwards, were very numerous in catalonia and especially in barcelona. they created small dispensaries and some clinics: mutua general de seguros; mutua catalana de accidentes e incendios; mutua sabadellense and mutua de seguros de terrassa. finally, it is also important to note the role of private insurance companies in the industrial accident branch, for example, hispania (pons and vilar 2019b). within this context, the foundations of a hospital structure in catalonia were laid, much conditioned by the “barcelona factor” and relying mainly on a constellation of small private clinics and hospitals of varying origin. 2. the work of the mancomunitat, the devolution of responsibility for healthcare to the republican generalitat and the debate on the catalan hospital system before the civil war as seen above, the shortage of hospital beds and their unequal distribution among the provinces and districts of catalonia were problems that were already evident at the turn of the twentieth century to professional doctors such as francesc puig i alonso and his colleagues participating 31 anuario financiero y de sociedades anónimas de españa 1935, madrid (p. 967). for more details on these joint-stock companies see pons and vilar (2019a, table 2). 32 this aspect has already been analysed in previous works, see for example pons and vilar (2012). the friendly societies also maintained an important presence in rural catalonia, see arnabat (1994). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 48 in the first congrés de metges de llengua catalana (congress of catalan-speaking doctors) in 1913 and in subsequent encounters organised by medical professionals (sabaté 1993, 118, and sabaté 2020). during this period, there were some initiatives launched by public institutions aimed at improving existing infrastructures. examples include the transformation of the old maritime lazaretto into hospital nostra senyora del mar, promoted by barcelona city council, or the inauguration of the new hospital clínico provincial in 1906. under these circumstances, the foundations of a model centred on the coexistence of private business with a limited development of public hospital institutions were gradually established. this was a result of the rejection of the model of provincial hospitals controlled by the provincial councils and a commitment to developing health districts and district hospitals. this strategy was accompanied by a significant change of approach towards a comprehensive system characterised by coordination between medicine and health, between public and private healthcare, and progressing from the charitable function of hospitals to the provision of a public service. this process began, according to sabaté (1993, 118), with the setting up of the mancomunitat de catalunya. this author also highlights the “pla de regionalització sanitària”, the regional healthcare plan drawn up by dr. cinto raventós (1917), as a fundamental precedent for hospital development. this was the basis for plans for the organisation of healthcare and hospitals in catalonia at regional and district levels throughout the twentieth century.33 the mancomunitat de catalunya was an institution that encompassed, from 1914 to 1925, the four catalan provincial councils in a single regional body.34 it was promoted by the leader of the lliga regionalista (catalan regionalist league) enric prat de la riba and constituted by 33 for more information on this doctor, see reventós (1984). 34 for further details, see mancomunitat de catalunya (1923). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 49 royal decree by the spanish government in march 1914. from the outset, the mancomunitat assumed responsibility for all the charitable services that had previously been run by the catalan provincial councils. thus, the four catalan diputaciones handed over their competencies to the mancomunitat but, contrary to what the regionalist league expected, the state did not relinquish any of its own competencies. a number of institutions were dependent on the mancomunitat, including the charity, maternity and foundling homes in barcelona; the maternity home, hospital and casa de misericordia in girona; the maternity home, hospital and casa de misericordia in lleida; and the casa de beneficencia, which incorporated a maternity home and a casa de misericordia, in tarragona. the governing boards retained wide powers and their presidents continued to serve as directors of the establishments. when the mancomunitat started functioning, only girona had a provincial hospital, due to the process of transformation into charity hospitals at the end of the nineteenth century, explained above in the first part of this paper. in the provinces of barcelona, lleida and tarragona, the sick in the charge of provincial institutions, now taken over by the mancomunitat, were attended by officially approved municipal hospitals. meanwhile, the mancomunitat, following the tradition already established by barcelona provincial council, kept an item in its budget to subsidise charitable institutions, whether private initiatives or of a municipal nature. furthermore, there were nine institutions that maintained an item reserved in the budget, a right that they had inherited from the four preceding catalan provincial councils. these were hospital clínic de barcelona; montepío de l´associació de la premsa diària de barcelona; patronat de l´institut català de sords-muts; city council of reus by casa de beneficència; city council of tortosa by casa de beneficència; city council of valls by casa de beneficència; associació la caritat de lleida; germanes dels pobres de lleida and refugi volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 50 bressol de girona. apart from these institutions, others could apply for assistance in accordance with the basic provisions established by the permanent council of the mancomunitat in the session of 18 august 1921. the following had priority with regard to an application for aid: first, those establishments that performed charitable functions that were responsibilities of the mancomunitat; second, those charitable institutions that performed functions different to those assigned to provincial charity. the application had to be accompanied by a report justifying objectives and accounts. the mancomunitat subsidised 28 public and private hospitals (table 4), 34 charity homes and asylums and another 33 institutions of various types located in the four catalan provinces during the financial year 1921-1922. table 4. hospitals subsidised by the mancomunitat in the financial year 1921-1922 hospital de balaguer hospital d´olot hospital de balsareny hospital de pobla de lillet hospital de cardona quinta de salut la alianza hospital de caldes de montbuy hospital de sabadell hospital d´esparraguera sanatori maritim de sant josep, per a nens tuberculosos (barceloneta) hospital l´esperit sant per a tuberculosos hospital de seu d´urgell hospital de figueres hospital de sitges hospital de granollers hospital de terrassa hospital d´igualada hospital de tremp hospital de manlleu hospital de valls hospital de mataró hospital de vich hospital de nens pobres de barcelona hospital de vilafranca del penedès hospital de nostra dona del sagrat cor hospital de vilanova i geltrú hospital d´olesa de montserrat hospital de vilassar source: mancomunitat de catalunya (1923, 90-95). in view of the inherited situation, the mancomunitat considered optimising services with the cooperation of existing healthcare facilities. once the transfer of powers had been completed, two strategies were implemented with respect to intervening in healthcare matters: a) rationalise subsidies b) initiate a programme of building provincial hospitals. with regard to the former, volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 51 some guidelines on subsidies to private institutions were laid down in the form of “bases de repartiment de subvencions a establiments particulars de beneficència” during the period 19201924, with the aim of eliminating arbitrariness and giving priority to hospitals. moreover, there was the paradoxical situation that many hospitals subsidised by the mancomunitat kept operating thanks almost exclusively to these contributions, but the government body was not directly represented and had no authority over the functioning of these hospitals. in order to improve this situation, an experiment was carried out by means of getting more directly involved in the hospital at ripoll in 1922. in this case, the mancomunitat, which provided 80% of the hospital’s budget, started to intervene in the governance of the hospital, and the experiment was a success. the mancomunitat then took action along similar lines with hospital civil de reus in 1923 and hospital d’arenys de mar in 1924 (sabaté 1993, 126). as for the second strategy, building provincial hospitals, in 1922 the councillor dr. estadella once again picked up the thread of the “pla de regionalització sanitària” proposed by dr. raventós and submitted a motion advocating the creation of district hospitals, an initiative that was not implemented until five years later, and once again under the guidance and supervision of barcelona provincial council. what was actually implemented at this time was the building project for a hospital in lleida (1923) and another project for building a hospital in tarragona (1924). as a result of these measures, a significant change in the weight of charity and healthcare in the expenditure of the mancomunitat can be seen at this time. in 1915, the charity item accounted for 47.46% of total spending, to which could be added 0.52% for “health services and social action” (out of a total expenditure item of 1,546,170.64 pesetas). by 1922-23, charity and healthcare jointly accounted for 23.78% of expenditure, half of the percentage of 1915, although volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 52 of a much larger item (26,051,390.30 pesetas of total expenditure).35 after functioning for barely a decade, the mancomunitat, which had assumed the functions of the provincial councils, was dissolved in 1925 by the dictatorship of primo de rivera. from 1925 to 1932, control of hospitals was given back to the provincial councils and some district hospitals were developed. nevertheless, by the end of this period, barcelona and tarragona continued without any publicly owned hospitals dependent on the provincial institutions. at the start of the 1930s another significant step was taken towards the creation of a hospital model in catalonia, linked to the second republic and the passage of the statute of catalonia in 1932. the inclusion of the transfer of responsibility for healthcare led to a serious controversy among medical associations throughout spain, which was countered by their catalan counterparts who defended their position. on 25 may 1932, a letter addressed to the head of government and the parliamentary representatives debating the statute was published. in this letter the inclusion of competencies for healthcare was defended, with arguments referring to the training of the medical professionals, the precedent of institutions created and the work carried out by the medical union sindicat de metges de catalunya i balears.36 finally, the statute (article 12 c and d) granted the generalitat responsibility for charity and healthcare. hervás (2004) establishes different phases in the generalitat’s health management in accordance with the stages of autonomous government. in the initial stage, from 14 april 1931 until the passage of the statute in december 1932, key steps were the creation of the consell tècnic de sanitat (technical health council) in 1931, the comissió parlamentària de sanitat i assistència social a la diputació provisional de la generalitat (a parliamentary commission 35 for further details, see mancomunitat de catalunya (1923). 36 la vanguardia, may 25, 1932. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 53 into health and social care under the catalan government) in 1932 and the creation of a nursing school, the escola d’infermeres de la generalitat attached to hospital clínic, in the same year. this author highlights as a decisive event, at this time, a series of talks prepared by professionals of the sindicat de metges analysing the hospital situation and making proposals to improve the state of affairs. of these talks, one that was especially influential was that presented by enric fernández i pellicer and cristià cortes i lladó, which was expounded by fernández i pellicer at the academia i laboratori de ciències médiques (medical science academy and laboratory) in barcelona on 16 march 1932 and subsequently published (hervás 2004, 20).37 fernández i pellicer (1932) summarised the evolution of the debate on hospital organisation in catalonia from the first congress of catalan-speaking doctors held in 1913 to the second republic. below, we extract a series of elements that we consider essential to understand the formation of the catalan hospital model. first, the need for decentralisation and the location of specific centres for the chronically ill and incurable. with regard to the first aspect, the move towards decentralisation, his thesis was based on data that revealed that of the 12,500 sick treated by the most important hospitals in barcelona (santa creu i sant pau and hospital clínico), more than 3,000 came from other parts of catalonia. this meant that a quarter of the sick admitted and treated were not residents of barcelona. in view of this situation, fernández pellicer (1932) proposed the creation of a catalan charity committee made up of technicians, experts and people qualified to take on the job of drawing up a new charity law. this new law should include certain basic elements such as a strict delimitation of the obligations of municipal councils and the generalitat in terms of 37 a biography of enric fernández i pellicer can be found at efs (2020). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 54 social welfare. for the author, the functioning of hospital care should depend on the municipality, above all because the municipal councils were best able to know the needs of their population and identify the people who most needed care. the generalitat, nevertheless, should take responsibility for surgical treatment. ultimately, however, under this philosophy, it is understood that the hygienic-sanitary or public health function corresponds to the central state or regional authorities, due to its peculiar complexity, and the hospital function, actual hospital admission and care, corresponds to the municipal services. this project included both privately and publicly owned hospitals, which should all adapt to a plan of joint and harmonious planning and organisation. in cases where municipalities did not have the capacity to run a hospital in accordance with modern, scientific method, the idea was to promote collaborative measures by means of grouping municipalities into larger associations in order to create and maintain a district hospital. in this respect, fernández i pellicer continued the tradition initiated in the nineteenth century of opposing organisation on a provincial basis and recommended a division of catalonia based on the comarca (a district comprising a group of municipalities). there were several reasons for this preference, including sentimental, cultural, legal and linguistic factors, while, on the contrary, the province was considered to be an “artificial concept”. the other great underlying debate was the question of the ownership of the district hospitals. in the context of the second republic, fernández i pellicer acknowledged various possibilities. one was district hospitals that were the property of the generalitat or the municipalities. another was privately owned district hospitals but subsidised by the official agencies in line with their social and charitable function. finally, he thought that all hospitals should be considered as institutions of public utility, and should therefore be supervised by the public authorities and subject to regulations inspired by modern norms of social welfare; scientific, volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 55 economic and moral. however, and this was a key aspect, he defended the idea that each hospital should be developed according to its own means and initiative. in other words, what was being proposed was the creation of hospitals as autonomous institutions where, principally, the municipalities, (and the generalitat in the form of subsidies) would provide their economic base; private individuals or entities were to offer their support and also economic assistance; and the technical personnel, who constitute the spirit of the hospital function, would contribute their scientific know-how. with respect to the healthcare organisation of these hospitals, he suggested a hierarchical organisation of care centres in three categories: primary, secondary and tertiary. the primary centres would be staffed by qualified doctors. the secondary centres would serve to support rural doctors. in this case, all the sick requiring hospitalisation should be sent to or admitted into the district hospital. finally, the tertiary centres would provide specialised surgery and physiotherapy, undertake complicated laboratory research, etc. these tertiary centres would simply be some district hospitals enlarged depending on their capacity and means, and they would simultaneously act as secondary centres for a district and as a supplementary resource for the secondary centres of neighbouring districts. overall, fernández i pellicer’s work encompassed the approach and included the proposals of the majority of medical professionals, and were intended to create the foundations of a catalan model based on the coexistence of private and public hospitals supervised by a higher institution and the division of the territory into health districts with a hierarchical system of hospital care. it is important to recall that an essential part of the large hospitals in the provincial capitals had gone from public status to private charity ownership in the late nineteenth century, and their management, recruitment practices and the work of their healthcare personnel were all free volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 56 from public control, despite receiving subsidies and reaching agreements with public institutions. this could explain the complaints of health workers at hospital de la santa creu i sant pau just after the second republic had been proclaimed. on 7 may 1931, prestigious doctors issued a public letter denouncing the lack of control, incompetence and arbitrariness of the hospital’s managers with respect to the medical staff. they also complained about the shortage of beds and a legislative framework based on nineteenth-century royal orders and regulations that did not correspond to the majority of demands of the medical personnel. finally, they launched an appeal for urgent public intervention.38 some of the ideas proposed by fernández pellicer and the sindicat de metges were implemented in the generalitat’s second stage from 29 december 1932 to the temporary suspension of the statute in october 1934. a series of laws that laid the foundations of the model were passed at this time. these established the organisation, coordination, control and division of the catalan health service, and were: “llei de bases per a l’organitació dels serveis sanitaris i assistència social a catalunya” (22 march 1934), “llei de coordinación i control sanitaris publics” (13 june 1934), “llei de divisió sanitària de catalunya” (10 july 1934) and “llei de carta sanitària de barcelona” (19 july 1934) (hervás 2004, 26). within this legal framework in the dividing up of catalonia’s health system, the following health districts were established: sabadell, berga, figueres, girona, granollers, igualada, lleida, manresa, mataró, olot, reus, la seu d’urgell, solsona, tarragona, tortosa, tremp, vic and vilafranca del penedés. 38 la vanguardia, may 7, 1931, p. 7. also worthy of note was a proposal to create 1,500 beds, made by the councillor mr huguet, la vanguardia, september 23, 1932, p. 6. a book by fargues and tey (2015) provides details about these struggles between doctors and administrators in hospital santa creu. the book of comelles (2006), and the article by fernández and sabaté (2019) also provide evidence in this regard. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 57 as well as the legislative task of regulating the hospital system, the generalitat also introduced changes in the district hospitals, replacing members of the hospital trusts by others who included representatives of the generalitat itself and some of the municipal councils involved. on 24 august 1933, it passed a decree suspending the trustees from their posts at the district hospital of vilafranca del penedés and named another interim board of trustees.39 on 21 september, the dissolution of the board of trustees of hospital de sant antoni de viella, which had been constituted by a royal order of 13 february 1928, was authorised. moreover, a list of subsidies and subscriptions was demanded, as well as an inventory of building work carried out and a record of the management of antonio abadía’s bequest of 50,000 pesetas.40 the generalitat’s commitment to developing the model of district hospitals was confirmed with an order approving a building project for the construction of a new wing at the district hospital in lleida. this was linked to a contract between this institution and the state for the establishment of a military infirmary, with the state agreeing to defray an important part of the cost.41 concern for the district hospitals continued after the suspension of the statute in october 1934. during 1935, the catalan regional minister for health, mr huguet, made a number of visits to district hospitals such as that in lleida and the inter-district hospital in reus,42 and the district hospital in viella where building work had been suspended,43 and then visited the one in vic in 1936.44 building work on district hospitals actually continued during the period of the civil 39 butlletí oficial de la generalitat de catalunya, (official gazette of the government of catalonia), 83, august 24, 1933. 40 butlletí oficial de la generalitat de catalunya, 95, september 21, 1933. 41 butlletí oficial de la generalitat de catalunya, 312, november 8, 1934. 42 la vanguardia. june 18, 1935, p. 22 43 la vanguardia, september 17, 1935. this hospital was inaugurated on 23 september 1937. la vanguardia, september 23, 1937, p. 3. 44 la vanguardia, january 14, 1936, p. 11. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 58 war.45 during this conflict, a decree was passed by the catalan regional ministry of the interior and social assistance declaring the following district hospitals: reus, tortosa, la seu d’urgell, vic, olot, figueres, mataró, granollers, manresa, berga, solsona, igualada and vilafranca del penedés.46 as well as its policy of promoting district hospitals, the generalitat had to intervene specifically in barcelona’s hospital system, crucial due to the capital’s demographic weight. it did so by regulating the role of hospitals in the city, extending their function as a public service beyond medical care for the poor sick, as well as providing financial support over and above the traditional subsidies. with regard to regulation, it established basic rules for the functioning of hospitals of the district that comprised barcelona’s metropolitan area. as well as care for the destitute, the decree also established admission on payment of a fee (5 pesetas a day) equivalent to 15 days for patients who paid privately, including foreigners, or were paid for by municipal councils. it is very interesting in this case to confirm that the fees established provisionally for services and surgical operations were those of a private insurance institution, hospital de la quinta de salut l’aliança, in this case reduced by 10%. on the other hand, as for financial support, this was extended beyond the traditional subsidies. in 1934, a law was passed authorising hospital clínic in barcelona to arrange a credit transaction with the caixa de pensions for two million pesetas, with the generalitat undertaking to provide an annual subsidy of 80,242.60 pesetas for twenty years (from 1935 to 1954). the only condition laid down was that barcelona city council committed itself to paying the same amount and in the same way.47 45 in 1938, the district hospital in berga was under construction. la vanguardia, january 25, 1938. 46 la vanguardia, october 14, 1938, p. 2. 47 butlletí oficial de la generalitat de catalunya, 208, july 27, 1934. volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 59 generally speaking, during this period, the generalitat continued the process initiated in the nineteenth century of rejecting provincial public hospitals, favouring a distribution of hospital care that took into account the interests of the economic elites, the owners of private hospitals (whether profit-oriented or in the form of private charity) and a significant part of the medical professionals who worked for, or were partners in, these institutions. the basic philosophy was to establish hospital organisation in terms of the healthcare function rather than on the basis of ownership and to follow a strategy of decentralisation based on public and private district hospitals. it is significant that some of the people to hold the post of regional health minister at this time were prestigious doctors linked to the private hospital system. this was the case, for example, of josep dencàs i puigdollers, minister during the government of francesc macià from january 1933 to june 1934, who along with his father-in-law, the doctor cararach i mauri, founded the private clínica sant jordi in the torre boades in the neighbourhood of sant andreu48 and manuel corachán i garcía, minister of health in 1936, a very prestigious doctor who became head of the surgery service at hospital de la santa creu i sant pau.49 from this perspective, the convergence of public and private interests seemed evident. conclusions the catalan hospital model is based on a greater prevalence of the private provision of beds and a greater participation of the private sector in coverage of the public demand compared with the spanish average. there were three key moments in the historical development of this model. first, in the late nineteenth century, when the elites who sat on the boards of trustees of the large public hospitals linked to the proprietorship of provincial or municipal councils 48 his biography at brugera (2020). 49 his biography at hervàs (2020). volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 60 wanted to break these links with public ownership and supervision by transforming them into privately owned hospitals in the form of “private charity hospitals”. with this strategy the sale of the property of these hospitals in exchange for public debt was prevented, but in return this property was now under the control of the economic and medical elites and the church. the privatisations are a fact. however, the hypotheses as to why the elites sought this option are open to interpretation and other elements, such as the type of documentation used, from private hospital archives or public documents consulted, also have an influence on this interpretation. in the end, it is a matter of discerning whether decisions were taken in the public interest or controlled by and in the interests of certain groups, or perhaps due to a mixture of both factors. in this way, these private charity hospitals continued to treat the poor sick and receive subsidies from public institutions, from the provincial or municipal authorities, but these were now unable to control the destination, spending and investment of these funds. second, the creation of the mancomunitat de catalunya in 1914 and its strategy gave rise to a new stage in this process. the mancomunitat was able to revert the situation described above by taking over the hospitals linked to the provincial authorities at a time when there was a chronic shortage of public beds, above all in the provinces of barcelona, lleida and tarragona, which did not have a provincial council hospital as a result of the previous phenomenon. within this context, the creation of new public hospitals in the provincial capitals that did not have one was proposed, and there was an attempt to audit and exert a minimum of control over the destination of the subsidies granted. however, the dissolution of the mancomunitat in 1925 barely allowed enough time to start building work on the projected hospitals in lleida and tarragona. third, in the years prior to the civil war, the idea of providing the provincial capitals with a public hospital dependent on the provincial authorities or the generalitat was abandoned (after the transfer of healthcare volume 6, number 1, 30-66, january-june 2021 doi.org/10.1344/ jesb2021.1.j083 61 responsibilities), and the idea of creating hospitals that were to function at a district level, regardless of the ownership of the hospital property, prevailed. influenced by the weight and leverage of the private hospitals, the idea of creating a network of public utility hospitals, which were not exclusively under public ownership, also gained currency. the idea was that both publicly and privately owned hospitals would participate to cover hospital 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pons. vilar-rodríguez, margarita, and jerònia pons pons. 2019. “the long shadow of charity in the spanish hospital system, c. 1870-1942.” social history 44, 3: 317-342. doi: 10.1080/03071022.2019.1618577. vilar-rodríguez, margarita, and jerònia pons pons. 2020 (in press). “la ciudad de barcelona en el sistema hospitalario catalán (1886-1986): una nota de investigación.”. in barcelona hospitalària la ciutat i els seus hospitals, segles xix i xx, edited by alfons zarzoso and josep barceló. vilar-rodríguez, margarita, and jerònia pons-pons. 2012. “economic growth and demand of health demand in spain: the role of friendly societies (1870–1942).” in welfare and old age in europe and north america: the development of social insurance, edited by bernard harris, 65-88. london: pickering & chatto. xi, j. 2016. “conceptualizing balance of care in china: numbers and theory.” paper presented at the eleventh european social science history conference, valencia, spain, march 30-april 2, 2016. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. https://doi.org/10.1080/03071022.2019.1618577 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 marie christine duggan keene state college (united states of america) https://orcid.org/0000-0002-9244-4658 from bourbon reform to open markets in california, 1801-1821 abstract the consulado de méxico was the mercantile guild that acted as commercial nerve-center of spain’s empire in the americas. from 1801 to 1821, one of its members, pedro gonzález de noriega, influenced california’s economic growth by putting his nephew, josé de la guerra y noriega, into the colony’s military supply line. in 1801, for what purpose did de la guerra y noriega come to california? whatever his intention, his life-plan changed in 1810, when insurgency broke out in new spain, and military payroll ceased to arrive in california. between 1811 and 1821, how did de la guerra y noriega adapt to this structural change by negotiating with international merchants from manila to san blas and lima to supply california? as spain’s empire unravele d, we follow the microhistory of the noriega mercantile network, as it reconfigured to the macroeconomic context of political transformation of the pacific rim in t he context of mexican independence from spain. the de la guerra collection at the santa bárbara mission archive-library reveals that guadalajara was mexico’s emerging center for pacific commerce, with san blas as guadalajara’s principal port. by mexican independence in 1821, de la guerra had established santa bárbara, california as the center of his family’s business, rather than mexico city. even as manila merchants relocated to tepic, he maintained ties with them. he also traded with the british in callao, peru, which is how he came to send his son to be educated in liverpool with the brotherston family. keywords: california, china trade, consulado de méxico, noriega, presidios, pacific rim commerce, otter hides, manila, san blas, lima, bourbon reform, 1810 de las reformas borbónicas a los mercados abiertos en california, 1801-1821 resumen el consulado de méxico fue el gremio mercantil que operó como centro neurálgico comercial del imperio español en las américas. entre 1801 y 1821, uno de sus miembros, pedro gonzález de noriega, influyó en el crecimiento económico de california al situar a su sobrino, josé de la guerra y noriega, en la línea de abastecimiento militar de la colonia. ¿con qué propósito de la guerra y noriega fue a california? fuera cual fuese su intención, sus planes vitales cambiaron en 1810, cuando la insurgencia estalló en nueva españa, y el situado dejó de llegar a california. ¿cómo se adaptó a este cambio estructural de la guerra y noriega, entre 1811 y 1821, en sus negociaciones con comerciantes internacionales de manila a san blas y lima para abastecer california? en el contexto de desmoronamiento del imperio español, seguimos la microhistoria de la red mercantil de noriega, que se adaptó al contexto macroeconómico generado por la transformación política en la cuenca del pacífico y por la independencia mexicana de españa. la de la guerra collectio n en la biblioteca-archivo de la misión santa bárbara revela que el centro emergente de méxico para el comercio del pacífico fue guadalajara, con san blas como su puerto principal. con la independencia de méxico en 1821, de la guerra había establecido santa bárbara, en california, como el centro de negocios de su familia, en lugar de la ciudad de méxico. incluso cuando los comerciantes de manila se relocalizaron a tepic, mantuvo sus lazos con ellos. también comerció con los británicos en el callao de perú, gracias a lo cual pudo enviar a su hijo a educarse en liverpool con la familia brotherston. palabras clave: california, comercio con china, consulado de méxico, noriega, presidios, comercio en la costa del pacífico, pieles de nutria, manila, san blas, lima, reformas borbónicas, 1810 de les reformes borbòniques als mercats oberts a califòrnia, 1801-1821 resum el consolat de mèxic va ser el gremi mercantil que va operar com a centre neuràlgic comercial de l’imperi espanyol a les amèr iques. entre 1801 i 1821, un dels seus membres, pedro gonzález de noriega, va influir en el creixement econòmic de califòrnia en situar el seu nebot, josé de la guerra y noriega, en la línia d’aprovisionament militar de la colònia. amb quin propòsit de la guerra y noriega va anar a califòrnia? fos quin fos, els seus plans vitals van canviar el 1810, quan la insurgència va esclatar a nova espanya, i el situado va deixar d’arribar a califòrnia. com es va adaptar a aquest canvi estructural de la guerra y noriega, entre 1811 i 1821, en les seves negociacions amb comerciants internacionals de manila a san blas i lima per aprovisionar califòrnia? en el context d’esfondrament de l’imperi espanyol, seguim la microhistòria de la xarxa mercantil de noriega, que es va adaptar al context macroeconòmic ge nerat per la transformació política a la conca del pacífic i per la independència mexicana d’espanya. la de la guerra collection a la biblioteca-arxiu de la missió santa bárbara revela que el centre emergent de mèxic per al comerç del pacífic en va ser guadalajara, amb san blas com al seu port principal. amb la independènc ia de mèxic el 1821, de la guerra havia establert santa bárbara, a califòrnia, com el centre de negocis de la seva família, en lloc de ciutat de mèxic. fins i tot va mantenir els lligams amb els comerciants de manila quan aquests es van relocalitzar a tepic. també va comerciar amb els britànics al callao del perú, amb què va poder enviar el seu fill a educar-se a liverpool amb la família brotherston. paraules clau: califòrnia, comerç amb la xina, consolat de mèxic, noriega, comerç a la costa del pacífic, pells de llúdria, manila, san blas, lima, reformes borbòniques, 1810 corresponding author: e-mail: mduggan@keene.edu received 9 march 2021 accepted 7 october 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-9244-4658 mailto:mduggan@keene.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 introduction the bourbon visitador josé de gálvez orchestrated spain’s settlement of california in 1769, and his antagonism to the consulado de méxico and its monopoly of spain’s trade with asia is well-known (priestley 1916, 172-209; salvucci 1983, 225; díaz-trechuelo 1965, 3-30; bonialian 2017, 13). nonetheless, there are hints that by 1791 mexico city financiers of trade with asia controlled california’s military supply line. by 1801, there was a definite link between the consulado de méxico and california in the person of josé de la guerra y noriega. his uncle pedro gonzález de noriega was a member of the mexico city business guild with interests in a wide range of activities, from sugar to cochineal to supplying mexico city with meat (del valle 2012, 86, 92, 96-97, 182; hamnett 1971, 160, 180, and 1980, 58). in approving his 1796 request to export otter hides to manila, the viceroy described gonzález de noriega as a “sujeto bien conocido en el comercio de esta capital…un comerciante de formalidad, conocimiento en la profesión, crédito y facultades.”1 gonzález de noriega was an ally of gabriel yermo when the latter led the consulado’s attempt to bring down viceroy iturrigaray in 1808 (del valle 2012, 85, 182). yet when the crown asked for donations to battle its enemies in 1809, gonzález de noriega was among the most generous (hamnett 1980, 71). we can say, then, that pedro gonzález de noriega was wealthy and powerful. his sister’s son, josé de la guerra y noriega, arrived in california in 1802 as supply master (habilitado) for the port in monterey—california’s capital. de la guerra earned $400 as alférez (sub-lieutenant), a salary augmented by a potential $1,000 commission for selling presidio supplies (bancroft 1884, 335). although this commission was roughly twice the pay of a lieutenant in california (bancroft 1884, 335), de la guerra’s father consoled him from afar: 1 an “individual well-known in commercial circles of this capital…a merchant of education, experience in business, credit and ability.” source: june 10, 1796, archivo general de la nación méxico (agnm), gobierno virreinal, general de parte 51, vol. 75, exp. 336, fojas 336-337. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 “even though the pay may not be much, a position such as this is of great honor and merit” (pubols 2009, 18). the permit de la guerra’s uncle obtained in 1796 to export otter hides to manila provides the only clue as to why such a well-connected man would come to the tiny town of monterey. below, we explore the possibility that de la guerra suppressed california’s contraband export of otter hides to new england ships between 1802 and 1804, perhaps redirecting the hides to his uncle’s associates. his intention was to return to mexico city in 1810. yet his world changed when insurgency broke out. instead, he became commander of presidio santa bárbara in 1815 and died in california in 1846. de la guerra wound up guiding california’s economy into global trade during the turbulent decade 1810 to 1821—with hispanic merchants from lima and manila, but also with us and english merchants with ties to canton and india. in doing so, he became an independent regional commercial agent in the northern pacific rim, the very sort of person who had long chafed under the monopoly rights of the consulado de méxico. de la guerra’s business correspondence at the santa bárbara mission archive-library (sbmal) provides insight into the mercantile actors beyond california to which the noriega family name gave him access. local military men also number among his correspondents. in contrast to de la guerra, they had moved up the ranks through battle and deprivation at the margin of empire. as granovetter (2005, 34) would put it, de la guerra’s status as an outsider to the tight-knit community of men in multi-generational military service, is precisely the reason that he offered to them social ties in the wider world of the pacific rim. one reason why the mercantile dimension of his role in california has been underexplored, is the challenges inherent in research into contraband trade. the methodology used here is microscopic archival analysis of geography, timing, and relationships to identify motive, opportunity and strategy in a period of structural change. critics of microhistory argue that the intense focus on human http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 relations in a tiny space omits analysis of larger context (levi 2001, 100). yet josé de la guerra’s ties to merchants in spain, panamá, lima and manila were global, and his adaptation to the collapse of the bourbon system in 1810 makes this a study of institutional change. in that sense, this research brings together regional history with the study of global institutions, defying the convention that global historians of sweeping change steer clear of details (crossley 2008, 3). finally, this research bridges the cultural divide between spanish-language literature on members of the consulado de méxico such as gonzález de noriega, and english-language scholarship on de la guerra. in recent spanish-language literature, bonialian (2017, 14-27) has argued that the bourbon government was too effective at undermining the power of mexico city’s business guild, and inadvertently pushed new spain’s pacific commerce into the hands of the british. through the pacific ports of acapulco and callao, the consulado de méxico had been supplying south america at lower cost than spain could at portobello. after 1743, the crown undermined the consulado’s hold on south america by granting permits to private ships to sail from spain around cape horn to lima. yet by 1790 the ships tended to be british and us whalers (bonialian 2017, 21; trejo 2006c, 23-25). by 1765, the bourbon crown cut into the consulado de méxico’s market in spain by opening up the cádiz-manila route around africa, a faster means to bring asian imports to spain than mexico city’s manila-acapulco galleon. by 1767, the nao was carrying less than half the cargo of pre-1750 years (bonialian 2017, 15). by 1815, the manila community tied by kinship and credit to mexico city’s consulado wrote that goods exported from manila paid duties of 42% upon arrival in new spain. as a result, even the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 merchants of guadalajara preferred duty-free british contraband by way of panamá over the galleon as the source of supply (bonialian 2017, 30; cabañas 1944, 170).2 yet others argue that the problem was not that bourbon reformers undermined the merchants of mexico city, but rather that neither those merchants nor the bourbon government opened up legal paths for ambitious men of modest means (trejo 2006a, 359; 2006b, 712-14). the absence of legal avenues to improve their fortunes left men open to engaging in contraband trade (trejo 2006c, 26). in the context of 18th century california, a man of talent could slowly rise to be an officer in the local military. gálvez made the reward for a military man who reached retirement half pay and communal grazing rights for 50 cattle. the veteran was prohibited from buying out his neighbor on the grounds that this would cause inequality to emerge. though the veteran also had access to irrigated land, he was banned from producing either a vineyard or an olive grove, two activities for which much of california’s land was suited (priestley 1916, 256-267; altable 2013, 422). the story below of a scion of the consulado de méxico in california illustrates how mexico city merchants could find ways to compensate men if they cooperated in evading bourbon restrictions on commerce between new spain and asia. raymundo carrillo and josé darío argüello were ambitious and talented soldiers in california who rose over decades to command ports in the pacific. de la guerra’s marriage to carrillo’s daughter and the business training he gave to argüello’s son illustrate how mexico city merchants used bourbon institutions to regain some control over trade out of california. this history also suggests that the unraveling 2 the consulado de manila (and hence, bonialian) overstates the case; in 1815, general josé de la cruz began charging duties on british goods imported via panama (trejo 2006a, 363). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 of bourbon institutions—rather than bourbon reform—was the ultimate undoing of mexico city’s commercial control over the northern pacific. part 1. how the game was played up to 1810 consulado de méxico and supply of california in 1798, josé antonio de la guerra y noriega entered military service by going to work for manuel cárcaba, the habilitado general for the californias in mexico city (pubols 2009, 16; sánchez 2018, 367). this office supplied presidios in alta and baja california, with a budget of about $150,000 pesos per year. de la guerra had departed asturias at age 13 in 1792 to learn figure 1. monterey in the pacific rim source: base map by malaspina, 1792, courtesy of dumbarton oaks. accounting with his uncle, pedro gonzález de noriega, in mexico city. the habilitado stationed at each presidio in the californias operated a sort of general store, where troops received their pay in kind (pubols 2009, 33). accounting skills were valued in habilitados, giving mercantile http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 families an opening to station one of their own at the three major ports on the china trade route through california: san francisco, monterey, and san diego (see figure 1). the fact that gonzález de noriega put his nephew into cárcaba’s employ implies that the consulado de méxico had a hand in presidio supply. in 1769, california supply had been managed by factor juan josé de echeveste, a merchant involved in asian trade, who was also a personal friend of josé de gálvez (yuste 2007, 221; priestley 1916, 311). the next factores were also men of business, first ramón manuel de goya and then pedro ignacio de arístegui. both were china trade merchants (del valle 2016, 62).3 in 1734, the navigational guide for the manila galleon recommended approaching land in california below point conversión (see figure 2), and suggested making repairs in the santa bárbara channel (gonzález 1734, 334). yet in 1777, the crown decreed that the galleon should stop further north in monterey. pilots found the dense fog at monterey hazardous to their valuable cargo, and the first nao anchored at monterey only in october 1784, after a four-month journey from manila, followed by six more weeks to acapulco (díaz-trechuelo 1956, 43-51). california’s location on the manilaacapulco route is perhaps why china traders in mexico city tended to hold the position of factor. we may wonder if arístegui had any connection to maría pascuala de arístegui, who was married to juan bautista ustáriz of the mercantile family in cádiz (herrero 2013, 61). ustáriz, san ginés and company had obtained a permit from the bourbon crown in 1779 to trade between asia and spain, and between asia and the americas (permanyer 2020, 15), thus offering an alternate source for spaniards and spanish americans to obtain asian products outside the galleon system. 3 sept. 26, 1790 conde de revillagigedo in archivo general de simancas (ags), presidios de california. es 47161 ags/sgu, leg, 7040, 7. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 by 1791 the position of factor had been transformed into manuel cárcaba’s new position of habilitado general de las californias. the change was made ostensibly to permit an official with california military experience to hold the position. however, cárcaba had no such experience. he was able to post a $6,000 surety.4 perhaps gálvez’ death in 1786 undermined arístegui’s hold on california supply. given cárcaba’s later employ of de la guerra, this 1791 change in management of california supply raises the possibility that control may have shifted from men sympathetic to bourbon reform to allies of merchants in mexico city. in 1801, de la guerra accompanied the supplies to california to become habilitado at monterey from 1802 to 1806. gonzález de noriega and otters in 1786, the governor of california estimated the annual harvest of otter in california at 20,000 hides (bancroft 1884, 440). by 1790, the chinese were paying $120 per otter hide (ogden 1941, 6), which in 2019 dollars is $1,865. california’s otter harvest had the potential to yield $2.4 million per year in 1790 dollars.5 between 1789 and 1792, vicente vasadre received the bourbon crown’s blessing to collect hides in california, because he proposed to exchange them in manila for chinese mercury, which would reduce the chronic shortage of that metal essential for refining silver at new spain’s mines. yet in manila, the company viewed the trade of otter hides with china as their own purview, and such conflicts caused delay which reduced profit (ogden 1941, 15-24; cook 1973, 107-108; ortega 2001, 118). the san blas navy had been exploring the prime otter grounds of nootka sound since 1774. by 1789, the otter boom motivated the british east india company (eic) to send ships and 4 desde 1791 hasta 31 de agosto de 1799 expediente sobre dar nueva forma a la factoría de los presidios de californias. ags, sgu, leg, 7040, 7. 5 us dollars were backed by mexican silver pesos, $1 = 1 peso. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 build an establishment at nootka. the spanish navy seized the ships, and took them to san blas. britain credibly threatened war. spain’s ally france was distracted by social unrest, so spain acquiesced, and gave britain the right to settle north of the northernmost spanish settlement by the nootka convention of 1790. dispute over this boundary lead to new negotiations at nootka in 1792. spain put on a show of strength with seven ships and a fort, and so only after the third nootka convention of 1794 was the fort transferred to the british in 1795. although the agreement prohibited the british from engaging in contraband trade with hispanics in the pacific, the nootka destination provided a plausible excuse for sailing from british india to spanish american waters (cook 1973, 236-239, 413, 422). from mexico city, cárcaba was by 1791 funneling beads to santa bárbara to facilitate the otter trade (perissinotto 1998, 172, 212). presidio troops could convert a portion of their pay into beads, the better to trade for otter pelts with the chumash, for whom the beads were a medium of exchange. because the chinese provided the demand for otter pelts, the trade unofficially tied california’s economy to asia. a number of proyectistas pointed out that california could be supplied from manila with the goods of lowest price and highest quality.6 yet the bourbons chose to supply california from mexico city via san blas. imperial commerce in late bourbon period in 1765 as fiscal to the audiencia of manila, francisco leandro de viana argued that spain should create a company modeled on the eic, with ships sailing from cádiz to manila via the cape of good hope. the buen consejo, a ship of the royal armada, made the journey in 1765 with cargo from private merchants on board, and the bourbon reformer simón de anda sailed on its return trip in 1767, testifying first hand that the journey to spain from manila could be 6 for example, bancroft library (bl) simon de anda y salazar to julian arriaga, feb. 16, 1775 to may 19, 1776, mss z-e1. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 accomplished in only five months. in 1778 and 1779, the crown sent around the cape of good hope two more naval ships carrying merchandise for the cinco gremios de madrid, the astrea, and the venus. in 1779, casa ustáriz, san ginés y cía obtained the right to send duty-free cargo cádiz to manila. merchants in manila tied to mexico city interests undermined traders plying the cádiz-manila mercantile route because they knew direct ships to cádiz would render unprofitable asian goods imported to spain by way of the galleon to acapulco. nonetheless, reformers won out with the establishment in 1785 of the royal philippine company, which initially had the right to trade only cádiz to manila, but as we will see below, would also sail at times from asia to san blas. (díaz-trechuelo 1965, 14-19). meanwhile in the atlantic, in 1765 the crown decreed comercio libre which forced cádiz to share the spanish american market with other ports in spain. these nine ports gained the right to trade not only with veracruz and portobelo, but also with havana, santo domingo and puerto rico (stein and stein 2003, 147). in 1778, the crown permitted five additional iberian ports to export to the americas, and added buenos aires, peru and chile as legitimate destinations in the americas. trade between acapulco and lima had been suppressed by the crown since 1634. starting in 1774, ships could ply the route if cargo were limited to “efectos de la tierra.” yet in 1779, the crown legitimized trade even in asian goods from acapulco for silver from lima (bonialian 2014, 243). the immediate cause of this about-face was war between spain and britain from 1779 to 1783—due to spain’s support for the thirteen colonies. conflict in the atlantic hindered cádiz from supplying lima. in addition, the crown appeased merchants of méxico city during wartime due to their donations and loans to fund defense (de valle 2016, 9-10). the 1779-83 opening of trade between manila, acapulco, and lima should have been a boon for méxico city merchants’ manila galleon. yet rivals out of spain posed a new threat to their http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 market share in the spanish american pacific. in 1779, ustáriz, san ginés y cía sailed the ship hércules around the cape of good hope to manila, and war in the atlantic hindered her return. the bourbon governor of the philippines granted this commercial house out of cádiz the right to ship asian products from macao to the americas. the consulado de manila’s vehement argument that a rival would ruin the profits of the manila galleon rang hollow given the warinduced scarcity in south america.7 the hércules arrived from macao in san blas in 1785 (herrero 2016, 3, 20, 360; pinzón 2011, 257). in the same year, the company began supplying spain with asian products by sailing cádiz-manila via the cape of good hope. by 1801, company ships would be docking at san blas (pardo 1994, 53; valdés 1987, 172), and company ships returned there in 1806 and 1807 (pardo 1994, 53). san blas naval ships returning from expeditions to manila were an alternate source of supply from asia. in 1767, a courier from san blas carried news of the jesuit expulsion to manila. in wartime between 1779 and 1783, the naval connection to manila flourished. it was customary for the crew to supplement pay by carrying merchandise (pardo 1994, 33, 83). in 1779, benito cambón of mission san francisco sailed from san blas to manila on la princesa to purchase ornaments to outfit the new church (mancini 2018, 107-118). in 1781, the san carlos brought him back from manila to san diego before heading for san blas (galvin 1964, 494, 505). in 1794, the crown granted special permits for trade between spain and the pacific. anticipating the arrival in california of cádiz merchant ramón márquez on the ship levante belonging to the cinco gremios mayores de madrid, governor diego de borica authorized habilitados to spend one-quarter of their budgets in california at such ships. however, it was 7 april 1780, testimony of governor josé basco y vargas on philippine commerce, archivo general de indias (agi) filipinas 106-1-7. copy in bl mss, ze 1, carton 1, folder 13. 1779-80. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 not until 1797 that the first ship from cádiz, neptuno, arrived at san blas,8 and the ship did not sail further north.9 1794 was the same year in which habilitado general cárcaba took the opportunity to put his own kin, manuel rodríguez, age 26, into the california military. rodríguez had in the 1780s been working as a china trader in mexico city (del valle 2016, 62-71). rodríguez was a cadet, a gentleman’s position in which private funds were meant to supplement the meager government salary. cárcaba paid the $20 to $25 per month so rodríguez could take the position (bancroft 1885, 98). in the northern pacific, the expansion of commercial privileges to ports beyond acapulco and manila finally occurred in the 1790s. in 1795, the consulado de guadalajara was founded, which stimulated the 1796 change in the status of san blas from military to commercial port, with the right to trade with lima (trejo 2006b, 215-217). 1796 was also the year that merchants of spain were granted the right to travel spain-india-spain, without stopping in manila (cheong 1970, 4, 11). this change should have further reduced the profits of the consulado de méxico’s manila galleon. yet war with britain broke out yet again in that year, so ships from spain were afraid to actually make the trip to india by way of africa until war ended in 1802. the commercial opening of the northern pacific is the context in which pedro gonzález de noriega received in 1796 the viceroy’s permission to export otter hides from san blas to mexico.10 in 1798, gonzález de noriega arranged for de la guerra to work in cárcaba’s office in mexico city, while cárcaba’s kin rodríguez became habilitado at presidio san diego. the 8 march 27, 1796 antonio bonilla to viceroy branciforte, agi guadalajara 104-b-21, transcript in bl carton 11: 28 item 144. 9 dec. 11, 1794 from monterey. bl, provincial state papers xii, 182-183; trejo 2006c, 16. 10 agnm, gobierno virreinal, general de parte 51, vol. 75, exp. 336, fojas 336, 297, 337. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 potential rewards of the otter trade in a more open pacific may explain why powerful merchants of mexico city were taking an interest in the military supply line of the californias. california’s “trade with neutrals” in 1796, war broke out between spain and britain, which made it difficult after 1797 for goods to arrive from cádiz to the atlantic coast of the americas. to alleviate scarcity, spain decreed on november 18, 1797 that ships of neutral nations could carry goods into spanish america. between 1796 and 1803, a number of us merchants were trading goods for otter hides in california (ogden 1941, 32-41). the consulado de méxico protested us competition in spanish american markets, so spain did indeed suspend the decree on april 20, 1799, before peace was declared in 1802 (pearce 2007, 191-196). however, us merchants and hispanic settlers had by then developed personal ties, so that the sale of foreign goods by us merchants in the spanish pacific northwest had solidified into a permanent change. in 1798 when rodríguez assumed the post of habilitado at san diego, he found competition from new england merchants in the otter trade. cárcaba from mexico city no doubt sent the same trade goods in shipments of supplies to san diego as he sent to santa bárbara. rodríguez would have permitted his men to collect their pay in such goods, which they could then trade to the kumeyaay in return for furs, which their commander would purchase. yet it appears new england merchants offered a higher price than the habilitado. in 1798 and again in 1800, the ship eliza out of boston was in san diego, followed in 1801 by the enterprise and then in 1803 by the alexander. in that year, the commander of the naval supply ship princesa wrote that it http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 was typical for his ships to pick up 1200 hides in san diego, but that the ships had only obtained 240 “porque los americanos las pagan bien.”11 figure 2. monterey, santa bárbara and san diego source: plano de la costa del sur corregido hasta la canal de santa bárbara” by miguel constanzó ,1769. archivo general militar de madrid, spain. pre-1824 maps (2017). 51 [online]. https://digitalcommons.csumb.edu/hornbeck_spa_1_a/51. in 1798, the viceroy intervened to put rodríguez on the fast track so that he became commander of presidio san diego in 1800 (bancroft 1885, 98). in 1802, de la guerra joined him in california as habilitado at monterey (see figure 2). by 1803, de la guerra became engaged to the daughter of raymundo carrillo, commander of presidio santa bárbara. carrillo was precisely the sort of self-made man that enlightenment reformers had in mind when they championed unleashing self-interest. at 24, he assisted in putting down the 1775 kumeyaay revolt, and made corporal. from 1783 to 1795, carrillo served as sergeant at santa bárbara. he 11 “[b]ecause the americans pay well for them.” nov. 26, 1803. braulio de ota lorca y oquendo to commander of san blas, agnm california 62, fojas 414-416; cited in trejo 2006c, 19. http://revistes.ub.edu/index.php/jesb https://digitalcommons.csumb.edu/hornbeck_spa_1_a/51 volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 was commander at monterey in 1800, then at santa bárbara from 1802 to 1807, finally at san diego where he died 1809. when the nephew of a consulado de méxico merchant asked carrillo for his daughter’s hand in marriage, the commander seized the opportunity to improve the carrillo family’s lot (pubols 2009, 18, 26). we see that the institutional structure which gálvez placed in california failed to offer incentives to men such as carrillo that would lead them to refuse to carry out the will of the merchants in mexico city. gálvez made rules, but did not give ambitious men opportunities to improve their family’s fortune by adhering to them (salvucci 1983, 227, 234). in contrast, the consulado de méxico’s man made a credible promise to carrillo to move his family up the social ladder. after rodríguez was commander at san diego and de la guerra habilitado at monterey and also future son-in-law of the santa bárbara commander, the two men appear to have put up a forceful resistance to trade with new englanders. in 1803, rodríguez seized 491 hides from captain brown of the alexander (ogden 1941, 36; bancroft 1885, 15). later that year, rodríguez broke up another attempted sale of other hides by his troops to william shaler of the lelia byrd (ogden 1941, 38). by 1804, “boston traders along the coast… encountered a new administrative attitude… this time all doors were closed,” writes adele ogden (1941, 42). the 1796 permit for mexico city merchant gonzález de noriega to sell otter hides from san blas to manila, coupled with the kinship ties that de la guerra and rodríguez had to the habilitación, are in combination circumstantial evidence these two men came to california to block the sale of hides by soldiers to new englanders. in 1807, rodriguez was promoted to habilitado general in mexico city. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 as carrillo’s son-in-law, de la guerra could by 1804 influence the older man’s decisions so that he had gained control of the santa bárbara channel. santa bárbara is not a port like san francisco, san diego and monterey. until 1816-1822, the northern channel islands were inhabited by the chumash, and the southern channel islands by the tongva. these two ethnolinguistic groups constructed plank canoes (heizer and massey 1953, 300-303; johnson 1999, 104; morris et al. 2019, 93), which makes it theoretically possible that they could come out to the galleon to trade food and water for chinese products. the island peoples were known by 1602 to be “muy amigos” of the spaniards (wagner 1929, 437). although the manila galleon still passed through the santa bárbara channel, its merchants opposed stopping in monterey, which is where de la guerra was stationed in 1802 (schurz 1939, 10, 126, 226). perhaps de la guerra courted the daughter of the commander at santa bárbara in order to gain easier access to the galleon. in his 1796 permit, the viceroy gave gonzález de noriega authorization to use the galleon to ship otter hides to manila: “[p]ueda embarcar pieles de nutria en la próxima nao con dirección a manila.”12 de la guerra’s cousin, diego de ágreda, was in 1801 the authorized agent in new spain of the consulado de manila (hamnet 1980, 71; yuste 2007, 168). yet the years 1804-1810 coincide with troubles on the line: no galleon sailed from manila in 1802, 1803 or 1805 (cheong 1971, 153; yuste 2007, 367), and in 1806, the british captured the san fernando (cheong 1971, 153). hispanic alternatives to the galleon on the manila-new spain route an alternate method that de la guerra may have used for shipping otter hides to manila was the military supply line. between 1806 and 1807, de la guerra moved from monterey to san diego because rodríguez had been promoted to mexico city as habilitado general (bancroft 12“[h]e may embark otter hides on the next galleon heading for manila.” http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 1885, 98-99). in mexico city, josé antonio noriega had succeeded gonzález de noriega in managing business. correspondence between the cousins reveals them calling rodríguez their muleteer because he transported goods on their private account between california and mexico city (pubols 2009, 36). the naval department of san blas shipped goods up to california, and carried wrapped packages (fardos) back. navy ships that sailed from santa barbara to san blas linked with other navy ships that sailed from san blas to manila. whether otter hides arrived in manila by galleon or by naval ship, the market for california’s pelts was china. initially, hispanic merchants negotiated the sale of otter hides to the spanishspeaking catholic chinese community in manila (ogden 1941, 22-23). one hispanic merchant who passed through california on the manila galleon in 1778 was luis pérez de tagle (yuste 1984, table 8). in 1801, pérez de tagle submitted from manila a petition to king carlos iv to become governor of california.13 mexico city merchants were required after 1769 to operate through men with permanent residence in manila (yuste 2007, 154), which raises the possibility that pérez de tagle was the resident to whom noriega intended to consign his shipments of otter hides. by the late 1780s, negotiations between hispanic merchants and the chinese tended to take place in canton, where the chinese merchant who dominated the market with the spanish was pan zhencheng (permanyer 2012, 532). although presidio soldiers had ceased to sell otter hides to anglo-americans by 1804, new england merchants found a way to stay in the otter trade. north of san francisco, the russians were hunting otters with alaskan native islanders (alutiiq) in kayaks (ogden 1941, 45-65). the russians had an agreement to trade with the chinese, but only through siberia (bao 2006, 212). 13 april 7, 1801 luis pérez de tagle, marqués de salinas, petitions king of spain. copy in bancroft library (bl) provincial state papers ms xvii 105-13), mss c-a 11. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 in order to sell otter hides at canton, the russians engaged in joint ventures with us merchants in california (ogden 1941, 45-52). the alutiiq came on board new england ships and hunted otter directly in the sea, while us merchants then negotiated sales of hides in canton. so long as the alutiiq did not land, the california military did nothing to stop them. thus, the potential million-dollar payoff from otter hides was not one that the consulado de méxico ever monopolized. based on new evidence—the 1796 permit to gonzález de noriega—we hypothesized that de la guerra arrived in california in 1802 to enlist the aid of commanders in california to end the sale of hides to us merchants. after de la guerra’s marriage in 1804 to the daughter of santa bárbara’s commander raymundo carrillo, presidio commanders in general began the concerted and effective campaign of blocking the export of otter hides by presidio soldiers to foreigners. whether and how de la guerra funneled those hides to his uncle is not clear, but both the manila galleon and the military supply line connected california to manila. if this hypothesis is correct, what did de la guerra and the consulado de méxico offer the presidio commanders to obtain their cooperation? commander carrillo at santa bárbara hoped that with his daughter’s marriage to de la guerra, his family could advance into mercantile ranks—indeed we will see below that de la guerra kept the implicit promise. a second commander was josé darío argüello of san francisco, who—like carrillo—had a distinguished career that had resulted in his promotion to commander. yet prior to de la guerra’s arrival, argüello’s only means of accumulating wealth beyond his modest salary had been to engage in contraband trade in the otter hides that abounded in california. de la guerra provided argüello’s son santiago with business training (pubols 2009, 48). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 in 1810, rodríguez died and the position of habilitado general in mexico city became vacant. de la guerra was promoted to the post, and carrillo prepared to send his fourteen-year-old son josé antonio to accompany his daughter and son-in-law on the journey, so that the young man could apprentice in the noriega family business in mexico city. de la guerra and his wife maría antonia left santa bárbara with three-year-old daughter rita and the boy on the naval frigate la princesa, which sailed to san blas. unbeknownst to them, san blas had been taken by insurgents who took de la guerra and his brother-in-law prisoner upon arrival. after marching them 140 miles inland to ixtlán, the two men were imprisoned awaiting execution (pubols 2009, 37-40; fuster 1998, 618). before turning to post-1810 developments, preliminary conclusions can be drawn regarding how bourbon institutions incentivized the practice of commerce by hispanic subjects in california. the amount of merchandise brought in on mail ships from manila could not have been large, casa ustáriz sent few ships, and company ships arrived rarely. indeed, if we return to our case study of california, we find that the bourbons only haltingly opened the market up to rivals to the consulado de méxico. gálvez managed initially to find a way to supply california that did not grant consulado merchants a monopoly. yet as soon as gálvez died— or perhaps as soon as otter hides reached a high price in china—the consulado de méxico gained influence over california supply. part 2. opening of trade, 1810 to 1821 war opens san blas we left de la guerra awaiting execution by insurgent josé maría mercado just outside san blas. in january 1811, the royalist general josé de la cruz routed mercado’s forces and liberated de la guerra and his brother-in-law. how de la guerra’s wife managed when her husband was seized is not known, but her young daughter died in the chaos (pubols 2009, 40). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 in may 1811, de la guerra returned with his wife and her brother to santa bárbara. since their original destination was mexico city, this return to california symbolizes how the pacific northwest of new spain was by 1811 cut off from its traditional line of supply. internal roads were blocked and acapulco was under siege. between 1811 and 1813, general cruz unleashed in san blas an institutional structure close to the open trade in the hispanic pacific that bourbon reform had never delivered. until 1815, trade was duty-free. suddenly, merchants of guadalajara supplanted mexico city as financiers and distributors of imports in the northern pacific (trejo 2006a, 378; trejo 2006b, 716-723). asian imports from manila arrived in san blas regularly by way of the galleon, navy ships and private carriers.14 other ships sailed from lima, with stops in guayaquil and panamá en route to san blas. in ports such as realejo and sonsonate, they picked up some of the company’s cargo of british east india cotton (valdés 1987, 233). panamá was a source for british imports brought across the isthmus from jamaica; in 1809, the crown legalized their sale in spanish america (trejo 2006a, 353-358, 376; pardo 1994, 86-89; bonialian 2017, 27). the unexpected openness of the northern pacific permits us to explore whether trade unleashed the type of productive energy in california that enlightenment thinkers had foretold. de la guerra began to work on commission for san blas merchant juan josé zestafe who resided in tepic, just inland from the port. zestafe accepted cargos of asian goods on behalf of mexico city merchants. in may 1811, de la guerra brought zestafe’s goods with him to california. in september 1811 the first private ship from san blas, el mexicano, arrived in san francisco bay, under josé arze, out of guayaquil (price and duran 1958, 112). arze was 14 zestafe to de la guerra, august 12, 1812 (1045 l3) in de la guerra collection (dlg ) in sbmal. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 buying tallow, for which he paid 11 reales per arroba.15 in august 1812, zestafe wrote to de la guerra that on his way back from guayaquil, arze had careened his damaged ship in acapulco. instead, zestafe would be sending nicolás noé in la flora. noé sailed from panamá to california in 1812 (trejo 2006a, 368).16 he brought $4,000 in goods, for which californios made half the payment in tallow, the rest a check from de la guerra on the habilitación (bancroft 1885, 202). merchants from guadalajara financed noé’s voyage from panamá to california.17 zestafe arranged for de la guerra to collect tallow from the nineteen missions and two pueblos to hold at the presidio ports in advance of noé’s arrival. zestafe urged de la guerra to get the missions organized, authorizing him to pay 10 to 12 reales per arroba. the voyage was a success, antonio linares wrote from san blas, “los efectos que han producido estos [unclear] en los famélicos comerciantes ha excitado la codicia en todos.”18 zestafe sent noé on the flora back to california in 1813.19 in 1813, juan bandini in la reina de los ángeles brought $7,000 of goods from panamá.20 the last galleon, the magallanes, departed manila in 1811 (cheong 1971, 149). in 1812, zestafe told de la guerra that this galleon had passed through san blas in july. in 1813, the cortes in spain decreed the suppression of the manila galleon and the opening of trade along its route to private ships financed by the manila commercial community (elizalde 2013, 341342; cheong 1971, 146; valdés 1987, 231; pérez 2015, 8). the san blas navy ship activo (josé 15 sept. 22, 1811, josé viader of santa clara to fr. guilez of el colegio de san fernando, mexico, huntington library, hm 19536-19564. 16 zestafe to de la guerra, august 12, 1812 (dlg 1045 l2); price and duran 1958, 115. 17 dlg 586 l1 and dlg 1045 l2. 18july 16, 1812 (dlg 586 l1): “the effect which [the flora’s return] produced on the starving merchants excited greed in everyone.” 19 dlg 1045 l3. 20 dlg 586 l1. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 maría narváez) sailed to manila in 1813, and on the return to san blas in 1814 stopped in santa bárbara to give de la guerra “a lacquered chinese trunk containing the goods of the attached invoice” (pubols 2009, 43). in 1818 and 1821, the san ruperto under captain varela plied the manila-san blas route.21 since at least 1723, the varela family had been active in manila commerce (yuste 2007, 457; valdés 1987, 234). in 1812, antonio linares wrote to de la guerra that he was dissatisfied with his pay as surgeon of the naval department of san blas, and planned to relocate to manila, where he knew manuel varela.22 in 1814, linares indeed sailed to manila on the san carlos (captain pedro toro), a ship which had stopped in california on the voyage from manila.23 by 1820, varela would relocate to tepic.24 in 1823, de la guerra sent his son juan (age 10) to live with varela so that he could receive an education (pubols 2009, 300). by 1830, there was a juan de la guerra y noriega integrated into tepic’s commercial world (mayo 2006, 165). the year 1820 witnessed the last of the private merchant ships from manila sailing for an 1821 arrival in new spain (cheong 1971, 142). one of these was the santa eulalia which sailed in 1814 to california under josé díaz and victorino legaspi, where they exchanged $16,000 of goods for habilitación checks (bancroft 1885, 204; trejo 2006a, 377; pubols 2009, 78). some have argued that the philippines-new spain line was displaced by direct ships to the americas out of india and canton (cheong 1971, 142, 150). others point to the santa rita incident as the ruin of manila commerce (legarda 2002, 128). the santa rita left manila in 1818 (garcía 2019, 3), picking up tallow in california in 1819 (bancroft 1885, 438). upon arrival in new 21 pedro de leiva from guaymas to fr. tomás de ahumada at mulegé, august 29, 1821 (dlg 582 l1). sola from monterey to de la guerra, feb. 18, 1818 (dlg 923 l30); bancroft 1885, 291-292. 22 antonio linares from san blas to de la guerra, dec. 12, 1812 (dlg 586 l1 and l2); fuster 1998, 600. 23 sola from monterey to de la guerra, nov. 17, 1817 (dlg 923 l25, dlg 586 l2). 24 varela from tepic to de la guerra, april 19, 1820 (dlg 1001 l1). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 spain, the santa rita sold the bulk of its asian cargo in mexico city, but then the royalist general agustín iturbide seized the 525,000 pesos to pay his troops, ruining the pérez de tagle family (garcía 2019, 3). by the 1790s, thoughtful people in spain could see the polity heading for crisis, and some advocated unleashing market forces as a way to advance able citizens. “remove the obstacles that oppose themselves to the free play of the interest of agents,” wrote gaspar melchor de jovellanos in 1795 (2008, 705). when he advocated removing restrictions, he implicitly assumed that everything else would remain constant. yet structural change of such magnitude occurs only when there is systemic crisis. the opening of california’s markets between 1810 and 1821 coincided with global war and insurrection. bourbon rules were suddenly irrelevant. men such as de la guerra were unhindered from trading with lima, panamá, san blas, manila and canton—but stability was elusive. hispanic merchants act to protect the california market de la guerra was between 1813 and 1816 solidifying his ties to us merchants even as he sought to remain in the good graces of hispanic traders. why? no ships came up from lima in 1815 or 1816, so california was in need. secondly, the prices that the americans out of canton offered would have been lower than those out of san blas after 1815, when general cruz levied 21.5% duties. thirdly, because the americans out of canton were operating outside the law, they ingratiated themselves with the local authorities. however, hispanic merchants did not sit idly by, but instead acted to protect their california market. in 1813, noé captured the mercury under george washington eayrs at refugio. refugio was a smuggler’s cove (bancroft 1885, 213, 268, 274) which had been connected to presidio santa bárbara command since 1798 (bancroft 1884, 671 and 1885, 112, 172, 663). eayrs had been http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 ferrying on behalf of the russians in alaska otter hides to china, and investing the proceeds in cargos of chinese goods to sell in california. noé hoped to confiscate the $16,000 on board, but de la guerra instead wrote a check on the habilitación account for noé and kept the $16,000 cash in california (miller 2001; bancroft 1885, 208, 269; trejo 2006c, 30-31). noé took to san blas the mercury and her crew, with eayrs sailing there as prisoner aboard the tagle under josé cavenecia.25 in 1814, cavenecia of the tagle seized john jacob astor’s pedler at san luis obispo. captain samuel northrop stated he had been trading with the russians, and had stopped at san luis obispo only to obtain fresh water and provisions (bancroft 1885, 271). when the tagle seized the pedler, it fell to josé darío argüello as interim governor of california to declare the seizure licit or not. mission san luis obispo was a notorious location for contraband trade. even so, argüello wrote that there was no evidence that the pedler had traded, and should be freed (bancroft 1885, 271). with this controversial decision, argüello created the institutional space for californios to trade with foreigners. he himself had long been implicated in contraband (ogden 1941, 39-40). his son luis antonio succeeded josé darío argüello as commander of presidio san francisco in 1806. the russians were using bodega bay from which to send alutiiq kayaks into san francisco bay. commander argüello demonstrated particular zeal in keeping russians out of san francisco bay between 1809 and 1811, going so far as to order his men to shoot to kill alutiiq hunting parties (ogden 1941, 54-55). commander argüello may not have been willing to let russians hunt otter in his jurisdiction, yet by 1812 when the russians settled fort ross north of san francisco, rumors abounded that cash-strapped argüello traded flour from his jurisdiction’s missions to the russians (duggan 2016, 69). 25 seizure of mercury, agi, estado 31, no 28, foja 78. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 when appointed interim governor of baja california, josé darío argüello did not leave his post at santa bárbara. as commander there since 1807, he was the highest-ranking officer in alta california and expected to be made governor of alta california. perhaps his 1814 ruling against hispanic mercantile interests (which quietly favored californio trade with foreigners), stimulated the viceroy to send instead the basque merchant pablo vicente de sola to govern california in 1815. bitterly disappointed, argüello relocated to loreto, far from his children. by 1816, california presidios had elected his son gervasio to represent them as habilitado general in guadalajara.26 in 1821, the elder argüello retired to guadalajara as well (bancroft 1885, 358-359). incoming alta california governor sola had entered the documentary record in 1787 as a merchant supplying baja california with 100 mules, blankets, reins, and soap.27 he also offered his services to larger merchants such as josé mariano de fagoaga in mexico city (del valle 2016, 132, 199). the confraternity of aránzazu grouped basques in the city, so it was to this community that sola turned to borrow (del valle 2012, 53, 58). sola’s brother faustino served as a missionary at san francisco between 1787 and 1790 (geiger 1969, 247). from 1805 to 1807, sola worked from mexico city as habilitado general. the tax collector of the port of san blas, agustín rivas, advanced sola a portion of his salary prior to his departure for california in 1815.28 this resume suggests sola was a man loyal to the consulado de méxico with ties to the hispanic mercantile community of san blas. yet if sola expected de la guerra to be his ally in the battle against foreign traders in california, the habilitado’s loyalties were shifting. when sola arrived to govern in 1815, de la guerra was 26 luis antonio martínez from san luis obispo to de la guerra, dec. 15, 1816. dlg 645 l2. 27 bl ca-4. provincial state papers tomo xvii, 1787 nota (page 98). 28 sola to de la guerra, sept. 25, 1819 (dlg 923 l49). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 promoted to commander of presidio santa bárbara. as commander of the channel, de la guerra had more control over whether or not to prosecute contraband traders. de la guerra’s new authority coupled with the lessons he had learned from the eayrs fiasco may be what caused him to orchestrate the seizure of a second, and much larger, us ship out of canton in 1816. the war of 1812 had reduced us merchants’ ability to bring silver from south america to canton, so they compensated by increasing their smuggling of opium into china as purchasing power over chinese exports (downs 2014, 125). the philadelphia merchant benjamin chew wilcox lived in canton from 1805 to 1827 precisely to manage that trade. de la guerra learned of wilcox when his brother james smith wilcox of the albatross arrived together with henry gyzelaar of the lydia in refugio cove in 1816 (bancroft 1885, 213, ogden 1941, 73-75). to develop steady profits from opium involved a two-pronged process: first, traders in canton brought opium in from turkey or bengal and sold it to the chinese at a high price. the second half of the business was to use the profits to purchase tea, spices, chinaware, and textiles for export. the trick then to a sustainable business model was to find a market for the asian goods, which is precisely what california offered. gyzelaar had picked up opium in turkey in 1815, and traded it at whampoa for a cargo of asian goods (downs 2014, 124). after trading with the russians at sitka, gyzelaar and wilcox came to california with $90,000 worth of asian goods. when they called at refugio in 1816, three men already known for contraband trade seized the lydia—de la guerra, his brother-in-law carlos carrillo, and his assistant, santiago argüello (bancroft 1885, 275-276). once gyzelaar and wilcox were in custody, de la guerra could negotiate with them. given future events, it seems likely that de http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 la guerra not only purchased goods but also offered to be agent for the wilcox concern in california. the challenge was to figure out how to persuade governor sola to release gyzelaar. for this, de la guerra turned to his fellow asturian, fr. luis martínez at mission san luis obispo. martínez came up with the plan that gyzelaar be permitted to sail his vessel on his own recognizance from santa bárbara to monterey, where the governor could fully investigate the matter. gyzelaar had motive and opportunity to trade en route with martínez, at san luis obispo. that martínez was involved in contraband with gyzelaar comes through in his correspondence with de la guerra, “tell henry [gyzelaar] that he owes his liberty to my efficiency, that i need him to pay me with palos de tinta [dyes] from the ones he carries, and two other pipas [of wine].”29 martínez offered gyzelaar a path to conducting trade in california despite its illegality, and gyzelaar offered martínez the opportunity to purchase goods out of asia without paying customs duties. governor sola wanted to expel gyzelaar from california in order to keep the market for the traders in mexico. yet he was under pressure from de la guerra, the carrillos and the argüellos—who controlled the ports of san diego, santa bárbara and san francisco. he finally agreed to the exchange, using as his precedent the decision by governor argüello to free the pedler in 1814, a decision approved by the viceroy.30 the case illustrates how important it was to have a local contraband trader in government. after deciding not to stand in the way, sola called in a favor from martínez: to transport wood for him from monterey to santa bárbara. if the captain of the lydia could not do it, then martínez should come up with 100 yoke of oxen.31 sola was revealing in an unspoken way that he understood contraband trade had taken place, 29 somos 19, no date (dlg 649 l1). 30 sola from monterey to de la guerra, march 9, 1816 (dlg 923 l3). 31 ibid. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 because otherwise de la guerra and martínez would have owed him nothing. the wood did not fit on the lydia, so in 1817, james smith wilcox returned from canton to california on the larger ship, traveler. he picked up the wood in monterey and ferried it to santa bárbara for sola.32 later that year, wilcox sailed to presidio loreto, intending to drop concepcíón argüello there to visit her father. en route, this brother of the american consul in canton proposed marriage to this sister of the commander of presidio san francisco and daughter of baja california's governor, but she demurred (bancroft 1885, 287). lima trader francisco ramírez seized the traveler outside loreto, thereby eliminating a competitor.33 the seizure of eayrs’ mercury in 1813 as well as wilcox’ traveler in 1817 must have been setbacks for supplying california out of canton. luckily for sola, traders from south america sailed to california in 1817 to obtain tallow. their traditional sources of supply in chile had fallen to insurgents. captain josé cavenecia and his supercargo juan josé mayo were bringing british goods to california by way of panamá on the san antonio (pubols 2009, 45; trejo 2006a, 368, 376; bancroft 1885, 282). sola calculated that california missions could produce 100,000 arrobas of tallow, and ordered them to give him 16%, a tax that would provide sola an alternate source of military payroll.34 cavenecia paid 18% duties to sola, and as a result, raised his prices. missionaries were incensed that on top of the 16% share of tallow they had already given sola, they now had to pay prices 18% higher than expected.35 a second south american trader was on the coast, ignacio 32 sola to de la guerra, june 6, 1819 (dlg 923 l41). 33 sola to de la guerra, dec. 22, 1817 (dlg 923 l28). 34 to de la guerra, august 23 and september 29, 1817 (dlg 923 l14 and l18). 35 martínez to de la guerra, dlg 649, somos 19, no date. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 mancisidor. he evaded customs duties by stopping at coves such as refugio. mancisidor’s cazadora was financed by the scott from india, diego goldie (trejo 2006a, 376; bancroft 1885, 291). goldie had operated in india in 1815-1816.36 in 1817, merchants out of india began to bypass manila to trade directly with south america (cheong 1971, 150). goldie was the supercargo of a ship which arrived from buenos aires to chile in 1818. by 1820, he was living in lima, where he advised british merchants to export copper and silver to india (besseghini 2020, 5). martínez asked de la guerra to conduct trade with mancisidor on his behalf-a hint that de la guerra was personally involved in evading customs duties.37 by 1818, habilitación finances were dangerously unclear. between 1810 and 1813, the problem for california had been that san blas naval supply ships had been diverted to assisting royalists in the siege of acapulco. the funds in the habilitación account in mexico city had remained valid, so that de la guerra used such checks to supplement in-kind payments in tallow when he purchased goods from hispanic traders. but by 1816, sola’s letters to the habilitado general— josé ignacio de ormaechea—requesting clarity on where the accounts stood, went unanswered.38 perhaps this is why california presidios elected one of their own, gervasio argüello, as new habilitado general in 1816 (bancroft 1885, 341, 701). he went to guadalajara, not mexico city, because it was up to general josé de la cruz there whether or not to fund california out of the 21.5% customs duties that he had imposed on goods coming into san blas in 1815 (trejo 2006a, 363). in 1817, ships from lima and san blas doing business in california were accepting checks written by de la guerra on the habilitación account. manila was an alternate source in the 36 the asiatic journal and monthly for british india and its dependencies, august 1816; the register of shipping for 1818. london: society of merchants, shipowners and underwriters. 37 dlg 649 l1. 38 september 23, 1819 to de la guerra, dlg 923 l47.” http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 hispanic world. in 1816, pedro negrete brought the only hispanic ship to california, his la paz. as late as 1818, sola was able to pay the san ruperto (out of manila) with a check written on the habilitación account (bancroft 1885, 251, 291-292). in 1818, fermín de genoa y aguirre out of lima was in california with the hermosa mexicana (pubols 2009, 44, 46), but his prices were high.39 by 1819, the manila ship santa rita insisted on tallow, of which california could only come up with $6,000 although the province had hoped to purchase $14,000 in goods. california later made a second payment of $3,000 in tallow by shipping it to san blas on zestafe’s ship the san javier (bancroft 1885, 438; pérez 2015, 6). de la guerra’s credit as habilitado was no longer solid because spain’s funding for california’s military was dwindling. spain fails to protect california a french-born privateer acting under buenos aires’ flag, hypolyte bouchard, attacked california’s coastal settlements in 1818, sacking monterey and burning rancho refugio to the ground. gyzelaar had given de la guerra advance notice of the impending attack, so californians were able to minimize casualties. nonetheless, the incident opened the military command’s eyes to the colony’s vulnerability. to create the illusion of a larger force during the attack, de la guerra had his men march around a hill in a circle over and over again (pubols 2009, 53). in 1819, the san blas navy hired the ship reina de los ángeles (captain juan bandini) to transport 200 additional troops to california. in 1817, guadalajara merchant pedro olazagarre had with his lima-based genoese son-in-law, josé rodulfo, financed the ship’s voyage all the way from cádiz to california. before 1810, olazagarre and rodulfo had been contraband traders in british goods out of panamá. between 1811 and 1815, a brisk trade in such goods 39 november 15, 1817 sola to de la guerra from monterey (dlg 923 l23, see also l28). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 emerged between panamá and san blas, which was the context for olazagarre’s relocation to guadalajara. the reina purchased cacao in guayaquil, a prized commodity in spain. when the reina returned from california to san blas, political winds must have changed because the ship was confiscated for transporting troops. the ambitious voyage from cádiz to california was a financial disaster for olazagarre and rodulfo (lévano 2019, 88; bancroft 1885, 253). in california, the cost of sustaining the military jumped from $86,000 to $150,000, yet the new men arrived with only $10,000 (bancroft 1885, 186, 253, 255). in a panic, governor sola sent de la guerra to guadalajara with instructions to continue on to the viceroy in mexico city where a face to face meeting might elicit funds. there was a more private story to sola’s desperation. before sailing for california in 1815, sola had borrowed $1,000 from olazagarre.40 sola had intended to repay the debt out of his $4,000 annual salary as governor. by 1818, sola was owed back pay for 3 years. sola’s letters to the habilitado general in mexico city were eliciting no response. de la guerra made the journey, but the vicerroy refused to meet with him, sending word to guadalajara that only $30,000 was available—20% of california’s needs (bancroft 1885, 261). by 1819, de la guerra knew that spain would neither finance nor protect california. turn to the british by 1820, the british were financing hispanic ships plying the coastal-trade—such as de la guerra’s old friend zestafe on the san francisco xavier, and juan malarín on the señoriano (bancroft 1885, 293). mexico only provided $36,000 to california’s military in 1821—about 20% of the need (bancroft 1885, 435). before leaving california in 1822, sola took advantage of the mexican decree of december 15, 1821 opening ports to develop a stream of customs 40 sola to de la guerra, september 25, 1819 (dlg 923 l48). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 duties for cash-strapped california (bancroft 1885, 473). he signed a three-year contract to sell hides, tallow, soap and cured beef from missions to mcculloch and hartnell, associates of john begg in lima, whose ultimate financier was james brotherston in liverpool. the terms were 1 peso per hide and 2 pesos per arroba of tallow (ogden 1927, 255). the rate for tallow was an increase over the typical 12 reales per arroba, but the price californians received for hides was low, perhaps because mcculloch and hartnell were paying export duties so sola might fund payroll. by 1825, de la guerra would cement his relationship with brotherston when he sent his son to be educated in liverpool (pubols 2009, 128), and married his daughter to begg’s man in california, william edward hartnell (pubols 2009, 119-122). mancisidor was the second british-financed operation in california, and by evading customs duties, he was able to offer twice the price of the hartnell contract for hides (pubols 2009, 117; ogden 1927, 258). despite his family tie to hartnell, de la guerra conducted business with both mercantile houses. the british presence in the trade of newly independent latin american republics opened a path back to stability for hispanic merchants in the pacific. part iii. markets and politics eighteenth century ideology held that pursuit of self-interest in open markets would unleash economic growth. and yet this story of an actual merchant illustrates that his commercial family’s success was intimately tied into the bourbon structure of california. before 1810, the post of habilitado meant de la guerra had access to a payroll account that opened up credit and free transport. the spanish flag inspired enough respect to protect california’s modest ports from attack. though the bourbon reformer gálvez who designed california’s institutions was no friend to mexico city mercantile interests, the spanish crown’s support for a set of institutions gave the merchants of mexico city a structure which they had coopted by the 1790s. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 in 1821 as in 1801, an outside observer would have seen presidios at the three pacific ports of san francisco, monterey, and san diego—with a fourth within the channel of santa bárbara. yet the incentives and constraints that channeled the behavior of the commanders at these institutions had changed. by 1821, not only had the government commanding the institutions switched from spanish to mexican, but furthermore after 1819 neither spain nor mexico was willing to provide more than 25% of military payroll. this enforced independence compelled the province of california to develop a source of revenue in the form of customs duties on international trade. commanders could no longer rely upon promotion to higher position within a government bureaucracy or even within mexico city’s mercantile community. instead, they used their control of ports to solidify personal relationships with merchants in commercial networks that extended from mexico to peru to the philippines and canton. indeed, while presidio commanders had probably long shipped commercial products on naval ships, it was not until 1811 that the first private ship under josé arze sailed from san blas to california. between 1811 and 1821 commerce rather than defense became the primary activity of california’s ports, in a transition similar to that experienced by the port of san blas to which they were attached. trade between california and lima, san blas, manila, and canton moved from the shadows into the light. and yet this opening coincided with the collapse of institutions which had given trade predictability and minimized risk. the crown could not protect de la guerra and his family from insurgents at san blas in 1810. in 1818, spain’s flag offered the california colony little protection from an insurgent privateer. in 1819, olazagarre lost his reina de los ángeles. in 1821, iturbide seized the profits of the manila merchants backing the santa rita. the crown sent extra soldiers to california but not the means to pay them, which made for an unsettling social situation. de la guerra found that to provide his family and his troops with a more stable http://revistes.ub.edu/index.php/jesb volume 8, number 1, 43-80, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 future, he should tie his community to guadalajara and to british commerce. he successfully negotiated his children’s transition into prominent positions in the new english-dominated world. yet it seems likely that he looked back on 1810 as a moment of great loss. references altable, francisco. 2013. vientos nuevos: idea, aplicación y resultados del proyecto borbónico para la organización del gobierno y el desarrollo de la población y economía de las californias, 17671825. la paz: universidad autónoma de baja california sur. bancroft, hubert howe. 1884. history of california, volume i: 1542-1800. san francisco: a.i. bancroft and company. bancroft, hubert howe. 1885. history of california, volume ii: 1801-1824. san francisco: a.i. bancroft and company. bao, muping. 2006. “trade centres (maimaicheng) in mongolia and their function in sino-russian trade networks.” international journal of asian studies 3(2): 211-237. besseghini, deborah. 2020a. “british trade and the fall of the spanish empire. changing practices and alliances of antony gibbs & sons in lima during the transition from viceregal to independentist rule (1820-1823).” nuevo mundo/mundos nuevos 20[online]: 1-20. doi:10.4000/nuevomundo.79632. bonialian, mariano, 2014. “nuevos problemas sobre una vieja controversia, el flujo de plata entre américa y china durante el siglo xviii.” in oro y plata en los inicios de la economía global, edited by bernd hausberger, and antonio ibarra, 217-249. mexico city: el colegio de méxico. bonialian, mariano. 2017. “comercio y atlantización del pacífico mexicano y sudamericano: la crisis del lago indiano y del galeón de manila, 1750 – 1821.” américa latina historia económica 24(1): 7-36. doi: 10.18232/alhe.v24i1.791. cabañas, joaquín ramírez, ed. 1944. comercio extranjero por el puerto de san blas en los años, 18121817. mexico city: archivo historico de hacienda. cheong, weng eang. 1971. “the decline of manila as the spanish entrepôt in the far east, 1785 – 1826.” journal of southeast asian studies 2(2): 142-158. doi:10.1017/s0022463400018579 cook, warren. 1973. floodtide of empire: spain and the pacific northwest, 1593 to 1819. new haven: yale university press. crossley, pamela kyle. 2008. what is global history? cambridge: polity. del valle pavón, guillermina. 2012. finanzas piadosas y redes de negocios: los mercaderes de la ciudad de méxico ante la crisis de nueva españa, 1804-1808. méxico: 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attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.3989/revindias.2006.i238.337 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 iguácel melero-polo university of zaragoza (spain) maría eugenia lópez-pérez areca consulting group (spain) identifying links between corporate social responsibility and reputation: some considerations for family firms abstract corporate social responsibility (csr) has become a key issue for both academics and business practitioners alike. there are numerous reasons why implementing csr policies and practices are advantageous: enhanced brand knowledge, market share, productivity, efficiency, workforce motivation and competiveness, to name a few. there are also indications that csr practices lead to a solid, positive corporate reputation. as a result, this research aims to contribute to current literature by establishing the current state of csr research and identifying the theoretical framework of reference for understanding the link between csr and reputation, providing a basis for future research. we also aim to delve deeper in the specific context of family firms. to this end—following consultations with a panel of internationally recognized scholars—a selection of leading management, marketing and ethics, corporate governance and family firm management journals were reviewed. the results—based on a content analysis of 55 articles considering the global link between rsc and reputation—allowed us to identify, among others, topics related to consumer attitude and market response to csr activities (via brand value), along with the impact of csr on financial value and risk management. keywords: csr; reputation; review of the literature; family firms corresponding author: e-mail: imelero@unizar.es received 26 april 2017 accepted 13 june 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 introduction corporate social responsibility (csr) is a topical issue in both academic research and business practice (peloza and shang 2011; taneja et al. 2011; dahlsrud 2008). during the last decade of the twentieth century and the beginning of the twenty-first century, csr has been at the forefront of business management. theoretically, csr necessitates economic prosperity, social cohesion and environmental sustainability—to which a fourth dimension has been added: philanthropy (porter and kramer 2006). the assumption is that these actions are undertaken voluntarily, are directly related to business ethics and go beyond the existing legislation (mcwilliams and siegel 2001). equally, corporate reputation is founded on a series of positive and/or negative signals which allow us to anticipate how a company will behave in the future (roberts and dowling 2002; janney and gove 2011). despite the lack of unanimity regarding the definition of this construct, one of the most widely used approaches is rooted in work by fombrun and shanley (1990) and fombrun (2001), who discuss the aggregation of perceptions held by various actors in terms of how organizations respond to stakeholder demands and expectations. this approach recognizes the cumulative and informative character of such perceptions. to date, numerous studies have examined the relationship between csr and corporate reputation. however, a unanimous consensus is still lacking with regard to the theoretical framework. moreover, there is no defining work that analyzes the current state of the question and identifies research opportunities. it seems pertinent then to analyze the current situation with a view to identify the theoretical framework, methodology and future lines of research into the links between csr and corporate reputation. we attempt to develop a framework that— while recognizing the cross-disciplinary nature of csr—allows researchers to delve deeper in http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 the links between csr, reputation, consumer behaviour and the financial value of the firm. in addition, we aim to take a closer look at the specific context of family businesses, with a view to delimit the most appropriate theoretical frame of reference and identify potentially interesting lines of research. this is justified by the specific characteristics of family businesses, linked to their ownership structure and management style. this article strives to address these issues through a systematic review of the literature. to this end, we first identify the major journals in the areas of (i) business management, (ii) marketing and (iii) corporate governance and ethics. then, we identify the most relevant articles, analyze the content of each and highlight the most relevant aspects in terms of csr and corporate reputation, using a predefined set of search criteria. additionally, this article presents the results of a specific literature review in family business management journals, with a view to identify similar research patterns or the need to adapt the general framework to the family firm context. we also aim to determine the state of the issue in family business contexts (number of publications per year, topics, etc.) and to identify possible lines of future research. the article is structured as follows: the next section explores the purpose and process underpinning our systematic review of the literature—including the search criteria used to produce auditable, repeatable results and to ensure reliability. the third section presents key findings by journal type, date, methodology and relevant topics. section four presents the specific results for the family business context. we conclude with a discussion and conclusions section. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 systematic review of the literature as the work of vázquez-carrasco and lópez-pérez (2013) indicates, the aim of a systematic literature review is to offer broad insight into existing research on a specific subject. literature reviews use precise methods to narrow the search and evaluate each relevant study in a critical and justified manner—providing a snapshot of the major lines of investigation to date. scholars should, therefore, execute informed decisions when researching and writing literature reviews if they are to be methodical, transparent and replicable—crucial to furthering knowledge (peloza and shang 2011; tranfield et al. 2003). the systematic review of literature is based on several assumptions. firstly, the vast quantity of existing information should be broken down into more manageable units in order to aid understanding and management of the data. in this sense—as rousseau et al. (2008) indicate— systematic reviews assume orderly accumulations, analyses and interpretive reflections of all the evidence provided on a specific subject; in our case, the links between csr and corporate reputation. through a synthesis of existing literature it is possible to identify the key articles and most interesting potential lines of future research, from the perspective of the academic community. literature reviews should be structured in such a way so as to permit other researchers to replicate the review process and, ultimately, produce the same results. the aim is to provide studies which are objective, transparent and synthetic; which minimize the search and analysis bias and summarize the evidence (chan and ngai 2011; peloza and shang 2011; rousseau et al. 2008; tranfield et al. 2003). in general, articles are chosen on the basis of title and summary. those articles which do not meet the selection criteria are discarded. at this point it is vital to determine the selection and http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 inclusion criteria, which themselves should be structured in such a way as to ensure quality. we followed the following steps—recommended by kitchenham et al. (2009) and baumann et al. (2002)—in order to carry out our first review of the literature on the topic of the rsc-reputation relationship: 1. define the research question(s): csr and corporate reputation. 2. use one or more keywords to execute the search in (i) a series of bibliographical databases and/or (ii) in a sample of well-defined, justified journals. to this end, we used the results from a simple questionnaire administered to a group of carefully selected csr researchers. respondents were asked to list the most relevant journals covering topics in management, marketing and ethics and corporate governance (vázquez-carrasco and lópez-pérez 2013). 3. include the keywords: “csr” and “reputation” in the search fields (title & abstract)1, with no date restrictions. in this way we were able to identify those articles which investigate the csr-corporate reputation relationship. 4. finally, analyze the content of each of the articles selected with the purpose of identifying the theoretical framework, methodology used and potential lines of future research. the results of this systematic literature review—including the most relevant findings and conclusions— allow us to identify the state of the research topic and can be found in the next section of this article. 1 there is a significant bias toward brand image in the marketing journals. hence, we chose to expand the search fields to find “csr” in the abstract and “reputation” in the full text. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 results once the most relevant journals in each of the reference areas (business management, marketing, ethics and corporate governance) had been identified, the search terms were included and an advanced search of titles was carried out. we obtained a total of fifty-five (55) articles2. table 1 shows the articles found, listed by journal. table 1. articles on the csr-corporate reputation relationship journal authors (year) academy of management review (2) aguilera et al. (2007), mc wiliams and siegel (2001) academy of management journal (0) ---- journal of management studies (2) hond et al. (2014), janney and gove (2011) journal of management (1) doh et al. (2010) strategic management journal (2) godfrey et al. (2009), mcwilliams and siegel (2000) journal of marketing (3) brown and dacin (1997), chen et al. (2009), wagner et al. (2009) journal of marketing research (1) sen and bhattachrya (2001) marketing science (0) ---- journal of the academy of marketing science (2) ellen et al. (2006), nikolaeva and bicho (2011) international journal of research in marketing (2) du et al. (2007), torres et al. (2012) business ethics quarterly (1) van de ven and jeurissen (2005) corporate governance: an international review (0) ---- 2 date of last access: december 30, 2016. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 journal of business ethics (32) aouadi and marsat (2016), axjonow et al. (2016), barnea and rubin (2010), bear et al. (2010), beliveau et al. (1994), basil et al. (2009), castelo and lima (2006), cui et al. (2017), dubbink et al. (2008), eberle et al. (2013), francés and del río (2008), harjoto and jo (2011), hsu (2012), hur et al. (2014), jahdi and acikdilli (2009), kim (2014), kim and park (2011), lai et al. (2010), lii and lee (2012), liston-heyes and ceton (2009), mueller et al. (2009), pérez et al. (2015), rettab et al. (2009), sacconi (2007), siltaoja (2006), stanaland et al. (2011), stuebs and sun (2010), tuck et al. (2007), vanhamme and grobben (2009), vidaver-cohen and simcic (2015), walker et al. (2010) business ethics: an european review (4) clarke and gibson-sweet (1999), ingenhoff and koelling (2012), jackson and bundgard (2002), morsing and schultz (2006) business & society (4) holzer (2008), muller and kolk (2015), orlitzky et al. (2011), tetrault and lvina (2016) source: authors elaboration having analyzed the table of contents of the five leading management journals, we observed that a small body of literature—totaling seven articles—satisfied the search criteria established to analyze the csr-corporate reputation relationship. although no articles were found in the academy of management journal, two were found in each of the following journals: the academy of management review, journal of management studies, and strategic management journal. finally, in the journal of management we found one article. we should mention here that all the studies were published after the year 2000. if we apply this same analysis to marketing journals the overall results are similar, with a total of eight articles being identified. in general terms, the articles analyze the consumer response to csr actions. csr is proposed as a direct antecedent of reputation. the journal of marketing stands out with a total of three articles published, while journal of the academy of marketing science and the international journal of research in marketing both contain two articles in each http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 journal. the journal of marketing research contained only one relevant article. marketing science did not contain any articles that met the search criteria. in terms of date of publication, only about 25% of the articles had been published in the last five years. in total, forty-one articles investigating the csr-reputation relationship have been published in business ethics and corporate governance journals. the journal of business ethics stands out with a total of thirty-one articles, heterogeneous in topic and content. the journals business ethics: a european review and business & society have each published four articles, while business ethics quarterly has only published one. corporate governance: an international review displayed no results. it is worth noting that almost 50% of the articles identified had been published in the last five years. graph 1, below, illustrates the publication time-spread for all articles identified using our systematic search process. this graph suggests we are dealing with an interesting, timely topic which has, perhaps, already reached maturity: while a peak is observed between 2009 and 2012, only 25% of the articles correspond to the last five years, as we indicated earlier. there is an increase in published work in the period spanning 2005-2008 and publication on the topic reaches its peak in 2009 with nine articles (17% of the total sample). between 2010 and 2012 there is a decline in articles on the relationship, which seems to mark the trend for the next five years. by 2017, however, the numbers have turned around again, with an increase in articles that abandon generalist approaches to focus on far more specific aspects such as the contribution of csr-based reputation to the management of certain business risks. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 graph 1. number of articles published, by year source: own elaboration broadly speaking—from a conceptual point of view—we can conclude the following: i) existing management journal literature considers the csr-reputation relationship in general contexts—the end goal being to analyze the impact of csr on the financial value of organizations. while the variety of theoretical approaches stands out, the relationship between csr and corporate reputation is always positive and significant. several studies in particular (e.g., cui et al. 2017; doh et al. 2010; janney and gove 2011) consider agency problems and information asymmetry between management and stakeholders. these articles indicate that csr-based reputation fosters a more honest organizational image, reinforcing corporate legitimacy and the trust stakeholders place in the company. ii) marketing journals tend to consider corporate reputation as an intangible resource of significant value, which enabling consumers to differentiate and position the company in their minds and improving the attitude of the market towards products through brand image (brown and dacin 1997; torres et al. 2012). in order for csr to reinforce corporate reputation, such 3 1 2 1 0 0 1 4 4 3 9 6 6 4 1 3 3 0 4 n u m b e r o f a rt ic le s http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 practices must be consistent, sustainable over a long period of time and integrated at the heart of the business model (sen and bhattacharya 2001; du et al. 2007; wagner et al. 2009). furthermore, a virtuous circle is created where by reputation once again contributes to overcoming information asymmetry and boosting the credibility of subsequent csr actions. iii) finally, the papers published in business ethics and corporate governance journals are characterized by the heterogeneity of topics and theoretical approaches. a number of authors (e.g., aouadi and marsat 2016; harjoto and jo 2011; orlitzky et al. 2011) analyze the effect of csr on financial value; others, look at market response (e.g., pérez et al. 2015; stanaland et al. 2011), whilst yet others consider the importance of communication and public relations as a means of reinforcing the impact of csr actions on reputation (vanhamme and grobben 2009; morsing and schultz 2006). research has also been conducted to analyze the repercussion in various stakeholder groups: employees (basil et al. 2009; stuebs and sun 2010), ngos (holzer 2008), consumers (tuck et al. 2007) and shareholders (sacconi 2007). therefore, we can conclude that the topic has sparked the most interest in business ethics and corporate governance journals (73% of total articles identified). at the other end of the spectrum, management journals appear to have given less quantitative importance to the subject—only 12.5%; yet, in terms of qualitative research, management journals stand out for their conceptual contributions and for laying the theoretical groundwork for analysis of the csr-reputation relationship in the remaining disciplines3. the marketing journals (14.5%) demonstrate an important bias toward consumer behavior research. 3 it should be clarified that the management journals include research on csr in an organizational context. however, it appears that the csr-reputation relationship has been used to analyze phenomena in a broader context. this is seen when comparing the search results for “csr” in the title and abstract fields vis-à-vis the more specific combined search term “csr” and “reputation”. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 the authors have provided a summary of the content analysis and coding process in the form of a comprehensive excel database. following a detailed content analysis we classified the articles using the criteria shown in table 2, explained in greater detail below. table 2. summary of the content analysis (topic and methodology)* topic authors (year, methodology) theoretical framework aguilera et al. (2007, c), castelo and lima (2006, c), doh et al. (2010, qt), francés and del rïo (2008, c), mcwilliams and siegel (2000, c), mueller et al. (2009, c), orlitzky et al. (2011, c), pérez et al. (2015, qt), sacconi (2007, c), tetrault and lvina (2016, qt) van de ven and jeurissesn (2005, c), vidaver-cohen and simcic (2015, qt) influence in the financial value of the firm aouadi and marsat (2016, qt), axjonow et al. (2016, qt), barnea and rubin (2010, qt), castelo and lima (2006, c), hond et al. (2014, qt), doh et al. (2010, qt), godfrey et al. (2009, qt), harjoto et al. (2011, qt), jackson and bungard (2002, ql), janney and gove (2011, qt), liston-heyes and ceton (2009, qt), mcwilliams and siegel (2000, c) mcwilliams and siegel (2001, qt), muller and kolk (2015), orlitzky et al. (2011, c), rettab et al. (2009, qt) risk management basil et al. (2009, qt), chen et al. (2009, qt), clarke and gibsonsweet (1999, qt), cui et al. (2017 ; qt), godfrey et al. (2009 ; qt), holzer (2008, ql), janney and gove (2011, qt), kim (2014 ; qt), orlitzki et al. (2011, c), stanaland et al. (2011, qt), tuck et al. (2007, qt), vanhamme and grobben (2009, qt), van de ven and jeurissen (2005, c) consumer behaviour brown and dacin (1997, qt), chen et al. (2009, qt), du et al. (2007, qt), eberle et al. (2013), hsu (2012, qt), hur et al. (2014, qt), jahdi and acikdilli (2009, ql), mcwilliams and siegel (2001, qt), lai et al. (2010, qt), lii and lee (2012, qt), nikolaeva and bicho (2011, qt), stanaland et al. (2011, qt), tuck et al. (2007, qt), sen and bhattacharya (2001, qt), scholder et al. (2006, qt), skard and thorbjørnsen (2014, qt), torres et al. (2012, qt), van de ven and jeurissesn (2005, c), wagner et al. (2009, qt), walker et al. (2010, qt) *c= conceptual; ql= qualitative; qt= quantitative source: own elaboration http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 as a result of the analytical process an article may be coded in more than one topic area. from a methodology standpoint, we observe a prevalence of quantitative research (79% of the total number of articles, which represents more than 90% of the articles which include an empirical study). these studies present results by means of regressions, structural equation analysis and multivariate analysis in similar proportions. there are much fewer qualitative studies, only four articles in all: three case studies and one narrative and content analysis—only 7% of total published papers. eight conceptual articles were identified—14% of the total sample. these last articles were published in management and business ethics journals; none were found in marketing journals. conceptual studies of this sort signal the current relevance of the topic and the research opportunities that still remain in the field. key issues in research described below are the main ideas emerging from the content analysis of the articles included in the sample. various tables illustrating the specific characteristics of each of the articles are included (hypotheses, sample, results) as a basis of the content included hereafter. definition of the theoretical framework the approaches used to study the csr-reputation relationship are characterized by their diversity and lack of consensus with regard to which theoretical framework is most appropriate. this may be due to the fact that general csr research lacks a dominant paradigm—which in turn affects the study of aspects relating to this general concept, as orlitzky et al. (2011) indicate. in our opinion, this may be due to the fact that said relationship has been studied in a wider context. orlitzky (2011) supports this fact inasmuch as he deems that we are still in an evolving field where varying theoretical approaches are competing with one another; and an objective consensus is still lacking to measure the absolute quality of the chosen approach. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 siltaoja (2006) appears to share this vein of thought, recognizing that the research on reputation is characterized by a weak theoretical basis—perhaps due to the highly subjective nature of the concept itself. hence, the debate and controversy surrounding the theoretical framework is permitted. our review of the literature highlights the following theories: theory of the firm, which emerges from economic theory, assumes that one of the core objectives of any firm is to maximize profits (barnea and rubin 2010). under this premise, csr supposes a nexus between economic theory and business ethics (jones 1995; mcwilliams and siegel 2001). csr is considered, then, as a form of investment that can help differentiate market offerings. products must therefore assume certain characteristics of csr actions or specific resources be dedicated in the production process. hence, firm opt for a market approach where csr actions are valued. for instance, csr helps to build and consolidate intangible attributes—like reputation—reinforcing the trust consumers place in the company and their perceptions regarding the quality of market offerings (fombrun and shanley 1990). csr could thus contribute towards developing a differentiation strategy. in order to undertake csr actions, an adequate provision of resources is required—such as capital, work, materials and services that generate outputs (e.g., market response). therefore, an optimum level of csr exists, which will be determined by the cost-benefit relationship, and where the market acts as a control mechanism (mcwilliams and siegel 2001). agency theory: schisms between ownership and management, coupled with incomplete information and information asymmetry, favor opportunistic behavior by agents—who may have different objectives than proprietors—generating an agency problem. in this context, csr could be used by management to signal social and political commitment— at the owner’s expense. the conflict arises when proprietors believe that the resources dedicated http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 to csr could boost efficiency in other areas of the organization (friedman 1970; mcwilliams and siegel 2001; hsu 2012; cui et al. 2017). in any event, if proposed csr actions coincide with owner value scales (moral case)—and are also able to strengthen competitive position (business case)—management could use csr as a way of demonstrating how performance helps to build and consolidate reputation (castelo and lima 2006; aguilera et al. 2007). stakeholders theory: initially proposed by freeman (1984). this theory holds that the organization maintains relationships with diverse groups of internal and external agents—or stakeholders—who may affect or be affected by actions taken by the organization itself (van de ven and jeurissen 2005; castelo and lima 2006; kim and park 2011; vidaver-cohen and simcic 2015; axjonow et al. 2016; tetrault and lvina 2016). therefore, the decisions taken by the organization should not only serve proprietary interests; they should take into consideration all of the reference groups as well (jackson and bungard 2002; stanaland et al. 2011; pérez et al. 2015). the need to combine these decisions with value creation in the long term is postulated. to this end, it is of the essence to strive for an interactive, mutually binding relationship fostering transparency and trust (morsing and schultz 2006, torres et al. 2012). this is the theory that is most often used to explain csr practice in business, according to mcwilliams and siegel (2001). hence, it is proposed that csr actions have an impact on stakeholder perceptions and judgments towards the organization, which help build corporate reputation—and ultimately help to reduce information asymmetry. assessments of the company will be positive when stakeholders perceive consistency; but can be counterproductive if stakeholders anticipate self-interest and opportunism (sen and bhattacharya 2001; van de ven and jeurissen 2005). this approach, then, may be viewed as a natural extension of agency theory in terms of the relationship the organization maintains with the rest of its stakeholders. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 resource-based theory: companies can intuitively define themselves as an accumulation of resources. for barney (1991), resources are defined as all of the assets, capabilities, processes, attributes, information and knowledge managed by the company. in order for an asset to be valuable it must be different, irreplaceable and difficult to imitate (orlitzky et al. 2011; tetrault and lvina 2016). under these premises, csr helps to build and consolidate a solid, consistent, sustainable, long-term corporate reputation—which can be a source of competitive advantage to the extent that it allows the company to differentiate itself from others (brown and dacin 1997; van de ven and jeurissen 2005; kim and park 2011; orlitzky et al. 2011; stanaland et al. 2011). due to its intangible nature, csr-based corporate reputation becomes a key resource for understanding the competitive position of many companies. although reputation is an asset which cannot be protected in a court of law, it does reflect the personality of the organization and—inasmuch as it is difficult to imitate—becomes a key resource for developing and maintaining sustainable competitive advantage (janney and gove 2011). furthermore, it is important to note that reputation is “built” not “bought”, making it much more difficult to replicate—thus becoming an imposing entry barrier (castelo and lima 2006). to the extent that csr can motivate the workforce, improve productive efficiency, facilitate access to better financial conditions and help improve the performance of the remaining organizational resources such as corporate reputation (castelo and lima 2006; fombrun and shanley 1990). another example is the “insurance-like” approach (godfrey 2005; gardberg and fombrun 2006); the notion that csr generates moral capital which acts as a protection mechanism against negative events, while maintaining value. authors such as godfrey et al. (2009) and du et al. (2007) draw attention to the fact that this moral capital serves more as a protective shield than as a value-creation resource—acting as a safety net of sorts. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 institutional theory: the existence of a social contract between the organization and society is proposed; organizations adopt specific behaviors to access resources and gain backing from stakeholders (dimaggio and powell 1983). in this sense, the institutions act as intermediaries, providing guidance with regard to which behaviors are socially desirable, encouraging their development and attesting to the process by means of legitimacy (hadani and coombes 2015; janney and gove 2011; doh et al. 2010). legitimacy implies the assumption that company actions are adequate, desirable and appropriate in terms of societal rules, values and beliefs (mueller et al. 2009). according to this interpretation, legitimacy helps reinforce corporate reputation, inasmuch as past actions of the firm help anticipate future actions and comparison with other companies (orlitzky and benjamin 2001). in other words, legitimacy reflects the acceptance of rules on the part of the company, whilst reputation differentiates firms amongst potential competitors. given that reputation is built upon an accumulation of signals, legitimacy is necessary but not sufficient for a strong reputation (janney and gove 2011; pérez et al. 2015). under these premises csr, (i) impacts company reputation, (ii) helps reduce information asymmetry and (iii) becomes an adequate signal for stakeholders, inasmuch as actions meet with the standards set by society and the institutions that have provided legitimacy. interesting examples of social legitimacy include accounting reports (clarke and gibson-sweet 1999; van de ven and jeurissen 2005), auditing firms (dubbink et al. 2008) and external evaluation bodies (bear et al. 2010; doh et al. 2010) such as newspapers, financial institutions, indexes and rankings (e.g., dow jones social and sustainability index-djssi). the impact of csr on corporate reputation as stated at the beginning of this subparagraph, the origin of this diverse theoretical approach could signal an agency problem that exists between, (i) management and proprietors and/or, (ii) http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 the company/management and stakeholders—and the way in which firms try to solve the problem of information asymmetry. in fact, much of the work analysed (e.g., clarke and gibson-sweet 1999; doh et al. 2010; kim and park 2011; stanaland et al. 2011; torres et al. 2012; eberle et al. 2013; tetrault and lvina 2016) rely on not only one, but several theories to establish the theoretical framework underpinning research hypotheses. in any event, we can deduce a direct relationship between csr and reputation, hence formulate our first hypothesis: hypothesis 1: there is a direct relationship between csr and corporate reputation. the impact of csr on financial value the analysis of the relationship between csr and reputation has identified an interesting link between csr and financial value. however, the ideas expressed in this paper should be analysed with some caution as they have been extracted from research that not only examines the aforementioned relationship but also investigates a more specific area. hence, some key articles that have addressed this relationship may not have been included. that said, it can be assumed that achieving profit is one of the core objectives of both management and companies as a whole (mcwilliams and siegel 2001). likewise, there is a growing demand for greater social contribution on the part of companies (clarke and gibson-sweet 1999). as a result, many companies carry out csr actions—which, in turn, should be reflected in market response. it is possible, therefore, to perceive a positive relationship between csr and performance / financial value (lai et al. 2010; janney and gove 2011; aouadi and marsat 2016; axjonow et al. 2016).4 the potential contribution of csr to streamlining internal organizational processes is highlighted: the impact on employee motivation and productivity (rettab et al. 2009; stuebs 4 mcwilliams and siegel (2000) indicate, however, that the literature has shown the positive, negative or neutral effects of csr on company financial performance, depending on the variables considered and the definition used. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 and sun 2010; siltaoja 2006), the implementation of more environmentally friendly, technically efficient production systems (mueller et al. 2009; orlitzky et al. 2011) or the obtention of better financing conditions (doh et al. 2010; torres et al. 2012), for example. furthermore, it is suggested that all companies—irrespective of their activity, size and experience—are prone to potential risks linked to operation alone. research therefore, has focused on how csr can aid crisis management; which, in turn, can affect a firm’s competitive position. when csr activities are in line with company activity and stakeholders—and consistent over time—they help build trust in the company and form a protective barrier which stands to be a safeguard for adverse events (basil et al. 2009; godfrey et al. 2009; vanhamme and grobben 2009; kim 2014). this protective function can be shored up by specific communication activities, proactive behavior and, where necessary, quick response (holzer 2008; chen et al. 2009; vanhamme and grobben 2009; cui et al. 2017). under these premises, csr improves the financial value of the company. thus, the arguments expressed in this conceptual block allow us to establish our second hypothesis 5: hypothesis 2: there is a direct relationship between csr and the financial value of the company. that being said, authors like mcwilliams and siegel (2000) report that a series of conditions must be met for the csr-financial value relationship to be positive, namely: including company r&d expenditures in the analysis—considering that investment in csr generates a degree of product differentiation and can imply certain organizational changes; taking into account the 5 appendix 1, shows a table summarizing the main articles related to this hypothesis resulting from the systematic literature review (hypothesis, sample, methodology and results). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 contribution of csr to the reputation and how the various stakeholders value this; and contemplating the impact of communication—the larger the company, the greater the effect. thus, the majority of the research analyzed in this systematic review of the literature appears to be inclined towards a positive relationship between csr and financial value. that said, some research points to reputational value as an additional variable to be considered (e.g., beliveau et al. 1994; clarke and gibson-sweet 1999; barnea and rubin 2010; doh et al. 2010; hsu 2012; rettab et al. 2009; siltaoja 2006; aouadi and marsat 2016). authors such as orlitzky et al. (2011), janney and gove (2011), lai et al. (2010) or du et al. (2007) explicitly state that one of the basic premises for csr to positively influence financial value is that an adequate reputation amongst the reference stakeholders exists, “particularly if there are multiple competitors of varying reputation” (janney and gove 2011, 1565). this is due to the fact that some csr actions are easily identified but at times it is difficult to evaluate a firm’s global social performance. authors like doh et al. (2010) and walker et al. (2010) indicate that some firms carry out both socially responsible and irresponsible behavior at the same time—generating information asymmetry. it is vital, therefore, to know how the market views organizational activity, particularly in terms of reputation, the social indexes, financial intermediaries—which as a whole affect market prices and, ultimately, financial performance. furthermore, those companies which have built a solid csr-based reputation are partially protected in the event of scandals or crises (janney and gove 2011; kim 2014). the same authors indicate, however, that a reputation built on csr must be coherent and consistent with company actions. if this is not the case, it could lead to the perception that some degree of hypocrisy exists—a schism between stated intentions and actions—which will, ultimately, have a negative impact on company value. therefore, behavior—past actions and stated csr http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 intentions—needs to be consistent. knowing the beliefs and values structures of the reference stakeholders, and adjusting to them accordingly, is also recommended (human rights, the environment, corporate governance, labor relations, etc.). this is crucial, as csr activities help establish company identity—regardless of a firm’s motives for implementing csr. company identity symbolizes how stakeholders view the firm and is reflected in the assessment and value the market places in the firm, to which csr contributes. in order to build and consolidate a reputation that safeguards against negative situations or crises, the company must not only do the right things but promote the right values; in other words, those values the firm shares with society (clarke and gibson-sweet 1999; stanaland et al. 2011; kim 2014). we can therefore postulate that a relationship between reputation and financial value exists 6: hypothesis 3: there is a direct relationship between reputation and financial value of the company. it should be noted, however, that a series of conditions must exist for the aforementioned relationship to be sustained. firstly, company actions must be consistent over time (godfrey et al. 2009). second, actions should be in line with the values and objectives of the reference stakeholders (doh et al. 2010; harjoto et al. 2011; pérez et al. 2015). last but not least, actions must be valued by the market (mcwilliams and siegel 2001). this suggests that—to the extent that csr contributes to creating or strengthening a positive reputation—the relationship between csr and financial performance will be positive, as stated earlier in this paper. consumer behavior authors like brown and dacin (1997), sen and bhattacharya (2001), scholder et al. (2006), wagner et al. (2009), walker et al. (2010), kim and park (2011), lii and lee (2012) and skard 6 appendix 1, shows a table summarizing the main articles with this hypothesis resulting from the systematic literature review (hypothesis, sample, methodology and results). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 and thorbjørnsen (2014) indicate that a reputation built on csr can influence consumer behavior. this is explained by the fact that csr-based reputation helps to foster a relationship of trust between the company and its stakeholders (e.g., stanaland et al. 2011). in specific terms, the relationship with consumers can produce a more favorable attitude toward product offerings—an enhanced perception of quality, trust—and a greater degree of consumercompany loyalty (mcwilliams and siegel 2001; van de ven and jeurissen 2005; du et al. 2007; wagner et al. 2009; torres et al. 2012). this favorable attitude is explained by brand equity: the utility or added value the brand gives to a product (hur et al. 2014). this is an asset of great value to companies given that it reinforces the measurable, tangible benefits of a product or service and helps differentiate knowledge and value both for the company and the customer. if the market perceives substantial differences in brand value, the company can expect to gain a competitive advantage (lai et al. 2010; torres et al. 2012; hsu 2012). in this sense, when consistency is perceived—and opportunism and hypocrisy avoided—csr helps to spread company culture and values, which in turn contribute to an image of honesty, quality and reliability (sen and bhattacharya 2001; wagner et al. 2009; lai et al. 2010; hur et al. 2014).7 hypothesis 4: there is a direct relationship between reputation and brand value. authors like stanaland et al. (2011), lii and lee (2012), torres et al. (2012) hsu (2012) and eberle et al. (2013), indicate that when message consistency is reinforced by brand image activities, customer satisfaction tends to increase—in turn, leading to positive word-of-mouth which ultimately improves the competitive position of the company. all this has a positive impact on financial results (chen et al. 2009; lai et al. 2010; torres et al. 2012). the literature 7 appendix 2, shows a table with a summary of the main articles related to this hypothesis, resulting from our systematic literature review (hypothesis, sample, methodology and results). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 indicates that a key aspect is the relationship between csr and reputation, which itself generates positive attitudes toward the brand and shields it from possible negative events (e.g., sen and bhattacharya 2001; tuck et al. 2007; chen et al. 2009; lai et al. 2010; walker et al. 2010; hsu 2012). hence, marketing managers gain an important asset: reputational equity (du et al. 2007; stanaland et al. 2011). in order for this to occur, the company must keep abreast of societal values, analyze the competitive environment, integrate csr at the heart of the organization and remain consistent over time (sen and bhattacharya 2001; van de ven and jeurissen 2005; du et al. 2007; lai et al. 2010). moreover, the importance of communication is highlighted (mcwilliams and siegel 2001; jahdi and acikdilli 2009; hsu 2012)—as these actions must be both visible to consumers and credible to the community (wagner et al. 2009; torres et al. 2012). other authors (e.g., brown and dacin 1997) indicate that—provided the company is able to differentiate itself from competitors—certain clients can be expected to be willing to pay more for products from companies that demonstrate a socially responsible attitude in line with their beliefs and values scale, (mcwilliams and siegel 2001; sen and bhattacharya 2001; torres et al. 2012). hence, we propose 8: hypothesis 5: there is a direct relationship between brand value and financial value of the company. furthermore, given that a previous hypothesis established a positive relationship between csr and reputation, this inherently implies the effect of csr on brand value (by virtue of reputation). 8 appendix 2, provides a table summarizing the main articles relating to this hypothesis from our systematic literature review (hypothesis, sample, methodology and results). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 corporate social responsibility and family firms the context that characterizes family businesses may differ from the global context defined earlier in this paper. for many of these family firms, it is important not only to maximize profits but—in many cases—to build appropriate relationships with local communities of reference and to preserve the family reputation (van gils et al. 2014; cui et al. 2017). hence, the theoretical framework of reference may need to be adapted in some way. in order to determine the state of the question, a second literature review was carried out with the leading journals covering family businesses, small and medium-sized enterprises (smes), and corporate social responsibility (csr) as our reference. the search criterion was that the articles contain the keywords "csr" and "family firm". a total sample of eighteen (18) articles was obtained9: among the journals covering topics relating to family business, two articles in the family business review, two in the journal of family business strategy and two in the journal of family business management; among journals specializing in smes, three articles in the journal of small business management and one in small business economics; finally, in csr journals, six articles in the journal of business ethics, one in corporate social responsibility and environmental management and one in business strategy and the environment. in the other relevant journals covering each of the three subject areas, no results were obtained. table 3 shows our article sample, by journal and year of publication. both the small number of articles found and their recent dates of publication suggest that we are dealing with a topic which is currently undergoing a growth phase. as graph 2 shows, almost 85% of the studies were published in the last five years (2013 and later). moreover, the 9 last date of access: december 30, 2016. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 maximum number of articles published—a third of the total—corresponds to this year, 2017, despite the fact that the year has not yet come to an end. table 3. articles analyzing csr in family business contexts journal articles (authors, year) family business review (2) marques et al. (2014), van gils et al. (2014) journal of family business strategy (2) binz et al. (2013), block and wagner (2014) journal of family business management (2) aoi et al. (2015), yusof et al. (2014) journal of small business management (3) fitzgerald et al. (2010), niehm et al. (2008), stoian and gilman (2017) small business economics (1) benavides-velasco et al. (2013) journal of business ethics (6) campopiano and de massis (2015), cui et al. (2017), déniz and cabrera (2005), faller and knyphausen-aufseb (2016), labelle et al. (2015), zientara (2015) corporate social responsibility and environmental management (1) laguir et al. (2016) business strategy and the environment 81) block and wagner (2013) source: own elaboration graph 2. number of articles published by year source: own elaboration before 1999 2000 2001 2015 2016 2017 3 3 4 2 1 5 n u m b e r o f a rt ic le s http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 in terms of content, we detect that many of these articles delve deeper into the concept of values—especially those values that define the way of being and conceiving the businesses pertaining to the family of reference. block and wagner (2013) are an interesting starting point. these authors indicate that family firms behave differently than non-family firms with regard to csr, in general; although—as déniz and cabrera (2005) point out—we must not make the mistake of considering all family firms as a homogeneous whole in general, nor as behaving homogeneously with regard to csr, in particular. several authors observe that, in general, family firms are more likely to engage in csr actions (aoi et al. 2015; laguir et al. 2016; cui et al. 2017). this may be linked to a more defined value structure and to some degree of concern on the part of family business owners regarding the reputation and brand value of their firm (binz et al. 2013). only benavides-velasco et al. (2013) indicate that family businesses are not necessarily more csr-prone; they are, however, less socially irresponsible. as zientara (2015) highlights, members of family firms are more likely to view business as an extension of themselves. as a result, they are more likely to avoid situations that may bring negative perceptions to their organizations. niehm et al. (2008), fitzgerald et al. (2010) and benavides-velasco et al. (2013) conclude that family businesses tend to be very connected and committed to their local communities; a strong bond and supportive attitude that emanate from the feeling of being an active part of the community, of wanting to contribute to its development and from their awareness of the role model part entrepreneurs often play within their communities. in this vein, studies by marques et al. (2014) and van gils et al. (2014)—among others— suggest that family businesses tend to be highly attuned to social issues, very sensitive to stakeholder interests and active in terms of philanthropy. the reason, these authors argue, has http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 to do with issues of identity and image; csr actions have an impact on company reputation. yusof et al. (2014) point out that csr helps small businesses preserve certain family values linked to aspects such as integrity and generosity. it seems relevant to note that—from the perspective of the theoretical framework—none of these studies focus on the theories discussed earlier in this paper. two theoretical approaches that fit the specificities of family businesses prevail: stewardship theory and socioemotional wealth theory. stewardship theory is rooted in the premise that the principles of agency theory are not always fulfilled (marques et al. 2014). in the case of family firms, managers may not always be driven by a desire to reach individual objectives; they can take on the goals of the proprietors, adopting a collectivist approach—regardless of whether they belong to the family or not (van gils et al. 2014; laguir et al. 2016, zientara 2015). the point of reference here are the common values that both manager and proprietors (the family) share; and the manager “serves” and becomes the "guardian" of those family values. in principle, socioemotional wealth connotes the emotional value intertwined with family firms that satisfies family affective needs, such as influence and affinity (berrone et al. 2012; labelle et al. 2015; zientara 2015). family members are—as a rule—motivated by a desire to protect and preserve their socioemotional wealth (berrone et al. 2012); hence, family members are thought to be likely to eschew any action that might imperil socioemotional wealth—which, at least theoretically, makes family firms more inclined to engage in socially responsible actions. in short, social-emotional goals and rewards—not purely economic objectives alone— are often pursued (block and wagner 2014; aoi et al. 2015; cui et al. 2017). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 yet other authors—van gils et al. (2014), among others—use both theoretical approaches simultaneously. from a methodological perspective, our review of the literature reveals a balance between qualitative research (e.g., yusof et al. 2014; laguir et al. 2016) and quantitative papers (e.g., binz et al. 2013; block and wagner 2014; aoi et al 2015). compared to the popularity of the phenomenon in the general literature, however, the scarcity of studies published thus far on the family business context suggests that research in this context remains in an incipient phase. benavides-velasco et al. (2013) conclude that many more comparative studies are needed. discussion and conclusions in carrying out a systematic review of the literature the authors aimed to carefully examine existing studies on the relationship between csr and reputation. specifically, we aimed to determine the state of the research in this field, the theoretical framework, methodologies used and potential lines of investigation for the future. to this end, the authors followed recommendations by authors such as peloza and shang (2011), rousseau et al. (2008) and tranfield et al. (2003). search criteria and journal selection were based on previous studies. moreover, in order to assess the relevance of the topic today, no date restrictions were applied. a total of fifty-two (52) articles were found in the leading management, marketing, ethics and corporate governance journals. our analysis of the sample allows us to confirm that the topic is still relevant today—albeit mature, perhaps; and that there is still a need for additional research. we should point out here that the csr-reputation relationship is often analyzed in a broader context. as regards to the nature of the journals, management titles show a greater concern for analyzing companies’ financial performance, whilst marketing journals tend to focus on consumer http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 reactions to csr activities. the ethics and corporate governance journals are characterized by more varied themes. in terms of the methodology used, quantitative and conceptual articles are predominant. from the content analysis we can conclude that the theoretical approach used to analyze the csr-reputation relationship is very heterogeneous. although all the theories seem to acknowledge the existence of an information asymmetry problem and the agency relationship, it would appear that the stakeholders theory and resource-based theory are the most frequently used. moreover, a good amount of existing research combines several theories. on the whole, the empirical results are conclusive in demonstrating a positive relationship between csr initiatives and brand value. conversely, the relationship between csr and financial performance has not always proved so conclusive. this relationship appears possible depending on the variables included in the general model—and on the operationalization of the variables, which can alter results. as a compendium of the analysis it was possible to propose a reference model in the form of hypotheses which considers a direct relationship between csr and corporate reputation and between csr and financial value of the company. furthermore, reputation also affects brand value and enhances financial value. this model is shown in figure 1. delving deeper into the context of family businesses we have found a much smaller body of literature, however. to date, far fewer authors who have studied the links between csr and reputation in family firms than in other contexts. moreover, while explicitly or implicitly recognizing some of the relationships in the general model (figure 1), the theoretical framework varies. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 figure 1. proposed research model: the csr-reputation relationship source: own elaboration the management style and characteristics of many family businesses themselves make it advisable to take into account aspects such as their strong link with local communities of reference, the transmission of values—such as integrity and honesty—and a notable interest in preserving brand / family reputation. hence, the generalist theories identified in the first part of this article—based, on the whole, on maximization of economic criteria principles—seem to lose their validity; and the need arises for other approaches with which to consider these peculiarities. this explains why stewardship theory and socioemotional wealth theory emerge as recommended, predominant approaches in the specialized literature. these proposals consider collective, emotional objectives rather than individual, merely economic goals. hence, in conclusion—and considering potential lines of future research—we consider that: while the topic is relatively mature in the general context, in the context of family businesses there is room for a considerable number of new contributions that take into account both comparative studies of family versus non-family businesses, and research considering the heterogeneity of family businesses themselves. csr reputation financial value brand value h1 h3 h2 h4 h5 http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 -the analysis of the proposed relationships in our general model—individually or jointly— would be of great theoretical and practical interest, fostering a better understanding of the extent to which csr actions actually have an impact on the reputation, image and financial value of family businesses. even international and cross-cultural studies would enrich the literature significantly (the fact is, we have not found any evidence of cross-cultural research on the topic). an evaluation of the reactions of each of the different stakeholders regarding csr actions by family firms would also be of great interest. the greater proximity that seems to exist between these companies and their interest groups could lead to results that are slightly different than those obtained in the generalist literature. from a methodological point of view, it is possible to approach the study using both qualitative and quantitative tools. we should note here the need to adapt generalist theories and to consider others that seem to be a better fit to the peculiarities of the context. finally, despite being a clear contribution to the literature, we are aware that this study is not without its limitations. firstly, the results may have been marginally different if the search criteria—journals and keywords—had been altered. with a view to minimize this shortcoming and ensure the reliability and replicability of the study, we followed the steps recommended by kitchenham et al. (2009) and baumann et al. (2002) in preparing this article. moreover, the journals chosen for the purpose of this study reflect the results of a survey carried out amongst specialized investigators of international repute. we also observed various trends that allowed us to identify topics of interest. furthermore, due to the time period of the analysis, the search results may have been modified slightly, as articles could have potentially been under revision or in the pre-publication stage. finally, content analysis is subject to a certain degree of http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 subjectivity, which we have tried to minimize by developing a complete database. in the future it would desirable to collaborate with other investigators who developed their own codification process in order to discuss conclusions and reach a consensus. in any event, the aforementioned limitations are to be expecting when carrying out systematic literature reviews. references aguilera, ruth v., deborah e. rupp, cynthia a. williams, and jyoti ganapathi. 2007. “putting the sback in corporate social responsibility: a multilevel theory of social change in organizations.” academy of management review 32:836-863. aoi, michikazu, shigeru asaba, keiichi kubota, and hitoshi takehara. 2015. 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"virtuous csr: an islamic family business in malaysia." journal of family business management 4:133-148. zientara, piotr. 2015. “socioemotional wealth and corporate social responsibility: a critical analysis.” journal of business ethics, (sept.): 1-15. doi:10.1007/s10551-015-2848-1. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 appendix 1. investigations that analyze the csr/ reputation-financial value relationship (related hypotheses) authors (year) hypotheses sample methodology results beliveau et al. (1994) h3: the company market share is directly related to the csr level of the company fortune annual survey of corporate reputation regression h3 is confirmed clarke and gibson-sweet (1999) rq: assessment of the csr report as a means of managing reputation and legitimacy 100 top companies in the u.k. content analysis of reports the importance of annual reports as a means of legitimacy and reputation management doh et al. (2010) h1(a): companies included in a social index will generate a positive effect índices calver & domini analysis of events h1(a) is rejected holzer (2008) rq: the consideration of organizations and stakeholders with regard to csr royal dutrch/ shell case study csr as a means of preventing conflicts that reinforces the reputation and contributes to the value of the company hsu (2012) h2: csr initiatives improve reputation life insurance companies in taiwan structural equations h2 is accepted godfrey et al. (2009) h1: shareholder value is less affected following an negative event for those companies that practice csr 160 companies selected from the socrates database econometric models h2 is accepted janney and gove (2011) h2: the global csr initiatives lessen the negative impact following the announcement of a scandal wall street journal scorecard of firms analysis of events h2 is accepted lai et al. (2010) h3: the perception of csr is directly related to the performance of the company h5: the corporate reputation is directly related to the performance of the company firms in taiwan structural equations h3 and h5 are accepted rettab et al. (2009) h1: csr is not positively related to financial results (in emerging economies) sample of firms in dubai structural equations h1 is rejected (that is to say that there is a relationship between csr and financial results) siltaoja (2006) rq: interactions between csr and reputation finnish company case study with in-depth interviews relationships between csr and reputation affect the value of company stanaland et al. (2011) h1: there is a relationship between the financial results of the company and the stakeholder’s evaluation of csr h6: corporate reputation lessens the perceived risk sample of consumers structural equations h1 and h6 are accepted vanhamme and grobben (2010) h1: the greater the tradition and integrity of csr the greater the protection in the event of a crisis convenience sample experimentation h1 is accepted the works of mcwilliams and siegel (2001), mueller et al. (2009), orlitzky et al. (2011) are conceptual studies http://revistes.ub.edu/index.php/jesb volume 2, number 2, 191-230, july-december 2017 doi:10.1344/jesb2017.2.j034 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 appendix 2. studies that analyze the relationships between reputation-brand value/brand value-financial value (related hypotheses) authors (year) hypotheses sample methodology results brown and dacin rq: there is a relationship between csr and product evaluation by consumers consumers experimentation csr affects the company reputation and brand value du et al. (2007) h4: consumers of a particular brand are more likely to identify themselves with the brand, be loyal and support the brand when the company is associated with csr versus those companies who do not carry out csr web survey among yogurt consumers structural equations h4 is accepted hsu (2012) h1: csr initiatives increase consumer satisfaction h2: csr initiatives improve corporate reputation h3: a better corporate reputation will improve the brand value insurance companies in taiwan structural equations h1, h2 and h3 are accepted jahdi and acikdilli (2009) rq: analysis of the effect of communication for the purpose of csr uk bank case study transparency in reporting increases the credibility and reinforces brand value lai et al. (2010) h1: a relationship exists between csr and brand value h2: a relationship exists between csr and reputation h4: corporate reputation is positively related to brand value h5: corporate reputation is positively related to performance h6: brand value is directly related to company performance firms in taiwan structural equations h1, h2, h4, h5 and h6 are accepted sen and battacharya (2001) h3: csr initiatives affect the consumer evaluations of the company mba students in the usa experimentation h3 is accepted stanaland et al. (2011) h1: there is a relationship between the financial results of the company and the consumer evaluation of csr h7: corporate reputation increases consumer trust h8/ 9: consumer trust decreases the risk perceived/increases loyalty sample of consumers structural equations h1, h7, h8 and h9 are accepted torres et al. (2012) h1: csr positively affects the brand value sgp/ siri + interbrand database econometric models h1 is accepted wagner et al. (2009) h1: the perception of hypocrisy in csr affects the attitudes of clients toward the company marketing students experimentation h1 is accepted walker et al. (2010) h3: knowledge of csr positively affects reputation when there are altruistic contributions but negatively when they are opportunistic h4: the reputation positively affects word-of-mouth when there are altruistic contributions but negatively when they are opportunistic attendees of the olympic games in pekin structural equations h3, is rejected and h4 is accepted the work of van de ven and jurissen (2005) is a conceptual study source: own elaboration http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 maría fernández moya cunef (spain) paloma fernández pérez universitat de barcelona (spain) the creation and transfer of entrepreneurship in emerging economies of the world. an approach through large family-owned corporations of china, mexico and brazil abstract this article analyses the process of creation and transfer of entrepreneurial competitive advantages in large family firms of three dynamic emerging economies of the 21st century: brazil, mexico and china. it does so by studing path dependencies and the creation of dynamic capabilities in three case studies: pao de açúcar (brazil), grupo carso (mexico) and hutchison whampoa (china). the interdisciplinary perspective of the article enables a long-term analysis of entrepreneurship, and facilitates the study of one important topic of debate in family business studies: the generational transfer of the so-called entrepreneurial spirit. the results of the article show on the one hand that existing historically determined institutions ruling local and global markets, and also inherited practices and values, have highly conditioned the strategies used to create and transfer entrepreneurship between generations in some of the largest family firms in brazil, china and mexico. keywords: entrepreneurship; business history; family business corresponding author: e-mail: mariafernandezmoya@cunef.edu received 12 march 2018 accepted 22 january 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 introduction entrepreneurship has been in many ways determined by prevailing institutions, but at the same time it is also true that entrepreneurs have often been attracted by the opportunity to modify existing rules of the game and institutions that determine the compensation for their activities (baumol 2010, 172). the management literature about entrepreneurship in developing economies reveals this close ambivalent relationship between entrepreneurs and the institutions in which they operate (morck, strangeland, and yeung 2000; casanova 2009; landes, mokyr, and baumol 2010). unfortunately, there are not many analyses that take into account path dependence in the study of firms in emerging economies, with significant exceptions (jones and wadwani 2006, 2007a, 2007b). this is, however, particularly important in understanding the historical roots of global giants from developing economies that are today successfully competing in global markets with multinationals from the developed world. many external and endogenous factors behind the creation of big global giants are not entirely new, as the conditions favouring their growth are in some cases similar to the factors that favoured the growth of the big mnes born a century ago in the u.s., germany, or japan, or almost two centuries ago in imperial britain (jones and khanna 2006). studies on the competitive advantage of mnes from emerging economies point out, for instance, that they are competitive today because they are experts in: working around institutional voids; raising capital and talent by trading on their reputation; reducing the costs of training their managers by hiring graduates from local business schools which have programs imitating those from top u.s. and european programs; exploiting the understanding of local product and factor markets; and demonstrating an excellent experience in execution (khanna and palepu 2006; guillén and garcía canal 2010). these are not new phenomena in the business landscape, as they are in many ways the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 same factors that have been behind the historical process of modernization and growth of global mnes in many countries which are today developed nations, like spain (fernández and puig 2007; puig and fernández 2009). the study of historical and institutional factors in the development of entrepreneurship is, thus, extremely important in achieving a correct understanding of the deep and diverse evolutionary forces behind the creation and growth of firms in the world. in the case of family businesses, an evolutionary approach allows in the analysis a consideration of the influence of time and the institutional framework, both necessary in understanding the diversity of structures and strategies of every stage in the generational control of a family business. in our article we combine this long-term institutional perspective with a sensibility towards managerial models that analyze the creation of internal dynamic capabilities that provide the competitive advantage of firms (teece, pisano, and shuen 1997). the dynamic capabilities framework analyzes factors of wealth creation in private firms operating in contexts of rapid technological change, and focuses on organizational capabilities, intangible assets and adopted or inherited evolution paths of firms. as these three elements are usually considered very important in understanding the transference of wealth and values in family firms from generation to generation, and in family controlled mnes of emerging markets (guillén and garcía canal 2010; casanova 2009), this model combines well with a business history perspective more specialized in environmental factors that surround family businesses. therefore, and because these two perspectives are useful for studying the endurance and transfer of entrepreneurship in family businesses, this study takes into account path dependencies and the creation of dynamic capabilities in analyzing what is the central topic of this article: the process of creation and transfer of entrepreneurial competitive advantages in http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 large family firms of three dynamic emerging economies of the 21st century: brazil, mexico and china. the interdisciplinary perspective of the article enables a long-term analysis of entrepreneurship, and facilitates the study of one important topic of debate in family business studies: the generational transfer of the so-called entrepreneurial spirit. the comparison of significant case studies of family-controlled corporations from large and dynamic emerging economies of the world is a relatively scarce field of research (casillas, acedo, and moreno 2007; casanova 2009; gupta et al. 2008), to which our article adds new evidence and a longterm approach with a comparison of the strategies for the intergenerational transfer of entrepreneurship in three big corporations: carso in mexico, hutchison whampoa in china, and companhia brasileira de distribuiçao (cbd) or pao de açúcar in brazil. can the entrepreneurial spirit of the founder of a successful and large family business be transmitted? and how? do we find different models of transmission of entrepreneurship among generations for every country or culture, or is the global scope of a large family business a homogenising factor in itself that makes it possible to present a common standard model of endurance of the entrepreneurial spirit across borders, and ages? to answer these questions, we conducted an inductive case study approach (eisenhardt 1989). following established literature on qualitative case study research (yin 1984, eisenhardt 1989, 2007) we have identified important family business players and reconstruct their stories through an extensive analysis of primary sources, such as orbis database, companies´ reports, and government reports. we have triangulated the information obtained with secondary sources (press and interviews), and previous academic literature on the field. the results of the article show on the one hand that existing historically determined institutions ruling local and global markets, and also inherited practices and values, have highly conditioned http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 the strategies used to create and transfer entrepreneurship between generations in some of the largest family firms in brazil, china and mexico. on the other hand, they also show that there are no magic tools or formulas to transmit the entrepreneurial spirit, but that there are some common practices that enable the creation of a “positive environment” for the successful transfer of entrepreneurship from one generation to another in large family-controlled businesses. among these potential best practices we can highlight: promoting the in-depth knowledge of the company and the sector, facilitating the creation and use of social networks, encouraging the university training and education in management of family members, hiring outside consultants (as much for family matters as for strategic management of the business sphere) despite the similarities, the particular way these best practices are designed and put into practice vary significantly in each case and country, according to: a) the strong influence of path dependence and the dominant local institutional rules of the game; and b) the singular needs and origins of each family group. the text is organised as follows: the first section of the article presents the theoretical framework of the research. the following sections compare evidence from the three case studies of the large family-controlled business groups in question: pao de açúcar (brazil), grupo carso (mexico) and hutchison whampoa (china). the three groups own and control firms that are among the largest firms of their countries and among the top ten largest family-controlled groups of latin america and asia. a study of how these companies have created and transferred entrepreneurship is, therefore, of great significance for understanding the creation and transfer of wealth and employment that affect entire sectors and regions in several countries. the last section offers the main conclusions of the article. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 entrepreneurship and family business. a theoretical approach to some recent debates following the classic work of schumpeter (1942), the interest in entrepreneurship has emerged in the last decades, when scholars from different disciplines have enriched the debate by responding and generating new research approaches (acs and audretsch 2003). the present article does not attempt to offer a complete overview of the topic. rather, it will highlight some theoretical points that have helped shape the framework of our empirical research related to family businesses in emerging economies of the world. the present article is heavily influenced by debates on entrepreneurship developed in business history. in this social science a group of historians and historical sociologists began to study the mentality and agency of entrepreneurs in the process of economic change in the early 20th century. during the central decades of the 20th century, business historians contributed to the body of knowledge on entrepreneurship by analysing the role of important entrepreneurs in the industrial revolution (jones and wadhwani 2006). after world war ii, arthur cole led the creation of the center for research on entrepreneurial history, based at harvard university. the centre included economists, historians and sociologists, who developed a corpus of research marked by its eclecticism: from socio-cultural studies of entrepreneurial origins, to works on the evolution of industries and organizations. over and beyond this eclectic approach to “entrepreneurial history”, the center made an extraordinary effort to conceptualise and synthesize the different points of view, and to use empirical research to construct theories of entrepreneurship (jones and wadhwani 2006). in spite of these earlier and relevant contributions, during the following decades the analysis on entrepreneurship was not a central stream of research for business historians. moreover, the influential studies of alfred chandler and the new economic history quantitative approach almost monopolised business historians’ http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 works. in recent decades, business historians have renewed their interest in entrepreneurship with the study of smaller firms, family businesses, networks and diasporas (jones and wadhwani 2007a), but their contribution still has room to grow, as they can add theoretical perspectives and solid empirical case studies to different disciplines (especially management) that lack a long-term historical perspectives. the long-term perspective and the analysis of historical and real contexts (core issues of the business history discipline) enable a close examination of how the economic or social context and institutions might influence entrepreneurs and their activities. in fact, the main contribution of business historians in our day is going in this direction. the role of institutions in entrepreneurship has been largely recognized by business history scholars (baumol 2010; jones and wadhwani 2007a). baumol concludes that institutions create incentives that allocate entrepreneurship between productive activities such as innovation, and unproductive activities such as rent seeking or organized crime. this allocation is highly influenced by the relative pay-offs society offers to such activities (baumol 1990, 2010; jones and wadhwani 2007a). in this light, politics “can influence the allocation of entrepreneurship more effectively than it can influence this supply” (baumol 1990, 893; baumol 2010). the importance of social networks in entrepreneurship behaviour is also recognized by business scholars in several works. the existing literature on diasporas has strongly contributed to the better understanding of this topic. different studies have explained how diasporas networks have been determinants in the configuration of international entrepreneurial opportunities, especially in terms of enhancing trust levels, vehicles of information flows and providing financial sources (mccabe et al. 2005). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 within social networks, family businesses have, in the last three decades, been a particularly productive field of research on entrepreneurship. in fact, family firms have usually been seen as a versatile entrepreneurial response to market failures in the early stages of industrialization (colli, fernández, and rose 2003; colli and rose 2008). using case studies, or the analysis of a particular sector, district, region or country, many economic or business history analyses have been demonstrating the historical flexibility of family firms to adapt to changes and to innovate, not only in technology but also in terms of management and organization, and in their active insertion in a diversity of social networks (colli, fernández, and rose 2003; fernández and puig 2007; puig and fernández 2009; colli 2003; colli and rose 2008; fernández and rose 2010). for instance, business historians working on family businesses have made in-depth investigations into the rules and contextual conditions that marked the preparation for intergenerational succession (colli, fernández, and rose 2003), pointing out the influence of the situation of community-based technical and business education (colli, fernández, androse 2003; fernández and puig 2004), the influence of religion and community (colli, fernández, and rose 2003), the impact of legislation or legal framework (fernández and hernández 2010) and the professionalization in modern family firms (puig and fernández 2008). several business historians have recently encouraged researchers to broaden the theoretical implications of their empirical evidence (cassis and minoglou 2005; jones and wadhwani 2006). family business research is one of the most interesting fields of research in which the relationship with other disciplines has been more fruitful in the last decades, as family firms are a common topic of study of many disciplines (anthropology, psychology, law, sociology, business history, management, in particular). the influence of family dynamics in entrepreneurial processes in family firms is a relatively emerging topic in the study of family http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 business, based on the idea that the distinctive characteristics of family firms may influence the strategic management process and determine decisions (sharma et al. 1997; chrisman et al. 2005; aldrich and cliff 2003; short et al. 2009). risk taking is probably the most studied dimension of entrepreneurship in family business literature (i.e. zhara 2005; naldi et al. 2007), although some scholars have dealt with the differences in innovation between family and nonfamily firms (mork et al. 2000), the performance implication of entrepreneurial behaviour in family firms (kellermanns et al. 2008), and the linkages between organizational culture and the entrepreneurial process (hall et al. 2001). succession is a major issue for family businesses (handler 1994; sharma 2004), and for this reason the problems in the transfer of entrepreneurship between generations have been a central topic in family business studies. successful initiatives have been developed in the field of management to study entrepreneurship and family business. one of the best known is the step project, founded by dr. timothy habbershon in 2005, a globally applied research initiative that explores the entrepreneurial process within business families and generates solutions that have immediate application for family leaders. focusing on the specific topic of this article the intergenerational transfer of entrepreneurship in family businesses previous literature from babson college highlighted the importance of the dynamic capabilities perspective in explaining the family-specific enablers and drivers for intergenerational entrepreneurial behaviour (salvato and melin 2006); as well as the importance of sharing new ideas to avoid lock-in and inertia and the risk of the “lengthening shadow” of the founder that could condition a lack of entrepreneurial orientation in new generations and an inward-looking culture (fernández and rose 2010). these ideas are critical for this article. we understand dynamic capabilities as defined by teece et al. (1997, 516): “the ability to integrate, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 build and reconfigure international and external competencies to address rapidly-changing environments”. the dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change (teece et al. 1997). especially significant for a study on the transfer of entrepreneurship in family businesses is also the economic and business history literature about how institutions and networks can influence entrepreneurial behaviour, and how entrepreneurs can at the same time influence the institutions that set the rules of the game for businesses at each particular moment in history (baumol 2010; fernández and rose 2010). the importance of networks is a central hypothesis of this research, mainly to determine its possible influence during the transference of entrepreneurial push and innovativeness from the founder to next generations. following these ideas, a central assumption of this article is that firms are embedded in social networks of relationships (granovetter and swedberg 1992), which in turn influence their entrepreneurial process. we consider entrepreneurial networks in a broad sense (or as a working definition) as “a complex mixture of multiplex social and professional ties, all of which tend to contain both affective and instrumental elements, bonded by trust” (anderson et al. 2005, 139). following granovetter, ties can be strong or weak. in this line, hwang and powell (2005) have proposed an interesting line of research in entrepreneurship by looking at the influence of institutions in these processes. these authors assume a broad definition of entrepreneurship that involves not only the creation of new business organizations but also the generation of new organizational models and policies that change organizational activity. many scholars have highlighted the importance of capabilities and institutions to recognise new opportunities, while hwang and powell’s focal point is the wider environment that defines and creates these opportunities, a concept very close http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 to what baumol has often said (baumol 2010), and also close to what economists specialized in developing economies indicate (estrin and mickiewicz 2010). three case studies of generational transfer of entrepreneurship in large familycontrolled corporations of emerging economies case studies allow a qualitative approach to important aspects of the generational transfer of entrepreneurship in family-controlled corporations, which are impossible to obtain from a quantitative study using comparable homogeneous sources. in this article we use evidence from hutchison whampoa in china, grupo carso in mexico and pao de açúcar in brazil. first, we analyze each case individually. suggestions derived from a comparison of the three cases are presented in the final section with the conclusions of the article. most of the information of the case studies was obtained in 2009. hutchison whampoa hutchison whampoa (h.w.) is a multinational company based in hong kong, with operations in 54 countries, and approximately 220,000 employees worldwide. the company has a very diversified core business, from ports and related services to telecommunications. the company was officially founded in 1977, and it has been listed on the hong kong stock exchange since january 3, 1978. however, h.w. dates back to the mid-19th century. before the merger (in 1977) h.w. was twice rescued from financial disaster by the hong kong and shanghai banking corporation: once in the last century and again in august 1975.i despite financial problems, the company had achieved an important growth, which made it an interesting investment for what the financial times called “predatory entrepreneurs”: from only hk$13m in 1964 the company’s issued capital expanded to almost hk$250m by the end of 1974; and net profits rose from hk$10.8m in 1965-66 to $136 in 1973-74. the purchasing of assets was particularly http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 heavy during the period of the cultural revolution in china.ii in 1977, just before the li family era, hutchison was one of hong kong’s major trading houses, and in that year merged with hong kong and whampoa dock to consolidate its size. the li family has controlled hutchison whampoa since 1979, after acquisition through cheung kong holdings, the master company of the hong kong based chinese entrepreneur li kashing.iii li ka-shing was born in 1928 in chaozhou in the guangdong province (china), and according to the li ka shing foundation website, his father li yunjing was a primary school teacher, and when schools were suspended due to the japanese invasion of the village in 1939 the family left the country and went in the winter of 1940 to hong kong (which fell under japanese control that year). his mother returned to chaozhou in 1942 with his younger son and daughter, while li ka-shing stayed in hong kong with his father, in the house of a wealthy uncle. while living in hong kong, and still a teenager, his father died of tuberculosis and he had to leave school before the age of 15, to work as an apprentice in a plastic watch strap company on ko shing street. he worked 16 hours a day, and bought second hand books to study and learn by himself. by 1947 he was promoted to manager. his marriage to his cousin chong yuet-ming (daughter of his wealthy uncle) and the creation of a new family was the final motivation to become an entrepreneur. by 1950, aged 22, with money from friends, relatives, and contacts from his trading activities he founded cheung kong plastics co., his own company, manufacturing high quality plastic products (toys, daily household products, and above all flowers) and selling them in asia with success in the 1950s. political instability and riots in hong kong in the 1960s, and the birth of his sons victor in 1964 and richard in 1966, contributed to making him see opportunity and incentive in a chaotic situation, as he invested right then his savings and loans from relatives and friends into something new with great http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 potential profits: real estate in hong kong. he foresaw the opportunity of the falling prices of real estate in the city due to riots and problems after 1967, and he believed prices would go up as soon as the economy recovered, as indeed they did. to organize this new business, he founded cheung kong industries in 1971, a firm that soon became a leading real estate investment company in hong kong, listed on the hong kong stock exchange since 1972 with great success (the initial public offering was oversubscribed 65.4 times).6 in the 1970s investments in real estate surpassed those in the plastics business, following incentives (the ten year housing plan of 1972 projected building quality housing for almost 2 million people in 10 years). the city extraordinarily transformed its infrastructure and finances and optimist perspectives led to further changes. in 1979 li acquired an important stake of the firm hutchison whampoa (from hsbc), a british company in hong kong created in 1866 and specialized in handling containers in ports all over the world.7 li became the first chinese owner of a british style trading company. the arrival of li ka-shing as the chairman of the company drastically changed the style of management and the priorities of the company, and caused a reshuffling of the board. in 1979 the company was a diversified transport, industrial and property group.8 during the first years of the 1980s, the growth strategy of the company was clear and it had three main aspects. firstly, li restructured some lines of business, buying out a number of minority interests within the group. secondly, he improved the transport-container division (the project of hong kong international terminals, the group’s container terminal, and a joint shipping company with a glaswegian firm based in hong kong and bermuda, and with offices in london).9 thirdly, he developed important construction projects. the ambitious scale of the growth strategy was easily financed out of internally generated funds10: in 1979 recurrent earnings were 74 cents http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 against 49 cents in 1978. that year (1979), the dividend of the company rose by 7%11. in 1980, the company increased its profit after taxes by 23.8%. final dividend was 32 cents per share12. in 1981, hutchison whampoa reported net profits of us$136m, almost double 1980´s. final dividend was 40 cents13. of course, the stock was one of the most buoyant on the market14. in 1983, the reported earnings rose to us$149.7m. problems appeared in 1983. that year, the company, that had interest in property, transportation, manufacturing, retailing and engineering, offered a special bonus dividend (63 cent per share).15 this policy came directly from li and was opposed by several senior executives who felt the cash could be better used by the company itself.16 a typical agency problem appeared: discrepancies between li and the top executives turned into a major management reshuffle in 1984.17 li fired old executives and installed men of his personal trust. george marcus, an executive director of hutchison since 1980 and of cheung kong (major shareholder of the company) became deputy chairman. another man of his personal trust, bill shurmak, became group treasurer. shurmak was assistant general manager for the canadian imperial bank of commerce, and had been the hong kong-based manager for canadian asiapacific between 1974-1978, during which time he was involved in various joint venture property deals with li.18 with the new team on board, li designed an ambitious growth strategy. he developed a “house cleaning” operation that included selling his stake in tvb (one of hong kong’s private sector television companies in 1984), his 21% stake in cross harbour tunnel and 4.9 % stake in pearson (the english publishing, banking and industrial conglomerate) in 1987.19 h.w. had a corporate policy of seeking management influence over decisions made by companies in which it took a substantial stake20, and some minority stakes were sold.21 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 nevertheless, the main strategies designed by li in the 1980s involved an overseas expansion and investment in telecommunications and natural resources. to reinforce the international dimension of the company, in 1985 hutchison opened a european office based in london.22 in that same year, he was appointed deputy chairman of the hong kong and shanghai banking corporation (five years earlier he had been appointed non-executive director of this financial company). the managing director of the new office was robin johnstone, an executive director of n.m. rothschild and sons.23 in this context, h.w. diversified into icts and created hutchison telecommunications, a subsidiary contesting the franchise to provide cable television services to hong kong, and faced important investments in it. the company also acquired a percentage in cable and wireless, an english telecommunications group24, and agreed a joint venture with this english company to launch a telecommunications satellite over china25. in 1987, cavendish international holding was created as the investment and natural resources arm of hutchison. the new company’s interests included 34.3 % in hong kong electric, an important percentage in husky oil of canada (oil and gas producer), the ownership of hong kong’s hilton hotel and a percentage in hutchison cable vision.26 in 1990, the company acquired nokia mobira (to reinforce the uk arm) and cluff resources uk mineral and mining company.27 in 1991 the company acquired byps communications, the uk telepoint consortium.28 this was one of a series of hutchison acquisitions in the uk, where the company planned to develop a full range of wireless personal telecommunications.29 a strong financial position allowed the company to look for new business opportunities. in 1992, just as the growth strategy based on overseas expansion was showing some problems, the communist party and den xiao ping approached li to invest in continental china. opportunities were increasing due to this networking activity with the communist party and http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 later he was appointed non-executive director of the hong kong and shanghai banking corporation (1980) and deputy chairman of the bank in 1985. overseas companies performed worse than the core business in china and hong kong. during 1991 and 1992, hutchison wrote off 187m pounds sterling against husky oil and gas and suffered losses in uk telecoms.30 the international expansion and diversification that characterised the company in the 1980s came to an end, although it did not totally disappear. h.w. returned to its core business of infrastructure and property in hong kong and china during the 1990s. li began to focus on post-1997 hong kong and china. in 1992 the company acquired 50% of shanghai´s container port.31 li concentrated on investing in mainland china during 1992, especially focusing on retailing and manufacturing and property development projects in selected cities of china (guangzhou, shanghai and qingdao).32 his connections with the communist party and his success as a businessman also helped him participate in institutions that would prepare future rules of the game in chinese hong kong after british rule, which would in turn help him efficiently design what his corporation should be doing to maximize the opportunities for business in the new scenario of a new china: he served as a member of the hong kong special administrative region’s basic law drafting committee, hong kong affairs adviser and the preparatory committee for the hong kong special administrative region. li was appointed member of citic, owned in 41 per cent by the chinese government, the most important chinese conglomerate involved in the economic development of the country, although a year later he abandoned membership. the li family constitutes, thus, a good example of baumol´s ideas about the multiple relationships that may exist between institutions and entrepreneurs: li ka-shing was influenced by institutional conditions when he started in business in the 1950s, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 but in the 1990s he was actively participating at the top level in the design of new institutions which would orientate the future economic growth of hong kong and china. the new situation and interests marked a major management reshuffle. in 1993 simon murray stepped down as managing director, and was replaced by canning fok. this replacement symbolised the group’s evolution from a british style trading company to a chinese style corporation.33 fok was regarded as a short-term stand-in for son richard li (26 years old), who was promoted at the same time to deputy chairman.34 during the first years of the 21st century, li came back to the overseas expansion, this time not in telecommunications or natural resources, but in the beauty sector. in 2005, watson group acquired the french company marionnaud parfumeries sa. and became the world's largest health and beauty chain. in the first decade of the 21st century, hutchison has five core businesses: 1) ports and related services, (hutchison is the world's leading port investor, with 50 ports in argentina, australia, the bahamas, belgium, egypt, germany, indonesia, italy, malaysia, mexico, myanmar, the netherlands, oman, pakistan, panama, poland, saudi arabia, south korea, spain, sweden, tanzania, thailand and vietnam; 2) property and hotels (specially in china, united kingdom and the bahamas); 3) retail (8,700 retail stores in 31 countries worldwide, including companies like drogas, kruidvat, rossmann, savers, superdrug, trekpleister, spektr, watsons your personal store, marionnaud, ici paris xl and the perfume shop); 4) energy, infrastructure, investments and others (e.g. water plants and related operations, or participations in hongkong electric holdings (heh) or husky energy; and 5) telecommunications, including hutchison telecommunications international limited (htil) that operates mobile telecommunications services in indonesia, vietnam, sri lanka and thailand).35 philanthropic activities would be an unofficial sixth core business: li ka shing says in the li ka shing foundation website that this http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 foundation is his third son, as a third of his fortune is being invested in a variety of projects that focus in the education and welfare of many communities located around the globe. in may 2015, the market capitalization of the conglomerate was $59.8 billion (forbes). did li take care of transferring his entrepreneurial eye to his heirs? are his heirs prepared to inherit that entrepreneurial instinct? li ka-shing was the chairman of cheung kong (holding) limited and hutchison whampoa limited, when this research took place in 2011. through cheung kong ltd he controlled strategic shares in hutchison whampoa. his two sons have served as directors of the company in different areas, and both have canadian citizenship (a detail which entitles them to legally invest in the area of the north american free trade agreement nafta, for instance). the eldest son, victor (born in hong kong in 1964) is the official successor in the li family. he is managing director and deputy chairman of cheung kong (holdings) limited, deputy chairman of hutchison whampoa limited36, and chairman of cheung kong infrastructure holdings limited and ck life sciences international (holdings) inc. he obtained a bachelor of science degree in civil engineering, a master of science degree in structural engineering and an honorary degree from stanford university.37 he serves as a member of the standing committee of the 10th national committee of the chinese people’s political consultative conference of the people’s republic of china. he is also a member of the commission on strategic development, the greater pearl river delta business council and the council for sustainable development of the hong kong special administrative region, and vice chairman of hong kong general chamber of commerce. in addition, he is director of the hong kong and shanghai banking corporation limited. these positions facilitate the strengthening of networking connections with the chinese government and businessmen (kriza and keating 2010). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 the international connections were planned in parallel with the internationalization strategy of the hutchison whampoa group. after studying in stanford, victor’s preparation was marked by the interests of husky oil, one of canada's largest energy and energy-related companies (victor served also as director of this company). as part of his preparation, victor was designated president of concord pacific, the company responsible for developing the pacific place project on the former site of expo ’86 in vancouver (yeung 2000). he was 22 years old. the vancouver experiences helped victor gain knowledge and understanding in property development (not only in hong kong, but in the global market); established connections with vancouver’s leading social network and hierarchy, and build a strong base, both personally and financially, to prepare his future career (yeung 2000). victor participated actively in establishing business networks and informal ties, and learned from consolidated businessmen. in fact, two other influential property magnates from hong kong were involved in the pacific place project: cheng yu-tung (new work development) and lee shau kee (henderson land development) who had already co-operated with li in many other property development projects (yeung 2000). in 1985 victor joined the group and acted as deputy managing director from 1993 to 1998 (he was kidnapped in 1996). victor served as a member of the standing committee of the 11th national committee of the chinese people’s political consultative conference of the people’s republic of china, and has been member of the commission on strategic development and the council for sustainable development of the hong kong special administrative region. these network connections facilitated knowledge of the sector and insertion in information networks that enabled him, like his father before him, to identify future opportunities. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 li ka-shing's younger son, richard, born in 1966, is chairman of pccw, one of asia’s leading information technology and telecommunications companies.38 he went to menlo park school in california, and attended stanford university, but did not graduate. the media provides a profile of richard li as a businessman who loves sports, but also the ict industries. richard first became interested in the media and technology industries in 1990 when, in his early twenties, he foresaw the opportunity for the creative development of information and home entertainment services in asia. the result was star tv, asia's first satellite-delivered cabletv service, which by 1993 had a viewer base of 45 million. richard li sold star to rupert murdoch's news corp. and went on to form the pacific century group of companies, including pccw limited. grupo carso according to its website, grupo carso was born in 1980.39 the real foundation of the group began a few decades before, because as it happened in the hutchison whampoa´s story, the history of grupo carso is the history of a family and an entrepreneur. in the case of carso, this story is in many ways the life of carlos slim and his family. carlos slim was born in mexico city in 1940, son of julián slim haddad, a lebanon expatriate who arrived in mexico in 1902 (14 years of age), speaking no spanish. his father arrived in veracruz, and moved to tampico, tamaulipas, where four of his older brothers had already lived since 1898 (josé, elías, carlos and pedro slim). the slim brothers moved to mexico city and in 1911 julián slim and his brother josé founded the company la estrella de oriente (“the star of the east”). in may 1914, during the mexican revolution, don julián, then 26 years old, bought his brother’s fifty percent stake.40 la estrella de oriente turned into an important dry goods store. the success of the business enabled don julián to acquire eleven more properties http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 in the same area, one of the most commercial, active and significant in downtown mexico city. by 1922, his net worth was already $1,012,258 pesos between real estate, businesses and various stocks.41 in 1926, julián slim married linda helú, a mexican woman from lebanese immigrant parents josé helú and wadiha atta, who had arrived in mexico at the end of the 19th century. they had five children: nour, alma julián, josé, carlos and linda. julián slim haddad became a prominent businessman, well-known in the lebanese community; a community that, according to the department of state of mexico, was “characterized by their work, their economy, their simplicity”.42 he served as president of the lebanese chamber of commerce for almost 20 years (from 1930 until the end of the 1940s). carlos slim helú received a strong set of business values from his father in early childhood, as his father taught him to handle his personal accounts while he was a teenager. the influence and also the good conditions for maths played their role to explain that carlos slim opened his first checking account and bought shares of banco nacional de méxico when he was 12 years old. when he was thirteen, in 1953, his father died.43 in contrast with li ka shing, who abandoned studies after he became orphan when he was 15 years old, carlos slim could continue his studies and graduated in civil engineering at the universidad autónoma de mexico, in 1960. in that university he would teach algebra and linear programming while he was still studying. in 1965, when he was 25 years old, he established the bases of grupo carso, by incorporating inversora bursátil (investment company), jarritos del sur (bottling company) and inmobiliaria carso (real state). one year later, in 1966, slim married soumaya domit gemayel, a woman member of the local lebanese immigrant elite of mexico city (soumaya was the daughter of the entrepreneur michel domit http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 and niece of the ex-president of lebanon amin gemayel). this was a proof of important social promotion at home in mexico and abroad in lebanon. they had six children: carlos, marco antonio, patrick, soumaya, vanessa and johanna. after his marriage, with the inherited taste for discipline in management of his father, the new social capital obtained after his wedding, and his own hard work, and in a very similar way to the one followed by li ka shing in this decade of the 1960s in hong kong, slim founded and acquired several companies in the real estate business during the second half of the 1960s: promotora del hogar, s.a. (residential real estate company) and gm maquinaria, (buying, selling and renting construction equipment) in 1967; mina el volcán ssg inmobiliaria, s.a. (real estate) in 1968; bienes raíces mexicanos, s.a. (real estate), nacional de arrendamientos (real estate), and invest mentor mexicana (investment company) in 1969; pedregales del sur, s.a. (real estate) in 1972. in 1976 he acquired 60% of galas de méxico, a printer of labels and calendars. in 1980, grupo galas was born, and its principal activities were: industry, construction, mining, retail, food and tobacco. this was the true economic takeoff: an industrial investment in 1981, in a tobacco company, cigatam, that generated a great deal of cash flow and allowed to reinvest and have cash to buy, when the debt crisis came in 1982, some companies “at 1.5% of their book value”.44 in 1982, the mexican government threatened not to pay its national foreign debt, and this unleashed a crisis both in mexico and throughout latin america, where the net flow of bank loans came to an abrupt halt (bulmer thomas 2003). it was an opportunity for investors with cash: slim bought reynolds aluminio, general tire, bimex, s.a., hullera el centenario firestone, 40% of british american tobacco, 33% of anderson clayton, seguros de méxico; sanborns, dennys, fábricas de papel loreto y peña pobre, pamosa, 50% of hershey's and artes http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 gráficas unidas; empresas nacobre, minera frisco and química fluor. in 1984, slim created grupo financiero inbursa – the financial arm of slim´s conglomerate. in carlos slim’s own words: “we paid peanuts for important stocks. these were good times to buy cheap. we got these companies going and subsequently we sold some of them”. 45 during the 1980s a period of privatizations began in mexico, especially between 1984 and 1988. to finance the growth strategy planned to take advantage of the emerging opportunities, grupo carso went public with an initial public offering in 1990. then, a restructuring process was made by centralising the different business areas, through mergers of the group’s companies and international ipos.46 the new scenario enabled slim to diversify his core business in a promising area: telecommunications. the same had happened during the same period in the chinese case study analyzed above: savings from traditional businesses, in de-regulatory contexts, and favourable relationships between entrepreneurs and politicians, were invested in new businesses with potentially great opportunities for growth. in 1990, slim won the bid to acquire telmex jointly with southwestern bell and france telecom. carso global telecom, the holding company for telmex, was born. several acquisitions reinforced the position in other business areas: hoteles calinda; condumex and a majority interest in general tire and grupo aluminio; in 1999 pastelería francesa el globo, and carso infraestructura y construcción, s. a. (cicsa), a construction and engineering company, was created. to clarify the organizational structure, in 1996 grupo carso was split into three companies: carso global telecom, grupo carso and invercorporación.47 during the 1990s and the first decade of this present century, the telecommunication area was reinforced by a lot of acquisitions made throughout america. his presence in the north http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 american market improved with the launch of telmex usa (1997), and the acquisition of an interest in the cellular company tracfone (1999). in 2000, américa telecom was born and slim acquired equity stakes in american cellular telephone companies, such as atl and telecom americas in brazil; telgua in guatemala; conecel in ecuador; and techtel in argentina. that year, carlos slim and bill gates opened the spanish portal t1msn, in mexico. this was a strategic alliance that confirmed the solid networking connexion of the successful mexican businessman and his capacity to translate it into new lines of business. during the first years of the new century, slim reinforced his position in telecom by acquiring shares of cellular telephone companies in brazil (tess, telet, americel and a larger stake in atl in 2001); comcel (colombia), techtel in argentina; and increases in its equity stake in cellular telephone companies in brazil, in 2002; acquisition of shares of celcaribe (colombia), bse and bcp (brazil), cte (el salvador), and cti (argentina), in 2003; entel (nicaragua), megatel (honduras), most of the stock of cte (el salvador), at&t latin america (argentina, brazil, chile, colombia and peru) chilesat, techtel, metrored and embratel, in 2004.48 what was the complex strategy designed by slim to maximize the opportunities? in his own words, “what we do is get undervalued, poorly-run firms and turn them around”.49 added to this was the vision to invest in sectors with high potential of growth, in which proximity to high political authorities, and excellent knowledge of how to handle external providers and local competitors, minimized the apparent market risks of investing in new activities. carso’s market capitalisation went up, as proof of the market’s esteem for slim’s skills.50 slim’s investment in the united states was completed with the acquisition of 6.4% of the new york times company in 2008 (6.9% in 2010). the financial part of the conglomerated grupo financiero inbursa established a strategic alliance with la caixa de barcelona, an important bank of spain.51 in http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 may 2017, the market capitalization of carso group, the holding company, which engages in the retail, industrial, and construction business, was $10.5 billion (forbes). in parallel with his business interests, and in the same way followed by the chinese li ka shing, slim has developed an intense philanthropic activity, both in his own name and through various companies. he created fundación carlos slim helú in 1986; museo soumaya (for his wife) in 1994; fundación telmex in 1995; and fundación del centro histórico de la ciudad de méxico in 2000. his international activity after retiring from direct management of daily routines in his group to transfer them to his heirs has increased in the last years: member of the united nations organization (un) on energy and climate change, vice chairman of the mexican stock exchange and chairman of the mexican association of brokerage firms; and first chairman of the latin american committee of the board of directors of the new york stock exchange are only a few of the positions not directly linked to the group that indirectly have made him participate in the design of institutional conditions in which the companies of his group are operating (as it has happened in china with the li group, confirming baumol´s ideas about the double direction of the links between politics and entrepreneurship).52 carlos slim’s ability to transfer management to his heirs by delegating power, by promoting their education, and facilitating a practical training of his offspring to top positions inside the group, under the careful eye of people in his trust, has greatly contributed to minimising difficulties in the generational transition. in 2009, his succession was ready. when this research took place, carlos slim domit (43 years old) was currently honorary life chairman of grupo carso, a position he also held at telmex, américa móvil and grupo financiero inbursa. the day-to-day business was already controlled by carlos, marco antonio (42 years old) and patrick slim domit (41 years old), who served as directors of grupo carso. carlos slim domit is the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 chairman of carso group (19 years on the board), president and general manager of sanborns, chairman of telmex international, teléfonos de mexico, carso global telecom. he held a degree in business administration from universidad anáhuac. marco antonio slim domit (14 years on the council of grupo carso) was chairman and general manager of inbursa (the financial arm of the group), chairman of inversora bursatil, and seguros inbursa, deputy chairman of impulsora del desarrollo y empleo en américa latina, and director of teléfonos de méxico, carso global telecom. he held a degree in business administration from universidad anáhuac. patrick slim domit (14 years on the council of grupo carso) was deputy chairman of carso group, chairman of américa móvil, comercial manager of teléfonos de méxico, chairman of grupo telvista, director of teléfonos de méxico, carso global telecom, impulsora del desarrollo y el empleo en américa latina. he held a degree in business administration from universidad anáhuac.53 it is interesting to observe that slim could have perfectly paid for a world prestigious university education for his sons, but preferred to educate his successors in a famous mexican university that has been linked since 1964 to the “legionarios de cristo”, an elitist catholic group with strict values that he wanted his family to adopt in their handling of life and business. maybe this catholic upbringing has contributed to the great respect slim’s offspring manifest towards their father and his decisions, very different to the opposition some offspring manifested towards the founding father in the succession process of the brazilian case study we analyze in the next section. carlos slim still supervised the business, but several trusted men also helped his sons in choosing the best business options. one example is juan antonio pérez simón, 76 years old (born in 1941) and 24 years as director of grupo carso. he has been a manager loyal to slim, chairman of grupo sanborns, deputy chairman of teléfonos de méxico.54 moreover, several http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 important mexican businessmen also served on the board of directors of grupo carso, thus strengthening personal ties with the local elite. among them, antonio cosío ariño and his son antonio cosío pando.55 with these and other alliances, slim’s sons are inserted into the social network and hierarchy of the mexican elite. they have been strongly connected with other mexican families in business, participated in national circles of information, and completed their education with the advice of important and experienced businessmen. to reinforce social networks, not only in mexico but in latin america, slim (together with venezuelan businessman gustavo cisneros) created a special meeting for the most important latin american families in business.56 the first meeting took place in mexico in 2003, and slim was the generous host who paid all the expenses. the other meetings took place, with local elite families of business as local hosts, in 2006 in argentina and 2009 in colombia. companhia brasileira de distribuição (cbd), or pão de açúcar cbd, the second biggest retail company in latin america and among the top corporations of brazil, was founded in 1948 as doceira pão de açúcar (a pastry shop) by valentim dos santos diniz, a portuguese immigrant son of merchants who arrived to brazil in 1929 when he was 16 years old. at the beginning of the 21st century, cbd was the second largest family controlled group of brazil (according to sales in 2008). secondary sources provide biographical data about the origins of the founder and the training of his heirs (dalla costa 2009, diniz 1998). diniz arrived in sao paulo, where he lived with josé tenreiro, his grandfather’s brother who was working at the time in the companhia antarctica paulista. two weeks after his arrival, valentim was already working in real barateiro (a trading company), assisting in all kinds of basic services, and learning how trade worked in what was then the big city center and market of the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 country. as happened in the case of li ka-shing of hutchison whampoa and carlos slim of grupo carso, marriage (with floripes, member of the local portuguese community, in 1936) and the birth of the first son (abílio in 1937) made diniz abandon his low-paid job and invest savings and money from family and friends in expanding his future and business horizons (in a modest shop of his own, in a partnership named padaria nice in 1937, and in panificadora e mercearia lalys). in 1948, doceira pão de açúcar started with forty employees. according to the website of the company: “a big dream was born: to build a solid company, committed to not only the commercial aspects, but also with a social role”. 57 the company adopted a gradual but fast growth strategy. four years after its foundation, in 1952, doceira pão de açúcar's had two stores, and few years later, in 1959, the first supermarket was inaugurated. during this period, in 1956, the oldest son abilio began to work with his father, while he was studying business at the fundaçao getúlio vargas. he was a key agent in the company’s expansion. in fact, after finishing his degree, abilio wanted to study a ph.d in economics in the united states, but his father convinced him to stay in brazil to create the first supermarket of the diniz family, an expanding sector due to the big size of the country and the relative scarcity of foreign and local competitors (dalla costa 2009). in fact, the growth strategy was lead by abilio and a few professional consultants from fundaçao getúlio vargas, including luis carlos bresser pereira, administrative director of the school. some data show the success of the ambitious strategy in few years: the company had 11 stores in 1965, thanks to the merger with the "sirva-se" chain. in 1966 the company also started to expand its commercial radius, by inaugurating the first store outside the city of são paulo, in santos. in 1968, the company comprised 64 stores.58 during that decade, the founder valentim was president of the cámara portuguesa de comércio de sao paulo. membership in local chambers of trade, something also put into practice by the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 slim and the li families, allowed close networking and the flow of information from a strategic institution, and it meant social promotion for people with foreign origins who were visibly succeeding in businesses. the internationalization process of the group began at the same decade, in 1968, when the international division was created to manage new stores of the companhia brasileira de distribuição in natural markets in which they had cultural affinities that helped reduce risks (portugal, angola, and spain).59 during the 70s, companhia brasileira de distribuição consolidated its expansion thanks to the acquisition of the eletroradiobraz chain and with the creation of a new commercial formula, jumbo stores, the first generation of hypermarkets in brazil. growth strategy fed by acquisitions continued in the following years. they acquired the supermarket chains superbom, peg-pag and mercantil. companhia brasileira de distribuição investigated the growing needs of the different segments of society, and was pioneer in creating new models to respond to these demands. according to these premises, in 1979 the company inaugurated the minibox chain: “a concept of "no-frills" stores, with fewer varieties of items at very competitive prices, targeting the low-income population”60, a brazilian version of the walmart model. a large diversification process occurred during the 1980s. the company acquired five stores of bazar 13 and six from the morita chain.61 the first two superbox stores, a successful new formula that implemented the concept of large deposits of food products, were established in 1980, in jundiaí and rio de janeiro. in 1989, the company had 54,479 employees. the results of the growth strategy could not be more positive, but the firm wanted to continue the expansion, and did so by innovating. the market, however, would suffer in these decades. to face the significant changes in the sector marked by the creation of the second generation of http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 hypermarkets, companhia brasileira de distribuição designed a new format: extra stores, “which besides operating with large selling areas, offer state-of-the-art technology and a broad range of products”. 62 the extraordinary growth was not balanced with a successful family succession in the business. in 1988, a conflict occurred in the family. the next generation of the family (abilio, alcides and lucília) had different perspectives of the firm’s future. in fact, the founder had to return to the position of president in order to prevent the company’s demise. the conflicts had to be resolved in court in 1993. as a result of the crisis, alcides sold his part of the company and abilio (the eldest son) and lucília (the youngest daughter) remained as shareholders and directors of the company. external consultants (consemp, by gerald reiss and andréa calabi) and new professional managers helped the family to carry out an important internal restructuring of the top management of the group, and the sale of several firms including their bank. the founder was in favor of his son being the heir who should take control of the process, but this created problems. the family conflict provoked many losses, and the yielding of the first position in supermarkets in brazil to the foreign group carrefour (dalla costa 2009, 149). this happened at difficult macroeconomic times. the financial needs almost strangled the reengineering process. in october 1995, to finance the new growth strategy with higher investment needs, the company conducted an initial public offering. they were, again, pioneer on the use of this formula. pao de azucar “was the first issuance of preferred shares by a food retailer to begin trading on the são paulo stock exchange”. the public offering occurred in may 1997, (us$172.5 million raised) and as a result, the company represented the first ads listing on the new york stock exchange by a http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 brazilian retailer. the company made new restructurings in order to adapt to the dynamic scenario. in 1997, a centralizing system was established; the activity of the purchasing, distribution and other administrative functions was transferred into central divisions, instead of the old model of independent stores. the company needed to improve economies of scale and reinforce its power with the suppliers in order to translate it into better price and payment conditions. in 1998, a new restructuring process affected the company. the last years of the 1990s and the first decade of the new millennium was a period of continuous growth generally thanks to acquisition and renovation. in 1999 the company acquired the peralta chain, (comprising 37 supermarkets and a hypermarket), and guassu store located on the coast of são paulo state. in 2000 it opened 16 new stores and acquired 64 (e.g. reimberg, nagumo, parati). it reinforced its distribution and technology structure by opening 3 new distribution centers in são paulo state, and through the construction of a new data center, “fully based on the emc infrastructure, leader in systems of data storage. this process resulted in the achievement of the maximum level of the emc proven certificate, making cbd the first company in the world in its industry to receive this certificate”. 63 in 2001, the company implemented a new category management system. that year the company acquired 26 stores of the supermercados abc s.a. to consolidate its position in rio de janeiro state, the second largest consumer market in brazil, where the company currently represented nearly 14% of the total sales in the industry. the acquisition policy continued the following years, with sé supermercados chain or comprebem chain. from august 1999, the company had a new strategic partner, casino group, a large french chain. another important agreement that influenced in the company’s accounts was the partnership agreement with banco itaú holding financeira, signed in 2004, to establish http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 a new financial institution named financeira itaú cbd s.a. crédito, financiamento e investimento, or itaú cbd. due to this expansion, and the memories of the conflicts of the 1990s that for the family almost marked their end, the professionalization of management was seriously studied and adopted. external consultants (john davis, from harvard, who had been professor of abílio´s daughter ana maría at harvard business school, worked for abílio since 2002, according to dalla costa 2009, 155) advised in the succession to the third generation of the family (abílio´s heirs). after talking to john davis, ana maría, the possible future family manager of the group, in a bid to avoid the problems faced by her father in the past, decided to professionalize the plans of succession to the next generation. in 2002, ana maría, abílio, joao paulo and pedro paulo (from the third generation of the diniz family) went to harvard for consultation from john davis, and came back with a plan to manage the future organization at the top level of the group: the diniz family would retire from executive positions; three committees would start operations (executive, finances, and development plus marketing) to link the administration council with the presidency of the group. abílio and his offspring ana maría and joao paulo diniz would participate in these committees; abílio would have the presidency of the administration council replacing the father; and the vice-president directors would become extinct. a new visible c.e.o., augusto cruz, would be in control of the day-to-day operations in the firms of the group (dalla costa 2009).64 currently, abilio dos santos is the chairman of the board, and valentim dos santos is the honorary chairman. an external executive, eneas cesar pestana who began his career in the company in 2003, after working at carrefour is the chief executive officer. in may 2017, the market capitalization of the company was $5.9 billion (forbes). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 some final remarks the long-term analysis of external and internal contexts of three significant case studies like the family controlled groups of hutchison whampoa (china), grupo carso (mexico) and pao de açúcar (brazil) suggests that there are at least six comparable aspects in the way large family businesses create and transfer the entrepreneurial spirit from generation to generation, despite the internal business differences revealed in appendix 1. first, the three groups have been growing enormously through the conquest of their huge national markets, and have developed important skills in organization, execution and logistics. the cases of grupo carso and hutchison whampoa confirm baumol´s, wadhwani and jones´ideas regarding the influence of institutions in entrepreneurs, and the influence of entrepreneurs in institutions that orientate their businesses. between the 1950s and the 1980s carlos slim and li ka shing were highly conditioned by path dependent conditions of their different environments in mexico and china, but after the 1990s their reputation and success made them participate in top level positions of institutions that had to establish new rules of the game that would also affect the companies in which they had a stake. second, the founders of the three groups were relative outsiders in their countries, and their ambition to be very visibly integrated and high up in the social ladder has therefore very possibly contributed to moulding their leadership and their entrepreneurial ambition: two of them were foreigners or belonged to foreign families (lebanon in the case of carlos slim, portugal in the case of valentim dos santos diniz) and one grew up in business in what was a british colony in china (hong kong) for many years (li). third, the three founders have created extensive and useful networks in three important directions, thus also confirming what business history has indicated about the importance of http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 diasporas and immigration in pooling together capital and human resources for entrepreneurship: a) their wives and their wives´ families played key roles as providers of resources and social capital at the beginning of their career as entrepreneurs; b) the three established strong connections with the foreign community to which they belonged (at home and abroad); and c) the three created and transferred to their heirs privileged personal relationships with the local elite and with elected presidents and dominant political parties in their home countries. fourth, all three have hired professional managers with global experience and external consultants to design and develop their growth as regards the business sphere and also the family wealth sphere. the growth of the business required, particularly when investing in new business activities and while heirs were in early childhood not just professionals, but loyal professionals trained in global businesses, and for this the mexican slim, the chinese li and brazilian santos diniz trusted local and international business schools where friends, and relatives received training and contacts. fifth, all three of them have completed, or are finishing, the transitional process of generational succession from the first to the second generation, managing to handle not just a more or less peaceful dialogue with young heirs (as seems to have been the case in the slim family), but above all the frequent problems associated with large family firms linked to the management of two sources of conflict: the different perceptions of founder and heirs about what business should be about (in the li family, two sons show very different interests and skills compared to the father’s, which could potentially compromise the future of the corporation, according to some gurus); and the different views about who should participate – and how in the succession http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 and wealth transfer of the family business and the family wealth (as has happened in the diniz family). finally, the three significant cases analyzed in the article demonstrate that path dependence is a key factor that explains when and why difficulties may be transformed into opportunities by entrepreneurial families able to combine market conditions with the internal competitive advantages mentioned above. in this sense, our findings are consistent with previous literature about path dependence developed by paul pierson and jörg sydow (pierson 2000; sydow, schreyögg, and koch 2009). however, to participate more fully in this debate, additional research, which does not enter the brief of our article, would be necessary. the hong kong riots of the 1960s could not have been the right times for business, or the mexican debt crisis of the 1980s, or the brazilian inflation of the 1980s. however, the families of the slim in mexico, the li in hong kong, and the santos diniz in brazil had accumulated during previous decades the values from their ancestors, the social capital from their immigrant and local communities, and the savings from modest businesses started to finance the creation of a company and the beginning of a new family. carlos slim´s father died when he was 13, li ka shing´s father died when he was 15. both left them memories of sacrifice, discipline, savings, and accumulated social capital, all of which were necessary to transform difficult situations into opportunities. with more or less success they professionalized the management of the business and the management of the family, and therefore have been able to create new powerful dynasties that, since the 1990s, participate in the design of the new rules of the game that affect family businesses in their countries and in the world. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 notes 1. although the peculiarities of family firms in terms of entrepreneurship is still and emerging field, the linkages between entrepreneurship and family business is obvious and strong. many family business departments/chairs and centers of study are inserted in entrepreneurship institutions, i.e. iese, esade, ie, insead, management school at lancaster university, etc. moreover, as sharma pointed out in 2004, family business research has deserved special issues on the topic in some of the top-ranked entrepreneurship journals such as entrepreneurship theory and practice, and journal of business venturing (sharma, 2004). 2. see http://www3.babson.edu/eship/step/. 3. “hong kong: financial times survey: a strong balance sheet”, the financial times, june 21 1982, p. xi. 4. “hong kong: financial times survey: a strong balance sheet”, the financial times, june 21 1982, p. xi. 5. cheung kong was defined by financial times in 1982 as “fast-growing property group” and it held a 42% stake in hutchison whampoa. “hong kong: financial times survey: a strong balance sheet”, the financial times, june 21 1982, p. xi. in 1984 mr. li was defined as “one of the territory’s most formidable business figures”. “cheung kong lifts stake in hutchison whampoa”, the financial times, june 02 1984, p. 21. 6. http://www.hutchison-whampoa.com/eng/index.htm, accessed november 3, 2010. 7. “the highly predatory entrepreneur”, the financial times, september 23 1986, p. 28. 8. “property interests boost hutchison whampoa”, the financial times, april 11, 1979, p. 36. 9. “earnings nearly doubled at hutchison whampoa”, the financial times april 01, 1982, p. 34; and “hutchison whampoa in joint shipping company”, the financial times, april 14, 1982, p. 29. 10. “hong kong: financial times survey: a strong balance sheet”, the financial times, june 21, 1982; p. xi. 11. “senior post at hutchison whampoa”, the financial times, january 05, 1980. 12. “strong advance in profits at hutchison whampoa”, the financial times, april 04, 1981. 13. “earnings nearly doubled at hutchison whampoa”, the financial times, april 01, 1982. 14. “hong kong: financial times survey: a strong balance sheet”, the financial times, june 21, 1982. 15. “hutchison whampoa limited”, the financial times april 25, 1984; p. 36. 16. “cheung kong lifts stake in hutchison whampoa”, the financial times, june 02, 1984. 17. “board reshuffle at hutchison whampoa”, the financial times, august 08, 1984; p. 18. “board reshuffle at hutchison whampoa”, the financial times, august 08, 1984; p. http://revistes.ub.edu/index.php/jesb http://www.hutchison-whampoa.com/eng/index.htm volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 19. “hutchison whampoa sells pearson stake for £62.5m”, the financial times, may 01, 1987. 20. “ hutchison whampoa profits soar”, the financial times, september 01, 1984; p. 15. 21. “hutchison whampoa sells tunnel holding”, the financial times, february 01, 1985. 22. “managing director at hutchison whampoa”, the financial times, november 20, 1985; p. 43. 23. “managing director at hutchison whampoa”, the financial times, november 20, 1985; p. 43. 24. “hutchison whampoa lifts earnings and dividend”, the financial times, march 30, 1988. 25. “hutchison whampoa lifts earnings and dividend”, the financial times, march 30, 1988. 26. “whampoa resources side leaps”, the financial times, march 20, 1989. 27. “hutchison whampoa lifted by property”, the financial times, august 24, 1990; p. 22. 28. “hutchison whampoa buys into telepoint”, the financial times, february 08, 1991; p. 19. 29. “hutchison whampoa buys into telepoint”, the financial times, february 08, 1991; p. 19. 30. “md of hutchison whampoa steps down”, the financial times, september 01, 1993; p.19. 31. “hutchison whampoa takes half share in shanghai container port”, the financial times, september 04, 1992; p. 26; 32. “hutchison whampoa declines 5%”, the financial times, march 19, 1993; p. 24. 33. “md of hutchison whampoa steps down”, the financial times, september 01, 1993; p.19. 34. “md of hutchison whampoa steps down”, the financial times, september 01, 1993; p.19. 35. hutchison-whampoa website. accessed november 3, 2010 http://www.hutchisonwhampoa.com/eng/index.htm 36. he has been executive director and deputy chairman of hutchison since 1995 and 1999 respectively. hutchison-whampoa website. accessed november 3, 2010 http://www.hutchisonwhampoa.com/eng/index.htm 37. hutchison-whampoa website. accessed november 3, 2010 http://www.hutchisonwhampoa.com/eng/index.htm 38. hutchison-whampoa website. accessed november 3, 2010 http://www.hutchisonwhampoa.com/eng/index.htm 39. grupo carso website. accessed november 3, 2010. http://www.gcarso.com.mx/ 40. http://www.carlosslim.com/ accessed november 3, 2010. 41. http://www.carlosslim.com/ accessed november 3, 2010. 42. http://www.carlosslim.com/ accessed november 3, 2010. 43. carlos slim helu's interview, francesc relea, el pais magazine number 1607, sunday july 15th, 2007. 44. carlos slim helu's interview, francesc relea, el pais magazine number 1607, sunday july 15th, 2007. http://revistes.ub.edu/index.php/jesb http://www.hutchison-whampoa.com/eng/index.htm http://www.hutchison-whampoa.com/eng/index.htm http://www.hutchison-whampoa.com/eng/index.htm http://www.hutchison-whampoa.com/eng/index.htm http://www.hutchison-whampoa.com/eng/index.htm http://www.hutchison-whampoa.com/eng/index.htm http://www.gcarso.com.mx/ volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 45. carlos slim helu's interview, francesc relea, el pais magazine number 1607, sunday july 15th, 2007. 46. http://www.carlosslim.com/ accessed november 3, 2010. 47. http://www.carlosslim.com/ accessed november 3, 2010. 48. http://www.carlosslim.com/ accessed november 3, 2010. 49. mexico´s mysterious one-man conglomerate. 50. mexico´s mysterious one-man conglomerate. 51. http://www.carlosslim.com/ accessed november 3, 2010. 52. http://www.carlosslim.com/ accessed november 3, 2010. 53. information from grupo carso annual report 2009. 54. information from grupo carso annual report 2009. 55. information from grupo carso annual report 2009. 56. those present at the first meeting were the following. from mexico: carlos slim, emilio azcárraga from televisa, maría aramburuzabala from grupo modelo, lorenzo zambrano from cemex, lorenzo servije from bimbo, bernardo quintana from ica, antonio cossio from grupo industrias tepejil del río, alberto bailleres from grupo peñoles, antonio fernández from cervezas modelo and josé antonio fernández from femsa. from venezuela: gustavo cisneros from grupo cisneros, ricardo poma from grupo poma, juan luis bosch from multinversiones, and gustavo julio vollmer from palmar-banco mercanti. from colombia: julio mario santo domingo from santo domingo-bavaria, carlos ardila gaviria from grupo ardila, luis carlos mayer from grupo mayer and luis carlos sarmiento from organización sarmiento-banco bogotá. from chile: andrónico luksic from grupo luksic, alvaro saieh from corbanca and josé said from embotelladora andina. brazilian: luiz carlos frías from folha, pedro moreira from unibanco, marcelo odebrecht from grupo odebrecht, eugenio staub from gradiente, joao roberto marinho from o'globo and joseph safra from grupo safra. from argentina: carlos miguens bemberg from grupo bemberg, alberto roemmers from roemmers, federico braun de grupo from importaciones and exportaciones de la patagonia, eduardo constantini from consultatio and ricardo esteves from pampas huetal. from ecuador: arturo noboa. http://www.americaeconomica.com/ accessed november 3, 2010. 57. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 58. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 59. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 60. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 61. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 62. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. http://revistes.ub.edu/index.php/jesb http://www.americaeconomica.com/ http://gpari.com.br/eng/conheca/historico.asp http://gpari.com.br/eng/conheca/historico.asp http://gpari.com.br/eng/conheca/historico.asp http://gpari.com.br/eng/conheca/historico.asp http://gpari.com.br/eng/conheca/historico.asp http://gpari.com.br/eng/conheca/historico.asp volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 63. http://gpari.com.br/eng/conheca/historico.asp acceded november 3, 2010. 64. http://portalexame.abril.com.br/gestao/noticias/john-davis-anuncia-abertura-escritorio-brasil559719.html accessed 23rd june 2010. john davis is an american professor (at harvard business school since 1996) and one 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(http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://www.babson.edu/entrep/fer/2005fer/chapter_ix/summary_ix10.html http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 132-174, july-december 2019 doi.org/10.1344/jesb2019.2.j063 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 appendix 1 company year of foundation owner family generation turnover usd(2016) employees (2016) activity position in ranking sources carso group 1980 slim 1st2nd $5.09 b 74,517 holding company with several divisions: industrial, commercial, infrastructure and construction, hotels, automotive and mining industries. first family controlled group of mexico according to sales consolidated accounts. annual report 2016 grupo carso, and forbes grupo pão de açúcar 1948 santos 2nd $11.97 b 160,000 retail 227st ranking top regarded companies according to forbes magazine (2016) forbes and annual report 2016 hutchison whampoa limited 1863/1977 li 1st2nd $35.1 b (data 2015) 280,000 employees worldwide (data 2015) holding company, five core businesses: ports and related services; property and hotels; retail; energy, infrastructure, investments and others; and telecommunications. largest asian family controlled corporation according to family firm institute database on largest family firms of the world. # 118 according to global 2000 (2015) forbes. company´s website, forbes, and family firm institute website (large family firms in the world) http://revistes.ub.edu/index.php/jesb volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 67 alfons zarzoso museu d'història de la medicina de catalunya (spain) private surgery clinics in an open medical market: barcelona, 1880s-1936 abstract the main purpose of this article is to examine how a new medical technology – the operating room resulted in the establishment of a model of private clinics in late 19th – century barcelona. this research explains that this kind of private medical care happened in an open medical market and successfully met a growing demand. since its origins in the 1880s, private surgery clinics rose to more than 50 in just half-a-century. here, several business strategies put at work by those surgeons-entrepreneurs are considered, especially those related to publicity and the search of patients/customers. several aspects played a paramount role in that success: medical technology, domestic comfort, and surgical efficacy. in a context where medical care delivered at hospital was provided by the city-state or the local bourgeoisie as a part of the medieval model of charity, a potential customer for the private surgery clinics was formed by the urban, popular and working classes through the model of mutual aid societies and health insurance companies. moreover, private clinics also showed how the process of medical specialization was configured and what kind of relationships surgeons-entrepreneurs established with general practitioners to attract their patients. here, medical directories and medical journals reveal as a useful source of information. keywords: private surgery clinics; mutualism; medical specialties; medical technology; advertising; health care business; health insurances corresponding author: e-mail: azarzoso@museudelamedicina.cat received 23 november 2020 accepted 9 december 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:azarzoso@museudelamedicina.cat http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 68 1. introduction operating theatres developed and transformed the ways medicine was practiced at the end of the 19th century. surgery revealed itself then as one of the most effective tools of healing. from a professional perspective, the new surgical practices allowed the development of new fields of work and consequently the emergence of new medical specialties. in this article we will examine how, in barcelona at the end of the 19th century, this phenomenon also led to the development of a specific healthcare offer in the form of private clinics, established in the city's eixample district. using advertising techniques and location and communication strategies, the surgical business became widespread in the first third of the 20th century. the medical services available coincided with the growing demand from the urban middle classes, contributing to the establishment of a medicalization process. in order to explain these aspects, we have used different sources concerning the new medical practices: directories and guides of doctors; medical press and advertising exclusively aimed at doctors; and medical records as a complementary tool of mutualism to get to know the target audiences of the new private healthcare system. description and analysis of these sources allow an understanding of such processes in terms of an urban history of medical practices. thus, this article tries to join different spheres (architecture, medicine, politics, town-planning) to show how intersections shaped scientific practices and the identity of its actors (dierig, lachmund and mendelson 2003). the aforementioned transformations did not occur simultaneously and with the same growth rates in western society. the variations between european and american countries were considerable and depended on multiple national factors. the weight of the state was more important in france or germany when it came to institutionalizing the incorporation of volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 69 laboratory sciences in medical education. this was a fundamental characteristic, since the new space of surgery, the operating rooms, was based on the concepts and solutions developed in laboratory practice to overcome infection which was one of the problems of traditional surgery alongside with bleeding and pain. the institutionalization of operating theatres showed a different pace according to the local significance of public and private care models. the best known cases of private clinics show the importance of the urban environment and sustained demand. in the case of spain, the absence of a state with the capacity to provide investment and infrastructure for university medical training in the practical terms of the modernity that was gaining ground in europe led to their replacement with private institutions. in fact, the appearance of surgeon-entrepreneurs at the end of the 19th century in the city of barcelona was not only a response to personal intellectual interest and ambition. the context in which the surgeon-entrepreneurs developed was also facilitated by some specific circumstances. from the end of the 18th century, the population of barcelona grew steadily as a result of the economic transformations arising from a commitment to industrialization and trade. throughout the 19th century and the first decades of the 20th century, the urbanization of barcelona intensified. the progressive establishment of a capitalist economy in catalonia called into question the institutions and inertia of the medieval and modern health care model that still existed. the liberal state of 19th century spain was not able to provide an economic solution to the collapse of those healthcare institutions. as a result, it transformed the new liberal model through public and private formulas based on the concept of charitable assistance. the hospital thus maintained a pejorative connotation as the destination for the sick poor, who were forced to submit to bourgeois charity and become subjects of medical research at the university. from the end of volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 70 the 18th century, the urban working classes, from the guilds to the factory workers, tried to cope with the hardships of illness by helping each other in the form of mutual aid societies. in this way, the healthcare business emerged and, in a highly dynamic urban context, a growing demand was met by an expanding medical supply. thus, since the middle of the 19th century, the presence of doctors with home clinics became increasingly commonplace throughout the city. in this context, the emergence of operating theatres as a medical tool was accompanied, in the case of barcelona, by the emergence of private surgical clinics. at the end of the 19th century, the business was run by only a few individuals. these were years of knowledge acquisition, of communication of practices. undoubtedly, therapeutic success also hid failure and impunity. however, the surgical benefits were becoming increasingly apparent. the first clinics were established in the historical center of the city, near the general hospital and the medical faculty, and were featured by two aspects: clinics were settled in private flats, without a specific architecture design, just offering one or two single rooms for convalescent patients and being their operating rooms based on antiseptic principles. but already in 1888, coinciding with the universal exhibition, a new model of private surgical clinic was set up in the eixample district, in search of a bourgeois clientele. it was the result of an architecture design based on the scientific guidelines of the aseptic environment, technology and comfort. the advertising strategies of these first surgeon-entrepreneurs served to strengthen the model of the clinic and to promote medical practice as a product for consumption among large sections of the urban population. throughout the first third of the 20th century, private surgical clinics multiplied, establishing themselves in strategic areas in the eixample district and cultivating practices of direct communication with general practitioners, who were seen as intermediaries with their volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 71 private clients. alongside the surgical clinics, the city was also the scene of new medical facilities —clinical analysis laboratories, diagnostic examination offices— where new technologies also contributed to that process of medicalization of society, to the configuration of medical specialties and to the definition of new forms of doctor-patient relations. in 1936, the clinics in barcelona, alongside the laboratories, clinical analysis institutes or the diagnostic clinics, were a reference point for doctors and for catalan society as a whole. the surgical clinical care model thus played a fundamental role in the establishment of a private medical care model, based on payments for surgical interventions and hospital stays, and paid for by private insurance companies. an alternative model to the non-profit, charitable public and private hospital, which was also offered to other urban populations. 2. laboratory medicine as a starting point since the middle of the 19th century, the work carried out in different types of laboratories – chemical, physiological, bacteriological – has shown the growing importance of basic science in medicine and the relevance of the laboratory as a new space for medical knowledge, next to the hospital and the bedside, the autopsy room, the museum and the library (cunningham and perry 1992). during this period, and from these foundations, the development of truly transformative medical technology took place. we are talking here about the progressive establishment of a new technological space, the operating room, and the consecutive development of a new invasive surgery. however, the penetration of laboratory medicine into higher education was not a simple process, quite the contrary – it was met with considerable resistance, and has been achieved slowly since the 1870s (bonner 2000, 251-295). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 72 in order to advance in the new realm of possibility that surgery offered to the medical sphere, the main barriers to be overcome were, evidently, the issues of pain, bleeding and infection. as a result of laboratory research, volatile substances, such as ethyl ether, chloroform and nitrous oxide, were produced from 1840 onwards, which when inhaled allowed anesthesia and longer operating times. operative bleeding was combated by means of hemostasis techniques – clamping instruments, pressure and vessel suture –, although it was not until the first third of the 20th century that blood transfusion was developed. and finally, the circulation of theories about the role of microorganisms in the production of infection led to the development, firstly, of antiseptic surgery, from 1865, based on preventing the access of germs to the surgical field by spraying phenol on the wound, hands, instruments and room, and, from the middle of the 1880s, of surgical asepsis, which aimed to prevent the appearance of germs in the surgical act, operating in a completely sterile environment and with instruments that were pre-sterilized. this resulted in a real surgical revolution, facilitated by the increased working time available with guarantees of survival. the operating room evolved into a new work and learning space around which a new infrastructure, based on laboratory science, was to be built. these technological innovations were not introduced without controversy and dispute, and the changes they brought about were not immediate, but progressive and slow (adams 2018). in 1847, professors of surgery at the medical faculty of barcelona started ether and chloroform experiments in dogs and performed the first operations in humans, which took place both in the clinic wards of the city's general hospital – the hospital de la santa creu – or in the medical school’s amphitheater. since then, chloroform was the surgical method of choice and was applied in surgical operations such as amputation, bladder carving, tumor ablation, hernia reduction, treatment of fractures and so on. there was a significant surgical practice in the two volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 73 following decades but it remained in a low profile due to the strong weight of conditioning factors such as infection and bleeding (hervàs 1986). more research is needed not only on the physiological mechanisms that could guide surgical treatment but also on other practices of clean surgery – students were taught to participate actively in the healing of the wounds of the operated patients – that were developed simultaneously, and later, in particular, asepsis, that made surgery safer (worboys 2018). significantly, the first operating room in the city was created around the year 1880.1 although we do not have precise information about the first surgical space in the city, we can characterize the peculiarities of the barcelona case from the trajectory of some of the leading surgeons such as salvador cardenal or miquel a. fargas, among others (hervàs 1986). to begin with, it should be pointed out that the spanish university model, which is hierarchical and centralized, with its main offices in the faculties of madrid, was not based on an early commitment, with investment in spaces, materials and teaching content, to institutionalize the teaching of laboratory medicine.2 in a fragmented manner and always linked to a few, prominent figures, this type of medicine developed slowly in spain between the last quarter of the 19th century and the first three decades of the 20th century. in barcelona, for example, the reforms introduced between the turbulent years of 1868 and 1874 did not result in the incorporation of the laboratory into medical education. in fact, in those years some young 1 the concept of an “operating room” (sala de operaciones) is hardly used in spain, where such a place is known as a quirófano, or an "operating theatre". due to the influence of the spanish language this neologism was introduced in the other official languages of the country. its origin can be found in a speech given by doctor andrés del busto in 1892 after the inauguration of a room in the san carlos hospital in madrid, to describe a place where operations could be seen by students without being present, separated by a transparent glass. the concept remains well-established to this day (pera 2003, 291-295). 2 in spain, university medical education was dominated by anatomical study and clinical practice. the laboratory sciences had little room until the turn of the century, while the social sciences were systematically marginalized (comelles et al. 2021). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 74 students, such as salvador cardenal, created private associations to train in experimental medicine, giving rise to entities such as the academy and laboratory of medical sciences in 1874. this was a first step in the progressive introduction of the ideas and practices proclaimed in europe by claude bernard, rudolf virchow or louis pasteur. the social position of some of these young doctors enabled them to acquire a knowledge of foreign languages and, above all, the possibility of going on study trips to hospitals and clinics in the main european medical capitals and learning from the great masters of surgery. the european tour facilitated access to the theory and new surgical practice based on the antiseptic principle and publicized by joseph lister in england in 1867. the so-called prelisterian surgery still dominated in spain during that period —being limited to amputations, removal of tumors and other external pathologies— and antiseptic surgical practices were only introduced in an isolated way during the 1870s. it is significant that, as a result of its application, salvador cardenal was one of the first surgeons to demonstrate his practical listerian experience in barcelona through the publication in 1879 of the book guía práctica para la cura de las heridas y la aplicación del método antiséptico en cirugía (“a practical guide to wound healing and the application of the antiseptic method in surgery”, riera 1969). the deficiencies derived from a lack of a systematic and formal presence of laboratory medicine were compensated by the extraordinary amount of anatomical study performed in the dissecting room of spanish university hospitals. in this case, it is worth noting the visit of cardenal and fargas to the dissection room and the anatomical museum of the faculty of medicine of barcelona (balagueró and benito 1985). the anatomical training acquired there led to intensive practice by reproducing the surgical operations of the period on the hundreds of corpses dissected in the autopsy room. without doubt, the precise knowledge of surgical anatomy was volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 75 at the foundation of the step that those surgeons were about to take: the access to very dense and complex areas of the body such as the abdominal cavity and the beginnings of a gynecological surgery that was then started by the first laparotomic surgery operations (marí 2010). in barcelona in 1880, alongside gynecological surgery, ophthalmology was consolidated as a surgical specialty in the city's general hospital – the hospital de la santa creu. at that time, josep presas and josep antoni barraquer introduced intense specialization by introducing practices and technologies in a unique space: the dispensary (fernández-victorio 1905). the organization of the work that took place there turned the dispensary into a model place for teaching, clinical assistance and surgical practice. since 1891, the dispensary has had an operating room attached to the cloister in the interior courtyard (nadal-abella 1992). as we shall see, the importance of the hospital de la santa creu – located in the old city, near the ramblas, in a place of alluvium, still industrial and highly densified – in the nearby establishment of the first surgical clinics in the city is evident. it should be noted, however, that the development of new surgical procedures was still far from incorporating the medical practices that the laboratory was to bring. not only antiseptic and aseptic surgery, which would come first, but also chemical, histological and bacteriological analyses (schlich 2012). it is significant to remember here that it was at the time of cholera, when the city of barcelona was hit by a new epidemic from 1884-1885, that the city council invested in studying the measures taken in france and supported the creation of the municipal microbiological laboratory (1886), under the direction of doctor jaume ferran. there was then an entry into modernity, with all the public rhetoric, hand in hand with science. experimental medicine, the laboratory and the volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 76 microscopic gaze were to inform many initiatives, programs, practices, architectures and urban planning in the city of barcelona (roca rosell 1988). 3. the first clinics in the city, 1880s-1900s during this period, the operating room was further established and became the central location around which a new care facility – the surgical clinic – and new medical practices were organized (adams and schlich 2006). we can certainly speak of the operating room as a transformative space. not only in terms of understanding disease and illness, but also as a place for the development of new medical practices, mediated by a growing technological presence and favoring an irrepressible process of specialization, and new relationships with patients, who were gradually convinced of its high curative efficacy (schlich 2007). let us now examine how this model was established in barcelona, and then describe the context and projection of the clinics in the first third of the 20th century. during this period, the clinics were located in two different places: in the old city and in the eixample district. this phenomenon was accompanied by an unmistakable determination based on the business search for a clientele. the first surgical clinics were established on both sides of the two main streets that surrounded the spaces of the hospital de la santa creu and the adjacent medical school, understood as a central hub. in 1884, the gynecological clinic of miquel a. fargas, at number 133 hospital street; in 1885, the ophthalmology department of manuel menacho, at number 40 carme street; in 1891, the otolaryngology department of ricard botey, at 57 carmen street; in 1893, the gynecology clinic of pere manaut, at 43 nou de la rambla; and in 1900, the centre mèdic espanyol dedicated to women's health, in the hands of doctors segalà, father and son, at 41 carme street (zarzoso and fajula 2015). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 77 there is no doubt about the pioneering character of surgeon fargas, whose initiative also served as a guide for other cases. surgical clinics then proved to be a profitable investment. in this case, the clinics were located on different floors, either on the second or the first floor (principal and primera planta, in spanish). they did not occupy large areas. according to popular accounts, apart from the room used as an operating theatre, the fargas and botey clinics had four rooms and the menacho clinic did not have a single recovery bed. an increasing number of surgical operations were carried out in these clinics. the data available for the fargas clinic indicate that in 1886 he had performed 10 ovariectomies and in 1907 his students honored him after reaching 1,000 laparotomies. in the first edition of his treatise on gynecology (barcelona, 1903), drawn up on the basis of his clinical practice, fargas states that between 1882 and 1902 he had treated 18,000 patients (fajula 2013). it should be pointed out that, beyond the controversy aroused by some of these interventions and by a certain impunity in their execution, it is possible to speak of surgical success and of the consequent cultural impact on that society (frampton 2018). fargas' publications provide a clear example of the introduction of new forms of medical work. they describe the different activities of the team members: the surgeon, the anesthetist, the instrumental assistants, photographers, analysts, etc. the analysis of these practices allows us to observe the circumstances and the strategies of persuasion that legitimized the communication of new medical knowledge, the phenomenon of specialization and the forging of a collective identity, that of the surgeon. the written and visual rhetoric displayed, through the representation of a team of experts and the presentation of techniques and new medical volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 78 spaces, highlights the heroic, masculine and modern nature of surgery (lawrence 1992).3 the clinic in fargas became a reference point for medical professionals beyond the city's borders. not only is it evident from the texts that were addressed to the general practitioner, but the medical records themselves that have been preserved indicate that the origin of his female patients extended beyond barcelona.4 the location of the clinics in this area of the city was limited to just over a decade, when there was a progressive move towards the bourgeois community located in the eixample district (aibar and bijker 1997). thus, in 1892 fargas opened his new clinic at number 333 consell de cent street, next to the rambla de catalunya, and manuel menacho moved the new clinic to gran via de les corts catalanes, next to passeig de gracia, in 1903. the decisions of those medical entrepreneurs must have been influenced by the construction of a new faculty of medicine and the hospital clínic, in the eixample district, which had been started in the last quarter of the 19th century, with work being completed in 1906, the year in which the new facilities were inaugurated (arqués 1985, 97-151). also during this period, in 1902, work began on the construction of the hospital that was to replace the city's old hospital, the new hospital de la santa creu i sant pau, whose facilities were gradually opened between 1920 and 1930 (garcía martín 1990).5 the eixample district subsequently became an increasingly popular destination for surgical clinics. the first of these was established in 1888 by salvador cardenal. we have already 3 the photographs of the clinic show women, both workers and patients, but they are either anonymous or auxiliary in their communication objectives. we know, however, the names of their team of collaborators, as well as their role in the new surgery that was being developed and communicated (schlich 2018). 4 the collection is housed in the fons fargas, històries clíniques, 1884-1920, museu d'història de la medicina de catalunya. 5 fernández perez (2021) has written a chapter on large hospitals organization and management in early 20 th century barcelona. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 79 mentioned some of the features of his training as a doctor, having been employed as a surgeon at the private charity centre of the hospital del sagrat cor, created in 1879 in rosselló street, and which he went on to run when he moved to his definitive headquarters in borrell street in 1883, again in the eixample district. after an initial period of training, cardenal consolidated and displayed his enormous medical capabilities in the sagrat cor operating room for a decade (agustí peypoch 1991). his conversion to a medical entrepreneur was a response to the public opportunity offered by the celebration of the universal exhibition of 1888 in barcelona. this resulted in the creation that same year of a "healing house" established at number 13 passatge mercader. as in the previous cases, the clinic was also the surgeon's family home. there is hardly any information about the first years of operation of this clinic. however, surgical activity must have been intense, according to information published in the third edition of the manual de cirugía antiséptica (barcelona, 1894), where cardenal explained his work in the 2,450 surgical operations performed up to 1893, 111 of which were laparotomies. at that time, abdominal surgery was a well-established reality in barcelona, as was its relationship with laboratory medicine. this is made clear in this book, which also includes an extensive chapter written with jaume ferran on surgical bacteriology (marí 2000). in less than ten years, cardenal’s original clinic was remodelled and enlarged, occupying number 15 of passatge mercader and changing its name, which was since thereafter called “clinicum”.6 the modernizing transformation of the surgery clinic was oriented to meet a demand among the bourgeoisie and cardenal developed a strategy of communication through 6 the change of name that takes place during this period is significant, even though it is now known as a "healing house", as it ends up being called a "clinic". there is a nominal differentiation here, perhaps strategic, with the name "hospital" and its pejorative connotation from a social, political and medical point of view. that is, a care space for the poor, governed by public and private charity and subject to the control of the body by doctors (comelles 1997 and 2013). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 80 pamphlets, books and journals, advertising and illustrating the new spaces. in 1899, he published an elaborately illustrated 39-page printed advertising pamphlet, describing in detail the new technical, architectural and comfort features, and addressed to general practitioners.7 this booklet showed all the elements of the new surgery and laboratory medicine through the incorporation of new technologies and medical innovations: antiseptic and aseptic facilities, two operating rooms, microbiological laboratory, x-ray chamber, darkroom for developing. a second axis was a well-planned comfortable environment based on the english private hotel model with different kinds of rooms-all designed according to the aseptic principle with fired mosaic floors and walls painted with varnish and permanent enamel, central heating, electrical facilities, running water, water closets, and a reading room and a garden for rest. a final argument was communication as it was very well connected by public transportation: close to provença station on the sarrià railway line and to passeig de gràcia station on the railway lines of girona-france and of tarragona-southern spain. so, cardenal’s clinicum consolidated a modern medical space clearly different from the traditional model hospital. by addressing it to medical doctors he was aware of not being a rival but, on the contrary, he encouraged doctors to accompany their patients during their stay in a unique surgical premise where they could recover their health (zarzoso and martínez-vidal 2016). cardenal strategically developed a rhetoric and display of modernity through written words and images of maps and photographs that perfectly established not only the new and modern, progressive and technological spaces that featured the identity of the new surgery but also the target audience of the bourgeoisie. in such an election of methods and aesthetic choices (warner 7 clinicum. casa de curación quirúrgica del dr. cardenal. notícia descriptiva y extracto del reglamento (“clinicum. dr. cardenal's surgical healing house: descriptive news and extract from the regulations”). barcelona 1899. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 81 2014), this strategy hinged on some of the arguments developed by those medical doctors and entrepreneurs that settled the new clinics for the mentally ill after the collapse of the hospital de santa creu in mid-nineteenth century barcelona. a private healthcare alternative was then established, which proved to be the inevitable response to the indifference of the spanish liberal state in terms of assuming administrative and financial responsibility for public hospitals (comelles 1983 and 1988). the name chosen had a cultural significance: asylum and not house for the 'insane' or 'mad'. this was of paramount importance in the case of the nova betlem asylum, settled firstly in the town of gràcia, next to barcelona in 1857, and relocated in the peaceful village of sant gervasi, in northern barcelona. the asylum’s director and medical doctor joan giné partagàs made an interesting use of brochures and pamphlets of the new clinic premises by advertising and defining the identity of its intended audience —the bourgeoisie— through visual images, maps, and a straight path of communication from downtown barcelona (pérez nespereira 2003).8 in their pamphlets, giné partagàs (1874) and cardenal (1899) offered detailed information about the prices of the services offered in their clinics. in both cases there was a division by class of patients. hence, in the giné asylum, first-class pensioners paid 180 pesetas a month, second-class pensioners 125 pesetas a month and third-class pensioners 90 pesetas. these payments covered different qualities of room and board, as well as observation and clinical treatment. tailors, dressmakers and shoemakers were available for the provision or patching of clothing and footwear, and their bills had to be paid "by the persons responsible for payment 8for more information see: reglamento del manicomio nueva-belén en la villa de gracia. barcelona: narciso ramírez, 1862; giné partagàs, joan. descripción, marcha funcional y reglamento orgánico del manicomio de nueva belén. barcelona: antonio palou, 1874; giné partagàs, joan. manicomio nueva belén: fundado en 1857 recién establecido en un edificio erigido ex-profeso en el término de san gervasio de cassólas junto al santuario de la bona-novabarcelona: la academia, 1880 and 1883. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 82 together with the corresponding immediate monthly payment".9 in doctor cardenal's clinicum, patients were divided according to the use of the room and two types of rooms were offered, with a variety of possibilities. the first class rooms had five rooms on the ground floor, with access to the garden and roundabout, and six on the first floor. the six second class rooms were on the first floor. all of them could be accessed by lift, which also allowed the transfer of patients to the medical intervention spaces. lodging in the first class rooms varied from 9 to 11 pesetas a day and, in the case of bringing a companion, the total price was 18 pesetas a day. for the patient staying in the second class rooms, the price ranged from 6 to 8 pesetas per day, which amounted to a total of 12 pesetas if a companion of the patient also stayed with them. in this price, cardenal included "room, board, service and ordinary medical assistance". it is important to point out the detail of this medical care, as it had nuances that increased the total cost of admission, and included: "visits from the director and the auxiliary doctors of the clinic, the cures and the topics or materials necessary for these (excluding all surgical operations and medicines that have to be sought from the pharmacy)".10 the cardenal and fargas clinics acted as a real pole of attraction and as a model of medical architecture —technology and comfort— and of entrepreneurial business for the establishment of new surgical clinics in the eixample district. it is truly singular that the operating rooms of these two surgeons were known by their disciples as "mecca" (balagueró and benito 1985; escudé and calbet 2007). among the new clinics established in this area, we should mention the gynecological clinic of sebastià recasens located at number 359 valència street, next to the passeig de sant joan. this student of cardenal transferred the clinic, after winning a 9 giné partagàs, joan. descripción..., 1874, 26-28. 10 clinicum. casa de curación…, 1899, 36-38. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 83 university professorship in the specialty in madrid, to his colleague francesc rusca in 1898. a decade later, when this surgeon died prematurely, the clinic was acquired in 1909 by enric ribas ribas, who had also trained with cardenal, and was in turn head of surgery at the new hospital de santa creu i sant pau. thus, there was a great dynamism in the private surgical business and also the duality of the work of these professionals, distributing their work and gaining social prestige in the academic sphere or in the private or public charity hospital system (agustí peypoch 1991, 25-27). another case of the clinic being moved from the old city to the eixample was that of ricard botey, who established in 1898 an imposing ent (ear, nose and throat) clinic at 166 rosselló street (zarzoso and martínez-vidal 2016, 83-90). some of the general medical journals of the time, such as the gaceta médica catalana, offered their pages to describe the medical services, their scientific and technological basis and the comfort of the accommodation in detail. this was the case of the clínica de víctor azcarreta (1895), which had its medical office in the centre of the city, in a flat in fontanella street, and offered urological surgery services in the clinic located in la bonanova. this journal also encouraged the insertion of advertisements explaining the provision of these new surgical services in the city of barcelona. thus, the surgeon jaume queraltó ros was able to announce the establishment of his "clínica gynecológica" at passeig de gràcia, 89, in the gaceta médica catalana of 1898. it is important to emphasize here the audience for these writings and announcements, as the aim was not to address the general public but the general practitioners, as we have pointed out above, who could act as intermediaries between their patients and the new business surgeons, the latter having both expertise and the necessary technical and service infrastructure. in the intense process of medicalization that took place during this period, the volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 84 private gynecological clinic penetrated the cultural fabric of that society not only as a space for the treatment of gynecological conditions but also as a maternity clinic.11 the clinic in queraltó is also a good example of the progressive introduction of laboratory medicine into surgical practice. in fact, its team included not only six surgeons in charge of the aseptic and antiseptic departments, but also an anesthetist and three professors in charge of the photographic, histological and microbiological laboratories. the latter was under the direction of ramon turró, who had been teaching this subject in the laboratory of the acadèmia i laboratori de ciències mèdiques de catalunya since 1897. however, the division of labour in the clinic and the systematic use of the laboratory as a diagnostic tool were not yet fully integrated into university medical education. it is likely that this could have led to a slow normalization – both by general practitioners and the general population – of medical practices centered on fluids and tissues that completed the information on the disease acquired in other spaces such as the clinic or the autopsy room (howell 1995). in fact, the municipal microbiological laboratory, run by ramon turró since 1905, and the courses organized by a private association of doctors, the acadèmia i laboratori de ciències mèdiques de catalunya, were the training facilities for dozens of doctors – many of whom became urban and rural medical general practitioners – in their practical laboratories of bacteriology, histology, histopathology, biological chemistry, hematology, etc. this association maintained the annual courses from 1897 to 1932, when it was considered unnecessary to carry out a task already provided by the university medical faculty (fernández simó 1971). 11 as we shall see, this seems to indicate that the processes of medicalization of childbirth and the introduction of maternity insurance —which became obligatory in spain in 1931— developed at around the same time. (ponspons 2009). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 85 queraltó also promoted his own medical journal, la gynecologia catalana (catalan gynaecology) by dr. queraltó (1898-1899), which was published in catalan and served both scientific communication and commercial advertising purposes. it was not, however, a new strategy. it was part of a tradition that had already been put into practice by other doctorentrepreneurs. thus, in the mid-19th century, the doctors who owned psychiatric clinics, antoni pujadas and joan giné partagàs, founded journals on medicine and psychiatric care that also responded to the demand for bourgeois healthcare.12 at the end of the century, public communication of private business and specialised medicine spread among these doctors and surgeons in barcelona. some examples are fargas and his magazine anuario de la clínica privada del doctor fargas (1892-1898), the surgeon antonio morales, medical director of the clinic and the magazine boletín clínico de la casa de salud de nuestra señora del pilar (18971901), the gynecologist pere manaut launched the magazine malaltias especials de la dona, a newsletter of the manaut clinic (1901-1902) or that of the surgeon ricard botey, director of various medical journals in his speciality and specifically two related to his clinic, archivos internacionales de laringología, otología y rinología (1885-1893) and anuario de la clínica oto-rino-laringológica by doctor ricardo botey (1927). in the process of establishing the new model of private clinics, it is also worth mentioning the introduction of a new business strategy that took place in the "casa de salud de nuestra señora del pilar" established in 1894, close to gràcia station on the sarrià railway line, and governed by the sisters of charity of santa anna. it was not strictly a clinic, but a private charity hospital, which provided medical and surgical services and had 18 rooms. the unfeasibility of the 12 pujadas created and directed the magazine la razón de los sinrazón (1865-1866) and giné partagàs the revista frenopática barcelonesa (1881-1885). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 86 institution led to the decision in 1897, under the direction of surgeon antonio morales, to focus exclusively on surgery and on its private clientele, provided by the doctors themselves. consequently, the "clínica del pilar" placed its facilities at the service of any surgeon, opening a new model of professional practice and of exploitation of technological and hotel resources – known as "open" private clinics –, in which the surgeon would contract some administrative services with the clinic which, together with accommodation and food expenses, were finally paid by the patients (marí 2010, 20-21). x-ray technology, which was demonstrated in the faculties of science and medicine in barcelona in february 1896, was also incorporated into the range of practices developed in surgical clinics at the end of the 19th century. the new cardenal and fargas clinics subsequently assigned specific rooms dedicated to this new diagnostic tool. however, the introduction of this technology was neither immediate nor fast (howell 1995, 103-132). the growing use of the photographic record was, however, revealing (torres 2001). in fact, the construction of radiological knowledge was a slow process, which took almost two decades of progressive training and consolidation among the new classes of doctors (pasveer 2006). in this context, the strategic establishment of a radiology office in 1898 on the main floor of number 613 of the gran via de les corts in the centre of the eixample district is significant. the centre was run by doctors cèsar comas and agustí prió, who in turn were responsible for promoting photography and radiology at the faculty of medicine and the hospital de la santa creu and, from the 1900s, at the hospital clínic and the hospital de la santa creu i sant pau. their prolific activity led them to play a fundamental role in the academic dissemination of medical radiology in catalonia, and through intense advertising they helped to standardize the new visual language and diagnostic possibilities of x-rays among doctors and patients (portolés 2004). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 87 4. first phase: establishment of the clinics, 1900-1920s during the first decades of the 20th century, barcelona was the scene of profound demographic, social, economic and political changes. the population doubled from 537,354 inhabitants in 1900 to just over one million in 1930, although growth was concentrated in the last fifteen years of that period with a population increase of 400,000 inhabitants.13 a large part of this growth was due to migratory movements that were concentrated in the historical centre, in the raval district, where the living conditions were extremely poor. during this period, and increasingly since the end of the world war i, the construction of housing, with considerable typological diversity, grew in the eixample district and became more dense in the working class neighbourhoods of sants, poblenou, clot, etc. and in the neighboring municipalities of the working class periphery in l'hospitalet, santa coloma and badalona (oyón 2008; colell et al 2009). end-of-century social reformism introduced important changes in social legislation, giving rise to the 1900 law on occupational accidents which defined occupational risk and made companies financially responsible in the case of occupational accidents (rodríguez ocaña and menéndez 2006). this gave rise to healthcare schemes, some already existing and others new, aimed at the working population: mutual aid societies, company medical services, employers' mutual funds and private insurance companies (martínez-gallego and ruzafa 2009; maza 2009). in industrial areas such as barcelona and its mainly working-class suburbs, this situation significantly expanded the fields of medical care (vilar-rodríguez and pons-pons 2018, 60-75). considered in terms of the medical market (jenner and wallis 2007), in this geographical space and in the framework of the transformations that took place, on the one hand, a growing monopoly of the said market can be observed by the representatives of official, 13 data from censuses and registers drawn up by the spanish national institute of statistics. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 88 regulated and university medicine, in view of the persistence of a medical pluralism cultivated by all social classes, and, on the other hand, a multiplication of the hospital medical care offer, with beneficial roots, both public and private (fernández-pérez 2018; fernández-pérez and sabaté 2019). given this panorama, it is worth asking whether the surgical practices offered by the clinics that emerged during this period reached the whole population. in a context in which the public – and also private – provision of medical care had a charitable character that marked the condition of the poor patient and given the capacity of the bourgeoisie to be able to face without problems the cost of the intervention, the stay and even the recovery period afterwards, it seems appropriate to ask whether the working and lower middle classes of the city, individually or through mutual societies, resorted to private surgical services in case of illness (rodríguez ocaña 1990). in fact, in this period, the healthcare subsidy offered by some mutual societies was part of a competitive market where consumer cooperatives, insurance companies and other forms of societies also participated (solà 2003; duch 2019). this was not a completely new form of healthcare service, as since the end of the eighteenth century, barcelona has seen the use of guilds and associations to pay for medical care, outside the medieval and modern model of hospital charity, and in a context of the establishment of a capitalist economy where the health business grew inevitably (zarzoso 2006, 85-112). we do not have any studies on the sociology of the patients in the aforementioned clinics, of which there is hardly any trace left in the archives. nor do the available data shed any light on this matter. therefore, in the previously cited case of the surgical gynecological clinic of fargas, a preliminary examination of the medical records for the years 1907 and 1908 only indicates the marital status and geographical origin of the women who underwent surgery. the source volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 89 points out in an irregular manner their specific addresses, although the appearance of the name of the town or village where they lived is consistent. as such, we can see not only the presence of women from the city of barcelona and its neighboring towns, but also from the rest of catalonia and even from different parts of spain. there is no information on the occupations of these women. given the clinical nature of the information, there is no data here on the price of the operations, the total cost of the stay or the methods of payment. thus, it seems risky to infer from the domicile data, in the cases where it appears and in the absence of a systematic study, that the clinic was limited to a social sector with great purchasing power.14 studies on barcelona's mutual insurance industry in the first third of the 20th century show different strategies for survival, management and action, with illness and medical care benefits being a basis for their work. the cases of the federación de sociedades de socorros mutuos de cataluña (created in 1896) or the agrupación mutua del comercio y de la industria (created in 1902) indicate a considerable increase of their members (largo and pujol 2016).15 despite this, the high cost of medical expenses in this period, together with other factors such as inflation, made it difficult for this type of mutualism to survive after the civil war (largo jiménez 2016). another management strategy in the face of illness was provided by the quinta de salut l'aliança, based on the interest in linking the mutual aid societies with medical benefits of a hospital nature. the association had its origin in the alianza montepío de camareros of barcelona (with headquarters at number 3 of quintana street, next to boqueria market), and had a medical assistance section directed by josep girona trius, at that time one of the surgeons 14 fons fargas, històrias clíniques, 1884-1920, museu d’història de la medicina de catalunya. registers from 1907 and 1908. 15 subsidies paid could be for medicine or major or minor surgery paid on a daily basis for a stipulated period between 40 and 90 days. the operation was therefore not subsidized. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 90 of doctor cardenal's team in his clinicum. the surgeon girona most likely convinced his employers of the importance of having a clinic, which was then opened in april 1904 at number 3 of de la torre square in sant gervasi, with a capacity for 9 patients. shortly afterwards it was decided to extend the services to other workers' associations, at a monthly fee of 0.10 pesetas, reaching 1,600 members by the end of that year. the growing number of members led to the clinic being moved to a new building, with a capacity for 25 beds, at 317 còrsega street, next to torrent de l'olla. the clinic offered medical and surgical services there between 1906 and 1917, when a new building was opened, known as the palau de la mutualitat, in sant antoni maria claret street, very close to the hospital de la santa creu i sant pau, which was still under construction and intended to accommodate poor patients. in 1917, the new clinic had 40 beds and the association had 26,000 members, and continued to grow and multiply its services over the following years: 80 beds in 1921 and 350 beds in 1930 (prim and campillo 1988). thus, the aliança mutual society, with a diverse urban social base made up of workers, shopkeepers and the petite-bourgeoisie, is a clear example of growing medicalization and the influence of the health factor in the services provided by these societies. the data provided by vilar-rodríguez and pons-pons are conclusive: in 1923, in the province of barcelona, 641 mutual aid societies welcomed 166,894 members who were offered medical care, mainly surgery, as well as benefits for disability and death. these historians place the average cost per day of illness of a member at almost 4 pesetas, when the average daily wage of an industrial worker in 1920 was 6.33 pesetas (vilar-rodríguez and pons-pons 2018, 60-61; pons-pons and vilar-rodríguez 2011 and 2019; menéndez 2010). the clinical histories of the patients of the ophthalmologist frederic hospital prats help to understand the complexity of the barcelona medical market of this period, the strategies of volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 91 diversification of work of the doctors and the sociology of the patients. this doctor had been trained at the aforementioned ophthalmology clinic at the hospital de santa creu, where he practiced between 1911 and 1924. he worked intensively in barcelona until the end of the civil war. his clientele came from all urban social classes, as he was a doctor at the gran teatre del liceu during this period. from 1911 he had a clinical practice on the first floor of number 13 of the ronda de sant pere and two dispensaries in the working class neighborhood of sant martí de provençals, at 114 major del clot street and 165 pere iv street. the clinical records kept indicate personal and clinical data of its patients: names, addresses, pathologies, treatments, prices of visits. the patients attended at his clinic generally came from the two dispensaries, as well as from entities with which he had signed medical assistance contracts: the aliança mutual insurance company, the highway and "rajolers" guilds, the sant martí de provençals association of metalworkers, the campsa company and the la nueva mundial and rabassa insurance companies (grabuleda 1998)16. in the years 1911-1912, the average cost of the visit was 5 pesetas. here is a small sample of the men and women visited, inhabitants of la sagrera, poblenou, clot, among other neighborhoods of the city: a young woman of 20, single, a weaver, from the clínica de san martín/csm (dispensary); josé blanch, 50, lives in amistat street, 22, poblenou, of the csm; josé duran, 36, a barber, lives in la sagrera, of the clínica del clot/cc (dispensary); marina minguella, 24 years old, seamstress, lives in poblenou, of the csm; ignacio puig-gros, 57 years old, market seller in sant agustí vell, recommended; benito lora, 21 years old, single, worker in "nuevo vulcano", barceloneta; a young man of 23 years old, single, glass painter, lives in clot, of the cc; n. pujadas, 30 years 16 rabassa probably refers to josep rabassa font, a health insurance promoter who joined doctors joaquim abelló and ferran rosell, founders of the insurance company atlántida in 1927 and promoters of the sindicat de metges de catalunya in 1919 (balasch 2002). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 92 old, single, owner of a perfume shop in conde del asalto (later known as nou de la rambla street)17 it does not seem risky to say that, in the face of illness and despite the fragility of the domestic economy, an economic effort was made, especially when surgery showed curative efficacy. it is possible that this was also favored by an upward trend in real industrial wages. however, the jobs that have analyzed the working families' budgets do not explain this type of expenditure, but that of other consumer goods such as clothing, shoes, food, alcoholic beverages and education. nor do they allow us to infer whether access to health, understood as a factor of consumption, showed inequalities between men and women within families (llonch 2004; borderías, pérez-fuentes and sarasúa. 2014). the line separating the condition between the sick worker and the poor sick worker was very fine and, in the second case, public and private philanthropy allowed them to access hospital services. a hospital where bourgeois charity was the main emblem of the social order and where the poor sick man put his body at the service of medical science. hence the resistance to ending up in the hospital, even in the new hospital de la santa creu i sant pau. the historian ealham has shown examples of workers' solidarity by talking about the presence of the disease in the face of the difficult survival conditions of the workers of the raval in order to pay rent, food and even for second-hand clothes (ealham 2005).18 as we can see, the dynamism of barcelona's urban society in the first two decades of the 20th century reveals a growing medical market, characterized by a diversified healthcare offer and 17 fons hospital prats, històries clíniques, 1911-1936, museu d'història de la medicina de catalunya. records from 1911 and 1912. 18 the popular disrepute of the new hospital de la santa creu i sant pau was in the public domain (rodríguez and cruz 2018). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 93 a population that anticipates, invests in and tackles illness head-on. during this period, however, there was no significant increase in the model of surgical clinics that originated at the end of the 19th century. this did not imply a failure of the model. in fact, the clinics, which were run by these surgeon-professor-entrepreneurs with great social prestige and public influence, showed that they functioned as a business. and also that their location in a bourgeois, hygienic, ordered and urbanized environment such as the eixample district had been a wise choice (colell et al. 2009). the few clinics that were created thus all had three similar features, which had already been established by the first clinics: the practical training and teaching of some of their directors, the increasing fragmentation of surgery into different specialties and the location in the centre of the eixample district. specifically, in the seven surgical clinics established in these years, two offered ophthalmic surgery services (barraquer and hospital prats), three specialized in urinary tract surgery (serrallach, sacanella and bartrina) and the other two, in the hands of professors, in general surgery (esquerdo and corachan). the geographical distribution in the city is also significant, and would be linked to strategic decisions by those business surgeons. this is why the ophthalmologists were located on the borders of the old walled city and the eixample district. in 1903, at number 3 of the ronda de sant pere, josep antoni barraquer set up the clinic where his son, ignasi barraquer, worked until he moved to his well-known clinic on muntaner street in 1940. at number 13 of the same ring road, in 1911 frederic hospital prats was established. these are not isolated clinics, but large floors fitted out for this purpose. on the other hand, the previous existence of clinics or the proximity of the two large hospitals served as a factor of attraction in other cases. in 1915, manuel corachan established himself near the hospital clínic, at number 189, rosselló street, and in 1921 he moved to a new clinic building on buïgas volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 94 street, where it still exists today, after substantial architectural modifications and extensions. in 1910, narcís serrallach put into operation the healthcare and business strategy of a double professional location: he visited the clinic on a central floor, at 40, pelai street, and operated in the clinic at 250, balmes street, next to the clínica del pilar. we see similar planning in the case of the surgical sanatorium founded by emili sacanella in 1911 in a huge, quiet mansion next to the sarrià train station. on the other hand, in the upper part of the eixample district, bordering popular neighborhoods such as sant martí and el clot, and on the transport line to the hospital de la santa creu i sant pau, still under construction, josep maria bartrina – in one solitary tower, as shown in the advertising photograph, located at number 760 gran via de les corts – and àlvar esquerdo – next to the diagonal, at 340 provença street, were established in the 1910s. these last two cases are also indicative of the profitability and durability of the private surgical business in these first decades. thus, bartrina's sons, who were also surgeons, continued to run the clinic beyond the 1930s. while the esquerdo family, after his death in 1921, sold the clinic to surgeon enric seguí, who sold it to surgeon sever figarola at the beginning of the 1930s after building a new large clinic at 49 salut street, in the sant josep de la muntanya district, which over time also became a quieter medical services area. in addition to these clinics, during these years one can observe the establishment of auxiliary services, in the form of small medical companies, under the name of a 'gabinete' or institute, which complement the services of the surgical clinics and standardize new practices in medical diagnosis and treatment in the city. two processes converged at its peak: the effects of laws on occupational accidents and the progressive shaping of radiological knowledge and laboratory medicine. in turn, the same pattern of geographical location can also be observed in all cases in the eixample district: proximity to clinics and hospitals and proximity to means of transport. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 95 and the same architectural formula: the fitting out of a large flat or the establishment in a "xalet" or a detached house. in 1904, doctors ricardo pi, luis gubern and rafael musterós built the institute of mechanotherapy at 44, bruc street. in 1910 three new centres were founded: two clinical analysis institutes, one at number 5 pelai street, in the hands of doctors carles and xifra, and another in plaça d'urquinaona, directed by j.a. grífols roig, luis celis and ricardo moragas, which would be moved in 1923 to rambla de catalunya, 102 (sans-ponsetí and fernández in this special issue); and the rontgenology and electrotherapy office of ignacio canal, at rambla de catalunya, 5. another similar radiological office was created in 1915 by the doctor francesc serra casals, in the historic centre, at tallers street, 62. at the beginning of the 1920s it was moved a few meters away, to 33 of the ronda de universitat. finally, in 1916, dr. joan riera vaquer opened a physiotherapy institute at 619 gran via de les corts (zarzoso and fajula 2015 zarzoso 2017). certainly, the architectural, urban, medical and business model of barcelona's surgical clinics is unique and shows characteristics that bring them closer together and also differentiate them in this period from the concentration of medical services in london's harley street (humphrey 2004), from the creation of a real medical neighborhood like vienna's medizin-viertel (rentetzi 2004), of the large hospital mansions in melbourne far from the centre and with domestic surroundings (bourke 2012), the "house-clinics" established by some doctors in toronto (adams and burke 2008), or the design of the "surgical suites" – the operating room surrounded by small preparatory rooms – which characterized the north american hospitals designed by the architects stevens and lee (adams 1999). in any case, it precedes and surpasses in number and presence the few clinics that were installed in those years in madrid (álvarez-sierra 1952), volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 96 valencia (garcía ferrandis 2021), san sebastián (solórzano 2004), toledo19 or palma de mallorca (rodríguez tejerina 1995), among other spanish cities, during the period under study. 5. second phase: expansion of the clinics, 1920s-1930s the period from the 1920s to the beginning of the civil war can be characterised by the splendour of the phenomenon of private clinics in barcelona. in the same way that urban history has explained the growth of the city, the construction of a great variety of buildings and the concentration of the working class suburbs and the eixample district, clinics flooded the urban landscape (see map 1). in fact, we have been able to identify more than forty new private medical spaces between 1920 and 1936. specifically, 29 surgical clinics, while the remaining twelve centres were specialized in other areas of internal medicine or in the form of auxiliary diagnostic services (see table 1 and 2). the pattern of location maintained the predominance of the eixample district for the clinics. this could indicate a segregation of activities by social areas or urban districts (oyón 1999 and 2008). however, the massive establishment of private doctors' surgeries throughout barcelona and the consolidation of the offer of mutual or business medical care management acted as intermediaries between the working and popular classes and the surgical clinics. the healthcare model thus became divided between public and private philanthropic hospital care based on charity and medical care based on the relationship between the free exercise of a given profession and the patient, understood as a consumer. it is no coincidence that the sindicat de metges de catalunya was founded in 1920, in a context of political debate regarding the extent of compulsory insurance, fees and medical benefits, 19 del cerro, rafael. 2017. “la atención médica en toledo entre 1900 y 1936.” abc, january 29. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 97 negotiations with occupational accident insurance companies and mutual benefit societies, and the free contractual relationship between doctors and patients (martín berbois 2012, 22-28). the identification we have made of clinics and auxiliary establishments during this period is based on the study of medical guides and directories published in barcelona between 1916 and 1936 (zarzoso 2011a). as well as in various works we have carried out advertising exclusively aimed at doctors and published in medical journals during the first third of the 20th century (zarzoso and fajula 2010 and 2011).20 with regard to medical guides, it should be noted that this is an exceptional source, used for other european and american cities from the middle of the 19th century to the first third of the 20th century, and that it allows the forms of selfrepresentation, the processes of specialization and nomenclature and the communication strategies of doctors to be considered throughout these years (weisz 1997 and 2005). geographical information the exact location of medical practices, clinics and care establishments and communication strategies – advertising – should be added to these aspects. the medical guides and directories of the city of barcelona began in 1798 and were discontinued during the 19th century. together with these sources, the general guides to the city published during that period also provide detailed information both on healthcare establishments and activities and on the name, address and activity of different healthcare professionals. the establishment of professional associations – the barcelona medical association (1895) – led to the publication of various medical directories with identification of addresses and consultations between 1898 and 1945. during the first third of the 20th century, medical guides multiplied. on the one hand, thanks to the publishing initiative of joaquim 20 advertising has also been studied in other contemporary journals: ciència (garcía lladó et al. 2013), la medicina catalana (perona 2015, 184-224) and monografies mèdiques (morera 2016, 151-198). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 98 domènech, supported by funding provided by the ibero-american laboratories, the galeniana medical guide was published between 1916 and 1926.21 it is possible that the end of this initiative coincided with the activity carried out since 1924 by the sindicat de catalunya, with a generalised geographical implantation and with greater and quicker access to the sources, that is, to its members. the medical union (sindicat de metges) produced a series of very complete medical guides, with a diversity of classifications, detailed information and a great profusion of images and advertisements between 1925 and 1936.22 an analysis of these medical guides shows the implementation of a new model of medical care in the city based on private medical consultation. this was a free service through a private flat-rate contract or a contract with a mutual aid society which completed and complemented the traditional model in which the doctor went to the patient's home. in the new model, the patient visits the doctor's surgery. the model was extended from the historical centre of barcelona in the mid-19th century to the different neighbourhoods throughout the city from 1900. the practice became more common and was implemented in parallel with the urban transformation of the city caused by demographic changes and new forms of transport and communication (knox, bohland and shumsky 1983). in barcelona's urban landscape, medical guides from the first third of the 19th century show the overlap between this form of care for private patients and the development of private clinics. this is a clearly urban model, which rarely occurred in other cities in catalonia. it is also linked to the growing process of specialisation that took place from the end of the 19th century and that has proliferated since 21 the latest edition indicates that this was the eleventh volume of a series introduced 11 years earlier. however, we have only been able to consult three issues: galeniana, guía médica de barcelona (year 1, no. 1, 1916); galeniana, guía médica de cataluña y baleares (no. 5, 1920); and galeniana, guía médica de cataluña, valencia, zaragoza y baleares (year 11, no. 11, 1926). 22 the sindicat de metges de catalunya guides consulted here are: guia mèdica de catalunya (1925), guia mèdica de catalunya (1926), guia mèdica de catalunya i balears (1935 y 1936). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 99 the period of the world war. despite the growing importance of medical specialisation, the majority of doctors working in the city were general practitioners and were working in a medical market where job opportunities were provided by the demand for medical services, which had been growing steadily since 1900. as we have pointed out, the target audience for the advertising strategies of the surgeon-entrepreneurs were those general practitioners, given their intermediary status between the patients visited in their practice and the surgical treatment of various illnesses or injuries carried out in the surgical clinics. in the medical guides and in the medical press of these years, the strategies of persuasion and communication developed by surgeon-entrepreneurs no longer needed to resort to the combination of an elaborate written description and a display of visual media maps, plans or photographs.23 the operating room and the surgery carried out there was a reality at the time that was solidly rooted. together with the names provided by professional self-representation, the advertising strategy made it possible to define specialization, the precise location of the service, the availability of suitable technologies and the architectural environment inside and outside where everything took place. this advertising, which was exclusively aimed at doctors, took place in a very particular context. firstly, between the last decade of the 19th century and 1938, around one hundred and fifty new medical periodicals were created in barcelona, both general and specialized (zarzoso and fajula 2009). along with subscriptions, advertising was their main source of funding. moreover, these years witnessed both the professionalization of 23 the advertising images of the above-mentioned clinics can be seen from the projects carried out at the museu d'història de la medicina de catalunya on the material culture of medicine in barcelona in 1900: www.medicinaiarquitecturabarcelona.cat/cliniques.html and http://www.premsamedica.cat/ http://www.medicinaiarquitecturabarcelona.cat/cliniques.html http://www.premsamedica.cat/ volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 100 advertising and the flourishing of the commercial agent, representatives and distributors of medical materials and instruments (liebenau 1986). the new advertising strategy of the clinics was therefore based on the visual representation of the ideas to be communicated and, through a precise combination of image and short text, aimed to persuade general practitioners of the technical and comfort benefits of their facilities (mendelson 1998). illustrators, photographers and designers were involved in the execution of the clinic advertisements and, in general, full-page or half-page advertisements were chosen (barjau 1999). in the presentation, photography was central: showing the exterior architecture and main facade of the clinic or some of the clinic rooms. in the latter case, the options were the operating room or the comfortable nature of the rooms or the dining room.24 framing the photograph, in the upper part, the header of the ad explained the name of the clinic and its surgeon owner, as well as the precise location and telephone number. in addition, in some cases, the proximity of a railway or tram station was also indicated. in this part or at the base of the illustration, the surgical specialty of the clinic was also indicated, as well as the conditions they were treating and the names of the members of the medical team and the area of specialization: from general and pediatric surgery to gynecological, urological, otolaryngological, ophthalmological and orthopedic surgery, etc. the lower part also contained, with different formulas of size, design and location, texts that reinforced certain characteristics of the clinics. thus, without a fixed method, the advertisements for the clinics mentioned different factors: the great comfort of the establishment with a lift, central heating, bathrooms, interior telephones, chapel, gardens; the possibility of being accompanied by the family; the recent 24 the architecture of the clinic and all the surgical units, as well as the building materials, were fully established in the 1920s (kisacky 2017). volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 101 construction of the building "with the latest innovations"; the availability of competent auxiliary personnel; the possession of technological equipment for exploration – x-rays – , for surgery – aseptic operating rooms already designed with materials for this purpose –, for treatment – deep radiotherapy and electromedical equipment –; the price of the stay – "pensions from 12 pesetas a day", "independent rooms from 10 to 50 pesetas a day", "general room at 6 pesetas a day"–; or the target public beyond the bourgeoisie – "medical-surgical assistance in optimal conditions to the middle and working classes, freeing them from resorting to charitable hospitals". the clinics (table 1) were located in the eixample district based on business strategies that responded to the progressive urbanisation of the city both in terms of building and electricity supply -, the provision of means of transport tram and bus lines, which in turn connected the previous railway stations, and since 1925 the underground and the poles of attraction created by both the large hospitals and other medical centres of reference. thus, the passatge mercader, location of the clinicum of the cardinal surgeon, became a real medical street, with a total of 6 clinics in the 1930s. in the centre of the eixample district, between balmes and bruc streets, clinics and other auxiliary medical establishments were set up, seeking prestige and visibility in the heart of the urban bourgeoisie. from the historical centre, the rounds were another destination for the clinics, on the border with the new city. there, the tram lines that left from the university to the hospital clínic and the hospital del sagrat cor along the streets aribau, provença, casanova, còrsega and urgell were the destination of as many clinics, as well as dozens of private medical practices. at the other end of the eixample district, from passeig sant joan, taking advantage of the progressive urbanization of this part of the city and the tram lines that went up to josepets square and the salut district, the clinics grew parallel to and at some distance from the hospital de la santa creu i sant pau, which was still under construction. the volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 102 surgical clinics were also located in the areas between putxet and sarrià from the railway lines and the trams that crossed the city. buildings of imposing architecture, in quiet, landscaped and well-communicated places. finally, on the outskirts of the city, specifically in the popular and working class neighborhoods of les corts, sants and horta, a few surgeons decided to set up their clinics. 5. conclusions the network of private surgical clinics studied in this article survived the impact of the civil war despite the fact that many of those entrepreneurial doctors closed their clinics and went into exile (zarzoso 2011b). overall, the surgical model was favored by the lack of competition in the public sector and, above all, by the continued cultivation of the working-class public provided by mutualism and by contracts with insurance companies, and also by collaboration with the obligatory health insurance created in 1942. it should be noted that the model of small clinics gradually disappeared over time due to a lack of competitiveness and the cost of the resources needed to maintain them. on the other hand, the polyclinic solution such as the clínica platón or the clínica corachán or the specialized formula such as the clínica dexeus, in gynecology, or the clínica barraquer, in ophthalmology, meant a successful alternative to the small surgical company which was either absorbed by other clinics or became extinct with its owner (comelles et al. 2017; vilar-rodríguez and pons-pons 2018, 229-250). this article has showed how a new model of private clinics were established in late 19th-century barcelona and developed in the first decades of the following century. significantly, since its origins in the 1880s, private surgery clinics rose to more than 50 in just half-a-century. here, this contribution has demonstrated how several business strategies were put at work by those volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 103 surgeons-entrepreneurs, mainly those related to publicity and the search of patients/customers, in order to attract the interest of general practitioners. several key-factors played a principal role in that success: medical technology, domestic comfort, and surgical efficacy. moreover, private clinics also showed how the process of medical specialization was configured and how it contributed to underpin those key-factors through a variety of surgical solutions. medical directories and medical journals are a useful resource to understand how those strategies of communication were deployed. interestingly, the use of a new language was of paramount importance as it can be seen in the utilization of the positive word clinic instead of the pejorative term of hospital. actually, general practitioners never lost control over their patients and acted as intermediaries between them and private surgery clinics. thus, all of them played a relevant role in the medicalization process of the catalan society since the late 19th century. so, this research explains that this kind of private medical care happened in an open medical market and successfully met a growing demand. in a context where medical care delivered at hospital was provided by the city-state or the local bourgeoisie as a part of the medieval model of charity, a potential customer for the private surgery clinics was formed by the urban, popular and working classes through the model of mutual aid societies and health insurance companies. surgery clinics established throughout this period contributed to configure and develop the catalan healthcare model, which can be defined both in terms of hospital centrism and the dominant weight of its private nature. volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 104 map 1. surgery clinics established in barcelona, 1920-1936 source: http://www.medicinaiarquitecturabarcelona.cat/cliniques.html a website project of the museu d’història de la medicina de catalunya. table 1. surgery clinics settled in barcelona, 1920-1936 founding year map number name of clinic or surgeonentrepreneur location c 1920 20 clínica del remei, dir./ dolores lucas, almenara widow pau claris 114 (transfer to the salut neighborhood , 1920s) c 1920 – clínica drs. roura and farreras hospital, 4 (old dity) c 1920 – clínica de nostra senyora de la mercè, drs. v. lillo and lluís oller còdols/ample (old city) c 1920 – clínica quirúrgica, dr. pere huguet puigderrajols pelai, 16 (transfer to ronda univ., 17) (old city) c 1920 2 clínica d’orl, dr. lluís vila d’abadal passatge mercader, 11 c 1920 18 clínica d’orl, dr. lluís tomàs passatge mercader, 15 c 1920 26 instituto policlínico degollada valència, 216 c 1920 7 sanatori quirúrgic dr. ramon san ricart ballester, 69 1923 10 clínica dr. adolf pujol brull granados 83 1925 25 clínica victòria passatge maragall, 52 1925 4 clínica del dr. mariano bretón mutua general de seguros muntaner, 474 http://www.medicinaiarquitecturabarcelona.cat/cliniques.html volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 105 founding year map number name of clinic or surgeonentrepreneur location 1926 5 clínica de cirurgia general dr. cèsar olivé-gumà còrsega, 347 1926 23 clínica dr. eduard vilaseca santa creu street, 1 (gràcia) transfer to passeig sant gervasi/craywinckel, ca 1930s 1927 11 clínica ginecològica, dr. víctor conill camèlies, 2 1928 17 institut mèdic d’ortopèdia dr. hermini castells passatge mercader, 7-9 1920-30 clínica gajo, josep gajo pagès and ramon gajo miro rambla just oliveras, 48 l’hospitalet (west barcelona) 1920-30 24 clínica quirúrgica dr. josep soler-roig modolell, 12 (via augusta) 1920-30 8 clínica drs. llauradó and julià (f. llauradó clavé, f. llauradó tomàs, r. julià rosés) roger street, 316/ jaume roig street, sants 1920-30 21 clínica d’operacions dr. j. pi figueras and isidre bogunyà porta remei street, les corts 1931 13 clínica dr. seguí salut street 1930s 3 clínica solarium , drs. jm vilardell and vicenç compañ violeta 1-passeig vall d’hebron 1934 28 clínica oftalmológica dr. hermenegildo arruga passatge méndez vigo 1935 14 clínica mater, s. dexeus passeig bonanova 1935 29 clínica quirúrgica drs. jm reverter and sixte pérez anglí, 1 1935 6 clínica de cirurgia dr. carles sala parés republica argentina avenue, 240/ carriage entrance c/ gomis 1935 9 clínica quirúrgica dels drs. albert i joaquim escayola bèlgica street (after alfons xii) 51 1935 22 clínica de joan pujol matabosch garcía mariño/tibidabo avenue 1936 12 clínica de tocoginecologia del dr. j. m. andreu bayer hurtado, 5 (sant gervasi) 19341941 16 clínica barraquer oftalmologia ignacio barraquer muntaner/laforja source: author’s elaboration from medical guides and medical journals published in barcelona (19161936) volume 6, number 1, 67-113, january-june 2021 doi.org/10.1344/jesb2021.1.j084 106 table 2. medical private firms established in barcelona (1920-1935) year of creation or identification name of entity of auxiliary services location c 1920 laboratori per a anàlisi d’orines, dr. joaquim vellvé cusidó ferran, 53 1922 institut de medicina pràctica, dr. domènec duran arrom astúries, 89 1925-26 institut policlínic sant gervasi clínica platón platón 1920-30 centre radiològic del dr. ramon torres carreras passeig de gràcia, 83 1920-30 institut de diagnòstic i terapèutica física dr. vicenç carulla còrsega, 285 1920-30 institut mèdico pedagògic, dr. josep córdoba brussel·les street, guinardó 1930 gabinet tractament de l’obesitat, dr. jesús noguer moré enric granados, 116 1932 institut de gastroenterologia, dr. jacint vilardell permanyer bruc street 1935 laboratori anàlisi i transfusió de sang, dr. manuel miserachs bruc, 117 1930s casa mèdica de repòs bonavista (august pi sunyer, emili mira, belarmí rodríguez.arias, jacint vilardell) diagonal avenue/ pedralbes road sant just desvern 1930 servicio de transfusión sanguínea, drs. antoni armengol and francesc martínez ribera rosselló, 255 1935 institut d’observació psicològica la sageta, emili mira teodor roviralta, 21/ tibidabo avenue, 1 source: author’s elaboration from medical guides and medical journals published in barcelona (19161936) references aibar, eduardo, and wiebe e. bijker. 1997. “constructing a city: the cerdà plan for the extension of barcelona.” science, technology, & human values, 22(1): 3-30. adams, annmarie 2018. “surgery and architecture: spaces for operating.” in: the palgrave handbook of the history of surgery, edited by thomas schlich, 261-281. london: palgrave macmillan. adams, annmarie, and 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digitalization; digital transformation; family business; family firm; spinnovation; digital branding corresponding author: e-mail: sven.cravotta@srh.de received 08 sept 2018 accepted 09 nov 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 1. introduction family businesses are the backbone not only in the dach region1 (simon 2007, 40) but in the economies of many european countries (european commission 2016). the economic importance of these companies is undisputed: in 2016, family-controlled companies compared to all active non-public companies accounted for 91%; furthermore, they were responsible for a share in total employment in the private sector of 57% and a share in total turnover of 55% (stiftung familienunternehmen 2017, 2). taking family firms in a german context as an object of scrutiny is particularly interesting because the cultural background of germany is well-known to stand for two aspects that are at the one end of two extremes: secrecy and dedication (e.g. grottke et al. 2016a). such values seem well to contrast with attributes such as transparency and flexibility that are commonly attributed to the anglo-saxon area (e.g. gray 1988; nobes 1998). such values have led to the corresponding and internationally well-known description of the most salient german family firms as ‘hidden champions’ (simon 2007) where the first word is a consequence of secrecy while the second is a derivative of dedication. at the moment digitalization has become a buzzword in germany. digitalization can be understood in two ways: one way describes the technical process of converting analog signals into a digital form (legner et al. 2017). this is accompanied by a dematerialization of information, a separation which decouples information from its physical carriers and allows for their digital storage. the second way in which this term is used consists in the multifaceted way in which socio-technical phenomena and the process of adopting and using digital technologies take place in another individual, organizational and social context (legner et al. 2017). hardly 1 the dach region includes germany, austria and switzerland. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 any company in this country (and probably worldwide) can ignore the fact that at the moment all businesses are going through a digital transformation of their own business models. this also applies to family businesses. in this paper, we present some insights with respect to central dimensions of the digital transformation and of the use of digital technologies from the perspective of family businesses. we do this by taking the characteristic features as well as the special opportunities offered to and risks to be faced by german family businesses in general as a starting point to develop a theoretical model that allows for identifying factors, that are widely discussed during the digital transformation. given the strategic importance and the characteristics of german family firms to be hidden, in contrast to general literature on digitalization (e.g. grottke and boll 2018; demary et al. 2016 among others), literature as well as empirical evidence on this topic is very scarce. the paper relies therefore on three sources: our own studies (e.g. grottke and boll 2018), digitalization cases in general that stem from family firms (purs-pardigol and kehren 2018; lichtner and kinkel 2018) and our personal numerous anecdotal evidences from managers and owners of family firms that we have accumulated during the last years. from this material we extract what can be related to the specific characteristics of family firms, neglect what is not specific for digitalization in particularly family firms and theorize why certain elements of the digital transformation might fundamentally change the way in which german family firms carry out their business. our contribution in this respect is twofold. theoretically our paper offers some indications that german family firms will take a different route through digitalization than other firms which might be interesting for family firms and other firms alike. practical implications of our paper might be seen in the implications which if they are correct can help mid-size family http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 businesses to face the rapid and extreme changes that arise with the digital transformation. while we recognize that due to the peculiarities of each family firm each firm will have to find its own way, we hope thus to assist to a certain degree by inspiring decision makers in those family firms. the remainder of this paper unfolds as follows: first of all, the specific features of already existing german family businesses are discussed, by making reference to their quantitative and qualitative characteristics and by deriving a theoretical framework for family firms from those characteristics. based on this framework, we outline why dealing with the digital transformation for family businesses is different from discussing digital transformation for startups and provide an overview which aspects of the digital transformation might be related to the framework and in which direction they change the framework. then changes occurring with respect to six dimensions of digitalization are discussed that offer a relationship to family businesses: agile collaboration, expedient entrepreneurial family organization, spinnovation, digital branding and digital production in family businesses, and networking and collaboration between family businesses. a short summary and an outlook on future research opportunities arising from the preliminary insights of this paper conclude. 2. characteristics of family businesses and german family businesses when introducing characteristics of a family business, two starting points can be offered. one starting point might be to take recourse to the fact that family businesses can be described by their differencia specifica, that is, their characteristic that a family is behind the company and that the firm can be significantly influenced by this family (wittener institut für familienunternehmen 2018). quantitatively, a significant influence requires a minimum of an equity investment held by the family which exceeds 25% (cravotta 2013, 37-38). what is not http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 necessary is an owner-manager. the decisive influence can be exercised also by the supervisory body (supervisory board or advisory board) (cravotta 2013, 61-62; wittener institut für familienunternehmen 2018). in consequence, family businesses can be managed by salaried managers, too (cravotta 2010, 1; cravotta 2013, 18; cravotta 2014, 5). following qualitative characterizations of family businesses that can commonly be found in the literature, e.g. in becker et al. (2008), cravotta (2013), hiebl (2012), schlippe et al. (2008) and many others, three derivatives of family businesses can be identified. on the one hand, the family tends to transfer a more human, more informal and therefore more flexible element to the company. on the other hand, a family usually operates a company not only for economic purposes, but also for content-related reasons or the vision of a given owner. as a result, we typically find that family businesses maintain close relationships with customers whose problems are resolved accurately. third, unlike a capital market-oriented firm, a family cannot easily raise equity as equity is limited more or less to the amount available from family members. this involves that the family firm tends to be less capital intensive than large corporations. when we ask for the specifically german aspect in family firms three aspects stand out. first, the german business culture has been characterized by a tendency towards content related obsession or dedication that takes a focus on the long-term effect and corrects and optimizes issues even then when this might have negative consequences in a short-term perspective (ahrens 1997). second, there is a ubiquitous tendency of german ("hidden") family firms to secrecy (grottke et al. 2016a). third, there is a culture of competition and performance in business that understands businesses as a successful discovery procedure of better products, http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 services and procedures and that therefore is very innovative but at the same time draws strong frontiers between a firm and those that are outside the firm (grottke 2011). together the characteristics of family firms and the german context explain the worldwide known german family firms that have been characterized as "hidden champions" and it explains why those very successful german family firms have certain criteria in common: an obsession, shared with like-minded employees, focusing, setting standards, and customer orientation (simon 2007). the theoretical framework which emerges from all the aforementioned aspects is outlined in the following picture, in which the framework puts the aforesaid in a nutshell and demonstrates how german culture and family firm characteristics interact with and complement each other. figure 1. theoretical framework of the characteristics of german family firms environment environment hidden secrecy secrecy hidden customer orientation source: own illustration. family dedication firm hierarchy, flexibility, humanity, focus http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 3. special challenges of digitalization for german family businesses why does digitalization involve specific challenges for german family businesses? this can be quickly understood by analyzing how main changes in digitalization can be related to the characteristics of german family businesses. one challenge for family firms in general consists in the fact that the geographical and temporal independence which arises from virtual reality data can partially contrast with the limited resources and regional roots that lead to a forced focus of family businesses. for example, a family business which is involved in digital brand management will hardly diffuse new products by investing billions in order to flood the entire virtual space with information on their new products taking into account cultural peculiarities of all regions in the world from which inquiries about their own product now start to be requested in the virtual space. this does also set a challenge based on the so-called innovator's dilemma of disruptive innovations (christensen 1997). it becomes increasingly clear that even today's world market leaders with brilliant products may be threatened by new, seemingly harmless, technologically and initially far inferior products. examples are numerous: the nikon camera of photos that was largely replaced by the smartphone, the metronome that was replaced by the metronom-app, the physical key that is increasingly replaced by a kind of qr code. and so eventually whole industries and traditional companies disappear – a real danger, in particular for highly specialized family businesses, which are naturally forced to focus. another challenge consists often in the hierarchical structure of family businesses. such firms have often a boss at the top, which characterizes the company through its charisma. this together with the ubiquitous tendency of ("hidden") family firms to secrecy (grottke et al. 2016a) stands in stark contrast to the extensive and steadily increasing digital traces that lead http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 to information overload for individuals and transparency of individual mistakes on the one hand and the increasing volatility, uncertainty, complexity and ambiguity on the other hand, that rather than individual decisions force to delegate decision making and to empower employees to take the best decisions. a further challenge is that, in turn, digitalization puts new levels of human-machine automation at work, which makes many of today's jobs superfluous. additive procedures such as rapid manufacturing and "mass customization" indicate that niches that were traditionally occupied by family businesses could in future also be filled by financially strong large companies. finally, comprehensive networking means that changes, both positive and negative, spread faster and that individual companies are barely able to operate in isolation from the digital world and from other companies. this is something which contrasts with the intention of many entrepreneurs in family businesses which is to be free from dependencies to act based on the own free will. in other words, typical characteristics of german family firms are under attack from different aspects of digitalization. figure 2. theoretical framework of the challenges for german family firms arising from digitalization vuca world environment environment hidden secrecy secrecy hidden transparency collaboration delegation of decisions customer orientation digital factories disruptive innovations source: own illustration firm hierarchy, flexibility, humanity, focus family dedication http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 how and why do family firms react or are recommended to react exactly in the way to those challenges as it can be observed in practice in germany at the moment? in the following we provide an answer to this question. to this purpose, we group our empirical observations around six dimensions and theorize why german family firms experiment with exactly those changes. 4. dimensions of the reactions to digitalization by german family businesses how could family businesses react to these changes? to understand why this question is in need to be answered with a specific focus on the peculiarities of family firms it is necessary to carve out first why traditional family businesses in europe, especially in germany, cannot be equated with the startups in the silicon valley. the key difference to startups consists in family businesses having been knowing their market for decades or even centuries (e.g. simon 2007). thus, they have a not inconsiderable wealth of experience on the one hand, which allows them to avoid unmanageable strategic options right from the beginning and to save much time and money that otherwise would be wasted in unnecessary trials. conversely, startups in the silicon valley can accumulate capital resources that allow them to establish themselves quickly. by making use of a marketing budget that amounts to a multiple of the annual revenue, a company can rapidly become known in the virtual space all over the world and learn from its customers e.g. by making use of the measurebuild-learn-concept of the lean startup approach (ries 2011; cravotta et al. 2018a). but what can be a sensible way of dealing with digitalization of family firms? robert obermaier from the university of passau, one of the leading german researchers on industry 4.0 and digitalization, pragmatically took this as follows: family businesses need to ask themselves which strategic decisions made today could increase the potential for new future decisions http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 (obermaier 2018). below we discuss some interesting aspects in key dimensions of which we believe that they might have such a potential. 4.1. dimension agility and german family businesses one way that is discussed for increasing the productivity, adaptivity and pace of the highly human capital-oriented family firms in an age of digitalization consists in making use of the principles of agile organizations. this is a way which for example the german consulting firm kyona proposes as a particularly suitable solution for family firms (borg and hill 2018). the basic idea is that the hierarchical structures of german family firms are too slow for a highly dynamically developing world. however, one could argue against this solution that hierarchies allowed for the dedication to a concrete idea which is typical for german family firms as hierarchy permits to be focused consistently across the family firm. therefore, it is indispensable to decentralize. for this reason, the company management needs to replace concrete goals with a blurred vision; instead of a rigid planning, an increasingly adaptive roadmap takes into account already existing and in real time accruing experiences. instead of personal communication, topic-related communication is preferred. indeed, an agile family business gets rid of many problems such as the exploding email accounts of executives in family businesses. at the same time, however, dedication of the owner to his vision needs to be replaced by dedication to the vision of the owner of the employees. the digitalization project of the german family firm rieber which reunited his employees around his vision to develop a way to verify the durability and health quality of food during an entire supply chain at a very low price is a case in point (purps-pardigol and kehren 2018). moreover, agile organizations ensure that decisions can be made quickly and flexibly through their decentralization of decisions and through their empowering employees to make decisions. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 it also ensures that all talents and abilities are used by individuals, not just those provided in the job description. imagine an employee to be comparable to cookie jar filled with various gemstones under a thin layer of grey stones. from this viewpoint it seems to be pure waste if the employee prefers to make use of his gems in the small animal breeder club or elsewhere but not at work, just because the family owner has only the grey stones in view. greater freedom for employees also ensures that market results are quickly absorbed by employees that act as sensors at the market. and the approach is particularly suited to raise the potential of ideas arising from interdisciplinary interaction and work. the approach of agile organizations is not as alien as it might seem at first to family businesses. it has always been the case that in family-owned businesses humanity and informal communication have quickly transported the knowledge of employees through the hierarchy. the aspect which is new consists in avoiding the hierarchic structure and in the owner-manager changing from deciding to empowering decisions of the employees. furthermore, the hidden champions among family businesses have always been obsessed with a vision rather than with rigid planning. in this respect, changes to an agile organization should not be a disruptive innovation at all, but rather a natural development of existing ones, avoiding overburdening the entrepreneurial family and the executives. one risk of this organization might consist in the fact that in an agile organization, employees become much more important and less replaceable than before. however, at least good family firms are commonly known to suffer very little fluctuation within their work force. as we would expect the approach seems to spread empirically among family firms. in the study by lichtner and kinkel (2018), half of the 193 surveyed family businesses already use this approach. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 4.2. dimension expedient entrepreneurial family organization since in a family business the peculiarity compared to other forms of business consists in the influence of the owner family which normally gives a family business a special economic stability, the question arises what might happen when digitalization leads to the occurrence of a vuca world. one important aspect is that the owner family must always remain able to act and to make well-informed decisions. therefore, the owner family (and not just the family business) needs to organize itself in a way so that it can meet the challenges of digitalization. haftlmeier-seiffert and cravotta (2018) in their empirical analysis of german family firms speak here of the requirement of an expedient entrepreneurial family organization that follows the so-called chameleon model. this model shows that different forms of organization are latent in entrepreneurial families. these are used flexibly, depending on what is expedient in order to arrive at decisions that are quickly viable; that is, the entrepreneurial family organization changes its explicit organizational form like a chameleon that changes its color. exactly this property is just as helpful to transport not only the organizational form, but also the knowledge necessary to solve business challenges. our experience from interviews with well-known german family entrepreneurs showed exactly this. for example, members of the entrepreneurial family who are scattered around the world feel often a need to transfer novel knowledge considered to be relevant to decision makers and outside family business managers to ensure that the decision makers in a family business are always well-informed about the challenges that are relevant to it. such networks which can comprise up to hundreds of people in influential and informed positions can make a difference to the quality of decisions taken in the family firm. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 4.3. dimension permanent spinnovation being limited in the resources family businesses had always to concentrate, to focus and to specialize. in an era of digitalization, however, disruptive innovations start to occur at a beforehand unknown pace. how this continuing focus on specialization as a hidden champion can be transferred to the age of digitalization is demonstrated by venter and friedrich (2017). the goal of the authors is to escape from the currently ubiquitously prevailing price competition. the means they propose in this context consist of a trias of a specialization in a complex problem on the one hand, innovation on the other hand, and, finally, a bottleneck or compulsory requirement of a group in need of the solution of this complex problem. in other words, it is important to innovate exactly at a place where a real need exists and then to specialize in the solution of this need as well as to stand out with respect to this solution. the authors emphasize that such needs are identified through extensive ethnographic analysis of the bottleneck (for example in the form of intensive interviews with customers who have quit recently). most important might be that in times of disruptive innovations it becomes important not to address only one problem from one perspective but to choose deliberately a multiperspective and multichannel approach to complex problems. this involves, for example, not only trying to solve the problems of existing customers but to analyze whether there might be new types of future customers that have not come to mind so far. such an approach is especially important as substitution in the era of digitalization can arise from many sides. the innovation to solve problems identified as bottlenecks is therefore addressed often through the use of creativity techniques (such as the knowledge hub or the design thinking technique (cravotta et al. 2017; 2018a). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 for example, a knowledge hub involves the process of first discussing customers' problems with one group of employees (e.g., sales), while another group (e.g. the developers) is taking notes and writing down possible solutions. in a second step, both groups change and now the sales department listens to the suggested solution. afterwards there will be a mixed discussion. the core of design thinking is the attempt to generate a problem-solving and creation process from an interdisciplinary point of view using a defined method (brown and wyatt 2010, 31). the approach is based on the insight that typical problems in the economy and society have become so complex that (mono) disciplinary and (mono) causal heuristics are no longer sufficient to arrive at acceptable solutions in a timely manner. a peculiarity with respect to the origin of design thinking from design is that much more than just ideas play a role. rather, design thinking is about solving particularly fuzzy and complex problems that can therefore be addressed by a variety of ideas (cravotta et al. 2018a). from a methodological point of view, the design thinking method is based on a change in the observer's perspective and proceeds in six steps (müller and thoring 2012, 3): 1. understanding the problem (understand) 2. observing the user environment / problem context (observe) 3. perception from the user / customer / micro-theory of the problem (point of view), 4. generate ideas with creative techniques (ideas), 5. create prototypes (prototype), and 6. improve them (test). for a simple reason, products resulting from such intensive approaches such as design thinking and knowledge hub related to the spinnovation approach are not in danger of being replaced by simple mass customization, which can be significantly expanded by industry 4.0: the focus on http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 one from the beginning complex problem prevents a simple imitation by competitors from taking place. it is not so much the customer and the market, which is kept secret here, as the problem solution, which is hidden because it is personalized. this can be illustrated, in particular, by an example of a consulting service product. a consulting service product is the better accepted the better it can be tailored to the needs of the customer. a product design that uses such a specialized solution instead of a recurring blueprint will be able to address complex special problems of a customer. the challenge, of course, is to have enough standardized components to be able to offer the result of such a process at competitive prices. 4.4. dimension digital brand management the changes triggered by digitalization in the form of the increasing (or at least additional) virtualization of the human range of motion creates also a new framework and sets new conditions for brand management in family businesses. the old-fashioned principles that have since been known and observed in brand management such as the credibility and relevance of the brand among consumers and the distinctive character of the brand compared with others – that is, the natural laws of hermes (hermes 2008, 284) – are therefore not enough anymore to position the brand of a family firm in the target audience. this becomes transparent when taking into account that together with the arising customer related individualization at the same time a fragmentation of markets arises. the question is then what a brand means when customers are not served by a product any more but rather by an individually tailored complex solution. to react to digitalization, family businesses need therefore to consider further basic principles that take into account the peculiarities of the virtual space. in particular, this involves the question how in particular german family firms make sure that they are at the same time acting secretly and hidden and are easily and meaningfully found in the world of the internet. cravotta http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 et al. (2018b) propose three further basic principles, the so-called three c's (cravotta et al. 2018b, 3) to solve this problem. a brand must be where the target group is and connect with it in the virtual space (connectivity). this also requires finding hidden champions on the internet. at the same time, the maximization of awareness of the relevant target groups on the one hand and the minimization of awareness among competitors should also be transferred to the digital age. for this purpose, all online and offline based activities or experiences are to be coordinated with each other in the sense of a holistic brand management (complementarity). in particular, it must be ensured that the target group recognizes the outstanding benefits of the solutions offered by the family-owned companies through the interaction of online and offline components, while competitors receive only fragments online and, as a rule, no information offline. digital brands also become a substitute for orientation and reduce the need for information and protection. digital brands must therefore be easy to use (complexity reduction). above all the importance of an overarching digital brand increases. in an era of n to n relationships in which customers significantly determine which firm they choose and with which firm they identify it is not sufficient to provide a message by the brand that describes the firm. instead it is rather necessary to extend the meaning of a brand to the entire network in which the family firm operates. depending on the strategic goals which are pursued by a family business, various instruments and methods can be used in (digital) brand management. if, for example, the establishment of a targeted brand communication with the customer and/or the promotion of the brand, the company can use tools such as live content or influencer marketing. in the context of influencer marketing, a company tries to involve opinion makers and thus people with reputation, influence and reach into their online brand communication. if the family business http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 tries to create brand loyalty, mass customization and social media marketing can be used. webdata analytics can be applied to verify whether these activities rendered the impact that was previously intended. a good overview of applicable tools and methods in (digital) brand management is given in the work of cravotta et al. (2018b). 4.5. dimension digitalization in production & value creation a phenomenon that accompanies digitalization in production and the value chain (see also grottke and boll 2018) is that there is an increasing intermeshing of functional areas with regard to human co-operation. increasingly, it is no longer possible to think in functional departments and thus in silos (as would be the case, for example, in a division in the sense of gutenberg's form, for example, in separate purchasing, production and sales departments). instead, departments will interact continuously. for example, it is no longer just the individual workplace that is optimized, but teams optimize on a holistic level, teams that are made up of different departments and formed across departments. this results in carving out holistic views on processes and in meshing control loops. the advantage of such holistic views is that there is less danger of missing the needs of the market, because the development department has the perspective of the market right from the beginning. the advantages of such meshing are very easy to illustrate considering that there are in principle many development paths in product development which makes it difficult to sort out the right one. here, information of the distribution on which development paths might be probably preferred by the customer can lead to a minimization of the risk of undesirable developments. the challenge for family firms is to create the holistic view within teams on the one hand and to adapt the production systems continuously without loosing too much flexibility. in a certain way with digital factories what comes in new is the difference between principally unlimited human flexibility and production http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 system flexibility which is always limited to those options that have been previously thought of. furthermore, use of platforms to optimize the value chain can be made. an advantage of family businesses can lie in years of trusting cooperations with their customers and suppliers, which now allows for realizing corresponding efficiency advantages by a partial mutual disclosure of data and thus better responsiveness that allows for realizing e.g. advantages of optimization that becomes possible by making use of artificial intelligence when tracking for product errors during the entire supply chain (grottke et al. 2016b). it should be noted, however, that the study by lichtner and kinkel (2018) so far suggests that family businesses, as a rule, do not disclose data beyond their own company. for example, only 15% in the study use an open it platform. however, individual cases of such a cooperation with advantages for both partners are listed in the study by grottke and boll (2018). a third aspect is that there is an increasing merging of it and subject domains, which create new cross-training occupations (olsen 2018). 4.6. dimension integration and collaboration two other major changing determinants for family businesses are that on the one hand, that speed becomes more important compared to accuracy and quality, and on the other hand, that more and more investments are software-like, with high initial investment and marginal costs close to zero (anderson 2012). both determinants have in common that they push the individual family firm into stronger cooperation relationships. the aforementioned german family firm rieber, for example, was only able to realize its solution by making use of a network of strategic external partners it had neither known nor worked with before (purps-pardigol and kehren 2018). as a result, speed can only be increased if, on the one hand, the focus is maintained and, on the other hand, http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 business is passed on to cooperation partners when it arises beyond the own focus which stands in contrast to the beforehand existing “my home, my castle” policy of many family firms in germany. in addition, marginal costs close to zero suggest that as many users as possible are necessary after having incurred a certain investment, which seems particularly possible if the number of users can be increased by leaps and bounds through cooperation. all this involves a major shift in the attitude of family firms, because this involves that family firms need to become well-known with their solutions rapidly among potential customers instead of keeping them rather known to current customers but secret beyond. to our knowledge, family businesses, in particular cloud providers, are experimenting with a disclosure of knowledge previously unknown to family businesses for cooperation partners with whom they have already been working for many years. however, there is still a certain reservation against cooperation in the area. whether the family businesses among companies succeed in realizing the advantages of cooperation will have to be seen. while some firms, particularly in the cloud service area cooperate such as, for example, the german hidden champion phoenixcontact, others are still reluctant to cooperate. 5. summary, conclusion and outlook summarizing the insights previously outlined in a nutshell, we find that digitalization offers opportunities and challenges for family businesses in general and for german family firms in particular. the challenges are to be seen in the fact that certain aspects of a family business, such as the question of secrecy or dedication of owners need to be changed and rebalanced. no family business can really escape these challenges. the most important message is therefore probably that there are suitable opportunities to set up as a family business with its characteristics to be future-oriented and well-prepared also in the age of digitalization. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 in particular in the arising six key dimensions of digitalization it is outlined how german family businesses can respond to the changes driven by digitalization. all six dimensions have in common that they are more of a strategic nature, which must be implemented in a respective family business and which need to be adapted to the individual circumstances prevailing in the respective family business. in addition, implementation also brings structural changes in organizations. as a result, the affected family business must be prepared for long-term changes that also affect day-to-day business. this requires a rethinking not only of the managers of family businesses, but especially of the owner families, because they significantly influence the company's development and are responsible for the stability of their family business (see again haftlmeier-seiffert and cravotta 2018). however, the authors' experience shows that a rethinking of family businesses, whether in germany or in europe, sometimes is hindered by hurdles among decision-makers in family firms. the family owners often stick to old solutions; they are more resistant to structural changes and change processes. however, on the other hand, it might be an important advantage in the upcoming digital transformation for family businesses that most of the ownership is in the hands of a family or a small group of owners. the great opportunity that results from this is precisely that no consideration has to be given to the information needs, fashions and trends of an anonymous capital market (see also grottke 2011, 295-298). the concomitant freedom to focus solely on the economically and entrepreneurially meaningful represents an excellent prerequisite for the use of the new possibilities of digitalization: "the innovative strength and entrepreneurial thinking of the german middle class [...] are excellent prerequisites [...] for an active driver role in reference to industry 4.0 [...]." (bmwi 2015, 23). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 advantages, for example, are likely to come from the fact that family businesses, since they are less under pressure to implement available short-term cost-cutting measures in the form of employee lay-offs with available automation options, must focus less on cutting back on employees than on an even greater qualification of these employees and the increase of their productivity with the help of new technical possibilities. this is all the more an opportunity, as it is economically costly to accumulate the necessary factory-specific experience. family businesses are also characterized by their close relationships with their customers – they are problem solvers. especially their customer orientation is certainly another important advantage to find one’s own way through the digitalization wave. thus, the changes can also be addressed together with the main customers. customer co-creation, joint product development or the establishments of a joint venture are conceivable examples of how cooperation can be implemented. finally, the high level of employee loyalty in family businesses could be seen as an advantage for the implementation of digital business models. it should be noted as a limitation that in the article only the author´s impressions of the current interaction between family businesses and digitalization, complemented with the scarce existing empirical evidence on digitalization in family firms was reproduced. a limitation hereby remains that no complete description of the effects of digitalization on german family businesses was sought or could have been sought. moreover, the comparability of the results for family businesses in other countries is limited. however, this opens space for further research and could sharpen the authors' impressions of the peculiarities and success factors of digital transformation in family businesses in practice. a comparison between german and spanish family businesses would be inspiring particularly in the early phase of digitalization in http://revistes.ub.edu/index.php/jesb volume 4, number 1, 01-25, january-june 2019 doi:10.1344/jesb2019.1.j051 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 family businesses in which much is unclear yet. so far this has received little attention in international family business research. overall, family businesses in germany remain a highly exciting field of research during and after the digital transformation. in particular the tensions identified in the six chapters that demonstrate that it is not clear yet in which direction family firms should develop provide interesting empirical questions. this is for the example the case with the question to which degree hierarchy will be still typical for family firms ore the question to which degree secrecy will be observed in future. it will only be clear in a few years' time whether and which family businesses will have a future after the digital transformation and how they would have to compete or cooperate in the future. references ahrens, thomas. 1997. “talking accounting: an ethnography of management knowledge in british and german brewers.” accounting, organizations and society 22 (7): 617-637. anderson, chris. 2012. makers: the new industrial revolution. new york: crown business. becker, wolfgang, michaela staffel, and patrick ulrich. 2008. mittelstand und mittelstandsforschung. bamberger betriebswirtschaftliche beiträge 153. bmwi. 2015. erschließen der potenziale der anwendung von „industrie 4.0“ im mittelstand (short version). in erschließen der potenziale der anwendung von industrie 4.0 im mittelstand, edited by jürgen bischoff. accessed september 12, 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https://www.familienunternehmen.de/media/public/pdf/publikationenstudien/studien/volkswirtschaftliche-bedeutung_studie_stiftung_familienunternehmen.pdf. venter, karlheinz, and kerstin friedrich. 2017. spinnovation. intelligent spezialisieren, kraftvoll innovieren, alleinstellung neu entwickeln. das unverzichtbare arbeitsbuch für strategie und alleinstellung, münchen: vahlen. wittener institut für familienunternehmen. 2018. definition familienunternehmen. accessed august 2, 2018. http://www.wifu.de/forschung/definitionen/familienunternehmen/. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 156 josep barceló prats deborah bekele universitat rovira i virgili de tarragona (spain) historical roots of hospital centrism in catalonia (19171980) abstract the aim of this article is to analyse the roots of the catalonia health reform, whose first projects on reform have been documented since 1917. this historical process set-up, in catalonia, a hospital-centric model involving three sets of regenerating and mutually reinforcing institutions: financial resources were being disproportionally distributed to hospitals, high-quality medical professionals were largely concentrated in hospitals and large outpatient departments were incorporated in hospitals, which functioned as a first point of care for many patients. based on these premises, the intention is to contribute to the understanding of the initiatives that, during much of the 20th century, took place in catalonia with the aim of bringing access to hospital services to the population. these same organising principles also had decisive influence on hospital planning in the rest of spain. as such, we develop an historical approach to public policies that have been shaping the current imbalance between hospitals and primary care providers in catalonia by combining two methodologies. on the one hand, an overview of the existing literature on this topic. on the other, an accumulation of case studies –which does not claim to be exhaustive– the result of this very research and that of other specialists in the object of study. as catalonia still has a hospital-centric health system seeded throughout the 20th century, these findings can inform the framing of contemporary options for primary care strengthening. without addressing these deep regenerating causes using a whole-system approach, catalonia is unlikely to achieve a primary care orientation for health system development. keywords: hospital centrism; health reform; catalonia; history corresponding author: e-mail: josep.barcelo@urv.cat received 5 september 2020 accepted 26 november 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:josep.barcelo@urv.cat http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 157 introduction in spain, analysis of and proposals for health reform were not frequent until the mid-1970s – between the end of the franco dictatorship and the beginning of spanish transition1 – (vilarrodríguez and pons 2018a). most of these studies agreed on the need to launch a national health service, with universal coverage, financed by general budget of the state (perdiguero and comelles 2019a). until then, the spanish health system had been characterised by chronic lack of investment, a circumstance that began to change after the 1977 tax reform, and due to the lack of coordination between the different publicaly and privately-owned health services (vilarrodríguez and pons 2018b). these and other reasons, such as those of a geographical or demographic nature, had set-up very unequal territorial distribution of said services which never aided, rather on the contrary, access for a significant part of the spanish population to healthcare resources, most particularly among the rural population (barceló-prats and comelles 2018). nonetheless, it should be considered that after the 1978 constitution the spanish “health reform” was, above all, a “hospital reform” (perdiguero-gil and comelles 2019b). although attempts were made to change the focus of the health system from a model based on curing the disease to one focused on its prevention and health promotion, the truth is that majority of health expenditure was dedicated to hospital and specialised services2 (lópez-casasnovas 2015, 3538). for this reason, even though the general health law of 1986 established primary health 1 the spanish transition is the process by which spain left behind the dictatorial regime of general francisco franco and came to be governed by a constitution that a restored democracy. there is certain consensus in placing the beginning of the transition at the death of general franco, on 20 november 1975, and its culmination with the entry into force of the constitution that was ratified by the 6 december 1978 referendum. 2 this trend has continued to this day. for example, in 2016, more than 60% of consolidated public health spending in spain, according to functional classification, was dedicated to hospital and specialised services (lillo-fernández and rodríguez-blas 2018). volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 158 care as one of its basic pillars, the hospital-centric culture3 continued to be predominant in the design of health policies during the last three decades. at this point, it must be pointed out that hospitalocentrism is not only characteristic of the spanish health system. it also occurs in many other countries such as, for example, china (xu, gorsky and mills 2019), and that is why the 2008 world health report already warned “health systems do not spontaneously gravitate towards primary health-care values, in part because of a disproportionate [...] hospital-centrism” (who 2008). in order to understand this situation, one must consider, from a historical perspective, the reasons for the hegemony of the hospital (comelles, alegre-agís and barcelóprats 2017) and the subalternity of primary care, as well as the prevention of disease and health education (perdiguero-gil 2015). on the other hand, it should also be mentioned that the planning of the spanish health system was conditioned by the deployment of territorial organisation of the state. the consecration, by the spanish constitutional legal order, of the autonomous communities as territorial and administrative entities endowed with a certain legislative autonomy, as well as certain executive powers, implied a slow process of sanitary decentralisation that was carried out in various stages (lópez-casanovas and rico 2003) and was not completed until 2002 (cantarero 2003). all this makes the spanish health system an interesting case study, since it is linked to its universalist vocation by its decentralised nature. some authors suggest “the building of the spanish nhs has not apparently been impeded but rather fuelled by the parallel process of federalisation” (rico and costa-font 2005, 231). according to this perspective, 3 hospital centrism should be understood as a concept that situates the diagnostic and therapeutic capacity of the hospital at the top apex of the health system and its policies. hospital hegemony with respect to the rest of the healthcare establishments is also given by its value as a fundamental space in the training of healthcare professionals. during the 20th century, then, these processes contributed to definitively change the collective imagination of the hospital on part of the citizens (comelles, alegre-agís, barceló-prats 2017, 57-61). volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 159 «decentralisation» would have brought health services access closer to all citizens by wagering on a more egalitarian socio-political structure that, in addition to promoting innovation and policy change, was compatible with «some regional diversity» and prevented the risk of territorial inequalities 4 (rico, gonzález and frayle 1999). certainly, decentralization is not specific to the spanish hospital system either (bernal-delgado et al. 2018), since it also occurred in other states, whether federal such as germany (busse and blümel 2014) and switzerland (de pietro et al. 2015) as well as in other countries centralised a priori, like france (chevreul et al. 2015). in this sense, it should be noted that there are many countries in which local governments have played an active role in shaping health systems. however, although the formation of a coordinated hospital system is a general phenomenon that can be observed in the united states, since the beginning of the 20th century, and in western europe since the end of world war ii, in spain this development did not have place systematically until the end of the seventies (barceló-prats, comelles and perdiguero-gil 2019, 162). focusing on the region under study in this article, catalonia was the first autonomous community to receive powers on health-related matters5. the effective transfer of these powers allowed the generalitat of catalonia (as is the official name of the current local government) 4 with nuances, the large part of the evaluations on the effect of the healthcare power transfers to the autonomous communities indicate that health inequalities have not increased (lópez-casasnovas, costa-font and planas 2005; rico and costa-font 2005; costa-font and rico 2006; costa-font and turati 2018). from a comparative perspective, similar arguments are defended (costa-font and greer 2013; alves peralta and perelman 2013). nevertheless, the level of citizen satisfaction with health services has not only not improved the transfer process, but also created greater disparities (antón et al. 2014). the difference in evaluations of quality of regional health services is also notable (fadsp 2015). 5 in relation with these competencies, everything included in the statue of autonomy of catalonia was regulated by royal decree 1949/1980, of july 31, on transfers of state services to the generalitat of catalonia on health and social assistance service matters. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 160 the preparation and deployment of the first catalan «health map» (generalitat de catalunya 1980a; generalitat de catalunya 1980b; clos, seculí and segura 1980). the development of this «map» (generalitat de catalunya 1983) which, in addition to taking stock of and evaluating the existing health resources in catalonia, presented a proposal for health zoning, making it possible to carry out directives that regulated the accreditation of the health centres and facilitated the start of two main lines of healthcare services; on one hand, the primary care reform and, on the other, the creation of the network of hospitals of the catalan health system and the hospital reorganisation programme. these set of initiatives and reforms, including the primary care reform, presented the hospital institution as the cornerstone for a health care network coordinated by the hospitals itself, but which exceeded its limits. without any doubt, this formulation reinforced the foundations of a hospital-centric culture that, since the 1970s, the population had been integrating from contact within a hospital approach that was becoming highly technical and with well-trained medical specialists thanks to the development of the spanish specialty training system (tutosaus, morán y pérez-iglesias 2018). of course, the role of new technology in the organization of the health system deeply impacted hospital planning in many countries and, in addition, it implied major changes in their respective health markets, the effects of which boosted the development of health industries” (donzé and fernández-pérez 2019). although it would be very interesting to analyse how this new reality modified the financial equilibrium within the catalan health system and determine if this produced a competition or collaboration between public and private sectors (pons and vilar-rodríguez 2019), our research question, due to the limitations of space, has focused on responding to, from a purely historical perspective, to why the roots that shaped the current volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 161 catalan health system can be found long before the debates held during the spanish transition (barceló-prats, comelles and perdiguero-gil 2019, 161-162). in this sense, the main singularity of the catalan case doesn’t consist of being the first to receive and exercise powers that, until then, had fallen under the state, but in verifying that the aforementioned health map “had not started from scratch as would happen in other spanish regions, already since 1917 studies already have been carried out on the health reality in catalonia and the factors of change that have almost reached to present day.”6 this text seeks to contribute to the understanding of the debates that, during much of the 20th century, took place in catalonia whose aim was to design and implement a comprehensive health plan. the design of the catalan health system had a decisive influence on hospital planning in the rest of spain and served as the basis for accrediting the quality of spanish hospitals through the standards established by the international hospital doctrine. to do this, this paper will, firstly, describe the hospital planning initiatives developed by the different regional governments in catalonia between 1914 and 1939. these proposals were already aimed at coordinating the catalan hospital system to address the existing deficiencies in healthcare and to respond to the growing demand of medical care that could no longer be absorbed by the structures of liberal charity. finally, after analysing the complex hospital panorama in catalonia during the first franco regime, special attention will be paid to the lessknown elements of the hospital planning projects that emerged in the 1960s and 1970s, the results that influenced the major reforms during the following two decades and whose practical 6 aragó, ignasi. 1980. “descentralización, base de la sanidad catalana.” la vanguardia, october 30, 29. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 162 application determined the hospital-centric design of the 1980 catalan health map (reventós, garcía and piqué 1990; nadal 2016; asenjo 2017; bohigas 2020). 1. the beginnings of health planning in catalonia (1917-1939) spain, from the 1849 welfare law and the 1955 health law (carasa 1985; maza 1991), opted for a health policy that concentrated hospital care in provincial capitals, distant from rural populations (comelles et al. 2020). this situation not including highly industrialised regions such as catalonia (barceló-prats and comelles 2020) and the basque country (pérezcastroviejo, 2002). due to the lack of a fiscal reform, the spanish hospital system never disposed of the necessary investments to employ enough medical personnel or technologies (carasa 1991). this implied that the state had to resort to religious-and-private-owned institutions, mainly, to be able to guarantee the care of, at least, the most vulnerable groups (pons and vilar-rodríguez 2017). this precarious welfare situation, centralised in the provincial capitals, could not be extrapolated to all spanish territories. focusing on catalonia, its early proto industrialisation (marfany 2013) also implied that the process of medicalisation of catalan society was quite pronounced by the 18th and 19th centuries (zarzoso 2006). the rapid insertion of catalan society into capitalism and the establishment of industries throughout its territory – textiles along its rivers, cork along the northern coastline, and sales of spirits in the southern coast, among others – , played a key role in the demographic growth through all of catalonia and, obviously, also in the increase in population in barcelona, its main city. taken together, these conditions fostered collective awareness of the need to have profuse health services throughout catalonia. these same circumstances also explain the proliferation, since the last third of the volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 163 19th century, of a powerful private medical market, characterised by the creation of small diagnostic centres and surgical clinics (zarzoso 2017), as well as the recent emergence of mutuals and other private health insurance (duch 2019). by the twentieth century, the first proposals to respond to the concern about hospital management problems in catalonia have been well-documented (calafell et al. 1967, 184), the pioneer of which was the communication titled: “hospitalisation in barcelona”, which dr. higinio sicart presented in the 1st congress of doctors of the catalan language in 1913 (sicart 1913). this study gives a damage report assessing the then existing health resources in barcelona in 1912 and makes a proposal of how many hospital beds would be needed to respond to the medical care needs of that moment (pardell 1973, 105; sabaté 1993, 118). it was not until 1917 when the then regional catalan government, known as the mancomunitat (1914-1925), commissioned dr. jacint reventós to draw up a proposal for the hospital regionalisation7 of catalan hospitals (balcells 2015, 83). although it never was implemented, this proposal is considered as the precedent of all hospital regionalisation plans in spain (sabaté 2015a, 77). it was also a turning point for catalan doctors to become interested in the organisation of hospitals as a measure to increase their health efficiency. however, due to the great demographic growth that catalonia underwent, a result of being a territory with an elevated rate of immigration from many other regions in spain, resulted in an exponential growth in the healthcare needs of the population, as a whole. according to a study on hospitalisation in barcelona in 1933 (mer 1933), the catalan capital suffered a deficiency 7 the concept of «hospital regionalisation» refers to “a complex mechanism of technical and administrative decentralisation that includes the establishment of levels of care that go from community’s primary care health centre to the general hospital and speciality hospitals” (bravo 1974, 231). in short, it is about the organisation and coordinated operation of health services in both rural and urban areas. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 164 of more than 4.000 hospital beds (mer 1933, 4). this was the precocious health situation that, with the advent of the second spanish republic (1931-1939), the recently reinstated regional government of catalonia, under the name of generalitat, was the forced to manage. as such, one of the first petitions made by the generalitat to the still spanish provisional government of the second republic was to have legal authorisation to be able to carry out “the necessary studies leading to the establishment of structuring plan for health services in its various aspects” 8. once this authorisation was granted, the generalitat commissioned different medical institutions to draft the corresponding reports (pardell 1973, 106; sabaté 2015b, 6). the report that most influenced the subsequent drafting of the health laws by generalitat was that written by dr. enric fernández pellicer (1932, 387-408), the title of which was hospital organisation in catalonia: practical solutions. in its drafting, it was stated that “all hospitals have to be considered as institutes of public utility and, consequently, be subject to the power of due vigilance by the public and to regulations inspired by the modern norms, both scientific and economic, of social assistance” (fernández-pellicer 1932, 387). it concluded by stating “a hospital can no longer be more be an island. hospitals need to complement one another” (fernández-pellicer 1932, 408). therefore, then, following the recommendations of the conference on rural hygiene of europe9, held in geneva in 1931 at the proposal of the league of nations, this proposal classified healthcare centres into three types: “primary” (rural hospitals), “secondary” (county hospitals), and “tertiary” (district hospitals), meaning the 8 gaceta de madrid. 1931. 142 (may 22): 866-877. 9 publication number c. 473.m.202.1931.111 from league of nations (sdn). https://iris.paho.org/bitstream/handle/10665.2/10471/v11n3p246.pdf?sequence=1&isallowed=y https://iris.paho.org/bitstream/handle/10665.2/10471/v11n3p246.pdf?sequence=1&isallowed=y volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 165 existence, at the top of this medical hierarchy, referral hospitals for the entire region of catalonia (regional hospitals). many of the proposals contained in fernández pellicer’s report influenced the drafting of the basic law for the organisation of health and social assistance services in catalonia that the generalitat passed in 1934 (peláez 1982). this was possible thanks to the fact that the generalitat, unlike the mancomunitat – its predecessor – did have power to legislate, control, inspect, direct and organise health and social assistant services. the practical application of the aforementioned law configured a health map that divided catalonia into twenty health zones, using the main catalan cities as points of reference. once the law was fully implemented, these twenty territories would have had, at least, a district hospital, a laboratory, and a charityassistance establishment. for the first time, in spain, a legislative design broke with the structure of liberal welfare, in force since the second half of the 19th century, and no concentrated all hospital equipment in the capitals of each province in order that the majority of the population could have rapid access to hospital care. however, the outbreak of the spanish civil war (1939-1939) modified the deployment and implementation of this novel health model. due to space limitations, we cannot tackle here what happened in catalonia, in terms of health, during the war, the consequences of which implied the adoption of radical organisational measures, both at the civil and military level (hervás 2014). 2. the hospital system in catalonia during the first franco regime (1939-1955) after the spanish civil war, the beginning of franco regime put a halt to all the reforms that, in terms of health, had been developing during the second republic by the generalitat of volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 166 catalonia. in 1939, for reasons previously described, the health system in catalonia was much more complex than in other regions of the spanish geography, and given the ample network of municipal and religious-own hospitals, as well numerous private clinics, it served patients coming from a profound network of labour mutuals or those who had private health insurance. however, after a short time, the emergence of a new element would change the spanish hospital landscape forever. at the end of 1942, aware that the control on social action was indispensable in order to ensure the adherence of the popular and working classes, the falangists created the compulsory health insurance (chi). after overcoming various obstacles for the implementation of this social insurance, initially as it if were a state mutual (bismark model), the chi began its operation lacking its own hospitals and having to arrange the care of their affiliates and beneficiaries with other hospitals (vilar-rodríguez and pons 2018c). only the partisan interest of the falangists in offering chi users alternative care to that of the provincial charity, very close to that which could be provided in private clinics or hospitals services paid for by mutual, led to the decision that the chi had its own network of hospitals, without any incentive to coordinate with the existing ones (quintana and espinosa 1944). the main problem with this decision was how to finance a network of new hospitals that demanded a mobilisation of financial recourses that neither the autocratic franco regime nor the late franco regime could serve without profound fiscal reform. thus, in 1952, of the thirty-four planned residencies in the 1949 national plan of sanitary facilities, only six were completed. the design of this new chi hospital system was jacobean and depended on a command chain at the top of which was the national insurance institute (nii). at the bottom were doctors, both those who practised in rural and urban areas. at the intermediate level were the specialised outpatient departments, and finally, at the top was the new hospital, euphemistically called a volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 167 residencia sanitaria. this model of pyramidal organisation should be understood as the first attempt by the spanish state for a network structure, like that of chi, going beyond the atomised and uncoordinated provincial structure of charities and the private sector. however, the global complexity of this insurance and its dependence on a multitude of administrations made it very difficult to rationalise its management, which ended up producing financial inequalities and discrimination among the population (pons 2010). this explains, for example, why in 1960 the population covered by the chi barely reached 50% of the total spanish population (solé-sabarís 1965). in catalonia, the first chi hospital was the residencia sanitaria francisco franco in barcelona – the current hospital de la vall d’hebron – whose inauguration took place in 1955. thus, between 1944 and 1955 catalonia did not have nii hospitals for chi policyholders, even though barcelona was one spain’s most populated provinces and with the highest affiliation to this state insurance. at the end of 1955, “the number of those insured by the chi in barcelona [was] almost 10% of the national total, and that, together with the capital and the province, reached up to 17%, the former with its 350.000 insured and both with 680.000”.10 however, the number of beneficiaries, normally the dependents of the insured, was practically double and this implied that more than half of the barcelona population received some type of medicopharmaceutical benefit from the chi. the reality is that the chi, in catalonia, was incapable of meeting the demand for care that increased exponentially every year. for this reason, the chi had to arrange the services of other catalan hospitals or clinics, both privately-and-church-owned (león 2019). although the 10 ezcurra, luis. 1956. “una eficaz labor sanitaria ha reducido notablemente la mortalidad.” la vanguardia.,january 26, 8. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 168 signing of these agreements signified a considerable economic injection for these healthcare centres, what is certain is that it did not allow the ability to achieve the necessary investments in diagnostic and therapeutic technology, as well as in internal reorganisation and hiring of qualified personnel, to be homologated with the international standards criteria that at that time had on the quality of hospital services. this circumstance condemned these small hospitals and clinics to become obsolete from a technical point a view. therefore, during this first franco regime the situation of the catalan hospital system had become “pathological” (aragó 1967, 11). 3. the first attempts at organization of hospital system (1955-1975) in catalonia, the first proposals to reverse this pathological situation had already been documented during the mid-50s. it was in 1955 when the official college of physicians of barcelona created a collegiate section on hospitals to initiate necessary studies to plan and modernise the catalan hospital network. one of its first initiatives was the creation of the journal estudios sobre hospitales y beneficencia (león and sarrasquesta 2017), whose publication for more than two decades was key to disseminating international theory on new hospitals, as well as studies and contributions by the most relevant experts who intervened in the spanish health reform. some doctors related with the aforementioned section, like carles soler-durall (1928-current), were the protagonists of the pioneering initiatives that promoted the spanish specialty training system and implemented a new internal organisation of the hospitals, with a hierarchal structure, starting with the creation of clinical services. the testing ground for both projects took place in the general hospital of asturias (garcía-gonzález 2011) and, a few years later, in one of the most important catalan hospitals, the hospital de la santa cruz y san pablo in barcelona (soler-durall 1968). this milestone should be considered the volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 169 starting point of a new way of understanding hospitals in catalonia, the consequences of which ended up placing a clear hegemony on the diagnostic and therapeutic efficacy of the hospital within the health system (nadal 2016). however, at the beginning of the 1960s, in spain, the hospital continued being a healthcare resource that was hardly beginning to be accessible to broad sectors of the public. while in most european countries the rates of hospital attendance,11 during this decade, ranged between 80 and 120 admissions per thousand inhabitants, in spain the figure was only 23 in 1960; and 37 in 1969 (pardell 1974, 28). another piece of information that helps to contextualise the dire situation of the spanish hospital system is the rate of beds, per 1,000 inhabitants. according to data from the world health organization (who), in 1964, spain was the european country with the fewest beds per 1,000 inhabitants (table 1). table 1. hospital beds in the main european countries number of beds (per 1000 habitants) country 13 15 swedenireland 12 13 east german – north irelandluxemburg 11 12 austria france –iceland – scotland 10 -11 czechoslovakia – switzerland – west germany finland italy 9-10 denmark norway 8 9 belgium – wales – england 7 8 bulgaria hungary poland holland romania 6 7 faroe islands malta 5 6 albania greece portugal yugoslavia 4 5 spain source: who 1968. 11 hospital attendance (hf) is calculated by dividing the total number of registered admissions in the country's hospital system during a year divided by the number of inhabitants and the resulting quotient multiplied by a thousand. fh = (total number of admissions / number of inhabitants) x 1,000 volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 170 the spanish hospital crisis was more than evident, and the franco regime was forced, not without difficulties, to enact a series of laws that would allow progress in the coordination and efficiency of hospitals. in the attempt to reduce health service access inequalities amongst the spanish population, the hospital law of 1962, the social security law of 1963 and the royal decree 575/1966, of the 3rd of march. this last decree made a national catalogue of hospitals and divided the spanish territory into 11 hospital regions in order to try providing specialised care for rural and urban population (image 1). however, all this legislation did not achieve its objective of implementing a unitary and integrated model of social protection, since a multitude of overlapping agencies in hospital management and health insurance continued to exist. the genealogy of the hospital regionalisation, understood as “a complex mechanism of technical and administrative decentralisation comprising of the establishment of levels of hospital care” (bravo 1974, 231), should be sought in the implementation of the aforementioned hospital section of the official college of physicians of barcelona. thanks to the dissemination efforts in spain, the regions began to be considered as an ideal «planning» unit to create, based on them, a coordinated, efficient, and operational hospital network (barceló-prats, comelles and perdiguero-gil 2019). volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 171 image 1. the eleven spanish hospital regions according to the royal decree 575/1966 source: ahdb 1972, 138 this new way of planning began with a basic axiom and two technical imperatives. the basic axiom consisted of the “equality of public service for all users” (aragó 1974, 81-85), which was based on the principles of «legal», «economic», and «physical» accessibility for hospital patients. as such, the principal objective of the «hospital regionalisation» was to try to reduce inequality in health service access. the two technical imperatives consisted of assuming the diverse frequency of diseases and optimising diagnostic and treatment services. “both items completed each other and postulated the necessity to create numerous services for those more volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 172 frequent ailments, reserving the specialised and costly services, whose volume of care is less, for the more complex hospital centres” (pardell 1973, 47). however, with the exception of the regions of catalonia (aragó et al. 1970) and asturias (artigas and asenjo 1971) in which specific hospital regionalisation plans were developed, the true incidence of the regionalisation in the whole of spain, before 1978, was scarce. in relation with the general hospital regionalisation plan for catalonia (aragó et al. 1970), the data it provides allows us to reproduce a very clear photo of the composition of the catalan hospital system in 1965 (tables 2, 3 and 4). table 2. data related to the population of catalonia in 1965 and its number of hospital beds catalan population number of beds (total) number of beds per 1000 habitants 4.524.034 25.912 5,72 source: aragó et al. 1970, 70. table 3. number of hospitals and beds in catalonia in 1965, classified according to whether they were public or private number of hospitals number of beds % of beds public sector 60 10.205 36,1 private sector 231 18.039 63,9 source: aragó et al. 1970, 68. table 4. distribution of hospitals and beds according to their membership organising body hospitals beds public sector ministry of interior 3 1.141 ministry of labour 6 2.894 ministry of education 1 904 provincial councils 13 3.341 municipalities 37 1.925 private sector red cross 3 190 church 5 210 relgious orders 17 4.695 private 205 12.902 foreign 1 42 source: aragó et al. 1970, 69. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 173 by way of comment on all these data, it is important to underline the high proportion of beds dependent on private organizations. these were generally small in size, with an average capacity of 63 beds. in contrast, hospitals belonging to public entities used to be much larger. in 1965, most of the beds in the public sector in catalonia belonged to hospitals dependent on the provincial councils (32.7%) or the chi of the ministry of labor (28.3%). in relation to the bed/population index, in 1965, the average for catalonia (5.72 beds per thousand inhabitants) was 1.28 points higher than the spanish one (4.44 beds per thousand inhabitants). however, it was far from the close to and even higher figures of 10 beds per thousand inhabitants that were recorded in european countries with a population similar to that of spain (pardell 1974, 25). finally, if we look at the rates of hospital attendance, in 1967, catalonia registered a rate of 39.6 admissions per thousand inhabitants, also well below the european average of 100 admissions per thousand inhabitants (pardell 1974, 28). all this added to the unequal distribution of hospitals within the catalan territory – the majority concentrated in barcelona and its metropolitan area – , aggravated the situation of the already weak catalan and, by extension, spanish hospital system. for all these reasons, the health reform proposals of the first half of 1970s once again put on the table the «hospital problem» and the need to resolve the unequal access of health services, especially in rural areas (comisión interministerial 1975). hence, during the transition the priority of the state was hospital reform rather than health reform, whose most visible consequence was the subalternity of primary care in the design of planning spanish health system. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 174 conclusions as of 1975, most of the health system reform proposals were published in catalonia and in all of them hospital regionalisation was a basic issue (acarín et al. 1976a; acarín et al. 1976b; acarín et al. 1977; solé-sabarís 1978). for its part, the reinstated generalitat of catalonia, during its provisional stage (1977-1980), ordered a series of sectoral studies on health and social assistance that served to design the 1980 health map (generalitat de catalunya 1980a; generalitat de catalunya 1980b). this map, with a clear decentralisation vocation, was inspired by the laws developed, in 1934 by the generalitat during the second republic and, thus, reinforced the idea of recuperating the structure of the regions, and not the provinces, as a frame of reference. the objective, yet again, was the necessity to solve the problem of hospital service accessibility, the demand of which –in the 1970s– was much more compelling than half a century before. we can no longer address here how the process of health decentralisation continued or its consequences after the implementation of health transfers to the autonomous communities. the entire decade of the eighties, with special attention to those immediately after the approval of the general health law of 1986, require detailed attention. as has been pointed out, the development of different autonomous health systems has not increased health inequalities, but neither has it managed to reduce them, and the differences in their quality are notorious (costa-font and turati 2018). decentralisation, by bringing access to health services closer to all citizens and placing their management centres in areas closest to them, sought to respond to population health needs, correct inequalities, both interregional and intraregional, and promote innovation. volume 6, number 1, 156-181, january-june 2021 doi.org/10.1344/jesb2021.1.j086 175 to conclude, after the decentralisation of the spanish health system, a hospital-centric model has been maintained, with nuances, despite the rhetoric about services focused on health and not on disease. although it is certain that the deployment of primary care has improved the proximity and quality of the first point of contact with the health system, the meaning of the hospital in health cultures shared by health professionals and the population remains central. due to its genealogy, decentralisation has maintained the hegemony of the hospital and has converted into an element of analysis that, along with others, must be considered in current discussions about the health system. acknowledgements this study was carried out within the framework of the research projects entitled “las claves históricas del desarrollo hospitalario en españa y su comparación internacional durante el siglo xx” [the historical keys to hospital development in spain and its international comparison during the 20th century], funded by feder and ministerio de ciencia e innovación agencia estatal de investigación (rti2018-094676-b-i00); and “lucha contra el cáncer y cambio socio-cultural en españa (19391975): entre el miedo y la esperanza” [fight against cancer and socio-cultural change in spain (19391975): between fear and hope], funded by ministerio de ciencia e innovación agencia estatal de investigación (pid2019-107658gb-i00). we also want to express our appreciation to: josep m. comelles, eduardo bueno, paloma fernández-pérez, josé martínez-pérez, enrique perdiguero-gil, jerònia pons, margarita vilar y alfons zarzoso references acarín, 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sanitaires mondiales, 1964. vol. iii, genève: who. who-world health organization. 2008. world health report 2008 primary health care (now more than ever). geneva: who. https://www.who.int/whr/2008/en/ xu, jin, martin gorsky, and anne mills. 2019. “historical roots of hospital centrism in china (18351949): a path dependence analysis.” social science and medicine 226: 56-62. doi: 10.1016/j.socscimed.2019.02.025. zarzoso, alfons. 2006. l’exercici de la medicina a la catalunya de la il·lustració. manresa: pahcs. zarzoso, alfons. 2017. “privatización de la medicina y profesionalización de la gestión.” in al servicio de la salud humana: la historia de la medicina ante los retos del siglo xxi, edited by alfons zarzoso, and jon arrizabalaga, 509-514. sant feliu de guíxols: sehm. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. https://doi.org/10.1111/ehr.12771 https://www.who.int/whr/2008/en/ https://doi.org/10.1016/j.socscimed.2019.02.025 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 césar augusto cáceres dagnino universidad de piura (peru) enrico pinna università degli studi di cagliari (italy) the generational change in family businesses: comparative analysis between italy and peru abstract the aim of this paper is to understand how family firms in italy and peru prepare for generational change, by comparing three companies from each of these countries. after a theoretical analysis, having examined and compared the literature to define the family business, the business family and the generational change, an empirical analysis has been made using a quantitative survey (step 2013-2014) and its model, which makes a revision of a set of constructs, to identify if there is transgenerational potential in the business families. from the comparison of the six companies it appears that, contrary to what was initially thought, there are no such relevant differences. they are only diverse approaches to different problems of the same phenomenon. it is concluded that the six companies have an adequate transgenerational potential and are ready for a successful generational change. keywords: family businesses; step; generational change; succession; family; company; familiness; undertaking corresponding author: e-mail: cesar.caceres@udep.pe received 11 may 2017 accepted 03 july 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 introduction over the years, a growing number of international studies on family businesses have been conducted. in a review, wortman (1995) found 144 family business studies focused on different countries; 84 (58%) focused on the united states, canada or the united kingdom, and all were single country studies. from this, wortman concluded: «at present, there are practically no comparative studies about family businesses across cultural boundaries, ethnic borders and national boundaries. are there really differences in the ways in which family businesses operate at sub-national, national or global levels? in what environmental or organizational contexts do family businesses operate more successfully?». since then, more studies have emerged focusing on family businesses in several nations and with greater consideration of contextual factors. centeno-caffarena (2006) found 120 articles published between 1977 and 2006 that examined the role of the institutional context of nations in family enterprises. a third of the studies involved the united states, but also other nations: spain (15%), china (6%) and united kingdom (6%). the institutional factors most frequently examined were culture (17%), values (15%), gender (14%), conflict (10%), networks (8%) and social capital (6%). in light of emerging evidence, smith (2008) issued a call for «new empirical studies that control the context», noting that «the differences between family and non-family businesses may be less than many previous studies have indicated and that differences in industry and differences between countries may be more important». family businesses represent a generalized form of organization in the world economy (beckhard and dyer 1983; ciambotti 1991; shanker and astrachan 2004) and they help define the level of employment, application models and educational schemes in many countries (ward http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 1987; heck and stafford 2001). many of these companies are affected by the aspirations and values of the family (chua and chrisman 2003). one of the most important and at the same time critical moments for a family business is the change of generation. it is a problematic and complex phenomenon that requires being able to be approached with the planning and the knowledge of the ideal strategic alternatives. succession can be a key opportunity to spread the innovative spirit in the company and to initiate the process of change, which was carried out in accordance with a future-oriented logic, combining continuity and renewal, tradition and innovation. the aim of this paper is to find out if there is any similarity between the six companies (three italians and three peruvian companies) by using a research carried out by step project, starting from the premise that generational change is the most difficult step for a family business. given the number of companies studied, this work is not and does not want to be a statistical reference of what happens in italian and peruvian family companies, but only a starting point to reflect on the arguments that support this research. step is a global research project led by babson college that began in 2005. it is aimed at studying business families specifically in their transgenerational venture, which is the ability to grow and generate social and economic value and perpetuate this entrepreneurial legacy for many generations. it aims to understand the transgenerational nature of business groups and families by determining how they foster the creation of new entrepreneurial initiatives over the time. family businesses and business families in the nineteenth century, and indeed in the twentieth century, economic activity was so http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 dominated by family businesses (harris 2000) that it was not necessary to give it a specific name to distinguish it from other legal and organizational forms. only from the interwar period (berle and medios 1932), with a growing interest in property and control separation, historians and business management specialists have differentiated family businesses from other business categories. all definitions have been developed to analyze the specific transition, intergenerational, financial commitment, strategic control, and so on. however, it is absolutely clear that property is only part of the history (gallo 1995). when we talk about family businesses we do not refer to a homogeneous group of companies. although similar traits can be identified, family businesses have a number of differences that involve some characteristic elements such as size, structure, management and governance. the heterogeneity that characterizes them makes difficult any form of classification. many authors have defined the family business (handler 1989; chua and chrisman 1999). recently, researchers have shown that it is misleading to see "family business" as a generic phrase, easily translated across economic and cultural boundaries. in fact, the definition of family business may vary internationally, and the form of family ownership may display different capacities in specific societies. therefore, it is important to avoid a rigid definition of family businesses that masks the impact of family members on strategic decisions (colli, fernández, and rose 2003). among the various definitions, the conceptual model proposed by tagiuri and davis (1992) is of a particular importance. the two authors have developed a simple linear model, according to which the business of a family can be represented by the intersection of two systems: family and business. each system has its own rules, its own values and its own organizational structure. the problems of the family arise because the same individuals have obligations in both systems http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 and because at the same time the company must dedicate itself to its own activities, and meet the needs of the family. tagiuri and davis (1992) have also explained that in many family businesses there is a distinction between ownership and management. some family members own, but do not participate in management; others are not owners, but run the business. consequently, the distinction between ownership and management could be as important as that between family and company. this distinction leads to the definition of a new model that describes family business as the result of three distinct but overlapping systems: business, property and family. often, the founder integrates the company into his life, as a personal thing, which is based on his creative abilities and sacrifices. it is from this context that often takes a contradictory attitude of the owner who, on the one hand, is aware of the need to adapt to the evolutionary cycles of his business and his life and, on the other, is reluctant to leave the command to the new generations. in most cases, the first generation of family entrepreneurs had built their businesses through intuition rather than programming business development, supported by a risk appetite. the founder's experience in his business is not found in those who have followed. having lived this experience in the company as the first (as the father of the first-born), it is believed that the governance of the firm can only take place in itself, centralizing all decisions (paternalistic system). consequently, the transfer is difficult to manage because there is no alternative that has the same “historical value” or that is capable of assuming the responsibilities that have been, until now, only for the founder. in addition, the entrepreneur facing the first generational change faces obstacles that refer more to his executive capacity (will) than his strategic capacity (intelligence) (the generational continuity of the sme). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 in the literature, other important distinctions are presented between family businesses and business families. it is a different perspective than usual to study and examine family businesses. however, despite the many differences, they share the fact of having to manage the generational change. the business family, unlike the family business, seeks that the descendants not only inherit ownership and, in many cases, the possibility of working in the company, but also acquire the necessary capacities so that they can replicate what the founders did. that is, they acquire the skills to start new businesses and integrate them into the family patrimony, if they wish. in this case, the rules that regulate the family-business relationship contemplate a series of additional aspects that contribute to the business group being maintained over time. the aim of all the business families is to achieve the continuity of the “entrepreneurial enterprise” in the future and for that reason they put the necessary means to foster the business growth. in the early years of the family business, it is logical to confuse business and family values, as a member of the family is also the founder and manager of the business. however, as both the size of the company and the composition of the family increase due to the generational increase, it becomes necessary to differentiate both figures. relationships among family shareholders become more complex as companies evolve and the leadership that in the first generation relapses without any doubt into the founder is diluted. this evolution in the life of the family business has led to the identification of three stages (ward 1991). the first stage (founder/controlling entrepreneur) is characterized by the confusion that occurs between management and ownership. the main concerns of the shareholders are the protection of the spouse in case of the founder death, inheritance and everything related to succession and leadership. at this stage, the overlap between family and business interests often occurs. the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 formal family organization is often not very necessary because since communication occurs automatically. in the second stage (siblings’ society) the division of actions takes the form of this type of society, where the main concern is to keep teamwork and family harmony. they begin to differentiate the family interests of the business interests. it is at this stage when processes must be established to formalize future management systems and governments. in the third stage (cousins’ consortium or family dynasty) the distribution of the property is complex, which causes the appearance of different types of shareholders belonging to the family, creating an atmosphere full of stress. it is at this stage when it becomes absolutely necessary to establish adequate instruments to avoid the end of the family business. table 1. evolution in the life of the family business ownership stage shareholders’ key problems stage one: founder/founders leadership transition. succession. spouse protection. inheritance planning. stage two: sibling society keep teamwork and harmony. support family ownership. succession stage three: cousins’ consortium tradition and family culture. resolution of family conflicts. participation and roles of the family. relation with the business. the important changes that take place in markets and the different factors of competitiveness require new responses from families and companies. generational change can be an opportunity to modernize management. the transition does not have to be traumatic and, in fact, if properly http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 prepared, it can be experienced as a time when the family and the company develop, with renewed strength and continuity, the results of a lifetime's work. italian and peruvian family businesses family businesses represent a key component of the region's economy on all continents, not only in terms of numerical incidence but, above all, for its contribution to the gdp and employment (see table 2). table 2. contribution to the gdp and employment continent % family businesses of total enterprises % gdp % employment europe 85 70 60 north america 90 57 usa 60 canada 57 latin america 85 60 70 middle east 90 80 70 asia-pacific 85 57 south of asia 32 north of asia na source: ey family business yearbook, 2014. italian businesses it is estimated that in italy family businesses are approximately 784,000, corresponding to more than 85% of all the companies, and about 70% have an influence on the employment. an important difference compared to the main european economies is represented by the reduction in the use of managers outside the family: 66% of italian family-owned companies have all http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 management integrated by family members, whereas in france this situation is found in 26% of companies and in the uk only 10%. in italy, family ownership and control remain important in both large and small companies. it is also interesting that the recent privatization process of the state conglomerates has considerably expanded the section of italian industrial capitalism "controlled" by family businesses. some very dynamic, family-owned companies such as benetton, del vecchio (luxottica glasses), riva and lucchini (special steels) bought large sections of the former statecontrolled conglomerates in the industry and distribution of iron and steel. on the other hand, the development of hierarchies within the dispersed productive structure of the industrial districts, of which some larger organizations are emerging, does not in any way question the traditional structure of the family (colli, fernández, and rose 2003). in the study carried out by pwc in 2014, the conclusion was that only 9% of italian family companies have a solid and documented succession plan; 58% of companies have not yet tackled the issue. and one family out of four does not have a procedure for conflict management; 46% of italian family companies plan to transfer management to the next generation. the important data are that less than a third of companies survive the first generational change and less than one-fifth surpasses the second generation. peruvian businesses in peru, there are about 660,000 family businesses that correspond to almost 90% of companies throughout the country. due to their great expansion, these generate 75% of the national gdp. the study carried out by pwc (2014) also indicates that 50% of medium-sized family businesses are professionalized or intend to be, while 30% have a family protocol and only 10% have a strategic plan. 59% of peruvian family businesses are not willing to sell their businesses http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 to third parties, a percentage higher than the 41% obtained from the global survey. eighty-six percent of family businesses in peru have at least one procedure and/or mechanism to deal with conflicts (which is slightly higher compared to the world average: 83%). focusing on the generational change, according to the study elaborated by the inter-american development bank idb and the chamber of commerce of lima ccl, the important data are that only 30% of the family companies follow along with the second generation and only the 5% to the third (jaramillo 2014). succession succession of companies should be considered as a process that requires careful planning (barach and gantisky 1995; ip and jacobs 2006), whose purpose is to ensure continuity. numerous international studies (beckhard and dyer 1983; kets de vries 1993; le bretonmiller, miller, and steier 2004; ward 1987) found that there is a high risk of company closure during the succession phase to the second generation and even more so to the third generation of the family. however, not all business succession processes determine the continuity of the organization within the same family of origin. in fact, in order to ensure survival, the entrepreneur might find himself in need (for lack of financial resources and/or lack of a valid successor) or opportunity (in the case of cost-effective sales price and/or low prospects of profits) to sell the company to third parties (lassini 2005). in this situation, the continuity of the business is guaranteed by the sale of the company, but it results in the loss of the relationship with the family. the success of generational change centers on the ability of the family to continue its existence http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 over time because one or more descendants of the same family can take control of it (corbetta1995). in medium-large family businesses, succession may also involve the entry of external managers to entrust all or part of corporate governance (compagno 1999). in small family businesses, for economic and affective reasons, generational change is generally carried out by transferring ownership and control of the enterprise to a child or children, identified as successors, whose capacity depends on the company's profit outlook and its own survival. although when we speak about succession, the real limits of the company do not appear in a defined way, in a theoretical process of succession three main phases can be clearly identified (mcgivern 1978). the endurance and essential importance of these phases depends on the specific characteristics of the family business, on the sector of reference, the competitive environment, the organizational structure, the stage of development of the company and, above all, the personality of the entrepreneur and the influence of the whole family (del bene 2005). a first phase, prior to succession, can be identified at the moment when the entrepreneur realizes that he must delegate his own position. this awareness can arise from the foundation of the company, something that denotes a positive attitude with which the entrepreneur aims to promote business continuity over time, or in a negative sense, that the entrepreneur notices he is no longer heard or simply pretend to perpetuate his position in time. the second phase of the process begins when the company identifies the potential successor figure within the family. this identification can be a source of family conflicts, as well as a source of problems of acceptance by the corporate structure. it should be noted that this phase is not always clearly separated from the previous one, in which the entrepreneur can develop a preference for the person to whom he intends to entrust the entrepreneurial role; but he may http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 prefer not to show his preference to avoid conflictive situations and to achieve a gradual and natural acceptance of the successor by the other members of the family and the whole organizational structure. in the latter case, it is possible that this second stage begins without the formalization of a successor, but with the tacit identification of a person as a potential successor. the third phase, later identified as the succession, is characterized by taking the real power of the successor (or successors). in this phase, coexistence between the old and the new generation can also be determined for a certain period of time. for succession to be considered as such, it is necessary that there had been a change of role between the two generations. it follows that the ancestor who continues to operate within the corporate structure simply has to play a supportive role, without affecting the decision-making or the autonomy management of the successor who took over the business function. however, if the successor does not have adequate business skills and talents at this stage, the beginning of the decline of the family enterprise can be identified, with the consequent reduction of future income prospects. on the contrary, succession can also be a development opportunity for the family business, realizing product innovations, processes or organizational changes required by the competitive environment, which is essential to keep the use of new skills in position of the successor or increase the competitiveness of the company over time. according to some authors and numerous empirical studies (boldizzoni, cifalinò, and serio 2000; dyck et al. 2002; armal 2003; cucculelli 2004), succession can generate processes of change that strengthen the business formula and consolidate the sources of competitive advantage (compagno and gubitta 2004). the transition at the strategic apex can and should http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 be seen as an opportunity to simplify and improve the company or to introduce the necessary changes to ensure adequate levels of competitiveness in the medium and long term. by reinforcing the business culture, succession of members can provide the basis for long-term strategies that reduce knowledge transmission costs. however, if business leaders have gathered training and experience within the company or family circle, this may restrict the company's ability to respond to external challenges or alter the internal organization. training and experience within the company must be balanced with the contacts network of an outgoing business leader who can be commercial, financial or knowledge-based and that represents an element of the company's intangible assets (colli, fernández, and rose 2003). it is ironic that the process is so conflicting since one of the main objectives of internal succession in family businesses is to reduce uncertainty by maintaining family control. although it is not the only factor determining the survival or prosperity in family businesses, the tumultuous nature of the generational transition has been identified as one of the main reasons why family businesses are often short-lived (gallo 1998). ultimately, it is desirable that generational change could be seen not as a threat or as a mere rotation at the apex or as an opportunity to revolutionize society, but as a physiological stage in the family business life cycle, essential for its development and integration of the strategic path that it intends to carry out. step model within the empirical analysis, six companies (three italian and three peruvian) were selected for an investigation carried out by the step project. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 the step project was created in 2005 by seven academic institutions. by 2015 there already were 40 academic institutions from five regions in the world, with 175 researchers involved. step is aimed at educating business families, focusing on their ability to create social and economic value, and to perpetuate this entrepreneurial legacy for many generations. the objectives are focused to understand the transgenerational nature of business groups and families, to determine how they foster the creation of new entrepreneurial initiatives over time and to identify the best family practices aimed at generating, maintaining and transmitting the entrepreneurial spirit throughout generations. to achieve the objectives, step proposes a transgenerational entrepreneurship model that especially includes these key components: ̶ particular emphasis on the family as a unit of analysis, thus broadening the scope of analysis beyond the individual and organizational level. ̶ the business mindset from the family. ̶ the influence of the family on founds and the use of resources. ̶ contextual factors such as industry, community culture, the stage of family life and the family participation. ̶ performance and value creation measured in terms of business, financial and social performance as antecedents of the transgenerational potential. step investigation used by this study was presented in february 2015. the survey was completed by 1043 participants, out of a total of 4162 eligible, with a response rate of 25.06%. the study was carried out by research teams of the countries where the step project is located, which had direct contact with the participating family companies. step project focuses on families motivated to change that have at least a second generation, with an ownership of at least three family members and another one in management. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 figure 1. revised case step form source: step, 2013-2014. businesses’ profiles for the present study, business families were selected according to the relevant information, regarding the following criteria:  one family runs a single company;  in the company they are simultaneously active at least two generations;  there has been a generational change desired by the family and not required by force majeure;  profiles of two different generations of the same family are present in the research. what also characterizes the family companies that participate in this survey is their long-term vision, their flexibility and independence to make timely decisions, their entrepreneurial spirit, http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 their commitment to society and workforce, their values and culture, the close relationship with their staff and clients, as well as being a guide for the family. the data used for the comparison are the result of a selection of more than 100 questions addressed to family companies chosen by the step project. by comparing the responses of the six companies selected using the step model, i was able to the trace of each family member's profile and the calculation of their transgenerational potential was possible. the limited number of cases, obviously, does not allow for statistically significant results. however, it is considered that the analysis of these cases can provide interesting reflections. companies1 selected are synthetically described in table 3. table 3. companies description company sector characteristics involved generations interviewed company 1 peru commerce control: 70% family employees: 123 sales: $1m-$5m 1°, 2° y 3° founder (1° gen.) director (2° gen.) company 2 peru construction control: 100% family employees: 20 sales: $500k 1°, 2° y 3° director (2° gen.) employee (3° gen.) company 3 peru construction control: 100% family employees: 40 sales: $5m-$10m 1° y 2° founder (1° gen.) director (2° gen.) company 1 italy commerce control: 70% family employees: 20 sales: $1m-$5m 1°y 2° founder (1° gen.) director (2° gen.) company 2 italy textile control: 100% family employees: 130 sales: $10m-$15m 3° y 4° director (3° gen.) director (4° gen.) company 3 italy construction control: 100% family employees: 15 sales: $10m-$15m 1°, 2° y 3° founder (1° gen) director (3° gen.) source: step 2013-2014 survey. 1 for a privacy issue, all the companies in the step project are not identified. therefore, in this study we have used fancy names to differentiate them. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 entrepreneurial orientation entrepreneurial orientation (eo) represents, qualifies and characterizes the health status of business innovation ecosystems. entrepreneurship encompasses all the people within the company. the entrepreneurial orientation refers to the attitude of the managers and executives of the company, as members of an organization with rules and procedures, to accommodate and encourage the emergence of business ideas. numerous experimental studies state that a high business orientation corresponds to better results in terms of sales, market share and size of companies (rauch et al. 2009). initially, eo had only three constructs —innovation, risk and proactivity— that should covariate positively for eo to manifest it. later, in the mid-1990s, lumpkin and dess (1996) extended the domain of the eo construct, including two additional dimensions: competitive aggressiveness and autonomy. autonomy autonomy can be understood as an independent action by an individual or team to launch an idea or a vision and carry it through to completion (lumpkin and dess 1996). in other words, it is about the ability and willingness to decide freely for oneself to pursue market opportunities. within the conceptual framework of the eo, autonomy has a very important role in boosting the strengths of a company, identifying opportunities that are outside the organization's capabilities and reinforcing to carry out new projects that improve business practices (kanter 1983). thus, autonomy reinforces innovation, stimulates start-up of business projects and improves competitiveness and efficiency within organizations (burgelman 1984). in our case, for italian and peruvian business families, autonomy is not a sensitive issue that http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 matters much. in particular, peruvian companies do not support individual efforts or autonomous working groups, nor do they encourage individuals to become autonomous. mainly, in company 2 peru, it is observed that the best results do not happen when the person and/or the group decide for themselves, but when there is a comparison between the collaborators. the relevant issue is that the third generation thinks that they should not work with much autonomy and that it is not necessary to give employees so much autonomy. the lack of autonomy is also noted by comparing the number of informal meetings that the family organizes, which is a number higher than the average of the rest of the companies in the study. innovation the key factors of innovation are vision of the future, shared vision and commitment to learning, so that it does not limit or punish a company's employees for making mistakes (wang 2008). innovations, which reflect the result of a dimension that has gained importance in recent years due to the rapid movements of markets and the changing needs of customers, can be classified, according to their focus, as external and internal. with the available data for the companies examined, we can focus mainly on external innovation. it can be seen that peruvian companies are most often the first in their own market to introduce new services/technologies (especially company 1 peru and company 1 italy). on the other hand, italian companies have introduced new lines and more changes in products/services in the last five years. this can be justified by the greater competition that the market imposes on the companies to diversify and to attract more clients with a constant innovation. comparing the responses of the different generations, we see how the last generation has a more positive and innovative vision than the previous generation. this can be justified by a more http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 open mindedness of the new generation, and the technological progress that is increasing over the years. assumption of risks risk assumption consists of daring actions, such as venturing into the unknown, massive contracting and compromising resources in launching new products with a high degree of uncertainty (rauch et al. 2009). in other words, it typifies the degree of willingness of management to compromise enterprise resources when the decision has a considerable probability of failure (lumpkin and dess 1996). in the case of family businesses, the idea that these types of companies assume the risk in a different way has been widely accepted. this is because management and ownership are not separated as well as the family nature of ownership and management (carney 2005). naldi et al. (2007) state that family businesses are more risk-averse because most of the family’s wealth is often invested in the firm, fully supporting the hypothetical financial losses of failed investments. these theses are not fully validated by the companies examined; in fact, the six companies are trying to encourage mostly low-risk projects (italians rather than peruvian ones), with prudent behavior to minimize the likelihood of costly decisions. peruvian companies, moreover, explore the environment with gradual actions more than the italian ones. therefore, there is evidence that these organizations are not as risk-averse as literature claims when it comes to family businesses. this is justified by the claim that in such a competitive market, a wrong decision could endanger the life of the company. proactivity proactivity refers to processes that aim to anticipate and operate in future needs, by seeking http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 new opportunities that may or may not be related to the usual line of action, the introduction of new products and brands —before the competition— and the elimination of operations, which are strategically in the stages of maturity or decline of the cycle of life. in the case of family firms, zellweger and sieger (2010) said that the pattern of proactivity is dynamic, with periods of low levels of proactivity and other phases of well-studied movements. the level varies depending on the generation owned by family businesses, and this level of proactivity can be quite widespread. in addition, short et al. (2009) indicates that large family firms exhibit lower levels of proactivity compared to non-family ones. this conclusion is in line with the fact that defensive strategy is the most common strategic approach employed by family firms. the companies studied play a moderately important role in identifying and selecting opportunities, limiting themselves to encouraging people and/or teams to make decisions regarding business opportunities, without constantly consulting their supervisor(s) on the contrary, company 1 peru tries to play an important, active and, above all, faster role than its competitors in the individualization and choice of opportunities. competitive aggressiveness competitive aggressiveness refers to the tendency of a company to challenge its competitors in a direct and intense way in order to outdo competitors in its sector (lumpkin and dess 1996). competitive aggressiveness can take different forms. all of them are based on acquiring larger market shares and customers attacking the weaknesses of competitors in order to reduce their ability to compete, and also to anticipate and respond to what an aggressive rival company hopes to do in the future ( hughes and morgan 2007). in the case of family businesses, their views and ways of acting tend to be different from nonhttp://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 family ones. within this dimension there are at least two different behaviors. one is the adoption of an aggressive attitude in order to undo the position of the competitors, while the other behavior is the attitude known as “live and let live” (covin and covin 1990). this latter form is the one that best represents peruvian companies, more oriented towards an approach that tries to avoid any kind of confrontation with competitors. they are not particularly aggressive and competitive. they simply observe the actions of the competitors and take sporadic actions to obtain business from them. as martin and lumpkin (2003) argue, participation in company control by different generations affects the intensity level of this dimension. in fact, as later generations become involved in the family business, competitive aggressiveness tends to be less. this is confirmed by comparing the responses of the two generations of companies. familiness and resources analyzing family businesses, we can observe the existence of a set of resources that differentiate each of these organizations from other companies. this set of resources can be the product of the constant interaction between the company and the family. habberson and williams (1999) characterize this set of resources, which he calls familiness and is defined as “that set of resources that are distinctive of a company as a result of its implication in a family”. if we analyze the resources that will integrate the family, they must necessarily be those that can characterize the organizations. thus, far from referring to any type of tangible asset, which may be available to any organization, they should be limited to certain intangible assets and capabilities and, in particular, to knowledge-based resources. if we consider the set of resources that will compose the familiness, it is easy to verify that these are valuable resources for the company; heterogeneous, since they are characteristic of each organization; imperfectly mobile, http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 especially because of belonging to a family of the company; and difficult to reproduce by other companies, especially because of their causal ambiguity. step considers in its model of familiness seven resources that, combined, make each company a unique and distinct entity. financial capital in companies ruled by a small number of people, the owners control the management of capital and the distribution of profits in a particular way. this control can mean an advantage (generates expectations of long-term gains) or a disadvantage (conflicts between shareholders who demand capital and managers who prefer to reinvest). financial capital should take into account aspects such as debts, money flow, strategic alliances and other ways of managing the capital. four of the six business families considered in this research have total control of the financial capital of the company; the other two, one italian and one peruvian, have 70%. all with sufficient freedom to manage capital, having control over all financial movements. from the step survey data, it can be seen that there is no significant difference between firms in terms of availability and control of financial capital. it can be seen that for peruvian companies it is more important to reinvest most of the profits in the company, used mainly to renew the productive processes. family culture in the company the culture of an organization is formed by the beliefs, ways of acting, rules, etc., that create the internal environment of the company. the culture components discussed include values, vision, behavior, and traditions of the family and organization, especially those related to the impact the family has on the company. the positive reputation of the business family is fundamental. this is a requirement that is not http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 only found in the six companies analyzed, but is present in most companies in peru. good reputation is considered a discriminator to highlight the competition. in italian companies, it was found that the impact of the family on the identity and harmony of the company is stronger and evident. intangible capital the ability of a company to realize its strategy depends, in the definition, on the non-material factors —intangibles— of the firm's capital. intangible capital does not directly participate in the generation of value, but generates it when it joins other intangible factors. its value depends on the goals of the company and its ability to achieve them; this makes objective measurement difficult. intangible capital includes several aspects: the network of contacts with people and organizations that are not part of the company (suppliers, customers, stakeholders) and what is defined as human capital: a set of knowledge, skills, abilities, emotions that each collaborator puts at the disposal of the company, being the mentioned the main ones. the education, experience, skills and learning capabilities of family members and non-family members working in or with the company reflect the knowledge and skills retained by the family members. from the interviews with the selected family companies, it was demonstrated that they consider essential that employees have experience and are sufficiently aware of the productive process in which the company operates. only company 1 peru does not think it necessary to choose informed employees (this, because the company organizes training courses). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 performance the performance of family businesses, as well as the ability to create value, has been the subject of intense international debate for several years (yu et al. 2012; o'boyle, pollack, and rutherford 2012; gedajlovic et al, 2012; mazzi 2011; zellweger, eddleston, and kellermanns 2010). the wide spread of the phenomenon, the particular nature of family businesses, the complexity of the resources derived from the interaction between family and company systems and the contrasting effects that are being realized on the performance of the business have encouraged the proliferation of a debate on the relationship between familiarity and performance. despite the profusion of studies, the literature has not achieved consistent results (o'boyle et al. 2012; chrisman, chua, and steier 2005). some research has shown the existence of a positive relationship between family participation and performance (van essen, van oosterhout, and carney 2011; sraer and thesmar 2007; martínez, stohr, and quiroga 2007); however, others have shown that the family effect has a negative impact on the firm's performance (westhead and howorth 2006; filatotchev, lien, and piesse 2005). others reveal that there is no significant relation, evidencing that the family character may not be sufficient by itself to explain the performance of the company and that, therefore, the focus of the research must move in the search for variables and/or moderators of relationship mediation (villalonga and amit 2006; daily and dollinger 1992). like the literature, the case studies that have been analyzed reflect uncertainty about the performance of family-run companies. in reference to the performance of the three years prior to the interview, there is a strong difference between the six companies when comparing them with the competition. in company 2 italy, for example, the growth of its sales has been http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 considerably smaller than the one of its competition. company 1 italy, on the other hand, it has had a much better sales increase than its competitors in the last three years. in general, peruvian companies have had a greater financial growth over their competitors than italian companies, and are distinguished because of a greater attention on the subject of social performance, trying to reduce the environmental impact of production and educating their employees on the matter. conclusions in order to study the generational change, which represents the most significant moment of change for family companies, this work analyzes it in several aspects. the objective that has guided our research has been to enrich the debate on the issue of generational change in family businesses, comparing italian and peruvian companies, in search of identifying any similarity or difference in the management and approach to succession. in general, the six companies examined do not show great diversity in the management of generational change. for example, in macro-themes such as family relations that influence the life of the company, we can point out that there is a particularity (the low harmony and low development of the new generation in company 2 italy), but they are identified in a single company and that does not characterize the others. it is worth noting that italian companies focus more on management practices, trying to constantly improve performance, with the aim of increasing sales, neglecting the intangible aspects such as the development of human capital and family life, aspects in which peruvian companies focus more. for a family business to have transgenerational potential, it is essential to maintain good http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 relations among family members. this relationship allows the sustainability of the company. it is observed that in the six companies studied, the first generation strives to transmit the basic values of the family to their children. these values are projected to companies. family members respect family business partners and care about communicating with them constantly. all the interviewees of the last generation, who theoretically would have to manage the companies, are willing to maintain the entrepreneurial spirit. they are aware of the importance of maintaining control of the organization among the family. with the results obtained, we can once again validate one of the most supported theses in the literature: the succession and generational change represents one of the most important moments in the life of a family business because it is and it can be a crossroads between the continuation of business activities and the closure of the company, so that companies live this with fear and concern. figure 2. mean values of the responses for the model variables source: step survey 2014 own elaboration only by planning and considering it, not as a threat or as a mere rotation, but as a physiological stage in the family business life cycle, succession can be a key opportunity to spread the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 160-190, july-december 2017 doi:10.1344/jesb2017.2.j033 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 innovative spirit in the company and to initiate the process of change carried out according to a logic oriented to the future, where continuity and renewal, tradition and innovation are combined. finally, the available data have not been sufficient to obtain a clear and definite idea of each company, but it can be said that the six companies investigated have a good transgenerational potential and 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kimberly a. eddleston, and franz w. kellermanns. 2010. “exploring the concept of familiness: introducing family firm identity.” journal of family business strategy 1:54-63. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 laxmipriya das soa university (india) sasmita mohanty soa university (india) https://orcid.org/0000-0002-0315-5062 https://orcid.org/0000-0001-5194-3429 impact of organizational justice on organizational citizenship behavior: empirical evidence from higher educational institutions abstract organizational justice appears to be a key component that leads to attaining organizational goals and, as a result, increases organizational performance. employees who feel fairness in today’s highly competitive workplace are more inclined to contribute more to their organization. employees who feel their organization performs fairly are more likely to display citizenship behavior. the current study sought to ascertain the level of faculty members’ justice perception and extrarole behavior in higher education institutions. to investigate the impact of organizational justice on organizational citizenship behavior among faculty members of higher educational institutions, various research questions are developed: first, how much influence does faculty members’ organizational justice (oj) have on their organizational citizenship behavior (ocb) towards the institution? second are there any important connections between t he oj and ocb constructs? statistical package for the social sciences (spss) was used in the study. cronbach’s alpha, descriptive analysis and multiple regression analysis were applied in the study. according to the findings, oj has a significant influence on the dimensions of ocb. it represents that the employe es should exhibit selflessness and always thinks for the welfare of others, act in positive ways, never complain, and participate in the organization's political process. keywords: organizational justice, organizational citizenship behavior, higher educational institutions impacto de la justicia organizacional en el comportamiento organizacional de la ciudadanía: evidencia empírica a partir de las instituciones de educación superior resumen la justicia organizacional parece ser un componente clave que conduce al logro de las metas organizacionales y, como resultado, aumenta el desempeño organizacional. los empleados que se sienten justos en el lugar de trabajo altamente competitivo de hoy están más inclinados a contribuir más a su organización. los empleados que sienten que su organización se desempeña de manera justa tienen más probabilidades de mostrar un comportamiento ciudadano. el presente estudio intenta determinar el nivel de percepción de justicia y el comportamiento más allá de sus funciones de los profesores en instituciones de educación superior. para investigar el impacto de la justicia organizacional en el comportamiento de ciudadanía organizacional entre los profesores de instituciones de educación superior, se desarrollan varias preguntas de investigación: primero, ¿cuánta influencia tiene la justicia organizacional (oj) de los profesores en su comportamiento de ciudadanía organizacional (ocb) hacia la institución? en segundo lugar, ¿existen conexiones importantes entre las construcciones oj y ocb? en el estudio se ha utilizado el paquete estadístico para las ciencias sociales (spss). en el estudio se ha aplicado el alfa de cronbach, el análisis descriptivo y el análisis de regresión múltiple. de acuerdo con los resultados, oj tiene una influencia significativa en las dimensiones de ocb. representa que los empleados deben mostrar desinterés y siempre pensar en el bienestar de los demás, actuar de manera positiva, no quejarse nunca y participar en el proceso político de la organización. palabras clave: justicia organizacional, conducta cívica en las organizaciones, instituciones de educación superior impacte de la justícia organitzativa en el comportament organitzatiu de la ciutadania: evidència empírica a partir de les institucions d'educació superior resum la justícia organitzativa sembla ser un component clau que condueix a assolir els objectius organitzatius i, com a resultat, augmenta el rendiment de l'organització. els empleats que senten la justícia en el lloc de treball altament competitiu actual estan més propensos a contribuir més a la seva organització. els empleats que consideren que la seva organització té un rendiment just tenen més probabilitats de mostrar un comportament de ciutadania. l'estudi actual pretén determinar el nivell de percepció de la justícia dels professors i el comportament extra-funcional a les institucions d'educació superior. per investigar l'impacte de la justícia organitzativa en el comportament de la ciutadania organitzativa entre els professors d'institucions d'educació superior es desenvolupen diverses preguntes d'investigació: en primer lloc, quina influència té la justícia organitzativa (oj) dels membres del professorat en el seu comportament de ciutadania organitzativa (ocb) cap a la institució? en segon lloc, hi ha alguna connexió important entre els constructes oj i ocb? en l'estudi s’ha utilitzat el paquet estadístic per a les ciències socials (spss). en el treball s’apliquen l'alfa de cronbach, l'anàlisi descriptiva i l'anàlisi de regressió múltiple. segons les conclusions, el do té una influència significativa en les dimensions de l'ocb. representa que els empleats han de mostrar abnegació i pensar sempre pel benestar dels altres, actuar de manera positiva, no queixar-se mai i participar en el procés polític de l'organització. paraules clau: justícia organitzativa, comportament de ciutadania organitzacional, institucions d'ensenyament superior corresponding author: e-mail: das.laxmipriya1984@gmail.com received 9 october 2021 accepted 8 arpil 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-0315-5062 https://orcid.org/0000-0001-5194-3429 mailto:das.laxmipriya1984@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 1. introduction the impact of justice perception on employee professional motivation, satisfaction, and behavior has recently gained prominence, and many studies are being conducted in this area. the degree to which employees believe the organization's policies, interactions, and outcome measures appear to be equitable is referred to as organizational justice. employee attitudes and behaviors can be influenced by these perceptions, which can have an impact on employee performance and the success of the organization. organizational justice (oj hereafter) seems to be a pivotal component that contributes to the accomplishment of organizational objectives and, as a result, improves the performance of the organization. employees in today's highly competitive workplace who perceive fairness are more likely to contribute more to their company. employees who go above and beyond the call of duty are essential for a successful organization. employees who believe their company operates equitably are more inclined to exhibit citizenship behavior. 2. problem statement the primary issue with this research is that organizational justice is a new concept that hasn't been thoroughly investigated by interested researchers in studies. as a result, the absence of this construct in companies may result in decreased levels of citizenship performance among employees. the significance of oj in accomplishing organizational goals by improving employees' extra-role behavior has been perceived by many scientists and practitioners. oj is becoming more important, and many attempts have been made to implement its ideas to better comprehend employee behavior in the workplace, as well as to be used as a framework for interpreting employee organizational citizenship behavior (ocb hereafter). as a result, the objective of this research is to determine the extent to which faculty members in higher http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 education institutions engage in oj practices and ocb, as well as the impact of these practices on their ocb. managers who treat employees unfairly and inconsistently may not be acting in the best interests of the company. although many studies have been conducted in the education sector, it has been discovered that very few studies have been conducted in higher educational institutions. as a result, it's crucial to figure out how oj affects ocb at higher education institutions. 3. objectives the study objectives are as follows: to identify the degree of fairness among the educationalists of the tertiary education sector. to recognize the degree of ocb among the faculty members of higher educational institutions. to work out the effect of categorical variables on organizational justice and organizational citizenship behavior in higher educational institutions. 4. hypotheses based upon the research objectives, the following hypotheses are formulated. ho: the dimensions of oj have no statistically positive effect on ocb dimensions at higher educational institutions. ho1: the dimensions of oj have no statistically positive effect on the altruism dimension of ocb at higher educational institutions. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 ho2: the dimensions of oj have no statistically positive effect on the conscientiousness dimension of ocb at higher educational institutions. ho3: the dimensions of oj have no statistically positive effect on the sportsmanship dimension of ocb at higher educational institutions. ho4: the dimensions of oj have no statistically positive effect on the courtesy dimension of ocb at higher educational institutions. ho5: the dimensions of oj have no statistically positive effect on the civic virtue dimension of ocb at higher educational institutions. figure 1. theoretical framework source: ajlouni et al. (2018). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 5. organizational justice people's perceptions of the organization's fairness are referred to as oj. researchers in human resource management and organizational behavior have been paying close attention to this concept in recent years. according to the connection between just perception and extra-role behavior, the prediction to engage in ocb originates from the justice principle (organ and moorman 1993). ocb may be withdrawn by those who believe in inequality. people may be more motivated to perform ocb more efficiently if they believe they have been treated fairly by their superiors or organizations. we concentrated on general attitudes toward justice as predictors of the ocb in this study. the fairness of decision-making processes is the foundation of procedural justice (greenberg and folger 1983). distributive justice is fairness in terms of the organization's outcomes (gilliland 1994). interactional justice is defined by an organization's leaders and decisions as a perception of equal treatment (chiaburu and lim 2008). fairness in the distribution of outcomes, fairness in decision-making procedures, and fairness in treatment are all emphasized in organizational justice studies, as follows: procedural justice it is involved with the equity of organizational decision-making processes and policies (green berg 1990). procedural justice, on the other hand, is linked to subjective and objective circumstances, according to konovsky (2000). greenberg and tyler (1987) suggested procedural justice guidelines for managers to ensure that workers view the processes as equitable: 1. workers will participate in the process of decision-making that affects them. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 2. during the allocation process, there must be options for amending or changing the decisions. 3. the allocation method should be based on as much positive knowledge. 4. over time, allocation processes should be stable and reliable across individuals. 5. throughout the allocation process, self-interest and bias should be avoided. interpersonal justice interpersonal justice represents the degree to which authorities and third parties are involved in carrying out the procedures and treated people with courtesy, dignity, and respect. interpersonal justice focuses on how organizations treat their workers with dignity and courtesy (holtz and harold 2013). informational justice "informational justice" is defined as "explanations given to people that convey information about why procedures were used in a certain way or why outcomes were distributed in a certain way."informational justice aims to find out whether employers owe workers sufficient explanations with an emphasis on timeliness, specialty, and truthfulness (cheung 2013). 6. organizational citizenship behavior the ocb concept was originally formulated by podsakoff and mackenzie (1997). according to organ (1988) “individual behavior that is discretionary, not directly or explicitly recognized by the formal reward system and that in aggregate promotes the effective functioning of the organization”. ocb is "behavior that benefits or is intended to benefit the organization, is discretionary, and goes beyond existing role expectations” (van dyne, graham and dienesch 1994). the ocb is a set of beneficial organizational behaviors with multidimensional http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 relationships and positive business implications. however, there is a lack of a conceptually sound structure to explain why ocb exists. every new study has previously suggested and, to some extent, endorsed a new ocb narrative. bateman and organ (1983) coined the term ocb. ocb’s five dimensions were altruism, conscientiousness, sportsmanship, courtesy and civic virtue. altruism in terms of the helping approach, altruism primarily affects organizational members. altruism encompasses actions such as voluntarily assisting overburdened coworkers and orienting new people. when an individual gives without expecting anything in return because he or she wants to improve the lives of others, this is referred to as altruism. conscientiousness impersonal behavior that benefits the entire organization is characterized by conscientiousness. to put it another way, it refers to behavior that has nothing to do with another person. for example, an employee who follows an organization’s rules, or who will not squander his or her holidays is referred to as conscientiousness behavior. sportsmanship sportsmanship refers to a worker's ability to work through difficult situations without complaining. it is the only type of ocb that causes behavior changes. courtesy interaction and general consideration for others are used to demonstrate courtesy, which helps to avoid organizational issues. for other employees, courteous behavior tries to avoid unforeseen problems. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 civic virtue civic virtue is inculcated in an organization's life and culture; it is not viewed as a personal trait, but rather as the organization's goal. attending business functions which include meetings and picnics which are not mandatory for employees, is an example of civic virtue. this also seems to provide reports describing organizational issues. 7. methodology the study population and its sample a total of 1,000 faculty members from higher educational institutions are included in the study. only 470 of the 1,000 questionnaires distributed were found to be valid for statistical analysis. purposive sampling was used because this is a type of sampling in which investigators choose individuals from the population to take part in evaluations depending on their own decision, and it is a homogeneous sampling. data collection and instrument the data was collected from higher educational institutions from 470 faculty members by questionnaire survey. a five-point likert scale was used. oj scale consists of 20 items including four variables developed by colquitt, (2001). ocb scale comprised of 24 items including five variables developed by podsakoff et al. (1990). the scale indicates high reliability and validity. instrument validity and reliability cronbach's alpha was used to test the questionnaire's reliability, and it was found to be adequate if it was greater than 0.60 (churchill and peter 1984). the results of cronbach’s alpha are justifiable, as shown in table 1, where the values are greater than 0.70. as a result, the instrument was appropriate and consistent for carrying out the research. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 table 1. cronbach’s alpha variable no. of items cronbach’s alpha distributive justice 4 .864 procedural justice 7 .879 interpersonal justice 4 .849 informational justice 5 .880 altruism 5 .726 conscientiousness 5 .742 sportsmanship 5 .860 courtesy 5 .737 civic virtue 4 .719 source: own elaboration. demographic details table 2 shows the demographic details of the sample. faculty members from higher educational institutions all over india were included in the sample. there were 358 males and 111 females among the respondents (21 to 51) age group. the age group 31-40 had the maximum number of respondents (155). the highest qualifications were ph.d. (273) and a maximum number of respondents were from human resource department (195). table 2. demographic variables characteristics gender males (358) females (111) age (in years) 21-30 (89) 31-40 (155) 41-50 (125) 51 years and above (101) qualification m. phil (18) phd (273) post doctoral (26) post graduation (142) other (11) department finance (40) human resource (195) marketing and sales (24) others (44) technical (167) source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 table 3. descriptive analysis of oj and ocb total percent mean std. deviation variance statistic statistic statistic statistic organizational justice 100.0 3.91 0.07 0.019 organizational citizenship behavior 100.0 3.86 0.25 0.264 source: own elaboration. the findings in table 3 represent that the mean of organizational justice is 3.91 and the mean of organizational citizenship behavior is 3.86. the standard deviation value of ac is .942, the standard deviation value of normative commitment is 1.42, and the standard deviation value of oj is .007 and the standard deviation value of ocb is 0.25. the variance of oj is 0.019 and the variance of ocb is 0.264. table 4. results of multiple regressions: the effect of oj on ocb organizational justice organizational citizenship behavior b value β t value sig distributive justice .477 .138 2.828 .005 procedural justice .558 .281 5.622 .000 interpersonal justice .283 .079 1.452 .147 informational justice .500 .187 3.293 .001 r .559 r 2 .313 f value 52.845 sig 0.000 source: own elaboration. table 4 indicates the outcomes of multiple regression of the impact of oj on ocb. results indicate that oj is significantly and positively affects ocb at p ≤ 0.05. this indicates a positive relationship between oj and ocb. r2 is .559 which implies that oj explains 31.3% of the variance of ocb of higher educational institutions, while 68.7% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on ocb dimensions at higher educational institutions. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 the findings of the multi-regression model indicate that distributive justice (β = .138, t = 2.828, sig = .005), procedural justice (β = .281, t = 5.622, sig = .000), interpersonal justice (β = .079, t = 1.452, sig = .147), informational justice (β = .187, t = 3.293, sig = .001) respectively. the value of (f) = 52.845 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). table 5. results of multiple regressions: the effect of oj on altruism organizational justice altruism b value β t value sig distributive justice .082 .079 1.466 .143 procedural justice .084 .141 2.541 .011 interpersonal justice .168 .156 2.596 .010 informational justice .087 .109 1.728 .085 r 0.392 r 2 0.154 f value 21.156 sig 0.000 source: own elaboration. table 5 indicates the outcomes of multiple regression of the impact of oj on altruism. results indicate that oj is significantly and positively affects altruism at p ≤ 0.05. this indicates a positive relationship between oj and altruism. r2 is 0.392 which implies that oj explains 15.4% of the variance of altruism attitude of higher educational institutions, while 84.6% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on the altruism dimension of ocb at higher educational institutions. the findings of the multi-regression model indicate that distributive justice (β =.079, t =1.466, sig = .143), procedural justice (β = .141, t =2.541, sig = .011), interpersonal justice (β = .156, t =2.596, sig = .010), informational justice (β = .109, t =1.728, sig = .085) respectively. the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 value of (f) = 21.156 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). table 6. results of multiple regressions: the effect of oj on conscientiousness organizational justice conscientiousness b value β t value sig distributive justice .190 .222 4.110 .000 procedural justice .045 .091 1.644 .101 interpersonal justice .100 .112 1.871 .062 informational justice .045 .068 1.081 .280 r .400 r 2 .160 f value 22.186 sig 0.000 source: own elaboration. table 6 indicates the outcomes of multiple regression of the influence of oj on conscientiousness. results indicate that oj is significantly and positively affects conscientiousness at p ≤ 0.05. this indicates a positive relationship between oj and conscientiousness. r2 is .400 which implies that oj explains 16.0% of the variance of the conscientiousness attitude of higher educational institutions, while 84.0% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on the conscientiousness dimension of ocb at higher educational institutions. the findings of the multi-regression model indicate that distributive justice (β =.222, t =4.110, sig = .000), procedural justice (β = .091, t =1.644, sig = .101), interpersonal justice (β = .112, t =1.871, sig = .062), informational justice (β = .068, t =1.081, sig = .280) respectively. the value of (f) = 22.186 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 table 7. results of multiple regressions: the effect of oj on sportsmanship organizational justice sportsmanship b value β t value sig distributive justice .018 .010 .178 .859 procedural justice .267 .261 4.539 .000 interpersonal justice -.306 .166 -2.657 .008 informational justice .221 .161 2.455 .014 r .294 r 2 .086 f value 10.985 sig 0.000 source: own elaboration. table 7 indicates the outcomes of multiple regression of the influence of oj on sportsmanship. results indicate that oj is significantly and positively affects sportsmanship at p ≤ 0.05. this indicates a positive relationship between oj and sportsmanship. r2 is .294 which implies that oj explains 0.86% of the variance of sportsmanship attitude of higher educational institutions, while 9.14% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on the sportsmanship dimension of ocb at higher educational institutions. table 8. results of multiple regressions: the effect of oj on courtesy organizational justice courtesy b value β t value sig distributive justice .061 .057 1.023 .307 procedural justice .059 .096 1.671 .095 interpersonal justice .167 .152 2.429 .016 informational justice .060 .073 1.115 .265 r .307 r 2 .094 f value 12.103 sig 0.000 source: own elaboration. the findings of the multi-regression model indicate that distributive justice (β = -.010, t = .178, sig = .859), procedural justice (β = .261, t = 4.539, sig = .000), interpersonal justice (β = -.166, t = -2.657, sig = .008), informational justice (β = .161, t = 2.455, sig = .014) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 respectively. the value of (f) = 10.985 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). table 8 indicates the outcomes of multiple regression of the influence of oj on courtesy. results indicate that oj is significantly and positively affects courtesy at p ≤ 0.05. this indicates a positive relationship between oj and courtesy. r2 is .307 which implies that oj explains 0.94% of the variance of sportsmanship attitude of higher educational institutions, while 9.06% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on the courtesy dimension of ocb at higher educational institutions. the findings of the multi-regression model indicate that distributive justice (β = .057, t = 1.023, sig = .307), procedural justice (β = .096, t = 1.671, sig = .095), interpersonal justice (β = .152, t = 2.429, sig = .016), informational justice (β = .073, t = 1.115, sig = .265) respectively. the value of (f) = 12.103 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). table 9. results of multiple regressions: the effect of oj on civic virtue organizational justice civic virtue b value β t value sig distributive justice .162 .178 3.583 .000 procedural justice .105 .200 3.939 .000 interpersonal justice .154 .164 2.963 .003 informational justice .088 .125 2.159 .031 r .535 r 2 .286 f value 46.671 sig 0.000 source: own elaboration. table 9 indicates the outcomes of multiple regression of the influence of oj on civic virtue. results indicate that oj is significantly and positively affects civic virtue at p ≤ 0.05. this http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 indicates a positive relationship between oj and civic virtue. r2 is .535 which implies that oj explains 2.86% of the variance of sportsmanship attitude of higher educational institutions, while 7.14% is related to other factors. the null hypothesis is thus rejected: the oj dimensions have no statistically positive effect on the civic virtue dimension of ocb at higher educational institutions. the findings of the multi-regression model indicate that distributive justice (β = .178, t = 3.583, sig = .000), procedural justice (β = .200, t = 3.939, sig = .000), interpersonal justice (β = .164, t = 2.963, sig = .003), informational justice (β = .125, t = 2.159, sig = .031) respectively. the value of (f) = 46.671 with the degree of freedom = 4 and significant level = (0.000) which is more than its assorted value at significant level (a ≤ 0.05). 8. discussions and conclusions table 1 presents the outcomes of the cronbach's alpha test. when cronbach's alpha value is greater than.7, the result is considered accurate. table 2 presents demographic variables characteristics. table 3 presents a descriptive analysis of oj and ocb (means and standard deviations). all scales demonstrated good internal consistency. the findings of multiple regression analysis between the dimensions of oj and ocb are shown in table 4. with the null hypothesis, the findings are not consistent. the results indicate that oj has a positive influence on the ocb. extra-role behaviors are more likely to be displayed by employees with a high level of oj. tables 5, 6,7,8,9 present the outcomes of regression analysis between the dimensions of oj and ocb. with the null hypothesis, the results are not consistent. according to the findings, oj has a significant influence on the dimensions of ocb. it represents that the employees should exhibit selflessness and always thinks for the welfare of others, act in positive ways, never complain, and participate in the political process of the organization. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 9. managerial implications managers should take certain steps to improve employees' organizational citizenship behaviors. the employee’s just perception should be increased. there should be equal distribution of wages. employees should participate in decision-making processes and attend periodic meetings to create a better understanding of the organization. the incentive must be attractive. if the incentive would be attractive, it can increase employee effort. therefore, higher education institutions must have a fair reward policy based on distributive and procedural justice. the employees should exhibit willingness towards altruistic behavior which includes supporting the coworkers who have heavy workloads without any expectations. they should exhibit willingness towards conscientiousness behavior which includes following the rules and who will not squander holidays. they should exhibit willingness towards sportsmanship behavior which includes working without complaining in difficult circumstances. they should exhibit willingness towards courtesy which includes communication and general concern for others. and finally, they should exhibit willingness towards civic virtue which includes the dedication of individuals to the common welfare of others and to fulfill the organization’s target. 10. future implications in the higher education context, the present study was carried out. there is a need to do more research regarding fairness and extra-role behavior in other sectors. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 references bateman, thomas s., and dennis w. organ. 1983. “job satisfaction and the good soldier: the relationship between affect and employee citizenship.” academy of management journal 26: 587-595. cheung, millissa f.y.2013. “the mediating role of perceived organizational support in the effects of interpersonal and informational justice on organizational citizenship behaviors.” leadership & organization development journal 34: 551-572. doi:10.1108/lodj-11-2011-0114. chiaburu, dan s., and audrey s. lim. 2008. “manager trustworthiness or interactional justice? predicting organizational citizenship behaviors.” journal of business ethics 83: 453-467. doi:10.1007/s10551-007-9631-x. churchill jr, gilbert a., and j. paul peter. 1984. “research design effects on the reliability of rating scales: a meta-analysis.” journal of marketing research 21: 360-375. cohen, ronald l. 1987. “distributive justice: theory and research.” social justice research 1: 19-40. colquitt, jason a. 2001. “on the dimensionality of organizational justice: a construct validation of a measure.” journal of applied psychology 86: 386. gilliland, stephen w. 1994. “effects of procedural and distributive justice on reactions to a selection system.” journal of applied psychology 79: 691–701. greenberg, jerald. 1990. “organizational justice: yesterday, today, and tomorrow.” journal of management 16: 399–432. doi:10.1177/014920639001600208. greenberg, jerald, and robert folger. 1983. “procedural justice, participation, and the fair process effect in groups and organizations.” basic group processes 1975: 235–256. greenberg, jerald, and tom r. tyler. 1987. “why procedural justice in organizations?” social justice research 1: 127–142. doi:10.1007/bf01048012. holtz, brian c., and crystal m. harold. 2013. “interpersonal justice and deviance: the moderating effects of interpersonal justice values and justice orientation.” journal of management 39: 339– 365. doi:10.1177/0149206310390049. konovsky, mary a. 2000. “understanding procedural justice and its impact on business organizations.” journal of management 26: 489–511. doi:10.1177/014920630002600306. organ, denis w. 1988. “a restatement of the satisfaction-performance hypothesis.” journal of management 14: 547–557. doi:10.1177/014920638801400405. organ, denis w., and robert h. moorman. 1993. “fairness and organizational citizenship behavior: what are the connections?” social justice research 6: 5–18. doi:10.1007/bf01048730. podsakoff, philip m., scott b. mackenzie, robert h. moorman, and richard fetter. 1990. “transformational leader behaviors and their effects on followers' trust in leader, satisfaction, and organizational citizenship behaviors.” the leadership quarterly 1: 107-142. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1108/lodj-11-2011-0114 https://doi.org/10.1007/s10551-007-9631-x https://doi.org/10.1177/014920639001600208 https://doi.org/10.1007/bf01048012 https://doi.org/10.1177/0149206310390049 https://doi.org/10.1177/014920630002600306 https://doi.org/10.1177/014920638801400405 https://doi.org/10.1007/bf01048730 volume 8, number 2, 32-49, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.36704 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 podsakoff, philip m., and scott b. mackenzie. 1997. “impact of organizational citizenship behavior on organizational performance: a review and suggestion for future research.” human performance 10: 133-151. van dyne, linn, jill w. graham, and richard m. dienesch. 1994. “organizational citizenship behavior: construct redefinition, measurement, and validation.” academy of management journal 37: 765-802. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 john tattersall university of central lancashire (u.k.) arts council england: ramifications of organisational dynamics and institutional setting on policy abstract this paper offers a view of the development of decision making and policy within the arts council, national development agency for the arts, and explores the notion of how strategies are often the outcome of resource, political and cultural processes rather than discrete strategic planning. for the purposes of this paper, decision making and policy making are being treated as synonymous as key expressions of strategy. the paper is based on an examination of the assumption with which the arts council historically has justified both its general operations and particular decisions, the aim being to identify the various ideological and structural determinants which bear upon its decision-making processes. the paper concludes that the arts council is influenced by normative pressures from without and within which leads the organisation to be guided by previously legitimated policies which over time have become standard operating practice. the legitimated policies have had the tendency to lead to isomorphism within the arts council environment, creating selected patterns of routine and continuity. a form of ‘constructive tension’ has arisen between that which is deemed necessary to preserve and that which must change with time. keywords: arts policy; resource, political, cultural processes corresponding author: e-mail: jrtattersall@live.co.uk received 31 aug. 2017 accepted 11 dec. 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 introduction this paper applies some concepts and theories in the fields of strategic management and organisational behaviour to a study of the council, as reflected through its policies, in the belief that relatively few attempts thus far have been made by academics to relate some of the profound difficulties of the public administration of art to these branches of the sciences. the author has sought not to bind himself to one particular model or strand of theory, in the belief that drawing on concepts and ideas in an appropriately focused yet eclectic fashion helps provide some answers at least, often missing from other discourses on the subject around the central question of why the arts council has never in its long history managed to formulate a comprehensive policy for the arts or settle once and for all its role as government appointed patron for the arts. background of growing academic interest to students of organisational theory and social policy is the increasing intervention of governments in ‘late capitalist societies’ which displays a desire to provide a measure of protection to those areas of the economy known to be at ‘high risk’ and which require constantly substantial amounts of financial, technical and manpower resources.1 this is so to the extent that governments have for some time now been intervening in the productive processes of a number of arts constituencies around the world, yet these protective and interventionist state strategies have oftentimes had the side effect of generating unintended consequences of ‘fiscal crises’ and ‘ideological crises’ that in some cases have produced severe internal contradictions for organisations like the arts council, which cannot always be 1 for a recent and widely recognised example of this, one need look no further than the intervention of world governments in the “global financial crisis” of late 2008. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 contained within existing structures, programmes and processes and have had serious implications for the development of strategy as a whole. government’s growing concern about value for money in public policy delivery and its determination to move policy-making and implementation nearer to the ‘market’ for that service has shaken the premise upon which the arts council was founded. the legislative mandate given to the arts council at its inception and carried forward to its later reincarnations was to foster, develop and promote the arts (always specified in the broadest of terms) and to increase its availability and accessibility to the public. with the advent of new technologies and new art forms, the council has been faced with the decision to conserve the traditional or to develop the innovative, adopting where appropriate a more entrepreneurial approach in conjunction with partner organisations and individuals. additionally, conflict has arisen in protecting its ‘arm’s length’ status from government who see it as their prerogative to shape the arts to the current social policy preoccupations. the arm’s length principle is politically ambiguous, perhaps deliberately so. the council, therefore, is something of an anomaly being at the same time both part of and separate from government. in summary, the arts council lives in a constant state of tension; on the one hand between conflicting ideas partly engendered by the phenomenal growth of the arts in the post-war period and, on the other hand, between the expectations of the artistic community and the perceptions of its performance by government. throughout its chequered history, the arts council has struggled with the question of excellence versus accessibility. should it give priority to improving the artistic quality of the arts or to extending the availability of the arts to audiences in more parts of the country with the possible risk of limiting of, or dilution of, quality? in the 1960s and early 1970s there were occasions when it appeared it might be able to do both but as inflation grew astronomically and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 budgets became erratic, the arts council found itself having to make choices among programmes and clients, a situation it has had to revisit on many subsequent occasions. in addition, some clients (in the main, national companies) had on the basis of more or less guaranteed levels of funding, got used to attaining lavish levels of production which increased greatly the demands on the limited funds of the council and heralded the era of the so-called ‘funding trap’. with the emphasis in approach to funding (if not always in monetary terms) now demonstrably changing in favour of access the arts council, in trying to find an equitable solution, set limitations on the number of a particular type of client supported and on the sub disciplines eligible for funding. a natural follow-on from questions of access and excellence are the related concerns of professional arts versus amateur arts, traditional art forms versus new art forms and individuals versus organisations. emphasis in funding has typically over the years been given to professional artists who by and large come from the ‘high arts’ organisations for it is in funding these choices that the arts council feels most safe. however, the council must still decide what emphasis and ultimately what proportion of its funds should be allotted to such areas as community style arts (these days also represented by professionals) or other speculatively formed entrepreneurial-type activities —in the sense of being innovative and risk taking— which may not always be of a significant quality but are offering people the opportunity to participate and gain first-hand experience of the arts. somewhat more recent art forms on occasions falling within traditional art forms i.e. media art and performance art only served to heighten the dilemma of the council. it is these sorts of issues which are contextualised within the arguments around ‘cultural democracy’ and ‘democracy of culture’. nevertheless, despite earlier reservations, the arts council has come to recognise the need to provide a full range of http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 support to the individual artist and has developed programmes to respond to these needs. however, when one examines the expenditures for the council, it is evident that the larger proportion of money has always gone to the established arts organisations and recent policy statements have done little to dispel consensus over long-standing funding patterns. resource processes there are two issues which should permit comparative evaluation of the operating objectives and the resulting pattern of funding of the arts council. the first is the balance between support to the high, commercial and amateur arts. the second is the range of artistic disciplines and sub-disciplines supported, as well as responsiveness to new and emerging art forms. historically, the arts council has tended to support traditional art forms in dance, music, opera, theatre, visual arts and literary writing. emerging sub-disciplines are an on-going test of the council’s artistic judgement in recognising and adapting to new art forms in a timely manner thereby keeping pace with artistic, social and economic change. since its inception, the arts council has adopted ‘excellence’ as the strategic principle to guide funding. excellence, however, is a relative term which involves the exercise of artistic judgement at various levels of artistic activity. there are two issues which should permit comparative evaluation of the policy objectives, and the resulting pattern of funding of the arts council. the first is whether the council defines standards of excellence at the national, regional or local level. the second issue is the financial balance between support to artistic enterprises in the metropolitan areas as opposed to the regions. in effect, the tactic of the arts council has been to organise support into programmes-in-aid to individual artists and, more particularly, to arts organisations. accordingly, a primary issue in evaluation of arts council funding is the balance between support to individual artists and arts organisations. in the case http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 of arts organisations, the issue is the balance between support to larger ‘flagship’ institutions and smaller, emerging companies. in preparation for what was in effect the third re-incarnation of its fifty-some year history the arts council (now called arts council england2) used its website to explain the ambitions of the ‘new’ organisation. the following are extracts: arts council england is the national development agency for the arts. between 2003 and 2006 we will invest £2 billion of public funds in the arts in england including funding from the national lottery. we want people throughout england to experience arts activities of the highest quality. we believe that access to the arts goes hand in hand with excellence. the website went on to explain the resource ambitions of the re-named council which are encapsulated under the following headings: the arts council and ‘the arts’ we will adopt a more modern definition of the arts, one that is open to current trends in emerging arts practice, in arts and technology, and in breaking down the boundaries between art forms, and between the arts and other disciplines. placing artists at the centre the artist is the ‘life source’ of our work. in the past, we have mainly funded institutions (emphasis, the author). now we want to give higher priority to the artist. we can do this indirectly through training, legislative change, or in stimulating the economy for artists. or, we might provide direct assistance through more funding. 2 arts council england went live in 2003. the original arts council of great britain was set up in 1946 with a change of name to arts council of england in 1994. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 our relationship with arts organisations most of our funding will continue to go to our portfolio of ‘regularly funded organisations’ (emphasis, the author). cultural diversity we will at the very least make more funding available specifically for culturally, diverse arts. we will also take steps to change the employment profile, governance and activities of both the arts council and the funded arts sector (emphasis, the author). growth in resources for the arts we will draw up a plan for growth nationally and regionally, with some clear and challenging resource targets. a concern to fund the best way to run an organisation prompts the question, ‘best for what and for whom’? it assumes some goals which should be maximised using resources in the most effective and efficient way; but whose goals? should they be the arts council’s or those of the various sub cultures in existence? the question is how far the arts council is prepared to go in encouraging tendencies which may require significant modification of existing attitudes and administrative structures to accommodate new demands, or the revision of priorities for the allocation of resources, with all the attendant political implications that such changes will undoubtedly have and within the confines of a finite budget. clearly the position in which the arts council has been placed is not an easy one. on the one hand, it sees the necessity to do something about the pressures and demands for a change to more community oriented art forms more entrepreneurial in nature and less institutionally based; on the other, it is conceivably reluctant to set in motion changes which could threaten its own established position which historically has demonstrated a preference for the established or ‘high’ arts and the institutions http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 which underpin them, with the greater sense of accountability that it affords. reasons behind the arts council’s predilection for particular avenues of funding can perhaps be found in the bower-burgelman (bower 1972; burgelman 1983) explanation of strategy developing as the outcome of resource allocation routines in organisations as did others later (noda and bower 1996). political processes agencies in their decision-making are affected by political considerations and by the wish to protect their own power and status. the political view of strategy development is, then, that strategies develop as the outcome of processes of bargaining and negotiation among powerful internal or external interest groups or stakeholders as they are often referred to today. it is possible to construct two broadly competing images of what the arts council does. first, we might see the council as formulating definite policy objectives in the arts, through some appropriate means of consultation and decision, and then proceeding to give effect to these by providing funds to various groups and individuals who are prepared and competent to carry out the required functions. a second view sees the arts council basically as an institution dispensing subsidies mostly to a range of well-established clients in the performing arts. these clients, in turn, view the council as having a long-term, if not permanent, responsibility to support them and beyond that, help them expand. in total, their demands constitute a major charge against the council which consequently finds itself left with very little financial or political room for manoeuvre or for the development of new policy initiatives despite, in part, a desire to do so. returning for the moment to the bower-burgelman view of strategy development, the procedures for deciding between competing proposals will include existing financial http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 commitments and in-grained idealistic values of the kind already described. the reality is that despite the art council’s references to a ‘new’ emphasis, the resolution of strategy is for the most part conditioned by financial imperatives and political manoeuvring in other quarters, and at other levels of the arts constituency than what would be conventionally thought of as strategic. the concept of ‘non-decision’ as advanced by bachrach and baratz (1970) appears as a useful analytical and explanatory tool in this context. from this ideological stance, demands or pressures for change in the existing allocation of resources or benefits in a particular sphere of activity can be suffocated or side-stepped before they are allowed to assume a dominant position. thus, in studying the strategy of the arts council it would appear important to examine what the council does not do, as much as what it does do. however, in reality an investigation of this type would not be straight forward, since the council has on occasion acknowledged that often their reasons for doing or not doing something are found or lost (depending on one’s viewpoint) in the ‘interstices of administrative decisions’, further complicated by the tendency to bury policy in their implicit assumptions about what is good for the arts community and people in general (shaw 1980). certain applications to the council for grant aid are therefore regarded as ‘legitimate’ having been funded before or as ‘appropriate’, for as schattschneider (1960) contends, ‘political’ organisations tend to develop a bias where some issues are organised into policy while others are organised out. in such situations, assistance to the arts and its ‘justification’ can be perpetuated without the need for objective assessment leading in time to legitimation of policies formulated and actions taken. former arts council chairman, lord goodman (1984), in an article in the observer had occasion to remark when learning of the council’s most recent protestations that it was about to free itself http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 from its traditional political constraints, that the idea suggested there was latitude available to it when in truth, there was not. the practical implication of comments like this, as johnson, scholes and whittington (2005) state, is that legitimacy is about meeting the expectations within an organisational field in terms of assumptions, behaviours and strategies. drawing on the work of evolutionary theorists such as aldrich (1999) and weeks and galunic (2003), they discuss the notions of selection through the lenses of function, fit, form and retention thought to depend on the extent to which policy and strategy is legitimised. policies may have the ‘function’ of serving the interest or expectations of key individuals within the organisation. by ‘fit’ they mean policies and strategies are more likely to be successful in competing with other alternatives as they align with the culture and prior experience of the organisation more about which will be said in the next section on cultural processes. of course, the reverse could also be the case, where it would be difficult to get new initiatives accepted because they are not seen as desirable or legitimate in terms of the way the organisation has traditionally operated. this brings us to the notion of ‘form’ by which is meant that some policies of strategy are by their very nature, more or less attractive, often from the outset, for the reasons thus stated. accordingly, ideas of ‘retention’ are also sometimes used to support notions of legitimation. strategies based on previous policies or ways of doing things are seen as the ‘right way’ to do things or best practice. retention can also stem from the extent to which policies are attributed to powerful or influential people in or around the organisation, past or present. one need only reflect on the enormous influence john maynard keynes and successive chairmen/secretary generals have had on the development of the council and its policies, important aspects of which still influence the council today. thus, policies or strategies and their selection and retention will http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 depend on the extent to which they are attractive to, and fostered by, a community of interest. both selection and retention need to be seen as a part of an iterative process based on experience and cultural and political processes. in acceding to conformity and legitimation the arts council has wittingly or unwittingly institutionalised its policies and strategies over the years. much of what has been said so far suggests the strong influence of forces for conformity. as researchers in institutional theory point out, innovation is not common; similarity is (zucker, 1987). from what minihan (1971) referred to as the nationalisation of culture in her book of that title has emerged (what some philosophers of art now term), ‘the institutional theory of art’. this theory perceives art in terms of its social, institutional definition. the sociological nature of the institutional theory of art is self-evident, for the theory relies on the social roles and institutions, with all their incumbent financial, political, constitutional, managerial and moral considerations, and it is from this melting pot that art is now largely promoted and accredited. thus, the council, like it or not, is to a greater or lesser degree an organ of social policy and the institutional policies that come out of it are often a product of established practice. the ‘political’ and the ‘aesthetic’ are the inseparable, simultaneously present faces of the currency of the post-modern problematic. the putative freedom of the artist is constrained by the institutional legitimation process which imposes a grid of the permissible upon the field of the possible. determinants and constraints will be submitted to the articulation of the ‘master discourse’ of the institution which in turn is influenced by notions of professional standards and artistic values derivative of the organisational field in which the arts council finds itself. this is then reproduced through a network of self-constructed subjective meanings which become institutionalised over time. it cannot be described or explained without a detailed knowledge of the subjective logic which informs the construction of these institutional configurations and the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 dynamics of their historical transformation. one can see how in this way decisions, values and standards begin to be operationalised through an institution like the arts council. confronted with the task of having to make value-laden judgements, the council has over the years developed guidelines to focus attention on particular facts and relationships and thereby both simplify and regularise the strategy process. executives, administrators, policy makers, frequently make use of precedents, often urged to do so by those who would be affected by their actions particularly if this helps maintain a desired status quo. drawing on the work of individuals such as, lindblom (1959), braybrooke and lindblom (1963), quinn (1980), mintzberg and waters (1985) and johnson (1988), the strategy making processes at the council could be characterised as both incremental and emergent in nature. in largely accepting or conforming to what has gone before, it is to be expected that changes in strategy will be incremental rather than revolutionary. council strategy represents a continued dichotomy between ‘past’ and ‘present’, between ‘product’ and ‘process’ and as such has evolved through a series of compromises, rather than by means of a planned progression. one must not forget that one of the over-arching functions of the quango state in which the council was placed was to enable it to commit itself to serving broad national ideals (the best for the most) without necessarily assuming all the political choices (what is the best for the most?). political activity often results in emergent or incremental activity where subjective judgements and multiple demands on finite resources are to the fore as in the arts. on many occasions, finance unavoidably takes precedence and predisposes strategies to limitations, entrepreneurial or otherwise. long-term planning, which may necessitate an up-front commitment to reform, together with associated costs, could assist in the development of a more comprehensive policy. this planning, however, is not largely attainable in the arts because of its predisposition to the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 mechanics of the public spending process which can be subject to drastic short-term fluctuations, especially when government finances are under strain. where different views prevail and different parties seek to exercise their political will, compromise is more inevitable. in part, it would appear the council has sought to protect what it sees as reasonably satisfactory working arrangements which have come about either through adoption or due process. this, in a quintessential way is what it has historically done believing its own brand of incrementalism to have achieved a modicum of success in moving with the times whilst safeguarding those canons which it holds most dear and upon which it bases all its fundamental strategies. on the other hand, the conflict and tensions that manifest themselves in the council’s political arena, arising as they do from different expectations or interests have on occasions prompted something of a paradigm shift as when community arts became a ‘legitimate’ activity for council funding despite some twenty years of avoidance and neglect even though there was nothing in its founding charter which prevented it from doing so. clearly there will be times when it is necessary to develop new concepts to guide future undertakings as well as to revise those arrangements which appear on close inspection not to have worked satisfactorily, or fairly, served the public interest. it is perhaps not surprising therefore that the council has never pretended to pass ultimate judgement on its contribution, or settle once and for all the proper scope of its activities for after all, the council’s incremental policies are arguably only the mirror image of its own developing view of itself and its role in the arts. cultural processes the observed pattern of incremental strategy development of the arts council can be explained in terms of the outcome of the influence of organisational culture. faced with forces for change the arts council has over the years conceivably sought to minimise the extent to which they http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 have been faced with ambiguity and uncertainty over funding for the arts, by largely defining their strategies and policies in terms of that which is familiar. changes around the periphery of policy as a reaction to developments in the artistic environment are approached incrementally. at any point in time, the selection of policies, strategies and events draws upon deeply held assumptions ever present in the organisation informing its behaviour whilst retention processes over time, describe the evolution of the organisation as a culture. as in the previous section, on political processes, the lenses of function, fit, form and retention are now once again considered in connection with selection but on this occasion more specifically in the context of cultural orientation. of these, ‘function’ might appear the most obvious. policies or specific strategies may in part be selected because it is felt their phenotypic expression serves some particular function or takes the organisation towards a desired end. in the arts council’s case attainment of these goals continues to be a challenge as it seeks to address its changing environment, meet the expectations of its numerous stakeholders whilst all the time operating in a realm of extreme subjectivity. critics of the council might well argue that they have often been wrong about the functionality of the strategies selected and adopted. of course the council has on numerous occasions and to varying degrees been shielded from the consequences of their decisions not least because of the fact that it receives the largest addition to its funds from the government’s annual grant-in-aid contribution (an underwriting luxury not available to most organisations) a situation conceivably enhanced by the arm’s length principle which gives the council a fair degree of latitude and not forgetting the professional efficacy which surrounds the decision making processes of the council all of which perhaps forces them to conclude they are doing as well as can be expected. the council has endeavoured to fulfil its interlocking http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 responsibilities of developing and supporting the arts to a level of excellence whilst attempting to disseminate the arts as widely as possible. strategies are as likely to be selected and promulgated because they are perceived as furthering local or individual aims as they are for furthering the aims of the organisation as a whole. it is ‘fit’ more than function that sometimes structures and determines the selection process: strategies that fit with other dominant strategies are more likely to be selected, a fact which takes its cue from institutional theory. a theory of the cultural evolution of the organisation suggests there is a persuasive argument for bringing institutional theory to the table in an examination of organisational strategy and policy to look, first, at how the isomorphism that it predicts between the organisation and its environment actually evolves over time, and second, at how similar issues of legitimacy and social reproduction create selection patterns of continuity and routine. a central platform of the institutional theory is that choice and preferences cannot be properly understood outside the cultural and historical frameworks in which they are set (powell and dimaggio 1991). organisations are often a product of their cultural orientation in much the same way that mintzberg (1994) describes organisation strategies as retrospective rationalisations of behaviour. the present selection of strategies depends to a lesser or greater extent on the pattern of strategies selected in the past. at the arts council organisational level, policies and strategies are essentially made for it because its choices are frequently constrained by existing demands and pre-dispositions leading to replication. aside from function and fit strategies may be selected for their ‘form’. in this context, they might be viewed as ‘self-promoting’ perhaps derivative of some management fad or particular ideological didactic. it is at this level of cultural process that ideas and values exist essentially http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 in their own right, and it is at this level of analysis that such parsonian concepts as, ‘total ideology’ and ‘collective representations’ belong. parsons, through his primary interest in the social system, witnessed how values can be internalised in an organisation as a ‘set of beliefs, of expressive symbols, or of instrumental patterns which may be institutionalised in the sense that conforming to the standards in question may become a role-expectation for members of the collective; organised around conformity with morally sanctioned patterns of value-orientation shared by members of the collective in which the role functions’ (parsons and shils 1962). the flagship philosophy referred to earlier to describe the process whereby a few companies in selected art forms are heavily subsidised to pursue excellence discriminates heavily in favour of art forms which not only cater to particular minority tastes, but which tend by their very nature to be among the most expensive manifestations of our culture and whilst most people today agree that it is still possible to talk meaningfully about something called ‘excellence’ they are far less sure about how it can be identified. also, where a number of different activities have been identified as ‘excellent’ there is still the difficult task of deciding which is to be funded, as shortage of funds makes competition inevitable. nor can the problem of selection be solved by counting heads, not least because the fact of providing subsidy can alter the number of heads to be counted. in addition to which, if excellence is the real determining factor when assessing applications, head counting becomes irrelevant. the right of these particular ‘high arts’ or, more specifically, the right of the leading companies presenting them to have a considerable proportion of their financial needs met by the community at large cannot be supported by logical evidence or rational argument. for some patrons of the arts it could be a matter of faith or personal belief whilst for the arts council it is arguably a matter of convention, a predisposition as suggested earlier which leads to a kind of self-perpetuation which in the final analysis is http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 easier to entreat than contesta form of lethargy, perhaps? in times of cut-backs the arts council has hitherto been criticised for its lack of specifics as to the reasons for the cut-backs. what has tended to be forthcoming from the council could be described as propaganda used here not in a pejorative sense but rather to denote efforts to gain acceptance of policies by identifying them with what are considered to be generally held values and beliefs. ‘retention’ occurs when selected policies are perpetuated, preserved, duplicated or otherwise reproduced. the idea of retention of certain preferred policies can be rooted in the identification of conflict within an organisation, the survival of such conflict only serving to reinforce those elements of retention. in the arts council’s case, the absence of a clearly defined strategy for the arts when combined with the aforementioned funding trap has meant it has struggled over the years to the point of conflict to reconcile traditional cultural criteria and alternative contemporary conceptions of artistic and cultural development and worth. the need for regular (and often high degrees of) subsidy tends to be considered synonymous with the value of the activitynot only do we know it to be art, but we believe it to be demonstrably some of the best examples of art otherwise why would the council spend the greater proportion of the available money on it? in such situations, assistance to particular art forms and their producing companies together with the accompanying justification can be perpetuated without any real degree of objective assessment. it is these processes at work in organisations that leads to the replication, perpetuation and preservation of policies as they develop such that they become routine and thus retained, eventually to become embedded in the culture of the organisation. as previously inferred, ownership of particular policies or ideological stances by powerful or influential individuals/stakeholders can heavily influence the replication of activities in the organisation thus leading to retention and legitimation. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 conclusions the arts council is influenced by normative pressures sometimes arising from external sources, other times arising from within the organisation itself. under some conditions, these pressures lead the organisation to be guided by previously legitimated policies, which over time become standard operating practice. recent attention has been given to the perceived ‘instrumentalism’ of arts policy born out of a lack of clarity and consensus about what arts council england should be promoting. not for the first time in the council’s history, the view has been expressed that in order to receive public money, artists and art organisations should be able to demonstrate that they have the potential to contribute to broad social and economic agendas arguably at the expense of their ‘intrinsic’ value and worth (holden 2005). in 2006 arts council england set out to address this longstanding conundrum through a major public enquiry involving research and consultation to explore how members of the public value the arts and their priorities for public funding. in this context, it was suggested that instrumentalism had afforded the arts sector a measure of protection in the absence of clearly defined arts policy goals (bunting 2008). furthermore, as previously stated the adoption of legitimated policies has had the tendency to lead to isomorphism within the institutional environment, creating selected patterns of routine and continuity and ultimately increasing the probability of survival of both the council and its policies. if arts council england is to be effectively adaptive to accommodate both pre-existing and current demands it would seem that there must be a ‘constructive tension’ between that which is necessary to preserve and that which must be changed (kanter 1983). a tension, for example, between the need for critics of the council to question and challenge the preservation of core http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 values and organisational ‘mission’; between the need for new ideas and directions whilst maintaining a degree of continuity and preservation of those ideals deemed important in the arena of arts subvention and which also serve to justify the council’s continued existence. this paper has considered the organisational dynamics of the arts council and the influences and pressures which characterise the institutional setting in which its policies are conditioned. by investigating this in the way it has been done, provides some clues as to what has been happening and some answers as to why things largely remain as they do. at its inception, the arts council was placed in a position and role where it could not ultimately hope to meet all the competing expectations arising from various individuals’ ideological preconceptions and sympathies surrounding the arts and could at best only hope, in the language of h.a. simon, to ‘satisfice’ (simon 1962). where there is a need for a compromise solution, a satisficing organisation will tend to be content to allow matters to continue in the way they always have done, at least up to the point where survival becomes threatened. whether the arts council, as the present vehicle for much of the public funding of the arts, is best placed to patronise the arts for the next generation or whether other models of subvention previously identified (cummings and katz 1987; tattersall 1988) offer a better solution remains open to ongoing question and debate. references aldrich, howard e. 1999. organisations evolving. london: sage. bachrach, peter, and morton s. baratz. 1970. power and poverty. new york: oxford university press. bower, joseph l. 1972. managing the resource allocation process: a study of corporate planning and investment. boston: harvard business school press. braybrooke, david, and charles e. lindblom. 1963. a strategy of decision. london: collier macmillan. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 245 bunting, catherine. 2008. “what instrumentalism? a public perception of value.” cultural trends 17 (4): 323-328. burgelman, robert a. 1983. “a model of the interaction of strategic behaviour, corporate context and the concept of strategy.” academy of management review 81 (1): 61-70. cummings, milton c. and richard s. katz, eds. 1987. the patron state: government and the arts in europe, north america and japan, oxford: oxford university press. goodman, arnold. 1984. “the case against arts cuts.” observer, march 25th, 1984. holden, john. 2005. capturing cultural value. london: demos. johnson, gerry. 1988. “re-thinking incrementalism.” strategic management journal 9:75-91. johnson, gerry, kevan scholes, and richard whittington. 2005. exploring corporate strategy. harlow: pearson education limited. kanter, rosabeth m. 1983. the change masters: innovation for productivity in the american corporation. new york: basic books. lindblom, charles e. 1959. “the science of muddling through.” public administration review 19:7988. minihan, janet. 1971. the nationalisation of culture. london: hamish hamilton. mintzberg, henry. 1994. the rise and fall of strategic planning. hemel hempstead: prentice hall. mintzberg, henry, and james a. waters. 1985. “of strategies, deliberate and emergent.” strategic management journal 6 (3): 257-272. noda, tomo, and joseph l. bower. 1996. “strategy as iterated processes of resource allocation.” strategic management journal 17:159-192. parsons, talcott, and edward a. shils. 1962. towards a general theory of action. new york: harper and row. powell, walter w., and paul j. dimaggio. 1991. the new institutionalism in organisational analysis. chicago: university of chicago press. quinn, james b. 1980. strategies for change:logical incrementalism. new york: mcgraw-hill. schattschneider, elmer e. 1960. the semi-sovereign people. new york: holt, rhinehart and wilson. shaw, roy. 1980. “problems of evaluation.” london: arts council of great britain, 183. simon, herbert a. 1962. “new developments in the theory of the firm.” the american economic review 52 (2): 1-15. tattersall, john r. 1988. “a strategy for the arts: five nation study of arts supports systems.” phd diss., city university. <http://openaccess.city.ac.uk/7401/> . weeks, john r., and charles galunic. 2003. “a theory of the cultural evolution of the firm: the intraorganisational ecology of memes.” organisational studies 24 (8): 1309-1352. http://revistes.ub.edu/index.php/jesb http://openaccess.city.ac.uk/7401/ volume 3, number 1, 226-246, january-june 2018 doi:10.1344/jesb2018.1.j043 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 246 zucker, lynne g. 1987. “institutional theories of organisation.” the annual review of sociology 13:443-464. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 esther hormiga universitat de barcelona (spain) li xiao lancaster university management school (u.k.) david smallbone kingston business school (u.k.) entrepreneurial dynamics and institutional changes abstract contemporary literature has paid considerable attention to the relationships between formal and informal institutions and early stage firms’ behaviours in different institutional settings in recent years. given a constantly changing business environment in which companies are operating, there is a need to continuously study how they deal with new challenges and how they achieve new goals. it is essential for not only nascent but also experienced entrepreneurs to discover new dynamics in order to stay at a competitive level. this special issue of journal of evolutionary studies in business aims to explore the role of dynamics that interact with institutional changes in surviving and growing ventures. we present the nine articles with a variety of studied contexts, which shed some light on how companies or organisations keep up with institutional changes at both macro and micro level, by actively transforming business practices and entrepreneurial processes. keywords: entrepreneurial dynamics; institutional changes; processes; entrepreneurship we are delighted to introduce this special issue of journal of evolutionary studies in business journal, the purpose of which is to develop a good understanding of the role of entrepreneurial dynamics that interact with institutional changes in surviving and growing new ventures. corresponding author: e-mail: ehormiga@ub.edu received 11 january 2018 accepted 18 january 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 we are pleased to present nine articles in this special issue, all of which survived the rigorous review process. each of these articles provides insights into our understanding of a variety of factors that affect entrepreneurial success, depending on the studied context. we first discuss two core concepts underpinning the focus of this special issue: entrepreneurial dynamics and institutional changes. the mechanisms that are associated with changes made in the entrepreneurial process are then discussed. finally, we introduce nine articles included in the special issue, categorized in three clusters, namely: hospitality, workforce, and collaborations. entrepreneurial dynamics dynamics is considered to be a key ingredient in order to fully understand entrepreneurship and the entrepreneurial process (gartner 2003; aldrich et al. 2002; lichtenstein et al. 2007). in the context of entrepreneurship, attention has been devoted to nascent entrepreneurs and new venture creation (reynolds et al. 2004). lichtenstein et al. (2007) find that new ventures are more likely to come into existence in a situation where nascent entrepreneurs pursue organising activities at a faster rate, and with a lower concentration. the pattern of specific entrepreneurial activities rather than the activities themselves contributes to new venture creation. following these arguments, it would be logical to expect that adaptation or tension to changes may be the key to the development and growth of new ventures. in other words, adaptive tension could well explain why some firms’ founding entrepreneurs are more successful than others. we therefore believe that there is a need to examine the development and growth of new ventures underpinning entrepreneurial dynamics. entrepreneurial dynamics refers in this special issue to entrepreneurs actively and constantly seeking changes, or making the most appropriate strategic http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 choices as a means of overcoming problems and influences that the ventures face, leading to business success. previous studies that have attempted to distinguish between successful and unsuccessful startup efforts have found that entrepreneurial dynamics plays an important role in creating a new venture and growing the business (wright et al. 2007; colombo and grilli 2010; unger et al. 2011). a growing body of literature has acknowledged the importance of entrepreneurs’ human capital, motivations, and availability of external finance in creating new ventures, and in determining the subsequent survival and growth (liu et al. 2010; gimmon and levie 2010; vanaelst et al. 2006; davidsson and honig 2003; shrader and siegel 2007; sambasivan et al. 2009). previous research also suggests that making the best use of expertise and skills, as well as social capital held by the entrepreneurs, is remarkably important in creating a new venture and making a success of the business (xiao and ramsden 2016). in other words, making strategic choices that best reflect the availability of resources for the venture and overcome the problems and influences that a venture faces determines the success of businesses (glancey et al. 1998). institutional changes north (1990) defines institutions as “any form of constraints that human beings devise to shape human interaction” and broadly divides them into formal (e.g., laws, regulations, rules, contracts) and informal types (e.g., norms, cultures, ethics). institutional changes emanate from gaps that exist by design or emerge over time between formal institutions and their actual implementation or enforcement, in the absence of exogenous shocks (north 1994). roland (2004) differentiated ‘slow-moving’ from ‘fast moving’ institutions and provided a basis for understanding the interactions among institutions and institutional changes. ‘slow-moving’, in http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 terms of, institutions, refers to those that change slowly and continuously (i.e., cultures, values, beliefs, and social norms), whilst ‘fast-moving’ in terms of institutions refers to those that change rapidly and irregularly (i.e., political institutions). ‘slow-moving’ institutions that change continuously build up pressure for provoking radical changes. such interactions between slow-moving and fast-moving institutions suggest that different cultural paths may affect the appropriate choices of fast-moving institutions. ‘fast-moving’ institutions in given contexts must in part build on existing slow-moving institutions embedded in cultural and historic pasts. entrepreneurial dynamics and institutional changes the development of regulatory institutions can influence both business practices and sets of institutional arrangements that govern exchanges in subtle and pervasive ways (scott 2001). changes to regulatory institutions may bring about the selection and utilisation of new institutional arrangements (e.g., contracts) more quickly, but influence norms and cultures slowly (brint and karabel 1991; dimaggio 2001). nevertheless, integration into the institutional environment in which the businesses operate is essential for entrepreneurs to survive and grow their ventures (peng 2003). scholars studying institutional changes find both formal (e.g., contracting and written documents) and informal institutions (e.g., personal network ties) to be particularly useful in explaining firm behaviours (hitt et al. 2004; lau et al., 2002; peng et al. 2009). scholars also find that informal institutions of personal network ties have a larger influence on the development and growth of firms in economies with weaker and more inefficient regulatory institutions than those in countries with a well-developed institutional framework (batjargal and liu 2004; bruton et al. 2010; li and zahra 2012). entrepreneurs utilising personal network http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 ties in order to gather information that is absolutely critical to the venture win contracts and solve disputes in countries with a less developed institutional framework (bruton and ahlstrom 2003; batjargal and liu 2004; ahlstrom and bruton 2006; le and nguyen 2009). one of the good examples of this is that personal network ties play a much more important role in making the informal finance market function in transitional economies than in developed countries (bruton and ahlstrom 2003; scheela and jittrapanun 2012; batjargal and liu 2004; ahlstrom and bruton 2006; le and nguyen 2009; xiao and north 2012). the next section introduces the three clusters and nine articles in the special issue, and also highlights the research findings related to the role of the entrepreneurial dynamics that interact with institutional changes in surviving and growing new ventures. the first three articles included in this special issue reflect the factors that influence the entrepreneurial dynamics in a key international sector such as the hospitality industry. from a global point of view, this is still considered to be an industry that is in constant ascent; indeed, the growth of international tourist excursions has been constant since the 1960s. in 2016 the amount of tourist excursions reached 1,235,000,000 (wto 2017). this fact is significant in the institutional environment where the empirical works have been developed, spain being the third most popular country for tourists in the world, after france and the usa. these first articles delve into aspects like growth aspirations or the mechanisms that have made companies achieve competitive advantages within their industrial content. we can see a specific emphasis on the role played by different types of knowledge, such as entrepreneurs’ previous experience, entrepreneurs’ educational achievements, or the practices used for managing tacit knowledge within the organizations and how they relate to factors within their regional context. the first article of this special issue represents an empirical work, using both hotels and restaurants as a http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 sample; the second article analyzes the case of hotels within a growing process; and the third one focuses on a high quality restaurant that has reached its objective level of success. the first paper by capelleras, contín-pilart, larraza-kintana and martín-sánchez, the regional and individual determinants of entrepreneurial growth aspirations, is based on the idea that entrepreneurial growth aspirations are vital to explain the growth of new businesses. this topic is specifically important for entrepreneurial dynamics within the hospitality industry because, as the authors explain in the paper, it is a sector characterized by new ventures that are highly influenced by entrepreneurs’ lifestyle objectives. thus one of the main challenges of this first paper is to combine both individual and environmental effects on growth aspirations. this work presents an analysis of how an entrepreneur’s education can act as a moderator for the relationship between population density and their aspirations to grow within their new venture. all the182 companies included in the study were investigated during the first years of their existence, i.e., within the first 42 months. the authors found that there was a direct positive effect of population density on growth aspiration in the case of the restaurant entrepreneurs, but not in the case of the hotel. however, when they analyzed the case of highly educated entrepreneurs separately, they discovered this positive effect. moreover, they found that the effect of regional population on growth aspiration is stronger for highly educated entrepreneurs. in their conclusions, the authors assume that the relationship between external conditions and growth aspirations appears to be moderated by the individual capability to interpret the local environment, given the influence of their particular entrepreneurial cognitions.the knowledge generated in this paper helps in the development of strategies to stimulate local entrepreneurial activities, especially in the growth of new and small hospitality firms. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 the second paper, analysis of knowledge tacitness in the transfer of food and beverage practices: evidence from new chain hotels, by garcía-almeida and ballesteros-rodríguez, focuses on the role of knowledge as a valuable resource that can provide a firm with competitive advantages, specifically when a hotel enters into an entrepreneurial dynamic of growth. this dynamic includes transferring the knowledge underlying the key practices within this type of organization. the authors elected to choose, for their empirical analysis, one of the departments either food or beverages where the information is not frequently shared through formal channels. in fact, one of the main focuses of this research is the understanding of the processes behind the transfer of the type of knowledge that is more complicated to measure: tacit knowledge. in this paper, the authors describe the level of tacitness of knowledge practice, and the mechanisms applied to transfer it and look for the relationship between the level of tacitness and the transfer success. with this purpose, the authors analyzed data from 93 new chain hotels that were involved in the dynamic of growth. based on their empirical analysis, the authors come to relevant conclusions regarding, for example, the practices with a higher and lower level of tacitness. thus the food planning, production and preparation is the practice with a higher level of tacitness knowledge, whereas the customer services practice is significantly lower. they discover that the main mechanism used in the knowledge transfer is long-term staff from other organizational units. in this respect, the authors find that the more tacit the knowledge, the richer the mechanism used to mobilize the knowledge. this research gives some guidelines about the more effective way of management tacit knowledge when a hotel enters into an entrepreneurial dynamic of growth. the third paper of this special issue, by bernardo, escalante and arbussà, analysis of the catalan haute cuisine success: the role of education and network creation, researches success http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 factors, specifically education and the network creation of restaurants that have achieved the classification of high quality. the authors highlight the importance of the relationship of both internal and external factors for the continuous improvement of this type of venture. therefore the location of the restaurant, and the informal institutions that affect them, influence the possibility of creating more networks and consequently stimulate the creation of new companies within the sector. this research focuses on the case of fifty-four michelin-starred restaurant chefs, and looks in depth into their specific educational experience and the process during the network creation. the authors conclude that chefs’ education is one of the main mechanisms of knowledge transfer for this type of restaurant, but it became a key starting point for network creation too. the authors conclude that the majority of chefs started their relationships at a professional level and some became personal. as far as the environmental issues are concerned, the authors show how two and three michelin-starred restaurant chefs act as spillovers for the rest of the sector. this research presents a very interesting analysis about how important education is in order to acquire the basis to understand and enrich fashionable cuisine, and act as a pool of relationships creation. moving to the next two papers of the special issue, they focus on one element that is fundamental for any entrepreneurial dynamics, and that is the workforce. the new leaders and decision makers face different challenges regarding their employees’ management, affected by factors like the automation of work or the role of employees in the new business models. the next two articles make an interesting review of the literature on two important phenomena employee participation and the presence of women in the workforce which have continuously increased and have changed the dynamics of human resource management within recent years. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 although both issues are basic necessities in allowing companies to adapt to the dynamic environment, they are still far from being normal practices. thus, many organizations continue to face the challenge of designing and applying practices that allow employees to participate actively in the decision making of organizations. the awareness of this favors the motivation and performance of their workers. in addition, despite the increase of women in the workforce, the enormous differences in the proportion of managerial positions held by women continues. it is known that both these aspects are positive for organizations when they are implemented. the fourth article, employee involvement and participation in smes: a synthesis of extant research, by rohlfer, focuses on the idea that smes cannot afford to under-utilize their workforce, and that owners/managers need to encourage ways to engage employees. this research studies employee involvement and participation practice in smes. based on a systematic literature review, the author makes a reflection about the evolution of employee involvement and participation practices, and identifies with key directions for future academic research. the results show, for example, that the most studied involvement practice is representative participation, followed by financial participation. moreover, she recognises a lack of contextualization of smes’ reality in the studies analyzed. the authors conclude that employee involvement and participation dynamics are basically a reflection of the rules, norms and structures of the context in which the companies compete. in this respect, she highlights the importance of understanding how institutional factors, such as the influence of employment laws, can affect the role of employees in the companies and recommend practices like comparative analysis of external factors and internal influences driving employee involvement and participation in smes. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 the fifth article, by ganiyu, oluwafemi, ademola, and olatunji, the glass ceiling conundrum: illusory beliefs or barriers that impede women’s career advancement in the workplace, examines the tendency of the glass ceiling phenomenon that limits women´s career development in the workplace. the authors review a series of previous academic works and discover the different perspectives that analyze the glass ceiling barriers issues. from a theoretical point of view they try to understand the conceptual foundations of the glass ceiling through the congruity theory and social role and identity theory. regarding congruity theory, this work describes how it is common that women are perceived as not desirable for managerial positions when this is not congruent with stereotypes associated with women. thus, social role theory reinforces the idea that men and women act according to social role (e.g., class) and that between them, gender plays an important role in all societies. moreover, in the second part of the article they focus on the understanding of restrictions that are still prevalent in the development of women´s careers, such as customary gender roles. this paper highlights the relevance of this topic, as the low proportion of women being promoted into management positions, compared to men, is still rife within most companies. the authors specifically recommend a series of institutional changes to promote strong organizational culture and a more helpful and supportive environment to develop women´s leadership skills. examples of these practices are adaptive workplace policies or workforce diversity strategies. this paper concludes by highlighting the fact that informal institutions do not help women to reach managerial positions. aspects such as cultural prejudice, religious convictions, family related issues or inadequate opportunities to networks, limit women´s progression to the top managerial hierarchy. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 the last four articles of this special issue present the cases of collaboration between private companies, communities and institutions in different sectors like the arts, media and mining industries, and three different institutional contexts, such as english, peruvian and spanish. the sixth article of this special issue, sustainability of a community-based enterprise through shared value. case: mallay communal company by muñoz marticorena, explains the case of how the mining company buenaventura collaborated with the community of mallay, in peru, to create a new venture with the objective of generating shared value within the region. the peasant community of mallay is located in the lima region, and the community population is 522 inhabitants. 50% of the inhabitants were evaluated as being in a state of poverty, and the vast majority of them only have access to basic education. the purpose of the project presented in this case was to organize and manage the economic activities of the community under a business format, through the generation of productive units of communal goods and services. the authors describe how the strategies for the management creation process of the mallay community enterprise came about, and the main social value that has been generated, such as the reduction of social conflicts. one of the necessities detected, which became a key element for the project’s development, was the training of community members. these practices allowed the improvement of company income, sanitation and habitat, generating a larger amount of surpluses to be redistributed. the new company has been running for seven years and has employed more than 50 people in the community. this project has redistributed the profits in training, social assistance and reinvestment, improving the quality of community life. this case is an example of how the redefinition of the productivity value chain includes the creation of social value for the different companies that are part of the value chain, and thus for society as a whole. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 the following article unequal growth and social capital in clothes-making enterprises in peru: 1980-2015, by wong, hernández, chirinos and carrasco is developed in the same country as the previous work, peru. the authors go in depth into the case of four small peruvian enterprises in the clothing industry, trying to understand the structural and historical conditions that explain their level of performance. the authors found the important role played by the social capital in the prevailing inequality owes. moreover they analyses how the institutional and structural conditions affects the rhythm of growing within the companies. this work adds an interesting knowledge about how the participation in different type of networks help individuals to develop certain skills. the eighth article in this special issue, the arts council: entrepreneurial dynamics and institutional changes, by tattersall, is a reflection of the different factors that affect the entrepreneurial strategic planning of the arts council, england. this institution is committed to championing and developing the arts, museums and libraries. it is a custodian of public investment and is charged with getting the maximum value from this, through the promotion of the arts and favoring its accessibility to the public. the analysis of the case of an organization like the arts council is relevant for different reasons. this institution represents the english government’s mechanism to strategically transform the arts organizations and industries, and to increase the quality of arts activities in the country, but it is also a challenge for their responsibles and managers due to factors like the permanent tension between the expectation of the artistic community and the perceptions of its performance by the government. this critical and theoretical academic paper delves in depth into the past and more recent statements of policy, with a view to identifying various ideological, structural and procedural determinants that bear upon the decision-making processes. the author develops different open http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 questions to make readers reflect; for example, he questions to what extent the arts council is prepared to encourage art tendencies that modify existing attitudes and are revolutionary in comparison with the traditional statements and points of view. when there is a finite budget to assign, this example of strategic decision becomes critical. the research highlights the influence made by institutional pressures and debates about the role of a form of ‘constructive tension’ between that which is deemed necessary to preserve and that which must change and innovate with time. finally, the last work in this special issue, on jesús de polanco and the prisa group, by cabrera, presents the case of the entrepreneurial career of this spanish businessman and the creation of the prisa group, (promotora de informaciones s.a.), which is the leading spanish multimedia group of its time. it is the greatest communications group in latin america, with presences in radio, television, print media and publishing. this paper analyses the connections between the company and political institutions during the last years of the franco dictatorship, and the transition to democracy from a concrete perspective. those were years characterized by deep institutional transformations, not only from the political point of view but also from the country experiencing important changes in its economy, society and business structures, which affected the entire media communications sector. this work examines the route of the first years of jesús polanco’s life, from his years of youth and study, his experiences in latin america, and his first business activities. the author continuously explains the foundation of the newspaper called el país, the first key project in the future prisa group, and she assumes that both jesús polanco and cebrian, its first director, are the people responsible for the success of the new business model of this journal, which was founded in 1976. then the authors make a description of the creation of the prisa group, the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 1-16, january-june 2018 doi:10.1344/jesb2018.1.j035 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 changes in its direction and the creation of new business units. all the decisions taken are analyzed based on the political circumstances that the country was experiencing in each moment. the author concludes by reinforcing the importance of jesus polanco’s technological consciousness, and how it has helped prisa’s evolution and allowed it to continue competing and leading in a hard and changing industry. references ahlstrom, david, and garry bruton. 2006. “venture capital in emerging economics: networks and institutional changes.” entrepreneurship theory and practice 30 (1): 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language of opportunity.” in new movements in entrepreneurship, edited by chris steyaert, and daniel hjorth, 103-124. london: edward elgar. gimmon, eli, and jonathan levie. 2010. “founder’s human capital, external investment, and the survival of new high-technology ventures.” research policy 39 (9): 1214-1226. hitt, michael a., david ahlstrom, m. tina dacin, edward levitas, and lilia svobodina. 2004. “the institutional effects on strategic alliance partner selection in transition economies: china versus russia.” organisation science 15 (2): 173-85. lau, chung-ming, david k. tse, and nan zhou. 2002. “institutional forces and organizational culture in china: effects on change schemas, firm commitment and job satisfaction.” journal of international business studies 33 (3): 533-550. le, ngoc t.b., and thang v. nguyen. 2009. “the impact of networking on bank financing: the case of small and medium-sized enterprises in vietnam.” entrepreneurship theory and practice 33 (4): 867-887. li, yong, and shaker a. zahra. 2012. “formal institutions, culture, and venture capital activity: a crosscountry analysis.” journal of business venturing 27 (1): 95-111. lichtenstein benyamin.b., nancy m. carter, kevin dooley, and william b. gartner. 2007. “complexity dynamics of nascent entrepreneurship.” journal of business venturing 22 (2): 236-261. liu, xiaohui, mike wright, igor filatotchev, ou dai, and jiangyong lu. 2010. “human mobility and international knowledge spillovers: evidence from high-tech small and medium enterprises in an emerging market.” strategic entrepreneurship journal 4 (4): 340-355. glancey, keith, malcolm greig, and malcolm pettigrew. 1998. “entrepreneurial dynamics in small business service firms.” international journal of entrepreneurial behavior & research 4:249268. north, douglass c. 1990. institutions, institutional change and economic performance. cambridge: cambridge university press. north, douglass c. 1994. “economic performance through time.” the american 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38:109-131. sambasivan, murali, mohani abdul, and yuzliani yusop. 2009. “impact of personal qualities and management skills of entrepreneurs on venture performance in malaysia: opportunity recognition skills as a meditating factor.” technovation 29 (11): 798-805. scheela, william, and thawatchai jittrapanun. 2012. “do institutions matter for business angel investing in emerging asian markets?” venture capital 14 (4): 289-308. scott, w. richard. 2001. institutions and organizations. thousante oakes: sage. shrader, rod, and donald s. siegel. 2007. “assessing the relationship between human capital and firm performance: evidence from technology-based new ventures.” entrepreneurship theory and practice 31 (6): 893-908. unger, jens m., andreas rauch, michael frese, and nina rosenbusch. 2011. “human capital and entrepreneurial success: a meta-analytical review.” journal of business venturing 26 (3): 341358. vanaelst, iris, bart clarysse, mike wright, andy lockett, nathalie moray, and rosette s’jegers. 2006. “entrepreneurial team development in academic spin-outs: an examination of team heterogeneity.” entrepreneurship theory and practice 30 (2): 249-271. wright, mike, keith m. hmieleski, donald siegel, and michael ensley. 2007. “the role of human capital in technological entrepreneurship.” entrepreneurship theory and practice 31 (6): 791806. world tourism organization. 2017. annual report 2017. http://cf.cdn.unwto.org/sites/all/files/pdf/annual_report_2016_web_0.pdf xiao, li, and david north. 2012. “institutional transition and the financing of high-tech smes in china: a longitudinal perspective.” venture capital 14 (4): 242-269. xiao, li, and mark ramsden. 2016. “founder expertise, strategic choices, formation and survival of high-tech smes in china: a resource-substitution approach.” journal of small business management 54:892-911. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://cf.cdn.unwto.org/sites/all/files/pdf/annual_report_2016_web_0.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 armando dalla costa rodolfo coelho prates federal university of paraná (brazil) embraer empresa brasileira de aeronáutica s.a. (brazilian aerospace conglomerate): brazilian aircraft flying around the world abstract in 2017, embraer held 58 percent of the world's market share in commercial jets for the regional aviation market. in addition, according to projections, embraer will have to produce and deliver a commercial jet every two days over a twenty-year period. according to the international civil aviation organization, there are 1,548 aircraft manufacturing companies in the world. however, only a few can be considered "assemblies" and only five of these carry out large-scale production: airbus (europe), boeing (usa), bombardier (canada), embraer (brazil) and tupolev (russia). embraer emerged in a 'developing country' with no tradition in the aerospace sector and became a strong competitor in the small and medium-sized global aircraft market. to understand embraer's experience, a synthetic review was carried out of the main theories related to the internationalization process. moreover, primary documents were used in this study, as well as extensive literature on the company's history and internationalization process. the starting point is the hypothesis that internationalization had a fundamental impact on the growth of the company. as a preliminary conclusion, it is possible to say that embraer started out with the "world market" in mind. likewise, it is possible to affirm that the decision to focus on executive, military, small and medium-sized aircraft aviation to boost regional markets proved to be assertive. keywords: embraer; technology; innovation; growth; internationalization of the company corresponding author: e-mail: @ub.edu received 24 january 2018 accepted 04 july 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 introduction a search of data with the international civil aviation organization (icao) shows that there are 1,548 aircraft manufacturing companies listed worldwide. among these companies, only a few dozen can be considered "assemblies". also, among these “assembly” companies, only five of them carry out large–scale production: airbus (europe), boeing (usa), bombardier (canada), embraer (brazil) and tupolev (russia). the concentrated nature of this industry is clear. within this group, embraer excels as a company headquartered in a developing country without a tradition of aviation. even though embraer is based in a country lacking technological, the company has, throughout its history, accumulated enough knowledge and technology to become the leader in the market for commercial jets with up to 130 seats. the company is also the main exporter of high value added goods in brazil (annual report 2015, 4). in 2016, the company had a net profit of $167.7 million, with total revenue of $6.2 billion1. embraer is undoubtedly a global company, with several manufacturing units throughout brazil as well as units on every the other continent, except for africa, oceania and antarctica. as it is brazil's biggest technology company there have been many academic and non-academic studies looking at embraer. their themes are diverse and cover innovation and technological gains, organizational performance, growth and internationalization. relevant to the last two themes is work by silva (2009), rodengen (2009), godfrey et al. (2009), andrade (2013) and vinagre (2015) (analyzing the company's growth) and by rodengen (2009), souza (2012), 1 http://www.valor.com.br/empresas/4893096/lucro-da-embraer-dispara-em-2016 access in 31 july 2017. http://revistes.ub.edu/index.php/jesb http://www.valor.com.br/empresas/4893096/lucro-da-embraer-dispara-em-2016 volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 marinho and dalla costa (2013) (covering its internationalization). however, there is a gap in the discussion about the relationship between the company’s growth and internationalization. in order to contribute to a better understanding of this relationship, this study aims to assess the impact of internationalization on embraer's growth. to achieve this objective, this text is divided into two main sections, in addition to this introduction. the first section is qualitative in nature and explains how some contextual factors, including government intervention, contributed to embraer’s growth and internationalization. the second is quantitative in nature and shows the impact of internationalization on the company’s growth. these sections are followed by the conclusion. internationalization and growth studies involving internationalization and growth are nothing new. according to chesnais (1996), the first discussions of this relationship can be found in studies on imperialism by hobson and lenin. these authors argued that the domestic market acted as a limiting factor to growth. yet it was work by penrose (1959) that made this relationship more evident. according to the author, “it is easy to envisage a process of expansion of international firms within the theoretical framework of the growth firms” (penrose 1959, xv). in her view, internationalization can be seen as a company movement towards growth. additionally, and as stated by kyläheiko et al. (2011, 511), "the growth strategy is always a combination of the product and market options." early studies argued that internationalization was focused on direct foreign investment. for hymer (1970), for example, multinational companies were understood in relation to imperfect market structures. buckley and casson (1976, 1985) added that internationalization is an important path to growth and to create value in imperfect structures. dunning (1988, 2000) http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 summarized hymer's work and created the ownership, location, internalization (oli) paradigm. any relation to penrose's theory of growth comes from the fact that internationalization can be understood as a growth movement resulting from optimal choices (pitelis 2002). this allows companies to use internationalization to obtain market opportunities. more recently, studies have focused on entrance choices (madhok 1997; erramilli, sanjeev, and chekitan 2002). from this aspect, the company is understood by using statistical resources that are transformed into capacities through dynamic elements. a second class of studies on internationalization looks at how it occurs. noteworthy in this line is pioneering work by johanson and wiedersheim-paul (1975) and johanson and vahlne (1977), which later became known as the uppsala model. this model describes internationalization as an incremental process. at the outset, because of a lack of knowledge regarding international markets, the company internationalizes through simple activities. over time, the company acquires knowledge, committing more resources abroad and undertaking more complex forms of internationalization. in addition, early on it internationalizes to countries that are more culturally similar and later moves to more culturally distant countries. the uppsala model is based on the work of both penrose (1959) and cyert and march (1963) and posits a direct relationship between internationalization and growth, which are both treated as a process and as cumulative. more recently, the focus on how internationalization occurs has looked at chain companies (johanson and vahlne 1990; chetty and blankenburg holm 2000), since they operate jointly with the capacity of other companies, whether in the domestic or foreign market. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 the third aspect of internationalization regards the moment when the company starts the process. initial studies showed that internationalization would happen once the company matured. however, a new type of internationalization appeared during the 1990s: the "born globals" (madsen and servais 1997). in relation to speed, the uppsala model underscores that late internationalization allows the company to accumulate resources. while theories related with rapid internationalization, such as the "new ventures" and "born globals" theories, state that they can consolidate their advantages. this suggests that the company has choices to make, weighing advantages and risks, especially of the small and medium kind (hessels and parker 2013). there is a wide range of work assessing the relationship between internationalization and growth. for example, davis and harveston (2000) found that family businesses are more prone to internationalize and grow depending on the age and education level of the owners. sapienza et al. (2006) built a model related to internationalization and the growth outlook for new ventures, pointing out that internationalization is important for a business to grow. the sapienza model (2006) was analyzed by schueffel et al. (2011), with no evidence found that internationalization is important for growth. using a different methodological approach, salwan (2011) looked at the growth and internationalization of tata motors. unlike these authors, this text intends to show the existing relationship between growth, exports and internationalization at embraer. emergence and growth of embraer by the end of the 1960s, aviation had already been fully consolidated globally. evidence of this can be seen in the concorde, the first supersonic airplane for passenger transport, which was http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 released in 1965. in 1969, the year embraer began operations, boeing launched its 747 models, the largest and one of the most popular aircraft for commercial flights. in the case of embraer, actions taken in previous decades helped to foster its start. it is important to mention the establishment of the ministry of aeronautics in 1941, which defined the development of the brazilian aerospace industry as a strategic government policy. within this scenario, the centro tecnológico da aeronáutica cta (technical center of aeronautics) was created in 1947. it established several institutes, including the instituto tecnológico de aeronáutica ita (technological institute of aeronautics). all of these institutions "started the long-term strategy to support the generation of human resources and local rd&i2 capabilities for the aerospace sector" (versino 2014, 64)3. cta’s main task was to build an aircraft for both civilian and military use. in 1965, the bandeirante projects began, culminating in the first flight in 1968. the following year, more precisely on august 19, 1969, embraer was incorporated by decree-law no. 770, which governed the production and sale of the bandeirante, a twin-engine airplane with capacity for 12 passengers. in a ceremony held in rio de janeiro on december 29, 1969, ozires silva took office as embraer’s first superintendent director (silva 2005). the founders were already in early discussions and were convinced that it was necessary to launch "compact turboprop airplanes, initially designed to carry 9 to 12 passengers," that is, craft intended to serve small airports and regional markets. "our goal was to answer the following question: what type of airplane could adequately handle the incipient but promising service of medium and small cities?" (silva 2008, 58). 2 research, development and innovation 3 for a detailed history of the various companies and institutions that have operated in the national aerospace sector since the beginning of the 20th century see: morais (2006), rodengen (2009, 15-37), embraer’s website, cabral (1987) and botelho (1999). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 the maiden flight of the bandeirante occurred in 1972. that same year, the aircraft received approval; and in 1973 the first three units were delivered to the brazilian air force (fab). since sales began, several brazilian airlines have acquired bandeirante aircraft in order to meet regional demands. an important facilitator was the creation of the sistema integrado de transporte aéreo regional sitar (integrated regional air transport system) in 1975, aimed at modernizing regional aviation. the creation of sitar made it possible for the government to intervene in "companies' administrative decisions, both in the choice of lines and retrofitting of the fleet, as well as in the establishment of ticket values and other measures of the kind" (embraer 2006). after the bandeirante, other aircraft were released, including the emb 200 ipanema, used for agricultural aviation, and the emb 200 urupema and the emb 326gb xavante, which were manufactured in partnership with the italian company aermacchi. this partnership paved the way for other international conventions, such as the piper convention in 1975 for industrial production of and cooperation on light aircraft. presenting a panoramic view of embraer's history, versino (2014, 62-81) highlights four phases and a period of crisis prior to the privatization of the company: phase i, from 1962 to 1969, represents the formative years. that is when the ipd-6504 program was created by a group within the aircraft department of the research and development institute at cta. phase ii, from 1970 to 1978, covers the creation and early years of embraer, a time when the government was its largest buyer and a financier, mainly through the ministries of aeronautics and agriculture. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 phase iii, from 1979 to 1990, represents embraer’s consolidation and insertion in the foreign market. at the end of this stage, versino highlights a significant crisis period from 1991 to 1994 which preceded the company's privatization. phase iv, from 1995 onwards, covers embraer's recovery, expansion, diversification and strong investment in the foreign sector. this phase established embraer as one of the largest regional jet manufacturers. in order to better understand the evolution and growth of embraer during its initial period, the table 1 shows the number of aircraft units sold between 1973 and 1986. there are three main groups of buyers: the domestic market, the foreign market and the government (through fab). a clear tendency cannot be seen for any of these groups, since all three show fluctuations. table 1. embraer aircraft delivered 1971 to 1986 pattern client 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 sub total total emb110 fab 5 14 22 19 9 23 4 11 10 3 14 134 462 br others 8 12 8 30 8 1 1 4 5 4 3 1 2 87 exterior 5 3 1 18 46 53 51 29 16 14 1 4 241 emb120 fab 25 br others exterior 6 19 25 emb121 fab 4 2 6 98 br others 5 17 11 8 1 1 1 1 45 exterior 5 14 24 4 47 emb326 fab 3 18 12 19 16 13 19 19 11 5 2 13 4 154 181 br others exterior 2 2 3 6 1 1 12 27 emb312 fab 12 39 46 21 118 153 br others exterior 12 6 7 35 sub total general 246 total general 919 sub total fab 169 total fab 412 source: adapted from cabral (1987, 41). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 in relation to total sales, there is clear upward growth in embraer's first decade, with a relative disturbance in the second half of the decade, particularly in 1977. due to an economic crisis in brazil, from 1980 forward there is a systematic decrease in sales. major insertion in foreign markets is prominent starting in the 1980s, as well as government purchases through fab made in parallel with a period of diminishing sales in the foreign market. the government: sponsor, manager and buyer the government surely played a role that extends far beyond serving as embraer's shareholder and controller. it not only participated in embraer’s creation, but also became its main shareholder, from its founding up to its privatization (1969-1994). moreover, because it was difficult for the company to convince private investors, the federal government intervened through tax stimulus bills, allowing "legal entities to convert 1% income tax payable into embraer shares" (silva 2008, 86)4. decisive support of embraer also came from the government early on in the form of the fab, which "ordered 80 bandeirante aircraft, agreeing to pay the equivalent of 30-40% of manufacturing costs in advance, with the remainder being paid upon delivery of the aircraft" (rodengen 2009, 49). the history of aircraft deliveries at the beginning of embraer’s activities also shows the government's effective and essential participation. when the number of aircraft delivered between 1971 and 1986 are considered, out of a total of 919 units, fab acquired 412, or 44.8%, almost half of total production. access to the foreign market was an important milestone in embraer's history (see below). this became more effective from 1978 onwards. data from 4 according to cabral (1987, 57), from 1973 to 1985, embraer received $292.7 million from these incentives. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 previous years (1971 to 1977) shows that the government's participation became more evident. out of a total of 246 aircraft delivered, fab acquired 169, or 68.7% of total units, as shown in table 1. orders by the brazilian ministry of aeronautics, both of bandeirante and xavante aircraft, were sufficient financially to resolve problems regarding the launch of new and improved versions of the bandeirante. with this higher profile, embraer began to attract interest from other markets, especially the united states. according to rodengen (2009, 209), embraer continued to maintain close ties with its military roots (government) even after becoming a leader in the commercial market. in 2008, 72% of the aircraft in the fab fleet were manufactured by embraer and 98% of the military aircraft produced by the company were purchased by fab. in line with on-demand research from fab, embraer developed a military cargo ship, the kc 390, "a twin-engine jet aircraft that can meet the demands of different military operators" (silva 2008, 206; dalla costa and souza santos, 2011). the erj platform was also used to create military versions. in 2002, embraer began producing the erj-145 aew & c "radar aircraft," characterized by a large antenna at the top of the fuselage, which is capable of detecting aircraft more than 400 km away while flying at low altitudes. this aircraft was purchased by the brazilian, greek, mexican and indian air forces5. indirectly, the federal government contributed to embraer through the creation of sitar, in 1975. sitar was created through decree 76590, which divided the country into five regions and consequently, promoted the creation of five airlines to supply them. the goal was to 5 http://airway.uol.com.br/aviao-que-reergueu-embraer-erj-145-completa-20-anos/ accessed july 31, 2017. http://revistes.ub.edu/index.php/jesb http://airway.uol.com.br/aviao-que-reergueu-embraer-erj-145-completa-20-anos/ volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 respond to the demands of medium-sized cities that did not have enough traffic for large airplanes. as a result, the new companies acquired 52 bandeirante aircraft (cabral 1987, 29). while the government played an important role in the growth of embraer, other institutions also contributed in their own way to its evolution. from the standpoint of professional training, ita created in 1947 in rio de janeiro and later transferred to são josé dos campos-sp in 1950 (cabral 1987; rodengen 2009; botelho 1999; silva 2008) was of fundamental importance. ita is a public institution linked to the air force command and housed under the department of aerospace science and technology6. considered a center of excellence in engineering education, ita specializes in these two areas and provides the following programs: i) undergraduate courses; ii) stricto sensu postgraduate programs at the master's, professional master's and phd levels; iii) lato sensu post-graduate specialization and continuing education. according to silva (2008, 259), "undoubtedly, the existence of ita was fundamental. without it, embraer would not have been founded". it is also important to highlight the role played by the instituto nacional de pesquisas espaciais – inpe (national institute of space research) and by other universities, such as the university of são paulo, which offers an aerospace engineering course through the são carlos school of engineering. another important factor was the contribution of national, state and municipal governments to the implementation and development of basic institutions for the advancement of aerospace science and industry. in the case of ita and cta, "the city of são josé dos campos ceded land and created the necessary infrastructure, and the state government of são paulo provided critical 6 www.ita.br/info accessed july 31, 2017. http://revistes.ub.edu/index.php/jesb http://www.ita.br/info volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 financial aid for their management and institutional renewal, at the time of their founding and later during financial crises" (botelho 1999, 151). international partnerships an essential aspect for embraer's growth, knowledge, innovation and consolidation was the partnerships it built over time. up until 1974, brazil was a major importer of small singleengine and twin-engine aircraft with up to 10 seats, mostly from the united states. in 1975, following a successful experiment with aermacchi, embraer signed an agreement to manufacture six light piper aircraft models (silva 2005, 351). in addition to the sale of about 3,000 aircraft, the agreement generated cash flow stability and allowed for the discovery of new light aircraft manufacturing techniques with a company already that was established on the market (rodingen 2009, 61). also in 1975, as compensation for the acquisition of 49 tiger ii supersonic fighters by the brazilian government, embraer obtained a licensing agreement with northrop to produce parts and components for the f-5 fighter plane for aermacchi. in addition to cash flow, this deal provided valuable manufacturing knowledge (mattos 2006, 31). in 1980, embraer completed the delivery of 167 xavantes aircraft to fab and rejoined aermacchi to create a new jet fighter. in 1981, the brazilian ministry of aeronautics signed an agreement with aeronautica militare italiana to develop the amx (aeritalia macchi experimental) jet, giving fab ample access to advanced technology. "the amx has brought computational integration and fly-by-wire technology to brazilian aircraft manufacturing. this technology would be used later, including for larger planes" (rodengen 2009, 83). in 1990, embraer established a contract with boeing, and was thus charged with manufacturing mechanical flap holders for the boeing 747 and 767 aircrafts. the following year, boeing hired http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 embraer to build vertical stabilizers, as well as wingtip fairings for the boeing 777 (rodengen 2009, 117). at the end of 1991, embraer resumed the erj 145 project, a 50-seat regional jet. in order to make the new aircraft viable, embraer obtained letters of intent from 14 airlines in australia, europe, latin america, and the united states. structure and equipment suppliers partnered with embraer to provide engineering and production capabilities for the erj 145: gamesa (spain) provided the aircraft wings, sonaca (belgium) made the fuselage rings, enaer (chile) produced the horizontal and vertical empennages, and c&d interiors (usa) was responsible for the interior design of the airplane (mattos 2006). the company's growth process continued to be focused on product lines serving the regional market. in 2017, embraer held a 58% of the world's regional jet market. the company expects to maintain and/or increase this percentage. according to these numbers, embraer will have to deliver 3,700 aircraft in the next 20 years (delivery starts in 2018 for the new e175-e2, e190e2, e195-e2 models), which would require it to produce and deliver one regional jet every two days and to certainly maintain current partnerships and establish new ones with foreign companies.7 the internationalization of embraer in 1969, the year embraer was founded, was when brazil started its greatest period of economic growth, which became known as the brazilian miracle and lasted until 1973. throughout the 1970s, economic policies were in line with the import substitution process (tavares 1974), 7http://todosabordo.blogosfera.uol.com.br/2017/09/13/embraer-jato-comercial-mercado-mundial. accessed october 11, 2017. http://revistes.ub.edu/index.php/jesb http://todosabordo.blogosfera.uol.com.br/2017/09/13/embraer-jato-comercial-mercado-mundial volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 where the focus was to strengthen both supply and domestic demand. little attention was paid to foreign markets; but that was not the case with embraer, which began to export soon after opening: six years after its founding and three years after the maiden flight of the bandeirante (emb 110). according to silva (2008, 105), exports were essential. to this end, "we decided to start working on two fronts: improving our product and trying to sell the aircraft to countries that accepted brazilian certification issued by brazil's cta". according to rodengen (2009, 62-70), embraer's first export took place in 1975, with the sale of five emb 110 bandeirante aircraft to the uruguayan air force and ten units of the emb 200 ipanema agricultural model to the uruguayan ministry of agriculture. in 1976, exports went to chile (bandeirante emb 111), and in 1977, exports went to togo (emb 326gb xavante). however, cta approvals were insufficient for key markets. as a result of this limitation, embraer began a certification process with the world's main oversight agencies, including the federal aviation administration (usa), the direction générale de l'aviation civile (france), the civil aviation authority (uk) and the australian department of transportation. the french were the first agency to award certification, allowing air litoral to acquire its first bandeirante unit in 1977. as a result, embraer's good performance in france helped its international expansion. in 1978, the civil aviation authority and the australian department of transportation also certified the bandeirante aircraft. as a result, air écosse, air wales, brit air and kar air, as well as australia's air masling, purchased bandeirante aircrafts (mattos, 2006, 19). exports http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 continued to grow after the federal aviation administration, which regulates air transportation in the usa, certified the bandeirante, also in 1978. the aircraft's arrival in the north american market was helped by the 1978 airline deregulation act, which stripped control of various aspects of air transport from the government, allowing for new routes, seat flexibility and price competition. this law increased demand because companies now needed small aircraft, which were exactly the models offered by embraer, and this ended up benefitting the company. the bandeirante was so successful in the us that embraer set up a subsidiary in fort lauderdale, florida, called embraer aircraft corporation (embraer 2016). in the transition from the 1970s to the 1980s, with the exception of asia and antarctica, companies or government agencies on every other continent owned some type of embraer aircraft, with the bandeirante model being the most popular. by 1979, 250 units had already been delivered. three hundred units were delivered in 1980 and 400 in 1982. by december 31, 1986, 463 units had been sold, around 240 of which were purchased on the foreign market, with around 125 of these going solely to the american market (cabral 1987, 30)8. embraer conquered the foreign market with its medium-sized aircrafts which were, above all, aimed at serving the regional aviation market. it sold and delivered aircraft to 98 companies from 50 countries, mainly to the usa and europe, but also to other regions and countries in africa and central and south america. table a.1 (appendix) shows the companies and their home countries, as well as quantities ordered and delivered along with firm orders for future deliveries. 8 rodengen (2009, 73-77) describes embraer's entry into the american market in detail, highlighting the difficulties in relation to competition from companies that had already been established for years in this market. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 an analysis of the information in the firm orders history shows that out of a total of 2,580 orders, 1,274 were placed by us companies, which represents 49.4%. of the 2,047 aircraft delivered, 1,250 were purchased by us firms, accounting for 61.1% of all orders; and of the 533 firm orders not yet delivered, 335 are from us firms (62.8%). this data shows how important the us is to embraer's foreign operations, accounting for more than half of its deliveries and future orders. china is the second largest individual buyer, with 162 firm orders (6.3%), 121 (5.9%) aircraft delivered and another 41 requests for future deliveries (7.7%). however, europe, as a group of countries, comes in second when considering orders and deliveries from the united kingdom, ireland, france, germany, spain, the netherlands, poland, portugal, austria, switzerland, sweden, luxembourg, italy and greece, with a total of 449 orders (17.4%) and 362 deliveries (17.7%). there are moreover 53 firm orders for future deliveries (9.9%). nine other american countries are on the list: canada, brazil, colombia, panama, ecuador, el salvador, argentina, venezuela and mexico, which made 290 orders (11.2%), with 253 deliveries (12.3%) and 37 aircraft yet to be delivered (8.8%). the other countries are divided among africa, the arab countries and the far east, totaling 50 countries and 98 companies involved in future acquisitions and demands. altogether, there are 2,047 embraer aircraft flying on six continents. this does not include individual buyers of executive aircraft or airplanes made for the brazilian air force and purchased by air forces in other countries. in addition to this history of orders and deliveries, there are a series of orders for new aircraft being developed and tested by embraer, which will start operating in 2018, as can be seen in http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 table 2, showing not only buyer companies, but also the countries where these new aircraft will be sent. of these new orders, out of a total of 285, 125 were made by american companies (43.8%), another 50 by companies from india and ireland, for a total of 17.5% between these two countries, and 30 by brazilian companies (10.5%). the remaining orders are distributed between two other norwegian (3) and indonesian (5) companies, in addition to ten units for "undisclosed customers." once again, us companies hold a prominent position, having shown an interest in acquiring about half of the new aircraft under development. table 2. firm orders for embraer aircraft 175-e2, 190-e2 and 195-e2 – 2017 customer firm orders deliveries firm orders backlog embraer 175-e2 100 100 skywest (usa) 100 100 embraer 190-e2 83 83 air costa (india) 25 25 aircastle (usa) 15 15 aercap (ireland) 23 23 icbc (china) 10 10 hainan (china) 2 2 wideroe (norway) 3 3 kalstar (indonesia) 5 5 embraer 195-e2 102 102 air costa (india) 25 25 aircastle (usa) 10 10 aercape (ireland) 27 27 azul (brazil) 30 30 customer not disclosed 10 10 source: created by the authors from embraer. annual report, 2017. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 due to the complexity of aeronautical activity, it is fundamental that an aeronautical company have a customer service structure. having representatives was important for both early sales and for early provision of after-sales services. as silva (2008, 107) points out, "although the factory could have an active presence in the market, the need for local representatives was essential". the first exports to north america were to aero industries inc., which was in charge of marketing and sales of embraer aircraft. because of the limitations of aero industries inc., the embraer aircraft corporation – a wholly owned subsidiary of embraer in brazil – was established in fort lauderdale, florida. embraer aircraft corporation took control of sales and technical assistance (silva 2008, 116-117). in the case of europe, an embraer subsidiary was set up as a result of the sale of the emb-121 xingu to the french air force, which made this purchase with the stipulation that a subsidiary be created in france. this was how embraer aviation international, a subsidiary of the company in brazil, was established inside le bourget airport (silva 2008, 122). in order to support after-sales operations, embraer has service and spare parts sales centers in são josé dos campos (são paulo), fort lauderdale (florida), mesa (arizona), nashville (tennessee) and windsor locks (connecticut) in the usa, in villepinte (near roissy charles de gaulle airport), france, and in singapore. this is in addition to its specialized network, which already has about 60 authorized service centers worldwide. to support customers, embraer also maintains spare parts distribution centers and specialized technical teams in louisville, usa; beijing, china; and dubai, united arab emirates (embraer annual report 2011, 6). support for sales, marketing, and promotion activities is carried out by offices located in são josé dos campos, fort lauderdale and villepinte, as well as by offices in beijing, china, and http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 singapore. special emphasis should be given to the expansion of the service network in europe through the acquisition of ogma-indústria aeronáutica de portugal in 2005, a portuguese company that provides aeronautical maintenance and production. for expansion and better parts service for customers in europe, africa and the middle east, a new parts distribution center was set up at the embraer facility in villepinte, replacing the old center located in le bourget and unifying all of the support, services and sales operations in the region at a single location (embraer annual report 2006, 8). in 2002, embraer put a new international strategy into action to support sales, marketing and after-sales in the us, following the acquisition of celsius aerotech inc., an aeronautic maintenance, repair and inspection company based in nashville, tennessee. afterwards, the company changed its name to embraer aircraft maintenance services and added 210 employees to its staff (mattos and lourenção 2006, 43). in 2003, embraer signed a co-management agreement with china aviation supplies import and export corporation, which allowed the company to open its first office in beijing (rodengen 2009, 181). that same year, in association with the harbin aircraft industry group in china, it set up embraer regional jet-erj in china, an operation that was active for 13 years.during this period, both companies manufactured more than 40 erj-145 jets and five legacy 650 aircraft (executive model derived from the erj-135), all intended for the local market9. in 2008, the company expanded its activities in the united states, building a new approximately 14,000-square-meter facility in melbourne, florida, where the business aviation operation was housed. this facility also housed embraer's first final assembly line in the us, capable of 9http://airway.uol.com.br/aviao-que-reergueu-embraer-erj-145-completa-20-anos/. accessed july 31, 2017. http://revistes.ub.edu/index.php/jesb http://airway.uol.com.br/aviao-que-reergueu-embraer-erj-145-completa-20-anos/ volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 producing the phenom 100 and phenom 300 executive jets. in 2008, embraer opened new service centers for executive jets in the united states at phoenix-mesa airport in mesa, arizona; at bradley international airport in windsor locks, connecticut; and at fort lauderdale-hollywood international airport, in fort lauderdale, florida (rodengen 2009, 205-207). within an industrial context, the company has consolidated its operations at plants in évora, portugal, and in melbourne, in the united states. it has also acquired a 100% stake in aero seating technologies (ast), an aircraft seat company located in the united states. in addition to the aforementioned actions, the subsidiary company's headquarters in europe was transferred from villepinte, france, to amsterdam, in the netherlands (embraer annual report 2015). in the united states, the biggest buyer of embraer aircraft, the group maintains 13 companies whose areas of expertise include: i) corporate activities in the usa; ii) sales of spare parts and support services; iii) aircraft maintenance; iv) after-sales support; v) support for the defense and commercial segments; vi) final assembly of jets; vii) engineering services; viii) production and maintenance of aircraft seats; ix) supply of super tucano aircraft; x) corporate and institutional activities; xi) training for pilots, mechanics and crew members; xii) marketing operations support; and xiii) commercial and institutional representation. this structure is justified both due to the planes already sold in that country and to sales expectations for the new embraer 175-e2; 155-190-e2 and e2, to be delivered in 2018 and in relation to which american companies account for 43.8% of all orders made. the second biggest buyer of embraer aircraft is europe. the group maintains firms in several countries on the continent. in portugal, for instance, it has five firms that are responsible for: (i) making investments in subsidiaries; ii) maintaining and producing aircraft; iii) coordinating http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 investment and economic activities; iv) manufacturing parts and metal products for the aircraft industry; and v) manufacturing parts and composite products for the aircraft industry. in addition to portugal, the group maintains six other companies (three in france and three in the netherlands), with: i) corporate activities in europe; ii) parts sales and after-sales services; iii) commercial representation in europe, africa and the middle east; iv) provision of the sgdc system to the brazilian government; v) embraer’s financial operations; and vi) corporate activities. five other subsidiaries are based in the united kingdom, ireland, spain and switzerland, performing the following activities: i) lease and sale of used aircraft; ii) manufacture of interiors for commercial aircraft; iii) training service for pilots, mechanics and crew members; iv) corporate activities; and v) investments in subsidiaries. there are also two other companies in china engaged in sales, after-sales maintenance, and aircraft manufacturing; while the cayman islands has three companies, devoted mainly to financial operations. there are 2,366 people working at branches outside of brazil. in addition to these employees, there are another 3,677 effective employees working at companies that are subsidiaries of and affiliated to embraer (embraer. annual report 2015, 4). regarding external production related to the aircraft industry, embraer holds three manufacturing units for aircraft interiors and parts (two in portugal and one in ireland); two production units (one in the usa and one in portugal); and two final assembly units for airplanes (one in the us and one in china), totaling seven industrial plants. internationalization as a growth factor this section discusses whether embraer's internationalization could be one of the causes of its growth. with this in mind, econometric techniques were used to analyze three variables: http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 exports, net asset value and shareholders’ equity from 2001 to 2016. data were obtained according to availability from the annual results statement. graph 1 shows the evolution over time of these variables. it is notable that there was growth in the period for all the variables analyzed. however, exports showed an upward trend up until 2008, the year of the subprime crisis, when a drop occurred. from that moment on, exports remained virtually constant. not surprisingly, embraer’s shareholders’ equity and assets demonstrated the same growth behavior. however, and this is normal, net asset value saw sharper fluctuations than shareholders’ equity; that is because there are operations that are included in the former and cannot be incorporated into the latter, such as leverage. graph 1. evolution over time of exports, net asset value and shareholders’ equity source: authors. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 the graph also suggests that the variables are integrated. the dickey-fuller test was conducted to clear up any doubts. the null hypothesis of the test indicates that the variable is integrated, i.e., it is not stationary. otherwise, the alternate hypothesis indicates that the variable is stationary. table 3. dickey-fuller test adf mackinnon z (t) n critical values 1%5% assets -2.401 0.1413 15 -3.750 -3.000 exports -1.812 0.3747 15 -3.750 -3.000 shareholders' equity -1.313 0.6230 15 -3.750 -3.000 source: authors. considering the fact that all tests were not statistically significant, the hypothesis that all of the variables are integrated, or rather, that all of them are non-stationary, cannot be refuted. this result is consistent with the behavior of the company's growth. in order to conduct a granger causality test, the variables must be stationary. one way to perform variable stationary is by means of differences (𝐷𝑦 = 𝑦𝑡 − 𝑦𝑡−1). results demonstrate that a single difference is enough to make the variable stationary. the granger causality test for two time series x and y, for instance checks whether x precedes y, y precedes x, or they occur simultaneously (greene 2008). in order to perform this causality test, the vector auto-regressive model (var), whose results are omitted, must be estimated. the model was estimated by taking into account the lags of orders two and three. greater lags would imply losses of degrees of freedom due to the relative shortness of the series. afterwards, granger causality tests were calculated. their results are shown in table 4. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 table 4. granger causality wald tests lags (2) lags (3) equation excluded chi2 df p-value chi2 df p-value d. assets d. shareh' equity 3.444 2 0.179 2.7505 3 0.432 d. assets d. exports 4.614 2 0.100 2.9611 3 0.432 d. assets all 9.795 4 0.044** 13.294 6 0.039** d. shareh' equity d. assets 7.546 2 0.023** 129.21 3 0.000* d. shareh' equity d. exports 30.041 2 0.000* 124.23 3 0.000* d. shareh' equity all 31.032 4 0.000* 278.45 6 0.000* d. exports d. assets .493 2 0.782 8.3315 3 0.040** d. exports d. shareh' equity .066 2 0.967 3.7493 3 0.290 d. exports all .495 4 0.974 10.092 6 0.121 * denotes statistical significance of 1%; ** denotes statistical significance of 5%; and *** denotes statistical significance of 10%. d is the difference operator used to turn the series into a stationary series. "d. shareh' equity" is short for "d. shareholders' equity" source: authors. in relation to assets, the export and shareholders’ equity variables do not establish a causal relationship, since they were not statistically significant. in relation to shareholders’ equity, both assets and exports demonstrate a causal relationship because the results are statistically significant to at least five percent for the lags of both order two and order three. in relation to exports, it should be noted that only the net asset value establishes a causal relationship when the lag of order 3 is taken into account. in short, it is apparent that the variable net asset value influences both the shareholders’ equity and exports variables. exports have an impact on shareholders’ equity, and shareholders’ equity does not influence any other variable. since the objective of this study is to check the impact of internationalization on the company's growth, analysis is done by verifying the impact of exports over the other variables. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 the effect of assets on exports is due to the fact that exports require funding. this has an advanced impact on the company's cash through loans, which are also accounted for under net asset value. it is therefore plausible that the assets establish a causal relationship due to the necessary provisions for exports. exports, in turn, establish a causal relationship with shareholders’ equity, which is precisely the wealth owned by the company. therefore, according to the data analyzed, internationalization, as measured by the value of exports, influences the growth of the company. conclusion the analysis of the data shows how important internationalization was as a process in the growth of embraer, the aerospace company studied. the limited size of the brazilian domestic market is notable and, in fact, could limit the speed and scale of the company's growth. despite having a short history compared to other international competitors, embraer has managed to develop technologies, create new aircraft and hold onto a significant slice of the international market share in the regional air transport sector, military aviation, agriculture aviation and executive aviation. several factors contributed to this. the government was essential to this growth since it: i) served as the company's majority shareholder, from its creation until its privatization (19711994); ii) encouraged and created institutions that were essential to the development of both the training of skilled labor and the production of rd&i (ita, usp, inpe); iii) initially acquired 68.7% of aircraft produced (1971-1977), which secured the resources needed for the start-up of activities; iv) purchased 98% of military aircraft manufactured by embraer through fab; and v) created the integrated regional transportation system that led the company to sell planes to serve the country's regional market. lastly, the municipal government of são josé dos http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 campos and the são paulo state government provided infrastructure, land and financial assistance to the company. another factor that contributed to embraer's growth and internationalization success was its partnership with research and teaching institutions. worth mentioning is the participation of the instituto tecnológico da aeronáutica (ita), one of the best world schools of training of engineers. casanova (2016, 33) states that, as a result of these partnerships, "embraer can get quality at a low price". partnerships with foreign companies also contributed to the growth and internationalization of embraer. the case of italian aermacchi, a partner from the start of activities, is notable, as are the cases of piper, northrop and boeing, all north american companies. these partnerships have helped the company to both access new technologies and qualify embraer’s workforce, which occurred when foreign technicians came to the country and/or when embraer’s technicians worked at factories in italy or in the united states. other international partnerships, such as with gamesa (spain), sonaca (belgium), enaer (chile) and c&i interiors (usa), were important to provide parts for various products, which resulted in lower rd&i costs while at the same time streamlining production processes. regarding the internationalization process, embraer followed the main steps described in traditional theories. it started sporadically exporting to neighboring and culturally similar countries, such as uruguay and chile, to whom its first products were sold six years after the company was founded. it then sent sales representatives to the united states and to europe, to the extent that exports gained space in those markets. when these representatives no longer met the demands of after-sales services, the company established its own commercial subsidiaries http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 and customer service. finally, it implemented industrial plants in the united states, europe and china. on the other hand, embraer is an example of a case that fits with discussions on new theories of internationalization. from the start, the company's creators conceived of it as a business whose goal was to serve the international market, since the brazilian market would be insufficient to maintain its operations. in addition, the company began exporting six years after opening, another essential characteristic of the "born globals," one of the new theories of internationalization. an important and, to a certain extent, critical factor to the internationalization of embraer was certifications. if at first uruguay, chile and togo accepted brazilian cta certifications, other countries required more recognized international certifications. as soon as embraer managed to obtain certifications from the federal aviation administration in the united states, the diréction générale de l'aviation civile in france, the civil aviation authority in england and australia's department of transportation, its export process took flight in the global market. the statistical test showed the importance of internationalization for embraer’s growth. the granger causality test results are evidence that exports have an impact on the company's shareholders’ equity, which expresses its wealth. despite taking into consideration the period of 2001-2016, an analysis of embraer’s history clearly shows that internationalization has been a predominant factor in its growth during its existence. more than that, it was of utmost importance for its development, both from a technological and a marketing standpoint. internationalization consolidated embraer in diverse markets, enabled strategic partnerships with several companies in this industry, attracted financing, and brought together experienced http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 professionals from around the world, to mention a few contributions. the result of all of these efforts is the importance and attention that this company has attained in the sector. references andrade, roberto pereira de. 2013. construção aeronáutica no brasil. 100 anos de história. são josé dos campos: jac editora. botelho, antonio josé j. 1999. “da utopia tecnológica aos desafios da política científica e tecnológica: o instituto tecnológico da aeronáutica (1947-1967)” revista brasileira de ciências sociais 14 (39): 139-154. buckley, peter, and mark casson. 1976. the future of the multinational enterprise. london: macmillan. buckley, peter, and mark casson. 1985. “general theories of the multinational enterprise: a critical examination.” in multinationals theory and history, edited by p. hertner, and g. jones. aldershot & brookfield, vt.: gower. cabral, arnoldo souza. 1987. “análise do desempenho tecnológico da indústria aeronáutica brasileira.” phd diss., ita, são josé dos campos. casanova, lourdes. 2016. “latin american multinationals facing the ‘new reality’”. in evolution of family business. continuity and change in latin america and spain, edited by fernández pérez, paloma and andrea lluch, 23-36. cheltenham, uk – northampton, ma, usa: edward elgar publishing limited. chesnais, françois. 1996. a mundialização do capital. são paulo: xamã. chetty, sylvie, and desiree blankenburg. 2000. “internationalisation of small to medium-sized manufacturing firms: a network approach.” international business review 9 (1): 77-93. cyert, richard m., and james march. 1963. a behavioral theory of the firm. englewood cliffs, nj: prentice-hall. davis, peter s., and paula d. harveston. 2000. “internationalization and organizational growth: the impact of internet usage and technology involvement among entrepreneurled family businesses.” family business review 13 (2): 107-120. dalla costa, armando, and elson souza santos. 2011. “embraer diversifica projetos na área militar: o novo cargueiro c-390.” economia & tecnologia 24 (1):167-174. dunning, john. 1988. “the eclectic paradigm of international production: a restatement and some possible extensions.” journal of international business studies 19 (1): 1-31. dunning, john. 2000. “the eclectic paradigm as an envelope for economic and business theories of mne activity.” international business review 9 (2): 163-190. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 embraer. annual report 2006 to2017. https://ri.embraer.com.br/. embraer. 2006. annual report. erramilli, m. krishna, sanjeev agarwal, and chekitan s. dev. 2002. “choice between nonequity entry modes: an organizational capability perspective.” journal of international business studies 33 (2): 223-242. greene, william h. 2008. econometric analysis, 6th ed. new jersey: prentice hall. godfrey, paul, craig b. merrill, and jared m. hansen. 2009. “the relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. strategic management journal 30 (4):425-445. doi 10.1002/smj.750. hessels, j. and 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fernando. 2006. montenegro: as aventuras do marechal que fez uma revolução nos céus do brasil. são paulo: editora planeta. pensore edith t. 1959. the theory of the growth of the firm. new york: wiley. pitelis, c. 2002. “a theory of the (growth of the) transnational firm: a penrosean perspective.” in the growth of the firm: the legacy of edith penrose, edited by c. pitelis, 127-145. oxford: oxford university press. rodengen, jeffrey l. 2009. the history of embraer. n.p.: write stuff (sic) enterprises, inc. salwan, p. 2011. “growth & internationalization: the case of tata motors.” indian journal of industrial relations 47 (1). sapienza, h.j., autio, e., george, g., and s.a. zahra. 2006. “a capabilities perspective on the effects of early internationalization on firm survival and growth.” academy of management review 31 (4): 914-933. schueffel, p., w. amann, and e. herbolzheimer. 2011. “internationalization of new ventures: tests of growth and survival.” the multinational business review 19 (4). silva, ozires. 2005. a decolagem de um sonho: a história da criação da embraer. são paulo: lemos editorial. silva, ozires. 2008. nas asas da educação. a trajetória da embraer. rio de janeiro: elsevier. silva, ozires. 2009. a economia verde. são paulo: editora gente. souza, rafael pereira nunes de. 2012. “o mercado aeronáutico e a inserção brasileira: o caso embraer.” trabalho de conclusão de curso. faculdade de engenharia da produção. universidade federal de juiz de fora. tavares, maria da conceição. 1974. da substituição de importações ao capitalismo financeiro. rio de janeiro: zahar. versino, a. 2014. história da embraer. são josé dos campos: embraer. vinagre, mário b. m. 2015. guido pessotti. mestre do design aeronáutico. são josé dos campos: somos editora. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 appendix table a.1. embraer – order history and delivery of aircraft 2016 customers firm orders deliveries made firm orders in portfolio american eagle (usa) 217 217 0 british midland (united kingdom) 12 12 0 city airline ab (sweden) 2 2 0 expressjet (usa) 275 275 0 flandre air (france) 8 8 0 jet magic (ireland) 1 1 0 luxair (luxembourg) 11 11 0 pan européenne (france) 1 1 0 proteus (france) 11 11 0 republic airways (usa) 90 90 0 south africa airlink (south africa) 5 5 0 aerolitoral (mexico) 5 5 0 air caribes (guadeloupe)* 3 3 0 alitalia (italy) 22 22 0 axon (greece) 3 3 0 british reg. airlines (united kingdom) 23 23 0 brymon (united kingdom) 7 7 0 china southern (china) 26 26 0 china eastern jiangsu (china) 5 5 0 cirrus (germany) 2 2 0 era (spain) 2 2 0 gecas (pb air thailand) 2 2 0 klm exel (netherlands) 2 2 0 lot polish (poland) 36 36 0 mesa (usa) 36 36 0 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 customers firm orders deliveries made firm orders in portfolio potugalia (portugal) 8 8 0 regional (france) 38 38 0 rheintalflug (austria) 3 3 0 rio sul (brazil) 16 16 0 sichuan (china) 5 5 0 skyways (sweden) 4 4 0 swiss (switzerland) 25 25 0 transtates (usa) 22 22 0 satenta (colombia) 4 4 0 saudi arabian airlines (saudi arabia) 15 15 0 finnair (finland) 22 22 0 gecas (usa) 53 53 0 us airways (usa) 53 53 0 air canada (canada) 60 60 0 copa (panama) 15 15 0 jetblue (usa) 88 64 24 flybe (united kingdom) 29 25 4 republic airlines (usa) 48 48 0 tame (ecuador) 5 5 0 china eastern wuhan (china) 5 5 0 aero republica (colombia) 5 5 0 royal jordanian (jordan) 4 4 0 hainan (china) 97 75 22 egyptair (egypt) 12 12 0 not disclosed 14 0 14 sirte oil (libya) 1 1 0 virgin blue (australia) 24 24 0 northwest (usa) 36 36 0 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 customers firm orders deliveries made firm orders in portfolio m1 travel (liban) 8 8 0 lufthansa (germany) 43 43 0 nigeria (nigeria) 1 1 0 jal (japan) 30 15 15 nasair (saudi arabia) 3 3 0 taca (el salvador) 11 11 0 virgin nigeria (nigeria) 2 2 0 suzuyo (japan) 10 8 2 ecc (ireland)** 8 8 0 air moldova (moldova) 1 1 0 jetscape (usa) 14 14 0 trip (brazil) 9 9 0 azul (brazil) 94 59 35 aeromexico (mexico) 12 12 0 kunpeng (china) 5 5 0 lam (mozambique) 2 2 0 niki (austria) 7 7 0 montenegro (montenegro) 1 1 0 ba city flyer (united kingdom) 15 15 0 globalia (spain) 12 12 0 klm (netherlands) 39 22 17 oman air (oman) 5 5 0 augsburg (germany) 2 2 0 petro air (libya) 2 2 0 austral (argentina) 22 22 0 air lease (usa) 31 31 0 republic (usa) 158 103 55 dniproavia (ukraine) 5 5 0 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 23-56, july-december 2018 doi:10.1344/jesb2018.2.j046 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 customers firm orders deliveries made firm orders in portfolio airnorth (australia) 1 1 0 air astana (kazakhstan) 2 2 0 boc (singapore) 15 15 0 cit (usa) 11 11 0 hebei (china) 7 5 2 kenya airways (quenia) 10 10 0 conviasa (venezuela) 22 20 2 azal (azerbaijan) 22 20 2 aldus (irland) 20 4 16 united airlines (usa) 40 30 10 skywest (usa) 155 38 117 air costa (india) 50 0 50 aurigny (guernsey) 1 1 0 belavia (belarus) 2 2 0 ilfc (usa) 50 0 50 american airlines (usa) 60 6 54 icbc (china) 10 0 10 ghizhou/colorful (china) 7 0 7 aircastle (usa) 25 0 25 total 2.580 2.047 533 total countries 50 total companies 98 * emb 175 aircraft delivered by ecc leasing to air caraibes. ** aircraft delivered by ecc leasing: one for cirrus, two for paramaunt and one for satena. source: authors elaboration from embraer website. accessed january 15, 2016. http://ri.embraer.com.br/show.aspx?idcanal=i08bp4c7v0zexon8xttf3g this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://ri.embraer.com.br/show.aspx?idcanal=i08bp4c7v0zexon8xttf3g http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 david wong universidad del pacífico (peru) harold hernández lefranc universidad nacional mayor de san marcos (peru) luis banchero rossi (1955-1972), the best entrepreneur in peru’s fishmeal industry: market governance, social capital, and embeddedness abstract in the 20th century, peru was one of the major fishmeal producers worldwide. luis banchero rossi (1929-1972) was the main driving force behind this economic boom. this article discusses how, given a set of historical conditions favoring such a setting, banchero’s business performance surpassed that of other peruvian and foreign producers in the industry, and enabled this development. this research uses complementary methodologies; i.e., case study work and financial databases. the authors find that banchero’s share in peru’s total exports reached 15.3 % in 1968, far above the next largest peruvian exporter. in this regard, banchero operated his organization following a set of criteria, called market governance by williamson, plus several advantages, including negotiation abilities, social capital formation, human capital management, and tacit knowledge development, building on peru’s specific sociological conditions. these conclusions help understanding how an entrepreneur of humble origins like banchero worked around a commodity such as fishmeal to become a successful business leader worldwide. keywords: luis banchero rossi; social capital; fishmeal; market governance; transaction costs; tacit knowledge corresponding author: e-mail: @ub.edu received october 7, 2020 accepted march 1, 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 a man’s character is his fate. heraclitus 1. introduction peru has been a leading fishmeal producer since the beginning of the 1950s. production grew 119 times in 1954-1971 (seminario 2015); and the average annual export volume increased from usd 0.8 million in 1950-54 to usd 188 million in 1970-73. fishery exports surged from 2.9% to 27.0% of total exports in 1960-67 (thorp and bertram 2013). peru’s fishery boom was sparked by a critical set of historical and structural conditions: natural anchoveta abundance created by the humboldt current; high economic momentum in 1943-1976, on the back of demographic expansion, tertiary industry development, and mining growth; and the emergence of scores of risk-taking, innovative peruvian and foreign fishing entrepreneurs. in this context, as a result of a spectacular industrial onslaught, by 1968 luis damiano manuel banchero rossi produced 15.3% of total fishmeal exports, 2.6 times ahead of his closest peruvian competitor (abramovich 1973). how did this son of italian immigrants, with no family background in the business, scarce initial capital, studies in a provincial university, and no english literacy become such a success story? how did this newcomer who did not begin to invest in fisheries until 1950 and was initially snubbed by the business community (whose arrogance he bitterly criticized) build one of peru’s largest fortunes? (malpica 1992). it has to do with the identification and implementation of innovations—using nylon instead of cotton nets, echo sounders to locate fish, and helicoidal impeller centrifugal pumps to transport catch from ship to plant—but also crucially with a creative use of tacit knowledge, social capital, and personal qualities. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 this paper explains how banchero’s historical and personal circumstances contributed to his achievements by using various methodological approaches (mainly the case study method, as well as close research of his life and times) and sources (the economática corporate database system); and the peruvian journal pesca. 2. fisheries in peru: economic and political developments (1959-1975) peru experienced an economic boom in 1943-1976, with an annual average growth of 5.13% (seminario 2015). at the same time, fiscal deficits remained high (above 10% of gdp in 1968); the foreign debt increased considerably to finance public works; and annual inflation exceeded two digits in 1957 (12.7%), 1965 (16.3%), and 1968 (19.2%). moreover, in 1959-1975, six presidents came to power. one of them, juan velasco alvarado, nationalized fishing companies. figure 1. fishmeal statistics source: compiled by the authors from seminario 2015, portocarrero 1992, brundenius, 1973. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 a major driver of this economic momentum was fishmeal production, which gained importance in international markets as livestock feed and offset the fall of other commodities—like bird manure fertilizer (guano)—within peru’s commodity exports. in 1955-1972, fishmeal prices fluctuated between a high of usd 261/ton and a low of usd 86/ton, with a standard deviation of usd 51/ton (figure 1). along with angola, norway, south africa, the u.s., denmark, spain, iceland, and portugal, in 1960 peru joined the fishmeal exporters’ organization (feo), which promoted strategies to hedge against market volatility. in the same year, the industry’s main stakeholders founded peru’s fishing consortium (consorcio pesquero del perú) to organize fishmeal exports, fight speculation, and establish a distribution system. up to 92.5% of fishmeal production was controlled by the consortium (thorndike 2019). fishmeal production almost doubled yearly in 1955-1960 and reached a historical high of 2,249.247 tons in 1970 (5.16% of gdp, compared with less than 0.5% in 1955). exports surged to a peak in 1969 (36% of total exports). during this period, luis banchero rossi became a main figure behind the fishmeal boom and reputedly built one of peru’s largest fortunes. the next sections suggest that this claim may be overstated. 3. banchero rossi: entrepreneur, innovator, and strategist luis banchero rossi was born on october 11, 1929 in tacna (peru). his parents, both immigrants from the village of carsi (italy), ran a vineyard and a wine-and-pisco mill. he had a brother and two sisters. when he graduated from high school, he left the parental home due to differences with his father. he settled in the city of trujillo, where his uncle benito rossi sattui—his mother’s brother, also an immigrant—encouraged him to study chemical http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 engineering at the local university. graduation remained an unfulfilled goal that stalked him throughout his life despite his business success, until he finally obtained his degree much later, at 42, just two months before his untimely death in 1971 (rossi 2011, 15-16). a born businessman, he started out selling soap as a college student. on one occasion, his cousin mario rossi, benito rossi sattui’s son, also a chemical engineering student, set out to make soap, which had become temporarily scarce in the market. he judged his experiment a failure, but luis took the soap and succeeded in selling it. he then asked mario and his classmates to make more despite their material limitations and rudimentary production techniques (thorndike 1980, 56-57). having completed his studies at the age of 21 in 1951, he embarked in several business ventures with his cousin alicia rossi de la riva, benito rossi sattui’s daughter. while selling kendall tractors and lubricants in peru’s northern estates, he befriended yugoslavian immigrant radovan samardzic, also a lubricant seller. further pursuing business opportunities, he began selling liquor, including at the important laredo plantation, where he became acquainted with engineer isidoro loebl. he realized that molasses (a by-product of sugar refining) could serve as livestock feed. banchero took the risk: “i’ll buy all the waste” (thorndike 1980, 68; rossi 2011, 16). when his bid proved successful, he founded the productos y forrajes company. he also became lubricant supplier to a fish canning plant located in the fishing locality of coishco, near the city of chimbote, where his cousin mario rossi, now a chemical engineer, was in charge of quality control. in chimbote he developed a close partnership with galician immigrants fernando and luis pazos caeiro, who introduced him to the vast potential of peru’s fishing industry (rossi 2011, 16). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 banchero also befriended juan sagarvarría, a chemical engineer of basque and italian descent. sagarvarría worked with his brother in law, who owned the envasadora chimbote company; and also willingly shared his experience in fisheries with banchero. shortly afterwards, in 1955, banchero decided to make a push into the nascent fish canning industry by creating compañía pesquera la florida s.a. he bought an inoperative plant subject to seizure for debt and took its assets to chimbote, where operations began in october 1955 with logistical assistance from samardzic, “always the right friend at the right time” (rossi 2011, 17). he also succeeded in engaging carlos a. mannucci (a trujillo businessman of italian descent) and ignacio de la riva (married to his cousin alicia rossi) in the venture. in 1955 fishery industries were incipient, consisting mainly of bonito canning for export, but also anchoveta fishmeal, pioneered by manuel elguera mcparlin, miguel capurro and other entrepreneurs like manuel almenara. in 1945 the latter founded the chimbote-based compañía pesquera coishco, to which banchero was originally a supplier of motor lubricants (cushman 2018, 431). chimbote was thus gradually becoming a fishing center led by entrepreneurs of italian and galician descent, the latter mostly from the spanish fishing port of malpica (rossi 2011, 21). soon, for logistical and other reasons, banchero rossi opened an office in lima, located in a space provided by the manager of the lubricant company for which he used to work. banchero rossi, then 26, commuted weekly between lima and chimbote. benito rossi, his future biographer, was 21 when he enrolled in the new company (rossi 2011). bonito canning and anchoveta fishmeal plants mushroomed along coastal peru throughout the 1950s, including u.s. company star kist, which formed partnerships with almenara and with the plants located in coishco and the southern port of ilo. the industry’s precarious conditions initially limited banchero’s efforts to venture into bonito fishing: he depended on widely http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 fluctuating prices set by shipping vessel owners, as well as on their wooden ships (bolicheras) with no more than a 60-ton hold capacity. he then launched a 40-ton fishing vessel in november 1956; and commissioned five more with the same hold capacity in 1957, as well as thirty-one 120-ton ships in 1960. previously, in 1959, banchero had already made a daring move by commissioning the 130-ton ship “tacna”, the first steel fishing vessel, followed by five more with the same hold capacity (rossi 2011, 53). the latter could also serve as factory ships; but there were concerns about their ability to float and the corrosion of steel in seawater. the experienced pazos caeiro brothers came up with the solution: using galvanic current to weld ship parts. banchero’s initiatives illustrate the push to overcome the industry’s incipient know-how and lack of technical sophistication in shipbuilding, fishing practices, transportation, and methods for unloading from fishing vessels to canning and fishmeal processing factories. crucially, the process also involved identifying international market opportunities, disclosing peru’s rich fishing potential, and investing exiguous capital in a timely and risk-savvy manner. fishmeal was initially produced using bonito waste, but later there was a massive shift towards anchoveta promoted by banchero and others. the year 1958 marked the beginning of the international fishmeal boom (as well as the decline of bonito fishing and a surge in south african demand for canned sardine and mackerel). using facilities purchased from californian investors at bargain prices, banchero established a plant in chimbote with a production capacity of 20 tons per hour, in partnership with us company wilbur ellis and peru’s compañía industrial pesquera del pacífico sur s.a. taking advantage of a price fall, banchero offered to buy wilbur ellis’s share in kind; changed the company’s name to pesquera humboldt s.a.; and named former classmate alfonso puga lópez as plant manager, as well as other college friends http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 (rossi 2011, 16, 32). he also hired his brother-in-law, orlando cerrutti, a police captain, to run the operative and administrative areas. rossi emphasizes that banchero “[…] needed to appoint only men he could fully trust in places of responsibility.” (rossi 2011, 32). at the same time, he closed down his molasses and tannery activities due to low turnover. after establishing fishmeal companies pesquera humboldt s.a. in chimbote, pesca mar s.a. in supe, and los ferroles s.a. in callao, as well as canning plants la florida s.a. and miramar s.a. separately for tax purposes, oyssa (operaciones y servicios s.a.) was created to coordinate operations and expansion plans for the group as a whole. mounting foreign demand had to be met by stepping up production, but within a framework of lean management, efficient logistics, daring innovation, and continuous learning. these materialized in a vertical integration arrangement involving a fleet and a shipyard of adequate size. banchero had to develop sound decision-making and capacity building practices on the spot, as universities and other education institutions did not offer careers in shipbuilding, fisheries, or plant design. initially banchero’s brother-in-law, civil engineer enrique agois, was appointed as oyssa general manager; but remained in that position only until 1962, as his conservative approach clashed with banchero’s bold methods (thorndike 1980, 48). as part of his plans to revamp financial and cost management practices, banchero hired engineer isidoro loebl, former supervisor at azucarera san jacinto, whom he had met while doing business in northern peru. banchero’s logistical strategy included a comprehensive information system encompassing the accounting and operative areas. the efficiency gains from this approach resulted from coordinating costs and capacity in all the group’s plants and vessels (approximately 200 ships, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 3,000 fishermen, and administrative staff). the fleet needed to be equipped with radios, echo sounders, sonars, pumps, power blocks, etc. in 1959-60 nylon nets replaced cotton nets. soon it also became necessary to establish a shipyard (pesquera industrial callao s.a., picsa) to build the group’s own vessels, as well as a dry dock (astilleros chimbote s.a) for maintenance and repair (rossi 2011, 59, 73). fishmeal production costs were initially low: the cost was usd 50/ton, and the selling price could reach usd 150/ton (thorndike 1980, 166); but price volatility and speculation remained serious drawbacks. in 1959, peruvian producers confronted comergal, a powerful international fishmeal trader owned by spanish national joaquín peña. in addition to fishmeal produced in angola, peña speculated with peruvian fishmeal supplied by a local company. he even visited peru and offered comergal’s trading services to fend off competition and secure a minimum price per ton, but negotiations failed (thorndike 1980, 167, 168, 170-174). around that time, the feo was created in the context of the paris agreement (october 1, 1960) on the basis of the international market regulatory framework issued by the international association of fishmeal manufacturers (iafmm). peru’s national fisheries association (sociedad nacional de pesquería) adhered to the agreement; and shortly afterwards, on november 21, 1960, peru’s fishing consortium was established, on banchero’s initiative, to combat speculation, provide technical assistance, and ensure contract compliance. peña’s speculation scheme consisted of selling in advance at a price below fishmeal production costs to break competition from peru. after a 44-day standoff, with prices already on the rise, the peruvian consortium delivered 30 thousand tons of fishmeal into the market at usd 115.00 fob. moreover, banchero had previously carried out massive purchases of comergal fishmeal from third parties at low prices. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 market participants began to purchase from the consortium, marking a victory in the trade war against peña (thorndike 1980, 184, 185, 187-189). the banchero group implemented organizational improvements continuously. in 1965, the fleet manager’s office was created and placed under the general manager’s office, together with the production manager’s office. the fleet manager’s office comprised the operations, maintenance, and finance departments, as well as the research unit. the operations department supervised the fleet chiefs and plant superintendents. the maintenance department team comprised mechanical engineers, electricians, electronics engineers, and refrigeration specialists. the finance department was in charge of budget preparation and implementation. the research unit followed up on world production statistics. humboldt international, the group’s maritime transport company, managed ships with a 10-ton hold capacity (rossi 2011, 60, 69). the oyssa fleet grew to 191 ships: 145 anchoveta vessels, 18 bonito vessels, 21 trawlers, 4 tuna vessels, and 3 auxiliary vessels (rossi 2011, 79). as a consequence of this extraordinary expansion, in less than ten years peru became the world’s leading fishmeal producer. banchero was also keen to promote capacity building among his employees, for instance via the workshop for fishing vessel skippers, created in 1964 (rossi 2011, 99). in 1966, the enactment of an export tax affected operations and provoked a strike. in addition, different sources indicated that the largest companies in the fishing consortium were responsible for ecological imbalances: the mass death of guaneras birds (caravedo 1979). moreover, the government declared a closed season for fishing in 1967. a political solution was found: congress approved an income tax on profits and a reinvestment incentive. this reflected banchero’s increasing influence on politics. in fact, by the end of the 1960s there was speculation that banchero might run for president. however, on october 3, 1968, in a context http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 of political crisis, government corruption allegations in the media, hostile relations between congress and the presidency, and social unrest, general juan velasco alvarado staged a coup and established a left-wing statist government. the relations between the regime and banchero became increasingly strained. banchero’s life came to an abrupt and violent end on january 1, 1972. the reasons behind his assassination, which provoked widespread repudiation, remain undisclosed to this day. his extraordinary rise to success and his sudden death raised him to legendary status. his reputation as an austere, indefatigable man set him apart from the traditional upper crust; and earned him an almost prophetic and providential quality in the popular mind. 4. the banchero fortune how large was luis banchero’s fortune? was he peru’s richest man by the beginning of the 1970s? his investment portfolio has been valuated and compared with other peruvian fortunes of the time to answer this question. although it is difficult to obtain the necessary data in a country with a rather shallow capital market like peru, relevant information was obtained from the institutions and publications mentioned in the introduction to this paper. in figure 2, companies marked with an asterisk (*) are associated with fisheries (production or commercialization) and operate under a vertical integration arrangement; i.e., inputs are purchased from their own suppliers and sold as transformed goods to firms also within the same group. the only exception is the firm at the end of the production chain; i.e., the one that makes the final sale. all intermediate goods and services (fish, fishing vessels, nets, etc.) served to produce the exports made by hamburg-based humboldt international. for example, all ships built by http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 picsa served only to export the group’s fishmeal and canned fish. although picsa did sign contracts to sell five ships to french firm pretabail, sixteen 600-ton vessels to cuba, and five ships to peruvian firm pepesca, the 1973 nationalization prevented their delivery (rossi 2011, 125). these sales to third parties, which could have increased the worth of banchero’s portfolio, never materialized. table 1. banchero’s portfolio valuation banchero’s portfolio (1968) usd thousands fishing high low fishmeal 43,314 12,032 canned fish 11,832 3,287 sub-total 55,146 15,318 source: compiled by the authors. we assume that a company’s equity (at market prices) can be estimated by multiplying an accounting indicator (sales) times a price sales ratio. the twin security chosen was austral group, a fishmeal exporter, with a 0.5-1.8 ratio. banchero’s fishery-related wealth (i.e., fishmeal and canning) in 1968 usd is estimated at usd 15-55 million (table 1). the banchero group included other interests like the correo newspaper, the seguros panamericana insurance company, and the defensor lima soccer team. although calculating banchero’s worth is a complex exercise, it is possible to arrive at reasonable conclusions. the fortunes of peruvian economic groups1 romero, wiese, bentín, and brescia in 1968 usd are estimated at usd 108, 101, 32, and 31 million, respectively. it should be noted that the latter are based on 1995 information from the lima stock exchange, which does not include important unlisted companies. clearly, the romero and wiese fortunes 1 only the share owned by the group is considered. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 were more important, with far more diversified investments in strategic sectors like banking, chemicals, mining, and hotels (vásquez 2000). 5. the distinctive advantage of the banchero group: market governance, transaction cost, social capital and embeddedness as discussed in the previous section, banchero’s net worth was not one of peru’s major industrial fortunes. however, after starting operations in 1955, by 1968 banchero had become peru’s first fishmeal producer, with a 15.3% share of total exports (abramovich 1973). the second was proteins corporation, a us company; and the third was madueño & elguera, a peruvian company (roemer 1970), both well below banchero’s output. the remainder of this section discusses the question advanced in the introduction: how did banchero’s entrepreneurial performance surpassed that of all locally-based peruvianand foreign-owned companies and international corporations, starting from an exiguous capital, eventually becoming the largest producer in the world’s main fishmeal exporting country? the historical-structural circumstances favored the fishing industry as a whole, with entrepreneurs competing aggressively against each other. therefore, in principle, the extraordinary growth of fishmeal production/exports over that period could have been basically the same without banchero. the value-added process for fishmeal is relatively simple and imitable. like in the case of other peruvian commodities (e.g., guano and nitrate in the 19th century, or mining at the turn of the 21st century), fishmeal production surged in a favorable economic and geopolitical context of rising demand and prices. in line with international trade theory, peru’s fishmeal export boom relied on a basic endowment, a fish-rich maritime territory. specifically, the humboldt http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 current—which also cuts through an important segment of chile’s territorial waters—creates rich nutrients for fish, notably anchoveta. other factors include pseudo-scientific studies, the creation of the national fisheries association, and laws allowing anchoveta over-exploitation. by end-1953, ten fishmeal processing plants were already in operation (cushman 2018, 428431). therefore, peru probably enjoys an absolute advantage in fishmeal production. there are no relative costs, but peruvian fishers face low opportunity costs. the world fishmeal market can be described as an oligopsony, where few buyers (like wilber ellis, coishco, and fipeco) compete to purchase a given good. (thorndike 2019). in addition to the historical factors mentioned above, technological conditions were more or less accessible to all entrepreneurs in the industry, depending on their economic capital or financing capacity. fishing innovations included nylon (instead of cotton) nets, the echo sounder (which facilitates fish catch), and helicoidal impeller centrifugal pumps (which facilitate unloading fish catch from ships to processing plants). but why was a company like, for instance, proteins corporation—which had access to greater financial and managerial resources, operated under a fully integrated process, and was run by seasoned managers—unable to equal banchero’s achievements and impose its dominance by sheer “brute force” (i.e., taking over the market by exploiting economies of scale)? a first hypothesis is that banchero created competitive advantage by establishing vertical and horizontal links within a group of companies, i.e., what michael porter calls a cluster (porter 1991). this hypothesis assumes the ability to measure tangible resources and free trade. moreover, development is explained by formal knowledge; that is, it can be expressed in words and numbers (cost-benefit analysis) and it is explainable (i.e., in can be expressed by a model). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 however, the limitation of this framework is that it does not consider intangible resources, which are also fundamental in this case. so how did banchero prevail over all other companies? how did he weather the successive crises that occurred during the 1960s? how did he compete against, and surpassed, all foreign and transnational corporations investing in peru at that time? we suggest two concepts that can contribute to resolving this issue: transaction costs and market governance; and social capital and its embeddedness in peruvian society. the transaction costs approach focuses on governance costs and relegates production costs to a lower priority. the issue is establishing whether the compartments generated by production should transfer resources as independent units via purchases or outsourcing (market governance), or under the supervision of a higher layer of authority (unified governance), thereby promoting vertical integration. both mechanisms create different governance costs. the problem is deciding who controls production, the market or the company. market governance originates market costs: data gathering, negotiation between the parties involved, and insurance and transportation for purchasing and outsourcing. alternatively, under unified governance, costs are generated when resources are mobilized under the owner’s planning and direction. the difference between both approaches is the generation of transaction costs. a company will tend to grow until the cost per additional transaction within the company is equal to the cost of carrying out the same transaction via the market. if all agents were loyal, products were homogeneous, and information was complete, both kinds of governance would originate the same cost. however, in most societies there is opportunism, products are heterogenous, and information is incomplete. therefore, costs differ between both http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 kinds of governance, but respond to three parameters: asset specificity, uncertainty, and frequency. on one hand, a less specific asset may be employed in different ways by different users without value loss, although, due to its simplicity, it will not generate significant benefits. on the other hand, a more specific asset cannot be used for alternative purposes, although it can take on a strategic behavior, thereby creating considerable gains. uncertainty means that information is insufficient to protect an agent against fraud. frequency refers to the number of transactions. market governance implies equality of power between the negotiating parts, as well as anonymity. costs are lower than under unified governance when products and technologies are simple (i.e., non-specific, general purpose assets); and economic agents have the same power over production factors. information transparency makes it possible to trust anonymous agents, so that the costs of a rapid negotiation can be recovered more frequently (williamson 1985). however, those were not peru’s market characteristics in the 1950s and 1960s. therefore, market governance was more suitable. the market governance mechanism allows lowering governance costs in the fishmeal industry. fishmeal is a commodity traded in a primary, general-use sector. its production process is not sophisticated and does not require specialized human capital. moreover, its elementary activities (fishing and processing) involve simple, easily imitable technologies, which can hardly become differential factors. the production process does not involve specific assets, but rather a general-purpose asset (fish), accessible to other buyers via the market; i.e., it is not a differentiated product. it was not a porter context: economies of scale were not required to diminish costs; and, at least initially, it was not necessary to implement production according to vertical integration criteria and under the supervision of a higher layer of authority, as in an integrated company. that was banchero’s http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 choice, but it could have been implemented by any other entrepreneur under the same conditions. as evidence of this strategy, banchero purchased an out-of-operation canning plant in association with two partners, mannucci and de la riva. later, in the face of difficulties with the price of fish, he invested in fishing vessels (bolicheras): “the conflict within the fishing bourgeoisie between vessel and plant owners revolved around the price of anchoveta catch” (caravedo 1979, 52). banchero later hired engineers with experience in the mining industry (roemer 1970), who did not required further technological specialization; and former engineering classmates, with whom he maintained a trust relationship that he used for the benefit of the company. he invested in his first fishmeal plant in partnership with, among others, a us subsidiary firm. banchero responded to price falls by purchasing partners’ shares, in case markets took time to recover. he also shared piece rate payments to fishermen (who initially did not pay social security contributions) with other shipbuilders (caravedo 1979, 53). he only implemented vertical integration when it was essential for sustaining production. moreover, he played a leading role in the creation of peru’s fishing consortium, a powerful lobby with the ability to pressure peru’s congress and government, thus creating a monopolization/denationalization trend in the fishing industry (caravedo 1979, 63, 64, 70). we maintain that, in implementing competition under market governance, banchero developed particular personal skills, involving social capital and its embeddedness in peruvian society, which allowed him to diminish governance costs more than any other company. this happened in a context where agents were not loyal and information was not accessible; on the contrary, peru’s social and cultural environment in the 1950s and 1960s was marked by opportunism instead of loyalty, limited rationality, and scarce information on market agents. banchero, as an entrepreneur, developed distinctive resources not confined to his professional, scientific, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 technological, and academic knowledge. he developed inventive, innovative, and integrative skills (acquired from close friends, most of them of recent immigrant descent like him, and from fellow engineers with experience in the industry), which materialized in the exploitation of tacit knowledge and social capital. banchero came through as trustworthy and able to articulate stakeholders’ interests in a fundamentally unstable political and economic context under an essentially corrupt national state (quiroz 2013). he was a dealer with the capacity to negotiate prices more efficiently and obtain the best possible information in a society characterized by imperfect economic rationality and segmented social relations (which did not form a system as such). banchero’s performance promoted a value chain that was key to the growth of his business. this strategy fostered confidence among banchero’s employees, partners, and clients, who willingly shared the risks involved in his ventures. such strategy was difficult to replicate, as it required a skillful management of both tangible and intangible assets (barney 1991). it involved skills that were not learned theoretically or conceptually, but rather emerged from acting experience. this kind of learning is best encapsulated by the phrase: “we can know more than we can tell”. this is key to winning stakeholders’ trust and inducing them to follow the leader. it is an ineffable element (polanyi 1966, 4; spender 1993; nonaka, reinmoeller and senoo 1999). such entrepreneurs push themselves to absorb diverse forms of knowledge and venture into social contexts that are not fully integrated, but rather compartmentalized, involving diverse participants like fishermen, sellers, businessmen, engineers, technicians, and exporters. all those who played an important role in banchero’s life—his immigrant family, his former engineering classmates, the fishermen who worked for him, the entrepreneurs he did business with—provided him with tacit knowledge, from the most basic experiences to the most http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 sophisticated technical practices, which he used to serve his vision. social capital is formed by trust-based networks of connections aimed at performing transactions that can be beneficial to all parties (nahapiet and ghoshal 1998). the literature on social capital (nahapiet and ghoshal 1998) indicates that social capital facilitates the creation of new intellectual capital through knowledge exchange and combination; that organizations, by sharing and transmitting knowledge, generate organizational advantage, where social capital sitting in social networks is a valuable element; and that access to such networks provides privileged information and opportunities, which other organizations cannot access, thereby creating comparatively higher growth in certain organizations. the evidence from banchero’s case shows that social capital does not materialize just by being there. the literature based on granovetter (1992) considers structural and relational embeddedness; and distinguishes between the properties of a relations network and the personal relations within a given history or biography. relational embeddedness is important, as it brings individuals closer to their capacity of action or choice. this is relevant for understanding that other individuals with the same willingness to do business may start from the same structural social conditions; but only a particular individual attitude and strategic disposition to exploit social relations triggers certain responses from eventual and unsuspected stakeholders: relatives, former engineering classmates, close friends, fishermen, etc., as evidenced by banchero’s biography. building on granovetter’s findings, nahapiet and ghoshal (1998) state that intellectual capital emerges from certain development conditions for social capital. in this regard, organizations http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 contribute to generating knowledge, which provides them with organizational advantage. additionally, based on polanyi (1966), spender (1996), and other authors, it is possible to distinguish between tacit/explicit and individual/social knowledge. this classification admits combinations: individual explicit, individual tacit, social explicit, and social tacit knowledge. the first one can be stored and accessed specifically. the second one is of an automatic, rather practical nature. the third one is objectified, shared, collective, and laid out in texts and manuals. the last one (social tacit knowledge) becomes manifest in institutional practice and emerges from inter-relations that cannot be replicated by other institutions like a recipe. it assumes an embeddedness into the daily practice of an organization’s members. entrepreneurs are coordinators of interests: they learn spontaneously—not explicitly, scientifically, or academically—to discover opportunities and identify market participants willing to sell or purchase. they develop a “know how” rather than a “know what”. they learn by doing and focus on action rather than objectives. they use a “knowing capability” to exploit opportunities by articulating interests. how do they transform this ability into a factor that makes extraordinary growth possible? the literature on social capital suggests that intellectual capital can be more valuable than material assets (e.g., land, money, or equipment). banchero’s biography shows how this capacity translated into business growth by reducing transaction costs between stakeholders; and, more generally, articulating stakeholders who previously were not linked by a common interest. in this context, carrying out transactions implies mobilizing resources in a timely manner. this in turn implies identifying a community of interest within the organization; and between the organization, on one hand, and labor suppliers and buyers, on the other hand; as well as articulating supply of, and demand for, increasing output volumes. in the process, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 transactions must be carried out in a timely manner between fish catching, processing, and exporting. two critical elements in the production chain are catch volume and foreign demand for fishmeal. banchero’s supply grew steadily and needed to be absorbed by the market. as a result of his ability to persuade fishermen to produce more, supply always exceeded demand. spanish fishmeal magnate joaquín peña suggested to reach out to new buyers in eastern europe (thorndike 2019, 170). table 2 shows that banchero succeeded in boosting peru’s share of exports to eastern europe from 9.7% in 1958 to 23.1% in 1967. this was possible to a great extent thanks to banchero’s push and initiative. table 2. fishmeal exports to eastern europe fishmeal exports to eastern europe (% from total) 1958 1963 1966 1967 trim i german democratic republic 0 3,7 9,1 5,7 bulgaria 0 0,2 1,3 0,9 chezchoslovakia 0 0,7 1,7 4,3 hungary 0 1,6 1 2,0 poland 0 0,8 4,4 5,1 yugoslavia 0 2,7 3,8 4,3 romania 0 0 0,8 0,9 total 0 9,7 22,1 23,1 source: pesca journal. this talent for articulating interests was based on his fiduciary capacity; i.e., offering wealth originated by products or services he did not possess or had not yet created. therefore, a second feature of this tacit knowledge or know-how, when translating into growth, is its capacity for fiduciary generation; i.e., by creating trust among stakeholders with differing interests, banchero was able to persuade them to enroll in his company or grant him unsecured loans. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 this embeddedness of the company’s rationality into its network of relations via negotiation was not confined to finding common ground between conflicting interests within the industrial sector alone. it extended into the ability to develop broad and structural political connections at the government level and to exert lobbying pressure on congress and the executive. very rapidly banchero took the leadership of what caravedo (1979) called the “fisheries faction”, which blocked the enactment of legislation against predation and the creation of environmental imbalances, among other benefits to the industry, a subject that was extensively discussed internationally at least since the 1940s (cushman 2018). the “fisheries faction” was relatively successful during the prado administration (1956-1962); but obtained considerable gains in 1963-1968 by using influence to persuade the apra-uno congressional alliance to support initiatives opposed by president fernando belaúnde, leader of the acción popular party: the belaúnde administration succumbed to pressures not only from social forces, which did not use congressional channels, but also from his own cabinet and congress, where the apra-uno coalition held a majority (caravedo 1979, 67). as a result, law 15048 of 1964 favored domestic industry through tax cuts and preferential loans; and law 16694 of 1967 promoted the creation of a domestic monopoly, led by banchero, in partnership with foreign capitals, which drove small and medium producers out of the market: within the snp [national fisheries association], luis banchero represented monopolistic interests. he had political connections with certain sectors of the acción popular, democracia cristiana, and apra parties (caravedo 1979, 73). this is confirmed by clarke: within the fisheries industry […] apra congressmen and senators participated in the “fisheries cell”, which successfully supported the interests of the industry in the complex congressional climate during the belaúnde administration (clarke 2018, 361-362). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 banchero’s spontaneous individual tacit knowledge articulated the individual tacit knowledge of fishermen (acquired from their work at sea) and salesmen; the individual explicit knowledge of technicians and engineers; and the social knowledge, both tacit (i.e., a sense of belonging and trust) and explicit (i.e., the contribution of engineers and managers in terms of economic rationality and market awareness). paternalism involves an intense labor relationship whereby employers seek mechanisms to condition their employees’ decisions and autonomy. this leadership style may take three forms: benevolent (employers have a genuine interest in their employees and the latter develop a sense of loyalty); moral (employees accept a greater degree of authority from employers); and authoritarian (employees accept absolute and unquestionable authority from employers). presumably labor relations improve, and organizational gains emerge, within the first two categories(mussolino and calabró 2014). the evidence suggests that banchero’s leadership style qualifies as benevolent paternalism (thorndike 1980; rossi 2011). significantly, within and outside the organization, banchero was known as the man (thorndike 1980, 136). at the same time, banchero’s paternalism did not exclude extracting benefits from labor to serve the interests of mediumand large-scale producers (in partnership with foreign monopolistic capital); or participating in ocean predation: early on, banchero established an alliance with apra unions, known as the “mafia” (clarke 2018, 362). building on findings by sulmont and flores galindo, caravedo states the following: “the mafia that prevailed over all others in 1960-65 was the one run by banchero ” (flores and sulmont 1972, 101-102; caravedo 1979, 58). in literature, josé maría arguedas’s “el zorro de arriba y el zorro de abajo” (arguedas 1983) provides a critical and harsh depiction of those times. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 banchero had an ineffable empirical knowledge of the behavioral patterns of diverse stakeholders. his talent for developing empathy across a range of social, cultural, organizational, labor, and professional environments proved instrumental in creating commitment towards the organization. notably, according to denis sulmont and alberto flores galindo, banchero succeeded in establishing a seemingly horizontal relationship with fishing workers due to his ability to adapt the human resources practices of his companies to the mentality of his employees, thereby promoting camaraderie and esprit de corps. an important element in peruvian fishermen’s mindset is an admiration for the “self-made man”, in addition to skill and cleverness. this close employer/employee connection is exemplified by initiatives like rewarding a number of workers by paying for their attendance to the 1970 soccer world cup; or finding time to join them for drinks (flores and sulmont 1972; rossi 2011, 132-134). as the son of italian immigrants, banchero did not inherit authoritarian legacies from peru’s colonial times. flores galindo suggests that the spaniards’ vertical dominion over the population of native and african descent was preserved in peru’s estates when republican rule weakened the political power of the clergy and provincial officials. with the oligarchy as the new political, economic, and social group in power, vertical authority gradually passed on to factories as urban centers became more industrialized; and the landowner/peasant paradigm morphed into an owner/worker relationship marked by social distancing (flores 2001, 184). this tacit knowledge embedded in his personality and initiatives also translated into technological innovation and corporate bureaucratic streamlining: former tacna schoolmates and trujillo college classmates, trujillo acquaintances, chimbote fishermen (with whom he partied and drank beer), and immigrant partners combined and articulated their diverse and complementary knowledge within oyssa. the organization reinforced previously weak http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 linkages. over a short period (1955-1964) technological innovation accelerated, spurred by the constantly growing world demand for fishmeal, under banchero’s bold leadership and increasingly sophisticated managerial model. the banchero group was among the first to adopt such innovations. banchero’s fiduciary reputation extended beyond the organization and the stakeholder circle, to the point of being considered presidential material in his time and gaining iconic status among the peruvian population to this day (hernández 2020). concluding remarks in the 1960s, peru became the world’s major fishmeal exporter due to a combination of historical, economic, and political factors. like other peruvian commodities (e.g., guano and nitrate in the 19th century, and currently mining), fishmeal production surged in a favorable international context. however, these economic factors do not explain how luis banchero, a peruvian entrepreneur with incipient knowledge of industrial fishing and scarce initial capital, became peru’s major fishmeal exporter, even surpassing foreign-financed companies. this article explains the strategy and capacities that banchero developed to achieve such unprecedented success. banchero used a market governance structure, which is a rational choice considering peru’s conditions in the 1950s and 1960s: opportunism, uncertainty, scarce economic rationality, and absence of reliable information. at the same time, this alternative was perfectly imitable by all other competitors. in response, banchero developed certain capacities that exceeded explicit economic knowledge accessible through institutional channels; and exploited elements of his own intellect and that of eventual stakeholders, especially tacit social knowledge within his organization, thereby generating organizational advantage and fostering trust and social capital http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 for the benefit of his companies. he also led lobbies and interest groups (e.g., the fishing consortium) connected with peru’s congress and government, which promoted legislation for the benefit of the consortium in general and his companies in particular. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 references arguedas, josé maría. 1983. el zorro de arriba y el zorro de abajo. tomo v de obras completas. lima: editorial horizonte. abramovich, jaysuño. 1973. la industria pesquera en el perú: génesis, apogeo y crisis. lima: universidad nacional federico villarreal. barney, jay. 1991. “firm resources and sustained competitive advantage”. journal of management 17(1): 97-98. doi: 10.1177%2f014920639101700108. brundenius, claes. 1973. “the rise and fall of the peruvian fishmeal industry.” instant research on peace and violence 3: 149–58. caravedo molinari, baltazar. 1979. estado, pesca y burguesía 1939-1973. lima: centro de proyección cristiana. clarke, nathan. 2018. “la revolución peruana y los trabajadores en chimbote, 1968-1973.” in la revolución peculiar: repensando el gobierno militar de velasco, edited by carlos aguirre, and paulo drinot, 353-88. lima: instituto de estudios peruanos. cushman, gregory. 2018. los señores del guano. una historia ecológica global del pacífico. lima: institutos de estudios peruanos. flores galindo, alberto and denis sulmont. 1972. el movimiento obrero en la industria pesquera: el caso de chimbote. lima: programa académico de ciencias sociales de la pontificia universidad católica del perú; taller urbano industrial. flores galindo, alberto. 2001. los rostros de la plebe. barcelona: crítica. granovetter, mark s. 1992. “problems of explanation in economic sociology.” in networks and organizations: structure, form and action, edited by nitin nohria and robert g. eccles, 25-56. boston: harvard business school press. hernández lefranc, harold. 2020. “el caso banchero, de guillermo thorndike: fuente impresa que explica el culto a luis banchero rossi, santo secular, en lima.” anthropologica xxxviii (44): 297-318. doi: 10.18800/anthropologica.202001.012. malpica, carlos. 1992. el poder económico en el perú: empresas de capital extranjero. lima: perugraph. mussolino, donata, and andrea calabrò. 2014. “paternalistic leadership in family firms. types and implications for intergenerational succession.” journal of family business strategy 5: 197-210. doi: 10.1016/j.jfbs.2013.09.003. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1177%2f014920639101700108 https://doi.org/10.18800/anthropologica.202001.012 https://doi.org/10.1016/j.jfbs.2013.09.003 volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 nahapiet, janine and sumantra ghoshal. 1998. “social capital, intellectual capital, and the organizational advantage.” academy of management review 23: 242-66. doi: doi.org/10.2307/259373. nonaka, ikujiro, patrick reinmoeller, and dai senoo. 1999. “el ‘art’ del conocimiento: sistemas para rentabilizar el conocimiento de mercado”. harvard deusto business review 92: 6-21. polanyi, michael. 1966. the tacit dimension. chicago: the university of chicago press. porter, michael. 1991. la ventaja competitiva de las naciones. buenos aires: vergara. portocarrero, felipe. 1992. compendio estadístico del perú 1900-1990. lima: universidad del pacífico. quiroz, alfonso. 2013. historia de la corrupción en el perú. lima: instituto de estudios peruanos. roemer, michael 1970. fishing for growth export-led development in perú 1950-1967. cambridge: harvard university press. rossi, benito. 2011. la pesca en el perú. remembranzas de una vida en la industria 1955-2005. lima: qg editores. seminario, bruno. 2015. el desarrollo de la economía peruana en la era moderna. precios, población, demanda y producción desde 1700. lima: universidad del pacífico. spender, j. c. 1993. “competitive advantage from tacit knowledge? unpacking the concept and its strategic implications.” academy of management best papers proceedings 1: 37–41. doi: 10.5465/ambpp.1993.10315222. spender, j.c. 1996. “making knowledge the basis of a dynamic theory of the firm.” strategic management journal 17 (s2): 45-62. doi: 10.1002/smj.4250171106. thorndike, guillermo. 1980. el caso banchero. lima: mosca azul. thorndike, guillermo. 2019. el caso banchero. lima: planeta. thorp, rosemary, and geoffrey bertram. 2013. perú 1890-1977: crecimiento y políticas en una economía abierta. lima: universidad del pacífico. vásquez, enrique. 2000. estrategias del poder. grupos económicos en el perú. lima: universidad del pacífico. williamson, oliver. 1985. the economic institutions of capitalism. new york: the free press. http://revistes.ub.edu/index.php/jesb https://doi.org/10.2307/259373 https://doi.org/10.5465/ambpp.1993.10315222 https://doi.org/10.1002/smj.4250171106 volume 6, number 2, 151-179, july-december 2021 doi.org/10.1344/jesb2021.1.j095 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 figure 2. source: compiled by authors. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. fish catch production fishmeal* pesquera humboldt ferroles pesca mar pesquera argos pesquera trujillo productos alimenticios pesquera paracas pesquera san josé canned fish* cadena envasadora san fernando compañía pesquera florida conservas miramar envasadora miramar pesquera industrial callao pesca y envase chimbote agropesca sales humboldt* international de hamburgo supliers shipyard* picsa net* textil cabo blanco textil marítima transport* naviera humboldt other empresa periodística nacional productos y forrajes food and feeds herramientas seguros panamericana club de fútbol defensor lima fishermen patrón fishermen production banchero´s portfolio http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 298 jiwu wang tus-holdings co., ltd. (china) jian gao tsinghua university (china) the exploration and practices of tuspark in promoting business incubation and industrial development abstract as a new platform for innovation, china's national university science parks gather a wealth of resources for innovation. the y are not only the carriers of new knowledge, technologies and systems, but also that of new cultures. as one of the first batch of national university science parks in china, tuspark, which is backed by tsinghua university with the active participation of varied entrepreneurial, r&d and financial institutions, has basically developed an ecological network for innovation that is distributed throughout the country. it has become an important platform for further transformation of the scientific and technological achievements of universities, as well as promoting the development of strategic emerging industries. focused on tuspark’s functions and roles in advancing startup incubation and industrial development, this paper conducts an in-depth analysis of tuspark’s developmental path, with research based on interviews conducted with people involved in tuspark’s construction and operations, as well as reviewing the developmental history and models of global university science parks with international perspectives and extracting tuspark’s unique developmental path and model. the aim of this paper is to analyse how tuspark, as the science park of china’s top university, blazed a trail for business incubation and industrial development. the paper presents some typical cases and explains tuspark’s major models for business incubation and industry cultivation. it also discusses the main factors of tuspark’s success and explores its approaches for encouraging future development under new domestic and internatio nal circumstances. keywords: tuspark; tusholdings; transformation of scientific and technological achievements; strategic emerging industry; multi-dimensional triple helix. l'exploració i les pràctiques de tuspark en la promoció de la incubació empresarial i el desenvolupament industrial resum com a nova plataforma per a la innovació, els parcs científics universitaris nacionals de la xina reuneixen una gran quantitat de recursos per a la innovació. no només són portadors de nous coneixements, tecnologies i sistemes, sinó també els de noves cultures. com a un dels primers parcs científics universitaris nacionals de la xina, tuspark, que compta amb el suport de la universitat de tsinghua amb la participació activa de diverses institucions empresarials, d'r+d i financeres, ha desenvolupat bàsicament una xarxa ecològica per a la innovació que es distribueix per tot el país. s'ha convertit en una plataforma important per a una major transformació dels assoliments científics i tecnològics de les universitats, així com per promoure el desenvolupament d'indústries emergents estratègiques. centrat en les funcions i els papers de tuspark en l'avanç de la incubació d'empreses i el desenvolupament industrial, aquest article realitza una anàlisi en profunditat del camí de desenvolupament de tuspark, amb investigacions basades en entrevistes realitzades amb persones implicades en la construcció i les operacions de tuspark, així com en la revisió de la història del desenvolupament i models de parcs científics universitaris globals amb perspectives internacionals i extreure el camí i el model de desenvolupament únics de tuspark. l'objectiu d'aquest article és analitzar com tuspark, com a parc científic de la millor universitat de la xina, va obrir un camí per a la incubació d'empreses i el desenvolupament industrial. el document presenta alguns casos típics i explica els principals models de tuspark per a la incubació d'empreses i el cultiu de la indústria. també analitza els principals factors de l'èxit de tuspark i explo ra els seus enfocaments per fomentar el desenvolupament futur en noves circumstàncies nacionals i internacionals. paraules clau: tuspark; tusholdings; transformació dels èxits científics i tecnològics; indústria estratègica emergent; multi-dimensional triple hèlix. la exploración y las prácticas de tuspark en la promoción de la incubación empresarial y el desarrollo industrial resumen como nueva plataforma para la innovación, los parques científicos universitarios nacionales de china reúnen una gran cantidad de recursos para la innovación. no sólo son portadores de nuevos conocimientos, tecnologías y sistemas, sino también de nuevas culturas. como uno de los primeros parques científicos universitarios nacionales de china, tuspark, que cuenta con el apoyo de la universidad de tsinghua con la participación activa de diversas instituciones empresariales, de i+d+i financieras, ha desarrollado básicamente una red ecológica para la innovación que se distribuye por todo el país. se ha convertido en una plataf orma importante para una mayor transformación de los logros científicos y tecnológicos de las universidades, así como para promover el desarrollo de industrias emergentes estratégicas. este artículo, centrado en las funciones y el rol de tuspark en el avance de la incubación de empresas y el desarrollo industrial, realiza un análisis en profundidad del camino de desarrollo de tuspark. con investigaciones basadas en entrevistas realizadas con personas implicadas en la construcción y las operaciones de tuspark, así como en la revisión de la historia del desarrollo y modelos de parques científicos universitarios globales con perspectivas internacionales, y así extraer el camino y modelo de desarrollo únicos de tuspark. el objetivo de este artículo es analizar cómo tuspark, como parque científico de la mejor universidad de china, abrió un camino para la incubación de empresas y el desarrollo industrial. el documento presenta algunos casos típicos, y explica los principales modelos de tuspark para la incubación de empresas y el cultivo de la industria. también analiza los principales factores del éxito de tuspark, y explora sus enfoques para fomentar el desarrollo futuro en nuevas circunstancias nacionales e internacionales. palabras clave: tuspark; tusholdings; transformación de los éxitos científicos y tecnológicos; industria estratégica emergente; triple hélice multi-dimensional. corresponding author: e-mail: zhangsl@tusholdings.com received 16 september 2021 accepted 3 may 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:zhangsl@tusholdings.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 299 introduction in 1951, stanford university created the first high-tech park in the world – the stanford research park (zhan and zhu 2021). since then, it has successively incubated a large number of enterprises and industries with far-reaching influence worldwide and has created tens of thousands of job opportunities, promoting the development of productivity and bringing about profound changes in varied modes of production, economic structures, ideologies and social systems. this pioneering move proved the significant role of university science parks in enhancing the strengths of universities' scientific research, promoting the transformation of scientific and technological achievements, upgrading industries and promoting regional economic development. soon thereafter, various countries and regions around the world raced to follow suit, beginning to set up science parks in various forms. after over 60 years of development, there are currently more than 1,000 large-scale university science parks recognized worldwide. distributed in the united states, europe, asia, south america and other countries and regions (xu 2021), they have created a variety of management models involving government, universities, business enterprises, and foundations. typical examples include the stanford research park, cambridge science park, tsukuba science city, singapore science park, and tsinghua science park (tuspark). china began to explore the construction and development of university science parks in the 1980s. the main difficulties and challenges of building a university science park at that time included: 1) there was no successful precedent in china from which to learn the functions, operation models and management systems for science parks; 2) there was neither talent nor teams readily available; 3) there was no funding or budget available from the state, local government or university. consequently, tuspark overcame these difficulties by organising http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 300 experts in sci-tech innovation and entrepreneurship, city planning and other areas to formulate strategic plans for the university science park, forming a planning and construction committee that consisted of members of government, university employees and a management team, as well as setting up a commercial construction holding company. these initiatives, which seemed quite ground-breaking and innovative at the time, put the establishment and development of the university science park on the right track from the outset. thanks to more than 30 years of unremitting efforts and practices, china has seen the establishment of many university science parks, which have achieved remarkable results in promoting the transformation of the scientific and technological achievements of universities, the incubation of high-tech enterprises, and regional economic development. they have constituted a significant force for universities to contribute to social development. on the one hand, they have expanded spaces for the development of disciplines that are advantageous for these universities consolidated their leading positions and promoted reforms in these universities’ programs, settings and curricula so as to be better geared toward their developmental needs. on the other hand, by focusing on industrial development and relying on the advantages of the universities’ technologies and talents, they have innovated the industryuniversity-research-application model of cooperation, attracting a large amount of venture capital to establish new businesses. they have also directly promoted the healthy and rapid development of the regional economy, becoming an important source of university and regional development and innovation. as of 2019, china boasts 115 national university science parks, including 65 in the eastern region, 23 in the western region, 14 in the northeastern region, and 12 in the central region, covering 26 provinces, autonomous regions and municipalities and more than 140 colleges and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 301 universities (torch high technology industry development center of the ministry of science and technology of china, 2020). in particular, the yangtze river delta and the beijing-tianjinhebei region have the largest number of such parks; they cover 5.996 million square meters, have incubated 9,483 businesses with 123,000 employees, and have completed the incubation of 12,052 enterprises in total, which paid 1.427 billion yuan in taxes in 2019. by linking the sources of innovation, strengthening the sources of entrepreneurship, boosting the sources of talents, and breeding the sources of industry, china’s national university science parks started from scratch and have since grown into comprehensive platforms for incubating high-tech enterprises, training innovative and entrepreneurial talents, and serving social and economic development (xu 2021). i. establishing the background and functional positioning of tuspark as an institution of higher learning that is a leader in scientific and technological development and innovation in china, tsinghua university gradually realized in the early 1990s that universities needed to engage directly with society and transform their scientific and technological achievements with a view toward social development and progress, though their campuses should be quiet places for scholarship. therefore, tsinghua university proposed the concept of functional zoning in education, which is to retain its own teaching and research functions while also gathering industry-, technology-, and market-oriented activities around the campus. that was also the original intention of building tuspark. in 1993, tsinghua university formally put forward the concept of creating tuspark to align with its general goal of becoming a world-class university. in august 1994, the tuspark development center (the predecessor of tus-holdings co., ltd., hereafter referred to as tusholdings) was set up to begin the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 302 construction of tuspark. later, tusholdings took full responsibility for managing and operating tuspark. tuspark’s main site covers an area of 25 hectares, with a total built area of 770,000 square meters. tuspark was defined with three main functions “transforming scientific and technological achievements, cultivating innovative talents and incubating startups.” taking these three functions as its mission (wang 2015), tusholdings has successfully built a global innovation service network with over 300 incubators, science parks, and science cities as carriers after 20-plus years of exploration and practice. it has integrated many innovative resources from government, industry, university, research, finance, intermediaries, trade and media, and has incubated many of the world’s leading independent and innovative technologies and enterprises that have grown into leaders in their respective industries. ii. main achievements and typical cases (1) main achievements in terms of industry-university-research cooperation and the transformation of scientific and technological achievements, tuspark has successfully commercialized a number of technologies such as the nano-imprinted led graphic substrate technology, the core technology of heavy-duty gas turbines and the integrated gasification combined cycle for coal, as well as the technology of utilizing coal-fired flue gas desulfurized waste residue to improve salinealkali soils. it also helped zhongqing yangming solar photovoltaic technology co., ltd., gigadevice, beijing u-precision tech co., ltd. and other enterprises successfully apply for 19 national-level projects in 2013. moreover, tuspark joined forces with local governments to introduce and support faster transformations of advanced technological achievements and successfully helped kunshan city to build a small nucleic acid industrial cluster. in 2003, the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 303 kunshan municipal government and the tuspark branch located in kunshan jointly invited peking university professor zicai liang to kunshan to carry out an exploratory survey. by 2007, zicai liang was chief scientist of the first key project on smallnucleic acids supported by the “863 program (national high-tech r&d program)” and had settled his startup company suzhou ribo life science co., ltd. in the kunshan high-tech zone. in this context, a number of small nucleic acid companies and expert laboratories were set up in kunshan and put into operation. in 2008, the first domestic small nucleic acid industrial base was built in the kunshan high-tech zone. in 2015, the kunshan small nucleic acid and biomedicine industrial park was established, reliant on the prior construction of the small nucleic acid industrial base. in 2017, the small nucleic acid industrial base was approved to be a distinctive industrial base by the national torch program. in regard to the cultivation of innovative and entrepreneurial talents, first, the “starting a new business” program launched jointly by tuspark and tsinghua university has trained nearly 200 entrepreneurial teams of students, and more than half of these have established companies. through tus innovation network, the “dream class” has made its way into dozens of colleges and universities in china. the innovation and entrepreneurship training carried out by tusstar has covered over 150 colleges and universities, and more than 60,000 students have received its training in total. second, tuspark assisted tsinghua university in the establishment of its innovative, creative and entrepreneurial practice platform x-lab. at present, more than 30,000 young students from tsinghua and the wider society have participated in the various lectures, competitions, exchanges and practical activities organized by the tsinghua x-lab, and 1,500-odd projects in different stages of creative development, innovation and entrepreneurship submitted by tsinghua students and alumni have joined the tsinghua x-lab. projects stemming from these registered businesses have directly created more than 8,000 jobs. at the same time, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 304 through the cultivation of the tsinghua x-lab, the total amount of project financing for all the registered businesses has exceeded 3 billion yuan. third, tuspark assists the tsinghua alumni association in organizing the tsinghua alumni creativity, innovation and entrepreneurship competition, which has been held 6 consecutive times. it has served over 1,000 startups run by tsinghua alumni in dozens of cities and has helped nurture a large number of entrepreneurial talents. in terms of the establishment of a business incubation and innovation service system, in the past 20 years, the tusstar incubator which originated from tuspark has deployed more than 150 innovative incubation bases in 80-plus cities around the world, with an incubation space of over 400,000 square meters. it has incubated more than 10,000 businesses, creating an innovation ecosystem for high-tech startups (wu 2010). at present, tuspark has established over 300 innovation network nodes around the world, serving more than 100 cooperative colleges and universities, over 10,000 high-tech enterprises, and nearly 30,000 college students. among them, there are nearly 20 overseas scientific and technological innovation platforms, with 44 overseas innovation and cooperation projects worth nearly 7 billion yuan. (2) typical cases 1. “starting a new business” program to cultivate new types of innovation and entrepreneurial talents in 2011, meng mei, director of tuspark development center and honorary chairman of tusholdings, launched a practical program “starting a new business”for teams of students in tsinghua who have started an enterprise. just as tuspark has forged a different path from others, this program has created a singular new model for early business development. as for its highlights, first, it has its own trademark “chuangye xing”, logo, badge, and serial number http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 305 for each team to receive continuous assistance from teachers. second, it has its own community “chuangye hang” for students to exchange ideas with one another. third, it has its own funding “chuangye henxing”. the initial funding of 20 million yuan was provided by highlander chairman wanqiu shen for student research. later, it was developed into seed funds. what differentiates this program from others is its extensive connections with industry. the mid-term and final exam scores are not given by teachers, but rather evaluated by venture capitalists from the industry. this program is fairly selective in regard to the students it admits, setting a high threshold. the applicants must have started their own businesses and sign up in the name of an entrepreneurial team, and the founder or key figure of each team is required to come to class. tsinghua university recruits 5,000 new graduate students per year, but only 50 of them are admitted to the “starting a new business” program per year, just 1% of the total graduate enrollment. over the past three years, more than 40 teams have participated in this program, and a total of 10 teams have received investment funding. the largest investment to date exceeded 10 million yuan (zhao 2016). 2. incubation and investment always keep up with the growth and development of enterprises gigadevice the achievements of university science sarks will consequentially accelerate both the implementation and the operation of the knowledge economy (xu and mei 2003). with tusstar as its flagship incubator, tuspark has adhered to the principle of long-term service and is committed to creating an innovation ecosystem for high-tech startups. it has cultivated a large number of outstanding technology companies by means of “incubation + investment” (luo 2005), as evidenced by the establishment and development of gigadevice. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 306 originating from the tus incubator in 2005, gigadevice is the first company in china that can provide spi nor flashmemory chips in mass production, breaking the monopoly of foreign companies in the domestic market. in august 2016, gigadevice was listed successfully on the a-share market. in 2005, gigadevice founder yiming zhu returned to china from the united states to start his own business. he established xinjijiayi microelectronics technology co., ltd. (later renamed gigadevice) in the tsinghua overseas students pioneer park with an investment of two million yuan from the lead investor, tusholdings, who also found co-investors for the business this important angel investor funding helped put gigadevice into corporate operation. in april 2007, gigadevice was included in tuspark’s first “diamond program”, receiving support from universities, enterprises, governments and domestic and foreign resources provided by tusholdings. at the time of the global financial crisis in 2008, gigadevice’s capital chain experienced problems. tusholdings once again became the lead investor, making an additional investment of more than 20 million yuan, and helped it obtain credit financing from financial institutions such as small-credit companies and banks, promoting its move from research and development to the market. this laid a solid foundation for gigadevice to obtain series b funding and complete the ipo. in september 2017, guoxin tus fund joined with the china integrated circuit industry fund to invest in gigadevice with the goal of promoting its development from being a leading private nor flash business in china to a national platform dedicated to driving the overall development of the country’s digital storage industry. at present, gigadevice is a leading flash memory chip designer in the chinese mainland and also the largest domestic mcu provider, ranking first in china and third in the world in terms http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 307 of the market share in the spi nor flash field. in june 2020, gigadevice came out third in the “2020 hurun china top 10 private enterprises in chip design”, with a valuation of 87 billion yuan. 3. funds assisting in the transformation and industrialization of technological achievements tus-clean energy tuspark aims to accelerate the application and industrialization of scientific and technological achievements by building a platform for the transformation of scientific research results, integrating resources from multiple sources, and allocating funds to acquire businesses. tusholdings’ leading enterprise in its clean energy industrial cluster, -tus-clean energy, is a typical case. tus-clean energy is a platform dedicated to the transformation of scientific research results in the clean energy field. it relies on the strong advantages of tsinghua’s industry-universityresearch cooperation and its management of a clean energy technology industry fund. so far, it has formed a complete strategic plan for working in the three major business sectors of clean heat, clean electric power, and clean motive power, becoming the clean energy group with the broadest business scope and the most comprehensive technology chain in china. focusing on high-grade, high-precision, and advanced technology, tus-clean energy group has made unremitting efforts to tap into the technological resources and strengths of tsinghua university, as well as other universities, scientific research institutions, and specialized companies. it has also allocated capital, business and other elements based on technology, so as to achieve the final successful commercialization of scientific research results. on the one hand, clean energy funds have been set up for capital support, including the seed fund established in cooperation with tsinghua x-lab, the clean energy angel fund created with http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 308 tusstar ventures, the overseas angel investment fund created with tus tgn, and the vc fund and various sector funds established with tsing capital. on the other hand, these funds are utilized to purchase traditional and thermal power companies, and to build power stations, with the goal of gradually applying the enterprise’s technology via these companies and platforms. at present, tus-clean energy owns two clean energy sector funds tus-jianshi and tus-zefeng and has successfully launched the tus-ruixing equity investment fund of 2.62 billion yuan, providing both technology and financing services for the development of the energy sector. this has also given a strong impetus to the research and development of energy technology, providing a wide range of application platforms for funding. following this model, tus-clean energy has integrated advanced technologies at home and abroad to promote the transformation of scientific research results overseas. it has carriedout technological and capital cooperation projects with the united states, finland, brazil, switzerland, germany, france, the united kingdom, israel, malaysia, kenya and other countries and regions. according to the resource endowment and energy demand of different countries, the cooperation is carried out at different levels in order to accelerate the overall development of the international industry. up to now, photovoltaic, biomass, wind power and several other projects have been launched abroad in succession. iii. success factors for the past 26 years, tuspark has followed the development model of “congregation, polymerization, focalization and achievement” (yang and huang 2006) to integrate the eight innovative elements of government, industry, university, research, finance, intermediaries, trade and media. remarkable development results have been achieved thanks to its consistent efforts to transform scientific and technological achievements, improve the service system for http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 309 enterprise innovation, cultivate innovative and entrepreneurial students, and build a global innovation service network and the model of corporate operation under the guidance of the university. 1. the establishment of a sound service system for the incubation and innovation of enterprises in 1999, tuspark established tsinghua pioneer park (the predecessor of tusstar incubator) and formed a professional incubation service team with dozens of members committed to the transformation of scientific and technological achievements and the incubation of high-tech enterprises. to meet the service needs of businesses in different stages of development, it built a whole-chain vertical incubation system and a seven-step incubation model covering the full entrepreneurial lifecycle1, as well as providing targeted counseling service and resources throughout the whole process, from entrepreneurship ideas to the listing of businesses. in response to the differing financing demands of technological enterprises in varied stages of development, a multi-level funding system has been established, including tusstar angel investment, tus ventures, section fund, and buyout fund. 2. continuous efforts to promote industry-university-research cooperation and the transformation of scientific and technological achievements relying on its own resources, tuspark has built a platform for the transformation of scientific research results, strengthened industry-university-research cooperation efforts, and integrated 1the "full-lifecycle seven-step incubation model" is an incubation service model that spans the entire entrepreneurial lifecycle: from developing an entrepreneurial idea to being listed on the stock market,. it takes entrepreneurs from the source of creativity, or the"dream class", to the "dream laboratory" for entrepreneurial practice, the “tusstar camp” early incubation program offers its resources to the public with its , "diamond plan" that intensively cultivates selected projects, provides pre-ipo guidance, and finally leads the company to the global network. it provides tailor-made guidance and resources according to the different needs of companies at varied stages of development and accompanies the growth of these companies during every step of the process. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 310 technology, industry, finance and other resources to provide support for the transformation of tsinghua university’s technological achievements and to achieve the final successful commercialization and industrialization of scientific research results. startup firms benefit from informal connections with faculty members and access to students (motohashi 2013). moreover, tuspark has also joined forces with local governments to introduce and support faster transformations of advanced technological achievements and has even helped local governments build several high-tech industrial clusters, such as the small nucleic acid industrial cluster and the oled industrial cluster. 3. a focus on the cultivation of innovative and entrepreneurial students university science parks are vital components of the national innovation system. they are an important base of independent innovation, an essential element of china’s higher education system, as well as being an important platform for both industry-university-research integration and the development of innovative and entrepreneurial talent (qin 2009). since its inception, tuspark has always regarded the cultivation of innovative and entrepreneurial students as one of its primary tasks, and thus has explored three talent training paths. first, since 2011, it has run the “starting a startup” program together with tsinghua university to cultivate entrepreneurial teams comprised of students. second, it assisted tsinghua university in setting up tsinghua x-lab, an innovative, creative and entrepreneurial practice platform designed to help students learn and carry out creative, innovative and entrepreneurial activities. third, it assists the tsinghua alumni association in organizing the tsinghua alumni creativity, innovation and entrepreneurship competition to give in-depth support to tsinghua alumni and students in developing their creative, innovative and entrepreneurial practices. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 311 4. the formation of its own industrial clusters, beneficial to its development so far, tusholdings, the builder and operator of tuspark, has formed five strategic emerging industry clusters, featuring environmental protection, clean energy, healthcare, the digital economy, and new materials. based on these industrial clusters, tuspark has set up a number of innovative service platforms, including the clean energy accelerator, clean energy research institute, environmental industry and technology research institute, digital economy research institute and new material industry research institute, in order to promote the continuous improvement of its innovative services and to attract similar industrial projects to settle in tuspark. 5. emphasis on its internationalization strategy and the establishment of a global innovation service network since its establishment, tuspark has given top priority to its internationalization strategy and has therefore begun to develop strategic plans to enhance its international visibility and influence. it established the tsinghua overseas students pioneer park in 2002 and becameengaged with the international association of science parks and areas of innovation (iasp) in 2004. four years later, iasp’s china office, the only overseas branch of the association, settled in tuspark. in 2021, herbert chen, deputy director of the tuspark development center, was elected the chairman of iasp. moreover, tuspark has also built an international technology transfer platform by introducing foreign technologies, has actively introduced international capital, and has attracted global 500 companies to establish r&d institutions within its grounds, all in a bid to construct an international innovation network. 6. the formation of a model of “corporate operation under the guidance of the university” http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 312 two construction models emerged in the process of developing chinese university science parks: the “one university, one park” model and the “several universities, one park” model (cao 2010). in the former model, a university science park is built mainly by one university with comprehensive strength, such as tuspark or the peking university science park. in the latter model, a university science park is built jointly by several universities according to their advantages and characteristics, such as the national university science park of henan province, which was built jointly by the zhengzhou high-tech zone, zhengzhou university, henan university of technology, henan agricultural university, and zhengzhou university of light industry. the construction of tuspark adopts the “one university, one park” model. it is run by tusholdings in cooperation with tsinghua university. in terms of organizational structure, tsinghua university is the largest shareholder on a par with tusholdings, playing a significant role in guiding the construction and development of tuspark. the “university-enterprise joint operation” model is conducive to the practice of giving full play to the university’s rich scientific research achievements and the enterprise’s strong market experience, as well as efficiently linking the supply and demand of scientific and technological achievements to promote their transformation and industrialization. this model meets the needs to cultivate innovative and entrepreneurial talents and to transform the scientific and technological achievements of the university. it also provides an impetus for integrating the university’s scientific research achievements with local economic development, and promotes regional economic growth, achieving a win-win effect. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 313 iv. approaches for encouraging future development throughout its 26 years of development, tuspark has turned itself into a world-class university science park. in the context of the accelerating global scientific and technological revolutions and industrial transformation, as well as china’s move to speed up the growth of its reputation as an innovative country, tuspark will play a more important role. it will seek further development under the guidance of a three-dimensional triple helix model comprised of the strategic lines of “park, industry and funding”, “technology, industry and finance”, and “government, enterprise and university”. based on years of scientific and technological service practices and its goals of meeting the basic requirements of innovation and promoting industrial development, tuspark put forward a three-dimensional triple helix model, marking an important upgrade and development of the former triple helix of “government-industry-university” interactions for innovation (etzkowitz 2016). this model comprises three spirals, involving the subjects, elements and carriers of innovation. these spirals are independent from one another, but they interact with each other dynamically, forming an important driving force for promoting technological innovation, the transformation of technological achievements and industrial upgrading. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 314 figure 1. the multi-dimensional triple helix model of tusholdings 1. the triple helix of innovation carriers “park, industry and funding” in the dimension of innovation carriers, a triple helix of “park, industry and funding” has been formed, with science parks acting as carriers and funding bodies as links to promote the development of industrial clusters and build local innovative and entrepreneurial ecological environments with the characteristics of tuspark. in a nutshell, the science park develops itself by investing in and incubating high-tech enterprises and strategic emerging industries. it becomes a shareholder of leading companies through investment, establishes a vertical incubation system, and solves the financing issue for investment and incubation by establishing a large number of funding and financial service platforms. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 315 from the perspective of the three entities contained in this triple helix, the investment supported by a comprehensive science park and its network is of great value to emerging technological industries. the cluster-type innovative network services of tusholdings distributed across various regions can be shared to create an organizational form of mutual support and verification between projects and investments, greatly improving the success rate of these investments, which, in return, bring about further industrial agglomerations and development in the park and make it more attractive, thus forming a virtuous circle. the organic combination of the park, industry and funding makes it possible to form a lush forest capable of self-growth and self-renewal and full of vitality, becoming the most active hot spot for innovation and entrepreneurship in various areas and an important engine for local economic development. 2. the triple helix of innovation elements “technology, industry and finance” in the triple helix of innovation elements, finance links the sources of technology and market demands to promote the transformation of scientific and technological achievements, as well as driving industrial upgrading and the development of emerging industries. tusholdings is fairly active in developing strategic emerging industries. it has invested in more than 500 technology companies; held shares in more than 10 large, listed companies; owned dozens of chinese or world leading technologies; and focused on the development of environmental protections, new energy sources, comprehensive health plans, the digital economy and new materials. its purpose is to promote the rapid transformation of scientific and technological achievements and industrial upgrading through the triple helix of technology, industry and finance. tusholdings sees no industry boundaries, though the industries involved must take technological innovation as the core of their competitiveness. tusholdings’ goal is to master http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 316 core technologies through integration and fully upgrade an industry by virtue of finance. it not only participates in the creation of a cluster-type innovation system as an important component of generating resources, but also makes full use of the resources and advantages contained in the system. tuspark relies on its 300+ technology-related base incubators, 10,000 small and medium-sized technology companies, multi-level investment funds, assistance from dozens of large-scale technology enterprise networks, and the strong talent of its organizations and teams. under the impetus of financial forces, tuspark is committed to accelerating the marketization of major national scientific and technological achievements, as well as speeding up the development of the r&d economy, assisting in the formation of high-tech industrial clusters and upgrading regional innovation capabilities in a well-rounded way. 3. the triple helix of innovators “government, enterprise and university” in this triple helix, the subjects of innovation are seen as the core means to promoting innovation. in this model, government, enterprise and universities work hand-in-hand to optimize the systems and mechanisms of their cooperation in order to improve the efficiency of innovation. tusholdings’ implementation of this triple helix started with its cooperation with tsinghua university and local governments. on this basis, each element was extended, forming a new spiral. the first is the government spiral. in addition to cooperating with a single local government, a large number of high-level government circles at home and abroad must also be established. the second is the enterprise spiral, involving not only tusholdings but also the many enterprises under tusholdings as a shareholder. the third is the university spiral, involving tsinghua university and other academic collaborators, such as research institutes and other universities at home and abroad. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 317 tusholdings will continue to explore ways to optimize the innovation mechanism and further clarify the relationship between the three innovation subjects government, enterprise and universityas well as the various innovative forces contained in the three helices and the dynamic combination of forces and interactions that exist between the forces, so as to create a more spontaneous and efficient model for innovation-driven development. the initial functional positioning of tuspark was to become a base for the transformation of scientific and technological achievements, a base for the incubation of startups and a base for the cultivation of innovative talents. today, tusholdings’ three-dimensional triple helix model still closely revolves around these three main functions. its science parks in various regions also regard the transformation of scientific and technological achievements, the incubation of startups, and the cultivation of innovative talents as the most important goals and missions. through its flexible utilization of the three-dimensional triple helix model, tusholdings is determined to make great contributions to the upgrading of local industries, the development of regional economies and the construction of an innovative and entrepreneurial ecosystem. figure 2. the theory of the multi-dimensional triple helix helps tusholdings become an engine of strategic emerging industries http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 318 v. conclusions over more than 20 years of development, tuspark has established a sound system of business incubation and innovation services. these are geared toward the continuous promotion of tsinghua university’s cultivation of innovative and entrepreneurial talents, the transformation of scientific and technological achievements and the expansion of industry-university-research cooperation. it has turned into a world-renowned science park with outstanding achievements in the cultivation of innovative talents, the transformation of scientific and technological achievements and the incubation of startups. although it is a pleasure and an honor to review and study the history of tuspark, there are some inevitable limitations in this research: 1) university science parks are a fairly new industry, hence the accumulated data lacks a structure of systematization that would allow for comparison and reference between data sources; 2) university science parks’ missions, working tasks and management models are still developing rapidly and dramatically; 3) although the name “university science park” is commonly used worldwide, the research produced by university science parks is strongly tied to their regions, as the social patterns, administration systems, and economic development standards differ greatly from region to region. it is thus currently unlikely that researchers may draw general conclusions of universal guiding significance, either by using traditional proven research methods or through straightforward comparisons of university science parks. today, the world is undergoing profound changes that have not been seen in a century, while china is working hard to promote high-quality development. in this context, tuspark has explored a creative three-dimensional triple helix model for development on the basis of the triple helix model for innovation, a model initiated in the united states. based on the study and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 319 summary of its history, tuspark remains committed to the cultivation of innovative and entrepreneurial talents, the transformation of scientific and technological achievements, the incubation of startups and the cultivation of emerging industries, with the goals of making further contributions to tsinghua university’s cultivation of innovative and entrepreneurial talents, as well as increasing regional economic development. references bin cao. 2010. “analysis of the construction and operation modes of university science parks”. guangdong science and technology. july: 10-11. chenguang yang, wei huang. 2006. “building a world-class university science park”. china education daily: 3. henry etzkowitz. 2016. triple helix model for innovation: selected works of henry etzkowitz. tsinghua: tsinghua university press. jinghong xu, m. mei. 2003. the accelerator of the knowledge economy the concept and development strategy of tsinghua science park. journal of tsinghua university: 89-94. jiwu wang. 2015. “the splendid changes of tsinghua science park”. china youth daily: 2. jun qin. 2009. building an educational platform for innovation and entrepreneurship and long-term mechanisms for talent development introduction of tuspark‘s work in promoting university student entrepreneurship. chinese university science & technology. motohashi, kazuyuki. 2011. the role of science parks in the innovation performance of start-up firms: an empirical analysis of tsinghua science park in beijing. paper presented at international conference on information management. motohashi, kazuyuki. 2013. “the role of science parks in the innovation performance of start-up firms: an empirical analysis of tsinghua science park in beijing.” asia pacific business review, 19(4): 578-599. shaowen zhan, yixin zhu. 2021. “the spatiotemporal evolution characteristics of national university science parks and the evaluation of their development performance”. forum on science and technology in china (09): 82-92. sutao xu. 2021. “top-level design of university science parks: best practices and essentials of innovation”. new economy outlook. torch high technology industry development center, chinese ministry of science & technology. 2020. china torch statistical yearbook 2020. china statistics press. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 298-320, july-december 2022 doi.org/10.1344/jesb2022.2.j114 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 320 xiuhong zhao. 2016. “infinite dream exploration and pursuit (interview with meng mei in 1977)”. the tsinghua people. xiaoyu wu. 2010. innovation diffusion theory and tsinghua science and technology zone’s space diffusion model. forum on science and technology in china: 9-12. zhuo luo. 2005. the role and practice of tsinghua science park in financing the activities of smes. iasp world conference on science & technology parks. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 leonardo gonçalves unisinos university (brazil) https://orcid.org/0000-00031752-9026 clarissa teixeira federal federal university of santa catarina, ufsc (brazil) https://orcid.org/0000-0003-1362-1255 josep miquel piqué innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0002-0215-0139 ruta n fostering the innovation ecosystem of medellín abstract the aim of this paper is to identify which factors have contributed to the success of ruta n. ruta n fostered the innovation ecosystem of medellín, but until now it remains open how it happened from the inside perspective, which actors were involved in the process and which practices were made. secondary data collection, interviews with directors directly involved and technical visits were made, and some important points emerged from the field that can shed light in order to apply those practices and configurations intentionally in other cities with similar contexts. keywords: ruta n, medellín, innovation ecosystem ruta n fomentant l'ecosistema d'innovació de medellín resum l'objectiu d'aquest document és identificar quins factors han contribuït a l'èxit de ruta n. ruta n fomentava l'ecosistema d'innovació de medellín, però fins ara segueix inexplicat com va ocórrer des de la perspectiva interna, quins actors van participar en el procés i quines pràctiques es van fer. mitjançant la recollida de dades secundàries, entrevistes amb directors directament implicats i visites tècniques que es van fer, apareixen alguns punts importants que poden il·lustrar com es va desenvolupar el projecte i així poder aplicar aquestes pràctiques i configuracions intencionadament en altres ciutats amb contextos similars. paraules clau: ruta n, medellín, ecosistema d'innovació ruta npromoviendo el ecosistema de innovación de medellín resumen el objetivo de este documento es identificar qué factores han contribuido al éxito de ruta n. ruta n fomento el ecosistema de innovación de medellín, pero hasta ahora no está explicado cómo esto ha sido posible desde una perspectiva interna, analizando los agentes involucrados en el proceso, y sus prácticas. a través de la recopilación de evidencias secundarias, entrevistes con directores directamente involucrados, y visitas técnicas, se han obtenido conclusiones importantes que pueden ilustrar cómo se ha desarrollado el proyecto, y proporcionar lecciones que puedan aplicarse intencionadamente a otras ciudades con contextos similares. palabras clave: ruta n, medellín, ecosistema de innovación corresponding author: e-mail: leonardo_fgoncalves@yahoo.com.br received 1 october 2021 accepted 2 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0003-1752-9026 https://orcid.org/0000-0003-1752-9026 https://orcid.org/0000-0003-1362-1255 https://orcid.org/0000-0002-0215-0139 mailto:leonardo_fgoncalves@yahoo.com.br http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 introduction medellin is one of the most populated cities in colombia. the city is located in the antioquia region, a prosperous and economically important region. the city of medellin have four historical phases of development according to morrison (2019): (1) in the 1880s, an expansion with coffee and mining; (2) in 1900s, the industrialization phase arriving in the 1970s as one of the largest industrial centers in latin america; (3) in the 1980s, the worst period in the city’s economic and social history, the city became a narcotic center due a deep structural industrial crisis bringing a lot of poverty and crime. at this point the city had 381 homicides per 100,000 inhabitants, the most dangerous in the world (hylton 2007); and (4) after that, becoming the knowledge city due to the decline of violence, social programmes and innovation policies. it is called the ‘medellin miracle’ (maclean 2015). in 2013, the urban institute, the wall street journal, and citi group named medellín the “innovative city of the year”, recognizing the city’s unique makeover (ruta n 2018). in 2015 the city showcased its success hosting the first “cities for life” global forum. after that, medellín was declared a world innovation hub by the annual ranking created by the australian firm 2thinknow. the actor at the center of this transformation was ruta n, created to foster medellin’s transition from an industrial into a knowledge city. ruta n was created on 11 november 2009 as an institution to upgrade the region and its actors. the plan was drafted in 2010 by more than 250 regional leaders, namely, entrepreneurs, business leaders, policymakers and academics. the objective was to promote policies to support scientific, technological and innovative development in medellin, identifying new knowledgebased businesses and transforming medellin into the ‘most innovative city in latin america’ http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 (molina betancur, lópez de mesa and hincapié 2015, higuita-palacio, 2015; morriszon and bevilacqua 2018; morrison 2019, morisson and panetti 2020, pineda and scheel 2011). the creation of ruta n corporation had the idea to better connect medellin to innovation hubs around the world. the four actors that have played a fundamental role in the creation and formulation of ruta n are the mayor of medellin, the public multi-utility and communications company epm-une empresas públicas de medellín empresa de telecomunicaciones (public enterprises of medellin telecommunication company), proantioquia, and the cta centro de tecnología de antioquía (science and technology center of antioquia). the mayor from 2008 to 2011 suggested the project in the municipal development plan. epm-une was in charge of funding the project. proantioquia became the institutional incubator for ruta n shaping its mission and model. and, cta was in charge of defining ruta n’s programmes and structures (morrison 2019). the initial plan of science, technology and innovation (sti) — involving universities and industrial groups in the city — targeted three sectors: sti, energy and health, that were selected by their potential growth and prior capabilities (salazar et. al. 2019). ruta n was made to connect and energize the innovation ecosystem and foster collaboration between science, technology and innovation actors, it means: promote, coordinate and articulate local policies and institutions working for economic development, generating favorable conditions for the expansion and consolidation of the entrepreneurial tissue (ruta n 2018). ruta n has already provided medellin with more than 3,000 qualified jobs, supported more than 500 projects and attracted more than 150 domestic and foreign businesses to settle on its premises within less than 10 years (ruta n 2018). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 the governance of ruta n is structured as an association between public entities, non-profit, of common utility and social interest, constituted in accordance with colombian law by private act of november 11, 2009 with a duration that expires on november 11, 2059. the governance, management, administration and control of the corporation is as follows: the general assembly of associates is the highest authority of the corporation and is made up of its active associates. the board of directors has 9 principal members and 2 alternates (salazar et. al. 2019). figure 1. the organizational structure of the corporation source: adapted from ruta n (2020). the executive director is the legal representative of the corporation, executor of the decisions of the executive board and those assigned by the assembly. the organizational structure of the corporation is made up of an executive board, an operating office, in which there is a chief operating officer and a chief strategy officer, then the portfolio managers — divided by themes: accelerate, finance, enable, persuade, manage, create, and negotiate —, and the project and process team (ruta n 2020). figure 1 shows the full structure. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 ruta n’s vision involves institutionalizing innovation as the main catalyser of the city’s economy and welfare, based on a world-class ecosystem. the mission is executing the sti plan that consists of three directions: innovation platforms, knowledge-based business, and innovation culture (ruta n 2018). innovation platforms strengthen the regional innovation system by targeting universities and other interface institutions such as business incubators and technology development centers. knowledge-based businesses are responsible for creating an environment for businesses and entrepreneurs to carry out knowledge-based activities, and high-value transactions. finally, innovation culture facilitates the promotion of social appropriation of science, technology and innovation in the city of medellín, to ensure social inclusion and sustainability (ruta n 2018). these three key goals are achieved through the focus of ruta n on talent, enabling capital, network growth and generating the necessary infrastructure (ruta n 2018). methodology and theoretical framework the study is an exploratory research, as it seeks to provide a closer view of the object of study (gil 2008). the approach can be considered as qualitative and applied in terms of nature. figure 2 illustrates the framework used to obtain the results. to obtain the data, a documentary research was carried out with information made available by ruta n in its official publications, without any previous analytical treatment (gil 2008). the triple helix model was used (etzkowitz and leydesdorff 2000) that considers the dynamics of the relationships between the actors: industry, government and academia, bringing an evolutionary and systemic vision of innovation. it was also considered the helixes included after http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 that model: the fourth helix (carayannis and campbell 2009) as the civil society and the fifth helix (carayannis and campbell, 2010) as the environment. figure 2. the methodological framework used to obtain the results source: own elaboration. in addition, a search was carried out in the sciencedirect and scopus databases to search for articles on the innovation habitat (silveira and córdova 2009). the literature searches aimed to identify five aspects: i) origins and development of ruta n, ii) key actors and governance, iii) the innovation center and the community, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 iv) key factors for the success and elements of conflicts, and v) indicators and future developments of ruta n. to complete the information, two technical visits and interviews with the managers were carried out. from these results, information was selected prioritizing what can be lessons learned for other ecosystems and innovation centers. the case of ruta n origins and development of ruta n medellin is among the world's top cities (iee smart cities initiative 2015), and has received the nobel for social urbanism (caracol news 2016) and also advances in the “best cities for doing business” ranking (intersoftware 2016), as well as being considered by innovation cities index (2017) as one of the continent's most attractive places to do business. the global need for development based on innovation, intellectual and technological empowerment influenced the creation of ruta n in 2009, which had the function of boosting growth and generating knowledge and technology (iee smart cities iniciative 2015). considering that one of the goals set for and by medellin is the recognition of the city as a world innovation hub, the innovation and business center ruta n brings this synergy and collective construction (franco 2017). the director of ruta n, maria paulina villa posada, director of the medellinnovation district and architect of ruta n (technical visit 2016), discusses the transformation that the habitat has made in the city for the creation of the culture of innovating: the word “innovation” is new to latin american society and comes from the influence of developed countries. here in medellin, the efforts are centered on the society assuming ownership of innovation, feeling that they can innovate, and innovate everywhere (technical visit 2016). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 key actors and governance created by the municipality of medellín, public companies and une telecommunications, ruta n is considered a center for innovation and business. due to the strategic partnership of various actors who have worked together, ruta n is one of the largest portfolios of innovation and research to improve the quality of life of the citizens. public and private organizations, educational institutions, and various actors in the science and technology system have supported the corporation since it was created (ruta n 2016). ruta n is a new driver for the city as it advances the consolidation of medellín as a knowledge city (ruta n 2016). some actions taken in the last twenty years allow the city to stand out in creative economy and innovation (cavalcanti, andreza and santiago 2014). innovation is the transformation of knowledge, of any nature, into new products and services in the market. for ruta n the innovation process is not a choice but a duty. analysis made about colombia's innovation policies in 2014 shows that innovation is important for ensuring the sustainable growth of the future of a country attractive and competitive for investors and other large governments (guedes and teixeira 2017). aiming at this point, ruta n set out to work as the innovative pillar of the city of medellín uniting academia, government, and business (ruta n 2016). based on an ecosystem of global class, the ruta n focused on the development and growth of the city, so that it became increasingly recognized internationally as a city prominent in innovation and quality of life. working with this perspective was important, as it formed a comparative over time, to measure its performance over the years, until it reaches its goal (ruta n 2016b). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 ruta n is intended for business, academia and science, also involving investors and the community. to address this, the innovation and business center presents different resources for each group, as described in figure 3. figure 3. practices made by ruta n in each group source: adapted from ruta n (2016b). although the services are open to everyone, it can be observed that the public most intensively assisted are the entrepreneurs. the active services (grouped by categories) offered are in table 1. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 table 1. services provided by ruta n groups services entrepreneurs training: training for funding in small business, funding for acceleration new businesses: orange route, corporate venturing, open innovation through challenges, technology trades: cati (center for technology and innovation) ruta n internationalization: leads, market entry network, open us for startups physical space: orange route, business landing. intellectual property: cati (center for technology and innovation) ruta n funding: funding possibilities, startup funding tracking trends: corporate venturing connections: open innovation through challenges innovation guides: self-diagnosis of innovation, corporate venturing academia training: training spaces for teachers. intellectual property: cati (center for technology and innovation) ruta n. education in innovation: training spaces for teachers. technology trades: cati (center for technology and innovation) ruta n. investors expert information: inversómetro (investmeter). students entrepreneurship: orange route. training: digital robotics, funding. source: adapted from ruta n (2021). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 about academia, it is important to highlight the actions that medellín has carried out in partnership with many universities: posada highlights that the culture of innovation is something complex, and that in medellin the need for people who are engaged and who are replicators and disseminators of this culture was perceived. thus, university professors played a fundamental role in the actions carried out in favor of entrepreneurship and innovation (technical visit 2016). there are some services for academia that are the same as those made available to entrepreneurs, such as vivelab medellín, innovation for all, patent squad and the open innovation platform. however, generation n — a project for teachers from educational institutions in medellin that seeks to transform the experience of students through project-based learning — stands out. the projects carried out with ruta n make connections with other environments. in the case of generation n, it is operated by explora park, which aims to benefit about 1,500 students in education between 3rd-11th grades in areas of science, technology, engineering and mathematics (stem) by working directly with their teachers. regarding investors, ruta n focuses on the investmeter, a tool implemented to measure the dynamism of active investors in the city, members of the smart capital network, which brings together actors such as domestic and foreign private capital funds (fcp), angel investors and private investors. in the 2016 report, investments were $31.5 million benefiting 25 companies, with $8.7 million from private capital funds, $1.7 million from the angel investor network and $21 million from other investment channels. in general, the groups have access according to the needs defined by ruta n in figure 4. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 figure 4. needs defined by ruta n for the groups source: adapted from ruta n (2021). for the operation of the ruta n there are some dimensions organizational innovation; business knowledge; innovation culture management; research and development management (r&d) — and the strategies connected with that, as seen in table 2. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 table 2. dimensions and strategic areas of ruta n dimensions strategies organizational innovation it aims to enhance the capabilities for innovation and knowledge development, for better conditions to implement innovation in the city. business knowledge the intention is to disseminate the proposal to innovate, both in existing companies and in new ones, thus providing an opportunity for the development axis between science, technology, and innovation. innovation culture management to provide activities that stimulate science, technology, and innovation for society, thus making medellin the city of knowledge. research and development management (r&d) the science, technology and innovation plan is developed as a result of a collective construction of the regional innovation system and becomes the public policy of the city of medellín in agreement 024 of 2012 with the city council. source: adapted from ruta n (2016b). the innovation center and the community as a way to attract people into the innovation center, identify opportunities and foster the culture of innovation and entrepreneurship in the community, the ruta n provides the event called open house, which emerged from the need of society to connect with the offer of entrepreneurship and innovation in the city. business owners, investors, entrepreneurs, researchers, and citizens who are interested in knowing what the ruta n and the other institutions of the regional innovation system have to offer are invited to attend on specific days for this event that is prepared for the community (technical visit 2016). the call for the open house is: “if you have a project with potential or simply want to know what the ruta n and the various entities of the innovation ecosystem are for, the open house is a space for connection between venture offers and innovation” (technical visit 2016). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 at the ruta n open house it is possible: • § connect with the city and the innovation and entrepreneurship offer, make friends and businesses; • § find mentoring or training on business models, product development, funding or internationalization; • § learn about the work of ruta n and other entities in the regional innovation system. with startup movement dynamics, the open house actions initially encourage entrepreneurs to explain their ideas through pitches. in addition, the ecosystem available to get ideas off the ground are presented during the activity. as a form of presentation, the environments also quickly present the potentials for supporting the entrepreneur, and at the end they are all available in a large showroom so that the entrepreneurs feel free to ask questions and deepen their understanding of the potentials of each actor in the ecosystem. thus, at the end of the presentations the representatives of each entity are at their desks to answer questions from the public, thus forming a network among all (technical visit 2016). the event is widely publicized in the city, generating crowded conferences. the promotion of local entrepreneurship happens with some entrepreneurs bringing their innovative ideas to the public and the public electing the best idea. one of the entrepreneurs participating in the open house indicates that the high participation is due to the ruta n's assistance in business development. (technical visit 2016). key factors for the success and elements of conflicts some key factors for the success of ruta n (salazar et. al. 2019) are: (1) municipal government support and continuity of public policy, (2) the bet on the university-company-state articulation, (3) think not only about business development but also think about the future. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 1. municipal government support and continuity of public policy ruta n has been able to transcend during three different mayoralties in which the municipal government has decided to support this initiative by allocating resources and giving continuity to the sti plan. proantioquia, une and epm were also key players in the construction of ruta n and for the initiative to gain strength and lead regional innovation. the challenge now is to define what follows after 2021, when the term of the current sti plan is fulfilled. 2. the bet on the university-company-state articulation there is a university-company-state committee (cuee) that meets every month to hold sessions and whose headquarters is ruta n. the main agents of the state participate, such as the government and the mayor's office. also participating are the group of the top 8 universities in the city, called g8, as well as the most important companies in the city. there, the sti agenda is discussed and the political will to cooperate and work together is maintained so that medellín's innovation ecosystem can continue to grow and strengthen. 3. think not only about business development but also think about the future. knowing the market and technological trends in order to keep the sti plan at the forefront has been a constant in the history of ruta n. the ruta n ct+i observatory is a unit that is in charge of constantly reviewing, analyzing and updating the trends and focus of market and technology priorities that should be developed or targeted within ruta n. these trends that are analyzed in the observatory are global. ruta n also analyzed and considered the learnings from the pathway of other projects to develop their innovation ecosystems, such as skolkovo in moscow, 22@ in barcelona, porto digital in recife (nikina and pique 2016), as well as florianópolis (garay 2019). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 but there are also some elements of conflicts detected in the ruta n journey related to the consequences in the city as a whole, especially in other areas not considered in the first moment. the conflicts were connected with socioeconomic polarization, lack of local community participation and the loss of neighborhood identity, that were caused by the weak links between ruta n and the innovation district. the results were some urban fragmentation, a lack of instrumentalisation/training for the residents, and a sense of uncertainty and fear of expulsion by them (arenas et al. 2020). these topics brought negative consequences and lessons that were included in the next steps of medellin urban politics and planning, and are now golden experiences to be used by other cities and policy makers. indicators and future developments of ruta n gutiérrez (2015) considers medellín as having an innovative dna, being ruta n the main distinction, for the work to create one of the best innovation ecosystems in latin america. in the management report of the corporation, it is observed that among the actions carried out by ruta n the design carried out to achieve the objectives stands out. these delineations are associated with the creation of ecosystem parameters. to measure its success the ruta n corporation determines measurables of success, which are: improvement in the quality of life with an increase in the fraction of new innovative companies in the city, amount of existing companies that innovate, increase in the percentage of direct and indirect jobs generated in innovative areas and value generation of these innovations (ruta n 2016). thus, ruta n presented in 2015 four ecosystem enablers: talent, culture, network and capital, and in 2016 changed to: talent, capital, business and infrastructure. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 for andrés calle valdés — knowledge business professional of ruta n — the theme of innovation is carried out in a variety of ways to the different entrepreneurs of medellín (technical visit 2016).1 medellín is focusing on innovation to improve the quality of life of its population. this is only possible when it is understood that the solutions to be developed must respond to real needs. with a knowledge society and a knowledge economy, more and better jobs are needed, as well as an increase in the number of people coming into higher education to contribute to innovative practices. thus, four basic axes were addressed in the ruta n management reports in 2016, being: • § talent: inspiring leaders to develop the businesses of the future is presented as an important skill of an innovation ecosystem. cities need people with technical skills and entrepreneurial spirit to manage innovation projects that generate economic development (ruta n 2016). • § capital: funding for innovation projects with high social and economic impact. businesses need intelligent and flexible capital to finance their development, consolidation, and growth. • § infrastructure: enabling spaces for innovation occurs. innovative organizations demand spaces with services and methodologies designed especially for their needs. • § business: support for projects that turn into innovative businesses. the city needs profitable, sustainable solutions with global vision. ruta n introduced features such as the abc of innovation, videos, jobs and training, as well as the hosting of a sti observatory. the abc of innovation works as a glossary of terms used in the world of science, technology and innovation. for entrepreneurs who want to stay up to date on opportunities, ruta n maintains information about opportunities in the innovation district, 1 capital development, city capabilities and competence, cultural development, and development of support infrastructure for businesses are the supports that entrepreneurs can find in ruta n. information from andrés calle valdés (techical visit 2016) http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 considering the different areas, companies, dates, and qualifications needed for the positions. in the area of training, ruta n also maintains information about the opportunities for courses.2 another focus is on the sti observatory of medellin, considered as a tool for monitoring global trends in science and technology in the markets of health, information and communication technologies, energy, and biotechnology for the agricultural sector. from this observatory it is possible to obtain information about capacities, weaknesses, actors and talents in each of the markets under observation, allowing the identification of challenges and opportunities for innovation to develop projects and businesses in the city. ruta n put on the management reports that most of the resources to maintain the innovation center are public. in addition, part of the resources available for the management and operation of the projects come from the rents of the existing spaces.3 ruta n has been working on the challenges of continued engagement for the culture of entrepreneurship and citizen innovation. in addition, posada indicates that work is being done with large entrepreneurs that due to the historical scenario of the country have lost accreditation in colombia. according to posada, little by little the networking movement is succeeding in bringing these actors back into investing in the ecosystem. ruta n is, together with the other entities, demonstrating that it is safe to undertake and innovate in medellin (technical visit 2016). 2 likewise, it keeps an agenda with events held throughout the week both in ruta n and in the city with a focus on science, technology and innovation. information from maría paulina villa posada (technical visit 2016) 3 however, it is expected that the revenue will generate surplus so that it can be converted into new programs and thus be less and less dependent on the government. the municipality, through the city council, signed an agreement in 2011 that ruta n is allocated 7% of epm's surplus. this ensures ruta n growth and sustainability, and is expected to depend on it less and less, and become 100% self-sustaining. information from maría paulina villa posada (technical visit 2016) http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 medellín is positioned in the world scenario in a way that innovation is not an option but an imperative to guarantee sustainable growth that in the future can convert the country into an attractive and competitive country (ruta n 2015). conclusions and lessons to be learned the ruta n case is the regional innovation agency ruta n in medellín, which was purposefully sampled for three reasons. first, the city of medellín has been implementing unorthodox economic policies in a market-based economy (bateman, durán and maclean 2011). second, ruta n and the city of medellín have been hailed as best practices in latin america (oecd 2015). third, medellín is a secondary city that is transitioning from an industrial to a more service — and knowledge — based city and which is located in the global south on the knowledge periphery, with limited links to regions in the knowledge core (morisson and panetti 2020). ruta n was made to connect and energize the innovation ecosystem and foster collaboration between science, technology and innovation actors, it means: promote, coordinate and articulate local policies and institutions working for economic development, generating favorable conditions for the expansion and consolidation of the entrepreneurial tissue (ruta n 2018). for ruta n the innovation process is not a choice but a duty. analyses made about colombia's innovation policies in 2014 shows that innovation is important for ensuring the sustainable growth of the future of a country attractive and competitive for investors and other large governments (guedes and teixeira 2016). aiming at this point, ruta n set out to work as the innovative pillar of the city of medellín uniting academia, government, and business (ruta n 2016). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 although the socio-economic context of colombia and the global environment were part of the story of ruta n, it would probably occur in other contexts due to the drivers that were used to launch it such as the percentage of epm as surplus funding for the project, the pact for innovation that was made with a vision for the future, the urban transformation that was consolidated as an innovation district, and the alignment between the actors for a legal regulation, a development plan, and a coherent urban policy. based on a world class ecosystem, the ruta n focused on the development and growth of the city, so that it became increasingly recognized internationally as a city prominent in innovation and quality of life. working with this perspective was important, as it formed a comparative over time, to measure its performance over the years, until it reaches its goal (ruta n 2016). four basic axes were addressed in the ruta n management reports in 2016, being: talent, capital, infrastructure and business. medellín has made a space for itself in innovative ecosystems, based on a collective desire to transform a reality that came from a critical and complex past. ruta n is also considered as a symbol. it is part of the urban fabric of the new north of medellin and has been converted as something that awakens different impressions. the quality of the infrastructure of its buildings is a point of reference related to science, technology and innovation in the sector where it is located, a singular prestige and urban memory with a quality and special characteristics to generate a sense of modernity, and is that “offering first class facilities that break with the traditional image of a region offers the element of unpredictable status to attract advanced companies (amaya vela 2012). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 in figure 5 are the lessons learned from medellin with ruta n. figure 5. lessons from medellin with ruta n source: own elaboration. 1. marrying the past with the future medellin has had a long industrial tradition throughout history. in times of change, it has been able to read what opportunities the future offered, and what assets could be considered a value from the past. principles such as digitization, inclusiveness, diversity or internationality have been present in the development of the formulation of the innovation district. 2. building a long term vision medellin developed an innovation district in one of the most disadvantaged and degraded areas of the city. for that, it proposed the development of a district based on innovation. medellin's challenges were the power for change. understanding their own problems was the source for targeting the solutions, including equity and sustainability that was into its dna. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 3. a holistic and integrated strategy the innovation district addressed transformation in its urban and infrastructural, economic, social and governance dimensions. for each dimension, there were challenges to be solved and agents to be involved. it raised a common agenda with the involvement of all the agents of the quadruple helix: public administration, universities and educational centers, companies and civil society. 4. an urban transformation with a mixture of uses the innovation district makes a rethinking of the district's land uses, combining business, civic and environmental activities. this mix promotes the district as a space to live and work. it incorporated the infrastructure of a smart city (mobility, connectivity, energy, ...) as a basis for the development of the economy and the knowledge society. 5. ruta n as transformation icon the ruta n building provided an icon of reference in the transformation to a district. information point and entrance to the district, with multifunctional rooms and spaces for incubation and landing of companies. it facilitated the basic and advanced services necessary for the development of the district. it promoted activities to stimulate innovation as a meeting point for the district. 6. science, technology and innovation as engines of change medellín used science, technology and innovation as facilitating elements to accelerate the solutions proposed to the challenges of the city. with an explicit plan, it developed an agenda to create and use the technologies that most effectively impact the transformation of the society and the economy. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 7. entrepreneurship as a source of innovation the most disruptive solutions come from entrepreneurs who, using new technologies, propose new solutions to old problems, or new solutions to new problems. medellin's vocation to support entrepreneurs in their business initiatives provided a permanent source of innovative proposals. 8. financing technology-based innovation ruta n incorporated the axis of financing for entrepreneurial projects with high economic and social impact. ruta n capital and the intelligent capital network stand out, which brought various private investment agents in innovation and entrepreneurship. a r&d fund has been created to co-finance research and economic development projects. 9. focus on sectors medellin, with its cluster policy, focused on sectors to create critical mass, targeted its resources, articulated agents of the same value chain and formalized a supporting science, technology and innovation agenda. health, ict and energy are leveraged in institutions and companies settled in the district, promoting innovation as a competitiveness mechanism. 10. talent policies the economy and the knowledge society are based on talent. ruta n promoted a set of programs aimed at creating and developing “paisa” talent. stem camps, bootcamp web or vivelab are examples of youth advocacy. these were combined with the training of innovation managers for companies or “innovacampus” for the university community. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 11. demand as a lever for innovation both in the public and private dimension, as well as in the economic and social dimension, innovation began with the identification of challenges, and the mobilization of technologies, talent and financing to solve them. medellín has leveraged on business challenges and social problems to promote innovation. it has practiced innovative public procurement, using the city as a pilot testing laboratory. 12. governance and transparency medellin had the know-how to involve all the agents of the city with the “great pact for innovation”, a governance mechanism and a commitment to the development of the knowledge economy and society. it stands out in the development of the district, the participation and transparency in the process, guaranteeing the continuity of the project in the long term. 13. build strong links between ruta n and the innovation district finally, medellin brought the lesson of building strong links with the district and the people involved (directly or indirectly) with the project. the key is to always consider, from the beginning, the local community to have participation and integration, and to instrumentalize the residents to deal with the uncertainty and fear inherent in the situation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 references amaya vela, francy. 2012. 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"plan de ciencia, tecnología e innovación de medellín− 2010." ruta n. 2015. management report. last modified december 11. http://www.rutanmedellin.org/images/rutan/informes_gestion/informe_gestion_rutan_n_2015.p df. http://revistes.ub.edu/index.php/jesb https://via.ufsc.br/wp-content/uploads/2016/11/analise-da-ruta-n.pdf https://www.rutanmedellin.org/descarga_documentos/management_report_2015.pdf http://smartcities.ieee.org/news-bulletin/january-2015/ieee-smart-cities-initiative-affiliate-city-profile-medellin-colombia.html http://smartcities.ieee.org/news-bulletin/january-2015/ieee-smart-cities-initiative-affiliate-city-profile-medellin-colombia.html http://www.intersoftware.org.co/content/medellin-avanza-en-el-ranking-de-las-mejores-ciudades-para-hacer-negocios http://www.intersoftware.org.co/content/medellin-avanza-en-el-ranking-de-las-mejores-ciudades-para-hacer-negocios http://www.intersoftware.org.co/content/medellin-avanza-en-el-ranking-de-las-mejores-ciud http://www.rutanmedellin.org/images/rutan/informes_gestion/informe_gestion_rutan_n_2015.pdf http://www.rutanmedellin.org/images/rutan/informes_gestion/informe_gestion_rutan_n_2015.pdf volume 7, number 2, 133-159, july-december 2022 doi.org/10.1344/jesb2022.2.j109 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 ruta n, 2016. parque de inovação ruta-n, sobre nosotros. last modified december 16. https://www.rutanmedellin.org/es/nosotros/ruta-n/sobre-nosotros.pdf. ruta n, 2018. case study ruta n medellín: from drug capital to innovation hub. last modified november 18. https://www.ub-cooperation.eu/pdf/cases/i_case_study_rutan.pdf. ruta n, 2020. organigrama corporación ruta n medellín. last modified december 20. https://www.rutanmedellin.org/documentos/organigrama-corporacion-ruta-2020.pdf. ruta n, 2021. nuestra oferta ruta n medellín. last modified july 21. http://www.rutanmedellin.org/es/oferta. salazar, juan carlos, juan camilo ramírez, liliana pinzón, and cristina rosember. 2019. "estudio del modelo de scoring de ruta n." silveira, denise tolfo, and fernanda peixoto córdova. 2009. "a pesquisa cientítica." in métodos de pesquisa, edited by tatiana engel gherardt and denise tolfo silveira, 33-44. porto alegre: editora da ufrgs. technical visit. 2016. group via estação conhecimento federal university of santa catarina. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.rutanmedellin.org/es/nosotros/ruta-n/sobre-nosotros.pdf https://www.ub-cooperation.eu/pdf/cases/i_case_study_rutan.pdf https://www.rutanmedellin.org/documentos/organigrama-corporacion-ruta-2020.pdf http://www.rutanmedellin.org/es/oferta http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 diego quer universidad de alicante (spain) and center for latin american and caribbean studies, southwest university of science and technology (china) laura rienda universidad de alicante (spain) rosario andreu universidad de alicante (spain) chinese investments in latin america: an analysis of host country determinants abstract despite cultural differences and political instability, latin america is already the second main destination of china’s outward foreign direct investment (ofdi), only behind asia. although natural resource-seeking has been the traditional motivation for chinese firms doing business in latin america, market-seeking is also becoming an increasingly important driver. the aim of this study is to investigate the influence of host country factors on the location decisions of chinese multinational enterprises (mnes) in latin america. we analyzed a sample of 106 investments carried out by 52 chinese mnes in 10 latin american countries between 2005 and 2017. our findings indicate that cultural distance negatively influences location choice by chinese mnes, while political risk has no influence. moreover, market-seeking motivations and good diplomatic relations between china and the host country also matter. keywords: china; foreign direct investment; fdi; latin america; host country factors corresponding author: e-mail: diego.quer@ua.es received 27 november 2018 accepted 8 may 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 1. introduction outward foreign direct investment (ofdi) carried out by chinese multinational enterprises (mnes) has grown exponentially in recent years. whereas in 2005 china’s ofdi flow was us$ 12.3 billion, in 2017 it reached us$ 124.6 billion, placing china as the third largest investor in the world, just behind the us and japan (united nations conference on trade and development 2018). past research paid less attention to emerging markets as destinations of china’s ofdi. although recent studies explored how the chinese government supports china’s ofdi in latin american extractive industries (shapiro, vecino, and li 2018), what are the myths and realities of energy cooperation between china and latin america (vasquez 2018), or the socioeconomic determinants that affect the attractiveness of latin america for chinese firms (zhang 2019), research focusing on latin america is still scarce (fornes and butt-philip 2011). therefore, further studies are needed in order to deepen our knowledge of the factors influencing location decisions of chinese mnes in latin american countries from a more general viewpoint, not only focused on the metal, oil, and gas industries that represent the traditional targets of china’s ofdi in latin america. investment flows between emerging economies deserve further research efforts since they are an interesting empirical setting for testing the applicability of traditional theoretical frameworks mainly derived from the behavior of developed-country mnes (wright et al. 2005). one of the challenges for the conventional wisdom derives from the potential competitive advantages of emerging-market mnes when entering other emerging economies with less developed institutions that may be similar to those of their home country (cuervo-cazurra and genc 2008). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 hence, the aim of our study is to contribute to a better understanding of the decision-making process of emerging-market mnes doing business in other emerging economies. more precisely, drawing on an institutional perspective, we analyze the influence of two host country factors—cultural distance and political risk—on location decisions by chinese mnes in latin america. in doing so, we aim to contribute to the literature on emerging-market mnes in several ways. firstly, we investigate whether the behavior of chinese mnes is consistent with the traditional view derived from the observation of developed-country mnes in the past or they behave in a less conventional way. secondly, we provide new empirical evidence on an under-researched topic, namely, location decisions made by emerging-market mnes in other emerging economies. the remainder of the article is organized as follows. the following section provides an overview of china’s ofdi in latin america. next, we establish the theoretical background for hypotheses development. in the subsequent section, the sample used in the empirical analysis as well as the methodology applied is described. finally, after a discussion of the results, some concluding remarks are provided. 2. general context of chinese ofdi in latin america latin america is a key trade partner for china, in particular as a supplier of energy—such as oil and gas—and raw materials—like iron ore, copper and other metals. however, it is becoming an increasingly important potential market for chinese exports as well (zhang 2019). this region is already the second destination of china’s ofdi, only surpassed by asia. as reported in figure 1, latin american countries accumulate 15 percent of china’s total ofdi stock so far (national bureau of statistics of china 2018). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 figure 1. china’s ofdi stock by region up to 2016 asia 67% latin america 15% europe 6% north america 6% africa 3% oceania 3% source: national bureau of statistics of china (2018) according to data from the academic network of latin america and the caribbean on china (red alc-china 2018), three countries accounted for 72.6% of chinese ofdi stock in latin america from 2000 to 2017: brazil (44%), peru (17.7%) and argentina (10.9%). as for destination activities, raw materials accounted for the largest ofdi stock (57.9%), followed by service and domestic market activities (33.2%), manufacturing (8.6%) and purchase of technology (0.3%). it is worth highlighting that the share of chinese ofdi in raw and materials industries has dropped significantly in recent years, while ofdi directed toward service and domestic markets has grown. thus, natural resource-seeking is no longer the only motivation for chinese firms doing business in latin america, as market-seeking ofdi is gaining great momentum. chinese mnes have made significant investments in latin america, mainly through the acquisition of local companies. table 1 reports the largest acquisitions carried out by chinese mnes in latin america so far, ranked by transaction value. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 table 1. largest acquisitions by chinese companies in latin america (up to 2017) year acquiring firm target firm industry host country percent (%) value (us$ billion ) 2017 state grid cpfl energia electricity brazil 95 7.9 2010 sinopec repsol ypf brasil (subsidiary of spainbased repsol) oil brazil 40 7.1 2014 china minmetals (along with suzhou guoxin international investment and citic metal) las bambas copper deposit (owned by switzerland-based glencore) copper peru 100 5.9 2011 sinopec petrogal (subsidiary of portugal-based galp energia) oil brazil 30 4.8 2016 china three gorges hydroelectric utilities jupia and ilha solteira hydropow er brazil 100 3.7 2010 cnooc bridas corporation oil and gas argentina 50 3.1 2010 sinochem peregrino oilfield (owned by norwaybased statoil) oil brazil 40 3.1 2013 cnpc petrobras energia peru (subsidiary of brazil-based petrobras) oil and gas peru 100 2.6 2010 sinopec occidental petroleum argentina (subsidiary of usbased occidental petroleum) oil and gas argentina 100 2.5 source: american enterprise institute (aei)-the heritage foundation (2018) and red alc-china (2018) as shown in table 1, the acquisition of a 95 percent stake of cpfl energia in brazil by state grid in 2017 was the largest one, with us$ 7.9 billion (by means of two partial acquisitions). the second largest acquisition was the takeover of a 40 percent stake of repsol ypf brazil— a subsidiary of spain-based repsol—by sinopec in 2010 (us$ 7.1 billion), followed by the takeover of las bambas copper deposit in peru by a group of chinese investors led by china minmetals (us$ 5.9 billion), and the partial acquisition of petrogal in brazil by sinopec (us$ http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 4.8 billion). it is worth mentioning that in three of these largest deals, the target units were subsidiaries of non-latin american companies: the spanish repsol, the swiss glencore and the portuguese galp energia, respectively. although the largest chinese acquisitions in latin america have been carried out by firms belonging to energy and metal industries, there are also some outstanding examples in service and commercial activities, such as telecommunications (huawei and zte), automobile and electronic components (byd), airlines (hna), ride-hailing (didi chuxing) or banking (icbc and china construction bank). 3. theory and hypotheses institutional theory deals with the ‘rules of the game’, particularly, the social, political, and economic factors that influence firms’ behavior (north 1990). institutional factors may be informal—derived from cultural issues—and formal—such as regulations and rules (peng et al. 2009). institutional differences between countries play a key role in explaining decision-making process in international business (estrin, baghdasaryan, and meyer 2009). the ‘rules of the game’ are underdeveloped in emerging economies and are usually more specific to the local context (buckley et al. 2016). accordingly, there is an increasing recognition among researchers that formal and informal institutions significantly shape the strategy of firms in emerging economies and have a strong impact on emerging-market mnes’ decision-making process (cui and jiang 2010; peng, wang, and jiang 2008). as a result, the institutional theory has been extensively used by scholars dealing with the distinctive strategic behavior of emerging-market mnes (quer, claver, and rienda 2015; xu and meyer 2013). in particular, it is considered a valid theoretical framework for explaining strategic choices by emerging-market mnes doing business in other emerging economies (wright et al. 2005). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 cultural distance and political risk are the two most usual institutional factors considered by prior studies when analyzing location decisions abroad. we argue that the idiosyncratic characteristics of emerging economies when they are simultaneously home and host countries may alter the impact of both formal an informal institutions when choosing foreign locations. therefore, next we propose several hypotheses with regard to the influence of these two factors on location choice by chinese mnes in latin america. 3.1 cultural distance informal institutional factors have to do with differences in culture between the home and the host country (schwens, eiche, and kabst 2011). culture represents the informal institutions of a country as an underpinning of its formal institutional environment (peng, wang, and jiang 2008). it involves social values and norms that may impose constraints on firm’s behavior (scott 1995). cultural distance between the home and the host country deals with how people interpret behavior and potential differences regarding these perceptions strongly affect the transfer of working methods between countries (hofstede, hofstede, and minkov 2010). cultural distance creates barriers for doing business abroad like misinterpretation and miscommunication (blomkvist and drogendijk 2013), increased difficulties to obtain social legitimacy in the host country (cui and jiang 2010), and higher costs to manage the acquisition of a local target, in particular, when transferring managerial practices (drogendijk and slangen 2006; kogut and singh 1988). for these reasons, cultural distance is considered a factor that has a strong impact on location choice by mnes (kang and jiang 2012). past empirical research supports this view, reporting that cultural distance between the home and the host country is negatively associated with target country selection (bhardwaj, dietz, and beamish 2007; holburn and zelner 2010; ojala and tyrväinen 2007). a recent meta-analysis of the literature http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 carried out by beugelsdijk et al. (2018) concludes that cultural distance matters for several stages of firm’s internationalization process, including the decision on whether to invest or not in a particular host country. in the case of chinese companies, most previous studies found that the higher the cultural distance, the lower the propensity of chinese companies to carry out and investment in that country (blomkvist and drogendijk 2013; buckley et al. 2007, 2016; malhotra, zhu, and locander 2010). consequently, we may expect that chinese mnes will be more reluctant to establish in those latin american countries with a greater cultural distance from china. thus, we propose: hypothesis 1: cultural distance between china and the host country negatively affects location choice by chinese mnes in latin america. 3.2 political risk the level of development of host country formal institutions also affects entry decisions. a situation of increased external uncertainty in a foreign destination is perceived as risky and will most probably influence firm’s entry strategy (chen et al. 2017). the lower the quality of formal institutions, the harder it will be for the firm to establish in that country due to factors such as higher political uncertainty, administrative and organizational costs, difficult relationships with local institutions, and information asymmetries (pinto et al. 2017). political risk is one of the most researched formal institutional factors in prior studies on foreign market location choice. political risk deals with the actions of a country’s government and the changes in the political and social situation that can negatively affect the stability of the local environment (simon 1984). http://revistes.ub.edu/index.php/jesb http://www.sciencedirect.com/science/article/pii/s1090951616300918#%21 volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 past research reported mixed results with regard to the influence of political risk on location decisions by chinese mnes. hence, whereas some scholars found that political risk has a conventional negative effect on chinese ofdi (duanmu and guney 2009; li, li, and shapiro 2012; lu et al. 2014), others observed a less conventional influence, either reporting that political risk does not deter chinese mnes (duanmu 2012, 2014; malhotra, zhu, and locander 2010) or even that chinese mnes tend to carry out investments in high-risk locations (buckley et al. 2007, 2016; han, chu, and li 2014; kang and jiang 2012; kolstad and wiig 2012; ramasamy, yeung, and laforet 2012). several arguments provide a justification for these less conventional findings. first, china’s ofdi has been mainly driven by state-owned enterprises (soes) that receive extensive support from the chinese government and may not behave as pure profit-maximizers since they usually pursue policy goals (buckley et al. 2007). second, china maintains good diplomatic relations with some countries that have a high political risk, which can facilitate ofdi in these risky destinations (zhang, jiang, and zhou 2014). these conditions apply in the case of chinese mnes in latin america. as stated above, china’s ofdi in the region has traditionally been driven by a natural resource-seeking motivation. besides, chinese soes have been key players, since they are the tool used by the chinese government to access the natural resources that china needs for its economic growth. for this reason, the chinese government has played a direct role in strengthening economic and political ties with latin america, signing several bilateral investment and trade agreements (fornes and butt-philip 2011). in addition, many latin american countries have recognized china as a market economy (economic commission for latin america and the caribbean 2007). moreover, from 2007 to 2016, the chinese government, mainly through china’s policy banks, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 loaned nearly us$ 140 billion to latin american governments and soes providing them with capital to exploit local energy reserves (vasquez 2018). these government loans reinforce bilateral diplomatic relationships, also facilitating chinese firms’ access to local natural resources and reducing disputes with host governments in destinations where governmentrelated political risk is higher for mnes from other countries (shapiro, vecino, and li 2018). firm-specific advantages also matter (rugman 2009). prior studies argue that emerging-market mnes, unlike the enterprises of developed countries, are able to successfully operate in adverse market conditions as those of host countries with high political risk (guillén and garcía-canal 2012; ramamurti 2009). as a result, we propose: hypothesis 2: host country political risk does not affect location choice by chinese mnes in latin america. 4. methods 4.1. sample and data we created a dataset of chinese ofdis in latin america from various sources of secondary data. our main data source was the china global investment tracker, a database of china’s ofdi compiled by the american enterprise institute and the heritage foundation (aei-the heritage foundation 2018). furthermore, in order to check the reliability of our data we used information from china’s media—like china daily and global times—and the corporate website of each chinese investor. we identified 106 ofdis carried out by 52 chinese mnes in 10 latin american countries between 2005 and 2017. we aim to analyze the firm’s decision on whether to invest or not in a focal host country in a given year. therefore, our initial dataset included 1,060 observations (106 ofdis multiplied by 10 host countries), that is, recording whether each ofdi was carried http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 out in a specific host country or not. after removing duplicated observations—firms that entered more than one country in a given year or a focal country several times during the same year—our final sample for analysis included 920 observations. with regard to establishment modes, acquisitions represent a 62.3% of the observations, whereas greenfield investments—including joint ventures—account for the remaining 37.7%. as reported in figure 2, brazil leads the ranking of top destinations (59 investments), followed by argentina (13) and peru (11), these four countries accounting for 78.3 percent of the investments. figure 2. chinese investments in latin america by country (2005-2017) source: authors’ sample figure 3 shows the number of investments by year. although the distribution is uneven, it is worth mentioning that the larger amount of investments (90) concentrated in the last few years, between 2010 and 2017, representing 84.9 percent of the whole sample. as for individual companies, china three gorges (8 investments), cnpc (7), state grid (6), china minmetals, and sinopec (5 investments each) are those with the largest number of investments (table 2). these top five investors are responsible for 29.2 percent of the investments covered by the sample. 0 10 20 30 40 50 60 59 13 11 5 5 5 4 2 1 1 n u m b e r http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 figure 3. chinese investments in latin america by year (2005-2017) source: authors’ sample table 2. top chinese investors in latin america (2005-2017) company industry number of investments countries china three gorges hydropower 8 brazil (7) peru (1) cnpc oil and gas 7 ecuador (3) venezuela (2) brazil (1) peru (1) state grid electricity 6 brazil (6) china minmetals copper and iron 5 peru (3) chile (1) cuba (1) sinopec oil and gas 5 brazil (2) argentina (1) colombia (1) venezuela (1) icbc banking 4 argentina (2) brazil (2) chery automobile automotive 3 argentina (1) brazil (1) venezuela (1) china construction bank banking 3 brazil (3) china railway construction copper and steel 3 ecuador (2) venezuela (1) cnooc oil and gas 3 argentina (3) jac motors automotive 3 brazil (2) mexico (1) source: authors’ sample 0 2 4 6 8 10 12 14 16 18 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 3 1 4 2 6 13 12 11 11 8 6 12 17 n u m b e r http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 4.2. variables and measures the dependent variable in our analysis is the location decision by each chinese firm in a latin american country. this is a dummy variable which takes the value of one if firm i invests in country j in year t, and zero otherwise (duanmu 2012; quer, claver, and rienda 2018; yuan and pangarkar 2010). we consider two explanatory variables. first, cultural distance between china and each host country, which was measured using the index developed by kogut and singh (1988). in doing so, we based on the six cultural dimensions of the hofstede’s model (hofstede, hofstede, and minkov 2010). this measure has been employed by prior studies on chinese ofdi (quer, claver, and rienda 2018; xu, hu, and fan 2011). the second explanatory variable is the political risk of each host country, measured by means of the international country risk guide developed by the political risk services group (buckley et al. 2007, 2016; duanmu 2012; duanmu and guney 2009; han, chu, and li 2014). in addition, we include several control variables that, according to prior research, may also affect location decisions by chinese mnes in latin america. thus, we control for the potential host country drivers of each ofdi decision. in doing so, we consider the above-mentioned two most important motivations of china’s investments in latin america. first, as a proxy of natural resource-seeking, we include host country natural resource endowment, proxied by the percentage of ore and metal exports to total merchandise exports by each latin american country, with a logarithmic transformation (buckley et al. 2007, 2016; quer, rienda, and andreu 2019; zhang, jiang, and zhou 2014). second, as a proxy of market-seeking motivation, we consider two variables: market size, measured by the log of gross domestic product (gdp) of each host country (buckley et al. 2007; duanmu and guney 2009) and market growth, using http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 the gdp growth rate (buckley et al. 2016; zhang, jiang, and zhou 2014). for measuring all these host country drivers, we based on the world development indicators of the world bank with one-year lag. moreover, as pointed out before, china maintains friendly diplomatic relations with most latin american countries that mitigate host country political risk for chinese firms, in particular when accessing local natural resources. therefore, by collecting data from the ministry of foreign affairs of the people’s republic of china website, we include two additional dummy variables to control for potential good bilateral diplomatic ties: market economy status recognition, coded as one if the focal latin american country has recognized china as a market economy, and as zero otherwise; and comprehensive strategic partnership, taking the value one if such an agreement between china and the host country had been signed before the focal location choice, and zero otherwise. 5. results and discussion to test the hypotheses, we used a conditional logistic regression. prior to running the regression, we checked potential multicollinearity by analyzing the variance inflation factor (vif) for all variables. as reported in table 3, all vifs are well below 10, the cut-off point recommended by kutner et al. (2005). thus, we ruled out the existence of serious multicollinearity problems in our analysis. table 4 shows the results of the conditional logistic regression for location decision. model 1 includes only control variables, while model 2 adds the effects of the explanatory variables. both models are highly statistically significant (p < 0.001). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 table 3. descriptive statistics and correlations variables mean sd vif 1 2 3 4 5 6 7 8 1. location decision 0.110 0.309 n.a. 1 2. cultural distance 3.333 0.652 1.982 -0.426 1 3. political risk 63.500 7.427 1.776 -0.146 0.430 1 4. natural resource endowment 1.239 0.635 1.873 0.061 -0.348 0.209 1 5. market size 11.276 0.630 1.756 0.298 -0.542 -0.233 0.436 1 6. market growth 2.953 3.601 1.241 -0.082 0.014 -0.087 -0.039 -0.217 1 7. market economy status recognition 0.500 0.500 1.711 0.254 -0.507 -0.189 0.442 0.448 -0.122 1 8. comprehensive strategic partnership 0.380 0.485 1.613 0.123 -0.308 -0.279 0.314 0.346 -0.306 0.466 1 correlations above /0.082/ are significant with p < 0.05 correlations above /0.087/ are significant with p < 0.01 source: authors’ sample based on spss statistics table 4. results of conditional logistic regression model 1 model 2 explanatory variables cultural distance -1.026*** (0.234) political risk 0.031 (0.024) control variables natural resource endowment -0.118 (0.273) -0.398 (0.328) market size 1.650*** (0.248) 0.582* (0.318) market growth 0.004 (0.031) -0.014 (0.035) market economy status recognition 1.345*** (0.318) 0.819** (0.380) comprehensive strategic partnership 0.054 (0.267) 0.126 (0.293) chi-square 100.512*** 182.072*** no. of observations 920 920 dependent variable: (1) firm i invests in country j in year t; (0) otherwise standard errors in parentheses * p < 0.10; ** p < 0.05; *** p < 0.001 source: authors’ sample based on spss statistics hypothesis 1 predicted that cultural distance between china and the host country had a negative effect on the likelihood of entering that destination. this hypothesis is supported, since the regression coefficient of cultural distance is negative and statistically significant (β = -1.026, p < 0.001). as a consequence, we can conclude that chinese companies tend to invest less in those latin american countries where there is a greater cultural distance from china. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 this finding is in line with that of many prior studies that, focusing on mnes from other locations, reported that cultural distance was negatively associated with target country selection because of the inherent obstacles (bhardwaj, dietz, and beamish 2007; holburn and zelner 2010; ojala and tyrväinen 2007). accordingly, we can infer that informal institutional differences lead chinese mnes to behave in a conventional manner when entering latin america, since a less familiar informal institutional environment dissuades them from choosing that specific location. as we pointed out above, past studies addressing chinese mnes’ location choice in other destinations reached a similar result (blomkvist and drogendijk 2013; buckley et al. 2007, 2016; malhotra, zhu, and locander 2010). the second hypothesis has also been supported, since we did not obtain statistical significance for the effect of political risk on location decisions (β = 0.031, p > 0.10). as we argued earlier, the conventional wisdom suggests a negative influence of this formal institutional factor on entry decisions because of the higher uncertainty and increased administrative and organizational costs (chen et al. 2017; pinto et al. 2017; simon 1984). therefore, our finding suggests that a high political risk in a latin american country does not deter chinese mnes from choosing that location. consequently, with regard to political risk as a formal institutional factor that discourages ofdi, we can conclude that chinese mnes show a less conventional behavior. although there are past studies on chinese mnes reporting a conventional negative influence of political risk, others obtained a non-significant effect as in our case (duanmu 2012, 2014; malhotra, zhu, and locander 2010). as stated before, the idiosyncrasy of chinese firms in terms of state ownership as well as the existence of friendly bilateral diplomatic relations between china and several host countries that are perceived as riskier by other mnes, may explain why chinese firms are less risk-averse. http://revistes.ub.edu/index.php/jesb http://www.sciencedirect.com/science/article/pii/s1090951616300918#%21 volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 we obtained empirical support for this potential explanation for such an unconventional behavior when analyzing the results of the control variables included in the analysis. thus, table 4 reports a positive and statistically significant influence of market economy status recognition on location choice (β = 1.345, p < 0.001). hence, the fact that the focal latin american country has recognized china as a market economy is an indicator of a good bilateral diplomatic relation that may act as a risk-reduction device. in addition, ofdi drivers also matter, since we obtained that a larger host market size attracts chinese mnes (β = 1.650, p < 0.001). conversely, the influence of natural resource endowment did not turn out to be statistically significant. as discussed earlier, natural resource-seeking is no longer the only motivation of chinese firms for doing business in latin america, as market-seeking is becoming an increasingly important driver. 6. conclusions in spite of cultural differences and political instability, latin america is a top destination of china’ ofdi, particularly, in recent years. in this study we have investigated the extent to which the two most researched host country institutional factors influencing location decisions abroad—namely, cultural distance and political risk—matter for explaining location choice by chinese mnes in latin america. our findings indicate that whereas cultural distance has a conventional negative influence, political risk does not deter chinese mnes. in our opinion, this study makes several contributions. first, from a theoretical viewpoint, it contributes to the academic debate on the validity of extant theories—derived from the behavior of developed-country mnes in the past—to explain international decisions made by emergingmarket mnes as latecomers. second, from an empirical standpoint, it provides new insights on location choice by emerging-market mnes in other emerging markets, which has received less http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 attention in the literature. in particular, studies focusing on latin america as destination of china’s ofdi are still scant (fornes and butt-philip 2011; shapiro, vecino, and li 2018; vasquez 2018; zhang 2019). as stated above, because of potential similarities in terms of weak institutional environments, ofdi flows between emerging economies are a pertinent empirical setting for analyzing the applicability of conventional theoretical frameworks. a recent literature review by alon et al. (2018) reveals that testing traditional theories and location choice—the key motivations of our study—are two of the most important streams of chinese mnes research. regarding cultural distance, another recent literature review by lópez-duarte, vidal-suárez, and gonzález díaz (2016) reports that prior empirical studies show a clear western bias, leading them to claim for more research focusing on emerging economies. our study also has implications from a managerial perspective. chinese mnes are increasingly becoming key players in most industries worldwide, from energy to automotive, engineering, and telecommunications. managers of incumbent mnes need to discern whether their emerging-market counterparts follow a conventional behavioral pattern or they behave in a truly distinctive way. our study provides new insights on how cultural distance and political risk affect their strategic decision making when choosing location in other emerging economies. despite these contributions, our study has several limitations that suggest avenues for future research. first, we have used secondary data. for this reason, we have not been able to analyze the perceptions of managers of chinese companies. future research could use surveys to capture managerial perceptions on to what extent cultural distance and political risk discourage them from choosing a location in latin america as well as what factors contribute to mitigate the perceived risks. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 45-67, july-december 2019 doi.org/10.1344/jesb2019.2.j060 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 second, given that we focused on a single region as location of chinese ofdi, the generalizability of our findings may be limited by the idiosyncrasy of latin american countries and their relationships with china. hence, future studies are needed in order to discern whether the behavioral patterns of chinese mnes in other locations remain similar or not to those reported by our study. in addition, the analysis of the specific factors that lead chinese companies to show a less conventional behavior when faced with host country institutional factors needs further research efforts. our results regarding the market economy status recognition of china suggest that bilateral diplomatic relations matter. thus, the role played by other signs of friendly relations such as the existence of bilateral investment treaties or frequent government official visits deserves additional analysis. the latter factors are particularly important, since latin america is now holding a relevant place in china’s foreign policy agenda. moreover, the chinese government considers latin america as the natural extension of the belt and road initiative—the ambitious project led by china whose aim is to establish a solid integration between asia, africa and europe going beyond commercial cooperation. 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http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 armando joão dalla costa ufpr federal university of paraná (brazil) https://orcid.org/0000-0002-1016-7491 naijla alves el alam fiep – federation of industry of state of paraná (brazil) https://orcid.org/0000-0003-0196-6731 sources and methodologies for micro, small and medium enterprises study in brazil abstract this article uncovers relevant sources and methodologies to gather knowledge about micro, small and medium enterprises (msme) in brazil. to achieve its purpose, the text presents sources and methodologies. this type of study is relatively neglected concerning msmes. until this moment, not much data has been reported about these companies’ categories, and even less in advanced research. among the most significant data and methodology of addressing msmes in the country, the text highlights the surveys conducted by the brazilian institute of geography and statistics (ibge), the brazilian micro and small business support service (sebrae), and the international annual research global entrepreneurship monitor (gem) a study on the entrepreneurial activity, which brazil is part for more than 20 years. the brazilian institutions, as well as consulting for those companies, collect key data that posteriorly become research sources. also, when explaining how institutions chose and treated the data, they own specific methodologies regarding those businesses in brazil. the paper also points out the importance of constant law monitoring, adjustment, and technology incentives. this article's contribution is to present a research methodology on msme in brazil with relevant data. keywords: micro business; small and medium enterprises; sources and methodologies; innovation; entrepreneurship corresponding author: e-mail: ajdcosta@uol.com.br received 7 july 2020 accepted 15 april 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-1016-7491 https://orcid.org/0000-0003-0196-6731 mailto:ajdcosta@uol.com.br http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 1. introduction “in brazil, repeating what happens in the world, about 99% of the companies are formed by micro and small ms” (sebrae 2020), followed by medium enterprises that also play an important role in the economy. however, most academic-scientific studies do not deal with these firms, but with large companies, also national and international success cases. there are some exceptions, such as those of dalla costa and el alam (2017) study, which deals with the difficulties and problems of micro and small companies when seeking their internationalization in latin america. what is the main challenge? it is to find sources, and adequate methodology to study micro, small and medium enterprises (msmes) in brazil. among the main sources of information and methodologies are the instituto brasileiro de geografia e estatística (ibge, brazilian institute of geography and statistics) and serviço brasileiro de apoio às micro e pequenas empresas (sebrae, brazilian micro and small business support service), and the international annual research global entrepreneurship monitor (gem). when referring to statistical data, research regarding the industry has vast literature compared with other sectors. "the survival strategy used by msme in brazil has been evaluated in universities with an emphasis on industry" (lima 2010, 172). thus, commerce and services emerged due to the country's economic growth. the brazilian economy stabilized in the ’90, “from july 1994, the real plan for the economic stabilization was in force, in the following year, the minister of finance, fernando henrique cardoso was elected president, then the brazilian economy entered an unprecedented phase of monetary stability” (botelho and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 mendonça 2002). almost three-decade later, inflation is under control, and the real (r$) remains the official currency. during an economic crisis, small firms are particularly affected. nowadays in brazil “micro and small companies, correspond to 52% of formal jobs in the private sector, approximately (16 million), multi-sector” (sebrae 2020). these firms operate in industrial, commercial, and service. in contrast, medium and large companies have the highest revenues. in terms of categories, in brazil, small companies are divided into micro and small. unfortunately, worldwide, “no international consensus definition delimits the concept of micro, small and medium-sized companies due to the differences among countries, their economies, and their enterprises” (guimarães, medeiros de carvalho and paixão 2018). after legislation for micro and small companies since the ‘80s, official entities use different criteria for credit providing, taxes calculated, and rule such enterprises. “the difficulties in defining the concept of msmes and the weight of the informal sector in the brazilian economy led to different views regarding companies' importance in the country's economy” (la rovere 2001, 2). the brazilian legislation is essential for the economic scenario since it is intrinsically linked to corporate performance. furthermore, the law's evolution for msme can explain the increase in companies from the '80s until the present. thus, due to law amendment, companies reduce bureaucracy and costs, which favors longevity and growth. in contrast, in brazil, business administration represents one of the main difficulties for msme. “it is agreed that small and medium-sized companies are not organized or structured efficiently and appropriately. however, as the level of “business literacy” increases, so does the strength of smalland medium-sized companies” (antonik 2004, 37). in brazil, commonly, small http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 companies are family businesses depending on the strategy they become medium or large companies. in 1972, was the creation of sebrae, the institution, became the agency in charge of supporting small firms at the national, regional, municipal, and international levels, establishing policies, and services. on the other hand, medium and large companies do not have a specific institution to safeguard their interests; most are part of a union or an association. in the 21st century, innovation and technology became an important competitive differential to business worldwide, from the internet of things (iot) to industry 4.0, supporting the new business model. the recognition of msme's importance seems to be linked to the so-called “change in the technological paradigm” which prioritizes innovations (puga 2002, 7). innovation sometimes can be incremental, demanding low or zero investment, contributing to product improvement and cost reduction, which is suitable for msme. nowadays, a technological startup is normally set up as a born micro or small company, developing critical and innovative products. in brazil, the law improvement on msme favored companies' longevity, using different criteria, and combining specifics incentives to business. the work analysis was divided into four parts with an introduction and conclusion. the second presents the survey's available literature. the third shows a brief note regarding challenges to the continuity of micro, small and medium enterprises, the importance of legislation, companies’ diversification in the 21st century as well as technological advancements. the fourth section presents the micro, small, and medium companies’ statistics, also brazilian entrepreneurship indicators comparing with selected regions globally through the global entrepreneurship monitor (gem) research. finally, the conclusion highlights, key sources, and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 methodologies to study and understand the msme in brazil. all those facts reflect the need for continuous research about msme in brazil. 2. brazilian msme literature the literature review explores the existing texts identifying the events that boost msme emergence and increase in brazil. additionally, it illustrates the legislation improvement and challenges faced by all companies over the years. this article brings multiple sources together from official, national, and international references. the data presented synthesize historical studies published in articles, books, dissertations, thesis, mostly with an emphasis on industry, with numerous studies, since industrialization in brazil is widely debated. in this article, we used the ibge database, which was established in 1934, and remains the official country's research agency. the sebrae database for micro and small companies was included, since they offer complementary statistics information. to analyze international entrepreneurship indicators of early-stage companies, the gem research offers updated statistics, and brazil is part since 2001. in the country, for the years, there were several changes in the official statistical data framework, for sample range and indicators, favoring a hardworking comparison across periods. the information has been reported without judgment, using reliable texts by economic, business historians, and in deeper academic studies available on a scientific data basis. the main authors consulted were (morais and pereira 2020, espósito 2017, silva and fernandes 2003, curi and saes 2014, suzigan 2000b; grandi 2016, marson 2015), among others. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 specific topics, such as finance, planning, consulting, management, decision-making, entrepreneurial activity, social responsibility, environmental, innovation, linked with msme performance, are available in a wide range of electronic journals and articles by area. 3. micro, small and medium enterprises in brazil between the 19th and beginning of the 20th centuries, small firms were predominant in brazil, while medium and large firms were quite a few. during the period, companies, as much as the country, were in development. credit was rare and expensive, there was a lack of qualified employees and legislation supporting companies. in brazil at the time, the southeast states (são paulo, rio de janeiro, minas gerais, espírito santo), were more advanced than the rest of the country.” between 1911 and 1913 also in 1919, while the manufacturing industry grew at an average annual rate of 4.4%, only são paulo reached 7.5%. between 1920 and 1928, these respective rates were 4.4% and 6.6%” (cano 2015, 447). until the present, the são paulo state remains the most industrialized, housing company of all segments and sizes considered the brazilian financial center. in the past, the brazilian economic and political scenarios were based on changeability. combined with global issues, such as world war i (1914-1918), followed by the new york stock market crash (1929), influenced the country’s development. nevertheless, in this period, companies continued to be set up. “through the depression decade, therefore, brazil continued significantly in its industrialization” (malan et al. 2000). in the subsequent period of world war ii (1939-1945), also several global crises in alternating periods, have affected the national economy. import substitution and population growth influenced the development of manufacturing, demanding finished products. “the sequence http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 craft-manufacture-industry was sometimes associated with the development of industry in brazil, although this was done without greater empirical basis” (saes 1989, 36). the msme stood out, playing a fundamental role contributing to the country's development. in the 20th century, industrialization was responsible for boosting brazil’s growth. “until 1939, the textile manufacturing industry was the most important in brazil” (suzigan 2000a, 129). furthermore, the textile also contributed to home-based sewing production. “previously, there was the hat, shoes, sugar, beer, phosphorus, metal mechanics, cement, steel, paper, cellulose, rubber, chemicals, and pharmaceuticals industries” (suzigan 2000a, 176-324). for over 45 years, there was an effort to structure public policies for msmes in brazil. however, recently, msme received more attention, according to their national economy participation and importance growing in modern production structures. public policies for msme are supported through the institutions, legal framework, and specific tax rules promoting them. public institutions support the productive system, official banks, development agencies, research institutes, and universities favor companies (naretto, botelho and mendonça 2004). the brazilian continuous industrialization was improved in the '50s. for example, “due to the automotive industry settled in the country, the number of auto parts companies increased to 118 in 1957. most of these firms were formed by msme” (fernández de sevilla and dalla costa 2019, 8). the sharp increase in job positions demanded labor regulation, which integrally took place, organizing the economic sector. “the 1951/1953 currency crisis, therefore, represents an important milestone in the evolution of brazil's post-war economic history” (malan et al. 1980). in 1988, through the federal constitution legislation designed especially for msme took effect. between 1988 and 2018, some laws simplified companies’ operations, and tax collection, reflecting in the msme daily administration as presented in table 1. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 table 1. brazilian legislation for msmes in the 20th and 21st centuries 1988 federal constitution, 1988 articles no.170 and 179. differentiated solutions for micro and small businesses. 2008 complementary law no. 128 of 2008, created the micro empreendedor individual (mei, individual micro-entrepreneur) in force since july 2019. 1996 law no. 9.317 of 1996: instituted the simples federal (simple federal) tax regime. 2009 complementary law no.133 of 2009: includes the cultural sector in simples nacional (simple national) tax system. 2003 proposta de emenda à constituição (pec, constitutional amendment proposal) no.42. 2011 complementary law no. 139 of 2011: corrects the ceilings of simples nacional (simple national) tax system; debt installments; stimulates exports. 2006 complementary law no. 123 of 2006: establishes the national statute of micro and small business, also known as the general law of micro and small business. 2014 complementary law no.147 of 2014: allows all activities in simples nacional (simple national) tax system. 2007 complementary law no. 127 of 2007: improvement in the general law. 2016 complementary law no.155 of 2016: extends the ceiling of simples nacional (simple national) tax system. 2007 law no. 11,598: creates the national network for the simplification of registration and legalization of companies and businesses. 2018 complementary law no.162 of 2018: pert-sn is the special tax regularization program for micro and small companies opting for simples nacional (simple national) tax system. source: own elaboration based on naretto, botelho and mendonça (2004) also official legislation. over the past thirty years, the twelve main laws implemented aimed to regulate msme's operation in brazil, especially to the simples nacional (simple national) tax regime, in which nine taxes are grouped, tax savings can reach up to 40% depending on the company's segment and revenue, using a single tax form for monthly payment. “brazil has 92 different taxes” (portal tributário 2020), divided into national, regional, and municipal; the current tax system is one of the most complex and bureaucratic globally, difficulties companies' growth. between 2010 and 2014, the companies’ survival rates up to two years went from 54% to 77%. this improvement is related to micro empreendedor individual (mei, individual micro-entrepreneurs) companies. when mei is excluded from the analysis, the survival rate grows from 54% to 58%. the mei has a positive impact on the company’s survival http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 rate since their participation between 2008 and 2012 increased from 0% to 63% of all companies (sebrae 2014). in brazil, specific legislation for msme favored the increased number of companies. in 1985 there were 1,065,027 firms, including micro, small, medium, and large (rais 2020). after 35 years, in 2020, more than five million businesses are operating, apart mei companies. in recent years, opening a business in brazil became less difficult, although starting a company is far from ideal. by the primary law no. 128 of 2008, for mei enterprises take less than thirty minutes for business registration, thus, this option is supportive during the covid-19 pandemic recession,1 being an alternative to unemployed. professionals such as confectionery, hairdressers, bricklayers, among others, can be an entrepreneur, operating in their own home as local of work. “in 2020, brazil has 10.6 million mei registered” (rfb 2020). the simplified tax regime for mei, reserves some advantages, such as contributing to social security, getting credit in federal, private banks, or angel investors with special interest rates and payment terms. in the mei tax regime is not mandatory to report information in the relação annual de informações sociais (rais, annual list of social information) “unless the company has hired at least one employee” (planalto 2006). in brazil, the ibge's report is the primary source for companies’ performance, data are retrieved from rais, this program was 1 from march 2020, in brazil, many people lost their jobs. "since the covid-19 pandemic arrived in brazil, 716,000 companies have closed their doors” (el país 2020). from this total, "at least 600,000 micros, and small businesses also 9 million employees were laid off due to the economic effects of the new coronavirus pandemic" (cnn brasil 2020). the pandemic is still far to the end, with the virus circulating worldwide. vaccination in brazil started in january 2021, people from vulnerable groups are priorities since the pandemic is at the highest level of contagion in the country. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 implemented in 1975, which monitors compliance with labor legislation, social security contributions, and verifies the brazilian employment situation. 3.1. brazilian msmes in the 21st century by the early 21st century, regulations, banking, legislation, financing, and support policies specific for msme in brazil, were established nevertheless, some measures have been implemented for innovation and technology. there were only amendments to the existing legislation. between 1996 and 2001, a new type of company emerged worldwide named “startups.” one of the definitions “is a young company with a repeatable and scalable business model, in a scenario of uncertainty and solutions to be developed”(startse 2020). generally, are technological-based companies, most are msme, can speedily become large, some of them born global, arousing interest from major investors worldwide. “in 2020, startups in brazil were representative, with 13,038 enterprises” (startupbase 2020). one of the characteristics of this business is the accentuated uncertainty about success, sometimes generating high expectations in the entrepreneurs. in brazil, “the states with the largest number of startups were são paulo (3,840), followed by minas gerais (1,105), the rio grande do sul (930), rio de janeiro (847), and paraná (655)” (startupbase 2020). some policies related to technology, combined with business networks favor startups to emerge. “the startup's highest performance segment in the country is education with 7.19%, followed by finance, 4.27%, health and well-being, 3.86%, internet 3.46%, and agribusiness 3.19%” (startupbase 2020). in brazil, the msme legislation improvement allied to incentives on innovation and technology, also the partnership between universities, institutes, private companies, incubators, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 international connections, such as silicon valley, has contributed to the startup's growth. the brazilian unicorn, are successful startups, reaching eleven companies in 2020: a) ebanx (global fintech ); b) 99 taxis (mobility solutions); c) pagseguro (financial services); d) arco educação (education); e) gympass (wellbeing and gym); f) nubank (financial services); g) wildlife studios (virtual games); h) movile (delivery and several other segments solutions); i) stone (national fintech); j) loggi (delivery solutions); k) loft (real state), evaluated in more than us$ 1 billion each (forbes magazine 2020). it is a significant achievement for brazil. “unicorns companies set a vision for growth, use technology to automate and scale, using artificial intelligence (ai), to innovate” (salesforce, 2021). the ebanx company operates in more than eight countries and has more than 700 employees in brazil and abroad (ebanx 2020). job creation could be alone an indicator of these companies’ importance to brazil. 3.2. innovation, technology and credit in the globalized and competitive economy, innovation can be a difference in msme growth and survival. without investment in technology, brazil is going to remain a technology follower, preventing competition with developed economies. the brazilian innovation law favored the emergence of the scientific, technological, and innovative institutions (ict), which is a non-profit institution for scientific, technological research, for new products, services, and processes. moreover, the law supported the establishment of the technological innovation center (nit) responsible for managing institutional innovation policies. by sixteen years ago, the federal http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 government established legislation incentivizing technology and innovation, as presented in table 2. table 2. incentive for innovation laws in brazil government program legislation innovation law: a) creating an environment conducive to strategic partnerships between universities, technological institutes, and companies; b) encouraging the participation of science and technology institutes in the innovation process; c) stimulating innovation in the company. technological innovation law no. 10,973/20042, modified by law no. 13,243 / 2016 government program legislation lei do bem (good law): a) some of the tax deduction, also innumerable topics offering benefits to companies’ development. seeks to encourage the activities of technological research and development of technological innovation (rd&i). law no. 11,196/20053, source: author’s elaboration based on (anpei 2017, 25). the empresa brasileira de pesquisa agropecuária (embrapa, brazilian agricultural research corporation) is a public research company internationally recognized as a reference in assisting companies in agribusiness research linked to the ministry of agriculture. “the innovation law intended to open possibilities for technological discoveries, being created in government-supported specialized research centers, such as embrapa and fiocruz” (naretto, botelho and mendonça 2004). in brazil, the collaborative and innovative network is growing steadily, in partnership with universities and research institutions. for micro and small companies, the sebrae offers free online training, seminars, workshops, credit, and specific programs; “some of them are personalized such as agente local de inovação (ali, local innovation agents); subsidized 2 available at: http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2004/lei/l10.973.htm 3 available at: http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2005/lei/l11196.htm http://revistes.ub.edu/index.php/jesb http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2004/lei/l10.973.htm http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2005/lei/l11196.htm volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 technological consultancies (sebraetec), business incubators, innovation, technology, trademarks, patents, and technical standards support” (sebrae 2020). the confederação nacional das micro e pequenas empresas e empreendedores individuais (conampe, national confederation of micro and small enterprises and entrepreneurs), also supports micro and small companies at a national level, offering several services such as free e-commerce platform development, credit line, export training, among others (conampe 2020). the banco nacional de desenvolvimento econômico e social (bndes, national bank for economic and social development) is a government institution that offers specific credit lines for all size companies (bndes 2020). the misinformation about how to obtain a loan prevents msme to access credit in the bndes. “in brazil, for example, there are several special financing lines for small companies. nevertheless, the requirement to keep up with tax obligations to obtain credit excludes most msmes” (la rovere 2001, 2-3). 4. employability indicators and company’s performance in brazil the ibge is the primary institution for brazilian statistics also providing data for the cadastro central de empresas (cempre, central register of companies). the “cempre covers business entities, public administration bodies, and private non-profit institutions” (ibge 2020a, 11). thus, it covers all organizations registered in the cadastro nacional de pessoa jurídica (cnpj, national register of legal entities) since all formal companies have a cnpj tax control number. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 the report is yearly published, and the most recent is from 2018 made available in july 2020, the report presents an overview of companies, employed personnel, partners, and monthly average wages in brazil. the study uses some of the sources previously mentioned: annually the economic data and registration updated by cempre combine information from the ibge recovered from annual company’s survey for industry, construction, commerce, services and from the sistema de manutenção cadastral de empresas (simcad, cadastral maintenance system of the central register of enterprises), rais and the cadastro geral de empregados e desempregados (caged, general register of employed and unemployed), they are all administrative mandatory records of the ministério do trabalho (ministry of labour) (ibge 2020a, 11). table 3 shows an overview of companies, employees, and employers for all size companies between table 3. companies, salaries, and employment in brazil (2017-2018) variable 2017 2018 relative variation (%) companies and other organizations 5,029,109 4,937,861 (-) 1.8 total employed staff 51,939,251 52,217,587 0.5 salaried employed personnel 45,070,312 45,456,277 0.9 partners and owners 6,868,939 6,761,310 (-) 1.6 average monthly salary (r$) (1) 2,946.49 2,952.87 0.2 source: author’s elaboration based on cempre’s study (ibge 2020a). comparing 2018 to 2017, a negative balance of 91,248 companies closed their activities, although a positive number of 278,336 new job positions. in 2018, there were 385,965 salaried workers, with an average salary of r$ 2.952,87, corresponding to about us$ 766.58. in 2018, the national minimum wage in brazil corresponded to r$ 954,00, around us$ 247.66. in the majority, brazilian workers have a monthly minimum wage, preventing a good quality of life. usually, workers have a low-level education, also work for micro and small companies. on the other hand, medium and large companies pay more than a minimum wage. multinationals usually have the highest salaries, depending on the sector, such as automotive, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 that share profit yearly. in 2018, there was a reduction in partners and owners, 107,629 executives, which can be linked to the companies’ survival. figure 1 shows the company's evolution and other organizations from 20072018. figure 1. all size companies and other organizations’ evolution 2007-2018 source: author’s analysis based on the cempre study (ibge 2020a). in brazil, between 2007 and 2018, the best year for new companies was 2013 with 5,392,234. in terms of variation from one period to another, 2011 (5,129,205) had the most significant growth in volume when compared to 2010 (4,599,880), representing 11.5% raise, this represents 529,325 new companies, co-related to new job positions. on the other hand, 2008 (4,607,261), 2009 (4,846,639), and 2010 (4,599,880) were the least favorable years and could be related to the us subprime crisis in 2007. the global crisis effects can extend through the 4.200.000 4.400.000 4.600.000 4.800.000 5.000.000 5.200.000 5.400.000 5.600.000 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 years, depending on the country's economic situation. figure 2 presents the companies' market share from 2007 to 2018. figure 2. micro, small and medium companies’ share in brazil (2007–2018) source: author’s elaboration based on the cempre study (ibge 2020a). in the brazilian economy, micro-companies are the majority an average of 87%, followed by small with 11%, medium 1.4%, and large 0.39%. micro and small companies together represent 98%, while medium and large, represents 2%. between 2007 and 2018, for all size companies, the variation was slightly stable due to economic flow. in terms of employment. figure 3 shows the employability for 2007 to 2018 by company. 80,00% 82,00% 84,00% 86,00% 88,00% 90,00% 92,00% 94,00% 96,00% 98,00% 100,00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 micro small medium large http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 figure 3. employees by companies’ size, 2007-2018 source: author’s elaboration based on the cempre study (ibge 2020a). between 2007 and 2018, about 916 million brazilian were employed in the industry, commerce, and service, an average of 83 million per year. for the period, large companies had most of the employees, over 472 million, followed by small companies with 179 million, the medium 149 million, and the micro-companies with 113 million. although legislation has been improved over the past few years, especially for small companies, taxes on hiring employees are still high impacting employment, therefore, the growth of informality and the number of unemployed does not decrease. “economic and financial sustainability are essential elements for the organization's success” (antonik 2004, 38). thus, to operate a business in brazil has been necessary a strict control of tax since direct and indirect costs are intrinsic to the operation. 0 10.000.000 20.000.000 30.000.000 40.000.000 50.000.000 60.000.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 micro small medium large http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 therefore, to monitor brazil's informal economy, the ibge conducted surveys through the pesquisa nacional por amostra de domicilios (pnad, continuous national household sample survey). in the quarterly research and for this article, the period available was from april to june 2020, showing the current situation. according to the ibge, “in this period, the number of workers in informal employment was (8.6 million people) a decrease of 21.6% when compared to the same period of 2019” (ibge 2020b,5). in the informal economy, workers do not have a formal contract, excluding employer obligation in tax payment. this job condition impacts the county's economy in several areas, such as workers' health conditions. “in the category self-employed, for the same period, showed some 21.6 million workers, 10.3% reduction in comparison to the previous quarter of 2019”(ibge 2020b,5-6). the self-employed reduction could represent the migration to mei, while cross-referencing information between sources could confirm this hypothesis. self-employed, as “domestic workers, are estimated at 4.7 million, with a reduction of 21.0% in 2020. for this job category, informality is high since families have no intention of paying several social taxes. brazil is a continental country, with 26 states and a federal district, totaling 5.570 cities with regional differences, social inequalities, and systemic corruption, facilitating informality impacting the economy. for international data, from now on, we will use gem research, analyzing the brazilian entrepreneurship level. 4.1. global entrepreneurship monitor – gem, 2019-2020 the 2019 gem survey is the most recent, in which some indicators were analyzed, including the brazilian performance, compared with worldwide specific regions. the research http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 interviewed the economically active population from 18 and 64 years old that were engaged to start or manage a new business. the leading indicator is the “total early-stage entrepreneurial activity (tea), a qualitative indicator offering a country overview” (gem 2020, 29). for over 19 years, some countries are in the research, such as brazil, the united states of america (usa), the netherlands, and the united kingdom (uk). in the 2019 report, 50 economies were researched, grouped into four regions, as defined by the world economic forum: a) the middle east and africa; b) asia and the pacific; c) latin america and the caribbean; d) europe and north america (gem 2020, 27). the countries were divided into low, medium, and high-income groups, assessing performance against some indicators. research points out that “in 36 of the 50 economies, more than half of the population consider that they have the skills, knowledge, and experience to start their own business. while 42 of the 50 economies, less than half of those who see opportunities, would be deterred by fear of failure” (gem 2020, 14). brazil is one of the economies in latin america with high entrepreneurship participation. “within the 50 economies participating in the 2019 gem research, the six highest levels of tea were all in the latin america & caribbean region” (gem 2020, 14). the survey indicates that the tea between 2001 and 2019 increased from 14% to 23% in brazil; from 11% to 17% in the usa; from 6% to 9% in the uk from 6% to 10% in the netherlands (gem 2020, 73-74). in general, brazil has increased nine points in entrepreneurship, even considering all difficulties in doing business, while developed countries have improved at most three or four points in 19 years. in latin america, brazil was the country with the largest population and territorial extension among countries. “also concerning the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 tea, only spain did not experience an increase during the analyzed period 2001 to 2019” (gem 2020, 73-74). table 4 presents the entrepreneurship development in each region, through the interviewees in latin america and the caribbean countries. table 4. survey results with latin american and caribbean countries tea question surveyed the proportion of adults aged 18-64 years, who agree with the question surveyed in brazil and puerto rico, chile, colombia, guatemala, mexico, ecuador, and panama ease of starting a business in my country (% of adults) in brazil, 44% believe it is easy to start a business. the highest index is in panama, 55%, and the lowest in puerto rico, 22%. have knowledge, skills, and experience to start a new business (% of adults) brazil has about 63% of the requirement. ecuador's best country, with around 80% of the requirement and the lowest in puerto rico, is approximately 55%. there are good opportunities in the country, but i would not open a business for fear of failure (% of adults) in brazil, over 35% are afraid of failing. in chile, almost 60% do not believe it is safe, and colombia is more fearless in opening a business, approximately 31% is just afraid of failing. source: author’s elaboration based on (gem 2020, 30-32). the research shows that brazilians feel prepared to open a business, although are afraid of failing when compared to the other analyzed countries, some of the reasons could be, the unstable economy, high interest, and indirect tax. thus, being an entrepreneur in brazil demands knowledge and cash flow. “in most economies, encouraging people to start a business http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 is an important and common political objective. anyhow, transforming these startups into financially sustainable businesses, in the long run, is also important” (gem 2020, 36). table 5 shows the worldwide tea result, which means, the proportion of adults between 18 and 64 years old, that started a business recently. the indicator is usually linked to micro and small companies. table 5. survey results concerning the tea for specific regions regions total entrepreneurial activity rate (tea) at an early stage (% adults) 18-64 years latin america, and the caribbean (brazil, puerto rico, chile, colombia, guatemala, mexico ecuador, and panama) brazil has over 22% of people with recent businesses. in the region, ecuador and chile have the highest entrepreneurship rates at 37%, and mexico has the lowest at about 12%. asia, and the pacific (pakistan, japan, china, australia, india, south korea, armenia, and taiwan) armenia has the highest rate, 21%; armenians have started a new business in the evaluation period or have a recent establishment; the lowest is pakistan at over 4%, followed by japan at 5%. europe, and north america (italy, poland, spain, belarus, macedonia, germany, slovenia, sweden, greece, norway, russia, the uk, switzerland, luxembourg, the netherlands, croatia, cyprus, ireland, portugal, slovakia, latvia, the usa, and canada). in europe, italy had the lowest rate of entrepreneurship, approximately 3%. the best performance was from latvia, 16%. the usa undertook 17% and canada, about 19%. the middle east and africa (egypt, oman, jordan, iran, south africa, morocco, israel, saudi arabia, qatar, united arab emirates, and madagascar) in the region, egypt had the worst performance with around 6%. madagascar undertook 20% of the largest in the region. iran, south africa, and morocco, nearly 11% of new developments performed practically the same. source: author’s elaboration based on research data (gem 2020, 36-37). entrepreneurs have different motivations and aspirations to open a business; for example, in latin america and the caribbean, the middle east, and africa, more than 80% of entrepreneurs start a business since jobs were scarce. in brazil, this is a fact, by higher unemployment tax. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 “in other regions, over 40% have the same motivation. while in the middle east and africa alone, 80% undertake, motivated to generate wealth and high income” (gem 2020, 36-37). regarding women entrepreneurship worldwide, gem research shows the result divided into regions. “it is important to highlight that the 2019 gem research shows that japan also has the lowest share of adults seeing good opportunities to start a business, about 10, indicating a prevalence towards other forms of income generation” (gem 2020, 14). thus, to know more regarding women's participation in business, table 6 presents the sharing in selected regions. table 6: worldwide initial entrepreneurship by gender region woman men latin america and the caribbean (brazil, puerto rico, chile, colombia, guatemala, mexico ecuador and panama.) 1% up to 34% 1% up to 42% asia and the pacific (pakistan, japan, china, australia, india, south korea, armenia, taiwan). 1% up to 16% 1% up to 25% europe and north america (russia, the uk, switzerland, luxembourg, the netherlands, croatia, cyprus, ireland, portugal, slovakia, latvia, the usa and canada) 1% up to 16% 1% up to 23% the middle east and africa (egypt, oman, jordan, iran, south africa, morocco, israel, saudi arabia, qatar, united arab emirates and madagascar). 1% up to 18% 1% up to 19% source: author’s elaboration based on research data (gem 2020, 56). in all analyzed regions, women have significant participation in business, a worldwide achievement for women, while in latin america and the caribbean, men and women are very similar in terms of entrepreneurship. “in mexico, brazil, spain, and the usa, high female participation increases the overall rate of tea” (gem 2020, 57). the middle east and africa are the second regions with the most entrepreneurial women. in brazil, traditionally women start a home business, while handcraft and sweets are preferred. in the brazilian economy, frequently, women being the only ones working, not only for the social inequality but also for family difficulties. even so, statistics could be better since women are the majority in several http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 countries. “in 2019, the rates of initial entrepreneurs by gender were slightly closer, approximately 23.1% for women and 23.5% for men” (gem 2020, 89). 5. final considerations this article's contribution is to present the sources and methodologies for the study of micro, small and medium enterprises in brazil, also, highlighting the importance of the main institutions in the elaboration of methodologies, such as ibge and sebrae and the international annual research global entrepreneurship monitor (gem). the database is permanently updated by these institutions, which explains how data is collected, elaborated, and therefore, aiding the understanding of the msme study in brazil. for msme just in the ‘80s, specific legislation allowed companies to grow steadily. articulations for a differentiated law started through policies, the result was the implementation of the micro and small company statute and simples nacional (simple national) tax regime. the specific legislation for mei, offers agility for business, allowing the democratization of credit improving the cash flow. the brazilian society became politically and socially integrated, promoting development amid successive national and international crises, while currency stabilization happened in 1994. the innovation law or lei do bem (good law), also contributed to technology and innovation incorporation in companies, favoring the collaborative network; the 4.0 industry as well as the internet of things (iot), became an opportunity for business improvement in the 21st century, influencing manufacturing. several startups emerged, playing a leading role in the last decade; some of those companies became an international unicorn, generating jobs in brazil also http://revistes.ub.edu/index.php/jesb volume 7, number 2, 59-86, january-june 2022 doi.org/10.1344/ jesb2022.1.j099 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 worldwide. through financial credits, national institutions, federal banks' support, was mandatory for companies' investment and growth, contributing to the local economy. political turmoil, excessive bureaucracy, high costs, and charges for various activities, including credit, social inequalities, lack of investment in infrastructure, and unemployment need a long-term to be improved. brazil for over the years is in constant improvement, overcoming several national and international crises that impact especially brazilian msme. this article provides evidence that even with the challenges, brazil has improved the number of companies, increased the quantity of new mei companies by more than ten million, also increase msme participation in the economy since they are the majority. through the international survey gem, it was possible to know the brazilian willingness to undertake any business highlighting the representative participation of women. also, suggest the necessity of research about msme continuously. references anpei – associação nacional de pesquisa e 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https://startupbase.com.br/home. suzigan, wilson. 2000a. “indústria brasileira origem e desenvolvimento. são paulo: hucitec/unicamp. suzigan, wilson. 2000b. “industrialização brasileira em perspectiva histórica”. revista história econômica e história de empresas iii(2): 7-25 i. accessed august 28, 2020. doi: https://doi.org/10.29182/hehe.v3i2.143. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://startupbase.com.br/home https://doi.org/10.29182/hehe.v3i2.143 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 alexander chekanov skolkovo institute of science and technology; innova institute, la salle ramon llull university (russia, spain) https://orcid.org/0000-0002-5371-5232 the triple helix in transition economies and skolkovo: a russian innovation ecosystem case abstract public administrations undertake initiatives to foster knowledge ecosystems in scientific and technology hotspots. it is assumed that innovation ecosystems will create value networks through which participants can develop and commercialize their value propositions. value networks refer to innovation ecosystems where the final product or service is offered by a constellation of businesses that complement each other. the innovation ecosystems literature suggests that innovation ecosystems lead to competitive advantages for each of the partners in the ecosystem, creating va lue for all its actors. based on a longitudinal case study of the skolkovo innovation center with more than 3000 innovative startups in the moscow district in russia, this study explores how value is created in innovation ecosystems in transition economies and the roles of the contributing stakeholders. through a longitudinal case study and using the triple helix framework, this study finds that in transition economies, the state tends to undertake the leading role in establishing the pillars of innovation ecosystems, followed by solid support from state-related industry partners, being the role of universities underrepresented in the initial stages of the ecosystem development. these findings refine the applicability of the triple helix model in transition economies by adjusting the weighting of the different parts of the model when establishing an innovation ecosystem. keywords: ecosystems, value networks, innovation systems, innovation ecosystems, russia, innovative startups, public sector funding schemes, skolkovo la triple hèlix en economies de transició i el cas de skolkovo: un exemple d´ecosistema d´innovació rus resum les administracions públiques emprenen iniciatives per fomentar els ecosistemes del coneixement en zones sensibles científiques i tecnològiques. s'assumeix que els ecosistemes d'innovació crearan xarxes de valor a través de les quals els participants poden desenvolupar i comercialitzar les seves proposicions de valor. les xarxes de valor es refereixen als ecosistemes d'innovació on el producte o servei final és ofert per una constel·lació d'empreses que es complementen entre sí. la literatura dels ecosistemes d'innovació suggereix que els ecosistemes d'innovació condueixen a avantatges competitius per a cadascun dels socis de l'ecosistema, creant valor per a tots els seus actors. basant-se en un estudi de cas longitudinal del centre d'innovació skolkovo amb més de 3.000 iniciatives innovadores al districte de moscou a rússia, aquest estudi explora com es crea valor en els ecosistemes d'innovació en les economies de transició i les funcions de les parts interessades que contribueixen. a través d'un estudi de casos longitudinals i utilitzant el marc triple hèlix, aquest estudi conclou que en economies de transició, l'estat tendeix a assumir el paper principal en l'establiment dels pilars dels ecosistemes d'innovació, seguit d'un sòlid suport dels socis de la indústria relacionada amb l'estat, sent les universitats infrarepresentades en les fases inicials del desenvolupament de l'ecosistema. aquests descobriments perfeccionen l'aplicabilitat del model de triple hèlix en les economies de transició ajustant la ponderació de les diferents parts del model en establir un ecosistema d'innovació. paraules clau: ecosistemes, xarxes de valor, sistemes d'innovació, ecosistemes d'innovació, rússia, noves iniciatives innovadores, plans de finançament del sector públic, skolkovo. la triple hélice en economías en transición a través del caso de skolkovo: un ejemplo de ecosistema de innovación ruso resumen las administraciones públicas toman iniciativas para fomentar los ecosistemas del conocimiento en zonas sensibles científicas y tecnológicas. se asume que los sistemas de innovación crearán redes de valor a través de las cuales los participantes puede desarrollar y comercializar sus propuestas de valor. las redes de valor se refieren a los ecosistemas de innovación en los que el producto o servicio final es ofertado por una constelación de empresas que se complementan entre sí. la literatura de los ecosistemas de innovación sugiere que los ecosistemas de innovación conducen a ventajas competitivas para cada uno de los socios inte grantes en el ecosistema, creando así valor para todos sus actores. basándose en un estudio de caso longitudinal del centro de inno vación skolkovo, con más de 3.000 iniciativas innovadoras en el distrito de moscú en rusia, este estudio explora cómo se crea valor en los ecosistemas de innovación en las economías de transición, y las funciones de las partes implicadas que contribuyen a los mismos. a través de un estudio de caso longitudinal, y utilizando el marco triple hélix, este estudio concluye que en economías de transición el estado tiende a asumir el papel principal en el establecimiento de los pilares de los ecosistemas de innovación, junto con un sólido apoyo de los socios de la industria relacionada con el estado, estando las universidades infrarepresentadas en las fases iniciales del desarrollo del ecosistema. estas contribuciones del estudio perfeccionan la aplicabilidad del modelo de triple hélix en las economías de transición, ajustando la ponderación de las diferentes partes del modelo para establecer un ecosistema de innovación. palabras clave: ecosistemas; redes de valor; sistemas de innovación; ecosistemas de innovación; rusia; nuevas iniciativas innovadoras; planes de financiación del sector público; skolkovo. corresponding author: e-mail: a.chekanov@skoltech.ru received 28 november 2021 accepted 25 may 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-5371-5232 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 introduction entrepreneurs contribute to the development of our society by creating societal wealth and helping others access that wealth. moreover, the development of successful entrepreneurial hubs in transition economies such as the bric countries (brazil, russia, india, and china) increasingly contribute to the global wealth, significantly contributing these regions to the global economy and its gdp (wilson and purushothaman 2003). innovation ecosystems or regional innovation systems (ris) refer to the networks that link together the knowledgeproducing institutions of a given location (e.g. universities and public research centers), and the innovative firms operating in the same area. these links ensure knowledge exchange between the different organizations, increasing the region’s overall innovation and competitive capacity (cooke, uranga, and etxebarria 1997). although some common factors on how innovation ecosystems create value have been analyzed (autio et al. 2014; bittencourt, santos and mignoni 2021; calza et al. 2021; jones, leiponen and vasudeva 2021), limited attention has been devoted to innovation ecosystems in a transition economy setting. to address this issue, this article analyzes the skolkovo innovation center ecosystem with more than 3000 innovative startups in the moscow district in russia to explore how value is created in such geographical settings. this study is grounded in the innovation ecosystem literature, focusing primarily on the interaction between state, academy, and industry from a triple helix framework perspective (etzkowitz and leydesdorff 2000). while technology transfer mechanisms may introduce unnecessary transaction costs by clustering knowledge in patents that instead could freely be transferred to industry (rosenberg and nelson 1994), exploring how special grants have been channeled to innovation, and firms formed on campus or within the innovation ecosystem portray a setting where knowledge can http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 still be successfully transferred to society. nevertheless, this process requires local adaptation of existing models and strong coordination between all its stakeholders. the objective of this article is to offer an overview, building on the innovation ecosystems literature, of the development process of innovation ecosystems in transition economies and the role played by the state, industry partners, and startups within such process. first, this article reviews the triple helix model (etzkowitz and leydesdorff 2000). next, the manuscript reviews the concept of transition economies and links it with innovation ecosystems. after that, in the empirical part of this manuscript, this study presents the evolution of the skolkovo ecosystem. finally, the theoretical work of this paper concludes with the refinement of the triple helix model in the context of innovation ecosystems in transition economies. the last section of this paper is dedicated to implications for practitioners with particular emphasis on policymakers. the triple helix model the triple helix model (etzkowitz and leydesdorff 2000) describes the development of knowledge-based economies, highlighting the synergies between the implicated agents and beyond government sponsorship of innovation initiatives. the three types of agents involved in this model are the universities, the industry, and the state or public administration. the role of the universities is to aggregate scientific and technological knowledge, develop local talent, and provide support to other stakeholders through their research centers. the industry’s role is to provide the scientific and technological community with challenges that could not be solved within the industry, inspiring entrepreneurs to transform knowledge and technology from the labs into solutions that could create economic value for society. finally, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 the role of the state and the public administration is to facilitate this technological, scientific, and business exchange by implementing favorable policies that could support such activities. the triple helix model appeared to reflect the complex dynamics of bi-lateral and tri-lateral relations between its agents in modern economies (leydesdorff and meyer 2006). the studies conduced in developed countries indicate that these institutions normally would operate on their own, without much interaction, but in the context of innovation ecosystems they have increasingly been working in close partnerships interacting and establishing links at various stages of the innovation process (etzkowitz and leydesdorff 1995). through these links knowledge is created, used, and diffused, fostering further levels of innovation. the triple helix model relies on a recursive system of interaction underlying a knowledge-base economy (david and foray 2002) reflecting 1) wealth generation by industry; 2) novelty creation in academia; 3) normative control by government (leydesdorff and meyer 2006). one of the core ideas of the triple helix model is that the university represents the source of new technology and scientific discoveries; the industry represents the connection between new inventions and the customers as they produce goods and services, and the state represents the regulator that provides a reliable and stable framework for interaction and knowledge exchange between the different parties. the goal of these increased interactions among the different actors is the development of new innovative strategies and practices that would translate into the adoption of initiatives that would foster innovation: scientific parks, incubators, accelerators, business angels’ networks, and venture capital, among others. consequently, the triple helix model of university-industry-state relations (etzkowitz 1983; 1998; 2003a; 2003b; 2004; 2008; ranga and etzkowitz 2013; leydesdorff and etzkowitz 1998 and 1996; etzkowitz et al. 2000; piqué, miralles and berbegal-mirabent 2019; piqué et al. 2021) provides a solid approach for implementing interactive modes of innovation beyond a linear knowledge flow set up. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 a number of previous studies used the triple helix model to analyze regional innovation system (leydesdorff and meyer 2006; lengyel and leydesdorff 2011), and nation wide innovation systems (leydesdorff and sun 2009; leydesdorff 2018). the triple helix model has also been used to assess bi-lateral relationships between university and industrial partners (viale and campodall’ orto 2002; shinn and lamy 2006). however, there’s little empirical evidence on how the triple helix model unfolds in transition economies. therefore, this manuscript can provide more precise guidance on how to implement this model to achieve the desired innovation results in such settings. transition economies the european bank for reconstruction and development (ebrd 1998) uses the term “transition economies” when referring to those economies that were historically planned and ruled by power relations and bureaucratic controls. in such a setting, the state limited the opportunistic behavior of potential entrepreneurs and allocated the available resources providing little need for formal laws to regulate the exchange relationships between economic actors. consequently, property rights were protected and held by the state while individuals could use assets but do not own them. the state-owned enterprises (soes) were closely linked to the state and public administrations, which granted them direct financial support and preferential treatment. such planned economies were also characterized by paternalistic, soft budget constraints, and the state actively involved the soes in its central planning strategy (kornai 1986 and 2000; kornai, maskin and roland 2003a and 2003b). after the collapse of communism in 1989, a set of rapid-growth economies in central and eastern europe (the transition economies) steered towards liberalization, stabilization, and encouragement of privately owned enterprises to sustain the free market mechanisms. such a move towards http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 market mechanism generated a set of impediments and challenges that appeared during the transformation process (e.g. lack of strong legal frameworks, limited foreign direct investment) (estrin and wright 1999; devlin, grafton and rowlands 1998). consequently, the setting in which the adoption of the triple helix model and the creation of innovation ecosystems takes place requires a more detailed examination to study how value is created in such conditions. methodology for the purpose of this research, the case study method (yin 1981 and 2014) has been used to analyze the case of skolkovo innovation ecosystem, using this district as the main context of the study. the case study method is suitable when analyzing a case or set of cases that are relevant within the specific context of the study and as is widely used in social science research (yin 1981). to address the research question of this study, the research setting was required to fulfill several criteria. these criteria allowed to assess whether a given innovation ecosystems was in a country that could be classified to have a “transition economy” or not (ebrd 1998). that is, an economy that was historically planned and ruled by power relations and bureaucratic controls. the countries that could qualify for the study had to be formerly characterized by paternalistic, soft budget constraints; where the state was actively involved in the economy through state-owned enterprises; where a state had a strong central planning strategy (kornai 1986 and 2000; kornai, maskin, and roland 2003a and 2003b). consequently, out of the rapidgrowth economies in easter europe, russia was selected as the appropriate country for the research setting, and the skolkovo innovation ecosystem was selected as one of the best and most well-documented innovation ecosystem cases (nikina and piqué 2016). this article is empirically grounded on more than 1,100 data points of publicly available information and archival data that were published between 2012 and 2019 and included press http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 releases, annual reports, quotes, and presentations.1 analyzing the content of these data points, the objective was to explore and track the dynamics of three key dimensions identified in the triple helix model: government intervention, industry intervention, and university intervention in the development of the innovation ecosystem. therefore, out of the empirical data illustrating the history of the first seven years of existence of the skolkovo innovation ecosystem, this study looked to outline the most relevant interventions of the three key stakeholders of the triple helix model and identified at which evolutionary stage of the ecosystem each of them intervened. moreover, the composition of the board of trustees of the skolkovo foundation at its inception and its composition in 2019 is provided to illustrate the weight of the three main stakeholders in the main supervisory and control body of the innovation ecosystem. the key highlights and milestones of the empirical findings are presented in the following section, outlining the most significant interventions of the leading stakeholder during the period covered by this study. skolkovo innovation ecosystem in 2009 in his annual speech to the federal assembly of the russian federation, russian president dmitry medvedev referred to creating a modern and powerful research and development hub in russia similar to other world’s leading hubs such as the silicon valley in the usa. according to the president, the goal was to create an attractive environment for leading engineers, scientists, managers, and scholars to contribute to the economic and social development of the russian federation and the world. consequently, in 2009 the president issued an order “on the working group for the development of the project for creating a territorially isolated complex for promoting r&d and commercialization of their results.” 1 sk media center. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 hence, the history of skolkovo can be traced back to late 2009 and 2010, when a long path started since the skolkovo foundation initiated to build from scratch an innovation center with global impact. the primary mission of the skolkovo district was the creation of an ecosystem that would support the development of entrepreneurship and research. we cannot delay this any longer. we must embark on modernization and technological reequipment of the industrial sector as a whole. i believe, for our country, it is a matter of survival in the modern world. (dmitry medvedev, russian president, 2009) in may of 2010, the constitutional assembly of the nonprofit organization “the foundation for development of the center for development and commercialization of new technologies” established as managerial bodies the board of trustees (the supervisory control body), the foundation council (the supreme control body), and the role of the president of the foundation (the executive body). the board of trustees of the skolkovo foundation was led directly by the president of the russian federation, dmitry medvedev. it also included the following members: ivan bortnik (chairman of the supervisory board of the fund for assistance to small innovative enterprises), igor agamirzyan (ceo of russian venture company), yury osipov (president of the russian academy of sciences), vladimir dmitriev (head of the state corporation bank for development and foreign economic affairs, vneshekonombank), arkady dvorkovich, (member of the skolkovo foundation board of trustees), andrey fursenko (minister of education and science of the russian federation), elvira nabiullina (minister of economic development of the russian federation), vyacheslav volodin (first deputy chief of staff of the presidential executive office), sergey sobyanin (mayor of moscow), vladislav surkov (deputy chairman of government of the russian federation). the foundation council was headed by two co-chairmen: craig barrett, ex ceo of the intel corporation, and viktor vekselberg, president of the skolkovo foundation and head of the supervisory board of the renova group. it also included the following members: ratan tata http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 (chairman of tata sons), john chambers (chairman, ceo of cisco systems inc), esko aho (executive vice president of nokia corporation), vladimir rashevsky (general director, chairman of the management board of oaosuek), mikhail kovalchuk (director of russia’s science center kurchatov institute), martin bouygues (co-owner of the bouygues industrial group), vagit alekperov (president of lukoil), alexander galitsky (managing partner of almaz capital partners), peter löscher (president and chairman of the board of siemens ag), eric schmidt (executive chairman and ceo of google inc.), anatoly chubais (ceo of rusnano), anatoly aleksandrov (rector of bauman mstu). in june of 2010, russian president dmitry medvedev appointed viktor vekselberg as president of the executive board of the skolkovo foundation. on the 28th of september of 2010, federal law no. 244 came into force, initiating the project for the creation of the skolkovo innovation center. after establishing the managerial bodies, the implementation of skolkovo’s mission required establishing all the necessary procedures for awarding the status of a skolkovo project participant to all those technology companies who would qualify to obtain such status. consequently, in 2011, the skolkovo foundation developed and introduced its grant procedure, which allowed 70 companies working in skolkovo to receive grants to accelerate and implement their innovative projects. as a result, by the end of 2011, the number of innovative companies that received the status of project participants and could potentially be eligible for obtaining grant support exceeded 330, setting the goal for grant financing in 2012 to 6 billion rubles.2 2 average exchange rate 2012: $1 ~ 31 rub. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 in parallel to the grant system, in 2011 were also set the leading institutes of the innovation ecosystem including the skolkovo institute of science and technology (skoltech); the establishment of the technopark skolkovo; the intellectual property center; and the customs and finance company to provide a customs representative’s services to the skolkovo project participants. to establish the skolkovo institute of science and technology, the skolkovo foundation and the massachusetts institute of technology (mit) signed a three-year agreement with the goal launch a pilot education program in the fall of 2013 and a full-scale educational and research program in 2014. the agreement was signed by the skolkovo foundation’s president viktor vekselberg and president of the massachusetts institute of technology, susan hockfield. expansion of cooperation between the skolkovo foundation and the mit will be profitable not to russia alone. we are convinced that the world’s educational, research and innovation community will gain from it, too. (victor vekselberg, skolkovo foundation’s president, 2011) in terms of funding, in 2011, the skolkovo foundation received more than 3.4 billion rubles3 of private funding, dedicating about 2 billion rubles into the development of participants’ projects and the rest to the foundation of skoltech. at the end of the same year, world-leading corporations such as ibm, microsoft, nokia, ericsson, siemens, eads, and cisco (among others) also joined skolkovo’s ecosystem. furthermore, 13 partnership agreements were signed with russian and western companies, who agreed to establish their r&d centers on skolkovo’s territory. in 2011 skolkovo’s ecosystem also attracted 24 venture funds who committed 10 billion rubles and received their accreditation with skolkovo. all this financial support 3 average exchange rate 2011 $1 ~ 29 rub. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 confirmed by the end of 2011 the viability and efficiency of the innovation ecosystem, while skolkovo’s startups gained international presence. creating skolkovo is an important step towards modernization of russian economy and enhancement of technological innovations. we are proud to be part of this project. (steve ballmer, ceo of microsoft, 2011) in the period between 2010 and 2014, the goal of the ecosystem was to attract as many innovative projects as possible, increasing the awareness of the skolkovo project among the entrepreneurial, tech, and scientific communities. a series of events were organized by the skolkovo foundation to attract projects with great potential across all of russia. in february 2012, the skolkovo foundation visited the united kingdom to present to the british and international academic and investment communities the capabilities of the russian innovation center, following up on previously reached russian-british agreements in september 2011. in addition, in march, the skolkovo foundation organized the first international forum of russian specialists in the field of science and technology in cambridge, united kingdom, and during the same month, foundation’s president viktor vekselberg led a delegation from the skolkovo foundation to visit the silicon valley supporting united states’ interest in cooperating in innovation with russia. during this visit, a memorandum on russian-american cooperation in the field of innovation was signed, followed by an agreement between skolkovo foundation and cisco on the strategies for research and development and an agreement between skolkovo foundation and venture capital firm bessemer venture partners on cooperation. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 by 2013, the number of startups exceeded 1,000. in 2014 the skolkovo foundation awarded more than 1,4 billion rubles4 in grants to the most innovative projects. by 2015 the community of skolkovo startups surpassed the 1400 participants from 65 russian regions, and the revenue from scientific research of skolkovo’s resident companies increased beyond 43 billion rubles5 beating more than eight times the target estimate. by 2015 more than thirteen thousand new jobs were created, 149 participants declared successful sales in 40 countries, and 645 intellectual property applications were filed despite a decrease of private investments in the ecosystem that remained around 4 billion rubles. during the time of economic downturn, sectoral ministries and agencies increased their search efforts for promising technologies within the skolkovo ecosystem to incorporate them across national industries, increasing the number of public and private organizations within russia who either implemented or piloted technological solutions developed within the skolkovo ecosystem. among other highlights, a new r&d program was launched in the domain of agriculture seeking to support innovative projects in such areas as microbiology, forestry, horticulture, and animal husbandry. the skolkovo foundation also put an increased emphasis on extending its presence in the asia-pacific region, establishing cooperation channels with china and japan. the foundation also opened a branch at the campus of the far eastern federal university to bring closer the activity of the foundation to the ecosystems and countries in the asia-pacific region and organized the 33rd iasp world conference. by 2016 skolkovo became the largest technopark in eastern europe after six years of existence, including its laboratories, offices, and common use centers. about 40% of 1,600 received 4 average exchange rate 2014 $1 ~ 39 rub. 5 average exchange rate 2015 $1 ~ 61 rub. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 revenues from their business activities, proving their developments to be commercially successful. skolkovo also hosted a jazz festival, concerts, and sporting events and accelerated the construction of the skolkovo institute of science and technology’s new campus. by 2017, skolkovo exceeded its planned key performance indicators in all areas of its activity, reaching 1,800 startups projects that generated total revenue of 48.3 billion rubles6 attracted 7.9 billion rubles of investments, and created more than 30,000 jobs accumulatively. new laboratories and shared knowledge facilities were inaugurated, including the skbiolab (first russian medical hackspace and accelerator), where participants could engage in research in the field of biotechnology. under the leadership of viktor feliksovich vekselberg, the skolkovo team has made several quantum leaps. many skolkovo startups are already making money, which is the main goal of any business. many years of day-to-day work of this team allows you to evaluate what is done here. from the very beginning, we understood the risks associated with the transition from the research and development stage to products demanded by the market and consumers. our goal is to minimize these risks and make the path from the idea to its implementation as short and comfortable as possible. (arkady dvorkovich, cochairman of the skolkovo foundation council, chairman of the board of trustees of skoltech 2017) by 2019, skolkovo foundation startups surpassed 100 billion rubles,7 attracting 13 billion rubles of investments. furthermore, since 2019, legislation amendments have allowed any organization conducting research activities in russia to access the skolkovo innovation center’s benefits and services. the skolkovo institute of science and technology (skoltech) also entered the nature index “top-100 young universities” list. three new r&d centers belonging to tatneft, tmk, and sibur were opened at the innovation center. 6 average exchange rate 2017 $1 ~ 58 rub. 7 average exchange rate 2019 $1 ~ 65 rub. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 in 2019, the skolkovo foundation board of trustees was formed by: dmitry medvedev (deputy chairman of the security council of the russian federation, chairman of advisory board of skolkovo foundation); maxim akimov (ceo, russian post); andrei belousov (first deputy prime minister); ivan bortnik (advisor to the general manager, foundation for innovations assistance); denis manturov (minister of trade and industry of the russian federation); maksim oreshkin (assistant to the president of russian federation); maksim reshetnikov (minister of economic development of the russian federation); anton siluanov (minister of finance of the russian federation); alexandr sergeev (president of the russian academy of sciences); sergey sobyanin (mayor of moscow); valery falkov (minister of science and higher education of the russian federation); andrey fursenko (assistant to the president of the russian federation); maxut shadayev (minister of digital development, communications and mass media). the summary of this evolutionary process is presented in table 1. table 1. key events in skolkovo ecosystem evolution and leading triple helix agent intervining year event triple helix agent intervining 2009 announcement of creation of a modern and powerful research and development hub in russia state 2010 creation of managerial bodies: the board of trustees (the supervisory control body), the foundation council (the supreme control body), and the role of the president of the foundation (the executive body). state (board of trustees) industry (foundation council) 2010 appointment of viktor vekselberg as president of the executive board of the skolkovo foundation state 2011 creation of the leading institutes of the innovation ecosystem state 2011 provision of funding to skolkovo foundation state 2011 world-leading corporations join skolkovo ecosystem industry 2012 skolkovo foundation visits to the united kingdom and us, signature of russian-british and russian-american collaboration agreements state 2013 2016 sectoral ministries and agencies increased their search efforts for promising technologies within the skolkovo ecosystem to incorporate them across national industries state source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 skolkovo innovation clusters and technopark one of the drivers that attracted talent and industrial partners to move to skolkovo is technopark, skolkovo’s industrial park. the goal of technopark within the skolkovo project is to provide skolkovo project participants with support to develop their technological initiatives not only within russia, but also abroad. the technopark achieves its goal by providing a combination of infrastructures, facilities, administrative and financial resources to its industrial partners, offering a wide range of corporate services to fulfill the needs of the innovation ecosystem. overall, skolkovo’s technopark operated as a facilitator and fostered the interaction and knowledge exchange between firms, the public administration and the scientific community. the list of services provided by technopark included: consulting services; legal support; access to research equipment; access to skoltech’s scientific and technological know-how and to other academic and research partners; facilities to conduct startup incubation activities; interaction with venture funds and international investors; and access to other international industrial parks through its network of “technopark-alliance”. the strategic development plan of skolkovo’s innovation ecosystem also included five priority directions of modernization that were identified and divided into clusters: biomedical technologies, nuclear technology, information technologies, energy efficient technologies and space technologies. the goal of the biomedical cluster was to innovate with the goal of improving nation’s health and support the development of biomedical technologies. the aim of the nuclear technology cluster was to develop nuclear technologies to consolidate russian global technological leadership and defence capabilities. the role of the information technology cluster was to establish a network of r&d centers with universities and key industrial partners (such as boeing, microsoft, cisco, or intel). the goal of the energy cluster http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 was to support innovation and novel technological solutions that could improve energy efficiency of public utilities and infrastructures, and reduce energy consumption among industrial entreprises. the goal of the space and telecommunications cluster was to support the space sector to accelerate the modernization of the economy and provide effective scientific and technological progress to improve living standards while also helping to contribute to national security. starting from 2012, all the participants of the skolkovo innovation ecosystem, their business partners, and guests from abroad could meet at the startup village. the startup village was established as an annual event where startups from skolkovo’s clusters could meet with mentors and investors, large corporations, scientists, and government officials to discuss technology trends, and new ideas. the venue provided the opportunity to scout industrial partners from high-tech sectors, obtaining knowledge about emerging markets and new business models, and find supporting cooperation within the innovation ecosystem and the public administration. from a scientifical and educational perspective, the startup village provided insights on new, breakthrough technologies while also providing perspective on promising research areas and technological trends. from a governmental perspective, the startup village allowed to identify and communicate new technology requests and requirements of the public administration and introduce new governmental support programs to foster innovative activities. the triple helix model in transition economies the traditional triple helix model builds on the idea that the three core roles are represented evenly through the whole development process: the university provides new technology and scientific discoveries; the industry provides the connection between new inventions and the customers as they produce goods and services, and the state provides a reliable and stable http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 framework for interaction and knowledge exchange between the different parties. nevertheless, using the theoretical lens of the triple helix model (etzkowitz and leydesdorff 2000) to analyze the development of the skolkovo innovation ecosystem, this study reveals that for innovation ecosystem in transition economies, the three types of agents involved in this model, universities, the industry, and the state or public administration are not necessarily introduced simultaneously in the development process of the innovation ecosystem. the triple helix model of university-industry-state relations provides valuable insights on implementing interactive modes of innovation in developed economies (etzkowitz, 1983, 1998, 2003a, 2003b, 2004, 2008; ranga and etzkowitz 2013; leydesdorff and etzkowitz 1998; 1996; henry etzkowitz et al. 2000). nevertheless, out of the empirical case of the skolkovo innovation ecosystem in russia, a set of insights emerge, refining the triple helix. this study reveals some notable differences for the transition economies compared to innovation ecosystems in developed economies. first, despite the transformational efforts, historically planned economies ruled by power relations and bureaucratic controls are still strongly influenced by their legacy. this study shows that at its incipient stages, the state, the stateowned enterprises (soes), and public administrations are the ones who provide the initial financial support of such ecosystems. second, the state appears to undertake the leading role in establishing such innovation ecosystems by undertaking a very active role in attracting private funding (mainly from other state-related industry partners). this study illustrates that for transition economies, the highest synergies are achieved through significant government implication via sponsorship of innovation initiatives and international diplomacy. such setup assigns a secondary role to the universities that join the ecosystem at later stages of development. the university remains critical to aggregate scientific and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 technological knowledge, develop a local talent pool, and engage other stakeholders through research and development centers. however, in transition economies, the state and the public administration play a leading role in facilitating technological, scientific, and business exchange by implementing favorable policies supporting such activities. within the innovation ecosystem, scientific parks, incubators, accelerators, business angels’ networks, and venture capital funds get established before universities, leading to a more industry-oriented ecosystem. from a governance perspective, in transition economies, where the state and the public administration have a leading role, the capability of deployment and timely creation of the core urban infrastructure appears to be key to engage the industrial and scientific agents of the triple helix. delaying the construction of key infrastructure (e.g. university campus or research centers) can lead to an unbalanced development of the whole ecosystem. in such scenario, the state would need to undertake increased economical efforts (e.g. additional grant programs and expenses) to mitigate the lack of attractiveness of the ecosystem due to unfinished infrastructure. from an urbanistic and social perspective, state agents conceived skolkovo not only as an innovation ecosystem, but also as a prototype for the city of the future that could provide optimal conditions for business and research, increasing its environmental and urban attractiveness for its residents. skolkovo’s example illustrates that from an urban perspective, the development of innovation ecosystems can foster positive spillovers of innovation and entrepreneurship from a business perspective, while also contributing to increase the land value and wellbeing of local citizens. by providing amenities to its residents (e.g. jazz festival, concerts, or sporting events) and quality housing, innovation ecosystems in transition http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 economies can increase their value proposition to attract not only local but also international talent. finally, from an economic perspective, technology clusters’ strategy allowed skolkovo to build on its strengths by focusing and developing further the national pool of talent and expertise while being aligned with nation-wide strategic development interests. given the increased complexity of creating and developing innovation ecosystems in transition economies, aligning the scope and goals of technological clusters’ with the public administration increase the attractiveness for prospective industrial partners and facilitate the alignment of strategic funding requests within the state budget allocation. conclusions the first conclusion emerging from this study is that a series of stages can be observed in the evolution of innovation ecosystems in transition economies: scouting of best practices; conceptualization and adaptation to local needs; core infrastructure deployment; growth and generativity (when ecosystems’ dynamics allows to gradually reduce the involvement of state and governmental support). the identification of these stages allow better expectations management when assessing innovation ecosystems in transition economies. failing to understand these stages might lead to a wrong assessment of the innovation and entrepreneurial outcomes from the ecosystem. the second conclusion that emerges from this study is that transition economies might still experience legacy inertia when establishing the key governance and administrative bodies of their innovation ecosystem’s projects. such circumstances might still lead to unconscious bias in the decision-making processes and underrepresentation of other stakeholders. one of the most challenging endeavors when establishing ecosystems is to bootstrap them from zero when http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 the ecosystem is not built on an already existing infrastructure. even when resources are abundant, careful planning and prioritization are still required. to ensure that the ecosystem engages in favorable dynamics that would allow it to achieve generativity and sustainable growth, government representatives and public administrations should ensure that the first participants of the ecosystem could already benefit from it regardless of whether other participants are already present in the ecosystem or not. the third conclusion that emerges from this study is that innovation grants offered by the public administration to industrial partners might be an extremely appealing mechanism to achieve the ecosystem’s growth targets in the short term. however, in transition economies, the distribution of public funds for grant purposes should be kept on a lower level of priority when compared to the destination of public funds for the deployment of other essential ecosystem infrastructures such as university campuses or research facilities. missing to timely accomplish the deployment of the critical infrastructure within the ecosystem might delay the achievement of generative growth of the ecosystem, limiting the effectiveness of invested resources. innovation ecosystems are attractive while they can mantain their positive dynamics and captivating innovators and entrepreneurs who are willing to join them. skolkovo is a very young innovation ecosystem that is still in the process of deployment of its infrastructure and further research is required to assess more accurately its trajectory. nevertheless, its social, economical and scientific impact has already positively contributed to moscow’s region, russian society, and international cientific community, providing some hints of a promising future. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 references autio, erkko, martin kenney, philippe mustar, don siegel and mike wright. 2014. “entrepreneurial innovation: the importance of context.” research policy 43(7: 1097-1108. doi: 10.1016/j.respol.2014.01.015. bittencourt, bruno anicet, diego alex gazaro dos santos, and julhete 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(2003). dreaming with brics: the path to 2050. goldman sachs global economics paper, 99, 1-24. yin, robert k. 1981. “the case study crisis: some answers.” administrative science quarterly 26(1): 58-65. doi: 10.2307/2392599. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1016/j.respol.2006.09.016 https://doi.org/10.1002/asi.20997 https://doi.org/10.4337/9781788974783.00016 https://doi.org/10.1504/ijkbd.2019.098227 https://doi.org/10.5367/ihe.2013.0165 https://doi.org/10.1016/0048-7333(94)90042-6 https://doi.org/10.1016/j.respol.2006.09.024 https://doi.org/10.3152/147154302781781029 https://doi.org/10.2307/2392599 volume 7, number 2, 160-183, july-december 2022 doi.org/10.1344/jesb2022.2.j110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 yin, robert k. 2014. case study research: design and methods. essential guide to qualitative methods in organizational research. thousand oaks: sage (5th ed.). this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 1-5, july-december 2022 doi.org/10.1344/jesb2022.2.j104 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 montserrat pareja-eastaway university of barcelona (spain) https://orcid.org/0000-0002-4031-0949 josep miquel pique innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0002-4031-0949 districts of innovation in the world abstract the 20th anniversary of the innovation district of barcelona, the 22@barcelona, provides the rationale for this special issue. key actors in the academia, organisations and institutions from several innovation districts around the world, have joined this celebration project that has materialized in the collection of articles that conform “districts of innovation in the world”. the result is a unique compilation of experiences, analysis and evaluations that evidence the relevance of innovation districts as tools for urban, economic and social development but also as urban cores of production of technology and innovation. benefiting from years of exchange of ideas and mutual collaboration, this special issue offers, from an evolutionary perspective, an analysis of the transitions, adaptations and mutations that innovation districts have experienced around the world. keywords: innovation districts; urban transformation; technology; governance; triple helix; knowledge based urban development districtes d’innovació al món resum el 20è aniversari del districte d’innovació de barcelona, el 22@barcelona, justifica plenament aquest número especial. actors clau del món acadèmic, organitzacions i institucions de diversos districtes d'innovació d'arreu del món s'han sumat a aquest projecte de celebració que s'ha materialitzat en la col·lecció d'articles que conformen “districts of innovation in the world”. el resultat és una recopilació única d'experiències, anàlisis i avaluacions que evidencien la rellevància dels districtes d'innovació com a eines per al desenvolupament urbà, econòmic i social, però també com a nuclis urbans de producció de tecnologia i innovació. beneficiat d'anys d'intercanvi d'idees i col·laboració mútua, aquest número especial ofereix, des d'una perspectiva evolutiva, una anàlisi de les transicions, adaptacions i mutacions que han experimentat els districtes d'innovació arreu del món. paraules clau: districtes d’innovació; transformació urbana; tecnologia; governança; triple hèlix; coneixement basat en el desenvolupament urbà distritos de innovación en el mundo resumen el 20 aniversario del distrito de innovación de barcelona, el 22@barcelona es la principal motivación de este número especial. figuras clave del mundo académico, organizaciones e instituciones de diversos distritos de innovación de todo el mundo se han reunido para este proyecto de celebración que ha acabado materializándose en el conjunto de artículos que conforman este “districts of innovation in the world”. el resultado es una compilación única de experiencias, análisis y evaluaciones que ponen en evidencia la relevancia de los distritos de innovación como herramientas para el desarrollo urbano, económico y social, así como para configurar centros urbanos de producción de tecnología e innovación. apoyándose en años de intercambio de ideas y de colaboración mutua entre los autores de este número especial, ofrecemos desde una perspectiva evolutiva un análisis de las transiciones, adaptaciones y mutaciones que los distritos de innovación han experimentado en el mundo. palabras clave: distritos de innovación; transformación urbana; tecnología; gobernanza; triple hélice; conocimiento basado en desarrollo urbano. corresponding author: mpareja@ub.edu received 12 june 2022 accepted 13 june 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-4031-0949 https://orcid.org/0000-0002-4031-0949 mailto:mpareja@ub.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 1-5, july-december 2022 doi.org/10.1344/jesb2022.2.j104 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 like business organisations, cities are dynamic and resilient entities that adapt to the requirements of globalization and take advantage of new technologies. their resources, the private and public actors and the existing institutions shape the well-being of citizens and communities. economic growth and the creation of jobs have been at the core of their activities for decades. the increasing concentration of population and economic activity within their boundaries claims for actions that guarantee inclusion and sustainability, without losing competitiveness in the international scenario. despite the global goals, it is in the territory where actions and policies take place. 22@barcelona, the innovation district of the city of barcelona celebrates the 20th anniversary. the district is an example of resilience and transformation along time. from an evolutionary perspective, the 22@barcelona of the xxi century is a sample in the territory of the transformation of the economic system: the district has shown its capacity to accelerate and to slow down according to the macro scenario, to adapt to the changes of the dominant economic model to include new economic requirements, to accommodate a variety of key actors in the decision-making processes that affect its future and to modify obsolete administrative structures. in sum, the current district has been reframed without losing its essence to answer the existing challenges of the moment, with successes and accomplishments but also with conflicts and errors. innovation districts, areas of innovation, technology parks, strategic clusters… these are different urban approaches to produce areas devoted to knowledge creation by clustering organisations and other actors such as government, industry and universities. different academic models such as the triple helix model (etzkowitz and leydesdorff 1997) or the knowledge based urban development model (yigitcanlar and inkinen 2019) have pointed out http://revistes.ub.edu/index.php/jesb volume 7, number 2, 1-5, july-december 2022 doi.org/10.1344/jesb2022.2.j104 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 the needed factors that ensure a successful result in the territory that contributes to the urban competitiveness of a particular city. in the origins of innovation districts, the obsolescence of industrial areas or the extended unused brownfields or greenfield have often represented a catalyser for urban authorities to find out alternative uses related to new economy, where technology and innovation play a key role. in a similar vein, consolidated actors such as universities or established business organisations, have seen in the promotion of nuclear areas responsible for research and development, crucial sites to produce and transfer innovation. on many occasions, the location of these areas responds to traditional patterns of location: the proximity to central areas of the city, to large infrastructures and with easy access to the market are common characteristics. the shift of the economic activity towards peripheral locations in the second half of the xx century left obsolescent areas in central areas of the city that required the definition of a clearer pathway for the future. the processes to set up innovation districts in urban areas varies accordingly to several factors; the origin, the geographical area, the definition of the leadership role along the process, the resources and the institutional context are, among others, factors that contribute to the identity of a particular innovation district. despite the existence of a planned trajectory, external shocks such as the gfc in 2008 or the covid-19 pandemic in 2020, can alter the development of a project. the capacity of the district to adapt to these externalities will prove the resilience of the area and the transformation of crisis into windows of opportunity. as the economy is global, districts of innovation perform in a globalized network of flows and relations (engel 2022). technological innovations favour an extended network of connections, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 1-5, july-december 2022 doi.org/10.1344/jesb2022.2.j104 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 a global community of talent, where entrepreneurs, local incubators, venture capital investors, accelerators, research centres and mature organisations, among others, participate. the local ecosystem of innovation is a paradigm for the local-global relationship. as an international referent, 22@barcelona has strong connections with other innovation districts around the world. in fact, throughout knowledge exchange processes, the transferability of the model has contributed to imagine and reproduce other innovation districts that mirror partially or totally the features of the innovation district in barcelona. since its beginning, the 22@barcelona is involved at different dimensions (territorial, economic, social and governance) in knowledge transfer and mutual processes of learning with other districts. to evidence this global connection, this special issue has contributions from all over the world. based on the 22@barcelona experience, carina rapetti, montserrat pareja-eastaway, josep miquel pique and didier grimaldi propose multidimensional indicators to ensure the effectiveness of the measures adopted in the innovation district. patrick cohendet, richard chenier, laurent simon and lucy stojak analyse the experience of centech, a world-class incubator located in a cultural heritage building, the old planetarium, at the quartier de la innovation in montreal, canada. poh kam wong studies the developments of one north, the innovation district in singapore and the relevance of the voices of critical actors in its development. daria tataj, paul louis krutko and joan bellavista develop a new approach to areas of innovation as a network of co-located entrepreneurial companies and reflect the case of ann arbor spark as an example of a networked community. leonardo gonçalves, clarissa teixeira and josep piqué identify the role of ruta n as a success factor in the trajectory of the innovation ecosystem of medellín. alexander chekanov focuses on the skolkovo innovation centre to identify the role of actors associated to the triple helix model. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 1-5, july-december 2022 doi.org/10.1344/jesb2022.2.j104 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 marta fernández and tom bentley study social innovation in the early evolution of the melbourne innovation district. carina rapetti, josep miquel pique, aline figlioli and jasmina berbegal-mirabent apply performance indicators to the case of porto digital in recife and alessandra giglio hirtenkauf, kerem gurses and llewellyn d w thomas provide a district-branding analysis involving several of the case studies of the special issue. as a complementary input, the research note from jiwu wang explores the tsinghua university science park — tuspark — in china. despite the global arena for competition, geography still matters. the future of innovation districts is intertwined with the global transformation of the economies and the change of priorities and goals at the international scale. the inclusion of the agenda 2030 principles, mostly sustainability, digitalisation and inclusion, will pave the future evolution of local innovation systems around the world. references engel, jerome s., editor. 2022. clusters of innovation in the age of disruption. cheltenham: edwar elgar publishing limited. etzkowitz, henry and loet leydesdorff. 1997. universities and the global knowledge economy: a triple helix of university-industry-government relations. london: pinter. yigitcanlar, tan, and tommi inkinen. 2019. geographies of disruption: place making for innovation in the age of knowledge economy. cham: springer. doi: 10.1007/978-3-030-03207-4. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 josé lannes federal university of paraná (brazil) the growth and internationalization of gerdau group abstract gerdau group is a brazilian enterprise that has undergone steady growth since its first acquisition in 1948 of riograndense steel mill. it has achieved a global position that is internationally recognized. this paper’s proposition of five hypotheses to explain the growth of the gerdau group is based on penrose’s concept of growth and diversification, guimarães’ concept of the internal restriction of growth, chandler’s concept of strategy-structure, dunning’s competitive advantages relative to the oli paradigm and the resource base view model. the main results found were that the group is a capital unit in the process of growth. this growth is achieved mainly by means of horizontal integration. it also occurs by means of vertical integration. most of the integration takes place within the original specialization area, the manufacturing of long steel products. the company recently started a process of diversification, expanded towards new markets, and new technological bases. domestic growth occurred at a higher level than the domestic apparent demand, creating a bottleneck for future growth; thus, exports and fdi appeared as an outlet for the potential growth of the group. as a response to the strategy of growth, the group promoted structural changes, shifting from being a functional organization into becoming a multidivisional one, with increased decentralization but a global system of control developed internally was also present. the growth process was based on resources advantages that were internally created; mainly operational and financial processes constituted the ownership specific asset advantage. such engendered sustainable advantages were due to its rare resource conditions and the challenge of any imitation. foreign growth was mainly the result of market seeking, although it also occurred, to a lesser degree, by natural resources seeking, specific assets seeking and productive efficiency seeking, along with support and escape strategies. keywords: micro-business history: latin america; business economics; firm organization; firm performance corresponding author: e-mail: lannes@ufpr.br received 25 january 2018 accepted 24 april 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 introduction it was a hot summer month in february 1948 when waldomiro schapke became manager of riograndense steel mill, in porto alegre, brazil. schapke expected that the steel company would be instrumental in solving the wire rod supply problem that a nail factory he had been managing was having (oliveira 1999). the nail factory hugo gerdau was then and still today one of the largest nail producers in the southern region (baer 1970, 90). it was a metallurgical unit dependent on basic raw material: the wire rod that was transformed into nails by deafening machines blasting their syncopated pings and twangs. in the 1930s and 40s the wire rod domestic market had only two sources: the input purchases from belgo mineira, and imports (gerdau 2001, 14). under normal circumstances, provided no external accidents occurred, the nail factory was able to meet their supply utilizing either one of those two sources and maintain their cost structure under control. during difficult times, though, when wwi and wwii cut the international commercial lines, the enterprise was left with two options: either reduce production drastically, as it had done during wwi (lannes 2006, 135), or acquire the wire rod from belgo mineira, the locus of more than a half the national steel production during the wwii (baer 1970, 114). schapke had experienced in both situations, first as factory employee and the second as a shareholder and manager. the siderúrgica riograndense economic deterioration came in handy, opening an opportunity horizon, the steel market, that was not restricted to tapping into the raw material supply by vertical integration. neither waldomiro schapke nor kurt johannpeter, the gerdau family representative in the nail factory, had ever imagined that the core business of the family enterprise would shift from the nail to the steel business, or that the nail factory hugo gerdau would eventually become the http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 gerdau group, today a steel conglomerate and the 18th greatest steel producer worldwide (world steel association 2017). it is their entrepreneurial history that shall be told and analyzed here. the first section is about theory and postulates five basic hypothesis of growth and internationalization; the second is a short methodological note; the third deals with the firm’s growth in the national market and the creation of the familiar group; the fourth deals with the process of the group’s internationalization; and the fifth brings the author’s final comments on the entrepreneurial experience presented. theory and hypotheses edith penrose (2009, 104) established their theory of the growth of the firm through the diversification of activities, arguing that each firm has a particular technological base to serve different market areas, which is its current market. if the firm’s main objective is to grow, it must expand its sales revenue so that it can expand its productive capacity which requires investment. the main important source of investment financing is profit reinvestment (wood 1975, 4). in modern capitalist models, profit is represented by the return on investment, which is the result of the difference between sales revenue and total costs, divided by net equity (dunning 1993, 54). hence, return on investment is positively related to sales revenue and negatively to costs. the continuous interaction of the technological base with current market leads to the accumulation of knowledge concerning the conditions of its supply vis-à-vis response to demand. the discrepancies between supply and demand lead the enterprise to innovate, generating a pool of cost and competitive strategies (possas 1999, 69), so that the return on investment could, at least, not decrease. as strategy advantages are acquired, the firm can achieve profits the essence of the process of valorization of capital (macedo e silva 1999, 45). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 thus, the firm in a capitalist economy is a unit of capital valorization, which grows in expanded reproduction. to do so, it requires two attributes: a general office with exclusive competencies to determine the firm’s organizational structure and its competitive and expansion strategies, and a level of profits that could lead to investment decision (guimarães 1987, 14). once stablished, the firm creates productive and administrative processes based on routines that gradually create skills and abilities, developing internally-generated capacities and competencies (nelson and winter 1982, 74). such competencies, in turn, could result not only in an ownership-specific advantage (dunning 1988, 43) or a firm-specific advantage (verbeke 2011, 4), but also a sustainable and differential advantage (barney 1991, 102; prahalad and hamel 1990, 4). such strategies regarding the firm are designed for its technological base and its current market, together comprising the area of specialization of the firm, its core business. the area of specialization in turn affords the firm confidence to invest and, furthermore, shows the route to expansion, (penrose 2009, 111). as the accumulation of capital is derived from investment and its return after acceptance of the firm’s strategies by the market, those characteristics of capital valorization reveal that the limits of growth derive from the limits of capital and market, as expressed as the capacity of the firm “to finance the required investment for its expansion and the existence of the market for its growing production” (guimarães 1987, 14). the growth in a particular area of specialization is restricted by the difference between two rates, the potential of growth of the firm and of the market. when the former is bigger than the later, the firm must find other market areas in which to expand, with the same technological base or with a new one. when the national market is restricted for expansion, the world market http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 become a natural outlet for the potential growth of the firm, such as exporting products or capital (guimarães 1987, 150). as the firm grows because of its competitive, sustainable and differential advantages, the organizational structure must follow such growth, as well as the family culture embedded in such a changing environment. growing by vertical and horizontal integration and by creating distribution channels requires the management of all these activities; thus, the firm is forced to make the “three-pronged investment” in production, selling and management (chandler 1972, 14; 1994, 8). on the other hand, to compete successfully the firm acquires the idiosyncratic ability to recombine internal and external resources as a result of the interaction among family members and the business; during a transgenerational family process, family members acquire a deep level of firm-specific tacit knowledge when working in the business and living among the family from an early age (chirico and nordqvist 2010, 4), which contributes to generate stronger institutional values, according to the interrelations between firm, property rights and management (esparza aguilar, pérez de lema and gómez guillamón 2010, 14). to invest abroad, the firm must have some advantages, such as the dunning’s oli (ownership, location, and internalization) or verbeke’s definition of firm-specific advantage (fsa), internationally transferable or non-transferable (verbeke 2011, 4). it is further important to have some strategic objectives (market, resource, efficiency and strategic asset seeking, escape, support and passive investment)1, and phases of internationalization (from export to direct foreign investment), which characterizes the path of growth in foreign markets (dunning 1980, 1 even though cuervo-cazurra, narula, and un (2015, 25-35) proposed another set of motives – sell more, buy better, upgrade and escape –, the author maintain the original dunning’s motives, because if we have to change ideas due the change in the world and consolidate all the dunning’s motives into four kinds of motives we can consolidate them into only two motives, derived from the essential equation dunning recalled as the main reason of entrepreneurs’ decisions, that is, to augment the rate of return. the dunning’s proposition (1993, 56-63) helps us in disaggregating the firm pool of strategies to analyzed them. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 9-11; 1993, 56-63; 2000, 163-165). the growth process can be done by construction of new productive units, or acquisition of an existing enterprise, or merger with a competitor or a jointventure with a partner in specific markets or with a specific purpose (penrose 2009, 143; mangum, kim, and tallman 1996, 16). when abroad, with all acquisitions as subsidiaries, the headquarters could ensure, for each foreign unit, a good deal of freedom to take strategic decision. this is a subsidiary mandate that guarantees (or not) initiatives from the subsidiaries (birkinshaw 1996, 471; 1997, 207). since the firm-specific advantages, motives, phases, form and subsidiary governance are not predicted, we only can observe them ex post, because of the uncertainty economic dynamic and the existence of randomly events. from such extant theories, we have constructed five hypotheses: hypothesis 1: growth of the firm derives mainly from its area of specialization due to the interaction between its technological base and its current market; hypothesis 2: growth of the firm occurs in foreign markets when the firm’s growth rate is higher than the growth rate of the domestic market; hypothesis 3: growth of the firm changes its organizational structure and its values; hypothesis 4: internationalization based on barely differentiable product is the result of operational advantages internally created; hypothesis 5: internationalization based on barely differentiable product is manly market seeking. business history and sources this paper is a historical microanalysis of a capitalist enterprise in its social economic context (kula 1974, 139), that is, a business history of an individual firm (barbero 2003, 318) with a http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 limited scope based on the theoretical approach discussed in the previous section. it is based on gerdau’s institutional history (gerdau 2001), from which it ispossible to extract relevant data about several aspects of gerdau’s temporal evolution. we have selected the following unit of analysis (and its variables): technological base (productive technologies), the current market (pool of market areas), the growth process by horizontal and vertical integration (acquisition, merger, backward and forward integration), financial strategy (borrowing, stock market, relations with bankers), organizational restructuring process (organization structure) and subsidiaries mandates (mandate gain, mandate development, mandate loss), institutional values (family creeds), innovative and quality strategies (product specification, durability, line of products, brand, commercial channels), and the relation between the firm and state-owned institutions (fund searching). the recent temporal evolution is based on the published reports, especially the annual report and the u.s. securities and exchange commission’s form 20-f. specific historical aspects, such as the evolution of financial strategy, national expansion and internationalization, are documented by means of two interviews conducted with key employees. three other interviews available in the company’s documentation center, were also utilized. the balance sheets submitted since 1969 to the security and exchange commission of brazil, in rio de janeiro were used as a source for the financial and production data. finally, some data for the enterprise were collected from monographs by graduate programs in brazil. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 the growth of gerdau group in the brazilian domestic market the riograndense steel mill in porto alegre, one of the smallest steel factories in brazil in the forties (baer 1970, 90), was a minimill2. its technological base in that period was composed of a electric furnace for scrap fusion and a conventional casting and rolling system. both systems were operated manually. its technological dependency was related to the geographic location of scrap. the location of raw material supplies determined where the factory would be located. riograndense steel mill’s current market was thus the mechanical, construction and farming industries. these markets were the targets of its main products, such as bars, rebars and wires. the nail factory hugo gerdau acquired the steel mill in 1948, with funds from the enterprise, the gerdau family itself and from loans (gerdau 2001, 14). after the acquisition, one of the first measures taken was to adjust the factory to build a profitable cost structure (oliveira 1999). the factory operated at a technological lag. the steel mill processed 3 tons per charge from the electric furnace, 11 thousand tons of raw steel/year using a 3-megawatts electric transformer (gerdau 2001, 19) when furnaces and electric transformers with fivefold capacity had been available since the beginning of the twentieth century (madias 2014, 271). conventional casting, with liquid steel pouring into molds and subsequently demolded, and the rolling system, followed the technological parameters of this period. however, the main problem of the steel mill was the operational process, which was resolved by closing the factory for six months (oliveira 1999). the need for wire rod supply for the manufacturing of nail had to wait for a medium-term solution the installation of a drawing mill in the early fifties. the technical 2 technology of steel production based on electric furnace, using mainly scrap as raw material; it is differentiated from the integrated steelmaking, with a larger productive scale, dependent on iron ore and situated near mineral deposits, while the minimill, with smaller productive scale, can be localized in several regions of the territory where water, electric energy and scrap are available. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 improvement, however, created two new bottlenecks for the enterprise that led to an unbalanced growth cycle: on the one hand, the electrical infrastructure did not support modernization and factory growth; on the other hand, the rolling mill capacity was greater than the steel mill, creating unbalanced input flow and machinery idleness. the solution was the construction of a steel greenhouse (gerdau 2001, 23). between 1955 and 1957, riograndense 2nd was build. it stood 30km from riograndense 1st in the city of sapucaia do sul. for six years, it was possible to construct a minimill with a more modern steel mill, a continuous casting and a much more modern rolling mill (gerdau 2001, 24-6). the electric furnace was capable of producing five tons per charge, producing 18 thousand tons annually. despite that, it was not able to exploit the scale economy already existing in the industry capable of producing twice that capacity (walden and marincek 1957, 56). the rolling mill was a tandem type, which meant that it had a continuous cold rolling. the gains in productivity and quality were only achieved, however, by substituting the continuous casting with the conventional one. this was considered an early adoption of this technical progress, since the fact that back in the sixties, this system only accounted for three percent of the global rolling process (palacio reparaz and arana bilbao 2002, 118). this new mill created an unprecedented experience of a greenhouse steel mill construction, that embedded a singular characteristic of the group central board: the implementation of the best technologies and methods. this factory mill would still receive the investment capable of five times the steel production that, added to the farrapos mill production, favored the enterprise to overcome the level of 100 thousand tons produced in 1967 (vieira 2007, 339). after one and a half decades of steel mill operation under new management, the enterprise advanced its expertise in the area of specialization of long steel with state of art technology in http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 sapucaia mill and in the obsolete factory in farrapos. this approach characterized technological heterogeneity for which the company would develop an adequate management system in the future. the growth of the riograndense mill that took place over the course of a decade and a half under the control of the gerdau family was concentrated regionally in the southern part of the country, although the firm possessed distribution centers in the northern, northeastern and southeastern regions of the country (rosenfeld 1999). the second half of the fifties was the period that saw a national growth spurt in infrastructure and industrialization due to brazilian president kubitschek’s “target plan”, which concentrated the national economic dynamics in the southeastern region of the country (lessa 1982, 27; cano 1983, 227). at the same time, the economy in the southern state of rio grande do sul saw a reduction in growth with the end of capital accumulation based on small enterprise under the new framework of integration of the national market (herrlein jr 2002, 653). for the company, the strategy of growth meant the achievement of productive units in larger markets, be it by greenhouse or acquisition. the business opportunity in these markets appeared randomly. the mini-mill technology base was instrumental in accessing local markets employing small productive units and utilizing the local supply of scrap. this approach allowed for the reduction of production costs related to a large-scale production unit by utilizing local scrap collection as opposed to transporting scrap from all around the country. from 1967 on, the brazilian economy grew rapidly, following the global trend, with the aid of the development plans of the civil-military dictatorship. this cycle extended until the early seventies, when the oil crisis exacerbated the domestic crisis (bresser pereira 1984, 219). the 2nd national development plan announced in 1974 would maintain the national economy in http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 “forced march” (castro 2004, 30). major infrastructure works were in process, such as the hydroelectric power plant of itaipu (1975-1982), são paulo subway system (1968-1975), the first line), the rio-niteroi bridge (1969-1975), among others. this would expand the market for long steel in the brazilian economic center (vargas 1994, 178). in this context, in five years, the company acquired three industrial mills in smaller regional markets in the northeastern and in the southern areas of the country. a larger scale steel mill, the guanabara steel company (cosigua), capable of producing 250 thousand tons annually was built between 1971 and 1974, in the national economic center of the time, rio de janeiro. that was ten times the output of the sapucaia factory. the first successful attempt at stablishing a joint enterprise for the business was achieved with an association with the german thyssen, who brought the credit for financing the project. during this expansion period towards the brazilian economic center, the fourth generation of gerdau-johannpeter family fully entered the steel business; construction of the greenhouse of cosigua was a formative learning experience for the four brothers that would be at the helm of the enterprise growth until the end of the century. by then, the company had already become a group, the gerdau group (gerdau 2001, 42-66). during the eighties, when the brazilian economy stagnated, the privatization of the national steel industry followed the international trend of privatizations. this opened opportunities of growth for the group that extended for the nighties. the group faced great competitors, such as nippon steel and arcelor (paula 1997, 94; crosseti and fernandes 2005, 157n). it took advantage of privatization, enlarging its horizontal integration to consolidate its regional market share in the northeast and south, expanding its market share in the southeast. gerdau’s current market was still increased within its area of specialization, long steel products, achieving the production level of two million tons by the late eighties (gerdau 2001, 171-187). the great shift http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 arrived with technological diversification: when gerdau entered the market of special and flat steel. the acquisition of piratini fine steel, in 1992, in the southern region, marked the company’s entry into the reduced market of special steel (gerdau 2001, 188). such a steel factory was somewhat technologically different, due to the inclusion of ladle refining in the steel mill. this difference determined the dependency on new inputs, such as metal alloys, and a more specific workforce with experience in ladle metallurgy. but the great jump was gerdau’s entry into the flat steel market, with the long and laborious acquisition of açominas. this process lasted six years. in 2003 açominas was finally integrated into the group (gerdau 2001, 176; gerdau 2003c, 10). however, in this case, the technological diversification was total, due to the shift to other steel productive routes, the integrated steel mill, with a blast furnace, basic oxygen furnace, casting and rolling slabs and rolled coil. such technology determined new dependencies on inputs, such as iron ore, coke and limestone (palacio raparaz and arana bilbao 2002, 39). in the late nineties, after achieving the global production level of five million tons of crude steel (vieira 2007, 339), the group’s growth in the national market was almost none, with the exception of the acquisition of villares steel, and the horizontal and vertical integration in the integrated steel sector. villares was a major special steel producer in brazil. it was indirectly acquired when its owner, the spanish sidenor, was purchased (lannes 2013, 19). in 2000, gerdau group was responsible for half the national production of long steel, its core business. it was about to monopolize the domestic special steel market and it started to take on the competition in the national flat steel market, which was 70% bigger than the long steel market (gerdau 2000b, 17; wsa 2002, 54-55). because of such a great amount of market share, http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 gerdau started to face legal impediments to growth issued by the administrative council for economic defense (cade) in 1995 (pinho 1995, 28), leading the group to escape investment related to long steel market areas domestically. with such growth achieved by horizontal integration, the group felt the pressure of low cashflow and gradually higher costs. from 1967 to 1970, when the national economy grew 10% per year, the group’s steel production grew at the annual rate of 30% and its current assets at a yearly rate of 13% (pib, gerdau 1969-1970), thus creating the need for a larger amount of working capital and current liquidity; for this reason and in order to meet the increased demand due to the “economic miracle” euphoria, guaranteed sales were needed. the group then created its merchant channel, commercial gerdau, a distribution network gradually dispersed across the larger regional center where steel consumers were concentrated. in the beginning, it also served the role of scrap buyer. in the eighties, with more mills in operation, the group invested in downstream operation of construction products ready for use, adding value to the main product, but compensated to the client for the productivity gains in construction. in 1989, the group created the steel cutting and folding service centers (armafer) (gerdau 2001, 80, 255), a new market area by reinforcing forward integration. on the other hand, the enterprise’s national accelerated growth during the seventies, when its production grew by a factor of six (vieira 2007, 339), made it vital to think about cost, mainly goods direct costs, including the cost of electric energy and raw materials. in the early seventies, the brazilian energy matrix had only 18% of electricity, while wood and vegetable coal accounted for 32%, and 38% by oil (pinto 1990, 77). foreseeing the possibility of energy shortage, the group created a reforestation enterprise, in 1971. in the next decade they began to produce wood. the scrap was the fundamental raw material of its technological base and was http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 already scarce in the southern region of the country, when the group decided to accelerate its growth in the seventies. at the end of this decade, such scarcity caused the enterprise to have to be supplied with pig iron, a dearer raw material (vieira 2007, 91). it was necessary to seek out other regional scrap sources, so, in 1980, the group created scrap gerdau to collect and process scrap, replacing commercial gerdau’s outsourcing. this processing is a fundamental requisite for liquid steel quality. when açominas was acquired, the group decided to acquire in the 2000’s a pig iron producer in the northeast of the country, since its technological base required the iron ore and pig iron as raw material. gerdau went on to purchase iron ore reserves in the southeast, whose exploration in the 2010 exceeded the firm’s necessity. gerdau then began to sell the surplus on the marketplace (gerdau 2003c, 2; 2007c, 5; 2009c, 6; 2011c, 5). the vertical integration caused the group to conglomerate, enlarging the technological heterogeneity and imposed more quantity of financial resources. the group could rely on the financial expertise of its president, the entrepreneur and original member of the gerdau group, kurt johannpeter, also a former auditor of deutsch überseeische bank in latin america, from the 1920s through the 1940s. he took over the family business, by way of marrying helda gerdau – the third-generation member of gerdau family and owner of one third of the nail factory – and by the bank closure after the world war ii. the acquisition of riograndense steel and the greenhouse construction of sapucaia factory required a considerable amount of financial resources drawn from their own funds and loans at market interest rate. to reduce financial cost, the group decided to participate in the stock market in the early sixties, when it launched its ipo (gerdau 2001, 85). at the same time, the group prepared to access international resources, and to achieve this it gathered the best minds available on the market. this is the gerdau way of innovating. from 1977 to 1981, as financial http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 director, and from 1982 to 1990, as financial advisor, the group hired a financial executive with extensive experience in the financial area. he served as president of two development banks: brde and badesul. he was also a former central bank director, whose job inside gerdau was to introduce the group to international financial centers, in europe and united states (burguer 2006; crp 2012). the group conglomeration went into the financial market in the nineties, with the creation of gerdau bank. it served the purpose of centralizing the group’s current assets financial operations – credit to customers in trade accounts receivable – and current liabilities – credit from outsourcers in trade accounts payable. with its internationalization, the search for cheaper resources to finance its foreign growth brought the group to the new york stock exchange in 1999, and to europe, via madrid stock exchange in 2002 (gerdau 2001, 209; 2002c, 6). the growth strategy that propelled a single steel mill in porto alegre to become a vertical integrated steel conglomerate required a structural change. for two and half decades, the group possessed a centralized management structure, run by executive committee where the gerdaujohannpeter family members and hired executives participated. during the 1970s expansion, new legislation concerning stock corporations was passed – law 6404, of december 15, 1976, which made it obligatory for the company to have a management committee with deliberative attributions. it also imposed the separation of the strategic management and the executive management. these, growth and law, pushed for a more decentralized organization, more regionalized and more concentrated on the productive apparatus. to that end, the group established several boards: a) the administrative board for the strategy functions and pertinent deliberations, b) the board of directors that would perform operational work and be responsible for the three regional centers – south, southeast and northeast – and c) the management of http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 factory and commercial units, each unit possessing its own management structure: production, commercial, finance-accountability-control, human resources. each of these units had its own intermediate-level manager (gerdau 2001, 96). such structure was later kept maintained only at higher-level management: the administrative board and the board of directors. the organization structure below this level changed over time as a result of growth dynamics. table 1. gerdau assets steel plants and other units from 1901 to 2010 year company region form of investmet 1901 fábrica de pregos ponta de paris south a 1948 siderúrgica riograndense south a 1957 usina riograndense ii south g 1969 siderúrgica açonorte northeast a 1971 comercial gerdau southeast g siderúrgica cosigua southeast jv a 1972 laminação guaíra south a d 1974 siderúrgica alagoas northeast a 1981 metálicos southeast g siderúrgica cearense northeast g 1983 usina guaíra south g 1985 siderúrgica hime southeast a 1986 usina siderúrgica paraense southeast a 1986 cia. brasileira de ferro southeast a 1988 siderúrgica barão de cocais southeast a 1989 siderúrgica usiba northeast a 1991 cosinor northeast a 1992 aços finos piratini south a 1994 siderúrgica pains southeast a laminadora são josé dos campos southeast a 1997-2001 açominas southeast a 2003 maranhão gusa s.a. northeast a reservas minerais southeast a 2005-2006 usina são paulo southeast g 2009 maco metalúrgica southeast a abbreviations: forms of investment: a-acquisition; g-greenfield; jv-joint venture; m-merger sources: gerdau 2001, 2001a-2010a; compiled by the author the conglomeration enlargement in the eighties changed the management organization; the emphasis on the productive units, that is, in the operational processes, was modified by an emphasis on the market, that is, focusing on sales channels, because of the group’s capacity to http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 segment its customers. business units were created for each of eight commercialization areas: construction, industry, farming, nails, metallurgical products, special steel, export and distribution (pinho 1995, 32). the business units in this period constituted the main source of the capital valorization process by direct contact with the demand in each market area. the market would signal to the productive and support units what, how much, and when each type of product must be produced. the group made a 180-degree change in its competition strategy during the 1980s. this approach was the result of a slow innovative process, originally planned in product and finally in processes, acquiring the best available knowledge in the market. in the sixties, when the group started to expand nationally, the technological heterogeneity of factory units brought operational problems that led the group to create an internal section of operational engineering to search for solutions for technological and processes problems, from the intermediate management level to the productive floor. the first knowhow import was the hire of retired north-american engineers specialized in the steel mill to resolve operational problems. from this interaction, a training program was created in the seventies, the gerdau engineering section (seg). its goal was to analyze manufacturing problems and develop its own technological knowledge and diffuse it among the productive units. the next knowhow import was the association with japanese steel enterprises – funabashi steel and nippon steel – specialized in minimill technology; from such partnership arose the concern about productive and process quality. this culminated in the consequent inner implementation, although slowly, of the pdca methodology, which encompassed even the factory floor, creating service cells (santos 2001; sommer 2006). over three decades, the group developed its own operational management capacity, which constituted an ownership asset advantage or a transferable fsa (lannes 2008, http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 387). this series of techniques allowed the group to manage the technological and process diversity of its production units. at each horizontal expansion by acquisition, the group internalized yet another management system inherited from each steel mill it had acquired. it was out of necessity for a uniformity pattern and the need for the continuity of quality management that the group created the management process, from which emerged a more unified management system in years 2000: the gerdau business system (gbs), which “capture, consolidate, and diffuse the enterprise best practices in its processes” (gerdau 2013a, 13). for the foreign units, the headquarters were able to ensure some growing degree of liberty in the subsidiary mandate, as the gbs provide the parameters to be reached by such units. during the group growth, the family members that were part of management instilled values that led the firm strategies; such values were established by the chief executive, kurt johannpeter, over the three and half decades of his term at the company’s helm. in 1986, after his death, the values johannpeter handed down were institutionalized as gerdau creeds: “sincerity and plain dealing with everybody, profit as the measure of performance, secure growth on a sound basis, and people as the basis for business efficiency”. in 1998, new values were added: “outstanding quality products and services; satisfied customers; and selffulfillment” (gerdau 2001, 234). this company culture brought both advantages and disadvantages to the group. safety and soundness were a hallmark of the group’s financial performance, causing it to become more indebted during the period of high expansion, returning to its original level of 40%, when expansion was decelerated (gerdau 1969-2010a). on the other hand, the nature of company’s relationship with the workforce was mediated by its concept of people: the value of profit as the measure of performance is the result of people’s efficiency, the group inner public, who rely on improved working conditions, stimulus and http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 support to their families. this support requires the company to supply services and assistance to employees and their families in areas such as health, housing, food, transport, education, sport, and leisure (gerdau 2001, 88). in order to achieve higher efficiency on their employees’ part, the company, inspired by its own values, took it upon itself to provide them with public services. these employees are not seen as mere members of their workforce, but as collaborators. as a result, the struggle between capital and labor does not exist in these institutional values. therefore, it has been difficult for the group to understand the trade union, the claim that capital and labor do not cooperate, that the union has to monitor labor practices and their remuneration, which includes the existence of union organization inside factories. the clash between company and union cultures led to the outbreak of a workers’ movement inside several factories that culminated in the creation of a global workers association, originally called workers of the gerdau group, in 1998, which ultimately became the gerdau workers’ world council, created in porto alegre in 2006 (gray 2009, 85, 124). such national growth was bolstered in part by support by the state. whether creating demand, or by supplying credit, the federal government has always directly influenced the steel industry as a whole and the group in particular. the two great jumps in growth, which involved not the acquisition of rival companies, but the greenhouse construction of new factories, was partially funded by national bank for economic development, the public long-term investment bank created in 1952, during president getúlio vargas term (gerdau 2001, 26, 47). investment in brazilian infrastructure, derived mainly from the 2nd national development plan (ii pnd), was heavily invested in hydroelectric power (batista 1987, 70). this policy secured effective demand for the steel industry, from which the group was benefited, supplying steel not only for http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 the itaipu power plant, but also for the construction of são paulo subway system and the construction of the rio-niteroi bridge. the internationalization of gerdau group before exhausting the possibility of expansion in the national market, the group started seeking markets abroad, for overcome to operate with overcapacity. in the seventies, it started to export goods, the first step in internationalization. the second step would be export capital in the form of foreign direct investment (fdi). since it was a completely new territory for the firm it would require a previous knowledge, so that the group could acquire the capacity to conquer another dynamic center, the united states’ economy, the second major steel demand in that moment (world steel association 1982, 36). the predominant form of fdi in foreign factories accounts for 37 acquisitions, and eight joint-ventures, one of which by greenhouse construction, three by merger and one as shareholder (table 2; lannes 2014, 148-149). such foreign expansion was broken down into three phases. the learning phase, which lasted for a decade, lasted from the beginning of the eighties to the beginning of nineties, when the group acquired assets in uruguay and canada. the second phase comprised the start and consolidation of the entry in the american markets, which peaked with the entry into both the united states’ steel market, and the latin american markets. the third phase was the recent expansion outside america continent, impaired by the 2008 economic crisis. the group had the perspective of its own capital internationalization since the beginning of its own goods’ exports, with the uruguay being one foreign market for its ingots. in 1980, when the commercial branch learned of a client’s intention to sell its factory, laisa steel, they acquired it. it proved to be an asset that came in handy. being located in uruguay, this factory was closer to the company’s headquarters in porto alegre than it was to the brazilian economic http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 center. it fully fit in the group’s plan to experiment on how to act in foreign environments, because of idiom, customs, labour relations, and so on; simply put, due to the broader conditions that the foreign world presented (gerdau 2001, 164-165). since the group needed to learn, the management of the acquired firm was completely controlled by the headquarters, a center-controlled mandate. it was a micro steel factory, with a seven thousand tons of steel production capacity, run annually by an obsolete technology. the former capacities acquired by the group: technical reforms, technological modernization and goods improved were transferred to this first fdi, seeking for the results with this experiment, characterizing internationally transferable fsas that would create another fsa that would also be transferable later. this highly educational experience shaped the executives who would be involved in the acquisition of a canadian steel factory, an entry gate for the north american market3. the second fdi was the acquisition of courtice steel, in 1989, almost a decade since the uruguayan experience (gerdau 2001, 159). the group advanced its own learning process, since it would operate a workforce with a different language and culture from their headquarters in brazil. from there they would deal with the correction of operational management and control labour conflicts derived from union pressure. the group started a shift in the governance pattern, maintaining the original executives in their management places, including the former ceo, who would share the management with brazilian executives who had trained in uruguay and new executives who would start their own learning experience in a new context. among such beginners were fifth generation members of the gerdau family, which would eventually run the group. a major mandate liberty was secured by the parent firm. 3 so, this fdi had not a market seeking objective, since the uruguayan market was already supplied by gerdau’s export, as expressed by barbosa (2004, 98). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 i characterize such a phase as a learning phase, since it was during this period that brazilian executives learned different styles of management of the already known technological base and established a relationship with distinct workforce, managing cultural and union conflicts, more than merely seeking market; it is more appropriately characterized as strategic-asset seeking, especially in canada, sharing capabilities with native employees4. when the group acquires assets in south america and canada in the early nineties, gerdau had a great steel market at its disposal. the apparent use of crude steel in america in 1990 was 143 million tons and it was estimated that nearly 37% was the long steel demand. gerdau would reach a production level of 2.4 million tons that year (wsa 1993, 54; 1998, 78-79; vieira 2007, 339). the long steel market in north america was seventeen times of the company’s production; south america’s was five times bigger. by the end of the century, the group would expand strongly into these two geographical areas, focusing its expansion in the united states’ economy, since its biggest market in the americas would allow for a greater diversity in the forms of growth. the latin american expansion coincided with the strong growth of the regional apparent steel demand since the late eighties. the demand jumped from 15 million tons in 1989 to 35.7 million tons in 2000 (wsa 1991, 41; 2001, 85), more than doubling in size in one decade. the group succeeded in entering in three south american economies with a market share above 15% before its great global competitors: chile, colombia and peru. in the other economies, argentina, méxico and venezuela, that had an apparent annual steel demand level above three million tons, the entry was marginal. the market share in those markets did not surpass five 4 as opposed in part to barbosa (2004, 99), which emphasized only the market seeking objective. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 percent, since its global competitors came in early into these markets (azpiazu, basualdo, and kufas 2005, 100; soto flores and solé parrellada 2001, 100; giacalone 2008, 14). when seeking markets in latin america, the group took the same mini-mill technological route, that is, to produce long steel, maintaining its growth inside its historical specialization area. such condition would change with the entry in the united states steel market. because of the size of its market, the possibility of diversification to other technological bases and other market areas became reality. before this event, a fortuitous experience caused the group to ingress in a new market area and bring to the company a totally new system of governance, characterizing this fdi as specificasset investment, not sought. manitoba rolling mills (mrm) was a canadian mini-mill in a market niche of long steel for the rail industry, agricultural machinery and elevator guides. the group was unaware of the existence of mrm up to this point. it was a medium scale factory, modern, with good financial indicators. despite that, its executives did not see how competition could be faced without the support of a great steel group; thus, in 1995 mrm executives reached out to gerdau with a proposal that their assets be acquired by the group. gerdau incorporated yet one more management system and, since mrm produced such positive outcomes, the group granted plain mandatory to local managers. the group would deal simply with the human resources interchange for the system integration with the headquarters system (gerdau 2001, 201; sommer, 2006). with this plain mandate, gerdau mrm was established in 1995 and in 2000 entered into two joint ventures for market niches, the trailer i rebar and guide elevators (gerdau 2002b, 49)5. 5 again, it is opposed to that quoted by barbosa (2004, 100) because, rather than a merely market seeking, mrm was a learning school for new form of governance, which, consequently, brought a new market niche. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 in 1999, the group finally entered the united states steel market, with the acquisition of the third biggest long steel producer, ameristeel, which consisted of four steel factories and eighteen service centers for cutting and bending bars. this acquisition put to the test the group’s expertise in financing its own acquisition: 88% of loans in a medium term (lannes 2005, 358). three years later, another fortuitous fact: the fourth biggest canadian steel producer and the first in mini-mill route, co-steel, proposed a merger to the group, which increased its canadian steel market share two and a half times, from 8,2% to 21,4%, only with stock exchange (gerdau 2003b, 7; lannes 2014, 157). from this point on, the group grew in the united states, acquiring two of the three biggest long steel producers, north star in 2004 and chaparral steel in 2007 in addition to other smaller steel producers, consolidating itself as the second biggest long steel producer in this country6. chaparral’s acquisition showed the gerdau’s financial expertise, another internationally transferable fsa: 7% of this investment was cash (susin 2009, 56). in 2007, the group acquired the second biggest special steel producer, excluding stainless steel, the macsteel. from 2004 to 2008, it expanded its secondary steel processing in the center of the united states by acquiring six services centers. in the same period, it reinforced its scrap supply by acquiring two recycling units in united states and one in canada. as the group acquired new factories in long and special steel production, it extended itself vertically to unsure enough demand and raw material supply, a support investment. the conquest of the western market was achieved by means of the acquisition of pacific coast steel, a supplier of steel structures for infrastructure constructors (gerdau 2014a, 19; lannes 2014, 158). over the span of one decade, the gerdau group stablished itself in the united states steel industry, with a strong presence in the long and special steel markets, by horizontal and vertical integration. 6 with 15% of the raw steel capacity in the long steel industry sector, nucor accounted 20% in 1996, according to hall (1997, 367-375) data. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 north american operations reached the maximum group total production level of 46% in 2005, the year when all foreign operations reached half of group total production. out of the 29 million tons of long steel total produced in north america in this year, the group was responsible for a fifth of that: 6 million tons. the gerdau group became then one of the most internationalized enterprise in brazil (wsa 2008, 42; gerdau 2005c, 1; kpmg 2008, 12). table 2. gerdau main fdi in steel plants and other units from 1980 to 2016 year company country technological route form of investment 1980 laisa uruguay eaf/r a 1989 courtice canada eaf/r a 1992 indac/aza chile eaf/r a 1995 manitoba rolling mill canada eaf/r a bradley steel canada jv 1997 sipsa argentina r a 1998 sipar argentina r p 1999 ameristeel united states eaf/r a 2000 sss/mrm canada jv 2001 birmingham united states eaf/r a 2002 co-steel canada/us eaf/r/tsc m/jv 2004 north star united states eaf/r a 2005 diaco colombia eaf/r a 2006 sidenor spain eaf/r a gsb spain eaf/r a sheffield united states eaf/r a pcs/bay area united states eaf jv/a siderperú peru bf/bof/eafr a 2007 chaparral united states eaf/r a sizuca venezuela eaf/rl a inca dominican republic r jv sidertul mexico bf/bof/r a 2008 sjk steel india bof/r jv corsa mexico eaf/r a estructurales mexico eaf/r jv/g ccaa guatemala eaf/r a macsteel united states eaf/r a 2010 tamco united states eaf/r a abbreviations: technological route: bf-blast furnace; bof-basic oxygen furnace; eaf-electric arc furnace; r-rolling; tscthin slab caster forms of investment: a-acquisition; g-greenfield; jv-joint venture; m-merger. sources: gerdau 2001, 2001a-2010a, 2001b-2010b; compiled by the author after a half decade of rapid growth in north america, the group started to seek other continents and other markets. in 2006, it gradually acquired the biggest special steel producer in spain, http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 sidenor, enabling its entry into the european market. the group dominated the special steel market share in brazil by acquiring sidenor’s assets. in 2007, the group started operating in india, through a joint venture process (lannes 2014, 158). the 2008 global economic crisis put a brake on the group’s expansion, when the group were the 13th largest steel enterprise in the world (table 3). the reduction in sales revenues and the reduction in the return on investment would lead not only to a reduction in investment, but also an increase in disinvestment. table 3. the biggest world steel producers, in million metric tons, 2008 arcellormittal nippon steel baosteel posco hebei steel jfe wuhan steel 103.3 37.5 35.4 34.7 33.3 33.0 27.7 tata steel jiangsu shangang u.s. steel shandong steel nucor gerdau severstal 24.4 23.3 23.2 21.8 20.4 20.4 19.2 source: (world steel association 2017) in nearly three decades of internationalization by fdi, its production grew seventeen times over, reaching the level of 19 million tons in 2008. (it has stagnated ever since). in 2009, the net sales decreased 37%, at current prices, and only would resume its former level a half decade later. it would do so by a decelerating rate, so that the sales would decrease again in 2016. meanwhile, direct sales costs increased more than sales values, decreasing the profit gross margin, thus threatening the group performance. with values above 25% from 2000 to 2008, such margin decreased quickly since the crisis, reaching 9.2% in 2016, pushing down the net profit margin to nearly zero. net profit margins went from 10% in 2000-2008 to 0.1% in 2016, not accounting for the cost of impairment of assets, since it put a consolidated loss to the group in 2015 and 2016. the return on investment, measured by the return on equity, dropped from 40.1% in 2006 to 4.6% three years later and -19.1% in 2015. steady growth was threatened by this new economic scenario and in 2015 the group announced the 2022 gerdau project, whose main objectives were to simplify internal processes and structures, to modernize the group’s http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 culture, to reevaluate the performance of all its assets and to develop new business opportunities. this was the remedy against the crisis, whose cycle was not over yet. by reevaluating its assets, in 2016 the group began a process of equity reduction, selling sidenor in spain, corporate interests in guatemala and honduras, mineral coals operations and deposits, in addition to one steel factory in colombia and some mill factories in united states (gerdau 2000a-2016a; 2015c, 9; 2016c, 37). in 2017, the group announced the separation between capital property and management (gerdau 2017). the fifth familiar generation would retire from the executive tasks on the board of directors, concentrating its effort on the administrative board. the new executives of the board of directors were coached in-house, who were trained within the group entrepreneurial culture, which allowed and would allow the appearance of inner management services necessary to grow. final comments despite the recent crisis, the gerdau steel group has had a history of the growth since the acquisition of the first factory in february 1948. the production of long steel was the company’s specialization area and its core business. it grew by horizontal integration for three decades, based on acquisitions, after which vertical integration started, when it needed new raw materials and markets. after five decades of growing at a yearly rate of 11% when the local market grew at only three percent, the potential for growth resided in exporting to foreign markets and fdi (hypothesis 2). the group’s internationalization effort accelerated in the first decade of the xxi century after nearly two decades of gathering know-how through foreign acquisitions. this endeavor was rewarded with increased market shares in both the united states and latin america. even http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 though the group has merged and engaged in joint ventures a number of times, most of its growth is mainly attributed to acquisitions, revealing the importance given by this family group to maintaining total control of its capital management. since the nineties, the group has added special steel and flat steel to its specialization area. the former has enabled them to ingress the international market and the latter the domestic market. whereas the technological base was little impacted by the implementation of special steel production, it was the flat steel production that completely changed the productive base. it was the implementation of integral steel production that would increase its verticalization. despite its accelerated diversification to other specialization areas, the original area still maintained 70% of the group productive capacity (gerdau 2016b, 49) (hypothesis 1). to each step in the growth strategy corresponded a necessary change in the administrative structure and values. the company shifted from functional to multidivisional structure, exercising a global system of control that would allow more decentralized decision making, resulting recently in the family decision to depart from positions in direct management. the group strategy to incorporate distinct management systems from acquired firms contributed to the separation of capital property and management which allowed distinct mandatory grades to subsidiaries, monitored by the global system of control. furthermore, the firm’s values were upgraded, despite the fact of contradictions with workforce (hypothesis 3). the group expansion into the global steel market was possible because of internal cumulative competitive advantage created in the process. some of these advantages seemed to be the source of operational and financial management competitiveness. the first allowed for the creation of operational know-how expertise in the original steel specialization area, manly in process procedure. the latter allowed for access to alternative sources of funds, that is, the group went http://revistes.ub.edu/index.php/jesb volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 from utilizing the financial system to being in the stock exchange market. such advantages are idiosyncratically built, rare and imperfectly replicated, the ownership specific asset and externally transferable fsa (hypothesis 4). since long steel is a product with low possibilities of differentiation, the firm sought markets to increase production scale. in some situations, it did seek natural resources, withdrawing from those markets when the expected results were not produced. colombia was one of those markets. in united states, it sought support and specific assets. spain included seeking specific assets, but it was later discarded. some assets located in peru and in argentina helped improve operational efficiency however these weren’t predominant factors in their acquisition (hypothesis 5). references azpiazu, daniel, eduardo basualdo, and matías kulfas. 2005. la industria siderúrgica en argentina y brasil durante las últimas décadas. buenos aires: federación de los trabajadores de la industrias y afines (fetia). baer, werner. 1970. siderurgia e desenvolvimento brasileiro. rio de janeiro: zahar. barbero, maría inés. 2003. “business history in latin america: issues and debates. in business history around the world, edited by 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(former director of brazil central bank and former financial director of gerdau) interviewed by the author. tape recording. porto alegre, may 26, 2006. cano, wilson. 1983. raízes da concentração industrial em são paulo. são paulo: t.a. queiroz. castro, antônio barros de. 2004. a economia brasileira em marcha forçada. são paulo: paz e terra. chandler jr., alfred d. 1972. strategy and structure: chapters in the history of the american industrial enterprise. cambdridge, mass.: the mit press. chandler jr., alfred d. 1994. scale and scope. 3ed. cambridge, mass.: the belknap press. chirico, francesco, and mattias nordqvist. 2010. “dynamic capabilities and transgenerational value creation in family firms. the role of the organizational culture.” international small business journal 28 (5): 487-504. crossetti, pedro de almeida, and patrícia dias fernandes. 2005. “para onde vai a china? o impacto de crescimento chinês na siderurgia brasileira.” bndes setorial 22:151-204. crp-companhia de participações. 2012. ary burguer’s curriculum vitae. porto alegre. cuervo-cazurra, alvaro, rajneesh narula, and c. annique un. 2015. “internationalization motives: sell more, buy better, upgrade and escape.” the multinational business review 23 (1): 25-35. dunning, john h. 1980. “toward an eclectic theory of international production: some empirical tests.” journal of international business studies 11 (1): 9-31. dunning, john h. 1988. “trade, location of economic activity and the multinational enterprise: a search for an eclectic approach.” in explaining international production, edited by john h. dunning, 1-40. london: unwin hyman. dunning, john h. 1993. multinational enterprises and the global economy. wokingham: addisonwesley. dunning, john h. 2000. “the eclectic paradigm as an envelope for economic and business theories of mne activity.” international business review 9:163-190. esparza aguilar, josé luis, domingo garcía pérez de lema, and antonio duréndez gómez guillamón. 2010. “la cultura empresarial en la gestión de las empresas familiares: una aproximación teórica.” investigación y ciencia 18(47): 13-20. gerdau. 2001. chama empreendedora: a história e a cultura do grupo gerdau. são paulo: prêmio editorial. gerdau. 1969-1970; 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(chemical engineer, former director of cosigua, gerdau), interviewed by fernanda ott. gerdau documentation center, september 22, 1999. porto alegre. palacio reparaz, josé maría, and josé luis arana bilbao. 2002. la fabricación del acero. madrid: unesid. paula, germano mendes de. 1997. “avaliação do processo de privatização da siderurgia brasileira.” revista de economia política 17 (2(66)): 92-109. penrose, edith tilt. 2009. the theory of the growth of the firm. new york: oxford university press. pib (at 2013 prices) reference 2000. ipeadata. accessed may 9, 2015. http://ipeadata.gov.br/default.aspx. pinho, marcelo. 1995. grupo gerdau. campinas: neit/ie/unicamp. relatório final do projeto grupos econômicos da indústria brasileira e a política econômica: estrutura, estratégia e desafios. pinto, fabiano augusto castro nogueira. 1990. “déficit energético.” análise econômica 8 (14): 69-95. possas, silvia. 1999. concorrência e competitividade. são paulo: hucitec. prahalad, c. k and gary hamel. 1990. “the core competence of the corporation”. harvard business review, may-june. rosenfeld, peter (former director of cosigua, gerdau) interviewed by fernanda ott. gerdau documentation center. september 22, 1999. porto alegre. santos, paulo (former member of gerdau engineering section) interviewed by fernanda ott. gerdau documentation center. october 18, 2001. porto alegre. sommer, érico teodoro (former director of gerdau). interviewed by the author. gerdau documentation center, may 1, 2006. porto alegre. soto flores, maría del rocío, and francesc solé parellada. 2001. “cambio tecnológico en la industria siderúrgica mexicana.” el cotidiano 21 (109): 97-106. susin, lia thomazzi. 2009. “gerdau s.a.: um estudo de caso sobre a estrutura financeira da aquisição da chaparral steel.” master diss. universidade federal do rio grande do sul. vargas, milton. 1994. “construção de hidrelétricas.” in tecnologia e industrialização no brasil, edited by shozo motoyama, 67-84. são paulo: editora unesp. verbeke, alain. 2011. international business strategy. 6ed. cambridge: cambridge up. vieira, fábio henrique cavalcante. 2007. “análise da trajetória de crescimento do grupo gerdau.” master diss. universidade federal do rio de janeiro. http://revistes.ub.edu/index.php/jesb http://ipeadata.gov.br/default.aspx volume 3, number 2, 118-150, july-december 2018 doi:10.1344/jesb2018.2.j049 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 walden, hermann, and boruk marincek. 1957. “la producción de arrabio y acero por el método eléctrico”. in problemas de la industria siderúrgica y de transformación de hierro y acero en américa latina, edited by cepal, 53-58. méxico: cepal. wood, adrian. 1975. a theory of profits. cambridge: cambridge up. world steel association (wsa). 1982, 1991, 1993, 1998, 2001, 2002, 2008. steel statistical yearbook. accessed february 17, 2012. https://www.worldsteel.org/stee-by-topic/statistics/steel-statisticalyearbook-.html world steel association (wsa) “top steel-producing companies.” accessed july 09, 2017. https://www.worldsteel.org/steel-by-topic/statistics/top-producers.html this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.worldsteel.org/stee-by-topic/statistics/steel-statistical-yearbook-.html https://www.worldsteel.org/stee-by-topic/statistics/steel-statistical-yearbook-.html https://www.worldsteel.org/steel-by-topic/statistics/top-producers.html http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 isabel edith torres zapata universidad de santiago de chile (chile) https://orcid.org/0000-0003-2088-6470 omar vargas orellana universidad de santiago de chile (chile) chilean public policies and their impact on biotechnology small and medium enterprises abstract it is difficult to find cases of technology-based small and medium enterprises in developing countries, however chile has some within the biotechnology sector. how has this been possible? as a consequence of the different public policies and structural economic conditions that allowed their emergence, especially in the 1990s. this study describes the historical conditions and how they have been able to create a sector within the chilean economy. from the analysis of secondary data the emergence of this type of company within the country is described. this analysis shows the link between structural conditions and appropriate public policies, meaning that these companies did not emerge by chance. understanding their development process is crucial to promote the creation of more such technologybased small and medium enterprises, as they have many positive externalities and are more globally competitive. keywords: chilean smes; biotechnology; innovation; scientific public policies; entrepreneurship; chile corresponding author: e-mail: isabel.torres@usach.cl received 31 january 2021 accepted 8 november 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0003-2088-6470 mailto:isabel.torres@usach.cl http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 1. introduction this research describes the structural conditions that allowed the emergence of the biotechnology sector in chile. if we consider industrial development in chile during the twentieth century, the year 1973 saw the establishment of a neoliberal system and the 1990s saw the return to democracy. the influence of these historical milestones is very clearly evidenced in the chilean biotechnology sector. as described in path's dependency approach “what happened at an earlier point in time will affect the possible outcomes of a sequence of events occurring at a later point in time.” (sewell 1996; 262-263). this historic process was influenced by global organisations such as the united nations and the world bank, which promoted several policies within developing countries. understanding the process of developing small and medium enterprises (smes) is crucial if more of them are to be created in the future, because they have many positive externalities, as well as making countries that possess these technology-based smes more globally competitive. chilean industrial trends have been strongly influenced by international industrial models. this is due to two aspects. first, these models are linked to a set of funds or credits that allowed their implementation. secondly, the chilean government has promoted specific industrial development at different times, based on the mining, agricultural and forestry sectors, among others. however, they have not been permanent, being very dependent on the type of government in power at any given time. basically, the political sectors, left and right, and their radically different approaches to industrial development. the first part of this research briefly describes international industrial policies and chilean industrial development, as a way to provide a historical perspective of the influence on the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 development of biotechnology companies that is described in the second part of this research. since the 1990s it is possible to observe an important set of public policies that have promoted the development of smes. this is relevant for biotechnology companies, because most of them belong to this group. at the same time, other relevant public policies, were the innovation and competitiveness policies along with the establishment of chilean clusters. it is thanks to these three pillars in chilean development since 1990 that the chilean biotechnology industry has emerged as a relevant sector within the chilean economy, promoting smes, public policies, stakeholders and educational institutions, among others. 2. chilean industrial policies and their roots and influence on the development of biotechnology companies 2.1. international industrial policies to understand the different industrial policies developed within the country, it is necessary to explain what forms of industrialization were promoted by economic commission for latin america and the caribbean (eclac) of united nation model in the second part of the twentieth century, the asian model of the 1980s, the washington consensus of the 1990s, the increased washington consensus of 2000 and the new structural economy of 2010. all these global trends from global organisations like the world bank and the united nations helped plant the seed of change in countries like chile along with the idea of focusing on specific aspects of the economy. at the same time, these trends influenced chilean public policies on innovation and entrepreneurship, encouraging the creation of new companies within the country and consolidating others, such as smes. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 in the first half of the twentieth century, latin american countries followed different paths and it is difficult to detect an industrialisation model in the region. most of these countries are still importers. however, there are some seeds of industrialisation in argentina, brazil, colombia, mexico and chile (sevares 2010; benavente et al., 1996). since the 1990s, industrial development in latin america has changed radically influenced by the world bank trends. it has shifted from a structuralist approach to the approach of the washington consensus. this was induced by the asian development model and its success in the global economy. asian countries followed their own development model that was basically based on several aspects such as: the management of high-tech knowledge, the promotion of local entrepreneurship and protectionism policies—asian miracle— (nelson and pack 1997). the asian model in the 1980s generated a critical analysis of the structuralist policies promoted by the world bank from the 1950s to the 1980s. one of the first responses to this criticism came from the institution itself. the washington consensus promoted trade liberalisation, privatisation, labour market flexibility and less government regulation. countries that promoted this approach were able to achieve long-term growth. this was due to the fact that most of these policies required the implementation of a set of controversial policies in the short term. however, according to the promoters of this new paradigm, this set of changes leads to success in the future, despite its lack of clarity in the present (rodrik 2007). from this controversial model the new structural economy (nse) has emerged, which promotes both the industrialisation and internationalisation of companies. on the one hand, this model proposes an industrial policy in a market economy as well as the use of comparative http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 advantages to succeed. this growth is possible by initially identifying those developed countries that have some similarities of comparative advantage. in this way it is possible to observe success stories, experiences, knowledge transfer and patterns of industrial vitalisation. the next step requires the identification of domestic companies. an economy needs to know if there are already successful companies in some industries or if they need to be fostered. at the same time, the model proposes spontaneous self-discovery by the government-supported private sector, especially in those areas linked to innovation in new industries. in each case, local institutions must define a set of policies such as removing restrictions on quality improvement, promoting improvement, promoting the arrival of companies or incubating programs for new companies. (lin 2012) 2.2 chilean industrial development during its history chile has tried, on several occasions, to be an industrialised country. historically we can describe four phases: the pre-industrial phase from 1850 to 1929, the protectionism phase from 1930 to 1950, the industrialisation phase by import substitution (isi policy) from 1960 to 1970 and the free market phase from the mid-1970s to the present. during the protectionism phase, chile, as well as other latin american countries, adopted the eclac model. in the early years, this model was a continuation of the previous phase of chilean industrialisation. the eclac model was adopted because, in this period, there was a global concern to link the industrialisation process with the level of development of a country. among other aspects, isi’s policy involved increasing local production. this surplus production was not absorbed by local demand. this situation forced some chilean leaders to organise some alliances in the region to increase demand. asociación latinoamericana de libre http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 comercio (alalc) was one of the first attempts. some chilean industrial companies reached consolidation during this period. however, this process of industrialisation was slow and mixed with local political turbulence (hachette 2003, turmo and moslares 2007, muñoz-goma 1995). in 1970 another more interesting model emerged within the country, the socialist model. the socialist model controlled industrial production and nationalised the mining sector—copper mining—(büchi 2008). this model ended with the military coup of 1973. chile has followed a model of export-led growth through free markets since the mid-1970s. a radical shift from a socialist economic model to one of an open or neoliberal free market allowed the promotion of industrialisation. in this period, you can observe a series of public policies that had an impact on the chilean industrialisation process (clausen 2009). first, the chilean government created policies that promoted foreign direct investment (fdi) in the country. a significant number of multinational companies were attracted by special tax regulations and the abundance of local natural resources. the presence of these companies in the country boosted industrialisation in two ways. first, these firms brought their own technology to the country and at the same time increased the demand for technological and quality products, and second, the chilean government lowered its import barriers, allowing for technological modernisation. chilean companies imported new technology and machinery and at the same time, the abundance of products led to a decrease in local prices. chilean companies had to deal with this new stage. both policies, according to the authorities of the time, attracted investment to the country and increased the competitiveness of local companies (büchi 2008). however, chilean companies were not adequately prepared to meet this challenge. the chilean market became very competitive and aggressive, because there were many medium-sized companies and fewer barriers to imports. the 1970s were a difficult period in which some local http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 businesses went bankrupt, especially smes, while others increased their business competitiveness (tybout et al. 1991, alvarez and vergara 2007). the chilean economic model is based on natural resources with an emphasis on efficiency and well-managed production costs (büchi 2008). from an economy based almost exclusively on the mining and agricultural sectors, in less than 20 years, chile has developed other sectors such as fruits, wine, forestry and salmon. this model is based on chile’s comparative advantages in these sectors. each sector was developed through the transfer of technology from foreign countries, foreign investment and the backward and forward linkages absorbed by smes. in the 1970s and 1980s, fundación chile was responsible for the emergence of new chilean industries. new technologies, new species (fruits, fish, trees, among others) and new fertilization methods, quality standards and knowledge were imported into the country under this agency’s supervision. the adoption of this model showed its first results in the 1990s when chile experienced significant growth in exports (ffrench-davis 2002).1 these new sectors needed support and technology to grow. this allowed for the emergence of technology-intensive smes within the chilean market. several chilean companies that survived the critical period of the 1970s and many other start-ups belong to this group. the emergence of these companies was not driven by public policy. technology-intensive chilean smes are entrepreneurial companies that saw the opportunity for success through support for new sectors. from the first moment these new chilean export sectors developed, technology 1 fundación chile is a private and non-profit organization. his role was especially important as he acted as a technical consultant and disseminator of new technologies, as well as a research and development institution (iizuka 2004). during the 1970s and 1980s it was a government agency. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 intensive chilean smes were playing an important role in maintaining efficiency and wellmanaged production costs within these companies. 2.3. policies to promote chilean smes since 1973 the neoliberal economic system has promoted a free market. it could be considered as a public policy that promotes free interaction between actors with no external influences. in these terms, industrialisation arises as a natural consequence of this interaction in a world where industrialisation means competitiveness and efficiency. this process evolves from the natural economic forces of competition in a free business ecosystem where companies are able to reach some technological level on their own. each company, according to its needs, will look for adequate technology and resources to obtain competitive advantages. the role of the state is to maintain the basic conditions of competition in the market. these conditions are created through a modern infrastructure, efficient communications, and information to compete. in this model, industrialisation in a country is a natural consequence of market conditions. therefore, government economic policies did not pay much attention to smes. they were not considered a source of growth. this was because the chilean economy focused on exporting natural resources, promoting foreign direct investment and establishing large corporations in the country. (büchi 2008) this situation changed, in 1990, when the concertacion (left-wing sector) won chile’s presidential election. in total four consecutive governments of the centre-left coalition came to power: patricio aylwin azocar (1990-1994), eduardo frei ruiz tagle (1994-2000), ricardo lagos escobar (2000-2006) and michelle bachelet jeria (2006-2010). this was one of the country’s most stable periods after 17 years of military dictatorship and therefore, political http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 transition was a priority, and this was carried out in an atmosphere of social peace. economic and social progress during this period achieved a rapid and widespread gdp growth and during the period 1990-1997 the country grew at a rate of 7.6%, to such a level that it positioned chile at the forefront of latin america. as a result, profound reforms were carried out to achieve the purpose of growth with equity, although the latter was focused on eradicating poverty, the most relevant was in the area of taxation, especially the increase in income tax and greater labour guarantees. greater macroeconomic stability was achieved, lowering inflation and balancing state finances, where the central bank and international reserves played an important role. foreign trade increased, import tariffs were lowered and exports were encouraged. the productive sectors that showed the greatest dynamism and in which investment was concentrated were telecommunications, electricity, salmon and fruit exports, as well as copper. as a result of foreign investment, feasibility concessions were developed (sanfuentes 2021). after the end of the abovementioned era, sebatian piñera echeñique was elected president together with the coalición por el cambio (coalition for change) sector, which brought together activists from renovación nacional and unión demócrata independiente political parties (right-wing sector). the central government allowed chile to move forward. the country recovered its capacity to grow (5.3% average) and at the same time created more than one million jobs, highlighting measures in favour of women's employment such as the 6-month maternity leave after birth and subsidies for women’s employment, allowing the country to grow by 576,000 employees. however, the right-wing sector was unable to consolidate its power, and in 2014 the country once again turned to the left-wing sector with the second government of michelle bachelet jeria, where a series of political reforms were promoted, which together with the probity and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 transparency agenda were the most relevant milestones in this area. in relation to the main economic indicators in this governmental period, growth averaged only 1.8% over the last four years. attempts were made to blame this on the international situation, but a comparison with the evolution of both world gdp and that of our trading partners shows that in the last four years the world has continued to grow and it is chile that has stagnated, with gdp growth barely outstripping population growth. the government argued that the decline in growth was due to mining activity, influenced by the fall in the international price of copper. in this regard, it should be noted that the mining imacec (monthly economic activity index) did indeed register a significant decline, from an average annual growth of 1.4% during the period 20102013, to an average of 0.3% in 2014-2017. however, the non-mining imacec has also evolved downwards, from an average annual growth of 6% in the period 2010-2013, to only 2.1% during the last four years. (lyd, 2018). in line with this situation, the right regained power in 2017 with sebastián piñera echeñique again as the president (chile p. d. 2021). currently, the chilean government has a wide range of promotional tools for the development of companies. more than 125 different programs managed by various government institutions have this mission (see table 1). these institutions have an annual budget corresponding to 0.54% of the chilean gdp (chile 2003). these programs are dedicated to supporting chilean companies, of all sizes, in several areas: technical advice, business development, alliances, training, innovation, technology transfer, financial resources, reorganisation of responsibilities, promotion and internationalisation of exports, environmental management, regional productive development, emerging sectors, specific sectors (manufacturing, agribusiness and fishing), promotion and incubation of entrepreneurship, certification and quality improvement, among many others. this policy has progressively increased the number of companies in the country, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 although it is difficult to assess its impact on smes, as these programs do not discriminate by company size (except corfo and sercotec). however, no more than 25% of public resources have been used by smes. for this reason, these instruments are continuously reviewed and reformulated by the chilean government in order to improve their scope (ferraro and stumpo 2010, muñoz-goma 2007). table 1. chilean institutions for the development and promotion of companies ministry institutions ministry of economy corfo by committees: innova chile and innovabíobío, sercotec, sernapesca and inn ministry of planning and cooperation fosis (solidarity and social investment) ministry of labour sence (national labor and training service) ministry of foreign affairs prochile (export promotion agency) ministry of the interior deputy for regional development ministry of agriculture indap, sag and conaf ministry of mining pamma and enami note: corfo: chilean economic development agency; innova chile and innovabío-bío: innovation promotion agencies; sercotec: technical cooperation agency; sernapesca: national fisheries agency; dci: national institute of norms and standards; fosis: social development agency; sence: agency for the promotion of training; prochile: export promotion agency; indap: agricultural promotion agency; conaf: forestry promotion agency; sag: livestock and agricultural promotion agency; pamma: modernization of the agency for the promotion of small-scale mining production; enami: national agency for mining promotion. source: adapted from (ferraro and stumpo, 2010). corfo has effective programs in the promotion of smes. some of them are: profo (alliance promotion program), pdp (supplier development promotion program), pti (integrated territorial development program), focal (quality promotion program) and fontec (technological innovation fund). as of 2005, all these instruments and resources are being gathered under a new institution, the national innovation council for competitiveness (nicc). 2.4. chilean innovation and competitiveness policies http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 the competitiveness of chilean products and services has been a permanent concern for the last 50 years. during the period of the dictatorship (1973 to 1989) both a leading export economy and a free market economy were implemented. currently, chile has a market-oriented economy characterised by a high level of foreign direct investment. this model has generated strong competition between chilean and foreign companies in the country. this situation has forced an increase in the competitiveness of chilean companies as a way to survive in this fierce environment (büchi 2008). despite the idea that state intervention is not part of a free market model, chile needs it so that its development has several sources of wealth, not just mining. in this period, a set of prospective studies were carried out to detect these “new sources”. during the dictatorship, this task was led by fundación chile and corfo. once democracy returned, a science and technology program (1992-1995) was implemented as a public policy that promoted productive development (tybout et al. 1991, alvarez and fuentes 2003, iizuka 2004). this program was financed by the inter-american development bank. this was followed by a second phase (1996-2000) in which a technological innovation program was implemented. as a result of these experiences, the government created a new program focused on smes. this new program (chile innova) identified four areas of interest: itcs (information and communication technologies), biotechnology, cleaner production and quality. according to this program, chilean smes could compete locally and internationally. minecon, corfo, conicyt, fia, inn and fundación chile participated in this program (2001-2005). in this period the government also detected priority sectors: aquaculture and fisheries, mining, agribusiness, e-learning, itc industry, tourism, wood industry, renewable energy, steel manufacturing, plastic production, pharmaceutical components and banking. thus, the chilean government has developed several public policies in order to promote the competitiveness of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 chilean companies—ministry of economy of chile, chilean agency of science and technology, agrary innovation fund, chilean normalisation institute (patenting and invention), itc: innovation in technology and communications—(herrera 2001). in 2005, the national innovation council for competitiveness (nicc) was created. it is an advisory body of the presidency of the republic. the purpose of the council is to propose guidelines for a national innovation strategy. the members have the highest level of competence found in the public, scientific, academic and private spheres, thus integrating all the visions required to shape an efficient innovation system and strengthen the efforts made by the country in this sense (conicyt 2007). this council interacts with many different stakeholders to achieve its goals (see figure 1). on average, chile has invested less than 0.5% of its gross domestic product in research and development (r&d) over the past 20 years (oecd 2021). as the 2004 figures show, the amount allocated to r&d in chile was us$646 million. 53% of r&d investment is made by the public sector, 37% by the private sector and 10% by other sources. 46% of these resources are used in r&d activities carried out by companies, 32% by universities, 10% by public bodies and 12% by private non-profit institutions. 22% of total resources are currently allocated to basic research and 78% to applied research and development (conicyt 2004). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 figure 1. national innovation council for competitiveness and its institutional links note: corfo: chilean economic development agency; conicyt: national commission for scientific and technological research; fia: foundation for agricultural innovation; fondecyt: national fund for scientific and technological development; fondef: fund for the promotion of scientific and technological development; fondap: fund for advanced research in priority areas; pbct: bicentennial science and technology program; mecesup: program to improve the quality of higher education; fip: fisheries research fund (ministry of economy); bwi: millennium science initiative; fonis: national fund for research and development in health. source: nicc (2008). 2.5. chilean clusters the clusters in chile have emerged as a response to the idea of promoting the development of the country in those areas or sectors of greater economic and social impact by family businesses. this interest arises from the abundance of limited natural resources exploited in the territory and that somehow give them an added value, a local seal. however, from the beginning these family clusters have relied on the role of the state for funds and financing programs to promote their creation and subsequent growth and development, but over time they have adapted to the president of the republic national innovation council for competitiveness inter-ministerial committee on innovation (chaired by the minister of economy) ministry of finance ministry of education ministry of foreign affairs ministry of public labour ministry of economy ministry of agriculture mideplan and sectoral ministries funding agencies & support programmes performers (research and innovation, technology transfer and difussion) conicyt fondecyt fondef fondap pbct mecesup fip corfo innova chile innova bío-bío icm fonis fia private and stateowned firms universities centres of excellence technology institutes government consortia fundación chile financial setor and risk seed capital national innovation fund http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 needs of the market, neglecting the opportunities to develop innovation in other fields. corfo, for instance, was created with this role (llorca-jaña and miller 2021). however, the low interest in allocating resources, such as in other parts of the world, to a high market focus in the competitive areas of application and investment on r+d+i and a high specialisation in the development and strengthening of the conditions of factors associated with the scientific and technological requirements of these industries have decreased the possibilities of expanding their growth. this has decreased the chances of expanding the market and therefore making biotechnology-based smes a niche of possibilities to contribute to the economic growth of the country (santibanez 2010). the chilean state has developed policies that have strengthened, encouraged and financed the emergence of clusters, including those described below (see table 2). table 2. description of the funds included in the different science, technology and innovation programs program description national fund for technological and productive development (fontec) was aimed at financing technological innovation projects and associative technology transfer in private companies. development and innovation fund (fdi) promoted initiatives that contributed substantively to generating and managing technological innovation processes in areas of strategic impact for the economic and social development of the country. fund for the promotion of scientific and technological development (fondef) aimed at financing scientific and technological r&d projects in universities and technology centres, associated with companies national fund for scientific and technological development (fondecyt) aimed at financing basic research projects presented by national researchers, without discriminating by theme or scientific discipline foundation for agricultural innovation (fia) encourages and promotes the transformation of agriculture and the rural economy, financing technological innovation and research http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 program description initiatives aimed at increasing the productivity and competitiveness of national agriculture. mining research fund (fim) was aimed at supporting scientific and technological research related to copper and its by-products. technical assistance fund (fat) supports the contracting of specialised consultancy services in management areas that contribute to improving the quality and productivity of companies supplier development program (pdp) supports the integration of supplier companies into production chains so that they improve and stabilise the commercial link with their client. this allows sme suppliers to achieve greater levels of flexibility and adaptability, and the demanding company ensures the quality of products and/or services in the production chain. associative development projects (profos) supports the preparation and development of groups of at least five companies that share a common business idea. this allows them to share market information and access critical competitive resources in globalised markets. source: dini and stumpo (2011). these programs have emerged in response to the need to eliminate market imbalance (munozgoma 1995), which results from a power imbalance. a large number of micro, small and medium-sized enterprises compete with a few large corporations. the latter have high bargaining power, networks, bank financial support and are the owners of chile’s natural resources (copper, productive land, fishing quotas, etc.). for this reason, the nicc supports a study conducted by the boston consulting group in order to define a set of priority areas (see figure 2). each of these areas will be promoted according to the cluster development model. these groups are eight: aquaculture, processed food for human consumption, primary agriculture-fruits, copper mining and derivatives, offshoring, swine and poultry farming, financial services and tourism. this policy was partially abandoned in june 2011 due to a return to a classic economic model present in the country prior to 1990. as mentioned above, in an economy based on a free market model, as the chilean economy currently is, the state is not required to spend resources on the development of specific enterprises. the market itself creates the conditions in which only the best companies survive (“natural selection process”). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 in these terms, the state must support the best companies in the market regardless of their size or the sector to which they belong. the cluster policy was the main tool of the chilean nicc. however, the political authorities now consider that the country needs to increase its productivity and improve efficiency. according to them, it is possible to achieve these objectives without concentrating resources. according to the new chilean political authorities, market imbalances will be eliminated by the “invisible hand” within the chilean economy. this issue is of great relevance for the biotechnology industry because, if chile’s public policies maintain this long-term policy, it will promote the biotechnology industry as a result of investments and improvements in those sectors that require biotechnology as a way to grow and compete (cheyre 2011). figure 2. bcg/nicc high potential cluster program source: nicc (2008). gdp growth within 10 years 1 billion chilean pesos highlighted sectors processed food for human consumption outsourcing primary horticulture acquaculture financial services primary agriculture – fruits pork and poultry farming non metallic mining construction mining copper and derivatives forestry wine sector communication business platform for latam higher education logistics and transport sheep and cattle chemical industry pharmaceutical sector metallurgy tourism high m edium low endeavour in order to reach an adequate level of competitiveness p o te n ti a l g ro w th (% ) high medium low processed food for animal consumption http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 in summary, these public policies led the private sector towards promoting research and investment in the biotechnology sector, thanks to seed capital, the human capital development in universities and the scientific equipment, and thus private companies began to adopt some biotechnological technologies within their traditional methods of production. for instance, the mining sector modernised its process through the adoption of lixiviation (beckel 2000). meanwhile, the salmon sector improved the growth of salmon using a new kind of feed along with an analysis of its life cycle and the development of new vaccines for the species (torres 2007). these examples show the importance and success in the economy of the biotechnology developed by chilean researchers. for example, the link between smes and biotechnology is shown below in figure 3 using a set of small firms involved in the wine sector, where many of them use biotechnology intensively in several stages of their production processes. figure 3. wine value chain and its smes as technology-intensive suppliers and biotech smes source: torres (2014) figure 3 shows the value chain of wine production. as shown, there are 3 main elements (services, supplies and capital) that are composed of a series of elements for wine production. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 at the beginning of the service segment are the communication systems, management system and meteorological system to analyse the conditions in which the vines are to be grown and their grapes later processed and transformed into wine. this starts after having defined the variety of the plant and the production of the necessary ecosystems for the vineyards. at this point, genetic technology selects the best variety of vines and, while they are growing, they are monitored to control pests and other risks with specially developed fertilisers. once the grapes have developed sufficiently, a check is carried out to define that they are at the exact point of ripeness, after which they are harvested and processed. the resultant wine is stored in a cellar where a team of oenologists together with the mechanical systems define the temperature and date controls for bottling, sealing and labelling, so that the logistics and sales team can then sell and distribute the products. each of these production phases and associated activities are carried out by technology-based smes and within these biotech smes. this is just one example of how these biotech smes, which are also present in chile in the production chains of agriculture, salmon aquaculture, forestry and mining, are composed and interrelated, are relevant in the economy. 3. chilean biotechnology industry chile is an open economy with strong macroeconomic health. however, in recent years the country has experienced stagnation in its growth due to the concentration of commodity exports and low innovation. this stagnation promotes the growth of the company or the specific growth of the economic sector through private and public effort. in this scenario, one part of society seeks more public support while others are satisfied with the situation. this issue has been in permanent debate without any solution. however, in some specific historical moments, the chilean government has promoted specific sectors through different public policies with, for http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 example, the grouping and the offer of specific public funds. therefore, it has been considered relevant that this study begins with a historical description as a way of helping to explain the development of the chilean biotechnology sector. a historical approach describes how actors, resources, and public policies evolve with respect to specific ever-changing situations. with a historical perspective, it is possible to observe successes and failures under a path-dependent approach. as pierson (2004, 20) mentioned “[dependence on the road] …refers to dynamic processes involving positive feedback, which generate multiple possible outcomes depending on the particular sequence in which events unfold.”. following this approach, it has been described the history of the chilean biotechnology sector through the milestones marked by those public policies, resources and actors (both public and private) involved. why should a country, whose economy is based on natural resources, be interested in fostering science-based innovation? currently, this question is easy to answer but difficult to implement. there are two main reasons: the transfer from a natural resource economy to a higher valueadded product economy and, at the same time, reducing production costs and improving productivity (jimenez 2007). 3. 1. biotechnology in chile in chile, biotechnology has been linked to the productive sectors since the early 1950s. in this period the first companies in the veterinary sector emerged, developing their own products thanks to research and innovation. in the 1980s, the first studies emerged from the public sector on the possibility of biotechnology improving various economic sectors such as agriculture, energy, the pharmaceutical industry, mining, waste treatment and the food industry. these initial studies showed that the government was aware of the importance of biotechnology to the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 chilean economy. in the 1990s, the first public funds were created to improve this sector (see figure 4). in 1999 the first diagnosis of this sector emerged. after this study, it was possible to obtain idb funding for forestry, agriculture and aquaculture. in 2010, an eclac research on “biotechnology cluster, competitive development and governance: the case of biopolo in santiago de chile” was published. it is relevant to mention the various sectors and fields in which biotechnology is used as a way of improving the productivity of the sector, for instance: agriculture, wine industry and mining among others (see table 3). in addition to the mining and agro-industrial sectors, which have had a cluster policy, these studies have promoted, among government actors, the relevance of the biotechnology sector. however, with the lack of longterm public policies and financial support, this group is an idea without progress (corfo 1987, gil, martínez and dornberger 2002, santibáñez 2010). figure 4: timeline of the development of the chilean biotechnology sector source: developed for this study http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 table 3. main fields of biotechnology application in chile mining: copper and other mining biomass, bioleaching. food industry agricultural and agro-industrial fruits for export horticulture processed foods wine industry genetic improvement assisted by molecular markers. molecular diagnosis. value addition and differentiation with the use of biotechnologies. bioprocesses. food industry livestock poultry pigs ovine bovine milk aquaculture salmon farming animal health: vaccines, immunostimulants, others. genetics and reproduction. animal feed. forestry: forest plantations and pulp genetic improvement assisted by molecular markers. pest and disease control. bioprocesses. energy unconventional renewable energy based on the use of biomass. environment bioremediation. treatment of organic waste health study of pathologies of greater prevalence in chile in terms of therapies. molecular diagnosis, and vaccines. source: santibáñez (2010). despite the concentration of companies in chile’s metropolitan region, those sectors based on natural resources promote regional growth, competitive improvement (gil, martínez and dornberger 2002), and attract foreign direct investment in specific biotechnology sectors (santibáñez 2010). during 2016, corfo launched the initiative for integrated strategic development in biotechnology, dedicated to coordinating the set of capacities installed within companies, public bodies and investment networks. this initiative has a group of actors: asembio, amcham, fundación imagen de chile, programa ganesha lab, direcon and prochile, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 iniciativa científica milenio (minecon), inapi, etc. it is based on a set of strategic axes (ifi-e) and promotes three pillars: 1. promotion of innovation and biotechnological entrepreneurship: • creating a coordinated ecosystem in innovation and biotechnological entrepreneurship: • promoting international networks that foster international links with local companies • facilitating the expansion of local biotechnological developments 2. generation of suitable conditions for the growth of the biotechnology industry: • controlling local regulation to avoid barriers that are an obstacle to biotechnological products and services • understanding international regulations in foreign markets that demand chilean biotech products 3. complete value chains for some incomplete products/services in order to promote their market launch in terms of public funds, there is no clear relationship between the way a country organizes its financial development system and the performance of biotechnology. the causes of this lie in the diversity of success factors that influence biotechnological research and application. this also applies to knowledge and discoveries, the transfer of knowledge between academia and business, the strengthening of innovation and product development, as well as the facilitation of access to finance and coordination at the national and international levels (enzing 2007). 3.2. chilean ecosystem of innovation in biotechnology since the 1990s chile has promoted several public policies in this ecosystem. within this ecosystem it is possible to identify several actors: institutions, public and private companies, organisations, research centres, consortia, business incubators and "angel" investors. from their interaction, it has been possible to identify this specific sector as one that interacts well with all other chilean economic sectors (see figure 5). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 figure 5. actors in chilean biotechnology source: preparation for this study based on data from www.redbioinnova.com the most recent public policies in the sector give a different picture (see figure 6). since 2015 corfo led the ifie biotech, this integrative promotion initiative focused on biotechnology, in order to detect the main gaps in the sector and develop a strategy for it until 2030. from this initiative a translational biotechnology platform has emerged as a catalyst and to promote ecosystem institutions with the main objective of scaling and internationalising chilean biotechnological products. corfo is currently investing in this chilean biotechnology strategy 2030 but the coronavirus pandemic crisis has reduced the effort and investment in this strategy. http://revistes.ub.edu/index.php/jesb http://www.redbioinnova.com/ volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 figure 6. chilean biotechnology ecosystem source: corfo ifi biotechnology (2018) 3.3. organizations and institutions according to red bio innova, a chilean private association focused on the development of the biotechnology sector, the chilean innovation ecosystem is composed of 64 research centres, 12 consortia, 5 government institutions, 4 angel investors, 8 associations and 14 business incubators, with most of them located in the metropolitan region of chile (capital city). from their interrelationship, a consolidated set of companies, research and development and innovations in this industry have emerged. 3.4. chilean biotechnology companies a biotechnology company uses modern (unconventional) biological techniques in technologies or commercial product development. fermentation companies (production of beer, wine, cheese, yeast, sausages, etc.) are excluded from this definition. they are excluded because these companies incorporate modern biotechnology into the production process. chilean biotechnology companies are classified into four groups (see table 4). within these categories, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 there are companies linked to biotechnology since the 1960s. different types of companies, supplying different sectors, are created by biologists, veterinarians, chemists and doctors who have graduated from the two largest universities in the country, pontificia universidad catholica de chile and universidad de chile. they were entrepreneurs in areas barely developed as a business within the country at that time. currently, there are few cases that have survived but they are very successful. most of them are family smes, while others emerged from individual initiatives or university spin-offs. most of them are under the age of 30, while spin-offs are usually less than 10 years old. in 2009 there were around 200 companies and research centres linked to biotechnology. currently this number is maintained, despite the lack of strong public policies focused on the sector. since 2010, chile has shown a lack of public policies aimed at investment in r&d has a whole (ey 2016, gil, martínez and dornberger 2002). table 4. types of chilean biotechnology companies category description type i company that develops advanced biotechnological products and/or processes, conducts research and development and markets products or services by itself or through other biotechnology companies type ii company that has sporadically developed a biotechnological product and/or process (non-permanent innovative process), that carries out r&d (or has funds for it) and that mainly markets products of other companies type iii company that has its own funds and/or carries out r&d to incorporate or adapt processes in its production chain (its final products are traditional) type iv company that sells biotech products (but does not conduct research and development) source: gil, martínez and dornberger (2002). the chilean biotech industry is a very small global player. according to the 2016 ey biotechnology report, us and european biotech companies generated revenue of us$132.7 billion and employed 203,850 people (ey 2016). chilean biotechnology companies generated http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 sales of us$9.2 million and employed 420 people. according to cost of sales estimates, these companies generated 0.003% of chilean gdp in 2015. despite this small figure, this sector grew to 57 companies, representing an increase of 90% over 2002 (30 companies). modern biotechnology is characterized by long cycles of product, technology and market insecurity (rapid changes, technological leaps), as well as being capital intensive. this makes it difficult to form new companies within the sector. however, spin-offs of private and public universities appear to be the new source of growth among biotech companies. of these companies in 2006, only 17 survived until 2015, signifying a 57% survival rate. this rate is positive considering the main limitations for the development of the biotechnology industry in chile (gil, martínez and dornberger 2002, santibáñez 2010): • the low availability of funding for scaling up and implementation. • incentives are not aimed at creating innovation: state subsidies for r&d far exceed subsidies for the transfer, scaling and implementation of r&d. innovations. (hundreds of thousands vs. tens of thousands of chilean pesos). this is compounded by the incipient development of the venture capital industry. • the low activity of national and international patenting both r+d+i taking into account the existing potential. • the low comparative percentage (11.9%) of employees with doctorates in chilean biotechnology companies. • regulatory limitations on the use of genetically modified organisms. • low investment in r&d&i of national companies that use biotechnology. some companies have been able to export and open branches in foreign markets, especially in south america. according to these firms, they have grown more than chilean non-exporting biotechnology companies (gil, martínez and dornberger 2002). in 2007, as a result of the technological idea of building and maintaining large bodies of water at low cost, the company crystal lagoons was established. this company has grown http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 unexpectedly for its founder fernando fischmann, who always wanted to find a way to maintain large volumes of crystalline, turquoise water resembling that found in the caribbean. his training as a biochemist led him to develop the technology to filter large quantities of water and as a result he built his first artificial lagoon in san alfonso del mar in algarrobo, chile. the lagoon was 1 km in length, covered 8 hectares and contained 250 million litres of water. for several years it held the record for the largest swimming pool on the planet. currently the company develops projects all over the world in countries such as colombia, brazil, dubai, australia, egypt, indonesia, among others. it has more than 10 offices around the world and close to 300 urban, tourist, public and industrial projects worldwide. for this biotech company, innovation is the cornerstone, and the company states that this concept is in the core of the organisation and has allowed crystal lagoons to constantly develop new technologies, beyond just crystalline lagoons. fernando fichmann points out that constant innovation is possible because crystal lagoons invests around 30% of its cash flow in r&d. the organisation notes that history has shown that countries that depend mostly on the export of raw materials for their economy, lag in innovation. however, it is important to note that a country's high level of development and quality of life are closely linked to innovation (yañez 2016). this successful case shows the possibilities within the sector. nevertheless, chile is still dependent on research and development from other countries, although we have installed capacity within the country, and it still requires long-term public policies beyond a presidential term (4 years). according to the diagnosis made in 2019 by troncoso chile has a biotechnology innovation system (bis), composed of 256 private institutions and 8 public institutions (troncoso, 2019). this represents a framework where chilean biotechnology could emerge as a mature and consolidated industry after decades of effort. at the same time, this study shows a set of difficulties and lack of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 relevant results in the market, similar to the findings of our research. it is relevant to emphasize the lack of a public policy towards industrial development as the main reason for the technological dependence. 4. conclusions this study has described the historical conditions, and how chilean biotechnology smes have been able to create a sector within the chilean economy. from the analysis of secondary data, it has been possible to describe the emergence of this type of companies within the chilean economy. this analysis shows the link between structural conditions and appropriate public policies, which means that these companies do not arise by chance. understanding their development process is crucial to be able to promote the creation of more of these technologybased smes, because they have many positive externalities in addition to being more competitive worldwide (kantis et al. 2020). all companies require a business ecosystem and a set of internal conditions that promote their development and successful performance. this is true for companies, but especially for biotech companies, because the limitations they face are extremely difficult to overcome. we have described an innovative ecosystem and the chilean conditions necessary to promote the biotechnology industry. this shows positives and negatives, but biotechnological entrepreneurship is developing despite many limitations. a country with little scientific promotion like chile tends to import all kinds of industrial inputs. this promotes a high local demand for biotechnological products and services. if this technological advance promoted by biotechnology occurs locally, this leads to a decrease in the cost of imports, promotes better after-sales services and helps solving problems at the local level. however, in the case of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 biotechnology sector, industrial policies have been successful taking into account the competitiveness and prevalence of biotechnology companies in the economy (judice and baeta 2007). aknowledgments this research has been possible through financial support from vridei at usach, universidad de santiago de chile. research project nro. 031860tz. references alvarez, rodrigo and rodrigo fuentes. 2003. “trade reforms and manufacturing industry in chile.” working paper central bank of chile 210. alvarez, rodrigo and sebastián vergara. 2007. “sobrevivencia de las pymes en chile.” estudios públicos 107: 79-98. benavente, josé miguel, gustavo crespi, jorge katz and giovanni stumpo. 1996. “la transformación del desarrollo industrial de américa latina.” eclac review 60: 49-72. beckel, jorge. 2000. el proceso hidrometalúrgico de lixiviación en pilas y el desarrollo de la minería cuprífera en chile. santiago de chile: cepal. serie desarrollo productivo 79. büchi, hernán. 2008. la transformación económica de chile: el modelo del progreso. santiago de chile: el mercurio-aguilar. cheyre, hernán. 2011. “política industrial no discriminatoria.” la tercera digital. accessed july 7. https://www.latercera.com/noticia/politica-industrial-no-discriminatoria/. chile, gobierno de. 2003. comisión nacional para el desarrollo de la biotecnología. santiago de chile: gobierno de chile. chile, presidencia de. 2021. “gobierno de chile.” accessed october 2. https://www.gob.cl/instituciones/presidencia/ clausen, bianca. 2009. untersuchungen zur wirschaftspolitik, exchange rate uncertainty,investment and international trade. köln: institute für wirschaftspolitik. conicyt. 2004. estimación del gasto en investigación y desarrollo en chile. santiago de chile: conicyt chilean government. conicyt. 2007. el sector vitivinícola en chile. capacidades de investigación y áreas de desarrollo http://revistes.ub.edu/index.php/jesb https://www.latercera.com/noticia/politica-industrial-no-discriminatoria/ https://www.gob.cl/instituciones/presidencia/ volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 científico-tecnológico. santiago de chile: conicyt chilean government. corfo. 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2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 llorca-jana, manuel and rory miller. 2021. historia economica de chile, desde la independencia. santiago de chile: ril editores. lyd. 2018. “hora de balances: segundo mandato de michelle bachelet.” temas públicos 2: 1-8. muñoz-gomá, oscar. 1995. los inesperados caminos de la modernización económica. santiago de chile: instituto de estudios avanzados. muñoz-gomá, oscar. 2007. el modelo económico de la concertación 1990-2005: ¿reformas o cambio? santiago de chile: catalonia. nelson, richard and howard pack. 1997. the asian miracle and modern growth theory. pennsylvania: university of pennsylvania and the world bank. nicc. 2008. toward a cohesive and well governed national innovation system. santiago de chile: document elaborated by world bank for national innovation council for competitiveness. chilean government. oecd. 2021. gross domestic spending on r&d. accessed 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ann arbor: university of michigan press. torres, carlos. 2007. “desarrollo de proveedores en la salmonicultura chilena.” journal of technology managment innovation 2(1): 92-107. torres, isabel. 2008. “sme’s internationalization process: the case of chilean technology-intensive suppliers (tis)” phd diss., university of leipzig, germany. turmo garuz, joaquín and carlos moslares garcía. 2007. “chile. de la industrialización mediante sustitución de importaciones a la liberalización y diversificación comercial.” boletín económico del ice 2914: 49-62. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1787/09614029-en https://www.elmostrador.cl/destacado/2021/08/09/progresos-en-los-gobiernos-de-la-concertacion/ https://www.elmostrador.cl/destacado/2021/08/09/progresos-en-los-gobiernos-de-la-concertacion/ volume 7, number 2, 204-237, january-june 2022 doi.org/10.1344/jesb2022.1.j103 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 troncoso, pablo, 2919. “el rol de la industria biotecnológica en la sofisticación y diversificación de la matriz productiva chilena: dificultades y propuestas para su desarrollo.”, msc diss., universidad de chile. tybout, james, jaime de melo and vittorio corbo. 1991. “the effects of trade reforms on scale and technical efficiency: new evidence from chile.” journal of international economics 3: 231-250. yañez, cecilia. 2016. “la clave del éxito tras crystal lagoons.” la tercera. accessed july, 6. https://www.latercera.com/noticia/la-clave-del-exito-tras-crystal-lagoons/ this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.latercera.com/noticia/la-clave-del-exito-tras-crystal-lagoons/ http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 santiago m. lópez garcía salamanca university (spain) science and business abstract there are two kinds of scientists in evolutionary studies that need a space of debate: the specialists in evolutionary studies in business and all other evolutionary scientists in general. the themes of the discussion are the behaviour, growth, reproduction, and organizational structures of the firm. keywords: science; evolution; firm; innovation this section of the journal of evolutionary studies in business will be a meeting point for two kinds of scientists: specialists in evolutionary studies in business and all other evolutionary scientists in general. in the first category of experts we can find scientists that observe firms, markets, and industries from the perspective of behavioural economics, neuroeconomics, institutional economics, neo-schumpeterian economics, innovation economics, cultural economics, evolutionary game theory, and complexity economics. on the other hand, there are two different groups of evolutionary scientists. the first group is related to the life sciences: sociobiology, evolutionary psychology, evolutionary neuroscience, population dynamics, ecology, and ethology. the second group includes colleagues from two evolutionary humanities disciplines: anthropology and the philosophy of science. corresponding author. e-mail: slopez@usal.es received 30 october 2015 accepted 11 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:slopez@usal.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 the themes of the discussion shall be the behaviour, growth, reproduction, and organizational structures of the firm. as a consequence of this, we must exclude two critical disciplines in evolutionary studies: archaeology and palaeontology. any speculation about firms before the emergence of capitalism makes very little sense. even so, certain references to these disciplines shall be nearly inevitable because both are based on the study of the eusociality of humans. eusociality is a constant that can be found in all our institutions since the first human groups 120,000 years ago (e.g. tribes) and up until the present (e.g. firms). the structure of this section will be based on interviews focused on discussion about what a firm is from the point of view of each scientific field. this reflexion will be inserted into the context of websites and blogs that are related to the topics chosen each time. imagine that we are analysing the firm with a neuroscientist, then a useful approach to neuroscience and business analysis could be found on a website such as medina’s brain rules (http://brainrules.net/introduction). our intention is to present opinions directly, without any guidance or comment that could distort the experts’ ideas. we will merely introduce a limited number of links to relevant websites. why do we want to be so impartial with the experts’ answers? the specific objective of this section is to break open the paradigm of the ecological model of competitive interaction between firms that is dominant in business literature related to the evolutionary perspective. we are academics that wish to unlock the backward-looking concept of ecological competitiveness; a notion that is rigid because it is dominated by the emblematic beliefs of economic efficiency and profit maximization. in simplistic business analysis it is common to blend adaptation with maximization. however, these are two different concepts. http://brainrules.net/introduction volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 in evolutionary analysis, adaptation always has two sides: reproductive efficiency (species survival) and efficiency regarding the use of the environment (individual survival). this double nature of adaptation is lost in simplistic business analysis. when we ask life scientists what a firm is for them from their respective evolutionary perspectives, adaptation is always revealed as a double-sided concept. when we introduce this notion of adaptation a pandora’s box is opened. this is our objective in this section: we wish to arouse our fears and insecurities regarding the central concepts of evolutionary approaches. one of these central concepts is adaptation, which is used thoughtlessly by business analysts. more than eighty years ago, schumpeter envisioned this kind of challenge. he understood firms as spaces that produce innovation and he related the capacity to innovate with the capacity of firms to reproduce. moreover, he managed to see this right in the historical moment when these processes were experiencing considerable growth. from a schumpeterian perspective, innovation is the direct consequence of the phenomenon of firms’ reproduction, which is spurred by the forces of competition. competition is the driving force of the process that he called ‘creative destruction’, but, as edith penrose stressed, we are not talking about perfect competition, but innovative competition: the society characterized by a widespread ‘spirit of enterprise’ and a highly developed technology, the threat of competition from new products, new techniques, new channels of distribution, new ways of influencing consumer demand, is in many ways a more important influence on the conduct of existing producers than any other kind of competition. (penrose 1995, 113) she identified the epistemological problem: what is the relationship between the type of competition and the reproduction of firms? for years, industrial economics has offered an volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 extremely simple understanding of firm reproduction, considering it merely as the process of births, mergers, acquisitions, and collapse of firms. perhaps in a world of perfect competition this was a valid answer, but in a society of innovative competition it is not. the common understanding of the ecology of firms has little to do with the idea of species competing in an environment. a scientific ecology of firms should be closer to the type of competition that occurs, for example, in the colonies of a coral reef. if we adopt this perspective then we can answer the question about what firm reproduction is. reproduction is based on the continuous interchange of managers, professionals, and workers. they (managers and so on) are like the polyps in a coral colony. without an intense process of losses and gains (understood as exchanges of people that leave the firm and others that join), firms lose their innovation capacity and this is substituted by countless path dependencies. we must not forget that the phenotype (innovation) is a reflection of the genotype (the knowledge of the managers, professionals, and workers that are combined within the walls of a firm). this analogy (firms as coral colonies) helps us understand, firstly, the resource-based view of the firm (a pool of resources), and, secondly, why competitiveness is the essential conduct of all firms. usually we associate competitiveness with the microeconomic foundation that resides only in the owner of the firm and its investors. however, competitiveness is also and essentially an attribute of managers, professionals, and workers. they fend off other employees (polyps) that are working in others firms (colonies) in the struggle for a strategic place in the market (reef). penrose came very close to this vision of the firm when trying to unravel the causes of company growth. at the end of the 1950s and the beginning of the 1960s penrose, a. chandler (1962), and r. l. marris (1961) defined the volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 phenomenon as ‘managerial capitalism’ or the ‘managerial firm’. within this perspective, penrose states the following: i also assumed that managers qua managers were primarily interested in the profitable expansion of the activities of their firm. profits were treated as a necessary condition of expansion –or growth – and growth, therefore, was a chief reason for the interest of managers in profits. moreover, the more profits that could be retained in the firm the better, for retained earnings are a relatively cheap source of finance; management had no desire to pay out to shareholders more dividends than were necessary to keep the capital market happy. (…) i argued that managerial resources with experience within the firm are necessary for efficient absorption of managers from outside the firm. thus the availability of ‘inherited managers’ with such experience limits the amount of expansion that can be planned and undertaken in any period of time. such managers, by definition, cannot be acquired from the market but are a necessary input in expansion. (penrose 1995, xii). she was also close to this vision when she introduced her concept of ‘management team’. according to penrose a management team is a team of employees able to provide services and experiences that are uniquely valuable for the operations of the particular group with which they are associated (penrose 1995, 46). these services and experiences are crucial for the firm and allow the team gain more relevance. sometimes the team cannot supply the service, and then the group details a ‘job description’ with the objective of the firm hiring people to fill the various positions that the team needs. this process is the mechanism of reproduction of the firm and the key to its growth. the new reconfiguration of knowledge creates innovations and the firm starts a new process of adaptation to a changing environment. sometimes, if the ‘team’ considers that the firm does not make enough effort, this process could mean the end of the company. the ‘team’ can establish a new firm or enter a firm that forms part of the volume 1, number 1, 116-121, january-june 2016 doi: 10.1344/jesb2016.1.j007 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 competition. all of these processes are forms of reproduction, like the polyps involved in the reproduction of a coral reef. these characteristics of the management team were revealed by j. m. valdaliso and s. lópez (2006) under the concept of grupos diseñadores, which we can translate as ‘planning groups’. these are the types of controversial issues we hope shall arise in this section. with the two groups (experts in life sciences and specialists in evolutionary humanities), we want to stimulate a discussion about the evolutionary bases of business, which will reveal firms as human institutions that adapt to and survive in a changing environment. a final issue: why is history (economic history and business history) absent from this approach to evolutionary economics? why have we not mentioned the history that exists between the evolutionary humanities? the historical account, like the historical narrative, is based on a continuum of cause and effect relationships. we could call this is ‘evolution’, but by recounting events one after another we are not necessarily tracing a natural evolutionary history of our subject. references chandler, alfred d. jr.. 1962. strategy and structure: chapters in the history of the american industrial enterprise. cambridge: ma, mit press. marris, r. l. 1961. “review of the theory of the growth of the firm.” economic journal 71:144-148. penrose, edith. 1995. the theory of the growth of the firm. oxford: oxford university press. valdaliso, jesús m. and santiago m. lópez. 2006. historia económica de la empresa. barcelona: crítica. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 carina rapetti innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0001-6423-7478 josep miquel pique innova institute. la salle – ramon llull university (spain) https://orcid.org/0000-0002-4031-0949 aline figlioli university of brighton (united kingdom) https://orcid.org/0000-0002-8270-863x jasmina berbegal-mirabent polytechnic university of catalonia (spain) https://orcid.org/0000-0001-5145-2179 performance indicators for the evolution of areas of innovation: porto digital case abstract areas of innovation (aois) need urban, economic, social and governance development. building upon the theories of triple helix, knowledge-based urban development, clusters of innovation, and the evolution phases of aois, this study presents in a novel way, key performance indicators (kpi ) that can be used to track and monitor the progress of an innovation district in distinct phases of development towards the achievement of its goals. using the porto digital case in recife, the most awarded project in brazil underway for 20 years at a triple helix hybrid organization núcleo gestor do porto digital (ngpd), performance indicators are analysed and classified. this yields further understanding of which stage of development they have become operative (from inception to maturity), which dimensions affected (namely, urban, economic, social and governance), and who (triple helix agents) has been involved with the major action power over it. keywords: porto digital, areas of innovation, evolution, indicators, triple helix, knowledge based urban districts indicadors de rendiment per a l'evolució de les àrees d'innovació: el cas de porto digital resum les àrees d'innovació (aoi) necessiten un desenvolupament urbà, econòmic, social i de governança. sobre la base de les teories de triple hèlix, desenvolupament urbà basat en el coneixement, clústers d'innovació i les fases d'evolució de les aoi, aquest estudi presenta de manera nova, indicadors clau de rendiment (kpi) que es poden utilitzar per seguir i supervisar el progrés d'un districte d'innovació en fases diferents de desenvolupament cap a la consecució dels seus objectius. utilitzant el cas de porto digital a recife, el projecte més premiat al brasil durant 20 anys, en una organització híbrida de triple hèlix, núcleo gestor do porto digital (ngpd), els indicadors de rendiment són analitzats i classificats. això dona una major comprensió de quines fases de desenvolupament s'han convertit en operatives (des de la creació fins a la maduresa), quines dimensions han afectat (urbana, econòmica, social i governança), i qui (agents de la triple hèlix) ha estat involucrat amb el poder d'acció principal sobre ella. keywords: porto digital, àrees d’innovació, evolució; indicadors, triple hèlix, districtes urbans basats en el coneixement indicadores de rendimiento para la evolución de las áreas de innovación: el caso de porto digital resumen las áreas de innovación (aoi) necesitan un desarrollo urbano, económico, social, y de gobernanza. sobre la base de las teorías de triple hélice, desarrollo urbano basado en el conocimiento, clústers de innovación,y las fases de evolución de las aoi, este estudio presenta de manera original indicadores clave de rendimiento (kpi), que se pueden utilizar para seguir y supervisar el progreso de un distrito de innovación en fases diferentes de desarrollo hacia la consecución de sus objetivos. utilizando el caso de porto digital en recife, el proyecto más premiado en brasil durante los últimos 20 años, en una organización híbrida de triple hélice, núcleo gestor de porto digital (ngpd), los indicadores de rendimiento se analizan y clasifican. esto permite una mejor comprensión de cuáles son las fases de desarrollo que se han convertido en operativas (desde la creación a la madurez), qué dimensiones han influido (urbana, económica, social, de gobernanza), y quién (agentes de la triple hélice) ha estado involucrado con el mayor poder de acción sobre ella. palabras clave: porto digital, áreas de innovación, evolución; indicadores, triple hélice; distritos urbanos basados en conocimiento corresponding author: e-mail: carina.rapetti@salle.url.edu received 17 january 2022 accepted 21 may 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-6423-7478 https://orcid.org/0000-0002-4031-0949 https://orcid.org/0000-0002-8270-863x https://orcid.org/0000-0001-5145-2179 mailto:carina.rapetti@salle.url.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 1. introduction areas of innovation (aois) are novelty ecosystems development initiatives deployed in urban contexts leading to major impacts in dimensions other than district economic development – through entrepreneurship, education, and innovation programmes – including the social and urban spheres. aois designed for converting degraded districts into dynamic hubs have attracted interest from policymakers and academics alike (piqué, miralles and berbegalmirabent 2019a) these knowledge-intensive areas (either cities or districts) provide environments and programmes to facilitate the concentration of creative industries integrated into a supportive social environment (scott 2000) by offering specialised amenities (yigitcanlar and dur 2013) and infrastructures (hutton 2004, porter 1995, utterback and afuah 1998). such an offering attracts knowledge-based companies, in substituting traditional businesses of old industrial districts of large urban clusters (hutton 2004), stimulating the concentration of talented people (florida 2008). each aoi is a complex network of components (citizens, business, transportation, communications, services, and other components of a cluster of innovation (engel 2022) with their own unique strengths and weaknesses that face a constant change that generates the permanent challenge of developing new strategies under the development paradigm of the knowledge-based urban development (kbud) (yigitcanlar 2014). understanding how an aoi can change and improve based on these elements is the starting point for it to achieve its vision and objectives and this can be achieved by refining its most complex link, but at the same time, essential: its strategy. defining a strategy can help determine where and when to invest, define http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 an integration and optimization schedule across all components and systems, and uncover new opportunities for growth and progress. evaluating the main systems and activities of an aoi is the first step in defining a strategy towards sustainable prosperity and developing a set of related indicators is the right activity to do so. indicators show the changes and progress a program is making towards achieving a specific result. hence, it becomes essential that the elements evaluated are directly linked to the main activities aimed at achieving specific goals. even when indicators in innovation districts have been studied in order to define a framework that classify these areas of innovation (yigitcanlar, adu-mcvie and erol 2020), indicators evaluating performance (lerro and jacobone 2013) and their evolution through the lifecycle of these spaces, still require further development. following the recent works of (piqué, miralles and berbegal-mirabent 2019a), we assume that aoi evolve over time, consequently they evolve, certain aspects of the dimensions stand out and consequently, their performance requires close management and monitoring, as they are essential for the development of the next phase and reflect the more active participation of a certain actor in the ecosystem. in each of the different phases of an aoi lifecycle (moore, 1996; etzkowitz 2005) the triple helix actors assume a diverse configuration in terms of role and leadership of the initiative. specific characteristics and activities related to the social, economic, and urban dimensions are also involved (pique 2019b, pique et al. 2021). aimed at shedding new light on how to assess the performance of aois along their lifecycle, this study proposes a set of kpi for each lifecycle phase of an aoi that considers the four main dimensions (a) urban and infrastructure, (b) economic (c) talent and social transformation, and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 (d) governance. to do so, different conceptual frameworks – triple helix, knowledge-based urban development, clusters of innovation, lifecycle of aois, and performance indicators – are used as the theoretical foundations that support our exploratory framework. we believe this study contributes to the existing literature in two main ways. first, it takes a step forward in the use of indicators, specifying the precise timing in which each indicator is meaningful and therefore, worthy of consideration, offering a more nuanced approach that facilitates planning, execution, and decision-making. second, this study shows how these indicators can be put into practice. specifically, we validate their suitability with the analysis of the case of porto digital, a reference innovation district located in brazil. section 2 below presents the theoretical underpinnings and section 3 the methodology employed to explore the subject. section 4 provides an overview of porto digital and presents the findings obtained. section 5 discusses the main indicators for each stage of an aoi development relating them to the case. finally, section 6 describes the main contributions of this work followed by concluding remarks. 2. theoretical underpinnings the theoretical foundations that support the use of different indicators to assess aois at their different stages of development can be found in different models and conceptual foundations. specifically, we build upon the previous works that focus on the evolution of aois (pique, et al., 2021; piqué, miralles and berbegal-mirabent 2019a), pique, berbegal-mirabent and etzkowitz 2018), expanding and refining these models, and combining them with performance evaluation theories. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 the foundation for understanding the components and behaviours of aoi ecosystem lies in the th model (etzkowitz and leydesdorff 2000), which focuses on the relationships between universities, government, and industry, and on the global cluster of innovation framework (engel 2022, engel 2015, engel and del-palacio 2009). both provide a comprehensive description of different agents’ roles in developing ecosystems of innovation. the latter also analyses the interactions of new ventures, investors, and large companies, and describes the behaviours that lead to international engagements. the knowledge-based urban development (kbud) theory (yigitcanlar, velibeyoglu and baum 2008a and 2008b) is employed to understand the various dimensions of an aoi and its framework is used as a basis for tracing the elements of each dimension throughout its evolution. key performance indicators are explored in order to understand the main categories that apply to each aoi dimension and its applicability and to each development stage. in the subsections that follow we briefly describe each of these frameworks. 2.1. the triple helix model the triple helix (th) model analyses the development of knowledge-based economies from the perspective of the mutually reinforced interactions of three institutional spheres: university, government, and industry. it has been employed as a framework to foster regional economic growth and to promote entrepreneurship, through the understanding of the dynamics of such interactions (cai and etzkowitz 2020). such interactions provide reciprocal benefits for each agent that tends to improve their original performance and expand initial activities, supporting the generation of new business. this process often requires institutional reconfiguration to provide support to startups and technology transfer as well as the creation of new mechanisms (etzkowitz and zhou 2017). aois, technology parks, business incubators and accelerators are http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 examples of (hybrid) mechanisms resulting from these interactions and joint innovation strategies and processes (kim, kim and yang 2012). th agents involved in these types of mechanisms assume complementary roles in supporting startups which benefit from the resources provided by th agents in their path to growth, providing robustness to the ecosystem. th agents also assume specific responsibilities in supporting the development of the mechanism itself: they evolve and remodel their role, accordingly, adopting new functions at the different stages of the evolution of these mechanisms (piqué, etzkowitz and solé 2007, pique, et al. 2021). individuals or organizations that initiate the interactions and have gained power and respect among th agents, particularly at local and regional levels, and are key to bringing to fruition the full potential of the knowledge base (cai and etzkowitz 2020). the inclusion of two further elements in the model is suggested: society (and its context), as a fourth helix, and the natural environment as a fifth helix. the quadruple helix model considers that knowledge should be democratized, therefore a knowledge society would evolve jointly with a knowledge economy. this expanded model endorses the role of society in using, applying, and generating knowledge, as well as encompassing the effect of culture and creativity. building upon the quadruple helix, the quintuple helix elevates sustainable development as one of the main elements for collaboration, knowledge sharing and innovation that leads to a socio-ecological transition (carayannis, barth and campbell 2012). 2.2. clusters of innovation the cluster of innovation (coi) framework focuses on the main components of thriving business agglomerations in which the generation of fast-growing startups are strongly stimulated by the behaviours of those components (engel and del-palacio 2009). in cois, the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 market potential disruption of innovative business models carried by dynamic entrepreneurs are resourced by venture capitalists and/or major corporations in a win-win game result. relevant actors, as the government, universities, management (professional managers of startups) and professions (such as lawyers and accountants) play a highly enabling support role for the core components interaction (engel and del-palacio 2009, engel and del-palacio 2011, engel 2015). a set of hybrid components – such as corporate venture capital (cvc), research parks, incubators, accelerators, and service organizations – emerge from interaction between core and supporting actors, as new organizations or programmes, expanding the remits of the original component activities (engel 2022). figure 1. core, supporting and hybrid components of a coi source: engel (2022). the emergence of cois therefore depends on the interaction of the different components in the development of an innovation cluster. the interest alignment among components, joint definition and communication of a common agenda enables the interaction and facilitates the building of the coi identity (bittencourt, et al. 2020). thus, although the presence of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 aforementioned components or their functions provided by other components are crucial, what actually bonds the relation and allows fast innovation in cois are the shared behaviours: entrepreneurial process, high mobility of resources, alignment of interests, global perspective and global linkages (engel 2015 and 2022). the dynamic processes of cois can evolve into a set of interactions with other physically remote cois, enabling them to avail of shared ideas and information as well as people and resource mobility, leading to new opportunities. in this (global) network of cois the interactions can vary from ephemeral contacts to more durable bonds embedded in contracts and formal partnerships, or, in a more radical form, two cois essentially operate in a fully integrated manner (engel and del-palacio 2009, engel and del-palacio 2011). startups and other companies benefit from the international connections for finding customers, partners, and investors, and for exploring new disruptive opportunities. the brand of the aoi is endorsed by whoever creates a project locally and internationally (pique et al. 2021). 2.3. knowledge-based urban development talent is the raw material of the knowledge-based economy and society (nikina and pique 2016). cities that want to be the platform of talent, need to develop strategies to create, develop, retain and attract talent (bontje, musterd and pelzer 2011, esmaeilpoorarabi, yigitcanlar and guaralda 2016, nikina and pique 2016) striking a balance with economic and social activities in the same place (scott 2006). the role of the city is crucial in developing a strategy to cluster highly skilled people and to provide the platform for economic and social development (parejaeastaway and piqué 2010). innovative and creative talent is clustered in knowledge-intensive cities (florida 2008). in the new economy the trend is to develop modern urban science parks that combine talent and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 technology in the innovation milieu of the cities (pique et al. 2021). urban planners replace old urban industrial districts into innovation districts, regenerating the old economy into a new knowledge-based economy in city centres (knight 1995). cities have been transformed into ‘knowledge community precincts’ (carrillo 2006, yigitcanlar, velibeyoglu and baum 2008b), that is, innovation districts hosting communities of talent that generate new knowledge (yigitcanlar and dur 2013). city centres are the platforms of ecosystems of innovation taking advantage of the city amenities and the vibrant urban life. innovation districts host significant concentrations of high technology sectors with creative and cultural industries which are integrated in the social context (scott 2000) and provide socio-cultural amenities (yigitcanlar and dur 2013). knight (1995) provided an explanation about the knowledge-based development (kbud) in cities, defining kbud as the transformation of knowledge in local development. kbud framework (sarimin and yigitcanlar 2012) includes social, economic, urban and governance development. (piqué, miralles and berbegal-mirabent 2019b), developed the framework in (1) urban transformation: urban plan, infrastructure plan, legal framework and buildings, (2) economic transformation: clusters and agenda of technologies, (3) social transformation: creation, development, attraction and retention of talent, (4) governance: government, universities and industry (the triple helix agents) playing a key role sharing the vision, and developing actions in all dimensions of the project. tangible (e.g., physical infrastructure or buildings) and intangible (e.g., knowledge or creativity) assets are necessary attributes of the innovation districts (velibeyoglu and yigitcanlar 2010) for living and working in the cities. th agents play different roles building innovation districts in the urban, economic, and social dimensions (pique et al. 2021). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 innovation districts like porto digital, 22@barcelona, or one-north in singapore are illustrations of this transformation (piqué, miralles and berbegal-mirabent 2019b, yigitcanlar 2011). 2.4. aois evolution phases based on the analogy of the lifecycle of a new venture of (freeman & engel 2007) (inception, launch, growth, and maturity), the ecosystems progress phases from (moore 1996) (birth, expansion, leadership, and self-renewal or death), and (etzkowitz 2005) stages of regional innovation ecosystems evolution (development of the idea of a new regional model; starting of new activities; consolidation, and adjustment; and self-sustaining growth), (piqué, berbegalmirabent and etzkowitz 2018, pique et al. 2021) propose four evolution phases for aois: inception, launching, growth and maturity. for each of the phases, the model presents the evolving (re)configuration of the engagement and leadership of the th agents, as well as the evolution of aspects of each dimension of the kbud framework. each phase depends on the contribution of the th agents for governance, urban, economic, and social development, as it outlines the subsequent stage, strengthening or obstructing its evolution (pique et al. 2021). in this context, the performance evaluation of the aspects of the dimensions involved in each phase becomes crucial for the orchestration or redesign of activities, programmes or processes. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 figure 2. stages of the aois development and its dimensions source: pique et al. (2021, 153). 2.5. performance indicators of aois strategic management literature has analysed mission statements as a tool to understand and evaluate how organizations perform (alegre et al. 2018). every organization has its own mission, and the way it is articulated can reveal crucial information about the strategy an organization is following. in the specific domain of science and technology we can find the recent works of (wang, wan and zhao 2014) and (berbegal-mirabent, et al., 2020) in which mission statements of science parks are scrutinized in order to find potential links between the strategy and the real performance. in these studies, organizational performance is http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 operationalized in a variety of ways, ranging from indicators of a number of startups to the indicators of funding. performance indicators are metrics used by organizations to measure and evaluate their behaviour and ensure that their efforts are directed towards achieving their objectives. effective assessment is significant to prove the value of projects and initiatives and the benefits delivered to city authorities and all city stakeholders (caird, hudson and kortuem 2016). to support the monitoring of relevant projects and initiatives, kpis can be a universal instrument to evaluate the progress of strategies (dameri 2017). with regard to the lifecycle of a product or innovation environment, managing the lifecycle generates maximum value and profitability at each stage. the selection of correct strategies and kpis is important to drive the value maximization process. kpis are the answers, therefore, it is important to think about the question that needs to be answered and since some indicators will be more time-consuming and costly than others to collect and analyse, simplicity is paramount for a measure to be taken and reproduced periodically. for this reason, an existing and known indicator that answers exactly the required question may be better than proposing a perfect new but unknown measure. strong indicators are simple, precise, and measurable. within the different categories in which the indicators can be grouped, there is one that is related to the different parts of a program or project, which also allows a temporal analogy. within this, there are three main and most common categories of indicators. • input indicators. measure the resources required to allow the program to be implemented. (e.g., funding, staff, key partners, infrastructure). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 • process indicators. measure the program’s activities and outputs assessing whether the program is implemented as planned. (e.g., direct products/deliverables of the activities). • outcome indicators (or impact indicators). measure if the program is achieving its expected effect in the short, intermediate, and long term. 3. method and data aois require urban, economic, social and governance transformation over its lifecycle. although some evidence can be found concerning the elements that trigger and favour these transformations (piqué et al. 2019), (piqué, miralles and berbegal-mirabent 2019b), it is not clear how to measure this evolution. this situation calls for the development of performance indicators able to capture the different phases of development of an aoi, when these indicators are activated, and the agents involved in this process. aimed at tackling this problem, we present a framework of key performance indicators that is expected to become a useful tool for controlling and monitoring how aois evolve. this paper adopts the form of a case study (yin 2018), since it analyses (1) “how” and “why” is the process of urban revitalisation, (2) there is no control over the aoi analysed, and (3) it is a contemporary phenomenon with real-life context. more precisely, a single-case study approach was adopted to explore and pilot the validity of a set of key performance indicators. porto digital in brazil was chosen as a unique case, as it presents three unique characteristics that make it worth being examined: (a) it allows for a longitudinal study, since it has been in operation since 2000, (b) the initiative is recognized as one of the most comprehensive aois in terms of dimensions developed — social, economic, and urban — (pique et al. 2021), and (c) there is strong engagement of the triple helix actors (university, industry, and government) that is also extended to the fourth helix (society). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 the indicators presented in this study, as well as overall data were collected from multiple sources, including official reports and webpages, as well as scholarly articles describing the case of porto digital, compiled and fed during 20 years of the district’s evolution, from its inception to its maturity (see table 1). also, primary data was considered by means of two interviews carried out in december 2021 with the past president of porto digital (francisco saboya) and the current innovation director (heraldo ourem). table 1. source of data of porto digital year source of the data – official reports and webpage 2001 • decreto nº 23.212, de 20 de abril de 2001 qualifica a associação núcleo de gestão do porto digital como organização social os, e dá outras providências • plano bi-anual 2001-2002 2002 • relatório de metas e atividades para 2002 • anexo j – prestação de contas 2002 2003 • plano de atividades e metas financeiras de março 2003 a março 2004 • anexo b prestação de contas 2003 2004 • metas físicas do contrato de gestão mar 2004-mar2005 • resultados metas físicas contrato de gestão mar2004 mar2005 2005 • relatório de desempenho de atividades do plano de trabalho de março a dezembro de 2005 2006 • monitoramento do planejamento estratégico período 2006 – 2008 balanço do cumprimento das metas do período 2006 2007 • relatório de prestação de contas – 2007 2008 • prestação de contas 2008 relatório gerencial 2008 2009 • prestação de contas 2009 relatório gerencial 2009 2010 • 5º relatório semestral de progresso. contrato de gestão see e ngpd • 4º relatório semestral de progresso. contrato de gestão see e ngpd 2011 • relatórios de prestação de contas dos contratos de gestão 2011 2012 • relatórios de prestação de contas dos contratos de gestão 2012 2013 • relatórios de prestação de contas dos contratos de gestão 2013 2014 • relatório de prestação de contas dos contratos de gestão 2014 2015 • relatório de prestação de contas do contrato de gestão nº 4 – 2015 2016 • relatório de prestação de contas do contrato de gestão secti/pe – 2016 • relatório de prestação de contas do contrato de gestão 04/2014 pcr 2016 2017 • relatório de prestação de contas do contrato de gestão secti/pe – 2017 • relatório de prestação de contas do contrato de gestão 04/2014 pcr 2017 2018 • relatório de prestação de contas do contrato de gestão 04/2014 pcr – 2018 • décima_reforma_do_estatuto_social – 2018 2019 • relatório de prestação de contas do contrato de gestão 04/2014 pcr 2019 2020 • extrato de relatório de execução contrato de gestão no 001/2019 – 2020 web • https://www.portodigital.org/parque/o-que-e-o-porto-digital/documentacao source: own elaboration. http://revistes.ub.edu/index.php/jesb http://portodigital.org/arqsite/relatorio_prestacao_de_contas_porto_digitalsectma2007.pdf http://portodigital.org/arqsite/relatorio_prestacao_de_contas_porto_digitalsectma2007.pdf http://portodigital.org/arqsite/relatorio_gerencial_2009.pdf https://drive.google.com/open?id=1oj2pvdhddssihhktjccummnbcpcm36n8 https://drive.google.com/open?id=11atbwh6alsrvmul3udrv7txrlbv3moe_ http://portodigital.org/arqsite/relatorio_gerencial_contrato_de_gestao_2011_sectec.pdf http://portodigital.org/arqsite/relatorio_gerencial_sectec_2012.pdf http://portodigital.org/arqsite/relatorio_gerencial_sectec_2013.pdf http://www.portodigital.org/arqsite/prestacao_sectec_exercicio_2014.pdf http://portodigital.org/arqsite/relatorio_contrato_gestao_04.pdf http://portodigital.org/arqsite/relatorio_gerencial_2016_17ta_signed.pdf http://portodigital.org/arqsite/relatorio_tecnico_gerencial_2016.pdf http://portodigital.org/arqsite/relato769rio_de_prestac807a771o_de_contas_do_contrato_de_gesta771o_2017.pdf http://portodigital.org/arqsite/relatorio_tecnico_gerencial_2016.pdf http://portodigital.org/arqsite/relatorio_cg_pcr_2018.pdf http://portodigital.org/arqsite/relatorio_cg_pcr_2019.pdf http://portodigital.org/arqsite/extrato_de_relato769rio_de_execuc807a771o_fi769sicofinanceira_2020.pdf https://www.portodigital.org/parque/o-que-e-o-porto-digital/documentacao volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 to link the data to the proposition, the key categories in which the indicators were grouped were derived from the main domains proposed by the kbud to model a knowledge-based development. from here, the indicators were analysed to arrange them within the urban, economic, social and governmental categories, to later locate them in the different stages of evolution of an innovation district (inception, launching, growth and maturity). it means the moment in which each indicator begins to be used or "activated" is indicated on a timeline that outlines the different phases of evolution of an innovation district. an active indicator is conceived, in this case, as the period of time in which the information provided by the indicator is necessary for an accurate decision-making process essential for the district to reach its goals in time and complete its evolution. knowing which indicator comes into action in each phase could help the main decision makers to decide what type of data to generate and start measuring from the beginning of each phase to guarantee compliance with their actions and anticipate future decisions. the activation period was identified through the information presented in the district's official reports and websites. that is, when the need to start measuring a parameter was mentioned or when it began to record its measurement according to different evolution needs of the district. that done, the analysis was complemented with contextual and validation information, which was obtained from the interviews carried out with the experts and from scientific articles prepared in advance. additionally, the th agent that has the most influence on each indicator was also analysed. here, the greatest influence is conceived as who has the greatest power of action to create measures that modify these observed data. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 below the framework for allocation the aforementioned indicators are presented in order to link data to proposition. table 2. framework for the key performance indicators by dimension and phase phase dimension inception launch growth maturity th agent infrastructures and urban transformation companies and economic transformation talent and social transformation source: own elaboration. 4. the case of porto digital “porto digital is a public policy” (ourem 2022)1 4.1. overview launched in 2000 in the city of recife, capital of pernambuco state in the northeast of brazil, porto digital (pd) is one of the most awarded aois in the country. in 2020, there were around 330 small and medium companies, knowledge institutions, research, and innovation centres (including from multinational companies), development organizations and governmental 1 ourem heraldo (innovation director of porto digital). notes of interview, december 2021. name of the indicators that are activated and remain active in each phase for each dimension th agent with the biggest influence http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 agencies in the area, with approximately 11 thousand professionals in total, generating an annual revenue of around brl 2.3 billion in 2019 (porto digital 2021). pd is an open well-defined urban aoi2 that covers an area of 171 hectares of the recife old historic neighbourhood and part of three adjacent neighbourhoods, with one unit in the countryside (caruaru). most of the area is listed by public heritage and, therefore, follows strict rules regarding its modification. the city law 17244/2006 and its further modifications provide the basis for its operation, that aims at urban revitalization and economic and cultural development with focus on information and communication technology (ict), creative economy (games, videos, digital media, animation, design, photography, and music), urban and future of technologies applied to cities (albuquerque neto, calheiros and targino 2012, portodigital 2021). established as a non-profit private association, the management organization of pd (ngpd) has deliberately pulverized governance. its steering committee includes representatives of the government, academia (universities and research centres), industry (business associations) and the civil society (people of notorious knowledge), but without any group reaching the majority of representation3 . pd is a product resulting from the formation of human capital and capacity to generate research at the federal university of pernambuco (ufpe), in its three fronts: teaching, research and extension activities. in the beginning, pd was positioned around the ufpe competencies but with its consolidation, other institutions were attracted to the area or for joint projects. 2 best technological park/innovation habitat in brazil in 2007, 2011, and 2015 (anprotec 2021) 3 porto digital statute. https://www.portodigital.org/arqsite/decima_reforma_do_estatuto_social.pdf http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 currently, more than 15 institutions integrate the human capital formation ecosystem, offering research and extension activities as well: ufpe, rural university, catholic university of pernambuco, and private ones, such as cesar school (which started in 2010 and offers undergraduate, master and doctorate programs). most institutions do not have a physical presence in the pd area but offer co-branded courses. these involve the co-creation of a curriculum, adapted to the needs of the ecosystem, and a mandatory module of professional technological residency (analogous to medical residencies, but in this case carried out in pd companies), in which students have the opportunity to experience the aoi. co-branded courses facilitate the development of hard and soft skills required by the companies in the selection process, as well as the development of joint projects between companies and the universities. when it comes to economic development, since its inception, a threefold strategy was in place: • creation of new companies (through incubation, acceleration programs, etc.). • strengthening of established businesses (internationalization, obtaining certification, support for financing). • attracting large companies. the 3-element strategy allowed for more formal action on a given element depending on the context. for instance, currently the trade-off in undertaking entrepreneurship through startups is considerable due to the high salaries paid to it professionals (there is a high demand for this type of professional). thus, the focus shifted to strengthening existing companies and attracting large companies to pd. it is important to mention that the pd has already reached a considerable level of maturity through endogenous generation of strong business: from the 10 most important companies in the area, 7 were created in porto itself. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 pd is in one of the more prestigious areas of the city, where recife was founded, and which has a series of cultural facilities (bars, restaurants, museums, a shopping mall, handcraft market, and areas for cyclists). in the area there are several political and cultural manifestations (such as carnival) on a city landmark, the “ground zero” square. as the creative economy is one of the pd’s areas of interest, the ngpd carries out a series of monitored activities to engage with the cultural movements that take place in the area. one of the cinemas is linked to porto media, a laboratory for experimentation of the creative economy that offers post-production services, which has already participated in brazilian and foreign productions. 4.2. pd performance indicators and th agent roles at each stage of the lifecycle as described in section 3, 67 indicators were found. their breakdown, by stage and dimension, is shown in table 3. by closely examining which indicators are more relevant through the different stages, it is possible to obtain a better grasp of how an aoi has evolved and where was the focus at each stage of its lifecycle. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 table 3. indicators activated in each stage of the aoi lifecycle 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 urban development u1 intervention area [sqm] gov u2 potential floor [sqm] gov u3 urbanized street [km] gov u4 connected buildings [#] gov / ind u5 fyber optic [km] gov / ind u6 wifi points [#] gov / ind u7 foreign direct invesment [eur] ind / gov u8 real estate investment [eur] ind / gov u9 constructed building [sqm] ind / gov / uni u10 renovated buildings [sqm] ind / gov / uni u11 available floor space [%] ind u12 new locations [sqm] gov area indicator unit th actor inception launching growth maturity economic development e13 jobs [#] ind / gov / uni e14 local workers [#] ind / soc e15 companies [#] ind e16 international companies [#] ind / gov e17 national companies [#] ind e18 relocated companies [#] ind e19 tax exemptions [%] gov e20 public investment in companies [eur] gov e21 private investment in companies [eur] ind e22 turnover all the district [eur] ind e23 companies using digital tools [%] ind e24 knowledge-based companies [#] ind e25 companies with quality certification [#] ind e26 exporting companies [%] ind e27 professional events [#] ind e28 incubators [#] gov / ind e29 ventures incubated [#] gov / ind e30 invesment in start ups [eur] ind e31 venture events [#] gov / ind e32 start ups [#] ind / uni e33 turnover start ups [eur] ind / uni e34 coworking [#] ind e35 freelancers [#] ind e36 innovation pilots [#] ind / uni e37 innovation and tech events [#] gov / ind / uni e38 local events [#] gov / ind / uni e39 international events [#] gov e40 participation in local events [#] gov / ind / uni / soc e41 impact in social network [#] gov / ind / uni / soc e42 publication in scientific journals [#] uni e43 intellectual property [#] ind / uni / gov http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 social development s44 citizens [#] gov / ind / uni / soc s45 research, tech and innovation centers [#] uni / ind s46 universities [#] uni s47 schools [#] gov s48 telecenters [#] gov s49 students in district universities [#] uni s50 students of primary and schools [#] gov s51 higher education degree [%] uni / gov s52 international workers [%] ind s53 certified professionals [%] ind s54 long life learning programs [#] uni / ind s55 students in long life learning programs [#] uni / ind s56 social activities [#] soc / gov s57 persons in social events [#] soc / gov s58 cultural activities [#] soc / gov s59 cultural venues [#] soc / gov s60 professional women in the district [%] gov / ind / uni / soc s61 housing [#] gov / ind source: own elaboration. below we elaborate on each stage of the lifecycle of pd and discuss the rationale behind the relevance of the indicators taking into account the strategy adopted by the aoi. 4.2.1 inception in terms of infrastructure and urban transformation, a new planning regulation4 was created at this stage in order delimit the area of pd, the type of uses intended for the land – streets, business and commerce, cultural equipment, etc – and to provide incentives for attracting investors to the innovation district. at that time, social housing was not available in the area. accordingly, kpis refer to the intervened area (measured as the total surface in which a modification of the urban space can been carried out), the potential floor available (proxied as the square meters that can be built), the urbanized streets (in kilometres), connected buildings (number of buildings with internet coverage) and high connectivity (kilometres of optical fibre cable). all measures here are linked and belonged to the master plan of the pd’s project definition. apart from the first indicator (intervention area) that was used over the 20 years of evolution of the 4 city law 17.244/2006 and further modifications http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 district, the remaining indicators that pertain to this dimension were measured during the first 7 years, that is, during the inception and launching phases. moving on to the economic dimension, the participation of universities, government and industry was prioritized to articulate the collaboration that stimulated the strategic development of the knowledge-based economy in a formerly deprived area. at this stage, the state government of pernambuco, in partnership with informatics centre (centro de informatica – ci), involved the association of software companies (softex recife) to explore the potential companies and jobs to be attracted/generated in the area through the regeneration of the port warehouses and historic real estate in the case of recife. kpis that capture the interventions in the economic sphere where measures such as the number of current companies and jobs, could be used as a starting point to establish future development objectives. these two measures remained operative throughout the district’s lifecycle. during the first two stages (inception and launch), it was also important to differentiate between national and international companies, for this reason two different indicators were defined (national companies and international companies). another parameter that was activated during this stage was an indicator that measured the number of companies attracted to the area (relocated company indicator), and they kept active up to the beginning of the maturity phase. the number of professional events (professional events indicator), local events and the quantity of people that participate in them, were also analysed from the origin and their values, were recorded throughout development of the district. finally, the number of startups was also activated at the inception stage and is still in use. note that even when economic viability of the project is analysed, the focus here is not that much on measuring profit. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 as for the social dimension, the state of pernambuco was the main stakeholder for converting the old quarter of the city into a new innovation district, thus the knowledge about the demographics of the area and the involvement of the residents, business owners and real estate owners were of utmost importance. the university of pernambuco (ufpe), through its informatics centre (centro de informatica – cin/) and the recife’s advanced studies and systems centre (cesar) were also involved at the time of inception. in this sphere, the role of citizens acquires prominence, as can be seen in the suggested kpi as knowing the number of citizens is used to forecast the future number of inhabitants, and thus, the number of houses and other infrastructures that will need building. the number of research, technology and innovation centres, universities, schools and telecentres also began to be registered at this stage, as well as the number of students attending university or primary school. accounting for the number of students was an activity maintained throughout the four stages, while measurement of numbers of research, technology and innovation centres stopped when the district reached maturity. the measurement of number of telecentres was discontinued in the growth stage. additionally, continuous training was also analysed and maintained from the beginning to the end of the development (indicators long life learning programs and students, which seek to record the number of programs offered and the students enrolled, respectively). finally, the number of social and cultural activities was recorded as a measurement parameter of how lively the aoi was. recording of this indicator started during the inception stage and has been maintained as of today. finally, looking at the governance dimension, main kpis refer to quantify the monetary value made available for district activities and projects (district budget), and the number of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 professionals in the management team (district management team professionals’ indicator). both metrics have and are still being used since inception. 4.2.2. launching in order to coordinate the efforts of the main actors in terms of the talent and social transformation, it was established the management organisation of the aoi, the núcleo gestor do porto digital (ngpd), a private not-for-profit company that represents the triple helix actors and that has as its mission to the promotion of competitive conditions that create, attract and strengthen innovative information technology and creative economy ventures to the innovation district. the implementation in the district of organisations, such as the state secretariat of science, technology and environment (sectma), research institutes as the cin – ufpe and the institute for innovation in informatics (i3) and the continuous involvement of incubators like cesar and cais do porto, and the support of the interamerican development bank, created the trust for attracting other institutions and companies to engage with the project. cesar also oversaw the development of physical and logical conditions for the creation and growth of startups, matching startups with entrepreneurship programmes and connections with investors. new indicators were created and identified in the launch phase, indicators such as foreign direct investment and real estate investment, which measure the money invested both externally and internally. the constructed building and renovated buildings indicators, which measure square meters built and renovated respectively. wi-fi points were also considered here, which counted the number of wi-fi connection points within the district. all these new indicators remain active until the beginning of the maturity phase. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 similarly, the economic dimension also begins to measure the investments amount in this launching stage. indicators such as public investment in companies and private investment in companies are activated here and will continue to be measured until the end. the percentage of tax exemptions (tax exemptions), the invoicing of the existing companies and the startups (indicators of turnover all the district and turnover startups respectively). the number of companies with quality certification (companies with quality certification indicator), the number of incubators (incubator indicator), the number of innovation pilots (innovation pilot indicator) and international events (international events indicator), begin to be measured in this phase, remaining operational throughout the development cycle. in terms of the social dimension, measurement of the following indicators began during launch stage: higher education degree: percentage of students with higher education; certified professionals: percentage of professionals who have participated in certification training; persons in social events: number of people participating in social events and cultural venues: number of cultural venues. the governance dimension activated here the district companies associated indicator, that measures the number of associated companies and the number of professionals that belong to district company associations (professionals in district companies associations indicator). 4.2.3 growth the management organisation of the area, ngdp, drove the building and integration of communities and networks. in terms of cultural activities, the tax incentives and local projects led to an enhancement of social facilities for the district workers, local citizens, and tourists. several facilities were implemented in the area, such as bars, restaurants, museums, a shopping mall, a handcraft market, and recife’s most famous space for festivities, especially during http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 carnival. on sundays and holidays, itinerant artistic presentations animate the district, and the streets are exclusively for pedestrians and cyclist use. companies of two clusters — it and the creative economy — were attracted to the area. other companies, such as fiat, accenture, ibm, uber were also attracted once the district became a reference for infrastructure, open innovation, and talent. it also attracts the interest of real estate investors and developers, that see opportunity in the rising demand and tax incentives to regenerate the real estate. urban indicators were created in previous phases, here it was only registered indicators that measure the percentage of available floor space and the new locations, which is the expansion in square meters of the district. in the economic field, indicators are developed to measure knowledge-based companies: number of knowledge-based companies. exporting companies: the percentage of companies that export. ventures incubated: the number of ventures incubated. investment in startups, the monetary amount of investment in startups. venture events: the number of venture events. coworking: the number of collaboration spaces. freelancers: number of freelancers. innovation and tech events: number of innovation and technology events. in the social sphere, the indicators detected in the growth stage were: international workers: percentage of international workers in the district. publication in scientific journals: the number of scientific publications made by works within the district. intellectual property: the number of patents registered within the district. the governance dimension began to register at this stage, the number of clusters that the district had (indicator of cluster). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 245 4.2.4 maturity the efforts made to consolidate porto digital attracted national and international events and visibility to the project, as well as enhanced competitiveness. it appeared in the financial times in 2014 as ”recife: rebirth of the brazilian venice”, which entitles porto digital as a main driver in containing the region’s brain drains through the nurturing of a dynamic economic ecosystem based on culture, information, and knowledge. ngpd consolidates its engagement with international networks (e.g., international association of science parks and areas of innovation -iasp, american chamber of commerce, and triple helix association), as well within brazilian networks (e.g., anprotec, assespro, softex recife). in 2013, porto digital hosted the annual conference of iasp, strengthening its engagement with the international community. these engagements created a robust platform for the internationalisation of porto digital and to export the model to other regions/countries. porto digital also expanded its operation to the countryside of pernambuco state, through the innovation lab “armazém da criatividade” in caruaru, and also expanded its companies cluster from it and creative economy to include urban and future of cities technologies. apart from the indicators activated in previous phases that remain active in this phase, the following are created in this instance: impact in social network: level of impact on social networks (high, medium or low). professional women in the district: percentage of women working in the district. housing: number of dwellings in the district. regarding this last indicator, currently, porto digital does not have housing in the district and pd staff still commute to their homes in the satellite areas. however, there is in place a large-scale project to convert 35 thousand meters of idle areas into residential areas. this area, currently degraded, will be regenerated via private investment. although priority will be given to housing for pd http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 246 workers, the housing project is a mix of buildings of various categories, including social housing. the ngpd developed the concept and sought out the investor (they have a memorandum of understanding for the development of this project). in the governmental sphere, measurement of the number of existing indicators that record the development of open data (indicators in open data) began in the maturity stage. 4.2.5 triple helix agents the triple helix model allows the different actors (i.e., government, university and private sector) to engage at different speed and levels of commitment. when analysing the evolution of pd, one notices that indeed, triple helix agents show diverse strategies which differ not only in the type of activity but also in terms of when (timing along the lifecycle) and how (resources they put into play and level of influence). in the paragraphs that follow we briefly explain how each of the triple helix agents behaved. government had a dominant role in urban development (defining the area of intervention, the potential floor, and the streets that qualified for urbanization), although a joint collaboration with the industry was needed in order to develop the infrastructure and define new locations. in the economic dimension the government also stood out, holding in his hands the capacity to stimulate economic activity by means of tax exemptions, public investment, easing the creation of entrepreneurial ecosystems (e.g. incubator, ventures incubated) and promoting the district through events (e.g. venture events). in the social sphere, the government was responsible for defining the number of houses to be built and, consequently, setting an estimate for the number of citizens that will be able to live in the district, and therefore, the need for schools and social services (which will be in hands of the public administration). finally, in the governance http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 247 dimensions, the government plays a key role promoting the association of companies, the clusterization and the budget of the organization in charge of developing the district. the industry, in urban development, will deploy the infrastructures and buildings and will offer all the offices to the tenants and investors. in terms of economic development, the industry will also be in charge of generating and developing companies, with the job creation that this entails. this occupation could be analysed by local workers and freelancers among others. also, as an expression of economic impact and development, industry will have indicators that follow the turnover of companies and the private investment in startups (business angels in venture capital and corporate venturing). the competitiveness of the companies using digital tools and the quality certifications (organizational and personal) are also measures led by the industry. the number of knowledge-based companies and the number of pilots are expressions of the innovative industry in the district. the internationalization degree analysed by the number of the international companies and the participation in international events, are also measures managed by the industry. in social development the industry contributes with the number of workers that live in the district being able to specify between international, women and others that will be neighbours in the district. in the governance development the number of the companies associated in the district and the number of clusters are indicators that have the industry as a relevant agent. universities, in urban development, can participate creating or renovating their own buildings. in terms of economic development, universities contribute with the development of new science, papers, and patents, the development of innovation pilots and new startups and finally with the participation in events. in social development, universities contribute with students and professors as citizens of the district and improving the education of workers. also, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 248 providing education degrees and long-life learning programs. in governance development, universities are also involved in the cluster and the company’s associations. society will be the user of the district, participating actively as workers in the economic development and as students in the social development. the dynamics of the district will be measured with social and cultural activities. in the case of recife, the society was not deeply involved in the governance at the beginning. 4.2.6 indicators’ categories in terms of the part in the program that the indicator can be related to, three main categories can be observed (see table 4) • input indicators, which measure the resources needed to implement the program (u1, u2, u7, u8, u12, e14(1), e19, e20, e21, s46, s47, s48, s49, s50, s61, g62, g63). • process indicators, which measure program activities and outputs (u3, u4, u5, u6, u9, u10, u11, e18, e23, e25, e27, e28, e29, e30, e31, e34, e36, e37, e38, e39, e40, e41, s51, s53, s54, s55, s56, s57, s58, s59, g64, g65, g66). • outcome indicators (2), which measure if the program reaches its expected effects (e13, e15, e16, e17, e22, e24, e19, e32, e33, e35, e42, e43, s44, s45, s52(3), s60, g67). (1) local workers, considered as a means of inclusion, it can be classified as an outcome, but at the same time if it is conceived as available resources, it could be classified as an input. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 249 (2) the indicators that measure outcome should be measured from the beginning in order to set the benchmark on which to improve. (3) international workers are on one side, input for the internationalization of the company and could be the result of activities of attraction of talent. in our case, as an outcome because of the goal of the district of increasing the international diversity. it could be observed here that some outputs became inputs of new activities and the addition of many outputs derived from the accomplishment of outcomes. table 4. lorem ipsum area indicator unit indicator category urban development u1 intervention area [sqm] input u2 potential floor [sqm] input u3 urbanized street [km] output u4 connected buildings [#] output u5 fyber optic [km] output u6 wifi points [#] output u7 foreign direct invesment [eur] input u8 real estate investment [eur] input u9 constructed building [sqm] output u10 renovated buildings [sqm] output u11 available floor space [%] output u12 new locations [sqm] input economic development e13 jobs [#] outcome e14 local workers [#] input e15 companies [#] outcome e16 international companies [#] outcome e17 national companies [#] outcome e18 relocated companies [#] output e19 tax exemptions [%] input e20 public investment in companies [eur] input e21 private investment in companies [eur] input http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 250 area indicator unit indicator category e22 turnover all the district [eur] outcome e23 companies using digital tools [%] output e24 knowledge-based companies [#] outcome e25 companies with quality certification [#] output e26 exporting companies [%] outcome e27 professional events [#] output e28 incubators [#] output e29 ventures incubated [#] output e30 invesment in start ups [eur] output e31 venture events [#] output e32 start ups [#] outcome e33 turnover start ups [eur] outcome e34 coworking [#] output e35 freelancers [#] outcome e36 innovation pilots [#] output e37 innovation and tech events [#] output e38 local events [#] output e39 international events [#] output e40 participation in local events [#] output e41 impact in social network [#] output e42 publication in scientific journals [#] outcome e43 intellectual property [#] outcome social development s44 citizens [#] outcome s45 research, tech and innovation centers [#] outcome s46 universities [#] input s47 schools [#] input s48 telecenters [#] input s49 students in district universities [#] input s50 students of primary and schools [#] input s51 higher education degree [%] output s52 international workers [%] outcome s53 certified professionals [%] output s54 long life learning programs [#] output s55 students in long life learning programs [#] output s56 social activities [#] output s57 persons in social events [#] output s58 cultural activities [#] output s59 cultural venues [#] output s60 professional women in the district [%] outcome http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 251 area indicator unit indicator category s61 housing [#] input governance development g62 district budget [€] input g63 district management team professionals [#] input g64 district organizations associated [#] output g65 professionals in district companies assoc [#] output g66 indicators in open data [#] output g67 clusters [#] outcome source: own elaboration. 5. discussion the transformation of a district of innovation implies changes in the urban, economic, social and governance dimensions, with a holistic approach between all of them (piqué, miralles and berbegal-mirabent 2019a). the final result is the convergence of a common agenda in which government, universities, private companies and the society at large, collaborate and find synergies. the consolidation of an aoi implies going through a number of stages, and at each stage (from inception to maturity), the different agents will adopt different roles, get involved in different activities and interact with the other stakeholders differently. within this context, we posit that identifying key performance indicators to monitor the progress of an aoi is of paramount importance in order to take more informative decisions at each stage and thus, allow policymakers to concentrate on those aspects that lead to successful implementation of the aoi. using data that covers a 20-years period, in this study we have been able to analyse the case of porto digital and provide key insights at each phase of its development. to do so, we have defined a framework of indicators, established at which moment each indicator enters into play, and identified the role played by each of the triple helix agents. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 252 we believe this work will provide new knowledge for researchers and policymakers in order to prioritize actions that will impact the desired goals. in the subsections that follow we dive deeper in the implications that can be drawn from this study. 5.1. triple helix agents under the lens of the triple helix model, the case examined evidence that triple helix actors play different roles and that the role each agent adopts evolves over time. according to the preponderance of the different actors in each stage of the lifecycle of an aoi, we observed that at the beginning, the government should take a leading role, particularly in urban planning and the development of infrastructures, not only making the location and the amenities surrounding them attractive, but also implementing financial incentives. this shows that the government power of action is preponderant in the urban dimension. the government is also the main driving agent for social development in the initial stages, therefore, actions undertaken should also be directed towards increasing and improving the number of citizens, schools, students and related areas. concerning the role played by academic institutions (in the specific case under analysis, the university of recife), the main contribution in the initial stages consisted of provision of the right talent and technology, to make the area attractive. as the aoi evolved, the industry came into play. first, being in charge of the construction of buildings and infrastructure, and later, settling national and international companies in the district and creating jobs. these companies formed clusters of innovation, which in turn, trigged the creation of startups, attracted venture investment, and contributed to corporate innovation and the establishment of a formalized innovative community. last but not least, the society in pd, as a quadruple helix agent, was in charge of the cultural development and the organising of social events beyond professional life. involving people was seen as critical to ensuring success, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 253 therefore, their participation began to be measured, particularly in the third and fourth stages, once opportunities were granted, and also as a strategy to monitor if the planning of housing and services was enough or required further investment to meet demand. 5.2. evolution phases of the aois at the inception stage, the aoi is conceptualized. a first decision is defining the location and what kind of transformation the area will require. according to the stages of aoi model, in the urban dimension the government should lead urban planning, infrastructure, and the foundation of the entity that will manage the district involving key institutions. in this phase, in tune with the theoretical model, the activated indicators reflect that in the case of study, evaluation of activities related to urban planning (indicators u1 and u2) and infrastructures (u3, u4, u5 and u6) commenced. it is important to mention here that the indicators u2 (potential floor) and u3 (urbanized streets) stopped being measured in the growth phase because the area was fully built, if there had been more space, this parameter would continue to be measured throughout all phases. on the other hand, the indicator that measured the kilometers of fiber optics (u5), was also discontinued in the growth stage, but for a different reason, related to the fact that it became a commodity, and every house was offered fiber optics. also, the ngpd was created involving the triple helix agents, applying the first budget (g62) and hiring the district management team (g63). additionally, advancing the phase of launching of the aoi model, pd activities related to the attraction of companies (e15), national (e17) and international (e16) were developed, but from the growth stage, further census start to consider just companies, and make no differentiation with multinational or national companies. furthermore, in confrontation with the aoi model, pd activities linked to generation and development of talent (s46, s47, s49, s50, s51, s54 and s55) were developed. also, in the case of pd, ngpd started http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 254 promotion of the entrepreneurial ecosystem with creation of startups (e32) that in the aoi’s evolution model was introduced in the growth phase. overall, and after the analysis of this pd case, activities related to talent and startups, as well as social and professional activities could advance the inception stage of the aoi model. this opens up or facilitates a debate about the importance of the relationship or dependence of the activities (conditions or resources previously required to carry out tasks or projects) over a fixed temporary disposition of each one of them in these promotional and social activities. the launching phase takes all the guidelines established at the inception phase and puts them into practice. according to the stages of the aoi model, the district deploys the utilities and starts the activity of the real estate, the first tractor companies and research and technology centres are located, and the incubation and landing programs are developed. the pd case coincides in this aspect since the indicators that measure the investment in real estate (u7 and u8) and the construction and renovation of buildings (u9 and u10) are activated in this instance. besides, anchor institutions (e15, e16, e17 and e18) were landing in the district and incubators (e28) promoted the activities of startups (e33) and the innovation pilots (e36) that agrees with what the model proposes. in contrast, pd was continuing the talent development (s51 and s53), social and cultural activities (s57 and s59) that do not appear directly in the aoi model. also, the first associations of companies in the district started at the launch stage (g64), unlike what is established in the aoi model, which proposes that these activities begin in the growth phase. it implies that as soon as the district has companies located, the networking could be activated, and the sense of belonging is necessary to be developed by tools as associations. this makes the relationship and dependence between indicators visible again, but not a temporary rigidity in terms of social activities. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 255 after the aoi has performed well on their kpis in the launching phase, the next step is the growth stage. according to the stages aoi model, it’s the moment of clustering and strengthening communities, while activities related to the urban and economic dimension (creation of startups, attraction of companies and open innovation) continue. in the case of pd, all the effort went into attracting new business and investment, and into boosting business clustering (g67) and networking, which made the indicators that measure the variations of these concepts operational at this stage. the entrepreneurial ecosystem was growing with the ventures incubated (e29) investment in startupss (e30) and venture events (e31) building the clusters of innovation. a special mention should be made of these indicators (e28, e29, e30 and e31) during the maturity phase, since even when the reports do not continue to record their evolution in the traditional way, and during and after this stage, the data was and is collected through a tool, (now a prototype, that is self-declaratory). pd asks the ecosystem to register and disclosure information, which is then validated. besides, the technology made possible the competitiveness of the firms and the knowledge-based companies (e23 and e24) and the tech base was boosted by tech events (e37) that are diffusing the research and the intellectual property (e42 and e43). pd started in this phase the involvement of the local residents as workers (e14) and international workers (e52), that the aoi model is focusing on the maturity stage. a special mention must be made about the measurement of the number of local workers (e14), which began and ended during the growth stage; this situation arose because this measure was carried out through censuses, and these were solved with money from the projects, then, at the end of the associated project, the census was also stopped. at the maturity stage, according with the stages aoi model, this is the moment of territorial growth, internationalization and growth of companies, and social networks. in the case of pd, new locations (u12) started in the growth model. the internationalization of the district started http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 256 in the launch phase (e39). in the case of pd, in the urban dimension, the district deployed all the floor and infrastructure, and the indicators finalized depending on the fulfilment of the project. in economic development the jobs and companies are performance indicators of the success of the district and the community creation is fully activated (e41). in the social development, the talent of the district is provided by educational institutions and promoting the inclusion of gender in the case of pd (s60), incorporated as a strategic objective, gender equity was not emerging in porto's strategy before. this conjunctural factor is evidence of the importance of the appropriate incorporation of the indicators over time, since an early measurement of female participation would have allowed for identification of its imbalance and for addressing it earlier on. paradoxically, the debate of the housing started in the maturity phase (s61). housing projects were not possible by pd authorities because the area is highly regulated. new projects with the city hall opened opportunities during this stage. housing and social dimension measures should be included from first phases, as a way of attracting and retaining talent and in order to be a co-author of the unique identity that the district will have, generating commitment and a sense of belonging; measuring these parameters from the beginning would have made it possible to highlight this shortcoming and address it, through inclusion actions, at earlier stages. 5.3. clusters of innovation this study also serves to provide new evidence for the clusters of innovation (coi) theory. from the data collected, it can be concluded that pd is an innovation district that behaves as a coi. if we look at the core components of a coi, they are all covered, with specific indicators to capture their breadth and depth: http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 257 − major corporations and entrepreneurs are present and active throughout the entire lifecycle. specifically, major corporations are embedded in a set of indicators in the economic dimension (e15, e16, e17, e18, e24, and e26). entrepreneurs are measured in startupss related indicators (e24, e29, e32, and e33). − venture capital indicators appear since the beginning (launching phase) in the economic dimension. see for instance private investment in companies (e21) and investment in startupss (e30). regarding supporting components: − universities related indicators are reflected in the social dimension and are measured through a set of indicators which are relevant during the entire life cycle (see indicators s46, s45 and s51). − government: the impact of government related activities in the area can be drawn from indicators connected with the area development (urban dimension), such as intervention area (u1), potential floor (u2), urbanized street (u3) and fiber optics (u5), which were relevant in the inception and launching phases. also, it is related to the economic dimension in terms of tax exemptions (e19), relevant from the launching phase on, and in the governance dimension, particularly in the district budget (g62); − supporting professionals, such as lawyers and accountants specialized in entrepreneurial issues, did not find any particular indicator in this particular case. − professional managers of startupss appear indirectly in professionals in district companies associated (g65). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 258 cois are also characterized by hybrid components. in the case of pd, these components have materialized as detailed below: − research parks, tech parks, incubators: there are specific indicators to measure the presence of such components, relevant from the launching phase on: incubators (e28), coworkings (e34). − corporate venturing capital (cvc) and angel investment: the indicators found do not make distinction between private investment (e21) in terms of regular venture capital, cvc and angel investment. − public vc: public investment in companies (e20) is measured from the launching phase on, but it includes grants as well, which precludes a more detail information on public vc. − service organizations and corporate foundations: there are no measures that capture information about this type of organizations (normally charities and a mix between governments and major corporations) in providing general support to the innovation process. finally, cois embed a series of behaviours among the components. these behaviours are almost all present in pd, and can be captured by some of the indicators included in our framework: − entrepreneurial process: innovation pilots (e36), is the only indicator that provides some information on the topic. although there are indicators related to infrastructures to support entrepreneurship (such as incubators – e28), indicators to capture more detailed information for this category were not found, such as number of serial http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 259 entrepreneurs, number of failed projects, number of grants approved (and from these the successful ones and the failed ones). − high mobility of resources: there were no indicators found related to turnover of personnel or any other that disclosed or yielded information on the topic. success rates of private investment (volume, number, series) and grants awarded could provide more information on the mobility of resources. as regards technology mobility, some indicators such as certified professional (s53), companies using digital tools (e23), companies with quality certifications (e25), and innovation and tech events (e37). − alignment of interests: although difficult to measure, and does not appear in specific indicator, pd has in its governance (pd statute), the participation of the different actors in the ecosystem. one measure that would be helpful for the validation of interest, is the variation of the budget allotted by government, industry, and academy for activities to foster pd innovation ecosystem. − global perspective: some indicators which provide the interest of the aoi on global engagement were found, such as foreign direct investment (u7), international companies (e16), international events (e39), international workers (s52), all from the launching phase. − global linkages: no indicator was found that addresses more formal linkages, such as number of joint international projects, memorandums of understanding with international organizations, soft-landing programmes. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 260 5.4. input, process and outcome indicators when analysing the indicators according to the part of the program to which the indicator can be related and its three main categories (input, output and outcome indicators), the case analysed shows that the indicators that measure outcome, that is, that control that the district reaches its expected effect; they are concentrated in the economic and social dimensions, not registering outcome indicators in the urban and governance domains. although, the strategic goals are specific to each project and this may vary from one particular case to another, it makes it possible to ask whether in the case of innovation districts, the data and measures related to infrastructures and governance are means to an end (input and output of intermediate projects), but not a goal in itself. additionally, also in the case of outcome indicators, measurement should begin before carrying out any activity that modifies the parameters they evaluate, so that it serves as a benchmark for improvement or growth. in the case of pd, there are certain outcome indicators that begin to be active after carrying out actions and projects that modify them (their respective output indicators are activated before), which prevents their growth from being accurately measured. 6. conclusions areas of innovation (aois) need urban, economic, social and governance development (sarimin and yigitcanlar 2012, nikina and piqué 2016). building upon the frameworks of triple helix, knowledge-based urban development, clusters of innovation, aois evolution phases, and the knowledge in performance indicators, this study presents a new way of organizing performance indicators of the mission of the aoi activated in different phases of the development transformation. using the porto digital case in recife, the most awarded project in brazil, that has been ongoing for 20 years at a triple helix hybrid organization http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 261 (ngpd), a set of performance indicators were defined, classified and analysed in order to understand when they have been activated at every stage of development in the urban economic, social and governance dimension, from inception to maturity, and what triple helix agents have been involved in every indicator with the major action power over it. four main conclusions emerge from the in-depth study of the case of porto digital district of innovation. first, to correctly monitor the progress and development of an aoi, indicators that capture the urban, economic, social and governance transformations that the territory will undergo are needed. porto digital is a brownfield transformation that has been developing for 20 years acting in (1) urban revitalization renewing buildings and preserving historic patrimony, (2) economic regeneration promoting entrepreneurship and innovation, and developing clusters in it and media, (3) social activation with amenities and activities beyond work, (4) governance orchestration with an administrative council with members of universities, industry and government. second, the indicators measure the result of the work in actions developed by triple helix agents individually or collectively. (1) likewise, government defining the urban planning, infrastructure, and the new locations. government also plays a key role providing investment, developing attractiveness of the district, and activating the ecosystem of innovation. additionally, government is the one that define the number of citizens that will live in the district and encouraging the location of main institutions. overall, create the conditions for management and the orchestration of the aoi. (2) the industry acts through the real estate investment, through construction of building and the deployment infrastructures. it is also the main party responsible for the occupation, the number and size of companies, adoption of technology and turnover. (3) the university through talent creation and development, scientific http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 262 productions, providing a tech base and research and technological centres, creates the foundations for innovation and scientific development that will also act as a means of attracting and retaining talent. third, indicators are activated in different stages. in the (a) inception phase, the number of citizens, jobs and companies are important to establishing the boundary conditions on which development of the district will be planned. the area of intervention and potential floor are also included and relevant measures for this initial conceptual work definition, which seeks the enrichment of a specific area with the aim of creating an ecosystem of urban innovation, which requires identifying a local context that ensures that talent, technology and capital can flow freely (etzkowitz and leydesdorff, 2000). in the (b) launching phase the number of anchor universities and centres and the tractor companies are essential to promote and drive innovation. anchor institutions are key links to connect startups and business incubators aligning research interests with business needs (pique et al. 2019b). measuring the development of infrastructures makes it possible to guarantee the existence of the necessary structure for the settlement of the first tenants. innovation pilots, district organizations, cultural activities, public and private investment and the economic impact starts to be measured here, granting a global perspective that fosters the innovative community, elevates its key competencies and allows for interaction with analogous communities. housing and social dimension should begin to be measured at this stage as a way to guarantee and promote measures that retain talent and attract investment. in the (c) growing phase, indicators related to the number of knowledge-based companies, number of exporting companies and the square meters of new locations begin to become operatives. the focus here is to attract business and investors promoting business clustering and networking. the indicators that measure the entrepreneurial ecosystem, the internationalization of the talent, and the companies clusterization are activated seeking to guarantee the actions http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 263 that will be a source of attraction for innovative and international talent and business. in the (d) maturity phase, the district deploys all the floor and infrastructure, and the indicators finalized depending on fulfilment of the project. the jobs and companies are performance indicators of the success of the district and the promotion and community creation is fully activated. the talent of the district is provided by educational institutions and promoting the inclusion of gender in the case of pd. fourth, being able to distinguish between input, output and outcome indicators allows us to glimpse the impact that the measures that are evaluated have on the general objectives and how they can affect other measurements of related indicators. in the case of pd, the indicators of the urban domain were identified as a means to an end, rather than a goal in itself, and this also conditioned the moments in which the measurements were carried out and generated boundary conditions for the other activities. measurement of outcome indicators should begin before taking measures that modify the parameters, they assess so that there is a reliable benchmark against which to compare. this study is not free of limitations, indicators are required for a comprehensive understanding of the dynamics of the pd ecosystem. although the indicators found do provide a good overview of the aoi ecosystem components, more detailed indicators are needed in order to reveal the actual existence of supporting actors such as supporting professionals, professional managers, and a distinct approach to private investment (cvc, angel, public vc). it is also crucial that the aoi understands the behaviours, mainly the dynamics of the entrepreneurial process (for which just one indicator was identified), mobility of resources (personal and funds), the actual commitment of the main actors, and global linkages. other limitations are that this research has been focused on one case study, in a brownfield transformation and that started 20 http://revistes.ub.edu/index.php/jesb volume 7, number 2, 219-267, july-december 2022 doi.org/10.1344/jesb2022.2.j112 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 264 years ago. future research could analyse other projects in other countries with different starting points (green field and brownfield transformation) and might analyse different aois in a comparative base in order to find common indicators in the urban, economic, social and governance dimension and the relationship between them. other future research could analysis the systemic relationship of the different indicators (input, output, outcomes) and how they impact or modify each other. references albuquerque neto, f. s., g. c. calheiros, and p. o. targino. 2012. parques tecnológicos: plataformas para articulação e fomento ao desenvolvimento regional sustentável. brasília: anprotec alegre, inés, jasmina berbegal-mirabent, adrián guerrero, and marta mas-machuca. 2018. “the real mission of the mission statement: a systematic review of the literature.” journal of management & organization 24(4): 456-473. doi: 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https://doi.org/10.1016/j.landusepol.2020.104595 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 152-156, january-june 2016 doi: 10.1344/jesb2016.1.j009 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 bernardo bátiz-lazo bangor university, wales (united kingdom) about millenials, new technology and researching business organizations abstract online resources for business research will be an innovative space that will help the community around the journal of evolutionary studies in business to sift through interesting and useful resources online to explore, research and teach the diverse, complex and global world of business. keywords: online resources; researching business; digital content; millenials an innovative area as noted in their first editorial, the executive editors want to break new ground by alerting the community around jesb about interesting and useful resources online to explore, research and teach the diverse, complex and global world of business. since the advent of the commercial internet circa 1995, the world has massively gone online. there has been an explosion in the wealth of data and resources available to individuals and organizations as consumer of digital content but also as they themselves have become producers of these resources. corresponding author. e-mail: b.batiz-lazo@bangor.ac.uk received 23 december 2015 accepted 31 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 152-156, january-june 2016 doi: 10.1344/jesb2016.1.j009 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 the architecture of business has also changed. this as marginal applications and innovative software solutions can build into new business models. think for instance that in today’s post-industrial society a taxi company can grow internationally without owning a single car (uber), the biggest global software vendors have written very little of the code they actually sell (google play store, apple app store), the largest accommodation provider has no real estate (airbnb), global telephone companies own no infrastructure (skype, wechat, wasapp, facetime), while the most valuable retailers have little or no inventory (alibaba, amazon) and the most popular media owners create no content (facebook, twitter, reddit). one would be tempted to suggest assets are no longer important for revenue generation in the new millennium. yet all of these businesses build on reliable and accessible infrastructure (such as telecommunications or electricity generation which are both characterized by large capital investments). thus we must not get carried away, as there is more to competitive advantage than innovative software or simple differentiation. industry has coined the term “millenials” to denote all those born and raised while considering the internet a fact of life. hence, to the extent that business organizations and people leave a digital “footprint” systematic studies of business (and the people that populate them) must now encompass those resources, the practices through which they are generated, as well as the motivation to generate them. more so as society has seen a fundamental transformation. fifty or so years after bank credit cards were issued outside of the united states for the first time, today no-one raises an eyebrow to the rather mundane fact that a piece of plastic enables the transfer of value. at the same time, the companies and financial institutions involved in this industry have grown into significant multinational corporations. volume 1, number 1, 152-156, january-june 2016 doi: 10.1344/jesb2016.1.j009 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 in brief, online resources poise opportunities and challenges for teaching, researching and engaging with business organisations. they are fundamental to better understanding capitalism as a system, the organizations and people that compose it in the 21 st century. we thus welcome the opportunity to create a space where we can inform about them, consider their content and discuss its potential. raising to the challenge as noted above, the executive editors of jesb plan to create an innovative space that helps the community around the journal to sift through the maze of online resources. this is a welcome addition to scholarly activities at the same time that it poses a challenge. some of us still remember the days before the internet. in that world paper-based communications such as scholarly journals played a key role to keep abreast with developments in the field. the model was relatively simple and guidelines for content were clear and standard. but in breaking new ground, as is the case of this section, we will stick to antonio machado: “caminante, no hay camino; se hace camino al andar” (loosely translated: “traveler, there is no road; you make your path as you walk"). although we will make things as we walk the journey, here go some basic rules to structure content while thinking to provide guidance to contributors:  name or title of the resource  nature: brief description of content and/or purpose (in 50 words or less).  category: o single (i.e. a blog populated by one or several authors; perhaps a specific hashtag in tweeter); volume 1, number 1, 152-156, january-june 2016 doi: 10.1344/jesb2016.1.j009 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 o generic (i.e. category of a resource such as a database, an activity as using a page in facebook, blogging or using wikipedia in teaching).  access: free or pay-wall.  platform: how does one go about accessing it.  location: url or keywords.  language that predominates: (self-explanatory).  type of scholarly activity for which it is relevant: o research; o teaching; o administrative (i.e. assistance to productivity); o social (i.e. engagement with others academics); or o impact (i.e. engagement with non-academic community).  review by: (name, last name) (institution, country)  date: (mm/yyyy)  review: in 800 to 15,000 words describe its contents while discussing its strengths, weaknesses, why it is innovative and the opportunities (or threats) it opens to the scholarly community around jesb. not each and every one of these will be appropriate for all the possible resources, resource combinations and their application to research, teaching and impact. but is a start. so what is the journey? the goal is to assess the potential of online resources (either as a producer or consumer of these) to further our understanding of business organizations, their people and their practices. the expression of this potential is not limited to a discussion of sources for systematic study or to satisfy intellectual curiosity but it is open to discuss and volume 1, number 1, 152-156, january-june 2016 doi: 10.1344/jesb2016.1.j009 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 evaluate how they can further our teaching or indeed, help us engage with others in the scientific community or the general public. online resources can be tools as much as they can be the object of research. as such they each have a past, present and future. they can be used to the benefit of single individuals or organizations but also communities of practice and learned societies. some have worked well, others have found new applications while others had an ephemeral life. ultimately, to establish a base-line from where we can improve our communications, research, engagement and daily life, in general, in as much as future generation of scholars can learn and better understand the different forms of capitalism, their institutions, their people, practices, ethics, governance and moral challenges in the early 21 st century. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 ander permanyer-ugartemendia universidad autónoma de madrid (spain) https://orcid.org/0000-0002-0330-7740 the collapse of mercantilism: anglo-hispanic trans-pacific ventures in asia at the end of the spanish empire (1815–30) abstract early modern connections between the pacific shores of the spanish empire have been assessed in previous studies and yet, studies on the subsequent developments during the late eighteenth and early nineteenth centuries are scant. this particularly applies to the consequences of the commercial developments at the end of the manila galleon and the collapse of the spanish empire in america. through the analysis of the professional networks of francisco xavier de ezpeleta, and juan nepomuceno machado, which stretched from asia to mexico at the time, this paper proposes some preliminary conclusions about trans-pacific links. it focuses on the study of networks and connections, and builds upon archival sources — mostly from the jardine matheson archive, in cambridge. in the transition from the eighteenth to the nineteenth centuries, actors who made up hispanic trading networks in what remained of the crumbling spanish empire, reorganised to benefit from opportunities as mercantilist limitations came to an end. in so doing, by the 1820s, hispanic traders allied with the fo rebears of the british firm of jardine, matheson & co., and controlled the resulting networks. this paper points to hispanic trans-pacific connections during the development of european private trade between east asia and the mexican pacific. ties between british and hispanic merchants are key for the analysis of the opium trade and western imperialism in east asia, and the development of british commercial hegemony in latin america in the nineteenth century. keywords: francisco xavier de ezpeleta; juan nepomuceno machado; jardine, matheson & co.; mexico; philippines; royal philippine company la caída del mercantilismo: iniciativas anglo-hispánicas transpacíficas en asia durante el fin del imperio español (1815-1830) resumen los contactos entre ambos lados del pacífico del imperio español, durante la edad moderna, han sido estudiados con anterioridad y, a pesar de ello, son escasos los análisis sobre los desarrollos posteriores, durante las últimas décadas del siglo xviii y las primeras del xix. esto afecta en particular al estudio de las consecuencias de los desarrollos comerciales al final del galeón de manila y a la caída del imperio español en américa. a través del anális is de las redes profesionales de francisco xavier de ezpeleta y juan nepomuceno machado, que abarcaban de asia a méxico en ese período, este artículo propone algunas conclusiones preliminares sobre los vínculos transpacíficos. el estudio se focaliza en redes y conexiones, y se basa en fuentes de archivo, sobre todo del jardine matheson archive de cambridge. en el tránsito del siglo xviii al xix, los protagonistas de la construcción de las redes comerciales hispánicas en lo que quedaba del imperio español se reorganizaron para aprovechar las oportunidades aparecidas con el fin de las limitaciones mercantilistas. al hacerlo, en los años de la década de 1820, los comerciantes hispánicos se aliaron con los precursores de la firma británica de jardine, matheson & co., y controlaron las redes resultantes. de este modo, este artículo analiza las conexiones trans-pacíficas hispánicas durante la expansión del comercio privado europeo entre asia oriental y el pacífico mexicano. los vínculos entre comerciantes británicos e hispánicos son fundamentales para el análisis del comercio del opio y del imperialismo occidental en asia oriental, y del desarrollo de la hegemonía comercial británica en américa latina en el siglo xix. palabras clave: francisco xavier de ezpeleta; juan nepomuceno machado; jardine, matheson & co.; méxico; filipinas; real compañía de filipinas la caiguda del mercantilisme: iniciatives anglo-hispàniques transpacífiques a àsia a la fi de l’imperi espanyol (1816-1830) resum els contactes entre tots dos costats del pacífic de l’imperi espanyol, durant l’edat moderna, han estat estudiats amb anterioritat, i tanmateix, en són escasses les anàlisis sobre els desenvolupaments posteriors, durant les darreres dècades del segle xviii i les primeres del xix. això afecta en particular l’estudi de les conseqüències dels desenvolupaments comercials a la fi del galió de manila i a la caiguda de l’imperi espanyol a amèrica. a través de l’anàlisi de les xarxes professionals de francisco xavier de ezpeleta i juan nepomuceno machado, que enllaçaven àsia i mèxic a l’època, aquest article proposa algunes conclusions preliminars sobre els vincles transpacífics. l’estudi es focalitza en xarxes i connexions, i es basa en fonts d’arxiu, sobre tot del jardine matheson archive de cambridge. en el trànsit del segle xviii al xix, els protagonistes de la construcció de les xarxes comercials hispàniques en el que quedava de l’imperi espanyol es van reorganitzar per aprofitar les oportunitats aparegudes amb la fi de les limitacions mercantilistes. en fer-ho, en els anys de la dècada de 1820, els comerciants hispànics es van aliar amb els precursors de la firma britànica de jardine, matheson & co., i van controlar les xarxes q ue en van resultar. aquest article analitza així les connexions transpacífiques hispàniques durant l’expansió del comerç privat europeu entre l’àsia oriental i el pacífic mexicà. els vincles entre comerciants britànics i hispànics són fonamentals per a l’anàlisi del comerç de l’opi i de l’imperialisme occidental a l’àsia oriental, i del desenvolupament de l’hegemonia comercial britànica a l’amèrica llatina al segle xix. paraules clau: francisco xavier de ezpeleta; juan nepomuceno machado; jardine, matheson & co.; mèxic; filipines; reial companyia de filipines corresponding author: e-mail: apermanyeru@gmail.com received 6 march 2021 accepted 11 november 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-0330-7740 mailto:apermanyeru@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 1. introduction: the collapse of trans-pacific mercantilism in the studies on the development of early nineteenth-century british trade on the two sides of the pacific ocean, two famous houses have been studied separately, that is, barron, forbes & co. on the mexican side (mayo 2006), and jardine, matheson & co. on the chinese side (greenberg 1951; cheong 1979; grace 2014). both have been considered hallmarks of british imperialism and free trade. still, they both share a relevant hispanic element in their origins. the two houses were connected thanks to the interests of two spanish subjects: francisco xavier de ezpeleta, from navarre, and juan nepomuceno machado, from the philippines, who had started their commercial careers in asia, and established themselves on the western coast of the recently independent nation of mexico by 1826; ezpeleta in tepic, and machado in mazatlán.1 they were part of a wider network of private interests that stemmed from the calcutta factory of the real compañía de filipinas (hereafter royal philippine company), and planned to make their fortune as new opportunities arose on mexico’s west coast as the country became independent from spain. by underlining the commercial ventures of ezpeleta and machado, this article will attempt a common trans-pacific narrative, while underlining trans-imperial entanglements. ezpeleta and machado represent the link between the two sides of the pacific ocean as well as the hispanic and the british commercial networks in asia, working as agents for the group of firms and investors that stemmed from the calcutta philippine company factory. together with the hispanic actors in the commercial world of east asia at the time, they were backed by the institutional remains of the then crumbling empire, either be the networks and knowledge of 1 the first references to their establishment in mexico appear respectively in june and august 1826. yrisarri & co. (hereafter cited as y&co.) to mendieta, uriarte & co., canton-calcutta, 13/6/1826, cambridge university library, department of manuscripts and university archives, jardine matheson archive (hereafter cited as ms.jm), c2/4; y&co. to juan nepomuceno machado, macao-tepic, 21/8/1826, ms.jm c2/5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 the royal philippine company in its asian factories, or the financial support from the old galleon traders in manila. they thus benefitted from the end of the spanish mercantilism, already set in motion before the end of the american empire, when by the 1820s many things seemed possible for these entrepreneurs. this paper will show how transitions in imperial hegemony unfolded. much literature concentrates on the great divergence in european and asian development patterns after 1830, when china’s foreign trade turned negative (pomeranz 2000). still, there was a time when europe and asia were tied together in spain’s system of mutual trade, from which britain was largely excluded. the change in that system had been developing for some time, yet there was a dramatic upturn in the pace of change between 1815 and 1830. for a moment it seemed hispanic actors would develop private enterprise in the wake of the galleon’s loss, while collaborating with the british. however, the spaniards suffered several blows, which opened the path to british hegemony on both sides of the pacific ocean by the 1830s. apparently, the trade ezpeleta and machado sought did not differ much from the asian textilesfor-american silver pattern that had dominated trans-pacific trade since the early modern period. however, such commerce was not an easy venture at the time. not only had the galleon trade ended in 1815, when the last galleon, the magallanes, returned to manila, but furthermore insurgents in many places of the then-crumbling spanish empire hindered the development of trade even in the 1820s. the liberalized manila trade that followed the end of the galleon was curtailed by high risk. many manila traders perceived as a warning agustín de iturbide’s seizure of the proceeds of the philippine ship santa rita in chilpancingo, while revenues were being sent overland from mexico city to san blas (legarda 1999, 98-100; garcía gimeno 2017). at the same time, the philippine company tried in vain to keep up with the calcuttahttp://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 lima-san blas trade which had emerged in the early 1820s (alfonso mola and martínez shaw 2018, 296-299).2 still, spanish interests in asia were developing apart from the philippine archipelago, forming from the calcutta and canton (guangzhou) factories of the royal philippine company. heeding the calls of the mexican government to attract foreign trade, they also tried to revamp the trans-pacific link, while avoiding using the spanish flag in their new ventures. to do so, private hispanic traders moved the asian terminus of the trans-pacific line from the philippine archipelago to china, thereby making the most of the burgeoning western private trade then developing in canton. on the northern shores of the south china sea things were changing as well for the western traders. european chartered companies were being dismantled at the time, while the regulations set up in the mid-eighteenth century by the qing authorities so as to control the trade — known as the “canton system” by foreign traders (van dyke 2005) — was still in place. by the early nineteenth century, only the east india company, and the royal philippine company remained. western private firms imported increasing amounts of raw cotton and opium into china so as to cancel the trade deficit coming from their china trade, setting the stage for future development of european private trade in the 1830s (greenberg 1951, 142; cheong 1979, 11-12). through the study of the efforts of ezpeleta and machado, this paper aims at ascertaining to what extent the reconfiguration of spanish private trade in asia during the 1820s served interests on the other side of the pacific in mexico. it will explore the development of spanish private trade in canton and calcutta amidst the collapse of the old mercantilist institutions, 2 others tried to relink asia and latin america at that time. see marie christine duggan’s paper in this monograph and particularly the efforts by the scot merchant diego goldie, formerly based in calcutta, and in 1817-1818 in lima, who tried to relaunch the san blas-lima-calcutta trade together with the spaniard ignacio mancisidor. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 while pinpointing the place of the trans-pacific ventures in this process of reconfiguration. while most of the spanish trade in asia was focused on the philippine archipelago, which was at the time moving towards the export-oriented growth model promoted since the 1760s by the bourbons, spanish initiatives in the india-china trade allied with the british by offering access to credit in the philippines. in addition, these initiatives also had the other side of the pacific ocean in mind. this paper will thus analyse the networks supporting ezpeleta and machado in the development of their trans-pacific interests. in the early decades of the nineteenth century, mercantilist regulations that ruled spanish trade for two hundred and fifty years disintegrated as empire collapsed. nonetheless these institutions did not fall apart overnight. the end of the galleon system in 1815 was the culmination of a process triggered in the mid-eighteenth century (fradera 1999, 71-131). thanks to the bourbon reforms, a plantation economy and a regional trade had been developing, as was the case with the southeast asian region overall (reid 2015, 196-212). as the prices of asian merchandise increased during the eighteenth century, the galleon trade had little room for development (yuste 2007, 268-269). therefore, its actors looked for alternatives. the royal philippine company, created in 1785, was aimed at developing change (díaz-trechuelo 1965). manila was opened to international trade in 1790 so as to export new plantation products, which in turn further integrated the archipelago in the trading networks of east asia. as the galleon ended, several private expeditions from manila to mexico followed (legarda 1999, 94-101). at the same time, spanish private trade from the asian factories of the philippine company developed, mainly in the intra-asian “country” trade. spanish trading activities in the transition from the eighteenth to the nineteenth centuries in east asia have been poorly studied. lack of initiative is often taken for granted, when actually http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 the galleon traders in manila set their sights on new sources of supply other than the fujian junk traders. mercantilist rules limiting this trade were often dismissed, as showed by the numbers of the permiso, the tonnage permitted on each of the galleons of the manila-acapulco trade (yuste 2007, 402). by the same token, laws banning spanish navigation in asia were often ignored. when the manila consulado — or merchant guild — was created in 1769, these laws were rescinded and manila trade to china developed further; in late 1787, the philippine company established in the canton factories (permanyer-ugartemendia 2020). in all, the 1820s expansion of spanish private trade in asia was a result of these previous developments, where alternatives to mercantilism had already been deployed. and with the collapse of mercantilism, private activities grew. and yet, by the 1820s, the end of restrictions did not come at a promising time. wars hindered trade, and uncertainty and constant change followed (cheong 1970). this is not an easy period to tackle, as the old and the new coexisted, and the latter could prosper thanks to the former. the logistics provided by the mercantilist chartered companies allowed private “free” trade to unfold — and that was also the case of the east india company. as for the royal philippine company, the private ventures of its employees further developed as the crisis of the company worsened, and while the canton factory closed in 1821, there are not too many details on the activities of the office in calcutta in the succeeding years. during this transitional stage, collaboration played an unprecedented role that surpassed national and institutional barriers. this was certainly the case with the spanish trade in asia and its mexican extension. after 1815, but prior to consolidation of british commercial hegemony in the 1830s, spanish initiative prospered as hispanic-anglo projects developed (cheong 1979, 51-85; permanyer-ugartemendia 2014). as the india-china opium trade http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 developed, and as silver supplies faltered while the spanish empire collapsed, private firms in canton looked to the philippines for sources of credit.3 in addition, philippine produce was imported into china. british interests in the philippines were not new. a clandestine “country” trade between british india and the archipelago had been developing since the seventeenth century, and the east india company’s interests in silver and produce from the archipelago were manifest (quiason 1966). in addition, the spanish flag was used to avoid chinese official vigilance against the traffic, as it was the only european flag besides the portuguese allowed in macao, and in the fujian port of xiamen (amoy) (cheong 1979, 51-85). these collaborations also extended to the new trans-pacific ventures. 2. the growth of hispanic private trade in asia in the 1820s spanish private activities in the calcutta factory where ezpeleta and machado originated resulted from british interest in the manila trade. although formally enemies, spain and britain manifested interest in commerce through informal channels. since 1790, the spanish crown had allowed the royal philippine company to engage in direct trade between spain and asia; in 1796, the spanish factory was established in calcutta (furber 1935, 462-463; díaz-trechuelo 1965, 179-180, 200-212). the napoleonic wars hindered the smooth conduct of the trade, yet this changed as a result of the anglo-spanish alliance in 1808-09 (cheong 1970, 18). the east india company’s 1813 charter act, by which the sovereignty of the honourable company’s possessions in india was transferred to the crown, opened british ports in india to “free” trade, yet retaining the monopoly of the china trade for the company. not in vain, the directors of the philippine company perceived these prospects and by 1815 focused their efforts on the india trade. at the same time, developments in canton also contributed to closer anglo-spanish 3 other houses resorted to the british and us financial markets; see for instance the wider networks of charles magniac & co. (cheong 1979, 90-103). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 collaboration. during the first half of the 1810s, as the galleon was coming to an end, silver scarcity in east asia emerged. the slowdown in flow of silver from the americas to asia coincided with the anglo-american war of 1812 and the end of the napoleonic wars (besseghini 2020a). between 1815 and 1816, the east india company’s canton committee negotiated india bills in manila so as to assure liquidity (cheong 1979, 32-40). figure 1. the spanish networks in the india-china trade (1815–30) source: own elaboration. at the same time, the employees of the philippine company combined their service to the corporation with expanding private activities. by the end of the 1810s, the employees of the spanish factory — its main representative, or factor, manuel larruleta, and his juniors josé de mendieta and josé maría uriarte — were close to the british firm of mackintosh & co. as an important indigo firm in calcutta, this was one of the main purveyors of the spanish company, http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 and had an interest in the philippine trade as well. thus, in 1818 the house of manuel larruleta & co. was established, while in 1821 larruleta also became partner of mackintosh & co. his contacts from the eastern side of the malacca strait were surely highly valued, as he had been bookkeeper at the manila factory of the philippine company, as well as a junior employee of the philippine company in canton. manuel larruleta & co. became gradually more involved in the consignment of opium from bengal. initially opium was sent primarily to the canton firm of robert taylor & co., yet this firm dissolved in 1820. at this point, in 1821 manuel larruleta & co. and mackintosh & co. joined forces to create a new house in china for the consignment of big amounts of opium. this was yrisarri & co., an agency house made of the scotsman james matheson, and the spaniard francisco xavier de yrisarri. matheson, known nowadays as one of the founders of jardine, matheson & co., was kin to the mackintoshes (grace 2014, 72-77) and had worked at taylor & co. as for yrisarri, he was a former employee of the spanish factory in calcutta. the new house was to compete with the canton factor of the philippine company, lorenzo calvo y mateo, who had made a name for himself in the opium traffic by 1820. in 1823, larruleta left the firm he had created, which then became mendieta, uriarte & co. the spanish role in the opium trade was short-lived, yet relevant. this took place as the opium trade boomed,4 as silver supplies faltered and foreign traders looked for other merchandise to trade for chinese merchandise. by 1825 spanish activities had diversified and expanded, and yet, they did not overcome the 1826 calcutta financial crisis that shook many firms (cheong 1973). the end of the philippine company in 1834 deprived the spaniards of the logistical support that had allowed them to enter into the trading networks of asia prior to british 4 from a yearly average of around 4,000 opium chests, these had rose to 19,000 in 1830 (trocki 1999, 95). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 hegemony. in addition, at that time they could not compete in a business that required increasing logistics and human resources, as well as ampler financing networks. these spanish trading networks were far from being merely hispanic: as hispanic-anglo efforts joined, in india these included known firms in the literature of jardine, matheson & co., such as cruttenden, mackillop & co., blaney, darby & co., mercer & co. in calcutta, together with william jardine and baboo ramrattan mullick in bombay. as for manila, one of the most frequent correspondents was the firm of yrastorza, brodett & co., one of whose partners was the philippine company factor in the islands until 1822, which developed sugar exports to india and china. in addition, members of the philippine elite were also in the networks of the firm, among them families related to the old galleon trade, such as baltasar mier, ventura de pereda or manuel de revilla. ezpeleta and machado appear during the first years of yrisarri & co.’s correspondence without fixed dwelling, moving instead as the calcutta group required them to do between canton, macao, calcutta and mexico. they undertook several tasks; very often they acquired opium and other merchandise on consignment. in their ventures, we find the names of british firms and individuals, as well as indians, and philippine creoles. ezpeleta did not hold any known position in the company though he may have entered its expanding asian business by way of his cousin, francisco xavier de yrisarri. as for machado, there is a specific reference to his relationship with the company as master of the ship infante don carlos, which was sent in 1817 from calcutta to el callao (alfonso mola and martínez shaw 2018, 296-297). a philippine origin can be deduced from his personal ties with the islands (mcmaster 1959, 380); http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 there are references to the fact that while in mexico, he could avoid expulsion, which meant that he was a spanish subject.5 in 1821, ezpeleta is mentioned in james matheson’s correspondence while working for robert taylor & co., when the spaniard was sent to canton to work with him as an apprentice prior to the arrival of his cousin yrisarri in june 1821.6 the kind of ventures he engaged in usually involved several parties from different places. for instance, in june 1823 he was in charge of the reception and disposal of ten chests of patna opium, ezpeleta’s property, sent from calcutta to china. he then invested the proceeds in several new ventures. almost 17,000 rupees from these proceeds were invested on account of the manila trader felipe de la peña in yrisarri & co. at a monthly rate of 8 per cent.7 in july 1823, yrisarri & co. told ezpeleta, then in macao, that they took note of his order to pay several individuals in canton and macao, as well as notifying him that six of the opium chests had been sold to three chinese dealers with a net profit of almost $2,000.8 the proceeds of the other four chests, they said, would be remitted to de la peña. finally, the total proceeds of the opium amounted to $17,000, a result that, according to yrisarri & co., was “not favourable.”9 as for machado, the earliest mention of him is in october 1822 when yrisarri & co. took note that the manila firm of yrastorza, brodett & co. had sent money on machado’s account — yet the reason is not mentioned; other similar 5 y&co. to juan nepomuceno machado, macao-tepic, 21/8/1826, ms.jm c2/5; james matheson to josé maría uriarte, canton-calcuta, 5/8/1831, ms.jm c5/1; jardine, matheson & co. (hereafter cited as jm&co.) to juan nepomuceno machado, canton-mazatlán, 11/4/1837, ms.jm c10/22. 6 james matheson to larruleta & co., macao-calcutta, 1/4/1821, ms.jm c1/4. 7 y&co. to camilo de la peña, canton-manila, 6/6/1823, ms.jm c2/2. yrisarri & co. used these deposits to invest them on bottomry — or respondentia — bonds on vessels that made intra-asian trips, resorting to similar credit devices used on the galleon and macao trades (yuste 2007, 91-101). 8 we use the dollar ($) sign to refer to the spanish imperial currency, that is, the peso fuerte, “spanish dollars” in english. 9 “[e]l exito poco favorable de su especulacion.” y&co. to francisco xavier de ezpeleta, macao, 13/7/1823, ms.jm c2/2; canton-calcutta, 11/10/1824, ms.jm c2/3. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 transfers to the manila firm followed.10 in april 1823, mackintosh & co. consigned to yrisarri & co. five chests of benares opium on behalf of machado.11 there are also other references to his connection to the manila trader josé de azcárraga,12 and in another occasion his connection to two indian investors, soorup chund dutt and tuckeer chund day, on whose account machado ordered during one year several consignments of silks and teas.13 3. mexican undertakings descriptions of the spanish commercial system in asia in the early modern period have focused on the manila-acapulco trade. during two centuries and a half, the nao was certainly a defining feature of the spanish colony until the early nineteenth century. still, and as pointed out above, there were routes and interests other than the trans-pacific trade in the early modern philippines, especially since the galleon could not develop further. these other routes included both alternative trans-pacific routes, as well as intra-asian routes. in the early nineteenth century, when the spanish private trade networks in asia were looking to the other side of the pacific ocean, their activities were focused on asia rather than mexico, and less still on peru. nevertheless, and in spite of difficulties in reviving the old trans-pacific trade, the idea of trading to mexico was not completely dismissed. silver was in high demand in asia at the time, and assuring sources of liquidity was an asset in times of transition and uncertainty. after an increase in 1818-1819, silver production was affected by mexican independence and diminished between 1820 and 1834 (valdés lakowsky 1987, 273). the spaniards could not 10 y&co. to juan nepomuceno machado, canton-calcutta, 8/10/1822, ms.jm c2/1; to yrastorza, brodett & co., macao-manila, 22/9/1822, ms.jm c2/1; canton-manila, 25/11/1822, ms.jm c2/1; to mendieta, uriarte & co., canton-calcutta, 15/4/1826, ms.jm c2/4. 11 y&co. to mackintosh & co., canton-calcutta, 29/7/1823, ms.jm c2/2. 12 y&co. to josé de azcárraga, canton-manila, 2/9/1825 and 15/10/1825, ms.jm c2/4; 17/8/1826, ms.jm c2/5; to mendieta, uriarte & co., canton-calcutta, 24/9/1825, ms.jm c2/4. 13 y&co. to mendieta, uriarte & co., canton-calcutta, 21/6/1825, 27/7/1825, 22/9/1825, 28/10/1825 and 7/6/1826, ms.jm c2/4; macao-calcutta, 23/6/1825 and 7/2/1826, ms.jm c2/4. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 easily access mexico at the time, but nonetheless, some of them partly contributed to the development of trade on mexico’s pacific coast (mayo 2006). insurgencies hindered trade in both viceroyalties, but while peru was at the time under turmoil, manila merchants’ contacts in mexico had precedent. as for peru, since the philippine company had developed a foothold in lima (marks 2007, 79-81), the lack of spanish private trade there merits examination. unfortunately, documents found during these initial years between 1818 and 1821 are scant. yrisarri & co.’s correspondence in the jardine matheson archive is consistent from april 1822 onwards. judging from these letters, it appears that the trans-pacific deals at the time were problematic, but not non-existent. this may suggest previous deals that might have taken place, pointing to an involvement of the hispanic trading networks in asia to the private trans-pacific trade that followed the end of the galleon until iturbide’s seizure of the proceeds of the santa rita in 1821 (valdés lakowsky 1987, 290-291). in turn, this may have opened the way to the british, who had been dealing in asian and british merchandise in san blas through the caribbean since the mid-eighteenth century (bonialian 2017, 7-36). and yet, collaboration also took place, at least in the pacific. at the same time, the new mexican government needed to rebuild the badly damaged national economy and attract investments. thus, the ports of mazatlán and guaymas were opened in 1822 and 1824, while the states of sinaloa and sonora were exempt from the prohibitions on silver exports in 1824. apart from quicksilver, spanish products —which we may infer, included philippine products — were forbidden (heath 1993, 263). we can explore some examples of the problematic trans-pacific deals in 1822. as a reply to the proposal of the manila trader nicolás de molina to send a cargo of bengal, philippine, and chinese merchandise to mexico, yrisarri & co. claimed that they were focused on taking care http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 of intra-asian consignments, while adducing the “not too favourable prospects in new spain [could not] bring ourselves to enter the venture you propose.” yrisarri & co. also warned molina in manila that, according to letters received from san blas, “the emancipation of the colonies will naturally lead to higher competition of products.”14 manuel de revilla already had experience in this trade in the private expeditions following the end of the galleon in 1815. in similar terms, yrisarri & co. warned him about the bad situation of the mexican market.15 letters also register the endeavours of ángel de la fuente, also from manila, to retrieve the money confiscated by iturbide. fortunately, he managed to do so, thanks to his contact in calcutta, martín serapio uriarte. the latter was a relative of josé maría uriarte, from the firm of mendieta, uriarte & co. de la fuente also was in contact with francisco xavier de ezpeleta (mcmaster 1959, 318, n. 19; valdés lakowsky 1987, 301). even some prominent names of the old trans-pacific interests appear in the correspondence, as for example iturbe & co. from mexico city — the heirs of the prominent francisco de yraeta company (torales pacheco 1996, 73-102) — who in early 1823 sent funds to a certain miguel del río from cavite, near manila.16 in spite of the troubles, spanish actors in asia maintained interests in mexico. from china, yrisarri & co. took charge of advanced funds, received consignments and contracted insurance policies. this was a first step to the shift of the asian end of the trans-pacific line from manila to canton and macao. in 1823, the first venture where the calcutta group invested on its own account appears, with ezpeleta involved: a shipment of asian merchandise valued at $15,000, 14 “[…] el semblante poco favorable que presenta hoy nueva españa para que no nos animasemos á entrar en el negocio que v. m. propone […] la emancipacion de las colonias naturalmente ocasionará mayor concurrencia de efectos.” y&co. to nicolás de molina, canton-manila, 22/9/1822, ms.jm c2/1. 15 y&co. to manuel de revilla, canton-manila, 22/9/1822, ms.jm c2/1. 16 y&co. to miguel del río, macao-cavite, 27/1/1823, ms.jm c2/2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 on which ezpeleta ordered insurance policies. of this amount, josé de mendieta, partner of mendieta, uriarte & co., had an interest of $3,700.17 the bill of lading was sent to ezpeleta, who embarked for mexico; and in his absence, it was sent to a certain “cubillas & forbes.” this surely referred not to a firm but to the merchants josé cubillas of tepic, one of the most prominent merchants there. as for alexander forbes, he was a prominent member of the trade on the western coast of mexico and partner in barron, forbes & co.18 apart from these, josé maría castaños was also pre-eminent at that point (meyer 1981; mayo 1987, 389-411; mayo 2006, 45, 66-69, 150-151). ezpeleta went back to calcutta, through singapore, in late 1824.19 prior to that, ezpeleta already had had some dealings with mexico, as one of the first mentions of him in the correspondence refers to his order in 1822 of insurance policies out of the canton office, on account of mackintosh & co., on a cargo of copper sent from san blas to calcutta on board of the british ship marquis of hastings.20 caution gave way to new ventures, and by 1825, the calcutta group undertook a new transpacific push when it organised a larger silver-for-textiles venture, where several parties were involved. this was sent on board the british corvette merope and was followed by ezpeleta and machado’s relocation to mexico. surely the abovementioned measures from the mexican government, as well as advice from manila trans-pacific networks prompted this change of opinion. the prospects of the spanish private trade in asia were also expanding at the time. mendieta, uriarte & co. organised the expedition, together with yrisarri & co. as supplier of part of its cargo. financing was provided by britons and indians from calcutta, as well as 17 y&co. to francisco xavier de ezpeleta, macao, 13/7/1823, ms.jm c2/2. 18 y&co. to francisco xavier de ezpeleta, macao, 11/7/1823, ms.jm c2/2. 19 y&co. to francisco xavier de ezpeleta, canton-calcutta, 11/10/1824, ms.jm c2/3; to mendieta, uriarte & co., canton-calcutta, 11/10/1824, ms.jm c2/3. 20 y&co. to manuel larruleta & co., canton-calcutta, 8/10/1822, ms.jm c2/1. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 manila creoles. the merope set sail in june 1825 from macao to mazatlán, and its cargo was mainly composed of chinese and indian produce, mostly textiles, among which 109 packages of nankeens, valued $11,998, as well as fifteen bundles of european merchandise, and twentyfive from china, valued $17,000, together with fifteen more from china, valued $3,865. ezpeleta and machado went on board the ship as consignees of the cargo.21 this was not the merope’s first trans-pacific trip: being a british private ship from calcutta, the philippine company had already chartered it in 1819 to undertake what was the last trip of the spanish company to peru (alfonso mola and martínez shaw 2018, 297-298), before yrisarri & co. used it for opium smuggling in the canton waters and on the fujian coast by the early 1820s. the trans-pacific ventures of the calcutta group came just prior to the great difficulties it envisaged, as francisco xavier de yrisarri died unexpectedly in late 1826, and in 1827 the firm of mendieta, uriarte & co. suspended payments, leading to a dispute on the distribution of its assets. the correspondence does not provide a balance of accounts over the merope expedition.22 we can form, however, partial pictures. among the investors, pedro de barcáiztegui stood out, a sea captain and member of a prominent family from san sebastián some of whose members established in asia, who invested $2,000. his brother joaquín, a calcutta resident, and máximo de mendieta, nephew of josé de mendieta, partner in mendieta, 21 y&co. to mendieta, uriarte & co., canton-calcutta, 2/5/1825, 14/6/1825, 18/6/1825 and 21/6/1825, ms.jm c2/4; macao-calcutta, 23/6/1825, ms.jm c2/4; to francisco xavier de ezpeleta, macao, 26/6/1825 (three letters), ms.jm c2/4; to yrastorza, brodett & co., canton-manila, 15/5/1827, ms.jm c2/5; james matheson to josé antonio fernández, canton-san sebastián, 15/1/1827, ms.jm c2/5; to mendieta, uriarte & co., canton-calcutta, 12/2/1827, ms.jm c2/5; to josé de azcárraga, canton-manila, 1/10/1828, ms.jm c2/5; josé maría uriarte to james matheson, serampore-canton, 4/11/1830, ms.jm b6/9 no. 52. on the return of the merope, y&co. to dolores de yruretagoyena, canton-manila, 12/10/1826, ms.jm c2/5; details of its return cargo are in y&co. to mendieta, uriarte & co., macao-calcutta, 28/10/1826, ms.jm c2/5. 22 an encompassing list of the manila investors is included in the circular sent by james matheson to all the philippine creditors of mendieta, uriarte & co.; this includes dolores de yruretagoyena and her husband, pedro de barcáiztegui, as well as ventura de pereda, ángel de la fuente, baltasar de mier, josé de azcárraga, manuel cacho, matías sáenz de vizmanos, and ana maría and felipa vélez de escalante; canton-manila, 26/9/1827, ms.jm c2/5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 uriarte & co., financed jointly $7,563 from their account at yrisarri & co. several employees of the firms of the calcutta group also invested in the venture: hugh matheson, nephew of james matheson; joaquín ybar, employee of yrisarri & co.; and william mackay, second official of the merope and cousin of matheson, appear in another invoice of the products carried by ezpeleta on the same voyage amounting $3,702.23 from the profits earned, information is again patchy. we know that dolores de yruretagoyena, widow of pedro de barcáiztegui, would earn $1,599 for the sale of the piña silver — and thus unregistered24 — that came on his account. on another letter, there are some details of the earnings from the sale of two chests of silver consigned by machado from mexico. these totalled $9,999, that were divided among joaquín de barcáiztegui, máximo de mendieta, joaquín solano — a spaniard in india who also worked for the calcutta group — and dolores de yruretagoyena; they earned respectively $3,967, $2,644, $744 and $2,644.25 by the mid 1820s, trans-pacific ventures developed after guadalupe victoria’s cabinet established measures to encourage trade. other ships followed the merope (valdés lakowsky 1987, 298-303), of which several were related to the ventures of the calcutta group. the brillante, the first mexican ship in asia, was sent from the other side of the pacific and arrived in late july 1826 in china, carrying on board its supercargo manuel gómez de noriega, who was introduced to yrisarri & co. by a letter sent by ezpeleta. noriega, associated with juan bautista martiarena, from tepic, and a certain j. r. de menchaca and josé maría castaños 23 y&co. to dolores de yruretagoyena, canton-manila, 12/10/1826, ms.jm c2/5; james matheson to francisco xavier de ezpeleta, canton-tepic or bordeaux, 31/10/1828, ms.jm c2/5; to juan nepomuceno machado, canton-mazatlán or tepic, 20/11/1828, ms.jm c2/5; to francisco xavier de ezpeleta, canton-bordeaux, 9/2/1831, ms.jm c5/1. 24 this was the name given to amalgamated but not minted silver, which had not yet paid taxes, and was thus exported illegally in great numbers (irigoin 2010, 941). 25 y&co. to dolores de yruretagoyena, canton-manila, 26/9/1827, ms.jm c2/5; to mendieta, uriarte & co., canton-calcutta, 12/10/1826 and 1/3/1827, ms.jm c2/5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 (mayo 2006, 70), from san blas, went to china to acquire chinese cargo, with the assistance of yrisarri & co. the ship left china by mid-december.26 martiarena had sent $20,000 on board of the merope to china on account of the manila trader nicolás de molina; martiarena, menchaca and castaños invested at least $30,000 on the brillante venture. the aforementioned solano also consigned textiles acquired to yrisarri & co. through noriega amounting to $2,380.27 since then, and even though the ventures of yrisarri & co. coming to an end, many names related to the trans-pacific initiative appear more often in the correspondence. for instance, the basque trader established in mazatlán, francisco josé de jáuregui, who invested $5,000 on account of dolores de yruretagoyena on chinese merchandise on board of the brillante. jáuregui carried several transactions of silver for asian merchandise by the mid 1820s, and he travelled from mexico to china on board of the sardinian frigate rosa together with a huge amount of piña consigned mostly to mendieta, uriarte & co., in exchange for which he sent several cargoes of china merchandise to mexico, one of them amounting $200,000 to san blas, and another on board of the brillante amounting $80,000.28 the rosa had been chartered by the canton british firm of dent & co., and jáuregui, according to correspondence, was a friend of yrisarri & co.’s employee ybar, who would eventually work for this british house (valdés lakowsky 1987, 300). antonio alonso de terán, a veteran of the mexico city trade since the 26 y&co. to juan bautista de martiarena, canton-tepic, 17/8/1826, ms.jm c2/5; to j. r. de menchaca and josé mª castaños, canton-san blas, 17/8/1826, ms.jm c2/5; to francisco xavier de ezpeleta (absent juan nepomuceno machado), canton-tepic, 9/12/1826, ms.jm c2/5; james matheson to francisco xavier de ezpeleta, canton-tepic, 1/11/1827, ms.jm c2/5. 27 y&co. to joaquín solano, canton-calcutta, 30/12/1826 and 8/7/1827, ms.jm c2/5. 28 y&co. to dolores de yruretagoyena and to yrastorza, brodett & co., canton-manila, 15/6/1826, ms.jm c2/4; to yrastorza, brodett & co., canton-manila, 15/6/1826, ms.jm c2/4; to josé nicolás de yrastorza, cantonmanila, 5/9/1826, ms.jm c2/5; to mendieta, uriarte & co., canton-calcutta, 11/8/1826, ms.jm c2/5; to francisco josé de jáuregui, macao-unidentified, 14/12/1826, ms.jm c2/5; to francisco xavier de ezpeleta (absent juan nepomuceno machado), canton-tepic, 9/12/1826, ms.jm c2/5; francisco josé de jáuregui to mendieta, uriarte & co., canton-calcutta, 11/8/1826, ms.jm c2/5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 late eighteenth century, also consigned money to mendieta, uriarte & co., which yrisarri & co. should tranship from china to calcutta, as ordered by the agents of the former in manila, baltasar de mier and manuel cacho (mcmaster 1959, 381, note 19).29 eustace barron, from the prominent firm of barron, forbes & co., also appears in the correspondence at the time as consignee of a cargo of chinese furniture by mediation of ezpeleta.30 4. the 1830s trans-pacific heritage of jardine, matheson & co. the networks that ezpeleta and machado established in mexico outlived the ventures of yrisarri & co., which dissolved in 1827. james matheson integrated the networks of the late firm into charles magniac & co. — which morphed into jardine, matheson & co. in 1832. no longer the priority in the more asian-focused ventures of the firm, the trans-pacific link developed on the same silver-for-textiles basis. asian textiles had been displaced by the british, which had been shipped from asia nonetheless. this trade certainly did not move the same amount of silver as the old galleon trade did, and yet, silver ingots and coins were still the main mexican export; these increased, mainly towards asia, by the late 1830s. the old colonial peso still enjoyed high demand in china, due to its stability, and was being imported into the country together with the less sought-after new republican pesos (lin 2006, 95, 106; irigoin 2009, 20743). ezpeleta did not stay long in mexico. he left in 1828 for europe for he was expelled from the country during the expulsion of the spaniards in 1827 (ruiz de gordejuela urquijo 2006, 289). business opportunities seem to have moved him as well: he then settled in bordeaux, where he established the firm of yñigo, ezpeleta et cie together with another spaniard from mexico, juan 29 y&co. to juan bautista de martiarena, canton-tepic, 17/8/1826, ms.jm c2/5; to j. r. de menchaca and josé maría castaños, canton-san blas, 17/8/1826, ms.jm c2/5; to baltasar de mier and manuel cacho, cantonmanila, 10/11/1826, ms.jm c2/5. 30 y&co. to francisco xavier de ezpeleta, canton-tepic, 9/12/1826, ms.jm c2/5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 bautista yñigo; at some point, xavier de barcáiztegui, from the barcáiztegui family and old partner of mendieta, uriarte & co., was also partner. like other basque firms in that city, it attracted capital expatriated from mexico belonging to expelled spaniards (ruiz de gordejuela urquijo 2006, 167-173).31 benefitting from an advantageous exchange rate, they invested it in railroads as well as in shipping. the firm also obtained concession for the exploitation of the quicksilver almadén mines, in ciudad real (spain), until this was transferred in 1835 to n. m. rothschild & sons.32 surely the expulsion hindered further developments of the trans-pacific trade or at least, was among various factors that accelerated to its eventual dominance by the british, yet with a hispanic link. machado himself dodged the expulsion decrees and remained in mazatlán the rest of his life, where he became a prominent member of local society. in late 1830, he visited china on board his mexican schooner joven dorotea so as to reestablish connections with charles magniac & co., again, on a silver-for-textiles basis that was financed with drafts on the british firm’s agents in britain. he maintained these connections until the 1840s, thanks to his regional contacts as well. he was the main link to the ventures that the british firm in china maintained with barron, forbes & co. (mcmaster 1959, 380-381; mayo 1987; heath 1989, 77-89; heath 1993).33 as aforementioned, this was one of the leading firms on the mexican pacific, with which the hispanic forebears of jardine, matheson & co. had already established contact. eustace barron — or eustaquio barrón — was certainly linked to the hispanic world. born in cádiz and of 31 the famous firm of aguirrebengoa fils & uribarren stood out for this practice (ruiz de gordejuela urquijo 2006, 212). circular announcing the establishment of yñigo, ezpeleta et cie, bordeaux, 1/1/1830, ms.jm b6/7 no. 30; james matheson to rickards, mackintosh & co., canton-london, 25/11/1828, ms.jm c2/5; to echegaray & fernández, canton-san sebastián, 24/2/1829, ms.jm c2/5; to francisco xavier de ezpeleta, canton-bordeaux, 19/3/1832, ms.jm c5/1. 32 barcáiztegui was witness in this transfer (de otazu 1987, 34-41). 33 james matheson to josé maría uriarte, canton-calcutta, 5/8/1831, ms.jm c5/1; to juan nepomuceno machado, canton-mazatlán, 19/3/1832, ms.jm c5/1. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 irish catholic descent, he was in 1818 in lima, later establishing himself in mexico. in peru he was strongly connected to the local philippine company factory: at san martín’s conquest, as the spanish properties were about to be confiscated, he fled to san blas and then manila together with josé de arismendi, partner of the lima factor pedro de abadía (besseghini 2020b, 10). according to john mayo, barron would have fought with the spanish royal army in peru; he spent some time between 1822-1823 in the philippines (mayo 2006, 67), where he certainly might have established useful contacts for his trans-pacific ventures. barron, forbes & co. consigned considerable amounts of silver to canton by the late 1830s (mayo 2006, 302-306). its value was then transferred in bills to several parties in manila, both old members of the galleon networks — such as baltasar de mier, ángel de la fuente and the vélez escalante family — and others like the trader josé de azcárraga, the augustine friars and even the consulado.34 part of this silver also went to the philippine trader based in macao, gabriel de yruretagoyena — who in the 1820s had been partner in the firm of lorenzo calvo & co. — and it is inferable that he sold the silver in china; he also traded in old colonial pesos bought inside china.35 machado also visited yruretagoyena during his trip to china in 1830, and there are some hints that the latter maintained some contacts with merchants established in mexico, such as the aforementioned castaños as well as barron, forbes & co. by the late 1830s, however, this manila involvement diminished. other names appear in the correspondence of jardine, matheson & co. to mexico. this is the case of ignacio fletes, and of castaños — now established in guadalajara (jalisco) — and both 34 jm&co. to baltasar de mier, felipa vélez de escalante, the president and members of the consulado of manila, ángel de la fuente (among others), canton-manila, 12/6/1838, ms.jm c10/23; 10/9/1838, ms.jm c10/24; to manuel blanco, provincial of the augustin fathers of manila, canton-manila, 12/6/1838, ms.jm c10/23; to josé de azcárraga (among others), macao-manila, 21/6/1839 and 23/8/1839, ms.jm c10/25. 35 jm&co. to gabriel de yruretagoyena, canton–macao, 10/9/1838; 24/9/1838 and 31/10/1838, ms.jm c10/24. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 created in 1844 the firm of castaños, fletes & co. castaños re-established his contacts with matheson through the sea captain archibald a. ritchie, who settled in tepic after having resided in canton for a time; there he formed the firm of herrera & ritchie, and he would also engage in the colonisation projects of california (mcmaster 1959, 380-381; valdés lakowsky 1987, 301; meyer, 1981).36 machado formed by then the firm of machado, yeoward & co. in tepic. among the other correspondents of jardine, matheson & co., domingo danglada of tepic, w. w. scarborough & co. and vega & hermanos, as well as parrot & co. and talbot & co., were concentrated in tepic; a few associates, such as manuel yñigo & co. wrote to the firm from guaymas (mcmaster 1959, 382-384).37 5. conclusions: on imperial transitions and global hegemony the cases explored here — the lives and experiences of francisco xavier de ezpeleta and juan nepomuceno machado — point to the relevance of spanish actors in the asian pacific even after the galleon ceased to sail. further research is certainly warranted into other cases before conclusions can be drawn. surely other similar trans-pacific links existed,38 while the persistence of networks that linked the manila trader — not to their counterparties in china — but to those in mexico on the other side of the pacific ocean merits further investigation. ezpeleta and machado point to these hispanic links, as well as british entanglements, that are key to the analysis of the opium trade, western imperialism in east asia, as well as the development of british commercial dominance in latin america in the nineteenth century. 36 charles magniac & co. to juan nepomuceno machado, canton-macao, 12/7/1831 (three letters), ms.jm c10/13; james matheson to juan nepomuceno machado, canton-mazatlán, 19/3/1832 and 1/9/1832, ms.jm c5/1; to josé maría castaños and to archibald a. ritchie, canton-guadalajara (jalisco), 11/4/1832, ms.jm c5/1; gabriel de yruretagoyena to charles magniac & co., macao-canton, 4/7/1831, ms.jm b7/27 no. 519; jm&co. to juan nepomuceno machado, canton-mazatlán, 22/5/1838, ms.jm c10/23. 37 jm&co. to eugenio de otadui & co., macao-manila, 2/7/1841 and 15/7/1841, ms.jm c10/29; to manuel yñigo & co., macao-guaymas, 28/8/1843 (three letters), ms.jm c11/7. 38 the canton british firm of dent & co. also invested in trans-pacific ventures (valdés lakowsky 1987, 300). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 these cases portray how imperial hegemonies unfold. a “stagnant” spanish empire did not leave a vacuum filled by the british, but rather intersections took place. certainly, crisis and recession were at play in the spanish empire, and precisely because of that, its actors intervened. starting from the mid-eighteenth century, during this long transition process there were adaptations from the traders on the spot. colonial administrators acquiesced, through reform, to what until then had been an infringement of the mercantilist rules. during this transition, the agency of the spanish actors was manifest, and they collaborated with actors of other nationalities — until then restricted by the old rules — among whom the british stood out, so as to face constantly changing circumstances. and finally, and in spite of the initiative for private enterprise shown by the hispanic actors, spanish trade never became hegemonic after the fall of empire in the americas. the expulsion of the spaniards from mexico in 1827; war and turmoil in the new latin american republics; and in asia, the end of the royal philippine company — thereby depriving the spaniards of a precious logistical support to trade in asia — hindered their means of competing with the british and us traders. a new commercial world was emerging, which required increasing logistics and human resources, and more diversified financing networks. the collapse of the spanish empire, in addition, affected how silver was globally distributed and deprived spanish merchants of an asset. as far as the asia and pacific trade is concerned, it should be noted how the trans-pacific link was secondary to the main priorities of the spanish agency houses of the early nineteenth century, that is, philippine and intra-asian — or “country” — trade, during this reconfiguration process. this does not mean that the trans-pacific ventures were absent, yet these did not have the same relevance that they had during the galleon days. both philippine and western trade with china diversified as the nineteenth century advanced, and for the british in asia, the silverfor-textiles trade to mexico was one among many divisions of their activities. this division also http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 reconfigured, as the asian terminus of the trade moved from manila to canton — and eventually, to hong kong — while british interests in the trade became hegemonic — among which jardine, matheson & co. stood out. on the mexican side, british fabrics meanwhile displaced asian textiles that used to be shipped on the galleon, while british firms such as barron, forbes & co. dominated the commercial sphere of the mexican pacific coast. the abovementioned process of reconfiguration certainly was one among many facets indicating the consolidation of the british hegemony in the global trade in the nineteenth century, as the great divergence was being attained. this was the last stage of “the first age of global imperialism,” to use christopher alan bayly’s words (1998), which had started by the 1760s and ended by 1830. british hegemony was not fully consolidated and by then was partly re-negotiated by different parties. before the compartmentalization of the “high” imperialism consolidated, cooperation beyond national and institutional barriers also took place. this reconfiguration agenda, that took place even prior to the imperial collapse, presented hispanic elements, or at least, spaniards contributed with their knowledge and networks to the consolidation of a new british hegemony on both sides of the pacific ocean. this did not materialize overnight, and the british needed local and regional supports. to what extent hispanic subjects such as ezpeleta and machado can be considered merely “local,” however, can be disputed, if we take note of their global — or rather imperial — experiences. certainly their experiences are explanatory of the global connections of the hispanic merchants, which should be taken into account when describing the reconfigurations at that time. they are indicative also of the wide transformations of the spanish empire, where old peripheries had been transitioning to new economic centres since the last third of the eighteenth century — such as the caribbean, venezuela, río de la plata as well as the philippines (fradera 2004, 161-199; http://revistes.ub.edu/index.php/jesb volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 goode 2019). such peripheries were gradually more integrated in the global economy, and as far as the asia and pacific region is concerned, british and hispanic collaboration took place. acknowledgments: this study has benefitted from a chiang ching-kuo foundation postdoctoral fellowship (pd012-u-17). this paper has been previously presented, in various forms, in the xxxvi international congress of the latin american studies association (lasa barcelona, may 2018) and in the vi latin american congress of economic history (cladhe vi, santiago de chile, july 2019). the author would like to thank the reviewers for their directions, and would also like to express his gratitude towards deborah besseghini for encouraging him to assemble these ideas, to cristina mazzeo for her useful hints, and to marie christine duggan for her essential final revision of this paper. references alfonso mola, marina, and carlos martínez shaw. 2018. “trade between peru and asia (1785–1820). an approximation.” in a global trading network. the spanish empire in the world economy (1580–1820), edited by josé ignacio martínez ruiz, 253-314. seville: editorial universidad de sevilla. bayly, christopher alan. 1998. “the first age of global imperialism, c. 1760–1830.” the journal of imperial and commonwealth history 26(2): 28-47. doi:10.1080/03086539808583023. besseghini, deborah. 2020a. “the anglo-american conflict in the far side of the world: a struggle for influence over revolutionary south america (1812-1814).” annals of the fondazione luigi einaudi liv: 35-56. doi:10.26331/1099. besseghini, deborah. 2020b. “british trade and the fall of the spanish empire. changing practices and alliances of antony gibbs & sons in lima during the transition from viceregal to independentist rule (1820-1823).” nuevo mundo mundos nuevos. doi: 10.4000/nuevomundo.79632. bonialian, mariano ardash. 2017. “comercio y atlantización del pacífico mexicano y sudamericano: la crisis del lago indiano y del galeón de manila, 1750-1821.” américa latina en la historia económica 24(1): 7-36. doi:10.18232/alhe.v24i1.791. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1080/03086539808583023 https://www.annalsfondazioneluigieinaudi.it/browse/the-anglo-american-conflict-in-the-far-side-of-the-world-a-struggle-for-influence-over-revolutionary-south-america-1812-1814/ https://doi.org/10.4000/nuevomundo.79632 https://doi.org/10.18232/alhe.v24i1.791 volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 cheong, weng eang. 1970. “changing the rules of the game (the india-manila trade: 1785–1809).” journal of southeast asian studies 1(2): 1-19. doi:10.1017/s002246340002021x. cheong, weng eang. 1973. “china houses and the bank of england crisis of 1825.” business history 15(1): 56-73. doi:10.1080/00076797300000004. cheong, weng eang. 1979. mandarins and merchants. jardine matheson & co., a china agency of the early nineteenth century. london: curzon press. de otazu, alfonso. 1987. los rothschild y sus socios en españa (1820-1850). madrid: o. hs. ediciones. díaz-trechuelo, maría lourdes. 1965. la real compañía de filipinas. seville: escuela de estudios hispano-americanos. fradera, josep m. 1999. filipinas, la colonia más peculiar. la hacienda pública en la definición de la política colonial, 1762-1868. madrid: consejo superior de investigaciones científicas. fradera, josep m. 2004. “de la periferia al centro. 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https://doi.org/10.1016/j.ihe.2014.07.001 volume 8, number 1, 212-239, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34044 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 van dyke, paul a. 2005. the canton trade. life and enterprise on the china coast, 1700–1845. hong kong: hong kong university press. yuste, carmen. 2007. emporios transpacíficos. comerciantes mexicanos en manila. 1710-1815. mexico city: universidad nacional autónoma de méxico. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 armando dalla costa li yu fang yi adalto acir althaus junior federal university of paraná (brazil) chinese companies and foreign direct investment in brazil between 2000 and 2018 abstract the article aims to understand the relationship between foreign direct investment (fdi) and the presence of chinese multinationals in brazil. to achieve its purpose, the text retrieves theoretical elements about fdi and the theories that explain the process of internationalization of companies, in order to explain the growing presence of chinese multinationals in the country. we used data from official sources, such as the central bank of brazil (cbb), unctad and the ministry of commerce of china (mofcom), and from unofficial sources, such as the american business institute (abi) and the brazil china business council. we present some case studies of multinationals such as sinopec (petroleum sector), didi chuxing (technology/ startup), state grid (electric power) and chery automobile (auto industry), with intent to show the modus operandi of companies from different economic sectors. to analyze these companies, we used data from their websites and other information available online. as a preliminary conclusion, it can be stated that chinese fdi in brazil increased significantly during the 21st century, when compared to the total direct investment from other countries. the chinese multinationals in brazil focus their interests in search for raw materials and sale of products with greater added value. keywords: chinese companies; fdi; foreign direct investment; raw materials; market seeking strategy; brazil corresponding author: e-mail: ajdcosta@uol.com.br received 14 december 2018 accepted 8 may 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 introduction china becomes brazil´s largest trade partner in 2009, in terms of the trade balance of imports and exports, surpassing the us. however, while the us imports more industrialized products, china buys mainly commodities and raw materials1. in addition, china overtook japan as the world's second largest economy in 2010. moreover, china's fdi increased, and its companies became major investors in brazil, both in the quest for raw materials and/or commodities, and to sell an ever-wider range of industrialized products and services. the presence abroad of chinese companies has already been mentioned for several reasons, according to buckley et al. (2007). authors have examined them in terms of their position in global trade flows (lall and albaladejo 2004); its comparative advantage as manufacturing location (chen et al. 2002; rowen 2003); and their search for raw materials and other inputs needed to sustain the recent development by domestic economy (appel and dalla costa 2014). our objective with this article is to understand the relationship between fdi and the presence of chinese multinationals in brazil. in addition, to discuss the hypotheses of the reason these multinationals entered in the brazilian market, that is, if they did come to seek raw materials and/or sell products and services with higher added value. data were obtained from official sources such as the central bank of brazil (cbb), unctad and the ministry of commerce of china (mofcom); and, from unofficial sources such as the american business institute (abi) and the brazil-china business council (cebc). in addition, the article presents some case studies of multinationals such as state grid, didi chuxing (technology / startup), china construction bank (financial) and chery automotive 1https://www.terra.com.br/economia/china-torna-se-o-maior-parceiro-comercial-dobrasil,dc3117a7adc4b310vgncld200000bbcceb0arcrd.html accessed on 19 nov 2018. http://revistes.ub.edu/index.php/jesb https://www.terra.com.br/economia/china-torna-se-o-maior-parceiro-comercial-do-brasil,dc3117a7adc4b310vgncld200000bbcceb0arcrd.html https://www.terra.com.br/economia/china-torna-se-o-maior-parceiro-comercial-do-brasil,dc3117a7adc4b310vgncld200000bbcceb0arcrd.html volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 (automobiles), through which it is intended to show the modus operandi of companies from various economic sectors. for the analysis of these companies, it will be used data from their websites and other online information, as well as secondary sources. finally, the article concludes by presenting the main considerations regarding fdi and the presence of chinese multinationals in brazil. foreign direct investment and chinese multinationals in brazil: theoretical/methodological aspects the intention of this part of the text is not to deepen the study of foreign direct investment theory nor to deal with the in-depth discussions about the theories of multinationals developed by the traditional authors, their criticisms and the recent models. we only tried to discuss some aspects that contribute to understand the presence of chinese companies in brazil. north (1990) and williamson (1998) emphasize the importance of institutions in the economic development and wealth of nations. they show that the western world countries, based on solid and perennial institutions, have gained space in international economic development and the fdi. once established as developed nations, a portion of their companies started to operate in the international market, in several continents. recently, china, following a similar model, can be seen as one of the nations that has consolidated institutions and constituted world-class companies. this article aims to verify how a group of chinese multinationals increased their relevance in china’s economy and settled in brazil. until 1979, fdi and the internationalization of chinese enterprises were controlled by central or provincial governments (buckley et al. 2006). since then, there has been a growing liberalization of fdi and foreign operation by firms. the process http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 has taken a more rapid pace since 2000 when deng xiaoping adopted a government policy known as 'go global' (sauvant 2005). buckley et al. (2007), when analyzing the chinese fdi, found that it was associated with high levels of political risk for the years 1984 to 1991. from 1992 to 2001, the country’s companies were mainly in search of natural resources. theoretically, the experience of chinese firms can be understood using the traditional explanation of the reasons that lead the companies to internationalization, summarized in dunning's eclectic paradigm (dunning 1977; 1993). for this author, there are three factors considered preponderant: i) foreign market seeking fdi; ii) efficiency (cost reduction) seeking fdi; iii) resource seeking fdi (including a subset that is known as strategic-asset seeking fdi). in the case of the productive process’ internationalization, dunning (1977; 1988) links it to the use of property advantages, which are specific to firms and countries themselves and make it possible to explain the activities of firms abroad. these advantages are represented by the oli (ownership, location and internalization) sub-paradigms. the ownership advantages are related to tangible and intangible assets (brands, technological capacity and human potential), allowing companies to use them in order to take advantage of the locational advantages offered by countries (natural resources, infrastructure, market size and characteristics and reliability of economic policy). on the other hand, investment outside their home borders makes companies decide whether to internalize production or allow production licenses to third parties. the advantages of internalization arise from the easiness in which the integrated firm is able to appropriate a higher total return, retaining, controlling and managing a more complex set of physical, technological and financial assets. in sum, according to dunning, the concrete way in which a multinational http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 company operates in a given market is a combination of these three factors, which vary according to country, industry and company characteristics (marinho 2013). in the case of chinese companies, it is possible to see motivations such as: a) go to countries with significant energy reserves and large raw materials deposits; b) "it may also involve the search for specific assets such as r&d capacity and output, design facilities and brand names that are embedded in advanced country firms and which are usually only accessed by takeover of these firms or subdivisions of them" (buckley et al. 2007, 5; dunning 2001). specifically, the chinese government has used fdi to ensure the supply of domestically-scarce factor inputs as the chinese economy has grown (ye 1992; zhan 1995; appel and dalla costa 2014). key sectors include minerals, oil, timber, fishery and agricultural products (wu and sia 2002; cai 1999). authors such as buckley et al. (2007, 6-7), based on several studies, point out four reasons that contributed to the internationalization of chinese companies: i) state-owned firms may have capital made available to them at below market rates (lardy 1998; warner et al. 2004; scott 2002); ii) inefficient banking systems may make soft loans to potential outward investors, either as policy or through inefficiency (child and rodrigues 2005; warner et al. 2004; antkiewicz and whalley 2006); iii) conglomerate firms may operate an inefficient internal capital market that effectively subsidizes fdi (liu 2005); and iv) family-owned firms may have access to cheap capital from family members (erdener and shapiro 2005; tsai 2002; child and pleister 2003). as china became the world's second largest economy, its available capital increased highly in recent years due to large foreign exchange reserves and surplus of savings of china was an important part to support china’s fdi (salidjanova 2011). the china’s "going global" strategy http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 in 2000 was an important advantage for chinese enterprises have gone abroad. in the first stage of “going global” policy, chinese enterprises only focus on the manufacturing and mining sectors to extract the natural resources. in recent years, however, china's fdi has spread across the various sectors (anh and hung 2016). chang (2014) examined determinants of china’s fdi into 138 nations over a seven-year period, 2003-2009. he applied gravitational-spatial linkages in regression analysis to show that china’s fdi was attracted by high-tech industries in developed nations and natural resources of host countries in general. a mix of motives drives the growth of china’s outward fdi. these reasons are similar to motives to explain the growth of mnes headquartered in other countries, although their relative importance may vary (buckley at al. 2007). one of these motives is resource–seeking, explained by the fact that china is short on mineral and oil resources, while its rapid economic growth needs them in high quantities. trade-supporting fdi is another important reason, reflecting the country’s leading role in international exports. also relevant is the desire to access markets through direct investment, including to protect the china’s exporters against possible trade barriers. a number of projects are furthermore characterized by the need to acquire technology and other asset-augmenting resources. given the rising costs particularly in the china’s coastal provinces, efficiency-seeking investment is becoming important, directed mainly to some asian and african countries. finally, several specific factors play a role, including round-tripping funds back into the country to benefit from lower taxes, keep funds abroad for future uses, or simply to withdraw funds from the country under the guise of outward fdi (sauvant and nolan 2015). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 as china continues to grow, develop, and integrate into the global economy, its overseas investments expand in quantity and quality, reflecting both the growing sophistication of the chinese economy and broader chinese commercial and policy goals (seaman, huotari, and otero-iglesias 2017). these phenomena can be verified, for example, regarding the chinese direct investment in the european union between 2010 and 2016. these investments were split by the following sectors: ict 16%; transport and infrastructure 15%; real state and hospitality 15%; automotive industry 14%; industrial machinery and equipment 11%; others 29%. in the following sections, we analyze how the chinese multinationals were established in brazil and in what sectors they operate, as well as their perspectives in the coming years. chinese direct investments in brazil to understand the chinese fdi in relation to brazil, we will highlight some elements that allow us make its contextualization. until the end of the last century, the fdi directed to brazil came from europe, especially from england, followed by investments from the us after world war ii. by 1950, fdi stock had reached roughly us$ 334 million. between 1951 and 1960, fdi flows amounted to approximately us$ 1.1 billion. in the 60’s, this process continued. between 1961 and 1970, the investment flows reached us$ 2.48 billion, and in 1979, according to data from the central bank of brazil (cbb), amounted to us$ 9.6 billion (curado and cruz 2008). therefore, the recent chinese fdi in the brazilian economy continues what foreign firms have done since 1889 (beginning that when brazil becomes a republic), with americans replacing europeans in importance and, in the last decades, chinese step by step becoming protagonist. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 as for the presence of foreign companies, there were also changes in the second half of the twentieth century. between 1980 and 2000, the share of foreign firms in the group of 500 largest brazilian companies, that was already significant, had increased continuously. in 2000, 46% of the 500 largest firms were foreign and their importance can be verified by the following numbers. they were responsible for 56% of sales, 49% of exports and 67.2% of imports (sarti and laplane 2002). the increase of the multinationals presence reached all the economic sectors, but was particularly intense in service activities, in which they previously had little participation (laplane et al. 2001). to sarti and laplane (2002), one of the strategies adopted by the multinationals subsidiaries was the resource seeking, characterized by the high propensity to export, at the same time as they have a reduced coefficient of imports, which resulted in positive trade balances. brazil maintained its insertion in the world stage as an exporter of primary goods and natural resource intensive products to the developed countries, and exporter of products with higher value-added and intensive r&d for the south american countries (coutinho 1997). the data regarding brazil’s fdi inflows from 2000 to 2018 will be presented next, considering two official sources: one international, the united nations conference on trade and development (unctad), the other national, the central bank of brazil (cbb). in the unctad data, there is some information on the flows and stocks of fdi that brazil received from the rest of the world, broken down by year. it allows us to observe the growth trajectories during the last years as can be seen in graph 1. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 the fdi flow can be better understood by analyzing its stock. in the period from 2000 to 2017, the stock of chinese fdi in brazil rise from about 100 to 800 billion dollars (unctad stat 2018). graph 1. fdi flow from the world to brazil from 2000 to 2017 (in us$ million) source: own elaboration from unctad stat (2018). in the central bank of brazil website, it is possible to extract the detailed data by country for the period 2010 to 2016, showing the progress of the fdis by the immediate investor and final controller. by analyzing these data, it is clear that investments from the united states, the netherlands and spain stand out. regarding the collection of statistical data on chinese investments in brazil, it is important to consider the differences between all the available statistical sources and the difficulty of analysis of official data due to various reasons. first, the ministry of commerce of china (mofcom), the official statistical source, only provides data on the first destinations of the investments, instead of the final ones. according to kupfer and freitas (2018), this distorts the results, since chinese companies usually carry out trans-shipping channeling the investments through third countries. in addition, it is common in china to practice round-tripping sending capital to hong kong and returning to the mainland as fdi, which overestimates the data. it is noteworthy that unctad also provide, in the bilateral fdi statistics (2014), the statistics of incoming fdi in brazil from 2001 to 2012, 0 20000 40000 60000 80000 100000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 broken down by country of origin. however, in that timeframe, chinese investments were still relatively low in brazil. in addition, the official brazilian source, the central bank of brazil (cbb) provides the census of foreign capital in brazil (base years: 2010 to 2016), where statistics are broken down by: sector of activity, country of origin, immediate investor and final controller. despite the short period of time (2010 to 2016), it is possible to analyze the phase in which chinese investments remained high, unlike unctad statistics. as the purpose of this study is to present data on chinese investments in recent years, and, therefore, provide an overview of the growing presence of chinese companies in brazil, all sources should be considered. among the various unofficial sources available, we will use the international databases china global investment tracker and redalc china, and the national database brazil china business council. china global investment tracker is a database developed by the american enterprise institute (aei) and the heritage foundation, compiling all chinese ofdi transactions worth more than us$ 100 million between 2005 and 2018. the data include countries of destination, sectors, subsectors, transaction channels, entry modes, and the percentage that chinese companies own of each project when it comes to m&a and joint ventures. the other international database was prepared by red-china fta, from various sources such as capital iq, cebc, market fdi, bloomberg, cgit, etc. it contains data on chinese fdi in latin america countries and the caribbean from 2003 to 2017, sorted by investing company, recipients, sectors, subsectors, countries of destination, mode of entry and number of employees. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 the brazil china business council (bcbc) has developed reports and analysis since 2011, compiling the investment projects of the major chinese firms in brazil, classifying them as "announced" or "confirmed." from various sources and interviews, the council has developed studies that provide a relatively complete database from 2007 to 2016, containing detailed investment information such as negotiation values, companies involved, sectors and project progress. therefore, the different accounting methods and statistics sources, allow us to see the chinese investments in brazil from different angles and help us analyze the strategies adopted and the growth trajectory with more rigor. evolution of chinese investments in brazil (2000 to 2018) first, it will be presented china's fdi data in brazil derived from official sources, broken down by periods, in order to clarify the evolution of the chinese investments. then, two mofcom charts will be displayed, showing the fdi stocks and entry flows, as well as an unctad graph of chinese fdi inflows to brazil. finally, two charts from the brazilian central bank (cbb), one representing the entry of investments by immediate investor and the other by the final controller. graph 2. china’s ofdi to brazil in the period 2007-2016 (in us$ million, data from mofcom) source: own elaboration from the statistical bulletin of china’s outward foreign direct investment 2016, 45-49. 51,13 22,38 116,27 487,46 126,40 194,10 310,93 730,00 -63,28 124,77 -100,00 0,00 100,00 200,00 300,00 400,00 500,00 600,00 700,00 800,00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 graph 3. chinese fdi stock in brazil in the period 2007-2016 (in us$ million) source: own elaboration from the statistical bulletin of china’s outward foreign direct investment 2016, 50-54. it can be seen in the graphs that there was a rapid expansion of fdi from 2009, with a decline after the first peak ($487.46 million usd) flow in 2010, returning to growth in 2011. in 2014, the flow reaches another peak at an even higher level ($730 million usd) and then a sharp drop to below-zero ($-63.28 million usd) in 2015. there is no definitive explanation as to the reasons for this decline in 2015, but 2014 was a very contested election year and there was great uncertainty about the direction the brazilian economy would take. in addition, in the postelection immediate period, several indicators that showed a certain weakness of the brazilian economy were disclosed. these factors may have motivated the reduction of chinese fdi in brazil in 2015. it is noticed in the chart that between 2001 and 2006, chinese fdi inflows in brazil kept a very low level and the significant growth occurred from 2009 to 2010. this fact coincides with the mofcom data, despite the general divergences in numbers and in the downward trajectory in 2011 and 2012, after a peak in 2010. 0,00 500,00 1000,00 1500,00 2000,00 2500,00 3000,00 3500,00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 graph 4. fdi flows from china to brazil from 2001 to 2012 (in us$ million, data from unctad) source: own elaboration from bilateral fdi statistics (2014). graph 5. fdi flow from china to brazil, as immediate investor, from 2010 to 2016 (in us$ million, data from cbb) source: own elaboration from the census of foreign capital in the county (2010 to 2016). graph 6. fdi flow from china to brazil, as final controller, in the period from 2010 to 2016 (in us$ million) source: own elaboration from the census of foreign capital in the country (2010 to 2016). 28,08 9,74 15,51 4,35 7,56 6,65 24,30 38,42 82,99 479,95 431,50 325,29 0,00 100,00 200,00 300,00 400,00 500,00 600,00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 582,00 638,66 929,06 736,12 2028,68 1365,66 1422,89 0,00 500,00 1000,00 1500,00 2000,00 2500,00 2010 2011 2012 2013 2014 2015 2016 7874,01 9268,82 9790,62 11521,47 12218,73 8605,75 11994,05 0,00 2000,00 4000,00 6000,00 8000,00 10000,00 12000,00 14000,00 2010 2011 2012 2013 2014 2015 2016 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 analyzing the graphs drawn from the central bank of brazil data, it is possible to note the differences in relation to mofcom data, both in values in general, and in oscillation over the years. for example, in the chart of fdi flows by the immediate investor criterion, there has not been a reduction in fdi values after 2010, as occurred in graph 2 of mofcom. moreover, despite having the same trajectory format between 2013 and 2015 (a peak and then a decline), the reduction is not as sharp as the mofcom “case”. in the fdi flows by the final controller criterion graph, the values are much higher than those presented in the mofcom and in the immediate investor charts. this can be explained by the common practice of channeling investments through intermediate countries.2 graph 7. china’s fdi to brazil: comparison by the final controller and immediate investor criteria (in us$ billion) source: central bank of brazil, report of direct investment in the country (2018, 19). 2 according to the country direct investment report (2018) published by the central bank of brazil, the average percentage of investments channeled by third countries relative to direct chinese investments reached, in general, 94% in 2013 and 88% in 2016, with the majority of investments coming from luxembourg. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 next, it will be presented data from unofficial sources, namely china global investment tracker, red alc and cebc. this section will have three graphs of the chinese fdi inflows history in brazil, allowing us to see and analyze the subject with another perspective. graph 8. china’s fdi to brazil from 2005 to 2018, by china global investment tracker database (in us$ million) source: own elaboration from china investment tracker (http://www.aei.org/china-global-investment-tracker/). accessed in 30 sep. 2018. graph 9. china’s fdi to brazil from 2003 to 2017, by red alc china database (in us$ million) source: own elaboration from “chinese ofdi in brazil at company level (2003-2017)” (http://www.redalcchina.org/monitor/informacion-por-pais/busqueda-por-pais/29-brasil) accessed on 30 sep. 2018. 670 1630 0 0 900 13890 7720 2050 2900 2400 3220 12960 9620 980 0 2000 4000 6000 8000 10000 12000 14000 16000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 7,00 3558,00 0,00 30,00 151,70 60,00 425,00 12866,89 2918,60 3231,50 901,50 1747,24 5318,77 13902,83 2901,75 0 2000 4000 6000 8000 10000 12000 14000 16000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 http://revistes.ub.edu/index.php/jesb http://www.redalc-china.org/monitor/informacion-por-pais/busqueda-por-pais/29-brasil http://www.redalc-china.org/monitor/informacion-por-pais/busqueda-por-pais/29-brasil volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 graph 10. china’s fdi to brazil from 2007 to 2016, by cebc database (in us$ million) source: own elaboration from ‘an analysis of chinese investments in brazil: 2007-2012’ ‘bulletin of chinese investments in brazil 2012 – 2013’ and ‘chinese investments in brazil – 2016’ (cbec). it is observed that these three graphs have some resemblance, both in relation to the values, as about the investment development path. in this sense, it is inferred that the inflow of chinese fdi maintained a negligible level before 2009 and, as of 2010, there was an investment boom, reaching a level of us$ 12 to us$ 13 billion. then, after a sharp and long drop, we can see a new exponential growth from 2014 on, to another peak in 2016. despite the differences between official and unofficial data, it is possible to aggregate the different views on the subject to raise certain characteristics of the historical trajectory of the chinese fdi inflows in brazil. first, it can be observed in all graphs (except the cbb graph, due to the restricted period), the abrupt increase of the chinese companies’ presence in brazil happened from 2009 on, and figures from previous years are almost insignificant to the analysis. this fact may have been, according to frischtak et al. (2013), the result of the significant growth of bilateral trade movements between the two countries in recent years, which has made the mentioned asian country brazil's largest trading partner, surpassing the united states. moreover, the decline of 434 20 95 13090 8030 3449 3415 1730 7446 8397 0 2000 4000 6000 8000 10000 12000 14000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 population consumption capacity in developed countries and the devaluation of companies’ assets in different countries could also have corroborated the fact. distribution of the chinese investments in brazil by sector in this section, we will discuss the statistical data on the sector distribution of chinese firms’ investments in brazil. here, two sources will be chosen for reference: the official one is the central bank of brazil, and the unofficial is the china global investment tracker. both use data from 2010 to 2016, when chinese investments were more significant. therefore, it is possible to clarify in what sectors the chinese firms invested the most in brazil. graph 11. sector participation of chinese fdi in brazil by the immediate investor criterion, from 2010 to 2016 (in u$ million – cbb data) source: own elaboration based on the census of foreign capitals in brazil (2010 to 2016). finance, insurance and related services activities 42,0% transformation industry 21,2% electricity and gas 15,1% auto-vehicles and motorcycles's commerce and repair 6,8% information and communication 5,7% agriculture, livestock, forestry and aquaculture 4,7% other 1,5% extractive industry 1,5% real state activities 1,0% construction 0,2% transport and storage 0,2% accommodation and alimentation 0,1% total 100% http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 graph 12. sector participation of chinese fdi in brazil by the final controller criterion, from 2010 to 2016 (in u$ million) source: own elaboration based on the census of foreign capitals in brazil (2010 to 2016). when comparing the two graphs, there is a divergence between the sector distribution by the immediate investor and final controller criteria. in the first criterion, the sectors that most concentrated chinese capital were financial activities, insurance and related services (42%) and manufacturing industries (21%). in the second, the sectors that received most of the investments were the extractive industries and electricity and gas (14%). this may be a result of investment channeling practice through intermediary countries, mentioned earlier, as seems to be the case of the entry of sinopec in brazil through the purchase of repsol brazil in luxembourg, presented below. despite different results, it is possible to conclude that most of the chinese capitals entering brazil came through intermediary countries. it is supported by an analysis of the cbb data published. that is, even by the criterion of the immediate investor, the sectors of financial activities, insurance and related services and industries of transformation present a relevant concentration of investments. extractive industry 73,1% electricity and gas 13,9% finance, insurance and related services activities 5,2% transformation industry 3,1% auto-vehicles and motorcycles's commerce and repair 2,5% other 1,0% information and communication 0,6% real state activities 0,3% agriculture, livestock, forestry and aquaculture 0,1% construction 0,0% transport and storage 0,0% accommodation and alimentation 0,0% total 100% http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 therefore, from this analysis, the extractive industries and electricity and gas can be considered that the brazilian economic sectors that chinese firms allocated more investments. graph 13. sector participation of chinese fdi on brazil from 2010 to 2016 (in us$ million, cgit data) source: own elaboration and translation based on the china investment tracker (http://www.aei.org/china-globalinvestment-tracker/) it is a fact that, among unofficial statistical sources, the one that demonstrates greater coherence and clarity in the division of sectors and subsectors is the china global investment tracker database. it can be seen from the graph that, among the 10 sectors analyzed, the chinese investment transactions are concentrated mainly in the energy sector (76%), which is far from second sector, metals (6%). in the china global investment tracker database, the energy sector includes extractive activities of oil, coal and gas, and the generation, transmission and distribution of electricity. from this perspective, together with the analysis of the cbb base, it can be concluded that the predominant objective of the chinese firms in brazil is the extraction of raw materials, mainly oil, gas and iron ore from the energy and metal segments. in this context, the companies that energy 72,0% metals 7,2% transport 6,9% agriculture 5,1% finance 3,3% chemicals 2,3% real state 1,6% logistics 0,7% technology 0,7% utilities 0,3% total 100% http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 are currently working in these segments include: sinopec and cnpc in oil extraction, wisco and china minmetals in the mining sector. in addition, the energy alternative generation, transmission and distribution sector plays a major role in the segment, with the most relevant companies being state grid, byd and china three gorges in the hydroelectric production. from the petroleum and metallic extractive industry to the transmission and distribution of electricity, the trend of investments by chinese multinationals in brazil experienced a gradual change in the period between 2010 and 2018. china has prioritized investment in the search for natural resources in brazil, developing economic segments connected directly to commodities, including the oil, mining and agribusiness. from 2014 on, this concentration of capital was gradually transferred to the services sectors, prioritizing the transmission and distribution of electricity and the financial sector. as a conclusion of this part, it can be said that chinese investments are concentrated in three sectors: financial activities, insurance and related services (42%); manufacturing industries (21%); extractive industries and electricity and gas (14%). another trend is the steady increase of these chinese investments in brazil, a trend that should continue in the coming years. case studies of chinese companies in brazil sinopec – international petroleum exploration and development corporation in recent years, china's accelerated economic growth has resulted in an expansion in oil consumption, surpassing the amount of domestic production. this fact has required an intensive search for this natural resource, whether in the form of imports, either in the internationalization of oil extraction companies. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 according to data from the international trade center, china is the largest petroleum importer in the world, with value amounting to us$ 163.8 billion in 2017, and its biggest suppliers are russia (us$23.8 billion), saudi arabia (us$20.5 billion) and angola (us$20.1 billion). on the one hand, the commodity worldwide supplier network guaranteed the supply of domestic demand; on the other, the country sought to invest abroad, through oil companies, as alternative forms of obtaining crude oil. according to china global investment tracker data, between 2005 and 2018, 151 projects were announced by chinese companies in the oil segment, ranging from the construction of pipelines in russia and kazakhstan by cnpc to acquisitions of the oil extraction fields in angola and brazil by sinopec3. sinopec was stablished in 1998 based on the former china petrochemical corporation, with a registered state-owned capital of only 274.9 billion yuan and was based in beijing. in 2001, sinopec international petroleum exploration and development corporation (sipc) was inaugurated, responsible for oil and gas investments and operations abroad, becoming a fundamental part of the sinopec group's internationalization. sinopec has 73 investment projects abroad and its operation takes place especially in the arab middle east and north africa, with 19 projects announced. however, in relation to transaction values, the most significant region is south america, with us$ 19 billion of accumulated investments, which represent 22% of the multinational's total transactions. in brazil, its operations began in 2004, signing a partnership with petrobras and the brazilian national development bank (bndes) to develop the gasene project. the project consisted in the construction of a 4.5 km pipeline, linking the city of macae, in rio de janeiro, to the catu 3 amongst the largest chinese oil companies, predominantly state-owned, the one that has the bigger operation in brazil is sinopec – the biggest petroleum company in china and in the world, according to fortune magazine. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 city, in bahia, in which sinopec was responsible for the construction of gascac (northern section) and gascav (southern section). as an engineering services provider, the multinational made several investments, not only limited to the oil and gas sector, such as the unf iii project (fertilizers production), samarco (mining) and trba natural gas pipeline and petrobras rio city project (natural gas transmission). some have been successfully completed, but others have not been successful, such as the unf iii project, due to errors in estimates of the costs involved. as a result, debt was generated during the rendering of services, resulting in sinopec brazil's judicial recovery in 2018 (polito 2018). from 2010 to 2012, the european financial crisis provided an opportunity for sinopec to expand its business by acquiring assets from european companies, such as spain's repsol and portugal's galp (frischtak and o’connort 2013). hence, the joint venture with repsol formed repsol sinopec brasil and the one with galp gave rise to petrogal brasil. however, despite the acquisitions, the chinese oil company did not interfere in the operations control, leaving the management responsibility for the acquired companies. in other words, sinopec took advantage of the expertise of these companies already consolidated in the market, without compromising their own management resources. the repsol's assets acquisition granted sinopec stakes in exploration and extraction of pre-salt petroleum reserves of the santos and campos basins, where the sapinhoá, lapa, pão de açúcar and gávea fields, among others, were discovered. with the acquisition of galp, it obtained holdings in the exploration of the blocks distributed in the six basins owned by the portuguese oil company. in addition, in 2010, sinopec acquired 20% of operations in the pama-3 and http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 pama-8 offshore exploration blocks in the pará-maranhão basin, with an exploration period of eight years. so, despite a relatively recent insertion in the brazilian market, sinopec has experienced both ways of operating. one as a provider of engineering services and the other as a direct investor, through the acquisition of holdings in companies already established in the sector, in order to shield itself against operation risks, considering the deep existing cultural gaps. apparently, the second form of action has been more successful so far, due precisely to the safety and speed in obtaining results from the operations that this form has. however, it is expected that as the company acquires the know-how of its operations in brazil, it will be able to overcome cultural and organizational gaps in the future, managing directly in the production and extraction of petroleum products, such as its competitors exxonmobil and shell. didi chuxing the chinese startups market has experienced a real boom in the past decade, changing in a way, the vision of china as the ‘world's factory’ to a global innovation hub. according to cb insights data, up to the beginning of 2018, of the 230 ‘unicorn’ companies in the world, 62 were chinese, behind only the united states, with 113 startups. these startups have received extensive support, not only from investment funds, but also from the chinese government in the form of direct investments and incentives, minimizing regulations and tax preferences. furthermore, in 2016, several guidelines were included in the 13th five-year plan to stimulate the innovative and shared economy sectors. many of these firms allied themselves with the four market leaders, the so-called batj (baidu, alibaba, tencent, jingdong), to receive direct investment and support from the tech giants. so, an ecosystem of startups was created that revolves around the batj, interconnecting the big http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 data to develop constant improvements solutions through the feedbacks received by this ecosystem. as a result of their business model, some of these companies, despite having only a few years of existence, have already extended their operations overseas, seeking to increase revenues and to maintain their growth rate. among them, the most noteworthy and active in brazil is didi chuxing, the second largest unicorn startup, just behind uber. the application developer company xiaoju tecnology co. was founded in 2012 in beijing. it launched the primary version of didi chuxing, the didi dache that had the only function of connecting taxi drivers with passengers. from 2013 to 2014, it received an investment of us$ 15 million from tecent. in parallel, it launched a number of additional in-app functions, such as trip scheduling, dynamic pricing and incorporated ride services with premium cars and trained drivers. later, in 2015, didi and its competitor kuaidi merged, creating the largest chinese private transport platform, developing the "carpool paid ride" services, didi bus and aftermarketing. to improve these products operations, they founded the didi research institute in the same year, bringing together professionals to develop big data and deep learning technologies applied in urban mobility. the huge amounts of investments received and the constant development of new technologies, in strategic partnership with other international leaders such as singapore's grab, usa’s lyft and india’s ola, fostered the rapid expansion of didi in the chinese market, leaving little room for uber’s growth in the country. all this, along with disjointed administration, misguided strategies and lack of innovation for the chinese market, made uber to sell its operations in china to didi in 2016, after only two and a half years of operation. therefore, with the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 acquisition of uber china, didi chuxing has become one of the world leaders in urban mobility, possessing the largest transportation app platform in the world. in 2017, didi chuxing invested in the brazilian startup 99, in order to expand into latin america, competing for market share with uber. initially it invested about us$ 100 million, used to improve and expand the 99 pop services app, hiring an on-demand private driver platform. as a major investor, didi joined the 99 board of directors, assisting in business planning and new products development. in addition, 99 was able to take advantage of the latest technologies developed at the chinese headquarters, in areas such as artificial intelligence, big data processing and advanced urban mobility solutions. at the beginning of 2018, didi acquired 99 for approximately us$ 600 million. on the one hand, the purchase of the brazilian company marked a new stage in didi's international strategy. on the other hand, with the acquisition, the 99 company strengthened itself to fight for market leadership in transport apps in brazil, challenging face to face uber, its biggest competitor. it is noteworthy that didi chuxing process of internationalization and insertion in the brazilian market has a greater degree of agility and dynamism compared to companies from other traditional sectors. however, despite the continued and rapid growth of 99, fueled by its acquisition, there are still a number of problems with daily operation. for example, few months after the acquisition, the number of complaints in social networks due to app malfunctioning increased, most of which were immediately identified by the engineers, but the solution was time-consuming. from this example, is important to take into consideration that, as the company expands in other countries, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 the management group needs to be better prepared to deal with the difficulties that arise from a series of aspects, especially organizational and cultural gaps. state grid – transmission and distribution of electricity the expansion of the chinese economy in recent years has boosted the rapid growth of electric power consumption. according to the statistical yearbook for electric energy (2017) and the energy research company and ministry of mines and energy, in 2011, china surpassed the united states, both in consumption and in electricity generation capacity, becoming the largest consumer in the world. all this stimulated the market expansion and transmission, favoring the growth of state grid. china's largest power transmission and distribution company, state grid was founded in beijing in 2002, with government exclusive funding and management staff. in 2018 it already had services in 26 chinese states, covering 88% of the territory, supplying the needs of 1.1 billion people. state grid's first step to operate abroad was in 2009, when it participated in the consortium of companies to control the philippines’ national grid corporation, entering with 40% of the capital. from 2010 to 2014 it made state and private-based investments in several countries, including the national energy networks of portugal, spi australia assets and sp ausnet (formerly owned by singapore power of temasek holdings), electranet of australia, hk eletric of hong kong and cassa depositi and prestiti (from italy)4. unlike the other chinese multinationals, state grid's internationalization trajectory was driven by the low profitability of domestic operations, which were around 2 to 3%. operations abroad 4 as the second largest company in the world, or the largest public sector company (forbes magazine), state grid is the right hand of the chinese government in implementing the "one belt one road" initiative. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 generated an average profitability of around 10 to 12%, therefore sustaining the operation margins in the country of origin. this situation shows that profits abroad reach around five times the domestic, with the difference that profitability is higher in developing countries, such as brazil and the philippines, but more stable in developed countries, as in europe. state grid has been in brazil since 2010, when it acquired seven national power transmission companies at a cost of us$ 989 million. between 2010 and 2014, it acquired ten other concessionaires in the transmission subsector and built its headquarters in rio de janeiro, consolidating the position of state grid brazil holding, operating in 12 states. in 2014, in partnership with furnas and eletronorte, state grid began planning the construction of the belo monte transmission line, the first and largest ultra-high-voltage electricity transmission line in latin america, putting together, for the first time on a single project, technology, equipment and construction. the project also had the objective of discharging part of the power generated by the belo monte hydroelectric power plant, from the xingu region (northern brazil), to the estreito substation in the southeast region. initially, the project was seen as a risky investment because of the long-distant power transmission, passing through different biomes, facing climatic variations, which can create risk and uncertainty. moreover, the strict environmental laws in brazil can create obstacles in project approval and license issuance, as the construction works pass through ecological reserves. besides the ‘ecological issue’, there was the fact that many of the construction works would go through some private owned properties, including indigenous populations. so, authorization for construction was required, which is a slow process. however, with the cooperation of local governments and local police, the operational team overcame the difficulties. on the one hand, they advanced in bureaucratic matters with previous planning, on http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 the other they interacted with the local populations, spreading the importance of the project and building reservoirs, wells and schools in the poor regions on the line way. in 2016 the company acquired 54.64% of the largest private group in the brazilian electric sector, cpfl energia, for approximately $3.5 billion usd, assuming its shareholding control. in addition to opening the possibility of technological exchange mainly of renewable energy and smart grid between the two companies, with cpfl, state grid also started to operate in the generation, transmission, distribution and commercialization of electricity in brazil. this was a successful insertion case in the brazilian market: apart from presenting certain advantages in market issues, state grid differs from other chinese state companies in overcoming difficulties in relation to local gaps. this fact is due mainly to the use of knowledge developed locally and maintaining at the command posts executives who had been working in the company before the acquisition. the accuracy of the strategic choices in the acquisition process of the transmission lines concessionaires and electric companies helped state grid to become one of the largest multinationals in the brazilian electric sector. in the future, its presence will be even more significant since, in may 2018, it announced investments of over usd 35 billion over the next five years. chery automobile the car market in china has seen an exponential increase from 5.5 million vehicles in 1990 to 1.85 billion in 2016, according to china statistical yearbook (2017), making it the largest automotive market in the world. in addition, according to oica statistics (2017), in 2009, china surpassed the united states in the production of vehicles. in 2017, with a production of 29 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 million vehicles/year, it reached almost the triple of united states figure (11 million), becoming the world's largest producer of cars. this boom in the chinese automotive market was the result of a series of central government plans, starting in 1986, when it prioritized the automotive sector in the seventh five-year plan, defining it as the pillar of the national economy. then, they launched two automotive industrial policies, one in 1988, another in 1994, with the objective of restructuring, developing and modernizing the automotive industry. first, the political and economic decisions were decentralized to provincial levels, encouraging the creation of new car manufacturers and suppliers. this has generated inefficiency in the market, due to competition among provinces, protectionism, low production capacity and lagged technologies. as a result, restrictions were established for the entry of new participants and a reduction in the number of companies via mergers was set in place, and consequently the emergence of large national automotive companies. in addition, to modernize the sector, it was encouraged the entry of multinationals, but with a requirement: they must to form joint ventures with the national companies and to cooperate in the research and development of technologies (de oliveira 2012, vianini 2017). following the restructuring, china reduced the entrance barriers for new participants, meeting the requirements of wto membership in 2001. from reduction of restrictions, new domestic automakers that didn’t belong to any of the previously formed joint ventures groups were founded, the so-called independent automakers, which one of them was chery automobile (de oliveira 2012). as one of the independents that has grown faster since its foundation, chery and its development plan has caught the attention of the global automotive industry. founded in 1997 in wuhu city, chery faced several difficulties in the beginning of its operations. because of the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 restrictions of entry into the automotive industry, it did not obtain the license to manufacture automobiles. the strong support of the local government, because of the automotive industry development plan in the province, encouraged production even without the license and the cars produced were intended to be used as taxis in the city, guaranteeing the company’s initial survival (luo 2005). later, the central government discovered chery's practice of unlicensed production and ordered its operations to be suspended. to overcome the situation, the company sold 20% of its assets to one of the three largest state-owned automakers, shanghai automotive industrial company (saic). this change in shareholding composition, in addition to facilitating the granting of the manufacturing license, helped in sales, considering that the saic logo on the products made the public think the cars were produced in shanghai, which was the symbol of excellence in quality (luo 2005). between 2000 and 2003, chery launched several car models such as fengyun, qq, oriental son and qiyun, with great success. however, the similarity of the qq model to chevrolet spark has caused dissatisfaction with gm, saic's joint venture partner. the fact led to the sale 20% of shares back to chery herself, making the company completely independent (luo 2005). since then, chery sales have grown substantially, turning the company biggest car seller in china in 2007, with only seven years of operation. chery's internationalization trajectory began in 2001, when malcolm bricklin, owner of a vehicle dealer in the usa, saw in china chery´s the new model, "fengyun", and decided to import the car brand to his country. since then, the company has opened a range of partnerships with different countries such as iran, egypt, cuba and russia, inserting its most popular models in the various global markets. according to oliveira (2012), in 2006, the company exported http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 more than 50.000 vehicles to 67 countries, surpassing the amount exported by the whole country in the period between 1955 and 2004. hence, in a context in which the great chinese automakers didn’t have the freedom to participate in the ‘wave’ of export, due to joint ventures with foreign brands, chery ranked first in the export of ‘light’ vehicles for 15 years, becoming the chinese brand that has more representation outside the country. in brazil, according to oliveira (2012), chery's operations can be divided into two phases: the first, from 2009 to 2013, in which it concentrated its activities on the import and resale vehicles in brazil, and the second, from 2014 onwards, was based on local car production, with sales focused on brazil and latin america. with its office in salto, in são paulo countryside area, chery entered the brazilian market in 2009, in a partnership with a reseller network in são paulo. in 2011, chery brazil already had more than 80 dealerships, serving all brazilian regions, making its most popular models available to the public. in 2014, chery inaugurated its production plant in jacarei (vale do paraíba region), a us$ 400 million investment located on 1 million square meters land. with a production capacity of 50 to 150 thousand vehicles, the plant is the first and only chinese automaker production plant in brazil, and the first full operational production facility of the brand outside china. from then on, it began to serve the brazilian and some latin american markets. in 2017, after 18 months of negotiations, caoa, the brazilian distributor of hyundai, ford and subaru brands, acquired 50.07% of chery brazil shares for us$ 60 million, taking control of the brand's operations. with this acquisition, chery vehicles will also be produced at the annapolis plant, in goiás state, and be available at dealerships, which doesn’t mean that the chinese company has given up investing in the country. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 chery's rapid expansion on the path to internationalization was fostered by the strategies adopted both in product development and in market choice. according to luo (2005), one of the biggest advantages that chery possesses in comparison with other brands is the low price of the products, as it can be seen in table 1. table 1. vehicle type, models and price comparison (2005) source: lou (2005). note that in all criteria presented, chery's popular models have price advantages. according to luo (2005), this price range established by chery was made possible by copying the competitors’ models, which resulted in minimized development costs, improvement of production efficiency and cost reduction in manufacturing, mainly labor. therefore, with a low price and a design compatible with the chinese ‘taste’, the brand's products quickly conquered http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 the domestic market, once dominated by the oligopoly of joint ventures of large state-owned brands. when deciding what foreign markets to serve, chery sought to join the countries with a demand profile similar to china, which ended up in attending the developing countries markets, where their products can make the most of its competitive advantages. as for brazil, the brand has positioned itself as the better cost benefit offer, selling cars with premium offers (all accessories included) to lower income buyers (oliveira 2012). however, as of 2011, the attempt to transform the company´s strategic guideline, shifting from a cheaper product brand to a high-quality one has resulted in a three-year hiatus in launching new models, giving opportunity for the competitors’ growth. thus, with the loss of market share and consequently some sale points, chery reacted and released models from its ‘second brand’ companies ‘zhiguan’ and ‘kaiyi’, but it didn’t obtain the expected result. furthermore, since the jacareí plant inauguration, chery has accumulated losses in the brazilian operation, resulting in the sale of the business control to caoa group. hence, it is expected that with the investments in the brand to be made by the new partner, chery and caoa can mutually benefit from the experience and technology of each other to strengthen the brand's position in the brazilian market. conclusion china became the second largest economy in the world in 2010, overtaking japan. in addition, a year earlier, it ranked first as brazil's largest trading partner, surpassing the united states. these two phenomena contributed to a greater chinese fdi in brazil as well as to a more effective presence of their companies in the country. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 regarding the literature that investigates fdi and the multinationalization of chinese companies, it was found that these companies went out in search of natural resources (buckley et al. 2007), but also went to other countries with significant energy reserves and large raw materials deposits (dunning 2001). some companies have been looking for key supplies for the domestic market, such as minerals, oil, agricultural products (wu and sai 2002; cai 1999). in recent years, china's fdi has spread across the various sectors (tuong anh and hung 2016). similarly, they pursued different goals according to their destination countries. for chang (2014), the china's fdi was attached by high-tech industries in developed nations and natural resources of host countries in general. in brazil, the presence of chinese multinational aims the raw materials extraction, mainly in energy and metal sectors, notably oil, gas and iron ore products. the main companies operating in these segments are: sinopec and cnpc in oil extraction, wisco and china minmetals in mining. in addition, the electricity sector (generation, transmission and distribution) plays a major role in ofdi strategy, represented by enterprises such as state grid, byd and china three gorges. in relation to the modus operandi of the four chosen companies in this study, there are diverse situations. sinopec switched between two different ways of operating in brazil: the first consisted of providing engineering services, first starting with the construction of gas pipelines and later advancing to ore slurry pipelines and a fertilizer production plant. the second form consisted of forming joint ventures with existing competitors (repsol and galp), without interfering with the management of these companies, in order to minimize the risks caused by cultural differences. this way of operating was successful in terms of operation management and http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 profitability, differing from the first form, which resulted in debt and the company’s judicial recovery in 2018. didi chuxing, a startup, entered in brazil by acquiring the 99 company, an uber’s market competitor. unlike sinopec, it went straight to the lucrative services market, facing, however, technical and cultural difficulties to provide fast solutions for everyday problems. state grid (electricity sector), unlike other chinese multinationals, has internationalized due to low domestic profitability. while in the chinese market the profitability was around 2 to 3%, overseas this average rose to 10-12%, sustaining the company’s operation margins in the origin country. with the acquisition of cpfl in 2016, state grid started to operate in the generation, transmission, distribution and commercialization of electricity in brazil. chery automotive has used loopholes in legislation as well as the fact that it has no joint ventures with international competitors to become the largest chinese exporter of cars. in brazil, it acted as an importer (2009-2013) and then started to manufacture cars, from 2014 on. because of difficulties intrinsic to the brazilian market (oligopoly by major world manufacturers, that have been in brazil since the 50s), the caoa group bought 50.07% of chery's capital in 2017. finally, we can state that the chinese multinationals have a double interest in brazil. on the one hand it is a country rich in natural resources and raw materials and, on the other hand, is among one of the eight largest consumer markets in the world. they come, therefore, for both reasons: to seek raw materials and to sell goods and services with higher added value. however, cultural, political, economic and social learning requires time of maturation and long-term dedication that, for the time being, most chinese multinationals have not yet reached. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 68-107, july-december 2019 doi.org/10.1344/jesb2019.2.j061 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 sources primary sources brasil-china c. c. e. 2014. boletim de investimentos chineses no brasil 2012-2013. rio de janeiro: cebc. brasil-china c. c. e. 2017. investimentos chineses no brasil 2016. rio de janeiro: cebec. luo j. 2005. the growth of independent chinese automotive companies. international motor vehicle program: mit (may 6). mofcom. 2016. statistical bulletin of china's outward foreign direct investment. bbva. working paper, n. 15/17. banco central do brasil. 2017. relatório de investimento direto no país 2016. brasília: bacen. anuário estatístico de energia elétrica (epe). 2018. ministério de minas e 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transnational corporations, 4(3): 67-100. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://dx.doi.org/10.2139/ssrn.2794842 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 daria tataj tataj innovation (spain) paul louis krutko ann arbor spark (united states) https://orcid.org/0000-0002-4772-8977 joan bellavista university of barcelona (spain) https://orcid.org/0000-0002-0488-4662 the ann arbor spark network intelligence as a driver for the emergence of a next generation science and technology park abstract in this article, we review the evolution of the phenomenon known as science and technology parks (stps) as an instrument designed to spur innovation and entrepreneurship at the level of a regional ecosystem. we develop a concept of the next generation of stp, or stp 2.0, as a network of co-located entrepreneurial firms and as a vital node in the value creation networks in a region. we build our definition based on diverse value creation networks such as examples in triple helix and knowledge triangle. we analyse the human and social factors related to the effectiveness of utilising networks for innovation towards diverse goals in the paradigm theorised as network intelligence framework, then, we describe the creation and evolution of ann arbor spark as an example of spt 2.0 focusing on its organisational design as a community platform, its culture of networking across the silos of research and industry and specific projects designed to accelerate time from labs to markets in the post-industrial region of the rust belt michigan in the us. we end the article with a list of conclusions that can inform the design of new and the transformation of existing stps designed and managed primarily as a real estate investment under the false assumption that the pure co-location of entrepreneurial agents in a physical location spurs innovation and entrepreneurship. keywords: innovation; entrepreneurship; science and technology park; triple helix; knowledge triangle; network intelligence; network iq, industry 4.0 ann arbor spark – network intelligence clau en l’emergència de la nova generació de parcs de ciència y tecnologia resum en aquest article, revisem l'evolució del fenomen conegut com a parcs científics i tecnològics (stp) com un instrument dissenyat per estimular la innovació i l'esperit empresarial en el nivell d'un ecosistema regional. desenvolupem un concepte de la pròxima generació de stp, o stp 2.0, com una xarxa empresarial de firmes ubicades en proximitat i com un node vital en les xarxes de creació de valor en una regió. construïm la nostra definic ió basant-nos en diverses xarxes de creació de valor, com ara exemples a triple hèlix i el triangle del coneixement. analitzem els factors humans i socials relacionats amb l'eficàcia de la utilització de xarxes per a la innovació vers objectius diversos en el paradigma teoritzat com el marc d'intel·ligència connectada, i després, descrivim la creació i l'evolució d'ann arbor spark com un exemple de spt 2.0 centrat en el seu disseny organitzatiu com a plataforma comunitària, la seva cultura de xarxes connectant centres aïllats de recerca i la indústria i projectes específics dissenyats per accelerar el temps dels laboratoris als mercats de la regió post industrial de la rust belt michigan als estats units. acabem l'article amb una llista de conclusions que expliquen el disseny de nous parcs i la transformació dels stp existents dissenyats i gestionats principalment com una inversió immobiliària sota la falsa suposició de que la mera localització propera d’agents empresarials en una localització física és suficient per fomentar la innovació i l’esperit empresarial. paraules clau: innovació, emprenedor, parc de ciència i tecnologia, triple hèlix, triangle del coneixement, intel·ligència connectada, xarxa iq, industria 4.0 ann arbor spark – network intelligence clave para la emergencia de la nueva generación de parques de ciencia y tecnología resumen en este artículo revisamos la evolución del fenómeno conocido como parques científicos y tecnológicos (stp), como un instrumento diseñado para estimular la innovación y el espíritu empresarial en el nivel de un ecosistema regional. desarrollamos un concepto de la siguiente generación de stp, stp 2.0, como una red empresarial de empresas situadas en proximidad, y como un nodo vital en las redes de creación valor en una región. construimos nuestra definición basándonos en diversas redes de creación de valor como por ejemplo la triple hélix y el triángulo del conocimiento. analizamos los factores humanos y sociales relacionados con la eficacia de la utilización de redes para la innovación, hacia objetivos diversos en el paradigma teorizado como el marco de inteligencia conectada, y después describimos la creación y evolución de ann arbor spark como un ejemplo de spt 2.0 centrado en su diseño organizativo, como una plataforma comunitaria, con su cultura de redes conectando centros aislados de investigación e industria, y proyectos específicos diseñados para acelerar laboratorios en los mercados de la región post industrial de la rust belt michigan en los estados unidos. acabamos el artículo con una lista de conclusiones que explican el diseño de nuevos parques y la transformación de los stp existentes, diseñados y gestionados principalmente como una inversión inmobiliaria bajo la falsa suposición de que la mera localización cercana de agentes empresariales en una localización física es suficiente para fomentar la innovación y el espíritu empresarial. palabras clave: innovación; emprendedor; parque de ciencia y tecnología; triple hélice; triángulo del conocimiento, inteligencia conectada; red iq; industria 4.0 corresponding author: e-mail: daria@tatajinnovation.com received 13 november 2021 accepted 22 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-4772-8977 https://orcid.org/0000-0002-0488-4662 mailto:daria@tatajinnovation.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 introduction entrepreneurial innovation ecosystems spring from a combination of factors present in a region that when combined and cultivated can produce an environment that leads to spurring of entrepreneurial firms (freeman 1987; lundvall 1992; tataj 2015; granstand and holgersson 2020). entrepreneurial innovation ecosystems can be framed at different levels of territories (local, regional, national) and in certain economic sectors (freeman 1987; lundvall 1992). heijs (2001) determines four groups of elements to consider. first, companies, their system of relationships and market structures; secondly, public and private infrastructures dedicated to supporting innovation; third, public actions focused on innovation and technological development, and related public policy actions; and fourth, the legal context. an stp is a vital element of entrepreneurial innovation ecosystems. it is an instrument designed to accelerate the emergence of such ecosystems. in this article, we propose to analyse an stp as a node in the local innovation network of networks. this analysis is different from the intentional intervention when an stp is created solely as a physical environment, a set of buildings, or a campus, where a range of r&d services is provided to support start-ups and local industry. the prototypical stp, which we call stp 1.0, was originally conceived as a real estate investment where the co-location of industry and start-ups was expected in itself to cocreate knowledge spillovers and accelerate the time from labs to markets. we firstly review the literature and the evolution of the phenomenon known as science and technology parks and then demonstrate that ann arbor spark is the next generation of an stp or stp 2.0 which we earlier conceptualised using network science approaches. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 literature review castells and hall (1994) relate the territorial element of stps to regional development and the creation of synergies, factors that can have a catalytic effect on regional and national economic growth (link and scott 2006). other authors claim, however, that there is no evidence of a conclusive result for the role of stps in regional development (wallsten 2004). the lack of methodological homogeneity has been a limitation in measuring the value of stps in the development of the local and regional knowledge economy. however, advances in proposals of useful performance measurement systems for understanding innovation ecosystems are underway (dabrowska and ferreira 2020). other studies consider stps to be relevant tools for setting up innovation systems that will help set up new ecosystems that basile (2011) categorises as inter-organisational. different case studies defend the role of these ecosystems concerning stps in the case of europe (nauwelaers, kleinbrink and stancova 2014), china (sutherland 2007), japan (edgington 2008), or in the case of the technopoles in canada (cooke 2001). the existence of disciplinary, institutional, organisational and cultural boundaries in the context of innovation has also been analysed, together with the relevance of breaking boundaries for better and improved ecosystems (ziman 1991; hill and turpin 1993). leydesdorff and etzkowitz (1996), etzkowitz and leydesdorff (1997), developed the model of the triple helix, to explain the system of relationships between the university, the business, and the government, which, at the same time, allowed a better understanding of the relationships that existed between the main components of science, technology, industry, and the business system. a key point of this model refers to the understanding of the relational dynamics established between the different components of the helix and the evolution between http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 organisations and institutions. traditionally they worked separately, and later they advanced toward a system that overlaps each other. in the conception of this model, the authors gave a preponderant role to the universities as institutions of knowledge production. but schumpeter's (1939) entrepreneurial model was also taken into account, which incorporates knowledge, education, the whole business system, and related public policies. another feature is that the three main components of this model are involved at different levels in the production, promotion, transfer, and dissemination of knowledge. this allows a better efficiency as a system but a greater complexity in the management of the interface. this requires understanding the processes of interrelation, the capabilities, and the contribution of each agent of the system in the configuration of a complex and dynamic ecosystem. the ecosystem works through agreements, network configuration, and experimenting with new hybrid organisations that emerge from evolving relationships among the members. the management involves the talent of the people who make it up, the material resources that can be captured, and the understanding of the dynamic relationship between the organisations that make up the triple helix (piqué et al. 2005). some stps have the ingredients to be considered entrepreneurial innovation ecosystems, a factor that brings us closer to understanding the triple helix model in this context. and beyond that, some stps can also be considered within the quadruple helix model, or at least, they incorporate important stakeholders for the configuration of a quadruple helix (nauwelaers, kleibrink and stancova 2014). the quadruple helix is an evolution of the previous model of the triple helix referenced above, which incorporates the social elements into the equation (carayannis and campbell 2012). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 entrepreneurial innovation ecosystems within and around stps are generally the result of the creation of a tacit collaborative, tightly knit locally and loosely coupled globally environment in which diverse players of the quadruple helix work together in an open innovation paradigm (chesbrough and teece 1996; etzkowitz and leydesdorff 2000; chesbrough 2003; tataj 2015). in many cases, areas of innovation through their collaborative intentionality become physical and digital “spaces of place and flows” that are more integrated with their surrounding city or community and as a result more recognizable to the community-at-large (castells 2009). their capacity to bring together, connect and build social networks of diverse actors of innovation creates different types of relatedness between them (farinha et al. 2019). this relatedness creates a social structure enabling a cultural transformation that underpins the economic revival of post-industrial regions (farinha et al. 2019). a few decades ago, freeman (1987) and lundvall (1992) pointed out that innovation must be located at the centre of the analysis together with several elements that have to be incorporated such as the economy, technology, organisations, institutions, and social issues. the ecosystem of stakeholders can play a relevant role in the business environment of the region or territory where they operate. but the impact on the territory does not have to be solely economic results for companies and the economy as a whole, but also labour, social and cultural impact on the community. these aspects, additionally justify the participation of public institutions in the development of these instruments and the processes of interaction and networking between the different agents involved in innovation (guadix et al. 2016). martínez-cañas, ruiz-palomino and sáez-martínez (2011) use the relational perspective (dyer and singh 1998) and the theory of social capital (westlund 2006), to analyse the interactions and networking processes that occur among all the agents (internal and external) participating in stps. the authors found a powerful generation of social capital and value for firms, but http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 instead, this social capital did not necessarily help the creation and/or technological improvement of new products. communities and networks can also be seen in the analyses carried out on the different “modes” of knowledge production. mode 1 of knowledge production is what is observed in the research activities of traditional universities. mode 2 is when the knowledge generated in mode 1 is applied and implemented (gibbons et al 1994; etzkowitz and leydesdorff 2000). mode 3 adds innovation networks, knowledge clusters, and stps, as well as interactions among them (carayannis and campbell 2012). in another analysis, stps are recognised as key instruments in the networking system of innovation and with the capacity of increasing the innovation output (basile 2011). from a different perspective, networks allow for knowledge sharing between companies and participating agents, but by contrast, opportunistic strategies are detected in other companies that do not necessarily create value for the community (chan, oerlemans and pretorius 2009). the evolution of the stp phenomenon one of the key actors in the triple helix as well as in the knowledge triangle is stps. when analysing stps such as ann arbor spark, it is important to know the evolution of the stp phenomenon. three generations of stps have been reported (allen 2007). the first generation was based on the traditional model of science push, where investment in science preconceived expected results. the second generation focused on science, technology, and demand-pull. the demand factor predominated, and projects were developed based on these variables. the third generation sophisticated these previous models with the incorporation of interactive factors and better communication between the main agents involved at different levels: universities generating research and new knowledge, companies that demand existing knowledge but at the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 same time generate their private knowledge within the company, and governments developing public policies that encourage interactions among the different actors involved. local and regional agents, and the different processes of innovation from local to global, are expected to occur because of the development of the activities planned. moreover, better management of interactions, processes, and their community environment is found. another element that is detected is a more urban location of the third generation of parks compared to previous generations that were more suburban (annerstedt 2006). some aspects of the third generation have been controversial in terms of the ability to achieve results and meet goals as set out below. therefore, the analysis of successful projects is necessary to advance the research, strategies, and management models that allow an advance of these instruments and the models that determine the new generations of stps. the ann arbor spark case analysis seeks to contribute in this direction. within the international association of science parks (iasp), there has been in recent years a discussion on models and case studies presented in the iasp annual conferences, which led to a rename of the iasp. and also, a redefinition of concepts with the added name of “areas of innovation” as an evolution of the name they already had previously (davis 2013). thus, the definition of areas of innovation in the iasp became the following: “areas of innovation are places designed and curated to attract entrepreneurial-minded people, skilled talent, knowledgeintensive businesses, and investments, by developing and combing a set of infrastructural, institutional, scientific, technological, educational and social assets, together with value services, thus enhancing sustainable economic development and prosperity with and for the community.” (iasp 2021). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 community and cooperation aspects have been analysed within the stps to find out the relevance of being a partner, promoter, or tenant of an stp. richard florida (2004) explains the importance of the community factor, both in economic, social, and cultural aspects, focusing on what he calls the creative class. paul romer's idea of the hybrid economy observes formulas of economic development in the relationship between science and the market, with a fundamental variable that is what type of community is involved in the development of the specific territory analysed (romer 2000). institutions, together with personal and professional talent, collaborate and cooperate with both internal and external agents to build the community. people and their organisations and institutions such as universities, research, and technology centres, start-ups, small, medium, and large companies, workers, users, or customers, are interrelated agents, and are interdependent (etzkowitz and leydesdorff 2000; bellavista 2002; bellavista and sanz 2009). aspects of collaboration and cooperation are also addressed by country as in the case of stps in spain (díez-vial and montoro-sánchez 2016), japan (fukugawa 2006), or china (jongwanich, kohpaiboon and chih-hai 2014). being in an stp improves cooperation relations in innovation and the intangible benefits that come from the diversity of relationships that are established within stps (vásquez-urriago et al. 2016). also, the localisation of new technology based firms (ntbfs) in stps entails the capacity for cooperation and growth (ferguson and olofson 2004). other studies have analysed the relevance of the specific involvement of universities in stps, which represents positive results in the number of patent applications, but instead negative results concerning the innovation sales of stp tenant companies. moreover, in those analyses, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 no obvious improvements are detected, in the cooperation relations of the companies located in the stp with the university (albahari et al. 2017). link and scott (2007), entered the controversy by stating that the models of university research parks in the us were not a relevant instrument of the us innovation system, but accepted that what was needed was further research on the subject and an in-depth analysis of the state of the art. on the other hand, despite these limitations, they detected a relevant role for stps in the flow of knowledge between universities and industry and even predicted a more important task for stps in the future with shorter technology life cycles and a more productive relationship between the actors involved. methodology: towards a definition of an stp 2.0, network intelligence and the human social factors the analysis of the evolution of the stps shows the emergence of “stp 2.0” which we define as an stp that is a strong network node in the local innovation ecosystem for community cooperation, collaboration, and networking and connects local actors with the global value chains and flows of knowledge, talent, and capital. we analyse the emergence of the ann arbor spark as an example of an stp 2.0. we highlight specifically one key success factor that is the leadership capacity to cooperate, collaborate and network both locally and globally at the level of the entire ecosystem of local actors representing the triple helix and knowledge triangle. to define the next generation of an stp, or stp 2.0, we propose to utilise the model of an entrepreneurship-driven knowledge triangle (tataj 2015). according to this model, innovation, and entrepreneurship, as a basis for innovativeness and competitiveness, are accelerated through the networking capacity of actors from the knowledge triangle which is formed by agents representing research, education, and innovation. these agents are brought http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 together into high-performance networked organisations (e.g., partnerships, consortia, communities) by entrepreneurial talent with a networking capacity to co-create and scale-up solutions across the silos of the knowledge triangle. a typical example of a knowledge traingle network is knowledge and innovation communities co-created and co-funded by the european union through the european institute of innovation and technology. a definition of an stp 2.0 as a node in a knowledge triangle should be conceptualised as one type of a value creation network — both at the level of an internal organisation (a network of co-located firms) and the regional or international level — as a node in an innovation ecosystem global architecture. conceptualised as a network in itself and as a network node, an stp 2.0 shares common features with other networked organisations when it comes, for example to the architecture and structure of human social networks, organisation of work (e.g., teaming capacity, collaboration across organisational boundaries), and dynamics of organisational change. if so, we can look at stp 2.0 as an organisation of interconnected networks of co-located firms, which have different importance and functionality and a temporary status in the stp. the stp 2.0 as a meta-node of this network adapts constantly to a volatile environment through its capacity to self-reconfigure its position and the network architecture around them. scalability, one of the characteristics of networked organisations, entices that the stp 2.0 as a node in a regional ecosystem, can constantly expand by adding additional nodes (e.g., firms). the operational ability of such a dynamic organisation that is constantly expanding or shrinking is based on strengthening or foregoing the ties (both strong and weak ties) through communication (online and offline) with other organisations and individuals. given that an stp 2.0 is connected with other stp 2.0 in a network, every single node can reproduce itself in different locations as it comes with the dna encoded in every network node, enabling it to reproduce the program and programming http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 of the entire network unless connecting points are physically eliminated, breaking the network as a unit. utilising the network science to develop a definition of stp 2.0 means taking into consideration the human, social and cultural factors related to both management and leadership of an stp 2.0. as an innovation network (internal processes and organisational culture), and as a node of an innovation network (external processes especially driving collaboration with other actors of knowledge triangle networks). therefore, the management capacity and leadership style are vital for the design and execution of public and private policies focused on investment in stp 2.0 as an instrument for innovativeness, competitiveness, and transformation — especially when we focus on post-industrial regions and the much desired digital and green transformation to the carbon-neutral economy which is at the top of policymakers and business leaders. in the post-covid workplace, the emergence of entrepreneurial innovation ecosystems is conditioned to an ever-larger extent than before the fundamental digitalization of the workplace, by the networking capacity among actors from the four silos of the knowledge triangle. the networking capacity has a special dimension, which is the networking of entrepreneurial firms as they are often a missing link in several post-industrial regions and objects of diverse policy interventions and public investment. to utilise the implosion of global value chains caused by the pandemics, an stp 2.0 can be a policy instrument to accelerate innovation and lead to greater competitiveness as well as a vital tool for embracing a shift from old to new economy models especially based on circularity, near-shoring, hard tech for manufacturing regions shifting towards a “build forward better” philosophy (european commission 2022). an stp 2.0 should therefore exceed the paradigm of a real estate investment and become a vital node in the regional innovation ecosystem http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 fostering a mission for a more sustainable and inclusive society and economy. in this context, a key element of a successful stp 2.0 is the human factor. the human factor in the context of an stp 2.0 means a set of specific skills (foremost digital skills) which underpin the utilisation of networks for innovation and an entrepreneurial growth mindset. this networking capacity has been defined by tataj as a specific type of human and collective intelligence; the network intelligence and codified through the network iq competency model which defines 7 core digital skills for a baseline network literacy, that is an ability to procure benefits networks offer and be of value to other network members; 5 types of profiles clustered around objectives for engaging in networking activities, and a purpose — network — fit framework as a process to assist in building a human social ecosystem along a shared mission for individuals and groups to accelerate innovation and entrepreneurship. network intelligence allows us to get a deeper understanding and empirically develop value creation networks. such a value can be defined, for example, as the relative value of its members as nodes of the original network by developing their capacity to become linking agents to other networks or by creating multiple, overlapping, and multi-layered connection points with other relevant networks and including members of the original, through projects leading to adding value and their status as connectors. the pioneering empirical work with value creation networks in spain, the uk, and the netherlands sheds some light on further research on what kind of skills are needed to unleash collective intelligence and drive transformation by accelerating high-impact innovation and entrepreneurship projects within value creation networks. the research on network iq individual skills conducted among a limited sample of stp managers from the iasp in 2020, shows that the self-perceived effectiveness of utilisation of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 networks towards 17 diverse objectives significantly exceeds the standard level at the ecosystem composed of a set of different networks (e.g. university, business-academia partnerships, government, and business) — all of which share a similar mission to activate and build the ecosystem for innovation (iasp 2020). further analysis of this data could demonstrate in which of the 5 network iq profiles (trader, connector, buddy, builder, and innovator) lie strengths of the stp community and what is the relation between their networking effeteness and the level of 7 network iq skills. leadership is a key component for the performance of networked organisations and teams working in fully digital or hybrid mode, especially in the knowledge sector (katz et al. 2004). the interactions and dynamics that are created in groups and networks of different types also get good results thanks to proper leadership (kouzes and posner 1995). moreover, it is important to analyse the influence of not only leaders but also followers on interpersonal and group dynamics, and thus better understand the role of leaders and their outcomes (dinh et al. 2014). what happened in ann arbor: “sparking” the birth of an stp 2.0 this part of the article will look at the ann arbor spark as an example of an stp 2.0. we argue that there are two success factors related to the networking capacity across the silos of the triple helix and knowledge triangle networks and an entrepreneurial growth mindset underpinning the effectiveness of utilisation of networks. the spark case study illustrates a development of a transformative, new generation stp which throughout 2011-2020, triggered a transformation of an ecosystem by enabling the development of an entrepreneurial community in the post-industrial manufacturing region of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 michigan in the united states, at the heart of the highly industrialised region, commonly referred to as the “rust belt”. the spark stp community has become the seedbed for 352 in-company projects resulting in $1.6 b in new capital investment and 9000 new jobs and yielding 732 start-ups employing 2600 ftes (ann arbor spark 2021). this new generation science park is a community platform designed to accelerate the transformation of a post-industrial region into an entrepreneurial innovation ecosystem and connect the global flows of knowledge, talent, and investment in the transformation of the manufacturing sector’s global value chains into industry 4.0. on the one hand, in the case of spark, there was an intentionality to network diverse actors of innovation both locally and globally from the very origins. on the other hand, leaders within each of the silos of the value creation networks shared a mission not only to drive innovation and entrepreneurship but also to drive change from the old to the new economic paradigm. in this context, spark was set up as a “space of places and a space flows’, intentionally networking and consciously influencing the ecosystem beyond its boundaries. the key element of this intentionality was personal leadership from members of the value creation networks which over time has evolved into continuing institutional leadership to build and manage networks fit for a purpose, to systematically invest in networking to keep social connectivity and expand local networks, to orchestrate projects based on communication and collaboration protocols and finally to influence the knowledge triangle and have agents from research, education, and innovation co-create entrepreneurial projects faster. the spark case is important as there are hundreds of cities and metropolitan areas, both in the developed as well as in the emerging economies, that could benefit from creating similar next-generation stps. research on ann arbor spark can inspire transformation and provide http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 concrete recommendations both for leaders and policymakers on smart investment into the r&i ecosystem. in the case of ann arbor spark, both the university, local business leaders, and government set up a funding model and a governance system so that ann arbor spark has not become yet another real estate investment project but a vibrant change agent driving the shift from the old automobile michigan industry into the new industry 4.0 based on digital technologies such as ai, blockchain, smart city sensor systems. the contribution of innovation ecosystems is both economic and societal and creates a virtuous cycle that advances the well-being of a surrounding community. existing businesses benefit from the presence of the customer base that the technology workforce represents and through the increased vibrancy that a daily workforce represents that is a magnet for other customers. at a macro-level for the local government entity, revenues are increased both from the rising value of the occupied buildings and the economic activity of the workforce, creating a virtuous cycle of reinvestment in services and capital projects that, in turn, encourage more locations by early-stage innovative companies who are drawn to the environment. for the business, the clustering of talent is important. a variety of studies in the usa indicate that more than 65% of young people pursuing careers in innovative and creative fields choose where to live first before who to work for. and their choice globally has become more urban, with a desire to live in vibrant areas — an essential consideration for deciding in which surrounding community to place a new innovation ecosystem (florida 2004). before 2005, the ann arbor region (population 330,000) could best be characterised as one of unmet potential as a place of innovation. unmet both in terms of economic and societal impact, despite the rich assets that should have made it a hotbed of innovation and innovative companies. year after year, the university of michigan deployed the largest research budget of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 any public university in the us with annual expenditures now exceeding $1.5 billion, yet it lagged in technology transfer, licensing, and company formation (university of michigan 2020). the university had a renowned international reputation and attracted students, faculty, and researchers from all over the world. the region was also blessed, with many high-net-worth individuals and families from southeast michigan’s legacy as the united states’ first “silicon valley''. ann arbor was and is one of the most attractive communities to live in not only in michigan but in the us with a highly educated populous, high quality of life, and in comparison, to us norms a relatively low cost of living and cost of doing business. however, these potential assets were underperforming at the beginning of the 21st century. entrepreneurship and the creation of new companies, and the commercialization of an incredible number of new ideas of product and processes coming out of the university of michigan was lagging when compared to other areas of the us. those that did emerge migrated to the communities like boston or the san francisco bay area where there was a nurturing environment of capital, talent, and serial entrepreneurship was in abundance. so much like a “potential’ viticultural area with good soil, climate and geography are lying dormant and overgrown with weeds, ann arbor needed several “vintners” to recognize its potential and to intentionally intervene by introducing appropriate varietals with modern growing techniques with well capitalised support systems to bring the product to market and to maximise its potential. the efforts to change this were centred around the university of michigan, starting from 2002. in addition to a student body of 50,000 undergraduates and 20,000 graduate students and postdoctoral researchers, the university has over 500,000 alumni living and working all over the world. however, of note was the university’s low ranking in technology transfer across all metrics in patents, licensing, and commercialising promising research. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 to assess what was not working and to build a strategy to move the university into full engagement with the local, regional, state, and national economies, the university convened a national advisory panel, which consists of experts in technology transfer from universities around the us, venture capitalists and executives, many of which are alumni of the university of michigan. the key conclusion of the national advisory panel was that ann arbor lacked an effective private-public-academic platform outside the physical and intellectual capital of the university to create a nurturing environment to receive potential companies that could be spawned once the technology transfer office improved its processes to commercialise new technologies and create start-ups and early-stage companies. it was felt that if such a collaborative platform could be created, then an entrepreneurial ecosystem would evolve to bring talent, ideas, and capital together and dramatically change the surrounding region into a known locale for entrepreneurship, early-stage company creation, and innovation – becoming an area of innovation. it is important to note at this point of this narrative, that the conclusion of the national advisory panel was not to create a science and technology park affiliated with the university. it was to build an ecosystem within and around the city of ann arbor where the company formation and growth would happen organically within the community taking advantage of the quality of “place” that ann arbor already possessed. it is also important to note that the effort was not to limit what clusters would evolve, but to create a nurturing environment for all types of technologies and innovation and let those clusters evolve naturally. in other words, the “terroir” of ann arbor was ripe for development into an area of innovation but there needed to be a “spark”. the university committed funding and talent to this new platform and made changes in its internal programming to support start-up formation and entrepreneurship campus-wide. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 however, it was clear to the president and the university’s board of regents that for it to be a successful platform, other members of the triple helix needed to come to the table as equal partners. university of michigan took up the baton of leadership and convened private sector and governmental leaders. a new non-profit organisation was created, funded, and led by a board made up of the key stakeholders in the region from the private sector, public sector, and the two universities and one community college in the region. these stakeholders came to the table as equal partners with a charge to create a technology-based entrepreneurial ecosystem in the ann arbor region. spark came into being in 2006 and has been integral in creating an area of innovation. the board of directors of spark adopted a strategic plan consisting of three pillars of acceleration, talent, and growth on the foundation of two supporting pillars of leadership and planning. these initiatives are delivered through the individual actions of different elements of the triple helix that are coordinated and advanced through the collaborative efforts of the spark professional staff teams in the areas of business development, business acceleration and marketing and communications as directed by the spark board of directors working through its executive committee and its finance, business development, entrepreneurial services, foreign direct investment, talent, and public sector committees. ann arbor spark values to provide high value and innovative services to our stakeholders and customers helping meet their challenges in an increasingly dynamic and volatile global economy. to pursue the principles of open-source economic development by engaging in regional and state-wide collaboration with public, private, and non-profit partners to advance the ann arbor region, southeast michigan, the state of michigan, and the nation. the nascent area of innovation took advantage of a major policy initiative of the state of michigan to improve its overall economic development posture through a concept called “smart http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 zones”. the state would allocate a portion of the revenues generated from taxing real estate value growth because of business activity in a defined district to support the growth and acceleration of technology start-ups and commit to doing so for a fifteen-year contract period without subject to annual appropriation. the initial funding raised through this scheme in 2002 was $60000. over the ensuing 15 years, this allocation has risen to 3.5 million dollars supporting technology companies (yeo and yeo 2017). the state of michigan passed legislation before the expiration of the first fifteen to reauthorize this program in ann arbor for an additional 15 years. a virtuous cycle was created: as growing tech companies filled up vacant space, market rates increased, further increasing the tax base. google occupied a multi-story former old bank building within the innovation district. even though it did not fully occupy the building, its presence attracted other tenants. vacancy rates dropped to less than 2%. in 2005, the vacancy rates were greater than 20% (concentrate 2020). capital costs are borne by the companies themselves in negotiation with individual landlords and developers. for example, google was responsible for its capital costs. through a collective and sustained effort, the ann arbor region is now recognised as one of the most important technology-based economies in the united states and globally (ann arbor spark 2020). the proof is quantifiable metrics. from 2011 to 2020, spark has enabled the development of the entrepreneurship community with the following results: 352 company growth projects, resulting in $1.6 billion in new capital investment and 9000 new jobs; 732 start-ups employing 2600 full-time employees (ftes), assisted through intensive accelerator services; $56.6 million in investment from the federal and state government in the community; 7.2 million social media interactions with 500000 engagements and 783000 video views in http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 2020 alone; and $982000 in private equity investment in spark’s family of start-ups and early-stage companies (ann arbor spark 2021). spark’s permanent convening platform is not limited to bimonthly meetings of its board directors and regular committee meetings have led to significant regional initiatives, some staying within spark’s remit and others that have been spun out. for example, in 2015, ann arbor spark launched tech trek to connect the community with the burgeoning tech scene in their hometown, allow companies to showcase their innovations, and enable job seekers to explore potential employers. tech trek is a free community event and essentially an open house for community members to visit the offices of downtown tech companies. the event has nearly tripled in scope since its inception, with attendance increasing nearly 75% year over year (ann arbor spark 2021). building on the success of previous years, spark added a new element in 2017, tech talk, a ted-style event featuring some of ann arbor’s most interesting and impactful companies. speakers shared key insights on evolving innovations, research, and technology, and took questions from the audience. the addition of tech talk was such a massive success that it spurred the evolution of a multi-day tech “festival” planned for june 2018, branded as “a2tech360”. a much smaller version of austin, texas’s south-by-southwest, a2tech360 2021 will be a 10-day affair, including events such as the new mobility summit (an event capitalising on the proliferation of mobile technology in the region), the fasttrack awards (honouring fast-growing companies in the region), tech talk, an open-air free concert between tech talk and tech trek, and the flagship event on friday afternoon: tech trek. the evolution of tech trek into a2tech360 is a testament to the vibrancy of ann arbor’s area of innovation, the critical mass of companies and activities, and the initiative of ann arbor spark to connect the wider community to the technology community. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 in part due to the success of tech trek and its evolution into a multi-day event, as well as the recognition of ann arbor as an area of innovation and tech hub, ann arbor spark worked to implement a prototype of a living laboratory for mobility technology in downtown ann arbor. spark worked closely with eight stakeholders including amazon web services, deloitte consulting, ford smart mobility, the city of ann arbor, and the university of michigan. this type of city-level “operating system” will enable “plug and play” hardware such as vehicles and street-level infrastructure as well as data management, payment, and other software systems to allow for maximum efficiency. the project endeavours to use design thinking to offer mobility-as-a-service to residents, visitors, and workers in ann arbor. in this way, ann arbor will play to existing strengths as an area of innovation, support cluster development in a burgeoning industry, and cement its global position as a leader in mobility technology. the benefit to government-level stakeholders of this project will be analysis and insights on operations, service, and future investments, with a low-touch engagement (expertise and data). mobility pilots are being pursued, consistent with institutional goals for testing transformational approaches to serve ann arbor area residents, visitors, employees, employers, etc. the living laboratory would not be possible without the existence of ann arbor spark, and the intentional creation of a quadruple helix structure that cultivates relationships between local government, the private sector, the university of michigan, and the neighbouring city of detroit. this demonstrates that beyond the physical assets of ann arbor, the community of actors is crucial to building and maintaining a living and breathing area of innovation. the story of the american centre for mobility (acm) begins with willow run and is pivotal in american history. willow run history is about a place and people that helped win a world http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 war set the stage for equality and social change, and dramatically accelerated the development of southeast michigan. in 1941, both the us government and established aircraft manufacturers believed it impossible to build aircraft on an assembly line, and initially hoped the ford motor company would help the war effort by creating a plan to handcraft one airplane per day. that plan became willow run, which included a major airport, a 5 million square feet manufacturing plant, and a village for the workers, all rising from scratch on former farm fields in less than a year. aircraft production began in 1941, and at its peak during the war years, over 40,000 workers at willow run produced b-24 liberator bombers at the astounding rate of one airplane every hour. after the war, ford sold the plant to the kaiser-frazer corporation, which used it to produce automobiles. during the korean war, kaiser-frazer produced c-119 and c-123 planes, before ceasing operations in 1953 and selling to general motors. for several decades, willow run stayed gm’s transmission plant. in 1982, the 50 millionth transmission rolled down the assembly line. in 2010, the production stopped, and the property was abandoned by gm as a part of its restructuring through bankruptcy. in 2013, spark released a white paper titled “ahead by a century: the future of automotive technology” outlining how the willow run site could be utilised as a connected and automated vehicle testing centre. the site included over $100 million in abandoned usable infrastructure ideal for simulating real traffic scenarios, vehicle testing, vacant roads, cross lighting, an abandoned railway, and other unique structures including two triple overpass sections and a bridge over a natural waterway. spark staff then began a series of meetings with key officials at the federal, state, and local levels, briefing them on the importance of the project to the region and the state. multiple surveys and research reports were undertaken by partner organisations to outline the feasibility of the project. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 in 2015, work began to organise a non-profit entity that would operate the american centre for mobility (acm), as well as begin the due diligence process for the development of the site. a working group was designated to continue work on the study, including the centre for automotive research, the detroit regional chamber, business leaders for michigan (blm), the michigan economic development corporation (medc), the michigan department of transportation (mdot), walbridge (a construction and engineering firm), and the university of michigan. ann arbor spark and walbridge were awarded a grant from the federal us economic development administration to conduct a feasibility study for the former manufacturing site to serve as a national centre for connected and automated vehicle research, testing, product development, validation, and certification facility. 2016 saw the official launch of acm, the formation of the board, further investment for the final acquisition of the site, and the ground-breaking ceremony for the start of construction. in 2017, total funding from the michigan strategic fund to the project reached $32 million — illustrating the level of commitment from the state of michigan to bring the facility to the next stage of development. in addition, construction on phase 1 of the project — the high-speed loop — began and was complete by the end of the year. throughout third and fourth quarter of 2017, toyota, ford, hyundai, and visteon all announced their intent to support as founder-level sponsors with a $5 million contribution each. in december 2017, construction on phase 1 of the project was completed, and american centre for mobility opened its proving grounds for testing, with visteon corporation and toyota research institute on-site to begin testing operations. the acm’s facilities are unparalleled within the us. its infrastructure mimics a wide range of environments that automated and connected vehicles will encounter. unique to acm is that it will have areas that serve today’s needs (urban, sub-urban and high-speed environment) but http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 also areas that serve future needs (rural, off-road), all in one place. michigan’s wide range of weather conditions allows testing of all these environments in varied weather conditions, a representative of the entire american continent. ann arbor spark was a key player in identifying the opportunity, the nascent industry cluster, the commercial prospects, and the community building potential of acm, and acted with intent. spark continues to be heavily involved in all aspects of the project, viewing it as a community asset that necessitates a community approach. leadership in this sense does not follow a topdown structure but originates from the “glue” between different partners in the development process. the american centre for mobility is already a crucial economic driver for the area of innovation, operating at near capacity with major mobility companies and start-ups working on products and services that will change how people and goods move in the remainder of this century and beyond. key findings our analysis of the ann arbor spark case study shows that the theoretical models of triple helix, knowledge triangle, and network intelligence provide useful frameworks to understand key success drivers which enabled spark to deliver outstanding results as an stp 2.0 (measured in terms of the number of start-ups, funds raised, jobs created, and transformational purpose-driven initiatives). we present our key findings below. firstly, the origin of spark points to the importance of a university in the local ecosystem as an entrepreneurial agent, catalyst, leader, and investor. the foundational role of an entrepreneurial university is multiplied in the case of spark with the strategic networking capacity of the university of michigan able to build research-education-innovation coalitions which resulted in the establishment of spark as the lead community platform and instrument http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 for regional government development policy, city-level experimentation, as well as forwardthinking initiatives of large industry. secondly, the case of spark shows the right purpose-network fit was core to the platform’s success. the clear purpose statement: ”to provide high value and innovative services to its stakeholders and customers” and ”to pursue the principle of open-source economic development”, was aligned with the engagement strategy with the right people. the intentionality of spark leadership to build a platform for regional development with stakeholders was institutionalised, with the right governance model and the board representing industry, academia, and government. thirdly, the success of ann arbor spark was based on its capacity to build not only the platform but a high-performance innovation community. this community has become a vital node in the local, regional and global innovation network architecture. for example, spark has become a popular networking space as well as a community manager; it gained high global visibility and brand recognition by investing in social media presence (e.g., over 9.000 followers on linkedin); and it has gained a high reputation in the global stp community with its president and ceo elected as the chair of the board of the iasp, which has over 270 members from around the world. fourthly, the spark networking power as an important network node was translated beyond networking or e-networking activities into a capacity to optimise its network and build cooperation, collaborations, and orchestrate diverse projects. these projects provide evidence to support our thesis that spark is a good example of an stp 2.0 as they connect local actors (e.g. start-ups) with the global value chains (e.g. through investment by global corporations and access to lead markets), local and global flows of knowledge (e.g. research on cutting edge http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 technology and living lab approach), and local and global flows of talent (e.g. the immigrant and migrant talent in the spark start-up community). lastly, spark was able to power its network as an influencer in the direction of development towards sustainability and industry 4.0. while data on the network iq skills of the spark community is not available, the evidence of high network intelligence in the spark leadership team and its ecosystem is visible through their capacity to attract investment for initiatives focused on the future of mobility and transformation of old industry towards sustainability. conclusions our findings show that ann arbor spark leadership was able to intentionally build diverse social networks and interconnect them into an organisational structure, which was the core infrastructure and enabled the networking culture within this stp 2.0 as a community platform to systematically invest in several strategic networking activities. these activities stimulate collaborations between diverse public and private actors, enable the execution of open innovation strategies, strengthen the human social technology ecosystem of local technology start-ups, and overcome the silos mentality of the networking industry and academia. there are several strategic implications concerning the successful establishment of stp 2.0 which can be drawn upon the spark case study and its role in building entrepreneurship culture and networking its surrounding community into diverse value creation networks: ● for the newly established areas of innovation, it is essential to simultaneously address the tasks of infrastructure creation and community building, attracting all the key stakeholders in the ecosystem. balancing the interests of the academic, private sector, and government interests through an independent organisation is critical and is an important insight from ann arbor spark’s, almost two decades of experience as the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 curator of the regional area of innovation. if any of the three elements of the triple helix exert dominance, the platform will be less effective because it will be deemed as the “university’s initiative” not the private sector or local government and vice versa, reducing and perhaps ending the participation of the non-dominant member(s) of the triple helix. ● areas of innovation arise and thrive through the intentional collaborative action of key triple helix and knowledge triangle stakeholders, and such mechanisms as e.g., establishing joint working groups or steering committees are necessary to enable resultoriented dialogue. many regions can successfully pull together for one-off projects or respond to a major private sector opportunity or funding made available by state or national government entities but can find themselves in the cycle of having to recreate the wheel (the working relationships) for each new opportunity. sustained and structured leadership and engagement are critical to the long-term success and sustainability of the organisation acting as the curating and coordinating entity for the area of innovation. this provides a ready platform to respond to one-off opportunities when they are fit for an agreed-to strategic plan without having to reinvent the wheel. such a permanent platform also creates the collective voice and will to advocate national and sub-national administrative and legislative entities that a regional innovation economy needs from that level in terms of policies, programs, and funding to be successful. ● a “permanent” platform connotes an ongoing stable source of funding to build the highlevel professional staff necessary to be a successful area of innovation. too often, such initiatives start with good intentions and commitments and those initial leaders move to new positions. the commitment to fund must be institutional, not personal, sufficient http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 for the task and the long term. if it is all possible, tying it to the economic success of the area of innovation is preferable and not dependent on the annual “political” appropriation within government, academic institutions, private companies, and foundations. ● formalised networking by “independent” players in an area of innovation maximises the potential of a region’s economic and physical assets and creates results that the mere presence of the physical assets can create on their own. it is therefore vital to ensure a baseline level of network iq skills and effectiveness of utilising networks for innovation and entrepreneurial growth. ● recognizing and building on the concept of an stp 2.0 as a vital instrument leading to activation of a local innovation ecosystem and the accelerated transition of postindustrial manufacturing regions into the new, green and digital economy models. ● the evolution from the first, second, and third generations of stps to the complementary concept of innovation areas, together with the new generations of stps, may require additional conceptualization and analysis of experiences such as ann arbor spark with the variables and literature provided in this article — especially when it comes to understanding the network-based paradigms of future of work in the post-pandemic era. our analysis has attempted to contribute to research devoted to stps and areas of innovation, altogether with the analysis of the entrepreneurial innovation ecosystems, community-based innovation networks, the triple and quadruple helix models, knowledge triangle, skills, and strategies to use a permanent platform, and the locus in a nurturing environment with strong leadership, that favours business growth, regional development, and economic and social http://revistes.ub.edu/index.php/jesb volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 impact. all these elements may be useful for other cases that may be analysed and developed in the future regarding the new generations of stps. references albahari, alberto, salvador pérez-canto, andrés barge-gil and aurelia modrego. 2017. “technology parks versus science parks: does the university make the difference?” technological forecasting & social change 116: 13–28. doi: 10.1016/j.techfore.2016.11.012. allen, john. 2007. third generation science parks. manchester: manchester science park. ann arbor spark. 2020. “benchmarking the ann arbor region 2020: an economic competitiveness assessment.” 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10.1016/j.respol.2015.07.006. http://revistes.ub.edu/index.php/jesb https://ubarcelona-my.sharepoint.com/personal/raimonsoler_ub_edu/documents/documentos/jesb/numeros%20publicats/v%207%202/maquetes/10.1093/spp/23.5.279 https://ubarcelona-my.sharepoint.com/personal/raimonsoler_ub_edu/documents/documentos/jesb/numeros%20publicats/v%207%202/maquetes/10.1093/oxrep/grm030 https://ubarcelona-my.sharepoint.com/personal/raimonsoler_ub_edu/documents/documentos/jesb/numeros%20publicats/v%207%202/maquetes/10.5897/ajbm11.768 https://doi.org/10.1080/1360238052000298399 https://research.umich.edu/sites/default/files/resource-download/fy20_rap.pdf https://ubarcelona-my.sharepoint.com/personal/raimonsoler_ub_edu/documents/documentos/jesb/numeros%20publicats/v%207%202/maquetes/10.1016/j.respol.2015.07.006 volume 7, number 2, 100-132, july-december 2022 doi.org/10.1344/jesb2022.2.j108 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 wallsten, scott. 2004. “do science parks generate economic growth? an empirical analysis of their effects on job growth and venture capital.” working paper 04-04, march 2004. joint center aei brokings. westlund, hans. 2006. social capital in the knowledge economy: theory and empirics. berlin: springer. yeo and yeo. 2017. “ann arbor spark and affiliate financial statements december 31”. accessed september 1, 2021. https://annarborusa.org/wp-content/uploads/2018/04/ann-arbor-spark2017-financial-statements.pdf. ziman, john. 1991. “academic science as a system of markets.” higher education quarterly 12: 57– 68. doi: 10.1111/j.1468-2273.1991.tb01555.x. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://annarborusa.org/wp-content/uploads/2018/04/ann-arbor-spark-2017-financial-statements.pdf https://annarborusa.org/wp-content/uploads/2018/04/ann-arbor-spark-2017-financial-statements.pdf https://ubarcelona-my.sharepoint.com/personal/raimonsoler_ub_edu/documents/documentos/jesb/numeros%20publicats/v%207%202/maquetes/10.1111/j.1468-2273.1991.tb01555.x http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 michel deliberali marson federal university of alfenas (brazil) from the import-substituting industrialization to internationalization in the machine tools industry in brazil: the case of romi abstract this paper aims to describe romi’s business history in order to contribute to the discussion and improve the understanding of how brazil, with strong industrial growth during the import substitution process, but with low technological development, generated companies that exported technology-intensive capital goods, and also started these firms’ internationalization process. romi started out as a small business, an automobile repair shop, at the beginning of the twentieth century. in the 1960s, the company was already one of the largest lathe producers in the world. today, it is still an important machine tools producer in brazil with subsidiaries in several countries around the world. keywords: industrialization; capital goods; machine tools; brazil introduction industrialization has been the most powerful factor in the process of accelerating economic growth. the industrial sector has had a dynamic impact on other sectors of the economy, especially on the social and institutional environment. corresponding author: michelmarson@yahoo.com.br received 05 dec 2017 accepted 11 april 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 the mechanical industry has a special role since its development supports other industrial sectors’ expansion as well, that is, its products are intended to equip other sectors through the supply of machinery and equipment. the most common form of technical improvement in the industrialization process is through technological changes, especially the development of machines to build machines. therefore, the development of the mechanical industry is fundamental in the industrialization process. there is a debate in the economic history literature about the industrialization period in latin america. authors from the eclac1 tradition think that import-substituting industrialization (isi) would be the path to economic modernization and development. in their opinion, industrialization is a means of overcoming poverty and reducing the gap between rich and poor countries and boosting independence through self-sustaining economic growth with inwardlooking development (prebisch 1949; eclac 1951). tavares (1964) first formulated isi as a dynamic process; however, his formulation was based on eclac texts and ideas from the beginning of the 1950s, with three basic ideas: a) tendency towards external imbalance is inherent in industrialization on the periphery; b) latin america’s industrialization consists of import substitution generated by external deficits; c) the process promotes a change in the imports’ composition, but does not reduce their volume. the industrialization process should be accompanied by diversification in the peripheral economies’ productive structure, the domestic market’s size, and the ability to import. in the 1960s, criticism about industrialization’s anti-export bias emerged within eclac, proposing export reorientation to improve allocative efficiency and reduce external restrictions (prebisch 1961; bielschowsky 1 the economic commission for latin america (ecla) is one of the united nations’ economic commissions and was funded in 1948 to study latin america’s economic development. in 1984, the economic council changed its name to the economic commission for latin america and the caribbean (eclac). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 2000, 44). in the 1980s and 1990s, latin american industrialization received its greatest criticism in the face of the period’s problems. the isi would have promoted low technological development and unequal growth in latin america between 1965 and 1984. compared with the rest of the world, latin america’s economic development process would have added insufficient technical progress, with a low relative participation in the production of capital goods, engineers, scientists, and scientific publications (fajnzylber 1983, 1990). according to more recent literature, such as taylor (1998) and haber (2008), the import substitution process resulted in a closed, technologically backward, and inefficient industrial development, that is, the inward-looking development model resulted in economic system distortions. the history of the company romi contributes to this discussion and improves the understanding of how brazil, with strong industrial growth during the import substitution process, but with a low aggregate technological development, generated companies that exported technologyintensive capital goods, and also started these firms’ internationalization process. romi started out as a small company, an automobile repair shop, at the beginning of the twentieth century. in 1960, the company was already one of the largest lathe producers in the world. today it is still an important machine tools producer in brazil with subsidiaries in several countries around the world. the next section describes the industrialization and capital goods industry by investigating the brazilian economy’s evolution between the 1930s and the 2000s. the third section outlines this study’s empirical contribution to business history. it shows romi’s growth and internationalization. original primary sources, mainly collected from the romi historical http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 documentation center and são paulo’s board of trade, were used in the research. the last section summarizes the paper’s main conclusions. industrialization and the capital goods industry in brazil brazil’s gdp grew at about 7% annually from 1940 to 1980 but slowed down to only 2.5% from 1980 to the 2000s (bacha and bonelli 2005). this rapid gdp growth until 1980 was led by the manufacturing sector (manly from the 1930s), which grew by 9% annually between 1945 and 1980. the industrial growth cycle coincided with the gdp trend in the post-war period up until the 1980s (serra 1982). the first period had an accelerated industrial production growth of 9.7% annually from 1947 to 1962. in the period from 1956 to 1961, in the context of the target plan (plano de metas) in jucelino kubitschek’s government, the rate accelerated to 11%. in the second period, between 1962 and 1967, growth slowed down to 2.6% annually. this led to joão goulart’s democratic regime change and castelo branco’s military dictatorship from 1964. after institutional reforms during the first military government, the industry’s growth accelerated again (about 13% annually from 1968 to 1973), a period known as the brazilian economic miracle during the costa e silva and medici governments. a new phase of economic slowdown occurred between 1973 and 1980, even with the geisel government’s (1974-1979) second national development plan (ii plano nacional de desenvolvimento econômico) and subsequent implementation of large investment projects. the growth rate was about 7%, but higher than the historical average (serra 1982, 20-44). after the 1970s oil crisis and the expansion of isi with external debt, brazil was in a condition of financial crisis at the beginning of the 1980s. the return of democracy in the country in 1985 was coupled with external debt and high inflation. in the 1980s, the brazilian gdp grew by 2% http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 less than the historic average, and the period became known as the lost decade. after several failed price stabilization plans, the 1994 real plan solved the inflation problem in the country. cardoso’s government (1995-2002) expanded the dismantling of state-owned companies built throughout the military government with isi. in the 1990s, the economy grew at almost the same rate as in the 1980s, around 2.5% (bacha and bonelli 2005, 165-167). table 1 outlines brazil’s isi between 1929 and 1964. the table shows total imports, imports by industrial sector, and industrial output’s growth rates. despite an 8.5% drop in the industrial output’s growth rate, imports dropped sharply (57.6%) and all industrial sectors’ imports declined between 1929 and 1932. according to celso furtado, due to the 1929 crisis, brazil’s economy shifted from a dynamic to an inward-looking, since the coffee defense policy maintained effective demand and the level of employment in the economy’s other sectors. at the same time, the crisis was responsible for an external imbalance that grew with the exchange rate devaluation (which raised imported goods’ prices) and, therefore, internally-created income put pressure on domestic producers (furtado 2000). the great depression in brazil coincided with domestic market growth, as the industrial sector grew by 57.8% and imports slightly recovered between 1933 and 1938 (despite the 57.3% import growth in the period, 1932 registered the lowest import levels in history). there was a significant import substitution with an increase in industrial production and a 33% drop in imports between 1929 and 1938 (fgv 1969, 29). during the second world war period (1939-1945), import substitution intensified. unlike the 1930s, the industry had diversified in the 1940s, with capital goods domestic production and machinery and equipment imports growing by 150% between 1933 and 1938 (table 1). total imports fell by 11.6% due to the war, which limited external demand (necessary to generate http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 foreign currency to purchase imports) and created import difficulties with other countries at war. industrial production grew by 40.1% between 1939 and 1945. during this period, the brazilian industrial sector began substituting machinery and equipment imports more intensively (a 52% drop between 1939 and 1945) and romi played a significant part in this process, as we shall see in the following sections. table 1. brazil – import growth rates by industrial sector, total imports, and industry output index (quantitybased), 1929-1964, (percentage) industries 19291932 19331938 19391945 19461952 19531961 19621964 industrial sector imports non-metallic minerals -64.9 -18.3 66.1 184.4 -80.8 -16.8 metallurgy -68.6 77.0 18.7 54.7 55.4 -42.7 machinery and equipment -80.6 150.3 -51.8 434.3 -21.1 -52.2 electrical materials and communication -71.1 64.9 -52.4 378.2 -42.8 -52.2 transportation equipment -91.9 394.4 -38.8 455.6 -65.5 -46.7 wood -31.6 63.3 48.8 17.2 -28.7 -7.6 furniture -92.3 165.7 -57.9 -32.8 -69.6 paper -25.1 65.8 4.0 61.4 -24.6 -62.8 rubber -54.8 -88.4 -93.8 1,296.6 -96.7 -47.8 leather -77.1 -77.6 15.9 -13.3 -96.1 70.5 chemicals -30.0 41.1 1.9 332.7 -4.7 -31.0 pharmaceutical and plastic products -67.7 10.0 52.6 321.9 -76.4 -4.6 textiles -72.7 9.4 -75.5 327.6 -79.9 -36.2 clothing and footwear -72.0 4.6 15.1 23.7 -57.4 242.8 food products -64.5 6.3 -26.2 160.8 -18.5 41.1 beverages -81.9 70.8 113.7 -37.8 -59.2 -21.7 printing and publishing -62.2 -2.4 200.9 32.0 10.3 2.3 miscellaneous products -61.0 -20.8 148.5 37.4 41.8 -23.2 total imports -57.6 57.3 -11.6 185.7 -11.9 -15.0 industry output index -8.5 57.8 40.1 82.1 135.9 13.9 source: author’s calculations from fgv, ibre/ccn. 1969. estrutura do comércio exterior do brasil, 1920/1964, vol. 1, 22, 25, 29, 30, 31, 37, 38, 39, 44, 45, 48, 60, 61, 63, 71, 72, 75. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 the period from 1946 to 1952 reflected the post-war economic conjuncture. dutra’s government promoted exchange rate system changes that significantly impacted isi. the 1946 exchange rate policy was a fixed exchange rate (18 cruzeiros per dollar), and this rate was overvalued. after a foreign exchange reserves slump, exchange controls were introduced in 1947 (quantitative control for imports), maintaining the exchange rate fixed and overvalued. this system changed in 1948, when the control happened under the previous import licenses’ regime. this new system would remain until 1953. the higher exchange rate favored imports until 1947, and subsequently the licenses favored essential products imports (fishlow 1972, 4247). between 1946 and 1952, imports grew by 185.7% and industrial production-by 82%. there was a decrease in non-essential consumer goods imports (leather, clothing, footwear, and beverages) but an increase in capital goods and intermediate goods imports, which were essential for industrial investment in that period (table 1). therefore, there was no capital goods industry stimulus, but a non-imported products substitution (fishlow 1972, 47). industrialization accelerated fast from 1953 to 1961 due to the target plan (1957-1961). it was the most intensive import substitution period, with a 12% total import decrease and a 136% industrial output increase. multiple exchange rates were implemented in the period, which were active measures to encourage balance of payments and industrialization equilibria. another measure was to create incentives for the flow of foreign capital. instruction 113 of the superintendency of currency and credit (superintendência da moeda e do crédito), a monetary authority, in 1955 allowed machinery and equipment imports without exchange coverage. although the fastest growing sectors were those linked to the automobile industry, there were no incentives for capital goods production (which would be observed in the 1960s) (fishlow 1972, 48-53). in the early 1960s, isi was showing signs of slowing down. industrial output http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 increased by only 14% and total imports decreased by 15% between 1962 and 1964. despite the deceleration, the capital goods sector made progress in import substitution as a result of the target plan’s investments maturity. as a result of isi, brazilian economic growth promoted changes within the industry, as shown in table 2. in 1939 consumer goods accounted for about 70% of the manufacturing industry’s value, food (23.3%) and textiles (21.8%) being the largest contributors. in 1980, food products accounted for 10% and textiles for only 6.4%. the intermediate and capital goods industries increased their relative shares between 1939 and 1980. for example, machinery and equipment, electrical materials and communication, transport equipment, metallurgy and chemicals had impressive growth between 1930 and 1980 (table 2). thus, in the 1970s brazil had the highest proportion of capital goods in latin america and close to western europe’s (serra 1982, 6). the capital goods industry in brazil is related to repairing machines and equipment parts, mainly agricultural machinery. the origin of this industry is ancient, possibly dating back in the colonial period. it is impossible to specify a date, but it was at the end of the nineteenth century that small workshops, with turners, carpenters, blacksmiths2, machinists, and others worked in cities or villages, which had an urban or rural artisan center. thus, it seems this industry’s origin is related to export-led growth, especially with coffee in southeastern brazil (leff 1968; erber et al. 1974; lago et al. 1979; marson 2017). in the 1920s and 1930s, the machinery and equipment firms experienced changes in their output. most companies founded in the 1920s produced industrial machines, indicating the diversification in the industry, unlike those founded in the previous period, which mostly served the agricultural sector. in the 1920s firms produced machines for weaving, ceramics, bakery, 2 a phenomenon similar to what occurred in the united states in the nineteenth century, where blacksmiths' contribution to the economy appears to have been important, though belittled by scholars (atack and margo 2017). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 footwear, pottery, stamping, pasta and bread manufacturing, metallurgy, the textile industry in general, glass factories, motors, and steam boilers. table 2. brazil manufacturing industries’ value, by industrial sector, 1939-1980, (%) industries 1939 1949 1959 1970 1975 1980 non-metallic minerals 5.3 7.1 6.6 5.9 6.2 5.8 metallurgy 7.5 9.4 11.8 11.6 12.6 11.5 machinery and equipment 2.1 3.4 7.1 10.3 10.1 electrical materials and communication 5.4 1.6 4.0 5.4 5.8 6.4 transportation equipment 2.2 7.6 8.0 6.4 7.6 wood 3.2 4.2 3.2 2.5 2.9 2.7 furniture 2.1 2.2 2.2 2.1 2.0 1.8 paper 1.5 2.2 3.0 2.6 2.5 3.0 rubber 0.6 1.9 2.9 1.9 1.7 1.3 leather 1.7 1.3 1.1 0.6 0.5 0.5 chemicals 6.6 5.3 8.6 10.0 12.0 14.7 pharmaceutical products 2.7 2.8 2.5 3.4 2.6 1.6 perfumery, soaps and candles 2.3 1.6 1.4 1.5 1.2 0.9 plastic products 0.3 0.9 1.9 2.3 2.4 textiles 21.8 19.6 12.0 9.3 6.1 6.4 clothing and footwear 4.8 4.3 3.6 3.3 3.8 4.8 food products 23.3 20.5 16.4 13.5 11.3 10.0 beverages 4.3 4.5 2.9 2.3 1.8 1.2 tobacco 2.3 1.4 1.3 1.3 1.0 0.7 printing and publishing 3.5 4.0 3.0 3.7 3.7 2.6 miscellaneous products 1.1 1.6 1.8 2.1 1.9 2.2 support activities 1.3 1.7 total manufacturing industries 100.0 100.0 100.0 100.0 100.0 100.0 source: author’s calculations from ibge, 1990. estatísticas históricas do brasil: séries econômicas, demográficas e sociais de 1550 a 1988, 386. in the 1930s there was a wider diversification in the production of machines for various industrial sectors and in that period the production of machine tools (such as lathes) began (marson 2017). with the second world war, the supply of capital goods from the european and north american markets to latin america declined. thus, in this period there was a development in the metal-mechanic industry by means of copying machines installed before the war. as can be seen in graph 1, equipment imports substitution deepened in the post-war http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 period. from the beginning of the 1950s, domestic equipment production was higher than imports. the local capital goods industry provided over 60% of domestic industrial equipment demand in 1949 (leff 1968, 8). from the 1950s, the main sources of capital goods demand were industrialization and government enterprises (erber et al. 1974, 16). although demand from the government sector has been central to the capital goods industry, brazilian equipment production did not receive any tariff protection until the 1960s (leff 1968, 132-156; bergsman 1970). the brazilian private firms3 in the capital goods industry were competitive with foreign firms in the 1960s (leff 1968). the result of the national industry’s growth has gone the "economic groups," business organization of legally independent firms, operating in several industrial sectors with great market power, under the control of familiar groups (leff 1978). the economic groups’ purpose was to satisfy the internal market, although not always taking advantage of the economies of scale. another characteristic of the economic groups was the close relationship with the government, with the latin american industrialization policy strategy in their favor (valdaliso and lópez 2007, 390-391). in brazil, this relationship will appear in the target plan between 1957 and 1961, and especially in the second national development plan between 1974 and 19794 (lessa 1998). the only slowdown in brazil’s equipment production was in the early 1950s and 1960s (1962-1966), following the results of the brazilian economy between 1947 and 1970. the periods of economic growth were during the target plan (1957-61) and the so called brazilian economic miracle (graph 1). 3 for details on the importance of the brazilian private industrial enterprise between 1950 and 1980, see cunningham (1982). 4 for details on government policies for the capital goods industry in brazil, see lago, 1979, chap. vi, and almeida, 1983, chap. 3. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 graph 1. brazil – domestic production, imports, and global supply of equipment, 1947-1970, (thousand cruzeiros from 1965/67) source: author’s calculations from erber et al. 1974, 28. in the early 1980s, there was a drop in brazil’s machinery and mechanical equipment production. between 1984 and 1987 there was a recovery, but production did not return to the pre-1970s levels. machinery and equipment production experienced a continuous downward trend between 1988 and 1993. after a small recovery, production kept decreasing again from 1995 until 1999. brazil’s machinery and equipment industry crisis in the 1980s and 1990s became obvious when compared to the machines imports evolution. the exchange rate appreciation between 1994 and 1999 due to the real plan promoted a significant imports increase and a clear deterioration of the importance of domestic production to the total supply of machinery (graph 2). the restructuring of the latin american economies coupled with commercial and financial opening favored firms’ internationalization in the 1990s. an internationalization process based on import-substituting industrialization took place between 1980 and 1990 in sectors that had 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 1945 1950 1955 1960 1965 1970 domestic production imports global supply http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 product design capabilities or adaptation and process advantages such as auto parts, metalworking, steel, and textiles (chudnovsky and lopez 1999, 12, 20). the brazilian multinationals were prominent in the domestic market in the 1970s, with a focus on export efforts. these companies began a new cycle in the late 1980s and early 1990s, developing international strategies for expanding their activities (cyrino and barcellos 2006, 227). the new multinationals’ expansion from brazil, india, china, south africa, and mexico altered the global corporate context in the 2000s. as previously noted, this new wave of internationalization was motivated by competitive domestic market pressure, combined with strategies to expand and diversify sales, markets, and products (santiso 2008). as will be seen in the next section, romi was one of the companies that took advantage of internationalization during this period. graph 2. brazil – domestic production, machinery, and mechanical equipment imports and exports, 1980-2002, in constant 2002 us$ billions source: author’s calculations from vermulm 2003, 11. 0 5 10 15 20 25 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 domestic production exports imports http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 romi’s growth and internationalization romi’s growth, 1930s-1980s américo emílio romi started his own business as a workshop. romi began operations in santa barbara in 1929 with an auto workshop, which produced parts and began receiving orders for farm equipment pieces. the origin of machinery and equipment production in brazil was linked to the local or regional economic development process. the economic development process in são paulo state’s interior in the early twentieth century where romi’s workshop was established is an example of the interconnection between local agriculture and the process of industrial growth and development. the local agro-industrial activities made possible the emergence of business to meet the machinery industry demand. in the 1940s, romi’s development strategy took a new turn. due the second world war’s import interruptions, romi decided to specialize their production. after achieving success in the field of land cultivation agricultural machinery such as plows, seeders, and others, romi expanded its production to the most universal industrial machinery: the lathe. romi took the opportunity of an applicant industrial machinery market and specialized in machine tools production. the specialization in a specific market segment and the development of more intensive products with modern techniques favored romi’s evolution. romi has followed the market’s evolution. along with this evolution, the firm was modernizing and adapting to more complex conditions and technical administration. romi managed to keep the market adapting to their conditions through constant technical innovation improvements in the production process and their products, making it the leading machine tools producer in brazil. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 the machine tools market, applicant core romi, is briefly analyzed here. machine tools are included in the mechanical and industrial classification. they are machines that are intended to produce new machines by mechanical movement, a set of tools. lathes, grinders, planers, milling machines, boring mills, drills, saws, shears, presses, and other tools are classified as machine tools. the lathe is one of the oldest tools invented by men that cuts, files, or polishes pieces of wood, metal, or other material machines. as there are several types of lathes, it can be used in a small machine shop, or in a complex industrial organization. romi launched its business by producing farm machinery and in 1941 started lathe production as well. the machine tools industry has origins in brazil, with companies continuously producing this type of engine in the 1930s. before this period, companies produced some machines for personal use. it is difficult to identify who romi’s customers were over the years, but we can make some generalizations to better understand the lathe market characteristics in brazil. its principal customers were the auto parts industries, the tooling (using the lathe in production machines), and the maintenance sectors (such as glass or porcelain cement, using lathe in simple maintenance). thus, romi’s lathe production served both marketscustomers requiring less complex lathes and customers requiring lathes for specific purposes. the market romi served over this period was composed of diversified customers, requiring a relative degree of technological complexity in the products manufactured by the company (marson 2017, 133178). in the 1950s, romi was already an important company in the lathe market in brazil. we have lathe production data for brazil between 1955 and 1970 and romi’s market share ranged from 61% in 1955 to 32% in 19705. 5 the market share was derived by comparing romi’s lathe production relative to brazil’s total production (vidossich et al. 1974, 18-21)) with data between 1955 and 1970 (table 3). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 graph 3 shows romi’s total lathe production and exports between 1941 and 1989 linking the evolution of lathe production with brazil’s main economic cyclesthe second world war (1939-1945), the target plan implemented by jucelino kubitschek (1956-1960), the brazilian economic miracle (1968-1973), the second national development plan (1975-1979), and the lost decade of the 1980s. despite high gdp and industrial production growth rates during the target plan and the economic miracle, there was a large increase in romi's lathe production only during the second national development plan (production in 1979 was 2.4 times greater than the last year of the economic miracle-1973). graph 3. romi’s total lathe production and exports, 1941-1989 source: author’s calculations from romi’s historical documentation center database. the greatest expansion of lathe production was caused by a strong domestic market demand, such as large government investment projects in the 1970s. however, earlier on the domestic market was not strong enough, and romi began exporting in 1944, first to argentina, then to 0 1000 2000 3000 4000 5000 6000 7000 8000 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 total production (units) export production (units) target plan world war ii brazilian economic miracle second national development plan lost decade http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 other latin american countries. before the end of the 1940s, exports were extended to other continents as well. exports were important for romi between 1945 and 1949 and represented 45% of the company’s production in 1947. from 1943 to 1947, lathe exports generated more revenue than domestic sales. however, starting 1947 domestic cost increased and without an exchange rate adjustment, exports fell. the company again exported lathes in bulk from the 1960s until the end of the 1970s. the following table shows romi’s lathe production for internal and external markets between 1941 and 1989. table 3. romi’s lathe production for domestic and foreign markets, 1941-1989, (current dollars) year total production (units) total production ($) % domestic market (units) % domestic market ($) % exports (units) % exports ($) 1941 46 24,029 100.0 100.0 0.0 0.0 1942 193 101,902 100.0 100.0 0.0 0.0 1943 770 521,610 100.0 100.0 0.0 0.0 1944 899 739,109 99.1 99.1 0.9 0.9 1945 1,098 797,250 90.5 90.4 9.5 9.6 1946 1,660 1,147,990 69.0 81.7 14.8 18.3 1947 1,110 1,015,294 55.0 56.1 45.0 43.9 1948 731 897,807 60.2 66.9 39.8 33.1 1949 798 871,711 78.9 80.9 21.1 19.1 1950 857 1,540,663 100.0 100.0 0.0 0.0 1951 1,379 2,383,155 100.0 100.0 0.0 0.0 1952 942 2,091,711 99.6 99.6 0.4 0.4 1953 880 1,067,229 99.5 99.4 0.5 0.6 1954 1,306 1,568,483 100.0 100.0 0.0 0.0 1955 1,492 1,764,560 100.0 100.0 0.0 0.0 1956 1,629 2,807,718 98.0 96.7 2.0 3.3 1957 1,449 2,668,022 99.8 99.6 0.2 0.4 1958 1,779 2,398,312 99.8 99.9 0.2 0.1 1959 1,237 2,736,298 99.7 0.3 1960 1,659 3,337,082 99.2 0.8 1961 1,756 3,809,352 97.9 2.1 1962 1,979 6,845,183 94.2 5.8 1963 1,679 5,817,626 81.4 18.6 http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 year total production (units) total production ($) % domestic market (units) % domestic market ($) % exports (units) % exports ($) 1964 1,784 4,510,915 78.0 83.0 22.0 17.0 1965 1,535 4,961,979 72.4 80.3 27.6 19.7 1966 2,011 6,949,129 78.0 83.4 22.0 16.6 1967 1,875 5,090,365 77.5 78.4 22.5 21.6 1968 2,219 5,866,493 80.6 81.1 19.4 18.9 1969 1,905 7,693,854 71.2 85.0 28.8 15.0 1970 1,690 7,290,803 72.5 83.6 27.5 16.4 1971 2,009 9,079,272 73.1 85.8 26.9 14.2 1972 2,346 15,031,350 75.8 91.7 24.2 8.3 1973 2,814 22,543,556 79.1 92.6 20.9 7.4 1974 3,009 28,070,709 87.1 92.7 12.9 7.3 1975 4,317 50,198,560 83.4 89.4 16.6 10.6 1976 4,843 60,900,944 94.3 93.0 5.7 7.0 1977 4,872 62,621,325 93.5 94.7 6.5 5.3 1978 5,762 76,352,719 84.5 91.6 15.5 8.4 1979 6,740 89,789,754 67.8 83.1 32.2 16.9 1980 4,800 66,927,050 53.6 70.0 46.4 30.0 1981 2,547 52,697,318 82.7 83.3 17.3 16.7 1982 2,205 39,699,291 93.0 92.3 7.0 7.7 1983 2,171 22,672,640 64.9 73.4 35.1 26.6 1984 1,939 25,741,230 77.8 82.8 22.2 17.2 1985 2,564 48,438,270 71.7 90.2 28.3 9.8 1986 2,862 79,290,518 87.7 96.5 12.3 3.5 1987 3,042 96,968,300 94.5 98.2 5.5 1.8 1988 2,139 86,640,465 76.9 93.9 23.1 6.1 1989 2,450 85,069,952 63.7 92.9 36.3 7.1 source: romi’s historical documentation center database and author’s calculations. romi has followed the market’s evolution and has provided more advanced machinery and equipment to satisfy businesses’ needs. until 1960, the company produced 22,000 lathes and exported 1,380. in the 1960s, romi became one of the largest lathes manufacturers in the world, only behind the soviet union’s state enterprise, exporting to 41 countries, including developed countries like the united states. romi’s export production was small in the 1950s. however, http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 exports started to grow again from the early 1960s. we have data on the precise export destination country for the period 1962 to 1967. graph 4 below shows these countries. graph 4. romi’s lathe exports by country, 1962-1967 (units) source: author’s calculations from romi’s historical documentation center. between 1962 and 1967, romi largely exported lathes to latin america (mainly chile and mexico) and the united states and europe (mainly the netherlands) (graph 4). in the early 1970s, romi’s share of exports as a percentage of total lathes output fell again. since 1976, the trend has been upward reaching a peak of 46.4% in 1980. despite the oscillation in the 1980s, the share of exports remained high in 1989 (table 3). romi has evolved over the years adapting itself to the lathe market conditions. the company developed from a small workshop producing agricultural machinery to the largest machine tools producer in the country and one of the most important producers in the world in the 1960s. before addressing the subject of romi's internationalization, the next section will outline the change in its business structure. 0 50 100 150 200 250 300 350 400 450 500 a rg e n ti n a b o li v ia c h il e c o lo m b ia e c u a d o r p a ra g u a y p e ru u ru g u a y v e n e z u e la c o st a r ic a p u e rt o r ic o c a n a d a u s a m e x ic o a n g o la r e p . s o u th a fr ic a g e rm a n d e m o c ra ti c … f e d e ra l r e p u b li c o f… a u st ri a s p a in n e th e rl a n d s e n g la n d it a ly p o la n d s w e d e n ja p a n l e b a n o n p h il ip p in e s s o u th v ie tn a m p o rt u g u e se a fr ic a r h o d e si a a u st ra li a http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 romi’s changing structure the profits of romi’s industrial and commercial activity explain the changes in its equity since emílio romi founded it as an individual business in 1929 until the company’s transformation into máquinas agrícolas romi ltda. (a limited liability company) in 1938. the company’s equity increase in 1938 was carried out with américo emílio romi’s resources and the entry of new members. late in 1954, the business was transformed into máquinas agrícolas romi s.a. (a joint-stock company). in 1955, the incorporated company’s origin was real estate capital, land, and buildings belonging to américo emílio romi that were being leased by the company. in 1956, the equity’s development took place with the company’s own reserves and a revaluation of the company’s assets. thus, by the end of the 1950s and the early 1960s company’s ownership was entirely in the romi family. only in the early 1960s did the company open to foreign investment in order to modernize its production to meet a more extensive and complex market; however, the administrative control still remained in the family (marson 2017, 165-169). graph 5 shows the evolution of romi’s equity between 1930 and 1980 (at constant prices). as we can see, in the 1940s (from 1943) romi had the first equity growth (table a.1 in the appendix). however, it was only in the 1950s that the company increased its equity substantially, becoming a leader in the specific machines and equipment sector. most interestingly, this growth occurred during getulio vargas' government and before juscelino kubitschek's government and the target plan, which began in 1956. the substantial expansion of romi's equity was between 1953 and 1956. between 1957 and 1960, romi's equity declined in real terms, increasing only in 1961 at the end of the target plan investments’ maturity. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 graph 5. romi’s equity, 1930-1981 (in 1961 constant prices, thousand cruzeiros) note: the equity’s values were deflated by malan et al. (1977, 516) between 1930 and 1943 and ipa origin prod. industrial fgv index between 1945 and 1981. source: são paulo’s board of trade and author’s calculations (table a.1 in the appendix). after a decline between 1963 and 1965, equity rose once again to a new level with the economic miracle between 1968 and 1969. after an oscillation in the early 1970s and after romi became a publicly-held corporation with shares traded on the são paulo stock exchange in 1972, equity rose sharply between 1974 and 1978, a period of large investment by the brazilian government during the second national development plan. since 1979, equity declined again, reflecting the slowdown of brazil’s economy in the 1980s, but romi's equity structure had already reached a very high level in that period. romi’s internationalization, 1990s-2010s romi’s machine production experienced high growth rates from 1950 to 1970. the domestic market was booming in the 1950s, but in the 1960s and 1970s, the export growth rate was higher than total machine production growth. the 1980s changed this growth trend, total machinery, 00000 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000 4500000 5000000 1930 1940 1950 1960 1970 1980 romi's equity 1929garage emilio romi (individual business) 1938 -máquinas agrícolas romi ltda. (limited liability company) 1954máquinas agrícolas romi s.a (joint-stock company) 1962indústrias romi s.a. new name (joint-stock company) 1972indústrias romi s.a. a publicly-held corporation with shares traded on the são paulo stock exchange http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 and exports production dropped significantly. the 1990s and 2000s machine production growth deteriorated even further. table 4 shows romi’s machine production between 1950 and 2010. table 4. romi’s machine production, 1950-2010 total machine production exported machine production year units average unit per year growth rate per year units growth rate per year % exported 1950 8,200 1,380 10.4 1,320 0.5 16 1960 22,000 1,900 6.4 1,380 13.7 6 1970 41,000 5,100 8.4 5,000 10.8 12 1980 92,000 2,900 2.8 14,000 3.6 15 1990 121,000 1,700 1.3 20,000 2.3 17 2000 138,000 1,200 0.8 25,000 1.2 18 2008 147,000 1.0 27,400 19 2010 150,000 source: author’s calculations from romi (2017b) romi's production growth rate is in line with the brazilian economy’s growth rate trend. perhaps brazilian economy’s slow growth6 motivated romi to start investing abroad in the 1990s. with the decreasing barriers to international trade and financial regulations in the 1990s, firms in developing countries faced increased competition in their local markets. however, they were more likely to connect to international production networks because production and operations were organized according to the globalization production, that is, those years were the era of productive globalization (fleury and fleury 2011, 25). romi's internationalization process is linked to the export movement the company started in the 1940s. through exports, romi partnered with companies in the international market through technology transfer. the internationalization process was originated with the exchange of technology and exports. for exports, romi used distributors, a choice that lowered business risk. in addition, subsidiaries abroad were necessary due to the specific machines and 6globalization’s impact on the brazilian economy in the 1990s was complex and mixed. for a good approach on the subject, see baumann (1996). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 equipment market in which the company operated. although romi did not have foreign production before the 1990s, the company needed to provide technical assistance services to sell its machinery and equipment. thus, “overseas subsidiaries, then, were basically for warehousing, pre-sale, sale and technical assistance. the company had these subsidiaries in the us, argentina and uruguay markets and was implanting another one in germany” (veiga and rocha 2003, 169). table 5 shows the evolution of romi's business abroad. romi's effective internationalization process occurred in the 1990s when the company began operations in the american market in chicago. table 5. romi’s business abroad year name city country 1998 romi machine tools ltd. erlanger, kentucky usa 2001 romi europa gmbh groß-gerau (next frankfurt) germany 2008 romi italia s.r.l. turin italy 2008 sandretto industrie s.r.l., grugliasco and pont canavese (next turin) italy 2009 lazzati s.p.a. (agreement) milan italy 2010 pfg s.p.a. (agreement) italy 2011 burkhardt + weber fertigungssysteme gmbh reutlingen (next stuttgart) germany source: author’s calculations from romi (2017b) in 1998, the company transferred its operations to erlanger in kentucky, a region of high machine tool producers concentration, founding romi machine tools. in 2001, a subsidiary, romi europa gmbh, was established in germany to support the european market’s distribution network. to support the company's activities in europe, romi italia s.r.l. was established in 2008 in turin, italy. that same year romi acquired assets from sandretto industrie s.r.l., a plastic injection molding machines manufacturer, with plants located in grugliasco and pont http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 canavese in the turin region of italy. romi continued its expansion in italy and signed an agreement with lazzati s.p.a., located in the region of milan, for boring machines production, and with pfg s.p.a. for the manufacturing of mobile column machining centers. in 2010 and 2011, sandretto and romi launched products in germany, france, and the united kingdom. in that last year, sandretto méxico’s activities began, operating with the romi and sandretto brands in the country. also, in 2011 romi acquired burkhardt + weber fertigungssysteme gmbh, a german company which has been producing machine tools since 1888 (bw 2017). all these initiatives have expanded the company's global market operations (romi 2017b). romi has a net of distributers located in all continents, and subsidiaries for trading and services located in north america (the united states and mexico) and europe (italy, germany, uk, spain, france). table a.2 in the appendix summarizes romi's industrial plants and sales subsidiaries around the world as of 2017. romi currently counts on eleven factories (nine in brazil and two in germany) with a production capacity of approximately 3,450 machines per year. its main markets are machine tools (metal cutting machines), such as turning centers, computerized numerical control (cnc) lathes, engine lathes and machining centers, and plastic processing machines (plastic injection moulding machines and blow moulding machines) (romi 2017c). romi has about 6,000 active customers in more than 60 countries, operating in the automotive, agricultural machinery, capital goods, consumer goods, tooling, hydraulic equipment, wind energy, and other industries. about 75% of the company's turnover comprises of conventional lathe sales, cnc lathes, machining centers, heavy and extra heavy horizontal and vertical lathes, turning centers, and boring machines. about 15% of its revenue comes from the plastic injection molding industry (romi 2012, 6-9). http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 conclusions this article examined the history of romi, an important producer of capital goods in brazil. we showed its growth between 1930 and 1980 in the context of the brazilian economy, and its relation with the capital goods isi, specifically the lathe. we have seen that the main period of its growth was tied to government investment in large projects under the second national development plan between 1975 and 1979. with the changes in the brazilian economy in the 1980s and 1990s, the company had to adapt itself, aiming to promote foreign investments, when its internationalization process was effective. romi was concerned about serving the foreign market early, intensified by the need to improve the products that the capital goods industry demanded. the companies’ exports can be seen as an indicator of the production process and the product’s efficiency, that is, the company is internationally competitive. romi’s case contrasts with the literature’s pessimistic view on brazil’s isi. romi developed characteristics to meet the external market in the face of policies aimed at replacing imports. thus, within the domestic market’s closed industrial structure, there were cases of companies that made export efforts shortly after its founding, mainly because they specialized in a technology-intensive sector and needed external contact for their development. although romi was an exceptional case, it shows isi’s complexity in brazil. at the macroeconomic analysis level, it seems that this development model has resulted in little effort in the relative generation of technology. at the micro level of business history, romi is an example of a successful company in a technology-intensive sector, such as capital goods. references almeida, lopes de, fernando. 1983. a expansão da indústria de bens de capital: fatores 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change 26 (4): 661-675. lessa, carlos. 1998. a estratégia de desenvolvimento, 1974-1976. são paulo: universidade estadual de campinas. malan, pedro, regis bonelli, marcelo de paiva abreu, and josé eduardo de c. pereira. 1977. política econômica externa e industrialização no brasil (1939/52). rio de janeiro: ipea/inpes. marson, michel deliberali. 2017. origens e evolução da indústria de máquinas e equipamentos em são paulo, 1870-1960. são paulo: annablume/fapesp. prebisch, raúl. 1949. “el desarrollo económico de la américa latina y algunos de sus principales problemas.” [the economic development of latin america and its principal problems]. 1-87. santiago: united nations. eclac. http://repositorio.cepal.org/bitstream/handle/11362/30088/001_es.pdf?sequence=2&isallowed=y prebisch, raúl. 1961. “desarrollo económico, planeación y cooperación internacional” in la obra de prebisch en la cepal, edited by adolfo gurrieri. méxico: fondo de cultura económica. romi archives. romi historical documentation center. santa barbara do oeste-sp. romi. 2012. “relatório anual.” santa bárbara do oeste. romi. 2017. “romi worldwide.” accessed august 12, 2017. http://www.romi.com/en/romi-worldwide/ romi. 2017b. “linha do tempo romi.” accessed august 12, 2017. http://www.romi.com/empresa/institucional/linha-do-tempo/ romi. 2017c. “romi – the company.” accessed august 12, 2017. http://www.romi.com/en/company/the-company/ são paulo archives. são paulo’s board of trade. são paulo-sp. santiso, javier. 2008. “the emergence of latin multinationals.” cepal review 95:7-30. http://revistes.ub.edu/index.php/jesb http://repositorio.cepal.org/bitstream/handle/11362/30088/001_es.pdf?sequence=2&isallowed=y http://www.romi.com/en/romi-worldwide/ http://www.romi.com/empresa/institucional/linha-do-tempo/ http://www.romi.com/en/company/the-company/ volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 serra, josé. 1982. “ciclos e mudanças estruturais na economia brasileira do após-guerra.” revista de economia política 2 (6):5-45. tavares, maria da conceição. 1964. “the growth and decline of import substitution in brazil.” economic bulletin for latin america 1:1-59. new york: united nations. eclac. available: http://repositorio.cepal.org/handle/11362/10087 taylor, alan m. 1998. “on the costs of inward-looking development: price distortions, growth, and divergence in latin america.” the journal of economic history 58 (1): 1-28. valdaliso, jesus maria, and santiago lópez. 2007. historia económica de la empresa. barcelona: crítica. veiga, luis filipe agapito da, and angela rocha da. 2003. “expansão internacional de grandes empresas: estabelecendo relacionamentos no mercado internacional.” in as novas fronteiras: a multinacionalização das empresas brasileiras, edited by angela da rocha, 163-210. rio de janeiro: mauad. vermulm, roberto. 2003. “a indústria de bens de capital seriados.” cepal 1-45. access online http://www.cepal.org/pt-br/publicaciones/28375-industria-bens-capital-seriados vidossich, franco, francisco almeida biato, eduardo augusto de almeida guimarães, and maurício jorge cardoso pinto. 1974. a indústria de máquinas-ferramenta no brasil. brasília: ipea. http://revistes.ub.edu/index.php/jesb http://repositorio.cepal.org/handle/11362/10087 http://www.cepal.org/pt-br/publicaciones/28375-industria-bens-capital-seriados volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 appendix table a.1. romi’s equity evolution, 1930-1981 (1961 constant prices, cruzeiros) years romi (malan deflator) romi (fgv deflator) years romi (malan deflator) romi (fgv deflator) 1930 74,105 1958 378,308,824 378,389,694 1932 68,895 1959 351,537,335 351,319,429 1933 67,067 1960 284,985,163 284,876,038 1934 3,201,333 1961 610,000,000 610,000,000 1935 6,196,129 1962 1,035,091,664 1,062,507,211 1936 5,799,517 1963 790,297,806 789,659,133 1937 6,406,381 1964 923,145,933 923,534,471 1938 7,679,104 1965 1,144,120,294 1,143,943,615 1943 22,286,510 1966 1,145,705,394 1,095,979,916 1945 17,811,573 17,269,476 1967 1,313,098,168 1,220,477,195 1946 26,001,613 23,998,392 1968 1,255,407,562 1,112,129,093 1946 55,322,581 51,060,409 1969 2,080,535,037 1,838,622,506 1947 61,801,802 61,782,647 1970 1,810,673,431 1,605,361,222 1947 92,702,703 92,673,970 1971 1,845,873,584 1,631,756,053 1948 102,782,534 102,835,886 1972 1,728,183,572 1,528,926,516 1950 94,639,338 94,521,319 1973 2,136,679,320 1,901,819,553 1951 79,661,579 79,654,224 1974 1,647,819,660 1,469,867,594 1952 74,104,938 74,360,769 1975 2,588,825,636 2,276,094,267 1953 141,235,294 141,709,422 1976 2,867,212,866 1954 195,203,252 195,572,214 1977 2,060,029,378 1954 219,603,659 220,018,740 1978 4,659,557,421 1955 258,635,548 257,700,617 1979 4,293,241,675 1956 472,924,242 472,591,250 1980 3,102,719,570 1957 442444717 443,637,558 1981 2,238,646,649 note: the values of equity were deflated by malan et al. (1977, 516) and ipa origin prod. industrial fgv index. source: author’s calculations from são paulo’s board of trade. http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 table a.2. romi around the world, 2017 name city country controlled companies romi machine tools dealers dealers of machines for plastic indústrias romi santa barbara do oeste brazil x são paulo abcd são paulo brazil x ribeirão preto ribeirão preto brazil x rio de janeiro rio de janeiro brazil x belo horizonte belo horizonte brazil x salvador salvador brazil x curitiba curitiba brazil x porto alegre porto alegre brazil x bromberg y cia s.a. montevideo uruguay x favel argentina s.a. buenos aires argentina x x favel argentina s.a. córdoba argentina x x cnc service santiago chile x maq & herr ( máquinas y herramientas ) asunción paraguay x cormaq s.a. santa cruz de la sierra bolivia x interlink-18 s.a. lima peru x compuengine cia. ltda. quito equador x x inversiones vc tecnología s.a.s bogotá colombia x herramientas técnicas hertec rrh, c.a caracas venezuela x eb servi tecnologia plástica, c.a. caracas venezuela x grupo index s.a. ciudad de panamá panamá x mr2 representaciones s.a. san josé costa rica x mr2 representaciones s.a. nicarágua x mr2 representaciones s.a. honduras x mr2 representaciones s.a. el salvador x mr2 representaciones s.a. guatemala x suplextrade comercio exterior ltda. cuba x x inter tools s.a. de c. v. (máquinas cnc) puebla mexico x krotarkmex s.a. de c.v. cidad del méxico mexico x em maquinados s.a. de c.v. (máquinas cnc y convencionales) monterrey mexico x people tech machine tool sales & service (northern california & northern nevada) santa clara usa x http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 name city country controlled companies romi machine tools dealers dealers of machines for plastic machine toolworks inc. (oregon, washington (flat bed cnc lathes, oil country cnc lathes)) tukwila usa x smith machinery co., inc (utah, wyoming, idaho, and montana) salt lake city usa x wd distributing (arkansas, oklahoma & southern kansas) kellyville usa x romi machine tools, ltd erlanger usa x jones machinery inc. (kentucky, southern ohio and southern indiana) cincinnati usa x titan machinery sales (illinois, northern indiana and eastern iowa) lake zurich usa x alternative machine tools, llc (wisconsin and the upper peninsula of michigan ) dousman usa x peak edm, inc. (michigan) wixom usa x northeast precision machinery (eastern pennsylvania) warminster usa x rice machinery inc. (rhode island, massachusetts, connecticut, new hampshire and maine) cranston usa x mega industries inc. (canada provinces: ontario, quebec, new brunswick, nova scotia, prince edward island, newfoundland & labrador) burlington canada x machine toolworks inc. western canada (flat bed cnc lathes, oil country cnc lathes) edmonton canada x libcor industrial machinery (pty) ltd johannesbur g south africa x cnc computer numerical control pty ltd mitcham australia x cnc services ltd auckland new zealand x el-ram oils & accessories ltd. afula israel x baranok takim tezgahlari malz. mak. hirdavat san. t.c. ltd.sti konya turkey x solver engineering company voronezh russia x grosver group llc minsk belarus x m.koskela o.y kokkola finland x m+e szerszámgép kereskedelmi kft budapest hungary x cnc invest sk s.r.o trencin slovakia x ntm sp. z.o.o. gliwice poland x capro werkzeugmaschinenhandel und service gmbh kemeten austria x cnc resitive d.o.o. ljubljani slovenia x cnc invest s.r.o. malešice czech republic x http://revistes.ub.edu/index.php/jesb volume 3, number 2, 151-182, july-december 2018 doi:10.1344/jesb2018.2.j050 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 name city country controlled companies romi machine tools dealers dealers of machines for plastic romi itália srl gossolengo italy x steiner werkzeugmaschinen ag gränichen switzerland x burkhardt+weber reutlingen germany x romi europa gmbh groß-gerau germany x eritec b.v. cnc machines hengelo netherland x mema machinery & tools londerzeel belgium x romi france sas st priest france x romi máquinas españa barberà del vallès spain x mecatool technologies s.l. division de hertec group barcelona spain x romi machines uk limited rugby uk x cortimetal águeda portugal x source: author’s calculations from romi (2017) this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 rafael bravo university of zaragoza (spain) jesús cambra university pablo de olavide (spain) edgar centeno agade, itesm monterrey (mexico) iguácel melero university of zaragoza (spain) the importance of brand values in family business abstract only a small body of literature exists on linking key marketing concepts in family business contexts and those studies that do exist show a significant bias towards brand management. both the relevance of the subject and the lack of research assuming this challenge to date justify the interest and timeliness of this literature review. based on this interest—and the existing research opportunities—this article presents the concept of brand, together with a framework for its analysis in family business contexts. the paper summarizes the six main lines of research proposed, three from the perspective of identity management, and three from the perspective of stakeholders. the last section presents a series of interesting aspects for carrying out future research. keywords: marketing; brand; family business introduction brand management is a fundamental issue in the field of marketing. it is, in fact, a concept of reference for several leading research institutions, including the american marketing association corresponding author: e-mail: rbravo@unizar.es received 05 may 2017 accepted 17 may 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 or the european marketing academy. in the foremost marketing journals—e.g., journal of marketing, marketing science, journal of marketing research, journal of the academy of marketing science, international journal of research in marketing—articles on brand management appear on a regular basis. in addition, relevant specialized journals exist, such as journal of product and brand management or journal of brand management. as for the specific case of marketing literature in family business contexts, brand management seems to be the subject which, to date, has aroused the greatest interest. a preliminary search in the leading international marketing journals of reference, cited above (family business review, journal of family management) and in the most relevant sme journals (journal of small business management, international small business journal)—using keywords like "marketing" and "family firms"—resulted in 15 articles, of which almost half (seven) presented brand management as the central theme. the above ideas suggest that, while the study of specific aspects of marketing in family business contexts has, thus far, sparked little interest, brand management—often understood as an extension of family image and identity—has indeed been more prominent. reuber and fischer (2011), published in family business review suggest that (i) there may be more differences than similarities between family firms (size, experience, management style, resources); hence, the fact that more research opportunities arise when comparing family firms than when comparing family and non-family firms; and that, (ii) for many family businesses, it is important to know how they are perceived by the different stakeholders—what their image and reputation are and how these constructs evolve over time. for all of these reasons, it seems fitting to contextualize the study of brand management in the context of family business. both the relevance of the subject and the lack of research assuming http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 this challenge to date justify the interest and timeliness of this literature review. specifically, this article has three main objectives: (i) to identify the most important studies on the concept of brand (ii) to present a set of key considerations when adapting global concepts to the specific context of family firms (iii) to put forward a series of interesting proposals for future research. to this end, the following section presents the concept of brand and its evolution in scholarly research. in section 3, the authors discuss brand management from the point of view of the company. section 4 presents current brand-related issues and transitions into an introduction to specific aspects of brand in family business contexts. finally, a series of options for future action are proposed. the concept of brand: evolution in scholarly research spanish trademark law 17/2001 (ley de marcas 17/2001), currently in effect in spain, defines brand as any symbol susceptible to graphic representation that may serve to distinguish the products or services of one company from those of others in the market. the raison d’être of brands, then, is to make it possible to distinguish between different products and services. this fundamental function can be considered to have existed since the middle ages, when merchants made first use of brands to help consumers distinguish between the products of different producers and guilds. however, the scope the brand concept—and above all, brand management—have undergone notable changes since then. at present, brand not only applies to products and services but to establishments, people, places, organizations and ideas (american marketing association 2017) as well. this shift is reflected by the advent of brand-derived concepts such as personal http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 branding, place branding and corporate branding. moreover, brands have gone from targeting consumers, exclusively, to focusing on all stakeholders; and brand management has evolved from being primarily product-focused to an experience in which all contact points should be aligned. this evolution parallels developments in the area of marketing and is the result of changes in the environment. hence, interest in concepts such as brand loyalty, for instance, derives from a paradigm shift in the company-consumer relationship (fournier 1998); and the importance of current concepts such as brand communities, brand commitment and ewom has its origin in the evolution of ict and their increasing impact on the business of organizations (pansari and kumar 2016). among the most notable changes in the study of brands is the 1950's interest in the emotional component of brands—leading to changes in the way both the brand concept and the advertising of the time are understood. years later, this emotional component would lead to the emergence of other concepts such as brand personality (aaker 1997) and brand love (batra, ahuvia, and bagozzi 2012). today, new technologies and the spread of social networks continue to drive the evolution of brand communication. companies have gone from mass to personalized communication (one-to-many, one-to-one), while consumers have gone from small to potentially large-scale communication (one-to-one, one-to-many) (hewett et al. 2016). new technologies have also meant changes in the type of information available and, especially, in the ability to analyze huge amounts of data resulting from the connectivity of the brand with the stakeholders. brand managers must know how to manage the single-channel nature of these stakeholders, in general, and consumers, in particular, if they are to direct appropriate actions towards each customer—and, above all, provide a consistent experience at each of the contact points (velotsou and guzman 2017). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 interest in brand management in practice has been paralleled by scholarly development. numerous papers have appeared on the subject in general marketing journals. likewise, both national and international conferences have emerged, including the global branding conference and the international conference on research on national brand and private label marketing (nb&pl)—along with journals focused on brand management such as the journal of product and brand management, or the journal of brand management. in scholarly terms, a range of theories have been applied to the study of brand. due to their transversal nature, these theories have sprung not only from marketing spheres but from fields such as business organization, psychology, sociology and even design. among the most cited are associative network theory and signaling theory (keller 1993; aaker 1996; stach 2015). in associative network theory, brand information is stored in the consumer's mind through a hierarchical network system. according to this theory—in synthesis—the mind of the individual is composed of nodes or concepts, connected to associations or information related to these nodes. in the specific case of brand, we could consider the brand as a node in the mind of the consumer; and as consumers come into contact with the brand, they will acquire information that they will link to that node. the more relevant the information be to the consumer or the more closely related it be to the brand, the stronger the connection between the node and that association. based on this theory, keller (1993) proposes to link the brand to positive, strong, unique associations. these associations are not necessarily related to the product but to other aspects such as the sales personnel places where the brand has been sold, or a particular occasion on which the consumer has used the brand (keller 2003). the set of associations will comprise the meaning that the brand has for each consumer and serve as the basis for brand image. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 signaling theory refers to the information that companies provide through signals such as price, points of sale, communication, etc., as perceived by consumers (rao et al. 1999; pappu and quester 2016). in the case of a brand that the consumer is not very familiar with, a high price can signal a quality product, for instance. likewise, if the brand is sold in luxury establishments or if the firm carries out a careful communication campaign in which the quality of the product is emphasized, the consumer may perceive the product as being prestigious. in this sense, the brand would act as a plus sign, adding information and confidence to the purchase. consumers will attribute a series of characteristics to the product or service, merely due to the brand. there are, in any case, numerous other theories on which research has been based, including the theory of accessibility and diagnosis, information integration theory and social identity theory (ahluwalia and gürhan-canli 2000; bhattacharya et al. 2003; czellar 2003; vernuccio et al. 2015). brand identity management in addition to the consumer analysis perspective, a good deal of brand research has been devoted to the development process within the company. it is crucial to determine, here, the way in which brand identity is developed and the elements that compose it. one salient literature review revealed that brand-building models may be categorised in two orientations: outside-in or inside-out, depending on the order in which brand owners wish to focus on growth. in general terms, kapferer (2004) argues that there is no one best orientation. other authors, however, suggest that firm size must be considered when selecting a brandbuilding orientation. yet other authors suggest that perhaps it is essential to evaluate the potential for finding the perfect balance between both orientations (ind and bjerke 2007). no matter which orientation is used, it is important to clearly establish a roadmap and to be http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 consistent during the brand-building period. both brand orientations lead to the development of a specific set of brand elements first, followed by the others: inside-out brand building focuses on brand identity first, then brand image. conversely, the outside-in orientation starts by analysing brand image first, then focusing on brand identity. inside-out brand building may be more suitable to family businesses. first, because specific variables beyond the firm’s control—coupled with difficulties inherent to today’s business environment—have arisen; as a result, family businesses may need to consider further. technological advances, for instance, have made some branded products more vulnerable to copying. hence, the surge in me-too products (de chernatony and mcdonald 2003; kapferer 2004; king 1991) in terms of product attributes, as they are easily copied. in many cases, this situation has led to a lack of clear differentiation. there is some indication then, that brand differentiation may be found, not in terms of product attributes, but in brand equity including organizational values (melewar and saunders 1998). secondly, media vehicle saturation has made it more difficult for brands to stand out among the communication clutter (joachimsthaler and aaker 1999). hence, brands need to have a clear brand identity before going through the complex brand communication process. third, when family firms lack sufficient financial, human, time or expertise resources to develop an effective brand image, brand identity becomes a key element to focus on first; in other words, if family businesses begin by developing the right brand identity—by clearly establishing what they want out of the brand—then brand image will be the second element to focus on. there are numerous ways to define brand identity. most authors, however, will agree that there is a common set of key characteristics: first, that the main purpose of brand identity is to convey the aim, competitive advantage, target brand associations and timeless essence of the brand; in http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 short, what the firm aims to create and develop (aaker and joachimsthaler 2000; de chernatony 2006; ghodeswar 2008; nandan 2005). more importantly, brand identity defines the values the firm strives to represent and support. brand equity—more specifically termed customer-based brand equity (cbbe)—is defined as those advantages which customers obtain in the long-term. second, that brand identity represents, essentially, the brand’s individuality or uniqueness (de chernatony 2006; ghodeswar 2008); what makes the brand relevant to consumers. this individuality, some authors suggest, is rooted in a unique set of characteristics which support a sustainable competitive advantage (ghodeswar 2008). yet other authors put forward that brand identity is the first block in brand-building (aaker 1996; keller 1993). according to keller’s brand equity model (2003, 76), the first question customers ask about a brand is regarding its identity. consumers ask “who are you?” before moving on to the other questions on the customer based brand equity (cbbe) pyramid. as a building block, brand identity precedes other brand components such as brand image and brand positioning. for authors such as kapferer (2004, 97), for instance, identity precedes image. this means that—before communicating the brand—firms must first develop a brand identity statement: “what makes our brand different?”. brand identity calls for determining which consumer needs will be satisfied prior to making decisions regarding which consumer needs will be communicated. brand identity looks at what the market need is that the brand will strive to fill (yakimova and beverland 2005). once this has been determined, the brand may move on to communicating its identity. confusion may arise between brand identity and brand image as these two concepts are sometimes used interchangeably (ind 1990). this can be avoided by clearly defining these http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 concepts with more precision (christensen and askegaard 2001). table 1 shows the specific differences between brand identity and brand image. as seen in table1, while brand identity is developed by the firm, brand image is the outcome of consumer perceptions; hence, brand image must be preceded by brand identity. table 1. characteristics of brand identity and brand image brand identity brand image what the organisation aspires the brand to become what customers and other stakeholders perceive about the brand should be active, future-oriented usually passive, past-oriented strategic, reflecting a business strategy that will lead to sustainable advantage tactical should include brand’s enduring qualities may include transitory characteristics company viewed as source of communication target audience viewed as receiver of communication created by brand management created by consumer perceptions encoded decoded identity is communicated image is received/perceived source: own elaboration some authors argue that brand identity is more than a set of symbols. aaker (1996), for instance, suggests that brand identity is composed of four dimensions brand as a product, brand as an organization, brand as a symbol and brand as a person. these dimensions affirm that brand identity is not made up of symbols alone; other elements are just as important for brand identity delivery. other authors argue that brand identity may also include other brand components, such as brand positioning, brand vision, brand culture and the relationships forged among staff, staff and customers, and staff and other stakeholders (de chernatony 2006). moreover, kapferer (2004) suggests that customer reflection and customer self-image components may also be included. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 for the purpose of this study, brand identity has been defined using aaker’s definition, as the unique set of target characteristics—including family values—created and developed by the family brand owner(s) based on the four brand image dimensions: brand as a product, brand as an organization, brand as a symbol and brand as a person. since the product is the heart of the brand, one of the key decisions family brand owners must make is how to configure brand as a product. this dimension is where customers establish a relationship and connection with the brand. it may be relevant, at this point, to define the product concept. a product is anything made available in the marketplace for purchase or consumption. hence, products may be physical items, but may also be a service, a person, place or idea (kotler et al. 2002). we use this broad definition for the purposes of this study. products, it is important to point out, are made up of different elements. kotler (1991), for instance, proposes five levels to a product: the core benefit or equity, the generic product, the expected product, the augmented product and the potential product. benefit/equity is the level from which all others are derived. other authors argue that “a brand is therefore a product, but one that adds other dimensions that differentiate it in some way from other products designed to satisfy the same need” (keller 2003, 57). in other words, products aid in establishing brand differentiation. still other authors suggest that a branded product may be composed of attributes, benefits and values (aaker 1996; keller 2003). brand attributes are physical characteristics which may describe the product (keller 2003). they include purely tangible traits making up the core product (de chernatony and mcdonald 2003). some authors have suggested several classifications, as a means to better understand these traits. attributes may be product-related and non-product related (keller 2003)—for http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 instance—intrinsic and extrinsic, with intrinsic attributes being perceptible or imperceptible (riezebos 2003). attributes fall into five categories: 1) primary ingredients and supplementary features, 2) product reliability, durability, and serviceability, 3) service effectiveness, efficiency and empathy, 4) style and design, and 5) price (kotler 1991; levitt 1980). it has also been established that consumers do not perceive all attributes as having the same level of importance. a hierarchy of attributes has been proposed—the most important being those that consumers use to decide which products to purchase (riezebos 2003). that said, there is evidence that some irrelevant attributes may also have a positive impact on consumer perceptions regarding brand (griffin and hauser 1993). brand benefits have been defined as short-term advantages offered to consumers (aaker 1996; arnold 1992; keller 2000; keller 1993). benefits can be functional or emotional. keller (1993) and aaker (1996) propose three categories: (i) functional benefits – benefits related to the product, (ii) experiential benefits – benefits which trigger a feeling linked to using a product, and (iii) symbolic benefits – benefits which garner social approval or enhance personal expression. the key difference between these benefits is that emotional benefits are not affected by changes in product attributes and may develop a different relationship with consumers (aaker and joachimsthaler 2000; ghodeswar 2008). important to note too is the fact that benefits should also be consistent to one another (arnold 1992). the definition of customer-based brand equity (cbbe) has been discussed extensively. one definition is long-term stable advantages sought by consumers (aaker 1996). when the concept is easily understood and valued by customers, cbbe has also been defined as the essence of the brand, (arnold 1992). from the perspective of the consumer, equity exists when a brand costs less than competing brands with similar benefits (de chernatony and mcdonald 2003; http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 porter 1980). consumers may also seek added-value in a brand seen as offering unique benefits worth paying a premium price for (de chernatony and mcdonald 2003). it has also been suggested that brand equity is a complex variable with different meanings and dimensions where emotional value may play an important role in defining added-value (de chernatony et al. 2000). in terms of categories, sheth et al. (1991) suggest five brand equity types: (i) functional value – the utility of a brand in relation to the functionality of its product, (ii) social value – the utility of a brand associated to a particular social group, (iii) emotional value – the utility of a brand associated with a particular feeling, (iv) epistemic value – the utility of a brand to arouse curiosity and (v) conditional value – the utility of a brand in a given situation. additionally, keller (2003) suggests that core brand equity helps positioning, and is supported by benefits and attributes. it is important to note that brand equity may contribute to long-term survival when it is not only rediscovered, but reinvented (kapferer 2004). finally, some authors suggest that attributes, benefits and brand equity are closely interrelated. this relationship has been depicted as a pyramid or a laddering process. davis (2000), for instance, proposes a pyramid with attributes at the base, benefits in the middle and values at the top (see figure 1, below). as figure 1 shows, attributes help guide and strengthen brand benefits and values. the pyramid also shows that brand values are more difficult to deliver—yet more meaningful—than brand features and attributes. other authors suggest that a laddering process starts with a set of attributes which lead to benefits which, in turn, support brand values (kapferer 2004; keller 2003). it is important to note that when the brand fails to move progressively up the ladder, it may suffer a reduction of alternative strategies for growth in the future (keller 2003). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 figure 1. the brand value pyramid source: davis 2000. current brand-related issues there is no consensus classification for the brand concept. as in other research fields, most existing studies connect different brand concepts—and each journal and brand-specific conference adopts its own classification based on the papers that are presented. at the 9th global brand conference in 2014 the papers were divided into the following sessions: "luxury, love and loyalty to the brand", "provocation and branding possibilities", "brand location (country, city, ...) and brand heritage", "corporate branding", "co-creation", "strategy and methodology”, “brand equity", and "innovation". the same conference the following year divided sessions as follows: "design and brand", "relations with the brand", "brand communities", "brand names", "brand identity", "brand in emerging markets", etc. values benefits features and attributes http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 one of the leading journals in brand research, the journal of product and brand management, has recently published a review issue covering the last 25 years of publication. in that issue, the editors point out eight major shifts in the literature and three challenges for the future—shown below, in table 2. table 2. shifts in brand research and future challenges changes ‒ from brands as transactional tools managed from within companies to brands as engagement entities co-created with others ‒ from interacting with brands as individuals to interacting with other consumers and with brands collectively ‒ from consuming brands to experiencing brands ‒ from measuring the strength of the brand to developing complex brand equity systems ‒ from focusing on positive brand outcomes to managing negative brand outcomes ‒ from goods and services brands to brands of all different natures ‒ from using traditional data collection and data analysis methods to introducing new methodological approaches ‒ from focusing on tangible brand characteristics to appreciating humanlike brand characteristics challenges ‒ increased expected accountability and loss of control ‒ technology, brands, and speed of change ‒ the increasingly global nature of markets source: velotsou and guzman (2017) in light of this table, it can be seen that changes in brand research are primarily a result of changes in the environment. most of these changes are also common to the rest of the marketing field, with aspects such as co-creation, engagement, or marketing experiences. these changes also point to the possibilities offered by new technologies to collect and analyze data on the internet, or new methodologies based on neuro-marketing. with respect to the challenges, the increasingly difficult role of management due to the consumer empowerment—and consumer capacity to generate noise on the internet and in the social networks—stand out. other salient http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 aspects include the increasingly global nature of markets, which leads brand managers to identify similarities among consumers in the development of brand associations. in any case, there are many issues that brand research must face in the future. the development of models that integrate new trends and elements in research, the creation of tools for the analysis of consistency between all points of contact between the consumer and the brand, studies aimed at bringing together the perceptions, attitudes and behaviors of the different stakeholders, the creation of new metrics related to the brand and its connection with kpis derived from the management of products and services, the development of new analytical tools to combine traditional brand metrics with new measures obtained from the big data , or even the evolution of the brand concept itself and its dimensions over time will be aspects that will need to be addressed in the next few years (hewett et al. 2016; urde 2016; velotsou and guzman 2017). brand & family business although the brand management literature is very extensive, this is not the case with the brand literature in family business contexts (benavides et al. 2013). in addition to the reduced number of articles, none have been found in the major marketing magazines such as the journal of marketing, journal of marketing research, or journal of the academy of marketing science. a recent review paper—specifically looking at the family firm context—is beck (2016). this author provides an updated compilation of works in this field, which is why we will use this article as the main reference in these last two sections. beck (2016) analyzes 41 brand management articles in the family business context, and brings out a series of future research questions. next we will highlight some of the works reviewed by this author, but using a http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 different classification system from the one used in his article. although the organizational perspective may be useful for the analysis, there are jobs that are difficult to classify because they address aspects that would fit in several different categories (brown et al. 2006). in order to simplify, a division of the study of brand into two groups can be established: (1) the brand identity elaboration and management by the organization and (2) the stakeholder brand perception. this second group would include the study of image, personality or brand reputation. in the papers that analyze the brand identity built by the organization, the articles reviewed highlight certain differences and idiosyncrasies in the management of the family business compared to other companies, and the effects that this can have on the specific management of corporate brand identity. thus, there are studies that point out the greater continuity in management positions in family companies compared to other companies, which also provides greater stability in the type of policies followed in brand management. in some cases it is pointed out that family firms show greater vision in the long term (bringham et al. 2014), while in other cases they show less market orientation than non-family firms (zachary et al. 2011). some studies highlight the flexibility in family business policies, their commitment and responsibility to the environment (lyman 1991; koiranen 2002), while other studies point to the existence of family conflicts that hinder management, and less willingness to employ crm (cooper et al. 2005; matherne et al. 2011). in short, the review shows that the family business has a series of particularities that derive in both positive and negative aspects regarding the management of corporate brand vis-à-vis other companies. with regard to the papers focusing on stakeholder brand perception, we can start by pointing out that the existence of a strong family brand that has endured several generations, with deeplyhttp://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 rooted history and values, and that achieved great achievements in the markets is a very valuable asset in the eyes of stakeholders (blombäck and brunninge 2013). this point is crucial to identity management, especially to the inside-out orientation. hence, understanding the unique characteristics or essence of the brand—before moving on to develop other brand elements— is of particular relevance to family firms. this paper argues that family values may be unique, potentially contributing brand differentiation to brand identity. given that values are the most meaningful and difficult to imitate, family businesses stand to enjoy strong differentiation when they establish family values as brand values. furthermore, we argue that, while davis (2000) suggests that values are the hardest to deliver in non-family firm contexts because it must be created and developed purposefully, brand value in family businesses may be organically continued by extension of family values—hence, greatly facilitating delivery. following the associative network theory, all this information regarding the values of the brand, essence and symbolism would lead to strengthening the brand node in the consumer's mind, giving it a positive, strong and unique meaning. that is why the family brand could be considered a source of competitive advantage in the market, with unique characteristics that would differentiate it from the rest. similarly, and from signal theory, the existence of a positive brand associated with positive values would also reduce the uncertainty of consumers and other interest groups (beck and kenning 2015). this information would be a signal perceived by the consumer that the product or service has certain characteristics. this type of positive associations referred to a particular family business could also apply to family businesses in general. that is, if there are differences in the perception of family companies versus nonrelatives, this will lead to the existence of a series of associations that are common to all family businesses. krappe et al. (2011) speaks of a brand of family business. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 as in the case of identity, studies have been carried out on the image and reputation of family corporate brands vis-à-vis non-family corporate brands, pointing out a series of positive and negative aspects of one versus the other. on the positive side, continuity in management translates into increased personal trust of the owner among clients, suppliers and employees (dyer 2006; sundaramurthy 2008), which also provides worker-related benefits such as increased job security and stability (cabrera et al. 2011; krappe et al. 2011). in terms of clients, it is noteworthy that customers may be more willing to establish a long-term relationship with family businesses than with non-family businesses. the image of these companies is, in general, trust, integrity and honesty (carrigan and buckley 2008). on the negative side, there are studies centered on students and unemployed people that show a worse perception of family businesses compared to other companies in aspects such as wages, contracting policies, resistance to change, or participation in company decision-making. in the case of consumers, they also perceive family firms as being less innovative, inefficient and stagnant (krappe et al. 2011). in conclusion, we can point out that brand literature in family business contexts is scarce and focuses mainly on showing a series of positive and negative aspects of family businesses versus non-family businesses. in any case, a better or worse position of these companies with regard to others is not clearly observed. based on the review of brand management, and the individuals highlighted in this section on brand research in the case of family businesses, the following section reflects on the potential areas of research of interest in this area of study. what to do table 3 summarizes the six main lines of research proposed in this paper, three from the perspective of identity management, and three from the perspective of stakeholders. all are discussed in more detail in this paper. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 table 3. research proposals in family firm management identity management ‒ analysis of the interrelationships between family identity, corporate identity management and commercialized products identity management. ‒ study of the determinants behind the visibility of family brand status and its impact on brand management ‒ analysis of the stability of the values that make up corporate identity and link to family values stakeholder perceptions ‒ analysis of the interrelations between the perceptions of a given family, the corporate brand of that family business and the brand of the products sold by that company. ‒ analysis of perceptions of the brand "family business" and their impact on corporate brand personality and brand associations in general. ‒ analysis of the relationships between the different stakeholders perceptions in family firms source: the authors, from beck (2016) the brand literature has revealed the interconnection between corporate identity and the identity of brands marketed by the company (simoes et al. 2005). thus, on the one hand, the identity of an organization determines the identity of each of the brands it sells. that is, top management establishes guidelines that delimit the identities of the brands in its portfolio. the objective being coherence between all of them, thus reinforcing the core values that will be common to all identities. on the other hand, the identity of all the brands that a company sells also determines the identity of the company as a whole. in this sense, all the actions developed by each of the trademarks help to define the identity of the company itself. this type of trademark identities—and, above all the brand image perceived by stakeholders—will condition corporate brand management. similarly, we can think that the particularities of the family business—family identity and their perceived image—will also influence identity and image management of the corporate brand http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 and trademarks (see figure 2). from the family business perspective, values are adhered to the same family values which the family members have been raised to praise. figure 2. brand interrelation source: own elaboration thus, the interrelationships between these three brands will focus future research, and their study can be approached from different angles. following the same scheme outlined in the previous section, we will analyze the future lines of research around the two perspectives cited: on the one hand, the development and management of brand identity from the organization; and on the other hand, the brand perception by stakeholders. from the perspective of the elaboration and management of the brand identity by the organization, we can start with the peculiarities in its management and see how they impact the way corporate identity is managed. although there are several studies that analyze this impact (shepherd and haynie 2009; parmentier 2011; blombäck and ramírez 2012), there is still much to study in this line of research. beck (2016) speaks of the need to focus the study on the effects that moderate the relationship between the family brand identity and corporate brand identity. because of heterogeneity in family businesses, it will be important to see to what extent the size, sector, or external constraints can affect the degree to which family identity and corporate identity are related. finally, it is also interesting to analyze the relationship between corporate identity and the identity of the brands it markets. although a priori is not so obvious, the specific characteristics of management in the family business can also affect the relationship between corporate identity and the identity of the product / service brands. this analysis will be “family” brand corporative brand commercial brand http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 especially relevant in the case of corporate brands with the same family name, or those that are easily linked to a family owner despite using a different name. in line with this last comment, we can talk about a second major line of research focused on the visibility of the family brand in the company. beck (2016) calls it the "family brand status". as in the previous case—and in spite of already existing studies (kashmiri and mahajan 2010; zellweger et al. 2012)—there are aspects which require further investigate, such as the determinants of family predisposition to use its name in business. these types of factors will be closely linked to the risk that the owners wish to assume, since a greater recognition of family property can have reciprocal effects on the image of the company and the family. that is, a family conflict could have an impact on the company's image. similarly, a company scandal could affect the image of the family (memili et al. 2010; botero et al. 2013). in studying such aspects, it could be interesting to start with a review of the brand extensions and alliances literature, in which the benefits and risks of this type of strategy are analyzed (aaker and keller 1990; simonin and ruth 1998; keller, aperia, and georgson 2012). all this can end up influencing aspects such as the care with which aspects of the corporate brand are managed, or brand community management for the products that the company sells. another aspect of interest are the very components that comprise family business identity. due to the greater continuity in management—and its effect on the stability of policies developed in the company—we may think that identity features will be more stable in these companies than other types of firms. there is an ongoing debate regarding the durability of identity values, with opinions closer to fostering enduring values that act as "anchors of meaning" (csaba and bengtsson 2006; urde 2016)—in contrast to other opinions advocating adaptation (balmer and soenen 1999; silveira et al. 2013). in this sense, it would be relevant to analyze the durability http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 of these values that make up corporate identity in family businesses and their products— especially those values that are common to the family identity. from the point of view of the stakeholder brand perception, the future lines of research could be similar to those discussed above. thus, perceptions of the brand are a reflection of the management of its identity, and therefore aspects such as the relationships between family identity and the identity of the company and its products, visibility of the family brand status, or stability in values identities will affect the way in which consumers and other interest groups perceive the brand. the empirical work of beck (2016) highlights the special importance that this type of perceptions have for family businesses and consulting. as a result, the image and reputation of family businesses can be further analyzed, and their effects on new variables of interest can be measured. combining this line of research with marketing priorities and the future challenges of brand management (msi 2017; velotsou and guzmán 2017), it could be encouraged to study how the positive and differential perceptions of family businesses translate into a greater commitment of its clients, and in a better economic results. for example, the greater confidence or greater commitment to the environment attributed to family businesses (carrigan and buckley 2008; beck and kenning 2015) could have an effect on customer lifetime value, predisposition to speak well of the brand on the internet (ewom), or less sensitivity to negative brand-related information. this type of study would help to better understand the value of the family business compared to other companies, and would justify the importance of family business associations. following the associations scheme proposed by keller (2003), associations linked to the family could bring meaning to the corporate brand and its products. the more visible and recognized by stakeholders the fact that the company is a family firm be, the greater the influence of family http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 associations on the product. in this sense, it would be interesting to analyze, for example, the transmission between the personality of the family and the personality of the company and its products. a positive aspect of this visibility is that, for the stakeholders, it would be easier to personify the company because they would easily associate it with the owner or with a specific family. as is true with the literature on consumer perceptions, it is possible to propose new research focused on brand perception on the part of other stakeholders. studies of this sort would allow for a periodic analysis of stakeholder perceptions—or even of the relationships between perceptions, attitudes and behaviors of the different stakeholders with regard to the company. for example, if employees in a family business perceive greater stability and confidence on the part of management, it would be interesting to know the impact this may have on consumer perceptions, attitudes and behaviors. this type of research is in line with the current trend to tap different data sources such as employees and clients (sirianni et al. 2013; mullins et al. 2014, and palmatier 2016). in short, we can conclude by saying that the literature on brand and family business has interesting issues to address in the future. approaching these two lines of research is crucial for family firms if they are to exploit their potential to create a strong brand and survive in the market. references aaker, david a. 1996. building strong brands. new york: the free press aaker, david a. 1997. “dimensions of brand personality.” journal of marketing research 34 (3): 347356. aaker, david a., and kevin l. keller. 1990. “consumer evaluations of brand extensions.” journal of marketing 54 (1): 27–41. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 16-43, july-december 2017 doi:10.1344/jesb2017.2.j029 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 aaker, david a., and erich joachimsthaler. 2000. 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"the brand-supportive firm: an exploration of organisational drivers of brand updating." journal of brand management 12 (6): 445-60. zachary, miles a., aaron mckenny, jeremy collin short, and g.tyge payne. 2011. “family business and market orientation construct validation and comparative analysis.” family business review 24 (3): 233-251. zellweger, thomas m., franz w. kellermanns, kimberly a. eddleston, and esra memili. 2012. “building a family firm image: how family firms capitalize on their family ties.” journal of family business strategy 3 (4): 239-250. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 antonio alcon vila universidad de alicante (spain) https://orcid.org/0000-0002-2190-4047 small and medium enterprises in bolivia, a look back to the future, 1900 2020 abstract the main objective of this article is to analyze bolivian small and medium enterprises (smes), their evolution, and their contribution to the country's economy. the globalization of markets is currently a reality to which companies are exposed for their survival, growth and development. in developing countries such as the plurinational state of bolivia, this reality becomes more relevant due to the socioeconomic characteristics of the country, where the main economic activity is dependent on the export of non-renewable natural resources (natural gas and minerals), and to a lesser extent the export of primary products. in this context, the article shows that smes struggle to consolidate their position in local markets, and have a low participation in global markets. the article reviews relevant secondary and primary literature, and concludes that smes require public and private support to contribute to the promotion of entrepreneurial culture, enter into global production chains, develop technological and innovation capabilities, and achieve growth in a sustainable manner and with high levels of competitiveness. the research method used is the review of relevant primary and secondary bibliographic sources of information about the origins, evolution and current situation of smes in bolivia, and about possible alternatives for growth and development. keywords: globalization; small and medium enterprises; competitiveness; innovation corresponding author: e-mail: aav54@alu.ua.es received 21 september 2020 accepted 29 july 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-2190-4047 mailto:aav54@alu.ua.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 1. introduction the plurinational state of bolivia has many limitations in terms of the competitiveness of its production, being a country whose economy is based on the export of its non-renewable natural resources, and in maintaining a large part of its economic activity in informality, hence the central focus of this article is the analysis of the main limitations faced by bolivian small and medium enterprises (smes) in their growth, and in their insertion in global markets. the bolivian economy is very fragile and small, with its lack of maritime access, its insuf ficient physical and productive infrastructure, its institutional shortcomings, social and political instability and legal insecurity, which means that the bolivian economy, and companies, are marginalized from the main international trade circuits. at present, bolivian smes are facing great challenges, and a new threat: covid-19, the work is arduous, companies have to be prepared to readapt to the current times and face these challenges; for these reasons the objective of this article is to analyze the most important aspects of bolivian smes to identify the greatest barriers, limitations, and deficiencies they are currently facing and prospectively propose solutions adjusted to their social, political and economic reality of the country. the article covers chronologically the period from the beginning of the 19th century to the present. the research method is based on the review of the main secondary works carried out by renowned bolivian historians, national and foreign experts, studies of international, public and private organizations in bolivia;1 about the most relevant social, political and economic, 1 world bank, inter-american development bank (idb), economic commission for latin america and the caribbean (eclac), organization for economic cooperation and development (oecd), world trade organization (wto), world labor organization (ilo), fundación para el desarrollo sostenible en américa latina s a (fundesa); government agencies such as the ministry of industry and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 historical and current aspects that had an impact on the productive sector of smes in the country, using primary and secondary sources of information. the article is divided into four parts: the first part describes the most relevant historical aspects of industrialization in bolivia and its main characteristics of the bolivian economy from the 19th century to the present; the second part determines the origin of smes in bolivia and analyzes their main characteristics; the third part analyzes the current situation, the projection, the obstacles faced by smes; the fourth and last part of the research presents the conclusions, recommendations and future lines of research. 2. main milestones of industrialization in bolivia since the 19th century during the 19th century, due to the importance of mining in the bolivian economy and the political power of the time, it was considered the national industry par excellence and the one with the greatest technological development. there was manufacturing industry that was characterized by its artisanal production, it was aimed at satisfying the needs of the populations surrounding the cities and mining centers (ferrufino 2017). the arrival of the railroad at the end of the 19th century had a great impact on the country's economic activity, mainly due to the fall in transportation costs for mineral exports; it not only allowed the massive outflow of minerals but also the entry of imported products, which competed with advantage in a larger area, where local production suffered the effects of internal disarticulation (mitre 1981, 175). commerce, the ministry of economy and plural productivity, the national statistics institute (ine), the bolivian chamber of commerce, the national chamber of industries cni, the bolivian institute of foreign trade ibce and the chamber of commerce of santa cruz (cainco). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 for the political elite of the time, the expansion of the railroad was the way to increase state revenues, a way without which the country had no options for economic development, as expressed by the president of the bolivian congress in 1905, edioloro villazón (correa 2013, 326). the railroads established the first major mass passenger transportation network,2 the deficient road network (in terms of coverage, as quality) allowed it to have primacy in cargo transportation much further than in other countries, being a means for the economic development of the country (contreras 2017, 318). from 1920 to 1935 an important industrial advance began, important companies were created in certain sectors,3 “it was the economic problems generated by the chaco war and the inconvertibility of the monetary sign, which imports the control of the means of payment on the exterior, which impelled the growth of the industry” (lora 1967). the initially handicraft items grew, the situation of the world war i generated a shortage of imported products that became a stimulus for the national production of manufactured goods, being the migrations a very dynamic contribution both with investments and with knowledge brought from abroad that was a valuable contribution to the bolivian society (seoane 2015).4 the period between 1938-1940, in the context of the post chaco war, a new era opened in bolivia, marked this time by tin production, where criticism of individualistic liberalism and 2 the development of railroads and then roads in bolivia played an important role both in mass passenger transportation and in the diversification of production to the extent that it allowed the transportation of low-value products such as agricultural products. (contreras 2017, 318). 3 see lora (1967): historia del movimiento obrero boliviano, capítulo iii los trabajadores fabriles, vistazo a las industrias. 4 the germans set up breweries, mills, chemical factories, meat and sausage factories, canned food, liquor, paper and leather factories, as well as mechanical workshops (bieber 2005). italian migration created very important companies such as figliozzi, la estrella pasta and candy factory, forno textiles, salvietti soft drinks, among the main ones. other important factories were created, such as said, forno (which produced blankets and cloths, with more than 1000 workers and technicians), volcán, soligno (which competed with the best english cassimirs), fanase (bohan 1942). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 abstract political rights and economic power at the service of big businessmen (mining barons) began. in this period, social justice and a social, regulatory and interventionist state with economic power at the service of society were sought (barragán 2017). the industrial sectors and several social sectors (academics) agreed that national production should be promoted on the basis of public policies, industrialization being the means to satisfy the domestic market; at that time there was no possibility of exporting to the global market. the social climate began to become complicated in 1940 due to the fact that in the industries, factory strikes and claims for better wages emerged with force, the unions assumed political roles leaving their vocation of labor demands (ferrufino 2017, 284). during the world war ii, bolivia became an ally of the united states, the us government invited general enrique peñaranda, president of bolivia to the allied table with the interest of negotiating the provision of tin, a mineral strategy for the production of weapons during that period (unzaga de la vega 2007). in 1941, as part of the cooperation of the united states with its allies, a mission of experts from the us department of agriculture, chaired by merwin l. bohan, was sent to bolivia (bohan plan).5 the bohan commission focused on the need for the development of a diversified agriculture that would meet national consumption and create export potential, the creation of an adequate communications infrastructure was necessary; regarding mining and oil, the improvement of mineral processing methods (tin smelting) and the construction of refineries, noting that the 5 the bohan plan, presented in 1942, proposed a more diversified and stable economy through: 1) the design of a highway system that would allow the economic development of the regions crossed by the system and the connection of producer and consumer centers. 2) promotion of agricultural production and the establishment of industrial processing plants, market facilities, credit agencies. 3) studies and construction of connection works with the development of irrigation crops in selected areas. 4) development of proven oil fields (bohan1942). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 country had oil not only to supply its own needs but also to create markets for exports, generating more foreign exchange (ferrufino 2017, 286-287). the bohan plan also contemplated the creation of the corporación boliviana de fomento (cbf), with the challenge of promoting industry in the eastern part of the country, which was financed with resources from the us export import, invested in sugar mills and other agroindustries. they also prioritized the needs related to the migration of workers, investments in schools and basic services. in mining, they carried out actions through cbf in exploration, training of their workers and studies to reduce costs; the plan also promoted programs to develop manufacturing and industry; in the area of communications, they worked on the cofinancing of roadways to the east of the country (bohan 1942). bohan's diagnosis mentioned that mining represented 94% of the value of exports in 1940, which employed only 7% of the population, agriculture provided livelihoods to two-thirds of the population, however it was a subsistence activity, with very low productivity and little surplus for trade, which explained that 50% of imports are agricultural products (seoane 2015). until the mid-twentieth century, bolivia's economy remained rural, with the city of la paz growing in the heat of political and bureaucratic concentration, a period in which a timid process of industrialization began, accounting for just over 70% of national industry (gordillo, rivera and sulcata 2007, 24). between 1951 and 1970, several government plans were created to substitute imports, to obtain state support for industry, and to improve productivity, especially in staple products. the agribusiness and food industrial sector received financing, allowing the country to overcome the situation of dependence on imports of food and other essential products (seoane 2015). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 the so-called state capitalism starts from the revolution of 1952, in which the revolutionary nationalist movement mnr and the popular resistance put an end to a government managed by an anti-national oligarchy in which governments were controlled and were at the service of the interest of the so-called tin barons (large mining owners), it is declared that social justice and economic progress represented the two main objectives of the new regime (morales 2017). the mnr government enacted three far-reaching reforms: the nationalization of large mining companies (october 1952) aimed at gaining control over the production and marketing of minerals to achieve long-term development according to the needs of the country; the agrarian reform (august 1953), which sought social justice and modernization of production systems in the countryside, the granting of land to peasants who did not have it, abolition of latifundism, cancellation of free personal services, and universal suffrage (mansilla 1980). before the approval of universal suffrage (1956), only literate men who owned property were entitled to vote, and only they were eligible for elected office (peñaranda et al. 2012). in the period from 1960 to 1970 there was a high and sustained growth of industrial production and gdp, the main components of this growth were oil refining and the activation of the agroindustrial sector, were the result of the development plans implemented during the previous period and mainly the continuation of the diversification that began with the “march to the east” driven since 1942 through the bohan plan (seoane 2016, 145-146). from the productive point of view, in 1978 the bolivian gross domestic product was generated by the agricultural sector with 17.2%, followed by the industrial sector with 15.1%, mining with 11.3% and hydrocarbons with 5.6%; bolivia was not a totally mining country; there was a not insignificant development of the industrial sector, there was production in all the sectors that http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 were integrated, however, they used imported inputs when they could use inputs of national origin; the capital goods were almost entirely of imported origin (espejo 1990). with the economic crisis of the 1970s, a process of economic destabilization began in bolivia that impacted mainly on workers; in the 1980s, conditions were fractured by neoliberal policies, the decrease in the labor supply of private companies and the public sector led to the creation of new artisanal and informal trade union establishments, which generated 80% of new jobs in bolivia (molero 2009). between 1970 and 1984, state capitalism and its direct role with the generation of industry deepened, in this period the decline of the economy was generated which would lead to the most severe crisis that the country went through in the 80s (ferrufino 2017, 294).6 until 1987, bolivia was a mining country, not only because of the strategic importance of minerals in its international trade, but mainly because of the presence of a “mining culture”, which came to be known as “mining centrality”, which collapsed when the international tin crisis (1985-1987) caused nearly 80% of the radicalized workers of the country's largest nationalized companies to be laid off (rodríguez 1994). in 1985 there was a large drop in the production levels of the mining sector that affected the gdp and the national economy. the nueva política económica (nep), with a clear neoliberal orientation, provided for a radical restructuring of the state-owned mining industry, which led to the dismissal of hundreds of workers (rodríguez 2001). 6 during the eighties there were several levels of inflation: medium inflation until april 1982; high inflation from may 1982 to march 1984; hyperinflation from april 1984 to september 1985; and a period of stabilization from october 1985 (espejo 1990). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 between 1985 and 2005, the neoliberal period was implemented,7 7 in which the economy was opened up and markets were liberalized as an uncontainable result of globalization; this opening was devastating for several weak industrial segments that had to disappear, and at the same time produced a rise in smuggling in the country. the main political and social actors saw in the hyperinflation of 1982-85 the most evident manifestation of the development model that had prevailed in the thirty-five preceding years, the government of víctor paz estensoro promulgated supreme decree 21060, which clearly had the purpose of changing the accumulation model, based on state capitalism in force since 1952 (morales 1992). the main measures they established were: wage freeze policies, price liberalization, dissolution of public companies considered non-strategic for the government, free hiring of labor force in the public and private sector, a flexible exchange rate policy that would work through the free play of supply and demand, and the liberalization of import and export policies (torrico 2006). since 1993, the used clothing sales market began in bolivia, and by 1995 this activity was fully consolidated; legal and illegal imports caused great economic damage to the country's small and fragile textile industry (vidaurre 2005). bolivia is one of the countries in latin america with the greatest presence of used clothing sales,8 according to figures from the national institute of statistics and the ministry of microenterprise, this sector represents about 45% of informal employment generated in urban areas (bernal 2013, 491). 7 in latin america the eighties of the twentieth century macroeconomic adjustments leaned towards neoliberalism and the wellknown program summarized in the washington consensus; especially in the measures of privatization, trade and financial openness, and deregulation, measures that gave the private sector greater spaces for profitability and control of the economies (hernández 2016). 8 “while the second-hand clothing trade provides employment for some, for example, those engaged in the informal street business, it also undermines the local textile industry in many countries.” (brooks 2019). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 for the instituto boliviano de comercio exterior (ibce, bolivian institute of foreign trade), the impact of this activity directly influences artisans and micro small and medium-sized national textile production companies, harming their development, they are considered unfair competition as they belong to the informal sector and market goods from smuggling (ibce, 2015).9 9 in the period 2006 to 2019 it has been characterized by an economic policy opposed to neoliberalism, from the rise to power of the movimiento al socialismo mas (period governed by evo morales), the country enters a period of profound political, economic and social transformations, its economic policy is more focused on the domestic market, it is more nationalistic and insists on state impulses to production (agudelo 2008).10 the fundamental pillar on which this model is based is the nationalization of hydrocarbons in 2006,11 which was an indirect nationalization because there was no expropriation of assets of foreign companies, but rather an increase in state participation that reduced the profits of foreign companies. in labor matters, it repealed the free hiring and negotiation of salaries (a measure that was stipulated in ds 21060), which protects the labor stability of the worker by prohibiting unjustified dismissal (muriel and jemio 2010). 9 the acceleration of globalization produced that both smuggling and informal trade grew, borders and popular markets gave rise to informal trade networks both in latin american and caribbean countries, southeast asia, russia or north africa, these transformed regional economic dynamics at a global level (hernandez and loureiro 2017). 10 with this model, the state has had a significant expansion in the economy displacing the private sector. nationalizations have also occurred both in natural resource exploitation sectors and in other sectors; and stateowned companies have been created in some very small cases (morales et al. 2017). 11 the enactment of the decree for the nationalization of the hydrocarbon sector (decree 28701) on may 1, 2006, which ended on october 28 of that year, called on multinational companies to leave the country if they did not remit 51% of their capital and 82% of their profits to ypfb within 180 days. the most affected companies were the brazilian state-owned petrobras and the spanishargentine repsol-ypf, which had 63% of the country's gas reserves (neira 2007). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 during this period, an important economic boom was experienced due to the rise in international oil and mineral prices; these were good years in terms of income, however, the productive apparatus and the national industry did not change. (national chamber of industries 2019, 13-14). 2. main characteristics of the bolivian economy the plurinational state of bolivia's economy is based on the primary sector (export of nonrenewable natural resources). in this regard, the co-authors of the book un siglo de economía en bolivia 1900 2015 agree that: the bolivian economy, as part of its colonial heritage, has been organized based on the exploitation of mainly non-renewable natural resources (rnnr), minerals, oil and natural gas. the exploitation of these resources has generated significant revenues for the benefit of the state, which constituted and constitute today a decisive contribution to tax revenues, however, several researchers agree that this orientation brought an impoverishing growth that did not allow bolivians to diversify and industrialize their economy, evidencing the phenomenon of dutch disease,12 12adding that these revenues did not reduce poverty, much less reverse inequalities" (velásquez-castellanos and pacheco 2017, 17). the sociologist and researcher fernanda wanderley, referring to the periods of state capitalism between 1952 and 1985, and the free market economy after 1985 until 2005, indicates that: insufficient economic growth, low productivity and competitiveness, social inequality and poverty are the result of an overconcentration of economic, social and political development associated with mining and hydrocarbon extractivism; small scale production of basic goods 12 dutch disease is the name given to the phenomenon of expansion of foreign currency income due to booms in the export of natural resources (oil and minerals) which, without adequate measures, generates negative economic effects if the state does not invest in the development of industry and diversification of the productive sector (aguirre 2011). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 and services, from colonial times to date, has only covered the domestic market, where local production was formed by small family units of reduced size (wanderley 2005). according to molina (2006), coordinator of the human development report for bolivia of the united nations development program (undp), the bolivian economy has a development pattern centered on mono-producer dependence, it is a narrow-based economy that consists of a manufacturing sector in which 83% of the labor force is organized in family, peasant or microenterprise units of less than five people, producing only 25% of income; only 7% of workers belong to companies with more than 50 employees, generating 65% of income. another aspect that characterizes the bolivian economy is unemployment, which affects most of the population and leads to high levels of poverty and precariousness (muriel and jemio 2010). unemployment according to figures from the ministry of economy as of july 2020 was 12.6% and closed with a rate of 8.4% as a result of the covid-19 health crisis; it should be taken into account that the largest employer in the country is the formal and informal private sector so the performance corresponds to the behavior of these sectors (inesad 2021). a critique of the plural economy model in bolivia states that: the government has to change its vision in terms of economic policies, leave statism for a mixed economy where there is a good complementation between the market and the state, national, local and foreign entrepreneurship. to give legal security and stability to foreign investments, but also to national investment, on the other hand, we have to change the focus of monetary and fiscal policies. if the bolivian institutional framework is not respected, it will be very difficult for national and foreign private investment to contribute to bolivia" (gutiérrez, 2010). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 table 1. plurinational state of bolivia: main economic indicators, 2016-2018 2016 2017 2018 annual rate of change gross domestic product 4.3 4,2 4,4 gross domestic product per capita 2,7 2,6 1,3 consumer prices 4,0 2,7 1,3 average actual salary 1,7 1,7 - money (m1) 9,6 2,0 7,6 real effective exchange rate -4,6 3,8 -4,2 exchange price ratio -20,2 15,5 7,9 average annual percentage overall general government performance/gdp -34,4 -5,0 -5,8 nominal deposit rate 0,5 1,4 1,9 nominal lending rate 6,2 6,0 6,4 millions of dollars exports of goods and services 8.725 9.504 10.565 imports of goods and services 10.789 11.678 12.082 current account balance -1.944 -2.013 -1423 capital and financial balance -1.102 2.001 -332 global balance -3.046 -12 -1.755 source: economic commission for latin america and the caribbean (eclac) based on official data 2018, own elaboration. bolivia has known a very important macroeconomic performance thanks to an external context that has favored economic growth, increasing its income and availability of public resources, which allowed it to become a lower-middle income country; the average annual growth rate between 2000 and 2014 was 4.2%; since the international financial crisis in 2009, the economy expanded at 5% per year, and the highest growth rate in the last 30 years was recorded in 2013 reaching 6.78%, doubling the real gdp per capita from us$ 998 in 2000 to us$ 1771 in 2013 (castellani and zenteno 2015). for the co-author of the book a century of bolivia's economy beatriz muriel hernández, the export structure maintains the hegemony of the export of non-renewable natural resources with little or no transformation. until the late 1960s tin was the main product that sustained the bolivian economy; from 1972 onwards, natural gas began to be exported to argentina and since 2000 to brazil, becoming the main trading partners in the last decade (muriel 2017). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 table 2. main export products by share of total exports product percentage year natural gas 38.3 % 2018 zinc ore and its concentrates 19.2% 2018 oilcake, oilseed cake and meal and other vegetable oil wastes 6,9% 2018 ores and concentrates of argentiferous ores, platinum ores and platinum group metals 6.7% 2018 tin and its alloys, unwrought 4% 2018 lead ore and concentrates 3.1% 2018 coconuts, brazil nuts and cashew nuts, fresh or dried 2.8% 2018 soybean oil 2.7% 2018 unground cereals 1.1% 2018 source: cepalstat databases and statistical publications, economic commission for latin america and the caribbean 2018, own elaboration. jemio and del granado (2015), position regarding the country's economic growth is that the bonanza experienced by bolivia in recent years has boosted the growth of non-tradable activities, which are those that generally employ workers with lower skill levels (e.g., commerce, small-scale cooperative mining, transportation, construction, informal services, etc.). this implies little job creation in the formal sector, which requires higher skill levels. this economic boom has not been taken advantage of because no efforts have been made to strengthen alternative economic activities to diversify the economy. according to data from the bolivian national statistics institute (ine) published by the national institute of foreign trade (ibce), 86% of bolivian exports still depend on the extraction of nonrenewable resources such as hydrocarbons and minerals. this situation is alarming considering that there are sectors with potential development such as agro-industry, tourism and services (arispe 2018). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 table 3. business base according to economic activity, total number of companies (companies updated may 2021) source: fundempresa official data as of may 31, 2021, own elaboration. (1) classification of economic activities. (2) total, companies registered in the bolivian trade registry as of may 31, 2021. (3) total, companies with the commercial registry updated as of may 31, 2021. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 official data published by fundempresa13 show that as of may 31, 2021, the business base legally registered in the bolivian registry of commerce was 341,809 companies, of which 76,711 have updated their registration, which represents 21.56% of the current business base in bolivia; 265,068 companies, which is 78.44%, do not have updated their registrations and are therefore temporarily disqualified from carrying out their activities.14 table 4. business base by department as of may 31, 2021 size la paz santa cruz cochabamba tarija oruro potosi chuqui saca beni pando total microenterprises 22.425 17.338 12.904 3.276 3.239 2.632 2.463 1.480 442 66.199 small businesses 1.642 2.310 1.120 326 234 257 176 128 91 6.284 medium-sized companies 837 1.687 619 125 87 77 80 66 25 3.603 large companies 168 345 65 11 9 7 8 10 2 625 total 25.072 21.680 14.708 3.738 3.569 2.973 2.727 1.684 560 76.711 source: fundempresa as of may 31, 2021, own elaboration. 3. origin of smes in bolivia alquisalet (2014), refers to the book by historian fernando chuquimia bonifaz, las sociedades de socorro y beneficencia en la paz, 1883-1920, in which, although he does not clearly describe the existence of small businesses, he indicates that in bolivia the artisan guilds emerged in pre-hispanic times. however, in pre-colonial times there were already indian artisans, that is, entrepreneurs and independent workers. it was in colonial times when the first artisans arrived having developed a new urban craftsmanship in la paz in the late sixteenth and 13 fundempresa is a non-profit foundation that holds a concession contract with the plurinational state, operates the bolivian commercial registry (law 2064, law 2196, supreme decree 26215 and supreme decree 26335), see www.fundeempresa.org.bo. 14 it does not represent the cancellation of its commercial registration or the closure of the company, but the temporary disqualification of the company to carry out its activities, and it must carry out the procedure of reference to carry out its activities in a normal manner (fundempresa 2021). http://revistes.ub.edu/index.php/jesb http://www.fundeempresa.org.bo/ volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 early seventeenth centuries, in which there was an interaction of spanish artisans and indians, this being a first historiographical approach to determine the origin of smes in bolivia. in the research conducted by barragán (2015), he argues that the group of k'ajchas/trapiches meant the emergence of a quasi-parallel circuit to that of the extractive mining guild in the colonial period;15 “the k'ajchas are an important part of the andean-bolivian mining history and although they have not gone unnoticed, they have not deserved a long term research”, which reinforces that they were characteristic of the eighteenth century, when mining was again on the rise, indicating that the k'ajcha was never a salaried and proletarian worker, but neither an owner or concessionaire of the mines, being legally recognized in the mid-twentieth century, so it is not clearly defined if they were small businessmen or rather independent workers; hence, they aroused much debate in 1938: some considered the k'ajchas as small employers and small businessmen, others characterized them as workers, and others saw them as poorer than any mining worker. in this regard, the bolivian historian gustavo rodriguez, refers to the work of antonio mitre published in lima "los patriarcas de la plata", in which he identifies that the author does not take into account the parallel sector to the "official" production of silver, which was the kajcheo (today it would be abusively called informal).16 the kajchas were articulated in a complex 15 the trapicheos and k'ajchas were closely related because the trapiches received ore from the k'ajchas, because the k'ajchas could own or lease trapiches and because there were arrangements between them. 16 the jajcheo, which originated in the xvii century, played a leading role in mining activities, so much so that in the period from 1825 to 1950 they were responsible for the production of approximately 35% of the silver extracted from cerro rico de potosí. it was an activity that allowed the workers and inhabitants of the city to freely take possession of pieces of ore (corpas) between saturday night and early monday morning; they also carried out the activity of working by splitting (mediería) the ore obtained, where the kajchas contributed their labor force and the owner provided the mine in reciprocity (rodríguez 1994). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 relationship that included small mill owners and ore collectors,17 so the kajcheo, which originated in the seventeenth century, played an important role in mining activities, especially in the period 1825-1950 (rodríguez 1994). the k'ajchas, who were pieceworkers at that time, became mining coperativists starting in the 1940s and who were consolidated after the 1952 revolution, where most men and women had to create their own sources of income (own account); so the k'ajchas broke into the mining sector in the eighteenth century and in the twentieth century opened the possibility of creating a mining economy that was not based exclusively on large and medium-sized entrepreneurs(barragán 2017, 26). so it is possible to attribute the origin of small entrepreneurs and independent workers in the country to the pre-colonial times. 4. main characteristics of bolivian micro, small and medium enterprises it should be noted that the majority of bolivian small-scale enterprises are microenterprises and that, in practical terms, they may be closer in definition and behavior to microenterprises than to medium-sized ones (collao 2011, 73). microenterprises in the bolivian economy represent 99.68% of the total number of enterprises in the country, and in total msmes represent 99.95% (saavedra and hernández 2007). one of the main characteristics is that the labor force belongs to the informal sector, which leads to the creation of microenterprises that are the main source of subsistence for the generation of income for low-income families, due to the precariousness with which they operate; the most relevant aspect that contributes to this situation is the increase in migration 17 the trapiche in the charcas region, especially in potosí, had a certain discredit for being linked to the kajchas and the theft of minerals, but in other provinces and mining centers such as oruro this stigma was not so important (gavira 2020). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 from the countryside to large cities, urbanization resulting from the precariousness of the standard of living and lack of job sources seek employment opportunities or entrepreneurship in the informal sector (solé, parella and petroff 2014). data provided by the international labor organization (ilo) estimates that in 2014 the proportion of informal employment in bolivia was 75.1% of the employed population. the origin of informal employment comes from a series of historical processes and structural policies, at the end of the 1970s and during the 1980s with neoliberal policies caused the growth of informal trade, which originated a new labor configuration at the margin of the state and the formal economy (lópez 2018, 88-89). figure 1. informality in economic activities, expressed in % 2019 source: andrews, caldera and johanson (2011). own elaboration. in bolivia, the importance of micro and small enterprises (msmes) in the national economy is recognized, not only because of the large number of enterprises, but mainly because of their http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 contribution to employment generation and socioeconomic aspects, their contribution to gdp, to the improvement of income distribution and to family savings (collao 2011,18). in the study of policies to increase the formality and productivity of enterprises in bolivia, carried out by the perry et al. (2007), it indicates that: “informality is also seen as another symptom of the failure of the state to promote basic public services, protection and opportunities, inciting people to work in an environment without authority. according to another hypothesis, the size of the informal sector in bolivia is due to the high cost of becoming formal, compared to the low benefits” (seynabou 2007,18). another characteristic of msmes in bolivia is the low level of capital investment; in most cases they are small family businesses, so the hiring of workers is direct, with little or no qualifications. they are concentrated in the country's three main cities, which is where the bulk of the country's economic activity is located: la paz, santa cruz de la sierra and cochabamba. there is a high degree of obsolescence in the productive sectors, with a very distant relationship between the educational system and the productive sectors; investments in scientific and technological development are very low, which explains the weak international economic insertion (zeballos 2003, 143). studies conducted on public policies to promote smes, identify that barriers to financing (bank and non-bank) in many cases restrict or block the development of projects related to research and development r&d&i that limits innovative capacity and, consequently, access to international markets (heredia and sánchez 2016). one of the latest studies shows a predominance of the commercial sector with 54.41% and the service sector with 34.03%, these sectors are of low added value since trade is only an exchange http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 that generates minimal value and services are of a personal nature. the manufacturing sector only concentrates 11.56% of the activity, this low average is due to the fact that this sector requires greater investment in technologies and innovation, qualified personnel and competitive advantages in its products and/or services for their acceptance in the markets (collao 2011, 32). table 5. classification of companies according to the instituto nacional de estadística of bolivia company category employment segment large company 50 and more workers medium-sized company 15 to 49 employees small business 5 to 14 workers microenterprise 1 to 4 workers source: national statistics institute (ine) micro and small business survey 2008, year 2011. in relation to the classification of smes, there are no unique criteria; in its broadest conception it is defined as the economic unit producing goods and services (cardozo, velásquez and rodríguez 2012). in the case of bolivia, they are mainly based on quantitative aspects such as the number of workers, sales and equity assets (collao 2011, 19-21). 5. current situation of msmes in bolivia the sector of micro, small and medium-sized economic units (made up of self-employed workers, small owners, producers, farmers and artisans) have not enjoyed opportunities and rights to improve the quality and scope of their economic transactions, do not have access to government support systems to minimize risks, do not have policies aimed at reducing transaction costs, improving their productivity and competitiveness, and therefore these economic activities have not been able to consolidate and do not generate quality jobs (wanderley 2005). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 the country's domestic demand is characterized by a very small economically active population (potential demand); unemployment and underemployment rates are very high, which shows the precariousness and poor working conditions. the poverty level of themajority of the population means that demand has low purchasing power and that the quality of products and services are conditions that are not taken into account when making purchases. regarding products, they prefer those of foreign origin whose origin is smuggling in most cases and which are of better quality and much lower price; the image of national production is quite deteriorated and with prices considerably higher than foreign products (collao 2011, 19). due to their productivity and scale, msmes cannot access demanding markets in terms of quantity and formal requirements. their low capacity to improve their productive efficiency, their human capital, their access to credit and technology, of the micro and small business units (1 to 20 employees), 92.7% of their production is destined for the local market. micro and small enterprises sell to local and national markets at 3.6%, and 1.5% of those in the local and/or national market are destined for international markets. there is evidence that the small number of exporters is not due to the fact that bolivian products are not competitive in foreign markets, but to the informal nature of exports (borda and ramírez 2006). in recent years there has been some interest from public and private institutions in the country, which are still in process, to be able to unify and articulate efforts aimed at supporting and promoting the sustainability of msmes. the government of the plurinational state of bolivia (government of evo morales) with the purpose of improving the competitiveness of msmes has included the strategy to support the development and growth of msmes in the new political constitution of the state (ncpe 2009). to carry out these actions, the state has http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 entities (deconcentrated and/or decentralized) that provide services according to the assigned functions (collao 2011, 44-49). 6. barriers faced by bolivian msmes historically, informality has been one of the main barriers to the development of smes in latin america in general and of the bolivian state in particular. schneider (2002) indicates, as a result of surveys carried out in latin america in 1998-1999, that the largest subway economy was in bolivia with 67% of gdp, and the smallest in chile with 19%. morales (2008), considering the proportion of workers in the informal sector as a measure of informality,18 finds that 70% of workers in bolivia develop their activities in the subway economy. a study by vargas (2011), which seeks to quantify the size of the informal economy in bolivia, finds that most estimates suggest that both the proportion of workers and the proportion of the product generated by the informal economy are between 60% and 70% of gdp. the eloquent lack of public policies to promote research and technological diffusion, lack of quality control standards, lack of marketing strategies added to institutional and regulatory obstacles to productivity growth that are related to tax rates,19 obtaining operating licenses and 18 the study carried out by the perry et al. (2007), determines that the main aspects of informality are that the costs incurred for msmes to formalize do not compensate the benefits that entrepreneurs could obtain from the state. informality is attractive to many because it allows more flexibility and independence due to the poor quality of services provided to the formal sector. 19 another cause of informality is the regulatory complexity that affects bolivian formal companies, bolivia being one of the countries with the highest regulatory burden. (seynabou 2007). although the tax structure is relatively simplified for msmes, particularly micro enterprises, it is an extra cost to comply with the payment requirements, because the rates do not differentiate between the size of the companies but by their legal constitution, reducing their competitiveness, especially due to unfair competition such as evasion and smuggling (borda and ramirez 2006). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 business registration, corruption and macroeconomic and political instability are the other obstacles identified (seynabou 2007). on the other hand, smuggling is a barrier to the development and growth of msmes and the fragile national industry; in bolivia it has become an uncontrollable phenomenon that eliminates the country's productive development initiatives, generates informal commerce and therefore tax evasion is of great magnitude, competes with the formal sector in conditions of unfair and unequal competition, occupying the first place in the country's informal sector (orias 1997, 226). cross-border trade in the andes has deep roots and has grown during the 1980s, in recent years governments have tried to limit and control these flows, however, these trade practices are based on networks of cooperation and exchange developed in response to historical inequalities and marginalization (odegaard 2016, 34-35). msmes in the textile sector face unfair competition from the marketing of used clothing, which has a negative impact on the sector's activity. this activity has been developing in the country since the enactment of d.s. 21691 of july 2, 1994, which regulates sanitary control for the import and marketing of used clothing in bolivia in order to prevent smuggling and establish a regulatory framework for the import of used clothing; currently, this regulatory framework is not complied with, except for legal imports registered in the corresponding customs precincts (vidaurre 2005, 81). in bolivia, unfair competition associated with the informal sector stands out, and is still aggravated by tax burdens, labor and corruption scenarios, which constitute as main ob stacles to formal productive-business performance (muriel 2018). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 a new threat to the country's weak productive structure is the global covid-19 crisis; the fall in gas prices and export volumes since 2014; the global economic contraction, aggravated by the collapse of oil prices; social distancing measures, including the national quarantine; could result in an economic contraction and an increase in poverty. given the health emergency, it is necessary to use all possible mechanisms to reduce the human cost of the crisis and lay the groundwork for economic recovery, consolidate its macroeconomic stability by reducing its fiscal and external deficits, promote the development of private investment to diversify its economy, and generate quality jobs (world bank 2020). 7. conclusions based on the review of relevant secondary literature, this article has analyzed the main characteristics of the bolivian economy and the main models of economic growth in bolivia since the 19th century. different studies coincide in pointing out that the bolivian state's economy historically depended on the exploitation of its non-renewable natural resources, which was the only sector favored by investment in technology and in its exploitation processes (industrialization). reviewing the historiography, the article confirms that the origin of smes in bolivia dates back to pre-colonial times, when there were already indian artisans, i.e., entrepreneurs and independent workers; in pre-hispanic times, the first artisan guilds emerged; and in the colonial period of the 17th century with the parallel activities to the mining sector (k'ajcheo) they increased, being only recognized as small entrepreneurs and independent workers in the middle of the 20th century. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 in the 1970s and 1980s of the 20th century the sme sector increased, as a result of a process of economic destabilization that impacted mainly on workers and led to the creation of new artisanal and informal trade establishments. the most important characteristics of msmes are that they develop in a submerged economy (informal activity), have many limitations in terms of competitiveness, and show the fragility and lack of efficiency of public and private policies to support, promote and strengthen entrepreneurial activity. the economic boom experienced in the first 15 years of the 21st century was not properly exploited, the country did not grow in sustainable alternative productive activities; the little industrialization in potential sectors of the country was not adapted to the requirements of current markets both to meet domestic demand and to increase its very low participation in external markets. although public entities (decentralized and deconcentrated), private entities and international organizations that support and promote msmes are currently working on programs to promote entrepreneurship, innovation and the use of new technologies, which is a great step forward in changing the entrepreneurial mentality, it requires greater support and integration among the parties involved (government, businessmen, higher education centers), so that a model of support and sustainable growth of the national productive sector can be built. it is necessary to review tax policies, adjust them to benefit businessmen and entrepreneurs, promote formality in economic activities, have effective mechanisms to fight smuggling, cut bureaucratic hurdles, facilitate access to financing, promote investment in the development of their productive processes (industrialization), promote the use of r+d+i to increase the technological capacity of their productive model, improve their production and distribution http://revistes.ub.edu/index.php/jesb volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 structure so that they can participate more actively in the markets, which is the basis for crating dynamic, profitable and sustainable enterprises. the recurrent political, social and economic instability of the country, the legal insecurity, the little support to the productive sector by the state, the little and slow integration in international markets make it a very difficult objective to achieve for the bolivian state and its national industry. the review of research on the weak structure of smes in bolivia in this article demonstrates the possibility of carrying out future research work that could contribute to the elaboration of a productive model that may improve the economic activity of smes in a sustainable manner and in accordance with the socioeconomic reality of the country, taking into account that smes are currently considered the engine of economic development of nations for their contribution to employment generation, and the reduction of poverty and social inequalities. references agudelo, german darío v. 2008. “bolivia, 2003-2008: un periodo de profundos cambios políticos y económicos.” perfil de coyuntura económica, 12: 179-202. accessed march 21, 2021. https://revistas.udea.edu.co/index.php/coyuntura/article/view/2343. aguirre, sergio cerezo. 2011. “enfermedad holandesa y coyuntura macroeconómica boliviana.” accessed december 8, 2021. http://www.inesad.edu.bo/bcde2011/dc2011/25 cerezo sergio.pdf. alquisalet, lorena a. 2014. “fernando chuquimia bonifaz. las sociedades de socorros mutuos y beneficencia en la paz, 1883-1920. centro de estudios para la américa andina y amazónica. 2013, 255pp.” procesos revista ecuatoriana de historia 39: 160-163. andrews, dan, aida caldera sánchez and åsa johansson. 2011. 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paz: superintendencia de empresas. muriel hernández, beatriz. 2017. “historia de los patrones comerciales de bolivia (1900-2015).” un siglo de economía en bolivia, 2015, p. 138-179. in un siglo de economía en bolivia (19002015) tópicos de historia económica, coordinated by iván velásquez-castellanos and napoleón pacheco torrico, 137-180. la paz: fundación konrad adenauer (kas), oficina bolivia. https://www.bivica.org/files/historia-economica-topicos.pdf#page=136. muriel hernández, beatriz. 2018. “ventajas comparativas: base del comercio internacional en bolivia.” inesad.edu.bo. last accessed march 11, 2021. https://inesad.edu.bo/dslm/2018/09/ventajas-comparativas-base-del-comercio-internacional-enbolivia/. muriel, beatriz, and luis carlos jemio. 2010. “mercado laboral y reformas en bolivia.” serie de documentos de trabajo sobre desarrollo no. 07/2010. la paz: instituto de estudios avanzados en desarrollo. last accessed may 4, 2021. http://www.inesad.edu.bo/pdf/wp07_2010.pdf. neira, díaz josé. 2007. “hacia la revolución legal de bolivia.” empresas políticas, 8: 137-49. odegaard, cecilie vindal. 2016. “border multiplicities: at the cross-roads between improvisation and regulation in the andes.” journal of borderlands studies 31(1): 23-38. last accessed january 2, 2021 doi: 10.1080/08865655.2015.1115733. orias, ramiro o. 1997. “bolivia en el comercio mundial : entre la globalización y la marginalización.” estudios internacionales. last accessed september 10, 2020. doi: 10.5354/07193769.2011.15171. peñaranda, raul, isabel mercad, boris miranda and clara berríos. 2012. 30 años de democracia en bolivia. repaso multidisciplinario a un proceso apasionante (1982-2012). la paz: página siete. last accessed 29.03.21 https://library.fes.de/pdf-files/bueros/bolivien/09460.pdf perry, guillermo e., william f. maloney, omar s. arias, pablo fajnzylber, andrew d. mason, and jaime saavedra-chanduvi. 2007. “informality: exit and exclusion.” world bank latin american and caribean studies. washington dc: world bank. last accessed february14, 2021. https://openknowledge.worldbank.org/handle/10986/6730. http://revistes.ub.edu/index.php/jesb https://www.bivica.org/files/historia-economica-topicos.pdf#page=96 https://www.bivica.org/files/historia-economica-topicos.pdf#page=96 https://www.bivica.org/files/historia-economica-topicos.pdf#page=136 https://inesad.edu.bo/dslm/2018/09/ventajas-comparativas-base-del-comercio-internacional-en-bolivia/ https://inesad.edu.bo/dslm/2018/09/ventajas-comparativas-base-del-comercio-internacional-en-bolivia/ http://www.inesad.edu.bo/pdf/wp07_2010.pdf https://doi.org/10.1080/08865655.2015.1115733 https://revistaei.uchile.cl/index.php/rei/article/view/15171 https://revistaei.uchile.cl/index.php/rei/article/view/15171 https://library.fes.de/pdf-files/bueros/bolivien/09460.pdf https://openknowledge.worldbank.org/handle/10986/6730 volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 rodríguez ostria, gustavo. 1994. “fuentes para una historia de la minería boliviana del siglo xix.” américa latina en la historia económica, 1(01): 9. doi: 10.18232/alhe.v1i01.140. rodríguez, gustavo. 2001, “los mineros de bolivia en una perspectiva histórica.” convergencia. revista de ciencias sociales 24: 271-298. saavedra, maría luisa, and yolanda hernández. 2007. “caracterización de la mpymes en latinoamérica: un estudio comparativo.” paper presented at empresa global y mercados locales: xxi congreso anual aedem, universidad rey juan carlos, madrid, june 68. schneider, friedrich, and dominik enste. 2002. “ocultándose en las sombras. el crecimiento de la economía subterránea.” temas de economía 30. washington: international monetary fund. last accessed march 9, 2021. https://www.imf.org/external/pubs/ft/issues/issues30/esl/issue30s.pdf. seoane, alfredo vicente. 2015. “hitos en la historia de la industria boliviana.” tinkazos 18(37): 6585. seoane, alfredo vicente. 2016 industrialización tardía y progreso técnico. un acercamiento teóricohistórico al proyecto desarrollista boliviano. la paz: cides-umsa. last accessed april 24, 2021 http://www.cides.edu.bo/index.php/component/content/article/24publicaciones/coleccion30-anos/110-industrializacion-tardia-y-progreso-tecnico?itemid=101. seynabou, yaye. 2007. “how to become more formal and productive, policies to strengthen enterprises.” world bank. last accessed march 25, 2021 doi: 10.1017/cbo9781107 415324.004 solé, carlota, sònia parella, and alisa petroff, coords. 2014. “las migraciones bolivianas en la encrucijada interdisciplinar: evolución, cambios y tendencias.” focus on international migration 1. last accessed january 2, 2021. https://ddd.uab.cat/record/129430?ln=es. torrico, mario. 2006. “¿qué ocurrió realmente en bolivia?” perfiles latinoamericanos 13(28): 231261. unzaga de la vega, oscar. 2015. “plan bohan una historia de éxito.” historias de bolivia. last accessed march 15, 2021. https://historias-bolivia.blogspot.com/2017/08/plan-bohan-una-historia-deexito.html?m=0. vargas, josé mauricio. 2011. “¿ser o no ser informal? una simulación estructural para bolivia.” fundación aru. last accessed march 14, 2020. https://www.inesad.edu.bo/bcde2011/dc2011/57%20vargas%20mauricio.pdf. velásquez-castellanos, iván, and napoleón pacheco torrico. 2017. un siglo de economía en bolivia (1900–2015). tópicos de historia económica. la paz: fundación konrad adenauer (kas), oficina bolivia. https://www.bivica.org/files/historia-economica-topicos.pdf. vidaurre, gonzalo m. 2005. impacto de la importación de ropa usada en bolivia. santa cruz: instituto boliviano de comercio exterior. last accessed december 6, 2020. http://revistes.ub.edu/index.php/jesb https://doi.org/10.18232/alhe.v1i01.140 https://www.imf.org/external/pubs/ft/issues/issues30/esl/issue30s.pdf http://www.cides.edu.bo/index.php/component/content/article/24publicaciones/coleccion-30-anos/110-industrializacion-tardia-y-progreso-tecnico?itemid=101 http://www.cides.edu.bo/index.php/component/content/article/24publicaciones/coleccion-30-anos/110-industrializacion-tardia-y-progreso-tecnico?itemid=101 https://ddd.uab.cat/record/129430?ln=es. https://historias-bolivia.blogspot.com/2017/08/plan-bohan-una-historia-de-exito.html?m=0 https://historias-bolivia.blogspot.com/2017/08/plan-bohan-una-historia-de-exito.html?m=0 https://www.inesad.edu.bo/bcde2011/dc2011/57%20vargas%20mauricio.pdf https://www.bivica.org/files/historia-economica-topicos.pdf volume 7, number 2, 87-120, january-june 2022 doi.org/10.1344/jesb2022.1.j100 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 http://ibce.org.bo/images/publicaciones/impacto_ropa_usada.pdf. wanderley, fernanda. 2005. “la construcción de ciudadanía económica: el desafío del nuevo modelo de desarrollo. t'inkazos. revista boliviana de ciencias sociales 18: 31-50. last accessed april 14, 2021. https://www.redalyc.org/pdf/4261/426141561003.pdf. world bank. 2020. “bolivia overview.” last accessed september 10, 2020. https://www.bancomundial.org/es/country/bolivia/overview. zeballos, emilio, and enrique velasco. 2003. construyendo el desarrollo a través de las pymes: la experiencia boliviana. san josé-la paz: fundes. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://ibce.org.bo/images/publicaciones/impacto_ropa_usada.pdf. https://www.redalyc.org/pdf/4261/426141561003.pdf https://www.bancomundial.org/es/country/bolivia/overview http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 laurine manac'h university of paris 1 panthéon sorbonne – ehehi-casa de velázquez – umr 8168 mondes américains cralmi/cerma (france) – https://orcid.org/0000-0003-0837-881x french merchants in buenos aires (1816-1825): economic opportunities and difficulties during the wars of independence abstract unlike other foreigners, the french merchants who migrated to hispanic america in the 19th century have received little attention, partly because they are supposed to have been few. with the emancipation of the river plate, the declaration of independence in 1816 and the end of the spanish commercial monopoly – and despite many difficulties due to revolutionary turmoil – some french merchants saw the legal opening of the rioplatense market as an opportunity and became more present in buenos aires, although less than their british counterparts. building upon the buenos aires commercial court’s records and data from censuses, this paper sheds light on the french commercial presence in buenos aires during the independence and civil wars, which hampered the circulation of credit instruments, the fluidity of credit relations, and business activities. it shows the importance of merchants’ private initiatives in consolidating the french presence, and how they coped with wartime consequences. whereas those who were poorly integrated into local society were vulnerable in these times of crisis, others benefited from close relations within the local society and acquired economic and social prominence. such integration may have contributed to making them key interlocutors for french authorities as they manifested an increased interest in the river plate in the context of the post-1815 imperial reconfigurations, when international and european rivalries continued in hispanic america, particularly between france and britain. keywords: french merchants, buenos aires, independence wars, trade, credit, foreigners, antoine françois leloir, françois touchard comerciantes franceses en buenos aires (1816-1825): oportunidades económicas y dificultades durante las guerras de independencia resumen a diferencia de otros extranjeros, los comerciantes franceses que migraron a hispanoamérica en el siglo xix han recibido escasa atención, en parte porque se supone que habían sido una pequeña minoría. con la emancipación del río de la plata, la declaración de independencia en 1816 y el fin del monopolio comercial español (y a pesar de las muchas dificultades debidas a la tormenta política revolucionaria), algunos comerciantes franceses vieron la apertura legal del mercado rioplatense como una oportunidad, e incrementaron su presencia en buenos aires, siempre en menor medida que sus colegas britá nicos. a partir de los registros del tribunal de comercio y datos de censos, este trabajo arroja luz sobre la presencia comercial francesa en buenos aires durante la independencia y las guerras civiles, que obstaculizaron la circulación de instrumentos de crédito, la fluidez de las relaciones crediticias, y las actividades de negocios. muestra, también, la importancia de las iniciativas privadas mercantiles en la consolidación de la presencia francesa, y cómo los comerciantes franceses se enfrentaron con las consecuencias derivadas de las circunstancias bélicas. mientras que los que estaban poco integrados en el contexto social rioplatense fueron vulnerables en aquellos tiempos de crisis, otros sobrevivieron mejor por su proximidad e integración en la sociedad local, y lograron relevancia económica y social. tal integración pudo haber contribuido a hacerles interlocutores estratégicos para las autoridades francesas al manifestar estas un creciente interés en el río de la plata en los años de reconfiguraciones imperiales posteriores a 1815, cuando las rivalidades internacionales y europeas continuaron en hispanoamérica, particularmente entre francia y gran bretaña. palabras clave: comerciantes franceses, buenos aires, guerras de independencia, comercio, crédito, extranjeros, antoine françois leloir, françois touchard comerciants francesos a buenos aires (1816-1825): oportunitats econòmiques i dificultats durant les guerres d’independència resum a diferència d’altres estrangers, els comerciants francesos que van migrar a hispanoamèrica al segle xix han rebut una atenció escassa, en part perquè se suposa que havien estat una petita minoria. amb l’emancipació del río de la plata, la declaració d’independència el 1816 i la fi del monopoli comercial espanyol (i malgrat les moltes dificultats a causa de la tempesta política revolucionària), alguns comerciants francesos van veure l’obertura legal del mercat rioplatense com una oportunitat, i van incrementar la seva presència a buenos aires, sempre en menor mesura que els seus col·legues britànics. a partir dels registres del tribunal de comerç i dades de censos, aquest treball dilucida la presència comercial francesa a buenos aires durant la independència i les guerres civils, que van obstaculitzar la circulació d’instruments de crèdit, la fluïdesa de les relacions creditícies, i les activitats de negocis. mostra, també, la importància de les iniciatives privades mercantils en la consolidació de la presència francesa, i com els comerciants francesos es van enfrontar a les conseqüències derivad es de les circumstàncies bèl·liques. mentre que aquells que estaven poc integrats en el context social del río de la plata van ser vulnerables en temps de crisi, d’altres van sobreviure-hi millor per la seva proximitat i integració en la societat local, i van aconseguir rellevància econòmica i social. tal integració podria haver contribuït a fer-los interlocutors estratègics per a les autoritats franceses en manifestar aquestes un creixent interès pel río de la plata en els anys de reconfiguracions imperials posteriors a 1815, quan les rivalitats internacionals i europees van continuar a hispanoamèrica, particularment entre frança i la gran bretanya. paraules clau: comerciants francesos, buenos aires, guerres d’independència, comerç, crèdit, estrangers, antoine françois leloir, françois touchard corresponding author: e-mail: laurine.manach@gmail.com received 11 april 2021 accepted 2 november 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0003-0837-881x mailto:laurine.manach@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 1. introduction in april 1821, antoine françois leloir, an important french merchant in buenos aires, sued a french company in the buenos aires commercial court for payment of a bill of exchange. leloir returned several months later to the court to demand to his creditors a suspension or delay of payments. in june, françois touchard, a french merchant with a former career in the french administration, reported to the court the difficulties he had faced in setting up his business in buenos aires in 1818.1 although leloir and touchard were unevenly integrated into local society, they both underwent the sharp consequences of the 1817-1820 political, institutional and military crisis launched when the military situation got worse with the portuguese invasion of the banda oriental and the threat of a spanish reconquest expedition. they were added to the conflicts between the directory and the governors of the littoral provinces: in buenos aires, the directory regime’s political legitimacy was undermined, which increased opposition in the capital and the provinces of the river plate (verdo 2006, 358). this crisis affected the circulation of credit instruments, credit relations and business activities. similarly, the french traders operating in the river plate suffered from economic difficulties caused by the independence wars.2 nevertheless, their experiences illustrate the opportunities generated during the period for foreign merchants, whose private initiatives helped to develop the french presence in the river plate. unlike the spanish, portuguese, british, north american, genoese and sardinian merchants who migrated to hispanic america during the colonial (brilli 2016; cristóforis 2009; pearce 1 archivo general de la nación de argentina (agn), sala ix, tribunal comercial la reja (tc), p-259, peronard contra touchard, 1821, f. 18-19v. 2 i will refer to “independence wars” for the sake of effective writing, yet wars that troubled the river plate during the period were also civil conflicts whose protagonists did not urge for independence at the same time and in the same way, as well as conflicts implying european powers. on the characterization of these wars, see fradkin (2010) and blaufarb (2007). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 2007; socolow 2009; stein and stein 2009) and independence periods (reber 1979; besseghini 2020a); the french who immigrated or temporarily stayed in hispanic america during the 19th century have received little attention. historians agree that their presence increased in buenos aires, montevideo and the interior territories, as well as in other hispanic american provinces, as a result of the legal opening of the rioplatense market to foreign merchants. some calls were made to encourage the study of french merchants in the americas at the time (weil 2000; otero 2012). as fernando jumar highlights (1998), they had previously participated in the river plate commerce, both within the legal limits of the spanish colonial commercial system and through contraband. this led to a renewed interest in the french presence in the region, in the broader frame of the imperial reconfigurations at work between the end of the 18th century and the last decades of the 19th century (thibaud 2018; todd 2011 and 2021). the revolutionary cycle, which began in the viceroyalty of the river plate in 1808-1809, was crucial for the immigration of french individuals, as well as for french geopolitical interests, before the establishment of french general inspectors of commerce in 1825, and of consulates in montevideo (1826) and buenos aires (1827). the emancipation of the river plate from the spanish rule and the declaration of independence in 1816 put an end to the spanish trade monopoly system in force during the colonial period. it had already loosened before, with the decrees of 1778, and the authorization of free trade with neutrals in 1797, before the broader authorization granted by the viceroy baltasar hidalgo de cisneros in 1809. as these measures relaxed the monopoly system, foreign merchants increased their presence and trade developed between the river plate and the north atlantic economies (halperín donghi 2002; brown 2002; hora 2010). the anglo-spanish war from 1796 – and the resulting franco-spanish alliance – had also contributed to increasing french commercial presence by hindering direct trade between spain and the river plate and encouraging the use http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 of neutral and foreign ships, thereby allowing french merchants to enter the river plate (ortiz de la tabla and ducasse 1999; schnakenbourg 2015; schlez 2019). spanish-american colonies’ changing alliances in favor of britain, and political, logistical and economic turmoil caused by the napoleonic military occupation of the iberian peninsula, forestalled the french presence from 1808 onwards, but the revolutionary wars and the 1816 declaration of independence of the united provinces of the river plate again opened up the region to french merchants. they were all the more encouraged to do so as france got more involved in the river plate geopolitical matters while, after 1815, international relations and imperial ambitions reconfigured in the atlantic and european rivalries continued in hispanic america, particularly between france and britain. while british traders operating in the river plate contributed to further british interests in the region, french merchants who settled there urged french authorities for recognition of the newly independent spanish american republics, and some became key players in the development of france’s influence in the region. this was the case with antoine françois leloir, considered as the french merchants’ representative in buenos aires in december 1817 (belgrano 1933).3 this article addresses the french merchants’ integration into local and regional economies, taking into account historical demography, migration history and atlantic economic history. it focuses on some french individuals involved in the commerce with buenos aires, including immigrants and temporary sojourners in the river plate, as well as merchants located in france. 3 this article focuses on the socio-economic aspects of the french presence in buenos aires. it does not delve into the modalities of france’s geopolitical influence in the region. the political influence of napoleon and of the french monarchy in spanish america is discussed in belgrano 1933, robertson 1967, blaufarb 2007, todd 2011 and 2021, besseghini 2018, gutiérrez ardila 2019, mellone 2020. it manifested with france’s role as a mediator in the resolution of the conflicts in the banda oriental (1816-1819), and the project of a constitutional monarchy in buenos aires (1817-1819). whereas french bourbon monarchy’s attitude towards ferdinand vii of spain, determined by the bourbon family ties, prevented any recognition of the river plate’s independence, preparations for such a recognition grew, within the ministry of foreign affairs in paris, before louis-philippe’s arrival in 1830 changed the geopolitical situation and gave more political support to french merchants in buenos aires. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 however, despite the legal opening of the river plate, commerce was not easy. thus, how did french merchants reinforce their presence in the river plate market during the wars of independence, which generated opportunities but also increased risks? the examples of touchard and leloir suggest that french merchants’ uneven integration into local society made them more or less vulnerable to wartime consequences. despite revolutionary turmoil, merchants benefiting from a solid social capital could partake more successfully in the river plate market than traders who had to build relations of solidarity and new networks. drawing from the study of various french individuals, the article examines how new economic relations were articulated with the businesses of well-established french merchants in buenos aires. this study analyzes trial records produced by the buenos aires commercial court, which involve french merchants as plaintiffs and/or defendants, between 1816 and 1825. the latter year saw the beginnings of a new time of crisis, marked by the war with brazil, naval blockades, and the on-going conflicts between the congress political factions.4 these trial records were selected from a larger corpus involving french merchants up to 1840, identified through a twofold search: by examining another larger corpus of trials randomly constituted with the inventory of the collection; and by looking for french individuals’ names in censuses. the commercial court’s records make it possible to know these french merchants at a time when documents concerning them are scattered and heterogeneous, especially because it was not unusual for them to deal with the commercial court. it is not easy to identify french merchants in coeval primary sources. general statistics on french emigration flows became available only by mid-19th century (otero 2012, 28). studies on previous decades are based on statistics of 4 in buenos aires, from the end of 1825, tensions increased in the congress, which became polarized by two main political factions: the supporters of bernardino rivadavia, elected president in 1826, wanted to establish a unitary and centralized government, whereas the opposition favored a government that respected the provinces’ sovereignty (ternavasio 2009, 152). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 movements in the main departure ports, on diplomatic archives, and on french consulates’ archives (register of births, marriages and deaths, correspondences), that we do not have for the river plate before 1826 (bonnain 2020). local censuses, though incomplete and difficult to access, give an overview of the demography and sociology of french residents in buenos aires. 2. french merchants in the newly independent river plate 2.1. the growing number of french immigrants and merchants in buenos aires the revolutionary period encouraged foreign merchants to trade with the river plate. while immigration had become a major factor of the demographic growth of buenos aires since the mid-18th century, french merchants became more numerous (halperín donghi 2002; fradkin and garavaglia 2004, 10; massé 1992; hora 2010; dmitruk 2016). whereas historians agree on the relevant french presence in montevideo and buenos aires in the 1830s, we know little about french merchants in previous decades. the available numbers on immigration in buenos aires before the outbreak of the war with brazil in 1825 come from the analysis of censuses: the 1810, 1822 and 1827 censuses make possible some estimations regarding the number of immigrants in buenos aires, and of french people among them. in 1810, buenos aires gathered between 42,800 inhabitants, a number derived from the 1810 census, and 76,450 inhabitants, as proposed by lyman johnson; in 1825 it counted more than 55,000 inhabitants (garcía belsunce 1976; johnson 2011, 30). the city still gathered about half the population living in the province of buenos aires. according to the 1822 census, immigrants, defined as those who were born outside the current argentine territory, represented 7% of the urban population. other authors present higher estimates based on the 1827 census, using samples and a more inclusive definition of the category “immigrants”, taking into account all persons born outside the city of buenos aires. immigrants would thus amount to more than a quarter of the city’s population in 1827 (di meglio 2006; dmitruk 2016). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 immigrants’ geographical origins changed over the period: while spanish immigration slowed down after the wars of independence, french immigration accelerated and ended up representing the third largest group of european immigrants behind the spanish and the british, although we must underline the presence of portuguese and of immigrants from the italian peninsula. while british immigrants represented 18% of buenos aires’ european immigrant population in the 1827 census, french immigrants represented 14%, and spanish migrants dominated the immigration flows in buenos aires. in absolute numbers, french immigrants were few: 584 in 1827.5 in contrast with this lesser calculation, benito díaz (1960) estimated that the french in buenos aires amounted to 4,500-5,000 in 1836, a top hypothesis. such a contrast is understandable if one takes into account that the river plate was not yet a popular destination for the french emigrating overseas, though the trend of french immigration was growing. moreover, whereas díaz based his estimates upon the gaceta mercantil, french immigrants were under-registered in the early 19th century censuses. despite these few numbers suggested by the 1827 census, french presence played an important role into the society and economy of buenos aires (djenderejian 2008). french immigration continued to accelerate thereafter and historians highlight the quantitative leap of the 1830s, in a new diplomatic context: the arrival of louis-philippe changed france’s attitude towards the recognition of the independence, permitting to negotiate commercial treaties6 (schneider 1977, 71; hora 2010, 66; otero 2012). 5 i calculated these numbers thanks to luis pablo dmitruk’s database constituted from the 1827 census. i thank him deeply for sharing his work with me. 6 further research would permit to sum up the existing estimates, formulated thanks to different sources, regarding french immigration and commerce in buenos aires and montevideo in the first half of the 19th century. jürgen schneider concluded that 187 ships went out of french ports towards buenos aires and montevideo between 1827 and 1834. according to roy hora, between 1821 and 1830, 9% of the annual arrivals of overseas ships in buenos aires were french, among the 288 overseas ships arrived. this was the third flow behind british and northamerican ships. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 french immigrants were mostly men between their 20s and 40s, whose activities developed in various sectors, mainly trade, handicraft production, liberal professions and farming. the data collected by luis pablo dmitruk from the 1827 census suggest several conclusions. on average, the french people surveyed had been present in buenos aires for 5 years, giving us an insight upon the end of the period under study: over half of them were skilled workers (mainly carpenters, hatters, blacksmiths, tailors, dyers, masons, gunsmiths), 19% worked as merchants and 10% were unskilled workers. however, there was no sharp distinction between trade and production, and economic agents diversified their activities. the word “commerce”, in short, had a very broad meaning. that is why we must underline the greater proportion of traders among french immigrants. furthermore, even if the french inhabitants registered in the 1827 census specified their activity, they considered themselves as part of the “comercio de buenos aires” when appearing before the commercial court, and are presented sometimes both as merchants and under other categories in blondel’s almanac. in short, although the french was not the largest immigrant community in the river plate before 1830, their presence was growing and they played a significant role in buenos aires, as evidenced by the commercial court’s archives. 2.2. french merchants: immigrants, commission agents and transients the court’s records allow us to identify french traders who resided in buenos aires, surveyed in the 1827 census, as well as those who were not registered: some merchants passed through, like ship captains; some went back to france before the 1827 census but had settled for a while; others avoided the census for fear of enlistment, and others traded with the river plate merchants from their residence in france and never settled in buenos aires. thus, it is possible to examine the modalities of french commercial presence in buenos aires beyond the sole merchants who settled in the city. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 some of those settled in buenos aires participated in the atlantic trade. their practices were typical of such trade, whose agents, infrastructures and facilities have been described by atlantic economic history since the 1990s: they were associates in partnerships specialized in consignment trade, such as roquin, meyer & co., one of the main french trading firms in buenos aires during the 1820s;7 and mendeville, loreilhe & co., a company specialized in french products’ importation and founded by edouard loreilhe and jean-baptiste washington de mendeville. others, while engaging themselves in local manufacturing or trade, participated in the atlantic trade as consignees, charterers, shippers, ship-owners, or contracted joint ownerships of vessels. in short, they diversified their activities. french merchants also operated in regional trade, both an outlet and a source of supply for various products, together with merchants from the interior of the river plate, montevideo, brazil, santiago de chile and, less frequently, paraguay. others ran workshops: juan pedro varangot was among the owners of the main buenos aires hat workshop since 1810, and imported coal from the córdoba region (mariluz urquijo 2002, 325-326; beraud and mariño 2012);8 blas despouy had a tannery and a leather and tallow factory in barracas.9 others opened warehouses for wholesale trade, shops and pulperías,10 where they sold products imported from france, among other goods. these merchants diversified their activities, changed of activity over time, and maintained business relations with merchants from adjacent territories, particularly santiago and montevideo. they relied on representatives in these territories, although they also travelled there themselves. mendeville, loreilhe & co. had a business agent in montevideo, the frenchman 7 agn, tc, l-145, capitán y consignatarios del bergantin francés intrepido, 1823; love 1825, 52. 8 agn, tc, l-144, letamendi contra varangot, 1817; v-404, varangot contra rosales, 1816; v-406, vaca contra varangot, 1824. the term “fábrica” appears in judicial sources, yet following love’s testimony and mariluz urquijo’s analysis this can be considered a workshop. 9 agn, tc, l-145, leloir contra despouy, 1821. 10 according to the 1826 almanac (blondel 1826), pulperías were shops where everything that made daily life possible, especially drinks and food, was sold in retail. they were also important places of sociability, and differed from tiendas, which used to sell all kinds of goods, except drinks and food, in both wholesale and retail. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 deleyderryier;11 françois touchard went to chile to trade yerba mate from paraguay where he was in relation with the frenchman j. goudy.12 archives provide information on the products traded by french merchants, who exported to france leather, horsehair, tallow and the like, while importing products that were more expensive than british goods, including clothing, accessories and delicate fabrics, such as hats and shoes, but also kitchenware, porcelain, and alcohol (hora 2010, 35-38; halperín donghi 2002, 76-122). some french merchants established in buenos aires, while others were sojourners. the town was a hub for traders who migrated or travelled to other territories of south america, and a stopover for ship captains and merchants wishing to return to france. jean lasvignes, also known as juan laviña, by his spanish name, represented and managed in santiago the commercial interests of tomás o’gorman sr after he left chile for lima and then spain, where he died around 1810. after o’gorman’s death, lasvignes kept on managing the business in chile and communicated information to tomás o’gorman’s wife, ana périchon, who lived near buenos aires with her son thomas.13 in 1819 he stopped in buenos aires in order to return to france, which urged thomas o’gorman jr., in november 1819, to refer to the commercial court, on behalf of his mother, asking that lasvignes not to leave the city until he named a representative.14 as for sojourners, this is the case of salesmen commissioned by companies in france that sought to develop their relations with river plate merchants. eleonor foiron, for instance, settled in 11 agn, tc, m-181, mendeville, loreilhe y cia contra chavarivère, 1826, f.1. 12 agn, tc, p-259, peronard contra touchard, 1821, f. 86. 13 in the archives, the father is named tomás, and his son thomas. 14 agn, tc, o-230, o’gorman contra laviña, 1819; on tomás o’gorman’s business in chile and peru, and on ana périchon, see: besseghini 2020b. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 buenos aires as agent of lamotte, maillet & co., from st-valéry-sur-somme, until january 1821. foiron’s presence was crucial in allowing the company to enter the river plate market, participate in credit relations involving french merchants across the atlantic, and settle debts that resulted from the company’s business. indeed, on december 10, 1819, foiron drew a bill of exchange to be paid in paris by lamotte, maillet & co., to the order of the buenos aires french company roquin, meyer & co. by this credit instrument and means of payment, foiron sought to settle his company’s debts in favor of roquin, meyer & co.15 the next day, the company endorsed the bill to lasvignes, who was to embark for france the same week.16 this credit relation was thus established thanks to lamotte, maillet & co.’s salesman’s sojourn in buenos aires, and to lasvignes’ mobility between chile, buenos aires and france. this suggests how important personal interactions and interdependencies, emerging within the port’s social and economic space, were for the development of long-distance exchanges (moutoukias 2016). thus, credit networks, salesmen, and other agents sent overseas (bartolomei 2012), together with infrastructures, allowed merchants established in france to enter the regional market. transatlantic partnerships, whose associates were located both in france and buenos aires, were also a means to get through the buenos aires market, and sometimes encouraged the migration of partners from france. this was the case of jean-victor peronard, who partnered with another french merchant to establish a trading house in buenos aires. after their company’s bankruptcy, peronard, who had remained in paris while his partner managed the buenos aires house, arrived in the city to settle the dispute with his partner before the commercial court, and then settled in buenos aires and managed a pulpería. all these french 15 agn, tc, l-145, leloir contra meyer, 1821. 16 agn, tc, o-230, o’gorman contra laviña, 1819. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 merchants, both those who settled down and those who stayed only temporarily, regarded the river plate market, now legally open to foreign traders, as a space for economic opportunity. 2.3. french merchants within credit networks the analysis of lawsuits’ records reveals a more detailed picture of the credit relations established by french agents involved in regional and atlantic trade. some of them in particular articulated these credit networks within a circumscribed geography. french merchants who resided in buenos aires had business partners in france, namely in marseille, paris and the paris basin (reims, amiens, st-valéry-sur-somme), bordeaux and le havre. although french merchants in buenos aires often turned to their compatriots to establish business relations, their integration into local society, and the credit they acquired, enabled them to diversify their sources of credit, relying on local and british merchants. the records of the proceedings started by antoine françois leloir before the commercial court reveal his credit relations. in september 1821, he added to his petition for a suspension of payments or a 6-year delay a statement of his debts and assets, as summarized below. although his debtors were concentrated in the river plate (mainly in buenos aires, but also in mendoza and tucumán) and chile, the list of his creditors shows that his union with the sáenz valiente family had been crucial for his integration into the local society and the establishment of his business. it also suggests the importance of his business relations in france. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 table 1. antoine françois leloir’s creditors according to location, 1821 location amount (pesos) % in the total of the creditors’ assets % among the assets from a same location buenos aires 23,295 57 100,0 sebastiana sáenz valiente 16,219 40 69,6 parish robertson y cía 2,000 5 8,6 ambroisio lezica 991 2 4,3 francisco delgado 975 2 4,2 julián panelo 883 2 3,8 pedro ponce 740 2 3,2 braulio costa 476 1 2,0 brown buchanan y cía 272 1 1,2 juan pablo sáenz valiente 220 1 0,9 félix álzaga 209 1 0,9 ruperto albarellos 200 0 0,9 pedro corpet 110 0 0,5 france 10,212 25 100,0 don juan bautista laurent padre e hijos (amiens) 7,046 17 69,0 bernadac regny y cía (marseille) 2,369 6 23,2 viuda henriot e hijos (reims) 539 1 5,3 lamothe maillet y cía (st-valéry-sur-somme) 171 0 1,7 henry (paris) 87 0 0,9 rio janeiro 6,922 17 lizaur, josef agustín 6,922 17 londres 367 1 hullett hermanos y cía 367 1 total 40,796 100 source: personal production on the basis of agn, l-145, don antonio francisco leloir y sus acreedores, f1, statement of leloir’s debts and assets, september 20, 1821. the amount of the creditors’ assets has been rounded off to the peso. of leloir’s debts, 40% consisted of his wife doña sebastiana sáenz valiente’s credits, which were moreover privileged over those of other creditors, making it all the more difficult for leloir’s creditors to recover their assets.17 as one of juan martín de pueyrredón’s nieces, sebastiana sáenz valiente related leloir to one of the major families and fortunes of buenos aires. a quarter of leloir’s debts were owed to business partners established in france and connected with other french merchants in buenos aires. leloir’s creditors distribution more generally illustrates the place he acquired in buenos aires society. he was linked to the town’s 17 agn, tc, l-145, don antonio francisco leloir y sus acreedores, f. 8, report of the creditors’ junta of 5 october 1821. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 main businessmen and financiers: juan pablo sáenz valiente, braulio costa, and the parish robertson brothers would be part of the commission formed by bernadino rivadavia in 1823, to obtain a loan in london (amaral 1984). he was involved in – sometimes unsuccessful – commercial operations in chile, paraguay, brazil, but also in patagonia, and he participated in the atlantic trade. like the parish robertson brothers, who permitted the buenos aires merchants and government to access to british credits, leloir played an essential role in developing business relations with french economic agents, including in france. leloir’s distinguished position in buenos aires made him a key intermediary in the discussions between the french colonel le moyne and pueyrredón in 1818. le moyne had been commissioned by the marquis d’osmond, louis xviii’s ambassador in london, to talk with pueyrredón about the establishment of a constitutional monarchy, as the province continued to oppose to the restauration of ferdinand vii’s authority. by permitting le moyne to meet pueyrredón, leloir, who also had a correspondence with the duke richelieu, participated in reinforcing france’s geopolitical influence in the river plate (belgrano 1933, 41-71; gutiérrez ardila 2019). it is therefore unsurprising that, after december 1817, french immigrants in buenos aires, pueyrredón, and perhaps the french government, regarded leloir as the unofficial french merchants’ representative. 3. revolutionary conflicts and civil wars: the economic difficulties of french merchants during the 1810s and early 1820s, almost permanent conflicts troubled the river plate. like others around them, french traders had to cope with many difficulties. 3.1. logistical obstacles to trade judicial sources contain many traces of the french merchants’ difficulties during the period, revealing how wartime consequences hampered business relations and activities. french merchants’ businesses were mainly based on import-export trade and involved correspondents http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 in buenos aires, montevideo, santiago de chile and various french localities. during the napoleonic wars as france was at war with great britain and after the 1808 overturning of alliances, and then because of the wars of independence, war hindered navigation, and consequently the delivery of correspondence, credit instruments, products and laborers. for instance, in spite of the business relations established in 1800 between the bordeaux firm strobel & martini and the buenos aires merchants josé riera and francisco delsar, through the intermediation of josé maría riera (josé riera’s son, sent as agent to bordeaux before he returned to buenos aires, named riera hereinafter), the correspondence between strobel & martini and riera ceased between 1801 and 1816. in autumn 1818, riera denounced the bordeaux firm’s silence before the buenos aires commercial court in order to defend himself from the accusations of strobel & martini’s representative in buenos aires, who was trying to recover the company’s credit.18 appearing before the court, the representative justified this silence by stating that “the continuous wars and great distance from europe must have contributed to the loss of the correspondence addressed to riera” or that “the letters [sent by riera have not] reached their destination.”19 similarly, because of the difficult communications between south american territories, ana périchon o’gorman could not appoint a representative to liquidate her husband’s business in chile after his death. she left it to jean lasvignes’s management, and contented herself with the information he communicated, waiting until 1819 to start a proceeding before the commercial court to collect the assets due to her.20 18 in 1818, the company strobel & martini only had legal existence, as it had gone bankrupt in 1804 and been dissolved. its former partner and director strived to recover the company’s assets. about strobel & martini, see: marzagalli 2015, 358-364. 19 agn, tc, s-341, lynch zimmerman y cía a nombre de strobel y martini contra jose maria riera, 1818. 20 agn, tc, s-341, ibid. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 the revolutionary conflicts, followed by the wars with brazil that troubled the river plate from 1824 onwards, undermined not only the commercial information exchange across the atlantic and between the river plate and adjacent territories, but also the transport of products and passengers who migrated to work in firms managed by french agents. for instance, economic life in buenos aires was particularly troubled by the 1817-1820 crisis mentioned above. thus, françois touchard, who settled in buenos aires in july 1818 and suffered from the crisis’ consequences as soon as he arrived, was forced to recommend to his partner in paris to “no longer solicit the emigration of workers until times get better.”21 despite the buenos aires’ economic recovery of the early 1820s, the population suffered from conflicts in the banda oriental, which worsened after its incorporation into the kingdom of portugal in 1821, and then into the empire of brazil in 1822. the government of buenos aires considered the banda oriental as part of its territory, while many sectors in the banda oriental population asserted their desire for emancipation. these conflicts hindered the french trade in the region. on january 24, 1824, josé fortunato pinto, passenger and shipper of the french vessel josefina, sued french captain fabio jalabert in the commercial court for reparation of damages caused since their departure from bahia. while the brazilian imperial fleet blocked montevideo, on november 11, 1823, the captain made his way on a dinghy to the coast against the charterer’s and shippers’ wishes, before a corvette conducted the ship into the port, where all of them were detained.22 political and military conflicts made it difficult for the french to trade across the atlantic, as well as in the region between brazil, the banda oriental and buenos aires. 21 agn, tc, p-259, peronard contra touchard, 1821, f. 86. all translations, from spanish and french, are mine. 22 agn, tc, p-250, pinto contra jalabert, 1824. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 3.2. business difficulties the independence and civil wars destroyed material and human resources, and affected merchants in buenos aires, who had to provide the armies with money, animals, goods and slaves, especially through voluntary and forced contributions, or confiscations (halperín donghi 2002, 84-85; amaral 2018, 354-355; moutoukias and ‘t hart 2021). they endured sackings perpetrated by troops (hora 2010, 30). throughout the lawsuit against his partner, françois touchard repeatedly pointed out the deleterious consequences of this crisis, provoking the “paralysis” and “disorder” of business transactions.23 in the 1822 french-language memoir he published in montevideo, addressed to the french population of the city backing up his defense before the buenos aires commercial court, touchard evoked “a disastrous era when the government of buenos aires […] spread mistrust and discontent among citizens, when civil wars devastated the countryside and dried up all the channels of public prosperity.”24 indeed, the threat of a spanish re-conquest expedition, the military setbacks of the directory government in buenos aires, the collapse of the directory and pueyrredón’s power, the crisis of 1820, the declaration of provincial independences and the problem of the banda oriental, exacerbated the conflicts and seriously hindered trade (verdo 2006). labor force was also lacking, due to enlistment, human losses and obstacles hampering workers’ immigration. french immigrants in buenos aires were concerned by military levies: in 1815, a decree required foreigners not in transit to join the army; with the law of april 10, 1821, rivadavia went further and required that foreigners with at least two years residence in buenos aires serve in the militias, although transient foreigners were enrolled only in case of great danger. these laws ended up concerning especially french and immigrants from the 23 agn, tc, p-259, peronard contra touchard, 1821, f.19v. 24 ibid., f. 86. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 italian peninsula, insofar as the british became protected by the 1825 treaty, as a result of britain’s recognition of the confederation (mariluz urquijo 2002; otero 2012, 90). such difficulties resulted in unpaid debts and bankruptcies. in a petition to the commercial court, juan pedro varangot reported that the buenos aires government had decreed, on january 15, 1816, that the european spanish residents in the capital and its surroundings had to be confined in the guardia de luján (cristóforis 2009, 280). because of this decree, varangot, who had on several occasions lent money to francisco sarriera, a spanish merchant, considered it “almost morally impossible” for sarriera to repay him.25 the difficulty to meet obligations did not affect only french merchants at a local scale. although french traders progressively entered the river plate market, benefiting from their access to products and credit sources in france (hora 2010, 32), the revolutionary upheavals affected the circulation and transfer of credit across the atlantic. 3.3. the difficult fluidity of credit relations in times of crisis french merchants used credit instruments, especially negotiable commercial paper (bills of exchange, promissory notes), which became a major means of payment in international trade (de roover 1953; rogers 1995; santarosa 2015). due in part to the scarcity of cash that characterized the period, these credit instruments were widely used in the river plate trade (halperín donghi 1982, 102-103; 2002, 76-120; adelman 1999). however, the revolutionary upheavals made it difficult, not only to meet payments on time, but also to ensure the circulation of commercial paper, and so the fluidity of merchants’ long-distance relations (moutoukias 2018). 25 agn, tc, v-404, varangot contra rosales, 1816. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 as mentioned before, in april 1821, antoine françois leloir sued the french company roquin, meyer & co. for payment of a bill of exchange. the lawsuit reveals how the bill circulated between france and buenos aires despite the obstacles to credit transfers, particularly during the 1820 crisis. eleonor foiron in buenos aires drew the bill on december 10, 1819. unpaid and protested, it was followed by two returned bills drawn in paris and marseille by two different companies. as mentioned, foiron had been sent to buenos aires as lamotte, maillet & co.’s salesman. the bill he drew in buenos aires on lamotte, maillet & co., worth 10,300 francs, was payable in paris at two months sight. the next day, it was endorsed by the beneficiaries roquin, meyer & co. in buenos aires to jean lasvignes, who was about to return to france.26 on june 6, 1820, lasvignes endorsed the letter to bernadac, regny & co. in marseille, who then endorsed it to guerin de foncin & co. in paris. however, in the meantime, lamotte, maillet & co., the drawee, refused to accept the bill, protesting it in saint-valéry-sursomme on june 6, 1820. thus, unable to recover the value specified by the draft from the drawee, guerin de foncin & co. was forced to establish a protest and a return account on august 7, 1820, hoping to to be repaid by bernadac, regny & co. in marseille, who had endorsed the bill to them. these endorsement practices favored the circulation of credit instruments, as they permitted “the extinction of successive debts” resulting from business transactions, “without requiring the slightest use of cash” (carrière 1973; bartolomei 2008). at the same time, they permitted various french firms to take part in trade with the river plate. the returned bills drawn by guerin de foncin & co. in paris, and then by bernadac, regny & co. in marseille, depended on specific conditions which reveal how difficult credit relations between france and buenos aires became during the revolutionary conflicts. negotiating the 26 agn, tc, o’gorman contra laviña, 1819. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 protested bill implied paying a new exchange rate, regulated by the french commercial code. according to the return account established by guerin de foncin & co., the last endorser of the draft bernadac, regny & co. had to repay 10,465 francs, namely the principal sum of the bill (10,300 francs), the costs generated by its protests for non-acceptance and non-payment, and the costs of the negotiation of its return (bank commission, brokerage, stamp and postage of the return of the bill). the new exchange rate was added to this amount. on august 7, 1820, guerin de foncin & co. turned to j. b. lafitte, a broker near the paris stock exchange, who negotiated the return of the bill on the marseille firm to abel forué. worth 10,504 francs, the return of the draft covered the 10,465 francs to be reimbursed by bernadac, regny & co., and a 3/8% exchange rate loss. this corresponded to the exchange rate of paris on marseille. as stipulated in the commercial code, the re-exchange was determined by the exchange rate of the place where the bill had been endorsed or negotiated by the endorsers, on the place where the repayment was made.27 at the same time, the broker certified that the exchange rate of paris on buenos aires “would not be better that at 30% loss.” there was no significant exchange market on buenos aires in paris at that time – little demand but also little supply of bills on buenos aires. furthermore, the paris exchange rate on buenos aires was more expensive than usual because of the 1820 crisis, marked by the courts’ and governments’ instability, according to the defendant appearing before the court to meet the unpaid bill. when news on the crisis troubling the river plate arrived in paris distorted by distance, the broker lafitte had to certify the exchange rate, as there did not exist official quotations between paris and buenos aires yet (denzel 2010, 466; demont, scherman and wegener 2018). he did so by “considering the dangers in the country” 27 code de commerce, 1807, livre i, tit. viii, §xiii, 179. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 and certified the exchange rate at a 30% loss. 28 trust, needed to favor credit relations, was undermined, both in the debtors’ ability to pay on time and in the ability of the buenos aires’ institutions to enforce payment of such a bill. therefore, guerin de foncin & co. drew the return of the bill in paris on the marseille firm. such a decision, perhaps, was less risky than drawing a bill on a rioplatense merchant, insofar as guerin de foncin & co. might not have developed its relations with buenos aires yet. then, the marseille company, which had had to reimburse the last bearers of the draft drawn by foiron, turned to one of the endorsers: since they were interested in transferring a credit to leloir (with whom they had business relations), they drew the draft not on jean lasvignes, who had returned to france, but on roquin, meyer & co. in buenos aires, the first endorsers, who would pay its value to leloir. besides, bernadac, regny & co. drew a 14,950 francs draft, which included the 10,465 francs and an exchange rate at 30% loss of paris on buenos aires, in conformity with the parisian broker’s certificate. it is worth pointing out that the marseille firm did not know roquin, meyer & co. and that the exchange rate was higher because of the crisis. such an exchange rate, besides being conform with the broker’s certificate, was perhaps a way, for the marseille firm, to anticipate the risk of non-payment. eventually, the exchange rate came to be disputed before the buenos aires commercial court. in buenos aires, roquin, meyer & co. refused to accept this new draft “for not knowing the signature of the drawer or having any relation with him”.29 this unpaid bill led leloir to sue in the commercial court. to conclude, roquin, meyer & co. had received 10,300 francs in december 1819, but had to pay 14,950 francs at the end of the circulation of the bill drawn by foiron, after the lawsuit for 28 agn, tc, l-145, leloir contra meyer, f. 21. joseph meyer, partner in roquin, meyer & co., testified about this crisis in his petition to the court. 29 agn, tc, l-145, leloir contra meyer, 1821, f. 14v. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 their unpaid bill. since they were one of the main french firms established in buenos aires, the loss they underwent did not challenge their position there. although the french perceived the river plate market’s legal opening as an opportunity, this example shows how difficult the circulation of credit (and therefore business activities) became in wartime, in absence of official stock prices, although the paris stock exchange was becoming important for buenos aires – an under-researched connection. 4. the unequal vulnerability of french merchants in buenos aires although they became more numerous, and were generally well received by the buenos aires inhabitants, french merchants were unevenly integrated into the local society (djenderedjian 2008, 202-215). while some of them enjoyed high social and economic status, welcomed and recommended their compatriots, and helped as interpreters, others needed an interpreter to deal with local institutions, perceived the uncertainty of their condition as foreigners, and were more vulnerable to wartime consequences.30 4.1. being a foreigner: the “uncertainty” of french merchants’ condition whether they were passing through, recently arrived, or faced the difficulties of being foreigners, some merchants reported to the court they were vulnerable as foreigners in times of crisis. being locally rooted brought “legal and social skills” (cerutti 2002, 254) as well as economic, which permitted access to valuable information on local and regional demand, as well as developing business relations. on the contrary, lesser integration into local society undermined businesses. the experience of françois touchard upon his arrival in july 1818 illustrates how such difficulties prevented him from coping with the 1817-1820 crisis and complicated his defense before the commercial court. touchard pointed out the consequences 30 on the forms of integration of french merchants into the cadiz society, see: bartolomei 2017, 253-293. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 of being a foreigner: “my sales […] were precipitated […]: many of the best items i had, because they were not well matched, lost their value” so “i had to buy some products from various french merchant captains.”31 as he needed money to establish his business, touchard had to use half of the funds he had raised to establish his trading house. this forced him to sell in a rush the products he had introduced in order to reconstitute his funds. without correspondents in buenos aires, he had a poor knowledge of local demand and came with too luxurious goods. he was forced to sell them at a loss and purchase goods that better suited demand. touchard also faced difficulties during the proceedings against his partner: poorly integrated into the buenos aires society, he could not present a guarantor for his defense – something the court had requested under threat of imprisonment. touchard explained why he was unable to present such a guarantor: the accusations that his partner jean victor peronard spread among the population and before the court, as well as the decree issued by the judges after the verbal hearing of may 22, 1821, “destroyed in a single stroke [his] credit and fortune, making it impossible for [him] to present the required bail. the rumour of the exaggerated sentence that peronard spread […] among the scarce relations of a foreigner, has inspired fear and mistrust even among the people most willing to vouch for [him].” this is why, as touchard explained from his refuge in montevideo in the 1822 memoir mentioned above, he was left without alternatives to prison: “as a foreigner in buenos aires, without powerful friends, without protection, what should i do? submit myself to the rigours of fate and the injustice of men. i went to the civic district.”32 touchard condemned the practices of the judges in charge in may 1821 and stressed how vulnerable could be a french merchant’s reputation, when he was not 31agn, tc, p-259, peronard contra touchard, 1821, f. 19. 32 ibid., f.13v and f.86. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 integrated into local society. he criticized such imprisonment because it prevented him from putting his business in order, presenting the accounts, benefiting from proceedings that would not undermine his business harder. hardly integrated into the host society, touchard was more exposed to the economic difficulties caused by the 1817-1820 crisis – which was taken into account by the arbiters appointed to resolve the dispute between the partners. in their december 1825 sentence, they asserted that touchard “faced all the difficulties that a foreigner could suffer, such as the problem of language, a few items that were not suitable, and the sad time of his establishment.”33 french merchants were generally well-received in independent river plate, especially after bernardino rivadavia entered the government of martín rodríguez in 1821 and began promoting trade with france. however, they were vulnerable in some conjunctures and marked, if not by hostility, at least by suspicion (otero 2012, 89). this was the case at the time of the “conspiracy of the french”34. at the end of 1818, a group of former napoleonic soldiers hatched a plot against pueyrredón. despite pueyrredón’s projects of collaboration with louis xviii’s france, this reactivated suspicions against french immigrants who were pointed at as linked to the napoleonic troops. french merchants in transit lamented their vulnerability as foreigners. in march 1818, luis podesta, the ship ardito french captain, asked the court for recognition of the ship’s damages. the proceedings provoked a dispute with one of the shippers. as it continued, the lawsuit entailed additional costs for the french captain who had to prolong his stay in buenos aires. 33 agn, tc, p-259, peronard contra touchard, f. 126. 34 on the french conspiracy of 1795, see johnson 2011, 149-178. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 that is why podesta demanded the dispute be promptly settled, “considering the prejudice caused to a foreigner as a result of his stay with the vessel.”35 4.2. lesser vulnerability of merchants integrated into local society? some french merchants were highly integrated into local society and enjoyed significant economic and social credit, which was essential for their business partners and for french immigrants and travelers in buenos aires. their integration into the buenos aires society, their relations of solidarity, their credit, and their business strategies (gervais 2015), enabled them to cope with the difficulties of the period. as we saw earlier, leloir was well integrated into the local society, which permitted him, in september 1821, to ask the court for a suspension of payment, or delay, from his creditors. he presented the statement of his debts and assets, pointed out his good faith, how his economic situation resulted neither from “bad judgement” nor from an “imprudent way of doing business,” 36 and that his assets would be sufficient to reimburse his debts. after the creditors’ meeting, leloir’s demand was accepted: the majority of the creditors granted him a 6-year delay and the court approved the decision. unlike touchard who, a few months earlier, had been treated as a debtor in bad faith, leloir was familiar with the institution and benefited from close ties of solidarity within the buenos aires society. although leloir, who was related to pueyrredón, may have been weakened by the collapse of the directory, his position within the local society encouraged his creditors’ trust. some french merchants enabled compatriots to benefit from initial support upon their arrival in buenos aires, recommending them and helping them to enter into new business relations. in a petition to the court, touchard related that, when arriving in buenos aires, he needed to pay the costs of his establishment and he could not get the support he expected from leloir, who 35 agn, tc, p-248, podesta contra bustamante, 1818, f. 20. 36 agn, tc, l-145, leloir solicita de sus acreedores moratorias de seis años, 1821, f. 2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 had taken touchard & co.’s products in consignment and was considered the french commercial agent: “far from finding help in leloir, i was required within the following two months to pay the customs duties, […] the value of the freight and commissions [...], to get a house in which to establish my warehouse […].”37 touchard stressed not only the importance of leloir for the newly arrived french merchants, but also the expected solidarity within the french community of buenos aires, and it is hard to tell why leloir did not help touchard. similarly, washington de mendeville supported the newly arrived french migrants by welcoming them at his home. as a result of his position within the local society, especially thanks to his union with mariquita sánchez, mendeville was appointed as general inspector of commerce in buenos aires by the french in 1825, before becoming the first general consul of france in 1827 (ayrolo 1999). merchants who were well integrated into local society provided valuable help to compatriots who needed to deal with local institutions. during the lawsuit against his partner, touchard had no choice but to turn to juan pedro varangot to act as his guarantor. thus, he turned not only to the community of french merchants in buenos aires, insofar as varangot was considered being part of it,38 but also to a merchant established since the beginning of the 19th century whose participation in the city’s defense during the 1806-1807 english invasions had contributed to its integration into the local society (mariluz urquijo 2002). integrated french merchants were important resources for the local institutions and for french people in transit, especially when they were fluent in spanish. joseph meyer acted as an interpreter when, in january 1824, the court clerk notified fabio jalabert, captain of the french 37 agn, tc, p-259, peronard contra touchard, 1821, f.19. 38 on varangot’s french nationality, and the political issue which underlays it, see: beraud and mariño 2012, 3. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 ship josefina, of the court’s decree in a proceeding that opposed him to fortunato josé pinto.39 meyer was one of the partners of the company roquin, meyer & co., one of the main french companies in buenos aires. as the naturalist alcide dessalines d’orbigny reported around 1827, meyer was one of the “most recommendable people in the city and the country,”40 with whom close relations were worth developing. french merchants integrated into local society were less vulnerable to the troubles the conflicts caused. in a general context of enthusiasm regarding their residence, and beyond the conjunctures of hostility, they coped with wartime consequences thanks to various business strategies. 5. concluding remarks i presented an overview of french commercial presence in buenos aires during the river plate independence and civil wars between 1816 and 1825, showing that the ability to integrate into former and new networks is one of the factors behind the growing presence of french merchants in the wartime river plate. beginning with an assessment of the french merchants who settled permanently in buenos aires, the study extended to the study of french traders in transit or who entered the rioplatense market while residing in france. despite revolutionary turmoil, french businessmen became more numerous in the river plate, where they arrived in search of new economic opportunities, and could acquire a significant position into the local society and its economic life. despite economic difficulties and political and institutional instability, which hindered the circulation of credit and the continuity of business activities, french merchants consolidated their presence whenever they managed to integrate into local and regional 39 agn, tc, p-250, pinto contra jalabert, 1824. 40 d’orbigny, 1835, 80. alcide dessalines d'orbigny stayed in buenos aires from january 1827, commissioned by the museum of natural history. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 networks, and thanks to the articulation of new transatlantic business relations with the commerce of longer-established french merchants in buenos aires. the analysis of the circulation of the bill drawn by eleonor foiron in buenos aires highlighted that the extension of credit networks involved french merchants settled or in transit in buenos aires, as well as established in france, generating relations between traders without previous acquaintance. this study also raises the issue of the legal institutions that helped french merchants to enter the buenos aires market and consolidate their presence, in a broader context when trade within and with the territories of the river plate was difficult. in this respect, the buenos aires commercial court, which was used by french merchants, either immigrants or transient, was a crucial institution to secure the international transactions that helped connecting the river plate to the north atlantic economies (manac’h 2021). moreover, while france’s strategic interests in the region increased and further manifested after the united provinces of the river plate’s declaration of independence and as pueyrredón sought to have the independence recognized in europe, the french government regarded the french merchants settled in buenos aires as interlocutors, treating them as intermediaries with the buenos aires authorities, as became antoine françois leloir in 1817. thus, regarding the growing importance of the river plate for french political authorities, especially after the post1815 imperial reconfigurations and in the context of rivalries with england, we should examine further how far these french merchants in buenos aires became key agents in reinforcing 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“agents sans lettres de créance, inspecteurs de commerce et consuls: les origines de la diplomatie française en amérique espagnole (1817-1830).” in rien appris, rien oublié? les restaurations dans l’europe postnapoléonienne (1814-1830), edited by jean-claude caron and jean-philippe luis, 284-295. rennes: presses universitaires de rennes. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 halperín donghi, tulio. 1982. guerra y finanzas en los orígenes del estado argentino (1791-1850). buenos aires: editorial de belgrano. halperín donghi, tulio. 2002 1972. revolución y guerra. formación de una elite dirigente en la argentina criolla. buenos aires: siglo veintiuno editores. hora, roy. 2010. historia económica de la argentina en el siglo xix. buenos aires: siglo veintiuno editores. johnson, lyman l. 2011. workshop of revolution: plebeian buenos aires and the atlantic world, 1776–1810. durham nc: duke university press. doi:10.1215/9780822394006 jumar, fernando. 1998. “el comercio francés en el río de la plata. fines del siglo xvii, principios del siglo xviii.” derroteros de la mar del sur 6(6): 81-101. manac’h, laurine. 2021. “le tribunal de commerce de buenos aires et la sécurité juridique des affaires des commerçants français au rio de la plata (1816-1840).” illes i imperis 23: 69-97. doi:10.31009/illesimperis.2021.i23.04. mariluz urquijo, josé maría. 2002. la industría porteña 1780-1835: derecho, sociedad, economía. buenos aires: instituto de investigaciones de historia del derecho. marzagalli, silvia. 2015. bordeaux et les états-unis, 1776-1815. politique et stratégies négociantes dans la genèse d’un réseau commercial. geneva: droz. massé, gladys m. 1992. “reinterpretación del fenómeno migratorio y su incidencia en la conformación socio-demográfica de la ciudad de buenos aires a mediados del siglo xix.” master diss., universidad nacional de luján. mellone, viviana. 2020. la restaurazione atlantica. la conferenza di parigi sulla banda oriental (1816-1819). naples: edizioni scientifiche italiane. moutoukias, zacarías. 2016. “buenos aires, port entre deux océans : mobilités, réseaux, stratification (2e moitié du xviiie siècle).” e-spania [online]. doi:10.4000/e-spania.25959 moutoukias zacarías. 2018. “coacción pública e innovación. deuda, actores y cambio institucional en el río de la plata (1760-1820).” in cambio institucional y fiscalidad. mundo hispánico, 17601850, edited by michel bertrand and zacarías moutoukías, 175-198. madrid: casa de velázquez. moutoukias, zacarias, and marjolein ’t hart. 2021. “fiscal crisis, forced loans and unintended institutional consequences in wartime buenos aires, 1800-1820”, revista de historia económica / journal of iberian and latin american economic history 39(2): 265-296. doi:10.1017/s021261092000004x ortiz de la tabla y ducasse, javier. 1999. “comercio neutral y redes familiares a fines de la época colonial.” in relaciones de poder y comercio colonial: nuevas perspectivas, edited by enriqueta vila vilar and allan kuethe, 143-172. seville: csic/eeha. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1215/9780822394006 https://doi.org/10.31009/illesimperis.2021.i23.04 http://doi.org/10.4000/e-spania.25959 http://doi.org/10.1017/s021261092000004x volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 otero, hernán. 2012. historia de los franceses en la argentina. buenos aires: editorial biblos. pearce, adrian. 2007. british trade with spanish america, 1763–1808. liverpool: liverpool university press. reber, vera blinn. 1979. british mercantile houses in buenos aires, 1810-1880. cambridge ma: harvard university press. robertson, william spence. 1967 [1939]. france and latin american independence. new york: octagon books. rogers, james steven. 1995. the early history of the law of bills and notes. cambridge: cambridge university press. santarosa, veronica aoki. 2015. “financing long-distance trade: the joint liability rule and bills of exchange in eighteenth-century france.” the journal of economic history 75(3): 690–719. doi:10.1017/s0022050715001072. schlez, mariano. 2019. “el tráfico comercial marítimo durante la invasión británica al río de la plata (1806-1807).” américa latina en la historia económica 27(1): e1030. doi:10.18232/alhe.1030. schnakenbourg, éric. ed. 2015. neutres et neutralité dans l’espace atlantique durant le long xviiie siècle (1700-1820): une approche globale. bécherel: les perséides. schneider, jürgen. 1977. “le commerce français avec l’amérique latine pendant l’âge de l’indépendance (première moitié du xixe siècle).” revista de historia de américa 84: 63-87. socolow, susan migden. 2009. the merchants of buenos aires, 1778-1810: family and commerce. cambridge: cambridge university press. stein, barbara h., and stanley j. stein. (2009). edge of crisis: war and trade in the spanish atlantic, 1789–1808. baltimore: johns hopkins university press. ternavasio, marcela. 2009. historia de la argentina, 1806-1852. buenos aires: siglo veintiuno editores. thibaud, clément. 2018. “après l’esclavage. ‘colonisation nouvelle’ et méridien imperial en amérique hispanique (1780-1860).” in la colonisation nouvelle (fin 18e-début 19e siècle), edited by marcel dorigny and bernard gainot, 109-152. paris: editions spm. todd, david. 2011. “a french imperial meridian, 1814-1870”, past & present 210 (1): 155-186. doi:10.1093/pastj/gtq063 todd, david. 2021. a velvet empire. french informal imperialism in the 19 th century. princeton: princeton university press. verdo, geneviève. 2006. l’indépendance argentine entre cités et nation (1808-1821). paris: publications de la sorbonne. weil, françois. 2000. “les migrants français aux amériques (xixe-xxe siècles), nouvel objet d’histoire.” annales de démographie historique 2(1): 5-10. doi:10.3406/adh.2000.1963. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1017/s0022050715001072 https://doi.org/10.18232/alhe.1030 https://doi.org/10.1093/pastj/gtq063 https://doi.org/10.3406/adh.2000.1963 volume 8, number 1, 119-151, january-june 2023 https://doi.org/10.1344/ jesb2023.8.1.34553 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 printed sources blondel, jean j.m. 1826. almanaque político y de comercio de la ciudad de buenos ayres para el año de 1826. buenos aires: imprenta del estado. d’orbigny, alcide. 1835. vol. 1. voyage dans l’amérique méridionale... exécuté pendant les années 1826, 1827, 1828, 1829, 1830, 1831, 1832 et 1833. paris-strasbourg: pitois-levrault & cie – v. levrault. love, george thomas. 1825. a five years' residence in buenos ayres: during the years 1820 to 1825. london: g. herbert. archives consulted archivo general de la nación argentina, sala ix, tribunal de comercio: l-144, don francisco antonio letamendi con don pedro varangot sobre cuentas, 1817, 381 p. l-145, don antonio francisco leloir contra don blas despouy, 1821, 56 p. l-145, antonio francisco leloir contra jose meyer, 1821, 43 p. l-145, don antonio francisco leloir solicita de sus acreedores moratorias de seis anos, 1821, 26 p. l-145, capitán y consignatarios del bergantín francés intrépido sobre averías, 1823, 149 p. m-181, expediente promovido por los ss mendeville, loreilhe y cia contra don juan chavarivère sobre entrega de 18 bultos de efectos, 1826, 24 p. o-230, thomas o’gorman contra juan laviña, 1819, 53 p. p-248, don luis podesta sobre avería de un buque con don manuel bustamante, 1818, 27 p. p-250, demandada suscitada por don fortunato josé pinto cargador del bergantín francés josefina, contra su capitán don fabio jalabert, sobre indemnización de perjuicios, 1824, 27 p. p-259, don juan victor peronard contra don francisco touchard sobre cuentas de compañía, 1821, 225 p. s-341, lynch zimmerman y cía a nombre de strobel y martini de burdeaux contra don josé maría riera por cobro de cantidad de pesos, 1818, 191 p. v-404, don juan pedro varangot y don antonio rosales sobre unos efectos tomados por don francisco sarriera, 1816, 196 p. v-405, don augusto verger contra don luis brian sobre que rinda cuentas de una habilitación que le hizo el finado padre de aquel, don maturan le verger, 1823, 56 p. v-406, don ubaldo vaca contra don juan pedro varangot por cobro de pesos, 1824, 21 p. room x 23-5-5 and 23-5-6, padrón de la ciudad y campaña de buenos aire 1827. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 andrea lluch conicet (argentina) and los andes university (colombia) u.s. companies in argentina: trade and investment patterns (1890–1930) abstract argentina was viewed as the least americanized country in latin america at the beginning of the twentieth century. however, the role u.s. companies in shaping the argentinean economy in the first decades of the twentieth century has not yet been fully documented. for this reason, this article provides a new estimate of the scope and characteristics of u.s. interests in argentina, and try to explain the role and impact of u.s. firms in argentina’s economic growth to 1930. it proposes that the impact of u.s. investments on the argentinean economy was of longer standing and more widely diversified than has generally been assumed. keywords: foreign investment; multinationals; argentina; united states; first global economy argentina was viewed as the least americanized country in latin america at the beginning of the twentieth century. at that time, britain, and other european nations, had heavily invested in argentina, one of the wealthiest countries in the world with a gdp more than twice the average for latin america (madison 1997, 27). by 1900 about 80 percent of the foreign investment in argentina was british (regalsky 1986). corresponding author: e-mail: alluch@conicet.gov.ar received 16 feb 2018 accepted 12 jun 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 however, the role u.s. companies in shaping the argentinean economy in the first decades of the twentieth century has not yet been fully documented. the case of argentina is particularly interesting; while the country did not receive u.s. direct investment in traditional sectors, such as agriculture and mining.1 the u.s. nevertheless invested more heavily in its manufacturing and trading companies than in any other latin american nation by 1929. in fact, in manufacturing, argentina was followed by brazil and cuba.2 the imports from the u.s. to argentina were modest at the end of nineteenth century, yet by 1930, argentina was the 6th largest worldwide market for u.s. goods and was the largest latin american single purchaser of american products during the years 1927 to 1930 (see table 1).3 how did this process unfold, and what role did american multinational companies play in it? using firms as analytical units, i examine which u.s. firms arrived in argentina and when, what reasons led them to establish or acquire sales offices or factories, and how they strengthened their business position. the purpose is to provide a new estimate of the scope and characteristics of u.s. interests in argentina, and try to explain the role and impact of u.s. firms in argentina’s economic growth to 1930. until now, the literature focusing on u.s. companies is sparse, except for some studies on the transport, meatpacking, and petroleum 1 prior to 1929, the u.s. department of commerce reports had lumped together direct and portfolio investment, private and governmental, and those in separate countries. the figures for numbers of firms and book values for 1929 were organized by broad categories. of course, book values give a highly arbitrary and understated view of real values. argentina. see estimates of united states direct foreign investment, 1929-1943 and 1947 (1976). 2 for latin america, see o’brien (1996, 1999), although argentina is hardly mentioned in his analysis. for argentina, a classical reference is regalsky (1986). a recent overview in lanciotti and lluch (2018). 3 estimated from: our world trade; value and volume of principal exports and imports between united states and chief foreign markets (foreign commerce department, chamber of commerce of the united states [19201940]). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 sectors.4 other studies have focused on political economy and international relationships.5 previous estimates therefore do exist, but they are incomplete or mainly concentrated on the 1930s and on industrial enterprises. in this regard, the proposition here is that research about u.s. companies is still lacking. before 1930, the u.s. certainly invested less capital in argentina than did european countries, particularly great britain. however, based on a new quantitative estimate of u.s. companies operating in argentina, the article proposes that the impact of u.s. investments on the argentinean economy was of longer standing and more widely diversified than has generally been assumed. an earlier and gradual increase in the number of newly established u.s. companies since the beginning of the twentieth century cannot be measured in terms of flows of direct investment. the convergence between arrivals of new firms and u.s. direct investment flows only occurred at the end of the 1920s. the u.s. stake prevailed in the industrial sector and was significant in the commercial and service sectors. in addition, and beyond the competition between european countries and the u.s. for the argentinean market, and especially the anglo-american rivalry, the paper proposed that the u.s, and great britain have played a relatively complementary rather a competitive role as suppliers of goods, since american firms had promoted a dormant demand for many new products as a result of its technological leadership. 4 for argentina, see ferrer (1964), and garcía heras (1985), among others. a useful study for understanding the subject is phelps (1939). other approaches to the problem of foreign investments (especially american) in argentina from a political perspective can be found in fuchs (1959) and sommi (1949). a recent contribution for uruguay, is jacob (2016). 5 the literature on the economic relations between the united states and argentina abounds, particularly from the point of view of commercial and international relations. classical references are mcgann (1957); peterson (1964); escudé (1983); tulchin (1990); and rapoport (1981). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 this new estimation relies heavily on empirical research, organized in a database of u.s. corporations operating in argentina from about 1890 until 1930 (see the main sources used in the appendix). this information complements and supplements data provided by a new database of foreign-controlled companies operating in argentina (foreign companies in argentina database – database fcad–pict 2010/0501) factoring in variables such as country of origin, creation date, organizational form, core business, capital invested/share capital, and entry strategies. the database fcad contains detailed information about foreign companies operating in argentina by selected years.6 the paper also links american firms’ arrival cycles to available statistics on direct investment and trade volumes between both countries. several other contemporary historical sources have been used to illustrate the characteristics of u.s. multinational corporations (mncs; here defined as firms that control income-generating assets in more than one country at a time) settling in argentina. however, multinationals not only make foreign direct investments, but also transfer over borders an entire business package that includes products, processes, experience, reputation, knowledge, financing, marketing knowhow, trademarks, technology research, information, and managerial expertise (jones 1998; wilkins 1998; chandler and maszlish 2005). the essay has six sections. the first outlines the characteristics of u.s. direct investment gathered from a newly created listing of u.s. companies established in argentina. the second presents the overall investments’ timing and the main business activities developed by u.s. corporations before 1930. sections three to five consider the main characteristics of u.s. business expansion in three different stages (before world war i, the war period, and the 6 see http://empexargentina.com/en/ http://revistes.ub.edu/index.php/jesb http://empexargentina.com/en/ volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 1920s). section six discusses the various motivations that led u.s. firms to migrate to argentina. u.s. companies operating in argentina the conventional wisdom regarding u.s. direct investment is that most u.s. companies established in argentina were related to the assembly of consumer goods.7 but this statement, though true, is incomplete. this research highlights the great diversity of u.s. companies operating in argentina. it also shows the number of individual companies within each sector. companies in the petroleum, metals and mining products, chemical and pharmaceutical, and electrical and non-electrical machinery sectors were most numerous, followed by those in manufacturing and consumer products, and banking and financial services. meatpacking companies, agricultural machinery, and automobile companies dominated the domestic market, even if they were few in number. the new estimate shows that previous research underestimated the number of agricultural and raw material firms; trade-supporting firms such as shipping firms; utilities; contracting firms; companies in professional, information, and financial activities; and sales organizations and manufacturing or partial-processing branches. a distinct feature of u.s. companies in argentina during this period was that sales extensions of u.s. corporations were initially branches of a u.s. incorporated company, in contrast to american firms’ experience in europe, where u.s. industrialists usually incorporated their sales subsidiaries in the host country because of the tax situation, local legislation, and to protect the 7 dunn (1926) and winkler (1929) described the complexity of american interests in the first decades of the twentieth century but only partially. phelps (1939) is an exception and represents an indispensable reference regarding industrial companies migrating to argentina. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 parent company from liability (dickens 1930; wilkins 1970, 193). therefore, the organization of “domestic” companies was not the norm in argentina until the 1920s. table 1. us companies by main sectors sector firms petroleum, chemical and other industrial products 24 office suppliers and electrical machinery 23 agricultural and pastoral products 15 manufactured and consumer products 15 banking and financial services 12 pharmaceutical and medicinal products 11 insurance companies 8 engineering and construction 6 moving pictures 6 service (others) 5 communications and electricity co (only americans) 7 transport sector 4 agricultural machinery 5 car companies 4 meat packing 4 miscellaneous 14 n/a 7 us importers & representations 19 public utilities companies (argentinean) 15 not confirmed data 24 other companies registered as argentinean corporations 12 source: own elaboration. see sources in the appendix. as suggested by lluch and lanciotti, the argentinization of foreign assets became noteworthy only after 1930, and particularly after 1933, in a new economic and political milieu, when the vast majority of u.s. companies migrating to argentina were organized as limited liability corporations (sociedad anónima argentina) and incorporated under the laws of the argentine republic (lanciotti and lluch 2015a). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 overall u.s. investments’ timing before 1890, almost all foreign companies operating in argentina were british. not many u.s. citizens were prominent in argentina’s commercial life.8 however, the proposition here is that the u.s. stake in argentina, although quantitatively low in terms of foreign direct investments, was of longer standing than has been generally assumed.9 based on the analysis of u.s. multinational companies’ entry dynamics, it is possible to argue an ongoing and steady rise in the number of u.s. companies that settled in argentina in the beginning of the twentieth century. it is worth noting how rapidly u.s. manufacturers entered the argentinean market before 1913. a growth not interrupted by world war i. in fact, an important number of u.s. companies decided to start operating in the country during the war and the immediate postwar years. the 1920s were a period of consolidation and steady expansion. as shown by lluch and lanciotti, this is not a unique trait of u.s.’s investors. indeed, after the world war i, the entry of foreign firms grew more than in any other period. by 1930, the number of foreign firms in argentina had doubled the number registered in pre-war years (lanciotti and lluch 2015b). the migration cycle by type of business until 1930 (in both manufacturing firms and nonmanufacturing enterprises such as transportation, retailers, construction firms, advertising agencies, and credit companies) was a complex phenomenon. but on the whole, more than 50 percent of the companies started operations before the 1920s. the rest were established in 8 see for example: reports of the commission appointed under an act of congress approved july 7, 1884, to ascertain and report upon the best modes of securing more intimate international and commercial relations between the united states and the several countries of central and south america commission to central and south american states, 1884-1885 (1886). 9 exceptions to this could be found in wythe (1949) and wilkins (1970, chapter 9) http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 argentina between 1920 and 1930.10 this is coincident with the data provided by the fcad– pict 2010/0501, since only considering u.s. companies operating in the 1930 year, 42% of them have established before the 1920s. table 2. annual distribution of us companies' migration, argentina, c.1890-1930 us firms us importers total share within total for 1890-1930 (%) until 1900 6 6 3 1901/1910 17 4 21 11 1911/1915 30 2 32 17 1916/1920 37 6 43 23 1921/1925 36 3 39 21 1926/1930 43 3 46 24 n/a 1 1 2 1 total 170 19 189 100 source: own elaboration. see sources in the appendix this data verifies two hypotheses: that there was a gradual, incremental increase in the number of newly settled companies during the first decades of the twentieth century (which cannot be measured in terms of the amount of direct investment) and that the u.s. stake in argentina was early and remarkably diverse. the following sections, in chronological order, identify the main activities of u.s. companies in argentina in each of the three phases previously identified. u.s. companies before world war i argentina was a vast country of fertile prairies, and it was swiftly included in global markets as a staple producer. its successful economic performance during the first global economy was 10 this calculation includes twenty-two import companies formed as foreign companies. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 supported, as mentioned before, by the arrival of foreign investments in infrastructure -mainly railways and portsand services to export primary goods. another characteristic of the argentinean economic structure was the enormous volume of its foreign trade. the trade between the united states and argentina developed slowly during the nineteenth century. continental europe (50 percent) and great britain (35 percent) dominated imports at the beginning of the twentieth century.11 in 1904, u.s. sales to argentina made their first large jump. agricultural implements accounted for the largest single increase, followed by wood and wood manufacturers. in 1905, the most important products were timber (in bulk), vehicles and railway material, and agricultural tools and machinery. trade between the u.s. and argentina reached a new peak in 1910, when the country received more than half—54 percent—of u.s. exports to south america (by value) (u.s. department of commerce 1900-1920). the united states had gained an unquestionably strong position as the supplier of certain products (machinery, petroleum, agricultural equipment, lumber, and barbed wire) before world war i. american exports grew remarkably while the u.s. stake in argentina was minimal, as stated above. for example, of the total foreign investments in argentina in 1913, it was estimated that about 53 percent was british, 27 percent french, 10 percent german, six percent belgian, three percent spanish, and about only one percent american.12 before 1910, trade was more important than the nationality of direct investment for the simple reason that half of the imported goods from the united states had a competitive advantage over similar imported european goods (mccrae, van metre, and eder 1931). the other half of imports from 11 a contemporary study of commercial relations between the u.s. and argentina, in phelps (1938). 12 by 1913, the stock of long-term private foreign investment reached half of the value of the total fixed capital stock. see united nations, economic commission for latin america (1958). for a general analysis of foreign investments in argentina, see barbero and regalsky (2002) and jorge (1971). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 the united states (pharmaceutical and chemical products, electrical machinery, textiles, iron and steel products, paper products, building materials, and tires and inner tubes, among others) faced european competition, which helps to explain the importance of having several u.s. distribution and selling organizations in argentina to manage the substantial increase in imported u.s. goods at the beginning of the twentieth century. the first u.s. firms that migrated to argentina were insurance and credit reporting companies. new york life insurance and equitable life assurance were active in argentina’s market at the end of the nineteenth century. the arrival of g. dun & co. in 1902 stands as a landmark of the internalization of credit report services. the buenos aires office was g. dun & co.’s third branch in latin america, and its region included not only argentina but also paraguay and uruguay. g. dun & co.’s new strategy was to collect information about argentinean companies and the argentine economy for u.s. multinational and exporting companies that had initiated the process of expanding into the south american market (vose 1916, 166). agricultural machinery companies also arrived in the late nineteenth century, opening direct selling and servicing branches. in 1885, j. i. case expanded its activities to south america, appointing w. r. grace & co. as distributor for the west coast. by 1890, case’s branch office opened in buenos aires, becoming the first branch of a u.s. company in this industry ever established in argentina. other companies, such as avery plow co., international harvester co., and rumely products company opened their commercial branches (with different commercial success in each case) before world war i. during this period, in nearly all categories of agricultural machines american products provided from 70 to 99 percent of the total imports to argentina, according to some estimates (motz 1916). the strategy of organizing a sales branch implied a higher investment and risk than indirect representation (through http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 commercial agents), but the drawbacks were outweighed by the improvement in distribution methods and after-sales services. before world war i, the best-known u.s. industrial investments were the meatpacking plants. in 1907, swift & co., the largest us meatpacker, bought the largest plant in argentina, the meat lockers of la plata cold storage co. the second step in u.s. penetration was the purchase of the argentine meatpacking plant la blanca by the national packing company, later controlled by armour and morris.13 by 1914, sulzerberger & sons (later wilson & co.) had a packing plant in buenos aires province. these u.s. companies purchased existing plants, which they improved and enlarged. with the exception of the cudahy packing co., all the largest u.s. meatpackers invested in south america. the reason that u.s. companies migrated to argentina was to continue the chilled-beef trade with the united kingdom. there were two reasons for this. first, available domestic surplus was diminishing. second, argentine beef had become competitive because us production costs had risen and argentina was able to produce good quality beef cattle more cheaply than any other country (white 1945; wilkins 1970). u.s. packers already faced competition in the british market: in 1905, the quantity of argentine beef arriving in the united kingdom exceeded that from the u.s. for the first time. improvements to refrigeration techniques after 1900 enabled the export of chilled meat, a more perishable product. argentina became the first country to export both frozen and chilled meat, and there were firms that handled both products (perren 1978). as such, u.s. firms expanded argentine chilled beef exports but by no means initiated these. overall, these firms’ migration to argentina (and south america in general) was a 13 the national packing company was a combination of swift, morris, and armour. when the company was liquidated in 1912 to avoid a civil suit, swift withdrew from la blanca and it became a property of armour and morris. see hanson (1938). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 defensive strategy. from 1910 to 1913, between 40 and 50 percent of total argentine beef exports came from plants owned by u.s. companies. the dominance of u.s. companies, in particular from swift and armour, was further extended in the following years.14 oil companies, such as the two standard oil subsidiaries—galena signal oil co. and the west india oil co.—accounted for an important increase of trade figures. in 1909 and 1911, these companies organized their own marketing offices in argentina. their presence allowed u.s. interests to dominate argentina’s petroleum sector during this period, and by 1912 the u.s. handle more than 96 percent of the imports of unrefined naphtha (solberg 1979). in a complementary way, several companies involved with intermediate goods and consumer goods arrived in argentina before 1914. american mass-production industries built sales organizations and branch offices. in 1900, general electric co. organized the south american electric supply co. under the laws of the state of new york to sell its electrical apparatus and supplies in argentina, chile, paraguay, uruguay, and bolivia (danvers 1901). the other two of the first multinational investments were the commercial branches of united shoe machinery corporation (in 1903) and singer sewing machine (in 1905). companies that sold new products, such as the remington typewriter co. (1911) and national cash register (1913), also moved into the country. among other multinationals that had opened import, sales, and service branches in argentina by 1913 were u.s. steel co., pullman standard car export co., and national paper and type co. 14 in 1914 , the south american meat importers’ freight committee (as it was called in the uk) reserved and allocated the tonnage for the transportation of refrigerated argentinean meat to great britain in the following terms: united states (58.50%), united kingdom (29.64%) and argentina (11.86%). (liceaga 1952). for an analysis of the argentine meat trade, see smith (1969). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 previous analyses based solely on direct investment amounts do not reveal the true features characterizing the first stage of u.s. business penetration in argentina’s market. american multinationals’ subsidiaries played a key role in the growth of trade between both nations. indeed, during the first stage, competitiveness was the reason why some u.s. companies established a presence in argentina despite the significant deficiencies in u.s. banking and communication infrastructure and facilities in argentina (compared with european competitors such as great britain).15 in addition, political and opportunity parameters contributed to increase argentina’s attractiveness (wilkins 1994). both the national and local government policies were very favorable to all foreign investors (u.s. included). at the same time, argentina's growing internal market combined with the lack of local competition (except for the banking sector) provided ample opportunities for multinationals (lanciotti and lluch 2015a). u.s. companies during the wartime period by the outbreak of world war i, u.s. business interests had permeated a wide section of activities. the argentinean case confirmed that the first world war did nothing to impede the expansion of american business investments abroad (wilkins 1970). furthermore, wartime dislocations deepened the shallow channels of trade between argentina and the united states. the eclipse of germany —the united states’ principal competitor in “modern” manufactured goodsforced the argentines to turn more and more to the united states. the u.s. exports trade, even in a depressed market, was able to double its share from 12.8 percent to 32.2 percent 15 as lincoln hutchinson stated in his report about trade conditions in south america, “american banks are conspicuous by their absence.” see hutchinson (1906). american exports also suffered serious delays and the uncertainty of return cargoes. for a review of shipping facilities at this time see whelpley (1911, 35). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 between 1914 and 1917 (see table 3). in that sense, the war accentuated and accelerated a development that would have occurred more gradually. this trend was accompanied by an increase in the number of registered foreign companies. even if during the war the flows of direct investment almost ceased (by its value), an important number of u.s. companies still decided to start operating in argentina. during the early period, u.s. businesspeople had confronted in argentina the inadequacy of its business infrastructure. for years, they had relied on british financial institutions, cable companies, and ships for banking transactions, communications, and transport, but world war i underscored the necessity of improving and developing their own business infrastructure. as a part of this process, u.s. bank branches began to be established during these years. the u.s. federal reserve act of 1913, section 25, of which first authorized the establishment of u.s. bank branches in foreign countries and u.s. dependencies, became effective in 1914, and the national city bank of new york was the first to use this authorization in south america. the bank had begun studying the argentine banking situation in 1908—urged on by u.s. ambassador to argentina charles h. sherrill and encouraged by the u.s. state department— and had obtained a thorough knowledge of argentina by 1913.16 the first foreign branch of the national city bank was finally opened in buenos aires in november 1914. it was also the first branch of any nationally chartered u.s. bank. a bank official reported that the decision to open branches in south america was reached not on the basis of estimated outlay and return, but on the basis of whether or not u.s. business interests 16 until the passage of the federal reserve act, american national banks were prohibited from establishing foreign branches and from making acceptances. see phelps (1927) for an analysis of the foreign expansion of american banks. about the national city bank of new york expansion, see cleveland and huertas (1985) and wilkins (1974, 19–23). also see mayer (1973, 60–76). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 would find these banking facilities of great help and value in extending business relations. the branch opened with only eight employees. the first manager was j. h. allen who was the manager of the banque nationale de la république d'haïti. the selection was made under the consideration that he was acquainted with latin american banking methods as well as those of the u.s. (cleveland and huertas 1985, 78).17 the immediate aim was modest: to perform the usual banking functions, to foster the bank’s relations with corporate customers, and to provide auxiliary banking services such as credit and trade information. despite the low expectations, the buenos aires branch began to make a profit almost immediately. within one year of its inauguration, the branch had accumulated enough deposits to become the eighth largest depository in argentina. by 1917, the branch had become argentina’s ninth-largest bank. in 1917, first national bank of boston arrived in argentina and opened its first foreign branch (mayer 1973). in the manufacturing sector, ford co. took the initiative, establishing a sales office in 1914, and in 1917 the company built an assembly plant. in 1916 the u.s. was already the source of 80 percent of the automobiles imported into argentina; a few years earlier, in 1912, only 24 percent of imports were from the u.s. kodak was another multinational that migrated during these years, which opened its first commercial branch in buenos aires in 1915. in the tire industry, sales subsidiaries of goodyear, firestone, and u.s. rubber were established between 1915 and 1917. since the world war i, argentina became the best market for u.s. rubber in the southern hemisphere (up to 75 percent of exports headed to latin america went to argentina). all of 17 see also the americas 1, no. 1 (1919, 12–13). according to mayer (1973, 66), the president of the united states steel corporation, james a. farrel, wanted an american bank to finance him in argentina. he asked vanderlip to open the first national city bank branch in argentina, pledging the support of the giant steel trust in return. he also promised to obtain the deposits of international harvester, armour and swift, in addition to those of his own company for the national city bank. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 the products consumed in the market were foreign-made since the first local commercial tire plants were set up only in the early 1930s by goodyear and firestone. a clear sign that u.s. interests had grown during world war i was the organization of amcham (american chamber of commerce in argentina) in 1918. its purpose was to improve the relations between american sellers and argentine and south american buyers. the chamber was an outgrowth of the american commercial club, and it was supported by big multinationals. amcham had 74 founding members, including the majority of banks, manufacturers, importers, and exporters who were settled in argentina at that time (chamber of commerce of the united states 1920).18 to sum up, during world war i more effective banking and communications systems between the united states and argentina were established, strengthening the u.s. competitive position in the local market, aiding u.s. trade flows, and promoting the arrival of a new group of multinationals. u.s. companies during the 1920s: new products and services a number of significant changes unfolded after world war i. as the argentine domestic market expanded and diversified in a low political risk environment, it attracted more foreign direct investment. the u.s. took on the role of main supplier of external capital to latin america formerly occupied by europe, and by the end of the 1920s, the u.s. capital flows exceeded the british ones (grosse 1989, 10).19 18 chamber of commerce of the united states of america in the argentine republic (1920). 19 a very large part (perhaps as much as 80 %) of the increase in u.s. investments in latin america between 1919 and 1930 was in the form of publicly floated bonds of governments and the bonds and stocks of private corporations. argentina was one of the chief governmental borrowers during the early part of the 1920s. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 the period after world war i marked the end of a fdi cycle that had focused on the exploitation of natural resources. new firms moved into the country, and the companies already installed there enlarged their facilities. as lewis has pointed out, the increased foreign demand for american exports boosted the funds available for investment abroad. the result was a steady and rapid increase in america’s foreign holdings.20 the department of commerce at the end of 1924 estimated that the total of us investments in argentina was 121 millions (halsey and butler 1925). as a consequence, in the 1920s, the united states confirmed its supremacy in investment flows and trade (see table 3). in 1925, u.s. exporters gained from great britain first place among argentina’s merchandise suppliers. in 1929, u.s. exporters provided 26.3 percent of argentinean imports, while great britain supplied 17.6 percent. argentina was the united states’ largest single purchaser in latin american between 1927 and 1930. durable goods represented a significant portion of this trade. in the 1920s, u.s. imports moved towards new products resulting from technological pioneering, such as automobiles (including accessories), agricultural machinery, and office and household appliances. these new products were the most important in terms of values of goods shipped to argentina from the u.s., accounting for 50 percent in 1922, for example (by value). the shares commanded by these new products, along with fuels and machinery, explain why imports from the united states grew four times in the 1920s, while products coming from continental europe failed to double their volume and imports from the united kingdom increased by less than 40 percent (jorge 1971; caputo de astelarra 1984). 20 by 1929, the principal area in which american business enterprises invested funds was south america (followed by canada and europe). the three areas altogether account for roughly three-fourths of american private investment abroad. see lewis (1938, 424). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 table 3. argentine u.s. trade (years 1913-1930) year m from us % of m x to us % of x trade with us % of total arg. trade balance 1913 165938 14,7 55884 4,7 221822 9,6 -110054 1914 98881 13,5 112428 12,3 211309 12,8 13547 1915 171795 24,8 212968 15 384763 19,2 41173 1916 243156 29,1 272114 20,8 515270 24,2 28958 1917 313829 36,4 366524 29,4 680353 32,2 52695 1918 384243 34,3 375345 20,7 760588 25,8 -8898 1919 529246 35,5 429924 17,4 959170 25 -99322 1920 705444 33,1 350308 14,9 105752 22,5 -355136 1921 456501 26,9 134603 8,8 591104 18,4 -321898 1922 346812 22,2 181339 11,8 528151 17 -165473 1923 412311 20,9 204131 11,7 616442 16,5 -208180 1924 415163 22,7 163273 7,1 578436 13,8 -251890 1925 468788 23,9 162961 8,2 631531 15,9 -305827 1926 460924 24,6 163961 9,1 624885 17 -296963 1927 495037 25,4 190499 8,3 685536 16,2 -304538 1928 441205 23,2 198335 8,3 639540 14,9 -242870 1929 516307 26,3 212633 9,8 728940 17,6 -303674 1930 370723 22 135110 9,7 505833 16,4 -235613 note: figures show 000 in real values (values in argentinean pesos). m (imports), x (exports). source: adaptation from information compiled in trade relations between argentina and the united states of america (buenos aires, chamber of commerce of the u.s. of america in the argentine republic, 1946). british concern for the rising american share as argentina’s industrial supplier while the u.k. remained its leading commodity buyer heightened the business rivalry between both nations. nonetheless, regardless of the anglo-american rivalry debate, at the end of the 1920s, in 18 out of 25 listed products imported to argentina there was no real competition between the u.s. and great britain (mccrae, et. al. 1931). this situation was even recognized by the british government: “a good proportion of the trade of each country comprises goods in which the other cannot, for certain fundamental reasons effectively compete at the present time, such as in agricultural machinery, automobiles, petroleum products, lumber, hinder twine, newsprint, cinematograph films, oil.” (great britain 1923, 20). the u.s. had not only replaced european http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 producers in the argentine market in some categories but most importantly had promoted a dormant demand for many new products in many sectors.. the rate of new u.s. companies established in argentina reached its peak in the 1920s, but did not take over the first position in the total of foreign firms until much later, as shown by lluch and lanciotti (2015a). for the first time, the migration of us companies was, coupled with a historical record in direct investments. the united states became the major supplier of new capital in argentina during the 1920s.21 the u.s. department of commerce estimated that at the end of 1924, the total of u.s. investments in argentina was $121 million. by 1929, it was calculated that u.s. firms had invested $331 million.22 in terms of amount and value, the most substantial impact in argentina of u.s. investment toward the end of the 1920s was made by public utility companies; from $1.5 million in 1924 to $147 million in 1929. this sharp increase was part of a worldwide trend: the same happened in european and other latin american countries. paralleling the domestic boom, u.s. corporations made sizable new foreign investments in communications and in power and light (lanciotti 2008; see also wilkins 1974, 129). purchases by the international telephone and telegraph company (itt) placed the major argentine telephone companies under u.s. ownership. the firm began its expansion in march 1928 by securing a controlling share in the argentine telephone co. of buenos aires. early in 1929, it bought the united river plate telephone company (compañía unión telefónica del río de la plata). this company, established by britain in 1882, was the most important company of its kind in argentina and it 21 between 1914 and 1919, the dollar value of u.s. investments in latin america increased by half and more than doubled in the decade following 1919. see united nations (1955, 7). 22 see estimates of united states direct foreign investment, 1929–1943 and 1947 (new york, 1976) and halsey and butler (1925). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 was the biggest telephone enterprise of south america (great britain 1931, 87). in the electrical sector, the american & foreign power co. (a controlling affiliate of electric bond and share company) and the intercontinents power co. (formed in 1928) were the only two u.s. corporations that purchased argentine electrical power stations. the largest transaction occurred in 1929 when the electric bond and share company took control of the atlas light and power company of london, the chief british electrical interest in argentina. between mid1928 and november 1929, the two u.s. firms added about 140 power stations to the forty they already owned (great britain 1930, 35). the apparent mass transfer of british properties to u.s. ownership worried the british community in argentina. the british ambassador in argentina, sir malcolm robertson, was disturbed by the american purchase of british-owned utilities in south america and he apparently feared that their railways, too, “would fall into yankee hands.”23 by 1929, as have been said, argentina was the first choice for manufacturing in all of latin america, followed by brazil and cuba (which got half the investment argentina received) (see table 4).24 it is difficult to quantify the amount of capital that foreign companies invested in argentina but the role of u.s. companies in certain industries and products was highly significant. in addition, by the 1920s, the american businessman community had consolidated itself in argentina with the active participation of american businessmen in the amcham (around 80 per cent of total 23 peterson (1964, 356). for a specific analysis of the anglo-u.s. trade rivalry in argentina, see gravil (1975). 24 the figures for numbers of firms and book values for 1929 were organized by broad categories. book values give a highly arbitrary and understated view of real values. see estimates of united states direct foreign investment, 1929–1943 and 1947 (american business abroad) (1976). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 u.s. firms were associated), other social organizations and clubs, and publications, such as the american weekly of buenos aires (lanciotti and lluch 2018). table 4: american direct investment in argentina, 1929 (values in thousands of dollars) number value manufacturing 27 82008 distribution (a) 37 52908 agriculture 8 29811 public utilities and transportation 7 147836 miscellaneous (b) 20 19256 99 331819 notes: a) petroleum is included in distribution, b) mining and smelting is included with miscellaneous. source: estimates of united states direct foreign investment, 1929-1943 and 1947 (new york, arno press, 1976). source: own elaboration u.s. industrial firms took a leading position in some sectors and made a partial contributing to local industrial growth.25 during the period from 1926 to 1930, forty-five new companies established subsidiaries in argentina. meanwhile, some other industrial companies already established enlarged their capacity. such was the case with the argentine portland cement co. and the otis elevator co., which extended its operations in 1927 by opening a factory in buenos aires to manufacture elevators (ferrer 1964, 205). ford continued to dominate the argentinean market during this period (60 percent of the 4,071 automobiles imported by argentina in january 1925 were fords, and 58 percent of the remainder were divided among four other u.s. companies) (phoebus 1926, 19). by the mid1920s, u.s. car companies were practically the only suppliers. general motors opened its argentinean assembly plant in 1925 as part of a worldwide strategy.26 competition was 25 for an analysis of the industrial sector, see barbero and rocchi (2003). 26 between 1925 and 1928 it increased its capital as much as four times (from 5 million to 20 million argentine pesos), history and activities of the north american colonies of argentina (1929). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 extremely keen, not only among the big u.s. automakers but also among more than fifty other firms (brady 1923; tewksbury 1929). in patent medicines and medical specialties, u.s. expansion was notable, even though france accounted for 50 percent of the imports of prepared medicines by 1925 (bergin 1927, 12). many firms including sidney ross co. inc. (as an argentinean liability company); lanman & kemp inc.; william r. warner & co.; scott y browne inc. of argentina; cia scholl sa; colgate/palmolive int. co.; dorothy gray & co.; and parke davis & co. opened sales branches in buenos aires, manufacturing on a small scale and packaging locally mostly to avoid custom duties. the chemical sector followed the same process, although its worldwide expansion took place later and its market-oriented stake in south america was smaller than its stakes in europe and canada (wilkins 1974, 84).27 u.s. film studios were established during these years also. by 1926, argentina was the united states’ largest latin american market (and fourth-largest market worldwide of films for local consumption) in terms of number of films imported. every renowned u.s. producer and distributor was locally represented: metro-goldwyn-mayer, paramount pictures, universal pictures corporation, fox film corporation, united artists, among others (north 1926, 1045). about 85 percent of the pictures shown in buenos aires during the 1920s were made in the united states (phoebus 1926, 36). the expansion of u.s. interests was noticeable in other sectors, beyond public utilities and manufacturing and partial-processing activities (including assembly operations). of course, u.s. firms stayed away from the sectors in which british companies were operating, such as banking and railways. but the 1920s witnessed the arrival of commercial and consumer finance 27 argentina was an important market for u.s. chemicals (1st in latin america, 7th in the u.s. world markets). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 companies, most of which financed exports of automobiles and other consumer goods (radios, electric appliances, and furniture). these companies in the financial sector helped to reinforce the u.s. market share of durable goods. u.s. companies from the transportation, construction, and engineering sectors also consolidated their presence in argentina in the late 1920s. for example, warren brothers company of argentina, a paving contractor, was organized in 1925, attracted by the increasing development of road construction and paving in the city of buenos aires. in advertising, in 1929, j. walter thompson (jwt) migrated to argentina thanks to a strategic alliance with general motors, which was trying to capture overseas markets for its products. a momentary edge over its closest competitor, ford motor co., gave gm the push it needed to launch an overseas offensive (another example of the multiplier effect of u.s. direct investment). from 1929 on, the jwt experts provided an important service to u.s. firms, developing advertising campaigns and consumer preference polls for corporate clients (salvatore 2005). the largest sector (by number) of new firms arriving into argentina was direct selling and trading companies. this is coincident with data provided by the database fcad–pict 2010/0501. still, in 1930, 43 u.s. firms classified by activity were listed under g category (this means involved in the commercialization and distribution of products). american companies dominated the sector (considering all foreign companies in argentina). the creation of selling organizations was a key strategy to encourage the penetration of foreign capital. as worldwide, trading houses spurred its growth. behind the development of selling organizations the interest was placed in the development of distribution networks of the same nationality. however, the importance of sales organizations has not received much attention in previous fdi studies. by 1929, half of the u.s. sales organizations of latin america were based http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 in the city of buenos aires.28 the significant number of such firms in argentina was a result of previous efforts by u.s. companies to develop distribution networks. if by 1916 most goods of u.s. origin sold in argentina were in the hands of the british and other foreign importers, the situation was different in the 1920s since several american houses had been established to handle practically every line of goods. a complementary issue, even less studied in the international business literature, is the role of u.s. multinationals acting as representatives of other u.s. interests. a directory of u.s. companies represented in argentina showed that the branches of multinational companies not only specialized in producing and marketing their own goods but also represented and imported related products. from a total of 509 u.s. companies represented in 1933, 109 had direct representation in the country. but one-third (133 firms) of the four hundred remaining firms were represented only by three u.s. multinational branches, as table 6 shows: united shoe machinery co. arg. (sixty-eight companies), general electric sa (thirty-seven companies), and cia standard electric argentina (twenty-eight companies). the list of main distributors of u.s. products in argentina also included westinghouse int. sa (twelve), general electric appliances sa (nine), national lead co. (eight), and the u.s. steel products co. (six). for example, general electric co. (ge co.), in addition to organizing special departments for the sale of various classes of electrical devices and materials, established an industrial section that specialized in importing and selling machines and devices to be used in construction industry. acting as representatives of u.s. companies, these multinationals were supplying their own products but also complementary goods. u.s. shoe machinery co, which manufactured 28 u.s. investment in africa, asia, and oceania altogether amounted to $72 million, whereas in australia and new zealand it reached $22 million. in canada, the value of selling organizations was estimated at $37 million. in europe the amount was $132 million (dickens 1930, 23). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 industrial machinery for shoe manufacture, imported its own products as well as related products for distribution—brushes from baker brush co., new york; cork filler from keno supply company; buttons for boots and shoes from federal button co.; and so on. these companies also provided services and technical support. table 5. main distributors of u.s. products in argentina, 1933 name number of representations status united shoe machinery. co. arg. 68 branch of u.s. company general electric sa 37 branch of u.s. company cia standard electr arg 28 branch of u.s. company will smith, s. 27 importers & representations mayón limitada 23 importers & representations, no amcham associate h w peabody & cia, arg 14 importers & representations cia westinghouse int sa 12 branch of u.s. company cia la carmona 10 importers & representations, no amcham associate storer & co. 9 importers & representations los fabricantes unidos inc 9 importers & representations general electric appliances sa 9 branch of u.s. company national lead co sa 8 branch of u.s. company cereal machine co ltd 8 branch, importers & representations the armco int co 7 branch of u.s. company johns manville boley ltda (organized in 1931) 7 importers & representations arthur s hawtrey 7 importers & representations u.s. steel products co 6 branch of u.s. company p. b. borwne & co 6 importers & representations, no amcham associate o. hidalgo 6 importers & representations, no amcham associate leng roberts & co 6 importers & representations, no amcham associate arturo w. boote & co. 6 importers & representations, no amcham associate source: guide to american companies in argentina, represented by members of the chamber" published in comments on argentine trade, 3 october 1933, buenos aires. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 the hybridization of forms adopted by u.s. interests (through various combinations of manufacturing, distributing, and representing) was notorious. one explanation for this hybridization is that u.s. companies needed to improve economies of scale and take advantage of opportunities to expand their import trade business. another hypothesis is the importance of strengthened cooperation and personal relationships among u.s. businesspeople. the need for u.s. distributors for u.s. goods in foreign markets was commonly discussed in official and business publications, and, ideally, u.s. business representatives were expected to be “american in heart, body and soul.” (u.s. federal trade commission 1916, 1919; amcham 1919, 2) by founding their own sales agencies and avoiding having to use the services of established commercial houses (particularly british ones), the united states was little by little destroying an important european advantage and, in that way, helping to strengthen u.s. trade and investment flows to argentina. why did u.s. companies settle in argentina? theories of the multinational enterprise suggest that foreign direct investment must be explained at different levels (dunning 1993; jones 1998, 436; among others). a number of ownership-specific advantages mainly at financial, managerial, entrepreneurial, and technological levels was key to the success of u.s. multinationals in argentina. some companies, such as meat-packing plants, had technical, marketing and financial advantages over some british and local competitors. in addition, the meatpacking plants, as well as other mineral and raw material extractive and processing industries, such as standard oil and the national lead company, and companies that processed bones, hides, and corn, were the united states’ main supply-oriented investments. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 in the argentinean case, several location-specific advantages were crucial to understanding the causes of migration. these factors include market size, income level, and potential growth. in the 1920s the argentinean market represented approximately 50 percent of the activity of the entire south american subcontinent.29 in that sense, wilkins’s opportunity parameters serve also to explain the entry of new us companies into argentina in the 1920s. according to internationalization-transaction cost theory, the kind of goods to be produced and commercialized also determines the motivation to invest abroad (williamson 1985). the tendency to construct their own distribution networks and not to depend on intermediaries was associated with brand name goods that had some of these features: complex distribution; special design (the goods’ production required specialized knowledge); high price per unit; after-sales service; competition; and a strong brand presence and advertising of goods to create new markets. u.s. companies justified the beginning of direct operations in the country by promising more direct control of distribution, cost reductions, increased availability of products, adaptation of products to consumer demand, as well as to overcome differences in customs regulations, language and other cultural aspects. in some business sectors, rather than competing with argentina’s local industry, u.s. firms competed with other foreign interests or among themselves. reducing costs and improving marketing facilities helped to increase sales and to promote u.s. trade names. the creation of a dense distribution network and an aggressive advertising campaign were also key to the success of several u.s. companies (sanger 1920, 14; see also bulletin of the chamber of commerce of the u.s. in the argentine republic 1920, 3). one example can be found in the strategy of some agricultural machinery manufacturers, who efficiently adapted their products 29 in 1921, argentina was defined as “the most lucrative and certainly the most competitive market in south america” (klein 1921, 12). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 to local use; in addition, they innovated in distribution methods and after-sales services (motz 1916). similarly, u.s. automobiles dominated the market due to their low cost, durability, and lightweight—important attributes, given argentina’s bad roads. “following sales with service” was ford’s slogan.30 according to u.s. analysts, u.s. supremacy in the argentine automobile market did not necessarily stem from the advantage the united states gained during world war i. the sales points were price and service (beecroft 1917; tewksbury 1929). an essential factor in promoting more direct dealing between manufacturer and importer was the increase in sales of products that require service. for example, u.s. drug manufacturers developed their own sales organizations and advertising campaigns, which allowed them to obtain a better share of a market dominated by french companies (great britain 1930, 54). by the late 1920s, when patterns of consumption were undergoing enormous change in argentina, u.s. companies made a crucial contribution to this process. generally speaking, there was a rise in consumer demand in a new environment permeated by local industrial growth and secularization and influenced by the rise of new business practices—such as advertising—that reshaped the market and the patterns of marketing (rocchi 1998; 2006). high tariffs and taxation also stimulated industrial migration to argentina, particularly for some items, although it should be noted that their impact was low until the great depression set in. prior to 1930, only some items were affected by local merchandise classifications, or higher tariffs on a product imported in packaged form than on the same product imported in bulk. for example, pharmaceutical companies imported certain items in bulk and packaged them within the market to avoid tariffs. another case was the tariff advantages provided by the importation of unassembled products. at the late 1920s, the argentine tariff provided for a 30 percent 30 the american weekly 1, no. 3 (21 july 1923, 12). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 concession on unassembled automotive units and a 15 percent reduction on semi-assembled units. as a consequence, ford and general motors assembled motor vehicles partly in argentina (cheaper cars were assembled there entirely) (wythe 1949, 119). for tire companies such as goodyear and firestone, the greatest incentive to produce locally was the differential in duties between finished casing and crude rubber, after 1930. in a competitive situation, this could mean virtual exclusion for those firms not assembling locally.31 the process of company migration, as said before, was gradual. although each case was unique, the settling of foreign companies followed a similar pattern. most migrations began with indirect representation (through independent agents, commission houses, or a salaried export manager) followed by direct representation. the next step was opening branch sales offices and finally, in some cases, starting assembly manufacturing plants that first combined importation and in situ manufacturing and later specialized in manufacturing. when their business volume and profit grew, the large u.s.-based trading enterprises saw advantages in having their own foreign houses (united states federal trade commission 1916; see also wilkins 1970). as they also did in other countries, u.s. concerns deliberately established sales and distribution agencies before they undertook assembly or manufacturing (dunning 1998, 17). for example, farm implement maker b. f. avery & sons used the services of a local importer for more than 30 years, and in 1911 it decided to improve the sale and services of its products and opened a branch house in buenos aires, establishing direct factory-to-consumer service in argentina. it was particularly important for u.s. companies to adapt their products to meet the requirements 31 although no tires were manufactured in argentina before 1930, the relatively high duties and the increasing demand have made various tire companies considered establishing subsidiary factories. in 1931 the firestone tire & rubber co was opened with a capacity of 1000 tires and rubbers per day. on changing tariffs and the implications for manufacturing firms, see lewis (1987). see also phelps (1939, 67). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 of the host countries. by 1929, when argentina was the second largest market worldwide for agricultural implements, practically all of the 150 different types of farm equipment imported into argentina by b. f. avery & sons were special “south american models.”32 the u.s. experience in argentina conforms to the normally accepted progression of selling: first agents, then sales branches, then secondary assembly/manufacturing, and that manufacturing activities included different methods. by 1930, however, full local manufacturing by u.s. firms was far from complete and few companies had achieved complete production, since practically all companies produced parts or changed the form of the product in some manner. most firms had not moved far beyond secondary manufacture, and they were focused principally on packing, assembly, and service for products, without risking the resources needed for a complete production facility. to sum up, the steady expansion of u.s. business interests may be attributed to international conditions, the growth of argentinean consumers’ purchasing power as well as their ready acceptance of “new products.” the internal market attractiveness and political and opportunity parameters contributed to argentina’s attractiveness. both the national and local government policies were very favorable to foreign investors. in addition, the expanding economy and the demand for required industrial and commercial investment services attracted entrepreneurial initiatives in the banking, transport, insurance, and advertising sectors, among others. u.s. firms in service sectors established units in the region to hold the loyalty of their domestic customers. inducements to invest were diverse, and included the multiplier effect of multinational expansion (acting as a driving force) and a desire to expand into south america generally, using argentinean subsidiaries as staging areas. 32 history and activities of the north american colonies of argentina (1929, 42). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 conclusions this essay has intended to complement and review prior studies about american companies in argentina, using the firm as the unit of analysis. the results of the new estimation show that american firms’ migration cycles were gradual and the u.s. stake dated from earlier than traditionally assumed. the investment’s flows were not affected by the deglobalization shift during world war i or afterward. on the contrary, the u.s. experience contributes to consolidate the view that argentina was a low-risk and growing host economy, very open to foreign investments and stable both economically during this period (lanciotti and lluch 2015a). the u.s. firms’ time of arrival and activities did not always coincide with the amount of u.s. direct investments. new firm arrivals and u.s. direct investment flows only converged in the late 1920s. most american companies preferred greenfield investments and did not set up joint ventures, partnerships, and alliances with local companies. by 1929, then, the united states had become the dominant new investor in argentina, with an extensive and complex business network. another distinctive characteristic of u.s.-based companies settling in argentina, as compared to those moving into other latin american countries, was that they ran a large number of operations, excluding land and agricultural sectors (as shown in table 4). indeed, within the scope of american firms’ worldwide foreign investment strategy, argentina was not fully involved in “supply-oriented strategies,” as were the majority of other latin american countries, with the major exception of meat-packing plants. argentina was viewed as an outlet for technology exports and other consumer and intermediate goods, and a remarkably diverse range of activities and services were carried out for u.s. companies. the argentine experience http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 should be considered as an intermediate case for u.s. companies’ strategies around the world, presenting certain similarities with some european countries. u.s. investments significantly influenced argentina’s economy. the competitive advantages of the largest american multinationals, with their modern manufacturing, marketing, and management methods, explained the dominance of the united states in several sectors (chandler 1977; 1990). u.s. firms had not only replaced european producers in some areas of the argentine market but also created a demand for new goods. these companies helped diversify the domestic market’s structure, particularly as a result of their new techniques in distribution, marketing, and advertising. they also contributed to innovation processes in the early stages of argentina’s industrialization. however, their impact would be more limited than in other countries, as full manufacturing by u.s. firms was far from complete by 1930. at the same time, the penetration of u.s. firms brought some negative effects for the argentine economy. the united states’ involvement in nontraditional business sectors created new forms of dependence through machinery and assembly part imports. after world war i, argentina imported fewer consumer goods and more durable goods and machinery. this trend clearly favored u.s. manufacturers. conversely, the non-complementary nature of the two economies as well as u.s. tariff policies reducing raw-material imports and establishing sanitary embargoes restricted argentina’s purchasing power.33 the result was a trade imbalance that grew continuously (except during world war i) and peaked in 1929, after being partly mitigated in the 1920s by the net inflow of u.s. capital (table 4). nonetheless, while those dollar investments made the u.s. the single most important foreign influence on argentina’s 33 in 1926, the department of agriculture prohibited the importation of argentine grapes and refrigerated meats after january 1927. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 economy, they increased argentine commercial deficits with the united states, since u.s. direct investment increased imports. the structural trade imbalance between argentina and the united states was correlated in part with the trade behavior of u.s. multinationals.34 a complex scenario characterized u.s.-argentine trade relations in the late 1920s, although until then u.s. firms had been able to take advantage of argentina’s economic openness and successful integration to the global economy. references amcham. 1919. comments on argentine trade 1 (1) (20 aug.): 2. american business abroad. 1976. estimates of united states direct foreign investment, 1929-1943 and 1947. new york: arno press. barbero, maría inés, and andrés regalsky. 2002. “las inversiones extranjeras y el comercio exterior.” in nueva historia de la nación argentina, edited by academia nacional de la historia, vol. 9. buenos aires: planeta. barbero, maría inés, and fernando rocchi. 2003. “industry and industrialization in argentina in the long run: from its origins to the 1970s.” in the new economic history of argentina, edited by geraldo della paolera, and alan taylor, 261-294. cambridge, uk: cambridge university press. beecroft, david. 1917. argentine market for motor vehicles. miscellaneous series, no. 62. washington: government print. off. bergin, mary 1927. markets for prepared medicines. united states. bureau of foreign and domestic commerce (dept. of commerce) (trade promotion series, no. 48). washington: government print. off. brady, g. s. 1923. argentine markets for motor vehicles. washington: government print off. caputo de astelarra, sara. 1984. “la argentina y la rivalidad comercial entre los estados unidos e inglaterra (1899–1929).” desarrollo económico 23 (92): 589-608. 34 at the same time, great britain remained argentina’s principal customer originating a triangular payment: europe bought argentine products and the u.s. received payment from europe. about the triangular aspect of argentine trade, see fodor and o’connell (1973). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 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capitalism in latin america. albuquerque: university of new mexico press. perren, richard. 1978. the meat trade in britain, 1840-1914. london and boston: routledge & kegan paul. peterson, harold. 1964. argentina and the united states, 1810–1960. albany: university of new york. phelps, clyde william. 1927. the foreign expansion of american banks. new york: the ronald press company. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1080/00076791.2018.1471061 volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 phelps, dudley maynard. 1939. migration of industry to south america. westport, conn.: greenwood press publishers. phelps, vernon lovell. 1938. the international economic position of argentina. philadelphia: university of pennsylvania press; london, h. milford, oxford university press. phoebus, mildred anna. 1926. argentine markets for united states goods. washington, dc: government print. off. rapoport, mario. 1981. gran bretaña, estados unidos y las clases dirigentes argentinas. buenos aires: editorial de belgrano. regalsky, andrés. 1986. las inversiones extranjeras en la argentina, 1860-1914. buenos aires: centro editor de américa latina. rocchi, fernando. 1998. “consumir es un placer: la industria y la expansión de la demanda en buenos aires a la vuelta del siglo pasado.” desarrollo económico 37 (148): 533–58. rocchi, fernando. 2006. chimneys in the desert: industrialization in argentina during the export boom years, 1870-1930. stanford: stanford university press. salvatore, ricardo. 2005. “yankee advertising in buenos aires: reflections on americanization.” interventions 7 (2): 216–35. sanger, jesse william. 1920. advertising methods in argentina, uruguay, and brazil, washington, dc: government print. off. smith, peter. 1969. politics and beef in argentina: patterns of conflict and change. new york: 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january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 vose, edward nevile. 1916. seventy-five years of r. g. dun & co., the mercantile agency, 1841– 1916. brooklyn: dun & co. whelpley, james. 1911. trade development in argentina. washington, dc: government print. off. white, langdon. 1945. “the argentine meat question.” geographical review 35 (4): 634-646. wilkins, mira. 1970. the emergence of multinational enterprise: business abroad from the colonial era to 1914. cambridge, mass.: harvard university press. wilkins, mira. 1974. the maturing of multinational enterprise: american business abroad from 1914 to 1970. cambridge, mass.: harvard university press. wilkins, mira 1994. “comparative hosts”. business history 36 (1): 18-50. wilkins, mira. 1998. “multinational enterprises and economic change.” australian economic history review 38 (2): 103–34. williamson, oliver. 1985. the economic institutions of capitalism: firms, markets, relational contracting. new york: free press. winkler, max. 1929. investments of united states capital in latin america. boston: world peace foundation pamphlets. wythe, george. 1949. industry in latin america, 2d ed. new york: columbia university press. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 70-108, january-june 2019 doi:10.1344/jesb2019.1.j053 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 appendix sources used:  drees, charles. 1922. americans in argentina: a record of past and present activities of americans in argentina, rodney to ridle. buenos aires: conti press.  guide to american companies in argentina, represented by members of the chamber. 1933. buenos aires: chamber of commerce of the united states of america in the argentine republic, 1933.  history and activities of the north american colonies of argentina. 1929. buenos aires, buenos aires herald.  hombres del día. diccionario biográfico argentino. 1917. buenos aires: sociedad inteligencia sud americana.  la información. revista mensual sociedades anónimas, cooperativas, asociaciones. 19301935. buenos aires.  list of members. chamber of commerce of the united states of america in the argentine republic. buenos aires, selected years: 1920, 1930 and 1940.  ministerio de justicia e instrucción pública. 1900-1930. memoria. personas jurídicas. buenos aires: ministerio de justicia e instrucción pública.  monitor de sociedades anónimas. 1904-1931. imprenta y casa editora de coni hnos.: buenos aires.  north american directory of the argentine and brazil. 1927. buenos aires: river plate edition.  north american directory of the argentine and brazil. 1921. buenos aires: river plate edition.  u.s. trade directory, american business in argentina. 1969. buenos aires: chamber of commerce of the united states of america in the argentine republic. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 maría fernández moya colegio universitario de estudios financieros (spain) paloma fernández pérez universitat de barcelona (spain) christina lubinski copenhagen business school (denmark) standing the test of time: external factors influencing family firm longevity in germany and spain during the twentieth century abstract while most research on family business longevity focuses on how internal corporate governance issue impact resilience, the aim of this article is to foreground the relevance of external environmental factors, and to do so in an internationally comparative perspective. by historically comparing the largest family businesses in germany and spain in the twentieth century, we find that they differ significantly in age and ask how external factors help us better understand these variances. after analysing the institutional framework of the two countries during the second part of the 20th century, we explore the strategic responses developed in reaction to that framework by four of the largest family businesses in the two countries. with this, we strive to capture the interdependent nature of internal decision-making processes and external environmental changes, ultimately arguing for a more holistic understanding of family business resilience over time. keywords: family business; longevity; resilience; external environment; national determinants; spain; germany corresponding author: e-mail: mariafernandezmoya@cunef.edu received 26 june 2018 accepted 24 feb 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:mariafernandezmoya@cunef.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 introduction this article contributes to understanding the influence of institutions and contextual factors on the longevity of large family businesses in europe by comparing two different european countries: germany and spain. the choice of these two countries responds to the willingness to test the hypothesis that despite the differences in terms of national path dependent factors and in terms of patterns of corporate and business systems in both countries, it is possible to observe a common trend: the influence of institutions and institutional change in the evolution of firm strategies and survival. in contrast with common stereotyped discourses about family business survival, often decontextualized and ahistorical, the article follows current scholarship in organizational studies that highlights the influence of contextual factors on the resilience and longevity of large family firms (wright et al. 2014). the findings and conclusions do not contradict or deny the influence of endogenous firm-specific factors in explaining business longevity but demonstrate the need to adequately integrate institutional factors and a historical perspective in the correct understanding and analysis of business strategies and evolution. economic and business history is a scientific field of study that influences the approach in this article, as in this discipline external factors, such as gdp growth, economic policy and market regulation, are considered to be always influential in explaining long-term business survival. however, often organizational studies and management approaches, when it comes to the specific business form of the family firm, often marginalize the analysis of external institutional factors, for the benefit of internal firm-specific explanatories, an approach to family business survival that is often ahistorical and decontextualized. in this article, we study the case of large family businesses in germany and spain, which are very different types of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 business and countries, to explore how despite the sometimes extremely different features in both (i) external environmental factors and internal firm-specific factors contribute to a more holistic understanding of long-term (family) firm survival and (ii) how family businesses’ reactions to changes in the external environments are crucial to understanding their resilience over time. we have selected germany and spain as two european countries because their business structure and economic history is profoundly different, but in both there is a strong presence of large family businesses and we had access to primary and secondary sources that allowed us to explore the questions. while our empirical results are specific to these two countries, we believe that our conceptual findings are relevant beyond them and may trigger additional research for other geographies. in the vast and continuously growing literature, family businesses are defined in a variety of different ways (chua, chrisman, and sharma 1999; astrachan, klein, and smyrnios 2002). several scholars characterize them not based on what they are in the present but rather for their ambition to survive into the future. rather than focusing on size, legal form, or corporate governance structure, they highlight the willingness of some family-influenced businesses to preserve their family character for future generation (casson 1999; lubinski, fear, and fernández 2013; sharma and salvato 2013). during the nineteenth and early twentieth centuries, family business definitions focusing on majority ownership by a family or the involvement of family members in management had many merits in countries such as germany and spain. these criteria captured the vast majority of family businesses in both countries (lubinski 2010; fernández pérez and díaz 2016), and were easier to study based on available firm records. however, since the last third of the twentieth century, in both countries, family business structures changed significantly http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 and business families experimented with new governance forms, often driven by the need to integrate external knowledge and capital (lubinski 2011). many diversified holdings are controlled by family foundations or by extremely diverse financial instruments that are ultimately controlled by families (fernández pérez and lluch 2016). family businesses, in their diversity in legal forms and shareholding structures, are widespread in europe (la porta, lopez-de-silanes and shleifer 1999; colli 2003; colli, fernández pérez and rose 2003; berghoff 2006). they have been the cornerstone of traditional and modern business for centuries, something which has been well recorded in public and private registers since at least the early stages of capitalism (goody, thirsk and thompson 1976; fernández pérez 1997). this article studies the longevity of large family firms in germany and spain, and pays special attention to the context that helped them endure (or not). longevity, which we define as the successful generational transfer of strategic family influence in business, is not only a defining goal of family businesses—the consequence of their long-term vision—but also often perceived as an important proxy for their entrepreneurial success (napolitano, marino and ojala 2015). due to its importance for family firms, and its effects on the creation of wealth and employment, longevity has become the subject of an extensive literature, particularly in the field of management studies. surprisingly, even though the topic of longevity includes by definition historical factors of analysis, most studies focus on the internal business organization and are deprived of any historical context. one of the most influential book about factors leading to successful long-term management in family firms (miller and le breton-miller 2005) does not consider the influence of changing historical conditions in explaining different factors of success for family businesses. in the last decade, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 more and more efforts have been made both in the field of family business studies (melin, nordqvist and sharma 2013) and in business history (napolitano, marino and ojala 2015) to study the influence of context and path dependent historical factors in the analysis of family business longevity (colli 2011a). we contribute to this literature by comparing the concrete situation of the largest family businesses in germany and spain, by analysing the macroeconomic, political and cultural factors which affected them. . regarding our empirical research design, we set the scene by comparing the 100 largest family firms in spain and germany in 2005, before the crisis of 2008, and their historical development. we offer this overview to clarify the differences between business landscapes in the two countries. we use data for 2005 because we have homogeneous sources for this year that enable the comparison between the two countries. moreover, using 2005 data helps us avoid the distortion of the last economic crisis because our aim is to see long term evolution. analysing year of foundation, age and industry, we look for similarities and differences in the longevity of german and spanish family firms. based on the results, the second part is devoted to a qualitative analysis of four selected case studies with the aim of identifying the most important external factors influencing their endurance and longevity after the ii world war. in particular, we focus on the political and economic context in both countries. given the great diversity in survival factors between industries, we limit this analysis to two selected industries—metal transformation and publishing—and a comparison of four companies, which we study based on archival material and literature. these two sectors have in common that they serve market niches and have a large number of family-owned companies in both countries. they, however, differ very much in their historical development, competitive structure and firm composition. deliberately, we http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 choose two industries that during the twentieth century faced major challenges and problems. we also include successful and unsuccessful businesses because in comparing them we can identify characteristics of the family business and see how they related to the different economic and political frameworks. prior studies of longevity often dealt exclusively with the oldest, and therefore most successful, firms in an economy. while this is a reasonable approach, it, however, limits the scope of the analysis to the few sectors with long-term success and certain regions where companies have been founded earliest (old capitals, regions with high population density, traditional marketplaces). our focus on industries allows us instead to take the specific competitive environment, and its development over time, into account. the article is organized as follows: the first section discusses the term “longevity”, and its interpretation in previous family business research. the next section identifies and compares characteristics related to longevity and specialization of the largest family firms in, respectively, germany and spain at the beginning of the twenty first century. following a case study approach, the third section focuses on the external factors that shed light on how and why these large old family firms in both countries have been able to survive the economic and political turmoil of the twentieth century. the final section summarizes the main conclusions of the article. longevity in family business research longevity is often interpreted as a measure of success (cassis 1997; fahed-sreih and djoundourian 2006, 225). while this is true for all businesses, family or not, longevity is at the same time a subject of keen interest especially for family firms. andrea colli and mary rose (2007, 194) define a family businesses as a firm, which is family influenced in both http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 ownership and management. as mark casson (1999) points out, family influenced firms differ in their “dynastic motive”, i.e., the wish to keep the company within the family for generations. many family businesses, therefore, measure their success on two scales: economic performance and long-term survival. other rewards of longevity are the accumulation of social and human capital, the assurance of employment opportunities and stability, and the growing association of the firm’s credibility and reputation with the family (perricone, earle and taplin 2001, 116). if family firms achieve longevity and social recognition for their contributions to local wealth and employment, local institutions may also use the values and names of these firms to design an attractive regional and national image, which again benefits the firms. all in all, the family may gain from the firm’s long-term survival but also has more to lose in case of unfavourable developments and crises, which affects both the business development and the personal reputation of the business family or families. when family business scholars investigate longevity—often with reference to the so-called “buddenbrooks syndrome”—they focus on the organization of the family and the firm but seldom embed the results in an economic-historical framework (ehrhardt, nowak and weber 2006; bakr ibrahim, mcguire and soufani 2009). a detailed literature review of the management literature on family businesses between 1994 and 2009 reveals that approximately every fourth contribution refers to a generic survival rate, arguing that only 30% of family businesses survive into the second generation, and less than 10–15% make it to the third generation (for details of the literature review and a critical review of the argument, see stamm and lubinski 2011). most of the contributions referring to this survival rate sustain from giving any context for this finding. selected ones give geographic or industry http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 boundary conditions, arguing e.g. that the rate applies only to western countries (birley, ng and godfrey 1999, 599), to the united kingdom (bjuggren and sund 2001, 11), or the united states (dyck et al. 2002, 369) or highlighting that it refer to the manufacturing industry (kuratko, foss and vanalst 1994; mandelbaum 1994). in the vast majority of cases, the survival rate is used in an ornamental fashion in the introductory passage and taken as a universal truth. studies that dive deeper into the issue of longevity and survival tend to over-emphasize the internal dynamics of family businesses. some suggest a set of standardized strategies that individual firms should follow to achieve endurance. probably the most differentiated example is the four-c priorities model by dan miller and isabell le breton-miller (2005). it attaches long-term success to command (i.e., granting managers the right to independently make decisions), continuity (i.e., following a dynastic mission), community (i.e., developing a unifying company culture), and connection (i.e., keeping long-term relationships with stakeholders of the firm). in this model, networking and community life are considered of outstanding positive relevance for endurance, without taking into account, however, that the external environment may impose favourable but also unfavourable conditions for the longevity of family businesses. for instance, emotional attachment and community life played an important role in the continuity of many german mittelstand firms during the nineteenth and twentieth century, despite the collapses of several political regimes and more than one economic breakdown (berghoff 2006). however, in a different case, the excellent international and national networking of multinational private firms (most of them, familyowned) that existed in china in the first decades of the twentieth century could not play any role in the continuity of the businesses after the 1940s, as the consolidation of a communist http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 regime led to the almost complete disappearance of all medium and large family businesses in that country (fernández pérez 2013). ahistorical and decontextualized approaches in the study of business endurance have been contested but more work needs to be done to fulfil the outlined agenda. wright et al. (2014) offer a distinction between institutional and organizational factors, and ask if different family firms respond to contextual variations in different ways. business historians are in a good position to contribute to this field of research by analysing long-term historical developments, path dependency and changing context factors. indeed, longevity has been a recurrent topic of business history over the past few decades, leading to a series of contributions and even a special issue of business history entirely devoted to longevity (for introduction and conceptual framework of the issue, see napolitano, marino and ojala 2015). historians have approached the topic from different directions, focusing on the impact of legal environments on resilience (daunton 1988; mackie 2001), on the intertwined nature of governance choices and changes in the external environment (berghoff 2006; lubinski 2011; yacob 2012; lorandini 2015; sasaki and sone 2015; fernández pérez and lluch 2016; sharma and dixit 2018), on the role of family cohesion (fernández-roca et al. 2014) or specifically the contributions of wives (nordlund edvinsson 2016), and on the relationship between longevity and business performance (capasso, gallucci and rossi 2015). however, as the review article by riviezzo, skippari, and garofano (2015, 979) shows, most business history contributions study single firms (71% of the articles reviewed in this review) and focus on one national context (69%). comparative perspectives remain rare, with some notable exceptions (colli, fernández pérez and rose 2003; james 2006; colli 2011b; fernández pérez and colli 2013; fernández pérez and lluch 2016). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 in this article we contribute to this line of research on the longevity of family firms, by historically comparing the largest family businesses in two european countries: spain and germany. these two countries provide very different institutional setups. their analysis may help us understand the importance of contextual factors for explaining long-term family firm survival. our analysis indicates that the internal resources of family firms need to be mobilized and adjusted to changes in the contextual environment, and not just seen as individual, technical or emotional skills, readily available and effective at all times and in various contexts. society and its problems matter for family business survival (colli 2003; james 2006; fernández pérez and colli 2013; fernández pérez and lluch 2016). many businesses did not pass the test of time because they poorly adapted to an ever-changing environment. however, so far, few authors have focused explicitly on the question how transformations in the competitive, technological and institutional framework affected family firms’ longevity in different countries. historical contributions that do foreground the intertwined nature of family business resilience and external context tend to do so based on single-company studies and usually in one national environment. we believe that our internationally comparative approach is beneficial because it allows us to better understand exogenous factors in different national environments, and to ask how they are intertwined with family firms’ organization. long-standing family firms in germany and spain at the beginning of the twenty first century: a comparative approach according to the family business network monitor, and the family business index of 2017, family business is the most common form of ownership and control in europe.1 family businesses represent 79% of all german enterprises and 85% of spanish firms compared to 1 available at http://www.fbn-i.org, http://familybusinessindex.com/ http://revistes.ub.edu/index.php/jesb http://www.fbn-i.org/ http://familybusinessindex.com/ volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 91% in finland, 83% in france, 79% in sweden, 73% in italy, 65% in the uk, and 61% in the netherlands. regarding total employment in europe, they account for between 31 (in the uk and the netherlands) and 61% (in sweden) (tàpies 2011). despite the obvious variances between countries, there are only few historical studies—such as colli, fernández pérez and rose (2003), james (2006) and colli (2011b)—that start to explicitly compare the national settings for family firms in different countries over time. we add to this line of research by comparing spain, a mediterranean country and industrial late developer, with germany, the fastest growing economic power in western europe, after the second world war. for germany, we used the list of the top 500 family owned corporations published by the institut für mittelstandsforschung and completed the data with information from websites and company publications. for spain, we used the list of the 100 largest family firms in 2005, published in tàpies (2009), and completed the database with data from actualidad económica and companies’ websites.2 at first glance and based on the percentages of family firms today, one would assume that long-term family ownership played a more important role in spain than it did in germany. in line with alfred d. chandler jr.’s (1977; 1990) ideas regarding the advances of large corporations in the world, one may think that the success of the big corporation has meant a sharp decline in family ownership in germany in the second half of the twentieth century, whereas the late convergence and integration of spain in the world markets would have resulted in a country with many old family firms. however, this assumption is proven wrong if we compare the 100 largest family firms in both countries in 2005. the figure below shows quite the opposite: on average large 2 a comparative overview of the longevity of the largest 20 family businesses of 17 countries including developed and developing economies in fernández pérez 2015, where findings also indicate that in germany and in japan despite war destructions of the 20th century family firms are today older than in south america or spain not so negatively affected by destructive world wars. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 and relatively old family firms dominate in germany, and relatively young family firms are typical for spain’s large family businesses. figure 1. top 100 largest family businesses in germany and spain by year of foundation (2005) source: author´s own elaboration. in germany, the majority (54%) of the top 100 largest family firms in 2005 was founded before the i world war with a peak during the years of the “gründerboom” (a boom of new businesses founded) in the early 1870s. another 16% started their activities in the inter-war period. only 30% in total were founded after 1939 and only a very small percentage of eight percent after 1975. that means a strong resilience of family firms created during the crucial years of consolidation of the german state and during the key years of dissemination of technologies and pioneering firms of the second technological revolution in germany. in spain, the majority of businesses (74%) clearly derived from the post-franco-period after 0 10 20 30 40 50 before 1848 1849-1913 1914-1939 1939-1975 after 1975 0 12 14 48 26 10 44 16 22 8 germany spain http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 1939 (the year of the end of the spanish civil war). only 12% of the largest family firms had already been in businesses before 1913 (none before 1848), another 14% started their activities between 1914 and 1939. in 2005, the top 100 family firms in germany were on average 83 years old, whereas in spain the average age was significantly lower; 41 years. a comparison with the average longevity of the largest 25 north-american family firms (82 years) reveals a strong similarity of germany with the u.s., and suggests that an important reason behind the old age of german and u.s. family firms may have been an early development of large firms specialized in technologies of the second industrial revolution, and a relatively long and stable protection of these industrial firms, which did not occur in the case of spain. institutional external factors were, together with pioneering technological waves of innovation, two driving external factors that seem to have influenced an average greater longevity in germany and in the us in comparison with spain. technological innovations provide market leadership to pioneering companies. institutional protection is more difficult to be analysed and measured, but could have interrelated effects with technological innovativeness to provide long-term effects in longevity capabilities of firms. the comparison of german and spanish family firms suggest that, alone, institutional protection is not enough and needs to be connected with pioneering technological and scientific innovative organizations. in the case of spain, for instance, protection via relatively lower taxation policies over the 20th century took place to support largest industrial companies regardless of the political parties in power, often with corrupt practices and bribery, but lack of competitiveness in new technological and market contexts made some of the biggest business groups led by families in fact, two important reasons behind the relatively young age of the oldest and largest spanish family firms in 2005 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 are (i) bankruptcy very related to lack of productivity and competitiveness, and (ii) transformation into diversified financial investment funds between the 1970s and the 1990s. bankruptcy, first, affected hundreds of small and medium-sized spanish family controlled industrial firms after the industrial crisis of the 1970s and 1980s, for two combined reasons: lack of technological and organizational competitiveness, and loss of institutional protection with changing political. those decades witnessed a complex political transition from dictatorship to democracy in spain, with new and very high taxes to spanish firms and wealthy individuals (who had benefitted from very low taxation over centuries). this led, as said, to a wave of industrial bankruptcies in the 1980s. in the 1990s, new changes of legislation in spain provided important tax reductions for the creation of family-controlled financial funds and other financial instruments, with new legislation promoting family offices and sicavs. both the bankruptcies of the 1980s, and the financialization of the 1990s, contributed to stimulate the legal disappearance of family firms from traditional spanish registers of firms, and to the creation of new family-participated or family-controlled financial investment funds, which are difficult to track and measure (fernández pérez and hernández 2010). german industrial firms, pioneering technological and scientific innovations, and keeping institutional protection despite change in political actors, increased their scale and scope before the i world war while strongly keeping – somewhat in opposition to what chandler has suggested – family ownership and control (for this critique see also, fear 2005). most of the spanish companies (48%) were founded between 1939-1975, during the franco regime, when the industrialization of the country primarily took place. in spain, there were family firms in capital intensive industries before 1939, like in the automobile and the chemical http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 industries, but franco´s regime established a tough public intervention in capital intensive industries after 1939 that stopped one pathway of growth in scale and scope in very important private firms. due to this strong interference of the public sector, and in contrast to germany and other western european countries, even some of the oldest industrial family firms in spain are relatively young, and are specialized today in sectors such as food and beverages and in those typical of the distribution revolution of the second industrial revolution (wholesale distribution) (fernández pérez and puig 2007; fernández pérez and diaz 2016). the argument that german family firms tend to be older is also supported by goto (2006, 521), who claims that the total number of long-lived firms is by far largest in japan, however closely followed by germany. other european countries, such as the netherlands, france, austria, and also spain give home to a significantly smaller number of long-lived firms. figure 2. top 100 largest family firms 2005 by industry source: author´s own elaboration. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 this article asks how these differences can be explained at the micro level and not just at the macro level, and unlike most contributions to longevity, research focuses on the external environment and how particular family businesses responded to the opportunities and challenges of such broader environments over time. to get to a level of empirical depth, we focus our analysis on individual case studies rather than studying macro-economic data in isolation. we thus explore family firms’ responses to external context and change, to better understand the impact of external environments on family businesses’ longevity. understanding longevity: four case studies in context as we want to understand the differences in longevity, we focus the qualitative section of this article on four case studies (two for each country) from two sectors, metal transformation and publishing. we have selected these four cases because of the availability of historical sources and their long-term existence over at least eighty years as family-influenced firms. we consciously included both successful and unsuccessful family firms to counter the otherwise common success bias. another important selection criterion was to have companies from two industries, publishing and metal transformation, because it allows us a cross-national comparison of companies in the same industry. we analyse the four cases based on company and family archives (bagel, deckel, public archives (planeta and roca), as well as published secondary sources. metallurgical industries and publishing industries have been selected, also, because historically metal companies have enjoyed a very old protection from military and civil authorities for the strategic implications metal production has, in times of war, but also for their capacity to employ thousands of workers for heavy industries and infrastructures, which has a political interest in election times. publishing companies, however, have less interest for policy makers, they tend to create fewer job positions. for these reasons both http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 sectors are interesting to test how in individual family firms external factors like technological change and institutional protection may have had a similar, or a different, influence in longevity of these firms. in metal transformation we analyse the spanish manufacturer roca corporación, a global leader in metal and ceramic equipment for the bathroom; and the german machine tool producer deckel, famous for its drilling machines. in publishing, we compare the spanish publishing group planeta and the german publisher a. bagel verlag, part of the printing and publishing group bagel. all four case studies have in common that they remained family influenced for several generations. while roca (founded in 1830) and bagel (founded in 1801) have both been family-owned and -controlled since inception, the publishing company planeta was bought by the family in 1949, which held and managed the firm ever since. the deckel company, by contrast, was founded in 1903 and remained familyowned and -controlled until 1991 when the family decided to sell to an external investor. the family business literature claims that less than 30% of family firms survive into the second generation and fewer than 15% make it to the third (ward 1987, 248). table 1: overview of case studies, 2001 spain germany planeta roca bagel deckel year of foundation 1949 1830 1801 1903 sector publishing metal and ceramic transformation publishing metal transformation family control 100% 100% 100% the family sold the company in 1991. family in business lara family. second generation roca family. fourth generation bagel family. seventh generation deckel family. third generation sales 2008, thousand euros 1,642 1,721 no data available (printing only: 166) 1,938 stock exchange private company private company private company publicly quoted since 1973 source: author´s own elaboration. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 this would suggest that our case studies are particularly successful in realizing longevity; however, as discussed in the literature review section, this survival rate is questionable on the grounds that it ignores the impact of the external environment on resilience. we studied the historical evolution of each of these four case studies based on the question how the external environment influenced the firms’ development and resilience and how the firm responded to changes in the environment. we then compared all four case studies with each other, and ultimately identified three sets of external factors that emerged as crucial for understanding these companies’ resilience over time: (1) the economic development at the industry level, (2) the political context at the national level, and (3) inheritance law regulations. figure 3. per capita gdp 1950-2008 (1990 international geary-khamis dollars) source: angus maddison. available at: http://www.ggdc.net/maddison/oriindex.htm economic development the general economic context, in which both spanish and german family businesses found opportunities for survival during the second half of the twentieth century was mostly favourable; according to macroeconomic indicators, such as gdp growth (see figure 3, http://revistes.ub.edu/index.php/jesb http://www.ggdc.net/maddison/oriindex.htm volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 productivity, investment, improvement of human capital endowment, and the parallel growth of entrepreneurial benefit and workers´ income rates. metal transformation industry the metal transformation industry in western europe expanded tremendously after the end of the second world war. it was the engine for economic growth and contributed to the increasing gdp growth rates in spain and germany respectively (schulze 1999). some common factors add to explain this expansion, particularly the need to cover the technological gap with the united states and the opportunities related to it; the strong demand of the transport and construction industries; and the positive effects in trade and finances of the bretton woods agreements. in both countries, the industry had a significant number of family-owned companies. production was frequently heterogeneous with products in many different types and sizes. therefore, companies often served niche markets, like the two cases discussed here, the german firm deckel and the spanish manufacturer roca. deckel (friedrich deckel münchen 1978) and roca realized enormous growth rates from the end of the second world war to the beginning of the 1970s. in the federal republic of germany, metal transformation was one of the leading sectors of the post-war economy (baumann 1965). technological innovations were fundamentally initiated before the war but accelerated its application for mass production after the war, at home and abroad, due to the positive technological gap with other countries in the sector. in the years directly after the war, most of the german capital goods industry was under the control of the allied that supported west-germany in regaining its economic strength. the korean war (1950-52) triggered a boom in demand, which in particular increased the export quota and even led to http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 supply shortfalls in german companies (giersch, paqué and schmieding 1994).3 the industry realized growth rates above average and settled in a position as world leader. in this favourable context, deckel raised its annual turnover and number of employees significantly (friedrich deckel münchen 1978, krogh 1987). it mainly produced high quality special purpose machines sold at premium prices. in this phase, innovation primarily consisted of adapting the conventional technology to different machine models. economies of scale were thus very limited because of the sheer variety of models and the absence of modularization. to nevertheless increase the economies of scale, deckel extended its target markets. the company’s main growth strategy at the time was exporting. up until the mid-70s, germany was the clear export leader for machine tools with exports accounting for over 30% of world trade (wieandt 1994). the spanish manufacturer roca was similarly successfully both in realizing profits and in adapting to the market challenges. technological innovation had also, as in deckel, taken place before world war ii, but not with own patents and engineering but with north american knowledge transfer from a us corporation with whom they had had a joint partnership before 1939. after 1939 new laws during the military dictatorship forced foreign owners of spanish companies to reduce or plainly sell at below the market prices their shares in spanish companies, thus forcing legally real property expropriations. due to this legal change intended to protect the spanish metal industry roca´s north american owners had to abandon the company with great losses, and the spanish family roca could buy their shares at a convenient price and fully control the firm. a firm with a new factory with brand new us technology that had been brought by the formerly dominant north american partners. with 3 according to these authors, the korean war acted like a keynesian stimulus. a different opinion was voiced by temin (1995). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 this extremely protectionist framework, between 1939 and 1975, the company’s main growth strategy was to increase relatively safe from foreign competitors their share of the domestic market in metal and ceramic sanitary equipment, through a combined strategy of acquisitions of firms with problems, superior technological know-how or commercial networks, and a strategy of closeness with the political authorities of the industry and economy ministries in madrid. both companies financed their growth strategies internally and thereby allowed the two family businesses to remain independent. this favourable context, however, changed during the 1970s. with the collapse of the bretton woods agreement, a system of free currency convertibility came to an end (eichengreen 2008). the oil price crisis of 1973 and 1979 raised the costs for energy, which had a significant impact on metal transformation companies. moreover, international competitors from low wage countries gained market shares within europe. deckel and roca had to adapt to the changing framework by reorganizing the company, rationalizing production and reinforcing internationalization. the spanish roca family reacted in stepping back from direct management and allowing an in-house trained outsider to professionalize the management and lead a strong internationalization process that had already started with opening of subsidiaries in france and portugal in 1970. in spain, after 1975, a new democratic regime, the integration in european and world markets, and the increasing international competitors made internationalization and professionalization of management two imperative needs. between 1973 and 2000 there was a big crisis in the spanish metal mechanic industries, with new firms in the landscape that bought many old firms in decline (ortega and hermosilla 2002). during these critical times, the family managed to make important changes in the internal organization to adapt to changes linked to the new wave of globalization and the new http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 democratic parliamentary system established in the country which increased protection to workers in terms of salary conditions and right to strike. a new management organization was able to deal with the new power of unions, european integration and competition, asian lower prices in europe. through proactive internationalization strategies and mergers and acquisitions in key markets, with expansion of sales in germany, united kingdom and italy in 1990, the construction of a factory in china in 1999, and the acquisition of factories in poland and of a global firm from switzerland (keramik laufen, the fourth largest world manufacturer of sanitary porcelain tiles) also in 1999. acquisitions worldwide have been the key strategy of entrance in other markets since 2000: croatia, romania, malaysia, india and brazil.4 important labour force reductions took place while at the same time a policy of importing technology from abroad increased in order to have a diversified and innovative number of products and services in the two areas of metal and ceramic equipment for bathrooms. the family, since the beginnings of the 1830s, had grown large in members, and the crisis made them see the need to unify the control of the different factories in the country under a professional non-family member, well acquainted with the workers, the factories, and the values and moral codes of the family. this new non-family ceo, a 29 years old industrial engineer close to the roca family, a man the rocas highly trusted, was salvador gabarró, who pushed forward an ambitious strategy of internationalization and also of networking in key professional and entrepreneurial associations between 1974 and 2000 (the year another young non-family ceo, josé miguel roca, took over the control of the company). the domestic market remained extremely important for the sales of the company, and more during 4 http://www.roca.com/our-history (accessed 4 october 2010) http://revistes.ub.edu/index.php/jesb http://www.roca.com/our-history volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 the real estate and construction bubble of the 1990s, which implied a sustained high demand for its products. a combination of first steps towards internationalization in the 1970s, continued investment in technology imports and innovative marketing and professional management since the 1980s, allowed survival of the family business with a professional non family ceo roca has been able to overcome difficulties and maintain leadership in its market niche in spain and has followed a process of acquisitions of major competitors and technology leaders in the world that has given the company world leadership in the field of manufacturing sanitary equipment. roca´s sales in 2005 were of 1,669 million euros, with more than 20,000 employees. it was therefore one of the largest spanish private firms in its sector of activity, very internationalized (50% of sales, 40 factories abroad, and commercialization structures in 88 countries of four continents in 2005), and world leader in the manufacturing of sanitary equipment after a strategic and continuous process of mergers and acquisitions at home and abroad that started in 1970, which helped much needed technology transfer at a global scale.5 deckel was hit hard by the recessions following the oil price crises and similarly to roca started taking in external managers and capital. when the german post-war reconstruction process eventually came to an end, the company experienced severe slumps in sales.6 more or less simultaneously product innovations significantly transformed the existing market structures in the machine tool industry. since the mid-1970s deckel invested heavily in new technologies, such as numerical control (nc)-systems and computer-based numerical control-systems (cnc) for their machines. the percentage of produced cnc-machines rose 5 http://www.oriolamat.cat/files/roca_radiadors.doc (accessed 8 june 2010). 6 bwa n06-005 to 017 geschäftsbericht der friedrich deckel ag 1978-1992. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 from 19% in 1978 to 83% in 1986.7 this development forced the family firm to invest in microelectronics and increased the demand for highly qualified workers (spur 1991; bähr 2001). to raise the necessary capital for these investments, the company ultimately went public in 1981; an unusual step for a family business interested in keeping control. however, the family issued, among others, “preference shares” without voting rights, a strategic choice designed to allow the family to keep control, while opening the business for external investors (schürmann and körfgen 1987).8 while deckel was struggling with the reorganization of the company, new competitors, in particular from japan, gained market shares and made deckel’s niche increasingly unprofitable due to price reductions and shifts in demand. following major losses at the end of the 1980s, the company reorganized and sold a vast number of non-core businesses thereby reducing its workforce from 2,450 in 1989 to less than 1,000 only three years later.9 in an attempt to realize greater economies of scale and scope, the firm strove for a stronger modularization of machine tool parts and simplified its products. while the company had hitherto focused on flawless engineering and generous customer service, japanese competitors were more successful with their aggressive pricing strategies. deckel sliced manufacturing of its own components in half, breaking with a treasured practice of the family firm aiming at guaranteeing quality. they also put a new focus on marketing and product development and cooperated with partners and competitors. however, sales continued to fall. in 1989, deckel’s losses accounted for dm 45 million at an annual turnover of dm 482 million. the turnaround-program designed in cooperation with the consulting firm roland berger triggered major cost-cuts. despite these efforts, the firm did not survive the biggest 7 bwa n06 011 geschäftsbericht der friedrich deckel ag 1985, p. 11. 8 bwa n06-043 ausgabe von stimmrechtslosen vorzugsaktien 1986. 9 bwa n06-1 verschmelzung der friedrich deckel ag mit der maho ag 1993. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 245 crisis in the industry since the second world war (lamparter 1993). in 1991, the deckel family decided to sell its shares to walter eder, a munich based manufacturer of excavators, thereby ending the family influence (anonymous 1994). publishing compared to metal transformation, the publishing industry developed in a similar manner but at reduced speed. the spanish publishing house planeta was bought by the family during the franco dictatorship. the growth of planeta in spain in the first decades (1950-1970) has been built upon three products: translations of north american best-sellers; spanish literature publicised through the famous planeta prizes for literature, created in 1952; encyclopaedia sets sold on a credit system. regarding the markets, planeta grew in the 1960s mainly through international expansion. it was the era of the so-called “exporting boom”, and the spanish companies realized 50% to 60% of their revenues in the latin american markets, taking advantage of the pro-franco government measures of support. affiliates were opened in mexico (1965), colombia (1965), and argentina (1966). but the reason for the leading position in international rankings was a growth strategy developed from 1980s onwards, focusing on three variables: internationalization (latin america and europe), diversification (literature, textbooks, communication), and vertical integration (print, distribution, and libraries) (tàpies and fernández-moya 2012) the decade of the 1980s marked the beginning of the concentration process of the spanishlanguage publishing sector. this relatively late concentration is a major difference compared to the german publishing industry, in which a strong concentration tendency can already be noted for the 1960s (fernandez-moya 2012). in that framework, planeta developed an extraordinary expansion process basically through a strategy of growth fed by acquisitions, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 246 like in roca corporación. planeta purchased prestigious brands in the spanish speaking area, with a solid market implantation, in order to consolidate its internalization and diversification process. sector concentration would increase in the 1990’s and the first years of the new century. as a result of the concentration process, grupo planeta consolidated as the largest spanish publishing company (fernandez-moya 2012). the success of the spanish company can be symbolized with the creation of the group: grupo planeta, and this transformation included profound changes in the organizational structure. according to its turnover and presence overseas, the company developed into a large multinational, which triggered further changes in the internal organization discussed below. similar to planeta, the publishing company bagel experienced high growth rates during the 1950s and 60s (lubinski 2010). at that time, the german publishing industry was faced with a wave of concentration. bagel as one of the medium-sized publishers and a typical german mittelstand firm relied on “organic” growth strategies. it reinvested profits into the business, but avoided the integration of external investors and venture capital. bagel had for long used the strategy of vertical integration combining activities in publishing with paper producing and printing since the late 19th century. the prosperous 1960s gave it the opportunity to diversify into other related industries mainly by acquisition activities. bagel, however, focused on less capital-intensive sectors in order to remain independent as a family firm.10 in all sectors, the company focused on the high-end-segment putting a special focus on quality and specialized goods, such as school books and literature in publishing, safety prints (stamps) in printing, and special thin papers in paper production. this mixed strategy of diversification and specialization allowed the business to explore new promising markets all 10 bagel-archives 236-2 peter bagel’s own description in: reden und ansprachen peter bagels, 1801-1976, 175 jahre bagel, 6 generationen. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 247 the while remaining a high quality producer. the number of employees rose from 900 in 1951 to 2,000 in 2006. with the changes in the economic and political framework in the 1970s, bagel encountered more and more difficulties. the changes in technology and workplace organization triggered rationalizations in the entire industry. in 1972, the publishing house self-analyzed that the business was stuck in an unfortunate middle-size; it had outgrown the small-size organization but was not in the position to compete with large german or international publishing houses.11 as an integrated printing and publishing company bagel experienced first-hand the degrading industrial relation in the printing industry in the mid-1970s, which endangered the harmonious employer-employee-relationship in the family firm.12 struggling simultaneously with the dangers in the macroeconomic development and at the level of the workplace, bagel reinvented itself more than once during the last three decades. it reorganized its activities, stepped back from paper production, diversified into label printing and set new priorities in its publishing activities. in the process, the family, however, managed to guarantee its independence and continued to this day to influence both management and ownership. political context the second exogenous factor for longevity largely ignored in longevity research so far is the political context. here important differences between germany and spain can be noted. first, the state was in general an ally of private businesses in germany during the second half of the twentieth century, and a disturbing competitor and sometimes evens an enemy of private businesses and free market forces in spain during the same decades. 11 bagel archives 192-5 jahresberichte der geschäftsführer, 1972 august bagel verlag. 12 bagel archives 192-5 jahresberichte der geschäftsführer, lagebericht über das personalund sozialwesen in der zeit vom 1.7.1975 bis 28.2.1976. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 248 in spain the end of the autarky period of the 1940s that followed the civil war of 1936-1939 dramatically isolated spain from its former path of internationalization and industrialization. the military regime organized the economy in the 1940s as a military endeavour, in which strategic inputs and activities had to be under state control (energy, iron and steel, chemicals, transportation equipment). since 1941 the state started a public industrial holding named ini (national institute of industry, similar to the italian iri) which radically reduced private businesses from what the state considered strategic national interests (metal mechanic industries, energy, telecommunications, transport industries). therefore, technologically complex firms with high requirements of knowledge transfer and long-term capital investments could only seriously be developed in spain by the public holding i.n.i. (national institute of industry). in publishing, the new government exercised its control through an iron-fisted censorship in the heavily regulated sector (martinez-martín 2015). to manage official politics of the sector, the government founded in 1941 the instituto nacional del libro español (inle). five years after, the government passed of the book protection law of 1946 (fernandez-moya 2009). the law established a number of theoretical measures which proved difficult to apply in practice (general administration archive). the spanish publishers began to talk with the spanish government and pressurised for support. the political framework was ideal; the government was initiating a new phase of economic planning, and designated some sectors as priority (not only the publishing sector), which were aided through a variety of measures. from this moment on, a group of norms were passed, which aimed to provide a solution to the problems of the period: paper importation, exemption from the utility tax, tax deductions, finance facilities and the reform of export insurance policies. the two major incentives for the publishing sector were export, tax http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 249 deduction and preferential finance (fernandez-moya 2015). the trajectory of planeta exemplifies the effects of this policy. the company began an international strategy, focused on the latin american markets, thanks to the help of this public support (banco de crédito industrial archives). until 1959, the state created many obstacles for survival or growth of private enterprises, and made every effort possible to discourage exports. the state restricted access to foreign currency (needed for imports), electricity, and raw materials (scarce due to commercial autarky) to private firms in consumer goods industries, which constituted the backbone of family owned businesses in the country. businesses suffered the consequences of this new economic policy. the state was very interventionist, reduced free competition in sectors of the ii technological revolution (modern steel production, car industry, ictss, chemistry, energy), allowed some freedom to private firms in low added value industries and services, and protected in different ways the domestic market from foreign competitors. the year 1959 marks a turning point in this economic policy: the dictatorial spanish regime started to liberalise the economy. franco government in the early 1960’s also initiated a new phase of economic planning aimed at the country’s complete industrialization, which supported family firms and groups in various sectors like the ones analyzed in this article. since the late 1970s, privatization and internationalization changed the legal rules of the game and the opportunities for private firms in general, and family firms in particular. the arrival of democracy (1978) and spain´s incorporation into the eec (1986) also affected the strategy of the spanish companies. planeta, for example, began to priorities the european markets, and its exports to the eurozone increased in the 1980s and 1990s. mayor investments in european http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 250 countries were made, like the acquisition of editis in 2008 (the third largest french publishing company). compared to spain, germany offered in general favourable conditions for businesses’ longevity. the economically prosperous reconstruction period after the second world war was accompanied by the introduction of the so-called “social market economy” guaranteeing personal property and supporting industries in their attempt to realize profits. subsidies for business activities played some role. the major recipients prior to the unification in 1990 were in agriculture, housing and transport; in industries, weak sectors, such as coal mining, shipping and steel were supported as well as firms situated in west berlin and along the border to the gdr. more importantly was the creation of an attractive and accepted economic framework. in contrast to the weimar republic, the post-wwii capitalistic system was generally accepted by entrepreneurs and managers. the regulative concept of the “social market economy” as a compromise between pure liberal and centrally planned economy has been interpreted as a system, which allowed for growth, profits, and wealth (giersch, paqué and schmieding 1994). the prosperous 1950s and 60s with overall high growth rates, an enlarging social state and the introduction of co-determination to the german economic system eased the opposition of capital and labour. even though severe changes occurred since the 1970s, for example in the printing industry, the relationship between capital and labour was overall rather harmonious compared to other european countries (spode et al. 1992; kittner 2005). anti-trust legislation, in particular the act against restraints on competition (gesetz gegen wettbewerbsbeschränkungen), derived from us pressure after the ii world war. it prohibited constraints on competition, especially cartels and abuses of market power, and prevented mergers that created market dominance. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 251 decisive for the long-term survival of family firms was also the rich variety in types of ownership and influence that the german corporate law allowed for. the alternative legal forms to the incorporation (aktiengesellschaft), such as the limited partnership (kommanditgesellschaft), the private limited liability company (gesellschaft mit beschränkter haftung), and different mixed forms, explain why the listed corporation accounts for only a small percentage of german firms to this day (guinnane et al. 2007; deutsches aktieninstitut e.v. 2009; lamoreaux 2009). family firms in particular often restrained from going public, which might have facilitated long-term independence and continuous family influence. bagel remained a private company and never ventured onto the stock market. deckel, in the much more capital-intensive metal transformation industry, went public in 1973. however, it opted to give out (some) preference shares, which do not grant voting rights to shareholders, as a way to maintain the influence of the founding family (schürmann and körfgen 1987). inheritance law finally, in both countries moderate inheritance taxation favoured intra-family successions; albeit changes over time. while these developments are more difficult to trace on the microlevel of the individual case companies (due to privacy concerns by the affected individuals), they are undoubtedly significant for explaining the longevity of family businesses in both countries. in spain, the legislation between the 1950s and 1978 was clearly very light in terms of taxation of family wealth transmission, and also in terms of transparency and accountability of the economic activity of private firms. this resulted in a lack of control and, also, in positive conditions for the generational transfer of family businesses, in general (particularly in sectors not considered of national interest by the state). this changed after 1978, until the late 1990s, when a tough legislation abruptly rose death duties, to almost 40 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 252 per cent over total value of one person´s wealth after death to his/her heirs. this meant a rapid death rate of family businesses in which personal and business wealth had been mixed for decades. this changed after the 1990s decentralization of wealth transfer taxation in regional administrations, and the global expansion of economic activity, which resulted in a diversity of regional conditions and in a general trend of the public administrations towards reduction of taxes burdening wealth transfer within family businesses, as lobbies of family firms managed to have bills approved in which personal and business wealth were to be considered legally different in family firms for tax purposes (fernández pérez and hernández 2010). in germany, the taxation of family wealth transmission in the second part of the twentieth century was also moderate and offered different allowable deductions for spouses and children, which resulted in a less transparent system but significantly reduced the net liability. historically, the german inheritance law interprets possession not as an individual’s but as family wealth (beckert 2008). a descendant was by law obliged to pass a part of his or her possession on to his spouse and children. this regulation can only be explained as a path dependency resulting from decisions and regulations fixed in the 19th century. however, being forced to spread the legal portion equally among descendants may also be interpreted as an obstacle for german family firm’s longevity because all descendants needed to be included as beneficiaries. with the beginning of the twenty-first century, a process of convergence can be observed. taking the example of a medium-sized incorporated company, the taxation in germany in 2003 was 6.08% compared to 4.71% in spain, which places both countries among the moderately taxing countries.13 for a private enterprise, the tax burden in spain would be 13 lesser tax rates can be found in luxembourg (no taxes) liechtenstein, ireland, switzerland, and the uk; higher rates in austria, belgium, france, sweden, the netherlands, and japan. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 253 lighter (0.16%) than in germany (3.77%), but other countries, such as ireland, luxembourg, and the uk, do not raise taxes at all, while japan (28.02%) has significantly higher tax rates (scheffler, spengel and büttner 2004, 970). these comparisons suggest that in the last two decades taxation policies have been relatively light for german and spanish family businesses, in international comparison. what we know about this subject indicates the strong influence of regional lobbies of family businesses and politicians in helping achieve relatively light wealth transfer taxes. in spain, these lobbies combined the interests of local companies and politicians, with the aim to protect employers and employees after the crisis of the 1970s and the impact of new competitors coming from emerging countries during the second wave of globalization that started in the 1980s. the lobbies were able to promote and get approval of new legislation that radically changed inheritance and corporate tax legislations originating in some cases in the eighteenth or nineteenth century, and in other cases in the 1970s crisis, that had two negative effects on wealth transfer and business continuity: the division of wealth after the death of a family member among all legitimate successors, on the one hand; and on the other hand the reduction of individual and collective wealth due to payments of death duties following the death of a family member. after the 1970s crisis these two relatively traditional negative effects of inheritance and corporate tax laws were felt extremely harmful and unjust by family business lobbies, and an obstacle to the opportunities to start or increase internationalization strategies opened up after the 1980s and 1990s. roca and planeta were two of the first members of the most important spanish lobby of family businesses (the instituto de empresa familiar), whose original aim was precisely to fight unfair taxation policies that were an obstacle for the longevity of family businesses in the country (fernández pérez and puig 2009). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 254 conclusion family businesses are a dominant form of business ownership in developed and developing countries, and family business studies have emerged in the last decades as an important research field, which attracts scholars from business history, management, organizational behaviour schools, psychology, and economics. important efforts towards the institutionalization of this research field in the united states and europe have been developed since the late 1970s, which are contributing to debate definitions, methods, and goals. in these debates about the family business there is general agreement about the fact that the very essence of a family businesses is the willingness to transfer the business to individuals who are culturally defined as kin, whether the kinship ties are of a consanguineous or a spiritual kind. the search for continuity beyond one´s life is, therefore, a defining feature of the family business. researchers have suggested different models that aim at investigating family firm’s longevity. however, most of these attempts are disembedded from a historical as well as a national context and focus instead on the challenges for the internal organization of the family firm. in this article, we contribute to the literature that explores links between issues of corporate governance and the broader historical framework. with this, we make an argument for a more historically sensitive analysis of family business survival which explicitly addresses how different contexts influence family firm behaviour; not just in germany and spain but among all family businesses. we posit that any discussion of longevity ought to explicitly include an analysis of the historical context to be convincing. this will also allow for greater cross-fertilization with family business management studies (wright et al. 2014). we contribute to this discussion with an analysis of the influence, at the microlevel, of three longhttp://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 255 term external factors _economic development, political context, inheritance law in the analysis of family business longevity. our short analysis of the 100 largest family firms in germany and spain in 2005 revealed that they differ considerable in their longevity. the figures clearly indicate that today´s largest family firms in germany initiated their competitive advantage and foundations for longevity in the midst of the unification and industrialization process of the country. for spain, the figures suggest that the largest family firms in 2005 were mostly founded during franco´s dictatorship. franco significantly restricted private initiative in what military officials considered national interests (heavy industry, energy, telecommunications, and transportation equipment) (carreras and tafunell 2004, but allowed the development of private firms in consumer goods industries and in other sectors not considered of strategic interests like publishing (planeta) or the manufacturing of ceramic and metal sanitary equipment (roca). this paradox helps explain that in the period of key restrictions for family businesses so many long-standing family businesses were founded in the country. looking at the average age of these firms—83 years in germany and 41 years in spain—it might be surprising to note the striking differences. is not spain a mediterranean country where family businesses dominate entrepreneurship, and are thus obstacles for big corporations? can germany be considered a northern european country, where non-family corporations dominate the business landscape in high-tech sectors? however, looking more closely at the exogenous factors we identified, helps to embed the numbers in a historical framework. they fit well with the recent history of german and spanish family businesses, with the former supported by the political framework of the social market economy and by a favourable economic context until the 1970s, and with the latter heavily influenced first of all http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 256 by the strong limitation of free market forces and the private initiative in some industrial sectors during franco´s dictatorship (1939-1975), and by the strong reduction of taxes burdening the continuity of family businesses in the country after the 1990s (in coincidence with the process of privatization of public firms, integration in european institutions, rapid internationalization of family businesses, and strong support of new regional governments to regionally embedded family firms). that there are today important spanish family businesses that were created before franco´s dictatorship indicates, on the other hand, the existence of important endogenous factors related to the management of these firms that helped them survive. in addition to the findings for the two specific countries, the fact that national differences were quite pronounced supports our argument that any longevity model should be grounded in a historical-economic framework. we sought inductively to discover the most important influence factors for longevity. the most important exogenous factors were the industryspecific economic development, the political context, and national regulations in inheritance law. these were closely linked to and helped to explain the endogenous factors for longevity, in particular the development of a new openness to external knowledge and professionals and the level and form of specialization. longevity is sometimes perceived as a proxy of entrepreneurial success. in the four large historical family businesses that we have studied longevity is something else: it is the complex result of varying historical opportunities used by several generations of a few entrepreneurial dynasties. historical opportunities are not controlled by endogenous family strategies, they are path-dependent constructions intertwined with institutional frameworks, in which stability or instability are defined; in which the allocation of strategic tangible and http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 257 intangible resources is made difficult, or easy, to family firms. schumpeterian entrepreneurship is not a sufficient condition for the creation, and above all, the endurance of family firms. we have seen in the introductory sections how the enduring institutional support to industrial firms that pioneered the second technological revolution in germany created favourable conditions for the stability of those firms in times of economic turmoil and political or industrial crisis. the lack, or the discontinuous support, to family controlled industrial firms in spain, especially in capital intensive sectors and knowledge intensive sectors, made them weaker in domestic and global markets after the ii world war. accessibility to foreign currency, bank or public loans, accessibility to a well-trained labour force, were structurally different –and worsein spain after 1939 than in germany, due to the fundamentally different strategic objectives and organization of the spanish state between 1939 and 1975. in those years, the most promising venues for creation and endurance of family firms in spain were in the relatively low capital intensive industries, like in the construction of bath equipment or in the publishing industries. it was in this context that roca and planeta could flourish and grow in scale and scope, and due to the limitations of the small spanish market, and the strong competition in the other western european markets, they very early targeted latin american markets for exports first, and outward direct investments, later. more culturally distant markets required higher financial resources, increased risks, and were an option for spanish family firms in these low capital intensive sectors only after the 1990s, when the spanish firms had more access to strategically resources they had lacked since the 1930s: capital from global financial sources, and information from global consulting companies. in the case of germany, family firms were challenged by the external changes in the economic http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 258 environment, in particular after 1970. many found themselves in a dilemma, when deciding how to incorporate external capital and knowledge, without relinquishing family control. as seen in the case of deckel, some even reverted to financial instruments, such as preference shares to access the organized capital market without completely giving up family influence. specialization and global niche markets helped some firms achieve resilience, while others yielded to the pressure. only a holistic view that incorporates external environmental developments as well as family firms’ responses to these changes allows for a historically informed debate of the issue of family business longevity. acknowledgment research for this paper has received support from the spanish research project "empredimeinto colectivo, innovación e internacionalización en las empresas españolas de servicios (1900-2017)" (pgc 2018-093971-b-100, ministerio de ciencia, innovación y universidades/agencia estatal de investigación/fondo europeo de desarrollo regional,unión europea) and funds from an icrea academia 2013 award. historical sources newspapers and magazines  wirtschaftswoche  managermagazin  die zeit  der spiegel  el libro español archives  bayerisches wirtschaftsarchiv münchen (bwa), n06 privatarchiv michael deckel  bayerisches wirtschaftsarchiv münchen (bwa), f60 friedrich deckel ag http://revistes.ub.edu/index.php/jesb volume 5, number 1, 221-264, january-june 2020 doi.org/10.1344/jesb2020.1.j073 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 259  bagel-archives, accessed via the rheinisch-westfälisches wirtschaftsarchiv zu köln (rwwa)  general administration archive, alcalá de henares, madrid (spain).  banco de crédito industrial archive, bilbao (spain). references anonymous. 1994. zwei kranke im bett. der spiegel. 10: 104-105. astrachan, joseph h., sabine b. klein, and kosmas x. smyrnios. 2002. 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"trans-generational renewal as managerial succession: the behn meyer story (1840–2000)." business history 54 (7): 1166-1185. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 cristina ana mazzeo pontificia universidad católica del perú (perú) https://orcid.org/0000-0002-6006-6250 foreign traders in south america and the financing of the independence wars, 18201830 abstract studying commerce and traders from a global perspective allows us to analyze the material and cultural exchanges that took place beyond national borders, which are often obscured by traditional historical perspectives centered on the nation. this wide terrain is explored here by addressing — and visualizing — the interrelations between the south american ports of lima, valparaíso and buenos aires, from the vantage point of independent peru. to do so, we study the links among foreign merchants who were rooted or closely connected to such ports in the context of the south american wars of independence. war placed peru in a disastrous economic situation, a circumstance that foreign merchants exploited by becoming the main lenders to the new state, which struggled to cover the expenses of the army to sustain the war. these businessmen created a mercantile network that bridged the boundaries of the re cently created nation-states and testified to their great business skills as it broke the economic system of commercial control that had prevailed during three hundred years. research in peruvian governmental, notary, and customs documentation unveils their ability to act as agents, negotiate loans and purchases, and take advantage of the wartime crisis to become the main providers of weaponry and military supplies and acquire a privileged position. since south america was not prepared to reach its independence in the early 19th century without an army, without money, or without weaponry, the nascent states’ economic and financial dependence on foreign traders that started during these times was in a sense inevitable. keywords: wars of independence; pacific ports; war finance; lima; trade networks; peruvian economy; buenos aires; frederick bergmann comerciantes extranjeros en sudamérica y la financiación de las guerras de independencia, 1820-1830 resumen el estudio del comercio y de los comerciantes desde una perspectiva global permite analizar los intercambios materiales y culturales que tuvieron lugar más allá de las fronteras, algo que resulta difícil mediante perspectivas históricas centradas en límites nacionales. esta amplia perspectiva se explora en este artículo, analizando y visualizando las interrelaciones entre los puertos sudamericanos de lima, valparaíso y buenos aires, desde el punto de vista del perú independiente. para ello, el trabajo estudia los vínculos entre comerciantes extranjeros enraizados o estrechamente vinculados con dichos puertos, en el contexto de las guerras de independencia en sudamérica. la guerra situó a perú en una situación económica desastrosa, circunstancia que los comerciantes extranjeros explotaron al convertirse en la principal fuente de préstamos del nuevo estado, el cual luchaba para cubrir los gastos del ejército para el sostenimiento de la guerra. estos negociantes crearon una red mercantil que atravesaba los límites de los estados-nación recientemente creados, aportando testimonio de sus excelentes habilidades negociadoras, y de su capacidad para transformar el sistema económico de control comercial que había dominado durante tres siglos en la región. la investigación en fuentes documentales del gobierno peruano, notarios y aduanas permite en este artículo descubrir la capacidad de estos negociantes para actuar como agentes, negociar préstamos y compras, y aprovechar una crisis de carácter bélico para convertirse en principales suministradores de armas y provisiones militares, lo que les hizo adquirir una posición privilegiada en la economía de la región. dado que sudamérica no estaba preparada para alcanzar su independencia a inicios del siglo xix sin ejército, sin dinero, o sin armas, la dependencia financiera y económica de los nacientes estados respecto a los comerciantes extranjeros que empezó en estos años fue, en algún sentido, inevitable. palabras clave: guerras de independencia; puertos del pacífico; financiación bélica; lima; redes de comercio; economía peruana; buenos aires; frederick bergmann comerciants estrangers a sudamèrica i el finançament de les guerres d’independència, 1820-1830 resum l’estudi del comerç i dels comerciants des d’una perspectiva global permet analitzar-ne els intercanvis materials i culturals que van tenir lloc més enllà de les fronteres, cosa que resulta difícil mitjançant perspectives històriques centrades en límits nacionals. aquesta ampla perspect iva s’explora en aquest article, tot analitzant i visualitzant les interrelacions entre els ports sudamericans de lima, valparaíso i buenos aires, des del punt de vista del perú independent. per a tal fi, el treball estudia els vincles entre comerciants estrangers arrelats o estretament vinculats amb els ports mencionats, en el context de les guerres d’independència a sudamèrica. la guerra va situar el perú en una situació econòmica desastrosa, circumstància que els comerciants estrangers va n explotar quan van esdevenir la principal font de préstecs del nou estat, el qual lluitava per cobrir les despeses de l’exèrcit per al sosteniment de la guerra. aquests negociants van crear una xarxa mercantil que travessava els límits dels estats-nació tot just creats, aportant així testimoni de les seves excel·lents habilitats negociadores, i de la seva capacitat per transformar el sistema econòmic de control comercial que havia dominat durant tres segles a la regió. la recerca en fonts documentals del go vern peruà, notaris i duanes permet en aquest article desentrellar la capacitat d’aquests negociants per actuar com a agents, negociar préstecs i compres, i aprofitar una crisi de caràcter bèl·lic per esdevenir els principals subministradors d’armes i provisions militars, el que els va fer adquirir una posició privilegiada a l’economia de la regió. atès que sudamèrica no estava preparada per assolir la independència a inicis del segle xix sense exèrcit, sense diners, o sense armes, la dependència financera i econòmica dels naixents estats respecte els comerciants estrangers que va començar durant aquells anys va ser, en algun sentit, inevitable. paraules clau: guerres d’independència; ports del pacífic; finançament bèl·lic; lima, xarxes de comerç; economia peruana; buenos aires; frederick bergmann corresponding author: e-mail: cmazzeo@pucp.pe received 10 march 2021 accepted 27 february 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-6006-6250 mailto:cmazzeo@pucp.pe http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 1. introduction the independence of the spanish american republics was consolidated after 1820, ending the period of spanish domination and opening latin american trade to the outside world. the atlantic was the first to open itself up to foreign trade, even before the so-called united provinces of south america formally declared their independence in mid-1816. two years later, the pacific was also opened to foreign trade through valparaiso (chilean independence was declared in 1818), when english traders settled in that port city and distributed goods across the coast to guayaquil. the peruvian port of callao had to await the arrival of general josé de san martín for the establishment of foreign traders and the opening up of trade to all the nations of the world. studies on british trade in the southern cone is quite ample, from the classic studies of desmond christopher martin platt (1972) and julio irazusta (1984) for the argentine case, heraclio bonilla for peru, eduardocavieres for chile, to the new contributions by mariano m. schlez (2019) for argentina, manuel llorca-jaña (2012) for chile, and paul gootenberg (1989) for peru. in the provinces of the río de la plata, free trade was championed since the beginning of the century (1806-1807) by its first statesmen (including esteban echevarría and bartolomé mitre), who considered the port of buenos aires as an ideal engine of development. julio irazusta (1984) argued that foreign traders hindered the development of the río de la plata by subordinating the region to foreign interests and therefore squandered the opportunity that opened up in 1810. according to schlez (2019), the so-called english invasions of 1806-1807 stroke a mortal blow to the spanish monopoly, although trade with spain had begun to http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 deteriorate long before, and the ports of the río de la plata traded with non-spanish ports since the very origin of its navigation. for desmond c.m. platt (1972, 3), although it had been commercializing textiles since the colonial period, british trade in latin america was not very significant, and it occupied a small percentage of the region’s international markets except for those of brazil and argentina. manuel llorca-jaña (2012) has recently argued that during the period after independence, british trade in chile didn’t differ much from that engaged by the british in the rest of the world. the exports from the united kingdom to the world behaved largely as its exports to the southern cone, all of which increased dramatically in the second half of the nineteenth century across the globe (llorca-jaña 2012, 23). he also adds that, although the spanish colonies traded with the english before independence, the volume of this commerce can only be quantified via the re-exports made by the spanish metropolis to other parts of the empire. part of the traditional historiography on this subject has concluded that the region’s dependence did not end when it reached independence, for the increase of the importance of british trade shifted dependence from spain to great britain. this confirmed the so-called “dependence theory” developed by andré gunder frank (1967) and fernando henrique cardoso and enzo faletto (1969). heraclio bonilla and karen spalding (1972) argued that in the peruvian case, the weak state apparatus that emerged from independence never became strong enough to counter the informal dependence threaded by british trade, and so the latter continued throughout the entire nineteenth century. this idea of subordination to the british via dependence on british trade encouraged the notion of an informal imperialism, a concept that has been revived during the last few years and that is defined as the indirect domination that latin america became subject to when it joined the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 global economy through the expansion and development of new forms of trading relations. according to deborah besseghini (2019, 2020b and 2021), this subjection was not based on explicit coercion, but upon an agreement between the parts. she describes informal imperialism as a new kind of indirect domination with political-strategic ends, a subtle and complex relationship that was carried out by official and officious agents who responded to the interests of imperial institutions. it was thus a relationship of mutual interests and benefits between the two poles, frequently in a context of unequal or asymmetrical negotiations, that was encouraged during the political-military juncture between 1810 and the early 1820s. this article will not explore the notion of “informal imperialism,” which, on the one hand, has not been clearly defined, and, on the other, is not accepted by all scholars of latin america as relevant during the post-independence period. instead, we will look at the connections developed in the southern pacific by a group of foreign traders established in the three main ports of the southern cone — callao, valparaíso, and buenos aires — during the period of transition between the colonial system and the republic. it is well known that once independence was declared, foreigners settled in spanish america to expand trade and trading relations on a global scale. the article seeks to contribute to the historiography of foreign trade in south america by focusing on the actions of a group of foreign traders using unpublished material, including customs records and private and notary archives, to show the extension of trading networks that connected the two main pacific ports (valparaíso and callao) with buenos aires in the atlantic. in the peruvian case, the need to finance the fight for independence (which continued throughout 1824) allowed these traders not only to insert themselves in the regional markets, but to become the fledgling government’s main financiers. but this relationship was established between the state and foreign traders as individuals or as members of trading companies, not as representatives of their respective nations. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 paul gootenberg (1998) points out that the peruvian state — unlike that of chile (llorca-jaña 2012) and río de la plata (schlez 2019) — held on to a protectionist tradition that dominated the economy between 1820 and 1845, during which a corporative colonial mindset of nationalist tint was prevalent. he analyzes the difficulties that north american consuls found when trying to initiate mercantile activities. lengthy representations and personal requests were not enough to overcome bureaucratic obstacles or to sway the peruvian state into giving north american products favorable tariff rates. indeed, the government imposed tariffs of 80% on imports of wool and cotton fabrics in order to protect those made in the country and issued a “law of prohibitions of foreign products” in 1829 (dancuart 1902, 10). these policies provide evidence to platt’s argument that the supposed british domination of latin america in the postindependence era was a myth. in the peruvian case, it was not until the guano period in the second half of the nineteenth century that a more intense penetration occurred. however, the traders whose activities we will analyze — who were english, north american, and german, with argentinean contacts — were skillful enough to conduct an intense trade in goods throughout the south pacific, despite the resistance to “foreign penetration” displayed by peru’s spanish-creole mercantile elite that had dominated trade in the country for more than 200 years but which, with the independence wars, was notably weakened. the vacuum left by these monopolistic merchants in peru was filled by foreign traders who awaited san martín’s arrival at lima in 1821. these traders’ connections with their allies in the port of valparaíso as well as in the port of buenos aires constituted a triangle of mercantile relations that kept the new republics’ economy active despite the political crisis and turmoil of the independence process. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 this article goes beyond the frontiers of national history to analyze the links and exchanges1 between foreign traders that settled in the southern cone’s three main ports, following a line of inquiry that parallels this historical process. second, it shows that foreign participation in trade was a fundamental element in the dynamization and even survival of the economy during the first quarter of the nineteenth century, as it allowed for the transportation and distribution of new and traditional goods (including weapons, necessary for the wars) and kept various regions in contact with each other and with the republican governments themselves. third, it shows the mechanisms that foreign traders used to finance these governments. in exchange for certain tariff privileges, these men and their companies become the main creditors of weak and unconsolidated states that needed to maintain well-supplied military forces if they were to win the war and secure their independence. this did not differ much from the role spanish traders had had during the viceroyalty — thus, we see that times had changed, but not timeworn ways. thus, as each nation found itself struggling to finance the war effort, and foreign traders took advantage of this, an economic system of controlled trade that had been in place for three hundred years was substituted by one open to global trade, but the ways in which merchants related to each other and to the states was not entirely brand new. 2. the impact of the war on peru’s social and economic situation, 1820 to 1830 after crossing the andes from mendoza, general josé de san martín declared the independence of chile and continued onto peru. by 1821, he had proclaimed the independence of the greater part of the south american coast. however, royalist forces continued fighting the peruvian republican forces until 1824 and the fort of el callao was in spanish hands until 1826. 1 sebastian conrad (2017) argues that to understand history from a perspective that goes beyond the formation of nation-states—as it very well is—it is necessary to search for links and connections of material and cultural exchange. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 one of the first measures adopted by san martín upon his assuming command of the peruvian republican government under the title of protector, was opening up trade to all the nations of the world. chile had obtained its independence in 1818 and had also launched the process of trade liberalization, while the river plate had done the same thing in 1810, even before independence was declared and the argentine state reorganized. peru’s economic conditions substantially deteriorated during the war. its silver mines would not recover the same levels of production of the last decade of the eighteenth century until 1830 (seminario 2015, 414).2 labor shortages and loss of capital and livestock caused a severe agrarian crisis which made itself evident in rising prices. table 1 compares the production value of different sectors of the peruvian economy in 1808, the year that the spanish monarchy fell into french hands, and 1826, the year that the spanish finally left peru after more than a decade of warfare. table 1. impact of the independence war on peruvian economy: 1808 vs. 1826 sector 1808 1826 difference % decline agriculture 25,841,159 21,874,842 3,966,317 -15 % mining 3,947,655 1,095,765 2,851,890 -72 % manufactures 3,232,970 802,630 2,430,340 -75 % commerce 4,820,945 993,327 3,827,618 -79 % transport 2,511,534 1,234,603 1,276,931 -51 % exports 7,694,945 247,633 7,447,312 -97 % imports 1,751,918 415,375 1,336,543 -76 % source: seminario (2015, 410). the value is given in pesos fuertes. as table 1 shows, the value of peru’s mines, factories and commerce dropped more than 70%. and it is no wonder. cerro de pasco, the country’s most important mining center, was alternatively occupied by the military of both sides (royalists and independentists) between 2 bruno seminario makes an effort to measure peruvian gdp between 1700 and the year 2000 through a sectoral analysis of the economy, distinguishing six stages of peruvian economic growth: recovery from the crisis of independence 1824 -1840; initial phase of the guano era 1841-1849; guano era 1850-1878; invasion and collapse 1878-1881; recovery 1881-1895; new mining sector 1895-1929. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 1820 and 1824. livestock was expropriated, workers who had not been conscripted fled, and the machines that were used to drain the galleries were destroyed (contreras 2010, 9). many of the most important haciendas were also occupied, particularly around lima. thus, when the marqués de montemira was asked for 2,000 pesos by the consulate of commerce to aid the war effort, he explained that he could not comply because his hacienda in aznapuquio (which produced sugar) had been taken by the royalist army while the one in valle de pisco had borne the costs of the occupation and maintenance of the pro-independence forces. moreover, he had already handed over 3,000 pesos to the public purse (mazzeo 2012, 196). trade was practically paralyzed. regular shipments disappeared once the independentist forces took the central pacific coast, an event that had been preceded by the constant capture or destruction of mercantile ships (flores 1984, 195 and 212). moreover, few shipments were sent from cádiz. after the victory at chacabuco and later at maipú, which sealed chile’s independence in 1818, trade between chile and the still spanish peru was considerably reduced. however, other ports, especially those under british or north american naval and commercial control, continued trading, not only with the exterior but across the south american coast. travelers who visited the region during this period eloquently described the difficult conditions that they encountered. the arrival of the so-called ejército libertador (liberating army) was (according to james thomson, a traveler) anything but liberating, for “instead of bringing peace, it increased uncertainty, and the great businessmen, who typically believed that it was necessary to keep the old ways and to whom great promises had been made, lived as if in a nightmare because of the new exactions brought home to them every day by the nature of the crisis”(nuñez 1971, 15). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 the war ruined the established commercial elite, for spaniards and creoles were forced to make such extraordinary “contributions” to the war effort that their wealth was practically destroyed. in 1822, the republican government established a juzgado de secuestro (court of sequestration) under the direction of bernardo de monteagudo that requisitioned the goods and properties of several spaniards. it confiscated, for instance, manuel gorbea’s landed properties; the houses, and stores of matías de elizalde in the barrio of san francisco; and pedro de abadía’s haciendas and other real estate. some of these properties were returned to those spaniards who stayed in the country or came back after the war was over (mazzeo 2012, 190). but since spaniards who wanted to stay in peru after independence had to become peruvian citizens, many left never to return. others, like francisco javier de izcue, renounced their spanish citizenship and adopted that of the new republic, which was not surprising, since he had loaned 8,000 pesos to the viceroyalty in 1819 and 4,000 pesos to the independentist authorities in 1821 (mazzeo 2017, 161-177; mazzeo 2021). the war, along with the food shortages and epidemics that it unleashed, caused great loss of life. between 1824 and 1825, the death toll of callao alone was of 4,300 people, who succumbed to disease and deprivation (contreras 2010, 301). moreover, the economic crisis was accompanied by an unprecedented political crisis that did nothing to advance stability. it is unsurprising that foreign traders found a space and a role to fill during this turbulent and difficult period, particularly the british merchants who had settled in the río de la plata and chile after their independence was secured, and, to a lesser extent, in peru. between the arrival of san martín in september of 1820 and the arrival of simón bolívar in september of 1823, many attempts to govern republican peru and its constitutional process failed, for various reasons, one of them being the division and militarization of the country. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 more than half of the national territory was occupied by an army that integrated peruvians, chileans, colombians, and argentineans, while the remaining territory, up in the mountains, was still under the sway of the royalist army under viceroy josé de la serna. another reason was the republican government’s lack of funds to pay the troops and government employees. forced loans became harder to obtain, and coercion in the shape of threats (and acts) of confiscation and exile were necessary to secure them. pressured by the military, the constitutional congress named josé de la riva agüero first president of peru, but he was in office for only four months. in 1823, the government obtained 1,324,195 pesos from the briefly renamed chamber of commerce — an institution established during the colonial period under the name of the consulado de comercio — and with this money, new battalions were created and sent on an expedition to the so-called intermediate ports in southern peru that were under spanish control (mazzeo 2012, 191). however, the expedition was a failure and desperation again gripped the country. unlike those in other regions in the continent, peru’s chamber of commerce or consulado never ceased functioning. it maintained its traditional, conservative structure, which allowed the institution to manage the country’s public debt. the system of assigned quotas and forced and voluntary loans that placed the responsibility of the armed forces’ upkeep in the hands of merchants and businessmen during the war followed the same logic and system used by the viceroyalty of peru to obtain emergency funds during the colonial period. in fact, in the early part of the war it supported the viceroyalty’s war effort, and later, that of the republican government. the chamber of commerce served as the link between short-lived governments and the businessmen whose wealth was required and demanded to finance the war. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 foreign and spanish traders coexisted in lima after 1821: the former did not simply replace the latter. the activities of the foreign trading houses complemented the older spanish houses. foreigners became an additional financial resource for the emerging republican states as early as the period of the independence war and its changing and uncertain circumstances, which we will address in section 4. the following section elaborates a detailed analysis of the activities carried out by a particular group of businessmen that should help us understand the extensive network that connected cities and ports in south america during the period in question. 3. commercial networks of buenos aires, valparaíso, and lima the port of buenos aires was the main entry point to south america. but while many traders settled there, others continued on to valparaíso, especially after the free trade policies established by manuel rengifo y cárdenas, the country’s finance minister during several governments (1831 to 1835 and 1841 to 1844). rengifo set up warehouses in valparaíso where, for a small fee, traders could keep their goods until they decided to export them to other ports, perhaps when prices met their profit expectations. these measures capitalized the geographic advantages of valparaíso as an ideal stop for ships that circumnavigated the pacific via cape horn. in the mid-1830s, 60% of goods imported to peru had been in valparaíso’s public warehouses (collier and sater 1999, 64). commercial connections in the southern half of south america generally went from south to north. after ships arrived at buenos aires, their merchandise was either transported over the andes through mendoza or taken via ship around cape horn to valparaíso and then callao. the northern pacific trade route went from its first stop at panama, to guayaquil and then callao. valparaíso was the central port in the southern route, midway between buenos aires and callao, while callao was the central port between panama and valparaíso in the northern http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 route. on the other hand, buenos aires was the first port, along with rio de janeiro in the southern atlantic, to which ships from europe arrived. in any case, trade expanded inland and onto other parts of the south american continent from the main ports of buenos aires, valparaiso, and callao, where foreign traders were settled and managed their trading networks. to understand the workings of this type of trading network, we will look at one of the most active. many of its traders were related one way or another with an english firm based on leeds, b. and s. winter & co. these traders set up firms in several cities in the southern cone, including winter, brittain & co. in buenos aires; brittain, waddington & co. in valparaíso; and samuel winter & co. in rio de janeiro, as one or the other moved on to new cities or incorporated traders from different cities, affiancing the relations between them. take winter, brittain & co. this firm had an agent in lima, christian friedrich bergmann, one of whose partners was thomas templeman, who, for his part, was in the trading house brittain, waddington & co., with joshua waddington in valparaíso. indeed, foreign traders were often loosely associated with a trading house headquartered in england, but they themselves came from different places. among the many related traders whose activities we address, are british john begg; argentineans josé riglos and estanislao lynch; german jew christian f. bergmann, englishman joshua waddington, and north american richard alsop, who was from middletown, connecticut. figure 1 shows how this trading network linked together the ports of callao, buenos aires, and valparaíso. john begg & co. operated in santiago de chile since 1818 as a trading subsidiary of liverpool’s brotherston company (england). there, begg begun his trading activities, which expanded slowly from coquimbo to guayaquil. in 1820 he travelled to monterrey, in alta california, with agents from the mcculloch and hart trading house, and he got in touch with http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 spanish governor pablo vicente de solá and the prefect to promote a contract with the missions of the region and trade tallow and hides. this proved to be a very profitable business. hides were destined for the english market, and they were priced at 1 peso (identical to their price in the buenos aires market) and tallow was sent to south america at 2 pesos per arroba (bushel) (ogden 1927). figure 1. connected traders in the ports of buenos aires, valparaíso and lima source: own elaboration. john begg had several connections in the peruvian interior, such as domingo villarino, a merchant settled in trujillo. begg had also been one of the state’s main creditors during the independence war. he became the representative of the firm waddington and green when these decided to end their lima operations and left him in charge of obtaining the payments that said firm was due.3 his trading enterprise was quite varied. in 1825, he received 4,000 3 agn lima registro de notarios, antonio lópez escudero. england b. and s. winter & co. valparaíso chile thomas templeman joshua waddington sebastián lezica buenos aires tomás lezica sáenz valiente félix de álzaga john parish robertson winter brittain & co. lima callao christian f. bergmann john begg estanislao lynch john parish robertson http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 pesos for the sale of the brigantine cora, which carried out the transit of goods between the ports of guayaquil (rubber soles, agave, oil, and cacao), pacasmayo (rice, sugar), huanchaco (pouches for tobacco, husks, and rice), and lambayeque (tobacco, rice, wine, vinegar, alfalfa, and soles), as well as pisco (aguardiente, eau de vie) pitchers, wine, and flour. in 1825 and 1826, he introduced 7,720 pesos fuertes worth of soap, tallow, salted meat, wine, and beef tongue to callao. but begg’s most high-value trade was the sale of cotton, wool and linen textiles and clothing (pants, shirts, and socks) in california.4 born in york, englishman joshua waddington settled in valparaíso in 1817, having arrived there from buenos aires, and he stayed in that chilean port-city until his death in 1876. waddington became an agent of winter, brittain & co., a firm established in buenos aires (araya 2017, 98). waddington eventually formed his own company in 1829, taking advantage of the conditions that chile offered foreign firms. his firm followed the model established by other foreign trading companies, such as antony gibbs & sons, frederick huth & co., alexander fletcher & co., naylor & co., watson thompson & co., robert scott fairlie & co., and alsop. & co. (araya 2017, 99). the principal commodities waddington worked with at that time were cotton cloth, so-called german bedding, muslin shawls, and indian cottons, which were what winter, brittain & co. originally traded in. waddington’s correspondence with hugh dallas & co. in buenos aires5 reveals not only his connection with that port city, but also his connections with rio de janeiro, where he sent wheat and from where he imported sugar in the pacific trade. in some letters, waddington addresses the scarcity of “ships in the pacific ports,” a lack which he took 4 he exported to callao 107,864 pesos fuertes worth of goods and imported 34,721 pesos fuertes worth of goods. 5 archivo del banco de la provincia de buenos aires, correspondencia entre waddington y dallas, 1820. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 advantage of when he became an investor in a steam shipping company established by us businessman william wheelwright (alberdi 1876). argentine estanislao lynch participated in argentina’s independence war as a naval officer, and he crossed the andes to collaborate with the liberation of chile. in 1821, lynch arrived at lima, where he asked the competent authorities, including the city’s procurators, the municipality, and the trading guild, for an exclusivity contract of ten years for steam shipping trade. evidently, he planned on settling in the city, at least for a time, and becoming a businessman. he was granted a six year exclusivity contract, with the explanation that an individual from “north america” could arrive “with a vessel of such type in order to direct it to these waters”(tauro del pino 1971, 137-138).6 by 1823, lynch owed the chamber of commerce 11,327 pesos of unpaid customs duties (tauro del pino 1971, 356). however, he argued that the state owed him much more than that for breach of contract, since they had not paid the rations that he had delivered in war transports for 6,000 troops. lynch also owed the chamber a supply quota that had been requested from him on october 29, 1822 (tauro del pino 1971, 339). in october 1823, lynch demanded the payment of 2,400 pesos for 100 barrels of wheat that had been delivered to the army.7 the state, for its part, demanded the payment of 15,892 pesos that he owed in customs duties. on another occasion, lynch asked the chamber of commerce to pay him what he was owed for the copper he had delivered. estanislao lynch was named consul to peru of río de la plata in 1826.8 in 1827, he partnered with juan josé sarratea, josé riglos, the firm cochran, robertson & co., cristóbal armero, 6 this man was probably william wheelright, who introduced steamships to south america (alberdi 1876). 7 agn lima, ol 71-115. 8 agn lima, protocolos notariales (hereafter pn) 38, 1822, f. 934; pn 44, 1827. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 samuel price, and manuel castilla to buy a mine in cerro de pasco along with the lands around it. the group paid the state with credits that ascended to 438,969 pesos, with 24,409 deposited at 30%.9 he also partnered with pedro antonio de la fuente, associated with vicente ovalle, in the eau de vie trade, and he invested in the purchase of mines in chanca province in cajamarquilla.10 the commercial transactions carried out by estanislao lynch in peru in 1827 had a total value of 313,215 pesos. wheat and tallow from valparaíso constituted the largest percentage, but commodities traded also included arms (guns and sabers) from the port of bremen, as well as blue cloths and buttons for the confection of military uniforms.11 lynch also exported 174,596 pesos worth of goods to other pacific ports (valparaíso and guayaquil), of which the most important were wine, textiles, flour, and currency. in 1847, lynch was selected as prior of the consulate of valparaíso.12 another member of the group of traders under study was juan josé sarratea, with whom lynch was connected. born in buenos aires, sarratea moved to chile in 1818 as general supplier of the chilean army. sarratea set up a trading house in chile with nicolás rodríguez peña that had operations in valparaíso and lima. eventually, sarratea relocated to lima, where he collaborated closely with san martín’s liberation effort, so much so that the general described him as one of his closest friends (cutolo 1968). another of the key traders in the network under study was the german jew christian friedrich bergmann, who arrived in buenos aires in mid-1812, and he got in touch with the firm winter, brittain & co. he had important connections in altona (hamburg) in 1816 and in amsterdam 9 agn lima, archivo notarial juan cubillas, protocolo 204, f. 271. 10 agn lima, pn 38, f. 934; pn 34, 1827 f. 42; pn 44 1827 f.85 v. 11 centro de estudios histórico-militares del perú: archivo militar, libro borrador n. 13: n. 15. 12 archivo nacional de chile, archivo de la intendencia de valparaíso. vol. 2, 159. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 in 1817. in 1820, he exchanged letters with karl frederick schlutter, another global trader who was established in rio de janeiro. for political reasons, he decided to travel to lima, but his long-term plans were to create a triangular trading setup between buenos aires, valparaíso, and lima. during his trip across the pacific, bergmann visited several merchants at each port. while he was in santiago waiting to depart for lima in 1821, he exchanged several important letters with joshua waddington (on september 15, 19, and 28 and on october 16) and winter (on the october 5, 9, and 10). bergmann wanted to use winter’s name in the firm that he wanted to establish in lima, but, for reasons that remain unknown, winter did not allow it. he therefore decided to partner with thomas templeman in the firm templeman, bergmann & co., with which waddington was associated in valparaíso.13 in 1822, bergmann was established in lima, and he received fine silks and cloths along with furs and other such commodities sent by sebastián lezica & brothers in the english frigate elizabeth. the lezica brothers were spread out across south america, with one operating in valparaíso, another in la paz, bolivia, with connections in salta, and another in buenos aires (olivero 2010, 94).14 as a representative of british and german traders, bergmann & templeman was a consignee of the firm elberfeld, and it kept connections with traders such as schmaling and the antwerp firm kreglinger. 13 colección bergmann, biblioteca central de la pontificia universidad católica del perú. templeman, who acted in synergy with moens, gibbs’ agent, was winter’s nephew (besseghini 2020a). 14 this commercial house was transformed into a bank. in 1825 sebastián lezica moved to chile and faustino lezica became the director of the firm until his bankruptcy. sebastián and faustino were sons of juan josé lezica, who in turn was related to the anchorena family, of outstanding commercial activity in the port of buenos aires. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 bergmann’s contact in lima was francisco javier de izcue, a spanish trader who had arrived at the city in the late eighteenth century. for his part, izcue had had connections with nicolás de chopitea in valparaíso and oleguer reynals in buenos aires, and they all participated, among others, in the slave trade, bringing slaves from buenos aires, where they arrived, to valparaíso across mendoza (mazzeo 2017 and 2021). bergmann had been recommended to francisco izcue by juan pablo sáenz valiente. in his correspondence, bergmann asked whether foreigners could engage in trade in that city, if the introduction of foreign commodities was legal, if foreign traders enjoyed personal safety, and if the country was contemplating opening up to trade with all nations, and whether this would happen soon after san martín’s pending arrival in august (this letter was written in june of 1821). when bergmann introduced himself to other foreign traders, he said: nine years of experience in the cited men’s very respectable house in buenos aires demonstrate my capacity to direct with the utmost circumspection any business with which i am entrusted in the new establishment that i will open. by this means, it is my pleasure to humbly ask that they may contribute to the prosperity of the trade in which you yourselves may engage, as well as for the recommendation that your good will may move you to make to your friends and correspondents in favor of my trading house, with the complete guarantee that the business that you will confide in me will receive my utmost diligence and interest to secure a good result…15 this letter of introduction lets us imagine the activities that bergmann sought to carry out in south america. bergmann also got in touch with the spanish merchant félix de álzaga, in buenos aires,16 to whom he explained that if it were impossible for him to settle in lima, he would continue on 15 colección bergmann, biblioteca central de la pontificia universidad católica del perú. the text has been translated in english from the spanish original. 16 son of martín de álzaga, a prominent figure during the british invasions of río de la plata. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 to guayaquil, telling álzaga that he could count on him and to get in in touch with winter, brittain & co.17 anxious to expand his business, bergmann connected himself with trader josé joaquín carvalho, of whom he received 15,000 pesos to create a company in which templeman was also supposed to participate. in 1824, this society with carvalho had been created, and bergmann invested the sum of 5,000 pesos to buy wool and european silk and cotton to sell them for cash in carvalho’s store.18 templeman & bergmann’s main line of business at this point was in textiles: they imported diverse kinds of cloth from liverpool and london to the prussian ports, as well as to the ports of guayaquil, islay and cobija. another key trader connected with bergmann and templeman was richard alsop, who carried out his activities in the northern pacific. according to researcher bill bollinger (nd), alsop was sent to peru as a representative of the family firm. he established important trading relations in the ports of valparaíso and arica, from which he transported flours and textiles as his main lines of business. alsop & co. was the most important us trading house in the south american western coast, and it was the only us trading house at least established there during the 1821 and 1822. compared to other import and shipping companies in lima, alsop’s was not among the top, but he was a pioneer in the sale of us light industry commodities in peru, including wheat flour 17 colección bergmann, letter of march 18, 1821, to álzaga. 18 bergmann’s business in lima extended throughout the nineteenth century—a subject beyond the scope of this article. let us, however, cite some significant data. in 1860, his sons cristóbal and carlos created a partnership with equal shares with joseph rodgers templeman from london and charles brownell from liverpool under the name of templeman & bergmann. subsequently, in 1862, a new company was formed with joseph templeman, juan federico bergmann and carlos diego bergmann with the participation of 3/5 each. in 1867 the partnership continued with percy davies and alfred miles speer, nephews and heirs of the late joseph templeman. bergmann’s sons were granted usage of the pier, dock, and boardwalk, their partners being francisco de paula and josé gaspar rivadeneira, both chilean. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 and thick cotton cloth (tocuyos), both produced using waterpower. as a result, his commercial enterprise was frequently in conflict with protectionist politicians and peruvian producers who sought to protect local production from foreign competition, and who preferred to do business with chile.19 alsop was also in the business of exporting commodities from pisco, arica and valparaíso. from pisco, he bought flour, eau de vie, wine, vicuña wool, and alfalfa seeds; from arica, lard, dry beef, tobacco, and tea — staples in soldiers’ diets —; and from valparaíso, flours, textiles, tallow, medicine, tobacco, mercury, ham, etc. in 1828, alsop imported a total of 581 barrels of flour for a total fob value of 15,372 pesos.20 his cloth imports between 1825 and 1827 were worth 94,246 pesos, while those of 1828 alone reached 70,406 pesos fuertes.21 traders were allowed by the peruvian state to pay part of a shipment’s customs duties in advance. in 1822, our group of traders took advantage of this opportunity to insert themselves in the market, advancing 80,000 pesos. however, this sum turned out to be only 5.25% of the total duties associated with the shipment, and was thus well below the legal requirement of 15% advance stipulated by the state’s commercial legislation. on another occasion, the same traders loaned the peruvian government 200,000 pesos, of which 50,000 were paid in cash and the rest in goods. for this operation, they eventually received 300,000 pesos — 100,000 in interest and 200,000 for the loan. as we can see, the interest on the loan was 50% (mazzeo 2006, 63-84). 19 see bollinger, nd, chapters 19-21. 20 agn lima, libros de aduana mares del sur: 1825: 7,218 pesos; 1826: 15,586 pesos; 1827: 1,036 pesos. 21 agn lima, libros de aduana de mares del sur, 1828. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 4. financing the war of independence foreign traders acquired a very important role by providing loans to the republican governments during the independence wars, which in peru’s case lasted until 1824. after san martín left peru in 1822 and until bolívar arrived in 1823, the population was forced to contribute to the army’s upkeep providing loans and donations (mazzeo 2012). in 1823, bolívar’s government needed money urgently, and a group of foreign traders lent it 72,900 pesos. among those who contributed were john begg & co. (12,000 pesos), templeman & bergmann (7,000 pesos) and john parish robertson (6,000 pesos). the creditors were reimbursed by customs vouchers that they could use to pay their customs duties in callao when their goods arrived. special arrangements were also made to collaborate with the republican governments by getting provisions for the army. thus, again in the year 1823, the same group of merchants (john begg, josé riglos and john parish robertson, among others) committed themselves to providing food and transport to 2,000 men for four months and for 4,000 men for two months, for an estimated value of 420,000 pesos. the peruvian government paid this sum using two bills of exchange, one drawn in chile and the other in london, but the bills issued by the peruvian government on the chilean loan could not be cashed because the representative of the chilean government protested against them, arguing that they “did not conform to the official copy.”22 this means that a formalistic detail delayed the payment of the loan, and it was only one of several episodes that show that business with a state in times of war and in constant need of cash was very complicated and did not always prove profitable. begg and robertson complained to the 22 archivo general de la nación, lima (hereafter agn lima), documentos republicanos, ol 90 4ta. this was a chilean loan to peru. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 president of the republic that the peruvian government had already signed several such contracts that it had not yet paid, and to please pay for at least part of this one.23 in times of war, arms were in great demand. the history of the arms that entered peru through callao, whether via valparaíso or panama, is evidenced in the customs records that reveal, for example, the imports procured by estanislao lynch in 1821 from bremen in the us frigate mercurio. table 2. estanislao lynch’s arms imports on october 2, 1821 date ship consignee origin item units pesos fuertes 02/10/1821 us frigate mercurio estanislao lynch bremen muskets 10,848 65,088 02/10/1821 us frigate mercurio estanislao lynch bremen carbines 570 4,560 02/10/1821 us frigate mercurio estanislao lynch bremen sabers 4,650 13,950 02/10/1821 us frigate mercurio estanislao lynch bremen gun powder 32 (barrels) 64 source: agn lima, libros de aduana mares del sur. lynch, as well as frederick pfeiffer and templeman & bergmann, also introduced arms via valparaíso, panama, and guayaquil between 1821 and 1826, as seen in table 3. table 3. arms imports, 1821 and 1826 date ship consignee origin item units pesos fuertes 27/10/1821 frigate fama estanislao lynch valparaíso muskets 1,200 9,600 04/07/1825 brig zodiaco templeman & bergmann guayaquil sabers 37 185 15/07/1826 brig rímac pfeiffer & hesterberg panama sabers 28 252 source: agn lima, libros de aduana mares del sur. pfeiffer & hesterberg also imported sabers in the brig rímac in 1826 at 28 pesos each, and 70 pairs of pistols from bordeaux in the french frigate danae (witt 1992, 163). frederick pfeiffer had arrived at lima sometime in 1821 with a modest capital, and hesterberg convinced him to 23 agn lima, documentos republicanos, o.l. 90-13. josé riglos, manuel castilla, and juan josé sarratea also appear in this contract. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 accept french shipments. after this period, there are no records of this firm in callao (witt 1992, 163). these foreign traders found an important line of business in latin america, and they were able to adapt to the necessities of the moment. several of their firms lasted throughout the nineteenth century, and even today, there are businessmen whose surnames clearly reveal their origin in this period (bergmann, winter…). and thanks to the creation of the pacific steamship line established by william wheelwright, many of the traders who resided in lima invested their capital in the business of steamship navigation in october of 1841 with the following firms: gibbs, crawley & co.; maclean, rowe & co.; alsop & co.; templeman & bergmann; frederick huth, gruning & co.; john mackie; swayne, reid & co.; dickson price & co.; william hodgson; lang, smith & co.; naylor, bourdman & owley; peter conroy; green, nelson & co.; henry severin; ad. zachariese & co.; henry real & co.; wheelvek, daliddon & labbabure; hegan, hall & co.; and a. roux (alberdi 1876, 91). this group included the most prestigious foreign traders established in lima. we can infer that, just like the trading connections in south america were global in their scale, with strong links between valparaíso, buenos aires, and lima, the loans acquired by the respective nations in which these cities were located were underwritten by an equally global structure. the scotsman john parish robertson is himself a great example. trading and traveling in the region since 1809, he had made a name for himself as a trader in buenos aires, but he later incorporated financial operations to his business, after having returned to great britain to establish connections with several institutions and businesses in various cities. he was engaged in febrile economic activity in argentina during the government of rivadavia http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 (1826-1827), and he was related to woodbine parish,24 the first official british consul to río de la plata. in 1822, juan garcía del río and james paroissien negotiated a 6 million pesos loan for the peruvian state floated by the london firm thomas kinder, which was guaranteed by peru’s future customs duties. juan garcía del río and james paroissien had arrived in peru with san martín, who regarded the latter, a physician by trade, as a personal friend, and had gone to london at san martín’s request. but the deal that they obtained was plagued with irregularities and was less useful than it might have been, for 5 million pesos were issued in letters and money orders and only 1 million was immediately available for covering the military’s expenses and paying public employees (tantaleán 1983, 42). in 1825, acting as a peruvian government agent in great britain, john parish robertson obtained a second loan for the peruvian state, this one of 660,000 pounds sterling.25 even though he was acting as a government agent, robertson was also acting in his own interest when in great britain, as partner in the firm cochran, robertson & co. this firm sent a shipment of rifles and rifle flints the same year that robertson brokered peru’s second loan, in the ship isabella. he also sent a cargo of 6,000 rifles in a ship called océano.26 in a letter to the peruvian government, robertson asked about a third shipment of 1,200 rifles and 30 barrels of 24 woodbine parish wrote a detailed traveler’s report on buenos aires and the río de la plata describing the geographical and economic conditions of the country since the spanish arrival and up to 1820. it was not published until 1958 by the editorial hachette of buenos aires. 25 agn lima, ol 120-117: copy of the instructions given to john parish robertson as agent of peru sent to london to demand compliance with the loan contracted by garcía del río and diego paroissien with mr. tomas kinder or to raise another. 26 agn lima, archivo histórico del ministerio de relaciones exteriores (hereafter mre) correspondencia de los representantes del perú en londres, caja 12, carpeta 2, código 5-17, 1826, note adressed to the plenipotenciary ministers of peru, gregorio paredes and josé joaquín olmedo. regarding the isabella weapons shipment, robertson explains that the cargo’s documents did not travel in the same ship “to avoid any risk of being captured by spanish pirates and ships.” http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 flint, wanting to know if they were satisfied with the deal, and whether it was to be consigned directly to the ministry of state, or if the war between brazil and buenos aires made it necessary to secure more guarantees.27 london’s loan letters were used to pay soldiers’ salaries, and they were exchanged through the commercial firms set up by waddington, templeman, and bergmann.28 daniel florence o’leary, simón bolívar’s personal secretary, had been part of the delegation sent to cash the letters of credit that backed the london debt used to raise and transport the final liberating army during bolívar’s government (1823-1826). as plenipotentiary minister of peru, juan salazar paid o’leary 180,000 pesos and john parish robertson 40,157 pesos “for your favors,” which seemed to be a commission for having brokered the loan. 5. conclusions the peruvian political historiography of the 1820s and 1830s shows that the country’s productive system was destroyed by the war, while the economic and business historiographies show that foreign traders took advantage of their international connections to broker profitable trading and financial agreements. in this paper, we have seen how these traders operated in lima, valparaíso, and buenos aires, forming a global network structured around these regional linkages. to better understand the history of the country in this period, we must put together these two historiographies, for they are like two sides of the same historical coin, and the coin is the independence war. 27 ibid., london, february 11,1826. 28 agn lima, ministerio de hacienda, caja 10, carpeta 11, código 2-5, 1826. in 1826, general echenique received the wages that were due to him in this same fashion. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 peru’s political crisis was also an economic crisis, as the first section shows. after san martín’ arrival in 1820, until the last of the spanish forces, stationed in callao, left the country in 1826, the scarcity of food, medicine, arms, transportation means, etc., is evidenced daily in official documentation. and scarcity affected not only the soldiers but the population at large. the foreign traders settled in lima found ways to cover the population’s and the armies’ necessities, using their connections with the ports of valparaíso and buenos aires, as well as with england, whose banks and firms became the peruvian government’s main financiers in its war effort. benefit was not always guaranteed to traders and lenders, for in times of war and during such a profound economic crisis, the peruvian government did not always pay the debts it contracted with its foreign providers. clearly, independence would not have been won the way it was without the resources provided by foreign loans. and such loans established and/or strengthened ties with the foreign traders — argentine, english, scottish, german, north americans — that brokered them. these men, however, acted independently and not as agents of their governments. in fact, even though some of them acted as consuls of their respective states in the early years of independence (or incomplete independence, for it was not achieved in the entirety of the peruvian territory until 1826), and others went to england to negotiate the peruvian state’s loans, there is no evidence that the traders analyzed here were imperial agents. the strategy used by these foreign traders did not differ much from the one used by spanish and creole traders in the last decades of the viceroyalty: acting in concert based on high levels of trust between them. this worked for them even though they did not share a common national origin, as the spaniards settled in america were supposed to share despite their diverse regional and ethnic backgrounds (lamikiz 2010). foreigners vouched for each other and supported each http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 other during the first years of the republic, as evidenced in a letter sent by a buenos aires trader (sáenz valiente) to francisco izcue asking him to help christian friedrich bergmann settle in lima. the north american businessmen who arrived and settled during this period in peru were mostly dedicated to shipping and transportation, even though their trading connections with spanish america preceded independence, and had been especially cemented during the neutral trading years of 1796-1810. during this period, spaniards and creoles made no distinction between them and other foreign traders. moreover, spanish and creole businessmen in peru were often allies or investors in foreign firms, such as in brittain & waddington, or in wheelwright’s shipping company, which extended communication routes with steamships and transpacific railways. during the war of independence, peru was afflicted by the destruction of its means of production, economic and political instability, scarcity of products, and the absence of fiscal revenues. this situation was alleviated by the commercial activity developed by foreign traders settled in the pacific’s main trading ports and connected to the atlantic via buenos aires, and by the arrival of foreign monies in the shape of loans brokered by the very same traders with english firms. as we saw in the article, part of the loans were transformed into bills of exchange used to pay providers (the same foreign traders) as well as the army. the traders that we have looked at created trading networks that went beyond national states and evidenced their negotiating abilities. their connections with the rest of the world gave them a privileged position at the time of garnering loans, purchases, or representations during a period when spanish america was opening itself up to global trade. they took advantage of the independence wars, becoming the main providers of both rations and arms without which the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 war effort would not have been possible. the nascent spanish american republics’ economic and financial dependence upon them was practically inevitable, because obtaining independence without money, weapons, or armies was impossible. throughout the nineteenth century, the importance of these foreign-origin firms continued to grow, as they took charge of extending railroads and steam navigation, which increased their profits and benefited their concerns, but also contributed to the countries’ economic growth. references alberdi, juan bautista, ed. and trans. 1876. la vida y los trabajos de william wheelwright en la américa del sud. paris: librería de garnier hermanos, harvard college library. https://www.britannica.com/biography/william-wheelwright. araya, roberto. 2017. “de agente consignatario a engranaje modernizador en el chile tradicional 18171876.” in empresas y empresarios en la historia de chile: 1810-1930, edited by manuel llorcajaña and diego barria, 97-119. santiago de chile: editorial universitaria, facultad de administración y economía. besseghini, deborah. 2019. “pax britannica: il dibattito sull’imperialismo informale ottocentesco in america latina.” passato e presente 37(108): 56-75. doi:10.3280/pa352019-108002. besseghini, deborah. 2020a. “british trade and the fall of the spanish empire – changing practices and alliances of antony gibbs & sons in lima during the transition from viceregal to independentist rule (1820-1823).” nuevo mundo/mundos nuevos 20 (on line). doi:10.4000/nuevomundo.79632. besseghini, deborah. 2020b. “the anglo-american conflict in the far side of the world: a struggle for influence over revolutionary south america, 1812-1814.” annals of the fondazione luigi einaudi 54(1): 35-56. doi:10.26331/1099. besseghini, deborah. 2021. “imperialismo informal e independencia: los británicos y la apertura del comercio en el río de la plata (1808-1810).” illes i imperis 23; 41-68. doi:10.31009/illesimperis.2021.i23.03. bollinger, william. no date. origins of us merchant house in perú: richard alsop´s flight to south america, chapters 19 and 21. unpublished document. bonilla, heraclio and karen spalding. 1972. “la independencia en el perú: las palabras y los hechos.” in la independencia en el perú, edited by heraclio bonilla et al.: 70-113. lima: iep. http://revistes.ub.edu/index.php/jesb https://www.britannica.com/biography/william-wheelwright https://www.francoangeli.it/riviste/scheda_rivista.aspx?idarticolo=64881 https://doi.org/10.4000/nuevomundo.79632 https://www.annalsfondazioneluigieinaudi.it/browse/the-anglo-american-conflict-in-the-far-side-of-the-world-a-struggle-for-influence-over-revolutionary-south-america-1812-1814/ https://doi.org/10.31009/illesimperis.2021.i23.03 volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 cardoso, fernando h. and enzo faletto. 1967. dependencia y desarrollo en américa latina. ensayo de interpretación sociológica. lima: iep. collier, simon, and william sater. 1999. historia de chile, 1808-1994. madrid: cambridge university press. conrad, sebastian. 2017. historia global, una nueva visión para el mundo actual. barcelona: editorial crítica. contreras, carlos. 2010. el legado económico de la independencia en el perú. documento de economía 301. lima: pontificia universidad católica del perú. https://www.pucp.edu.pe/departamento/economia/images/documentos/ddd301.pdf. cutolo, vicente osvaldo. 1968. nuevo diccionario biográfico (1750-1930). buenos aires: elche. flores galindo, alberto. 1984. aristocracia y plebe, lima 1760-1830. lima: mosca azul editores. frank, andré gunder. 1967. dependencia y subdesarolllo en américa latina. lima: iep. gootenberg, paul. 1989. tejidos, harinas, corazones y mentes. el imperialismo norteamericano en el perú 1825 – 1840. lima: insitituto de estudios peruanos. gootenberg, paul. 1998. imaginando el desarrollo. las ideas económicas en el perú poscolonial. lima: instituto de estudios peruanos – banco central de reserva del perú. irazusta, julio. 1984 [1963]. influencia económica británica en el río de la plata. buenos aires: editorial universitaria de buenos aires. lamikiz, xabier. 2010. trade and trust in the eighteenth-century atlantic world: spanish merchants and their overseas networks. boydell & brewer. llorca-jaña, manuel. 2012. the british textile trade in south american in the nineteenth century. cambridge: cambridge university press. mazzeo, cristina. 2006. “los comerciantes, el consulado y los préstamos al gobierno republicano (lima – perú, 1820-1840).” revista complutense de historia económica 32: 63-84. mazzeo, cristina. 2012. gremios mercantiles en las guerras de independencia: perú y méxico en la transición de la colonia a la república, 1740-1840. lima: banco central de reserva del perú, instituto de estudios peruanos. mazzeo, cristina. 2017. “redes familiares y espacios mercantiles: el caso de los izcue, siglo xviii.” in parientes, criados y allegados: los vínculos personales en el mundo virreinal peruano, edited by margarita suárez, 161-177. lima: pontificia universidad católica del perú pucp – instituto riva agüero. mazzeo, cristina. 2021. “el circuito comercial en el pacífico sur durante la guerra entre españa e inglaterra visto a través de una triada de comerciantes conectados, 1796-1816.” américa latina en la historia económica 28(1): 1-27. doi:10.18232/alhe.1085. http://revistes.ub.edu/index.php/jesb https://www.pucp.edu.pe/departamento/economia/images/documentos/ddd301.pdf file:///c:/users/cristina/downloads/10.18232/alhe.1085 volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 ogden, adele. 1927. “hides and tallow: mcculloch, hartnell and company 1822-1828.” california historical society quarterly 6(3): 254-264. olivero, sandra. 2010. “estrategias de conformación y consolidación de las familias de elite comercial y política porteñas.” in familias, jerarquización y movilidad social, edited by giovani levi (rodríguez pérez comp.), 87-100. murcia: editum. platt, desmond christopher martin. 1972. latin america and british trade, 1806-1914 london: adam and charles black. robertson, john parish. 1958. buenos aires y las provincias del río de la plata. buenos aires: editorial hachette. schlez, mariano m. 2019. “el tráfico comercial marítimo durante la invasión británica al río de la plata (1806-1807).” américa latina en la historia económica 27(1), e1030. doi:10.18232/alhe.1030. seminario, bruno. 2015. el desarrollo de la economía peruana en la era moderna. lima: universidad del pacífico. tantaleán arbulú, javier. 1983. política económico financiera y la formación del estado: siglo xix. lima: centro de estudios para el desarrollo y la participación. printed sources dancuart, emilio. 1902. anales de la hacienda pública del perú, leyes decretos, reglamentos y resoluciones, tomo ii. lima: imprenta de gmo. stolte. núñez, estuardo, comp., 1971. colección documental de la independencia del perú, tomo xxvii vol. 2: relaciones de viajeros. lima: comisión nacional del sesquicentenario de la independencia del perú. tauro del pino, alberto, ed. 1971. colección documental de la independencia del perú, tomo xxi – asuntos económicos, vol. 1: informes y oficios del tribunal del consulado, edited and prefaced by alberto tauro del pino. lima: comisión nacional del sesquicentenario de la independencia del perú. witt, heinrich. 1992. diario 18241890: un testimonio personal sobre el perú del siglo xix. vol. 1 (1824-1842). lima: banco mercantil. archives consulted archivo general de la nación, lima archivo notarial juan cubillas, protocolo 204. protocolos notariales, 38, 1822; 34, 1827; 44, 1827. libros de aduana mares del sur, 1821, 1825-1828. documentos republicanos, o.l. 90-4; 90-13; 120-98; 71-115; 120-117. http://revistes.ub.edu/index.php/jesb https://dx.doi.org/10.18232/alhe.1030 volume 8, number 1, 181-211, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.1.34110 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 sección histórica del ministerio de hacienda: caja 10, carpeta 11, código 2-5, 1826. archivo histórico del ministerio de relaciones exteriores: caja 12, carpeta 2, código 5-17, 1826; caja 31 carpetas 5, código 7-13, 1823-1835. archivo nacional de chile, archivo de la intendencia de valparaíso. vol. 2, 159 biblioteca central de la pontificia universidad católica del perú, colección bergmann. centro de estudios histórico-militares del perú: archivo militar, libro borrador n. 13: n. 15. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 araceli almaraz alvarado el colegio de la frontera norte (mexico) https://orcid.org/0000-0001-7142-1994 small and medium enterprises in mexico and the craft beer sector in baja california: dynamic capabilities, culture, and innovation abstract this article studies how small and medium enterprises (smes) operating in emerging economies implement adaptative strategies to respond to constant changes in demand and global uncertainties, such as those stemming from the current sars-cov2 pandemic. in this study the knowledge management capabilities used by smes in the craft beer sector in a region of northern mexico are the focus of analysis. the objective is to present the competitive capabilities that craft beer sector has demonstrated in baja california region and how small companies compete with the national industrial brewery and survive. sources are data from a sample of companies and interviews with brewery owners, with which the analysis approaches, also, the baja california business environment. the article highlights the routes of creativity, innovation, and symbolic capital of the companies in the region, and uses ideas from dynamic capabilities and knowledge management theoretical frameworks, to understand the craft brewery milieu. the conclusions in this article include the confirmation about the usefulness of these analytical frameworks based in the capabilities approach and the territorial knowledge. also, the description of the existence of a complex baja californian milieu, where a multimodal scheme of craft beer characterized by different places of distribution and types of beer container, food-districts, at mexicali, tijuana, and ensenada and a second generation of entrepreneur groups leading local business, is identified. keywords: brewery milieu; dynamic capabilities; innovation; culture and creativity; baja california. corresponding author: e-mail: almaraz@colef.mx received 21 september 2020 accepted 28 may 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-7142-1994 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 1. introduction the evolution of the global economy is forcing companies to adopt new strategies in the short and medium term. while the more vulnerable a national economy is, the firms must implement more aggressive actions to resist and survive. given this situation, it is necessary to question if small and medium enterprises are a group that corresponds to the apparently least, resistant, excluded and most vulnerable sector in the innovation process. this article contributes to indicate the complexities involved in such an assumption, and how competitiveness can be represented with different models of entrepreneurship, with the case study approach of the craft brewery in mexico and the analytical tool of theoretical frameworks from the dynamic knowledge management capabilities approach (penrose [1959] 1995, verona and ravasi 2003, adner 2003, aguilera 2020). the main research questions guiding this research have been: should the apparent fragility of smes be analyzed as a homogeneous situation in the emerging economies? can the recent boom of smes in the craft beer industries in mexico help understand new routes of competitiveness? the hypotheses are that the apparent universal fragility of smes is not that general neither homogeneous, because the competitive capacities depend on territorial aspects and temporal changing dynamics. also, on the owners´ management and knowledge capacities, which gives an increase to dynamic and geographical differentiable competitive capabilities. the statistics of the craft beer sector and the testimonies of owners in the northern border of mexico refer to dynamic innovation processes. some findings are to highlight: the territorial and cultural aspects associated with management and knowledge around the craft beer process; the symbolic business capital emboldened in the craft brands; the craft beer connection to the regional gastronomic sector; the owners’ aspirations and intentions closely associated with http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 creativity and innovations; multimodal and a model expressed in diverse individual and collective dynamics, including the participation of women brewers. the first section will present a classification of latin american smes, introducing heterogeneous innovation capabilities of small business owners who were interviewed between 2018-2019. the second is focused on the analysis of the entrepreneur´s behavior and the current context of mexican smes. the third section is dedicated to the boom of craft beer in mexico started in 2013, the routes of creativity and innovation, and the symbolic capital business in the baja californian craft beer environment. the last section resumes the findings and remarks the opportunity to reconsider ideas about what we believe are often simplistic points of view on business organization limits and large corporations, through the example and lessons from the analysis of the craft beer industry in baja california. 2. small and medium enterprises in latin america it is interesting to highlight at least three aspects regarding the development of companies with less than 250 employees in emerging economies such as those that exist in latin america. on the one hand, the challenges that smes face to stay in the market and survive. on the other hand, the sme classification and monitoring problem and the different parameters used among latin american countries. and, lastly, the problems associated with the monitoring of informal businesses and businesses that are driven by individuals but are not registered as companies, which prevents accurate data on business competitiveness. despite the fact that mexican craft brewery is part of this scenario, the experience of entrepreneurs allows identifying adaptive organizational modes and competitive capacities. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 in latin america, the type of risks experienced by latin american smes in the startup phase is not precisely known. this situation is associated, in most countries, with a lack of records of these groups of businesses. this situation is contradictory in countries like mexico where 97% of businesses correspond to those with less than 250 employees. despite this, there seems to be a consensus among various institutions that smes are vulnerable, and their lifespan is short. oit (2009) reports that the survival rate of micro and smes is higher in europe, between 7577% in the two first years. while even though there is no consolidated information to latin america, this institution refers to the survival rate of 45% in three years. molina-ycaza and sánchez-riofrío (2016, 27) consider the economic commission for latin america and the caribbean (eclac) reports about the disadvantageous conditions of micro and smes in latin america and emphasize: “growth for this group of companies is a long road that not all go through since there are many that close shortly after opening”. also, lederman, messina, pienknagura and rigolini, call attention to entrepreneurship in latin america forewarning that: given a skill set wages are higher in the most productive companies, which are also often the largest, around the world. for example, in lac, medium-size companies pay salaries that are 20–40 percent higher than those of small companies; likewise, large companies pay salaries that are 30–60 percent higher. (lederman et al. 2014, 2) for these authors, the entrepreneur makes the difference, in the “medium and large companies, which are generally run by the most dynamic entrepreneurs, are also the ones most likely to innovate in different ways” (lederman et al. 2014, 2). therefore, if: “behind the most dynamic and productive companies—those that innovate, whose production is expanding and whose job creation rate is relatively high— there are creative entrepreneurs” (lederman et al. 2014), it is important asking for the differences between http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 competitiveness and entrepreneurship in the smes, but also between business, sectors, and regions. at the same time, this situation suggests going beyond the financial institutional instruments, as the main supports that sme requires. from our point of view, the latin american smes, including mexican ones, are in front a limited conception of how the entrepreneurship process occurs which excludes cultural and spatial features as part of its complexity. all smes go through the startup phase, but it is unknown how business ideas fail or progress, and what happens before reaching the market. this is the key feature to understand its survival because it is related to the knowledge managed by entrepreneurs. the eclac emphasizes the dimension of policy instruments to improve sme development, such as financing and supporting for production chains and business networks to encourage entrepreneurship (dini 2010). however, the first life cycle of companies moving forward before entering the market should not be obvious because it requires many steps to materialize entrepreneurship. lederman, messina, pienknagura and rigolini consider “many possible reasons why latin american and caribbean companies grow as slowly as they do and [one of them is] the deficiency in the innovation" (lederman et al. 2014, 8). for these authors “the companies need to innovate continually to grow (or even to survive)”. nevertheless, many companies are not interested in innovation, the owners do not know how to do it, or they fear doing it. in contrast, there are startups that emerge as innovators although their innovation capacities are weak, or the adopted strategies are simple, as the last section of this article show for the craft brewery. it is true that innovation is part of the dynamics of businesses to its endurance and particularly to entry into big markets and exporting. but what happens when a small business has been acquired by a large corporation? how the smes entrepreneurs acquire knowledge to innovate? http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 how an entrepreneur selects ideas to startup an innovator small business specialized in craft beer? and how an entrepreneur uses its social and symbolic capital to configure entrepreneurial networks and innovate? the discussion about the history of companies that arise and survive, especially smes, must focus on entrepreneurship as a multidimensional problem. because “simple definitions do not refer to the heterogeneity of innovative actions that this phenomenon encompasses” (lederman et al. 2014) new companies that do not innovate can be excluded from the entrepreneurship analysis, missing their experiences. for many latin american countries, the smes relevance lies in generating employment, and not in the shift and share into innovation systems either. also, sme reports have different scopes. in argentine, a study carried out in 1996 by the fiel, the total smes (less than 50 employees) represented for this year 99.2% of all units. this analysis found that smes have a low impact caused by government policies to improve their position and competitive conditions. one reason was that “beneficiaries of industrial promotion and the recipients of public credits corresponded to larger companies in the majority” (fiel 1996, 308). in mexico, smes have been followed recently by the government. since 2015 a survey was elaborated to know about the competitiveness of small companies the results have been published twice and allow to know the weakness and vulnerability of business. based on recent fieldwork, innovation adopts different levels in smes.1 this situation can be related to the sector and founder’s aspirations, the innovation of retail commerce activities being 1 between august 2018 and february 2019, semi-structured interviews to entrepreneurs were carried out. ten companies with less than 10 employees were selected, including craft breweries in baja california. with an intentional non-probabilistic sample, the objective was to obtain qualitative information on the enterprises in different cities of latin america (buenos aires, neuquén, asunción, tijuana, ensenada). the questions were about the start of the ventures, innovation, business plan and financing. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 the less intensive. however, when trying to find a connection between innovation and productivity, or and innovation and profits, it was not possible to reach definitive conclusions, due to the intentionality and aspiration of the founders. the experiences of the founders interviewed in tijuana (mexico), asunción (paraguay), as well as in buenos aires and neuquén (argentina), reflected how business evolution with different ages was aligned with the instinct of entrepreneurs, while the path of innovation was mainly linked to the sectorial nature of activities. based on these preliminary results studies with multiple analytical are required. on the one hand about the company in its industry and territory, and on the other hand about the aspirations and knowledge with which the entrepreneur starts a business (table 1). table 1. overview of ventures: smes from argentina, paraguay, and mexico. company name / location summary of startup innovation capacities and manage of knowledge sabater brothers / palermo, argentina mr. sebastián sabater, a perfume specialist (graduate in italy), started selling handmade soaps at fairs with his daughter eliana after being fired. he started his own business during the argentine crisis between 2001 and 2002 (entrepreneur by necessity). the initiative matured and led him and his family to found “sabater hermanos”. the product is made in the family business. the creations are innovative in the final product (varieties of aromas and size). in 2018 the family already had four stores, three in argentina and one more in barcelona, spain. the four commercial businesses have one or two workers, being one of them the owner. high industrial innovation capacities developed by the founder catering service / asunción, paraguay 2016 ana morinigo started in asunción, paraguay, her own business without an established brand. the catering services are focused on public offices. the founder has no employees, and she has doubled her sales in just one year (2018). she seeks to expand her client portfolio without neglecting the competitive advantages that she has: punctuality and direct contact with the client. the entrepreneur is aware that her advantages can also be limited to growth. she does not think of herself as innovative. medium distribution and cook innovation capacities developed by the founder ecléctiko (furniture two decorators and founders of this business are from tijuana, mexico. they started up a business in 2018 low paint and commercial http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 company name / location summary of startup innovation capacities and manage of knowledge intervened with art) / tijuana, mexico out of an innovation plan. this business renews used furniture intervening in an artistic way. when the intervention finished the furniture starts the second cycle of life and can be sold. since the beginning, the store was formally established but not as a commercial firm. in 2019 the founders dissolved their informal society, but the original idea has been continued by one of them. for two years the business has maintained the same level of sales and growth medium-low level. in the summer of 2020, the founder has received a proposition to expand her business with a second store. innovation capabilities developed by the founder handicrafts from argentina / neuquén, argentina the sale of handicrafts of argentine and uruguayan origin in the city of neuquén, in southern argentina, is a business that is sought like a needle in a haystack because this place is not a tourist destination. the entrepreneur of one of these businesses, located in a little mall, decided to start up the store responding to the increasing arrival of foreign workers who demanded local products from the region such as mate, jams, and honey. the owner supplies herself with typical products from argentina and uruguay, but without a specific business strategy and no plan for to medium and long term. the competitive advantages of the business are the location, few competitors in neuquén, and a variety of products offered. low commercial innovation capabilities developed by the founder verdulería valerio buenos aires, argentina the dynamics of the buenos aires greengrocers attended mostly by bolivians depends in the first place on a strategic location. they function as convenience stores located every two hundred meters on average. they are small stores operating in spaces that are regularly 20 square meters, and not all of them are recently created. they have a minimal organization in the sale points, they seem improvised and some look visually saturated; businesses do not innovate in commercial strategies to sell, although depending on the neighborhood the stores offer specific goods. verdulería valerio located at 2601 paraguay street offers fruits, vegetables, and products for the jewish population. the competitive advantage is the quality and variety of fresh products. families that are operating the stores not always are the owners. few business innovation capabilities developed by dealers and/or founders. stores compete on quality, freshness, and variety of products. prices are not usually lower than those of large commercial chains such as coto, carrefour, or others. craft beer taste rooms tijuana, mexico the concept of “hall beer tasting” in tijuana has been successfully implemented in recent years. entrepreneurs in craft beer production have experimented with different ways of entering local competitive capacity is associated with prestige, which is granted by consumers. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 company name / location summary of startup innovation capacities and manage of knowledge markets. there are producers who sell beer in their own homes; others now manage their testing rooms. in these places, the owners can combine the sale of beer without a bottle with the food offer, in others they only offer beer. the installed production capacity is directly proportional to the number of liters per week. the brand and the product are associated with prestige. the successful path is for those who have managed, who have bottled their products, and who have explored other points of sale in the city or region, maintaining the indicators to be considered beer craft producers. a brand of beer can offer many types of beer, but the prestigious beer transferred this attribute to the brand as a whole, for example, “lágrimas negras” from the ramuri brand. the variety of products is also a factor of competitiveness, being the knowledge of the master in craft beer is the main innovation factor. source: author’s elaboration based on fieldwork (2018-2019). some business omitted a schedule and selection of ideas and designed an action starting plan with prototypes before entering the market, except the soap and beer entrepreneurs who did partially. in most cases, the local and regional market conditions, imposed adjustments to push the owners’ startups to change the original ideas. the innovation only was considered by owners dedicated to soap and beer elaboration. the craft brewery caught the eye to focus deeper than the other activities. it is interesting because all craft beer companies in mexico should stay small.2 in baja california the brewer’s milieu is distinguished by local and regional networks that encourage incentives to owners to collaborate. the craft beer networks in baja california are consistent with dini (2010) studies about business networks: 2 mexican breweries have followed two references to be considered artisanal: annual production (less than 50 hectoliters per moth), and the production process. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 [the networks] represent the most emblematic places where the operation can be seen and its potentialities, [... the] high social capital allows a significant decrease in transaction costs [… and] small companies can strengthen collaborative ties and achieve new competitive advantages through networks organization. (dini, 2010, 21) however, the territorial organization of companies is not registered by public institutions. another problem is the monitoring of smes and the classification in latam. the classification of smes in latin america is a problem due to the different parameters to register companies with less than 250 employees. according to molina-ycaza and sánchezriofrío (2016, 24), argentina (which also divides medium-sized companies into two groups), panama, and peru, consider the sales volume to determine if a company is in the sme group; colombia considers employees and the value of assets; belize, brazil, chile, ecuador, el salvador, paraguay, puerto rico, and venezuela, consider employees and volume of sales; bolivia, guatemala, honduras, and mexico only employees; while costa rica, nicaragua, dominican republic, and uruguay, consider employees, the value of assets and volume of sales. this divergence makes the comparative monitoring of smes in latin america very difficult. also, some countries divide smes by sector. table 2 shows the criteria for mexico. table 2. size of companies in mexico by sector and employees size manufacture commerce services micro 0-10 0-10 0-10 small 11-50 11-30 11-50 medium 51-250 31-100 51-100 big ≥251 ≥101 ≥101 source: inegi, 2009. by taking the employment and the concentration of business per location as main variables, latin american countries can be compared, to measure innovation ecosystems, as well as business capacities, where knowledge management and cultural values are often relevant. although it has been recognized that brazil, chile, mexico and colombia “show mature http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 programs to support entrepreneurs [such as] the government agencies corporación de fomento de la producción (corfo) of chile and the national company for financing studies and projects (finep) of brazil [for its] standards of evolution in the design and development of programs adapted to the changes of the entrepreneurial actors in their respective countries” (sela, 2016), there is a gap in the entrepreneurship promotion policies. 2.1. mexican entrepreneurs in small and medium enterprises from a new theoretical perspective this article uses a theoretical framework that considers the entrepreneurial cultural and sociospatial aspects, by using two approaches: a) the dynamic capabilities and b) the entrepreneurs’ knowledge management potential (table 3). in both, the territorial context is a key component to understanding the spirit and aspirations of entrepreneurs. at the same time, the integral lens to analyze the startup phase according to almaraz (2020) is adopted. to penrose ([1959] 1995), knowledge plays a crucial role in creating value for companies and has a major influence on their survival. also, the author describes two kinds of knowledge relevant to a company’s success: entrepreneurial knowledge and managerial knowledge. she considers that entrepreneurial knowledge relates to an entrepreneur recognizing and developing a business opportunity. but penrose also distinguished two kinds of entrepreneurs that help to understand the complexity in the business decisions and the smes owners´behavior, which should be present for studying emerging fields like the craft beer and their entrepreneurs: there are some entrepreneurs who seem to be primarily interested in the profitability and growth of their firm as an organization for the production and distribution of goods and services. these we might call ‘product-minded’ or ‘workmanship-minded’ entrepreneurs or ‘goodwill builders’. their interests are directed towards the improvement of the quality of products, the reduction of costs, the development of better technology, the extension http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 of markets through better service to consumers… another type of entrepreneur, whom we might call the ‘empire builder’ is of a different order. he is pushed by visions of creating a powerful industrial ‘empire’ extending over a wide area. (penrose, [1959] 1995, 39). later, penrose's ideas were recovered by other authors that argue about the dynamic capabilities of entrepreneurs, overlapping aspects of business and management knowledge (teece, pisano and shuen 1997, zollo and winter 2001). adner and helfat (2003) also mention that “managers may differ in their dynamic capabilities and therefore may make different decisions [and …] because managerial decisions operate on the resource and capability base of an organization, differences between firms in their resources and capabilities may lead to differences in managerial decisions.” table 3. analytical approaches and components to study smes dynamic capabilities and knowledge management dynamic capabilities and knowledge management components penrose ([1959] 1995, 9) ▪ “the patterns of economic life, are largely shaped by the multitude, of individual decisions made by the businessmen who guide the actions of the business units we call firms.” ▪ “the business firm … is both and administrative organization and a collection of productive resources […] enterprise, or entrepreneurship as it is sometimes called, is a slippery concept, not easy to work into formal economic analysis, because it is so closely associated with the temperament of personal qualities of individuals.” knowledge management individual decisions enterprises teece, pisano and shuen (1997, 510-516) ▪ “dynamic capabilities are the subset of competence/capabilities which allow the firm to create new products and processes and respond to changing market circumstances” ▪ “dynamic capabilities,’ as capabilities that enable an organization ‘to integrate, build, and reconfigure competences’; “are the capabilities with which managers build, integrate, and reconfigure organizational resources and competences.” firms new products market competences managers resources zollo and winter (2001) ▪ “dynamic capabilities to date have focused on organizational factors that enable firms to adapt to change” organizational factors changes entrepreneurs http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 dynamic capabilities and knowledge management components adner and helfat (2003) ▪ “dynamic managerial capabilities are the capabilities with which managers build, integrate, and reconfigure organizational resources and competences” managers capabilities (to build and integrate organizational resources) competences source: own, based on authors cited in the table. in addition, smes entrepreneurs’ decisions are part of knowledge acting as the first step of the venture associated to select ideas. but what is it that motivates decision-making beyond the intention of making a profit? in almaraz (2020), a debate on startups and entrepreneurial behavior, proposing social and cultural aspects has been opened. the conception and selection of ideas, the prototype or startup phase, and the entry to the market, are three phases that involve internal and external dimensions related to entrepreneurship. the socio-cultural aspects as an external dimension are considered at the same level as institutional and technical-technological aspects. this external dimension opened again the discussion to analyze the entrepreneurial behavior interconnected to social and cultural values, codes, and meanings integrated in business capabilities. this makes possible a historical building process that should be named 'historical business social and symbolic capital”. nevertheless, the landscape of smes in mexico offered by the reports of the ministry of economy (2015 and 2019) based on the national survey of productivity and competitiveness of smes (enaproce) is far away from showing the dynamic capacities, knowledge management, and sociocultural components. despite this, the following section offers an overview of the situation of mexican smes and their entrepreneurial agents to contextualize in a broad sense the response possibilities of smes owners. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 3. overview of small and medium enterprises in mexico in mexico and latin america, the smes are overwhelmingly dominating both business and employment.3 different discussions about this sector come from economists, sociologists, anthropologists, management studies. in mexico the traditional views have focused on the impact of smes on gdp, the percentage of jobs and businesses in the national productive context, and also on their weakness; it last point has been explained by the scarcity of government political actions to strengthen their competitive capacity. nevertheless, dussel (2004), has pointed to academic and institutional studies on instruments and mechanisms to promote smes at the federal level in mexico revealing the supply of government support services to smes in the last two decades. despite this, dussel (2004) points out some relevant aspects: smes have not stopped losing companies since the mid 1990s in mexico, the disconnection of smes with the national productive core since the end of the 1980s and that sme’s exports are low versus the increasing dependency on imports in their processes and sales. this scenario is explained by the high percentage of smes with fewer than 10 employees in the commercial sector and the low participation of smes in manufacturing activities. de maria (2002) considers that structural changes in mexico since the second half of the 20th century affected the development of smes. the financial support dedicated to promoting technological development in a context of low national competitiveness in 1970s did not have 3 between 2015 and 2016, the first business survey focused on micro, small and medium-sized companies was conducted by the now defunct instituto nacional del emprendedor (inadem). in others, like argentina, there have been efforts for several decades, but they are not regular. through the fundación de investigaciones económicas latinoamericanas (fiel) -latin american economic research foundation-, the argentine government obtained support to carry out a study ten years earlier (1995), on smes from a comparative perspective. the interest responded “on the one hand, to the importance observed of this type of companies in other experiences [considering that]” in industrial countries and in some developing countries with good performance, a high proportion of economic structures was [observed] of smes. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 the expected effects on smes. in the following decade (1980), mexico promoted industrial reconversion to impulse technological development, but from a new model based on commercial openness and export orientation that most smes could not follow. the 1990s was reflected in the macroeconomic policy and the outsourcing was not favorable for all smes. the northern region distinguished itself as the best-positioned mexican territory in the international outsourcing process (dominguez and brown 1989), concentrating companies linked to global production chains like low-cost labor units. recently the debate has moved beyond the weakness and mortality of smes to approaches on female participation from institutional, gender, and cultural studies (inmujeres 2009, banco mundial 2010, heller 2010, hernández 2015, oit 2015). when writing about entrepreneurial culture, many specialists think in sectoral groupings that have not been able to develop, instead of reflecting on chains and productive identity, and regional codes. entrepreneurship and innovation have been enhanced as elements in recent debate for smes in mexico (angelelli and llisterri 2003, almaraz 2020). according to enaproce, in 2019 there were more than 4 million businesses with less than ten employees in this country, which barely managed to subsist with net earnings of $ 77 per week. the most recent results of this survey, published in 2019, reported 4,180,986 business and almost 20 million employees in mexico. large companies accounted for 0.20% business and accounted 36% of employees, while small and medium-sized enterprises accounted 2.6% business and 16% of employees. while micro-businesses concentrated 97.2% and almost 50%, respectively (table 4). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 table 4. mexican smes: economic units by size, 2018. size economic units total employment employees by unit % economic units % employees micro 4,057,719 9,505,392 2.34 97.20 47.60 small 111,958 3,223,928 28.79 2.60 16.14 medium 11,309 7,234,072 639.67 0.20 36.20 total 4,180,986 19,963,392 4.77 100.00 100.00 source: based on enaproce (inegi, 2018). manufacturing businesses with less than 250 employees concentrated 13% of total, services 36%, and commercial 51% (inegi 2018). in employment 21% was in manufacturing, 41% in commercial, and 38% in services. these percentages indicated that in 2018 at least 2 million mexican sme businesses were in commerce employing at least 5 million workers; the service businesses exceed 1.5 million and concentrated almost 5 million employees; while the manufactures units, which barely exceeded half a million, employed 2.6 million. these data reveal, on the one hand, the weight of services and trade, compared to manufacturing in both indicators, but only in absolute terms, since the importance of manufacturing is concentrated in the ability to create a greater number of jobs per unit. data for business with less than 10 employees in the 2018 survey, 48% corresponded to man owners, and 52% to woman. nevertheless, the national survey does not allow to obtain the balance by sector and owners by sex, or competitiveness indicators by subsector and owners’ type. 3.1. competitiveness, managerial aspects, and training in mexican small and medium enterprises the competitiveness of mexican smes depends on their management capacity. enaproce 2015 shows a worrying outlook. almost half of smes with 0-10 employees, (47.6%) did not have a plan to resolve operational and organizational obstacles. in the group of companies with 11-50 employees, 16.5% did not carry out an immediate action plan. in the 51-250 employees’ http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 group, only 8.4% did not have a plan. however, the data cannot be viewed by sector or region, or locality which prevents more complex analyzes about the behavior of entrepreneurs and sectors. the 2019 results changed the aggregation. official data refer separately only to companies with 0-10 employees. in this case, the percentage with a problem-solving plan decreased to 40.4%, but this means that 4 out of 10 micro businesses do not have an action plan to solve internal problems. without an improvement plan, it is inexplicable how the owners manage growth and innovation. despite the limitations in monitoring the competitiveness of companies, a common denominator is that for both benchmark years (2014 and 2017), 66% of companies with fewer than 10 employees do not monitor their performance. while in the rest of the companies the monitoring is presented in a range of 60% to 65% of the units. in this case, the mixture by sector is very important, since it is inferred that it is in the case of manufacturing where there is greater control, followed by monitoring in services and finally in the case of shops. based on these inferences, the first hypothesis is that size is not the central factor of business vulnerability but rather the lack of an organizational structure and the type of sector and chain to which it belongs. by not requiring quality control in the production of merchandise, businesses are more likely to skip this step. likewise, a business can subsist without a place for which rent is paid, or without occupied personnel since the owners, including the family, can take charge of the sales processes. what does not happen in an industrial workshop and in some services. the management of knowledge is key to the innovation process. in 2015, enaproce reported that only 12.6% smes provided training, included to the owners in business with 0-10 employees. the 55.8% of small business (11 to 50 employees) provided training. and medium business (51 to 250 employees) 73.7% did so. the reasons to offer training vary in each case, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 but the limitation surveys do not allow elaborating final conclusions.4 again, a crosstab at least by sector and size is needed. about the use of tic, the 2019 enaproce results show 72% of smes made regular use of a computer (2018), but a low proportion used it and internet connection to increase the productivity or aspects related to the organization. financing, as an structural aspect, represents to mexican smes a complicated scenario. in 2017, 7 of 10 business owners said that they do not trust to apply for a bank loan because the money was expensive. in businesses with 11 to 50, and 51 to 250 the use of credit cards was 100%, while only 1% in the smallest businesses (0-10 employees). it was explained by the necessity of daily cash. the 81.3% of smes requires cash to purchase daily inputs; purchase machinery 27.5%, to do payments of credits 25.6%, and to increase the production by only 11%. the owner's reasons to not go to financial institutions are: they do not know the banking services (52%), sme owners do not trust in their self-credit history and fear being rejected (16%), and some owners do not need loans. in consequence, the smes limit their growth, they have low productivity and innovation, and little saving capacity. the enaproce reported in 2015 that 14.7% of smes (three sectors 0-10, 11-50, and 51-250 employees) were not interested in growing. in the 2019 report, the percentage increased to 22.5%. this proportion and tendency open new questions about the dynamics capabilities and knowledge management in smes, pushing to achieve studies by sector. the social structure by business and sector is not data available for the smes in mexico. 4 among the reasons that stand out for not providing training are a) the cost of offering it and b) the idea or impression that it is not required because the knowledge of the workers and / or owners is adequate. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 the general analysis of the sme sector in mexico shows its remarkable diversity, the financing as secondary goal owners’, internal and external growth obstacles associated with government models in mexico (before 1980 high protectionism and after the trade liberalization oriented to foreign markets), low management capacity, low educational capacity in most of the owners of smes, and startup associated to unemployed people.5 entrepreneurship in mexican smes is still very limited and highly segmented. many examples may contradict general perspectives. the craft beer industry is distinguished by the creativity and innovation capabilities of owners. about the value chains and mexican smes, the official data is not consistent, then coordination and productive networks cannot be analyzed at this moment in general terms. in this way, it is mandatory to generate information about the territorial innovation ecosystems linkages and evolution. this work could offer the pulse of productive and organizational chains of supply and value, not only for smes. today, a large proportion of smes use direct profits to buy materials, but it is unknown in which value chains their exchange is concentrated. finally, the scenario for mexican smes owners in general, is very complicated. the average profits obtained per week by sme, in 2018, were 1,700 pesos, equally to 77 dollars per week (22 pesos/dollar), or 11 dollars a day. despite the situation, there are industries such as the craft brewery that must remain small, where the nature of the activity requires constant innovation and the creativity to new final products. in mexico, today is craft beer is being considered a 5 librado and ramírez (2020), consider that entrepreneurship by necessity may be more explicit in commerce activities. while entrepreneurship by opportunity can be related to the proximity of markets. the 76% of smes in mexico with less than 10 employees were in 2018 near their markets, so the idea of convenience proximity can illustrate the ‘opportunity entrepreneurship’, which does not solve the vulnerability in long run. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 sector of increasing profitability, where owners need minimal managerial capabilities because of the size of firms less than seven employees by business (mexican beer association 2018), but a high knowledge in cooking and learning process capabilities to be creative. the owners need to be innovators and respond with quality products to access local markets of craft beer. 4. the boom of the craft brewery and the dynamic capabilities the word beer comes from celtic latin cerevisiae and corresponds to a non-distilled alcoholic beverage made from the cooking of barley grains. according to a recent report published by deloitte (2017, 3), beer consumption continues to rise and currently represents 75% of the alcoholic beverages consumed in the world; the main markets are india, china, the united states, brazil, russia, germany and mexico. the beer introduction to mexico occurred during the arrival of the spanish in the 16th century. this drink gained surface thanks to the production of “pulque”, which was a regional drink extracted from the maguey plant that is fermented in small barrels. the positioning of industrial beer in mexico in the 19th century resulted in a small group of long-lived companies located in the central area, yucatán, and north of mexico. recio (2004, 7) refers to eleven beer brands constituted between 1896 and 1900, distributed in chihuahua (1), mexico city (3), jalisco (1) state of mexico (1), nuevo león (1), sinaloa (1), sonora (1), veracruz (1) and yucatán (1). according to inegi (2020, 6), last year mexican beer production was the most important in the alcoholic beverages branch which represents the highest percentages of jobs (49.3%) and gross production (65.0%). table 5 are showed the features of the mexican beer national industry. the grand view research (2020) and india & us-based market research and consulting company, “the global number of craft brewers is increasing rapidly on account of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 the growing demand for the product”. while the “latest research: global beer industry (20172022)” has valued the global market at $ 530 billion in 2016, with a growth expectation in five years in 40%.6 in the craft beer industry, production per brewery must be less than 6-7 million barrels per year, not belong to a transnational company and have the recognition of a beer producer (brewers association, 2020). most of the reports in the world refer to the beginning of craft breweries between 1970 and 1980, but in mexico, it was until the mid-1990s.7 although the boom of a craft brewery in mexico become in the last ten years. in 2013 there were 300 microbreweries (bernáldez 2013), in 2016 the businesses registered reached 560, mainly distributed in mexico city (16%), state of baja california (13%), and jalisco (11%). in 2018 the mexican beer association reported 940 breweries. in mexico craft breweries are small businesses that do not produce more than 50 hectoliters per month. a craft beer has the following characteristics: it does not contain artificial elements, neither in the process nor in the ingredients, the fermentation is a natural process, and the flavors are the result of the mixture of water, malt, hops, yeast, and other ingredients like oatmeal. also, it can contain fruits, spices, and herbs, chocolate, chili, and other ingredients depending on the 6 to grand view research “the global craft beer market size was valued at usd 85.02 billion in 2015 and is expected to witness significant growth over the forecast period owing to the increasing penetration product in countries like south africa, australia, new zealand, and brazil.” (grand view research (2020). 7 according to guillén, rendón and morales (2016) the pioneering craft beer brands in mexico: cosaco from mexico city, calavera and minerva from guadalajara. although the 1990s are referred to as the period in which the craft beer boom began in mexico, the year 2000 is the watershed with the emergence of the cosaco brand and the emergence of the first microbrewery in mexico. these authors point out that in “2008, bjorn gilbert nielsen created” calavera in mexico, after being awarded in denmark. its craft beers are distinguished by their proximity to mexican cuisine from chocolate, coffee and morita, guajillo, ancho, and chipotle chilies (guillén, rendón and morales 2016, 443). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 brewmaster's technique. it is an industry highly innovative because of combinations of flavors. it is independent since by not belonging to the large corporations. table 5. beer market and production of beer in mexico according to inegi (2020) 1. the beer industry is among the 19 most important activities, for the value of its production, of a total of 288 of economic activities of the manufacturing industries 2. average annual beer production growth was 6.7%, from 2013 to 2019. 3. the beer industry has an important level of integration to national industry. 73% of total inputs required by this industry are national (the average of manufacturing industries, national inputs represent 42.1%). 4. the value added as part of production value, generated by the beer industry is 47.0%. this percentage is higher than total manufacturing industries that is 26.3% 5. in recent years, the number of economic brewing businesses is increasing due to the emergence of craft beer smes. 6. the beer industry pays its workers the highest wages in the entire alcoholic beverages industry 7. mexico exported 4.9 billion dollars of beer in 2019 and imported 94 million dollars, generating a surplus of 4.8 billion dollars, which means that exports represented 51.7 times imports 8. the average annual growth rate of beer exports was 13.1% from 1993 to 2019. 9. since 2010, mexico has positioned in the first exporting place worldwide, surpassing important beer exporting countries, such as the netherlands, belgium and germany. source: based on inegi 2021. 4.1. knowledge, collaboration, creativity, and cultural dimension the recent literature published between 2017 and 2020 on craft beer has focused on three main aspects: knowledge, collaboration and creativity, and cultural dimension (symbolic capital) associated with geographical aspects. each one refers to resources and consequently to dynamic capabilities experienced by brewers in multiple ways. a study case of craft beer focused on transfer of knowledge (tk) detected that it: “also plays a crucial role in the transition from the start-up phase to the development phase because [information] managing and growing a business is subtly different from the business skills necessary to start a business”. [the capabilities of the owner are based on] “general knowledge about business planning; product http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 knowledge regarding different kinds of beer and production technologies; and market knowledge” (cardoni et al. 2018). on the northern border of mexico, the owners of craft breweries, having fewer than 10 employees, even less than 5, for this reason, they don’t have to transfer knowledge within the firm. they know the market and manage symbolic capital, in addition to having the basic brewing knowledge. their local collaboration is very important to transfer knowledge between brewers. collaboration and creativity a distinctive of the craft beer industry. to cunningham and barclay “a key theme to emerge from this artistic and intrinsically creative sector is the dependence on collaboration between entrepreneurial agents” (cunningham and barclay 2020, 263). to these authors, focused on the northeast of scotland, the growth of craft beer come from a deep-rooted collaboration, as well as a reaction to and in resistance of large companies’ competition. this is relevant because the craft beer sector on the northern border of mexico exists a high level of collaboration and it is geographically the main characteristic. cunningham and barclay (2020, 263-264) assume that collaboration in the northeast scotland craft beer sector has geographical connections between consumers, suppliers, and another brewer. consequently, “the idea of place posits an informing element to how collaboration is developed, not necessarily creating boundaries in scope but certainly leading to a prioritization of who is important in terms of stakeholders” (cunningham and barclay 2020, 263-264). to northern border mexico the collaboration exists and transcends borders. to duarte, alexander and o’brien (2018, 203) collaboration in the craft beer sector is basic to increase product quality and “acquire basic knowledge of new recipes and improve strategic knowledge about the industry”. in baja california this is happening, but the behavior of the brewers is associated strongly with a cultural environment. cultural codes refer to corporate symbolic capital and its http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 historical process that is used by the owners and transformed into strategic and dynamic knowledge, according to dynamic capabilities. the argument about sociocultural antecedents in a territory is that it includes values of integrity in businesses that are usually present in an intangible way, included those of the family and family businesses. recently the article titled “knowledge, innovation, and outcomes in craft beer: theoretical framework and fuzzy-set qualitative comparative analysis” (cabrera-flores, peris-ortiz and león-pozo 2020) focused on cultural aspects in the baja california craft beer. to the author's regional factors as well as wine-growing and gastronomical vocation and the institutional dimension affected favorably the craft beer sector, dynamizing the smes knowledge. however, the business culture of a certain place must be understood as a complex dimension interacting with others and not just as a set of causal factors to be foreseeable. for this reason, to analyze the cultural dimension must focus on the so-called symbolic capital from its historical construction which is far away from generalizations. this idea is nearby to the geographical perspective which emphasizing the differentiation and authenticity like gatrell, reid and steiger have shown for the us craft beer sector and its local brandings. the authors explain that “explosion of the craft beer branch [in the us] suggests other dynamics are at work in an industry that is interestingly bimodal with respect to scale and branding: local (craft beer-microbreweries, regional breweries, and brewpubs) and global (macro-breweries)” (gatrell, reid and steiger 2017, 363). but the craft beer industry is itself multimodal and comparison fieldwork in the future needs to assume a new lens directed to local and regional capacities. in baja california, the multimodal model is expressed in diverse individual and collective dynamics, including the participation of women brewers. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 4.2. baja californian craft brewery milieu the interest to discuss the craft sector in mexico characterized by smes is due to their existence and impressive rise in the last two decades. it is noteworthy that the existence of craft breweries itself would not make sense if it were not for the aspirations, capabilities, and knowledge of the owners competing for different goals. in baja california, many microbreweries are located in tijuana (border city), with more than 120 businesses in 2018. ensenada and mexicali cities, the boom has been since 2015. the beer ecosystem in baja california is full of startups. one of the main characteristics is this place is the permanent link among brewers from california and baja california. the owners (men and women) are not focused on growing into big companies and thus competing with the big brands. owners' aspirations are based on quality and related to quality expectation and recognition from consumers and regional beer communities (crews). geographical and internal business conditions in the craft brewery sector, allow to discuss how the small companies innovate and define their own growth, exploiting their management capabilities improving personal, friendship, fraternal, and parental relations and at the same time taking advantage of the local context of consumption, and collaboration among local and binational brewers crews. in baja california those resources are remarkable as entrepreneurial and cultural codes that owners transform inabilities to manage small businesses, as well as introducing constant innovations and collaborative practices. the innovation routes and creativity are visible in the market: different types of beers bottled and draft beer, with special flavors and grains, generating new beers based on stout, ipa, porter, ale, pilsner, among other styles. beyond the house elaboration places, the tasting rooms, at least in baja california, correspond to a new type of social space that offers a diversity of presentation and gastronomic products. from http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 revolución street in tijuana to the old building of the azteca brewery in mexicali, and the small places in the port city ensenada, have become beer temples evoking the urban art, the quality of beer, and local identity in each creation brand. baja california began the production of beer during the alcohol prohibition in the us, sanctioned by the volstead law between 1920 and 1933 (almaraz 2007). this event in california attracted investments that boosted the local industry accompanied by tourism activities. the most famous brands in those years were abc (aztec brewing co.), de anza, cerveza mexicali, cerveza tijuana, and cerveza tecate. of these, the last three are still functioning. the first brewers were organized by us and mexican entrepreneurs’ groups during the first boom (the 1920s-1930s). until the 1990s the industrial beer was the only option to satisfy the taste of the population linked to heat weather in the ensenada area and much more in mexicali. now there are three craft beer districts: tijuana (border city), ensenada (port city), and mexicali (border city). after the prohibition phase in the us, the baja californian brewers preserve industries and brands like cerveza mexicali, cerveza tijuana, and cerveza tecate and others succumbed to the arrival of industrial brandings like cuauhtémoc moctezuma (from northeast of the country). this large company bought the tecate brewery in the 1940s and is still active today recently was merged with heineken. ten years ago (2000), in the middle of baja californian gastronomy boom, the brewery re-emerged as a craft beer industry evoking the past context. in less than a decade the recognition of different startups has been reflected in important awards achieved. the most recent achievements are observed in the global rate beer 2019 ranking. according to forbes magazine, tijuana is heading to be the world capital of craft beer. the insurgente brewery was awarded as the best mexican craft beer for its creation hops and chill, and madueño as the best new brewery. founders-brewers are the creators of many beer brands and http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 styles. they are mostly men under 50 years of age, but the role of women dedicated to produce and manage craft breweries is becoming more visible. all of them have created and innovated from one to twenty beers. some styles are no longer produced, and others have become the brand's trademark. companies have fewer than 10 employees in all cases. most of these small companies are formally incorporated into the tax records as individuals with business activity. only a few brewers remain operating in the informality in the garage. sergio michel and carlos maklis are founders of two first craft breweries in tijuana. both have different sales strategies, but a common value is their capability to cooperate. the collaboration also is extended to brewers in mexicali, ensenada, and california in the us. the beers created by sergio stand out for the combination of local flavors as chocolate and coffee. sergio has been inspired by traditional mexican flavors and his creations have broken styles being careful with the international standards of craft beer (almaraz 2020), recently opened his tasted room, and bottled some of his creations. carlos only has a tasting room, and his creations are only on tap. the owners in baja california are between 30 and 40 years old, where the participation of women already exceeds 10% of the businesses, which is distinctive not only in this region but in mexico. the women brewers have constituted their own association named mujeres catadoras de cerveza (women beer tasters) which is led by the brewery kathy pedrín from ensenada. the milieu of smes in baja california also includes informal craft breweries organized in “home garage”. the planning and organization of the businesses in most cases can be followed in private and institutional websites. many projects have upgraded the factory and home garage to the first http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 testing room projects, and some of them have become in restaurants. another example of the upgrading brewer is the offering of bottled beers and different branding to each style. in the first case the brewers that bottle has upgraded to distribute beers in other regional testing rooms, restaurants, and local supermarkets. in the second, the flexibility to create new styles with your own brand (house brand) and brands for each style is remarkable. internal diversification is not only the result of creativity and administrative capacities, but of the regional environment itself, and identity performance. it's not as easy for industrial breweries to create new styles and brands too often, or to quickly adapt to consumer preferences, as craft breweries do. despite the entrepreneurs in baja california craft beer industry are not impromptu, they are professionals too. most of them have completed graduate education and have also continued to master beermaking techniques. this feature is very important to manage knowledge and the innovation process. the baja california brewers also have used the symbolic codes as sub-brands for their styles. some examples are the branding in allusion to indigenous groups, local animal species, and regional characters. finally, it is important that in ten years only two companies merged with an industrial group. the breweries were tijuana and cucapá that in 2016 made a strategic alliance with grupo modelo to market their products. 4.3. constant innovation in craft breweries in mexico, the craft beer brands offer flavors and combinations unimaginable in industrial beer. for example, coffee, chocolate, or chili, in addition to essential grains for brewing such as hops, barley malt, and others, preserving general conventions to specific styles. the idea of the isomorphism within the industrial beer sector in baja california has broken with the increase of women brewers. they are imposing their own styles and breaking business organization schemes being cookers, testers, and judge’s beer. once the first startup phases are completed http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 (best idea, financial and organizational planning, first designs), a brewer arrives in the local market, and the sense of competition is focused on the consumers approval to increase productivity. the market entry does not occur in isolation. in baja california local and regional ties are part of the accompanying codes; the first year in the market collaboration is dense and strategic for the ‘new’ brewers. also, the regional crews recognize the best new brewers and adopt them. sometimes, the limit to growth can be the installed capacity or scarcity of supplies. then brewers concentrate on quality because is the most important for them; their passion and fascination for experimenting with new combinations of flavors can substitute the quantity produced. the geographical collaboration can help to solve supplies problems. unlike other smes, the craft brewery depends on innovation and quality to gain prestige. the aspiration of brewers is not aimed at monopoly. consumers recognize brands and styles. craft brewers seek creativity and recognition at national and international festivals, but regional consumer taste is the main objective. the crews—themselves named—are not competing with the “industrial beer” brandings; the growth is in another place; the sectorial and firm growth is in different routes to upgrading and collaborating. competitiveness is represented by the creativity of “brew-masters’”, “cookers” or “brew chefs” where they are the owners and entrepreneurs. for this reason, in short term, the acceleration and continuity of the craft beer industry depend specifically on them. visible obstacles for this can be that craft brewers have another business or jobs, crucial events, and/or institutional obstacles, and geographical distance with the suppliers. the craft brewery in mexico escapes to the isomorphism imposed by the industrial brewery. the dynamic capabilities in baja california, are pushing variations of pale ale, ipa, amber, porter, and stout, and others, with creativity, territorial collaboration http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 and cultural codes and passion, all of them compressed in the idea of business symbolic, historical, intangible, and embedded capital. 5. final thoughts the craft beer entrepreneurs’ examples in this article show that innovation is a process guided by individuals and their creativity, high capacity to collaborate, specialized knowledge, and cultural codes. they do not need high technology issues and their aspirations to become in large firms are not a goal. furthermore, innovation does not exclude smes either. innovation is a craft beer industry condition that does not depend on the ability to adopt codified and released knowledge. the production of craft beer necessarily requires an understanding of three startup phases. for this reason, some brewers remain in ‘house garage (informal). when a planned business is done the brewer access to formal markets. in the baja californian milieu exists a multimodal scheme: place of distribution type of beer container home garage draft beer tasting rooms / tap rooms bottled beer, draft beer in alliance with restaurants bottled beer, draft beer stores and supermarkets bottled beer source: based on testimonies. in mexico, the fragility of smes can be associated with structural conditions, as well as with the internal aspects of the companies, or sectorial aspects. by not having a record per company that allows the knowledge of it general characteristics of business evolution, it is not possible to follow the capabilities and evolution. the heterogeneity of smes must therefore be analyzed by milieu (sector, territory, and entrepreneurship). also, it is relevant to observe three large groups of activities and levels to innovation: a) technological, and software linked industries, which are inherently linked to innovative processes, b) non-technological companies but http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 depending and are obliged to innovate in product and/or process, and c) companies that do not depend on innovations in the start-up and that therefore can survive indefinitely without them. craft beer owners in baja california understand the importance of innovations and internal control by experts. the entrepreneur’s startup considers innovation as an inherent aspect. if this were not considered, there would be a relative disadvantage. the owners, whether men or women, do not acquire their skills by reading a beer book, the activity demands high creativity, continuous improvement, learning, sensitivity, and cultural integration. penrose's thinking has been inspiring to take a step forward, as well as the authors who later advanced the idea of knowledge, management, and dynamic capabilities. these brewers in baja california have experienced different growth and upgrading types. from the “home-garage”, to testing rooms the brewers’ main aspiration is prestige. the upgrading is associated with products, bottling, and tasting rooms, which mean a combination of creativity, innovation, collaboration, and symbolic business capital. be merged with industrial brandings is not an option. only two firms in more than 10 years in baja california have opted for this way. the food-districts, at mexicali, tijuana, and ensenada (baja california, 2020a, 2020b, and 2020c) are part of entrepreneurial craft brewery milieu in northern border mexico, where brewers in most cases belongs to second generation of entrepreneur groups leading local business and not only this type of smes. the “brew master”, “cooker” is the key agent in the craft beer milieu. in baja california they are the entrepreneur and manager, the purchase the equipment, seek new local markets, participate in regional crews, and cook beer. they are learning through their own experimentation and interaction with colleagues, attending courses, and also transferring and getting knowledge through personal and/or collective networks (including family). there are http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 two ways to the brewery startup: a) elaboration by experimentation without immediate sale, and b) elaboration by experimentation for immediate sale. in both cases, the investment exceeds $ 500 dollars, and the owners require the basic knowledge to cook beer and financial capacity to buy machinery and supplies. if the entrepreneurs want to venture into the immediate sale, must prepare a name and logo brand (table 6), and therefore implement a business plan or protocol and do a formal registration, either as an individual or legal entity (anonymous society). this phase does not always happen in other smes (services or commerce). the brewing logos creators are usually local artists and professional designers. the craft brewery in mexico has positioned itself to such a degree that in principle it is not a sector that requires direct financial support to enter the market. the owners in northern mexico in the craft beer milieu usually have a bachelor’s degree. the collaboration crosses the border making a tijuana-san diego region a context to collaborative work, including owners from ensenada and mexicali. it also highlights a combination of annual productive activities as beer festivals in each district and regional stands including california. the current pandemic caused by sars cov2 contrary to initial expectations had a favorable impact on baja california craft brewer milieu. the macroeconomic instability did not affect all economic sectors in the same way. the geographical location allowed the breweries to adapt to social mobility restrictions. brewers organized seminars and conferences named “chevinars” by zoom to offer products and explain to people who they work. at the same time, brewers implemented new distribution networks including their own “taxi-beer”, and introduced returnable containers named “growlers”, even including hand-labeling. all these strategies allow us to exemplify the dynamic capacities in the baja california brewery and exhibit the importance of collective actions among brewers. brewery owners in baja california changed rapidly to adapt and renew http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 their sales competencies from may to december 2020. the dynamic capabilities were amplified the last year. special design brands and websites alluding to the local and nostalgic culture had in social media the perfect atmosphere to fascinate more people sense. surely craft beer sector prepares new strategies to prevail in the market and to continue innovating above the current crisis. the specialization as a growth process has not been explored deeper, however, this aspect will be developed in future jobs. table 6. baja california beer brands source: from company websites analyzing the craft beer milieu in the northern border of mexico invites to reconsider the false limits of business organization and large corporations, demanding new analytical frameworks beyond the size of companies. it is urgent to focus on emerging forms of innovation as collaborative processes in this sector and mature the discussion about the cultural dimension http://revistes.ub.edu/index.php/jesb volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 associated with the historical process of symbolic business capital. the brewing branch encourages to return to edith penrose's argument on difficulties of applying general theories to all companies and her proposition about human motivation and decision (penrose [1959] 1995, 2). craft beer owners in baja california are not reflecting a path to become managers of corporate structures and large companies. the baja californian craft beer milieu (integrated by three local districts, more than 100 companies, male, and female brewers) is linked to social codes that build and preserve a symbolic capital, where owners and consumers are geographically merged by the cultural dimension around craft beer. in this journey, the studies of business history, administration, and other disciplines will have much to contribute. the focus of this work has been smes, startups, creativity, innovation, collaboration, and closely the brewer’s motivation, as well as the role of the territory and culture in the entrepreneur’s aspirations for future comparisons of craft brewery milieus. references aguilera, ana maría. 2020. “la ambidextría organizacional: el camino a la competitividad.” retrieved august 21, 2020. http://anamariaaguilera.com/ambidextria-organizacional/. adner, ron and constance e. helfat. 2003. corporate effects and dynamic managerial capabilities, strategic management journal (24) pp.1011–1025. almaraz, araceli. 2007. “el boom de las empresas extranjeras en el valle de mexicali: efectos en las relaciones empresariales locales (1912-1930).” frontera norte [online], (19)37 pp.113-142. retrieved from http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=s018773722007000100005&lng=es&nrm=iso. . almaraz, araceli. 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12(3): 577–606. doi: https://doi.org/10.1093/icc/12.3.577. zollo, maurizio, and sidney g. 7 winter. 2002. deliberate learning and the evolution of dynamic capabilities. organization science 13: 339-351. http://revistes.ub.edu/index.php/jesb http://cedoc.inmujeres.gob.mx/documentos_download/100583.pdf http://acermex.org/wp-content/uploads/2019/11/reporte-de-la-industria-.-acermex.pdf http://acermex.org/wp-content/uploads/2019/11/reporte-de-la-industria-.-acermex.pdf https://doi.org/10.1093/icc/12.3.577 volume 7, number 2, 166-203, january-june 2022 doi.org/10.1344/jesb2022.1.j102 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 266 paloma fernández pérez university of barcelona (spain) laboratorios andrómaco: origins of the first subsidiary of a spanish pharmaceutical multinational in the united states (1928–1946) 1 abstract laboratorios andrómaco was a spanish pharmaceutical company that opened a commercial subsidiary in the united states in the early months of 1928. it was located right in the heart of manhattan, at 11 west 42 nd street, in front of the new york public library. despite the wall street crash, it remained open until 1946. the owner was the pharmacist-entrepreneur fernando rubió tudurí (1900–1994). it was the first foreign direct investment made by a spanish pharmaceutical multinational in the united states, using a maquila-style operation to export spanish products made in the usa to central american markets. nothing has been published about this until now. only interviews with enrique and mercè rubió boada (son and daughter of fernando rubió), digitalized sources from the company held by the fundació rubió tudurí in mahón, minorca, and hard-to-access secondary sources have made the recovery of this history possible. the company closed its doors in the us and expanded in south american markets after world war ii, but the short history of their investment in the united states reveals the potential and international capabilities of spanish pharmaceutical companies before the spanish civil war. moreover, it reveals how the spanish civil war was a disaster for millions of people but in some special cases it became an opportunity for companies in the science industries. few pharmaceutical firms like andrómaco, with entrepreneurs, resources, and a long-term vision, took the decision to invest in the most profitable (though also the most difficult) market for pharmaceutical products in the world: the united states. andrómaco was created in barcelona in 1923 by two scientist-entrepreneurs (raul roviralta and fernando rubió tudurí). a nutritional product called 1 this research is ongoing and has been made possible thanks to the fundación bbva’s i ayudas a la investigación en socio-economía (2014–2016), within the research project ‘multinacionales innovadoras españolas en estados unidos y alemania’ (innovative spanish multinationals in the united states and germany). corresponding author. e-mail: palomafernandez@ub.edu received 23 june 2016 accepted 04 july 2016 http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 267 glefina (made with norwegian cod oil from ålesund and sugar) brought the small firm considerable success in sales in spain in the mid-1920s. making use of impressive networks (with the spanish royal family, catalan political elites, and the medical and pharmaceutical profession in spain and germany) and innovative commercial approaches (sending free samples to selected clients like king alfonso xiii’s family circle and dr gregorio marañón) were key business strategies during those years. the commercial subsidiary had two employees that coordinated the outsourcing of the production to local us producers, with exports of their us-made andrómaco products going to central american clients. those clients loved buying a us-made product designed and sold by a spanish pharmacist living in long island, with an office in manhattan, who frequently travelled from the us to latin america in the tough years of the depression. keywords: laboratorios andrómaco; spanish multinationals; pharmaceutical industry; history of pharmaceutical fdi today, laboratorios andrómaco is well-known as one of the most important pharmaceutical corporations in argentina, and andrómaco also exists as one of the leading pharmaceutical corporations in mexico. they are, despite sharing the same name, independent companies, heirs of laboratorios andrómaco, a spanish pharmaceutical corporation founded in barcelona, spain, in 1923 by raul roviralta and fernando rubió tudurí. the company was one of the most successful laboratories before the spanish civil war and the partners were two of the most outward-looking pharmaceutical entrepreneurs in the country, opening subsidiaries in lisbon in 1926, buenos aires in 1927, and in cuba, new york, montevideo, são paulo, and caracas in 1928. the civil war in spain caused the partners and their families to leave the country and move to where their subsidiaries were located. raul roviralta moved to buenos aires, taking control of the lab’s south american businesses. fernando rubió tudurí moved to new york and from his 5 th avenue office in manhattan he controlled the production of their products in the united states and their exports to cuba, santo domingo, and guatemala with the label andrómaco usa. the company was particularly outstanding in http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 268 the design of pharmaceutical products with relatively low production costs and prices but with great demand, such as glefina (a nutritional product based on cod oil and sugar) and a cream for skin rashes known as halibut in spain and lassar in north, central, and south america. the founders were also remarkable for their innovative commercial strategies and their global outward-looking attitude: most of the subsidiaries and the commercial network were set up between the 1920s and the 1940s. the great expansion of their company took place during these very difficult years, with products adapted to the scarcity and low purchasing power of the times, and with a relatively simple organizational structure (rapid creation of commercial subsidiaries under control of managers linked to them through trust-based agreements). andrómaco is interesting for these reasons, but also because it was the first spanish pharmaceutical company that dared to open a subsidiary at the heart of the global pharmaceutical industry market, the united states, in 1928. not many companies in developing economies, particularly in science-based industries, dare to sell anything in the markets where global innovation takes place and the major industry players are located. academic international business models often indicate that companies in developing economies usually develop through a gradual process where they first learn and transfer knowledge on international operations from developed economies and leading corporations in an industry using different mechanisms, including imports and business trips. according to these gradual academic models of internationalization, a second step for these kinds of companies is to try to export to psychologically similar markets to reduce uncertainty and risk. and in the final stage they may, or may not, try to export and invest in more difficult markets, but rarely the most developed and regulated markets where the toughest competitors in the world are located. andrómaco is one of the cases that challenge the academic models. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 269 laboratorios andrómaco accumulated sales, knowledge, social networks, and human capital between 1923 and 1928. the founders were recent graduates in pharmacy and chemistry, belonged to the upper middle classes of barcelona, and had an excellent social network among the upper middle classes beyond barcelona and in the medical profession. rubió tudurí’s father was a military civil engineer who graduated from the academy of guadalajara and his brothers were outstanding architects and politicians (mariano and nicolas rubió tudurí), who were well-connected to local catalanist political leaders like francesc maciá and lluis companys, and to local real estate businessmen. rubió tudurí’s father worked, like one of his sons, in the urbanization of barcelona linked to the international exposition of 1929, participating in the design and construction of infrastructures in plaça d’espanya, montjuїc, and the tibidabo mountain. rubió tudurí and roviralta were neighbours and had important pharmacist-entrepreneurs living nearby, including friends of their families such as dr salvador andreu and dr antoni esteve. post-graduate studies in madrid granted rubió tudurí the opportunity to help the personal doctor of the king’s children and he met the royal family. his post-graduate studies at the institut pasteur in paris also allowed rubió tudurí to meet renowned european scientists that would help him in the future when he had to move to the united states due to war. laboratorios andrómaco’s success started with the production of glefina (1924–1960s), made with cod oil imported from the norwegian town of ålesund, where dozens of cod oil exporters concentrated a huge level of production in the 1920s (jonsson 2006). the success of this product and its consumption and recommendations to consume it by the entire royal family and the famous dr gregorio marañón led the partners to decide to expand their market http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 270 beyond spain, opening their first commercial subsidiary in lisbon in 1926 and a factory in the same city in 1931. the positive prospects, the extraordinary self-confidence of the partners, and the social networks through which privileged information circulated made them take the decision to invest outside europe, first in buenos aires in 1927 and then in central america. while negotiating the opening of a subsidiary in cuba, rubió tudurí had to stop off in new york in 1928, and he was left wide-eyed at the sight of the luxurious atmosphere of consumption in the city. he was used to dealing with the spanish upper classes and their consumption habits, as well as taking care of presentation and commercialization with labels, boxes, advertisements, and the personal care of clients, and so he took the decision to open a subsidiary in new york and to try to sell the products in the united states, right before the wall street crash of 1929. one wonders whether this was a wise decision considering future developments, but the fact is that the lab’s products were made with relatively cheap raw materials, the profit margins were very high, and the employment costs were relatively low. rubió tudurí believed that by outsourcing the production of his nutritional products to us producers, a maquila-style operation, he would certainly save on transportation costs and have good quality production. the quality achieved thanks to the suppliers’ us production facilities was much appreciated by central american clients in cuba, santo domingo, and guatemala, who according to enrique rubió boada, fernando rubió tudurí’s son, ‘loved’ buying a us-made spanish product sold by a spanish-speaking entrepreneur. rubió tudurí was not afraid of the financial crash and probably (though we have no information to back this hypothesis so far) it was perceived as an opportunity to have more us companies ready to serve the spanish lab at lower prices, as well as to manufacture and to transport the products in us ships to central america. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 271 rubió tudurí hired two people for his commercial office in manhattan. the manager was a german named unger who had worked in the barcelona international exposition of 1929 in which rubió’s father had also worked as a civil engineer. unger was fluent in german, spanish (married to an andalusian woman), and english, and had a strong commercial profile and expertise. unger would be rubió’s right hand man in new york while he travelled to meet central and south american clients. unger was also in charge of administering a warehouse where products manufactured by us suppliers were kept until their final export to clients in central america, cuba, guatemala, or santo domingo, in a maquila-style operation. a secretary who lived in new york was also employed to handle administrative tasks. while the office was managed by unger and the secretary, rubió travelled to find suppliers in the us and to meet and take care of old and new clients in central america but also in colombia, mexico, and canada. rubió’s family was installed in a house on long island, and they frequently met other spanish refugees from the civil war such as dr duran reynalds, who worked in the rockefeller institute, and many catalan politicians and businessmen. the end of the first us subsidiary of this spanish pharmaceutical company took place between 1946 and 1949. for personal and professional reasons, rubió tudurí moved to colombia and then to mexico city where he concentrated his activities and businesses. further research will have to explore north american archives to discover more about this unique company. a hard-to-answer counterfactual question could be what would have happened if the civil war had not taken place? maybe the example of andrómaco in the united states could have attracted more spanish pharmaceutical companies to manhattan. and maybe the era of internationalization of the spanish pharmaceutical industry would have http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 272 been the mid-20 th century and not the late 20 th century as subsequent events have shown us to be the case. andrómaco was a visionary company and, therefore, it opened new pathways to internationalization for innovative companies in spain. the war and the francoist dictatorship blocked these pathways and slowed down the entire industry. selected chronology 1923: establishment of laboratorios andrómaco in barcelona by founding partners raul roviralta and fernando rubió tudurí. 1924: commercial distribution of nutritional product glefina based on cod oil imported from ålesund in norway and toasted sugar (following the advice of rubió tudurí’s mother to improve the taste). samples were distributed for free among the political elite, the royal family, and the elite of the medical and pharmaceutical professions. commercialization was a success up until the 1960s when a variety of multivitamin products from foreign multinationals began to spread. 1926: opening of laboratorios andrómaco commercial office in lisbon. 1927: opening of laboratorios andrómaco commercial office in buenos aires. 1928: opening of laboratorios andrómaco commercial offices in cuba, new york, montevideo, são paulo, and caracas. 1929: fernando rubió is ceo of laboratorios andrómaco’s subsidiaries in north america, central america, and mexico, with headquarters in new york. 1931: opening of a laboratorios andrómaco factory in lisbon. 1938–1975: the two founding partners left spain with their families and left c. matjí, a relative of rubió, in charge of the factory in barcelona. roviralta moved to the subsidiary in buenos aires and rubió to the subsidiary in new york. they split the ownership and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 273 management of the company. fernando rubió tudurí kept subsidiaries in colombia, the united states, portugal, and mexico. raul roviralta kept the rest of south america (argentina, chile, brazil, and uruguay) with headquarters in buenos aires. the spanish subsidiary would remain owned by both founding partners, half each, and was managed by c. matjí first in barcelona and then in madrid until its gradual sale to the german grünenthal between the 1970s and the 1990s. the name andrómaco was maintained by rubió tudurí. rubió tudurí gave autonomy to all of his subsidiaries (barcelona, madrid, mexico, paris, lisbon, new york, montreal, havana, bogotá, são paulo), under his coordination first in new york until 1946 and from then onwards in colombia and mexico. 1968: opening of andrómaco building in colombia. acknowledgments this research is ongoing and has been made possible thanks to the fundación bbva’s i ayudas a la investigación en socio-economía (2014–2016), within the research project ‘multinacionales innovadoras españolas en estados unidos y alemania’ (innovative spanish multinationals in the united states and germany). the author was able to begin the research after conversations and email exchanges (2 and 4 may 2016) with xisca fortuny, and was able to have a long interview with fernando rubió tudurí’s daughter mercè boada by phone on 18 may 2016 and in person in barcelona on 3 june 2016. mercè boada helped contact rubió tudurí’s son enrique rubió boada and his wife fernanda who kindly accepted a meeting and an interview in their family home near mercadal in minorca on 22 june 2016. in that interview, key details about the chronology, the suppliers, the clients, and the internal organization of the subsidiary that cannot be found in any other source were provided. mercè boada’s son josep roselló rubió published mongofre: la pasión por menorca de fernando rubió i tudurí, a book of personal memories written by his grandson where a wealth of details about the personal life and friends of rubió tudurí can be found. i thank josep and mercè for http://revistes.ub.edu/index.php/jesb volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 274 giving me a free copy of that book for this research. i also thank enrique and fernanda rubió for giving me copies of enrique’s short account of memories about his father and the 1923–1924 diary, handwritten by rubió tudurí with details about the creation of the laboratory, the choice of its name, and the hiring of the first employee. references  interviews rubio tudurí, fernando. interview with josep m. espinàs. personal i intransferible, tv3 a la carta. may 20, 1993. video at http://www.ccma.cat/tv3/alacarta/personal-iintransferible/fernando-rubio-i-tuduri/video/3088490/ (accessed 27 may and 27 june 2016). rubió boada, mercè. interview by author. barcelona, may 18, 2016 (by phone); june 3, 2016 (faculty of economics and business, university of barcelona). rubió, enrique, and fernanda rubió. interview by author. minorca, june 22, 2016 (family home near mercadal, minorca).  email correspondence xisca fortuny, e-mail message to author, may 2 & 4, 2016. as well as a phone conversation.  historical archive fundació rubió tudurí, mahón, minorca advertisements of products by laboratorios andrómaco 1923 diary detailing the creation of laboratorios andrómaco documents from laboratorios andrómaco lisbon, several years 1931–1950. documents from laboratorios andrómaco mexico, several years 1955 press reports about andrómaco  fernando rubió boada’s personal archive rubió boada, enrique (fernando´s son). fernando rubió tudurí: farmacéutico. typewritten. no date.  secondary sources jonsson, gudmundur. 2006. “comparing the icelandic and norwegian fishing industries’ response to the economic crisis of the 1930s.” unpublished paper presented at the xiv international economic history congress, helsinki, 21–25 august 2006, session 91: the nordic countries and the commercial de-globalization of the interwar period. roselló rubió, josep. 2009. mongofre: la pasión por menorca de fernando rubió i tudurí. barcelona: m edicions. http://revistes.ub.edu/index.php/jesb http://www.ccma.cat/tv3/alacarta/personal-i-intransferible/fernando-rubio-i-tuduri/video/3088490/ http://www.ccma.cat/tv3/alacarta/personal-i-intransferible/fernando-rubio-i-tuduri/video/3088490/ volume 2, number 1, 266-275, july-december 2016 doi.org/10.1344/jesb2016.2.j019 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 275 osama hatum, andrés. 2002. “organisational flexibility in an emergent economy.” phd thesis in management, university of warwick. accessed may 27, 2016. http://wrap.warwick.ac.uk/1293/1/wrap_thesis_hatum_2002.pdf this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://wrap.warwick.ac.uk/1293/1/wrap_thesis_hatum_2002.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 114 cristina sans-ponseti universitat autònoma de barcelona-grifols sa (spain) paloma fernández pérez universitat de barcelona (spain) innovation and entrepreneurship in catalan private laboratories: origins and rise of grifols lab (1880-1955) abstract studying the evolution of private medical clinics is extremely useful in understanding the history of the catalan healthcare system where, from the 19th century onwards, a marshallian atmosphere of flows of knowledge, people and technology has resulted in close connections between the public and private practice of modern medicine. the history of the grifols laboratories, from 1880 to the 1950s, is a relevant case study in this context, as it highlights patterns that were repeated in other medical laboratories in catalonia a century ago. but grifols is also particularly interesting both because of its survival and evolution to this day, and for its curation of its own historical archive. this article aims to understand how a small laboratory in the healthcare district of barcelona built its scientific foundations on laboratory medicine during the early 20th century, and finally changed its business strategy because of the spanish civil war, becoming a family pharmaceutical company. the sources are documents from the grifols archive and interviews with managers at the company. the findings highlight the importance of interdisciplinary analysis, suggesting that both scientific and business adaptations by successive generations are equally important in explaining the success of grifols laboratories. science-based family firms that endure over time not only acquire specialised knowledge to compete in the market, but also knowledge about transferring entrepreneurship in the long term. in grifols case, knowledge from younger generations was crucial to adapting their activity, first to a changing scientific paradigm and then to a precarious national market. keywords: innovation; entrepreneurship; pharmaceutical laboratories; healthcare; catalonia; grifols corresponding author: e-mail: cristina.sans.ponseti@uab.cat received 17 september 2020 accepted 15 october 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:cristina.sans.ponseti@uab.cat http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 115 introduction studying the evolution of private medical clinics is extremely useful in understanding the history of the catalan healthcare system where, from the 19th century onwards, a marshallian atmosphere of flows of knowledge, people and technology has resulted in close connections between the public and private practice of modern medicine. in this regard, a complete understanding about the modernisation of the catalan healthcare cluster has to consider both hospitals and private clinics. the history of the grifols laboratories, from 1880 to the 1950s, is a useful case study in this context, as it highlights patterns that were repeated in other laboratories and institutes of medicine in catalonia a century ago. but it is also particularly interesting both because of its survival and evolution to this day, and for its curation and conservation of its own very complete historical archive. grifols' scientific history dates back to the 1880s, and it could be said that during its more than 140 years of history, three ideas are key to explain its scientific foundations: its understanding of the laboratory as a diagnostic and a therapeutic tool; its own technological developments, closely linked to needs that arose from the laboratory; and the strong influence the barcelona medical cluster and influences from abroad had on it. it is precisely the continuous updating of these three elements, in addition to changing business strategies, that led to the survival of this science-based family firm over such a long period of time and through various rapidly changing social and political circumstances. this article will endeavour to analyse which modernisation strategies, both scientific and business-related, were used in the case of grifols between 1880 and 1955. the first part will analyse how the family's medical practices originated before grifols became a public limited volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 116 company in 1940. we find that the first 30 years of activity, between 1880 and 1909, culminated in the adaptation of the homeopathic tradition to a new medical approach, and left behind a very specific understanding of the laboratory: a bacteriological-therapeutic laboratory. between 1909 and 1923, both the potential of this duality and the search for technological innovation were exploited by the family, in a context of profound change in medical practices and the emergence of medical disciplines such as haematology. later, until the beginning of the spanish civil war, we see how the techno-scientific advances that led to haemotherapy were received and adapted rapidly by those professionals who already dominated the scientific manipulation of blood. in the second part, the minutes of the grifols laboratories shareholders meetings will be used to study how the company's strategy changed after the civil war, and to what extent the then current political situation was significant in this decision. we identify two major stages from the point of view of scientific specialisation: the first five years, between 1940 and 1945, when it was a small family business organised around the sale and production of pharmaceutical and nutritional products; and the subsequent years, when the business diversified and haemotherapy took on a more important role, but which also required grifols to attract shareholders from outside the family in order to obtain the investment they needed to grow the company. the beginnings (1880-1910s): a private homeopathic laboratory the first member of the grifols family with medical training was josep antoni grifols morera (1857-1931). born in vilanova i la geltrú, grifols morera graduated from the faculty of medicine of the university of barcelona in 1880, and during the final years of his degree he volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 117 established relationships with homeopathic specialists, which sparked his strong interest in the discipline (puig rovira 2003, 157). in the 1880s the influence of homeopathy grew increasingly in spain, although its professional community was disunited. in barcelona, by the end of the decade, there were 14 homeopathic doctors, who operated with no coordination between them at all (puig rovira 2003, 158). however, aware that the institutionalisation of the discipline would give them legitimacy on both a scientific and social level, they founded the homeopathic medical academy of barcelona (“academia médico homeopática de barcelona”, the amhb) on 13 april 1890 (piqué 2018). among the founding partners was grifols morera, who in 1887 moved permanently to barcelona, opening what would become his first medical practice in the capital (josep antoni grifols morera’s obituary in la vanguardia, june 12, 1931). grifols morera's practice was a private dispensary located in the raval neighbourhood in the old centre of barcelona, where it carried out therapeutic experimentation in line with the doctrinal foundations of homeopathy. certainly, both the location and the business format he employed both became quite common among barcelona's medical class in the midto late 19th century. works such as zarzoso and martínez-vidal (2016) and the one of zarzoso published in this issue explain how the raval district, which by the 1920s had become a marginalised area known locally as the “barrio chino”, had previously had an important role in transforming the medical practice. with its high concentration of factories, people and health services (the hospital de la santa creu and the faculty of medicine the most important among them), ‘the old city’ area of raval acted as a medical hub and saw the establishment of the new private dispensaries and the first surgical clinics in the city. in the case of homeopathy, moreover, the presence of the main homeopathic pharmacy in the neighbourhood, the farmacia grau-alta, volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 118 further favoured the presence of these new dispensaries. and in the same way, piqué (2018) explains how homeopathy, today on the whole discredited by orthodox medicine, was at that time within the official medical body. together with the creation of the amhb and the foundation of the hospital homeópata del niño dios (1902), clinics such as grifols morera's were fundamental pillars for the great expansion that the discipline experienced in the city during the first decades of the 20th century, and which culminated in the great popularisation of homeopathic remedies between 1902 and 1910 among very diverse social sectors (piqué 2019, 1338-1342). the practice of grifols morera, therefore, located in the heart of barcelona's medical community and within the context of the rising popularity of homeopathy, gained popularity and developed a large clientele. in addition, as a result of its own expansion plans and the tendency of new homeopathic practices to move outside what had been the city walls, it moved in 1891 to a larger practice located in portaferrissa street (puig rovira 2003, 158). however, the professionalisation and popularisation of the discipline was also marked by fierce doctrinal debates at a time of great upheaval in the medical conceptual framework. during the last decade of the 19th century and the first decades of the 20th, western science experienced a period of consolidation of a new medical model: the acceptance of the bacterial theory opened the way to the development of positivist medicine, and led to a new understanding of life and disease with a growing interest in reducing all vital phenomena to physicochemical phenomena. this led to the progressive introduction of laboratory medicine, where the laboratory and its volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 119 practices took on a central role and become the key source of scientific knowledge (piqué 2018, 202).1 the positivisation of physiology had an unequal reception in vitalist sectors, which entered into constant redefinitions of their foundations. piqué (2018) published what is considered a reference work in terms of understanding how the important catalan homeopathic school had to engage in various strategies of scientific and social legitimisation, in order to establish the validity of its therapeutic system and so avoid falling into the scenario of being excluded from the orthodox medical body. one of these strategies was the approach they took towards laboratory methods, which created strong epistemological differences within the collective. some argued that making adaptations to accommodate reductionism was in direct conflict with the ontological conception of the discipline of homeopathy. other parties, however, tried to submit their research on homeopathic remedies to the methods and technologies of the laboratory, i.e. they tried to explain the therapeutic action of homeopathic remedies through physiological experimentation. the multiplicity of interpretations led to a division within the amhb and in march 1904, those who supported the idea of doctrinal renovation, grifols morera among them, ended up founding their own institution, the homeopathic institute of barcelona (“institut homeòpata de barcelona”, the ihb). grifols morera first became the vice president of ihb and then president of its scientific section (diario de villanueva y geltrú, january 19, 1906, and january 24, 1907). the ihb was founded with the purpose of taking forward the adaptation of the homeopathic tradition to the new scientific paradigm, and the laboratory was a key element since it was used 1 for nuanced views of the category ‘laboratory medicine’ see: cunningham and perry (1992) and brunton (2004). volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 120 as “an instrument of legitimisation taking advantage of its undefined nature” (piqué 2018, 212). as such, homeopathic doctors took advantage of its methods and technologies to back up and support homeopathic therapies with arguments from the new science, while also taking advantage of the diagnostic tools that the laboratory offered. by investigating the subject of study, that is, the patient, they argued that they would not fall into the “empty” empiricism which characterised the new model and which was in opposition to the doctrinal bases of homeopathy, which strongly defended the holistic study of the individual (grifols morera 1904). in march 1907, grifols morera moved his practice to a larger premise in plaza urquinaona (diario de villanueva y geltrú, march 17, 1907). only two years later, both the practice and its patient portfolio were handed over to his son, and the practice was renamed as the central institute of clinical, bacteriological and chemical analysis (“instituto central de análisis clínicos, bacteriológicos y químicos”, henceforth, the institute). the central institute for clinical, bacteriological and chemical analysis (1909-1923): the emergence of haematology, without haematologists during the first decade of the 20th century, a new class of young doctors, interested in both homeopathy and new scientific discoveries, approached and joined the ihb (piqué 2018, 196). among them were josep antoni grifols roig (1985-1976), son of grifols morera, and his classmate ricard moragas gracia (1883-1966), both of whom had graduated in medicine from the university of barcelona in 1909. together with a third fellow student, dr. lluís celis pujol (1887-1941), they were the driving force behind converting grifols morera’s clinic into the institute but still following the medical practices started by him. volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 121 although the institute was founded in 1909, because grifols roig left for the winter semester at the university of munich in october of that year (ludwig-maximilians-universität münchen 1909, 78), it did not begin its activities until a year later. economically supported by his family, grifols roig’s stay in munich was very important for his technical training as he began to specialise in clinical analysis, pathological anatomy and state-of-the-art laboratory technologies. he trained in histology under dr. siegfried mollier (1866-1954) and in bacteriology under max von gruber (1853-1927). with the latter, who was also karl landsteiner's teacher, he learned the technique and science of agglutination, and the traditional method of wassermann's reaction to detect syphilis which had only been developed three years earlier. wassermann's reaction was a crucial technique for the institute, as it would be the main source of income for the laboratory for many years (fernández pérez and sabaté 2017). indeed, over the years, grifols roig built on and perfected the technique to the extent that he finally proposed a new method to avoid false positives, which he would end up presenting in 1913 as a doctoral thesis in order to obtain the degree of doctor of medicine and surgery at the faculty of medicine of the university of barcelona, and which he patented in 1917 (grifols roig 1913 and 1917). the technical profile that grifols roig’s classmate and business partner moragas acquired was quite similar. from 1906 to 1909, he was an intern at the bacteriology and serology laboratory of the hospital de sant pau, where he also learned the technique of agglutinating reactions as a means of diagnosing infectious diseases. he then worked as an assistant in the laboratory of bacteriology and chemical analysis at the hospital de niños pobres in barcelona, combining it with his work as director of the laboratory of the academy of medical sciences (“acadèmia i laboratori de ciències mèdiques”, the alcm) from 1908 to 1912 (hospital de la santa creu volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 122 i sant pau 1948). celis, on the other hand, approached the laboratory from a more academic perspective and took a special interest in teaching: in 1911, he was in charge of teaching histology and pathological histology at the alcm, and in 1914, he gained a position as assistant professor in the faculty of medicine at the university of barcelona, where he also taught pathological anatomy and general pathology (zarzoso 2020). alongside these activities, the three doctors ran the institute from 1910 to 1923. the institute was a private “biological research laboratory”, where a series of clinical, histopathological and cytological analyses were carried out using the latest laboratory techniques developed in bacteriology and chemistry (celis, grifols i moragas ca. 1915). they used various human fluids as samples (blood, sputum, faeces, urine or exudates) but blood was undoubtedly the most frequent. using the technique of agglutination, they performed serodiagnoses to determine the presence of different infectious diseases in the individual, such as typhoid fever, paratyphoid a and b, and mediterranean fever. serological tests such as quantitative wassermann's reactions to diagnose syphilis and abderhalden's reactions to determine pregnancies were also carried out. however, what made the institute particularly interesting was that, in addition to the diagnostic aspect typical of the bacteriological laboratory, a second fundamental pillar was added: therapeutic investigation. using the knowledge they had developed in serology, moragas and grifols began to produce preventive vaccines against typhoid fever, cholera and anthrax; as well as auto-vaccines – serums prepared by diluting or inactivating germs found in the patient's own blood – for acne, furunculosis and urethritis. these preventive vaccines and auto-vaccines, once ingested or injected, helped the patient to develop or strengthen their own immunity against the pathogen involved (celis, grifols i moragas ca. 1915). the institute's volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 123 clients were individuals or other physicians who contracted its services to conduct bacteriological analyses of samples that they sent to the institute, or to purchase vaccines. the first years of the institute have to be understood as it being a dual function laboratory: the bacteriological laboratory capable of diagnosing diseases and the dispensary capable of creating therapeutic remedies. that is to say, the institute continued the homeopathic tradition of grifols morera, but its three founding partners also brought to the practice the new medical paradigm of bacteriology, enabling them to now not only make remedies, but also to diagnose in their own laboratories. it is no coincidence that serotherapy and vaccinotherapy were disciplines which for years offered discourses in favour of homeopathy (moragas 1915, 89). this trend was reinforced by the emergence of a new pharmacological model during the first decades of the 20th century which revolutionised the field of medicine (piqué 2019). the medicines that were marketed at the institute had their own idiosyncrasies in that the auto-vaccines were personalised remedies. this hybrid nature of the diagnostic and therapeutic aspects was not exclusive to the institute, but it is a very useful characteristic to use to describe how a medical tradition could be reinterpreted by young physicians trained and interested in the methods of a new medical paradigm. what is more, it is fundamental to the complete understanding of the subsequent activity of the grifols family, since the approach was transferred to its successor, grifols laboratories (“laboratorios grifols sa”, lg). with the advent of the technical and scientific developments which made blood transfusions possible, therapeutics became more widely available, but clinical analysis continued to be the mainstay of the business, not only for the institute but also for lg, until well into the 1950s. this central role given to the laboratory was linked to two aspects that were equally important in the establishment of the company that was volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 124 to come later: in-house technological developments arising from the needs of the laboratory and the response to strong local and outside influences. as regards the former, doctors developed a multitude of technological developments to solve problems they encountered in the laboratory on a daily basis. based on the skills obtained in the creation of the first serums and reagents for carrying out biological analyses (which included physiological solutions using distilled water, solutions of washed red blood cells and serums extracted from animals), early in the 1920s, grifols roig was able to develop the first control serums for blood transfusions on the market in barcelona, which were essential for safe transfusions following the creation of the hemobanco (blood and plasma bank) in 1945 (laboratorios grifols 1944). the outbreaks of endemic typhoid in barcelona early in the century were also a driving force, prompting moragas and grifols to develop rapid fermentation tubes to detect bacillus coli in public fountains in barcelona in 1916 (moragas and grifols 1916). nevertheless, the main problem that doctors had to face during their daily laboratory practice, both to carry out analyses and to create vaccines, was maintaining asepsis. most of the patented technical materialisations were devices that sought to safely maintain the sterility of the fluids they contained: “the practice of haemoculture is nowadays a frequent and necessary operation, especially to be able to discover which is the causal agent of numerous infections, which clinically are revealed by the septicemic picture, and at the same time to be able to prepare, if necessary, an auto-vaccine, in order to make the treatment as specific as possible for the disease. however, the great problem of blood cultures today is the lack of sterility. when the blood is put in the solution, germs that do not come from the blood can be introduced”. (moragas and grifols 1914, 77). volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 125 in 1914, moragas and grifols developed the first instrument capable of taking blood directly from the vein and seeding it onto a medium: a sterilised vacuum flask connected to a needle through which the blood was extracted. based on this device, which grifols called the flébula aspiradora, he developed and patented eight different instruments between 1916 and 1929 (grifols roig 1916 and grifols roig 1929a). as with clinical analyses, technological innovation was also particularly important for the catalan medical market: the aim was for any doctor to be able to carry out a blood test easily and, if they did not have a good laboratory, to be able to send the sample to a specialised laboratory such as the institute with the assurance that it would arrive completely isolated from external pathogens (grifols roig 1928a). to this end, he not only offered his services as an analyst, but also built the business around the apparatus he developed. the third and final key factor in understanding the legacy which the institute left to lg is its investment in building an important network of national and international connections. works such as those of garcía-canal et al. (2018) and fernández-pérez et al. (2019) have shown that early contact with advanced international markets was one of the keys to the subsequent successful internationalisation of the laboratories. this contact was, in the case of the institute, preceded by strong scientific influences from abroad. grifols roig's stay in munich to study his specialism was followed by other international collaborations: the presence at the institute in 1916 of dr. paul gordan (1869-1923), the director of the bacteriology laboratory in danzig between 1907 and 1911 (sancho gallel in el día, november 23, 1918); and the institute’s collaboration with dr. helmolz in 1924 to develop a new analytical method to determine the amount of urea in blood (grifols and helmholz 1924). volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 126 however, this first stage of the institute demonstrates in practical terms what the birth of modern haematology meant, and the professional hybridisation which occurred to give rise to the profession of haematologist. despite developing the techniques that were laying the foundations of the discipline, the protagonists of this work did not call themselves haematologists since neither the discipline was as yet not institutionalised and nor had they developed a professional identity. nevertheless, strongly practical interests guided their research on blood (whether in the field of diagnosis or therapy), creating new foundational knowledge through their dual laboratory. grifols, moragas and celis, all doctors who sought to modernise their profession, came from a scientific culture which was witnessing the emergence of new medical specialities, the consolidation in barcelona of a very specific form of urban medicine, and the introduction and assimilation of new diagnostic methods from abroad. all this made for a professional hybridisation that advanced their practices, accompanied by their own technological innovations in overcoming the difficulties that had arisen in their laboratories. the article of zarzoso, in this same special issue, shows in a broader sense how this process of medical specialisation was configured in the city of barcelona, and the fundamental importance of laboratory medicine in this process. the professionalisation of the institute’s activity and the arrival of haemotherapy (19231939) in 1923, the institute moved to the eixample district in barcelona, and grifols roig himself took over its management (grifols group 2001). celis was appointed professor of histology and pathological anatomy at the university of barcelona in the same year, but continued to collaborate with the institute on an ad hoc basis. moragas and grifols became increasingly separated from the homeopathic institutions of which they had been a part (piqué 2018). volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 127 moragas worked in the laboratory of the hospital de la santa creu, where in 1930 he was appointed director, and two years later, he founded the hospital's first blood transfusion service, together with dr. manuel miserachs (hospital de la santa creu 1948). the role of moragas and miserachs, and thus of the hospital's laboratories, was very important in the transformation of hospital practices at the hospital de la santa creu i sant pau. just as the raval district was an important element in the transformation of barcelona's medical class at the end of the century, the relocation of medical clinics to the bourgeois eixample district during the first third of the 20th century was also decisive. the new precepts of laboratory medicine not only exerted their influence at the epistemological level of medicine, but also changed healthcare systems at other levels. in barcelona, a new model of private surgical clinics was starting to be set up in this neighbourhood, with open spaces and welldefined and separate areas, in accordance with aseptic and antiseptic new ideas (zarzoso and martínez-vidal 2016). as a result, auxiliary services like the institute followed the trend, firstly by seeking out a bourgeois clientele, and then also promoting medical practice as a product for consumption among large sections of the urban population, giving an alternative model to the charitable public hospitals aimed at the poor, as zarzoso shows in this issue. this early activity of the grifols family cannot be understood without this urban context: the trends of the barcelona healthcare district played a fundamental role in the establishment of the private medical care model and grifols roig knew how to adapt the institute to consolidated his activity. from his new practice located on rambla catalunya, this second stage of the institute (1923-1939) was one of the professionalisation of the scientific activity, but always building on the foundations that had been established in previous years. furthermore, in this second period a new line of therapeutics was launched: the introduction and assimilation of the volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 128 techno-scientific resources needed to make blood transfusions more effective opened up access to the technique. the discovery of the existence of the different blood groups by karl landsteiner in 1901, the development of new techniques and apparatus for the safe extraction and injection of blood during the first decades of the 20th century, and the establishment of sodium citrate as an anticoagulant substance by luis agote in 1914, established the technoscientific basis that led to the world war i becoming a field of experimentation for the use of transfusions on a large scale (starr 1998). all of these innovations became popular among the medical class during the 1920s, meaning the practice of blood transfusions changed from being a purely military practice to one used regularly in civilian medicine and resulted in improved safety and standardised practices (schneider 2003). a new discipline was emerging: haemotherapy, or the study of the therapeutic value of blood. the arrival of the recent innovations was quickly taken advantage of by those professionals, like grifols roig and moragas, who already had great skill in the use of blood in the laboratory. it is not surprising, then, that in 1925 the first indirect blood transfusions were registered at the institute, possibly being some of the first in catalonia (laboratorios grifols 1951). this led to the creation of a second centre that same year: the institute of biological therapeutics (“instituto de terapéutica biológica”, the itb) (1925-1939), also under the direction of grifols roig (faura bordas 1940). the instruments used for transfusions at the two practices were manufactured in-house, based on models used in europe. on may 23, 1928, grifols roig patented its first flébula transfusora, a transfusion device, similar to a kimpton-brown-percy tube, but without the rubber tubes as an innovation implemented to reduce the possibility of contamination (grifols roig 1933a). grifols roig used the knowledge they had gained during years of developing the flébulas volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 129 aspiradoras: once the technique for storing blood in sterile conditions had been achieved, he needed to find a way to store the extracted blood to prevent it from coagulating before it was transfused to the recipient. he did this first by means of paraffin, and then using sodium citrate, and managed to make transfusions using the flébula system, the first indirect transfusion system patented in spain, at a time of great debate about the suitability of the technique as opposed to direct transfusion. despite these reservations on the part of some practitioners, the equipment was also patented in germany that same year, in france and great britain the following year, and in the usa in 1933 (grifols roig 1928b, 1929b, 1929c and 1933b). however, its high cost meant that it was not a great commercial success, despite it being grifols roig's most important contribution to the emerging discipline. thanks to the flébula, the institute was able to organise a bank of barcelona blood donors early in 1928, and thus provide its services to the three most important public hospitals in the city (la vanguardia, august 5, 1928). once again, the technological innovation of the institute also led to the increased use of its other services. the creation of a second institute focused on therapeutics demonstrates how the dual functions of the laboratory were enhanced and professionalised during this middle period of the business. this base built on the institute's own technological and technical development as well as the further development of their international network continued during the following decade. thanks to the experience grifols roig had developed in the production of auto-vaccines, in 1931 the sociedad general de farmacia approached him with a view to jointly producing various biological products and pharmaceutical specialities (grifols roig 1933c). in collaboration with the sociedad and under the name laboratorios om, grifols roig continued to produce vaccines and medicines based on isolating pathogens, such as the om anti volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 130 colibacillary vaccine, the preventive typhoid vaccine and the normaflora intestinal vaccine, and later, in 1944, they made the first attempt to produce penicillin in spain under the name of penicillin om (la vanguardia, march 12, 1944, and grifols lucas 1945). the vaccines, in oral format, were very successful and were commercialised in switzerland and a number of south american countries (grifols group 2000). this was the first industrialisation of biological products for the family, an early stage in the development of lg. nevertheless, although also of great importance for the business during the 30s were the dietary products developed at the institute. at the same time, efforts were being made to keep the company well-connected internationally: in 1935, an association was established with the lister institute of preventive medicine in london, from which grifols roig developed a personal friendship with dr. robert race, director of the medical research council blood group unit (laboratorios grifols 1953). the outbreak of the spanish civil war would, however, abruptly change the evolution of the institute. the organisation and mobilisation of professionals on both sides of the conflict, and the new methods characteristic of war medicine, led many scientific centres to cease their activity and participate in new organisations that would also create new knowledge and ways of using blood (palfreeman 2016; zarzoso 2018, and starr 1998). this was the case with moragas and miserachs, as well as two of grifols roig’s sons, josep antoni grifols lucas (1917-1958) and victor grifols lucas (1919-2015), all of whom joined the blood transfusion service at the front (“servei de transfusió de sang al front”, the stsf) led by frederic duran i jordà (1905-1957). the war, in addition to bringing about great changes in the use of blood, also led to a deep economic crisis that would affect all subsequent scientific activity, as well as the market. private businesses had to adapt, as did scientists. from this perspective it is easy to understand why the institutes became laboratorios grifols s.a. the following year. the need volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 131 to protect a business which was fundamental for the family, in a fragile economic market and in changing social circumstances, was certainly the main trigger for change. to effect this protective strategy, all the recognition and scientific experience developed by the grifols roig over the previous 60 years was exploited, especially in terms of looking for new partners outside the family who could provide the necessary capital required by the new company. this was a business modernisation strategy, as or more important than that carried out within the family’s scientific practices and was essential for the survival of the business. business growth, productive diversification and introduction of outsider shareholders after the civil war (1940 1965) between 1940 and 1965 the ownership structure which had existed prior to 1940 at the institute changed profoundly at grifols laboratories (lg), as did its corporate governance and the productive specialisation developed by grifols roig.2 after the spanish civil war, the industrial fabric of barcelona – already a very important manufacturing centre before the war – grew rapidly. it seems that the autarky favoured industrial concentration, and import restrictions appeared to boost local production and foster the development of small and medium-sized industrial activities (tatjer 2006). in the case of pharmaceutical industries, the high degree of specialisation of many doctors and chemists in barcelona’s healthcare district led to the emergence of a large conglomerate of industrial laboratories, including laboratorios ferrer sl (1940), inibsa (industrial ibérica químico-farmacéutica sa) (1948), laboratorios almirall sa (1943) owned by antoni gallardo, and laboratorios hubber (1952) by his brother felix gallardo (morell 1996a and morell 1996b). others, like the laboratorio experimental de 2 for a broad and general review of the history of grifols laboratories, see avellà and miquel (2015) and grifols lucas (2009). volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 132 terapéutica inmunogama (known as laboratorios leti) which had been founded earlier, in 1919, inspired by the municipal laboratory of barcelona led by dr. turró, intensified and industrialized their activity during this decade. many of them, along with lg, joined forces in the form of a lobby known as the national business association of the pharmaceutical industry (1963), or farmaindustria, during the 60s. this demonstrates that it was not hard to find pharmaceutical industries with a scientific background similar to that of lg during these years, but bad business decisions resulted in many of them experiencing a drop-in activity or even disappearing in the following years. the case of instituto llorente is a good example of this scenario (mateo de la hoz 2016). the study of the business strategy followed by the grifols family is therefore a point of special interest in understanding their later success. laboratorios grifols sa was incorporated in barcelona before the notary josé faura bordas on 18 november 1940 (arxiu històric grifols barcelona. deed of incorporation of the company entitled laboratorios grifols sa. november 18, 1940, from the barcelona protocols archive, authentic copy drawn up by mr. cruz usatorre y gracia). the deed of incorporation states that a commercial company was set up by grifols roig, a physician by profession, and his wife magdalena lucas viñas, both residents of barcelona at 102 rambla de catalunya, and aureliano mas ballarin, an accountant by profession and resident of barcelona at 21 balmes street. the share capital was set at 500,000 pesetas distributed in 500 shares of 1,000 pesetas nominal value each to bearer, and 100 founder's shares which did not represent capital neither did the bearer have the right to benefit from the company’s profits, although they did have the right to intervene in the administration of the company owned by grifols roig. with regard to volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 133 ownership, the deed of incorporation of lg states that grifols roig purchased 170 shares representing a capital of 170,000 pesetas: “ten thousand of which he is obliged to pay in cash into the company's social fund for the whole day on the day of incorporation, while the remaining one hundred and sixty thousand are to be paid in kind through the signing over of the following to the same company named in this act: all the assets of the establishments which he founded under the names “instituto central de análisis clínicos” and “instituto de terapéutica biológica” in 1909 and 1925 respectively and which will continue under the company “laboratorios grifols sa”, comprising all the installations, apparatus, utensils, furniture and products in them, valued together at one hundred and sixty thousand pesetas”. (deed of incorporation of the laboratorios grifols sa, november 18, 1940). his wife, magdalena lucas, purchased 5 shares at a total value of 5,000 pesetas, which she undertook to pay in cash into the company's bank account on the day the company was incorporated. and aureliano mas also purchased 5 shares with a nominal total value of 5,000 pesetas which he also paid in cash into the social fund on the day of incorporation. the remaining 320 shares were left in the portfolio to be put into circulation when the general assembly of shareholders decided the time was right. the minutes of the shareholders' meetings held at the museu grifols in barcelona between 1940 and 1965 indicate the variations in the distribution of the shares created at the time of incorporation in 1940. the first extraordinary shareholders' meeting was held on june 30, 1941, and no longer included aurelio mas. the meeting stated that grifols roig had 172 shares in his own name, his wife magdalena lucas, 5 shares, and their three children (maria josefa, victor and josep antoni grifols lucas) 1 share each. the remaining shares remained in the portfolio. each share at this point had a nominal value of 1,000 pesetas each. it was founded as a family company. volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 134 at a meeting on june 30, 1941, the shareholders put more shares into circulation, although all were bought by the family: the founder purchased 60 more shares, for a total sum of 60,000 pesetas, his wife 4 shares (4,000 pesetas) and each of the three children 2 shares (6,000 pesetas in total). in the minutes of a meeting on the may 23, 1942, it is stated that grifols roig was in possession of 230 capital shares and 100 founder shares, his wife 11 capital shares, his daughter and two sons 3 capital shares each. in total, the family unit controlled 250 capital shares and 100 founder shares, more than half of the 425 now in the share capital portfolio. outsiders entered the business, albeit in a very limited manner, shortly thereafter. on may 8, 1944, the minutes indicate that at the ordinary general shareholders' meeting, josé segarra bernils was present and held 5 capital shares. at the ordinary general shareholders' meeting of may 9, 1945, the name of domingo brasó domingo, who held 100 capital shares, also appeared for the first time, and the minutes state that segarra continued to hold 5 capital shares, the grifols roig children 3 capital shares each, the wife of the founder 9 capital shares and grifols roig 377 capital shares and 100 founder shares. the reasons for incorporating outsiders into the company, particularly domingo brasó, are set out in the minutes of the shareholders' meetings of july 30, 1945 and april 15, 1946: “[the president took the floor] to explain in detail to the shareholders' meeting the need for the company to increase its capital due to a number of circumstances, such as the general increase in the price of raw materials and all kinds of supplies and services, which makes it essential to have an ample cash flow to meet the needs of the company's business, and also to undertake the preparation of new products which have now been sufficiently studied and which it is therefore in the interest [of the company] to launch on the market as soon as possible”. (minutes of july 30, 1945). at the same meeting, it was agreed to increase the share capital from 500,000 pesetas to 1,000,000 pesetas. to this end, 500 ordinary bearer shares with a par value of 1,000 pesetas volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 135 each were created. consequently, the capital of the company stood at 1 million pesetas, represented by one thousand bearer shares of 1,000 pesetas par value each, as ordinary shares. in addition, there were the 100 founder's shares “which do not represent capital or give the bearer the right to participate in the profits or assets of the company, but does give them the right to intervene in the system and administration of the company in the manner and to the extent determined by the bylaws”. the founder shares were assigned to grifols roig, and could only be transferred to his wife and children, and were to be shared between them, expiring upon their death. in the event of an increase in share capital, it was agreed at this meeting that existing shareholders would have priority and preferential rights to sign up for new shares in proportion to the shares they already held (and the founding shares would count as ordinary shares for this purpose). in the deed of capital increase of may 9, 1946, the following persons appeared at the time of the increase and purchase of the new shares: grifols roig, his two sons, domingo brasó, and the widow josefa delapuerta llupiá. josefa delapuerta purchased 119 shares, and in payment for them she signed over the urban estate of sant gervasi, which lay between the convent of jesús maría and vendrell street, to lg. this property, which was to be the new headquarters of lg, had three mortgages in the name of juan güell y ferrer for three loans which he had made to josefa delapuerta and a loan called “censo”. the property was transferred to lg in the 1946 deed of capital increase, and the company assumed the obligation to pay off the three mortgages and the debt that on the property. the brothers josep antoni and victor grifols lucas each purchased 50 shares, contributing in payment of these “their detailed project for the installation of a penicillin factory, which belongs to them 50:50 pro-rata, and which is valued together at one hundred thousand pesetas”. grifols roig bought 15 new shares for a total of 15,000 pesetas paying for them in kind with various objects, including a leica standard volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 136 camera, a summar lens, a leitz enlarger, an optical desk for reading negative copies, a letiz micro-photographic device which could be attached to the leica, a large gas heater, a mediumsized autoclave, and a mignon typewriter. domingo brasó subscribed the remaining 266 new shares for 266,000 pesetas, contributing this amount in cash that was deposited in the company's cash office. at the shareholders' meeting on june 10, 1955, the minutes list that the shareholders of all the registered shares of ptas. 1,000 each, representing a capital stock of ptas. 1,000,000, were: josep antoni grifols roig; 395 shares domingo brasó domingo; 470 shares magdalena lucas viñas; 24 shares josep antoni grifols lucas; 53 shares victor grifols lucas; 53 shares maria josefa grifols lucas; 1 share josé segarra bernils; 2 shares thus, although the majority of the shares were in fact held by the grifols family, the main individual shareholder was brasó. on the september 20, 1958, at the general meeting of shareholders, the distribution of shares had hardly changed, although josé segarra had essentially withdrawn as a shareholder: josep antoni grifols roig; 397 shares domingo brasó domingo; 470 shares magdalena lucas viñas; 24 shares josep antoni grifols lucas; 53 shares volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 137 victor grifols lucas; 53 shares maria josefa grifols lucas; 3 shares another interesting issue addressed at the meeting on september 20, 1958, was that the owners of the grifols brand (grifols roig and his two sons) leased the grifols brand to lg for the benefit of all concerned, but in exchange they charged a royalty of 3% per year on sales, with a minimum payment of 300,000 pesetas per year (raised to 350,000 pesetas a few years later). on may 30, 1959, at the shareholders' meeting, josep antoni grifols lucas was no longer a shareholder. grifols roig, as president, informed the shareholders at the meeting, after reporting that the automation of activities to reduce production costs was being studied in depth, that his son had died: “i do not want to close these comments without dedicating a sincere remembrance to our late dr. josep antoni grifols lucas, my son, who was the initiator of the activities of our hemobanco and the department of plasma fractions, which thanks to his work continue to follow their proposed course. in the hearts of all of us who worked and collaborated with him, we keep a deep memory for the intelligence, industriousness and chivalry that came together in him. rip”. (minutes of may 30, 1959). josep antoni’s death meant that shortly afterwards (as of the july 10, 1962, meeting), montserrat gras riera, his widow, joined the shareholders' group after inheriting his 53 shares. more new shareholders, in relation to a capital increase, are recorded at the shareholders' meeting on may 30, 1960, when it is indicated that the automation process was continuing through loans made to the company by domingo brasó, grifols roig and son, angel devant and antonio ruiz, in anticipation of an approved capital increase which would involve devant and ruiz, who had appeared in alternate minutes for the previous 10 years as auditors, joining the company as minority shareholders. volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 138 secondly, with respect to the structure of corporate governance, the grifols family showed an early and constant desire to organise the company professionally and to follow legal regulations. the corporate governance of these years combined a clearly personalist and hierarchical structure in the taking of long-term strategic decisions, centred on the president who was practically always the founder of lg, grifols roig, and had a very horizontal structure of middle management to which operational scientific, technical and administrative decisions were delegated. according to grifols roig, this coexistence of an owner with control over strategic decisions and managers in specialist areas within a very small company was in keeping with what was expected of a company which specialised in the pharmaceutical and biomedical profession, and whose reputation depended on that of its founder and scientific leader. in the minutes, grifols roig confesses that the decision to set up an independent company was met with criticism from the small world of barcelona, where lies were spread that grifols roig, who had run the institute of clinical analysis up until that point with other professional colleagues, would no longer take care of the analyses personally and would delegate professional activity to employees. at the extraordinary general meeting of july 2, 1941, it was stated that “dr. grifols explained to those present that he had learned through various channels that elements interested in discrediting the activities of the company were disseminating the fact that the laboratory of analysis of dr. grifols had been incorporated into a public limited company and that consequently dr. grifols no longer dealt with it personally and that other employees were doing the work without direct interest, thus not deserving the trust he had previously enjoyed. as the damage which could be caused by the disclosure of this material could certainly be great, grifols roig proposes that the board study what should be done to avoid this and, above all, to ensure that the heading of sa [the spanish version of plc] does not have to appear on any clinical analysis forms. [after deliberations, the board unanimously agreed that] the clinical analysis laboratory which is the core of dr. grifols' professional activity should be separated from the company. to this end, dr. grifols will purchase the scientific equipment and furniture from the company for the same price as that for which they were provided, i.e. 15,675 pts for the volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 139 scientific equipment and 3,995 pts for the furniture. and that the premises of the office, waiting room, and offices continue to depend on the company, which will pay 550 pts for their rent instead of the 650 pts it had been paying”. (minutes of july 2, 1941). the fact that professional activity implied individual responsibility meant, as mentioned above, that the president of lg was almost always grifols roig during these years, except in the minutes of the may 12, 1942, when aurelio mas, the accountant who appeared in the deed of incorporation of lg was appointed president. as a very minor founding partner with only 5 of the 500 shares which made up the initial share capital, he was recorded as a shareholder in the minutes of the ordinary meeting of shareholders held on november 19, 1940, and that of may 12, 1941, but then no longer appeared in the minutes as either a shareholder or president in subsequent years. the secretary of the shareholders' meetings, as recorded in the minutes of these years, was more variable. in the early 1940s both the wife and the daughter of the president and founder of lg appeared in this position, although as soon as the founder's sons joined the company, new shareholders began to replace the women in the family as secretary of the shareholders' meeting. the wife and daughter would, however, continue to appear as auditors at the shareholders' meetings, a position which franco's legislation required and which had to be recorded in the minutes of company shareholders' meetings. the secretary at the first ordinary general meeting of shareholders on may 12, 1941 was grifols roig’s wife magdalena lucas, who also filled this position at the first general meeting of shareholders on june 30, 1941, but at the extraordinary meeting on july 2 of that year the secretary was her daughter, maria josefa grifols lucas. after 1944 there were various shareholders with or without charge who were not members of the grifols family: josé segarra who was recorded as secretary of the shareholders' meeting in the minutes of july 30, 1945, and domingo brasó, following the shareholders' meeting of april 15, 1946, and at the suggestion of grifols roig, was frequently volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 140 the secretary of the ordinary shareholders' meetings. at the shareholders' meeting on june 20, 1952, it was agreed that brasó would be the president of the meeting and jose segarra the secretary, although on may 12, 1953, grifols roig was again president and domingo brasó secretary. in the corporate governance of the company in the 1940s and 1950s, therefore, decision-making and the approval of balance sheets and accounts were shared between the various members of the close family of the founder, grifols roig, and the shareholders who came to own the company, particularly domingo brasó, who at times became, as has been indicated, the majority individual shareholder (1955) and even president of the shareholders' meeting (1952). brasó, of whom hardly anything is known in existing publications about the history of grifols in these years, was an industrialist in the beverage and ice sector who had a factory in a district of barcelona called sant martí de provençals, a factory where, according to oral testimony from the family, they rented space and regularly went in order to store plasma and other materials which needed to be refrigerated, as reliable refrigeration could not be guaranteed at the company's headquarters due to power cuts implemented by the francoist autarchy (according to an interview conducted by paloma fernández with victor grifols roura in sant cugat, february 13, 2015). domingo brasó is said to have been a friend of grifols roig, hailing from molins de rei, who, before the civil war, already had ice factories with refrigerators and cabinets with ice inside, which were essential to the businesses of grifols roig who needed to freeze plasma. when grifols roig decided to set up the clinical analysis company as a public limited company, he involved brasó as a partner. brasó was therefore important because he contributed capital, and because he manufactured ice and rented the company his ice warehouses in the area of avenida marina in barcelona, where the mapfre tower is located volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 141 today, in front of sal costa. grifols had a few refrigerators at the company headquarters in the 1940s, but they did not have the capacity they needed. brasó had the ammonia technology necessary for making ice, since there was no gas supply available to produce it at the time, as well as the required safety permits, making him and his business premises essential to lg. brasó’s importance to lg was therefore twofold: as a capital partner who made it possible to double the company's share capital at a time when money was scarce in barcelona at the height of the franco regime, and because he had the facilities and capacity for refrigeration and freezing that lg needed for the perishable product in which grifols had specialised since 1945, that is, plasma and its derivatives (interview conducted by paloma fernández with victor grifols roura in sant cugat on february 13, 2015). despite the fact that brasó played a decisive role as a capital partner and as a collaborator by renting out his ice warehouses, grifols roig felt that the specialised work that he himself carried out and which gave lg their reputation clearly required recognition in terms of strategic decision-making, as well as in terms of salary, and he wanted this acknowledged in writing very explicitly from the moment the company was incorporated. for the patent and for the medical and professional work as manager, grifols roig was initially paid 2,000 pesetas per month, later increased to 3,500 ptas per month; for the commercial work, grifols roig was also paid the amount set out in the company's articles of association, 650 ptas, as rent for part of the property (from the minutes of the shareholders' meeting dated november 19, 1940). with regard to the distribution of profits, at the meeting held on april 15, 1946, it was agreed that grifols roig would receive 6% of the net profits as remuneration for his management role, 2% would be paid for services rendered to the scientific director, 2% for services rendered to the volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 142 technical director, and the rest for the obligatory reserve fund, taxes, and for the purposes of the general shareholders' meeting. in addition, the company's productive specialisation has undergone fundamental strategic diversification since the mid-1940s. in the organisation and definition of the functions of lg there was a before and after the creation of the hemobanco. lg's corporate objectives, as set out in its articles of association, included the development of therapeutic and nutritional products and the performance of biomedical clinical analyses. the initiative of creating a blood and plasma bank was, according to the minutes of the shareholders' meeting, driven by josep antoni grifols lucas, who along with his brother victor, had learned from duran i jordà during the civil war about the operation of the first blood bank established on the aragon front. as students recruited to the front to help in health units, they learned how to store blood and were able to experiment with techniques which they later developed further and applied for civilian purposes when the war ended and they returned to the clinical analysis laboratory in 1940. grifols roig had confidence in his sons, both good students (josep antoni studied medicine and pharmacy, and victor studied chemistry and pharmacy), and both were lovers of reading and updating their medical and clinical knowledge and their competence in key languages (german, french and english for josep antoni and english for victor, the languages in which scientific innovations in the area of medicine and clinical analysis were being published). grifols roig decided that, once again due to his reputation at lg, the new blood bank to be created with grifols capital should operate independently and autonomously of the laboratory. in 1945 the hemobanco was created, with josep antoni as its scientific director and victor as its technical director. it was separated operationally from lg because of the importance at that volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 143 time for lg of customers not thinking that grifols roig was going to stop dedicating time to lg because of calls made on him by the hemobanco. however, what is true is that the hemobanco was gaining importance among the family businesses, not only because of increased sales, but also because of the need for investment to reduce costs. what began as an adventure by a young member of the grifols family, in the shadow of lg, ended up being responsible for the highest volume of sales, and what would be the most important specialisation in the history of the grifols group: plasma and its derivatives. the hemobanco would end up being grifols' main activity, and the articles of association and the corporate purpose of lg had to be modified to recognise this reality: blood and plasma activities brought more money in and had more future potential than clinical analysis and nutritional products or reagents. barely five years after its inception, the hemobanco had reoriented the entire activity of the company, its organisation, and its operation. in the minutes of lg's ordinary shareholders' meeting of december 30, 1950, it is stated that “due to the impetus given to the blood and plasma bank, which is likely to increase, and by virtue of the fact that the plan for its organisation is practically complete, the current scientific director of the company, who in fact carries the weight of the bank's professional work, has much more purely medical work to do, and often overtime and urgent work, with more organisation and management work”. (minutes of december 30, 1950). the minutes point out that an increase in activity is to be expected, as well as an increase in the services provided by more doctors working with donors, and that in this case: "the doctors who may be called in this case cannot and will not be considered as employees of this company since they exercise a free profession, for which they pay a contribution and are registered, and therefore they will present their fee note to the company as appropriate. accepting as indisputable that in the collection of human blood, for therapeutic cases, there is a phase, that of the recognition of the donor, which is a volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 144 purely medical question, that the doctor performs with complete independence from the entire organisation of the company, and for whose fees only the medical associations can dictate rules, it is natural that such a doctor should be paid as a professional and not be given an employee's salary. to this end, it is considered fair that the remuneration corresponding to the management of the auxiliary personnel of the donor service organisation should only be the statutory 2% of the profits, with the corresponding recognition of donors as professional fees. the complete management of these particular organisational services of the blood and plasma bank requires that the doctor in charge of performing them usually has his own office in the company's premises. for this reason, the company recommends that the physician subleases a room on the right-hand side of the entrance to the current office, where he can freely recognise the donors who need to be bled in his own office. mr. josep antoni grifols roig said that it would be appropriate to propose that the management of the company be subordinated to the work of the board of directors, and to this end he proposed that it be partly entrusted to other people, so that they can devote more time to their professional work. therefore, he offers to modify the monthly payment in the manner deemed appropriate by the board, but charging 6% of the statutory benefits". (minutes of december 30, 1950). for all these reasons, it was agreed to sublet the first room on the right-hand side of the jesús y maría laboratory to josep antoni grifols lucas, so that he could install his office there, paying 125 pts per month for the rental. secondly, that josep antoni accepts the waiver of the monthly payment currently assigned to him and instead be paid the professional fee for medical examinations and scientific upon presentation of the corresponding notes and under the rules which may be established by the medical association as is customary in the city of barcelona. it is clear from the minutes of the meeting on the may 23, 1951, that the hemobanco gradually took on more activity, including that of lg, in which the manager stated that the owner of a pharmaceutical laboratory which prepared products with penicillin had been talking to him, and the manager had suggested that he might like to manufacture his own penicillin, even on a small scale, and in this context the manager offered to sell him the project and health permit they had for manufacturing penicillin. however, the minutes continue to explain, since the government volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 145 had just granted manufacturing exclusivity to two large pharmaceutical institutions, “the hope of being able to sell penicillin manufactured in a relatively modest facility is completely illusory, and that besides being our main activities dedicated to the blood and plasma bank we lack space and time to dedicate to the manufacture of penicillin. therefore, the manager advises careful deliberation of the convenience of buying the mentioned project and health permit”. on june 16, 1958, the tendency of the hemobanco to be the main source of income for the family business, and that it should therefore be invested in, is made explicit: “it must be considered that the highest percentage of sales is recorded by our hemobanco department, which is still in an experimental or evolutionary period. its services are required more and more by the medical class in general, but in spite of this, its maintenance still costs money. the price of the hemobanco's services is very low in relation to its cost and due to the nature of these services it is not prudent to increase it. in order to reduce this cost, which is when this a department will no longer be a burden, suitable apparatus is needed that cannot be obtained in spain, appropriate installation, etc. ..., all of which means that the proper method is not used, making it expensive. apart from this, research work on haematology is constantly being carried out in this section, in which assets and raw materials are invested in quantity, aimed at obtaining, as in other advanced countries, by-products of human blood of high therapeutic value. recently we have made available to the medical class in general active human fibrinogen and human albumin, both truly life-saving products in certain cases, but commercially they have proved to be a failure for the moment, given their high manufacturing cost and the fact that a large part of the medical class is still unaware of their existence. this means, and we have no doubt that [shareholders] will take this into account, that in our case the volume of sales is not a sign that can be used as a basis for calculating profits. (…) we have applied for, and we believe will be granted, permission to import foreign equipment and, in addition, the work being done on preparing new human blood by-products offers the best prospects. (…) “all this leads me to express my sincerest conviction of the need for a capital increase so that we can carry out the necessary publicity campaign for the sale of the new products i have mentioned to you, the necessary modification work to properly organise the production and storage, and the importation of the apparatus we have requested and for volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 146 which we have found the ministry of commerce to be positively inclined towards, which warrants being taken advantage of”. (minutes of june 16, 1958). at the shareholders' meeting held on november 25, 1964, it was resolved to amend the company's articles of association to specify that one of the central objectives of lg would be to provide services to the hemobanco, which since 1945 had been excluded from the company's objectives to protect the reputation of grifols roig and lg in its initial corporate objectives, which were more closely linked to the production of therapeutic and dietetic reagents and products: "the presidency, after listing the difficulties encountered since the society's foundation, concerning the social objectives that were initially expressed in the practice of clinical and biological research and the preparation of therapeutic and dietetic reagents and products and subsequently since 1945, given the particularity of having specialised with evident success in the clinical and biological analytical techniques proper to blood banks and their derivatives [stated that] the central purpose of the company is to continue and increase, to the extent possible, these services of the blood and plasma banks, as one of its unique social objectives, which is why an express financial program will be carried out, proposing in view of the aforementioned the convenience of specifically including the aforementioned services within the corporate purpose. the meeting unanimously approved the proposal and amended article 3 of the bylaws, which read as follows: art.3. the object of this company shall consist of the practice of clinical and biological research and the preparation of therapeutic and dietetic reagents and products and, in particular, the services of blood bank and plasma derivatives, in the analytical-clinical and biological techniques inherent to them”. (minutes of november 25, 1964). on december 5, 1964, the shareholders' meeting agreed to increase the company's share capital by 17 million pesetas, to 18 million, in order to buy land and make investments that would eventually lead to the creation of the new blood and plasma derivatives factory in parets del vallés. what started out in 1945 almost as an addition to the family business in order to give the young son of the owner of a prestigious laboratory an avenue for growth ended up being the core business of a large business group. volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 147 lg, therefore, between 1940 and 1965, had two major stages from the point of view of specialisation: between 1940 and 1945, when the small family pharmaceutical products business began to become more organised; and then from 1945, when the business diversified into a very knowledgeand capital-intensive activity which required the share capital to be increased, incorporating shareholders from outside the family, and changing the management organisation of the new specialities and units of the business by taking advantage of the capacity and competence of young family members as well as trained employees from barcelona's medical health district and german laboratories, due to the effects of the world war ii and the persecution of jewish scientists known to the family since grifols roig's stay in germany in 1909 (fernández-perez 2019). the commitment to develop new biomedical, pharmaceutical and clinical specialities meant constant investments, the reinvestment of profits in the company's reserve fund, capital increases for close trusted partners, and slow progress in the distribution of dividends over these years. the minutes of the shareholders' meetings are a testimony to the constancy of the reinvestment of profits, and the renouncing of dividend distributions in these key years of investment and the creation of the new knowledgeand capital-intensive businesses. the years with the lowest profits are also years of heavy investment, such as 1940 when the laboratory was set up and machinery and furniture were purchased, and 1946 when the new hemobanco was launched. in 1958, however, negative profits were, according to grifols roig's testimony in the minutes of the shareholders' meeting of that year, due to the lack of a method for reducing costs and increasing productivity, and to an organisational problem which would become more acute after the death of josep antoni grifols lucas, and which would be tackled resolutely from 1960 onwards through what would be an alliance with an american partner (dade reagents – volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 148 and the creation of dade grifols – and american hospital supply corp. (ahs), following the death of the founder of dade reagents and the company’s sale by his widow to ahs) that would give a boost to the company's organisational and technological renewal. figure 1. benefits of laboratorios grifols 1940-1964 (pesetas at the time) source: grifols historical archive in barcelona. minutes of the shareholders' meeting of laboratorios grifols s.a. 1940-1964 and deed of incorporation of laboratorios grifols sa. conclusions the work we present here is an example of how small dynastic family firms in science industries that endure over time not only acquire specialised knowledge to compete in the market, but also knowledge about transferring and absorbing new knowledge from younger generations to ensure the continuation of the family business. without the idea of opening a blood bank under the personal direction of josep antoni grifols lucas in the mid-1940s, maybe laboratorios volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 149 grifols sa would have never grown anywhere near as much if they had simply stuck with the original activity of the founder (clinical analysis, nutritional products or their attempt to produce penicillin). the outward looking, professional and tolerant communication and coordination between members of the different generations of the grifols family, and their close colleagues in the city of barcelona and abroad, allowed for the early embeddedness of innovation in the strategic decision making of the laboratory. all the partners involved in the ownership and management of the firm established continuous small changes which left room for new ideas and new products, regardless the age or the experience of the person in the firm proposing the ideas. grifols roig gave enormous freedom to his sons, and placed his trust in their scientific initiatives, and the sons accepted their father’s controlling top-down managerial decisions. interdisciplinary historical analysis has helped us see how a small private clinic in barcelona in the late 19th century used very modern coordination and professional attitudes that allowed for continuous innovation in its practices, both in science and in business. as some authors have indicated, the early imprinting of practices of innovation in family businesses in healthcare activities may help understand their distinctive growth and internationalisation (donzé and fernández-perez 2019 and garcia-ruiz and fernández-perez 2017). on the one hand, we have been able to understand how the grifols family adjusted its different medical practices to a changing scientific paradigm, which was crucial to the survival of the family's business at the end of the 19th century. this adaptation left behind ways of understanding medicine which persisted during the subsequent years of activity, and which are still latent in the company's organisation today. the four business divisions which currently make up the grifols holding company are a result of the different medical practices in which the family specialised during the 20th century, i.e. diagnostic and therapeutic practices (both volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 150 haemotherapy and nutrition): bioscience is the division in charge of the production of plasmaderived medicines; diagnostic is the division in charge of developing diagnostic solutions in transfusion medicine; hospital is in charge of meeting the needs of hospital pharmacies, such as the use of intravenous solutions or special formulations for clinical nutrition; and finally, bio supplies provides the different biological materials needed for health science research. this adaptation, both in scientific practices and in epistemology itself, was accompanied by a significant technological innovation of its own and a strong local and international network of contacts, which managed to build up its own clientele (both among the medical class and among individuals) in order to survive in precarious national markets. on the other hand, thanks to an analysis of the minutes of grifols laboratories shareholders’ meeting, we have been able to understand why the company was incorporated after the war and then diversified its scientific activity. both strategies, scientific modernisation and business modernisation, are equally necessary to explain the current company’s success. acknowledgements cristina sans-ponseti acknowledges support from the research project pid2019-105131gbi00 (ministerio de ciencia, innovación y universidades) and the industrial partnership project di 2017 73 between universitat autònoma de barcelona and grifols sa (generalitat de catalunya). paloma fernández has received financial support from the research project pgc2018-093971b-i00, funding from: ministerio de ciencia, innovación y universidades (mciu), agencia estatal de investigación (aei) and the european regional development fund (erdf). she has also benefitted from a non-profit agreement (signed in 2014) with the grifols group to conduct volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 151 research into the grifols historical archive, within which constant support and guidance has been received from nuria pascual and rosa avella. particular appreciation is expressed also to victor grifols roura for the interview with paloma fernández in the grifols office in sant cugat del vallès on 13th february 2015. archives grífols historical archive celis, lluís, josep antoni grifols roig, and ricard moragas. ca. 1915. laboratorio de investigaciones biológicas. barcelona: instituto central de análisis clínicos, bacteriológicos y químicos (reference grifols historical archive: mg0453). grifols roig, josep a. 1928a. flebula aspiradora grifols: aparato para extraer automáticamente sangre y otros fluidos del organismo humano y animal destinados al anàlisis. barcelona: departamento de biología de la sociedad general de farmacia, sa (references grifols historical archive: mg0761, mg6495 and mg2054). grifols roig, josep a. 1933c. la vacunoterapia por ingesta en las afecciones colibacilares. barcelona: departamento de biología de la sociedad general de farmacia, s. (reference grifols historical archive: mg0427). laboratorios grifols. 1944. equipo para la determinación de los grupos sanguíneos. barcelona: hemobanco de sangre y plasma de laboratorios grifols, sa. laboratorios grifols. 1951. el banco de sangre y plasma de laboratorios grifols. barcelona: hemobanco de sangre y plasma de laboratorios grifols, sa. laboratorios grifols. 1953. memoria del hemobanco. barcelona: laboratorios grifols, s.a. (reference grifols historical archive: mg6353). shareholders meeting minutes, from november 1940 to december 1964, shareholders meeting records, grifols historical archive, barcelona. oficina española de patentes y marcas grifols roig, josep a. 1916. un aparato perfeccionado para la obtención de muestras de sangre, destinadas al anàlisis. invention patent number 62983. madrid: oficina española de patentes. grifols roig, josep a. 1917. resultados posibles en la fuerza de la reacción, según nuestro método. volume 6, number 1, 114-155, january-june 2021 doi.org/10.1344/jesb2021.1.j085 152 trademark number 31936. madrid, espanya: oficina española de patentes. grifols roig, josep a. 1929a. ampollas previamente preparadas autoaspiradoras y autoinyectables. invention patent number 111456. madrid: oficina española de patentes. reichspatentamt patentschrift grifols roig, josep a. 1928b. bluttransfusionsapparat. invention patent number 569.648. berlin: reichspatentamt patentschrift. brevet d’invention délivré sans garantie du gouvernement grifols roig, josep a. 1929b. dispositif pour injections ou prélevements de sang. invention patent number 671969. paris: brevet d’invention délivré sans garantie du gouvernement. patent specification of his majesty's stationery office grifols roig, josep a. 1929c. needle holder for ampules. invention patent number 308.597. london: patent specification of his majesty's stationery office. united states patent office grifols roig, josep a. 1933b. blood transfusion apparatus. invention patent number 1923846. washington: united states patent office. hospital de la santa creu i sant pau archive hospital de la santa creu i sant pau. 1948. libros mayores. barcelona: hospital de la santa creu i sant pau. arxiu històric de protocols barcelona il·lustre col·legi de notaris de catalunya faura bordas, josé. 1940. protocolo número 1798. barcelona: archivo de protocolos de barcelona. interviews grifols roura, victor, interview by paloma 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electrónica de geografía y ciencias sociales 10(218): 46. zarzoso, alfons and martínez-vidal, àlvar. 2016. “laboratory medicine and surgical enterprise in the medical landscape of the eixample district.” in barcelona: an urban history of science and modernity, 1888–1929, edited by oliver hochadel and agustí nieto-galan, 69-72. london: routledge. zarzoso, alfons. 2018. “medicina i cirurgia en temps de guerra”. in història mundial de catalunya, edited by borja de riquer, 762-769. barcelona: edicions 62. zarzoso, alfons. 2020. “lluis celis i pujol.” galeria de metges catalans, accessed august 2020. http://www.galeriametges.cat/galeria-fitxa.php?icod=emg. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://www.galeriametges.cat/galeria-fitxa.php?icod=emg http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 deborah besseghini università degli studi di torino (italy) https://orcid.org/0000-0002-6266-5521 the weapons of revolution: global merchants and the arms trade in south america (1808-1824) abstract this article investigates the role that the arms trade connected to hispanic american independence wars played in the transformations at the origins of 19th century globalization. it looks specifically at how arms supplies to governments encouraged the early post-mercantilist development of south american commerce, and some of the domino effects of such development. this turning point in economic history is analyzed through the biographical trajectories of merchants who were well positioned between geopolitics and trade, and who had “imperial” functions without being formally involved in imperialist projects. business and political correspondence, notarial documents, and customs registers from archives in europe and the americas reveal the workings of networks and business affairs of global merchants whose companies were major arms importers in buenos aires during the years leading to chile’s liberation. the threads of john mcneile’s (an important but neglected figure) and david deforest’s networks hook onto the principal economic and political laboratories of the countries from whence most arms were imported: great britain and the united states. they reached chile and peru from buenos aires and remained crucial to the liberation campaigns, encouraging further commercial expansion along the american pacific coast and toward asia, and pioneering financial adventures. relations between commercial houses active in hispanic america and asia reveal british and us transpacific networks and ties between hispanic american and asian commerce and economies. the article thus shows how, by bringing together fragmented and scattered sources from both sides of the atlantic, the significance of the arms trade in south america as a driving force of globalization emerges. keywords: arms trade; war finance; hispanic american independence; buenos aires; pacific; john mcneile; david curtis deforest las armas de la revolución: comerciantes globales y la importación de armas en américa del sur (1808-1824) resumen este artículo investiga el rol ejercido por el comercio de armas vinculado a las guerras de independencia hispanoamericanas en las transformaciones en el comienzo de la globalización decimonónica. analiza, específicamente, cómo los suministros de armas a los gobiernos contribuyeron al desarrollo post-mercantilista del comercio sudamericano, y determinados efectos dominó de dicho negocio. este momento de cambio en la historia económica se analiza a través de las trayectorias biográficas de comerciantes bien posicionados entre geopolítica y comercio, que poseían funciones “imperiales” sin estar formalmente involucrados en proyectos imperialistas. mediante correspondencia comercial y política, documentos notariales y registros de aduanas, de archivos de europa y las américas, se revela la operativa de las alianzas y de las iniciativas empresariales de comerciantes globales cuyas compañías fueron principales impo rtadoras de armas en buenos aires durante los años precedentes a la liberación de chile. las trayectorias de las redes de john mcneile (importante pero olvidado personaje) y david deforest se insertan en los principales laboratorios económicos y políticos de países desde donde se importaban la mayor parte de armas: gran bretaña y los estados unidos. alcanzaron chile y perú desde buenos aires, y permanecieron cruciales para las campañas de liberación, promoviendo una expansión co mercial adicional a lo largo de la costa del pacífico americano, y hacia asia, y fueron pioneros en aventuras financieras. las relaciones entre algunas casas de comercio activas en hispanoamérica y asia revelan redes y vínculos transpacíficos, británicos y norteamericanos, entre los sistemas comerciales y económicos de dichos lugares. de este modo, relacionando fuentes fragmentarias y dispersas de ambos lados del atlántico, el artículo desvela la importancia del comercio de armas en sudamérica como un motor de la emergente globalización. palabras clave: comercio de armas; finanzas de guerra; independencia hispanoamericana; buenos aires; pacífico; john mcneile; david curtis deforest les armes de la revolució: comerciants globals i la importació d’armes a l’amèrica del sud (1808-1824) resum aquest article investiga el rol exercit pel comerç d’armes vinculat a les guerres d’independència hispanoamericanes en les transformacions a l’inici de la globalització del segle xix. analitza, específicament, com els subministraments d’armes als governs van contribuir al desenvolupament post-mercantilista del comerç sudamericà, i determinats efectes dòmino d’aquest negoci. aquest moment de canvi a la història econòmica s’analitza a través de les trajectòries biogràfiques de comerciants ben posicionats entre geopolítica i comerç, que posseïen funcions “imperials” sense estar formalment involucrats en projectes imperialistes. mitjançant correspondència comercial i política, documents notarials i registres de duanes, d’arxius d’europa i les amèriques, es revela l’operativa de les aliances i de les iniciatives empresarials de comerciants globals les companyies dels quals van ser principals importadores d’armes a buenos aires durant els anys precedents a l’alliberament de xile. les trajectòries de les xarxes de john mcneile (important però oblidat personatge) i david deforest s’insereixen en els principals laboratoris econòmics i polítics de països des d’on s’importaven la major part d’armes: gran bretanya i els estats units. van arribar a xile i el perú des de buenos aires, i van romandre crucials per a les campanyes d’alliberament, tot promovent una expansió comercial addicional al llarg de la costa del pacífic americà, i cap a àsia, i van ser pioners en aventures financeres. les relacions entre algunes cases de comerç actives a hispanoamèrica i àsia revelen xarxes i vincles transpacífics, britànics i nordamericans, entre els sistemes comercials i econòmics d’aquests llocs. d’aquesta manera, tot relacionant fonts fragmentàries i disperses de tots dos costats de l’atlàntic, l’article desvela la importància del comerç d’armes a sudamèrica com a motor de l’emergent globalització. paraules clau: comerç d’armes; finances de guerra; independència hispanoamericana; buenos aires; pacífic; john mcneile; david curtis deforest corresponding author: edeborahbesseghini@gmail.com received 6 march 2021 accepted 28 march 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-6266-5521 mailto:deborahbesseghini@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 1. introduction: weapons and revolutions there is no doubt that the arms trade was a factor in the age of revolutions and in what christopher bayly (1989) has called the “imperial meridian” (1780-1830), that moment in which new empires were built in asia while the old atlantic empires were disintegrating. the implications of the arms trade on the commercial reconfiguration of empires are, however, under-researched. studying such trade at the micro-historical level is useful to deepen our understanding of strategic adjustments by businesses to geopolitical change, but also of statelevel changes in financial mechanisms – i.e., macroeconomic transformations connected to war. the analysis of short-term timescales reveals interconnections between political and economic goals and public and private interests, which were usually intertwined. this study highlights how the weapons trade in south america contributed to the transformation of commercial circuits and practices. it reconstructs the trajectories of global merchants connected to decisionmaking centers in great britain and the united states, the two countries from which independentists most sought support and from which most arms were imported, specifically, the british firms of john mcneile1 and those connected to the us merchant david curtis deforest. zacarias moutoukias and marjolein ’t hart (2021) have shown how the 1810s war financing unwittingly weakened the old corporate order and further dismantled imperial structures that limited south american direct trade with foreigners.2 as arnaud bartolomei (2021) has pointed out, bargaining for privileges and protection, and other mercantilist habits still characterized the opening of new markets, which relied on institutional and political supports, often at both ends, and new forms of monopoly in long-distance trade. and although this was also the case 1 in south american sources, mcneile’s name is spelled in many ways: mcnelly, mcneil, mcneilly, m.niely, m.nielly, etc. 2 for cases of direct trade with foreigners in colonial times, see: pearce 2007. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 for the arms trade in south america, it nonetheless eroded mercantilist remnants. it was not the terrain for the baby steps of an impersonal market-driven free-trade capitalism, but it provided political momentum to growing links between south american spaces and north atlantic economies, and – what concerns us here – nurtured new opportunities and practices on a global scale. as we will see, a specific analysis of the weapons trade reveals further continuities and transformations in the hispanic american economies linked to war. tulio halperin donghi (1982) and clément thibaud (2006) have described the sharp turn towards militarization in south america during the crisis of the spanish monarchy, and halperin donghi and christopher platt (1972) shed light on south american attempts to produce weapons and gunpowder. however, these attempts partially failed,3 and as caitlin fitz (2016) and rafe blaufarb (2016) have pointed out, a significant part of the equipment for war came from abroad, while the greater availability of arms after the end of the napoleonic and anglo-american wars fostered the escalation of conflicts in south america. fitz and blaufarb have analyzed firearm imports to hispanic america based on documentation from the chief exporters: the united states, where sales of arms to hispanic american “rebels” were legal, and britain, where – notwithstanding the 60,000 arms shipped in 1817 alone under privy council license –, they were outlawed since 1814 due to a treaty with spain. south american documents allow us to adopt the point of view of the recipients, who had fewer reasons to conceal this trade. no further investigation was made of these after rafael demaria (1972, 239-243) noted the central position of some foreign arms traders in buenos aires, including mcneile and deforest. no existing document shows all the traffic, but combining many – solicitudes civiles y militares, documents from the arms factory, miscellaneous sources, 3 march 30, 1816, and passim, archivo general de la nación, buenos aires (hereafter agn), sala x (hereafter x), 9-1-4. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 the log of entradas marítimas etc. – allows us to cross-check and see details of the arms deliveries. mcneile, deforest, their partners, and us consul thomas halsey were the major arms importers, the principal deliverers of arms to the public arsenals, and among the most recurrent sellers to the state. as we will see, this favored their businesses expansion in new sectors and regions. conventional wisdom has it that in the 1810s selling weapons was a method of gaining entry into hispanic american markets. perhaps it also served to keep profits high in markets that, although not poor (llorca-jaña 2012), appeared saturated as soon as trade was “opened”. difficulties increased once the end of the napoleonic wars brought fresh competition – for example, in textiles – from continental europe (house of commons 1822, 227-234). merchants perceived the arms trade as beneficial to their general business. in 1816, mcneile, by then an important merchant in buenos aires, partner of the british appointed consul and spokesman for the community in his absence, wrote home: “without powder and arms [the year’s account] would cut but a sorry figure.”4 how did the arms trade, representing around 2-3% of imports’ value that year,5 work – at least in part – as a business’ lifeline for some? revolutionary governments allowed arms traders and other entrepreneurs in strategic sectors linked to the war, such as producers of salted meat (like mcneile) or consignees of privateering spoils (like deforest), to import and export specific goods duty-free, for example copper to asia, and gunpowder and arms from europe and the united states. sometimes this was a form of reward for their services, which had included selling weapons to states still under construction and with financial difficulties that needed allies positioned – as mcneile and 4 mcneile to richard staples, march 20, 1816, public record office of northern ireland, belfast (hereafter proni), staples papers (d 1567), f/1/5. 5 to make this estimate, we have considered average prices for firearms in buenos aires (see footnote 45) and the duty the merchants generally paid on non-arms imports. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 deforest – in political-economic networks that included decision-makers abroad. thus, a virtuous circle was created for these traders. merchants in buenos aires who traded the most arms were also importers of a wide range of goods and paid large shares of import duties – i.e., their trade prospered and contributed both to commercial expansion and financing war. financing war depended almost entirely on duties on foreign trade, and state’s suppliers and lenders sometimes speculated or presumed tolerance (halperin donghi 1982, 107; mazzeo 2006, 71). cash shortage increased in south american ports after independence and was behind difficulties such as those of the arms factories, but the war economy encouraged “substitute forms for metallic coin” crucial for trade and for financing war, as highlighted by emilio hansen (1916), halperin donghi, samuel amaral (1981), moutoukias, and others. especially after 1813, with the first forced loan in buenos aires, sovereign power recognized its debts by issuing pagarés (promissory notes), which the holder or beneficiary could use to cancel their debts to the government. the british rejected in principle forced loans, but some of them – like mcneile – lent voluntarily,6 and they in general profited from local bargaining mechanisms, which favored great traders and hurt smaller ones.7 beyond promissory notes, bills of exchange payable at the buenos aires custom house were also used to buy goods and services for many theatres of war, such as consignments of provisions and weapons to the army. treasury sometimes ordered the custom house to draw bills upon its debtors, the beneficiaries being creditors of the state, who used them to cancel 6 hispanic merchants traditionally negotiated their “mandatory” contributions, but the british case was slightly different as royal navy officials defended their refusal of forced loans on the basis of international law. see: captain bowles to croker, aug. 3, 1813, the national archives, kew uk (hereafter tna), records of the admiralty (hereafter adm), 1/1555; staples to tribunal del consulado, dec. 20, 1817, agn x 1-3-11; commodore bowles to pueyrredón, sept. 28, 1818, tna, adm 1/23; staples to hamilton, june 3, 1819, tna, foreign office (hereafter fo), 72/227. 7 depreciated pagarés could be bought from smallholders who needed to quickly recoup their capital or were unable to use them to pay custom debts (moutoukias 2018; moutoukias and ’t hart 2021). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 their debts to the state (moutoukias and ’t hart 2021). for example, an 1816 payment to mcneile for military supplies worth 33,564 was ordered in bills “contra los deudores de la aduana” (drawn upon customs’ debtors), 14,400 to be considered both “en favor y contra” (in his favor and upon) him.8 the custom house drew bills upon its debtors worth 33,564 pesos and mcneile cancelled custom debts for 14,400 pesos – a considerable payment.9 therefore, although they seldom received cash, merchants were interested in selling arms to these fledgling states. they negotiated prices from an advantageous position, i.e., in a war context, but success or failure in selling well depended on many factors, including the value of the arms traders’ political connections. complaints about cost/quality ratio were recurrent, but governments accepted inflated prices for arms and vessels (e.g., platt 1972, 48) precisely because merchants accepted the forms of payment the governments imposed. the governments paid (duty-free imported) arms mostly in bills – and in privileges like permits to extract silver, as in mcneile’s case.10 arms traders used these bills to pay their custom duties on their other, diverse imports. to close the circle, merchants preferred paying duties with paper (promissory notes and bills), instead of metallic coin. in the next sections, we will reconstruct mcneile’s and deforest’s wartime affairs and networks, from their bases in buenos aires, to their dealings in chile, peru, mexico, and beyond. these micro-histories illustrate the impact their arms trade had on the modification of wider, even global, commercial circuits, and how their personal and political connections worked as linchpins of transformations. merchants with roots in such trade were positioned to become both vectors of change and guarantors of continuity in the storm. the analysis of the 8 april 18, 1816, agn x 9-2-4. and other cases that year. 9 nos. 835 and 839, agn, sala iii (hereafter iii), 38-3-12; mcneile’s payment in agn iii 38-3-13. 10 april 18, 1816, agn x 9-2-4. pagarés were also used, e.g., agn x 8-9-5. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 arms trade also allows us to explore early involvement of transnational merchant and financial networks in the war of independence, and how these networks permitted independentists to access international credit – a point generally addressed for the 1820s. 2. arms suppliers, fiscal strategies, and the dawn of a new trade the breakup of the spanish american empire was like an earthquake, and its effects were felt far and wide. in the tempest of the napoleonic wars, the end of spanish rule meant the collapse of an enormous structure, and the crash struck the old world, accelerating the end of old monopolies and leading to reconfigurations of commerce. new actors, new rules, and new geographies of commercial routes emerged. the winds of political change blew through buenos aires, which after the 1810 revolution became the safest hispanic american port open to direct foreign trade and channeled this energy into exporting liberation campaigns. from 1817 on, global merchants expanded their activity in chile, almost on libertador san martín’s coattails, using the arms trade as an entry point. alliances with british and us traders contributed to valparaíso’s secure affirmation as the principal south american port in the pacific. loyalist ports like callao were sporadically opened to neutrals’ trade as well, chiefly in order to receive weapons, but this increased political instability undermining benefits (marks 2007). revolutionary upheaval sealed the decline of acapulco, the historical spanish port for asia. chile’s liberation was thus key in linking international trade circuits between hemispheres. it razed the shaky barrier between the atlantic and the pacific – the spanish “monopoly” – laying down an open route for foreign trade. the arms trade contributed to foster, as we will see, direct exchanges between south america and asia, and with america’s pacific coast as far as california, thus dynamizing britain’s and the united states’ trade along trajectories for their http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 imperial expansion. chile’s mineral market withstood international speculation on hispanic american mines and chile became a major exporter of copper, first to asia and later to britain and the united states. according to the british consul, between 1817 and 1824, two-thirds of chilean copper production was exported to asia on calcutta country ships (mayo 2001, 368) – i.e., british ships active in inter-asian trade –, not including what us ships transported to canton.11 all this had global implications. buenos aires customs registers are filled with eminent names of hispanic traders (lezica, sarratea, ugarte, etc.): their ongoing vitality is not called into question here. yet, british merchants paid the most duties. from 1813 (when the “national” consignee requirement was eliminated) till 1817, they paid an average of 60% of all duties on imports by sea. one-third of that total came from just three traders: mcneile, george dickson, and james brittain (galmarini 2000, 137-138). the first two were partners in a firm. vital networks of local businesses lay behind the duties foreign merchants paid. local merchants needed foreign flags’ protection, as well as foreign ships and networks, to continue long-distance trade after the break with spain and its global empire. they especially exploited british and us neutrality in the independence wars and their determined defense of trade. the inequality of relations with great powers and their economic spaces and actors were largely due to political-military circumstances. foreign merchants often presented themselves as politically influential and provided practical aid to the independentists, especially if they perceived their political patrons at home unofficially approved their initiative. in their attempts to obtain 11 between 1815 and 1819 us copper exports from the americas to canton increased almost fourfold, fueling british fears for their own copper business (house of commons 1821, 181-182). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 support from their governments, they painted gloomy pictures of rival or enemy influence – exploiting fears of losing geopolitical advantages (blaufarb 2007). the analyzed merchants prospered in buenos aires, especially between 1814, when the revolutionary government equipped its first fleet, and 1816-1817, when it was preparing and realizing chile’s liberation. buenos aires’ libros mayores y manuales de la aduana provide a picture (albeit still concealing important elements) of which merchants paid more custom duties and how. these traders were mcneile, brittain, and dickson in 1814; and mcneile, deforest, and brittain in 1816.12 in 1814 the custom house drew bills covering the government’s “military expenses” in favor of various individuals. halperin donghi (1982, 103) underlined that british merchants were predominant among them, and that mcneile received the most, but that it was almost impossible to establish why. in 1814 british traders began the large sales of vessels and weapons to the state, receiving bills in their favor usable to pay custom debts.13 perhaps herein lies the origin of some payments. it has been argued that the first forced loan answered juan larrea’s project for a fleet to attack loyalist montevideo. as contemporaries noted, british merchants profited greatly from the sale of the necessary vessels and military supplies at inflated prices.14 larrea was the economic mastermind of several buenos aires governments, and a business ally of both mcneile and deforest, to whom he owed important favors.15 documentation reveals that mcneile played a 12 agn iii 38-3-1, agn iii 38-3-2, agn iii 38-3-3, agn iii 38-3-12, agn iii 38-3-13. 13 e.g., “david price” and “mcneile,” agn x 8-9-5; see also, agn iii 38-3-1, agn iii 38-3-2, agn iii 38-3-3 (dickson 16,727 and mcneile 12,000 pesos “por gastos militares de marina”). 14 “confesión de guillermo white” and passim, agn x 22-1-1. a recent exception to a certain historiographical silence on the british role in this project is ternavasio (2021, 56). 15 on larrea as “friend” of the british, see tagart 1832, 265-266 (consider errors in names’ transcription). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 key role in these commercial and financial operations, in alliance with other merchants like david price, and even sold a vessel belonging to the british consul’s family firm, which became the expedition’s flagship.16 since us merchants faced difficulties deriving from britain’s reinforced maritime control of the river plate during the second phase of the 1812 angloamerican war (besseghini 2020a), deforest almost suspended his activities. but thanks to larrea, in late 1814 he was able to take advantage of the liquidation of the fleet and booty, thus consolidating his position in buenos aires (keen 1970, 97). although after a political reverse larrea was condemned for damage to the public purse, his involvement of foreign merchants in an operation crucial to buenos aires’ security proved beneficial. for one thing, it secured tacit consent from the british captain in the river plate.17 mcneile and deforest then founded new alliances with josé de san martín and juan martín de pueyrredón, respectively, becoming principal arms’ suppliers. political connections and cooperation were crucial for their success. figures 1 and 2 show mcneile’s and deforest’s position in the buenos aires’ import trade, as related to the number of ships they received and to the position of the different national mercantile communities before and after the 1815 political upheaval that largely replaced the revolution’s ruling group. after the end of the european and anglo-american wars in 1815, neutral foreign merchants, particularly navy-protected british and americans active on the cape horn route, rose to the top of the south american import trade. they adapted to the market, including that of firearms, and were allowed great flexibility vis-a-vis custom houses. 16 “deposición de david price” and passim, agn x 22-1-1; feb. 15, 1814, agn x 36-5-1; belfast newsletter, oct. 1, 1813. 17 graham and humphreys 1962, 132 and passim. captain bowles brought to the british treasury exceptional quantities of coins and bullion that year: tna, national audit office (ao), 1/7/13. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 figure 1. consignees who received at least two ships in buenos aires, 1814 and 1816 source: the author’s elaborations based on agn x 36-5-1. in 1816, the sovereign power in buenos aires paid “arms, powder, flints and war supplies” in bills worth 467,209 pesos in favor of ten individuals, among whom seven were foreign merchants and three were mcneile, dickson and deforest; and 77,028 pesos for “arms and war supplies” to mcneile, deforest, halsey and hugh matison.18 crossing this kind of information with other like that provided earlier may reinforce our interpretation that a significant part of mcneile’s and deforest’s customs debt payments was connected to weapons sales, i.e., to bills derived in their favor payable at the custom house.19 availability of notes and bills to pay 18 the ten were: mcneile, deforest, dickson, brittain, juan josé real, thomas newton, baltazar jiménez, manuel pinto, halsey and william miller, see: “estado […] ministros generales de hacienda”, 1816, archivo histórico de la provincia de buenos aires, tribunal de cuentas, legajo de gastos 1017. 19 these custom payments were worth about 70,000 pesos in 1816, in both cases, see: agn iii 38-3-13. many bills in mcneile’s favor are mentioned also in the 1816 manual custom log, agn iii 38-3-12. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 custom duties allowed these merchants to preserve their metallic coin for further commercial and financial operations, in other regions as well, and probably with greater ease than other traders. figure 2. ships consigned to each national group, 1814 and 181620 source: the author’s elaborations based on agn x 36-5-1. at the end of 1816, after writing to his partners that business would have been bad had it not been for arms, mcneile returned to london, continuing to trade in south america through mcneile, dickson & co. of buenos aires, and mcneile, price & co. in chile. he maintained relations with san martín and his envoys in england, providing them with many services. one of his partners later estimated that his south american business earned mcneile a capital of £60,000 (about 270,000 pesos).21 deforest had by then established a partnership with patricio lynch, friend and relative of supreme director pueyrredón, and johann zimmermann, us vice-consul from 1819 and later hamburg consul in buenos aires.22 deforest returned to the united states as consul-general for the united provinces of the river plate in 1818. he received a settlement worth 101,952 20 the word “hispanic” identifies the merchants from the hispanic world who were active in buenos aires. 21 staples to planta, dec. 6, 1825, tna fo 6/10. 22 patricio lynch managed deforest’s interests for a 30% of profits. various houses connecting deforest with the lynchs were established (körner 1966, 15). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 pesos (about £22,600) from his partners but continued doing business in south america through them (körner 1966; keen 1970). zimmermann would dissolve his firm with lynch in 1821, after pueyrredón’s fall. immediately after the arrival of san martín in chile, deforest’s agent estanislao lynch and mcneile’s partner richard price – brothers, respectively, of the abovementioned patricio lynch and david price –, emerged as central to the arms trade in chile.23 ventures of mcneile’s british group and the us-argentine one promoted by deforest went beyond weapons, and engaged in other politically strategic initiatives, such as financing and/or facilitating quasidiplomatic missions, privateering, mining investments, bullion and coins exports, and loans, which permitted governments to buy further military supplies. 3. two global merchants in buenos aires: the beginnings let us step back to analyze deforest and mcneile’s early connections, political networks, and activities, which help explain their position as arms traders and as transatlantic mediators between interests, as well as their rise as great merchants. david deforest was born in 1774, in what is today shelton, connecticut, son of estate owners benjamin and mehitable curtis. his first ill-fated affairs in the west indies led him to embark on a ship to china in the late 1790s, although his voyage came to an end in buenos aires.24 he was able to take advantage of the opportunities offered by neutral commerce, an exceptional measure motivated by british attacks on spanish ships during spain’s alliance with france, which gave us merchants a carrying trade involving both spanish america and european colonies in asia. by 1805, deforest had stabilized his business between buenos aires, cuba, 23 in 1821 they also were the main debtors to the chilean customs: feb. 10, 1821, archivo nacional de chile, santiago (hereafter anc) contaduría mayor, vol. 2530. 24 on information on trans-pacific trade in deforest’s journal (1801), see: silva and tejerina 1991. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 the united states, and england, thanks to his family connections and alliances with josé acebal in cuba, francisco de ugarte in buenos aires, dunham & lord in boston, and thomas wilson in england. this is the same wilson famous for passing information on river plate to british captain home popham on the eve of his brief conquest of buenos aires in 1806. deforest attempted to have himself named us consul to buenos aires, but the continuation of neutral commerce was by then uncertain.25 at the time of the independentist expedition to venezuela of francisco de miranda (who with popham in 1804 had submitted a plan to liberate south america to the british government), deforest met with president jefferson, who questioned him about south america. it seems that deforest was not enthusiastic about miranda’s plans: should the expedition succeed, he wrote to wilson, venezuela would open its ports to britain, wrecking us carrying trade. deforest returned to buenos aires with a cargo of slaves. he witnessed the failure of the british invasions as guest of benito rivadavia, father of future president bernardino. deforest then settled as a commissions merchant, acting through juan pedro varangot, a friend of the antibritish resistance hero and now viceroy, jacques de liniers (keen 1970). john mcneile was born in 1785 to alexander, a landowner of county antrim and friend of the greatest west indies merchant in belfast, hugh montgomery.26 alexander mcneile was also a land agent for mp john staples, who had family ties to both arthur wellesley (later duke of wellington) and viscount castlereagh, the most prominent political figure of the day. one of staples’s sons, richard, was montgomery’s son-in-law. together they founded montgomery, staples & co., which specialized in trade with buenos aires. the firm was preparing the departure of its first commercial ship to south america as the british navy was conveying the 25 deforest made further attempts in 1807 and 1809. 26 a founder of the northern banking partnership, of which john mcneile became a director. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 portuguese royal family to brazil. agents for this venture were the youngest son of john staples, robert, and john mcneile. the firm benefitted from liniers’ tolerance of contraband in buenos aires, one consequence of a shift in the alliances uniting britain and the hispanic world against napoleon. mcneile started exporting tallow, cochineal, quinine, and cotton from brazil, while he sold british manufactures, including weapons, in buenos aires.27 meanwhile, deforest was an informer of the us consul in rio de janeiro and worried about what seemed british attempts to take control of independentist impulses. the new viceroy cisneros temporarily legalized neutral and allied trade on november 6, 1809.28 deforest’s consignee was then larrea. deforest was expelled in december though, together with other foreigners. the british avoided expulsion thanks to mediation by their representatives and the navy (british warships were by now a permanent fixture), until the may revolution removed the expulsion threat (besseghini 2021). as a member of the junta, larrea supported staples and mcneile’s saladero (salted meat plant). the firm supplied the local military and had agreements to stock the british navy.29 old-spanish fiscal exemptions for saladeros were later extended to mcneile, thanks to justo pastor lynch, customs functionary of irish descent and father of deforest’s future partners.30 in sum, before enlarging their arms business, both mcneile and deforest were already part of transatlantic trading and political networks, and both had valuable allies in buenos aires. 27 belfast newsletter, aug. 25 and 29, sept 19, 1809; march 15, 1810, agn, catalogo archivo de gobierno, aduanas. 28 the first ship to enter the port under the new regulation was consigned to deforest’s partner by british merchant henry glover of rio de janeiro, whose leeds firm had ties to the united states. 29 staples to decourcy, jan. 25, 1810, proni d1567/f/1/5; “staples”, agn x 8-9-5. 30 agn x 41-10-7. shortly before, mcneile had been on the verge of selling the saladero. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 4. missions to buy arms in political grey areas and the war of 1812 in early 1808, when spain was still allied with france, a british expedition in support of hispanic american independence had been prepared by arthur wellesley, later duke of wellington. but after the july 1808 overturning of alliances, wellesley led his forces to assist in the liberation of spain and portugal from french occupation. if the french won in spain, london would support the separation of the american territories, but the outcome of the peninsular war was still uncertain. certain, however, was british interest in obtaining spanish reales de a ocho, the global means of payment. to pressure spain into formally opening hispanic america to british trade, london asked cadiz to recognize mcneile’s partner, robert staples, as consul in buenos aires (llorca-jaña 2009; besseghini 2020a). meanwhile, south american juntas asked london for arms, but for defense against france, not spain. envoys had recourse to private trade which, at that time, was not yet illegal. deforest, then in london, negotiated an arms purchase for the buenos aires envoy, who received unofficial help from the british government (whitaker 1964, 75).31 the united states remained neutral in the liberation struggles of both hispanic america and spain, and sought to take advantage of the situation. secretary of state monroe informed deforest, on his return to the united states, of the intention to name a french merchant as consul to río de la plata.32 william gilchrist miller, agent of deforest, had already been chosen as vice-consul in buenos aires, and although deforest’s correspondence with a merchant later 31 deforest bought weapons from graham, riggs & co. their agent, samuel gardiner, was already active in selling arms to buenos aires. another mission to buy arms was entrusted to john curtis. 32 louis goddefroy, deforest’s agent in montevideo. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 active in exporting european arms to south america reveals that deforest contributed to alter the plan to name a frenchman,33 it was thomas halsey who received the appointment as consul. vice-consul miller had given assistance to pedro de aguirre and diego saavedra’s34 mission to the united states in 1811, placing a sum at the envoys’ disposal. they had travelled from the river plate on a ship consigned to john jacob astor, the most active merchant in trade with china, whose agent in buenos aires was deforest. deforest opened his us networks to the pair,35 thus starting his business relation with aguirre. aguirre and saavedra met informally with monroe and subsequently wrote to him alluding to a “favorable disposition toward our cause” by the us government and people (bemis 1939, 24). according to aguirre, stephen girard (a leading east india merchant) had obtained authorization to export 18,000 muskets36 to buenos aires (demaria 1972, 232-233), but no proof exists that monroe answered girard’s letter on point. it seems that aguirre bought 1,000 muskets and 370,000 flints, thanks to the good offices of miller & van beuren (whitaker 1964, 68-69).37 miller later wrote to president madison that the mission had contributed to an increase in us influence (manning 1925, 326). during the anglo-american war of 1812, mcneile’s partner, staples, passed information to foreign secretary castlereagh about far greater arms deliveries for the aguirre-saavedra mission: 4500 muskets, 2000 pistols, 1000 swords and 100,000 flints, with a second shipment 33 deforest to william crammond, nov. 24, 1811, yale university library, new haven, united states (hereafter yul), deforest family papers, letterbooks vol. 5. see also: deforest to senator varnum, nov. 19, 1811, and deforest to william todd, nov. 23, 1811, ibid. french arms were mostly sold in south america through the united states. 34 son of former junta president, cornelio saavedra. 35 deforest to daniel sheldon, nov 8, 1811; deforest to larrea, nov. 10, 1811; deforest to pedro lópez and josé cabrera (i.e., saavedra and aguirre), nov. 8 and 24, 1811, ibid. 36 smoothbore muskets (the british “brown bess”, the french “charleville”) were the most used in the independence wars. the word rifle, occasionally present in archives, indicates rifled-barrel guns. 37 during the aguirre-saavedra mission, deforest was in correspondence with john miller, partner of abraham van beuren (e.g., nov. 20, 1811, ibid). one john miller in south america was brother of us vice-consul miller: dixon to croker, july 12, 1813, tna adm 1/21. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 en route.38 there was talk of sending staples back to south america, after the failed recognition of his role as consul by both spain and buenos aires had induced him to return to london (llorca-jaña 2009; besseghini 2020a). some merchants suggested counteracting us influence, acquired through the arms trade, with a british government agent in buenos aires. staples was thus sent back, not formally as the consul, but as agent of the treasury to buy coins and bullion, an undertaking justifiable with spain by the necessity of financing the war against napoleon. staples’ mission also allowed merchants to conduct remittances to britain, avoiding the risks of the naval war underway with the united states. in exchange for the coins and bullion sold to staples, they received bills payable in england with a premium. in this way, the british had an informal consul who collaborated with the foreign office and acted as informal advisor to buenos aires (hanon 2005, 171). to maintain equal distance with all the merchants, staples withdrew from business with mcneile, who remained agent for staples’s brother. the connection between the two was still common knowledge in buenos aires, as were staples’s family ties to prominent british political figures.39 in 1813-1816, mcneile was commission agent for several firms. he was apoderado general for greg, lindsay & co. of samuel greg, a cotton manufacturer originally from belfast who dealt in military supplies during the napoleonic wars and had great quantities to sell afterwards.40 mcneile’s belfast partner, montgomery, had made his fortune in collaboration with the greg family. this connection may be a lead worth looking into to identify mcneile’s 38 staples to castlereagh, aug. 7, 1812, tna fo 72/157. 39 ff. 53-62v, archives du ministère des affaires étrangères, la courneuve, argentine 1. 40 1815, “obligación: thomas stevenson, á los señores sam.l greg y compañia, y por estos a su apoderado don juan mc neile,” agn, protocolos de escribanos, registro 2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 partners in britain in affairs linked to the independence wars, which the 1814 prohibition against supplying the “rebels” partly conceals. 5. mcneile and deforest’s war business in buenos aires commerce in arms from britain was well underway at that point, despite the bans. between 1815 and 1825, 700,000 muskets were exported to the americas, a number that includes reexportations from the united states, brazil, and the west indies (blaufarb 2016, 106-110). moreover, for example, buenos aires’ envoy to london, manuel de sarratea, bought large quantities of flintlocks – the part of the weapon requiring the most technical skill and the easiest to conceal –, which are overlooked in such estimates.41 mcneile and dickson contributed to finance his mission and were repaid at customs.42 figure 3. arms consignments in buenos aires in 1816-1817 source: the author’s elaboration based on agn x 36-5-1.43 41 sarratea al gobierno sobre gastos ordinarios extraordinarios y secretos, agn x 2-1-1. muskets were manufactured in buenos aires using imported flintlocks (demaria 1972, 231). by government order, the arms factory chiefly assembled weapons, instead of fabricating them from scratch: may 8, 1816, and passim, agn x 9-1-4. 42 sarratea to garcía, april 28, 1814, agn x 2-1-1; hullett to dickson, mcneile, feb. 26, 1816, agn x 1-2-12. 43 in january 1817 halsey received 6 crates with 122 carbines that we have counted as muskets. in addition to the weapons in the graph, an unspecified cargo of muskets was consigned to halsey (feb. 19) and “a few muskets” to françois leloir, later the french informal consul (may 8). a more detailed log for 1816-1817 gives roughly the same information. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 based on explicit references to arms crates in the entradas marítimas log, figure 3 shows which traders received the most in buenos aires during the effort to liberate chile. these were mcneile, deforest, their associates, and us consul halsey.44 a crate generally contained 20 muskets, and if we consider their average price was 12 pesos each, the estimated value of the most consistent cargo for dickson and mcneile in 1816 corresponds to half of the value of their custom duty payments in general that year, and the estimated value of mcneile and deforest’s documented consignments to the arsenal to between 1/4 and 1/3 of their custom payments.45 we can also estimate that dickson and mcneile received around 9,500 firearms (muskets and pistols) between 1815 and 1818, a substantial amount if we consider that most of the battles during the wars of independence were fought by a few thousand men. this data reflects the portion of arms traffic that passed through ports such as baltimore, philadelphia, antwerp, and rio de janeiro: only one cargo of firearms arriving directly from britain is explicitly mentioned.46 but this does not mean that imports from britain were few. the number of firearms imported by mcneile and his partners was probably greater than that recorded. expressions such as “250 cajas, se ignora el contenido” (crates, content unknown) were quite common. in 1815, when more than 15% of the ships arriving in port were received by dickson and mcneile, entries of this type often referred to ships from britain consigned to 44 on payment of halsey’s arms deliveries, agn x 8-7-4. 45 agn x 9-1-4, fábrica de armas. dickson and mcneile delivered around 20% of muskets entering the arsenal, plus 2000 delivered by one of their supercargoes. some muskets mcneile consigned were considered poor quality and valued at 10 pesos each: nov. 15, 1816, ibid. a musket’s price could vary from 6 to 19 pesos (demaria 1972, 235). the average price for sabers was 9 pesos, 8 for pistols. 46 a second cargo of “arms” from london probably included muskets. the same day (june 6, 1816), dickson indeed consigned 903 muskets to the arsenal, agn x 9-1-4 http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 them.47 one 1818 document mentions containers transported for mcneile from britain, not their content, but a note on the back specifies some crates contained weapons.48 de forest also received unmarked arms crates (demaria 1972, 238-239), a measure against spanish seizures. as for deforest’s group, based on similar estimates we know that it received approximately 13,000 firearms in three years. for example, in september 1815, deforest imported 3,000 muskets from new york; in june 1816, 1,777 muskets he had sold to the state were delivered to the arsenal.49 between august and september 1817, patricio lynch received hundreds of muskets from baltimore and philadelphia. in november 1817, the brigantine ellen, consigned to lynch, brought 84 crates of muskets and others of pistols and sabers. in december, 190 crates of muskets were consigned to him. in february 1818, lynch, zimmermann & co. received on the columbus (later sold to the chilean navy) 47 crates of muskets.50 taking into account the numbers gleaned above from the entradas marítimas register, imperfect as they are, we arrive at a total of approximately 22,500 firearms delivered by ship to buenos aires to deforest’s and mcneile’s groups alone in three years’ time. according to fitz (2016), the united states exported 150,000 firearms to revolutionary hispanic america over fifteen years. in 1815, deforest proposed outfitting corsairs to sail under the buenos aires’ flag to merchants such as astor, george crowninshield, thomas tenant, and the firm of d’arcy & didier, represented in buenos aires by deforest himself.51 hundreds of us sailors attacked the 47 agn x 36-5-1. 48 nov. 27, 1818, anc contaduría mayor, vol. 2530. 49 june 6, 1816, agn x 9-1-4. 50 agn x 36-5-1. 51 henry didier was deforest’s apoderado in the united states from 1817 on, when he substituted john gooding: 1817, agn, protocolos de escribanos, registro 2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 spanish in ships owned by us merchants for 50% of the prizes. the patents belonged to buenos aires citizens, of whom deforest and his associates were the most active.52 these armadores earned a 10% commission on all prizes. the buenos aires commercial house of deforest often bought prizes auctioned off by deforest, speculating with them. the capture of the ship tritón of the royal philippine company earned deforest and his associates a 640,000 pesos profit (keen 1970, 118). only one captured ship was consigned to mcneile.53 british direct participation in privateering, at odds with london and navy interests, was effectively discouraged.54 perhaps on deforest’s suggestion (keen 1970, 124), pueyrredón’s government accused consul halsey – deforest’s rival in both the arms trade and corsair activity – of involvement in privateering for the oriental provinces, considered rebels by the united provinces. it requested that the united states recall halsey, who had appointed mcneile’s partners among his agents.55 in 1818, deforest was named buenos aires’ consul-general to the united states, and was instructed to request us recognition of the united provinces’ independence, and issue privateering patents (keen 1970, 135). us laws forbade privateering by us citizens but deforest returned to his home country as an “argentine” citizen, and a foreign consul. deforest was unofficially received and created a favorable climate toward buenos aires (whitaker 1964, 258). but although henry clay’s party supported him, secretary adams 52 the entradas marítimas register noted several captured spanish ships consigned to deforest, lynch, and zimmermann. 53 nov. 8, 1816, agn x 36-5-1. also involved was us captain james chaytor who, after delivering a cargo of arms to mcneile immediately bought by the “state” (dec. 11, 1816, agn x 9-1-4), accepted a commission as privateer. 54 commodore bowles obtained limitations on privateering activities from buenos aires in 1817 and from chile in 1818. 55 march 18, and nov. 3, 1818, agn, protocolos de escribanos, registro 3. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 wanted to delay recognition, and used deforest’s corsair activities to do so. deforest was also embroiled in bonapartist exiles’ plans for texas (ocampo 2009, 276-278 and 290-291). once recognition arrived, deforest was replaced. writing to the us secretary of the treasury, he claimed as a patriotic merit having promoted several us-argentine trading houses in south america (keen 1970, 121). 6. the arms trade on the pacific coast: a bridge to asia when general san martín crossed the andes, fresh business opportunities for flexible arms importers emerged in chile, and from 1817 on, buenos aires’ intermediation became gradually less important to reach the army preparing to liberate peru. at the end of 1816 josé miguel de carrera – who in 1814 had departed for the united states in search of allies, with letters of introduction by deforest to astor and other merchants – left the united states with three frigates loaded with military supplies and a group of adventurers with the idea of liberating chile, but san martín beat them to it. one of carrera’s companions on the trip, us citizen henry hill, established the chilean branch of deforest’s empire in 1817 along with estanislao lynch. lynch, hill & co. was the most important firm tied to the united states in chile. hill was introduced to san martín in buenos aires by deforest himself and became one of the main weapons suppliers to chile. the cargo of weapons, shipped on the savage by the d’arcy & didier firm and delivered to hill, was sold to the government for 96,000 pesos (neumann 1947, 216; körner 1966), launching a prosperous future for the firm’s arms trade in chile (e.g., betancourt-castillo 2020, 235; méndez-beltrán 2021, 164-165). the firm was also involved in privateering. hill encouraged us sailors to participate, something which almost cost him his post as consul in valparaíso (pereira-salas 1940). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 hill and lynch imported us goods and arms and exported copper – which was sometimes used to pay arms – to india and china through the intermediation of the british firm alexander & co. of calcutta (pereira-salas 1940, 21), founder of the hindustan bank and active in the opium trade, as well as an intermediary in the trade with asia to firms connected to mcneile.56 the irish network was crucial: two of staples’ siblings had married into the alexander family. with the expansion to asia, their business became truly global. figure 4. map of the analyzed networks source: the author’s elaboration, on the planisphere published in rees, abraham. 1820. the ciclopaedia, or universal dictionary of arts, sciences and literature. plates. vol. 6: ancient and modern atlas. london: longman. back from buenos aires, staples was called to give information before a parliamentary committee on trade between south america and india.57 he claimed that us presence on this trade route was negligible. robert pizey, from the mcneile firm, clarified that, beyond the 56 connections of the us-argentine group with the us firm perkins in canton – active in the opium trade – can be inferred from documentation from the 1820s: e.g., “taccuino” (notebook) i, doc. 6b, archivio storico di casale monferrato, italy (hereafter ascm), fondo famiglia vidua di conzano, viaggi di carlo vidua (hereafter fv). 57 mcneile, dickson & co. received their first cargo from bengal in buenos aires on dec. 21, 1817 (agn x 365-1). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 dominant calcutta country ships, south american vessels were present (house of commons 1821, 140-141). us merchants often traded through intermediaries from british india but british capital made use of us ships in direct commerce between south america and canton. as time and trade went on, residual mercantilist barriers continued to break down. british merchants used their politicians’ fear of us competition as an argument for eliminating east india company restrictions. licenses issued in gibraltar were used for commerce between india and south america with ships under the size permitted by e.i.c. norms (house of commons 1821, 94). british merchants in buenos aires, including mcneile’s partners, organized shipments to canton on us ships, passing through chile and peru and returning through the cape of good hope.58 in 1821, staples went to india, where the family of his british wife-tobe, eliza russell, had made a fortune with opium.59 anglo-american alliances were structural in the asian markets (fichter 2010). the intermediation of the alexanders and other merchants connected to mcneile, like stewart & co.,60 in hill’s affairs from chile hints at a synergy between the two groups, despite their geopolitical rivalry in business related to the ongoing liberation campaigns. mcneile enabled the purchase from london of several ships for the chilean fleet, while similar attempts did not meet with the same success in the united states (whitaker 1964, 232-236). mcneile’s partner obtained a permit to export 10,500 quintals of copper to calcutta as partial payment for the east indiaman cumberland (méndez-beltrán 2004, 187), sold to the chilean 58 e.g., the asiatic journal, march 1, 1830, with reference to 1822-1823. 59 this scottish family is not the same as that of the firm russell & co. of canton. one of eliza’s in-laws was wilhelm drusina, rothschild’s agent in mexico. on links between drusina, rothschild, and huth & co., see: llorca-jaña 2014, 478 and 486. 60 “poder general: don guillermo stewart á juan mcneile,” jan. 7, 1814; “poder especial: los ss. stuart, maccall y comp.a á favor de mr. juan mc neile y comp.a,”1820, agn, protocolos de escribanos, registro 4. the document is signed william stewart. stewart & co. sold chilean wheat for hill. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 navy, which also carried military supplies.61 the same happened with other cargos of weapons to san martín. one arrived aboard the east indiaman lord lyndock and contained 10 cannons, 3 mortars, 10 cannon carriages, 1,584 cannon balls, 76 barrels of flints, muskets, and swords. this made hill worry that the chilean government would no longer need his arms deliveries.62 mcneile’s associates, dickson and price, also facilitated the business of samuel haigh, who sold a cargo of weapons on the eve of the battle of maipú (haigh 1829). in 1820, mcneile, price & co. consigned arms and naval equipment to josé riglos,63 who followed san martín to peru. mcneile, price & co. therefore exported duty-free64 copper from valparaíso to calcutta: the price of copper in london was around 17 dollars per quintal, while in calcutta it was 23-24 dollars. during the first half of 1819 alone, the firm exported more than 6,000 quintals of copper to calcutta on the ships rebecca and oak, which they had previously used to import military supplies. in 1821, after san martín’s liberation, both the rebecca and the lord lyndock arrived in peru from india.65 mcneile’s partner, price, participated in the establishment of the chilean compañía de calcuta, which exported copper to asia.66 these merchants, therefore, used the arms trade to enlarge their opportunities in direct trade between south america and asia, which strengthened their links with chiefly western houses 61 june 22, 1818, anc contaduría mayor, vol. 2537. 62 november 22, 1818, anc contaduría mayor, vol. 2530; lynch to hill, nov. 23, 1818, yul hill papers. 63 april 25, 1820, anc contaduría mayor, vol. 2533. 64 june 2, 1820, anc hacienda, vol. 57. 65 josé de arismendi of the philippine company escaped to manila aboard the rebecca (loaded with a cargo procured by mcneile’s agent), accompanied by spanish-irish trader eustace barron, who staples would later appoint his vice-consul in mexico (besseghini 2020b). 66 its agent in india was josé antonio herrera, future chilean consul in mexico. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 active in india and china. and silver and copper exports to asia financed a multilateral trade, not just imports of cotton, indigo and rice to south america. 7. arms trade, fiscal problems, and loans: first steps to new opportunities the practices described with relation to purchases of arms and war financing relied on international trade, which increased overall. however, governments’ difficulties in financing the war also increased. in buenos aires revenue from customs fell, as pueyrredón lamented: between 1809 and 1816, it had increased seven-fold (moutoukias 2018, 175, 179). and notwithstanding continuity in hispanic-foreign alliances,67 fiscal reforms and some privileges for local traders contributed to foreign merchants’ search of new opportunities. hill believed that the arms trade in buenos aires was suffering from the government’s growing “monetary necessities”, and predicted that the same would happen in chile. he hoped to soon transfer his affairs to lima: merchants who financed san martín were promised future fiscal exemptions and incentives in liberated peru (pereira-salas 1940). the need for international loans – often promoted by networks of the arms dealers themselves – turned disastrous for several countries in the context of the 1825 london financial crisis (marichal 1989) and encouraged mining speculation. there were many false starts before the new governments found access to major financial markets, and although initially arms dealers remained small-scale lenders, the british network contributed to pave the way towards this end. in buenos aires, staples helped to create the caja de fondos de sud américa – an unsuccessful attempt to resolve problems derived from the “monetization” of debts – transmitting a power, as requested by director pueyrredón, to “messrs. macaulay & babington” to receive funds in 67 after 1817 ambrosio lezica stands out in buenos aires custom logs, and his apoderado in liverpool was mcneile: jan. 7, 1817, agn, protocolos de escribanos, registro 2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 britain.68 it was a growth medium for the interests that would later support the baring loan, through the banco de descuentos, in which the riglos and lezicas favored the rise of stewart & co., all mcneile’s allies. price and mcneile continued lending money to chile and its envoys in london, and to use this credit to pay off custom debts.69 envoys received sums through hullett brothers, a firm with which mcneile and staples had a long-lasting synergy, and with which one of them later negotiated chile’s first international loan. however, both deforest’s and halsey’s projects to raise money for buenos aires in the united states failed. 1818 and 1820 saw the failure of other initiatives (one by the us consul-general) aimed at raising capital for chile, even though some us politicians sensed that influence gained through loans would prove strategic. 8. the expansion northward both british and us arms traders’ networks paved the way to the rise of future protagonists of hispanic american commerce and finance in peru and mexico. at the beginning of this process, british and us neutral presence on the pacific coast benefitted commerce between independent chile and loyalist peru, in spite of naval blockades. this was tolerated by chile not only because this trade was indispensable, but also because foreign arms traders had a great contractual power and room for maneuver in their trade, as sporadic attempts to prosecute them for trading with the loyalists showed. neutral traders who financed and equipped the independentists wielded patronage similar to that which great traders and lenders had practiced in the spanish system. the latter were now seeking protection by allying themselves with foreigners. mcneile, price 68 staples to hamilton, feb. 16, 1819, tna fo 72/227. 69 march 24, 1819, anc relaciones exteriores, vol. 387; anc hacienda, vol. 16. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 & co. was the agent for the british firm gibbs & sons, future kings of guano, and mcneile’s group was positioned to ease and protect, from chile, gibbs’ and their spanish partners’ business with loyalist peru, for example (besseghini 2020b). in 1822 mcneile withdrew from his south american companies. the chilean firm, under the names montgomery, price & co.70 and dickson, price & co., continued doing business connected to war in peru, in alliance with henry kendall, later british consul in peru (cavieres 1999, 171-172);71 and through samuel price (richard’s brother), who had arrived in loyalist lima as mcneile’s agent in 1820. price exported great quantities of silver, both before and after the arrival of the independentists, including for local partners, who either wanted to export capital to europe in anticipation of their exile, or to continue trading overseas in alliance with foreigners (besseghini 2020b).72 the arms trade fostered habitual trust and collaboration with independent governments in america that merchants exploited to enhance their position in other sectors, like loans connected to mining leases. dickson, price & co. would later back the chilean and peruvian mining association promoted by staples’s british partner, thomas kinder (both companies were heirs of mcneile’s activities). the initiative involved san martín’s envoy to london, james paroissien, and john barnard, at the center of the british community in chile. barnard represented another smaller circuit for the arms traffic and asian trade, which collaborated with mcneile’s and was linked to the brotherstons of liverpool, who in turn helped paroissien make 70 robert montgomery, nephew of hugh of belfast. 71 the kendall family was related by marriage to brittain. 72 moens to gibbs, jan. 16, july 19, 1821, london metropolitan archives (lma), antony gibbs & sons ltd. collection, private letter book from south american partners (clc/b/012/ms19867); archivo general de la nación, lima (hereafter agn lima), libros de cuentas, legajo 250, expediente 1212. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 contact with the best-politically-connected merchants.73 in 1822, paroissien contracted the first international loan to independent peru with kinder, which was decisive for the continuation of the war. the agent of the loan was to buy silver in lima through staples & co. in exchange for bills used to export capital to europe (kinder and everett 1824, 39; proctor 1825, 289). the use of bills to finance the loan allowed firms to pay for british merchandise with local paper. as for the us-argentine group, hill returned to the united states in 1820 and lynch moved to lima, where he was later the “argentine” consul. there he benefited from his position as financier and arms supplier to the independentists. in 1822-1823 he received ships from liverpool, baltimore, boston, new york, and providence, and exported spanish dollars on both british and us warships.74 hill, lynch and co. continued to exist until 1824. in 1825 lynch and william cochran named the barings and their agent john parish robertson – cochran’s partner in cochran, robertson & co – apoderados for rights to the mines of cerro de pasco.75 after the transition of the administration of the kinder loan to other merchants, robertson became the loan’s agent. staples & co. offered services for exporting capital from mexico, too.76 in october 1823 staples was appointed british consul at acapulco, but he was mainly active in mexico city. he founded the real del monte mining company with kinder, and his vice-consul in san blas, the spanish-irish merchant eustace barron (already active in peru and manila) was pivotal to trade 73 journal 1822, 20 sept., essex record office (ero), chelmsford, uk, paroissien papers 1807-1828 (d/dob), f1/12. on barnard see andrés baeza's work. barnard had arrived in chile during the patria vieja with a cargo of weapons from britain (ossa 2014, 63). barnard’s partner, john begg, was active up and down the pacific coast, as far as california. in lima he was apoderado of paroissien, who participated in their commercial endeavors in america and asia (e.g., “poder de diego paroissien a juan begg,” agn lima, protocolos notariales, vol. 37, 1820). james brotherston of liverpool was financial backer of begg’s initiatives and his brother-in-law. 74 agn lima, libros de cuentas, leg. 249, exp. 1210; agn lima, libros de cuentas, leg. 250, exp. 1212. 75 “poder: d.n guillermo cochran y otros [a] d. juan parish robertson y otros,” agn lima, protocolos notariales, vol. 41, 1825. 76 gazeta del gobierno de méxico, may 17, 1823; hervey to fillmore, jan 9, 1824, tna fo 204/3. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 and silver contraband from the pacific coast (mayo 2006).77 in 1824, staples and kinder promoted another politically strategic loan to mexico, but the operation generated controversy in england and the british government dismissed staples.78 as both staples’ and deforest’s case show, with the new states’ recognition, the value of political agents and brokers deeply involved in the wars of independence decreased. 9. concluding remarks the arms trade was carried out by politically well-connected foreign merchants, who played a creative role as mediators between very different parties. they sometimes enjoyed semidiplomatic status, even though some of them, like staples and deforest, lost it after independences were recognized. mcneile was linked to staples, british unofficial consul in buenos aires and later consul at acapulco. hill was us consul in valparaíso, zimmermann us vice-consul in buenos aires. deforest, lynch and dickson would be appointed, respectively, “argentine” consuls in the united states, peru, and england. mcneile, dickson, deforest, and hill returned to their own countries, but others, like price, did not. in this, as in all trade, families were decisive for business expansion. the prices and the lynches are examples – the latter also exemplifies how local merchants took advantage of their business ties to neutrals. commercial circuits in south america grew from some of their roots strategically placed in the arms trade. this trade produced microeconomic mechanisms that connected war and economic 77 already in the mid-1820s: “datas de tesorería 1825,” archivo general de la nación, mexico city (hereafter agnm), aduanas, san blas, caja 3126, exp. 27. the long war in peru favored chile in the pacific trade, and the rise of san blas and mazatlán in post-independent trade circuits (e.g. agnm, movimiento marítimo, vol. 1, exp. 3). in 1823, for example, coins were exported from mazatlán aboard the isabella robertson, which had set sail from india and later from chile for winter, brittain & waddington. the supercargo was an agent of cochran & robertson. a ship bearing that same name was later active in india-canton trade (the author thanks ander permanyer for this information). on connections in india of the south american firms (involved in the arms trade) of winter, brittain and waddington, see: taccuini i and ii, ascm fv. 78 the morning chronicle, july 2, 1824; canning to hervey, july 20, 1824, tna fo 50/3. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 change. selling weapons to revolutionary countries was a good business opportunity for foreign neutral merchants, who in turn were politically interested in doing so, as arms were indispensable to gain independence and, therefore, to keep their trade firmly open. they were paid in varied ways that prompted their activities’ expansion, and they created opportunities for other merchants in synergy with the governments. they relied on some support from their home country, e.g., when exporting coin and bullion on warships, or when selling them to the british treasury agent – who was mcneile’s former partner – obtaining bills payable in england (manning 1925, 455; besseghini 2020a). and they privately created similar opportunities. such operations eased trade. for fifteen years, business linked to war represented a fairly stable basis from which to expand commercially. the arms trade served, in a sense, as fuel for commercial re-organization, which in turn further eroded remnants of mercantilism, as we have seen in the case of direct commerce between hispanic america and asia. but although foreigners were a driving force, they were not the only beneficiaries. the link between the arms trade in south america, the export of bullion and coins, and the asian trade has yet to be explored in full detail, including its association with the opium trade. but we know that major barriers to british and us intermediation between producers and consumers of copper and silver were toppled. as a consequence of their arms trade, which governments rewarded with permits and tolerance, key foreign merchants from the analyzed networks became leading exporters of copper and silver from the americas to india and china (where reales de a ocho were most sought-after).79 it would take immense work to find out the exact proportion of each format of silver – minted coins, bullion – exported, as well as their destinations. but it would be important to assess the global economic consequences of hispanic 79 until almost the end of the analyzed period, reales de a ocho were still produced, in peru and mexico. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 american independences, as alejandra irigoin has pointed out in her studies on the implications of the collapse of the peso standard after hispanic american independences on the silver-copper crisis in china (irigoin 2009; lin 2006).80 the arms trade gave a boost to the “globalization” of chilean copper as well – later managed by firms like huth & co., whose buenos aires agent was zimmermann (llorca-jaña 2014, 478).81 global merchants were able to take root in south america in an unstable political climate through the arms trade and other crucial services to the fledgling states. they were so indispensable that governments at home and abroad sometimes turned a blind eye to their business. the conjunction between major arms importers and global merchants whose south american business grew during the independence conflicts helps us understand both foreign merchants’ response to revolutions and their ability to seize opportunities, and to exploit their political-relational capital in a war context. war was key to them. although they created lasting networks and companies, both deforest and mcneile withdrew from a deeper involvement in south american affairs in early 1820s. foreign powers considered the embedded presence of their own merchants as capital to be used and defended, while spain was deprived of maneuvering room. london, for example, sought strong guarantees for british property in case of spanish attacks82 and in regions where there was only one “port of entry” – like buenos aires – this rendered spanish military intervention more difficult. the presence of foreign warships benefitted independentists because loyalists 80 the roughly two-fold increase of silver prices in copper coins. 81 copper exports to asia in early 1820s may have contributed to the initial chinese impression that the devaluation of its copper money was due to the increase of copper in circulation. only in 1829 was the chinese monetary crisis connected to silver exports. lin refutes the idea that copper circulation in china increased, since copper exports from japan were declining and mining production was in crisis, but it might be worth considering changes in copper imports from south america. for example, mcneile’s partner stated (house of commons 1821, 94) that both “specie and copper [were] the great means by which the chinese trade [was] carried on [and] procured in great abundance in south america for british manufactures.” 82 e.g., castlereagh to henry wellesley, march 9, 1815, tna fo 72/172. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 only partially opened commerce, and by capitalizing on the ambition of men like deforest and mcneile, independent governments were able to engage the interest of some great powers in their survival. acknowledgments: this study comes from research carried out in many libraries and archives that lasted several years, parts of which have been financed by institutions including the university of turin, the fondation maison des sciences de l’homme (paris) and the fondazione luigi einaudi (turin). the author would like to express her gratitude towards the numerous colleagues who read the various versions of this article during the years, including all the contributors to this special issue. a previous version of this paper has been presented in the conference of the latin american studies association (barcelona, may 2018), but the author discussed her ideas and findings in several international conferences, and she feels indebted to all who provided suggestions. the author is also deeply grateful to the anonymous reviewers and to the jesb personnel. her interest in the arms trade comes from her father, ermes besseghini (1955-2021), who 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doi:10.2307/2508416. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1163/9781684174386 https://doi.org/10.1093/ref:odnb/98243 https://doi.org/10.1017/s0007680514000403 https://doi.org/10.1353/tam.2001.0014 https://doi.org/10.1017/s021261092000004x https://doi.org/10.2307/2508416 volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 ocampo, emilio. 2009. the emperor’s last campaign: a napoleonic empire in america. tuscaloosa: university of alabama press. ossa, juan l. 2014. armies, politics and revolution: chile, 1808-1826. liverpool: liverpool university press. pearce, adrian j. 2007. british trade with spanish america, 1763-1808. liverpool: liverpool university press. pereira-salas, eugenio. 1940. henry hill: comerciante, vicecónsul y misionero. santiago de chile: imprenta universitaria. platt, d. christopher m. 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ayres and chile. london: james carpenter and son. house of commons. 1821. report [relative to the trade with the east indies and china,] from the select committee of the house of lords appointed to inquire into the means of extending and securing the foreign trade of the country, and to report to the house; together with the minutes of evidence taken in sessions 1820 and 1821, before the said committee: 11 april 1821. cambridge: proquest llc. house of commons. 1822. fourth report of the commissioners of inquiry into the collection and management of the revenue arising in ireland, reports of the commissioners. cambridge: proquest llc. kinder, thomas and everett, walker & co. 1824. a report of the trial of kinder versus everett and others: in the court of king’s bench, dec. 20, 1823, before lord chief justice abbott and a special jury. london: r. taylor for j. m. richardson. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 81-118, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.34043 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 manning, william r. 1925. diplomatic correspondence of the united states concerning the independence of latin american nations. vol. 1. new york: oxford university press. proctor, robert. 1825. narrative of a journey across the cordillera of the andes and of a residence in lima and other parts of peru in the years 1823 and 1824. london: hurst, robinson & co. tagart, edward. 1832. a memoir of the late captain peter heywood, r. n.: with extracts from his diaries and correspondence. london: effingham wilson. archives consulted archives du ministère des affaires étrangères, la courneuve, france archivio storico di casale monferrato, italy archivo general de la nación, buenos aires, argentina archivo general de la nación, lima, peru archivo general de la nación, mexico archivo histórico de la provincia de buenos aires, la plata, argentina archivo nacional de chile, santiago de chile essex record office, chelmsford, united kingdom london metropolitan archives, london, united kingdom public record office of northern ireland, belfast, united kingdom the national archives, kew, united kingdom yale university library, new haven, connecticut, united states this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 maria eugénia mata universidade nova de lisboa (portugal) https://orcid.org/0000-0003-0461-1338 organizational perspectives for stock exchanges in a fragile global world: forecasts and speculations abstract the new millennium crises have fueled the debate about free running markets management, in some parts of europe. this is having considerable consequences for corporations that need to raise funds to invest in job-creating facilities or in improving productivity necessary to compete with new producers from asia. increasing volumes of trade historically required rules and government regulation. in this article organizational theoretical frameworks are used to understand dynamism and change in financial operations, and in this line rules are here approached as progressive legal adjustments to good practice. historical evidence is the methodology used in this paper, to highlight significant changes in the conceptualization about the organizations that have to supply financial services, especially when external shocks affect smes and their needs. keywords: stock exchanges, capital markets, business funding, organizational aspects perspectivas organizativas para las bolsas de valores en un mundo global frágil: pronósticos y especulaciones resumen las crisis del nuevo milenio han alimentado el debate sobre la gestión de los mercados de funcionamiento libre en algunas partes de europa. esto está teniendo consecuencias considerables para las compañías que necesitan recaudar fondos para invertir en instalaciones que creen empleo o en mejorar la productividad necesaria para competir con los nuevos productores de asia. históricamente, los volúmenes crecientes de comercio requerían reglas y regulación gubernamental. en este artículo se utilizan marcos teóricos organizacionales para comprender el dinamismo y el cambio en las operaciones financieras, y en esta línea se abordan las reglas como ajustes legales progresivos a las buenas prácticas. la evidencia histórica es la metodología utilizada en este documento, para resaltar cambios significativos en la conceptualización sobre las organizaciones que deben brindar servicios financieros, especialmente cuando los choques externos afectan a las pyme y sus necesidades. palabras clave: bolsas, mercados de capitales, financiación empresarial, aspectos organizativos perspectives organitzatives de les borses en un món global fràgil: previsions i especulacions resum les crisis del nou mil·lenni han alimentat el debat sobre la gestió dels mercats lliures, en algunes parts d'europa. això està tenint conseqüències considerables per a les companyies que necessiten recaptar fons per invertir en instal·lacions de creació d'ocupació o per millorar la productivitat necessària per competir amb nous productors d'àsia. l'augment dels volums de comerç requeria històricament regles i regulacions governamentals. en aquest article s'utilitzen marcs teòrics organitzatius per entendre el dinamisme i el canvi en les operacions financeres, i en aquesta línia s'aborden les regles com ajustos legals progressius a les bones pràctiques. l'evidència històrica és la metodologia que s'utilitza en aquest treball, per destacar canvis significatius en la conceptualització sobre les organitzacions que han de subministrar serveis financers, especialment quan els xocs externs afecten les pimes i les seves necessitats. paraules clau: borses, mercats de capitals, finançament empresarial, aspectes organitzatius corresponding author: e-mail: memata@novasbe.pt received 24 january 2022 accepted 21 may 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0003-0461-1338 mailto:memata@novasbe.pt http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 1. introduction “exchanges were human constructions devised to meet the needs of advanced economies. as such they both arose from economic growth and contributed to it”. (michie 2010, 14.) more than before, the new millennium crises have fueled the debate about free running markets management, in some parts of europe where anti-capitalism still attracts the sympathies of many voters. this is having considerable consequences for corporations that need to raise funds to invest in job-creating facilities or in improving productivity necessary to compete with new producers from asia. in many countries stock exchanges evolved from regionalized into national solutions, and even accepted their subsequent integration into transnational conglomerates of organized markets, and derivatives exchanges merged amongst themselves or with the traditional stock exchanges. it must have been the result of some very powerful reasons. in what way must they be viewed as a consequence of management expertise? historical evidence is the evolutionary methodology used in this paper. if organizational frameworks are a requirement for dealing in financial operations, rules can be approached as progressive legal adjustments to good practice (telles 1985). according to edward stringham, “in the seventeenth century, the amsterdam bourse developed surprisingly advanced trading instruments at a time when government courts were unaccustomed and unable to deal with what today would be considered common financial transactions. much of the dealings that took place were actually prohibited by law, although the law was ineffective and not strictly enforced.” (stringham 2002, 2) should one alternatively look at those legal adjustments to good practice as a set of organizational instruments and principles for cooperating with other stock markets? or are they http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 an element for national and international competition among stock markets? despite the publication of stock market regulations, the regulation on brokers was missing in some cases.1 as organizations, stock exchanges claim a historical heritage for their role, which was made of a free atmosphere for financial business management, and informal mechanisms of enforcement based on business honor imputed to national character. as for other european stock markets, the word stock-market designated the principle for the organization of the institutional market, as well as the registration of the operations, the institution itself, and the physical location (the house) where negotiation and dealing operations occurred (braudel 1979, 78). the new millennium severe shocks, such as crises, pandemic events, and wars, may require organizational adjustments for a fragile global world, where evidence from past stock exchange organizational aspects may bring a plus. time-horizons are being changed in these newmillennium years, because each market has its own geopolitical profile, and strategic investment from different market participants must consider specific risks. information on new geopolitical events under realistic constraints can change the profitability of portfolios for heterogeneous agents in stock markets. what can we learn from the past? can historical intelligence enlighten a possible overall new structure for financial markets? according to andrade, mitchell and stafford (2001) mergers and adquisitions (m&a hereafther) occur in waves, clustered by industry in each wave, because of industry-level shocks. the historical nature of shocks may range from global crises, technological innovations, to deregulation (as in the 1980s, for example). as they create imbalances to small-medium enterprises (smes here 1 in portugal, for example, the auditing requirements became optional after the law of 11 april 1901 (duarte 2008, 27). this regulation would last for long: as in other markets, the lisbon exchange experienced increasing relative stagnation throughout the first half of the twentieth century, bank loans were the main source of capital funding for firms, and no new regulation was needed. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 afhter), such imbalances will be explored through m&a. after the presentation of the historical plural stock markets in section 2, section 3 proves that local funding from stock markets should support smes, as it is possible to identify significant abnormal efficiency and returns whenever their strategy goes to m&a among them, as suggested by kachaner, stalk and bloch (2012). the case of the euronext context in section 4 is the departing point for new solutions in section 5, and conclusions in section 6. 2. the historical times of plural stock markets financial activities characterized cosmopolitan capital cities of europe throughout centuries, and lisbon pioneered this trend thanks to the discoveries (justino 1994, 1-5). maritime traffic of commodities, those brought from recently discovered overseas regions, required funding for investment (marques 1987, 176), while government payments abroad were rented to bill brokers, district by district throughout the country (justino 1994, 31). lisbon pioneered the management experience of world trade, shipping, and maritime insurance, thanks to the discoveries and the circum-africa international trade route (mata, costa and justino 2017). since then, the role of the portuguese trade and financial market in the global network of financial operations has been reflected in the special settings that framed the lisbon bourse. it is even possible to say that this framework became a market-maker, due to the concentration on local specialities throughout the 1500s, but it lost prominence in the following century (barbosa 1874). the vigorous brazilian trade in the eighteenth century re-instated lisbon to a world-market management position, in part due to the monopolist companies that were engaged in colonial commodities traffic. networked professionals and cosmopolitan traders gathered then in a new trading room, built after the 1755 earthquake (stockbrokers, bankers, company promoters, accountants, lawyers, information providers, directors, and security marketing specialists) although no formal investment analysts and trust companies were yet available. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 stock market growth and economic development demand a legal framework, and it was only during the first industrialization phase of the 1860s to the 1890s that most exchanges grew large enough to really drive organizational and managerial legal changes (oliveira 1891). the natural development of stock exchanges in europe and america justifies the legal status historically adopted in many countries: simple private associations of stockbrokers that were established to manage the means for their members to trade securities (ulrich 1906). the selfenhancement of the word member has been a direct consequence of this club-like character initially adopted by most stock exchanges (cagigal 2009). only members of such a club could enter the trading room and trade securities on behalf of their clients. and in most places only individuals, not firms, could be members of exchanges. one important consequence of this legal nature of stock exchanges was their frequent tendency to refuse membership in such organizations to commercial banks, which explains why, often in the past, banks could not trade on the floors of those local exchanges, and instead had to hire the services of exchange members to do so on their behalf. whenever there were distinct groups of customers, and there were externalities associated with customers becoming connected or coordinated in some fashion, platforms could increase social surplus for complex organizations such as stock exchanges. an intermediary was necessary to internalize the externalities created by one group for the other group (evans 2004, 241-243). despite their economic importance, multi-sided markets management has only recently received attention from economists and no attention from historians. however, it is interesting to note that brokers were managing stock exchanges as platform markets. to generate revenues that cover development and maintenance costs, the platform holder must regulate access to other goods and services within the total consumption bundle. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 rules were implemented in one way or another in all stock exchanges, before the first world war. increasing volumes of trade historically required rules and government regulation. the secret for regional, national, or world financial hegemony should be related to securities settlement systems, taxes, and listing fees, but also to cultural contexts, historical traditions, and political conditions. london stock exchange (lse), the largest nineteenth, managed to be notably hospitable to foreign listings (hannah 2009, 2): “the lse before 1914 was the global stock market: it traded a third of the world’s securities and 71 of the world’s hundred largest quoted corporations had at least one of their securities listed there” (foreman-peck and hannah 2011, 5). the liberal regulations offered by european governments in the nineteenth century, such as commercial codes, promoted a legal convergence toward other stock markets, in europe and america (rojo 1977). stock exchanges accompanied the evolutionary separation of ownership from control in top managerial personnel of corporations (foreman-peck and hannah 2011). if economic growth requires liquid stock markets, a clear set of trading rules have contributed to that economic growth, providing protection and confidence to investors. under weak legal systems, management discretion can be used to expropriate revenue from financiers through various means such as outright expropriation, transfer pricing or asset stripping: “minority shareholders do not have the resources and expertise to monitor the managers and due to rational inaction, there would be too little monitoring. the presence of agency costs and the inability to implement complete contracts give the management some discretionary power” (rathinam and rajá 2010, 307). if focusing on law is important, especially whenever there was a polity that supported capital markets, many finance managers have concluded that policymakers and private players built http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 the organizations that supported the stock markets, but they also needed sufficient political support, so that polity did not attack finance and financial groups (la porta et al. 1998). businesses management could devise anti-competitive strategies in multi-sided platform markets, as they were likely to be more complex and less transparent than those used in singlesided markets (evans 2004, 239). the success of the american economy in the twentieth century suggests high success for american stock markets, but extrapolations to european national economies may be misleading, because of the baring crisis (in the early 1890s) and the two world wars. regulation followed periods of speculation: “various bodies of literature attest to how crises significantly damage the way people relate with one another—damage that lasts long past the cessation of those crises” (kahn, barton and fellows 2013, 377). the baring crisis stimulated speculation in financial markets, and the regulation for stock markets was revised.2 note that the french 1882 crash “had led to 14 defaults among (…) brokers” in the parisian parquet forcing “some of their clients – mostly bankers – to loose money” particularly when two more brokers went bankrupt in the 1886 (vueaflart) and 1888 (bex) events, according to hautcoeur (2010, 10). once disturbed, relational systems underlying organizations presented dysfunctional patterns of behavior, organizational vulnerabilities, and longer-term performance problems (kahn, barton,and fellows 2013, 377-390). crises, pandemics, and wars have been and still are great causes for heterogeneous expectations for businesses. in the same way “historical events are reflected in asset prices”, as it was 2 in portugal coming from the decrees of 8 october 1889, for example imprensa nacional, diário do governo. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 demonstrated for hitler's appointment as chancellor on 30 january 1933 and for events along the world war ii, even in a neutral country such as switzerland (frey and kucher 2000, 468). the main american slump, the 1929-1933 great depression, which was very severe, also affected the european economies. it is possible to offer interpretations of plural stock exchanges and commodity markets as a need of multiple multi-sided platform markets for matching local firms’ financial needs. it has been extended to market equilibrium management in the first decade of the new millennium according to suarez and cusumano (2009), as “platforms are businesses that sell products and need customers of type a to get customers of type b and vice versa. to get both sides on board, businesses operate a ‘platform’ that connects or coordinates multiple customers” (evans 2004, 237-238). additionally, regional platforms were devoted to financial regional needs. in small countries, the great depression drew attention to the need for a separate housing for the commodities market. as in other countries, in lisbon, for example, “to give larger capacity to the public space (…) two galleries will be raised, along the two sides of the room, elegantly furbished with smooth-iron protections. the access to the galleries is provided by two staircases, discretely covered by two curtains, one for a telephone and the other for a postal telegraph station. around the room, along the walls, there are desks for the people, to take notes, which are unavoidable in this kind of establishment” (associação industrial portuguesa 1930, 64). the importance of the exchange market at a second-ranked urban center reflects the role that such a city performed in the political scene. the existence of another portuguese stock exchange in porto, (in the northern part of the country), assured not only the survival of the capital-city market, but also the juridical background for increasing trading volumes on government debt, as well as on securities of foreign companies, operating both in the motherland and its overseas territories (mata 2008). in general, though second-ranked urban centers’ market traded volumes might be much smaller http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 than in the capital city, it was a fact that the presence of the exchange was a signal of the city’s political influence over the country (azevedo 1996). 3 since the end of the world war ii, europe has been a fertile territory for experiments in centralized markets for financial instruments, including cash and derivative products, and for testing different organizational models of post-trade infra-structures used in association with those markets. the american marshall plan subsidies were very important for european corporations and stock exchanges (mata 2010). the development of large companies in the western world – many being huge multinationals – and the sheer size of their financial needs gave an added importance to tradability, a fact that can be gauged clearly by the recently discovered high frequency trading operations, which have been only possible with large issues (hennart 1998). 3. the importance of technology for stock market organization and scale in the domain of financial legislation, since the treaty of rome in 1957, europe has evolved into a legal system that today includes several legal layers. at the national level, a corporate code, a securities code, several regulations issued by the supervisory authority, listing and trading rules defined by the exchange. at the union level, some directives in a frequent process of updating, and new regulations of direct application in all the territory of the union. successful industrializations after the world war ii also changed that situation (maddison 2001). for example, the 1960s, and the 1970s before the first oil shock, were such busy times for stock operations that new securities codes were necessary in many countries (amaral 2003). 3 for example, all political revolutions that have succeeded in portugal were acclaimed in porto, and the ones that were planned and failed were those that did not receive the support of its people (mata 1991). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 politics could strongly affect organizational aspects of capital markets and stock exchanges. wars have closed stock exchanges, and revolutions certainly have disturbed capital markets.4 the combination of democratization of savings with the sophistication of financial products and legislation, has led to an expanding use of professionals to manage present day family savings. middle class families were able to accumulate periodic savings but have tended to use investment funds of the various types available to invest in companies. therefore, retail investors were disappearing everywhere, even in the us. also, in several countries in europe, institutional investors were controlled by banks (local or from nearby countries), which raised several questions as to the neutrality of their investment decisions. also, the technicalities of the current financial markets have been such that it was becoming increasingly difficult for the final investor – the retailor – to be able to control those decisions efficiently and in a timely fashion. additionally, stock exchanges always need to retain some screening in the process of admitting new issues of securities to their market to guarantee some credibility which had to be paid for. but more than requiring a cash disbursement, in most countries the admission process has involved such an extensive process that it now demands from the issuer much more than a simple lump fee. it has been therefore an area of increasing specialization where the recourse to experts has been a must for all issuers of securities, including smes (barnett 2011). however, these smaller corporations can hardly divert internal human power from their daily 4 for recent european times, the portuguese 1974 revolution is a good example, as the lisbon stock exchange closed in april 1974 to only reopen in 1977 (costa and mata 2011a), with a few companies remaining listed and even fewer trading any security per day (lisbon stock exchange daily bulletins, in comparison with information from martins 1975). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 operational activities, which means that inevitably they depend on banks to obtain financing (ross, westefield and jaffe 2005). although this model prevailed long into the 21st century, during the 1980s some voices began to be heard stressing the advantages of another configuration for such exchanges in the double sense that a fully private corporation could be more efficient in supplying the different types of services demanded by their various constituencies, instead of being a closed club, and advocating the extension of membership to include commercial banks and other financial intermediaries. in fact, commercial banks normally control a vast network of branches that can be used to deliver the exchanges’ services to a much larger part of the population, and they also have a base of capital that offers less risky conditions to deal with the very large portfolios. computers were very important for these aspects in stock exchanges. the transition from the traditional open outcry trading model to an electronic substitute was appraised in the context of the telecommunication facilities, information technologies (it) improvements, market integration, and accounting standardization rules. the positive effects on liquidity, volatility and cost of capital related to scale, credibility, and shared expertise were very relevant, against the problems of adaptation to local markets and stakeholders (karmel 2010). the appraisal must be addressed in considering the historical evidence for evolutionary illustration. the very nature of all derivative contracts recommended that their trade between buyer and seller be followed by some guaranteeing mechanism that reduced the risk of either side defaulting before the maturity of the contract. even the so-called traditional otc products have been under pressure everywhere to switch to centralized markets, or at least to use clearing houses to reduce this type of risk, both for the two players and for the overall markets. clearing houses have been precisely the entities that complemented the liquidity service of a derivative http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 exchange by supplying that guarantee. such were the advantages of this intermediation of a clearing house that, currently, several traditional stock exchanges also have offered as a service to cash instruments with the added advantage for the owners of that centralized market that contributed greatly to the profitability of the business. the question is whether, for the needs of smes, it is essential to force any trades in their issued securities to also benefit from that guarantee (duffie, gârleanu and pedersen 2002). available studies prove that, thanks to mergers and acquisitions (m&a) among smes, value creation ownership impacts positively on performance. bouzgarrou and navatte (2013) investigates the role of control in acquisitions of french smes between 1997 and 2006, benamar and andré (2006) studies m&a performance of canadian smes between 1998 and 2002, feito-ruiz and menendez-requejo (2010) and caprio, croci and del giudice (2011) develops similar studies for the periods 19982008 and 2002-2004, with a sample for large european countries. most small countries had low levels of liquidity in equity markets, due mostly to their reduced economic dimension, which translates into a small number of large domestic corporations that are listed, in parallel with insignificant foreign investors’ interest in all domestic companies (brealey 2009). 4. the euronext context paris had become the so called societé des bourses françaises only in 1988, the amsterdam exchanges was created in 1997, and the brussels exchanges was born in 1999. the euronext was announced to the press in march 2000, and this new group of exchanges was created in september 2000 through the merger of the three existing national exchanges of paris, amsterdam, and brussels. following the merger in 2000, each was renamed, respectively, euronext paris, euronext amsterdam, and euronext brussels. although other moves toward integration were underway at the same time in europe – the nordic group of exchanges, for example – this was a significant and rather unexpected development. soon after, in february http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 2002, lisbon also joined euronext, along with the british derivatives exchange. the local organization was called bolsa de valores de lisboa e porto (bvlp) and was also renamed euronext lisbon after its acquisition by euronext nv. then, and while this euronext group of exchanges was still digesting this idea of a single entity serving the traditional and different national markets in europe, another innovation was proposed in 2006 by american counterparts: to merge this european group with a similar one that was then being constructed from scratch in the usa, and already covering that country from coast to coast. this transatlantic project was implemented on 4 april 2007 (raiborn and mcginnis 2008, 65-73). this meant that one single holding company offered a collection of trading centers – for cash and for derivative markets – that spanned much of the globe from western europe to california. this was probably the most visible case, but another, parallel one emerged shortly thereafter based on the omx group of exchanges, which was being created for the nordic markets since the 1990s, but which similarly merged with the american nasdaq company in 2007 also. in less than 20 years, therefore, the world jumped from a model of independent companies that were designed to meet only the national trading – and after-trading – needs of investors and issuers in each individual country (only marginally were some listings received from other countries) to a model of multinational corporations that gave a coordinated direction to the different affiliates owned in different geographies (gajewski and gresse 2007). under the strategic plan for the “let’s grow together 2022”, euronext continued pursuing the strategy of framing a leading pan-european infrastructure for stock market. the idea was to stimulate organic growth, and to hire the nord pool and vp securities. in the same way the acquisition of the borsa italiana group was a great impulse. the idea has been to grow thanks to geographic expansion provided by the italian, norwegian and irish stock markets. the aim was to attract http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 the top issuing firms and governments and convince savers to invest their liquidity, making euronext stronger and stronger. if the purpose was to support firms wanting to survive, a lot of compliance will be required, and this means that providing them a positive impact was not making euronext stronger and stronger in the global market, even before the covid pandemics and the russian-ukrainian war. this recent trend for concentration is yet short-lived experience and the importance of this innovation both suggests that some time might still be needed to properly assess those few multinational models established until now. it is also worth bearing in mind that both cross-atlantic cases mentioned above have halted, and that no other country has undertaken to transfer its market infra-structure to any of these two multinationals. these factors have had consequences for the average cost of capital for large issuers headquartered in small markets, since they could more easily tap into foreign pools of liquidity where more buyers were available to take up those large issues. in the same direction of lower costs was going the impact upon volatility, as more stability might reduce the liquidity premium demanded by investors. in the end, the question is whether this new globalized model is appropriate to respond to the very needs of the local customers, whoever they might be (la porta et al. 1997), namely now in the covid pandemics and the russian-ukrainian war times. membership of exchanges has also changed considerably over the last decades. the initial model of trading members in most exchanges was of personal brokers who made a living only from the commissions they collected from sellers and buyers of securities. they could not hold positions in the securities they intermediated for their customers. therefore, they were very much interested in attracting companies to the market and were always very eager to offer facilities to their trading clients. membership now includes banks, which do not depend on the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 trading business alone to make their profits, but also may have vested interests, both in an issue or in an issuer. different countries in europe have followed different historical paths regarding the legal status of stock exchanges, but the recent trend has been for exchanges to be commercial corporations owned by several stockholders, even sometimes listed on its own central market. the rational was that management of for-profit entities tended to focus on short-term profits and to concentrate their efforts on the most profitable segments of their business. due to the inevitable presence of economies of scale, large issuers and the most profitable instruments have been clearly targeted, leaving aside small companies or issues that produce less income. automation of trading also facilitates this focus on large sizes. in recognizing that only about 1,500 smes are listed in euro-next, and in pretending to simplify the means for making easier the access to finance equity and bonds in all stock markets, namely in italy, it was concluded that only thanks to a star segment market to frame an elite network system could it be possible. (marques 2020), using a sample of 381 (national or cross-border) m&a events, performed by 303 publicly listed non-financial smes, which occurred between 2005 and 2015, in 9 european countries, plus usa and canada, extracted from the thomson reuters’ sdc platinum mergers & acquisitions database, and historical stock performance from the bloomberg database, finds evidence that m&a among smes in bad times are more inventive to explore market imperfections, as (schumpeter 1939) suggests. the methodology of time windows made of daily 250 return observations follows (zollo and meier 2007) to isolate the effects of crises and other global problems. short-term event analysis allows to control for the high-magnitude and prolonged global shocks of the new millennium. as in brown and warner (1985), the crosssectional independence between daily returns was assumed, leading to the distribution of the daily 250 mean excess returns. durbin-watson (dw) tests for each of the 381 daily expected http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 returns, each one corresponding to a stock, led to conclude for no serial autocorrelation at the 1% significance level, and corroborates value creation by smes’ business growth in exploring imperfections through m&a, more efficiently in bad times, be they signalled by crises, pandemics, or warrying. as socioemotional wealth plays a major role in smes, one can realize how much important is to avoid common inflection points across major markets and survey possible repercussions across regions (berrone, cruz and gomez-mejia 2012). 5. rediscovering small and medium enterprises: new solutions via market finance most new firms come into being when someone finds an innovative product, a new service, technology, or marketing tool that is believed to either establish a new area of business or win some market share away from the mature companies already serving those needs. it is rare that someone comes to the market to do the very same thing that is already being done. in europe, statistics indicate that a large percentage of innovations come from smes even if, in some areas such as pharmaceutical products, the size of their development labs is a fundamental determinant. according to the office for national statistics of uk, “companies with less than 50 staff were responsible for 40% of live patents during 2000 to 2008, while large organizations accounted for 44% and medium-sized enterprises just 16%”.5 the overrepresentation of pharmaceutical/chemical patents only confirms that advantage of small companies in the innovation arena. on the other hand, by definition, smallness cannot benefit significantly from economies of scale (nor of experience), and so the segment of labor amongst sme companies is proportionally 5 see office for national statistics of uk: http://www.smallbusiness.co.uk/channels/technology-inbusiness/news/110332/smes-drive-innovation.thtml. http://revistes.ub.edu/index.php/jesb http://www.smallbusiness.co.uk/channels/technology-in-business/news/110332/smes-drive-innovation.thtml http://www.smallbusiness.co.uk/channels/technology-in-business/news/110332/smes-drive-innovation.thtml volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 much larger than amongst large corporations. in fact, statistics corroborate this and, more importantly, while recently there has been some manpower reduction in many large companies due to the crisis, smes are still hiring new employees: “smes are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialised countries as well as in emerging and developing economies. smes constitute the dominant form of business organization, accounting for over 95% to 99% of enterprises .... they are responsible for between 60-70% net job creation in oecd countries” (oecd 2006). that is, not only do smes need more human labor per invested dollar, but they also keep recruiting individuals even when large enterprises (le) are laying them off. another characteristic of smes is their inherent flexibility.6 because they are small, and therefore have less resistance to change – or because they are still in their infancy, and therefore expected to reveal adaptation, smes rarely are rigid. in a world where geopolitics tend to change with increasing speed and in violent swings, flexible economies are better able to exploit new opportunities than “lazy” economies (högbom and wagenius 2011). large firms are not the only paradigm for an economy. moreover, they are abandoning russian endeavors. smes exist in any economy in much larger numbers than les, and their shares in the labor force and innovations are greater than in mature companies. in emerging economies, as well as in small countries, the failure of one sme has much less impact to the respective society than the failure of an le. crucially, they are also much more adaptable to market evolution, both individually and as a group, which makes them large net contributors to economic growth in catching-up processes, in the perspective of global modernization. in 6 as the european commission site on innovation and smes states: http://ec.europa.eu/research/sme/leaflets/en/intro02.html. http://revistes.ub.edu/index.php/jesb http://ec.europa.eu/research/sme/leaflets/en/intro02.html volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 europe (eu-27), the contribution of smes to the whole set of enterprises was 99.8% in numbers, 67.4% of the overall employment and 58.1% of the gross value added, according to the annual report on small and medium-sized enterprises in the eu, 2012. although with important differences amongst the many countries comprising the european union (eu), the pre-covid and pre-russian war panorama on the continent was of a strong shortage of financing that was made available to small and medium enterprise (sme) working there, with great consequences on the growth of the member states’ gdps and to the number of europeans unemployed everywhere (la porta, 1999). political and geopolitical uncertainty is always a source of heterogeneous outcomes throughout national economies in the world. military threat and wars are significant sources of business trouble. these financing difficulties felt by smes were not new in europe, but the current effects of the 2012 crisis, the pandemics, the russian-ukrainian war, and the accompanying credit crunch due to the balance sheet problems within the local bank industry highlight the poor situation more than before, as these matters were becoming critical to the economic recovery of many european countries, moreover now, after so great shocks. it is unlikely that the crunch will disappear in europe in the short run, as most resident banks are undergoing a long process of structural change resulting from the various decisions taken by the g-20 group to strengthen their balance sheets and liquidity postures. funding allocation to warrying, humanitarian support to displaced people, and reconstruction needs, sum up to inflationary pressure. however, and in spite of their smaller size, smes face the very same financial needs as les: on one hand, they must fund their fixed assets (plus their net working capital) with relatively stable forms of capital – equity and long-term loans – but on the other hand, they need to maintain permanent access to shortterm funding to run the daily business of buying inputs, paying labor, granting credit to clients, etc. until they are covered by their sales (amihud and mendelson 1986). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 probably, new financial solutions must be invented to better cope with the special needs of these innovative smes (högbom and wagenius 2011). several hybrid instruments are known that mix features of shares with those of bonds, but some improvements may not only make them more visible to potential issuers and investors, but also adapt them to the special requirements of highly vulnerable enterprises. taxation is clearly an example of a consequence, as savings are now heavily penalized when put to work in any investment – capital gains tax, and taxes on dividends. also, greater profitability sometimes pays higher taxes, and the tobin tax that has been announced may have profound consequences. although a very same crisis has affected the us economy, there are significant differences between the us and western europe regarding the way savings have been organized and channeled into productive use in the corporate fabric. additionally, the us government enacted the jumpstart our business startups act or jobs act in 2010 precisely to foster the mechanisms to finance all segments of their corporations. the jobs act was a law intended to encourage funding of united states small businesses by easing various securities regulations. signed into law by president barack obama on april 5, 2012, who had unveiled the startup america initiative on january 31, 2011, it came to recommend different reforms aimed at increasing small businesses’ ability to raise capital over the course of a year. europe led a movement where all stock exchanges progressively changed their status from closed associations of stockbrokers to open incorporated firms whose shares were offered to the public for investment. this implied a clear differentiation between the trading privileges of exchange members and the ownership rights of shareholders, even if some members could take on both capacities (hilt 2008). some exchanges even went a step further and listed their issued capital in some centralized markets. this listing of the shares of a stock exchange in its own market may raise the question of a potential conflict of interests: who, inside the exchange http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 organization is sufficiently independent to decide any measure against this issuer – suspension of trading, delisting – if such case were to arise? of course, this movement did not alter the main goal of a stock exchange – to provide trading facilities – although in most places a few other services were added to better serve their clientele (costa and mata 2011b). a for-profit organization needs to search unceasingly for new business to increase the annual profits paid to its capital, and so cannot assume a passive attitude toward the market, as was the tradition in the earlier days of those associations of stockbrokers. this proactive position was also reinforced by their merger with derivative exchanges, where an aggressive attitude has always been a precondition of survival according to brown, goetzman and ross (1995). despite the rationale for these concentration movements – cost reductions and added liquidity – in all cases the single central markets became in the end very distant from the local communities precisely where many of smes were and are still headquartered. consequently, these isolated companies face amplified difficulties when planning to issue new shares and/or bonds and subsequently when applying for admission to trading on any distant exchange. there is also a daunting financial gap for smes. this difficulty comes partly from the very small size of these firms and the restricted amounts of shares and/or bonds they issue precisely when stock exchanges are quickly changing in response to pressure of the economies of scale imposed by the sheer size of the securities issues listed by les, especially large multinationals. smes also dislike the transparency required to tap any capital market. more recently, a regulatory barrier to entry has been erected in front of smes as the number of laws and regulations to comply with is mushrooming every year and almost everywhere. additionally, all new laws, codes, and regulations are published with more and greater requirements http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 regarding the issuing companies. with regional exchanges and principally with local ones, the admission process was much simpler, in part because the world was then also simpler and because the exchange listing officials naturally knew the applicant corporation and so did not need to demand all the documents and prospectuses that distant issuers must provide. moreover, privatization of exchanges has also made it necessary to introduce a new layer of bureaucracy: a state organized supervisor and regulator to oversee the daily operation of those centralized markets and to establish permanently updated regulations to discipline the entire capital market. this is a new source of costs to be paid both by issuers and the final investor, increasing the average cost of capital. several initiatives have been devised in different spheres in europe, but the structural reason behind those constraints and the multidimensional origin of them requires an integrated approach. part of the reason came from the cultural background informing overall politics, along with the design of legislation in most european countries. but part also derived from the tremendous evolution that capital markets have demonstrated everywhere since the end of world war ii, which was mainly driven by the needs of the large (powerful and influential) european and multinational corporations. stock exchanges, where liquidity might be searched for by issuers and investors have changed from small local organizations to large multinational entities that tend to focus on the much more profitable business brought about by large issuers and by the attached derivative markets. smes have tended to leave stock exchanges, while some recent decisions remember a move to past organizational aspects, preventing that a huge corporation may manage largely merged stock exchanges throughout the world (costa and mata 2011b). the australian authorities refused the merger of the australian stock exchange with singapore’s. the london proposal to buy toronto’s stock exchanges failed. the european authorities also refused the project of merging the nyse euronext with the deustsch http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 boerse. several innovative brazilian stock exchanges are competing with the large bovespa. liverpool’s entrepreneurs have tried to reopen this british stock exchange, the last one to be closed in the 1970s. there is a plan for a spin off between the intercontinental exchange and the european part of euronext (paris, brussels, lisbon, and amsterdam). as there is a widespread understanding that strong financial markets can drive economic development, the organizational interactions between politics and the juridical background can gain valuable insight into economic growth engineering for supporting the current retake of activities after confinements and warrying in the world, in fuelling funding beyond bank credit (roe 2006, 1-2). it is recognized that issuers need to be supported along the transition to the environmental social governance. however, it is never explained how to deal with non-financial disclosure requirements, even for firms issuing for a sustainable environmental transition, because not all firms can have science-based targets in a near future to become coveted by savers and stockmarket investors. 6. reflections, forecasts and conclusions examining the organizational features of equity markets throughout european countries’ history is of interest for this deglobalizing world. capital markets in most (if not all) countries experienced a profound organizational revolution during most of the twentieth century in the wake of the tremendous evolution in technologies and in the reduction of the obstacles presented by the different country borders to ideas, persons and financial capital. “routines, as collective accomplishments, are (re)created from within” (dionysiou and tsoukas 2013, 181). stock exchanges accompanied a historical evolution and experienced an even more substantial transformation in several core characteristics of their features: merger between many such http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 organizations, ownership, has extended membership to institutional intermediaries and to commercial banks, trading mechanisms, legal and regulatory framework, risk management, and fragmentation of the secondary market. the economics of multi-sided platform markets brings to light a novel understanding of some stock-market organizational aspects (barnett 2011). political reasons must also be included to explain the close convergence of organizational features among countries. for most countries, joining the european union brought a new credibility to the future, which led to a progressive opening of borders to financial investment from abroad, as national markets were so limited in size that even small influxes of cash fueled discussions on the organizational background. not negating the many advantages gained so far from the recent historical evolution, in various geographies the various stakeholders interested in stock exchanges are developing studies to assess the pros and cons of stepping back in some organizational respects to respond to the various market needs. the rapid recent evolution, the covid pandemics, and the russianukrainian war seem to indicate that the world may have gone too far from the old model. symptoms of this excess appear in the increasing difficulties faced by sme companies to use these facilities to raise money for their investments and their operations, because of the increasing divorce from local markets on the part of the very big groups of exchanges, and the enhanced level of systemic risk brought about by these highly interdependent organizations. it is central to re-evaluate the different historic models used in the past to develop a new solution that might allow to benefit from both the new technologies and lack of restrictions with the advantage of “smallness” and “locality”. examples of such areas of re-assessment are the legal regulatory organizational complexification to be closer to the much simpler form of the past, the level of integration between the different poles within the same group of exchanges, the type of competition between exchanges and the new forms of centralized markets, membership http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 of exchanges and the role to be played by banks. history is a central source of data to guide these efforts to redesign the organized markets of the future geopolitical landscape. small markets may benefit from the capital capacities and the accumulated expertise that the intermediaries headquartered in more mature markets may bring to the domestic market. this is particularly important for those countries where financial intermediaries did not have the tradition of being market makers in the securities market. also, in most of western europe, and for a long time now, there has been a clear predominance of the banking channel in this role of funding corporations – either large or small – making most non-financial firms (and almost all smes) critically dependent on bank credit. the financing difficulties felt by smes are not new in europe, but the current crisis and the accompanying credit crunch due to the balance sheet problems within the local bank industry has highlighted it more in this corona virus pandemic than before as it has become critical to the necessary economic recovery in many european countries. additionally, stock exchanges in most of europe are products of a long process of amalgamation between tiny local markets into regional ones, subsequently to national exchanges. more recently some of them have merged into very large multinationals with operations on both sides of the atlantic, while geopolitical alliances will dictate how to allocate funding to the armament sector to stop predatory threat and military clash. in the past, information flowed much more efficiently and naturally within a local community, which made it unnecessary to legislate so extensively upon the type, quality, and frequency of information disclosure, which became necessary for situations in which issuers and investors lived in geographically and culturally distant worlds. if more foreign members can easily and directly access other domestic markets via their electronic connection to the same central http://revistes.ub.edu/index.php/jesb volume 8, number 2, 77-105, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38128 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 computer, then more interested parties observed domestic share and bond issues. this naturally led to larger local trading volumes, which helped to reduce price jumps resulting from larger orders – both of which were crucial variables for the recovery of small domestic markets. legal origins and framework have affected finance, but new geopolitical variables and globalization versus deglobalization will dictate the tools to build markets and advance economically. references andrade, gregor, mark mitchell, and erik stafford. 2001. “new evidence and perspectives on mergers.” journal of 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corporate acquisitions.” research paper 2007/25/st. insead business school. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 muzakar isa muhammadiyah university of surakarta (indonesia) https://orcid.org/0000-0002-5129-1157 m. farid wajdi muhammadiyah university of surakarta (indonesia) https://orcid.org/0000-0003-0564-1125 liana mangifera muhammadiyah university of surakarta (indonesia) ahmad mardalis muhammadiyah university of surakarta (indonesia) nitty hirawaty kamarulzaman universiti putra malaysia (malaysia) value chain and stakeholders’ analyses of batik tulis industry in indonesia abstract the study aims to analyze the values added of batik tulis production and to analyze stakeholders’ objectives and competitiveness of batik tulis business. the study used a mixed method, a combination of quantitative and qualitative analysis. the data were analyzed using several analyses namely content analysis, value chain analysis, and stakeholder analysis. the content analysis was carried out to identify and to explain the supply chain of batik tulis production. the value chain analysis was undertaken to identify the existing stages of the value chain in batik tulis production. the stakeholders analysis was used to analyze stakeholders’ objectives and competitiveness of batik tulis business. the results revealed that the value chain of batik tulis production started from the procurement of raw materials, production processes, and sales. the highest added values obtained were through sales to wholesalers and retailers as compared to sales by displaying the products in galleries. the average profit margin earned by each entrepreneur exceeded 50% of the main production costs. profit and rep utation were revealed as the two stakeholders’ objectives that have the strongest and the most dominant influences in the industry. the entrepreneurs are expected to further optimize the activities that contribute the highest added values to be more efficient in managing the production costs, and in maintaining the interrelationship with other players of batik tulis entrepreneurs as well as with the suppliers of raw materials so that the cooperation can be carried out effectively. keywords: batik tulis, value chain, creative industry, stakeholders análisis de las cadenas de valor y de los inversores en la industria de batik tulis en indonesia resumen el estudio tiene como objetivo analizar los valores agregados de la producción, los objetivos de los grupos de interés y la competitividad del negocio de batik tulis. el estudio utiliza un método mixto, una combinación de análisis cuantitativo y cualitativo. los datos se analizan utilizando varios métodos, a saber, análisis de contenido, análisis de la cadena de valor y análisis de grupos de interés. el análisis de contenido se ha llevado a cabo para identificar y explicar la cadena de suministro de la producción de batik tulis. el análisis de la cadena de valor pretende identificar las etapas existentes de la cadena de valor en la producción de batik tulis. el análisis de los grupos de interés se utiliza para analizar sus objetivos y la competitividad del negocio de batik tulis. los resultados revelan que la cadena de valor de la producción de batik tulis se inicia desde la adquisición de materias primas, procesos de producción y ventas. los valores agregados más altos obtenidos fueron a través de las ventas a mayoristas y minoristas en comparación con las ventas a través de la exhibición de los productos en galerías. el margen de utilidad promedio obtenido por cada empresario superó el 50% de los principales costos de producción. las ganancias y la reputación se revelaron como los dos objetivos de los grupos de interés que tienen las influencias más fuertes y dominantes en la industria. se espera que los empresarios optimicen aún más las actividades que aportan los mayores valores agregados para ser más eficientes en la gestión de los costos de producción y en mantener la interrelación de los empresarios de batik tulis con otros actores, así como con los proveedores de materias primas para que la cooperación se puede llevar a cabo con eficacia. palabras clave: batik tulis, cadena de valor, industria creativa, grupos de interés anàlisi de la cadena de valor i dels inversors a la indústria de batik tulis a indonèsia resum l'estudi té com a objectiu analitzar els valors agregats de la producció, els objectius dels grups d’interès i la competitivitat del negoci de batik tulis. l'estudi utilitza un mètode mixt, una combinació d'anàlisi quantitativa i qualitativa. les dades s'analitzen utilitzant diversos mètodes, és a dir, anàlisi de contingut, anàlisi de la cadena de valor i anàlisi dels grups d’interès. l'anàlisi de contingut s'ha fet per identificar i explicar la cadena de subministrament de la producció de batik tulis. l'anàlisi de la cadena de valor pretén identificar les etapes existents de la cadena de valor a la producció de batik tulis. l'anàlisi dels grups d’interès s’usa per analitzar els objectius i la competitivitat del negoci de batik tulis. els resultats revelen que la cadena de valor de la producció de batik tulis s'inicia des de l'adquisició de primeres matèries, processos de producció i vendes. els valors agregats més alts obtinguts ho són a través de les vendes a majoristes i detallistes en comparació de les vendes a través de l'exhibició dels productes a galeries. el marge d'utilitat mitjana obtingut per cada empresari supera el 50% dels costos de producció principals. els guanys i la reputació es revelen com els dos objectius dels grups d’interès que tenen les influències més fortes i dominants a la indústria. s'espera que els empresaris optimitzin encara més les activitats que aporten els valors agregats més grans per ser més eficients en la gestió dels costos de producció i en mantenir la interrelació dels empresaris de batik tulis amb altres actors, així com amb els proveïdors de matèries primeres perquè la cooperació es pot dur a terme amb eficàcia. paraules clau: batik tulis, cadena de valor, indústria creativa, grups d’interès corresponding author: e-mail: muzakar.isa@ums.ac.id received 23 february 2022 accepted 12 april 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-5129-1157 https://orcid.org/0000-0003-0564-1125 mailto:muzakar.isa@ums.ac.id http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 1. introduction batik is a product that has an artistic value that respects local wisdom based on local natural resources (mangifera and isa 2019). the advantage of batik business that must be maintained is the mobilization of innovation capabilities and new actors in implying the creation of new value chains. many owners and managers of this industry have been impacted by the pandemic. as the global economic crisis destroys global value chains, businesses must rely on local value chains to continue to sell their products. reconstruction of the value chain using alternative local resources requires the industry to improve the knowledge, skills, methods, tools, and readiness of employees required may differ, depending on the natural resources used. value chain analysis (vca) has been widely applied to product research that focuses on the value chain structure (muflikh et al. 2021, sandeep and navitha 2020) and policy interventions to improve income (acaye and odongo 2018). however, conventional value chain analysis is rarely adopted to investigate the issue of price volatility (shaker and sri 2019). value chain analysis and statistical methods have been combined to form a better understanding of the market structure, price transmission, and price volatility across the observed value chain (luckmann et al. 2015). however, conventional value chain analysis has been criticized for its inability to capture feedback and dynamic interactions between the components of the value chain from production to market (rich; rich and dizyee 2018). although this method is considered comprehensive, it only results in a static feedback assessment of the value chain (acaye and odongo 2018) which cannot explain feedback interactions between components across the chain. the systematic approach by vca to understanding batik production and trading systems provides evidence for risk analysis and management. it provides a practical framework for analyzing the functioning of the chains linking production systems, trade sites, and consumers, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 with particular attention to stakeholder interactions, practices, and motivations (kaplinsky and morris 2000, 4-7) that identify hand batik production activities as having implications for control of production and increase industrial competitiveness in many areas around the world and provide essential knowledge to understand aspects of production and competitive advantage (tang et al. 2021). however, to the best of the author's knowledge, published research documenting the value chain of hand-drawn batik products is lacking. therefore, very little is known about how production and trade chains work, who is involved, and the governance structures between them. this information is very important for developing a strategy for developing the written batik industry as a cultural heritage that has superior competitiveness. batik is one of the industrial products which are labour-intensive, especially for batik tulis and batik cap (wajdi et al. 2016). batik tulis is made by painting while batik cap is made by sealing. batik tulis, as a part of the indonesian cultural legacy and also world heritage, become the mainstay of indonesian textile products (mangifera 2015). batik tulis is the product of a creative industry that makes a substantial contribution to the regional economy, wherein the creative industry plays a role as a boosting sector that manages to create not only competitiveness with other sectors but also regional competitiveness (ma’ruf et al. 2017, mangifera 2019). batik tulis is produced in various regions in indonesia such as pekalongan, yogyakarta, and surakarta. surakarta is reported as the biggest city producer of batik tulis in indonesia (wajdi et al. 2016). the existence of batik laweyan has existed since ancient times before 1500 m (basworo and sujadi 2018). laweyan is a unique, specific, and historic batik industrial center area, with the laweyan market and its kabanaran bandar being the bustling and strategic centers of trade and sales of clothing (lawe) in the kingdom of pajang. through the years, surakarta has actively optimized batik tulis as one of the creative industry products although the city is currently http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 competing with batik cap business and inadequate natural resources (mangifera, 2019). such potential promotes the rise of the creative industry that affects the high economic growth of surakarta. batik tulis is one of the notable export commodities in surakarta which has a significant impact on the national economy (ma’ruf et al. 2017, wajdi et al. 2016). the batik tulis industry must be supported by good institutions. a good institutional capacity will improve the efficiency and effectiveness of batik tulis industry, wherein nowadays institutional efficiency and effectiveness frequently become a serious problem within the industrial development in indonesia (ma’ruf et al. 2017). thus far, there are not many institutional studies of the batik tulis industry in indonesia that explain who are the key stakeholders in developing batik tulis, their competitiveness, and the relationship among them (wajdi et al. 2016; mangifera, 2019). the sustainability of the industry has also become a crucial agenda of indonesia government where all public servants, as well as students, are encouraged to wear batik attire every thursday. to cope with increasingly stiff competition, batik tulis industry is necessitated to be capable of and ready to have high competitiveness. high competitiveness is certainly needed by every industry to stay competitive (isa and kusmiati 2013; ma’ruf et al. 2017). the industry competitiveness for the sake of attaining optimal performances is one of them, influenced by an effective value chain (setyawan et al. 2015). setyawan, isa and wajdi (2017) explained that value chain refers to a strategic analysis which manages to understand the competitive advantage, to identify the customers’ value which can be enhanced or the decrease in costs, and to understand the relationship between the company and the suppliers, customers, and other players within the industry. studies by mangifera, (2015) and barua, rahman and barua (2021) elucidated that an effective value chain is a key to having the competitive advantage that can produce added values for an http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 industry. the value chain can be depicted as the entirely required activities to carry goods or services from the design place through a variety of production phases (incorporating a physical transformation and input from several service providers), to deliver them to consumers, and to recycle them after use. in addition, the value chain analysis is also functional to identify the value chain stages whereby the industry can increase the added values for customers and make the incurred costs efficient (gereffi and lee 2012). the batik tulis industry manages to be more competitive through cost efficiency or increasing the added values gained through the value chain activities. this article is divided into 5 sections structure. first, an introduction that contains the reasons for the research is described, followed by the basis of value chain theory and stakeholder theory. then, the research methods used are described, and the research results are also explained. the results of the study describe the supply chain of batik tulis production, value chain analysis, and stakeholder analysis. finally, the closing outlines the conclusions and some recommendations for improving the management of the written batik business. 2. literature review value chain analysis (vca) is a diagnostic tool to support continuous improvement processes at the overall chain level. barua, rahman and barua (2021) defines vca as a multidimensional assessment of value chain performance through examining product flows, information flows, and chain management and control. the value chain analysis focuses on three main issues: first, the input of information in the value chain from the final consumer — to the main production and input suppliers, and back again and so on, how inclusive, transparent and responsive is the flow of information in the chain. to what extent are stakeholder decisions (what to produce, when to produce, how to produce) drawn by what consumer values? second, value creation and flow, in the eyes of the final consumer, at each stage in the value chain — how many production http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 and processing activities add value? how much investment was made in this critical activity? how much is necessary but does not add value (this should be accomplished with the minimal allocation of resources)? how much is unnecessary (waste activities should be eliminated and resources reallocated to promote value creation and efficiency)? third, the nature of the relationship — how much trust is there between the different stakeholders? what is the nature of communication within and between organizations? what is evidence of organizational commitment? how risk is shared and risk assumptions are rewarded in the chain. how is the value created shared along the chain? (bonney et al. 2007). dwivedi, agrawal and madaan (2019) in their study on the development of a sustainable manufacturing evaluation model for industrial leather for india, stated that due to strict environmental regulations and government sustainability policies regarding the leather industry, it is very difficult to adapt to this sustainable policy. the main challenge facing the leather industry is the significant increase in the value of adaptation options for the product and its sustainable development. meanwhile, moktadir et al. (2020) states that interactive associations between key performance indicators such as government support and trade policies, availability of raw materials, availability of skilled labor, technological capabilities, financial resources, better process management, sustainable work environment, better workforce health well, increased security workforce. training and skills development, water supply, minimization of hazardous materials, adjustment of environmental regulations and better waste management will help relevant stakeholders to adapt to successful sustainable supply chain policies in indian leather industry (moktadir et al. 2020). in addition, moktadir et al. (2019) states that asian countries welcome enormous pressure from universal markets related to environmental practices from tackling climate change to protecting the environment. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 value chain analysis (vca) provides a systematic framework for describing the roles and relationships of stakeholders (bolwig et al. 2011). this includes understanding materials flow and activities in various parts of the value chain (rushton and leonard 2009). regardless of the complexity of vca, analytical procedures can be carried out by implementing the following procedures: first, the company’s operating process is divided into various specific business activities or processes; second, analysts try to charge fees for each activity and the costs can be in the form of time and money. third, analysts change cost data into information that can produce competitive profits or losses. value chains are characterized as collaborative and interdependent, including internal business policies and external corporate environments (setyawan. isa and wajdi 2017). value chain analysis (vca) refers to the process by which a company determines the costs associated with a company’s activities from raw materials purchases to production and marketing (gereffi, humprey and sturgeon 2005). vca aims to identify where low-cost benefits or losses exist throughout the value chain (mangifera 2015). porter (1998) developed an approach to analytical tools called value chain analysis. this approach is a systematic way of looking at companies serving their customers (mangifera 2015). value chain analysis is shown in figure 1. figure 1. generic value chain of porter source: porter (1998). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 according to mangifera, (2015) and setyawan, isa and wajdi (2017), the basic of value chains analysis are grouped into two general groups, namely the main activities and supporting activities. the main activities include the supply of raw materials, operations, marketing, shipping and after-sales support of products or services. the main activities consist of five categories, namely internal (inbound) logistics, operations, external (outbound) logistics, marketing and sales, and services, while supporting activities include the provision of infrastructure or inputs that enable the main activities to continue. supporting activities include purchasing, technology research and development, public administration and human resource management. stakeholder theory is a strategic management concept that aims to help business units to strengthen their relationships with stakeholders in developing competitive advantage (bracke, de greef and hopster 2005; isa, fauzi and susilowati 2019). based on friedman and miles (2006), the business competitiveness is influenced by relationships between stakeholders consisting of suppliers, wholesalers, retailers, and consumers. thus, the basic premise in stakeholder theory is the stronger the relationship between stakeholders, the better the business and industry, and vice versa (setyawan et al. 2015). stakeholder theory also explained that a business unit is not a single entity that only operates alone but is related to other stakeholders (isa, fauzi and susilowati 2019, miles 2012). thus, the existence of a company is strongly influenced by the support provided by stakeholders to the company. the survival of a company depends on the support of stakeholders so that the company’s activities are to seek that support (mangifera 2019). the more powerful the stakeholders, the greater the company to adapt and win the competition. in any industry, the responsibility is not only from the government, but is also the responsibility of all stakeholders involved in it (mangifera 2019). as a shared responsibility, it is necessary to develop a tough http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 business that is able to embrace all institutional elements, starting from the aspects of higher education and batik tulis entrepreneurs, suppliers of raw materials, wholesalers, retailers, governments, ngos, and consumers (setyawan, isa and wajdi 2017). the institutional aspect has an important role in the development of batik tulis business (mangifera 2019). through this institutional aspect, it is expected that batik tulis business development will be carried out faster, planned, and sustainable. gaur and kumar (2010) explained that without good institutions, transaction costs would be high. the institution is very important as a tool to regulate and control stakeholders. 3. research method this study was conducted in kampoeng batik laweyan of surakarta, central java province, indonesia. kampoeng batik laweyan is a central area of batik tulis industry in surakarta which is unique, specific, and historical. it has been established since 1935, and batik tulis business has become a major income for most of the people in the city. however, through the years, the batik tulis industry becomes deteriorated. in 2004, batik tulis entrepreneurs incorporated in the forum of kampoeng batik laweyan development (fkbld) and attempted to revive its glory by releasing a branding name so-called kampoeng batik laweyan. in 2018, it was reported that there were 26 enterprises of batik tulis who still in the operations and actively produced the products. among them were 5 large-scale enterprises, 14 medium-scale enterprises, and 7 small-scale enterprises. this study applied a mixed-method approach that extended to identify the value chain of batik tulis production, to analyze the values added along batik tulis production, and to analyze stakeholders’ objectives and competitiveness of batik tulis business. the samples of this study involved target players along batik tulis production value chain for both primary and supporting activities. the value chain players were represented by raw material suppliers, entrepreneurs http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 (producers), wholesalers, and consumers. the samples were selected using a snowball sampling technique (neuman 2000) in which one key respondent gave some relevant information as regard to other key respondents in a path of the value chain. this study utilized the primary data gathered from the respondents in the study location. the data were obtained through in-depth interviews using a structured questionnaire. table 1 shows the respondents who involved in this study consisting of 45 respondents to represent value chain players namely suppliers (10 respondents), entrepreneurs (12 respondents), wholesalers (6 respondents), retailers (7 respondents) and consumers (10 respondents). table 1. no of respondents sample small entreprises medium enterprises large enterprises total supplier 10 0 0 10 entrepreneur 4 6 2 12 wholesaler 0 2 4 6 retailer 3 4 0 7 consumer 10 0 0 10 total 17 12 6 45 source: own elaboration. the data analysis was executed by using several analyses such as content analysis, value chain analysis, and stakeholder analysis. the content analysis was carried out to identify and to explain the supply chain of batik tulis production. the value chain analysis was undertaken to identify the existing stages of the value chain in batik tulis production. in stakeholders’ analysis, matrix of alliances and conflicts: tactics, objectives, and recommendations (mactor) was used to analyze the influences and interests of stakeholders consisting of raw material suppliers, producers, wholesalers, and consumers. the stakeholder’s analysis is very broad because it can be used for up to 20 related purposes and yet it is simple and accessible (rees and macdonell 2017, mangifera 2019). mactor includes several stages of matrix preparation, namely: (1) determination of key variables and relevant players; (2) preparation of table of actors; (3) preparation of strategic issues and objectives; (4) determination of players and strategic objectives in the matrix; (5) calculation of convergence and divergence matrices as performed http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 in three stages; (6) calculation of the direct and indirect relationship of power matrix; (7) calculation of the position matrix value; and (8) analysis of strategic recommendations of each players (isa, fauzi and susilowati 2019, rees and macdonell 2017). 4. results and discussion 4.1. value chain of batik tulis production the players of batik tulis production in kampoeng batik laweyan of surakarta are raw material suppliers, entrepreneurs, wholesalers, and consumers. about 45 respondents were interviewed and their details are as shown in table 1. content analysis and value chain analysis were carried out to map and identify the value chain of batik tulis production and to analyze the value chain of batik tulis production. the results of both analyses are depicted in figure 2. based on figure 2, the batik tulis production consisted of four (4) stages of value chain processes. each activity along production processes had an added value having an impact on the final products. the main processes of the supply chain for batik tulis started from buying raw materials from the suppliers, dealing with the production processes, to finally selling the final products to the consumers. batik tulis entrepreneurs included a set of activities which extend to both primary and supporting activities (mangifera 2015). the main activities comprised inbound logistics, operations, outbound logistics, marketing, and sales, and services. the first stage of the value chain production was inbound logistics that is purchasing raw materials. batik tulis production involved several raw materials namely fabrics so-called mori, wax so-called malam, dyes, and other supporting equipment such as canting (an equipment which it main function is like a pen usually utilized to apply liquid hot wax in batik-making), pans so-called wajan, and the fabric holder so-called gawangan. the aforementioned raw materials as well as the related tools were procured from local suppliers. the suppliers of mori fabrics included those derived from inside and outside surakarta city, wherein entrepreneurs http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 procured mori from the suppliers via purchase order, and mori fabrics were further delivered to them. the entrepreneurs procured raw materials such as malam and dyes by making a direct purchase in the shops and as an alternative also sending delivery orders whereby the entrepreneurs only ordered the required goods via telephone or short message (whatsapp), and the wholesalers further delivered them. besides, a few entrepreneurs also made their own dyes whose substances were taken from natural resources such as leaves, sap, and fruits from a variety of plants which were available in the surrounding environment. the primary equipment exerted to make batik tulis were wajan, canting, and gawangan. the suppliers of such equipment existed in surakarta city. the entrepreneurs obtained that equipment by making a direct purchase or getting delivered by the suppliers when a prior delivery order had been made via telephone. the entrepreneurs had a number of different needs with respect to the raw materials resting on the extent of their business scale. figure 2. value chain of batik tulis production source: primary data (2022). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 the ways of storing and maintaining raw materials were done not only keeping them in a warehouse, but also treating them with some approaches. the following details are a set of depiction in association with the storage and maintenance of batik tulis related materials and equipment. a. the storage and maintenance of mori fabrics were done by placing them in a warehouse. generally, the entrepreneurs had their own warehouses to keep mori and other materials. nevertheless, there were some entrepreneurs who also treated mori fabrics by covering them with plastic to prevent from dirt and dust. some others even provided special rooms which only contained mori fabrics. b. the storage and maintenance of malam were undertaken by placing it in a warehouse or in a particular place. c. the storage and treatment of dyes were done by placing them in certain containers, drums or jars. d. the storage and maintenance of batik-making equipment were undertaken by placing them in the location of batik-making once the related activities had been finished at some point. the entrepreneurs then only washed the tools and continuously stored them. the second stage is operations. the processes of batik tulis production were composed of seven (7) activities (figure 3). the processes started by designing the motifs and making the patterns on a mori fabric. the patterns were continuously thickened by utilizing canting or this way was commonly known as mencanting. the further process went to applying colors on mori whose motifs and patterns had been drawn in prior by using canting; mori was then drained; and washing mori was done after the colors had dried. furthermore, the process called nglorod was carried out. nglorod referred to an effort made to prevent malam (wax) from adhering to mori http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 by means of dipping it in hot water. the last stage or process was to dry mori until it was completely dry and ready to display. figure 3. batik tulis production activities source: primary data (2022). the long-time duration that took in the process of pencantingan (painting and coloring by utilizing canting) and the high labor wage specifically those dealing with pencantingan became the main problem in this industry. each of the batik tulis entrepreneur took different time duration while working with a piece of batik fabric. such difference resulted from the complexity degree of batik motifs. the batik fabric whose motifs were not too complex could be produced within one day, but that having complex motifs could plausibly take time even up to one week. in general, the work system employed freelance workers, namely part-time workers who took and did the work at home. the number of workers engaged in the production of batik tulis was various. the entrepreneurs had varied workers. some entrepreneurs had 3 workers, 8 workers, even more up to 25 workers. the number of workers rested on the level of difficulty and the working system which had been legitimized by the respective batik tulis entrepreneurs. some activity stages were carried out by the same workers, and some others were done by diverse ones. the workers in overall had good skills. the entrepreneurs at some point did not need to teach them any longer vis-a-vis the related skills such as the mastery in batik tulis patterns. the entrepreneurs only took control to direct their workers in order to manage to produce batik tulis which was good, smooth, and http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 neat. almost every entrepreneur enacted this way. nonetheless, when someone came to offer himself/herself to become a batik worker, the entrepreneurs would just further ask him/her to draw. that batik tulis entrepreneurs would continuously assess whether his/her work was acceptable as expected or not yet. the generalizable convention, such as prior experiences corresponding to batik-making those workers should have possessed, did not seem to be a high priority for the entrepreneurs as the formality the entrepreneurs at some degree applied such criterion to the prospective workers. however, all entrepreneurs in average had got the workers who had already been adequately experienced, at least they had got 5-year experiences, and maximally their experiences had even reached 50 years. some of them had even worked for two to three generations of the ownership, so no wonder if workers there had already been experienced for decades. the quality control of production was executed at each stage of the production. some entrepreneurs relied on one worker to help supervise, but there were also other entrepreneurs who directly intervened to check the quality of the production results. the control of quality was more oriented towards checking the stitching and fabric quality. if at some degree the stitched threads were found to be cumulatively bad, the work result could not be acceptable. for colouring, the problem was not often found. the number of productions amid the entrepreneurs was diverse. this difference resulted from a couple of factors such as demand, complexity, and weather. within one day, some entrepreneurs only produced one piece of batik tulis, but there were also some entrepreneurs who were capable of producing even up to 100 pieces in one day. the third stage was outbound logistics, that is marketing and sales. the means of marketing was undertaken by displaying the products in galleries. the galleries were generally located http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 proximately or exactly in the entrepreneur’s residence. some entrepreneurs also promoted their products online. the entrepreneurs felt getting much help from their customers who voluntarily gave their friends information related to the entrepreneurs as the reference so that their customers naturally continued to grow. the consumers of batik tulis were comprised wholesalers, retailers, and end consumers. almost all of the entrepreneurs sold their products to wholesalers. in average, the wholesalers came from outside surakarta such as jakarta, bandung, kalimantan, blitar, pekalongan, bali, and even from malaysia. furthermore, 50% of product sales were executed to retailers. the retailers mostly came from surakarta (beteng, klewer, and laweyan) and yogjakarta (beringharjo). commonly, the batik tulis entrepreneurs also sold their products to the end consumers. they were the customers or visitors who directly came to the entrepreneurs’ galleries or the locations of their businesses. however, there was an entrepreneur who was not served to end consumers on account of focusing on being provided to wholesalers and retailers. the value of selling products in one month ranged from rp6,000,000 ($429) to rp1,000,000,000 ($71,429). the entrepreneurs marketed their products on a local, national, and foreign scale. the local marketing was done to fulfill the consumers’ demand in surakarta, yogyakarta and the surrounding areas. at the national level, the marketing pervaded to jakarta, bali, bandung, semarang, malang, a number of cities in the sumatera provinces, and several cities in the kalimantan provinces. in addition, the marketing at the foreign level spread to various countries in asia (japan, malaysia, and vietnam), australia, europe (spain) and even the united states of america. the fourth stage was services. not all of the entrepreneurs provided after-sales services. some entrepreneurs believed that their products which were sold had passed strict quality control. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 the given after-sales service was only limited to the return of products perceived to be less perfect in terms of their quality. the performance as regards the main activities of batik tulis entrepreneurs value chain was in general good (high) and some activities even had a very high performance. the activities whose performance was categorized as high and very high covered some aspects such as types and variations of motifs, the coloring quality, and the quality of service to enhance and maintain the value of products. on the other side, some activities whose performance was classified as less than good (low) were those pertaining to the entrepreneurs’ efficiency in storing raw materials and maintaining the security of batik tulis storage. batik tulis entrepreneurs have three kinds of supporting activities encompassing technology, human resources, and infrastructure (mangifera 2015). the entrepreneurs did not always exert the up-to-date technology in their businesses. the types of equipment used by the entrepreneurs from time to time were generally the same. in general, the entrepreneurs decided not to replace their tools with more sophisticated ones. as encountered, when some entrepreneurs ever tried to switch to apply the latest equipment, the obtained results in fact were not as good as when utilizing the old equipment. it was noticeable and could be discerned that there needed a special modification of new equipment for production. the number of workers engaged in the production ranged from 5 to 25 workers. mostly they were originally from surakarta especially laweyan. however, a few of workers also came from other districts out of solo such as klaten, sragen and wonogiri, wherein they usually elicited the information in respect of working opportunities in entrepreneurs as it was spread by word of mouth. the workers from outside surakarta took their work home in order to be done there. all production houses had the same work schedule from monday to saturday, starting out from 8 a.m. till 4 p.m. this was done in order to inhibit the presence of social gaps amid the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 employees. the owners of batik tulis production houses mostly did not have supplies in the form of raw materials, and if probably any, they even only stored such materials in a warehouse without any proper management such as recording or reviewing inasmuch as they had to be dealing with the production work every day. in the meantime, concerning with batik tulis that had already been in the form of fabric, it usually had been packed in plastic and stored in a storage room. the maintenance of equipment which was undertaken was at a very standard level by means of merely washing them after use and placing them in a certain place. there was no special treatment because the equipment did not require complex ways of maintenance. in general, the performance associated with supporting activities of the value chain was good (high), and some activities even had very high performance, namely those in relation to the infrastructure owned by entrepreneurs. in the meantime, the supporting activities having a low value were in the aspects of knowledge and technology development of equipment. 4.2. value chain analysis the processes of batik tulis production subsumed several activities. each of the production processes had an added value which affected the final products (gereffi and lee 2005, sturgeon 2001). the results based on value chain analysis, it revealed that along the value chain production, there were several activities that have been added values. based on the results in table 2, the production costs of one piece of batik tulis fabric was rp147,500 ($10.54) while the costs of accessories and other supporting costs was rp20,350 ($14.31). thus, the total costs incurred for one piece of batik tulis was rp220,600 ($15.76) and the selling price for one piece of batik tulis fabric was rp700,000 ($50). thus, an added value of rp479,400 ($34.24) or 68.5% was gained. the highest added value obtained from the activities of sales were associated with the sales to wholesalers and retailers since from these sales entrepreneurs could earn bigger http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 and faster profits compared to those done to the final consumers through displaying the products in galleries. the average margin of profits earned by each entrepreneur in exceeded 50% of the main production costs. table 2. added values of batik tulis production no costs lowest costs (rp) average costs (rp) highest costs (rp) average production costs (rp) added values (%) 1. mori fabric 34.000 35.000 36.000 5.00% 2. malam 17.000 17.000 17.000 2.43% 3. dyes 500 750 1.000 0.11% raw material costs 52.750 7.54% 4. designing and painting 5.000 7.500 10.000 1.07% 5. penolet 80.000 120.000 160.000 17.14% 6. coloring 7.500 14.000 20.000 2.00% 7. quality control 4.500 6.000 8.000 0.86% production costs 147. 500 21.07% 8. supporting materials 2.500 2.750 3.000 0.39% 9. electricity 1.700 1.750 1.800 0.25% 10 equipments (gas, canting, and computer) 3.950 3.950 3.950 0.56% 11 sales fee 14.000 14.500 15.000 2.07% supporting costs 20.350 3.28% total costs of production 220.600 31.89% 12 selling price to wholesalers/retailers 700.000 68.11% note: values are in idr source: primary data (2022). 4.3. stakeholders analysis batik tulis industry makes a significant contribution to the regional economy of surakarta and indonesia as well. the results of the value chain analysis based on mactor showed that not all activities in the batik tulis industry were efficiently and effectively operated, thus the operations and coordination among the related stakeholders are really necessary. based on indepth interviews with the stakeholders, there were at least nine (9) types of players incorporated into this industry. the stakeholders were comprised suppliers, entrepreneurs, wholesalers, retailers, end consumers, fpkbl, development planning agency at sub-national level http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 (bappeda), department of industry, and university. the aforementioned stakeholders have diverse concerns in their activities as elucidated by mangifera (2019). stakeholders in batik tulis industry can be categorized into three groups (reed et al. 2009, mangifera 2019), namely: (1) beneficiaries, comprised of individuals, or organizations, including entrepreneur, supplier, wholesaler, retailer and end consumer; (2) intermediaries, comprised of organizations, community groups or individuals who can provide strategy and or facility in batik tulis industry development, including: university that has programs relation with batik tulis industry development; (3) policymakers, comprised of institutions authorized to make decisions, policy and legal basis, such as development planning agency (bappeda), and department of industry (disperin). figure 4. main objectives of stakeholders source: the results of mactor analysis (2022). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 based on figure 4, there were four (4) major objectives of the stakeholders corresponding to the industry namely profits (profit), reputation, regional economy, and main tasks alongside functions (in indonesian term called tupoksi). the differences of such objectives frequently lead to conflicts of interest in the development of industry; and this result was in line with the results of mangifera (2019). the aspects of profits and reputation represented two stakeholders’ main objectives which were the strongest and the most dominant in the batik tulis industry. in general, the stakeholders oriented towards earning profits and gaining a good reputation and so far, being engaged in the activities vis-a-vis the development of batik tulis industry. figure 5. stakeholders competitiveness source: the results of mactor analysis (2022). anchored in the analysis of stakeholders by using mactor, it was also explained as regards the competitiveness of each stakeholder viewed from the influence and the level of interdependence. the entrepreneurs became the key players in the development of this industry since they had been totally engaged and dealing with these entrepreneurs at the middle or large scale, this result is supported by mangifera (2019). thus far, the entrepreneurs were those who http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 determined the progress and deterioration of batik tulis industry. this condition was also portrayed in the map of influence and interdependence amid the stakeholders in the development of batik tulis industry in surakarta, whereby the aforementioned map represented the position of each stakeholder alongside the influence and interdependence of one another. the results of the batik tulis competitiveness are revealed in figure 5 and figure 6. the results of mactor analysis on the stakeholders’ influence and dependence in batik tulis development were classified into 4 (four) quadrants (isa, fauzi and susilowati et al. 2019, isa and kusmiati 2013, mangifera 2019). 1) quadrant i is an independent factor (strong influence weak dependent). this quadrant includes a player that has strong strength and weak dependence. the player is the key player in batik tulis development. 2) quadrant ii is a linkage factor (strong influence strongly dependent). it includes players that have a strong influence and strong dependence. they should be determined meticulously since the relationship between goals is unstable. 3) quadrant iii is dependent factors (weak influence strongly dependent). it includes players that have weak influence and strong dependence. the players in this quadrant are non-independent ones. 4) quadrant iv is an autonomous factor (weak influence driver weak dependent). this quadrant includes players that have a weak influence and dependence. the player is less related to other players in batik tulis development. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 figure 6. influence and interdependence among stakeholders source: the results of mactor analysis (2022). based on the stakeholders’ analysis, the results revealed in figure 6 that the stakeholders were at three different quadrants, namely quadrant ii, quadrant iii, and quadrant iv. there were no players found in quadrant i which mean that no players have major influence in developing as well as have no greatest impact in developing batik tulis industry di surakarta. those players who in quadrant ii were suppliers, entrepreneurs, wholesalers, retailers, and fpkbl. they should be determined meticulously since the relationship between these players was unstable because of their main objectives are mainly covered both profit and reputation. those in quadrant iii were the department of industry and bappeda. the players in this quadrant are non-independent ones because of their main objective were not to develop batik tulis industry. in turn, the stakeholder in quadrant iv was the university. the player was less related to batik tulis development and may have few relationships that will be eliminated from the stakeholders in batik tulis development (reed et al., 2009). in f l u e n c e depencence entrepreneurs consumers university department of industry bappeda retailers fpkbl wholesalers suppliers quadrant i quadrant ii quadrant iii quadrant iv high high low low http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 as illustrated in figure 7, the relationship among the stakeholders in the development of batik tulis industry in surakarta showed that their relationship among entrepreneurs manifested strong values for the stakeholders of batik tulis entrepreneurs, suppliers, wholesalers, and retailers. it portrayed a more central position of those players in light of having a high level of mutual concerns. the stakeholder with the lowest convergence rate was the university. this was resulted from that the university did not have a firm interrelationship with the objectives of other players. figure 7. convergent player map in batik industry development source: the results of mactor analysis (2022). the relationship amid the players eventually classified them into three large groups. the first group consisted of regional development planning agency (bappeda), department of industry, and fpkbl. the second group comprised batik tulis entrepreneurs, suppliers, retailers, consumers, and wholesalers. in turn, the third group consisted of university. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 university in this regard became an interesting phenomenon on account of having no strong influence in terms of developing batik tulis industry in surakarta. based on the results in figure 7, it is useful for arranging the institutionalism in developing batik tulis industry in surakarta. the stakeholders that were in the same quadrant had the same goals, interests, or concerns, and they could properly cooperate if compared to those from different quadrants. this implied that when they were involved in one or the same institutional, the development of batik tulis industry could further run more effectively and efficiently this result is supported by setyawan et al. (2015), mangifera (2019) and isa et al. (2021). 5. conclusion this study provides a detailed description of the production process of hand-drawn batik in each of its stages, starting with the activity of obtaining raw materials, the production process, and selling to final consumers. the calculation of value addition is also obtained for each chain of activities involved, starting from raw materials to finished products in the form of written batik cloth. stakeholders involved in the production process and trade of hand-drawn batik are those who interact in the value chain system from suppliers of mori cloth, sellers of dyes, equipment shops, employees of batik motif makers, the production department from the colouring and dyeing process to drying, to the sales department, and consumers. the sales of batik tulis were generally carried out to wholesalers from both domestic and overseas, retailers, and final consumers. the highest added values obtained were associated with the sales to wholesalers and retailers since from these sales activities the players could earn bigger and faster profits compared to those who carried out sales directly to the final consumers through displaying the products in galleries. the average margin of profits earned by each batik tulis entrepreneur exceeded 50% of the main production costs. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 profits and reputation represented two stakeholders’ main objectives which were the strongest and the most dominant in this industry. the entrepreneurs of batik tulis became the key players in the development of the industry since they had been engaged and dealing with this business. the importance of the role of stakeholders starting from the head of local batik craftsmen groups, government, associations, and universities are explained in the form of an engagement diagram and their respective roles in the development of strategies to increase competitiveness along the value chain. support from the government, universities, and associations is very important to improve business performance, especially in the provision of information, networks, resources, technology, and access to funding, incentives, and training. an interesting finding here is the importance of considering business characteristics in value chain activities so that they can be considered in formulating strategies considering the characteristics of each batik business are very unique and different, there are values of local wisdom and cultural heritage that are still attached that are maintained because of the business. is a family legacy business. meanwhile, this study also reveals that the practice of making handdrawn batik is very heavy depending on the ability of the staff to make the motifs, which are currently increasingly scarce, causing high production costs, considering that the process of making written batik motifs is done manually, it takes days according to the complexity of the pattern. batik made. therefore, involving universities and the government in terms of providing skilled human resources in the technology-based design phase, will facilitate the implementation of production cost efficiency. however, not a few companies still maintain the value of art and culture through craftsmanship because they believe that every motif made contains a deep philosophy and meaning because of the combination of art, beauty and history, and the feelings of the maker. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 138-167, january-june 2023 https://doi.org/ 10.1344/jesb2023.8.2.38898 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 this study recommends that the entrepreneurs to further optimize the activities that contribute 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rationalization; consolidation; ini; inisel; ict introduction the thoughtful and in every sense devastating global recession of recent years has invigorated an already long-standing debate about the different impact of crises on the pace, magnitude and corresponding author: e-mail: angel.calvo@ub.edu received 14 may 2018 accepted 26 september 2018 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 manner in which restructuring decisions were made, a reflection of the diverse state of economic development and institutional characteristics, particularly the role of the state and the system of industrial relations (eurofound 2015; rose et al. 2000, 601-625)1. in this sense, the analysis of the differential characteristics of the high-tech firms has sometimes been tinged with prejudices about state intervention (ordover and willig 1999, 103-104). the article recovers the central debate on the growth model and on the characteristics of state-owned enterprises and their relative efficiency, which had its peak during the 1980s and the beginning of the following decade2. something similar, on the other hand, has occurred with the endless academic debate on the restructuring of state enterprises, relaunched at that time, through the transition from central planning to market economies, for many the greatest social experiment in modern times, baited by the wave of privatizations under the washington consensus and ignited by the growing weight of some brics or emerging economies (abramov et al. 2017, 1-23). a debate, by the way, that in spain had abundant ramifications, some from contributions of empirical evidence3. it might be worth considering particularly for our case the controversy on the privatization from an interdisciplinary approach, which has remarkable contributions (clifton, comín, and díazfuentes 2006a, 736-756; clifton, comín, and díaz-fuentes 2006b, 121-153; clifton, comín, and díaz-fuentes 2003). in spain, the debate was often based on contributions that placed 1 the european commission considered in crisis a company condemned to disappear in the short or medium term without intervention by the state: european commission (2014, 3-5). 2 vickers and yarrow (1988), pestieau and tulkens (1993), and martin and parker (1997), among an extensive bibliography collected by argimón, artola and gonzález-páramo (1997, 5-6). as an example, several clue questions were analyzed by bös (1986) and (1988, 409-414): the interdependencies with the private economy; adjustment to monopolistic pricing in the private sector as well as to rationed markets; managers of public enterprises and unions relationships; maximizing output or revenue, energy inputs and price indices. 3 collected to satisfaction by hernández (2004, 13-21). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 advanced technology in the center, while at the same time stressing the role of the state and the risks of technological dependence4. no doubt for visibility reasons, the study of the spanish industrial reconversion has focused on the general aspects of the reconversion policies, sometimes in charge of prominent players in those processes (aranzadi 1987, 162-163; aranzadi 1989, 258-261; aranzadi et al. 1983, 317325; boyer 2004, 239-304; fernández marugán 1992, 135-194; garcía 1989, 262-276; guerra and tezanos 1992; solchaga 2017), and in energy sectors and heavy equipment. the advanced industries of the third industrial revolution have remained at least marginalized from the attention of scholars, if not forgotten. this statement refers in particular to information and communication technologies (ict), whose interest has nevertheless increased among business history researchers (haigh 2001)5. this article aims to mitigate this unfair situation and examine the restructuring of public sector companies in spain, focusing on the holding of icts of the instituto nacional de industria (national institute of industry, henceforth ini). 4 among a large list, see buesa and molero (1986); molero (1988), and lópez (1992, 30-55). 5 business history is one of the more relevant approaches followed by james cortada addressing the history of computing (cortada 1996a, 1996b); it predominates in batiz-lazo, b. and boyns (2004, 225-232) and batiz-lazo (2009, 1-27). of great relevance are the interdisciplinary approaches: business history of computer firms marries up with the development of key computing technologies in campbell-kelly et al. (2014); akera (2006), mixes business history with several historical genres -biography and the institutional history of science; finally, riordan and hoddeson (1997) and reid (2001) overview the history of electronic engineering and the business history of the electronics industry and the integrated circuit. ibm wins widely in the monographs devoted to individual companies. the overview of the firm’s development, based on archival sources (pugh 1995), centers on the relationships between the ibm’s market positions, technologies, and internal dynamics. two monographs devoted to individual companies other than ibm are those of campbell-kelly (1989) on icl, and norberg (2005) on two of the first startup companies in the industry -the eckert mauchly computer co. and engineering research associateswhich merged to found univac. an attempt to overcome the dominant journalistic vision in microsoft's story: fisher et al. (1983); evolutionary economics: lechman (2015); garretsen and brakman (2005). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 the work is part of a broader project, directed to study a strategic sector in the first years of the new millennium, some of whose results have been presented to the public6. the issues addressed in the manuscript are of great interest -restructuring in a key sector with r&d intensive firms (telecommunications). methodologically it describes the changes that have taken place in the ict sector in two related aspects: strategy and organizational structure. it belongs, then, to the category of a case study, contextualized within a broader discussion on privatization as well as restructuring in western europe and predominantly descriptive in nature, straddling industrial history with strategic management. the research draws furthermore on extensive primary historical sources of both public and private origin together with reports and studies from large international organizations. the paper is structured into four main sections, which include the introduction, a presentation of the public sector of information and communication technologies, the restructuring of the public sector of icts and the birth of the inisel group, called to play a prominent role in the future for its leadership in the setting up of the technological firm indra. before moving forward, it is advisable to lay down a series of preliminary considerations about the content and scope of the topic addressed in order to better track the story. firstly, information and communication correspond to industries and companies that use intensive cutting-edge technologies, particularly electronics (mohr, sengupta, and slater 2009, 9). as 6 seminar “industrialización, desindustrialización y reindustrialización en españa. lecciones de la historia reciente,” universidad complutense de madrid, madrid, april 20-21, 2017 and the session “industrialización, desindustrialización y reindustrialización en españa” within the xiih conference of aehe. lecciones de la historia reciente”, both organized by josé l. garcía ruiz and jesús mª valdaliso to whom i thank your warm welcome to my work. to these papers i refer for a greater theoretical elaboration on the industrial policy and wider references to the existing bibliography. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 regards size structure, in the spanish electronics industry, small and medium-sized units predominated7. regarding terminological precisions, as established by the oecd, state-owned enterprises (soes) are characterized by significant control maintained by the state through significant total, majority or minority ownership. such definition includes companies that are owned by the central or federal government, as well as state enterprises of regional and local governments (sturesson et al. 2015, 8)8. in this sense, the value of state enterprises in the oecd area exceeded 2 trillion dollars and an employment of 6 million people. but their importance is determined not only by the weight they have in the productive economy (average of 2.5% of national employment), but also by being highly concentrated in strategic sectors on which large portions of the private economy depend. significantly, half of state-owned companies by value operate in network industries (telecommunications, gas and electricity, transportation and postal services) (oecd 2014). the strategic nature of the sector imposes a strong state intervention in its various facets of regulator, designer and policy inspirer, direct investor and buyer of products. in this last aspect, it is worth remembering the percentages higher than 70% of the total market in the communication equipment and minors in computers and office equipment of the large developed countries, with the sole exception of the usa (locksley 1983, 74). it seems appropriate to draw the european framework in a global context where games are being made more and more between usa and japan9. in the world production, the european 7 there was only one of the top 50 in 1982, one of the top 25 in 1992, then there were five of the top 100: buesa (1994, 12). 8 it is worth noting that the common definition for a public company is one that has issued securities through an initial public offering and is traded on at the stock exchange market. 9 question écrite 3,690 de m. andré rouvière (gard soc), journal officiel du sénat, 4/12/1986, p. 1670; réponse du ministère de l’industrie, journal officiel du sénat, 14/5/1987, p. 760. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 electronics industry had significant positions in telecommunications equipment, medical informatics, professional equipment, and software and services. the european market share of 13,000 european information technology companies of all sizes gained eight percentage points from 47% between 1984 and 1989. at company level, philips and thomson were among the world's six largest consumer electronics manufacturers, and s.g.s. thomson number two worldwide for non-volatile memories. however, the european trade balance remained strongly negative, with an overall coverage rate of around three quarters of the total10. only four european companies were among the top 20 in the world semiconductor market in 1985: philips (6th), siemens (15th), thomson (17th) and s.g.s. (20th). in france, thomson acquired the north american mostek11. as for comparative sense, some similarities and differences with other european countries are worth highlighting. the italian case seems the most inspiring to carry out this exercise given the existence of a public body, which, on the other hand, had inspired the franco dictatorship in spain to create the ini. as for the similarities we find the existence of a telecommunication monopoly in the hands of the national telephone company of spain (ctne as the acronym of compañía telefónica nacional de españa) and stet, in spain and italy respectively. the differences point to several concerns. firstly, it must be underlined the great boost given in italy to the electronics sector after the oil crisis of 1973 –long before the spanish effortsalthough it was limited by inadequate public backing to r & d. secondly, support for vertical integration should be highlighted at least in a double direction. the electronic division of iri came under the control of the italian operator stet to exploit the link with telecommunications, also 10 question écrite 13,785 de m. daniel percheron (pas-de-calais soc), 9e législature, journal officiel du sénat, 14/2/1991, 289; réponse du ministère de l’industrie, journal officiel du sénat, 28/11/1991, 2645. 11 question écrite 3,690 de m. andré rouvière (gard soc), journal officiel du sénat, 4/12/1986, 1670; réponse du ministère de l’industrie, journal officiel du sénat, 14/5/1987, 760. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 controlled by stet. iri also took over società generale semiconduttori (sgs), the largest italian company in the field of electronic components, hit by the crisis after the withdrawal of the us founding group. this transaction differentiates between the two countries, since the electronic sector of spanish ini lacked a component sector, considered as basic by the government and suffering from inefficiencies in size, technology and financial structure of the companies (baumol 1980; kumar and anjali 1994, 60-109)12. some of the elements mentioned, particularly at the company level, point to certain interesting peculiarities that france presented, in the framework of a round trip nationalizations/privatizations. beyond, one of the peculiarities of france was the existence of public r & d laboratories13. information and communication technologies at the ini at the beginning of the decade of 1980, spain aligned among the european countries with companies heavily owned by the state, although with a degree below the average of the ec14. the adjustment policies of the public sector are part of the broader reconversion carried out by the socialist governments in the 1980s, largely as an adjustment for entry into the ec. data available show that gdp annual growth from 1979 to 1996 only overpass a three percent 12 there were nine companies of electronic components, one of which – piherwith four subsidiaries: ministerio de industria y energía (1983, 163-164; 170-173). in 1993, the market for electronic components amounted to 168 billion pesetas, representing 14% of the total market, 15 percentage points less than ten years earlier. 13 public r & d laboratories: c.e.t.-c.n.s. and c.e.a.-l.e.t.i. sgs-thomson, for example, a national company, was considered a tremendous success of the french microelectronics because it was born in the public sector: dominique strauss-kahn, minister of the economy, finance and industry, senate of france, 11 december 1997; 26 april 1989, 398. sgsthomson expected to benefit from significant public aid (paca region, datar, european fund) to install a new semiconductor manufacturing plant near aix-en-provence: senate of france, december 5, 1995, p. 3,840. while thomson-s.g.s was transferring productions to southeast asia and the united states, it announced the elimination of thousands of jobs in europe, as siemens and philips forecasted for their part: thomson was purchased by lagardère group: l´économiste, 24/10/1996. 14 state-owned enterprises/gdp in 1982: ce: 14.1%; spain: 6.8%: dehesa (1993, 131). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 between 1987 and 1990, while in the previous period, from 1961 to 1978 gdp growth overpassed the three percent in each year15. some eight hundred companies in eleven sectors contemplated the law of reconversion and reindustrialization of 1984, with an estimated loss of 830,000 jobs (burgess 2004, 25-26). under luis carlos croissier at the ini, the government promoted the recovery of the prestige of public companies. secondly, it encouraged the privatization of numerous companies of the public group in which certain specialists point as a "dual process" of privatizations in the ini, which seemed to have expected the active participation of the autochthonous financial capital and that of foreign multinationals16. through successive transformations, the spanish public productive sector was grouped into three holdings: the group of the national institute of industry (ini), which was divided into two sub holdings and covered the basic and strategic industries; the inh group, which brought together the hydrocarbons sector (oil, gas and petrochemicals) and the patrimony group, which encompassed service and banking companies (aceña and comín 1991, 539)17. the electronics had arrived late and timidly to spain, coinciding with the dawn of the democratic transition. part of the efforts came from the public sector through the ini and indirectly through ctne18. in subsequent years, the purposes of developing the cutting-edge technology and electronics sectors fell short. at the beginning of the new millennium, spanish electronic production represented 5.5% of european production, 3.5 percentage points below 15 carreras and tafunell (2004); bliss and braga de macedo (1990, 193) claim that the adjustment resulted in significant growth in the economy, at the expense of maintaining a high level of unemployment; see also prados (2017). 16 this "dual process" of privatizations in the ini would have begun with a financial restructuring and followed with a sale to buyers who were favored by the operation: heywood (1999, 171). 17 for an analysis of the restructuring of the public sector see parker (2002, 200). 18 for an overview, see duch-brown and fonfría (2014, 1). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 the weight it had in the european market (lawlor, rigby and smith 2005, 55-56). given the modest place that european electronics occupied in the world market, we can conclude the spain's scant relevance. ini's commitment to information and communication technologies (icts) began in the 1970s via firms generally linked to the military industry, and some subsidiaries of foreign companies, which incorporated electronics into traditional technology and through creation or acquisition of new ones. we refer to the historical experiencias industriales (eisa), to empresa nacional de óptica (enosa), created in 1951 with orientation to military optics, and to equipos electrónicos, s. a. (eesa), founded in 1971 by the french thomson and acquired by the ini seven years later to strengthen the defense market (molas-gallart 1992, 64). for its part, eria (1973) emerged in the it services sector, while sociedad española de construcciones e industria (spanish society of construction and industry, secoinsa) was the large computer hardware company, the result of the technological-industrial-financial alliance with japan's fujitsu, the monopolist operator ctne and a spanish banking group (table 1, infogram)19. table 1. infogram with the historical evolution of the electronic manufacturing firms in spain and the merger processes firm year of creation field ownership later ownership experiencias industriales (eisa) 1921 artillery systems and control equipment for transport eisa empresa nacional de óptica (enosa) 1951 defense optics ini equipos electrónicos s. a. (eesa) 1971 defense optics thomson ini (1978) eria 1973 it services 19 the group of banks was formed by the hispanoamericano, bilbao, urquijo, central, santander, vizcaya, popular and banesto: calvo (2014, 222-224). after a period of marginalization of industrial defense policy, in the early years of the 1980s the spanish government, very aware of western military alliances, began to pay attention to this forgotten sector: latham and hooper (2013, 147). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 firm year of creation field ownership later ownership secoinsa 1975 computer hardware fujitsu, ctne and spanish banks telefónica estudios y realizaciones de diseño informatizados (erdisa) 1981 services to industry in electronics and computers ini, control data ibérica aerea software ini ervisa computer-aided design and manufacturing aerea (ini) i cuatro electro medical equipment ini isel pesa telesincro 1963 computers joan majó bull entry (40%) inisel 1985 professional electronics merger of eesa and eisa gyconsa 1991 defense equipment inisel/hughes indra/hughes sadiel 1984 society to promote investments eria 10% empresa nacional de ingeniería y tecnología (initec) 1964 engineering services ini 1999: técnicas reunidas and westinghouse, which sold 25% to dragados industrial defex 1972 bazan, casa, eisa, enosa and santa bárbara (51%) microcare (usa) 1956 precision cleaning systems in electronics and the metal finishing industries enisa 33% selesmar 1980 marine radars and arpa anti-collision systems segnalamento marittimo ed aereo (florence) eisa 20% eritel 1991 software for computers telefónica (39%) and the ini (51%) through entel and eria indra 1993 information and control technologies inisel (66.6%) and ceselsa (33.3%) 2/3 inisel y 1/3 ceselsa. source: own elaboration from the text. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 figure 1. the electronics and computer division of the ini. sales, 1984 source: own elaboration from reorganización de empresas electrónicas del ini. creación de un holding en el sector electrónico-informático del ini. let's place ourselves in 1984, taking advantage of a diagnosis and various recipes from the ini itself. at that time, the electronics area of the ini was composed of a set of ten public or mixed companies, belonging to three large fields -computers, electronics for the defense, and civil electronics-, from which consumer electronics and components were excluded (figure 1). the main customers were diverse organisms of the national defense sector (appendix 1 and 2)20. regarding the productive structure, the computer science area headed the activity of the division with 45% of the turnover, followed by the electronics for the defense with 30%, while the civil 20 it had a sales volume of 25,576 million pesetas, of which 15.83% corresponded to exports, the order book stood at 26,275 million ptas., and employment at 3,581 people: reorganización de empresas electrónicas del ini. creación de un holding en el sector electrónico-informático del ini, ini archives. as an example, eisa’s r & d department employed 49 people in 1983, almost a quarter of which were senior graduates and 220 million pesetas had been allocated to it, 6% sales (the overwhelming majority for development and preparation of prototypes and the remaining 11 million for material investments in laboratory equipment); as for the origin, 79 million pesetas came from external financing (caycit and cdti, mainly): eisa (1984). four years before, the share capital of the division was 3,266 million ptas., its sales were 7,688, and its r & d expenses 351 and its staff was 2,646 employees: bit, 16, may-june 1981,8-12. 0 2000 4000 6000 8000 10000 12000 14000 military electronics civil electronics computing services computer hardware without secoinsa total http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 professional electronics held the remaining 25%, in each case in approximate percentages. some of these companies were leaders in their respective areas, as was the case with television equipment, with electromedicine and with digital communications, although here under a subsidiary leadership given that the industrial property of the product belonged to a shareholder of the company that developed it21. already since 1983 the ini followed a policy involving the “reduction of losses and the formation of a profitable and competitive industrial group.”22as a result, the expansive phase the electronic division experienced in the early 1980s took a sudden turn next. this was not seen by the heads of the division, who argued in favor of their arguments the increase in the volume of activity in terms of turnover by 25%, a notable export orientation a quarter of the turnover and an appreciable level of spending -7% of its sales approximately on r & d or investments in technology. linked to market and investment, r & d had the double facet of its increase and its strategic nature. the expense of the division for this concept increased by 6.5 between 1979 and 1984, from 184 to 1,193 million ptas. this came about in a country, spain, whose industry made a technological effort that barely reached 0.3% of gdp, well below the surrounding nations. according to the same sources, all the companies of the division were going to finish the year of 1984 very close to the equilibrium point and in an optimum situation to obtain benefits hereafter23. 21 appearances of the director of the electronic and computer division of the ini in relation to the national electronic and computer plan: report of the congress of deputies proceedings (diario de sesiones del congreso de los diputados, dscd), 226, october 23, 1984, 7, 90-7, 93. by number, the division amounted to 5 % of the total companies of the ini: informe anual sobre la gestión del sector público en 1985, congress of deputies, june 27, 1990, p. 109. 22 el país, august 13, 1988. the socialist party, in office, expressed its support for an explicit strategy to achieve the best and most suitable implementation in the different subsectors of electronics and information technology: speech by eugenio triana (socialist group), dscd, 226, 23 october 1984, pp. 7,090-7,093. 23 appearances of the director of the electronic and computer division of the ini in relation to the national electronic and computer plan: dscd, 226, october 23, 1984, pp. 7,090-7,093; appearance of the director general of electronics and new technologies, report of the senate proceedings, 111, november 19, 1991, pp. 31-34. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 an argument wield against accusations of withdrawal referred to the strategy of diversification of activity and markets, together with the search for greater qualification in a dynamic sector, threatened by obsolescence. the decision to apply information technology and electronics to industrial productivity had resulted in the creation of a service company named computerized design studies and achievements (estudios y realizaciones de diseño informatizados, erdisa) through an agreement with the company control data corporation as a technological partner24. the ini based its claim of being at the forefront of technology on the contribution of secoinsa to the manufacture of the tesys system, a technological development of the ctne and node of the spanish data transmission network. the activity of aerea, software company of the division, was due to the development of a programming language, object of an export agreement with one of the most important north american multinationals of the software and that had managed to penetrate the world market. for its part, the subsidiary of aerea, called ervisa, provided services in the field of computer-aided design and manufacturing. the division also planned entering new fields, giving priority to computer-aided teaching and robotics. but significantly for its positioning in the market, the division aspired not so much to manufacture robots, despite having its own technology, but to offer the country an engineering skills in robotics25. the strategy of internationalization of activities was added to the demand for expansion, diversification and the struggle to be at the vanguard. in a group of relatively small size, this strategy meant not only the aforementioned export but also the establishment of bridgeheads or nuclei of expansion in the markets with the greatest potential. these were basically three, 24 el país, december 7, 1983; spanish economic news service, 38, 1-51: 9. 25 appearances of the director of the electronic and computer division of the ini in relation to the national electronic and computer plan: dscd, 226, october 23, 1984, 7090-7093. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 certainly diverse: the united states of america, the european economic community (eec) and ibero-america. in the first, the division had two bridge heads, the beginnings of two actions and perspectives of a third. in the eec, possibly in the netherlands for fiscal reasons, the ini planned to set up a mixed software company in a technological alliance with a french group and from its own company. regarding latin america, already an important market, the intention was to create a platform, possibly in argentina, for which institutional relations were being established with the government of that country26. the ini continued betting on a spanish business group strengthened, consolidated, stable in the long term and capable to ensure, either alone or in partnerships, national participation in european industry and services. this required, however, to adopt divestment or participation measures in certain businesses (salas 1991). later on the cuts continued, which the opposition did not fail to throw in the face of the government. in this regard, investments in r & d of the ministry of industry and energy (miner) suffered a significant contraction of 13%, equivalent to about 7,000 million pesetas (triana 1991, 8-9; report of the senate proceedings, 111, november 19, 1991, 31-34). the government then countered the attacks with the full force of the national electronic and information plan (plan electrónico e informático nacional) for almost a decade and the launch of the industrial technology action plan (plan de actuación tecnológica industrial, pati). ascribed to an industrial policy, it was a three-year plan for 1991-1993 of a horizontal nature with the sole objective of achieving a significant increase in the technological effort of spanish industry in various sectors steel, footwear, textiles and capital goods. it was embodied in 26 appearances of the director of the electronic and computer division of the ini in relation to the national electronic and computer plan: dscd, 226, october 23, 1984, 7090-7093. previous activity in the computer science of the semi-public monopolist ctne in argentina: calvo (2016, 250-251). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 specific plans, including the electronic and computer industry. its figure in the initial year was set at 0.42% of gdp and 0.57% at the end. in total, the government hoped to mobilize public funds for a sum slightly higher than 150,000 million pesetas. the funds would come from four different sources: the miner's own budget in the form of grants; soft loans from the center for technological and industrial development (centro para el desarrollo tecnológico e industrial, cdti); resources channeled to spanish companies by european community and non-eu programs and other public contributions of different origins and modalities, including funds from budgets of autonomous communities or the state administration27. in reality, between 1991 and 1994, miner allocated 23,000 million pesetas as a direct subsidies to companies to finance new product developments or improvements in production processes. in a reissue of pati until 1996, 28,000 million pesetas were planned to subsidize the r & d of the companies. nevertheless, the government admitted the low level of investment of r & d in the context of developed countries28. the restructuring of the public sector of icts returning to the sector that concerns us in the early years of the 1980s, reality left little room for doubt. in secoinsa a capital injection of 5,000 million pesetas was envisaged by the ini in 1983, with a positive effect on the income statement then in the red. but the financial reinforcement was followed by divestment with the sale of the stake in secoinsa to 27 comparecencia del señor director general de electrónica y nuevas tecnologías, diario de sesiones del senado (report of the senate proceedings), 111, 19 november, 1991, 31-34. in the autonomous communities and, as an example, the competitiveness plan of the catalan industry included four areas of preferred action internationalization, research and technology, services to companies, industrial and territorial rebalancing-, which distributed the bulk of 44,150 million ptas: mosconi et al. (2001). it is worth remembering that the supranational european policy of r & d promotion responded to the failure of national policies: kassim and menon (2002, 228). 28 desarrollo tecnológico 6, january 1994, 11-12, and 50; to this we should add the industrial quality plan. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 telefónica, its main client. what in the ini was a stonewalling became into the ctne, momentarily at least, in exponent of a firm policy of reindustrialization of the country, of integration of the performance of the operator and occasion to relaunch industrial activity, this time in alliance with the japanese multinational fujitsu, an aspect that deserves a separate study29. telesincro, one of its subsidiaries, and isel were to be integrated into a defensive and professional electronic and computer subgroup, which would also include eesa, eisa, piher and enosa30. in a first phase, the merger of eesa and eisa led to inisel, which became the head of the group -on which we will returnkey to defense electronics and one of the most significant companies in european electronics31. there were even episodes of internationalization in the primordial modality of industrial and technological alliances. inisel was the industrial manager and main contractor in spain to equip the ground stations of the 29 the price to be paid by telefónica to the ini for the purchase of the shares of the ini in secoinsa was set at 1,411 million pesetas, equivalent to the total amount, of 2,234 million pesetas, less the payments that the ini should make to telefónica for telesincro, isel and digi power: el país, july 26, 1985. 30 in 1980, the french bull agreed with ini to start a phase of manufacturing its own products in telesincro, which resulted in exports worth 4,300 million pesetas. both partners planned to expand the collaboration with a technological and industrial agreement to boost the development of telesincro, reinforced by the entry of bull. this, a leader in european computing, aspired to further root its presence in spain overflowing that framework through a minority stake in a spanish company. for its part, the spanish administration intended to access a future european computer program to strengthen european competitiveness against the supremacy of the us and japan. in 1984, the french company and the spanish government agreed that bull, then nationalized, would enter as a minority partner in the capital of the spanish company telesincro. before the end of the assessment of the joint venture secoinsa –parent company of telesincro-, materializing the takeover of 60% of the capital by fujitsu (the remaining 40% would be held by telefónica) and be resolved at a legal level the transfer of telesincro to ini: el país, may 6, 1985. the pact contemplated the possible entry of a third national partner. the business plan agreed between ini and bull envisaged investments of 1,000 million pesetas in 1986-1988, providing telesincro with a new factory and a newly created research and development center, which will initially be composed of 25 engineers and high level technicians. the budget of this center will be, in 1988, 8% of the turnover of the company: el país, march 23 and june 23, 1986. 31 inisel (1992); el país, march 10, 1989; abc, november 10, 1988. the creation of inisel is a fact repeatedly collected in the international bibliography: gummett and stein (ed.) (2014, 206); wilson (2013, 186). http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 military observation satellite helios, a european project with an estimated cost of 160,000 million pesetas, led by france (79%) and from italy (14%) and spain participation (7%). the action of the spanish government was pivotal here. first, to instruct inisel to take part in an international defense program and form an international consortium to boost the on-board radar of the european fighter aircraft. the consortium with three other european companies aeg (germany), ferranti (united kingdom) and the fiar of marconi (italy) entrusted a company, eurofighter, with the mission of coordinating and subcontracting all project activities. second, to support inisel in the sealed of an alliance in the field of electronic warfare with the italian company elettronica, consisting of 51% of the spanish company elt, s. a., specialized in this sector and controlled by the aforementioned italian company32. in a situation where global defense spending tended to decrease, the cooperation efforts turn out to be very important. for its part, the aspirations of north american industry to gain a foothold in the european market offered favorable ground for such inter-company collaboration. therein lie the ingredients of the "occasional" strategic alliance in two phases between the us multinational hughes and inisel. the first consisted of a triple shareholding movement hugues' entry as a minority partner in the capital of enosa, of the inisel group-, the transfer of cutting-edge optronics technology from enosa to hughes, and the manufacture in spain of a new launcher of missiles tow, this time in charge of inisel with technological contribution of the partner. the agreement was completed with the joint development of a new 32 as a nominated national producer and participant in the two proposed competing systems, inisel, like aeg and fiar, was guaranteed its share in industrial production, regardless of the chosen radar system; on the contrary, ferranti ran the risk of being excluded from participation in manufacturing: disco and van der meulen (1998, 91); wood and sorenson (2000, 59); freedman (1999, 206); interavia, 44, 1-6, 1989, 17. the partners of the consortium had to admit their limitations to develop such a sophisticated device. entry in elt s. a.: ministerio de industria y energía (1990, 363); economia pubblica, 21, 1991, 56; tecnología militar, 13, 1991, 67; elt, memoria anual, 1991; el país, september 22, 1990. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 anti-tank missile, which would be manufactured in spain. with these premises, inisel partnered with hughes aircraft company missile systems group in the joint venture company gyconsa sa (guiado y control sa). the objective was to develop the aries program, later replaced by the macam (spanish acronym for advanced medium-range anti-car mission) (macamarchivado 9/2003, 2-3; molas-gallart 1992, 70)33. the electronic and computer division of the ini was reinforced with new companies andalusian society for the development of information technology and electronics (sociedad andaluza para el desarrollo de la informática y la electrónica, sadiel), and piher electrónica s. a. inc. (pesa), to name the most outstanding34. towards the end of the 1970s, ini created a new direction to coordinate activities in the fields of engineering, electronics and information technology. there is the ferment of the new and aggressive national enterprise of engineering and technology (empresa nacional de ingeniería y tecnología, initec), provider of engineering services in the national and international market, including nuclear power plants, conventional thermal and hydroelectric plants. outside spain, initec sold his technology and know-how to south america, europe, the middle east and africa. it was subjected later to a process of adjustment, which was aimed at economic consolidation. from then on, initec and eria, secoinsa, enosa, eesa and 33 the new missile should compete with the european project trigat (germany, france and the united kingdom), abandoned by spain at the end of 1989: el país, may 11, 1991. in 1992, gyconsa sa received from the spanish government a contract of 20 million $ to supply a new light launcher for the spanish tow 2b missiles and develop a third generation antitank system, macam, contract valued at 4.85 million. in 1997, enosa contracted with kuwait the supply of its light launcher tow: macam-archived 9/2003, 2-3. in the example of spain, between 1985 and 1993, the share of military spending in gdp fell by one percentage point -from 2.2% to 1.2%; between 1982 and 1993, the percentage with respect to the total budget fell to less than half from 11.5% to 5.1%: canales and elices (1994, 107). 34 between 1980 and 1984 the average cumulative growth of the group of companies was 32% in sales, 150% in cash-flow and 6% in employment. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 eisa, along with other similar ones, would act in an integrated manner. initec was sold to westinghouse and técnicas reunidas in the last year of the decade (muller 1991, 104; tribunal de cuentas 2007, 15.)35. in addition to this restructuring, the ini took over the majority in secoinsa. then, in 1980, the ini undertook the third phase of its internal reorganization, which meant the creation of a financial committee, the increase of the six existing divisions since 1979 with nine more and the suppression of the sector directorates that still subsisted. this is context of the creation by the ini of a division of information and communication technologies (icts) with the mission of strengthening and coordinating the presence of its companies in the sector, which began in the 1970s. the participatory structure of the ict division obeyed a complex scheme based on three levels of dependency and a very diverse set of inter-company relations. the first and second level included companies of the first hour and on which the rest depended -eesa, eisa, enosa, eria and secoinsa. the division was completed with a quartet of companies formed by defex (eisa and enosa), the north american microcare36, selesmar and 35 several job cuts occurred, first under public ownership, in 1987, affecting five hundred workers and in the privatization process with a downsizing of 189 through voluntary redundancies and early retirement: el país, 9 december 1987. two thousand experts in more than twenty different fields and experience evaluated in hundreds of projects placed initec in a prominent place among spanish engineering companies: información comercial española, 564-568, 1980, 245. the drastic collapse in the demand for energy products (especially services for nuclear power plants) led in 1988 to an adjustment process, boosting other products with innovative technological content, whether derived from traditional or new activities. initec's investment in r & d in 1989 amounted to 245 million pesetas and was mainly focused on projects and programs in the field of energy, the environment and new products, as well as a policy of technology transfer and cooperation international technology: official bulletin of the cortes generales-congreso de los diputados, 89, september 12, 1990, 200. the analysis of privatization is left out of this study. 36 microcare: 33% from empresa nacional de innovación (enisa) that served as a channel to create incipresa manufacture company of fire protection equipmentin partnership with the german multinational preussag (80%) as matrix of the direct participant pefripesa, and the public company sodiga: el país, 1 march 1985. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 sadiel, and i4, specialized in electromedicine and electromedical equipment) (cantoni et al. 2011, 610)37. the projected consolidation process by the creation of a spanish software consortium as part of the restructuring of the industrial activities of the autochthonous electronic sector suffered several delays. after overcoming uncertainties and doubts, telefónica and the ini reached an agreement to restructure the telecommunications sector with the involvement of the respective companies of both groups. the agreement revolved around the axis of the double need to concentrate industrial groups to promote specialization and avoid overlapping while resizing the industry in an attempt to gain competitiveness. in 1991, telefónica and the ini added the assets of their respective subsidiaries entel and eria according to the integration modality38. this is how eritel was born, controlled mainly by the ini through inisel, with the task of developing software for computer applications. telefónica and the ini maintained a tenacious pulse for the control of the new large company, due to the strategic nature of their respective subsidiaries and the amount of capital committed39. 37 reorganización de empresas electrónicas del ini. creación de un holding en el sector electrónico-informático del ini, 223, 614, 01927, historical archive of the ini, 14-5/1985-21/5/1985. 38 eritel (1991); actas consejo telefónica, 20/12/1989; aec, 11/7/1990; telefónica, memoria, 1989, 17-19; "appearance of the president of the national telephone company of spain, mr. luis solana madariaga", report of the senate proceedings, 93, 14/2/1986, 1-26; expansión, february 1, 2015. the creation of eritel was presented as the biggest event of those years: jane's defense weekly, 17, 1992, 1034; it was advertised as an "integration for quality", a company of dimension and experience, highly qualified (2,000 professionals) "official supplier of communication systems and information to the olympic family" and "strategic ally" of its clients: la vanguardia, may 13 and june 17, 1991. 39 participation in the merger between eria and entel: inisel (ini) 51%, telefónica 39% and several banks and the french cap gemini the remaining 10%: tecnología militar, 12, 1990, 5, 75. the consolidation of the public sector advanced with an agreement between inisel and the private ceselsa, which paved the way for the merger in a single group to form the new technological indra, and a shareholding between sainco and inisel: lane (1997, 279); boix (1998, 105-130); mallin (2006, 87). pressure from the ministry of industry to accelerate the merger and opposition of telefónica to integrate communications software activities: abc, june 11, 1989; difficulties and interruptions: el país, march 25, 1990. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 integration and concentration of the public sector of icts in spain: criteria, choices and reorganization proposal let's take a look at the ins and outs of the restructuring of the electronic companies of the ini and the creation of a holding company with its own financial resources and through selffinancing plans. it was a process that led to a new head company, product of the absorption of eisa by eesa and the acquisition of the rest of the companies in the division -enosa, eisa, i4, isel, pesa and telesincrothat became subsidiaries, taking advantage of the fiscal advantages. the objective was multiple, beginning with the rationalization of the ini's presence in the electronic industry in response to the need for greater coordination and better definition of strategies in the precise defense market. in addition, it advocated integrating r & d capabilities to optimize resources, limit the dispersion of actions and obtain economies of scale without forgetting the rationalization of basic actions -investments, commercialization purchases and human resources. finally, it sought cohesion in dispersed activities in relevant fields such as industrial automation, as well as the most coherent allocation of markets, avoiding duplication of actions and self-competition scenarios40. we must remember that the electronic sector had as a peculiarity the great speed of technological change together with strong competition from the international industry. the strong growth of the ini’s division brought to light unforeseen problems at the time of its creation, essentially the structure not suited to the needs. 40 reorganización de empresas electrónicas del ini. creación de un holding en el sector electrónico-informático del ini, historical archive of the ini,, 14/5/1985-21/5/1985. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 taking into account aspects previously mentioned, the ini division had the mission of coordinating companies whose relatively small size made it necessary to optimize resources and potential in markets, investments, r & d and personnel, among other aspects. in markets because the acquisition of related technologies and the logical extension of activities by different companies had led to an overlap of products. these included lasers in enosa, consoles for presenting data in eesa and eisa for developments for civil aviation and naval programs, respectively; radars for developments for civil aviation and for applications for the infantry, as well as television transmissions in eesa and pesa. in addition, industrial automation or robotics in several companies opened the possibility of new overlaps, which only integration could avoid. the need for optimization extended to investments because the use of new technologies by different companies required large amounts of money, sometimes duplicated and out of reach of the whole. if we go specifically to the criteria, the restructuring of the electronic and computer division of the ini pursued several objectives. they included rationalizing the offer from the various companies in the group; technological complementarity and specialization; the use of common resources and capacities in order to optimize their use and allow shared access to unavailable resources to an individual initiative; the coordination of actions of international projection that guarantee their viability; agility and decision-making in the mechanisms for making investments, launching new activities, commercial action, purchases, making use of human resources, together with the allocation of resources based on the needs derived from a joint strategy. the lack of integration of the companies caused the loss of economies of scale, the duplication of activities and resources and the dispersion of effort in small units. the achievement of these http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 economies of scale was also possible through the coordination of purchases, which in 1984 had saved 500 million pesetas. the alternatives looked at a holding company or a sole proprietorship and sole or majority shareholder in the rest of the companies. the holding company, contemplated in a project of the division dated november 1984, was justified in terms of optimization of technology applications and in the existence of specific activities that secoinsa would have to carry out in the field of information technology, non-existent reasons once secoinsa belonged to the ini. against him was the inconvenience of the cost, increased by the exclusion of secoinsa from the group. the option contemplated by the head company was based on the existence of two companies of comparable size and activity, namely eesa and eisa. it allowed to take advantage of the existing resources in it to reach the objectives and take advantage of the homogenization in markets and dimension achieved with the departure of secoinsa from the division. regarding the reorganization proposal, the alternative of the head company as the parent of the holding envisaged the eesa-eisa merger according to two basic criteria. the first combined a similar dimension between the two, complementarity of their respective markets, strong dependence on the same client and common perspectives for the future. the second translated the governmental impulse to the development of a national defense industry, a field to which the aforementioned companies contributed almost a third of their turnover. the differences between them were compensated with complementarity, visible in the more mechanical orientation of eesa and more eisa electronics. the objective revolved around avoiding duplications and achieving size. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 if we consider the content of the integration, the double industrial location of the eesa and eisa plants should be maintained with optimization of their relative specialization. in addition, greater efficiency and a more rational allocation of resources asked for a unification of the remaining functional activities. on the other hand, it was important to unify the respective departments of r & d, action with positive effects on the serious problem of hiring technical personnel to aranjuez (madrid), a city in which eisa occupied the second position among the large companies. it was also convenient to generate developments in microelectronics in response to future needs. regarding management, the holding company had to have a structure capable of structuring and coordinating access to large business areas in a multi-company framework. these included a prominent defense and robotics and were completed with several others, including television, electromedicine, engineering and computer services. the holding company had to acquire coordination capacity in areas such as planning, technology, purchasing and human resources. the rationalization should be extended to the allocation of markets and activities of all the companies. of the two open possibilities for the eesa-eisa integration (merger and absorption) the optimum was the second for the fiscal benefits: maintenance of the right to compensation of losses in the corporate tax to safeguard society and a bonus of up to 99% provided for in law 76/1980 for mergers of companies of national interest. added to this were organizational reasons, such as the reduction in the number of executive and administrative units -as reported by the division-. once the absorption was chosen as a form of integration, deciding the absorbing company and the dissolved one depended on the lower fiscal costs. in that sense, eesa had to absorb eisa to maintain the right to compensation for losses existing in eesa. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 with regard to the general financing scheme, the holding company was created through two types of transactions, namely, the transfer by the ini of direct shares in companies and the "purchases of the holding company from the other companies of its interests in indirect companies”. the disbursements to be made had a dual origin: one of the purchase action and another fiscal. the acquisition of company shares, i.e., the purchase of shares of isel and pesa held by enosa and eria, should be supported by the holding company, with the exception of the fiscal costs derived from a commercial purchase operation, which should be charged to of the ini. there remains a reference to the stages. the holding company was to be constituted in three successive: absorption of eisa by eesa, acquisition by the absorber of the indirectly owned companies by the ini -enosa, eria and pesa in iseland purchase of the direct ones enosa, eria and telesincro. in the first stage, the fiscal cost of the capital increase in eesa to acquire the assets of d, after termination of this, amounted to 4 million pesetas, including fees; the second stage required the holding to pay out 98.3 million pesetas for purchases of indirect ini holdings in pesa and isel, which would be covered by selffinancing in the amount of 98 million pesetas and by disbursement of the ini from the small remaining amount in concept of fiscal cost and fees. the third stage settled the transfer of the ini to the holding of its portfolio of securities in the direct investees enosa and eria, jointly valued at 612 million pesetas. in addition, it entailed the expansion of the holding's assets through the acquisition of telesincro, the participation of secoinsa in isel and the shares of ini in eria through initec. this capital increase had to be covered via capital increase with fiscal costs of around 40 million pesetas. the total cost to be covered by the ini http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 was 60 million pesetas in cash, 98 in the form of self-financing and a transfer of the ini's securities portfolio for 3,657 million pesetas. table 2. reorganization of the ini electronics division (millions of ptas.) financial investment fiscal coste; fee total financing absorption of eisa by eesa 2,562 4 2,566 indirect acquisition isel and pesa 98 0 98 direct acquisition enosa, telesa and eria 1,111 40 1,151 total 3,771 44 3,815 source: own elaboration from the historical archive of the ini. the reduction of fiscal costs brought to discard the integration of the two companies as a procedure and to create in its place a society, heir to the patrimonies of both. this new company, already with the possible name of eesa-eisa in order to preserve the two commercial names, had to acquire the shareholdings at that time corresponding to the ini in the direct companies enosa (100% of the capital) and eria (61.8%), as well as in the indirect pesa (75%) and isel (84.5%). for its part, the holding company should integrate telesincro, the shares of secoinsa in isel and those of initec in eria. the legal advisory of the ini opted for the holding company, which required the approval of the government to the whole operation due to the importance and the regulations of the ini in force as well as the respect of the current legislation law of companies and tax regime of mergers and the status of workers. the advisory presented the reasons and basic elements of the proposal for the creation of the holding. according to this body, the study of the director of the division of computer electronics was based on legal reasons, focused on the lack of legal personality and the complexity of financial participation in the composition of the division. the advisory body denied the current organizational system, ie the division, effectiveness to develop multi-company projects especially in foreign markets, lacking legal personality. the http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 complexity of the organization chart of financial holdings in the composition of the division reduced opportunities for the exercise of an effective control and the weighted allocation of resources among companies depending on whether they were direct, indirect or indirectly participated (asesoría jurídica 1985). birth and growth of the inisel group inisel presented the ini with a proposal for an organizational plan that clarified the previous organization chart submitted for approval on october 9, 1985, and above all justified such an organization chart, including definitions of functions or activities to be carried out in the main units in the new organization chart or in the context of the definitions of functions or activities. inisel picked up the suggestions made at the time by the management and structure management policy. in the new proposal, up to seven main objectives to be achieved in the organizational aspect were completed. in essence, they entailed the creation of an industrial group subject to a common business strategy and action with a flexible hierarchical and organizational unit to respond to emerging and very changing markets, composed of operational management units lightened of non-executive functions and with management and executive units of command clearly defined. the organizational scheme contained in the proposal basically saw eye to eye with the previous one and consisted in the creation of three operational managers, a common economic financial management, an executive committee, a steering committee, a technical and prospective planning management, an address of human resources and a corporate policy unit. the proposal also included the organization charts and brief descriptions of functions or activities to be carried out by the main units. finally, a plan for the implementation of the proposed organization was indicated. the main suggestion made by the directorate of structure http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 and policy of executives was that even if each management was engaged in a different business, it would seem necessary to coordinate the commercial policy: this function was assigned although it did not appear specifically in the job description to the management of technical planning. the scheme contained in the report determined the functions of the three inisel businesses and had a small number of central units. in any case, as foreseen in the implementation plan, the description of functions of the main units should be developed conveniently to define with sufficient clarity in operational operation41. in short, inisel was shaped as a dynamic and diversely articulated conglomerate of companies dedicated to the design of professional electronic systems, both civil and military. its clientele was composed predominantly of large private and public companies with a strong technological component (ballart 2001, 124)42. the firm was governed by an executive presidency from which the legal advice and the secretariat of the council and the direction of technical planning, on the one hand, and the corporate policy and directions of human and economic-financial resources were based. the group was integrated by enisa, i4, pesa and its subsidiary pesamiami, isel, telesincro and friasa with its subsidiary erdisa. its product line consisted of military products, defense systems, space equipment, civil systems and industrial electronics. in turn, the former included ammunition, tactical communications, firing directions, submarine electronics and missiles; the latter grouped avionics, radars, electronic warfare, automatic measurement systems and data transmission systems; third parties, earth stations and satellite equipment; the latter comprised industrial automation and industrial process control43. 41 propuesta plan organizativo inisel y su grupo industrial, historical archive of the ini, 21/11/1985. 42 the great press was airing: ‘the inisel concern is building an automated factory to make electronic equipment, in cooperation with france and italy, new york times, march 23, 1986. 43 boletín informativo, inisel group, december 1985, 4. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 inisel carried out a diagnosis of the group's situation, as a step prior to a strategic reorientation. a state of affairs too dispersed, disorganized, with excessive lines of business unclear was found. from this arose a consensual orientation to the reordering, especially considering that the sector was concentrating at great speed worldwide (ballart 2001, 125). as a result, inisel suffered significant changes in the organizational structure, the basis for changes in the work systems of the group. firstly, it was a generational change in the management team, grounded on the internal promotion of young professionals but with specific technological knowledge in substitution of senior management, barely oriented to the market and with low recycling options. regarding changes in work systems, inisel was inclined to focus on results, developing more agile coordination mechanisms and implementing a monthly reporting system, prioritizing customer satisfaction. in other words, it guided company managers to define specific objectives and to systematize operational monitoring mechanisms that measure achievements. it involved the selective rethinking of the activities in which inisel participated, with the consequent rejection of certain lines of business to focus efforts on other (ballart 2001, 129). conclusion this article brings us back to the beginning of the debates on the reconversion policies in spain and on the role of high technology in them. it has addressed the reshaping of the public electronic industry after the sudden turn that followed the expansive phase experienced in the early 1980s, focusing on the electronics and computer division of the ini, comprised by small and medium-sized public or mixed-capital enterprises of modest quantitative importance but of enormous strategic salience. it has centred on the reorganization process of the division, with its various privatizations and mergers, as well as on strategic alliances with technology partners. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 the article has analyzed the nation-state component of crises and industrial restructuring based on a case study, centered on the electronics and computer division of the ini, one of the three major restructuring of icts in spain, together with those of private groups of telefónica and international telephone and telegraph. specifically, it has studied the relationship between cutting-edge technology and organizational structure, while also delving into the various alternatives to this relationship. the chosen chronological cut is part of the globalization stage of the economy and includes the period between the incorporation of spain to the european union and its full integration and, therefore, implies the policies of prior readjustment, the submission to the european guidelines and the use of horizontal and sectoral plans (henderson 1991). the empirical evidence shows that the spanish industrial restructuring, in times of crisis and globalization, managed by state was not oriented to pave the way for subsequent privatizations but in search of greater competitiveness -consolidation and rationalizationof the public sector. evidence presented shows the connection of the sector with the military industry, possibly one of the main strategic reasons for the ict sector to remain under public control. it must be said, however, that some companies have ended up in the private sector, as it happened to initec, and others have served as a basis for creating joint companies, as it was the case of indra. the processes described here to define the behavior of the ini in the ict sector seem to fit appropriately in terms of consolidation of companies, rationalization search for economies of scale to compete in open markets and internationalization. in short, what has been investigated here is the configuration of a spanish group specialized industrial group, which currently has a rather minor relative importance in the international scene. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 primary sources historical archive of the ini, madrid. historical archive of the congress of deputies, madrid. historical archive of the senate, madrid. senate of france, paris. telefónica, madrid. newspaper library (most frequently referred) abc, madrid. economia pubblica, milan. el país, madrid. la vanguardia, barcelona. new york times, new york. references abramov, alexander, alexander radygin, and maria chernova. 2017. “state-owned enterprises in the russian market: ownership structure and their role in the economy.” russian journal of economics 3 (1): 1-23. aceña, pablo martín, and francisco comín. 1991. ini: 50 años de industrialización en españa. madrid: espasa calpe. akera, atsushi. 2007. calculating a natural world: scientists, engineers, and computers during the rise of u.s. cold war research. ma: mit press. aranzadi, claudio. 1989. “la política de desinversiones en el ini.” papeles de economía española 38:258-261. aranzadi, claudio. 1987. “la crisis ha exigido una reorientación de los instrumentos financieros de promoción del ini.” perspectivas del sistema financiero 20:162-163. aranzadi, claudio, oscar fanjul, and fernando maravall. 1983. “una nota sobre ajuste y reindustrialización.” papeles de economía española 15:317-325. argimón, isabel, concha artola, and josé manuel gonzález-páramo. 1997. empresa pública y empresa privada: titularidad y eficiencia relativa. madrid: banco de españa. asesoría jurídica. 2001. nota sobre la propuesta de creación de un ‘holding’ en el sector electrónico informático del instituto ini. archivo histórico del ini, 16/5/1985. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 ballart, xavier. 2001. innovación en la gestión pública y en la empresa privada. madrid: díaz de santos. baumol, william j., ed. 1980. public and private enterprise in a mixed economy: proceedings of a conference held by the international economic association in mexico city. new york: macmillan. batiz-lazo, bernardo, and 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meulen. 1998. getting new technologies together: studies in making sociotechnical. berlin: walter de gruyter. duch-brown, néstor, and antonio fonfría. 2014. “the spanish defence industry: an introduction to the special issue.” defence and peace economics 25:1-6. eisa. 1984. memoria 1983. historical archive of the ini, 346.3 (2ª). eritel. 1991. memoria de 1991. historical archive of the ini. eurofound. 2015. erm annual report 2014: restructuring in the public sector. luxembourg: publications office of the european union. fernández marugán, francisco.1992. “la década de los ochenta. impulso y reforma económica.” in la década del cambio: diez años de gobierno socialista 1982-1992, edited by alfoso guerra, and josé félix tezanos, 135-194. madrid: sistema. fisher, franklin m., james w. mckie, and richard b. mancke. 1983. ibm and the u.s. data processing industry: an economic history. new york: praeger. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 freedman, lawrence. 1999. the politics of british defence 1979–98. houndmills: macmillan. garcía, jose manuel. 1989. “el ini como grupo de negocios.” papeles de economía española 38:262276. garretsen, harry, and steven brakman. 2005. location and competition. london and new york: routledge, gummett, phlip, and josephine a. stein, ed. 2014. european defence technology in transition. routledge, london. haigh, thomas. 2001. “inventing information systems: the systems men and the computer, 19501968.” business history review 75 (1): 15-61. henderson, jeffrey. 1991. the globalisation of high technology production: society, space, and semiconductors in the restructuring of the modern world. london: routledge hernández, pablo. 2004. empresa pública, privatización y eficiencia. madrid: banco de españa. heywood, paul. 1999. politics and policy in democratic spain-no longer different? london: frank cass. inisel. 1992. memoria anual, 1992. kassim, hussein, and anand menon. 2002. the european union and national industrial policy. new york: routledge. kumar, anjali. 1994. “italy: iri and others, state holding companies and public enterprises in transition.” in patterns of a network economy, edited by börje johansson, and charlie karlsson, and lars westin, 60-109. berlin; new york: springer. latham, andrew, and nick hooper. 2013. the future of the defence firm: new challenges, new directions. dordrecht: springer. lawlor, teresa, mike rigby, and roger smith. 2005. european trade unions: change and response. london: routledge. lechman, ewa. 2015. ict diffusion in developing countries: towards a new concept of technological takeoff. cham: springer. locksley, gareth. 1983. the eec telecommunications industry. competition, concentration & competitiveness. bruxels: commission of the european communities. lópez, santiago. 1992. “un sistema tecnológico que progresa sin innovar. aproximación a las claves de la tercera revolución tecnológica en españa.” ekonomiaz: revista vasca de economía, 22 30-55. martin, stephen, and david parker. 1997. the impact of privatisation: ownership and corporate performance in the uk. routledge, london. ministerio de industria y energía 1990. informe sobre la industria española. madrid: miner. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 ministerio de industria y energía 1983. libro blanco de la reindustrialización. madrid: miner. mohr, jakki, sanjit sengupta, and stanley slater. 2009. marketing of high-technology products and innovations, upper saddle river nj: pearson. molas-gallart, jordi. 1992. military production and innovation in spain. chur: harwood. molero, josé. 1988. foreign technology and local innovation: some lessons from spanish defence industry experience. in the relations between defence and civil technologies. nato asi series, vol 46, edited by gummett philip, and judith reppy. dordrecht: springer. mosconi, franco, francesc solé parellada, and alejandro chantiri. 2001. política industrial y tecnológica ii: documentos, volumen 2, barcelona: universitat politècnica de catalunya. muller, harald. 1991. how western european nuclear policy is made: deciding on the atom. new york: palgrave macmillan. norberg, arthur l. 2005. computers and commerce: a study of technology and management at eckert mauchly computer company, engineering research associates, and remington rand, 19461957, cambridge, ma: mit press. oecd 2014. the size and sectoral distribution of soes in oecd and partner countries. paris: oecd. ordover, janusz a., and robert d. willig. 1998. competition, convergence and the microsoft monopoly, washington, dc: the progress and freedom foundation conference. parker, david. 2002. privatization in the european union: theory and policy perspectives, london: taylor & francis. pestieau, pierre, and henry tulkens. 1993. “assessing and exp1aining the performance of public enterprises.” finanz archiv journal 50 (3): 293-323. pugh, emerson w. 1995. building ibm: shaping an industry and its technology. ma: mit press. prados, leandro. 2017. spain’s performance in comparative perspective. in: spanish economic growth, 1850–2015. cham: palgrave macmillan. reid, thomas r. 2001. the chip: how two americans invented the microchip and launched a revolution. new york: random house. riordan, michael, and lillian hoddeson. 1997. crystal fire: the birth of the information age. new york and london: w. w. norton & company, rose, joseph b., gary n. chaison, and enrique de la garza. 2000. “a comparative analysis of public sector restructuring in the u.s., canada, mexico, and the caribbean.” journal of labor research december, 21, 4601-625. salas, javier. 1991. “tribuna: el fortalecimiento del grupo ini.” el país. august 26, 1991. solchaga, carlos. 2017. las cosas como son, madrid: editorial galaxia. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 sturesson, jan, scott mcintyre, and nick c. jones. 2015. state-owned enterprises. catalysts for public value creation? pwc. triana, eugenio. 1991. “plan de actuación tecnológico industrial”, política científica 29:8-9. tribunal de cuentas. 2007. informe de fiscalización de la privatización de initec, s.a., number 750, madrid. vickers, john, and george yarrow. 1988. privatization: and economic analysis. cambridge ma: mit press. wilson, kenneth f. 2013. west europe. oxford: elsevier. wood, pia christina, and david. s. sorenson. 2000. international military aerospace collaboration: case studies in domestic and intergovernmental politics. ashgate: farnham. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 appendix 1. customers of eisa. balances, december 1983 (million pesetas) defense sector artillery academy 0.9 military naval arsenal 0.3 general headquarters of the navy 872.1 general headquarters of the army 169.4 armored division 0.6 air force 1.8 artillery park of valladolid 0.9 central artillery park 4.1 park and maestranza artillery of madrid 0.2 park and maestranza artillery of sevilla 12.7 military division 0.5 u.j.t. and joint artillery regiment 0.1 nuclear energy board 2.2 cetme s.a. 1.5 empresa nacional santa bárbara traffic general office 43.4 85.0 civil sector division i+d 2.5 ministry of industry and energy 0.2 ministry of transport and communications 9.0 rtv 0.6 renfe 1.1 astilleros canarios s. a. 2.3 astilleros españoles 5.9 auxini 0.3 casa 10.5 enisa 2.6 enagas 0.2 empresa nacional bazán 88.5 empresa nacional de uranio 12.1 traffic general office 85 gas y electricidad 6.1 hunosa 0.2 unión eléctrica de canarias 2.4 note: empresa nacional bazán: central (35.1) and facilities in san fernando in the southern province of cadix (49), cartagena (4) in the east, and el ferrol in the northern galicia region (0.4). source: own elaboration from eisa, información correspondiente a 1983 (information corresponding to 1983), p. 19. http://revistes.ub.edu/index.php/jesb volume 4, number 1, 142-179, january-june 2019 doi:10.1344/jesb2019.1.j055 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 appendix 2. eisa market, 1983-1984 source: own elaboration from eisa, information corresponding to 1983, june 1984, 19. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 0 200 400 600 800 1000 1200 1400 1600 1800 national market sales exports national market purchases imports january-june 1983 january-june 1984 http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 ignacio gonzález-correa and manuel llorca-jaña universidad de valparaíso (chile) a state-owned bank for small farmers in chile, c.19261953 abstract this article deals with the creation and operations of the first agricultural development bank ever created in chile, the caja de crédito agrario (cca), founded in 1926, in operations until 1953. the main sources are the annual reports of cca from 1933 to 1951. the main contributions are to show first that the cca was instrumental to provide subsidized long-term capital to small farmers in chile to promote agricultural production, but that also had a “social mission”. the cca soon became a protagonist within the local financial market. given the lack of knowledge about the modus operandi of development banks in latin america, we provide the first account of the management and financial activities of the cca. we show that the management structure of the firm, and in particular its strategy of decentralization, was key to explain its success. likewise, the cca managed successfully to raise increasing amounts of capital from other state institutions at low interest rates, thus being able to cover its increasing loan operations. keywords: development banks; state-owned banks; chile; caja de crédito agrario corresponding author: e-mail: ignacio.gonzalez.correa@gmail.com received december 12, 2020 accepted march 9, 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:ignacio.gonzalez.correa@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 introduction there has been a fair amount of work on the role played by international financial institutions in latin america, in particular on the activities of the world bank (formerly the international bank of reconstruction and development), the eximbank and the inter-american development bank during the period of state-led industrialization, c.1930s-1960s (alacevich 2009; kedar 2012; londoño and perry 1985; basch 1968; diamond 1957; kapur, lewis and webb 1997; brezina 1999; kofas 1997). likewise, there has been increasing interest on the working of the state-owned latin american national development banks that emerged during this isi period, many of which received (or administered) loans from some of these international financial institutions, such as the brazilian national development bank (bndes); nacional financiera (nafinsa) in mexico; corporación de fomento de la producción (corfo) in chile; and fedesarrollo in colombia (lazzarini et. al. 2015; brennan and rougier 2009; lópez 2012; cepal 1971; arés 2007; nazer, camus and muñoz 2009; nazer, 2016; doctor 2015; londoño and perry 1985). since the financial crisis of 2007-2009 there has been a renewed interest in development banks (griffith-jones et. al. 2019; clifton, díaz-fuentes and howarth 2021; mertens, thiemann and volberding 2021). these state banks were instrumental to provide subsidized long-term capital into many emerging industries which otherwise would not have accessed credit, not only in latin america, but in any market where there was a lack of trust among potential lenders and borrowers. often state banks have been seen as playing a social role, promoting economic development or solving market failures (gerschenkron 1962, 19-22),1 although for many scholars government 1 these views have been termed the “social view” and the “development view”: the former supports the idea that state banks are needed because the banking sector has too many imperfections that need to be solved by the state, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 ownership of banks had political, rather than social motivations. according to this latter group of scholars, or “political view”, governments promote the creation and control of banks in order to provide benefits to supporters.2 in any case, the international financial institutions and the national development banks that emerged during the 1930s-1950s provided long-term credit mainly to promote emerging industrialization, transport, utility, and infrastructure projects, most of which were second-tier lenders, although many were also first-tier lenders (griffith-jones et. al. 2019). and indeed, there is an important body of literature on sectoral industrial banks for many latin american countries (lazzarini et. al. 2015; armendáriz de aghion 1999; rougier 2001; nazer 2016), which is not surprising since they are more prevalent in countries with less developed financial markets (la porta, lopez-de-silanes and shleifer 2002). yet, and important for the aim of this article, a lesser-known range of developing banking activities encompassed the provision of loans to promote agricultural production too (by first-tier lenders), which is unfortunate given the continuing importance of this latter sector for most latin american republics, even during the period when the state tried hard to promote local industries. but this is not to say that there were not state-owned banks linked to the agricultural sector in latin america during the first half of the twentieth century, despite a general perceived unsuitability of the traditional local banking system to operate within the agricultural sector (tulchin and seibert 1978). and indeed, we know about the existence of the caja de credito while the latter view emphasizes the idea that there is a need for public intervention in the banking sector in countries lacking capital and/or suffering from weak institutions (for a summary, see levy-yeyati, micco and panizza 2004). 2 on this discussion, see la porta, lópez-de-silanes and shleifer 2002; levy-yeyati, micco and panizza 2004. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 agrario (cca hereafter) in chile from 1926 (our focus of study); the banco nacional de crédito agrícola in mexico, also from 1926, together with the banco de sinaloa (1933), the banco agrícola de sonora (1933) and the banco nacional de crédito ejidal from 1935 in the same country (lópez 2012; de la peña 1940; méndez 2017; aguilar and grijalva 2011; mottier 2019); and the banco agrícola in peru, founded in 1931 (quiroz 1992), just to mention some illustrative examples. yet, and unfortunately, agricultural development banks have received little attention by scholars. most attention for this period has been devoted to the industrial sector. even more, despite the extant works on developing banking for both the agricultural and the non-agricultural sectors, it is believed that development banks are not only a peculiar but also an understudied type of lender, in particular in latin america. most of the extant literature has analysed them from a theoretical point of view, focussing on whether the state should directly own banks, or just regulate/subsidize them (la porta, lopez-de-silanes and shleifer 2002; levy-yeyati, micco and panizza 2004). as a consequence, its modus operandi has been neglected (lazzarini et. al. 2015), perhaps given the lack of surviving archives. for example, the management structure of developing banks has not been studied, neither the ways they raised capital within the internal market. there is, therefore, an important lacuna to our knowledge of state banking in latin america during the isi period, and in particular for the non-industrial sector. thus, the aim of this article is to provide an account of the management and financial activities of an agricultural development bank in chile, the caja de crédito agrario (cca), from the mid-1920s to the 1950s. it was created to promote chilean agricultural production by giving http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 directly credit to small farmers, as first-tier lender, at low (subsidised) interest rates,3 whose main issue was not long-term finance but working capital. the cca’s loans were used by farmers to buy seeds, cattle, fertilisers, and basic production tools/machinery. as they were microenterprises, they were highly dependent on informal channels of finance, so welcomed the presence of the cca as a lending institution (griffith-jones et. al. 2019). the maximum interest rate that the cca could charge was 5% per year, well below the very high rates charged by the traditional banking system (“25 años de fomento agrario”, el mercurio, january 2, 1952). more importantly, it was a nominal rate in an economy suffering chronic inflation. that is, real interest rates were far lower than this 5%, and most of the time were even negative.4 additionally, the repayment period was longer (7-12 months)5 than most agricultural loans that could be taken from commercial banks (most usually at 90 days), while the collaterals asked for by the cca (e.g. seeds, cattle, tools) were less demanding than those requested by the traditional banks or informal lenders, who often asked to mortgage their own land to farmers (“25 años de fomento agrario”, el mercurio, january 2, 1952). the cca was improving competitive behaviour in the rural banking system, which has been identified as another reason to support the creation of state banks in uncompetitive markets (levy-yeyati, 3 small farmers were usually taken as those exploiting plots of under 10 hectares, or those whose legal value of their plots was under $50 million (bcch-ar, 1938). they were also defined in terms of their borrowing capacity. indeed, law no. 5185 (1933) defined “small farmers” as those who received loans for amounts not exceeding $20,000. 4 the maximum interest rate that could be charged was 5% per annum between 1932 and 1953. since this was a nominal rate under inflation (a salient feature of the chilean economy at that time; llorca-jaña and miller 2021), real interest rates were lower, which was a fact perceived by economic agents at that time (“caja agraria propone modificar el interés cobrado por sus préstamos”, el mercurio, 8 december 1949; “los recursos de la caja de c. agrario y sus operaciones: influencia de la desvaloración monetaria en sus actividades”, el mercurio, 19 may 1950). 5 in the case of those cca’s loans given to cooperatives, the repayment period was even longer: up to 18 months (bcch-ar 1940). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 micco and panizza 2004), as well as improving banking specialisation and enhancing financial inclusion, which are other functions usually performed by development banks (griffith-jones et. al. 2019). the cca also aimed to support small farmers during difficult times. for example, during draughts or frosts, loan payments were condone or postpone, interest rates were reduced, interest penalties forgiven, cattle (livestock) mobilised if needed with the support of the cca, additional credit was extended to cope with any crisis, among other supporting measures.6 this is important because it has been acknowledged that state banks play an important role in stabilizing credit over the business cycle and/or during periods of financial instability, while financial support to microenterprises (small farmers in this case) is perceived as critical for poverty reduction and for improving overall standards of living (bertay, demirguç-kunt and huizinga 2015; griffith-jones et. al. 2019). and indeed, only three years after its creation, it came the 1929 world depression. it hit chile badly, leading the country to its first default on its external debt in over 100 years (in 1931), and second only in its entire history, being the previous one that of 1825 (díaz-bahamonde 2021). yet, the cca continued providing credit to small farmers, despite the debt crisis and the consequent lack of finance both in chile and internationally. how was this possible? during these years, the main financer of the cca was the caja de crédito hipotecario (cch), as we shall see, which had a great international reputation, to the extent that it even managed to float bonds in the us market (brock 2009). if there was anyone with available resources in chile 6 for some examples, see “caja de crédito agrario acordó otorgar facilidades a agricultores damnificados”, el mercurio, 18 march 1950; “ayuda a damnificados por la sequía en la zona norte acordó el consejo de la caja de crédito agrario”, el mercurio, 19 october 1946; “sería ventajoso que los pequeños agricultores se organizaran en cooperativas para gozar del crédito”, el mercurio, 21 june 1933; cca-ar 1935 (when interest rates were reduced to 3% for some loans for those farmers affected by a severe frost). likewise, agricultural cooperatives of small farmers were enthusiastically supported by the cca. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 that was the cch, with together with the national state railways company concentrated about half of the nation’s external debt (díaz-bahamonde 2021). by this stage, it is important to mention that it is clear that the cca’s activities are a clear example of counter cyclical measures during this period, which renders additional importance to this study. this was part of a set of expansionary fiscal policies implemented during the 1930s-1940s, aiming to reactivate the economy, partly funded with increasing taxation (díazbahamonde 2021; marfán 1984; duarte 2019), as well as to avoid or to diminish the impact of any food shortage. the chilean government decided to channel part of its scarce financial resources to both the construction and the agricultural sectors, including small farmers: a clear targeting strategy (in particular during the second presidency of alessandri). that is, despite these difficult times, the chilean government managed to provide increasing finance to the cca, which makes even more important to focus on the financing side of the cca’s activities. taking all these factors into account, it is clear, therefore, that the cca was conceived by chilean authorities as having a “social mission”, and was entrusted to finance socially valuable projects that could not get funding elsewhere, in particular those related to residents (farmers in this case) of relatively isolated areas.7 in chile banks were concentrated in santiago and valparaíso in north-central chile (see map 1); therefore, most of the agricultural cities (or towns) did not have any private financial institution nearby. these two reasons have been identified as important arguments in favour of state intervention in the banking sector (levyyeyati, micco and panizza 2004). during this period even large enterprises had to resort to own 7 those in favour of offering banking facilities in isolated areas argue that access to financial services is a right, and that when unavailable, the state should be there to provide them. these scholars believe that by granting new banking services financial development improves, and with it, economic growth (leyv-yeyati, micco and panizza 2004). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 resources to finance their investment projects as a result of the limited role played by credit institutions (aguirre-briones 2020). finally, the creation of the cca was also part of the beginning of a process of increasing intervention of the state in economic affairs,8 that would further increase after the great depression hit the chilean economy as no other country in the region (meller 1996). for the banking sector in particular this was translated in the following fact: between 1927 and 1952 the cca managed to provide around 12% of all loans extended in chile, thus becoming one of the main lenders of the economy, and the largest within the agricultural sector (gonzález-correa and robles-ortiz 2022). this is important because it is well known that in economies with significant capital constraints, as chile was during the 1920s-1950s, development banks were one of the few means to alleviate capital scarcity (lazzarini et. al. 2015; armendáriz de aghion 1999), and, in our particular case, to promote agricultural production. as we shall see, the cca soon became a protagonist within the local financial market, allowing many small farmers, formerly completely excluded from the formal financial market to access loans from a state institution (nisbet 1967). one reason given for the rationale behind the existence of state banks (including developing banks) is that they facilitate socially profitable projects that are financially unattractive to the traditional banking system (levy-yeyati, micco and panizza 2004). in this vein, one of the first presidents of the cca, manuel merino, proudly declared that the main aim of the cca was “to provide support exclusively to productive labour, and preferably to small farmers, only this way our loans can exert a positive influence upon our 8 and indeed, together with the cca, it was created a state mining and a state industrial bank too in 1927 and 1928, respectively. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 agriculture and our national economy” (“la caja agraria ayuda de preferencia a los pequeños agricultores”, el mercurio, march 14, 1933). thus, in this article we wanted to focus our attention on the management structure of the firm and on how the strategy of decentralization followed by the cca was key to explain its success. although it started as a very centralized organization, with headquarters and decision making in santiago, soon the cca board decided to open branches in the main agricultural regions where agencies were empowered with a great deal of autonomy to provide loans to small farmers and to take many other important decisions. finally, we also wanted to provide evidence on how the cca raised the capital needed to provide loans to small farmers, and, as part of this, on the main sources of capital for this institution. for the uninformed reader, it is worth mentioning that the cca was founded in 1926, well before the better-known case of chile’s main development bank, corfo, that was created in 1939 (nazer, camus and muñoz 2009; nazer 2016). the fact that the cca was created thirteen years before the mighty corfo makes its study even more attractive to our understanding of the early emergence of developing banking in latin america. indeed, it was a direct result of the influence exerted by the cadre of technocrats that emerged in chile from the 1920s, as well as part of the development of sectoral credit institutions after the conclusion of the us’s kemmerer mission that led to the establishment of the central bank in 1925, amongst many other institutions, including the caja de crédito minero and the instituto de crédito industrial (drake 1989; ibáñez 1983).9 9 this is quite similar to what happened in brazil, albeit a few decades later, after the creation of a joint brazilunited states development commission (lazzarini et. al. 2015). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 more generally, this paper contributes too to the historiography on banking in latin america. and indeed, despite the importance of the above mentioned works and in particular if compared to other sectors of the economy, the historiography on monetary, financial and banking history is underdeveloped for most of latin america during the 1930s-1960s (marichal and gambi 2017), and in particular for chile (couyoumdjian and couyoumdjian 2021; llorca-jaña and miller 2021). additionally, a study on the cca would contribute to further improve our understanding of the development of the agricultural sector during our period of study, which later economists saw it as a backward sector (mamalakis 1976). this view, though, has been recently revised by claudio robles (2009, 2018, 2020, and robles et. al., 2021). our main primary sources are the cca annual reports (cca-ar hereafter), available from 1933 to 1951 at the chilean national library (hemeroteca section), and that have not been used before by other scholars. not to rely solely on the cca as a source of information, we also reviewed el mercurio, the most influential chilean newspaper for the whole period under analysis and that had a special interest in the agricultural sector, also at the chilean national library (hemeroteca section). finally, we consulted the central bank’s annual reports (bcch-ar hereafter), given the fact that it was the most important provider of capital for the cca. they have been recently released by the central bank in its newly inaugurated digital repository.10 and indeed, within these annual reports there was a section called “credit to development institutions”, in which all operations with the cca were reported/commented. after this introduction, this paper contains four more sections. next, we provide a section on the origins of the cca. the subsequent sections deal with the decentralization process of the 10 https://repositoriodigital.bcentral.cl/ http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 cca, and with the expansionary period of this institution. a last section touches on the financial side of the business, before concluding. origins and development of the cca before the mid-nineteenth century there was no formal banking in chile. a first private bank (arcos & co.) was created in 1848, but it failed quickly, as did that of bezanilla & macclure (1854). the first important and successful commercial bank, the banco de valparaíso, was not created until 1855. it discounted bills of exchange, extended credit, took deposits, operated on the securities, gold, and silver markets as a broker, and issued bills. the first banking law of the country was not promulgated until 1860, and together with other positive developments led to the emergence of a proper banking system (llorca-jaña and navarrete-montalvo 2021; couyoumdjian and couyoumdjian 2021). within this development, in 1855 the chilean government decided to create, first, the caja de crédito hipotecario or national mortgage bank (cch) to funnel credit to the countryside, being the first state-owned financial institution of the country,11 being followed by the caja nacional de ahorros (cna), funded in 1910 (which operated as a commercial bank);12 and thereafter by our focus of study, the caja de crédito agrario or agricultural credit bank (cca),13 which was created in 1926, as a subsidiary of the cch, although it started operations in 1927, ending its existence in 1953 after being merged with other institutions to create the 11 the cch provided loans within the agricultural sector, but mainly to large state holders (bauer 1975; brock 2009; mamalakis 1976; fetter 1937; drake 1989; friedmann 1993). 12 for a recent work on the cna, see gonzález-correa 2021. see also cordero 2000. 13 in 1953 these three institutions merged and created, together with the instituto de crédito industrial, the banco del estado de chile (state bank), still in operation. it currently ranks as the bank with the largest number of clients. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 national state bank (banco del estado de chile).14 surprisingly, the cca has received little attention from previous scholars,15 despite being the first banking institution created in chile after the promulgation of a new (far more comprehensive) banking law in 1925 (which replaced the first law of 1860) and the creation of the central bank that same year (couyoumdjian and couyoumdjian 2021). the country had now achieved a mature banking system. between 1925 and the 1950s the chilean central bank supplied credit to different public institutions, including the cca, as well as the caja de crédito minero and the instituto de crédito industrial. the central bank’s role was that of an institution in charge of productive development (couyoumdjian and couyoumdjian 2021). during its 26 years of existence, the cca was a state development bank, whose main mission was to provide soft loans to small farmers in chile, although from 1929 it was also authorised to trade seeds, cattle, fertilizers, and other inputs needed by agricultural producers such as basic machinery. as far as seeds in particular is concerned, the cca signed agreements with producers of genetically produced seeds, to improve national harvests, of wheat in particular (“difícil será para la caja agraria financiar sus operaciones”, el mercurio, february 20, 1933). for this, a special committee was created within the cca to ensure a regular supply of top quality seeds (“la caja agraria no escatimará sacrificios para cooperar con el fomento de la producción agrícola”, el mercurio, march 17, 1933), which would be sold at cost to farmers (“la caja agraria venderá las semillas a precio de costo”, el mercurio, march 22, 1933). for 14 in 1932, the cca was granted full institutional and financial autonomy, although it remained closely tied to the agriculture ministry. indeed, from 1945 the agriculture minister was also the president of the cca board. 15 the only exceptions would be bernedo (1989), friedmann (1993) and almonacid (2009), where the cca is mentioned in passing, using secondary sources only. more recently, see the comprehensive work of gonzálezcorrea and robles-ortiz (2022). however, almonacid offers a distorted view of the institution. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 the reader to have an idea of the coverage of the cca within the seeds market, in the season 1948-9, the cca provided farmers with 16% of all wheat seeds used in the whole country (“la caja de crédito agrario aumentó sus préstamos y colocaciones en 1948”, el mercurio, june 29, 1949). likewise, the cca signed agreements too with guano and nitrate producers, such as consorcio agrícola, also to supply local farmers (“la labor de la caja agraria en el año agrícola último”, el mercurio, february 26, 1934; “difícil será para la caja agraria financiar sus operaciones”, el mercurio, february 20, 1933). in many ways the cca was not a traditional banking institution in as much as it did not receive deposits, nor it opened bank accounts as such, despite many pressures for the cca to be transformed into a formal national agricultural bank (“hacia la descentralización de la caja de crédito agrario”, el mercurio, january 27, 1933). most loans extended by the cca were channelled to promote the production of essential foodstuffs to improve the nutritional status of the population such as wheat, meat, and milk. the chileans governments of that time regarded the agriculture sector as a key to the economic development of the country, while at the same time they tried to promote national industrialisation (robles 2003; nazer 2016). the cca had a slow start since only two years after beginning operations chile was hit by the great depression. during these early years its organization structure was rather simple. the headquarters were in santiago, the capital of the country, while eight agencies were opened (from north to south) in some of the main regional capitals, such as la serena, talca, chillán, concepción, los ángeles, temuco, valdivia and osorno (see map 1). decision making was highly concentrated in the headquarters as well as the geographical distribution of the loans (cca-ar 1933). during the 1930s business improved gradually in chile, including production by the agricultural sector, and therefore the cca’s activities started to gather momentum. it http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 started to receive more loan requests than ever before. with that, the cca’s changed: it opened new agencies, some units were subdivided into new ones, while other completely new were created, as we shall see in the next section. regarding the early structure of the institution, the cca was led by a board. its members were ten people appointed by the government. board members were typically mps, members of agricultural associations and members of other state organizations’ boards such as the central bank. this is in line with the idea that the success of development banks rests to an important degree on their ability to coordinate with other state institutions (griffith-jones et. al. 2019). there were strong financial and administrative links among the cca, cna and cch that explain both their success and subsequent merger (gonzález-correa, 2021). the board was in charge of making all strategic decisions, while it also decided the level of the loans to be granted every year for every region, as well as the resources allocated to trading activities and internal guidance (cca-ar 1933-1934). the initial capital of the cca was $2 million pesos (some us$360k), divided in 50,000 shares. of these, 49,500 (99%) were subscribed by the cch and the remaining 500 by a few selected people (see below). in 1928 the capital was increased to $20m, while the cna was authorised to acquire the extra $18m (cca-ar 1933-1934). to deal with its mission, the cca had initially 380 employees, while its board defined the following areas as strategic concerns: clients’ selection; loans’ supervision; and unpaid loans. thus, nine units were created to deal with these issues (figure 1). from its early start, the cca tried hard to select premium clients, understanding by this those perceived as having low risks of delaying payments or defaulting them. for this, the reports (informes) unit gathered information on the standing of those requesting loans. this unit produced regular reports containing information on the economic situation of farmers, their moral standing, their http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 working methods and any other information deemed relevant. the collaterals used by farmers were also inspected and valued, and these reports were even validated by the cca’s comptroller.16 a director of the cca made it clear that, despite its social mission, the cca was not charity institution: it needed to cover its loans with good collaterals (“la caja agraria ayuda de preferencia a los pequeños agricultores”, el mercurio, march 14, 1933). for this, the cca employed local inspectors, hired by the nearest cca branch. additional information was also gathered from public servants working in relevant institutions, and from large landholders of the same region (cca-ar 1933-1934). this is in line with the idea that although the main objective of a good development bank should be to maximise its development impact rather than profits, it must assure minimal commercial returns: credit should meet the standards of creditworthiness (griffith-jones et. al. 2019). the financial situation of the cca was healthy even if we consider the subsidized interest rates for loans (table 1). table 1. cca’s net income and roe, 1927-1951 (selected years) year net income (mill pesos) roe 1927 0.01 0.1% 1928 0.88 4.4% 1929 1.93 9.5% 1930 1.29 6.3% 1931 0.26 1.3% 1932 -0.80 -4.0% 1933 2.42 12.1% 1934 2.28 11.4% 1935 2.84 13.3% 1936 2.38 6.3% 1938 1.03 2.7% 1940 0.16 0.4% 16 collaterals were regulated by a special law, no. 4097, promulgated in 1926, the so-called prenda agraria law (available at http://bcn.cl/2f4u8). see also “25 años de fomento agrario”, el mercurio, january 2, 1952. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 year net income (mill pesos) roe 1946 34.89 6.5% 1947 0.50 0.1% 1948 1.72 0.3% 1949 1.66 0.2% 1950 1.14 0.1% 1951 20.30 2.4% source: own elaboration from cca-ar 1933-1951. the cca enjoyed profits in all the years contained in the table, except in 1932 when the great depression affected the company's finances. on the other hand, the roe was quite irregular. for most years it was less than 1 percent, but in other years it was higher than 10 percent. if compared to the financial profitability of the main chilean economic groups for 1938 and 1958 (the only years for which we have comparable data), which amounted to 13.7% and 12.7%, respectively (aguirre-briones 2020),17 cca’s roe was slightly lower than those results, and similar in some years, such as in 1935, when the cca’s roe reached 13.3%. the cca obtained good financial results most of the time, despite its social mission. next, there was a special unit in charge of offering clients insurance protection, called insurance (seguros). the cca acted as an intermediary between insurance companies and the small farmers, while also intermediate in case of any losses, in particular of the collaterals used by farmers to obtain the loan. in addition, there was another unit called “monitoring and single debtor” (control de garantías y deudor único), which was in charge of valuations, inspections, and interventions. there was also a prosecution unit (fiscalía), which oversaw all the legal aspects of the business, including the collaterals files, actions over defaulters, and the elaboration of special reports for the superintendence of banks and the cca board. likewise, 17 these are the only available years in aguirre-briones’ study that are relevant for our period of study. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 the general inspectorate unit (inspectoría general) was entrusted with valuing and monitoring the loans’ collaterals, reporting to the “monitoring and single debtor” unit. in turn, the procedures unit (tramitaciones) oversaw credit applications from santiago and the agencies, and the discounts unit (descuentos) was in charge of the amortization of credit letter and other documents for the loan repayment (cca-ar 1933-1941). figure 1. cca’s earliest organizational structure, c.1926-1931 source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 another important unit was cattle or livestock (ganado). we already mentioned that apart from providing loans, the cca got also involved in trading operations to promote agricultural production. the most relevant of these activities was the cattle trade (together with the seeds trade). the cca acquired cattle that was subsequently sold to farmers, either in cash or via loans.18 the operations based on credit are easy to explain: farmers were short of capital. yet, how to explain those operations in which the cca was a mere intermediary? in these cases, small farmers, in particular those living in isolated regions, found it difficult to find cattle sellers, so that it was easier for them to go directly to the cca, which was a trusted institution (the alternative was to buy cattle to unscrupulous private traders). the cca would thus also reduce information asymmetries to the benefit of small farmers and decreased the risk of default. likewise, in those regions suffering draughts, and when farmers were unable to feed their cattle, the cca acted as intermediary to get these cattle sold in regions where there was not any draught, including transportation by railways (cca-ar 1933-1936).19 continuing with the operations side of the business, the marketing unit (propaganda) was in charge of promoting the activities of the cca, of producing internal reports, amongst other office duties. finally, the inputs section (materiales) was entrusted with buying office supplies and all related inputs needed for the normal operations of any office (cca-ar 1933-1934). by this early stage, all these units reported directly to the board, as did the agencies. 18 as with seeds, the cca was also opened to provide cash to farmers to buy cattle from elsewhere, although this rarely happened (“la caja agraria venderá las semillas a precio de costo”, el mercurio, march 22, 1933). 19 for example, during a draught in 1933, the cca offered farmers from the most affected area (ovalle) to transport their cattle to the south to be fed, temporarily, or, alternatively, to act as intermediary to sell the cattle to southern farmers. “una provechosa gira realizó el presidente de la caja agraria”, el mercurio, 25 september 1933. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 the decentralization process following the negative impact of the great depression, it was only from the 1930s that agricultural production really expanded in chile, and with that the total value of the loans extended by the cca. as part of this process, there was a government intervention of the cca in 1932, including firing the entire board, which was perceived as being responsible for not reaching small farmers as originally intended. thus, government authorities decided to promote a decentralization of the cca, in particular in the decision-making process regarding the geographical distribution of loans and to whom they were granted. they also decided to increase the staff of the cca. this process was welcomed and widely publicised by the national press.20 there were also increasing political concerns about the urgent necessity of supporting small farming in chile, a country characterised by the concentration of agricultural land in a few hands. according to the 1933 director of the cca, the main aim of the decentralization process was to provide loans to small farmers quickly, timely and directly, “without any intervention whatsoever by the national direction”.21 the main decentralization measures were three: local agencies in the regions were allowed to grant small loans (i.e. less than $5k) without authorization from santiago; elaboration of regular comprehensive reports for each agricultural zone; and relocation of some duties from the santiago’s headquarters to the regional agencies. likewise, the 8 agencies were divided into two categories: category 1 (talca, chillán, temuco and osorno) and category 2 (la serena, 20 see, for example “hacia la descentralización de la caja de crédito agrario”, el mercurio, january 27, 1933; “descentralizar sus servicios persigue la caja agraria”, el mercurio, march 3, 1933. 21 “la caja agraria ayuda de preferencia a los pequeños agricultores”, el mercurio, march 14, 1933. see also “la labor de la caja agraria en el año agrícola último”, el mercurio, february 26, 1934. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 concepción, los ángeles y valdivia). agencies in categories 1 and 2 could provide loans for up to $10k and $5k (in either cash or goods, respectively) without seeking authorization from santiago (“difícil será para la caja agraria financiar sus operaciones”, el mercurio, february 20, 1933). to support their decision-making process, regional committees were created (ccaar 1933). furthermore, if larger loans were needed, they could be extended too after quick consultation with santiago. decentralization did not mean lack of coordination. indeed, the cca decided to create what they call “single debt” monitoring for each borrower, as a mean to control total loans taken by small farmers.22 during 1933-1935 over 70% of the value of the cca’s loans ended in the provinces belonging to central chile, but by 1953 this share had decreased to 35%. during the same period, the comparable shares of la frontera and llanquihue jumped from 7%, and 12%, respectively, to 30% and 25%, respectively (gonzálezcorrea and robles-ortiz 2022). all in all, this process of decentralisation ended being one of the main causes that explain the successful performance of the cca after a mediocre beginning of operations (c.1927-1932). clients’ transaction costs were reduced by accessing directly their nearest local agencies thus shortening the time spent on travelling and other related procedures, while application processes were also speedy. for example, before 1933 loan requests that could take up to 2-4 months to be approved were shortened to 7-8 days (“la labor de la caja agraria en el año agrícola último”, el mercurio, february 26, 1934; “la política seguida por la caja agraria”, el mercurio, april 5, 1934). equally important, the new board appointed by 1932 decided to greatly increase the 22 “hacia la descentralización de la caja de crédito agrario”, el mercurio, january 27, 1933. likewise, the agencies received regular visits from santiago’s officers. “a visitar agencias de la caja agraria”, el mercurio, march 29, 1934. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 number of chief inspectors in the regions (in particular in talca, chillán, la serena, osorno and los ángeles), while reducing at the same time those in santiago (cca-ar 1933-1934). likewise, fairs’ inspectors (inspectores de ferias) were also appointed. they were in charge of supervising the use of credits for the acquisition of agricultural inputs (mainly livestock) at fairs organized by agricultural associations or at small farmers' markets such as the vega central (cca-ar 1933-1939). likewise, a new unit was added in 1932: the promissory note unit (conservador del pagaré), to tighten the control over debtors, and in particular to speed the process of debts recovery. by this stage, the cca had introduced widely the use of promissory notes (pagarés) as a new collateral, so that a specialised unit was needed. the purpose of introducing the pagarés was to easy the access to credit to small farmers since no physical collateral was needed, neither notarial expenses and they quickly granted (“la caja agraria ayuda de preferencia a los pequeños agricultores”, el mercurio, march 14, 1933). this process was further enhanced after a new structure was implemented between 1934 and 1936 (figure 2). it further promoted decentralization but also modernization. for example, as part of the modernization process, in 1934 it was created the statistics unit (estadísticas), in recognition to the lateness in the delivery of information, and to provide better information to many stakeholders, such as the central bank, the banks’ superintendence and chile’s national statistics office. it was also created a trade unit (comercial), separated from the cattle unit, to deal with seeds, fertilisers, and other goods. in 1935 it was also created the collaterals liquidation unit (liquidadora de garantías), to speed up the process of debt recovery from defaulters. it would sell quickly all collaterals held by the cca. a further step was taken in 1936, when two new divisions were created: deputy management and prosecution. each of them had several units under their belt (figure 2). likewise, in 1937 a human resources unit http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 was added to the organization chart of the company. by this stage, the cca had become a large and complex organization (cca-ar 1934-1937). figure 2. cca’s structure, circa the mid-1930s source: own elaboration. regarding the ownership of cca around 1936, around this time there were 30 shareholders, but ownership was as concentrated as before in the state’s hands, a common feature of development banks: only a minority of governments have a minority ownership (griffith-jones http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 et. al. 2019). the treasury owned 90% of all shares (450,000), followed by the cch with 9.8% of the shares (49,467). the public sector owned 99.8% of the cca. the greatest advantage of the state’s owning banks has been highlighted elsewhere: it allowed the government to exert full control over the projects receiving funding (la porta, lopez-de-silanes and shleifer 2002), which in our case would be socially desirable. the other 28 shareholders owned just 0.2% of the company. but they were not ordinary people, among them were: pedro aguirre cerda future president of chile between 1938 and 1941 and wine entrepreneur; luis barros borgoño, director of the cch, ministry, and former vice president of the country in 1925; luis correa vergara, agriculture ministry in 1925; arturo lyon peña, senator; luis matte larraín, former ministry of carlos ibáñez del campo and founder of compañía manufacturera de papeles y cartones, one of the most important industrial companies of the country; pedro opaso letelier, longstanding mp, which was twice president of the senate; and francisco vidal garcés, also mp. further expansion and consolidation, c.1940s-1950s following the decentralization and modernization processes of the 1930s, combined with an expansion of the institution, it was now the time to create larger divisions, and to distribute the previous units within them (figure 3). if by the early 1930s there were 10 units, by the early 1950s this had increased to more than 30 within 4 divisions. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 figure 3. cca’s structure, early-1950s source: own elaboration. it is clear then that not only divisions were created but also that new units were launched, including a wine unit (vinos) in 1940. its aim was to better control the many loans that were regularly extended to wine producers. likewise, the cca wanted to expand its increasing business associated to this industry. thus, cca employees were trained to undertake regular visits to vineyards, to control the quality of the grapes and its alcohol content, including the analysis of laboratory samples (cca-ar 1940-1941). additionally, some of the old units were reformed. for example, the reports unit started to request financial reports from banks, retail http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 stores and respectable neighbours about the standing of those requesting loans (cca-ar 19421943). to make the most of these units, in 1939 many employees were fired while others were hired, in particular agronomists, former banking employees, and technical staff who were qualified in trade and banking (“análisis de la gestión de la ex caja de crédito agrario”, el mercurio, september 17, 1953). all in all, the number of staff increased up to 910 employees in 1953 (classified in 15 different grades) (“la dirección de la caja de crédito agrario”, el mercurio, september 16, 1953; “la verdadera situación del personal de la caja de crédito agrario”, el mercurio, may 13, 1953). equally important, new agencies were opened. from having eight at its early beginnings, by the early 1950s the cca had twice as much: la serena, san felipe, santiago, talca, linares, chillán, concepción, los ángeles, angol, temuco, valdivia, osorno, puerto montt, castro and punta arenas (the new ones are highlighted in italic). perhaps the most important change within this process, besides the obvious increase in the number of agencies, was that the cca expanded the range of operations to the extreme south of the country (see map 1). this allowed to further support the production of many products such as potatoes (in chiloé archipelago). in turn, these agencies strengthen their relationships with other state institutions in the zones they operated. for example, loan committees were created within each agency, and they included the cca’s agent, three local farmers, but also the agronomist of the area, who was employed by the minister of agriculture rather than by the cca (cca-ar 1944). likewise, the state national railways company was very supportive of the cca’s activities, either to move cattle or any other good such as seeds and fertilizers at preferential rates (cca-ar 19401950). furthermore, the national railways company allowed the cca to store goods in the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 railways’ own stores, giving the cca national coverage, in particular for a swift supply of nitrate and other fertilizers. apart from these new agencies, twenty-five inspectorates (inspectorías) were created too. they were sort of an agency, but smaller, mainly located in remote places, although in occasions close to large regional capitals. they were opened in arica, copiapó, illapel, la ligua, los andes, quillota, melipilla, rancagua, rengo, san fernando, santa cruz, curicó, san javier, parral, san carlos, cañete, traiguén, mulchén, victoria, lautaro, loncoche, río negro, puerto varas, maullín and puerto aysén. in addition, the cca complemented the work of its agencies and inspectorates with resident inspectors (inspectores residentes). they resided in the following locations: combarbalá, san antonio, san vicente de tagua tagua, licantén, molina, cauquenes, bulnes, pemuco, los sauces, collipulli, lanco, san josé de la mariquina and ancud. finally, the cca decided to open warehouses in many of these locations too, either in own premises or rented ones: arica, san felipe, ovalle, santiago, paine, san fernando, santa cruz, curicó, linares, talca, chillán, los ángeles, traiguén, temuco, mulchén, angol, valdivia, osorno, la unión, puerto montt, puerto aysén and punta arenas (see map 1). that is, not only credit was available from many locations, but also a wide array of goods, such as seeds, fertilizers and the likes. all in all, the cca now had physical presence in nearly 60 locations all over chile, from arica to punta arenas, covering some 4,000 km. furthermore, the cca had an agreement with the cna so that small farmers could apply for cca’s loans at the cna’s branches too (gonzález-correa 2021). this geographical diversification process came to hand with real decentralisation in decision making too. the head of the agencies, the inspectorates and the resident inspectors themselves were entrusted, gradually, with more and http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 more powers by the board. this included granting of loans in either cash or goods, and for sizeable amounts. so important and innovative was this process of being present in so many places that it was highlighted by the national and the regional press. for example, according to a santiago’s newspaper, el diario ilustrado, the cca became “the most decentralised public institution” in the entire chilean history (quoted in caja de crédito agrario 1952, 9). this was supported by chillán’s newspaper la discusión, where it was stated that the cca’s decentralisation was worth revealing, and in particular as that it was the main cause of its great success (quoted in caja de crédito agrario 1952, 10). financial resources most latin american developing banks funded themselves with paid-in capital provided by governments, which also raised further funds from the national (or international) capital markets (griffith-jones et al. 2019). regarding the cca’s financial resources needed to operate, the 1927’s $20 million pesos capital was not modified until 1945. given currency depreciation, it passed from being us$3.6 million in 1927 to three-quarters of a million (all figures in us$ of 1951) by 1944. this, understandably, was not enough to provide all loans requested by small farmers in chile. thus, the cca had necessarily to receive financial support from many state institutions. the initial financer was the cch, which is not surprising: after all the cca had been created as a subsidiary of this institution. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 from 1932 the central bank started to cooperate too through specific loans granted to the cca via discounts,23 or rediscounts,24 although until 1940 the cch still remained the most important partner. this protagonist role was taken by the central bank from the early 1940s until the end of our period of study (table 2). the central bank was firstly very enthusiastic about discounting and rediscounting for cattle and seeds operations, under the law no. 4806 (bcchar 1936). furthermore, from 1933, a new law (no. 5185) allowed the central bank to lend directly to the cca, for up to $40 million. a further increase was given after passing the 1938 law no. 6290, which authorized the central bank to extend direct and indirect loans to the cca, for up to $100 million (bcch-ar 1938). given the expansionary policy followed by the cca, above described, from the late 1930s the cca was borrowing from the central bank at the maximum level allowed by the legislation, and at the very low rate of 1% per annum (bcch-ar 1939; bcch-ar 1940; bcch-ar 1941). in 1941 this threshold was further increased to $250 million (bcch-ar 1941), and a year later to $370 million, including direct loans, indirect loans, discount and rediscounts (laws no. 4806, 6006, 6021, 6874, 7413), while all operations at 1% were extended to 12 months (bcch-ar 1942). likewise, from 1943 all loans provided by the central bank to the cca were given at this preferential interest rate (bcch-ar 1943). for the cca the increasing importance of the central bank as a capital provider was the most important since there were some tensions between the cca and the cch: at one moment the cch stopped providing 23 this was formalised after the promulgation of the law no. 127 of 4 july 1932: it allowed the central bank to discount cca’s bills for up to $50 million, at 2% interest rate, although that year only $16.1 million were actually discounted (bcch-ar 1932). 24 by law, commercial banks and the cna could also discount for the cca, with the approval of the central bank, who would rediscount these operations (bcch-ar, 1933). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 funds, even ignoring previous agreements, for example to provide loans to cooperatives through the cca.25 by this stage the central bank was lending, not only to the cca, but also to the treasury and many other state institutions, such as covensa, instituto de crédito industrial, caja de crédito minero, cna, and cch. and indeed, and rightly so, for many scholars the early latin american central banks can be taken as development banks too, apart from its regular monetary duties (doctor 2015; epstein 2006). table 2. origin and value of the cca’s financial resources, 1927-1951 (us$ millions of 1951) year cch contributions central bank’s contributions corfo contributions other state institutions contributions capital reserves total 1927 7.17 0.00 0.00 0.00 3.60 0.00 10.77 1928 13.30 0.00 0.00 0.00 3.70 0.02 16.99 1929 21.04 0.00 0.00 0.00 3.68 0.07 24.73 1930 31.63 0.00 0.00 0.00 3.78 0.09 35.41 1931 31.59 0.00 0.00 0.00 3.62 0.00 35.21 1932 8.83 0.61 0.00 0.00 1.05 0.00 10.49 1933 9.82 0.36 0.00 0.00 1.21 0.00 11.39 1934 12.45 0.00 0.00 0.00 1.57 0.00 14.02 1935 9.72 1.14 0.00 0.00 1.52 0.10 12.37 1936 9.39 3.35 0.00 0.00 1.47 1.30 14.21 1937 8.89 3.42 0.00 0.00 1.39 1.37 13.70 1938 8.76 4.77 0.00 0.00 1.37 1.28 14.89 1939 8.73 8.13 0.73 0.00 1.36 1.35 18.96 1940 8.56 7.62 1.78 0.00 1.34 1.32 19.30 1941 7.37 9.90 1.10 0.00 1.15 1.14 19.52 1942 6.60 13.03 0.99 0.45 1.03 1.02 22.11 1943 5.72 15.52 0.80 0.67 0.89 0.65 23.60 1944 4.98 13.59 0.50 0.58 0.78 0.51 20.43 25 “modificaciones a la ley que creó las cooperativas de pequeños agricultores”, el mercurio, 18 september 1949. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 year cch contributions central bank’s contributions corfo contributions other state institutions contributions capital reserves total 1945 0.00 3.87 0.00 1.94 20.14 0.56 25.95 1946 0.00 5.21 0.00 3.30 18.07 0.54 26.58 1947 0.00 6.40 0.00 4.16 19.85 0.48 30.41 1948 0.00 5.45 0.00 4.10 18.31 0.48 27.86 1949 0.00 6.31 0.00 7.63 19.27 0.51 33.21 1950 0.00 10.05 0.00 7.51 15.01 0.40 32.57 1951 0.00 27.32 0.00 3.17 12.99 0.33 43.48 total 214.6 146.1 5.9 33.5 158.1 13.5 558.2 source: own elaboration from cca-ar 1933-1951. without direct support from the central bank, the cca could not have expanded as it did. indeed, when the cca accumulated many authorised loans that could not be delivered because of lack of funds, the cca board requested to the agriculture ministry to send to parliament a new law project aiming to increase the central bank’s contributions to the cca. many laws were passed increasing the amounts of loans that could be taken by the cca from the central bank during the 1940s (e.g. no. 6280 and no. 7413). regular visits were undertaken by either directors of the cca or the agriculture ministry to the central bank’s council meetings to request additional funds.26 in 1945 a new law authorized that all pending obligations of the cca with the central bank for up to $350 million could be converted into public bonds issued by the treasury (bcch-ar 1945). furthermore, the central bank was also authorized to buy any bond issued by the cca. finally, in 1951 law no. 9872 increased to $1,000 million the annual limit of the central bank’s loans to the cca (bcch-ar 1952). 26 see for example, visit of fernando moller to the central bank’s council meeting of august 1951 to request additional resources for the cca (“préstamos necesitan dos rubros agrícolas”, el mercurio, august 9, 1951). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 another important financial contributor was corfo, chile’s main development bank, that had been created in 1939. between 1939 and 1944, every year, corfo, through the cca, provided funds destined to provide small loans to farmers. yet, in 1945 corfo’s contributions disappeared, since it was thought that it was not corfo’s role to get involved directly in agricultural loans: that ought to be the sole remit of the cca. yet, by the mid-1940s it was widely acknowledge that the cca needed additional financial support from the state to continue operations (“alcance del proyecto de ley que otorga recursos a la caja agraria”, el mercurio, february 2, 1945). eventually, in 1951, a new law was passed after which the cca managed to obtain $1,000 million from the government as a capital contribution (“ley que otorga mil millones para caja de crédito agrario”, el mercurio, february 10, 1951). likewise, not included in table 2 (since there are not cca’s annual reports for 1952-3), in 1952 a new capital provider was added: the cna. it gave the cca $150 million to provide long-term loans for the cattle sector, but also for infrastructure (“créditos especiales para fomento ganadero otorgará la caja agraria”, el mercurio, august 27, 1952). a final contribution of $30 million was given in 1953, to cover loans for wood producers (“créditos destinados a industria maderera: entrega de fondos a la caja de crédito agrario”, el mercurio, february 5, 1953), just a few months before the cca was merged with the rest of the institutions that formed banco del estado de chile. finally, the cca’s own profits also provided funds to operate within the chilean market, although they were rather limited. all in all, one way or another, the cca’s board managed to secure the capital needed to finance its increasing operations. in real values, the average annual loans extended by the cca to small farmers in 1950-1953 were 3.6 times higher than during 1930-1933, while the geographical distribution of the loans extended changed dramatically for the benefit of llanquihue and the frontier’s provinces. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 conclusions we have shown in this article that chile was a pioneer within latin america regarding the creation of agricultural development banks (i.e. for rural financing), following the creation of the cca as early as in 1926, a few years before the beginning of state led development within the region, at least according to its most classic periodisation. the cca was instrumental to provide subsidized capital in longer repayment periods than so far available to small farmers in chile to promote agricultural production, while the cca also had a “social mission”. it was part of a successful effort to build strong state capacities in the rural sector, and to promote the social inclusion of small farmers, formerly excluded from the banking sector. it helped its clients whenever needed, providing cash, seeds, cattle, fertilizers, and other inputs needed by agricultural producers such as basic machinery. the cca personnel was made of experts in the marketing chain of all these products. further, even during the turbulent years that followed the great depression of 1929, the government decided to continue financing the cca’s activities: agriculture was perceived as a key sector of the economy. all this said, despite its social mission, the cca was not a charity institution. on the contrary, the cca endeavoured to reach timely as many small farmers as possible throughout the entire country, without incurring in operational losses (except for 1932), and protecting itself against the usual lending risks, even becoming a protagonist within the local financial market. it also endeavoured to get full knowledge of all markets in which clients were operating, would it be wheat, wine, or cattle production. for this, it successfully implemented a strategy of highly coordinated decentralization, having a physical presence in most chilean provinces, either with agencies, inspectorates, resident inspectors, or empowered representatives, which ended being a key to explain its success. the decentralization process can be labelled as a success in as much http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 as the cca increased the real values of total loans provided, and the geographical distribution of these loans improved to the benefit of the southern provinces beyond central chile. most clients were small farmers, so the main goals of the cca were fully accomplished. the cca also introduced novel business strategies such as not requesting physical collaterals for its loans, the establishment of collaboration schemes with other state institutions (e.g. the national railways company and the cna), and the creation of highly specialised units within its divisions staffed with competent professionals. this is important because effective collaboration with other institutions is perceived as essential in a “good” development bank. finally, the cca managed successfully to raise increasing amounts of capital from other state institutions at low interest rates, such as cch, corfo, and the central bank, despite the international shortage of capital, thus being able to cover its increasing loan operations, also at subsidized rates. the cca’s activities can be taken as a successful case of counter cyclical policy. acknowledgements the authors thank the editors and the anonymous referees. we are very grateful to rory miller and claudio robles for general advice, as well as to uziel gonzález. this article received funding from proyecto anillos anid pia soc180001. primary sources cca annual reports (cca-ar), 1933-1951. el mercurio, 1933-1953. central bank annual reports (bcch-ar), 1932-1953. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 87-125, july-december 2021 doi.org/10.1344/jesb2021.1.j093 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 references aguilar, gustavo and ana isabel grijalva. 2011. “estado, banca y crédito agrícola en sinaloa y sonora: el banco de sinaloa y el banco agrícola sonorense, 1933-1976.” mundo agrario 11, 22. http://www.memoria.fahce.unlp.edu.ar/art_revistas/pr.4797/pr.4797.pdf aguirre-briones, andrés (2020). “la rentabilidad financiera de los grupos económicos chilenos en el largo plazo (1938-1988).”. 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non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. arica copiapó illapel la ligua los andesq uillota san antonio rancagua rengo san fernandosanta cruz curicó san javier parral san carlos cañete traiguén m ulchén victoria lautaro loncoche río negro puerto varas m aullín puerto aysén combarbalá m elipilla san vicente de tagua tagua licantén m olina cauquenes bulnes pemuco los sauces collipulli lancosan josé de la m ariquina ancud san felipe o valle santiago paine linares talca chillán los ángeles temuco angol valdivia o sorno la unión puerto m ontt punta arenas la serena concepción http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 palomamiravitlles university of barcelona (spain) yingying zhang cunef (spain) six decades of international business research: where next? abstract this article portrays the evolution of international business (ib) literature. we review the main issues and theoretical assumptions that have dominated research in the ib field during the last sixty years. moreover, on the basis of the essential paradigms developed, we analyse what issues are of interest and may represent a potentially fruitful arena in which to develop future scholarly research. keywords: international business research; literature review; future research development introduction a lot has been said about international business (ib) and multinational corporations (mncs) in particular. as the international economy has evolved and changed over time, different questions and concerns have been raised among management scholars. why and when do firms internationalize? what are their home and host countries? which entry mode do they choose? why do multinational enterprises exist? when do they become multinationals? how do they organize international strategy and activities? in order to answer these and other questions, many theories and different perspectives have been developed in efforts to further understand various aspects of the international business arena. corresponding author. e-mail: paloma.miravitlles@ub.edu received 30 october 2015 accepted 23 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 the process of theory development is gradual and incremental, in parallel to business changes and environmental evolution. a lot of water has passed under the bridge since the 1960s when the first ib theories based on market imperfections were proposed. as a result, mncs have been examined from different disciplines and points of view, yielding a great and diversified array of theoretical research. many ways of understanding the mnc and its diverse patterns of behaviour have been hitherto developed; yet, focusing on only one stream of analysis can severely limit the power of explanation of the ib field. therefore, to support and advance theorization in ib, the aim of this article is to review the main issues and theoretical assumptions that have dominated research in international business during the last sixty years in order to discover the basic paradigms on which the present literature is grounded. therefore, the present article briefly explains the evolution of existing thought on which new and future theory and models can be built. in addition, although theoretical and empirical research has succeeded in answering many of the questions mentioned above, there are still many challenges to be confronted and new questions to be answered. accordingly, we try to go further, analysing which issues are of interest today and may represent a potentially fruitful arena in which to develop future scholarly research. in short, we contribute to a better understanding of what we know about ib up until the present and also what we would like to know in the immediate future. in order to better understand this co-evolution of theoretical development and changes in the business environment, we dedicate the next section to explaining the birth of modern international business literature. section three is dedicated to the development of ib theory with the arrival of the new century. after this overview of the field, the fourth section lays out several challenges and future lines of research and the final section presents the conclusions. volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 the birth of modern international business literature (1960s to 1980s) primary concerns about ib arose for the first time in the early 1960s when trade and investment barriers increasingly broke down around the world and, as a result, mncs began to take on a leading role. it was around that time when the knowledge base of the field laid the foundations for the emergence of a new area of study with its own identity and an independent position in relation to other areas of business research. indeed, it was actually marked by the foundation of the academy of international business, the leading association of scholars in the field, in 1959. table 1 summarizes the main theoretical contributions in the field during this period. table 1. theories on international business (1960-1980s) main contributions research questions answers and assumptions authors and references capital transfer and portfolio theory why do firms internationalize? before the 1960s international movement of financial capitall differences of market capital between countries diversification of risk and investment and business portfolios markowitz (1959); tobin (1958); aliber (1970) monopolistic advantages what is the origin of internationalization strategy? the 1960s liability of foreignness and ownership of competitive advantages imperfection of international markets hymer (1960); kindleberger (1969) life cycle of the product why and when do firms internationalize? the 1960s introduces a dynamic conception of internationalization linked to innovation the life cycle of the product explains the process of internationalization of the firm vernon (1966) volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 main contributions research questions answers and assumptions authors and references internalization theory why do firms practice foreign direct investment? what is an mnc? why do mncs exist? the 1970s and beginning of the 1980s transaction costs theory multinationals (internal markets) are more cost efficient than external markets international value chain fragmentation to take advantage of imperfect markets caves (1971); teece (1976) buckley and casson (1976); rugman (1981); hennart (1982); porter (1985) eclectic paradigm why, how, and where do firms make foreign direct investment? the 1980s ownership of competitive advantages locational advantages internalization of advantages dunning (1979; 1988) uppsala internationalization process model when and how do firms internationalize? the 1970s and beginning of the 1980s internationalization follows a gradual learning process the lack of knowledge about foreign markets determines the international strategy of the firm international expansion is made cautiously, sequentially, and concurrently as the firm learns to operate in foreign markets johanson & vahlne (1977); johanson and wiedersheinpaul (1975) source: compiled by author the first contributions in the field attempted to respond to simple inquiries about what impels a firm to invest abroad or what advantages mncs have over domestic competitors. early answers were sought in the international movements of financial markets. firms internationalize to diversify risk and investment portfolios in order to take advantage of international capital market imperfections, such as currency exchange rates and differences in interest rates on debt (tobin 1958; markowitz 1959; aliber 1970). accordingly, firms gain higher returns by moving capital from a low-interest and strong currency country to a highinterest and weak currency country. however, these explanations were not completely satisfactory because, on the one hand, they considered only financial flows across countries and no other kind of investment, such as setting up factories abroad or transferring volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 knowledge, products, and technology. on the other hand, they only reflected the direction of the post-war expansion of mncs (i.e. the american takeover of europe after the second world war and the japanese takeover of southeast asia in the late sixties and early seventies) and were unable to clarify other capital flow directions between countries within the same currency areas and with the same interest rates (buckley and casson 1976). to overcome these constraints, hymer (1960) and kindleberger (1969) explained the motives for internationalizing by focusing on the firm’s operations across borders instead of international capital movements. they argued that only firms that enjoy some kind of monopolistic advantage over domestic companies can outweigh the adverse effects of the liability of foreignness. this concept, long-established yet still up-to-date, symbolizes the burden and prejudice faced by foreigners in any country in the world. the liability of foreignness is not only explained by the currency conversion risk associated with doing business in foreign countries, but also by discrimination from local authorities and consumers and by the ignorance of the firm about the new distant host environment. in fact, this last factor is the only one that a foreign company can diminish by trying to learn more about the host country (economy, language, institutions, culture, relations, etc.). however, the liability of foreignness always exists at the beginning of the internationalization process and the only way to overcome it is to possess a certain monopolistic advantage that compensates for this constraint. the origin of this advantage was always considered to be found in the home country and based on goods markets (product differentiation, marketing skills, etc.) or factor markets (patented technology, favourable access to capital, managerial and organizational skills, etc.). all in all, this perspective of foreign direct investment turns out to be a theory of volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 market imperfection, because obtaining power through monopolistic advantages is a necessary condition to invest abroad and become an mnc (forsgren 2008). aside from these arguments, and in the same period, vernon’s ‘product cycle theory’ (vernon 1966) tried not only to answer why firms internationalize but also to explain the timing and the pace of the location of production. as a result, this theory introduced for the first time a dynamic conception of the internationalization strategy, putting less emphasis upon market imperfections and cost efficiency and more upon the timing of innovation, the effects of scale economies, and the uncertainty of trade barriers (vernon 1966). the product cycle theory distinguishes between three stages in the internationalization process: the first is the new product stage where innovation and production activities are located in the advanced home market close to entrepreneurs in order to be more aware of opportunities and also as a way to save on the costs of communication and transport. the second stage, the maturing product stage, is characterized by the clear definition of the technology and the product and more price-elastic demand in the home-market. therefore, in this phase it is less important to be close to the final market, but productivity and cost issues gain much more importance. moreover, when young foreign markets grow, they are served by exports just until the moment when marginal production and transport costs overseas become lower than the average cost of production in the home country. in that moment, the last stage, the standardized product stage, often takes place in the process, and this is characterized by low product differentiation and market competition based solely on price. hence, the most labourintensive stages of production are transferred to developing countries with lower wage costs. then, the home market is finally covered by operations located in host countries through imports, thus closing the complete product cycle. volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 all of these contributions made in the 1960s established the bases for the subsequent development of mnc theory during the following decade (1970s-1980s). at that time, under the influence of the economic viewpoint and without abandoning the market imperfection perspective, internalization theory emerged (buckley and casson 1976; teece 1976; rugman 1981; hennart 1982). this theory tried to respond to why firms based in one country exploit their competitive advantages by locating their production in other countries despite the high internal costs associated with distance and the lack of host market knowledge. the explanation given was based on transaction costs economics (tce) related to imperfect geographical markets. 1 since international markets are considerably imperfect and the probability of incurring in important transaction costs is extremely high, there is a clear incentive to use hierarchies to organize international business more efficiently, rather than trusting market transactions. due to different comparative advantages between countries, there are activities that are more efficiently carried out in some locations than others (ohlin 1933). as a consequence, if the international value chain is spread around the world and needs to be coordinated (porter 1985), the motivation for internalizing across borders when transaction costs are high is strong. moreover, mncs exist because the firm has internalized markets across national boundaries, replacing foreign external markets with a number of much more efficient internal ones. firms become multinational because they are more cost efficient than operating in-market (forsgren 2008). therefore, to summarize, we can consider internalization theory as an extrapolation of the tce theory of the firm (williamson 1975) to explain and predict the nature of mncs in the ib field. 1 transaction costs are associated with any market transaction subject to use of the price mechanism including, among others, costs associated with finding information, negotiating transactions, breaking contracts, and opportunistic behavior (williamson 1975). volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 although these theories were first responding to queries about internationalization strategy, none of them seemed to fully explain the essence of firms’ foreign direct investment. they offered explanations of the reasons that impel a firm to internationalize (the ownership of monopolistic advantages) and the means by which the international activity is organized (through internal markets rather than external ones). however, they still did not explicitly address the decision about where to locate foreign activity. therefore, a well-grounded theory of mncs needed to include not only firm-specific advantages and cost efficiency through internalization, but also the interaction with location-specific advantages. in this regard, the eclectic paradigm, also called the oli model (ownership, location advantages, and internalization) (dunning 1979; 1988), incorporated all these explanations into one. according to this model, three conditions must be met to make foreign direct investment effective. first, firms seeking to set up in a new country must somehow offset and overcome their liability of foreignness by owning some kind of competitive advantage (ownership). if this first condition is met, it has to be more beneficial for the company to exploit these competitive advantages by itself in the foreign country (internalization) than to have these exploited by others, for example through licensing or franchise agreements. finally, if these two conditions are met, the firm will only make foreign direct investment when it can gain something from locating the activity abroad (location advantage). if this does not happen, the firm will prefer to serve foreign markets from its home country through exporting rather than establishing a subsidiary. therefore, from this eclectic perspective, it is the interplay between firms’ competitive advantage, internalization advantage, and location-specific advantage that leads to foreign direct investment and as a result explains the true nature of the mnc. volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 finally, another important contribution of this decade can be found in the internationalization process or uppsala model (johanson and wiedershein-paul 1975; johanson and vahlne 1977). like vernon’s product cycle theory, this perspective tries to understand a dynamic conception of the internationalization process of the firm. this model suggests that the most important obstacle to internationalization is the lack of knowledge and resources and that this can be remedied only by gradual and sequential direct presence in foreign markets. the perceived risk of foreign investments only reduces as the firm learns incrementally more about foreign markets and operations. therefore, a firm expands abroad on a country-bycountry basis, choosing to internationalize stepwise, first in neighbouring countries and only once it has gained experience, later moving into more psychically and geographically distant countries. accordingly, resource commitment to internationalization also increases gradually and cautiously with regard to the firm’s degree of involvement in foreign markets. in this regard, they identify four different stages of internationalization: passive exports, exporting through local agents, establishing a sales subsidiary, and finally setting up a manufacturing subsidiary. all in all, this perspective reflects the internationalization strategy as an ongoing learning process that progresses only as fast as knowledge and experience accumulation permits, resulting in a path-dependent decision-making process, where past decisions predetermine future choices in terms of countries and modes of entry. the 1990s and the arrival of the new century as we saw in the preceding section, previous streams of literature have been dominated by economic and industrial organizational perspectives, indicating that the main reasons that explain the nature of mncs were attributable to international market imperfections and country locations. however, from the 1990s on, more sophisticated and mature queries about volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 mncs emerged and scholars relied on more managerial, psychological, and sociological approaches to give new insights into the field. more in touch with the current times, new theories and paradigms were developed establishing the fundamental bases of contemporary ib literature (see table 2). table 2. theories on international business (1990-2000s) main contributions research questions answers and assumptions authors and references resource-based view (rbv), evolutionary theory of the mnc why do firms practice foreign direct investment? how do they generate competitive advantages? why do mncs exist? the 1990s mncs are social communities and repositories of knowledge the multinational as the most efficient organization to transfer resources and capabilities internationally internationalization not only to exploit but also to seek competitive advantages in foreign countries kogut and zander (1993); teece et.al. (1997); madhok, (1998); cantwell (1991) international entrepreneurship (born globalinternational new ventures) when do firms internationalize? how do they become mncs? who makes the decision? the 1990s-2000s accelerated internationalization of new and small ventures breaking the sequential process of internationalization based on gradual learning the birth of the born global and international new ventures key role of individual entrepreneurs and managers international entrepreneurship, accelerated internationalization mc dougall, shane, and oviatt (1994); knight and cavusgil, (1996); oviatt and mcdougall (1977); rialp et al (2005); coviello (2006) institutional theory how does the multinational face and adapt to the international environment? the 1990-2000s influence of sociology the importance of the international environment multinationals face different institutional environments (home country, host country, internal corporation) searching for legitimacy through isomorphism zaheer (1995) kostova and zaheer (1999); dimaggio and powell (1983) network theory how does the multinational coordinate and organize its international activity? the 1990s-2000s the importance of the business relationships of the mnc the transnational approach the mnc perceived as a network where knowledge flows freely in different directions internal and external embeddedness greater prominence of the subsidiary ghoshal and bartlett (1990); fosgren and johanson (1992); gupta and govindarahan, (2000); andersson et al. (2002); forsgren et al. (2005); johanson and vahlne (2009) source: compiled by author volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 firstly, one of the most important contributions in the 1990s was evolutionary theory (cantwell 1991; kogut and zander 1993; teece et al. 1997; madhok 1998), consisting of the adaptation of the resource-based view (rbv) to explain the raison d'être of the mnc. within this perspective, scholars tried to understand why mncs exist by focusing more attention on the origin or nature of competitive advantages and less on the international transaction itself. mncs are not created because of the transaction costs associated with imperfect markets, but through their superiority as an efficient organization that acts as a vehicle for the transfer of competitive advantages beyond national borders. due to the tacit nature of knowledge, competitive advantages are linked to human capital (social interactions and team relationships) and technological, marketing, and organizational capabilities (expertise, routines, proceedings, skills, etc.). these are usually difficult to codify, imitate, and replicate in other settings. hence, fdi is chosen not only because it is the least costly mechanism, but also because it is the only way to transfer certain organizational capabilities without them losing their original effectiveness. the more intangible the knowledge is upon which the firmspecific advantage is based, the more difficult it will be for transferring it abroad and, therefore, the more possibilities for choosing the mnc as the best way for organizing and coordinating. furthermore, internationalization can provide companies with an endless source of new ideas, new product discoveries, access to staff with different skills and ways of thinking, and, ultimately, it can inspire new business opportunities that had not previously been thought of in the home country. thus, a company makes fdi not only to exploit the resources and capabilities it already has in the home country (exploiting-seeking), but also to look for new ones (opportunity-seeking). this motivation to internationalize is based on the notion of the volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 company as a collection of resources and capabilities acquired gradually over time that determine its international competitive advantages (kogut and zander 1993). as a result, mncs are considered to be organizationally superior because their members, although geographically dispersed and from different cultures, accumulate experience over time through repeated exchanges and interactions that allow them to develop capabilities and a shared understanding, making this organization an ideal instrument for transferring knowledge across the world. in short, this new approach meant a radical shift in the conception of the monopolistic advantage of mncs, placing its origin not only in the home country but also considering other host countries as potential sources of value creation. parallel to this new conception of mncs, other scholars from the entrepreneurship field were still trying to gain a deeper understanding of the dynamics of internationalization processes from a more microfoundations approach. in the 1990s, the challenge of the globalization phenomenon was emerging and, as a result, some small and dynamic start-up firms did not follow a slow, evolutionary path of internationalization (johanson & vahlne 1990); quite the opposite, they were becoming international at birth or very shortly thereafter (rialp et al. 2005). these firms, called international new ventures (mcdougall et al. 1994; coviello 2006) or born globals (rennie 1993; knight and cavusgil 1996; zahra et al. 2005), were defined as business organizations that, from inception, seek to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries (oviatt and mcdougall 1994). facing this new phenomenon, traditional ib theories failed to answer why some firms had accelerated the pace and rhythm of their internationalization processes. monopolistic advantage theory, product cycle theory, internalization theory, and the uppsala volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 internationalization model could not adequately explain the formation process of international new ventures (mcdougall et al. 1994). as an alternative, literature in entrepreneurship based on psychological, sociocultural, and managerial approaches brought new insights on the issue. instead of analysing accelerated internationalization processes at the firm level, the international entrepreneurship (ie) literature paid attention to individuals and their international networks and relationships. the speed and intensity of international expansion enabled by technology and motivated by global competition (oviatt and mcdougall 2005) is strongly influenced by entrepreneurs’ competences (proactivity, risk perception, knowledge, international experience, social capital, network ties, etc.). indeed, network capabilities, complemented by entrepreneurial opportunity-seeking behaviour, appear to play a central role in the rapid and successful internationalization of firms. as a result, the ie approach meant a scaling down of the unit of analysis, understanding entry into a foreign country as an inherent entrepreneurial act decided by individuals, regardless of whether the company is newly established or is large and has been operating for some time (zahra 2005). accordingly, this stream of literature turned attention for the first time towards the role played by entrepreneurs, managers, and management teams in the internationalization process of the firm. aside from the dynamics of internationalization processes, other important contributions to the ib literature tried to answer additional questions about how mncs adapt to different international environments. based on institutional theory derived from sociology and classical organizational theorists such as meyer and rowan (1977), dimaggio and powel (1983), or scott (1995), a new theory of mnc legitimacy was developed (kostova and zaheer 1999). according to this approach, institutions generate isomorphic pressures that oblige volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 organizations to resemble others that face the same set of environmental conditions (dimaggio and powel 1983). organizations, indeed, feel the necessity to fit into systems of laws and rules (regulative), professional societies (normative), and social beliefs and values (cultural-cognitive), in order to earn legitimacy (acceptance of the organization by its environment), thus reinforcing institutional homogenization or the isomorphic process. according to this perspective, mncs operate in different countries facing different institutional pressures. the existence of multiple environments with varying legitimacy standards creates tensions between the mnc as a whole and its foreign subsidiaries. on the one hand, subsidiaries overcome their liability of foreignness by achieving legitimacy through the adoption of practices and structures institutionalized in host countries (external organizational legitimacy). on the other hand, in order to play a key role in the organization and to survive, subsidiaries also need to become internally isomorphic, assimilating and integrating institutions within the mnc (internal organizational legitimacy). therefore, internal and external environments exert isomorphic pulls on the subsidiary, creating institutional conflicts within the mnc. the more institutional distance between home and host countries, the more complex the organizational legitimacy balance the mnc will have (kostova and zaheer 1999). finally, one of the last but not least important contributions to ib literature in recent decades is the conceptualization of the mnc according to network theory (ghoshal and bartlett 1990; forsgren and johanson 1998 gupta and govindarahan 2000; andersson et al. 2002; forsgren et al. 2005). in order to explain how mncs coordinate and structure their international activity, this theory relies on their business relationships (ties to different agents such as customers, suppliers, competitors, public agencies, r&d labs, etc.). unlike institutional volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 theory, the network view assumes that mncs are more affected by their business environment than by their institutional environment (forsgren 2008). mncs are considered to work more like complex global networks than hierarchies (ghoshal and bartlett 1990), since they count on internationally dispersed connected units, which in turn are each embedded in different host country networks (andersson et al. 2002; forsgren et al. 2005). the creation of international business networks is the result of a path-dependent process where past decisions condition future steps, and this process is considered a key source of intangible assets and competence development. indeed, the mnc’s very existence is linked to its ability to manage a portfolio of scattered capabilities in multiple heterogeneous local contexts through subsidiaries, whilst devising strategies to embed these units in each of the multiple environments. in fact, the subsidiary acts as a bridge in the knowledge-transfer between the host country (external network) and the international corporation (internal network) (achcaoucaou et al. 2013). moreover, mncs’ competitive advantages are due to the ability to manage dispersed capabilities effectively within this ‘double network’ (frost, birkinshaw, and ensign 2002). this conception of the mnc as an organizational network is consistent with previous approaches based on the resource-based view, the evolutionary theory of the firm, institutional theory, the uppsala model, and even international entrepreneurship literature. challenges and future research after the overall review of the evolution of theoretical development in international business, this section will tackle the challenges of future research in the field. in what follows, we specifically highlight the tendencies in existing lines of research in emerging markets, volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 knowledge and innovation, and cultural studies in the international business context, while recognizing the existence of other interesting lines of research developing in the ib field. emerging markets have attracted most of the recent interest in studying the international business phenomenon. here, there are two angles. one looks at doing business in emerging markets (ems), generally referring to how traditional advanced economy multinationals can perform better in ems (e.g. cavusgil, ghauri, and akcal 2013; ramamurti 2004). the other looks at how multinationals from ems perform in the global scenario (e.g. cuervo-cazurra and ramamurti 2014; williamson, ramamurti et al. 2013). differentiated from developing markets, the term ‘emerging market’ refers to fast-growing economies with rapid industrialization (van agtmael 2007). however, despite the popular usage of em in academia and industry, the definition of countries as emerging markets is not at all clear-cut, with discrepancies between different public and private institutions (cavusgil, ghauri, and akcal 2013). there are a few exceptions such as the bric (brazil, russia, india, and china) group, representing the rising power of emerging markets (sinkovics et al. 2014). as the bric group becomes the economic and political driver of the global economy, most research interests have paid considerable attention to these specific countries (e.g. fleury and fleury 2011 for brazil; child and rodrigues 2005 and luo 2007 for china; chittoor et al. 2009 for india; and aidis, estrin, and mickiesicz 2008 and estrin, pouliakova, and shapiro 2009 for russia), and especially to china since it became the world’s largest economy in terms of gdp based on purchasing power parity in 2014 (imf 2015). in the case of china, tsui et al. (2004) find increasingly exponential interest in publishing chinese-context research in the top 20 journals. however, there are also other studies generalized at the level of emerging markets (e.g. khanna and rivkin 2000; london and hart 2004). volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 in the case of studying multinationals from emerging markets, critical issues are raised regarding the possibility that the latter may represent the changing face of international business (sinkovics et al. 2014), instead of an adaptive strategy of traditional multinationals in emerging markets. some argue for the distinctive competitive advantages of em multinationals (e.g. cuervo-cazurra and genc 2008; williamson 2015), without following traditional theoretical models such as the oli paradigm. others question to what degree the phenomenon of em multinationals is old wine in a new bottle (ramamurti 2012). this emerging interest opens up much debate on different fields of management; for instance, the role of acquisition for entrepreneurship (madhok and keyhani 2012), reverse innovation from the bottom of the pyramid (govindarajan and ramamurti 2011), and entrepreneurs and innovation (liu et al. 2010). considerable interest has been paid to multinationals’ investments in emerging markets in recent decades, with scholarly attention basically stressing how to improve performance in these markets. given some contradictory results on multinationals from advanced economies in these markets, it seems that high technology and advanced managerial systems are not sufficient to guarantee success. questions are raised on whether the prevailing western management theories are effective in emerging markets and how these supposedly advanced managerial systems or business models need to adapt to the local context in emerging markets. nevertheless, the most recent trends have been focusing on studying the phenomenon of multinationals from emerging markets. the rising power of emerging economies and their enterprises has been the most fascinating and recent phenomenon, but it is relatively under-studied. in the accelerated globalization process of the 21 st century, emerging markets play an important role as a new phenomenon that could potentially volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 influence new theory building in the field of international business on the basis of two different questions: 1. what are the distinguishing features of multinationals from emerging countries, or so-called emerging multinationals (emnes)? 2. how can traditional multinationals achieve better performance in emerging markets given their distinctive market characteristics? further exploration of these issues will continue to be needed in the field. closely related to the latest tendencies in the study of emerging markets, such as the work of govindarajan and ramamurti (2011) and liu and zhang (2014), knowledge and innovation is another trendy topic in international business. posited as a different area of focus, scholars have been interested in gaining an in-depth understanding of how knowledge is managed, innovation is transferred, and learning is brought about in international business, and especially between emerging and advanced economies. after the success and establishment of the resource-based view of the firm (rbv), nonaka (1994), spender and grant (1996), and others developed organizational theory through the knowledge management school or the knowledge-based theory of the firm (kbv). the essential idea of nonaka’s knowledge management lies in the humanistic approach to knowledge creation and innovation based on knowledge conversion and the knowledge spiral (zhang, zhou, and mckenzie 2013). a significant amount of scholarly work has been devoted to knowledge management, especially referring to knowledge transfer in the international context. some examples are bresman, birkinshaw, and nobel’s (1999) study of knowledge transfer in international acquisitions; welch and welch’s (2008) exploration of the role of language in knowledge transfer; simonin’s (2004) knowledge transfer process in international strategic alliances; inkpen’s (2008) knowledge transfer in international joint ventures; minbaeva et al.’s (2003) association of knowledge transfer with absorptive capacity volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 and hrm; and si and bruton’s (1999) knowledge transfer in international joint ventures in transitional economies. on the other hand, innovation as knowledge creation has gone through its own evolution in the field, spanning more than half a century. however, the international dimension of knowledge creation and innovation emerged relatively recently thanks to the increasing interest in and development of international business (shavinina 2003). the focus of studies in innovation has varied but has mainly been on technological aspects and product innovation (fromhold-eisebith 2007; osborn and marion 2009; popp 2006; zander 2002), with increasing interest in business model innovation (e.g. chesbrough 2010; chesbrough and rosenbloom 2002; sosna, trevinyo-rodriguez, and velamuri 2010) and management innovation (birkinshaw, hamel, and mol 2008). focusing on reverse innovation from developing countries, special interest has developed in recent years around how innovation at the bottom of the pyramid in emerging markets has contributed to the global market, including advanced economies (govindarajan and ramamurti 2011: von zedtwitz et al. 2015). in this process of knowledge transfer and innovation, learning has become a critical focal point in the international process, as this is how organizations, teams, and individuals can acquire knowledge and, consequently, develop knowledge transfer and creation as the source for innovation (e.g. alcacer and oxley 2014). it was relatively recently that learning was incorporated into international business knowledge and innovation processes as an explanatory factor for the accelerated internationalization of latecomers (liu and zhang 2014; lyles, li, and yan 2014; mathews and zander 2007). volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 with the growing interest in knowledge, innovation, and learning in management, international business has been obliged to incorporate these elements as the centre of its theoretical development. conversely, increasing complexity in ib requires theoretical development based on corporate frontier challenges in the area of knowledge management in order to contribute to the general field of management. this field is open to diverse lines of research, including key determinants and processes of international knowledge management, innovation capability transfer in an international context (which includes product innovation, process innovation, and management innovation), and learning as a dynamic perspective to enhance innovative capabilities and performance in international business. on the other hand, culture has always been a unique aspect of international business, differentiating it from business in domestic markets. however, formal legitimized internationalization theory treats culture as an informal institutional element, considered as an external factor, versus the resource-based internal factors (e.g. peng and meyer 2011). thus, the cultural dimension is limited to the national level and its interplay with corporate culture is almost totally ignored in international business studies, which is primarily explored and debated from the organizational behavioural perspective (tsui, nifadkar, and ou 2007) in spite of its relevance for a better understanding of the dynamic nature of culture in this environment. however, the complexity of culture per se as a construct with multiple levels and dimensions (fischer 2009; gerhart 2009; leung et al. 2005) deserves its own theoretical development, which may potentially shift the paradigmatic tendency in management (rohlfer and zhang 2016). the national level of culture is only one among many other levels such as organizational, regional, professional, industrial, and team levels. though often these levels volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 are treated as hierarchical relations (e.g. erez and gati 2004), in fact, in a globalized world with increasing corporate power, it is no longer appropriate to locate the organizational level under the national as though it were one of its subcategories. indeed, study of the interplay between these two cultural levels is needed to further explore culture’s role in the field of international business. rohlfer and zhang (2016) identify three trends in studying culture in the international business context that reveal rising pressure for this paradigmatic shift: integration of the west-east dichotomy, coexistence of convergence and divergence, and dynamic versus static perspectives of cultural studies. these lines of research potentially contribute to a greater understanding of the role of culture in international business, and to fostering a cultural theory of management and international business. conclusions in conclusion, after having reviewed all of these important streams of literature developed over the last sixty years, we can say that each of these perspectives emerged to explain different issues in international business phenomena according to the concerns and inquiries that were relevant in the period in which they were developed. in this regard, a large part of these theories, mainly the oldest ones, tried to respond to existentialist questions, resulting in contributions sometimes much closer to a philosophy of the multinational firm than to implications for practitioners. based on different disciplines such as economics, sociology, management, political science, social psychology, etc., these theories have succeeded in explaining the raison d’être of international business from an interdisciplinary perspective. additionally, we find different streams of literature that have highlighted other relevant and more specific topics linked to multinationals. particularly, it is worth mentioning the dynamics of internationalization processes (covered by the life cycle of the product, the volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 uppsala model, or international entrepreneurship); the efficient and costless type of international organization (internalization theory); how to generate competitive advantages internationally (the evolutionary theory of the mnc); the structure and coordination of international activity (network theory); or the influence and problems derived from adaptation to multiple types of environments (institutional theory). furthermore, according to the issues addressed, scholars differ in their primary areas of focus, giving more prominence to different units of analysis within the mnc. in the case of the earliest theories, the vision of the parent company in the home country completely dominated the research (i.e. portfolio theory, monopolistic advantages, internalization theory, and the eclectic paradigm). the life cycle of the product, the uppsala model, and evolutionary theory had a more holistic perspective of the mnc, analysing it much more as a whole. likewise, institutional theory and network theory shifted attention towards the level of host countries and subsidiaries. lastly, the international entrepreneurship perspective is even more concrete, focusing on the decisions made by individuals and managers across the mnc. in line with the perspective of international entrepreneurship, the knowledge and innovation field seeks systematic knowledge management among individuals and within organizations to fulfil business challenges. consequently, a shift from the economics model to humanistic management becomes inevitable. in this sense, cultural studies play another critical role in international business research, not only posited as an external institutional variable, but also as an intrinsic factor for individuals and firms to gain and sustain competitive advantages in the global arena. the research context of emerging markets provides an additional study environment for the growing number of multinationals, both from existing advanced economies and indigenous firms from emerging markets. the generation of nonaka’s volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 knowledge management theory in growing japanese companies is one example where new study contexts offer research opportunities for novel theory building, thus contributing to the field’s development. in this editorial article, we have overviewed six decades of research progress in the field of international business, and some existing challenges for future research development. as theories are closely linked with the contemporary business world and practices, a better connection is needed between research and the realities of business and society. with scientific rigour, we can improve the global business world by increasing the relevance of our research work. for this reason we take the opportunity here to call for quality papers for forthcoming issues in the field of international business for the journal of evolutionary studies in business (jesb). there is a wide range of interesting topics in ib, especially those targeting the aforementioned trendy topics, but not limited exclusively to them. issues such as the differences and impacts of culture, internationalization of family businesses, smes and firms in the service industries, relationships between the parent company and subsidiaries, or changes and new entry modes are all welcome. both conceptual and empirical manuscripts are appreciated. we are open to a variety of qualitative and quantitative methodologies, and encourage the triangulation of methodology in empirical research papers. discussions on methodological issues, literature reviews defining the state of the art, and new challenges in international business from an evolutionary perspective are especially encouraged. we expect submissions of quality papers, which together with a rigorous review process will fill the existing research gaps in international business and, especially, contribute to further paradigm building in the field. volume 1, number 1, 63-94, january-june 2016 doi: 10.1344/jesb2016.1.j005 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 references achcaoucaou, fariza; 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perspective.” industrial and corporate change 11(2):327-353. zhang, y., y. zhou, and j. mckenzie. 2013. “a humanistic approach to knowledge creation: peoplecentric innovation.” in towards organization knowledge: the pioneering work of ikujiro nonaka, edited by g. von krogh, h. takeuchi, k. kase, and c. g. canton, 167-185. uk: palgrave macmillan. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 paula rodríguez-modroño lina gálvez muñoz astrid agenjo-calderón universidad pablo de olavide (spain) the hidden work of women in small family firms in southern spain abstract women have historically played an important hidden role in family firms, and a great deal of research is now shedding light on this role. in spite of the more formal nature of female work at the present day, still a considerable volume of women’s contributions in family firms is unregistered and unpaid, even in developed regions. a questionnaire was administered in 2011 to 396 women working in small and medium-sized family firms located in andalucia, a southern european region, characterized by familialism and a large informal economy. our results confirm the persistence of subordinate forms of unpaid family collaboration due to the neutrality assigned to female contributions under the traditional gendered division of work. but also this study shows how some of the women voluntarily embrace subordinate roles as a temporary way to gain professional experience, useful for their future work inside or outside the family firm. keywords: gender; women in business; unpaid work; smes; family firms introduction literature on family firms started to include gender issues and the participation of women in family firms only in the recent decades, driven by a general increase in the registered labor corresponding author: e-mail: promod@upo.es received 03 may 2016 accepted 29 july 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 force participation of women, the increasing visibility of their work as self-employed or employed workers, the growing number of women entrepreneurs, the rise of individualism, the professionalization of family businesses and the recognition of gender as an important analytical variable (fitzgerald et al. 2001; barrett and moores 2009; martínez 2009; wang 2010; benavides, guzmán and quintana 2011; bjursell and bäckvall 2011; lerner and malach-pines 2011; heinonen and stenholm 2011; blondel 2013; hamilton 2013). however, the vast majority of analyses concentrates on the role of women in processes of inheritance (dumas 1992; vera and dean 2005; haberman and danes 2007; overbeke, bilimoria and perelli 2013), and on interpersonal family dynamics, emphasizing particularly three spheres associated with the reproductive role of women: the creation of the next generation, the education of the future business leaders, and the transmission of values (ceja 2008; dugan et al. 2011). therefore, in spite of this emergent literature on women in family firms, there is a wide gap for incorporating gender as a central analytical variable in family business research, though there are some recent attempts to theorize business enterprise from a gendered perspective (marlow and mcadam 2013; al-dajani et al. 2014; barrett 2014). we agree with recent research that shows that the number of women performing management and leadership functions in businesses is higher than recorded by the statistics at the present day as it was in the past (fitzgerald and muske 2002; sharma 2004; vadnjal and zupan 2009; cesaroni and sentuti 2014). in fact, whereas early studies about the empiric evidence of female participation in family firms highlighted the success stories (frishkoff and brown 1993), more recent approaches, by expanding documentary sources to include legal archives, private documents, and interviews, are revealing the existence of major discrimination. we argue that the important participation of women in family firms is still undervalued, since it is http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 a participation that does not occur necessarily as owners or managers, but still very often as collaborators, unpaid workers, and informal leaders without proper recognition (cole 1997; dumas 1992, 1998; gillis-donovan and moynihan-brandt 1990; hollander and bukowitz 1990; salganicoff 1990; rowe and hong 2000; cappuyns 2007; barrett and moores 2009). as blondel (2013) states, women take part in the family firm in different ways: they support their husbands, contribute to vital functions in the business, and bring in financial capital, directly or indirectly; they contribute to the development of the social and cultural capital; and, they develop the human and emotional capital. therefore, she calls them the ‘hidden giants’. hence, women have not only historically played an important ‘hidden’ role in family firms, a role that is being highlighted by numerous studies within the fields of economic and business history, 1 but still a considerable volume of women’s work and contributions to family firms remains invisible, even in present times in advanced countries. as martini and bellavitis state “the issue of unpaid work in family businesses is regularly raised, but much ground remains to be covered on these productive units, which have dominated both the early modern era and a large part of the modern and contemporary era in southern and northern europe” (2014, 273). our analysis contributes to this recent research that shows how women are still underrecorded as business people in the formal statistics of companies, and are classified into reproductive or secondary and informal roles. the persistent strength of traditional roles in familialistic societies, such as the southern european ones, still keeps women’s contributions in small family firms heavily underestimated. therefore, we aim to investigate the 1 see, among others, horrell and humphries (1995), sarasúa and gálvez (2003), gálvez and fernández-pérez (2007), solà (2008), or the recent off the record symposia published in two issues of feminist economics (2012, 2013) and the special issue of history of the family edited by martini and bellavitis (2014). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 unregistered and many times unpaid role of women – mothers, wives and daughters – in small family businesses and to discuss the nature of their work. based on data from 396 female family workers, this paper identifies typical women’s profiles according to the amount and informality of their work in the family businesses. our research has been structured around four main questions: what is the nature of women’s work in family firms? under what conditions do women work in a hidden role in small family firms? what are the usual working conditions of women in small and medium sized family firms? what are the consequences of women working in a hidden role on individual level? analyzing women’s work in family firms: an awkward fit in conventional dichotomies feminist economists have shown that unpaid work is located at home but also somewhere between the household and the market, challenging any artificial separation between the two. family firms constitute a middle ground between the market and the home, between paid and unpaid work, highlighting the limits of using such dichotomies when analyzing the work carried out by women therein (philipps 2008), since these types of companies become a kind of ‘black box’ in which conventional concepts and instruments of measurement are limited. institutional, economic, and social forces affect families and businesses alike, forging gender identities, roles, and relations. from this perspective, cramton (1993) and hamilton (2006) criticize the fact that studies into family firms that apply the theoretical approaches taken from the literature about entrepreneurship emphasize individualism and economic rationality, without contributing a framework to understand collaborative practices. as argued by fernández-pérez (2003) and by fernández-pérez and hamilton (2007), gender studies of family firms must be tackled from an evolutionist perspective, acknowledging that gender relations and roles are changing, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 inserting family firms into their social and business context, and incorporating the variable of time into the study of continuous organizational and productive changes, and in the relationships that exist within these businesses. forms of leadership in the context of a family firm are multiple; they change constantly by means of ongoing bargaining and, therefore, family firms should be analyzed as fundamentally collaborative spheres that integrate different relationships and practices between family and business. in fact, the area of unpaid work in family business lies at the intersection of the history of the family and the history of labor (martini and bellavitis 2014). therefore, we argue that the ‘bargaining framework’ for the household set out by sen (1983, 1990) and refined by authors such as katz (1997) and agarwal (1997), is a useful model to study the role of women in family firms. sen considers the household as an area of ‘cooperative conflicts’, understanding that within households there are gender and generational (age) inequalities that lie at the foundation of their functioning. sen’s framework includes “three factors relevant to the bargaining process: a) the ‘breakdown well-being response’ (what a person has to fall back on, were s/he to physically survive outside the family), b) ‘self-interest response’ (one's perceptions of her/his self-interest), and c) ‘perceived contribution response’ (one's perception of her/his contribution to the family)” (op. cit. benería, berik and floro 2016: 74). perceptions about the contributions made by each member of the family, about their needs and capacities, and external perceptions are shaped by social norms. these norms affect not only the differential bargaining power of women and men within the family, but also outside of it, and they even determine what can be negotiated (agarwal 1997). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 katz (1997) also made important contributions in this respect about the treatment of members of the family as agents in terms of their capacity to participate in the bargaining process (their voice) and their capacity to perceive and have access to viable alternatives for a cooperative solution (emergence). this treatment cannot be symmetrical since, with regard to gender, the voice and emergence of women and men is very different, owing to a variety of factors that range from the valuation of their earnings according to social norms and cultural practices, to gender-differentiated social sanctions (benería 2008). family firms, just like households, can be analyzed as human groupings in which the members of a family cooperate to a certain extent, but in which the existence of conflicts is also recognized when it comes to establishing who makes decisions and how. family firms function through cooperative conflicts, with models of resources distribution and social norms in general acting against women, detracting from their bargaining power, decreasing their capacity to obtain, control, and decide over resources. family firms are organizations in which gender roles are dually reproduced by bringing into play not only the gendered division of labor, but also the influence of normativity around the traditional nuclear family and the roles associated with women therein. as sen recognized, in family owned businesses or family farms, women’s contributions to the family enterprise might less be visible both to themselves and others around them compared to a setting of wage labor (op. cit. benería, berik and floro 2016: 74). women’s unregistered work in family firms is not due to a neutral or natural process, but rather is motivated by the role imposed upon them historically, by their socialization as altruistic caregivers for the home and the people who live there, and by the historic sense of guilt inflicted on those who did not abide by this rule. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 unveiling women’s work in family firms women have always shared the responsibilities in family firms. this is very evident in rural areas and in family production units, now and in the past. in urban economies, their participation has always been more important in the services sector 2 than in industry, where women were more visible in family firms from preindustrial ages, although capitalism did not expel women, but rather kept them on, adapting their work according to the life cycle of their families, taking up and leaving jobs as their children were born or grew up, or as their husbands died and they remarried (wiesner-hanks 2001; humphries 2010). women have historically played a crucial role in founding, managing, and expanding family firms, as the research is revealing, often within the fields of economic and business history, either visibly or chiefly hidden (mulholland 1996; dumas 1998; colli, fernández-pérez and rose 2003; vera and dean 2005; hamilton 2006, colli and rose 2008). but although women have been directly involved in daily management, historically they have not received any recognition for their contribution, in the form of a formal position in the business or a salary (hollander and bukowitz 1990; cole 1997; nelton 1998). this systematic under-evaluation of women’s work was rooted in a cultural and ideological model based on the idea that their work – paid as well as unpaid – was not valuable. work was not part of the social identity of women; they were only expected to act according to their ‘natural’ role of caregivers. in this sense, female work was a ‘dutiful contribution’ required in order to earn a livelihood and ensure the maintenance of the family (zucca 2013, 2014). the historical and hierarchical division of work and spaces imposed a gendered construction of identities. 2 see the special issue about women’s work in services companies of the business history review edited by kwolek-fowland and walsh (2007). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 the different positions of men and women in the economy and in society, with differentiated roles and responsibilities according to their gender, explain the invisibilization of women in family firms (rowe and hong 2000) and, in general, why most female work was largely unrecorded in european societies (humphries and sarasúa 2012). the study about family firms in spain, italy, and great britain in the 19 th and 20 th centuries conducted by colli, fernández-pérez and rose (2003) shows, for example, that women contributed with vital capital resources and access to trusted business and family networks. in 19 th century great britain, for example, women were under the protection of their spouses and could not inherit until the second half of the 19 th century, so that many were de facto partners in a business, but lacked the legal right to the business capital or other properties. this pattern was also fairly common in europe in the 20 th century. however, business interests and the family were fully interlinked and the phantom tasks performed by women extended even to finance. as indicated also by gálvez and fernández-pérez (2007), the majority of women’s work in family firms has been carried out without a contract, salary, or social benefits, and if women have received some kind of remuneration, it has always been lower than their male colleagues, although this gap cannot be attributed to differences in productivity. in the 19 th century, women frequently provided services and helped out family firms in agriculture, manufacturing and commerce without a contract, wages, or public recognition. women appear in some historical records as auxiliary service providers who served customers and workers, assisted in public relations, and helped to manage family firms. many managed the businesses for years, between one male relative and another, but in spite of their numerous responsibilities, women never appeared as owners or employees. in large mercantile cities, women managed the business while the men were away travelling (fernández-pérez 1996). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 although their help was vital for family firms, particularly during crucial moments of transition, their participation depended entirely on the wishes of their male relatives. all of these contributions by women to family firms have remained in the shadows for several reasons. first, because in the division of labor between the business and family subsystems, women are usually situated within the family system (frishkoff and brown 1993) or they are assigned informal support functions as assistants, advisers, or mediators between the members of the family (gillis-donovan and moynihan-bradt 1990) or even, a role of emotional leadership (lyman 1988; salganicoff 1990). second, because the legal and cultural restrictions that existed in all countries blocking the incorporation of women into the labor market in general and particularly into the management and ownership of business, until well into the 20 th century, have impeded the ‘formal recognition’ and ‘official recording’ of the role of women in family firms, even in favor of their husbands in the event that women inherited the family firm (gálvez and fernández-pérez 2007; fernández-pérez and hamilton 2007). hence, information about the work of women and their role in the business sphere is not only diffuse but buried, and even intentionally distorted (wiesner-hanks 2001). this unrecording of women’s work in family firms is not just a feature of the past. despite the gender gap in the business sphere has been considerably reduced in recent years, the number of women performing management and leadership functions in businesses is still higher than recorded by the official statistics. oecd data show that the proportion of businesses managed by women is stuck at around 30% of the total in the majority of countries, and in 2010, three out of every employer were men, and there were 1.5 times more self-employed men than women. in spain, male employers double female employers, and there are 1.59 self-employed men working as own-account for every women (oecd 2012, 2013). however, we know that http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 these official figures continue to underestimate women’s contribution to family firms, even more in regions, like the mediterranean, with a large informal economy and familialistic welfare states. context and methodology the geographical area selected for the study of women’s unregistered work in family firms is andalusia, a region in the south of spain with 8.39 million inhabitants, and a gdp per capita of 70% of the eu-28 average, according to eurostat data for 2013. main economic sectors in andalusia, as in many southern european regions, are tourism (13% of the gdp), agriculture (5.2% of the gdp) and agrifood (22% of industrial output). in this region, as well as in the world economy, small family firms play a fundamental role. in europe at least 80 % of firms are family-owned and family-controlled (poza and daugherty, 2013). in spain, family enterprises account for 90% of all firms, contributing to 60% of gdp (70% in andalusia), and providing employment to 75% of employees in the private sector, according to data from the spanish institute of family firms. also, as it is usual in mediterranean countries, gender inequalities in the labor market are larger than in the north of europe. female labor force participation rate is still at 52% compared to 66% of males in 2015 and female employment is 43%, 12 percentage points lower than male employment rate. these basic traits are clearly represented in the results of this study, although the aim is to go deeper, from a gender perspective, into what is happening inside family firms with female workers. in spain, all workers in a family firm who are relatives of the business owner up to the second-degree must register under the social security especial regime as entrepreneurs or business managers. 3 however, this registration process is not always followed, and in small 3 in spain, régimen especial de trabajadores autónomos. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 businesses there is still a large amount of unreported work which is carried out mostly by women in the family. we want to analyze what factors determine the extent to which women work officially or unofficially in small family firms. are these factors individual, family or business-related? what is the nature of women’s hidden work in small and medium sized family firms? and what are the consequences for these women? to this end, we administered a questionnaire to women who work in family smes throughout andalusia. the questionnaire allowed the gathering of data related to characteristics of both family firms and women, as well as to the nature of their work, the frequency and time devoted to work and the type of tasks performed. informal workers were also asked about the reasons for their unregistered work, the type of compensations received, as well as their perceptions about their working conditions. since our population comprehends women who are working in family firms without being registered, and thus that are inherently difficult to quantify and where population databases do not exist, we accessed the respondents through a gatekeeper, in the form of a women’s employment program (unem in spanish). this program has 110 women’s employment units that offer professional guidance services for women in urban and rural areas of the andalusian region. it was created in 2007 and it is managed by the andalusian women’s institute in collaboration with local governments. we had a meeting with unem staff in order to explain the women we wanted to approach, women working officially or unofficially in family firms, and the questionnaire. unem staff was essential to approach the target population as they have a deep knowledge of women in their territory, being able to find the sample of women with the characteristics we needed, and to administer the questionnaire http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 directly through a face-to-face method. information was gathered during three months of 2011, with spain already in recession as a result of the outbreak of the eurozone crisis. our final sample consists of 396 women working in small family firms. we divide them in three groups: (i) those who are registered in the social security regime as business owners or managers -77 women, who account for 19% in our sample-; and those who are not officially employed but work in the family firm, either (ii) in a regular basis and full-time -184 or 46% or (iii) only occasionally and part-time -135 or 34% of our sample. the classification of women as regular or occasional workers was carried out once information was collected, based on data about the frequency of their work in the company. main findings the first aspect evidenced by this research is the presence of a significant amount of unreported labor that, although often considered sporadic, reaches similar volumes to that of formal work. we were able to find a considerable amount of unregistered family workers without much effort. the majority of these women without a contract work in the family firm on a daily basis, 60% of women who work informally are in the business indefinitely, and dedicate 30 hours on average a week to the business. ‘occasional informal workers’ state that they go only several times a week and work on average 17 hours a week (see table 2). secondly, in order to distinguish which factors -individual, family or businessmay determine if women work under a hidden role, we look for different profiles of female family workers according to the degree of informality or formality of their work. most of these women work in micro-enterprises, but family workers with a contract are in slightly larger firms. looking at the type of activity, despite most firms are in retail, accommodation and food activities and personal services, many informal workers are also in agriculture firms. the most common http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 tasks carried out by all women are customer service related and customer and supplier relationship management, though many women without a contract declare to devote a considerable amount of time to cleaning activities. the majority of the respondents are women aged 30 to 49 years of age, with secondary education, married, and living with their partner –who is the business owner -. however, an important part of the occasional workers are young women studying at the university or with a university degree that temporarily work in their parents’ family firm to gain experience or because they cannot find a job outside the family firm (table 1). table 1. relationship with the family business owner registered worker (%) regular informal worker (%) occasional informal worker (%) partner 42.9 48.9 35.6 parents 20.8 16.9 29.7 children 13.0 13.5 7.4 siblings 7.8 8.2 11.9 others 9.1 9.8 14.8 n/a 6.5 2.7 0.7 total 100 100 100 source: own elaboration. as there were just slight differences among the female family workers with and without a contract, women were also asked directly about their main reason for working in the business (table 2). the majority of them state that they work to help their family, both women with a contract and without, although 38% of the women working formally declared that they have studied to run the family business, in contrast to an important subset of women working informally who state that they are just gaining professional experience or they cannot find another job. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 when asked for the significance of the work they do, it is above all a means to serve the welfare of the family. this was the motivation given by 73% of regular informal workers, 77% of occasional collaborators, and 57% of registered workers. this emphasizes the idea of blurred boundaries between family and business, and the reproduction of gendered stereotypes in this interaction, since these informal female workers are also aware that their situation of informality has negative consequences for them, but they work in the firm because helping their family is a priority for them. table 2. characteristics of female work in family firms registered worker regular informal worker occasional informal worker average weekly hours of work 39 30 17.2 reasons for working in firm 60% helping family 38% studied for it 64% helping family 15% getting work experience 15% cannot find a job 56% helping family 16% getting work experience 13% cannot find a job significance of work 57% family wellbeing 52% earning a living 73% family wellbeing 27% earning a living 77% family wellbeing 20% earning a living remuneration 45% fixed payment 30% non-fixed payment 48% none 23.4% non-fixed payment 51% none 27% non-fixed payment source: own elaboration. according to the women interviewed, a main reason for the informality of their situation is cash flow problems that prevent the family business from covering the cost of employing them: 52% of regular workers and 29% of occasional workers. thus, quite a few family firms replace salaried work with informal family work, reducing labor costs. family informal work has historically coexisted with other forms of regulated labor, but is usually more significant at times of crisis, such as in this case study, in which family firms and households turn to the buffer and flexibility of family labor, especially that of women. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 finally, as for the type of compensation they receive for their work, half of informal workers do not receive any type of compensation, and if they do it tends to be little and not fixed. the majority receives less than €500 per month (34% of regular and 31% of occasional workers) and between € 500 and € 1000 (47% and 27%, respectively). concluding remarks this article presents original research about the still substantial amount of unreported work carried out by women in family firms. our study of 396 women working in small and medium-sized family firms in southern europe shows, in the first place, that the unregistered and many times unpaid work of women in family businesses is a key issue in the gender order of our economies, not only in developing economies but also in developed ones, such as the southern european regions, which compared to other welfare regimes (karamessini 2008; moreno 2010) are still characterized by a larger informal economy due to lack of regular employment, and a higher level of familialism which gives access to other channels of income-provisioning opportunities (narotzky 2013). the second salient finding is that the informal or formal nature of women’s work in family firms cannot be explained by the socio-demographic characteristics of the workforce, or by the type of business activity, but rather by a production structure where the predominant vision of family work, especially women’s work, as a supplementary flexible contribution still pervades. hence, these findings corroborate the idea that the separate spaces between family and business must be analyzed as permeable spaces in which negotiations are reproduced based on cooperative conflict on the basis of gendered identities that assign differentiated roles to women and men, as examined in the theoretical section of this paper. many times the role of women in family firms continues to be invisible or underestimated because of the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 neutrality assigned to their contributions in the family sphere. the prevailing traditional cultural model assigns different roles to men and women and characterizes female work as less valuable, and thus as irregular and informal. the still dominant view of women’s work as a supplementary flexible contribution, almost always available for the wellbeing of the family, explains the undeclared nature of women’s work in family firms in many cases. indeed, we asked interviewees if other family members, male and female, were working in the firm formally or informally, and the number of women working informally without contract is always higher than the number of men. men usually work at the family firm with a contract while more women work irregularly than with a formal contract. in more than one third of the cases, family firms resort to unregistered female work as a mechanism for cutting costs, replacing salaried work with informal family work. this mechanism can be particularly important during recessionary periods or in the context of neoliberal policies promoting competitiveness through labor cost-cutting strategies (addabbo, rodríguez-modroño and gálvez 2015; gálvez and rodríguez-modroño 2013, 2015). these strategies that promote the embeddedness of production relations in the social fabric of the family may generate deep tensions. as narotzky warns: “the objectification of affective relations, their embodiment and materialization in production relations appears as a loss of reality of the person and a loss of these affective relations themselves.” (2004, 75). however, not all women’s experiences in family firms are the same. there are also some informal workers that do not want to have a formal contract in the family firm. almost one third of informal workers say they work temporarily in the family firm because they cannot find another job or because they are interested in acquiring experience. these results support dumas’ studies (1992, 1998), who also found that many women do not plan a career in the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 66-87, january-june 2017 doi: 10.1344/jesb2017.1.j023 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 family business and do not aspire to ownership but come into the business to help the family in a time of crisis or because other options are less attractive. in her studies, these women see their participation in the family firm as being only temporary. indeed, many of the occasional informal workers interviewed in our study say that their work in the family firm is something they do occasionally while they are studying, looking for another job or gaining experience before taking over the family firm permanently; or because they have a job in another company. thus, the marginal role of women in family firms is not always the result of stereotyping and gender discrimination: women are not always forced to operate in a secondary position (barrett and moores 2009). as in zucca’s (2014) analysis of women in eighteenth-century turin or cesaroni and sentuti’s (2014) study of women in contemporary italian family businesses, many times they embrace informal roles just for a limited period of their life or precisely to limit their commitment and responsibility in the family business, in order to have more freedom and more time to focus on other activities or to create their own enterprises. these findings support the idea that gender studies of family firms must be tackled from an evolutionist perspective, acknowledging that gender relations and roles change, and women can be working informally in family firms just for a period of time, before being formally employed in the family firm or outside. therefore, a step further in our analysis should incorporate time into the study of these family businesses and the continuous changes in the roles of the family members. references addabbo, tindara, paula rodríguez-modroño, and lina gálvez muñoz. 2015. “gender differences in labor force participation rates in spain and italy under the great recession.” revista de economía mundial 41: 21-42. http://revistes.ub.edu/index.php/jesb volume 2, number 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commons license 4.0 204 pedro nueno iese (spain) chinese companies in the world abstract over the next few years, we are going to see a major global expansion of chinese companies in all sectors and in all countries. obviously, this is an opportunity for companies whose future is not so clearcut, be it because of their size, their technological weaknesses or their owners’ failing business interests (for reasons of age, family matters, diversification, etc.). however, it should be an opportunity for chinese companies to expand their operations in europe or in america. in many cases, such acquisitions (some of which have already been completed) will protect jobs and create many more. we should see the internationalization of chinese companies as a great opportunity, and we should prepare ourselves for it and make sure we have the right strategies in place be it as partners, allies, suppliers or customers. keywords: chinese companies; internationalization; strategic there is little question that chinese companies will extend their operations beyond their own borders in their efforts to go global but, as yet, surprisingly few have done so if we consider the volume of china’s economy and the technological and financial capacity that many chinese companies obviously boast. corresponding author: e-mail: pnueno@iese.edu received 22 may 2019 accepted 04 june 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 204-209, july-december 2019 doi.org/10.1344/jesb2019.2.j065 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 various cases can be cited to illustrate their undoubted capacity to operate abroad. in the tough, competitive environment of the automotive sector we find the case of geely, the chinese car manufacturer, founded by billionaire businessman li shufu, which acquired volvo cars in 2010. prior to this, volvo had been acquired by ford, in their attempt to enter the high-end market along with jaguar, and land rover. ford paid around 6.5 billion dollars for volvo. but, a few years later, when the effects of the 2008 economic crisis began to make themselves felt, ford started to accumulate debts that threatened to take it to the point of bankruptcy, and looked around to sell off its high-end brands. ford managed to sell off jaguar land rover relatively quickly to the indian multinational, tata motors. but it looked as if it would be harder to offload volvo given volvo’s need to liquidate assets. current owner li shufu had his offer of 1.5 billion dollars accepted and he kept the volvo management team in place, including its board of directors, and encouraged the company to grow internationally. since being acquired by geely, volvo has recovered it image of excellence in the market, fueled a more profitable rate of growth, expanded its production capacity with a new plant in china and another in the united states, and is currently leading the field in the development of self-driving, electric and hybrid cars . huawei is another chinese company that has gone global, in this case, in the field of telecommunications, manufacturing both smartphones and the infrastructure that facilitates their efficient deployment. huawei has enjoyed success in the european market, but in the united states it has faced considerable obstacles with the us government concerned that, because of the services it provides, it could be a channel providing unauthorized access to confidential information. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 204-209, july-december 2019 doi.org/10.1344/jesb2019.2.j065 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 a third example is provided by mindray. founded in shenzhen, in the south of china by leading entrepreneur xu han, this company is dedicated to the manufacture of medical diagnostic equipment. the company has also developed its operations internationally, although it has run into problems in the united states. however, xu han was successful in launching mindray on the new york stock exchange and getting the firm listed on the nasdaq, making it the first chinese company to achieve this bussiness landmark and, naturally, facilitating its operations throughout america. in the same way that many spanish companies strengthened their international operations by extending their businesses throughout latin america, many chinese companies are doing the same in africa. technical regulations in africa remain fairly limited and this obviously facilitates their doing business in such areas as south africa and sub-saharan africa (nigeria, ghana, ivory coast, etc.). today, chinese private and state companies alike are working on infrastructure projects on the continent (primarily roads, railways, and ports). moreover, the chinese government has sealed many agreements with african governments to facilitate the further expansion of their business concerns. for the chinese government, international growth is an obvious objective. president xi jinping has done everything in his power to stay on good terms with all international leaders. he has turned a deaf ear to the threats made by president donald trump against china’s exports to the us and has forged ahead with his “new silk road” project, which includes trade agreements with many countries. the new silk road began as a project to link china and europe by rail and was then extended to include a further rail link between eastern china and turkey. later, the project was expanded http://revistes.ub.edu/index.php/jesb volume 4, number 2, 204-209, july-december 2019 doi.org/10.1344/jesb2019.2.j065 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 to include a sea connection linking china and the countries of mediterranean europe and north africa via the suez canal. yet, xi jinping has gone on record to state that the new silk road should be seen as china’s connection with western china, eastern europe, the rest of europe, africa and latin america. in his support for the internationalization of chinese companies, the president has signed agreements with many countries and has created loan funds that can finance the investments of chinese companies in many areas and countries of the world. parallel concerns for the chinese government, and of equal importance, are its attempts to reduce poverty and to improve health care and education throughout the country. western china is home to hundreds of millions of people living below the poverty line and here president xi jinping has pledged a significant annual reduction in the number of poor. to achieve this means keeping growth rates high by boosting consumption. gdp growth in china currently stands around 6% with a large part of this being supported by consumption while a few years ago it was based almost solely on exports and real estate. we live in the digital age, and people the world over, including china, are interconnected. the fact that every year many millions are able to escape poverty, that those who continue to live below the poverty line can see a way out, that education and access to it for china’s children and young people are undergoing constant improvements, that it is possible for more people to access good healthcare, means the population is prepared to give their support to the government. in this interconnected world, any fall in the satisfaction of the people would undoubtedly lead to protests that would be difficult to avert. the international expansion of american companies happened apace in the 1960s and 70s. but the process was not understood. the unions protested. the government asked harvard business http://revistes.ub.edu/index.php/jesb volume 4, number 2, 204-209, july-december 2019 doi.org/10.1344/jesb2019.2.j065 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 school to study the problem. in 1973 as a phd student, i had the opportunity to participate in this study. we analyzed lots of cases of us companies that had invested internationally, examining in detail the impact it was having on employment. the outcome was very clear, a company investing in another country obviously created jobs there, but there were a whole set of areas – the manufacturing of components that were sent to subsidiaries abroad, the addressing of financial questions that was conducted at head office, and matters related to many other services (logistics, marketing, human resources) – in which, as a result, many jobs were also created in the united states. this process can be summed up in the saying: “foreign direct investment creates jobs at home”. we observed the very same processes in the 1980s and 90s as european companies internationalized operations. the expansion of spanish companies throughout latin america created many jobs in spain. in addition, we should bear in mind that if the us companies who expanded, for example, into europe, had not done so, they would have found themselves considerably weakened. global companies like colgate, mcdonald’s, heinz, goodyear, whose brands are well-known today throughout the world, are not without their competitors. but had they not fought for their share of the global markets they would be smaller and would be facing much larger competitors. thanks to their process of globalization they have managed to strengthen their position, maintained their competitiveness for many years and satisfied their long-term shareholders. however, the phenomenon was such that the internationalization of us companies was concentrated above all in the decade from 1965 to 1975; that of japanese companies from 1975 to 1985; and that of european companies from 1985 to 1995. this is not without its logic. when a company acquires another in a foreign country or opens a large branch there, its competitors find out and do not want to be left behind. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 204-209, july-december 2019 doi.org/10.1344/jesb2019.2.j065 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 this whole process will be repeated with chinese companies. over the next few years we are going to see a major global expansion of chinese companies in all sectors and in all countries. obviously, this is an opportunity for companies whose future is not so clear-cut, be it because of their size, their technological weaknesses or their owners’ failing business interests (for reasons of age, family matters, diversification, etc.). however, it should be an opportunity for chinese companies to expand their operations in europe or in america. in many cases, such acquisitions (some of which have already been completed) will protect jobs and create many more. we should see the internationalization of chinese companies as a great opportunity, and we should prepare ourselves for it and make sure we have the right strategies in place be it as partners, allies, suppliers or customers. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 ángel calvo universitat de barcelona (spain) https://orcid.org/0000-0002-1370-9970 china-europe cooperation in the telecommunications: the case of china unicom/telefónica, 2002-2016 abstract this research seeks to explore the driving forces behind the diverse pathways of telecommunications and, in particular, the rationale for international alliances in the context of globalisation and the extension of the value chain induced by technological change. it attempts to answer two interrelated questions: from china's side, why telefónica and from this operator's side, why china? china was looking for a reliable technology partner for its weak market segments and a bridge to latin america. telefónica ambitioned to expand its mobile customer base in a country with high growth potential (nyt) while reducing through economies of scale equipment supply costs in an oligopolistic market. the research adopts a case study methodology and focuses on the service operators china unicom and telefónica de españa in the ye ars after the dotcom crash and before the arrival of the covid-19 pandemic. the investigation is based on sources from the companies involved and relevant documents from specialised institutions. the study finds that the need for cooperation in the knowledge and capital-intensive services and the coincidence in strategies led to the frame of international alliances of companies. keywords: china unicom, telefónica, telecommunications, strategic alliances cooperación china-europa en telecomunicaciones: el caso de china unicom/telefónica, 2002-2016 resumen esta investigación busca explorar las fuerzas impulsoras que están detrás de las diversas vías de las telecomunicaciones y, en particular, la justificación de las alianzas internacionales en el contexto de la globalización y la extensión de la cadena de valor inducida por el cambio tecnológico. intenta responder a dos preguntas interrelacionadas: del lado de china, ¿por qué telefónica? y del lado de este operador, ¿por qué china? china buscaba un socio tecnológico de confianza para sus débiles segmentos de mercado y un puente hacia américa latina. telefónica aspiraba a expandir su base de clientes móviles en un país con alto potencial de crecimiento (nyt) mientras reducía a través de economías de escala los costos de suministro de equipos en un mercado oligopólico. la investigación adopta una metodología de estudio de casos y se centra en los operadores de servicios c hina unicom y telefónica de españa en los años posteriores al colapso de las puntocom y antes de la llegada de la pandemia del covid-19. la investigación se basa en fuentes de las empresas involucradas y documentos relevantes de instituciones especializadas. el estudio revela que la necesidad de cooperación en los servicios intensivos en conocimiento y capital y la coincidencia en las estrategias llevaron al marco de alianzas internacionales de empresas. palabras clave: china unicom, telefónica, telecomunicaciones, alianzas estratégicas cooperació xina-europa en les telecomunicacions: el cas de china unicom/telefónica, 2002-2016 resum aquesta recerca cerca explorar les forces impulsores que hi ha darrere de les diverses vies de les telecomunicacions i, en particular, la justificació de les aliances internacionals en el context de la globalització i l'extensió de la cadena de valor induïda pel canvi tecnològic. intenta respondre dues preguntes interrelacionades: del costat de la xina, per què telefónica? i pel costat d'aquest operador, per què la xina? la xina buscava un soci tecnològic de confiança per als seus febles segments de mercat i un pont cap a amèrica llatina. telefónica aspirava a expandir la base de clients mòbils en un país amb un alt potencial de creixement (nyt) mentre reduïa a través d'economies d'escala els costos de subministrament d'equips en un mercat oligopòlic. la investigació adopta una metodologia d'estudi de casos i se centra en els operadors de serveis china unicom i telefónica de españa els anys posteriors al col·lapse de les puntcom i abans de l'arribada de la pandèmia del covid-19. la investigació es basa en fonts de les empreses involucrades i documents rellevants de les institucions especialitzades. l’estudi revela que la necessitat de cooperació en els serveis intensius en coneixement i capital i la coincidència en les estratègies van portar al marc d‟aliances internacionals d‟empreses. paraules clau: china unicom, telefónica, telecomunicacions, aliances estratègiques corresponding author: e-mail: angel.calvo@ub.edu received 27 january 2023 accepted 24 april 2023 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-1370-9970 mailto:angel.calvo@ub.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 1. introduction trade has always been the backbone of china-european union economic relations. their upsurge can be traced to various factors, starting with china's accession to the world trade organisation (wto) in 2001, through the dramatic expansion of bilateral economic cooperation driven by a myriad of institutional fora, to the identification of common areas of global cooperation (cowhey and klimenko 2001). the european union and china were major trading partners and sources of imports. in 2004, the eu-25 overtook japan and the united sates to become china's largest trading partner. in recent years, the value of trade between china and the eu-28 has been around $600 billion annually (mission of china to eu 2019, 67). the economic relationship went beyond trade and gradually expanded into new areas, such as investment, science and technology, and economic cooperation (tu and li 2020, 1-4). with the ‘open door’ policy of deng xiao ping in 1978, which promoted foreign investment, china became the country offering the most attractive market prospects for most information and communication technologies (ict) products and services, pillar, fundamental for national security, driving force for innovation, core industry underlying informatisation and new economic growth and catch up patterns. it made icts a key focus of scientific and technological west-china cooperation. this country thus took in the so-called third wave of internationalisation of companies from mature western markets, which followed the first (europe-north america) and the second (japan and south korea). a selective approach prevailed as preference was given to foreign companies with niche technologies neglected by local manufacturers or those likely to invest in western china, where communication services were poor. in addition, institutional factors came into play: foreign companies better connected to the many different governmental institutions were expected to http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 perform better in the chinese market (gereffi et al. 2022, 4; yu and li-hua 2009, 4-6 and 122; shaolong 2016, 89). scholars have focused heavily on industry and have somewhat neglected services, which are different from the manufactures (buckley, pass and prescott 1992, 39-56; zedtwitz 2007) and constitute the very core of economic globalisation (primo 1996, 34-37). research is lacking on the internationalisation of companies from developing countries (jiang 2005). for its part, literature has traditionally focused on cooperation between nationals and foreigners in china but mainly likewise in the manufacturing sector (mu and lee 2005, 759-783). on the other hand, it is questionable whether foreign direct investment (fdi), the conventional mode of entry for a market of this size, is the right way to enter the services sector (clegg, kamall and leung 1996, 111-137). that is why telecommunications services present a new scenario for the scholarship. this research aims to contribute to the theoretical debates on china’s new development strategies in general within the changing global context (gereffi et al. 2022). more specifically it aims to contribute to the controversy on the modes of entry and diversity of pathways in the evolution of telecommunications industries and services one of the strategic industries of the chinese governmentin the historical context of the chinese public sector, which is characterised by an extreme diversity of organisations and administrative units at the provincial and municipal levels involved in the same industry (loo 2004, 699-700). by another hand, countries deferred in the priorities given to implementation of reform (maximising the revenues from the sale of state-owned enterprises, long-run economic benefits to consumers and society at large, creating an institutional environment, and establishing a legal and regulatory framework) (noll 1999). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 the research focuses on the service operators china unicom and telefónica de españa in the years after the dotcom bubble collapse and before the arrival of the covid-19 pandemic. it consists of three main sections, which include an overview of the sector and the analysis of the first entry of telefónica in china and its arrangements with its counterparts. the research is grounded on sources from the companies involved and rich documents from specialised institutions. it has suffered from the limitations of the resources used particularly from the chinese sources1. 2. the worldwide telecommunications: nature and evolution the nature of a service sector grants telecommunications two distinctive characteristics. the first involves high sunk costs in physical networks and high expenditure on research and development (r&d). knowledge capital, i.e. high-tech products and rapid innovations, reputation, management, patents, and brands, are crucial to determining a firm's competitive advantage. secondly, the telecommunications have significant network externalities, where the benefit that consumers secure depends on the number of other users. therefore, economies of scale are important and consequently, industry concentration and overseas expansion are required (zhiling 2002, 33-34). specific circumstances are at work in this scene to bring telecommunications the precise profile of a given period. in the late 20th and early 21st centuries, the global telecommunications sector went through two distinct phases. in the bursting of the bubble and subsequent recession — the major telecom implosion2 — out of the $7 trillion drop in the stock market since its peak, about 1 sasac, for example, has its web but the first information on telecommunications goes back to 2019-10-31, while the ndrc does not provide any information. 2 shifting from reform to collapse, half a million people lost their jobs, the wireless communications index dropped 89 per cent, declines in value worthy of comparison to the great crash of 1929: starr 2002, p. 21. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 $2 trillion disappeared in the capitalization of telecom companies; twenty-three telecommunications companies failed in a wave that culminated in the collapse of worldcom, the largest bankruptcy in united states history. a recovery in 2003 followed this phase (chen and shi 2008, 127; starr 2002, 21). within this period, in the 1990s, a gigantic wave of mergers and acquisitions dramatically restructured telecommunications around the world. in europe and the united states, telecommunications companies consolidated into a shrinking group of providers, rapidly oligopolising the sector. the reasons for this process include technology, institutions and the profound movements of the world economy, in other words, the convergence of digital technologies, deregulation, globalisation and the search for economies of scale and scope (warf 2003, 321). unlike in the us and europe, there had not been active cross-border mergers and acquisitions (m&as) in asia. nevertheless, more and more penetration into the asian market by united states and european telecommunication enterprises was expected in the immediate future (park et al. 2002, 58). the wave of international m&as became more pronounced in the twenty-first century (gershon 2020). in the telecommunications sector, the traditional paradigm of fixed telephony, monomedia and electromechanical devices shifted to a new one, defined in four terms: mobile and global, private, competitive and with a wide value chain. by 2010 a dozen operators dominated the international telecommunications market. china mobile ranked first and was followed by at&t and vodafone ahead of the large companies of the core european powers (figure 1). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 figure 1. ranking of telecommunications companies by market capitalisation, 2010 (€) source: based on telefónica (2010, 31). in china and hong kong, telecommunications accounted for 2.2% of a total number of over 9,737 transactions between 2000-2016, far from the industrial, materials and financial sectors representing 14.2%, 13.8% and 13.8% of all deals, respectively (institute for mergers, acquisitions and alliances). china telecom hong kong ltd in 2000, china unicom ltd in 2008 and china telecom corp ltd in 2012 ranked four, five and eighth in the largest m&a deals in china and hong kong between 2000-2015 (table 1). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 table 1. largest m&a deals in china and hong kong rank date acquiror nation target nation value (in bil. usd) 1 2014 citic pacific ltd hong kong citic ltd china 42.2 2 2000 pacific century cyberworks ltd hong kong cable & wireless hkt hong kong 37.4 3 2015 spin-off hong kong cheung kong (hldg) ltd ppty hong kong 36.9 4 2000 china telecom hong kong ltd hong kong beijing mobile,6 others china 34.2 5 2008 china unicom ltd hong kong china netcom grp(hk)corp ltd hong kong 25.4 6 2015 cheung kong(holdings)ltd hong kong hutchison whampoa ltd hong kong 23.6 7 2015 china tower corp ltd china china-telecommun tower asts china 18.3 8 2012 china telecom corp ltd china china telecom corp-3g assets china 18.0 9 2014 investor group china sinopec sales co ltd china 17.5 source: elaborated from institute for mergers, acquisitions and alliances. a means to enhance strategic resources are strategic alliances or voluntary cooperative relationships between two or more independent organizations (he et al. 2020, 589-617; serrat 2009, 1-19). in the closing two decades of the twentieth century, several cross-border strategic alliances appeared in the telecommunications industry to lay the foundations for a global information highway, three of them between european partners and one between asian partners — five telephone companies — and the us firm at&t (mcklintock 2015, 228). broadening the field, the telecommunications and information technology (ict) sector in the twenty-first century is rapidly and significantly changing the business landscape with fast-changing activities, expectations and new modes of collaboration (he et al. 2020, 589-617). in spain, revenues in the telecommunications sector between 2001 and 2021 followed two distinct phases: a decrease until 2013 and an increase in the following years. the year-on-year http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 rate of change had two peaks, the first one in 2002, exceeding the chronological limit of the dot.com bubble, and in 2016 (figure 2). figure 2. revenues in the telecommunications sector between 2001 and 2021 source: elaboration from cnmt, informe(s) anual(es). many companies expanded outside their countries of origin to psychologically close markets — uppsala internationalization model —, i.e. of similar cultures, as was the case with telefónica. once the crisis of the technology bubble had been quelled, telefónica was able to take advantage of the favourable economic context of icts, especially telecommunications, to undertake a transformation process by which it became a global operator in barely four years. telefónica continued the strategy of internationalisation that started substantially two decades earlier in latin america in the era of the predominant voice telephony but now under the convergence of ict and in the transition to the predominance of mobile telephony, the operator's growth engine, and broadband businesses. in the new phase predominated a selective strategy, which took the form of entry into open markets in eastern europe and china with high http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 growth potential. at the same time, markets that had been explored, including turkey, were discarded (redestelecom, 22 october 2007). telefónica headed the list of the world's largest investors in the sector with $70,856 million between 1990-2006, far behind the group comprising telecom italia, carso group, america movil, suez and france telecom, with figures of between usd 27 and usd 35 billion. aes corporation, deutsche telekom, portugal telecom and singapore telecom are below this level (world bank, infrastructure projects database, on-line). it has been said that telefónica's access to europe was swift and decisive. to a certain extent, this is borne out by the figures, since in just two years, between 2004 and 2006, the continent went from contributing just over 4% of the company's revenues to 26%. a closer reading points to a slow start because telefónica had already been in different segments of the european market for a number of years. what happened was a major leap, not without previous failures. to explore new distant markets was a challenge. 3. telefónica, a “taciturn lone ranger” in china for many years china telecom was the sole provider of telecommunications services in china. competition was introduced in the country from 1994 and the state monopoly was replaced by an oligopoly of new state-owned enterprises and clearly broken in 2000 (loo 2004, 697-714). it occurred a century after the new imperial telephone bureau opened the government-run telephone service in 1899 and some years after the gradual reform policy was initiated (chen 2007). china netcom was created by combining with jitong communications company ltd and the companies in the ten northern provinces; between 2002 and 2004 it underwent a remarkable process of concentration (chen and shi 2008, 130). china telecom, former monopoly and twice the size of its rival (expansión, 15 november 2005), predominated in the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 more populous and wealthier south, which included states such as shanghai and guandong, and had entered as the second operator the areas controlled by netcom3. further to the core question, three forces drove the peculiar pathway and strategy of chinese telecommunications transformation and growth from monopoly to full competition in globalization: government concerns, foreign pressure and domestic demand (loo 2004, 697714; harwit 1998, 175-193; gao and lyytinen 2013, 229)4. cooperation was also of great importance. the chinese telecommunications reforms resulted in a fragmented structure (mu and lee 2005, 759-783) comprising six main state operators. four of them — china telecom, china unicom, china netcom and china railcom — provided fixed-line local, long-distance and international telephony services, while china unicom and china mobile operated the mobile services. ip telephony service was provided by the four cited together with china mobile, and the satellite service by china satellite. the chinese government's entry policy restricted the competition to the network-based one (hanna and knight 2011, 96). in this context, what interest could china have in spain? spain represented economic, business and geopolitical assets, namely, vigorous economic growth, business leadership in some sectors, eu membership, close ties with latin america, an area of great interest to the asian giant, and non-hostility towards china (valenzuela 2007, 281). 3 milestones in liberalisation of the telecommunications in china (1994-2001): jan. 1994: creation of jitong; jul. 1994: creation of china unicom; feb. 1999: break-up of china telecom (china telecom-f -dec.1999-, china mobile (-jan. 2000-, china satellite -jun. 2000-; apr. 1999: creation of china netcom; mar. 1999 china paging →china unicom; dec. 2000 creation of china railcom; dec. 2001 splitting of china telecom-f (new china netcom & china telecom-s china netcom & jitong →new china netcom china railcom →china unicom). see zhiling (2002, 30) and securities and exchange commission (2006, 1617). 4 for the structure of telecommunication in the domestic market in early 21st century, see mu and lee (2005, 759783) together with he, lim and wong (2006, 1147–1165). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 telefónica significantly claimed its multinational dimension and presented clear objectives of integration and cultural change, based on the group's scale, positioning and leadership at home and in latin america, as well as on recent operations. the spanish operator pursued making results-oriented management a priority objective. to the acquisition of cesky telecom, it added in its analysis the successful integration of the mobile operations acquired from bellsouth, the strategic investment of 5% in china netcom, which deserves a separated analysis, and the planned acquisition of the british o2, with a significant presence in the united kingdom, germany and ireland5. telefónica considered china, where barely a quarter of the population used a mobile phone, as a very complex and appealing market, although the timing and the selection of possible acquisition targets would take time to assess and would have to be right. but there had to be a suitable climate in politics and business. an income tax treaty into force since 1990 limited the tax rate on dividends to 10% (lang and owens 2018). the cornerstone of the relations was the first diplomatic relations in 1973 — five years before the ‘open door’ policy — and the embassy of spain opened an economic and commercial office six years later (dezcallar 2022, 443-453). since then, the economic relations rested on a sharp asymmetry, which prompted the spanish government to encourage companies to enter the chinese market. trade with china represented 73% of the total spanish trade deficit but just over 2% of spain’s exports and only 4.7% of china’s trade surplus in 2017 (ortega 2019). 5 financial times, 15 november 2005; telefónica, significant event, 21 december 2005; chen and shi (2008, 128). by combining the operations of movicom – acquired for a value of usd 988 millionand unifon, telefónica móviles became the leading mobile operator in argentina: business wire, 11 january 2005. a preliminary version of this section in calvo (2021, 11-28). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 commercial representation offices shaped together with service companies the main business presence of spain in china, which amounted to more than half a thousand companies some years later. according to the embassy of spain in beijing, in 2010, only around 40% were engaged in directly productive activities, mainly located in the beijing, shanghai and guangzhou areas. from the human capital perspective, apart from the ambassador to spain, zhu bangzao, and the economic and commercial advisor, ji xianzheng, the two decision-makers who could lead the group of key executives for doing business with china were ms. hong chen jin and liu gang, general manager of the icbc bank in spain. ms. hong chen jin combined her activity as an executive with the presidency of the professional association china club spain (expansión, 2 and 12 february 2012). a first chance arose in 2004 from the chinese side. a high-ranking delegation led by the vice premier of the state council zeng peiyan met managers of spanish companies (europa press, 29 november 2004). the chinese representative, also responsible of major infrastructure and environmental projects, visited specifically the telefónica's headquarters (telefónica 2004, 149). he stressed that china supported the establishment of strategic partnership with foreign companies to jointly explore the international market (el economista, 25 august 2006). furthermore, the chinese government choose telefónica to increase its telecommunications cooperation with spain. telefónica began to weigh opportunities for investment in china, without ruling out the possibility of acquiring businesses provided that it ensured control of the company, a procedure followed in latin america (telegeography, 27 june 2005). the spanish operator warned until http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 late in the day that any acquisition of assets in china was conditional on the operator obtaining a mobile licence and expanding its fixed-line footprint (financial times, 15 november 2005). far from improvisation, the transaction required some time to mature, with moments of limited success. in 2005, the year when spain and china initialled a strategic partnership agreement as well as several other on markets and companies (valenzuela 2007, 281), telefónica established a springboard for its expansion in china. it created an office in beijing with the aim of sounding out the possibilities in that country, the primary move before the direct investment that is very dear to some of the great theories of internationalisation, such as the uppsala original model built on the manufacturing sector6. telefónica's decision came against the backdrop of a boost in relations between the two countries as a result of the rapid adaptation of spanish companies to china’s evolving needs7. furthermore, the decision to invest in china obeyed to the huge potential of that market in broadband and mobile telephony, although the supposed partner did not yet have a mobile licence and china had not set deadlines for third generation (3g) licensing (financial times, 25 july 2005). telefónica set three major courses of action for its delegation. as a basis, it sought to establish the appropriate contacts at governmental and corporate level, both with the diverse chinese authorities and with the spanish, european and latin american leaders. relations were 6 the school advocates now for a model of the evolution of the multinational business enterprise in general, from early steps abroad to being a global firm, not only strictly characteristics of the internationalisation process: see vahlne and johanson (2017, 1087-1102). in comparative terms, indra, present in china since 1997, since 2002 it had a subsidiary in beijing from where it managed its expansion in the region as well as a network of offices to support the development of the different projects: indra news, 27 june 2007. deutsche telekom opened a higherranking centre: its sales and marketing office for deutsche telekom asia pacific was deutsche telekom (china): the foreign companies in china yearbook, 2007, 93. 7 spanish exports to china have been on the rise and in 2019 the number of spanish exporting companies multiplied by 8.48 from 1,656 in 2000: dezcallar 2022, pp. 444-445. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 established with organizations and bodies of a different hierarchical order, within an intricate network of policy makers and regulatory agencies which played an important role in the reforms. they included the mii (ministry of information industry), two commissions linked to the state council — sasac (state-owned assets supervision and administration commission, the equivalent of the spanish sepi) and the ndrc (national development and reform commission) — (laperrouza 2014, 51-53). the sasac manages the assets of companies controlled directly by the central government while the ndrc is the policy-making body under the supervision of the state council. other chinese government agents existed with diverse kind of competences in the telecommunications sector, indicating an institutional leadership (hanna and knight 2011, 90-91). in addition, telefónica became an active member of the chamber of commerce of spain and the european union, as an actor for promoting policies as well as networking and lobbying activities. as a second objective, telefónica sought to increase the participation of chinese industrialists in its portfolio, both to reduce costs and to gain first-hand knowledge of trends in technological innovation in the region (martín 2008, 169-172). as southeast asia increased in economic significance, telefónica consolidated its presence with offices in shanghai, beijing, hong kong and singapore, the already mentioned friendly business area with more concentration of spanish enterprises. many of its customers had invested in the asia-pacific area, forcing the operator to expand and develop customer relationships in the area (cincodías, 18 november 2013)8. the beijing office was set up in units and functions so that the pre-sales manager, for example, handled customer requests and helped provide solutions and the business unit and sales support prepared official responses to international tenders and business cases for customer proposals. 8 the singapore telefonica’s office was staffed by sales people, consultants, engineers, solution architects and service managers. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 the office, strengthened in the skills of the staff, was responsible, among other things, for commercial preparation, marketing campaigns and monitoring the company's financial situation. it was, in particular, crucial as a stepping stone for telefónica's entry into china, no doubt thanks to the coincidence of interests but also to interconnection between the companies' cultures — china netcom's and telefónica's — through the contribution of skills from the host country. this issue is embodied by ms. hong chen jin, who joined influence on the chinese authorities, adequate position in the relationship networks (guanxi in mandarin) and experience in the sector. she was promoted to deputy director and director position of telefónica in 1999, became responsible in 2004 to expand telefónica in asia and was appointed deputy general manager of the asia representative office of telefónica internacional in beijing since 20059. the very modest entry into china had brought foreign telecommunications multinationals little in the way of tangible synergies and inter-company value creation, as was the case with britain's vodafone with 3.3% interest in china mobile, the biggest wireless operator. conversely, telefónica considered uncertainty to be perennial and exchange rate behaviour unpredictable (e.g. unforeseen renminbi appreciation). telefónica faced risks arising from a number of technological and institutional factors in general: markets subject to intense technological renewal that required constant technological innovation; subjection to the terms and conditions imposed by the governments of each country when granting licences to provide services; user 9 mauricio sartorius, telefónica's chief representative in beijing, held a degree in economics from the universidad complutense of madrid and a mba from new york university; he said telefónica's investment in netcom was for the long term (financial times, 25 july 2005). ms. hong chen jin, alias margaret chen, successor of sartorius, had worked for seven years in the it industry in the usa — among others, as a vice president of r&d in acs, a software development company — before joining telefónica and staying in the group for more than ten years. she had a degree in computer science and a mba degree from shanghai jiao tong university, and a master’s degree from the usa in industrial engineering major in investment analysis and corporate management skills. ms. hong chen jin was considered one of the most influential women in the telecommunications field by the chinese government in 2007: china netcom group corporation (hong kong) limited, announcement, 19 december 2006. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 animosity towards mobile telephony due to the potential health problems caused by radio electric emissions10. there were also the specific risks of the telefónica group, from country risk (investments in latin america) and continuing with those associated with the management of exchange rate or interest rate risk; relations with partners in joint ventures not controlled by telefónica; the greater solvency risk arising from acquisitions and, therefore, greater financial vulnerability and less strategic flexibility; acquisitions and business integrations and, finally, litigation and other legal proceedings pending before courts and arbitration bodies in the various countries. if we look at country risks, we find up to seven elements of a political, regulatory, monetary, fiscal and economic policy nature. in detail, they related to possible abrupt changes in policies and/or regulation; devaluation of local currencies or imposition of restrictions on the exchange rate regime or on capital movements; negative equity situation in group subsidiaries and consequent recapitalisation or start of the dissolution process due to the effects of inflation and/or possible devaluation of local currencies; possible public expropriation of assets; possible imposition of excessive taxes or duties; possible political changes that could affect the economic or business conditions of the market in which it operates; the possibility of economic crises, or situations of political instability or public unrest, which could adversely affect the group's operations in these countries11. in addition, and from a general perspective, country risk also had an impact on the group's market value in these countries, revenues, dividends and management payments for these 10 telefónica, s.a., document on registration of bonds and derivatives, annex iv of the european commission regulation (ec), 29 april 2004, pp. 6-10. we have thoroughly exploited this exceptional document. 11 casson and da silva, 2013, pp. 375-404; political risk and mnes' entry into new markets from an international business perspective (henisz and zelner 2001, 123-148; henisz 2000, 334-364). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 companies. an adverse economic situation in these regions could affect demand, consumption and the exchange rate in these countries12. telefónica leveraged strategic alliances as a tool to consolidate its leadership position. through them it managed to reach 650 million customers worldwide, equivalent to roughly a tenth of the world's population (telefónica 2009, 40-41). during 2009, telefónica sa created a specific area with the primary mission of optimising the management of these alliances under a common perspective and leadership. the strategic alliances and industrial shareholdings department was able to implement specific actions in terms of both shareholder control and industrial management with telefónica's partners: telecom italia and china unicom. this same operational model of maximising synergies was extended to other markets outside the telefónica group. the ultimate goal was to leverage the scale with third party operators under a strictly commercial relationship model. towards the end of 1997, telefónica joined a group of italian institutions (generali, mediobanca, intesa sanpaolo and benetton) to form the telco consortium, entrusted with acquiring a significant stake in telecom italia through the purchase of 100% of olimpia, the operator's main shareholder (fernández valbuena and mielgo 2008, 85-86; el economista, 30 april 2007). the investment positioned the group as the largest shareholder in the consortium and laid the groundwork for the development of a significant programme of operational synergies. even without being the focus of our study, it ratifies the liability to alliances. in the following we focus on the alliance between china unicom and telefónica. 12 telefónica, s.a., document on registration… 2004, 6-10. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 4. to cooperate to expand: china unicom and telefónica in the crucial year of 2005, in front of the intensive competition and an ever-changing market environment, china unicom maintained its growth strategy, promoting the transformation of its development model, improving business execution and realising continuous expansion of its core businesses (china unicom 2005, 30). further on, china unicom reorganised its major assets and services to grow into a nationwide fully integrated service provider, which marked a big stride forward in the company's development strategy (china unicom 2009, 1-2). telefónica knew the risk factors relating to the business of china unicom. this operator cellular businesses faced competition in the fragmented market which we have described above. such competition may intensify and result in slower subscriber growth, lower tariffs and higher customer acquisition costs, which would materially adversely affect financial condition, results of operations and growth prospects for china unicom (securities and exchange comission 2007, 5). the china's quest for development as well as of further restructuring for its telecom industry suffered a setback in the painful year of 2008 (china unicom 2009, 1-2)13. the chinese government boosted business relations with spain, a country in need of assistance. during chinese prime minister wen jiabao's visit to spain, he signed agreements with companies under the modalities of cooperation, provision of technical and financial services and direct investment. telefónica concluded an agreement with china unicom and its supplier huawei). as it is known, it was a former state-owned company closely connected with the spanish government and political elite even after being privatized. the list included some close to political power (indra — high technology firm —, rtve — spanish public television — and 13 in a gesture of friendship, telefónica donated one €million to china to help alleviate the effects of the sicuani earthquake (telefónica 2008, 133). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 eads — aeronautics, defence and space —), alongside others in the service and production sectors outside this category. rtve wanted to get exchange programming and personnel and co-production; the airbus eads consortium a high-tech production center with avicopter, indra a joint venture with two chinese companies to produce air traffic control systems in tianjin and bbva an offer of automobile financing and private banking with citic (europa press, 29 january 2009; converge, 8 february 2009; computing, february 2009). in 2009, telefónica and china unicom successively forged a first framework cooperation agreement and a broad strategic alliance through a share-sharing arrangement. for the first time, a chinese telecommunications company took a stake in an overseas company. through this non-monetary agreement, each partner undertook to invest the equivalent of $1 billion in ordinary shares of the other at a rate of 17 new shares issued by china unicom per one of the partner. the shareholding swap, performed by telefónica via its subsidiary telefónica internacional, sau, resulted in an increase from 5.38% to 8.06% of telefónica's stake in china unicom's voting capital and, in turn, in the conversion of china unicom into a holder of approximately 0.87% of telefónica's voting capital14. shortly thereafter, china unicom acquired and subsequently redeemed shares the korean operator skt owned in china unicom, final act of their strategic alliance15. both operations allowed telefónica to increase 14 china unicom (hong kong) limited 2014 p. 163; cnmv-ri, 21/10/2009 and, 8/10/2009; well-reflected in the international literature (rizzi and guo 2012; jeffries 2010, 2, 004). the 2009 agreement constituted a parasocial arrangement obliged to the partners not to sell or offer to any of their main competitors or issue a significant number of their shares, convertible securities or securities conferring the right to subscribe for or acquire shares in a significant number (telefónica 2016, 62-63). 15 china unicom's cooperative relationship with skt dated back to the creation of unisk (beijing) information technology company limited, a joint venture at a 49/51 ratio engaged in the cdma value added services business in china. furthermore china unicom operated a second larger separate mobile networks using the more common gsm standard. china unicom and skt agreed to cooperate in several areas related to cdma cellular communications in mainland china (cdma handsets; value added service; vas business platform; marketing; it infrastructure and network): financial times, 26 september 2006; telecompaper, 21 june 2006; s&p global, 28 september 2009; business korea, 12 october 2015. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 its stake in china unicom to 8.37% of its capital, consolidating its position as the largest foreign shareholder, while china unicom's stake in telefónica stood at around 0.9%. in conjunction with these corporate moves, the two companies deepened their strategic alliance in the fields of technology, procurement, provision of services to multinationals, roaming and training for executives of both companies, among others. telefónica's scale and position in the ict value chain made it a perfect partner in the digital environment. to make the most of the opportunities arising from this situation, in 2009 telefónica strengthened its collaboration with companies in the sector and with partners in other sectors in numerous areas, including innovation, where it consolidated the "open telefónica" concept to innovate in collaboration with companies, developers, customers, employees, marketing, networks, processes, etc. collaboration with other operators enabled telefónica to maintain its commitment to alliances with other firms in the internet, content, devices and outsourcing. these included deals with microsoft, hp, nokia, dell, lg and yahoo. of particular note was the agreement with vodafone to share mobile network assets in several european countries and the alliance signed in 2010 with the main operators to set up the wac (wholesale applications community) platform, which aimed to create applications and offer them to a large customer base of more than 3 billion people. an important framework contract was reached with huawei, a latecomer aggressive globalizer leader in providing nextgeneration telecommunications network solutions worldwide. this vertical pact aimed to deploy a telecommunications services platform in thirteen latin american countries (light reading, 2 june 2009)16. 16 four strategies of huawei, leader in cdma: market-oriented, core r&d and technologies, employee stock ownership and internationalisation of supply chain, management system, the market and the r&d (guanjing 2013). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 in fulfilment of the earlier commitments, in january 2011, telefónica and china unicom strengthened their initial strategic alliance and deepened their cooperation in areas such as recruitment, mobile service platforms, services to multinationals, wholesale companies, roaming, and technology, among others. they added a new reciprocal cross-shareholding mutual investment of the equivalent of $500 million in ordinary shares of the other party. telefónica would raise its stake in china unicom to approximately 9.7%, while china unicom would reach 1.37% of telefónica's share capital. telefónica was to propose the appointment of a new chairman of the board of directors to represent china unicom (comisión nacional del mercado de valores [national stock market commission], relevant information — hereinafter cnmv-ri —, 23 january 2011) (china unicom 2015, 151). in detailing the terms, telefónica would acquire a number of china unicom shares corresponding to $500 million, through purchases from third parties, to be made within nine months of the signing of this agreement. for its part, china unicom would immediately acquire 21,827,499 telefónica shares at an agreed price of €17.16 per share17. we have a highly qualified — although undisguised propaganda — assessment of the situation of the unicom and telefónica alliance and its prospects in 2010. lu yimin, president of china unicom, acknowledged that cooperation between the companies was going tailwind (el economista, 10 february 2010). he revealed that at this stage the company did not have a clear plan to join telefónica's board or to increase its stake in the telefónica group, but left it until later to assess the investment outcome and business performance to further elaborate on the plans. the chinese executive acknowledged that multiple factors at play, including capital 17 arithmetic average of the official closing price of telefónica's shares on the madrid stock exchange during the thirty consecutive trading days prior to 14 january 2011 using a formula analogous to that agreed in their initial agreement signed on 6 september 2009. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 market performance and investment strategy, closed the way to clear-cut necessary conditions. ultimately, he downplayed the importance of a possible seat on the telefónica board, because it would not affect cooperation on capital, business development and increasing quality of service. for its part, he had no objection or reservation to telefónica increasing its shareholding in china unicom. in substance, he expressed satisfaction with the good results of the initial strategic partnership agreement and its extension. the cooperation went in several directions; exploitation of economies of scale with the joint procurement of equipment; development of infrastructure and services, with the mobile operating platform and the first choice in international roaming and, finally, achievements at the corporate level, with a structure with senior management from both companies to steer the cooperation. within the multiplicity of areas of collaboration, the joint procurement of equipment was of huge importance because it reduced costs in the future. at that very moment, it took the form of the joint procurement of adsl modems. after securing a wcdma licence, joint procurement of core equipment with telefonica enabled china unicom to build the world's largest wcdma network in a short period of time, backed through the china-china-foreign scheme of rising fund from the foreign companies. obviously, the initial stage of the collaboration did not allow for very clear data on the subsequent savings from joint purchases. however, he admitted a minimum saving of 30-31% on the purchase of broadband equipment alone. regarding the importance of telefónica's experience in the development of china unicom's wcdma technology, he pointed out that one of the reasons for the success was due to telefónica's assistance in that standard, which had a european character and had been the goal of the agreement with the korean skt. telefónica had a great deal of experience in network knowledge and construction as well as in http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 technological development. this essential contribution was complemented by the experience learned from other major operators around the world. the collaboration between china unicom and the ipod company had great importance in terms of brand and service enhancement, but among 3g users — 2.74 million in december — iphone users did not carry much weight. a major issue in the relations between the two partners was the international expansion of each of them separately. according to the already mentioned parasocial agreement, neither company could invest in markets where their respective competitors were located. the high-ranking executive of china unicom saw latin america as a very important part of the company's strategy and that was another reason for its cooperation with telefónica18. but china unicom was planning to offer service to customers in latin america and was counting on telefónica's presence there. the aim was to jointly develop coverage and services in other parts of the world, namely asia and africa, although they had not defined specific targets. cooperation with other areas or with other operators could be unilateral or joint, but it all had to do with the market situation (telecompaper, 9 february 2010; reuters, 9 february 2010). the performance of china unicom's business and in particular the 50% drop in profit in 2009 deserved special attention. in the previous year, a very large part of the ¥3.8 billion (around €407 million) profit was due to the sale of the cdma network (worth ¥2.74 billion). on the other hand, large investments could affect the results and china unicom had invested 110 billion yuan in the construction of new networks19. 18 in the context of asia's growing economic weight in latin america, china became the largest trading partner of several countries brazil, chile and peru. china sought access to the region's raw materials and natural resources, while it exported mainly intermediate and capital goods and became the third largest investor in the region, with 8% of total investments, primarily in natural resources (casanova 2015, 72-73). 19 china unicom purchased cdma2000 1x equipment from lucent technologies to build 3g networks in four regions: shandong, hubei, inner mongolia and shaanxi. lucent was expanding in china and its lucent china unit had eight regional offices, two bell labs branches and five r&d facilities in china: network computing, 18 may 2004. china unicom, the last of the country's three wireless licensees to launch a 3g network, launched it in 55 cities and planned to expand quickly coverage to 284 cities. by the end of 2005, china unicom finished network http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 a first joint equipment order followed to the partnership agreement and share swap deal completed in october 2009. the tender was valued at around €1.745 billion and targeted more than 40 telecommunications equipment suppliers worldwide. the winner of the contract was to supply connection equipment for up to 16 million residential adsl lines (telecompaper, 11 january 2010). further on, in 2015, telefónica and china unicom extended the strategic collaboration of jointly purchase to handsets with the aim of selecting smartphones with common specifications and offering better data services to their customers in china, latin america, and europe (table 2). it was the first of other joint purchases, seeking innovative formulas in the procurement process between two leading telecoms operators, telefónica and china unicom. the first tangible result was the purchase of fourth generation (4g) handsets. both partners designed consumer propositions as well as specific marketing plans in all countries. the project offered to chinese brands such as lenovo and tcl a window of opportunity to expand in very important mobile markets thanks to the large global scale of telefónica and china unicom (telefónica, communication room, 29 june 2015). the partners selected the lte c630 handset from china's phicomm, a popular smartphone in china, to offer 4g data services in telefónica's key latin american markets. this new joint purchase allowed china unicom to continue supporting the internationalisation of the chinese handset manufacturers with which it collaborates thanks to telefónica's global scale. the construction and launched cdma service in macau, thereby becoming the first mainland chinese telecom service provider to operate outside mainland china (china unicom 2005, 34). unicom released more than 20 w-cdma handsets (models from sony ericsson, samsung, huawei and zte) and expected to market phones from nokia, motorola, lg and sharp (rcr wireless news, 21 november 2001 and 13 february 2003; telegeography, 18 may 2009). china mobile began trials of its td-scdma-based 3g services in 2008 and achieved coverage of 38 cities within a year, while china telecom launched in april 2009 its cdma20001x ev-do network in 120 cities, seven years after its pioneering deployment by skt. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 marketing of this handset was part of telefónica's strategy to boost the penetration of 4g devices and services at affordable prices in the markets where it operated. the chinese and spanish operators regularly share information on strategy alignment, global market trends, and implementation of common initiatives to create value and reinforce each other's leadership in the global mobile ecosystem (telefónica communication room, 29 february 2016). the telefónica group purchased stakes in china unicom in 2011 for an amount of €358 million in such a way that at the end of this year, the group's stake in this company amounted to 9.57%. in 2012, telefónica, s.a. through its wholly owned subsidiary, telefónica internacional, sau, and china united network communications group company limited, through a whollyowned subsidiary, sealed a definitive agreement whereby the latter acquired 1,073,777,121 shares of china unicom, owned by telefónica (equivalent to 4.56% of the company's share capital), implying a total amount of hk$10,963.3 million, approximately €1,128.9 million. once executed this transaction allowed telefónica to increase its financial flexibility while remaining a significant shareholder of china unicom with a 5.01% stake. telefónica undertook not to transfer any shares in china unicom that it held directly or indirectly for one year. both companies reaffirmed their senior management positions on the board of directors of the partner (cnmv-ri, 10 june and 30 july 2012; telefónica 2016, 32-3; lang and owens 2018). in 2014, telefónica s.a. undertook an organisational restructuring of the group (cnmv-ri, 26 february 2014), which started a biennium of slimming down of telefónica's existing holdings, with certain particularities. the operator made acquisitions such as the purchase of e-plus, a subsidiary of kpn in the german market, for example and intensified its interest in another area of the value chain -media and television20. telefónica strengthened its foothold in 20 telefónica became the leading mobile operator in the german market: cnmv-ri, 1 october 2014. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 china with the creation of telefónica technology beijing company limited to support its international services activity in asia. it depended on telefónica internacional until 2015 and was then attached to telefónica latinoamérica holding sl (tlh), headquartered in madrid and oriented to investment and consulting. the difficulties of the covid19 pandemic forced telefónica to liquidate this subsidiary, which began to carry out its activity from hong kong and madrid (telefónica latinoamérica holding sl. https://www.telefonica.com/es/wp-content/uploads/sites/4/2022/06/estatutos-telefonicalatinoamerica-holding-slu.pdf; cincodías, 19 september 2022)21. the slimming down of telefónica's existing holdings had a particular impact in china. in 2014, telefónica divested 2.5% of the share capital of china unicom (hong kong) limited through a block trade, for a total consideration of hk$6.66 billion, approximately €687 million at current exchange rates. nevertheless, telefónica kept intact the strategic alliance with china unicom (cnmv-ri, 10 november 2014). the second transaction took place in mid-2016. telefónica sold 1.51% of the share capital of china unicom (hong kong) limited through a block trade placement process, amounting a total of hk$2,822 million, approximately €322 million. this transaction was part of the company's asset portfolio management measures and the company's medium-term deleveraging objective. telefónica retained a stake of close to 1% in china unicom without breaking the strategic alliance with china unicom, which had been recently strengthened through cooperation in digital areas such as the joint venture for big data (cnmv, hr, 10 july, 21 the company was derecognised, with a portfolio cost of one €million and €871,000 at the date of liquidation (telefónica latinoamérica holding, 2021). almost unknown is telefonica china, b.v., an instrumental holding company domiciled in the netherlands and subsidiary of telefónica internacional, s.a. (100%): see telefónica (2009, 109). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 2016; china unicom, 6; telefónica 2016, 62-63). in this field of intense growth, telefónica in 2012 had launched in the uk its new big data business unit, telefonica dynamic insights, a tool to provide services to companies and governments with analytical insights based on mobile network and machine-to-machine (m2m) data. its first product, smart steps, used “anonymised and aggregated mobile network data to enable public sector organisations and companies to measure, compare, and understand what factors influence the number of people visiting a location at any time” (oecd 2015, 78). in 2015 telefónica and unicom established (45%/55%) the smart steps data technology company in china for big data services, later joined by chinese e-commerce giant jd.com as a third partner (la vanguardia, 6 march 2019)22. telefónica brought the technology, suitably adapted to the local market, while china unicom provided the usage and analysis for its millions of customers (tórtola and gonzález 2018, 11). it was expected that smart steps services could be applied extensively in china in countless areas activities and services. smart steps service will further improve china unicom’s deployment in the big data market and enhance china unicom’s market influence in this area. for telefonica, the joint venture enabled access to the tremendous potential of the big data market of china – the second largest economy in the world-, and for the first time extended its smart steps operations beyond the telefonica global operational footprint (telefónica, communication room, 5 january 2016). smart steps served more than half of china's major banks. in the urban planning sector, the joint venture achieved market leadership in china in 22 the spanish group held its stake through telefonica iot & big data tech. the third shareholder joined the joint venture through a capital increase subscribed by suqian xindongteng business service co., ltd, a company controlled by jd.com; the stake of telefónica diminished to 37.5% (telefónica, consolidated financial statements 2020, 11; la vanguardia, 6 april 2019). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 just two years. more than two hundred chinese cities were using its geolocation services to design the development of different urban projects and the provision of public services. finally, smart steps also offered its services to large companies to select the location of their business premises throughout china. china unicom joined telefónica's partners programme, along with groups such as bouygues, etisalat, sunrise, russian megafon and o2 czech republic, to cooperate in key business areas such as digital services, roaming, services to multinationals and equipment purchases. the alliance with unicom facilitated telefónica's agreements with major chinese equipment manufacturers in mobile devices and networks (telecoms, 28 may 2013; échos du net, 28 july 2014; les mobiles, 11 july 2011; la vanguardia, 6 march 2019). table 2. china unicom-telefónica agreements year chinese partners foreign partner content 2014 china unicom; tsinghua technology and innovation telefónica open future fostering a global platform to share innovation sources and resources 2015 china unicom; tsinghua technology and innovation telefónica open future (annexe 1) global call to accelerate internet of things (iot) startups 2015 china unicom telefónica strategic partnership programme for the joint purchase of smartphones with common specifications 2015 china unicom telefónica sharing their data centres, first step towards wider and larger-scale cooperation in the cloud business 2016 university of tsinghua telefónica fostering digital education around the world 2016 china unicom telefónica joint venture smart steps digital technology company limited to provide big data services in china http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 year chinese partners foreign partner content 2017 tsinghua holdings (thti)23; china unicom telefónica open future first joint call aimed at startups willing to be part of a mixed acceleration, business development and immersion process between the wayra academies in america and europe. 2017 thti; china unicom telefónica open future china open future second call for startups won by pixoneye and bernstein 2018 china unicom telefónica iot agreement to gain access to each other's networks to deploy their iot services and offer them to business customers 2019 jd digits china unicom telefónica strategic investment of jd digits in smart steps technology co. ltd (worth 100 million yuan, around €13.2 million: 16.7% stake) 2020 china unicom, kt and telstra telefónica collaboration on the development of the multi.operator multiaccess edge computing experience within the gsma operator platform initiative (design a solution for operators to expose and monetise their network capabilities) source: elaborated from institute for mergers, acquisitions and alliances. thus, divestment combined with agreements of various kinds that brought china unicom and telefónica closer together. big data and smart steps were star products, but other goods also 23 thti is a powerful science and technology service provider and science park manager specialised in the provision of innovative technology services as a member of the technology innovation platform of tsinghua holdings co., ltd., a fully state-owned enterprise, solely invested by tsinghua university, dedicated to the technology service industry (oecd 2008, 248). thti's strategy is geared towards regional innovation and technology business development through an international operation and investment network focusing on five major business areas covering innovation and entrepreneurship, science parks, investment and incubation, technology financing and international business. thti operates 18 science parks in china with other partners in more than 50 cities. it manages a strong incubation ecosystem that integrates five entities -innoway, virtue inno valley, binggo café, lean one academy and tippark silicon valleyand supplies to more than 1,000 technology companies, having invested in more than 100 companies. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 gained special relevance, forming a significant list of around ten initiatives between 2014 and 2020 (table 2). 5. conclusion the shaping of ict and the widespread regulation caused profound transformations in telecommunications on a global scale. this research has explored the driving forces behind the diverse patterns in the evolution of telecommunications and, in particular, the rationale for international alliances in the context of the globalisation and the extension of the value chain induced by technological change. the work tries to answer two interrelated questions: why telefónica from china's side and why china from telefónica's position. china was looking for a reliable technology partner for its weak market segments and a bridge to latin america. telefónica was pursuing to expand its mobile customers in a country with high growth potential (nyt) while reducing equipment supply costs in an oligopolistic market through economies of scale. the research has addressed the forging of strategic alliances between operators from distant latitudes and different cultures. the case study has focused on the operators china unicom and spain's telefónica in the roughly twenty years of the 21st century using sources from the companies involved and documents from specialised institutions. the research reveals the full sequence of chinese firms and telefónica relationship. the evidence points to a process that is not as simple as some theories of internationalisation advocate. it comprises primary investment in a representative office and foreign direct investment from telefonica to a strategic alliance and shareholding exchange agreements. the study shows that foreign direct investment (fdi), the conventional mode of entry for a market of big size, is not the right/unique way to enter the services sector. adversely, the need http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 for cooperation in the knowledge and capital-intensive services and the coincidence in strategies led to the configuration of international alliances of companies, which entailed sometimes nonmonetary shareholding exchanges and the start of a chinese company abroad. the internationalisation through cooperation between operators of services resulted in mutual benefits for the partners. furthermore, the joint purchase programmes had vertical effects and contributed to the international expansion of the chinese equipment manufacturers, which, ultimately, became multinationals. appendix. projects in the field of the internet of things china unicom, thti and telefónica open future, telefónica's global investment and entrepreneurship network, selected eight projects developed in the field of the iot. five chinese startups (yaoyao, mugeda, vigo, amesante and lovelive), along with two spanish startups (ubikwa and zolertia) and chilean startup wiseconn were the winners of the joint call for proposals launched in march in barcelona during mwc2015. a thousand startups from 16 countries participated in the competition, targeting all types of economic sectors (telefónica, communication room, 1 september 2015). acknowledgements this research falls under the auspices of the observatori centre d'estudis jordi nadal d'història econòmica of the departament d'història econòmica, institucions, política i economia mundial, facultat d'economia i empresa (universitat de barcelona). i would like to thank those responsible for their support for my work. i express my gratitude to the editors and reviewers of the manuscript. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 213-247, july-december 2023 https://doi.org/ 10.1344/ 10.1344/jesb2023.8.2.41837 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 references buckley, peter j., c.l. pass, and kate prescott. 1992. “the internationalization of service firms: a comparison with the manufacturing sector.” scandinavian international business review 1(1): 39-56. doi:10.1016/0962-9262(92)90035-5. calvo, ángel. 2021. “the new cycle of internationalisation of a southern european telecommunications company at the early 21st century: telefónica.” culture and history 1(1):11-28. doi:10.30560/ch.v1n1p11. casanova, lourdes. 2015. “las multinacionales latinoamericanas ante la nueva realidad.” in familias empresarias y grandes empresas familiares en américa latina y españa. una visión de largo plazo, edited by paloma fernández, and andrea lluch, 71-93. bilbao: fundación bbva. 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sun. 2002. china’s telecommunications industry. the forbidden city in the information age? bergen: ireba. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 265 leonel corona treviño universidad nacional autónoma de méxico (mexico) culture and university entrepreneurship abstract latin american universities typically fulfil the functions of teaching, research and the dissemination of culture. to become entrepreneurial universities, they incorporate knowledge transfer or, more generally, the commercialization of academic research and involvement in socio-economic development. however, proposals have been made to treat culture as a horizontal activity that also encompasses the creation of university cultural enterprises. to achieve this requires the crossing of the arts and sciences and the promotion of the resulting knowledge transfer. here, an exploratory study of 16 cultural firms in mexico allows us to identify strategies aimed at enhancing the entrepreneurial potential of the universities’ cultural activities in the country. keywords: culture; university; cultural entrepreneurship; creative industries; mexico introduction cultural entrepreneurship is concerned with creating a business that is “grounded in the arts, creatively inclined and/or is relevant to the cultural heritage of a specific community. (…) cultural entrepreneurship [has been] characterized as a sub-set of social entrepreneurship” (buford 2017). corresponding author: e-mail: leonel.corona.trevino@gmail.com received 20 nov 2019 accepted 08 january 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 266 since the 1980s, cultural businesses in all fields of the traditional arts have been promoted and funded within unesco, forming what has become known as the “cultural and creative industries” (ccis) (cunningham 2002) in the nascent field of creative economy research (cer) (lazzeretti et al. 2018). the study of cultural entrepreneurship has emerged as a scholarly task in three fields: 1) from a sociological perspective, focusing on the organizational processes by which cultural products are created; 2) from a managerial perspective, focusing on the dissemination of cultural processes; and 3) from a cultural perspective, as a new wave in “cultural making”, where culture is both a medium (a “deploying”) and an outcome (a “making”) of entrepreneurial actions (gehman and soublière 2017). when universities are conceived fundamentally as a way of life and of cultural development 1 , then we should observe, first, the deploying of cultural activities; second, the undertaking of cultural research; and third, the teaching of cultural activities and the implicit values that form culture itself 2 . this means that the entrepreneurial university seeks to complement its traditional teaching and research functions with cultural activities, at the same time as it incorporates cultural content with external productive relations through cultural entrepreneurship. thus, in considering how to profile their main activities, universities have to make a dual selection: on the one hand, undertaking research, technology transfer and providing services in artistic and cultural knowledge; and, on the other, the promotion of innovative spin-offs from their cultural services. 1 the university is a space of cultural learning: “it is critical to develop once more within the university the teaching of culture or of the system of the living ideas that time possesses…this must be the radical task of the university. this, before anything else, has to be the university” (ortega y gasset 1976). 2 as such, the three functions of the universities are: i. cultural transmission, ii. teaching of the professions, and iii. scientific research (ortega y gasset 1976). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 267 this paper reports a study and critical analysis of a number of cultural ventures. here, by means of a questionnaire, data were gathered aimed at identifying innovations and factors that promote or impede links – i.e. relationships founded on knowledge, technology transfer and incubation – between cultural firms and universities, where the requirements of entrepreneurship are recognized as needs for obtaining and developing management skills, financing, linkages, visibility and, sustainability. the hypothesis underpinning this study is that the consolidation of cultural entrepreneurships depends on their differentiation and on their commercialization capabilities in accordance with their specific cultural/artistic type, and on available institutional support, in particular that provided by the universities, within a diverse environment of factors and relationships that enable such start-ups to survive in the various stages of the life cycle. as part of the conclusions, some develop criteria are elaborated for designing policies to increase the generation, survival and consolidation of cultural and artistic ventures. methods an evolutionary approach to the functions of the university provides a new dimension to its cultural activities. here, since the end of the 19 th century, the historical context and the need to construct a national identity in mexico have served as the primary motives underpinning the development and promotion of the cultural activities of the country’s universities (molina ahtziri and ejea 2019). indeed, the importance attached to cultural activities in various mexican universities can be inferred by the relative financial weight assigned to promoting these goals within their total budget. at this point, we examine the university’s functions based on its evolution and the marked increase in its interrelations with the dissemination of knowledge. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 268 two levels of data are considered: first, an analysis of nine aggregate creative industries, making up mexico’s cultural and creative sectors, is reported, focusing on their impacts, at both the regional and national levels, on employment and the number of firms. second, an estimate of the sustainability of ten cultural start-ups and identify the challenges they face. we then contrast their prospects with those of six mature cultural firms and examine how mexico’s universities might boost the capacities of these cultural ventures. the firms’ innovativeness is measured using a structured questionnaire, the indico index (corona treviño 2015), specifically adapted to cultural entrepreneurships. here, we formulate and address three main questions: 1) how can a university incorporate within its functions the objectives of an entrepreneurial university? 2) what is the relative intensity of cultural activities in the universities of mexico? 3) what kind of policies and strategies emerge as being most effective from our study of the ten university cultural ventures? universities begin by fulfilling what is typically and exclusively a teaching function before evolving to establish themselves as research universities. in latin american, moreover, universities generally also fulfil the function of disseminating culture, which might be related to their teaching and social research. some universities promote a range of extension activities, which serve to highlight the relationship between the university and the community in which it is immersed, becoming one of the three university’s functions: namely teaching, research and extension. a more recent development has been the evolution of what have become known as entrepreneurial universities, as the latter have incorporated activities of knowledge transfer or, more generally, the commercialization of academic research and a closer involvement in http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 269 socio-economic development. to achieve this requires the crossing of the arts and sciences and the promotion of the resulting knowledge transfer. therefore, what has been proposed is the treatment of culture as a horizontal activity that cuts across all university functions, a move that also encompasses the creation of university cultural enterprises. an entrepreneurial university is said to be conceived when this third mission of economic and social development is added to those of teaching and research (etzkowitz 2003); when it is prepared to take risks in translating the knowledge produced within the university into economic and social utility (clark 1998), and when the research it undertakes leads to patentable inventions and discoveries, faculty spin-off ventures, and technology transfers (chrisman 1995) (see table 1). table 1. the vision of the entrepreneurial university entrepreneurial university henry etzkowitz (2002) expansion of university mission teaching preservation and dissemination of knowledge new missions generate conflict of interest and controversies research first academic revolution two missions: teaching and research entrepreneurial second academic revolution third mission: economic and social development, old missions continue burton r. clark (1998) the entrepreneurial university has the ability to generate a focused strategic direction, both in formulating academic goals and in translating knowledge produced within the university into economic and social utility. taking risks when initiating new practices whose outcome is in doubt is a major factor. james j. chrisman (1995) universities are still in the education business and this mission continues to be of critical importance. however, universities also make substantial contributions to local economies through research leading to patentable inventions and discoveries, faculty spin-off ventures, and technology transfers. source: based on the works of the authors cited. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 270 however, to become an entrepreneurial university, it is not enough simply to develop external links aimed at solving social and economic problems. a number of fundamental changes are required (see figure 1): 1) a shift from the diffusion of culture to the inclusion of cultural making activities. each university must acquire a cultural dimension, based on culture learning, cultural research and cultural development, in general. 2) the promotion and strengthening of interrelations between culture, research and teaching activities, developing additional capabilities for undertaking these activities and introducing a systemic perspective for solving external problems 3 . 3) facilitating external criticism on and of society but also explicit mechanisms for facilitating internal criticism. figure 1. entrepreneurial and research university (ɛru) source: author’s own. 3 with the objective of a true articulation of cultural diffusion with research and teaching which originates creation and knowledge development (regil vargas 2009). an additional aspect is the "collaboration between public services and the private sector with the universities for the promotion of an entrepreneurial culture (de pablo, isidro et al. 2011). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 271 results cultural activities of mexico’s universities the cultural activities of mexico’s universities represent around 6% of their total budget. for the national autonomous university of mexico or unam, they represent 8.2%, a figure that rises to 11.5% if we include the budgets for cultural teaching activities (1.6%) and cultural research centers (1.7%) 4 (table 2). table 2. university budgets for cultural diffusion, 2018 (millions of mex. pesos). university income ( $ millions of mex. pesos) cultural diffusion budget ( $ millions of mex. pesos) percentage unam 38300 3135 8.2 ipn 15554 udeg 13398 328 2.4 uanl 7858 587 7.5 uam 7097 643 9.1 uv 6529 419 6.4 uabc 4526 353 7.8 total 93262 5465 5.9 source:http://www.estadistica.unam.mx/series_inst/index.php; http://www.transparencia.uam.mx; http://patronato.uabc.edu.mx/documents/10652/59534/presupuabc2018.pdf; http://transparencia.uanl.mx/secciones/informacion_presupuestal/presupuesto_2018/.pdf; http://transparencia.udg.mx/sites/default/files/presupuesto_2018.pdf: http://colaboracion.uv.mx/informacionpublica/presupuestos/.pdf in general, and increasingly, according to regil vargas (2009) the activities of cultural diffusion in public universities find themselves blocked by the uncertainty between fading away and their reactivation. 4 unam has the schools of arts and design, music, cinematic arts and a theater center within its teaching spaces (representing 1.61% of its total budget). unam research includes its bibliographic, librarianship and information, aesthetics and philological research institutes (representing 1.7% of its total budget). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 272 creative industries in mexico there is a correlation – a two-way interaction – between culture and creativity: creative expression is a universal human phenomenon that has its foundations in culture and which at the same time has a profound impact on culture (rudovicz 2003). over the last two decades, mexico’s cultural and creative industries (ccis) have made a notable contribution to national growth, calculated at somewhere between three and six percent of gross domestic product (gdp). the contribution originates from two main sources, one linked to modernity and highly creative technology, the other to the country’s culture and heritage (valdivia 2018). mexico’s ccis are constituted by 91,000 firms, which employ somewhere in the region of 725 thousand people, equivalent to 2.5percent of the country’s active population and 1.7percent of the country’s total firms 5 (table 3). table 3. number of firms and employees per creative sector. creative industries firms employees mean nº of employees per firm music & visual and performing arts 27 791 180 686 7 advertising and marketing 15 042 150 802 10 publishing 19 216 80 750 4 architecture 6 945 75 145 11 film, tv & radio 3 324 70 588 21 software 3 947 67 753 17 libraries and museums 6 114 42 983 7 handicrafts 6 254 41 501 7 design 2 755 14 779 5 total/average 91 388 724 987 8 source: (mapa transmedia 2019). the creative industries have been adapted from bakhshi et al. 2013. https://www.nesta.org.uk. the first three sectors in table 3, i.e. music & visual and performing arts, advertising and marketing, and publishing, provide jobs for half the people working in the creative industries 5 the 2.5% is a proportion of total employment and 1.7% of firms according to denue statistics (inegi 2015; 2018) http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 273 (53%). the largest firms operate in the film, tv & radio industry (mean number of employees is 21) followed by software (17 employees per firm). to determine the picture at the regional level, we selected the top 14 mexican states (from a total of 32) presenting the highest growth rates between 2015 and 2018 as determined by the creative industries index. these 14 states moreover also have the highest number of firms operating in the ccis (table 4). three of the states, namely querétaro, mexico city and nuevo leon, are the most diversified, presenting five more cultural and creative industries than the national average. within this ranking, querétaro appears in first place, thanks, in large part, to the fact that growth in the software, architecture and design sectors is double that of the other states. mexico city takes second place in the ranking, with a rate of growth in the software sector that is the triple of that of its competitors. it is also the state with the highest average number of employees per firm at 14. in third place is nuevo leon, where growth in software is 2.6 higher than that of its competitors, while it is the state has the second highest average number of employees per firm at 10.7. overall, design has grown at a rate above the average in eight states, as have software and architecture in six states. the city of mexico concentrates most of the country’s ccis, with 1,512 creative firms and employing 22,301 workers per million inhabitants. it is followed by the states of aguascalientes (872 firms), jalisco (862), quintana roo (846) and campeche (831), each of which has around 7,000 employees, both figures per million inhabitants (table 3). interestingly, three of these last four states are among mexico’s smallest having enjoyed high growth rates in the following sectors: aguascalientes – with an increase in design of 2.02, in software of 1.73, in architecture of 1.43 and in advertising and marketing of 1.25; and quintana roo and campeche, most notably in film, tv & radio, with respective increases of 1.6 and 1.62, respectively (table 4). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 274 table 4. mexico states with high-growth creative industries, 2015-2018; and highest number of firms 2018. 9 creative industries nation al avera ge growth index querétaro mexico city jalisco aguascalient es veracruz quintana roo campeche tabasco coahuila nuevo león guanajuat o estado de méxico chiapas oaxaca nº of states music & visual and performing arts 1.03 1.3 1.22 2 advertising and marketing 0.98 1.6 2.42 1.25 1.54 1.73 5 publishing 0.93 1.26 1 architecture 1.05 2.14 1.87 1.43 1.73 1.27 1.84 6 film, tv & radio 1.1 1.5 1.6 1.62 1.8 1.38 5 software 0.93 2.69 3.14 1.27 1.73 1.14 2.64 6 library and museums 1.1 1.33 1.62 2 handicrafts 0.9 1.17 1.32 2 design 0.99 2.26 1.9 1.39 2.02 1.42 1.22 1.57 1.55 8 number of creative industries above national average 5 5 3 4 0 3 2 2 3 5 1 1 1 2 14 number of firms 2102 13485 6764 1145 4313 1270 748 1222 2061 4281 3902 9130 2925 2968 number of employees 17508 198894 52483 9051 25933 11457 6388 11464 17536 45825 24797 54564 15106 14421 average employees per firm 8 8.3 14.7 7.8 7.9 6 9 8.5 9.4 8.5 10.7 6.4 6 5.2 4.9 population 119.5 5.1 8.9 7.8 1.3 8.1 1.5 0.9 2.4 3 5.1 5.9 16.2 5.2 4 75.4 millions inhabitants firms per million inhabitants 765 411 1512 862 872 532 846 831 510 697 836 667 564 561 748 employees per million inhabitants 6065 3420 22301 6690 6896 3197 7630 7098 4787 5935 8951 4236 3371 2895 3634 source: table based on data from mapa transmedia (2019). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 275 specific cases of cultural entrepreneurship based on an exploratory study of ten cases of cultural entrepreneurship, we identify strategies that can be employed to enhance the entrepreneurial potential of a university’s cultural activities. the majority of these cases form part of the unam’s incubator, the “laboratory of cultural initiatives”, which is a program of cultural diffusion coordination. the incubator supports artistic entrepreneurs in their efforts to investigate, experiment and learn in collaborative teams. these teams receive an annual scholarship and are provided with a mentor, workshop space and a range of services for undertaking their artistic work 6 . we then compare and contrast the characteristics of these start-ups with those of six mature firms, with an average age of 12 years compared to just 3.4 in the case of the ten cultural entrepreneurships. on average, the indico index recorded for the cultural entrepreneurship is 4.0 which, as we would have expected, is lower than that of the mature firms (5.6). the latter record a result index score that is nearly twice (1.8) that of the start-ups, whereas both sets of firms have similar score in terms of capacity (table 5b). most of the cases of cultural entrepreneurship are characterized by collaboration in the generation of innovations: some of these are institutional, others are based on artist networks 7 . on average, nearly half the innovation comes from external links, whereas in the case of the mature firms the influence of these links is smaller at 43%. clearly, external collaboration is critical, however, for the success of both types of cultural entrepreneurship. 6 the incubator is located in the emblematic “1968 cultural unam” building and is known as “piso 16” or floor 16. there have, as of 2019, been only two calls for artistic projects. in 2019, ten projects were selected from a total of 135 presented, while in 2018, just five from a total of 102 won support. 7 artistic innovation typically moves through four stages – proximal innovation, fuzzy innovation, established innovation and maintained innovation – sustained by a relational network characterized by strong or weak ties, depending on the artist’s inclusion and differentiation (montanari et al. 2016). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 276 investment in creative effort (r&d) of the cultural entrepreneurships stands at 41%, and while important for mature cultural companies, it represents less than half (19%), fig 5a. table 5a. university cultural entrepreneurships vs. mature firms entrepreneur -ship/firms culturalartistic industry age in yea rs innovations (average) linkage: university participation in innovation % r&d activiti es p p m tot kind of support firm unive rsities othe rs % 10 ɛ 8 arts (3 theater, 3 visual, 2 dance) 2 publishing 3.4 1.3 0.1 0.3 1.7 workshops, space, mentoring 45.5 24 30.5 38 of effort 6 creative firms 4 art 1 advertisin g 1 publishing 12.2 1.8 0.3 0.5 2.7 students mentor, academic collaboration 61 5 34.5 30 of sales table 5b. university cultural entrepreneurships vs. mature firms (cont.) entrepr eneursh ip ɛ /firms intellectual property main client sales $ million mx pesos/ year personnel indico index legitimation sup port cre ativ e r c indico index awa rd (%) exhi bition (%) medi a repor t-age (%) review er (%) 10 ɛ authors’ copyright diverse 0.15 2.7 5.9 3.52 4.50 4.0 100 40 0 0 6 creativ e firms copyright s and trademark s diverse 102.53 4.4 10.6 6.34 4.79 5.6 50 100 83 67 source: based on responses to the indico questionnaire from ten cultural entrepreneurships and six mature creative firms. (see annexes 1 and 2). conclusions an important new function is being fulfilled by universities, namely, that of knowledge transfer. scientific, technological, social and cultural entrepreneurships all form part of this transfer and have come to play major roles in relation to the universities’ fourth function, that of the productive use of knowledge. within an entrepreneurship university, interrelationships are created internally between culture, research and teaching, while at the same time external http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 277 links are developed to solve productive and social problems, within an overall framework of external and internal criticism (fig. 1). three of mexico’s states – querétaro, mexico city and nuevo leon – present a higher degree of diversification in their creative industries than their counterparts. querétaro is ranked first, enjoying more than twice the growth presented by its regional competitors in the software, architecture and design sectors. mexico city, ranked second, records three times the growth of the other states in software, and has the largest average firm size with 14 employees. third place is taken by nuevo leon with 2.6 times the growth in the software sector and the second largest average firm size with 10.7 employees. it is evident that cultural entrepreneurship could be substantially boosted were it to be supported by the universities’ cultural activities, as illustrated by the unam’s cultural incubator “piso 16”. however, such initiatives need to be escalated and multiplied (with just ten out of a 135 projects presented being selected by unam) in order to respond to the potential of cultural entrepreneurship that requires supporting. the average age of the ten cultural ventures is 3.4 years, considerably less than that of the mature firms with an average of 12 years. measuring the innovativeness of the cultural entrepreneurships, using the indico index, provides an opportunity also to compare the heterogeneity within their apparent artistic diversity. it also allows a comparison to be made with other creative industries. on average, they present an innovativeness of 4.0 which is lower than the 5.6 presented by the mature creative firms. the latter also score almost twice as high in terms of output as the entrepreneurships, while are similar in terms of their capacity. the creative effort (r&d) of the artistic entrepreneurship projects is 38%, and while important for mature cultural companies stands at 30%. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 278 the goal must be to strengthen the links between the functions of the universities as this would serve to enhance the possibility of the students’ integral education in different areas of knowledge – including technology, the arts and humanities. likewise, it would boost the diversity of intraand inter-entrepreneurship. references bakhshi, hasan, alan freeman, and peter higgs. 2013. a dynamic maping of the uk`s creative industries. london: nesta. buford, kathryn. 2017. expert in cultural impact and cultural entrepreneurship . https://www.quora.com access: 2019. chrisman, james j. 1995. "faculty entrepreneurship and economic development: the case of the university of calgary." journal of busines venturing 10 (4): 267-281. clark, burton. 1998. creating entrepreneurial universities. organizational pathways of transformation. pergamon press. . corona treviño, leonel. 2015. "índice indico: innovación en las empresas." cuaderno de trabajo 4, cepcyt facultad de economía unam. cunningham, stuart d. 2002. "from cultural to creative industries: theory, industry,and policy implications." media international australia incorporating culture and policy 102 (1): 54–65. de pablo, isidro, fernando alfaro, miriam rodriguez, and esperanza valdés. 2011. promoting entrepreneurial university. industry & higher education 25 (5): 375-382. etzkowitz, henry. 2003. "research groups as ‘quasi-firms’: the invention of the entrepreneurial university." research policy 32(1): 109-121. gehman, joel , and jean-françois soublière. 2017. cultural entrepreneurship: from making culture to cultural making. innovation 19 (1): 61-73. inegi, 2015; 2018. directorio estadístico nacional de unidades económicas (denue). https://www.inegi.org.mx/app/mapa/denue/ lazzeretti , luciana, francesco capone, and niccolò innocenti. 2018." the rise of cultural and creative industries in creative economy research: a bibliometric analysis." in creative industries an entrepreneurship: paradigms in transition from a global perspective,13-34. eward elgar pub. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 279 mapa transmedia. 2019. méxico creativo: mapeando las industrias creativas en méxico. https://centroculturadigital.mx/mapa-transmedia/mexico-creativo/ access september 23, 2019. molina ahtziri, and thomás ejea. 2019. entre la comunidad y el mercado. los ámbitos y usos de la tercera función sustantiva universitaria en méxico. xalapa: universidad veracruzana. montanari, fabrizio, annachiara scapolan, and martina gianecchini. 2016. "‘absolutely free’? the role of relational work in sustaining artistic innovation." organization studies, sage 37 (6): 797-821. ortega y gasset, j. 1976. "mision de la universidad." in mision de la universidad y otros ensayos afines. madrid: revista de occidente. regil vargas, l. 2009. difusión cultural universitaria: entre el ocaso y el porvenir. reencuentro 56 (december): 60-65. rudovicz, elizabeth. 2003. "creativity and culture: a two way interaction." scandinavian journal of educational research 47(3): 273-290. valdivia, marcos. 2018. "cultural and creative industries in mexico: the role of export-oriented manufacturing metro areas." in creative industries an entrepreneurship: paradigms in transition from a global perspective, edited by luciana lazzeretti and marilena vecco, 262282. edward elgar. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 280 annex 1. cases of creative and cultural entrepreneurship. mexico 2019. group 1: unam’s floor 16 th : entrepreneurships. entrepreneurship cultural-artistic industry founda tion innovatio ns linkage: university participation for innovation % r&d activi ties p p m kind of support fir m univers ities oth ers % of effort editorial sin fe collaborative editorial (editorial) 2009 1 1 1 udg: entrepreneur’ s students 40 0 60 25 lolita pank visual arts 2013 1 0 0 1. space 2. workshops 3. training program. 50 15 35 50 mercado negro editorial editorial 2019 2 0 0 support for entrepreneursh ip 45 25 30 10 moc performing arts. dance 2013 1 0 0 1 space 2scholarship 3 workshops 50 10 40 30 país arid performing arts. party`s scenario. 2019 1 0 0 1 training 2workshops 60 30 10 50 buitre amargo, desde la escena performing arts. theater 2016 3 0 0 1 mentoring 2 space 3) workshops 50 20 30 80 colectivo giroscopio performing arts. philosophy dance 2015 1 0 1 1. mentoring 2. other ɛ`s mentoring 3. space with services. 60 40 0 40 proyecto ovni visual arts’ management 2017 1 0 0 1.-workshops 2.-mentoring 3.-scholarship 0 50 50 25 colmena consulting on public space urban scenarios 2016 1 0 0 1.workshops 2.-visibility 3.scholarship 70 30 0 40 oto prints graphic (music & visual) performing arts) 2019 1 0 1 1.mentoring, 2. workshops 30 20 50 30 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 281 group 1: unam’s floor 16th: entrepreneurships. (continuation) entrepreneu rship intellect ual propert y main client sales $ milli on mx pesos / year personnel indico index legitimation supp ort creati ve r c indico index awa rd exh ibiti on media report age rev iew er editorial sin fe creativ e commo ns library "sol luna" 0,10 8 40 6,0 4,4 5,2 1 0 0 0 lolita pank --- punk women ---2 1 1,7 5,2 3,4 1 0 0 0 mercado negro editorial ---collecto rs 0.5 0 1 2,8 2,8 2,8 1 0 0 0 moc author copyrigh t public instituti ons 0.1 3 2 3,1 4,0 3,6 1 0 0 0 país arid 3,7 4,9 4,3 1 1 0 0 buitre amargo, desde la escena author copyrigh t young people 0.1 4 4 3,8 3,8 3,8 1 0 0 0 colectivo giroscopio ---dancers 0.2 2 2 4,3 5,3 4,8 1 1 0 0 proyecto ovni author copyrigh t art student s 0.0 3 2 2,7 3,3 3,0 1 0 0 0 colmena consulting on public space ---- general public 0,30 2 4 2,9 5,7 4,3 1 1 0 0 oto prints author licence s hotels 0,05 2 1 4,0 5,5 4,8 1 1 0 0 source: application of indico` questionnaire to entrepreneurships. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 282 annex 2. cases of creative and cultural firms. mexico 2019 group 2 firm creative industry foun datio n innovation s linkage participation for innovation % r& d p p m institu te kind firm univers ities oth ers % of sale s miravete lms 2 advertising 2017 2 0 1 rccetc* technology development 70 10 20 5 taller 8a 1 graphic and sculpture 2012 3 1 esmer alda training and space for art students 50 0 50 15 estudio miguel rodríguez sepúlveda 1 painting (music & visual and performing arts) 2007 1 0 1 unam student, mentor 100 0 0 30 shakespeare & cía 1 graphic and sculpture (music & visual and performing arts) 2000 0 1 0 unam student, mentor 30 0 70 50 sebastian 1 monumental sculpture 1990 2 0 1 unam academic staff 68 0 32 30 r cen ter fondo editorial universitario uaq 3 quality editorial and book sales (editorial) 2015 2 0 1 uaq uaq’s entrepreneurs hip 45 20 35 50 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 265-283, january-june 2020 doi.org/10.1344/jesb2020.1.j074 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 283 group 2: contrast cases: creative and artistic` firms (continue) group 2 ip main client sales $ million mx pesos, year personnel indico index legitimation firms supp ort creat ive r c indic o index aw ard exhi bitio n media report age revie wer, curat or miravete lms patent lms visual moving 2,00 2 3 6.39 3.9 5.15 0 1 0 0 taller 8a artist's copyrigh ts artists 0,30 2 8 5.06 4.57 4.81 0 1 1 1 estudio: miguel rodríguez sepúlveda logos& design copyrigh ts public modern art 0,35 1 1 7,1 4,5 5,8 1 1 1 1 shakespeare & cía tradem arks performing arts public 10,00 12 35 3,5 3,9 3,7 0 1 1 1 sebastian author copyrigh t* unam 500 na na 5.27 4.79 5.03 1 1 1 1 fondo editorial universitario uaq author copyrigh t readers na 5 6 5,5 5,5 5,5 1 1 1 0 source: application of indico` questionnaire to firms. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 ioanna sapfo pepelasis aueb (greece) dimitrios varvaritis independent scholar (switzerland) an unexplored facet of international business in greece: foreign and diaspora shareholders in joint stock company start-ups, 1833-1920 1 abstract this article focuses on an unexplored aspect of the history of international business in greece, the presence of international shareholders in greek joint stock company start-ups. our main findings are that these investors participated in numerous such firms usually as minority shareholders in capital and/or knowledge intensive firms. rarely did they opt for the exclusive international ownership of a joint stock company in greece and the dividing line between foreign direct investment and foreign portfolio investment was not always clear. it is also the case that international capital inflow into the nascent corporate sector involved a mosaic of collaborating actors including not only the foreign but also the diasporic. keywords: greece; joint stock company; start-up; international shareholders; diaspora; business strategy. corresponding author. e-mail: ioannasapfopepelasis@gmail.com received 12 april 2016 accepted 03 june 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 1 this article is an outgrowth of research conducted under the first eu funded basic research project at the athens university of economics and business (aueb) in 2010. we wish to thank the ‘association of greek commercialists’ (i.e. commercial attorneys) for funding, mara vidali (aueb) for research assistance and kalli ralli for editing assistance. finally we would like to thank the organisers and participants for comments on our presentation of an earlier version of the article at the workshop ‘ international business in southern europe in a long term perspective’, university of barcelona, november 24, 2015. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 introduction on the basis of a new dataset this article examines for the first time, the presence of international (namely, foreign and diaspora) shareholders in joint stock company (or société anonyme) start-ups in greece – a small, latecomer country born into debt and perennially subject to external financial dependence. 2 the starting (1833) and the end points (1920) of this article constitute critical junctures in the historical trajectory of the greek state. 1833 marks the opening of the reign of the country's first monarch, otto, the young son of king ludwig of bavaria. otto inaugurated a period of modernising, albeit autocratic rule. and 1920 represents, with the landing of the greek army in smyrna/izmir, the high endpoint of greek irredentism in the near east. 1920 marks furthermore a significant milestone in greek legal and business history namely, the introduction of a company act (law 2190). until that time the relevant law governing joint stock companies in greece was derived from the napoleonic commercial code of 1807 (karavas 1930; angelopoulos 1928; franghiadis 2007). the core questions we address are: 1) in which joint stock company (henceforth, jsc) startups were there at least one international shareholder (is) within the shareholder base? 2) in what sectors and geographical locations were these start-ups based? 3) what were the features of the body of international shareholders and what was the business profile of the main players in this cohort? 4) what were the interlinkages between international investors in the nascent corporate sector and sovereign borrowing? from this point onwards, the article is organised as follows. the next section provides a brief review of the literature. an outline of the external financial dependence of the greek state is 2 for why we define international as foreign and diaspora see in the text section three. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 given in the third section. we make a detailed description of our sources, data base construction and methodology in section four. the fifth section presents the findings of our statistical analysis of the dataset. in section six we focus on biographical information on selected key international shareholders. section seven explores interconnections between international investment in the nascent corporate sector and players involved in the raising of foreign loan capital for the state. in the conclusion we offer some thoughts on the wider implications of our research results. the literature within the large and diverse historiographical output concerning the economy of greece, international business and the rise of the joint stock company have traditionally been examined as separate strands of research with minimal overlap. 3 on the first theme most research has focused on the macroeconomic and diplomatic aspects of sovereign borrowing, foreign debt accumulation and defaults (stephanidis 1930; pepelasis minoglou 1995, 2002; pandelakis 1995; dertilis 2009). in parallel with this line of research, the topic of foreign investment in greek business has been examined from the following angles. anastasios yiannitsis (1977) opened the way with his general survey on foreign direct investment (fdi) and more specialised research subsequently followed. among the pertinent works that stand out are the studies on the construction of railways (papayiannakis 1982) and the corinth canal (papayiannopoulou 1989) as well as the schemes for electrification (pandelakis 1991) and the drainage and development of the lake copais region (melios 1987). 3 for recent efforts to combine both see: foreman-peck and pepelasis (2013); pepelasis and varvaritis (2016). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 other scholars, such as agriantonis (1986), have incorporated extensive references to foreign entrepreneurial pioneers and specifically their activities concerning greece’s industrialisation while several monographs have addressed the corresponding activities of a number of diaspora families involved in shipping and merchant banking (dertilis 1989; chatzioannou 2003; agriantonis and chatzioannou 1997; harlaftis 1996; kostis and tsokopoulos 1988). foreign and diaspora investors have furthermore left us a number of memoirs and related writings such as the autobiographies of the diaspora merchants andreas syngros (syngros 1998) and dimitrios vikelas (vikelas 1997) and the british landowning family the noels of euboea (noel-baker 2000). as for the rise of the joint stock company in greece the literature on this theme is relatively small. this may be explained by the fact that historically, and indeed even today, the great majority of greek firms are sole partnership or broader family firms that stand outside the corporate sector (pepelasis 2011; pepelasis and protogerou 2016). the first relevant studies on the joint stock company appeared in the early twentieth century (angelopoulos 1928; karavas 1930) and encompassed a principally legalistic approach. more recent works have however focused their attention on related aspects such as for example the formation of industrial capital (tsotsoros 1994), the long-term development of the greek state (dertilis 2009) and the networks active in the international investment in greece in the interwar period (pepelasis-minoglou 2002a). what is however lacking in this literature is a quantitative approach embracing all economic sectors of the greek corporate sector. the eradication of the latter gap is now the object of intense research of a special project at the athens university of economics and business (henceforth aueb) through the creation of comprehensive datasets derived from the charters http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 of jsc start-ups (1830-1929) and balance sheets (1927-1936). various facets of the evolution of the joint stock company have been examined up to this point (as for example pepelasis 2010a, 2011; pepelasis and aivalis 2014). but none has selectively addressed the issue of the participation of international investment in jsc start-ups. the most relevant to the theme of this article, and indeed based on the above aueb project, has been a recent study which has documented the basic contours of jewish founding shareholders (pepelasis and varvaritis 2016). turning to the area of international literature, there has been extensive historical research on both international business and the joint stock company. a considerable number of scholars have examined these themes concurrently often focusing their studies on the multinational corporation (micklethwait and wooldridge 2003; langlois 2007; jones 2007; neal and williamson 2015; miravitlles and zhang 2016). other topics addressed in the international literature that are relevant to the research presented in this article are international comparisons (amatori and colli 2011); the role of regulation in foreign investment (chang 2004) the economics of information and the related networks of trust within commercial diasporas. in fact, the international literature has taken note of how, as a force, the greek diaspora enhanced globalization (jones 2007; godley 2006). that said, the particular niche examined in this article namely, international investment in the local corporate sector of a peripheral economy, does not figure prominently in the literature. yet despite this lack of prominence it remains possible that this niche may, in the future, be integrated into the emerging and newer literature that approaches the study of international business in a more evolutionary and holistic manner (miravitlles and zhang 2016). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 a succinct historical outline of foreign borrowing by the state the initial presence of international business in greece may be dated from the period when the greek state itself did not exist, but was in a process of formation and it was exclusively situated within the london-based international finance sector. during the nearly decade long rebellion against the ottoman empire (1821-1830), better known as the war of independence, the greek rebel leadership managed to raise a loan in london for the purposes of the war effort. the greeks however defaulted on this loan in 1827 thereby setting a precedent that was repeated by the state on two further occasions in the same century, namely in the foreign debt defaults of 1843 and 1893 (chatzioannou 2013; lazaretou 2013; pepelasis minoglou 1995). the repetitive pattern of heavy foreign borrowing followed by default directly affected greece’s overall economic position, thereby placing significant fetters on the ability of the state to borrow and implement economic policies of its own choosing. in the case of the 1843 default, greece was excluded from the international capital markets until 1879 while following the 1893 default an international financial commission (ifc) was imposed in 1898. this ifc supervised greek monetary and fiscal policy and was imposed by a number of greece’s creditors following the latter’s military defeat in a war with the ottoman empire (1897) and the resultant inability of greece to pay a large war indemnity to the porte. heavy foreign borrowing by the greek state, (which had been temporarily halted in 1894) resumed unabated until the outbreak of the balkan wars (1912-3) (pepelasis minoglou 1995; dertlis 2009). it is against this background of financial dependence and eventual external economic intervention in 1898 that the process of international participation in greek http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 registered joint stock companies materialised. sources, data and methodology this article makes use of one principle source namely, the founding charters of greek joint stock companies established in the period 1833-1920. these charters include the following crucially significant information: company name and date of foundation, its place of registration and nominal capital, the names, places of residence (or registration in the case of company shareholders) and professions of its shareholders and finally the details of shareholder proxies and notaries. although initially drafted by one or more notaries these charters acquired their legal force through submission to the relevant authorities and subsequent approval and official publication, by way of royal or ministerial decree, in the government gazette of greece. this process of submission and administrative ratification was inaugurated in 1836 with the foundation of greece’s first jsc the patras-based marine insurance firm achaiki asfalistiki tis thalassoploias or marine insurance company of achaia and was furthermore maintained, albeit with some variations, until the company act of 1920. taken as a whole, this collective body of charters allows us to document and analyse, diachronically and spatially, certain repeated patterns and themes. among these are the quantity, sectoral and geographical dissemination of jscs as well as the investment choices and/or strategies of each jsc’s constituent shareholders. having set out above the nature and basic content of this article’s main primary source one should also note its numerous weaknesses. chief among these weaknesses are the evidentiary gaps. a considerable number of charters do not include details concerning the profession, residence (or registration in the case of legal entities) and indeed the individual nominal http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 capital of all of their shareholders while other charters do not list all their constituent shareholders. a case in point is the charter founding the ethniki trapeza tis ellados or national bank of greece (1841). it lists for reasons presumably of state confidentiality the greek government as holding 1,000 shares while ‘other shareholders’ hold the remaining 1,600. furthermore some charters do not list any shareholders while other charters include groups of shareholders or syndicates. the existence of the latter groups further complicates our ability to clearly identify and classify consistently all those participating persons, whether legal or natural. as a consequence of the above limitations we do not have exact figures concerning both the number of shareholders and indeed the corresponding total capital of these shareholders. this also in turn affects our calculations and this factor should be kept in mind. as the missing information concerns mostly the number and value of shares, in our analysis we have not included any data on the nominal capital registered by international shareholders per jsc/is. instead in the analysis that follows reference is made to the total nominal capital of such start-ups. taken together the factors outlined immediately above do indeed endow our dataset with a certain unevenness and inconsistency. that said, it does still however provide a fairly large, but admittedly limited in parts, prism through which to study and analyse the broader economic phenomenon of company formation and entrepreneurship in greece. our starting point in the construction of the new dataset of jscs with international investors was the original body of jsc charters. this body contained 460 such charters. upon a close examination of this body of data, and specifically the shareholders details contained within each charter, a selection was made of those jsc start-ups that included at least one http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 shareholder whose declared particulars displayed a connection to a foreign country or foreign legal entity. one such feature was, in the case of legal persons a verifiably foreign or non-greek surname, while in the case of legal persons it often was the place of company registration being outside of greece or the jsc start-up being the greek subsidiary of a foreign registered company. at this point we would like to go into some detail regarding what is meant by the abovementioned words ‘connection to a foreign country’. due to the peculiarity of greece, our body of international shareholders includes in addition to foreign investors (natural or legal persons), members of the globally present greek mercantile diaspora residing outside greece. we deemed it necessary to include members of this particular group within the rubric of ‘international shareholders’, because their livelihood was positioned in the global trade of bulk goods and shipping, and also because of their crucial participation in the issuing of foreign loans to the greek government. thus, the basic criterion for selection was the presence, at the moment of a jsc’s creation, of a stated residential, registrational and/or personal factor connecting one or more shareholder(s) to the wider international community. through the application of this criterion we were able to extract 119 jsc start-ups containing international investors that constitute the principle dataset of this article. the process of examination and selection was completed through the use of a previous database containing all the particulars of shareholders in greek jsc start-ups for the period 1833-1909. this database was created under the first eu funded basic research project at aueb (for the first results from this data base see: pepelasis minoglou 2010). for the remaining period (1910-1920) no such analogous database existed and so the relevant http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 volumes of the government gazette were checked manually. in the course of checking these volumes initial guidance was provided by the work of enta angelopoulou (2003). that said, in arriving at this dataset a certain number of jsc start-ups had to be excluded. these were 15 in total and the reason they were excluded is two-fold. the factual matrix of their shareholder base was such that of the often numerous shareholders whose surnames were foreign none could be securely verified as foreign to greece and thus in such an eventuality the corresponding jsc was excluded. in closing, we must note that in the next section we analyse our collected data through two perspectives: the first takes as its unit of analysis jsc/ii startups. the second perspective focuses on the characteristics of the body of international shareholders. in order to ‘weigh the significance’ of our findings on the presence of international business in the nascent corporate sector we also make comparisons with the aggregate figures provided for incorporation in the data bases used for the following studies: pepelasis minoglou (2010), pepelasis (2011) and pepelasis and aivalis (2014). statistical analysis of the database part one: mapping joint stock company (jsc) start-ups in which there was an international shareholder (is) number of jsc/is start-ups between 1833 and 1920 the total number of joint stock company start-ups with at least one international shareholder (henceforth, jsc/is) was 119. this amounted to a little under one third of the total population of jsc births in greece at the time. as table 1 below demonstrates the number of births fluctuated over time and the two peak decades in the numbers of jsc/is births were the 1860s/1870s and more significantly the 1910s. the first of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 these two high waves began as a precursor to the incorporation boom of 1872-3, whereas the second coincided with the start of the take-off in jsc births in the country (pepelasis and aivalis 2014). how can this pattern be interpreted? were international investors exceptionally sensitive to rising opportunities in greece? did they lead by example, influencing others (i.e. local greeks) to engage in incorporation? perhaps both processes were at work. it is not easy to interpret this pattern and assess how much foresight international shareholders had and to what extent they led the way, influencing local greeks to engage in incorporation. table 1. geographical distribution by decade of jsc/is start-ups decade number of jsc/is startups a th e n s p a tr a s e r m o u p o li s p ir a ie u s t in o s a r g o st o li t h e ss a lo n ik i c o r fu m it il in i a e g io n e o f a li r o c o n st a n ti n o p le p a r is 1840 1 1 1850 5 1 2 2 1860 19 2 7 7 2 1 1870 18 15 2 1 1880 9 6 1 1 1 1890 8 4 1 1 1 1900 27 20 4 2 1 1910 38 26 1 8 1 1 1 total 119 72 15 10 13 1 1 1 1 1 1 1 1 1 source: compiled from selected issues of the greek government gazette (1833-1920) nominal capital of jsc/is start-ups the share of jsc/is start-ups in the total nominal capital of all jsc start-ups founded in the period under review was 70 percent. moreover, given that the mean nominal capital of jsc/is start-ups was more than double the respective figure for the total population of jsc start-ups, it appears then that international investors showed a preference for participating in large start-ups. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 the peak decade in the total nominal capital of jsc/is start-ups was the 1880s. this perhaps was not coincidental as 1879 marked the beginning of massive foreign borrowing by the greek state and also the building of a national railway network (pandelakis1995; pepelasis minoglou 1995). in fact, in 1881 the largest jsc start-up in the period under review was set up in athens. this was the ‘trapeza constantinoupoleos’ (bank of constantinople) a branch of the ‘banque de constantinople’ (founded in the capital of the ottoman empire in 1847/52). between 1870 and 1910 the share of all jsc/is start-ups in the total nominal capital of incorporation was larger than that of jscs without an is for the respective period. thus, this ‘40 year high point’ was situated chronologically in the pre wwi upswing of international capital flows on a global level (jones 2007). place of registration of jsc/is start-ups between 1833 and 1920 the geography of registration for jsc/is start-ups was rather narrow compared to what was the case for the total population of jsc births. in total, it was distributed among only fourteen cities, (two of which were outside greece) and it was largely absent in small urban centres. registration was also far more concentrated in athens than what was the general case for incorporation. initially, the ports of patras (greece’s main export port) and ermoupolis (the centre of transit trade) were more popular than athens, a status they both lost from the 1870s onwards. (see again table 1) sectoral distribution of jsc/is start-ups for the period as a whole the bulk of jsc/is start-ups was more or less evenly distributed among: insurance, large commerce, banking, industry, mining and shipping. land transport http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 (railways) was also significant and in fact this was a sector in which all companies were of a jsc/is type. compared to what was the case with the total population of jsc births, in our cohort there was a lower overall presence of insurance. in contrast, there was a higher involvement in: large commerce plus all the more capital and knowledge intensive sectors mentioned already in the previous paragraph. however, in spite of this overall difference, the shifts in sectoral orientation of jsc/is startups over the decades reflected more general trends within the nascent corporate sector. notably, insurance nearly monopolised the interest of international investment up to 1870 and in banking and mining it peaked in the 1870s. international participation in railways peaked in the 1880s and in commerce, industry and shipping the 1910s were the high point. table 2. sectoral distribution by decade of jsc/is start-ups decade number of jscs startups in su r a n c e c o m m e r c e b a n k s in d u st r y m e r c h a n t m a r in e l a n d t r a n sp o r t t o u r is m c o n st r u c ti o n o th e r 1840 1 1 1850 5 3 1 1 1860 19 15 1 2 1870 18 2 6 2 1 1 1880 9 1 2 1 4 1 1890 5 1 0 1 1 1 1900 24 6 3 2 4 1 1 2 1910 38 12 2 10 8 1 1 total 119 21 19 15 18 16 6 1 2 4 source: compiled from selected issues of the greek government gazette (1833-1920) in sum, between 1833 and 1920 jsc/is start-ups were significant in numbers and more capital intensive than the average jsc start-up at the time. their geographical distribution was more concentrated in the larger cities and centres of incorporation; a reflection perhaps of a desire of international shareholders to minimise transaction costs and overcome http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 assymetric information in a country which though born in the image of the west had an idiosyncratic institutional and cultural make up. part two: mapping the body of international shareholders in the nascent corporate sector total number and composition in terms of legal identity the total number of international investors in the nascent corporate sector amounted to only 375, namely 3.5% of the total body of shareholders in jsc start-ups and 10% of the total number of founders in jsc/is in greece in the period under review. natural persons comprised the largest group among international shareholders. in the early decades, shareholders who were not natural persons were mostly merchant houses, whereas from 1870s onwards there was a growing presence in this category of banking, construction and industrial firms. table 3. number of shareholders by decade: total, and international subgroup (foreign+diaspora) d e c a d e n u m b e r o f js c /i s s ta rt -u p s total number of shareholders foreign shareholders diaspora shareholders n a tu ra l p e rs o n s legal persons c o m b in a ti o n o f n a tu ra l a n d l e g a l p e rs o n s t o ta l n u m b e r o f s h a re h o ld e rs n a tu ra l p e rs o n s legal persons c o m b in a ti o n o f n a tu ra l a n d l e g a l p e rs o n s t o ta l n u m b e r o f f o re ig n s h a re h o ld e rs n a tu ra l p e rs o n s legal persons c o m b in a ti o n o f n a tu ra l a n d l e g a l p e rs o n s t o ta l n u m b e r o f d ia sp o ra s h a re h o ld e rs c o m p a n ie s b a n k s s ta te i n st it u ti o n s c o m p a n ie s b a n k s c o m p a n ie s b a n k s 1840 1 1850 5 706 57 3 3 0 769 4 4 0 0 8 63 1 0 0 64 1860 19 1185 60 1 0 0 1246 21 2 0 0 23 21 0 0 0 21 1870 18 1127 53 10 2 2 1194 27 4 2 0 33 57 1 3 0 61 1880 9 106 1 17 0 0 124 9 1 3 0 13 19 2 3 0 24 1890 8 97 8 0 0 0 105 8 3 1 0 12 4 1 0 0 5 1900 27 75 13 4 0 0 92 24 5 2 0 31 15 0 0 0 15 1910 38 205 24 1 0 0 230 32 1 1 0 34 31 0 0 0 31 total 119 3501 216 36 5 2 3756 125 20 9 0 154 210 5 6 0 221 source: compiled from selected issues of the greek government gazette (1833-1920) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 occupation of international shareholders who were natural persons pre 1873 the main occupation of international shareholders were merchants. there was the odd banker or banking agent and landowner. from 1873 onwards bankers became a main occupational group among international investors. also, there was a rise in the number of industrialists, engineers and the rare manager/professional. post 1900 shipping agent/shipowners were an important force also in the international shareholding body. places of residence of international shareholders the map of the residence of international investors incorporates an expansive geographical spectrum stretching from the eastern seaboard of north america across the numerous cities and ports of europe’s main continental powers to the eastern mediterranean and black sea littoral. this map includes, amongst others locales, boston and new york in the united states and london, liverpool and manchester in the united kingdom. on the western european mainland it comprises paris, versailles, marseille, brussels, braine-le-comte (belgium), amsterdam, berlin, geneva while in the black sea region we have the russian ports of odessa and rostov-on-don and the cities of braila, bucharest, galati/galatz and chisinau/kishinev within the romanian principalities. the adjoining mediterranean and levant regions are represented by rome, livorno, trieste, malta, alexandria, tandah (egypt), the ottoman cities of constantinople/istanbul, smyrna/izmir, beirut, mytilene and corfu within the british protectorate of the ionian islands. the most popular places of residence among foreign shareholders (who were not resident in greece) were the two largest international financial centres of the time (and providers of substantial loan capital to the state), namely paris and london (stephanidis 1930) whereas http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 the founding shareholders who belonged to the mercantile diaspora were more widely dispersed. international shareholders per jsc/is start-up although it is not possible with accuracy to estimate the size of capital provided by international investors in jsc/is start-ups, with some safety we have reached the conclusion that in two thirds of the jsc/is firms, international investors held less than 2%and more rarely 10%of the total number of shares. in all likelihood this reflects the hesitance of international investors to do business on their own in greece. as mentioned above in the text, they preferred to build collaborations with locals as a preemptive strategy in order to minimise possible frictions with the local environment-given the cultural barriers and the idiosyncratic legal frameworkand to gain more easily access to information and the chambers of political and economic power. from the early 1870s onwards the picture somewhat changed as thereafter, in some jsc/is start-ups international shareholders held more substantial amounts of shares. the first exclusively internationally owned jsc/is was the trapeza epi ton kiniton pisteos, the bank of credit for moveable property (1872). ten more such cases followed thereafter. in chronological order they were as follows: trapeza constantinoupoleos, bank of constantinople (1881); ipposidirodromoi athinon kai perihoron, horsedrawn railways of athens and the suburbs (1884); gallo-elliniki etaireia kataskevis ekriktikon ylon kai chimikon proionton,, franco-hellenic company for the production of explosives and chemical products (1893); etaireia ellinikon sidirodromon, hellenic railways company (1902); elliniki etaireia trohiodromon athinon, pireos kai perihoron, hellenic tramways company for athens, piraeus and suburbs, (1907); achaiki atmoploia, shipping company http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 of achaia (1908); etaireia ton metalleion vani, mining company of vani (1908); angloelliniki atmoploia, anglo-hellenic shipping (1910); naftiki anonymos etaireia laskaridis, laskaridis shipping co (1919); vrettano elliniki trapezitiki, british hellenic banking co (1919). foreign and diaspora shareholders: collaborators or ‘strangers’? the number of jsc/is startups in which international investor(s) were exclusively foreign was 51 whereas only in 28 jsc/is companies, did international presence consist exclusively of diaspora greeks. in 40 jsc/is start-ups, both groups were concurrently present and this was not a coincidence, as often members of the diaspora operated as the middlemen and ‘guarantors’ for foreigners, given the high risks involved for them in investing in a young nation state which was untested and had a peculiar legacy combining remnants of byzantine and ottoman institutional elements (dertilis 2009; pepelasis minoglou 1995). to a certain extent, the nascent corporate sector in this respect mirrored what was happening in the realm of sovereign borrowing (pandelakis 1995). it is known from the relevant literature that the diaspora, due to its the key position in the large western financial centres of the epoch, acted as a handmaiden and collaborator to foreign banks as underwriters. the practice of shareholding by one international investor in more than one jsc start-up in our dataset thirty six international investors were present in more than one jsc start-up. this amounted to approximately one tenth of the total body of international shareholders. through the construction of a tree graph (too large to include in the article) the activities of these thirty six international founding shareholders in the nascent corporate sector were analysed. based on this analysis our major observations are: there were two banks among them, erlanger & co and the bank of constantinople, and one partnership, fels & co. (see http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 section 6). the others were natural persons among whom twenty-two were members of the diaspora. a ‘multiple’ international investor would have varying degrees of participation in each of the jsc in which he/it would be present and would usually make his consecutive investments within the time space of around six years. at an aggregate level there were three waves in the phenomenon of multiple investments. in the first wave (1856-1866) the focus was mainly on marine insurance. in the second (1872-3) it was on banking and in the third (1882-1909) on railways and shipping. biographical material on major international shareholders in what follows some basic factual data are provided for seven top shareholders for whom we were able to find biographical and historical references: giovanni serpieri, karl kloebe, fels & co, theodor hamburger, emile erlanger & co, françois theophile feraldi and andreas syngros. the rimini-born engineer and entrepreneur giovanni battista serpieri made his name (and indeed the fortune of his family) in mining. having discovered in 1863 the ancient mines of laurium north west of athens he acquired exploratory and exploitation rights in consortium with a french firm roux et cie of marseilles (grange 1994, i 453-454). these mines yielded a considerable amount of lead and silver but there were also at the centre of a major domestic political question in greece, the lavreotika or the laurium affair. we find serpieri investing in eight jscs between 1869 and 1908, only three of which were in mining the remainder concerned maritime insurance, banking and railway construction. serpieri’s name would remain basically connected to the laurium mines in the public eye and the business activities of giovanni serpieri were continued by his son ferdinand (grange 1994, i 453). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 like serpieri, karl (or charles) kloebe established himself in greece at some point in the mid 19th century and specifically in syros where he was involved in the trade in emery mined in the neighbouring island of naxos (mackroth 1930, 68). he also served as consul for a number of foreign powers including prussia, norway and sweden (almanach 1857, 2219-2220). kloebe invested in five jsc start-ups in the 1860s and 1870s, four of which were maritime insurance companies while the fifth was a printing and typographical business. figure 1. multiple investments of the major seven shareholders giovanni b. serpieri agkira (1869) credit bank for pledges (1872) metallurgy of lavrio (1873) kea (1873) athens peireus peloponesse railways (1882) pirgos katakolo railways (1883) dardeza (1894) mining co., vani (1908) karl kloebe omonoia (1861) greek insurance co, mesogeios (1865) elpis (1866) poseidon (1866) ekatoheir (1871) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 fels & co amalia (1856) greek fire and insurance, foinix (1857) hellenic vinification (1858) miaoulis (1859) argonautis bank (1860) theodor hamburger argonautis bank (1860) agkira (1862) emile erlanger & co greek railway co. (1902) company of production and trading of raisin (1905) francois theophile feraldi credit bank for pledges (1872) births and maintenance of theaters in athens (1872) kea (1873) andreas syngros commercial and credit bank (1872) birth and maintenance of theaters in athens (1872) general credit bank of greece (1873) real estate credit bank (1873) metallurgy of lavrio (1873) the bank of constandinople (1881) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 fels & co is another important example of fdi in mid-19 th century especially because of this firm’s direct links to larger and continental-wide concerns. two separate sources link fels & co with the firm of german-english merchant house of cornelius souchay (roth 2001, 59) and genoese firm of f. gruber & co (mackroth 1930, 68-69) both of which were involved in the trade in english-made cotton textiles. martin fels initially founded his firm in corfu in 1845 as a branch of gruber but subsequently established it as fels & co. the firm in turn opened a branch in patras. it dealt not only in manufactured goods but was also heavily involved in trading in the basic commodities of ionian and adjacent greek territory, that is olive oil and currants. given fels & co’s concentration in the import/export sector it should not be surprising that of the five jsc start-ups in which it invested four were involved in maritime loans and insurance and only in local wine production. theodor hamburger was directly related to fels & co being the director of its branch in patras and responsible for the firm’s trade in the main export commodity of this port, the corinthian raisin or currant. the patras branch was founded in 1855 and although initially led by the swiss merchant hamburger he together with others (and in his later years with his sons) would go on to establish other businesses within the same export trade as well as the related wine production sector. hamburger invested in two jsc start-ups, both of which were involved in the maritime insurance business. although the links between the family of the frankfurt banker raphael erlanger date from at least the 1860s (schönhärl 2013, 121) it was only in the early twentieth century (grunwald 1977, 207) that the family firm emile erlanger & co invested heavily in greece. it is at this time erlanger appears as a shareholder in two jsc start-ups. so we thus find erlanger investing together with baron george de reuter and the french civil engineering firm http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 société de construction des batignolles (park-barjot 2005, 355-356) in the elliniki etaria sidirodromon or hellenic railways company, a jsc created to construct a railway line linking piraeus to the turkish border. furthermore we find erlanger investing in another jsc directly related to greece’s most important export commodity, the currant. the jsc pronomouchios etairia pros prostasian tis paragogis kai tou emporiou tis stafidos or privileged company for the protection of the production and trade in currants was established, as its name suggests, for the protection of the currant trade and this investment erlanger shared with a number of other important players such as the ‘rising star’ (schönhärl 2013, 121) of domestic greek banking the bank of athens and the french banque de l’union parisienne. the case of french engineer, banker and shipping entrepreneur françois théophile feraldi is like that giovanni serpieri of particular interest because it further illustrates the example of a foreign investor who establishes himself in greece. feraldi appears to have arrived in greece during the ill-fated presidency of count ioannis kapodistrias in the late 1820s. like martin fels and carl kloebe he was the representative of a number of foreign powers, namely sardinia and the saxony (strong 1842, 131), but more importantly he was able to secure very early in the life of the young greek state (1834) a concession (government gazette greece 1834, no 21) for a number of steam ship routes connecting greek ports to malta, livorno, trieste, canea and marseilles. it is not clear how long this concession lasted but by 1853 he was still residing in greece and was acting as the representative of the french steam ship company messageries maritimes. he is now mostly remembered for his visionary plans (papanikolaou-kristensen 1995, 58) to construct a railway connection between athens and piraeus and to build a large central market in athens. this sense of civic duty is perhaps http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 present in his choice to invest in a jsc whose principle aim was to build a public theatre in athens. his investment in two other jscs reflect the general diversified investment patterns of foreigners in greece, one company involved in banking and another in mining. andreas syngros is one of the major figures of 19 th century greek and specifically chiot merchant bankers of constantinople (syngros 1998; pepelasis-minoglou 2002). having been born into modestly well-off family he was able to rise quickly to become of the major greek financiers of the galata district of constantinople having made a considerable fortune in trading in ottoman public debt (dertlis 1989, 15-17). he owned a controlling interest in the bank of constantinople but as the market ottoman public debt market began to change in the late 1860s he moved to greece and his investments in six jscs (four of which were banks) reflected perhaps a desire to take a significant share of the domestic greek banking sector. the other jscs were a mining corporation and a public benefit company. in a nutshell, major international shareholders were a mixed lot, but the common/combined outcome of their investment strategies was the enhancement of the market economy and the expansion of export commodities, shipping and finance. linking international investment in jsc start-ups and sovereign borrowing the process of international investment in jscs did not operate in a vacuum. as described in section two above there was a heavy dependence of the greek state on foreign borrowing and apparently as we observe there was an absence of firm boundaries between this sphere and international presence in the nascent corporate sector: firstly, from our analysis of the database we observe that some key players were present in both spheres. the banker andreas syngros, and six international banks involved in setting up syndicates for issuing foreign loans for the greek government in the large financial centres http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 of the epoch were also founding shareholders in jsc/is start-ups. notably, these banks were: emile erlanger & co., hambro, comptoir d’escompte de paris, banque de l’union parisienne, the ionian bank, and the headquarters of the banque de constantinople (in which syngros was coincidentally a stakeholder) (pepelasis minoglou 2002a). syngros and these banks seemed to have a preference for investing in large jscs which had a public benefit character such as the etaireia diaheiriseos ton monopolion, the company for the management of the monopoliesor in railways banking, mining and industry. secondly, some of the jsc/is banks, after their start-up phase would participate in the issuing of a tranche of the foreign loans raised for the greek government. in this small latter category were the: national bank of greece (which as already mentioned was founded in 1841); the geniki pistotiki trapeza ellados general credit bank of greece and the trapeza viomihanikis pisteos bank of industrial credit of greece, both of which were established in 1873. thirdly, a further interlinkage between the two spheres was that a few jsc/is start-ups, once they were established were beneficiaries of funds provided to them through sovereign borrowing on the international capital market an important case in point being railways (papayiannakis 1982). conclusion: some further implications of our research in conclusion our main findings are: -the involvement of international investors in the greek corporate sector began in 1841, became more intense two decades later (at a time of financial embargo for the state on the international capital market) and it reached its maximum level in the 1910s (in spite of the collapse of the international financial system with the outbreak of wwi). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 100-128, july-december 2016 doi.org/10.1344/jesb2016.2.j014 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 -international shareholding was dispersed among a fairly large number of firms most of which were large and in sectors which were capital/knowledge intensive and strenngthened greece’s ties to the international market. -international shareholding in the nascent corporate sector was a mosaicinvolving actors with varying characteristics and interconnections among themselves and the international economy. in addition there was some overlap between shareholding in the nascent corporate sector and the foreign borrowing of the greek state. the deciphering of the possible interactions, collaborations, possible antagonisms amongst this larger whole is a challenge for future researchers. -the greek mercantile diaspora acted as a unifying cultural force within the body of international shareholders enhancing the exchange of information, ties and joint ventures between foreigners and local greeks. this article we believe has wider implications for the historical study of the investment strategy of international business in receiving (host) countries and in particular those that have large diasporas such as israel, lebanon and china. finally, we would like to argue that this case study is also of wider interest to business scholars today given the increasing fluidity and deconstruction of hierarchies in the global economy and the rise in cultural interactions. primary source: selected issues of the φύλλον εφημερίδος της κυβερνήσεως, greek government gazette 1833-1920. references agriantonis, christina. 1986. the beginnings of industrialisation in greece 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distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 peter j. buckley university of leeds (u.k.) paloma fernández pérez university of barcelona (spain) the role of history in international business in southern europe abstract this article examines first of all two aspects of the increasing role of history in international business: history as a source of research methods and history as an underpinning for international business theory. second, the authors present key themes related to international business in southern europe in the last two centuries, as analyzed in the other articles of the special issue devoted to this theme in this special issue of the journal of evolutionary studies in business. keywords: international business; southern europe; joint ventures; alliances; multinationals. introduction there have been many calls to incorporate history into international business research including both “history as evidence” (jones and khanna 2006) and “history as a proving ground for international business research” (buckley (2009)). examining the long run in international business is increasingly at the forefront of current research (fitzgerald 2015). corresponding author. e-mail: p.j.buckley@lubs.leeds.ac.uk received 06 april 2016 accepted 06 june 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 it is notable that not only is international business increasingly turning to history as a source of evidence (“process” research is increasingly salient (welch and paavilainen-montymaki 2014), but also other areas of business research are becoming more historicised (a key example is organisation theory (clark and rowlinson 2004; decker 2013). this article examines two aspects of the increasing role of history in international business – history as a source of research methods and history as an underpinning for international business theory. it takes for granted the role of history as evidence. history as a source of research methods buckley (2016) suggested that four key research methods could, with profit, be more intensively applied to international business research. these are (1) source criticism, (2) time series analysis (3) comparative (historical) methods and (4) counterfactual analysis. in addition, history has much to add on the key methodological question of ‘the unit of analysis’. source criticism international business researchers too often take “texts” at face value. “texts” to international business researchers include secondary statistics, company financial statements, interviews with executives and policy makers, minutes of meeting and speeches. trustworthiness is often taken for granted. all sources including oral history, artefacts and documents must be tested for authenticity and their authority, provenance and internal reliability and be subject to criticism – preferably from multiple sources. critical text analysis includes the following questions. when was the text produced? where was it produced? by whom was it produced? what pre-existing material influenced the text? does it have integrity and credibility? in international business, there is often the question of language to be factored in to analysis http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 has the document been back – translated and are all the nuances understood? often it is possible to shed illumination on texts by a dyadic approach – interviewing both parent and subsidiary, licensor and licensee, principal and outsourcing agent, management and unions, in order to get multiple viewpoints (this approach has become mandatory for publication in the top journals in international business). there is also the question of what the extant archive omits. jones (1998) makes this point in respect of company archives and excluded material may be important in achieving a rounded analysis. this point is well made in “subaltern studies”, highlighting the excluded voices from (mainly) colonial narratives (ludden 2001). time series analyses the long run (and long standing) effects in international business are well documented (chitu, eichengreen and mehl 2013). process research is also an attempt to focus on the importance of sequencing in establishing causality (pettigrew 1997). this contrasts with variance approaches’ that exclude a time dimension (easterlin 2013). many cross-sectional approaches cannot capture causality. comparative methods three classic comparative methods are across space (geographic comparison), across time (historical comparison) and against a carefully specified alternative state of the world (counterfactual comparison) (buckley, pass and prescott 1992). international business, almost by definition, concentrates on across space (across nations), in most analysis and the multinational enterprise is a perfect vehicle for this because “the firm” is held constant whilst space is varied in comparing units of an international firm. this helps to highlight the impact http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 of locational and cultural variations in the strategy of the firm. historical research therefore adds another dimension of variation. the doyen of business historians, alfred chandler, described his use of detailed historical case studies as generating ‘non-historically specific generalisations’ (chandler 1984). these were, ironically, highly location specific being drawn exclusively from the usa. the comparative geographical and historical methods give rich variation, essential for fine grained analysis, which is exactly what its advocates claim. counterfactual analysis the third key comparator is controversial – this is to construct a theoretically plausible alternative state of the world (alternative scenario) with which to compare observations of the existing state of affairs in order to evaluate decisions against ‘what might have been’. this type of analysis has a long provenance in international business as ‘the alternative position’ in the analysis of foreign direct investment, asking the question ‘what would have happened if the fdi had not taken place’. the key problem is to specify the alternative. in fdi there are three alternatives – no investment, investment by a domestic (home) firm or investment by a different foreign investor. usually, the question of a different foreign investor is not considered, although it can have interest – does it matter if a foreign investment is chinese owned rather than spanish owned (in the uk for instance)? this is a subtly different question from comparing an fdi with a domestic investment focussing on strategic and cultural differences among nationalities of foreign investor. normally the question is asked relative to no investment or to a domestic investment (reddaway 1968; steuer 1973; cairncross 1953). this fits with a tradition in economics where cost is defined as ‘opportunity cost’ – the real cost of the best alternative foregone, so http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 this does not stretch the bounds of conventional economic thinking. where the alternative is less easy to specify then arguments can be made on this designation and counterfactual analysis is not so straightforward – although it can be rewarding as a ‘thought experiment’ (fogel 1964; casson 2009). the unit of analysis international business has a challenging issue for researchers in the choice of unit of analysis (buckley and lessard 2005). investigations can be at the level of the individual manager, the decision making body (the board), the firm, the national economy, the region (eu), or the world economy. in today’s world of networked multinationals (buckley 2011; buckley and ghauri 2004) it can also be at the level of the network (the global factory) or the value chain. history, of course, has similar issues. proponents of microhistory suggest that historical analysis at the smallest level (person, small group, local community, village) is the only way to detect key phenomena – and to do “total history” (zeitlin 2007, 28). this move away from larger scale national or political history has to account – like all choices of units of analysis – with interactions from all the other levels. are not individual managers subject to company strategies, national policies, workplace, national and company cultures? history as an underpinning for international business theory historians have long faced the challenges of understanding, comprehending and interpreting the mental structures of past societies. this exactly parallels the contextual difficulties of ib scholars interpreting the cognitive matrices of “other” cultures. as solzhenitsyn said: “how can you expect a man who’s warm to understand a man who’s cold?” (solzhenitsyn 1962). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 two particularly approaches to this problem in history are the annales school and ‘subaltern studies’. the annales school emphasise the mental structures or mentalités of past societies. the historian’s craft (bloch 1954) is subject to revision over time. historians from different periods, or from different countries, religions and cultures will ask different questions of the archive and will read its sources in different ways. there is however an issue about the ultimate purpose of history – is it to unveil ‘the truth’ or to understand the different perspectives (truths) of the various participants? subaltern studies attempt to re-interpret the experience of colonialism by seeking to replicate the history of those excluded from conventional sources on which standard narratives are based (‘subalterns’). historians are familiar with the pitfalls that rise from taking archive material at face value. many documents do not survive, or were never created (jones 1998). in addition, the creation of an archive inevitably involves a selection process and the selectors may be subject to bias towards, or away from, particular genders, creeds, political groups, nations, regions, races, classes or belief systems. this is the basis for research on ‘subaltern studies’ (ludden 2001). archive records may also not cover particular issues or questions (moss 1997; belich 2009; decker 2013; schwarzkopf 2012). one example of differences in context is time: specifically liturgical (sacred) time versus mechanical clock time. these systems of time are contrasted by the opening of the english parliament "by tradition the parliament of 1386 would have convened on the first monday after the feast of st. jerome, but now it was announced for october 1, 1386" (strohm 2014, 155). this also applied to the computation of the year. "for most people in england it was the ninth year of king richard, second of that name an effect of computing the years by regnal time, or the space of a king's reign but for purposes of parliamentary record keeping, it was http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 now 1386" (strohm 2014, 155). until 1376 parliament moved by "the stately measures of liturgical time, convening at half time, as somewhere between eight and nine o'clock. but for the previous decade it had convened by mechanical or clock time, at 8:00 in the morning" (strohm 2014, 155). liturgical time is cyclical it marks time in relation to a holy festival and repeats annually. regnal time, marking the location of the year in a given monarch's name, presumes continuity, tradition, inevitability, even divine sanction, of the status quo. with clock time come notions of linearity, progress, change and uncertainty in contrast to the certainty of repetition in liturgical time. "the new, mechanical systems of temporal measurement bespoke a commitment not just to accurate measurement but also to pragmatic assessment and an empirical view of political and social issues" (strohm, 2014, 156). the shift from church's time to merchant's time, practical and measured, is a profound contextual change (le goff 1982). the contribution of history to international business theory given these challenges, the contribution of history to international business theorising has several components. first, historical research focuses attention to long run versus short run theorising. internalisation theory is the basis of a long-run theory of the multinational enterprise, comparing the net advantages of the firm versus the market as methods of organising economic activities (buckley and casson 1976). in contrast, john dunning’s (2000, 2001) eclectic theory incudes an ownership (o) component in the oli (ownership, location, internalisation) explanation of the activities of mnes that has to be defined in the short (or at least the medium) run (casson 1987). this distinction aligns to some extent with the contrast between “strategy” and tactics (freedman 2013). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 second, historical research reminds us that theories are often time-bound in their relevance and applicability. a good example is vernon’s (1966) “product cycle hypothesis” which was an excellent predictor of 1960s, 1970s and possibility 1980s outward foreign direct investment by us multinationals to europe in research of markets and to resource rich countries in search of primary inputs. the causality of this model was undermined by the growth of mnes from japan, europe and later from emerging markets. vernon’s attempt to recast the theory in a less time-bound mode, focusing on oligopolistic market structures was considerably less satisfying as a coherent theory (vernon 1979). it is possible that today’s theories specifically aimed at explaining outward foreign direct investment from emerging markets may provide to be similarly timebound (e.g. matthews 2002). similarly, the time horizon of theorising into the future has to be borne in mind. how long are the predictions of theory expected to hold? this of course relates to the structure of the theory, the exogenous variables and those factors held constant in the model. sadly, there is often a disregard for the historical context in which theories operate, or are expected to operate. fourth, the role of expectations is often not explicit in international business theory. expectations, and speculation on the formation of expectations can be a major element in decision making – including the strategic decisions of firms. history is an important determinant of expectation – the future is often held to resemble the past. modelling of international business decision making and theories of the determinants of corporate policy could be underpinned by a greater awareness of historical reality. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 international business in southern europe: crossing boundaries between business history and international business the articles in this special issue are a combination of revised papers presented in a workshop at the university of barcelona the 24 th of november of 2016, and invited papers. the theoretical and methodological approaches are diverse, from entrepreneurship, international business, and business history. their common aim is to provide readers of this journal a synthetic survey of old and new themes related to foreign direct investment and multinationals in southern europe, in a historical perspective. three articles in particular present a long-term overview of the most outstanding scholarly contributions about the presence of foreign multinationals, and the evolution of domestic multinationals between the nineteenth century and the twentieth century, in three countries: italy (veronica binda), spain (adoración álvaro and núria puig), and greece (ioanna sapfo pepelasis and dimitrios varvaritis). three articles provide in-depth case study approaches that focus on historical problems of alliances and knowledge transfer between multinationals of late developed and developed countries, and the liability of outsidership involved in the internationalization of companies in spain: the case of the spanish subsidiary of the french renault (tomás fernández de sevilla), and two chinese subsidiaries (felix barahona, fariza achcaoucaou, paloma miravitlles) operating in spain. and the case of the strategic alliance of the spanish telefónica in a european semiconductor corporation, european silicon structures es2 (àngel calvo). the relevance of schumpeterian entrepreneurs and efficient networks in southern european countries, to overcome enormous technological and financial gaps with more developed and protected innovative neighbours, is highlighted in all the articles of the special issue, with a particularly useful overview of theories and contributions in this regard in the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 article by águeda gil, ricardo zozimo, elena san román, and sarah l. jack. their role in developing international domestic companies has been historically outstanding in the late developed southern european countries. a final research topic which is analyzed in this special issue is the intensity, evolution, and different internal composition and economic spillovers of foreign direct investors in greece (ioanna sapfo pepelasis and dimitrios varvaritis), portugal (álvaro ferreira da silva), italy (verónica binda), and spain (adoración álvaro and nuria puig, tomás fernández de sevilla). all the articles agree that quantitative approaches shed light, despite problems of quality and reliability of the historical records, on the participation of local investors with foreign investors in the first joint-stock companies that developed physical infrastructures and strategic industrial sectors and services in southern europe. the authors provide abundant evidences about the debates that since the nineteenth century the presence of foreign investors awakened among the national political and economic elites in spain, italy, greece, or portugal. they provide sound evidences that internationalization, inward or outward has been historically evaluated by some scholars as intrinsically helping to develop backward economic sectors, or intrinsically reducing the competitiveness of the local entrepreneurs. more needs to be studied, but this special issue is one of the first opportunities to learn in a synthetic way, from outstanding scholars in the field, about international business in an interdisciplinary perspective, for the southern nations of europe. we only hope that this special issue can contribute to a better understanding and learning about the complexities of the historical process of internationalization in these territories. also, to promote new research that makes the knowledge go forward. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 acknowledgments financial support from the spanish ministerio de economía y competitividad, research project har2013-41453-p helped present first drafts of the articles included in this special issue, in a workshop held at the university of barcelona the 24 th nov 2015. funds from the university of barcelona received financed technical support for the copyediting of this issue. references belich, james. 2009. replenishing the earth: the settler revolution and the rise of the angle-world 1783-1939. oxford: oxford university press. bloch, marc. 1954. the historian’s craft. translated by peter putman. uk: manchester university press. buckley, peter j. 2009. “business history and international business.” business history 51 (3): 307333. buckley, peter j. 2011. “international integration and coordination in the global factory.” management international review 51 (2): 269-283. buckley, peter j. (2016). “historical research approaches to the analysis of internationalisation.” management international review 56 (5/6). buckley, peter j., and mark casson. 1976. the future of the multinational enterprise. london: macmillan. buckley, peter j., and pervez n. ghauri. 2004. “globalisation, economic geography and the strategy of multinational enterprises.” journal of international business studies 35 (2): 81-98. buckley, peter j., and donald r. lessard. 2005. “regaining the edge for international business research.” journal of international business studies 36 (6): 595-599. buckley, peter j., c. l. pass, and kate prescott. 1992. “the internationalization of service firms: a comparison with the manufacturing sector.” scandinavian international business 1 (1): 39-56. casson, mark. 1987. the firm and the market: studies on multinational enterprise and the scope of the firm. oxford: basil blackwell. casson, mark. 2009. the world’s first railway system. oxford: oxford university press. cairncross, alexander k. 1953. home and foreign investment 1870-1913. cambridge: cambridge university press. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 chandler, alfred d. 1984. “comparative business history.” in enterprise and history: essays in honour of charles wilson, edited by d. c. coleman and peter mathias, 3-26. cambridge: cambridge university press. chitu, livia, barry eichengreen, and arnaud j. mehl. 2013. “history, gravity and international finance.” national bureau of economic research working paper 18697. washington d.c. clark, peter, and michael rowlinson. 2004. “the treatment of history in organisation studies: towards an ‘historic turn’?” business history 43 (3): 331-352. decker, stephanie. 2013. “the silence of the archive: post-colonialism and the practice of historical reconstruction from archival evidence.” management and organisational history 22 (1): 27-48. dunning, john h. 2000. “the eclectic paradigm as an envelope for economic and business theories of the mne.” international business review 9:163-90. dunning, john h. 2001. “the eclectic (oli) paradigm of international production: past, present and future.” international journal of the economics of business 8 (2): 173-90. easterlin, richard a. 2013. “cross sections are history.” iza, discussion paper 7341. fitzgerald, robert. 2015. the rise of the global company, multinationals and the making of the modern world. cambridge: cambridge university press. fogel, robert w. 1964. railroads and american economic growth: essays in econometric history. baltimore, maryland: the johns hopkins press. freedman, lawrence. 2013. strategy. oxford: oxford university press. jones, geoffrey g. 1998. “company history and business history in the 1990s.” university of reading discussion papers in economics and management (series a). 383. jones, geoffrey, and tarun khanna. 2006. bringing history (back) into international business. journal of international business studies 37 (4): 453-468. le goff, jaques. 1982. time, work and culture in the middle age. chicago: university of chicago press. ludden, david, ed. 2001. reading subaltern studies: critical history, contested meaning and the globalization of south asia. london: anthem press. mathews, john a. 2002. dragon multinational: a new model for global growth. oxford and new york: oxford university press. moss, michael. 1997. “archives, the historian and the future.” in companion to historiography, edited by michael bentley, 937-948. london: routledge. pettigrew, andrew m. 1997. “what is a processual analysis?” scandinavian journal of management 13 (4): 337-348. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-13, july-december 2016 doi.org/10.1344/jesb2016.2.j010 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 reddaway, william b., s. j. potter, and christopher t. taylor. 1968. effects of uk direct investment overseas: final report. cambridge: cambridge university press. schwarzkopf, stefan. 2012. “why business historians need a constructive theory of the archive.” business archives 105 (november): 1-9. solzhenitsyn, aleksandr. 1962. one day in the life of ivan denisovich. london: sphere books. strohm, paul. 2014. the poet’s tale: chaucer and the year that made the canterbury tales. london: profile books. steuer, max david, et al. 1973. the impact of foreign direct investment on the u.k. london: hmso. vernon, raymond. 1966. “international trade and international investment in the product cycle.” quarterly journal of economics 80 (2): 190-207. vernon, r. 1979. “the product cycle hypothesis in a new international environment.” oxford bulletin of economics and statistics 41 (4): 255-67. welch, catherine, and eriikka paavilainen-mäntymäki. 2014. “putting process (back) in: research on the internationalization process of the firm.” international journal of management reviews 16 (1): 2-23. zeitlin, jonathan. 2007. “the historical alternatives approach.” in the oxford handbook of business history, edited by geoffrey jones and jonathan zeitlin, 120-140. oxford: oxford university press. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 veronica binda bocconi university (italy) a short history of international business in italy: what we know and how we know it abstract this article is a voyage through the history of international business in italy, one which takes contemporary studies and, in particular, studies conducted over time by business historians from the italian unification until the present day, into account. after a brief introduction, the first part of the article is devoted to an analysis of the literature, especially focusing on the early studies conducted on foreign capital until world war ii, on the investigations done in the second part of the twentieth century, and on the most recent trends and contributions in research. the second part of the article deals, in a stylised way, with a very short summary of the principal information that we have attained on foreign direct investments in the country, with a special focus on international business in italy before the great war, in the inter-war years, until the 1980s, and in the most recent decades. finally, the conclusions indicate the possible main directions for future research in this field. keywords: business history; international business; italy; multinationals introduction on 2 july 1861, a few months after the political unification of the country, italian politicians were already debating intensively in parliament. the subject of the debate was the approval of an agreement signed on 12 may which granted the concessions for the construction of a new railway to connect naples to the adriatic sea to foreign investors. “the steam engine is more corresponding author. e-mail: veronica.binda@unibocconi.it received 09 may 2016 accepted 06 june 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 than a material locomotive. it is a moral locomotive, which triples credit, commercial motion, and the wealth of a nation. […] railways were at the base of the dynamics which raised the power of england, america, and france”, argued one of the main opponents to the law. “railways, which could be a valid instrument to educate people to associate and work, will be only imported from abroad. it will be an artificial motion, with no roots in our country, and we will act simply as the paying audience, obedient day labourers. the huge industrial and financial operations will be done in paris, london, brussels. the carriages which could have come out from our factories in naples, ancona, milan and genoa will be provided by talabot’s factories, produced in paris or marseilles, at a price that suits their needs better. the only honour we will have is that of paying the bill.” (camera dei deputati, 1861, 1719) foreign direct investments had been significant players on the scenario of the italian economy from the very beginning, but, as one might guess from these first sentences, their relationships with local players have been characterised by many ups and downs. it is well known that foreign investments, in all their different shapes, have represented a relevant agent of economic growth since the second part of the nineteenth century. scholars have pointed out that knowledge, technology, and capital coming from abroad have all played a very important role in making the industrial take-off possible in several late-comer nations. at the same time, the existence of markets, and/or a labour force, and/or raw materials, outside national borders was often crucial for the growth strategies of the large corporations of the most advanced nations (jones 2005; wilkins 1970, 1974; franko 1976). italy was not an exception in this sense, and it attracted significant amounts of foreign investments throughout its history. even though the italian share of foreign direct investment as a percentage of gdp is quite low today compared to the most advanced european nations – http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 17.33 per cent compared to 19.3 for germany, 25.6 for france, and 56.37 for the united kingdom (unctadstat 2016) – italy was nonetheless a host economy of no small relevance for multinationals, as recent investigations show (colli 2014). on the other hand, compared to the attention that has been devoted to other kinds of companies, such as stateowned enterprises, large domestically-owned private firms, and, more recently, smalland medium-sized enterprises, multinationals were, by and large, overlooked both by italian economic and business historians and by contemporary scholars throughout the twentieth century, at least up to quite recent times. the main aim of this article is to map the existing studies on international business in italy from a long-term perspective and to summarise the situation, assessing what we actually know about this topic, and how we were able to deduce this knowledge. following this brief introduction, the second section of the article will present the most important works on international business in italy and will briefly summarise their focus and research questions as well as their main outcomes. three broad historical periods of research on international business will be considered, i.e., early studies until world war ii, investigations conducted in the second part of the twentieth century, and, finally, recent research. the second part of the article is then devoted to briefly sketching our present knowledge of international business and its dynamics in italy in the long run. conclusions and hints for future research close the work. investigations into long term international business in italy: an overview early studies of foreign capital the worries generated by the extensive presence of foreign investors in the railway sector did not inspire significant studies of international business in the country, at least not in the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 nineteenth century. the issue of the “italianity” of a corporation was discussed to a certain degree and under certain circumstances, and was also used by some businessmen in order to promote their business against foreign investors before the parliament. just to provide a significant example, it was in the name of “italianity” that the rothschilds were excluded from the construction of a major part of the railways in the south of italy to the advantage of a group of national investors (camera dei deputati 1862). nevertheless, attention to the presence of foreign investors in the country did not lead to specific studies on the presence of foreign capital in italy, nor were there any relevant publications on this subject until the beginning of world war i. after all, the crusade against the supposed foreign conquest of the italian railways was probably only superficial, given the fact that it was soon discovered that the group of “italian” investors which in the end obtained the concession to build the railways was supported by the rothschilds’ rivals – the french bankers and businessmen, the péreire brothers. at the same time, foreign investments were also becoming more and more pervasive in several other industries. no exhaustive, official lists of foreign-controlled companies were systematically compiled in italy before the second part of the twentieth century, and the quantitative information that we possess until world war ii is only partial and quite fragmented. the ministry of agriculture, industry and commerce compiled a list of foreign-owned companies for fiscal reasons, but this list is incomplete and is available only for the 1890s (ministero di agricoltura, industria e commercio 1899). some foreign-controlled companies were included in the yearbook of the italian joint-stock companies, edited by credito italiano from 1908 to 1926 and by the association of italian joint-stock companies (associazione fra le società italiane per azioni) from 1928 onwards. until the year 1928, the yearbook included a section on the “foreignhttp://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 based companies operating in italy”. however, this list is also incomplete, and, moreover, only joint-stock companies with a company capital higher than 1,000,000 lire (500,000 lire only in 1914) are included (credito italiano, various years). the best picture of foreign direct investments in italy and the perception of them can, however, be found in a pamphlet written in 1915 by a very well-known italian radical politician (prime minister of italy between 1919 and 1920) and economist, francesco saverio nitti (1915). “the action of foreign capital in italy has been very relevant for a long time. it tends to become proportionally much less relevant,” claimed nitti in the opening of this book (nitti 1915, 9). according to his interpretation, some foreign companies were “greedily wanted” (nitti 1915, 14) and were invited to the country, since the newly born nation of italy had a severe lack of both capital and the knowledge of “big business” industries just when “big businesses” outside italy were becoming gigantic. after an overview of the economic features of the main capital exporters in europe (great britain, france, germany, and belgium), nitti explored the variety and characteristics of foreign capital in italy and pointed out the relevant presence of foreign-owned enterprises in the most strategic industries, at the same time stressing the declining role that non-domestic investors were playing in the country, compared to national players. however, some concerns emerge quite clearly when the statesman claims that “no foreigner should have a dominant role in our finance, in our banks, in our industry.” (nitti 1915, 57). from the outbreak of the great war, foreign investments, and especially german-owned ones, gained increasing attention. several anti-german propaganda books and pamphlets were published. books and articles significantly entitled not xenophobia, but autarky (pantaleoni 1914), germany conquering italy (preziosi 1915), war without blood (gray 1915a), and the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 german invasion of italy (gray 1915b), to provide just some examples, very effectively symbolise the increasing tension and the hostile climate which was brewing particularly against german-owned companies in the country. the two decades following the end of the great war are strongly lacking in information about both the extent and the kinds of foreign direct investments in italy. however, some quite scattered and sporadic quantitative information on foreign companies in italy can be retrieved in a publication edited by the ministry of finance in the mid-1920s (ministero delle finanze, 1925-1926) and, indirectly, from foreign sources on specific foreign investors. this is the case of the information provided by the us department of commerce of american direct investments in foreign countries (us department of commerce 1930). even though, as will be shown in the second section of this article, foreign companies were strongly present in the country despite the nationalistic rhetoric of the fascist regime especially during the 1930s, contemporary relevant works on international business in italy in the inter-war years are basically absent. on top of this, a proper analysis of foreign-controlled companies active in italy based upon sources from the 1920s and 1930s, especially in the years which directly preceded the war, is further complicated by the fact that, in such a hostile context, many foreign companies camouflaged their real identities. analyses of international capital in the second half of the twentieth century investigations into international business in the country flourished again after the end of world war ii. already in the 1940s, some first estimations were made of both the amount and the distribution of foreign direct investments in italy. the constituent assembly provided a first picture of what had happened during the 1930s, claiming that a relevant drop in the flow of foreign direct investments had occurred (del buttero 1946). the italian general http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 confederation of labour trade union (cgil) also commissioned some research in order to assess the relevance of foreign capital in italy after the war (cgil 1948, 1949). however, the first real attempt to set up a database of the presence of foreign-controlled companies in italy dates back to the early 1960s and was conducted by walter giorgio scott (scott 1960). the database includes foreign-controlled joint-stock companies that held a share of capital of at least 50 million italian lire in 1958. after an overview of the italian legislation on foreign investments, scott analysed the population of multinationals according to their geographical origin and the industries in which they were active, focusing, in particular, on mining, metallurgical industries, mechanical engineering, oil, chemical, textile, food, glass and pottery industries, commercial, financial and insurance services, and other various industries. despite some limitations and minor mistakes of attribution, scott’s database, made up by almost 500 enterprises which were, either in part or completely, under foreign control, provides relevant information for that specific year and paved the way to the set-up of other quantitative databases, which were built in the following decades. in the late 1960s, a research group published a new database which included 1,269 firms, in which foreign capital was equal or higher than local capital or, in any case, of a relevant amount, considering both joint-stock companies and limited liability enterprises in italy in 1966 (soris 1968). in this case, too, foreign multinationals were classified according to their industry, and a sectoral analysis was included in the work. the next database was built by carlo monotti in the 1970s, who mapped the main firms and groups in italy, separately considering “state-owned”, “italian private-owned”, and “foreign-controlled” groups (monotti 1975). finally, since 1984, a database named “reprint” has provided extensive information on foreign-controlled companies in the country. this database, made up of joint-stock companies and limited http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 liability firms, was created by sergio mariotti and marco mutinelli, and was published yearly until 2006, and every other year after that, with the title italia multinazionale (ricerche e progetti, various years). the construction of databases of foreign-controlled companies in italy made important progress during the second part of the century, even though a comprehensive dataset built on a long-term homogeneous source was still lacking in the early 2000s. notwithstanding this, the set-up of the databases represented only a part of the efforts made by scholars in studying international business in italy. before presenting the main contributions provided by business historians in this sense, i would like to highlight the emergence, during the second part of the twentieth century, of several studies from different disciplines, such as law, economics, accounting, management, and so on, which, for the first time, had to consider the topic of foreign direct investments in italy actively. just to provide some examples, accompanying and in the light of the promulgation of new laws by the italian government to regulate and attract foreign capital, scholars of law started to produce and public research in this field. the work published by salvatore baeli, which aimed to re-construct and describe the whole new regime for foreign investments in the country, represents one of the first steps here (baeli 1957). economists started to enquire into the contribution of foreign private investment to the solution of italy’s main economic troubles (for example, mini 1968). the economic and financial performances of multinational firms in the country became a new subject of research for accounting scholars, especially in those geographic areas in which they were expected to contribute more to the economic growth of the country, such as the southern part, the so-called mezzogiorno (for example, venturelli, milone and pastore 1979). the strategies and organisational forms of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 foreign corporations started to be more and more frequently analysed and compared to those of italian companies by management scholars with the aim of understanding the reasons of their success and teaching them in class discussions (for example, chiadò-fiorio et al. 1973; pavan 1976). the transformation which occurred in the literature of these disciplines with regard to international business over more than fifty years is huge, and it would be an interesting topic to be considered. unfortunately, it is beyond the realms of this work to investigate these dynamics in all these fields. focusing on the progress made by business historians into international business in these decades, some topics were especially addressed. simplifying a great deal, the existing studies conducted in the second part of the twentieth century can be catalogued in two broad categories: those which focused on specific company case studies, and those which investigated the dynamics of foreign direct investments in italy based upon their geographical origin. the analysis of us capital in italy is an important sub-category of the latter group of studies. among the most famous studies of a company history, it is worth mentioning the works by peter hertner on tubi mannesmann both before and during the first years of the great war, and on officine lombarde apparecchi di precisione in the inter-war years (hertner 1978; hertner 1986), by luciano segreto on vickers until the outbreak of world war ii (segreto 1985), by francesca bova on cucirini cantoni coats from 1912 to 1929 (bova 1987); and by stefania licini on tecnomasio italiano brown boveri from its origins up to the 1930s (licini 1989-1990). as far as the investigations of foreign capital catalogued according to geographical origin are concerned, the countries which have received most attention, also according to their http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 significant importance as foreign investors in italy, are belgium (dumoulin 1989; dumoulin 1990), france (gille 1959; bouvier 1961; gille 1968), germany (hertner 1981, 1984; von oswald 1994), and switzerland (segreto 1987). peter hertner also worked on a special kind of foreign direct investment in italy, namely, free-standing companies, between 1883 and 1912 (hertner 1998). american capital in italy deserves a separate mention in this work, given the great attention which has been devoted to this topic both by italian and foreign scholars. us direct investment in the italian manufacturing sector in the period preceding world war ii has been especially investigated by mira wilkins and francesca bova (wilkins 1970; bova 1995). as far as the post-war period is concerned, many studies, conducted both by contemporary scholars and by authors who wrote at a later stage, worked extensively to assess the features and the impact of the marshall plan in italy (for example, cir 1952; harper 1986; toniolo 1983; d’attorre 1985a, 1985b). luciano segreto, on the other hand, is the scholar who has most extensively dealt with american capital in the country since the end of world war ii and during the decades of the italian “economic miracle”, the 1950s and 1960s (segreto 1995, 1996). recent research on multinationals: scholars and topics what is contemporary economics and management literature on international business currently discussing in italy? looking at the main topics of interest in the last fifteen years, it is possible to find an overlapping of “old” and “new” themes. the declining attractiveness of the country as a host economy for multinationals provided an important incentive for scholars to investigate the role of the institutional context in making italy attractive or not for foreign direct investments (de santis and vicarelli 2001; basile, benfratello and castellani 2005; basile, castellani and zanfei 2004). special attention in this sense has also been given to the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 political context of the country (mudambi and navarra 2003a, 2003b). the issue of the locational choices and geographical distribution of multinationals in italy is still important in the literature (pazienza and vecchione 2009), and we can find investigations both of the southern part of the country (basile and mantuano 2008) and of the northern part, especially lombardy (onida 2007). at the same time, foreign companies are also analysed according to their geographical origin. multinationals from emerging countries have been studied by sergio mariotti and mauro mutinelli (mariotti and mutinelli 2008), while foreign investments from china have been investigated by carlo pietrobelli, roberta rabellotti, and marco sanfilippo (pietrobelli, rabelotti and sanfilippo 2013). in this respect, giuseppe tardivo and rui dias worked on the (temporary versus permanent) effects of foreign direct investments in italy by also taking their country of origin into account (tardivo and dias 2003). the entry modes of multinationals have been investigated according to different location choices (basile 2004), and with a special focus on greenfield investments (mariotti and mutinelli 2014), while the performances of these companies in italy has been assessed in a study on the relationship between multinational ownership and survival (ferragina, pittiglio and reganati 2014), and by analysing performance differences both across and within foreign-owned firms and domestic multinationals in italy (grasseni 2010). one of the topics which most attracted the attention of scholars is currently the technological contribution that capital and technology coming from abroad can provide for the national environment. filippo reganati and edgardo sica studied the horizontal and vertical spillovers from fdi in italy (reganati and sica 2007), while other investigations focused on the determinants of technology transfer between parent firms and their international affiliates, and of knowledge spillovers from these affiliates to italian firms (driffield, love and menghinello 2010) as well as on the relationship between http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 multinationals and high technology industries in italy (mariotti and mutinelli 2006). finally, foreign corporations have been observed in the specific context which characterised the italian economy at the turn of the century, between industrial districts (bronzini 2004; mariotti and mutinelli 2003; mariotti and mutinelli 2004) and the privatisation of big businesses (affinito, de cecco and dringoli 2000). with the arrival of the new millennium, international business history has entered a new phase and seen a renewed interest. many studies have been conducted in italy during this period. it is possible to catalogue the most recent contributions in three main areas. first, we have new empirical evidence on company cases. marco bertilorenzi, for instance, described the strategy adopted by saint gobain in italy between 1887 and 1939 (bertilorenzi 2006) and worked on the history of aluminium in italy from 1917 to 1943 (bertilorenzi 2008). laura solimene wrote a history of siv and the flat glass industry (solimene 2000), while pier angelo toninelli focused on ford’s unsuccessful attempt to build a solid base of operations in the country (toninelli 2009). monika poettinger provided more empirical evidence working on the history of foreign entrepreneurs in italy, with a special focus on german entrepreneurs in lombardy in the early nineteenth century (poettinger 2007). a second sign of the renewed vitality of the history of international business in the country is given by the efforts put into gathering more quantitative information and setting up new datasets on international business. particularly relevant in this sense is the work done by andrea colli to build a new and more comprehensive database of multinationals in italy, which focuses on the 100 largest companies under foreign control in eight benchmark years during the twentieth century (1913, 1921, 1927, 1936, 1952, 1960, 1972). in addition to building the database, andrea colli has been particularly committed in recent years to http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 mapping and analysing the features and dynamics of these populations of foreign multinationals in italy (see, for instance, colli 2010). last, but not least, in the most recent years, business historians have improved their efforts to deal with unexplored topics and to tackle some specific and relevant issues. andrea colli has worked on the role played by foreign direct investments in the process of italian economic growth and the entry modes of multinationals (colli 2014). veronica binda has analysed the strategies and organisational structures adopted by the largest multinationals in the country, comparing them with what national companies did in the second part of the twentieth century (binda 2013). recent research by veronica binda and mario perugini has started to focus on the specific dynamics of the interaction which occurred in joint-ventures between local and foreign partners in some specific industries (binda and perugini 2016). the following section will present a very brief and simplified summary of the main evidence which business historians have been able to provide until now on long-term international business in italy. international business in italy: what we know the kick-off: multinationals as a “substitutive factor” in a late-comer nation? the existing literature allows us to sketch some of the basic features of foreign direct investments in italy since the late nineteenth century. the picture shown on the eve of world war i, after the economic expansion experienced by the country during the so-called “giolittian era” (1901-1914), includes multinationals as important protagonists. according to the mainstream literature, even though it is not possible to speak of a “big spurt” yet, it was in this historical period that the real industrialisation process started in the country. industries from the first, and, even more, from the second industrial revolution, had been growing at http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 unprecedented rates since the beginning of the 1890s. a few large private companies were created to exploit opportunities in new sectors, such as falck in steel, fiat in the automobile industry, and pirelli in rubber. the establishment of two institutions somewhat analogous to the german universal banks, to wit, banca commerciale and credito italiano, marked a stark departure from the usual practices of the italian banking system. at the same time, government involvement in the domestic economy was increasing, as the pursuing of active policies to industrialise the southern part of the country proves (romeo 1988; cafagna 1989; zamagni 1990; amatori and colli 1999). according to andrea colli, within this framework, “multinational firms played an important role acting, in several cases, exactly as gerschenkronian substitutes for weak, or even absent, domestic entrepreneurship” (colli 2014, 304). during the first wave of globalisation, the italian government was a fairly active actor in international economic relations, especially from the 1880s, when new protectionist policies were adopted in the agricultural sector and successively extended to manufacturing. but, in line with what was happening abroad, no law restrictions hindered or prohibited the entrance of foreign capital. nor were there any particular incentives. in the context of a latecomer country which was increasingly closed to international trade, but not to international investments, foreign investors were attracted, and entered in a similar manner to what happened in other promising industrialising nations (see, for instance, jones 2008). scholars who have dealt with foreign direct investments in italy during this period have basically agreed that foreign controlled firms were quite common in the country. according to francesco saverio nitti, foreign direct investments in italy were already pervasive before world war i in most of the “strategic industries”, such as mechanics, steel, energy, utilities, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 and transport (nitti 1915). peter hertner detected an impressively high presence of german investments, especially in finance, services, transportation, and manufacturing (hertner 1984). vera zamagni has also found a pervasive presence particularly of german and swiss companies in the capitaland technology-intensive industries (zamagni 1978). mira wilkins provided information of some of the subsidiaries of us multinationals in italy in the same period (wilkins 1970), and there is also evidence of british, belgian, and french investments (bova 1987, 1995; dumoulin, 1989, 1990; gille, 1959, 1968). the evidence provided by andrea colli’s database for the year 1913 can be summarised in three main points: (1) a large number of industries were affected by the presence of foreign capital; (2) the concentration of foreign capital privileged capitaland technology-intensive industries; and (3) as far as the distribution of the foreign-controlled companies by the home country is concerned, belgium and france accounted for almost 44 per cent of the total investments of the sample, and they were focused, above all, on utilities and public transportation; switzerland accounted for about 20 per cent, and invested in particular in utilities (primarily electricity), but also in the textile industry; german capital accounted for about 17 per cent and principally focused on electricity, chemicals, transportation, and mechanical engineering (colli 2010). a love-hate relationship: histories of international business in the inter-war years “industrial mobilisation” pushed the italian industrialisation process onto a “road with no return” during the great war, when industries such as steel, engineering, chemicals, and shipbuilding underwent rapid expansion. despite the post-war economic crisis and the great depression of the 1930s, italian industry continued to grow in the inter-war years. the 1920s were rather positive for the italian economy (toniolo 2013, 18-19). industrial production increased in almost every sector, especially in the chemical industry. but things started to http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 worsen during the 1930s, due to both domestic and international dynamics. in 1933, a huge operation to rescue the main italian universal banks brought about the creation of the stateowned holding istituto di ricostruzione industriale (iri). in the context of the general turmoil and the backlash against globalisation that basically hit the whole world at the time, the attitude towards international trade and investment also changed in fascist italy during the 1920s, and especially during the 1930s. this decade was characterised by the imposition of greater trade barriers and more trade restrictions, which were progressively tightened until they reached forms of “autarky” (toniolo 1980). as far as the laws on foreign investments were concerned, several decrees were issued in italy during the 1920s. they sought to attract capital from abroad, mainly by creating fiscal advantages (see, for instance, the royal decree law of 16 december 1922, no. 1634 and the royal decree law of 11 september 1925, no. 1925). at the same time, on the other hand, these decrees made it increasingly compulsory to obtain government authorisation in order to invest in italy (see the royal decree law of 10 december 1925, no. 2162). with the royal decreelaw of 5 january 1928, every foreign operation of every kind and duration in italy had to be previously authorised by the government. authorisations were limited to only those foreign loans that were intended to pursue “productive activities”. according to this last law, in order to obtain authorisation “to have credit from abroad”, it was necessary to make an application that cited the reason for the loan, the terms that had been established, and all the other relevant information. moreover, the government could make constant controls to check that the capital was really used in the “productive activity” mentioned in the application (scott 1960). no new legislation was enacted with regard to foreign investment in the 1930s. during the war, all http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 companies that were controlled by the citizens of italy’s enemies – or in which they had more than 50 per cent of the share capital – were confiscated (royal decree law of 28 june 1940). if we look at the concrete activity of multinational companies during the inter-war period, we can note that an important discontinuity in the activity of multinationals in italy had occurred since world war i, when important german and austrian companies in mechanics, metallurgy, and utilities were “italianised”. notwithstanding this, most of the multinationals from other nations continued to operate in italy during the 1920s. according to the big picture provided by the constituent assembly right after world war ii, a general slowdown in the italian inward foreign direct-investment flow had taken place in the inter-war period (del buttero 1946). according to andrea colli’s database, the paradigm of foreign direct investments changed in this period, shifting from utilities, transportation and public services in general, to a stronger focus on manufacturing, technology and capital-intensive industries. as far as the nationality of foreign investors is concerned, apart from the already mentioned cases of austria and germany, only belgium showed a persistent decline in representation. switzerland and france remained quite constant and the united states’ investment declined immediately after the 1929 crisis but re-started in the decade preceding world war ii (colli 2010). “re-opening the doors”: international business from the end of world war ii until the 1980s the real italian take-off occurred after world war ii. during the 1950s and 1960s, the gross national product grew at a rate of almost 6 per cent (zamagni 1990, 423-424). “light sectors”, such as textiles, shoe manufacturing, and household furnishings moved from being run by able craftsmen to “true industries”, while the industrial structure of the country was becoming stronger in basic sectors, such as oil, steel, and durable consumer goods. during http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 this period, albeit with some idiosyncrasies, the fordist model spread in the country, also taking advantage of the abundant italian labour force and of the exploitation of economies of scale made possible by an expanding domestic market. among the main discontinuities with the previous period, it is worth mentioning the new and more pervasive role taken by stateowned companies in italy. on the one hand, state-owned companies became an instrument for offsetting the effects of the liberalisation of trade dictated by the recently founded european economic community, by providing more specific import-substitution and export-promoting investment. on the other, they started to achieve aims such as undertaking long-term, highrisk projects that private enterprise was unwilling to undertake, the maintenance of effective competition in oligopolistic sectors not exposed to foreign competition; and, finally, coping with the presence of multinational enterprises in the country (amatori 2013). drawing inspiration by an article written by luciano segreto (segreto 1995) it is possible to claim that “doors were re-opened”, and that multinationals were welcomed again. the legal efforts to encourage foreign investment resulted in two major laws. the first one, approved on 2 march 1948, aimed to provide foreign investors who were extremely suspicious and distrustful after the war with at least some legal certainties. however, this law was not a sufficiently strong incentive for foreign capital to enter italy, also because no more than 6 per cent of the profits could be repatriated. the second law, approved on 7 february 1956, was the first one that distinguished among foreign direct investments, portfolio investments and loans. as far as the first kind of investment was concerned, the law established that investments which were aimed at “productive activities” – i.e., the production of goods or services – could repatriate their dividends and profits without any restrictions. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 according to the evidence provided by andrea colli’s database in the benchmark years 1952 and 1960, during the “miracle”, the united states established itself as the most important investor, while both france and switzerland reduced their presence slightly. during these decades, there were new foreign investments in italy, with a quite heterogeneous industrial destination. although there was little change in the case of food, beverages and non-metallicproducts, in other cases, such as the chemical sector, machine tools and equipment, and electric machinery, the presence of foreign capital grew impressively. the picture at the beginning of the 1970s showed both continuities and differences. the united states remained the most important investor, followed by switzerland and france. chemicals and machinery remained strongly characterised by the foreign presence. in the chemical industry, the presence of foreign companies was confirmed both at the top level, as well as in smalland medium-sized companies. in machinery, foreign capital remained important in machine tools, machines for special purposes, and especially in electrical machinery (colli 2010, 2014). foreign companies were, moreover, heavily involved in high-technology projects together with state-owned firms. the italian government was, in fact, using iri to invest in sophisticated sectors, such as telephone equipment, electronics, satellite components, and passenger aircraft, frequently developing joint-ventures with leading foreign companies as a means of securing the required technology (colli 2014). these dynamics are reflected in the composition of the rankings of the largest companies in italy during the late 1960s and early 1970s. the population of state-owned companies and foreign enterprises among the 100 largest firms in the country grew considerably while, at the same time, there was a sharp drop in the presence of independent italian firms (binda 2013). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 current dynamics an analysis of the contemporary situation goes beyond the aims of this brief summary. it is well-known that the italian process of catching-up ended in the early 1990s. despite the pursuance of privatisation and liberalisation policies that occurred during the 1990s, which, according to policy-makers, should have helped the italian economy to improve, the country performance has been very weak since that time, and a slow recovery around the middle of the 2000s was soon stopped by the world economic crisis of 2007. much has been written about this. according to the economic historian gianni toniolo, italy’s loss of growth capability can be explained at least in part by considering “(1) a decrease in size, scope and productivity of the large firms, (2) an increase of the debt-to-gdp ratio over and above the supposedly “critical” threshold of 90 per cent, and (3) a shift from under evaluation to over evaluation of the real exchange rate of the currency.” (toniolo 2013, 29) the current italian economic conditions and the opportunities for recovery are, of course, a subject of intense debate. returning to the main purpose of this study, what is certain is that, since the early 1980s, italy became a less attractive host economy for foreign investors (onida, mariotti and piscitello 2003). the poor economic performance of the country and the great opportunities provided by the emerging countries in the decades of the “second global economy” contribute, to a large extent, to explain italy’s declining capacity to attract international investment. according to mariotti and mutinelli, a further “alarming decline” of foreign direct investments in the country took place during the period between the years 20002008 (mariotti and mutinelli 2010). even in the context of a stagnating europe, italy is less able to attract foreign multinationals than its european counterparts, such as france, germany, spain and great britain, as mentioned in the introduction to this article. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 according to the publication italia multinazionale 2014, which, every two years, maps the situation of italy with regard to the stock of inward and outward foreign direct investments, the gap between italy and the other european nations further increased during and after the economic crisis. according to the report, foreign direct investments have reduced their importance especially in the manufacturing sector, with the relevant exception of mechanical instruments, “made in italy”-related industries, and a few other areas. while stressing the fact that greenfield investments are a minor proportion of foreign direct investments compared to brownfield investments, the work also shows that while the investments coming from the main investors in the country, such as north america and europe, are stagnating or declining, the percentage of investments coming from new areas, such as china, india, russia, and other, especially asian, countries, is rising at a remarkable rate (ricerche e progetti 2014). conclusions: looking ahead slightly more than a hundred years have past since francesco saverio nitti wrote the first attempt to quantify the presence of foreign companies in italy in 1915, endeavouring to establish their origin, sectoral distribution and impact on the eve of italy’s entry into world war i, showing his concerns about the country’s dangerous dependence on foreign countries. many things have changed since then: both italian and foreign scholars have worked on mapping and interpreting foreign direct investments in the country, and some databases, investigations based upon the geographical origin of foreign investors, and company cases have made it possible for us to start to understand the quantitative presence of multinationals in the country, the distribution by sector and the geographical origin of the largest of them throughout the twentieth century, and to assess, in some cases, their behaviour and relationship with the local context. having said this, it should be stressed that the information http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 that we actually have on long-term international business in italy is still quite scarce and patchy, and important dynamics remain, to a large degree, unexplored. improving our knowledge in terms of the “quantification” of foreign direct investments in italy since the unification of the country (1861) sounds like a very valuable but tough task, given the scarce amount of statistical information that we have on this topic especially in some historical periods. on the other hand, it is feasible and recommended to assess and understand the dynamics of international business in italy better. out of the many possible directions that research could take in the next years, i would like to suggest three alternative and, at the same time, complementary, broad directions to follow. the first way to improve our knowledge on this topic is to focus more on the economic dynamics which are strictly related to international business in italy as a host country, with a problem-oriented approach. many studies, both currently as well as in the past, have enquired into the impact of foreign direct investments in italy. some of these investigations, in a sense, also shaped the economic policies pursued by the government in order to attract or reject foreign direct investments. but, in order to properly assess the relevance of the impact of multinationals in italy we should investigate some issues in greater depth. with the exception of a few specific case studies, we are still basically ignorant of the extent to which multinational companies had an impact in transferring knowledge. the search for a transfer of knowledge, in terms of technology, know-how, organisational capabilities, and so on and so forth, is probably one of the main reasons which urge governments today, as in the past, to try to attract multinationals. on the other hand, it is also quite well-known that multinational companies do not wish to transfer knowledge, and that they try to avoid the transfer of knowledge to local potential “competitors” whenever they can. the same, of course, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 happened in the past. the extent to which foreign knowledge was incorporated into the italian industrial system in the long run is still largely to be investigated, and we are basically ignorant of both the amount and the relevance of the spillovers coming from multinational firms to different industries over time, as well as their impact in fostering the development of local entrepreneurial talent. following up on this point, we are not able to answer exhaustively and satisfactorily another classic question on foreign direct investment yet, i.e., the impact of multinationals on the local environment in terms of hindering or fostering the emergence of local companies in this field. did multinationals help italy to catch-up by favouring the improvement of the knowledge and capabilities held by local companies, or did they simply make it impossible for the country to develop companies in those sectors in which stronger foreign multinationals were already present and carefully avoided sharing knowledge, thereby causing the country’s long-term dependence on foreign multinationals? apart from the pioneering attempt made by andrea colli (2014), no reliable attempts to deal with such a major topic have been made to date. studying in greater detail the entry and operation modes of multinationals in italy would greatly help us to answer these questions, but we still know very little about the entry modes of multinationals or their way of interacting with the local economic system and with the existing native companies. as has already been mentioned, we are still in the early stages of understanding these phenomena, and, to date, we have probably only analysed the “tip of the iceberg”, by focusing exclusively on only the very largest corporations (colli 2014) and on the cases of some specific industries (binda and perugini 2016). secondly, but no less important, we do not have a fully convincing “big picture” on relevant topics such as the political influence that foreign direct investment had on the italian http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 government or the social attitudes towards foreign direct investment in the long run. although, in some specific cases, studies have stressed the lobbying activities both by foreign and local companies in order to defend their interests at national level, a big comparative analysis of the outcomes of these efforts is still lacking. in addition, apart from a few studies dealing with specific periods and companies, it has, to date, been difficult to identify how foreign multinationals were perceived by local society, and how these perceptions changed over time. according to a challenging study by the sociologist mauro guillén (2001), the topic of multinationals tends to be more divisive in newly-industrialising countries than in developed ones. according to guillén, multinationals in the former group of countries can be catalogued as having one of four potential images: “partners”, “necessary evils”, “arm’slength collaborators”, or “villains”. even if one takes its significant regional differences into account, italy was still a developing area at the end of the nineteenth century and for part of the twentieth century. while it would be very interesting to understand the perception that italian society, in its various forms, had of the multinationals, and how this changed over time, no broader investigations into these topics have so far been conducted on a large comparative scale, with very few exceptions (see, for instance, pells 1997; de grazia 2005; bonin and de goey 2009). last, but not least, i think that a stronger effort in international comparisons would help italian scholars to tackle their questions on the economic, political and social impact of foreign multinationals in the country better. to this purpose, it might be particularly interesting to look at southern europe, and this special issue is particularly appropriate and timely in this sense. even though italy, spain, portugal, and greece were characterised by significant differences, it is possible to identify some features of their economic development http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 that made these nations similar to each other and quite different from other european nations. the strong intervention of the state in company ownership, creation, and protection, the fundamental role played by a small number of very big and diversified business groups, the importance of smalland medium-sized private corporations, and, last, but not least, the controversial relationship with foreign capital and know-how, which, in some phases, was almost desperately desired, and, at other times, completely rejected, were common features of these southern european countries (binda 2013). to a limited extent, these nations also share another characteristic: the economic weakness that nowadays has earned them the insulting acronym of “piigs”, which also includes ireland. but notwithstanding these common features, and the need to delve deeper into the dynamics that guided the nineteenth and twentieth century development of these nations, an effective effort in constructing the “big picture” that analyses and understands the role and the behaviour of multinational corporations in the long run in southern europe is still missing. references affinito, massimiliano, marcello de cecco, and angelo dringoli. 2000. le privatizzazioni nell'industria manifatturiera italiana. rome: donzelli. amatori, franco, and andrea colli. 1999. impresa e industria in italia dall’unità ad oggi. venice: marsilio. amatori, franco, ed. 2013. storia dell’iri, vol.2. il “miracolo” economico e il ruolo dell’iri. romebari: laterza. baeli, salvatore. 1957. investimenti e finanziamenti esteri in italia. investimenti diretti e di portafoglio. i prestiti privati esteri. rome: guido pastena. basile, roberto. 2004. “acquisition versus greenfield investment: the location of foreign manufacturers in italy.” regional science & urban economics 34 (1): 3-25. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 basile, roberto, davide castellani, and antonello zanfei. 2004. “la localizzazione delle imprese multinazionali in europa: il ruolo delle politiche dell’ue e le peculiarità dell’italia.” l’industria 3: 571-596 basile, roberto, luigi benfratello, and davide castellani. 2005. “attracting foreign direct investments in europe: are italian regions doomed?” rivista di politica economica 1 (1): 319-354. basile, roberto, and marianna mantuano. 2008. “l’attrazione di investimenti diretti esteri in italia e nel mezzogiorno: il ruolo delle politiche nazionali e regionali.” l’industria 29 (4): 623-642. bertilorenzi, marco. 2006. “la méthode saint-gobain: strategia di un’impresa multinazionale in italia, 1887-1939.” m.sc. diss., university of florence. bertilorenzi, marco. 2008. “the italian aluminium industry: cartels, multinationals and the autarkic phase, 1917-1943.” cahiers d’histoire de l’aluminium 41: 42-71. binda, veronica. 2013. the dynamics of big business: structure, strategy, and impact in italy and spain. new york: routledge. binda, veronica, and mario perugini. 2016. “nella buona e nella cattiva sorte? le joint-venture tra multinazionali straniere e imprese locali in italia in una prospettiva di lungo periodo.” in “atti sise”. bonin, hubert, and ferry de goey, eds. 2009. american firms in europe (1880-1980). strategy, identity, perception and performance. geneve: droz. bouvier jean. 1961. “les interventions bancaires françaises dans quelques grandes affaires financières de l’unité italienne.” annali dell’istituto g. feltrinelli iv: 224-233. bova, francesca. 1987. “l’evoluzione di una grande azienda cotoniera: la cucirini cantoni coats dal 1912 al 1939.” annali di storia dell’impresa 3: 323-68. bova, francesca. 1995. “american direct investment in the italian manufacturing sector, 1900-1940.” business and economic history 24 (1): 218-230. bronzini, raffaello. 2004. distretti industriali, economie di agglomerazione e investimenti esteri in italia, in economie locali, modelli di agglomerazione e aperture internazionale. rome: bank of italy. cafagna, luciano. 1989. dualismo e sviluppo nella storia d’italia. venice: marsilio. camera dei deputati. july 2nd, 1861. atti del parlamento italiano discussioni della camera dei deputati, viii legislatura sessione 1861 (18/02/1861 23/07/1861), volume (sn) 1° periodo dal 27/05/1861 al 23/07/1861 n.d.r., 1707-1738. turin. camera dei deputati. july 31st, 1862. atti del parlamento italiano discussioni della camera dei deputati, viii legislatura sessione 1861 1862 (12/07/1862 01/08/1862), volume (vi) xii della sessione 3° periodo dal 12/07/1862 al 01/08/1862. turin. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope 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enterprise and society 10 (2): 335-75. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 69-99, july-december 2016 doi.org/10.1344/jesb2016.2.j013 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 toniolo, gianni. 1980. l’economia dell’italia fascista. roma-bari: laterza. toniolo gianni. 1983. “l’utilizzazione dei fondi erp nella ricostruzione italiana: alcune ipotesi di lavoro.” in il piano marshall e l’europa, edited by elena aga rossi, 189-192. rome: istituto dell’enciclopedia italiana. toniolo, gianni. 2013. “an overview of italy’s economic growth.” in the oxford handbook of the italian economy since unification, edited by gianni toniolo,3-36. new york: oxford university press. venturelli, francesco, marino milone, and antonio pastore. 1979. alcuni dati economico-finanziari relativi ad imprese multinazionali operanti nel mezzogiorno. bari: cacucci editore. unctadstat. 2016. “foreign direct investment: inward and outward flows and stock, annual, 19802014.” accessed april 26, 2016. http://unctadstat.unctad.org/wds/tableviewer/tableview.aspx. us department of commerce. 1930. american direct investments in foreign countries. washington: us gov. printing office, reprinted by arno press (1978). wilkins, mira. 1970. the emergence of multinational enterprise: american business abroad from the colonial era to 1914. cambridge, ma: harvard university press. wilkins, mira. 1974. the maturing of multinational enterprise: american business abroad from 1914 to 1970. cambridge, ma: harvard university press. zamagni, vera. 1978. industrializzazione e squilibri regionali in italia. bologna: il mulino. zamagni, vera. 1990. dalla periferia al centro. la seconda rinascita economica dell’italia (18611990). bologna: il mulino. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 angel calvo university of barcelona (spain) strategic alliances in the european industries of the third industrial revolution abstract the dimension of the alliances has compelled experts to revise their preconceptions about the internationalization of companies and to include this strategy in their models as uppsala model was forced to acknowledge. this article focuses on one of the alliances forged in europe, very deviated from the practices of the majority because it was a company with exclusively european partners. it adopts the perspective of a peripheral country (spain) in the global economy and from the special status of at least one of the partners in a monopoly. finally, the article follows case study methodology, which aims to delve into the complexity of the processes and the phenomena at hand. the article responds to the need for an alternative approach to industry analysis that is particularly important for technology-based industries and the most turbulent high-tech industries. the first section examines the creation of european silicon structures as a strategic alliance in the european semiconductor industry. parts two and three look at the case of spain and the role of demand using the example of telefonica. conclusions are presented in the final section. keywords: strategic alliances; microelectronics; technology transfer; telefonica corresponding author. e-mail: angel.calvo@ub.edu received 6 april 2016 accepted 17 april 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 introduction global strategic alliances are cooperative business arrangements between actual or potential competitor firms from several countries involving joint ventures for short-term contractual agreements around a particular problem (such as developing a new product). from a managerial perspective, the strategic objectives of these alliances are to enter into a foreign market, share the fixed costs and risks associated with the development of new products and processes, assist the inter-firm transfer of complementary skills, and establish technical standards (hill, jones, and schilling 2016). in a more general framework, firms find in international alliances the flexibility to respond to changing market conditions and effective paths for enlarging the scale of operations together with green field investment and mergers and acquisitions (m&as). the driving forces behind them embrace cost economizing in production and r&d, strengthening market presence, and accessing intangible assets. during the last two decades of the 20 th century, the intensification of competition in open markets forced companies to adopt measures that would enable them to meet the new challenges in optimal conditions. one of the answers was to develop international strategic alliances, which became standard practice in the struggle for competitiveness, but with very different results. sectoral and geographical components influenced the configuration of the alliances in such a way that in some industries, such as high-tech industries, they slightly outnumbered the amount of m&as and in the case of europe, on which this article focuses, alliances established with the united states predominated over inter-european alliances. the dimension of the phenomenon has forced experts to revise their preconceptions about the internationalization of companies and to include this strategy in their models; this was the case of the uppsala model, initially very conditioned by its allegiance to northern european http://revistes.ub.edu/index.php/jesb https://www.google.es/search?hl=es&tbo=p&tbm=bks&q=inauthor:%22charles+w.+l.+hill%22 volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 industrial processes. joining dunning’s (2001) oli paradigm, it acknowledges the relevance of joint ventures and strategic alliances as ways of internationalizing (johanson and vahlne 2009). this article intends to retrieve and explore one of those alliances forged in europe, which had the incentive to deviate from the practices of the majority because it was a company with exclusively european partners. the article does this from the perspective of a peripheral country (spain) in the global economy and from the special status of at least one of the partners in a monopoly. finally, it follows case study methodology, which aims to delve into the complexity of the processes and the phenomena at hand. 1 the article responds to the need for an alternative approach to industry analysis that is particularly important for technology-based industries and the most turbulent high-tech industries; an approach focusing on complicated networks of relations and taking into account multiple possible configurations of value creation and delivery, not merely the typical supplier-customer scenario (klincewicz 2005). in terms of its structure, after the introduction the first section examines the creation of european silicon structures as a strategic alliance in the european semiconductor industry. sections two and three look at the case of spain and the role of demand using the example of telefonica. conclusions are presented in the final section. 1 in yin’s (yin 1993, 59) definition, a case study is an empirical inquiry into ‘a contemporary phenomenon within its real-life context and addresses a situation in which the boundaries between phenomenon and context are not clearly evident.’ http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 a strategic alliance in the european semiconductor industry: european silicon structures the case study (european silicon structures-es2) emerged as an initiative formed under the umbrella of supranational institutions in order to promote the unification and harmonization of the market. in the 1980s, the european community prepared the end of its internal trade barriers for the beginning the next decade. the region shifted in telematics from the national champions to cooperation strategy, possibly because several states simultaneously faced issues of scale. on the other hand, the stock traded by young companies, which was almost inexistent some years before, was booming. 2 one important feature in europe was the lack of an indigenous electronics industry (bait for the semiconductor industry and driver, in turn, of electronics in general) and an absence of management culture; circumstances that were compounded by a lack of correspondence between the tremendous emphasis on science and technology and production and marketing. politicians and european business elites looked to lasting technological innovation and risktaking in a favourable socio-economic climate as the best hopes to survive in the global competition (forester 1989, 289). 3 the dominance of the semiconductor market by standardized products or commodity chips allowed some differentiation in speed chips and in quality control, which was a peculiarity of the japanese. rising r&d costs and climbing capital investments forced the firms to increase their sales to recover these costs. despite the very low and falling marginal costs of chips and 2 (sandholtz 1992, 20; fortune, april 27, 1987). some pioneering analysts stressed european (and french) backwardness (pouderoux 1968, 22). 3 the roundtable of european industrialists think tank considered it crucial to abolish national standards opposed to free trade in the ec and the remaining telecommunications monopolies, as well as to remove all obstacles to cross-border mergers and acquisitions and to extend ec research programmes beyond the precompetitive stage (dataquest 1991, 104). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 recurrent competitive gluts in this highly cyclical industry, the omnipresence of chips in ict compelled the large companies towards vertical integration for more powerful chips. three relevant processes occurred here. to begin with, the restructuring of research-oriented connections in the case of philips and siemens and the merger between the italian sgs with the semiconductor operations of the french thomson. another process was the increasing quest for government subsidies and protection and the third involved sidestepping the commodity market through the formation of a new company (faulhaber and tamburini 2012). the plans for a new european venture in the semiconductor industry were based on several assumptions about, for example, market trends and nature. in the context of a very fastgrowing full-custom cmos circuits market, it was expected that this might more than triple in the period 1985–1988 in europe, reaching $1.44 billion in 1991. an increase in full-custom circuits from $120 million in 1984 to $1 billion in 1991 was possible. the new firm would try to cover no less than one-fifth of the 50 per cent for prototypes and small volume series, a market amounting to $110 million in 1991. european customers needed professional, industrial, and specialized data-processing electronics based on circuit series preferably with reduced design and manufacturing times in order to shorten the production process. meeting this specific need was a significant differentiation in comparison to us and japanese companies, which were more geared towards large series. expertise in high-tech silicon compilers would give speed of design; http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 speed of prototype and small-series manufacturing would be achieved through innovative technology. 4 at the time, europe provided around 10 per cent of the world output of semiconductors. several eec efforts were engaged in increasing that share, including the peaceful mitterrandist eureka project. it was one of several programmes with a high degree of risk, involving cross-country cooperation on a massive scale between firms in the early stages of the process leading from research to industrial application. 5 seven participants of the first eureka programme of 1985 helped establish a pan-european start-up under french initiative named european silicon structures, or es2. its objective was the production of prototypes or small batches (less than 50,000 units) of full-custom circuits. the new firm would train the designers of client companies, assist them in their work, provide design tools, and finally offer a packaging and testing service (forester 1989; mytelka 1990; sandholtz 1992). this new undertaking was possible thanks to the sum of an original idea coupled with the transfer of the managerial and technical knowledge accumulated by the founding trio in several european and us firms from the sector, as well as financial backing and state political support. the actual brain behind es2 was the french engineer and well 4 80 per cent of all european equipment was manufactured in series with less than 5,000 parts; the plant would be equipped with an electronic masker: prs report science & technology, november 8, 1985, 40. 5 french president francois mitterrand learned about the silicon valley organization in situ, made it a source of inspiration for a european common technology, and met with leaders in computer chips and information systems: le monde, december 28, 1985; the new york times, march 26, 1984. advisers to mitterrand included hubert curien, former president of cnes (france’s national space agency), who conceived eureka to counterbalance reagan’s plan for a strategic defense initiative (sdi) – a space-based missile defence: (friend 1998, 228; business week, 3.108–3.121, 1989, 158). the es2 project was estimated at ecu 94 million; other projects include: the philips-siemens mega (the base of the controversial jessi (joint european semiconductor initiative)) at a total cost of some ecu 2,000 million; the eurocim project, whose cost was around ecu 30 million; and the eurolaser project, costing around ecu 80 million (cowhey and aronson 1993, 157; european commission, press releases, 31/10/1986, 2). http://revistes.ub.edu/index.php/jesb https://books.google.es/books?id=p-0daqaamaaj&q=european+silicon+structures,+mitterrand&dq=european+silicon+structures,+mitterrand&hl=es&sa=x&ved=0ahukewju7kd9s-dkahxjwbqkhtzzbj0q6aeimjad http://www.google.es/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahukewiw9bw28m7kahxhchqkhsb3am8qfggymai&url=http%3a%2f%2feuropa.eu%2frapid%2fpress-release_ip-86-518_en.htm%3flocale%3den&usg=afqjcngmclg3jxbceprvlbivlbgczbixzg&bvm=bv.113034660,d.d24 volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 trained cosmopolitan manager jean-luc grand-clement, who contacted business elite member robert r. heikes, head of the national semiconductor corporation’s operations in europe and latin america. 6 they consecutively brought in robert w. wilmot, chairman of the british computer maker icl ltd., and a london-based venture capital firm, advent, the overseas branch of boston’s ta associates, america’s largest group in its class. 7 some of them were participants in previous projects. heikes and grand-clement, director general and general manager at motorola europe and glasgow, respectively, were also involved in a plant project for semiconductors in malta. 8 because a large amount of capital ($50 million) was needed to build the company and to equip the plant and research labs, the founders decided on a pan-european firm, more intricate than the previous simple bilateral ventures. 9 advent injected the first half a million dollars in 6 engineer of the école nationale supérieure de télécommunications, experienced in eurotechnique and in electronics in cit-alcatel, as well as a founder of the l’occitane of electronics (le monde, september 4, 1985). 7 motorola taught grand-clement ‘the importance of having solid financing and a clear strategy from the start’. when grand-clement, former senior manager in motorola europe, contacted saxby, saxby’s secretary said: ‘there’s a frenchman on the phone, and he sounds a bit like inspector clouseau’(saxby 2012). some sources added other venture capital to advent: technoventures and euroventures, founded in 1984 by the european group asea/fiat/3m/olivetti/bosch/volvo (lipnack and stamps 1993, 124) and it was backed by a number of giants including pirelli and saint-gobain (fortune, april 27, 1987), four seasons/alfa-laval, the fjarde ap fund, sfp, and others such as schroder ventures (investors chronicle, 86, 1988, 81; prs report science & technology, november 8 1985, 9; les echos, 5/4/1995). advent appears sometimes as coordinator of funding and robb wilmot as the prime mover in es2 (investors chronicle, 75, 1986, 61). wilmot came from a 16-year stay at texas instruments inc. and from the post of executive chairman of international computers limited (icl) (1984), ultimately becoming managing director of its british subsidiary (prs report science & technology, november 8, 1985, 40; the new york times, october 24, 1990). wilmot commented in 1987: ‘the day may not be far ahead when it will cost less to design a custom chip than buy a secondhand car’: semiconductor international, 12(1–6), 1987, 76. 8 heikes explained that the advantages of malta were a comparatively low wage scale combined with common market preferences; negotiations continued in 1974: industrialization: motorola semiconductors, october 1, 1973, wikeleaks, 1973vallet01930_b; april 10, 1974, 1974vallet00677_b. 9 french-italian export oriented agreement sescosem-mistral (pouderoux 1968, 22). rod attwooll confessed that the involvement of some depended on the involvement of others: ‘they all separately said they would invest if x would – and promised to talk to x. while weeks and months passed. in the end, we got them all into a room in a http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 seed capital and offered its offices in the early days, and es2 eventually raised near to $100 million in corporate investment, venture capital, and grants (campbell 2003). 10 the situation in 1985 was as follows: the two leading european venture capital companies, advent (london and belgium) and techno-venture management (munich), as well as alpha associates in france, orange nassau in holland, and four seasons in sweden, had provided $4 million. industrial investors and financial institutions from six european countries would provide the remaining $61 million, in equal amounts, with the absence of any non-european sources. the capital structure should have been, in principle, as follows: 25 per cent from the founders and the personnel; 15 per cent from venture capital; 30 per cent from large manufacturers; and 30 per cent from ‘institutions’. 11 table 1 displays subsequent financial operations for several years. hotel in brussels and told them to get down to talking to each other. with hindsight, silicon fabrication on venture capital money was a tall order’ (campbell 2003, 59). 10 a source reported the ambitious programme: $65 million to start, or $100 million over 5 years for a full setup: prs report science & technology, november 8, 1985, 40. sources differed on data: $46 million according to fortune, april 27, 1987; advent seeded es2 with about $5 million and there was start-up capital of $60m according to the economist, 303, 1987, 71; $60 million was gathered from eight european corporations (including italy’s olivetti, sweden’s saab, the uk’s british aerospace, and the netherlands’ philips) according to the scientist, november 28, 1988. venture capital disbursements grew by a factor of 6.4 from 1978–1986. capitalization of es2 in 1988 was at 44 million dollars, similar to matra harris and mietec. es2 had the most substantial venture-capital backing seen so far outside the us: electronics, 59, 1986. some scholars considered the company as ‘an ambitious – some might say foolish – stab at creating the first european-based designer and developer of integrated circuits at a time when a worldwide glut of silicon chips was wreaking havoc with the industry’ (brooke and penrice 2009, 66). 11 the four seasons intended to present the project to a number of investment groups in sweden, including folksam and aktiv: prs report science & technology, november 8, 1985, 36. the project did not include dynamic countries like ireland, then on the way to becoming a european silicon valley, as asserted by the government: public papers of the presidents of the united states (reagan, ronald 1986, 801). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 table 1. european silicon structures, financing date financing ($million) 1985 advent, london; techno-venture mgmt. corp. 5 dec. 1985 brown boveri and cie of switzerland; 25 ing. c. olivetti & co. (italy); n. v. philips (netherlands); saab-scandia ab (sweden) jan. 1986 british aerospace 5 banque international in luxembourg; 9 european investment bank source: compiled by author using data from dataquest, june 1988, 205. es2’s structure was established during the most awful recession in the semiconductor industry’s history (cowhey and aronson 1993). 12 as a main feature, es2 had complex legal development, which allowed it introduce itself as a local company in the various countries in which it was implemented (prs report science & technology, europe & latin america, january 26, 1988, 11–12). 13 national boundaries were still an issue, requiring export licenses even within western europe as well as the usual transport documentation. lacking the european legal status for a pan-european company, es2 was incorporated in luxembourg as a parent company of several subsidiaries in each country in which it was implemented; a holding company with national subsidiaries. 14 the composition of the board of directors displayed in annex 1 shows the presence of founders, financers, and some executives from the sector, including the french-international bernard pruniaux, formed in france, trained in 12 see also the new york times, august 1, 1988. 13 in germany it was established as es2 gmbh (wedgwood ed. 2013, 146); in the united kingdom as es2 limited, and in the netherlands as es2 netherlands b.v. the designs of chips with es2 software were translated by their computers into etching instructions for the $4-million able 150 electron-beam machines, manufactured by the perkin-elmer corporation. it was also considered as a ‘chip maker without a country’, the new york times, august 1, 1988; while others considered it geocentric oriented (vasudeva 2006, 48). more accurately, it was called a ‘company with many countries’ (the scientist, november 28, 1988). 14 the scientist, november 28, 1988. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 the usa, and acting in france. the situation changed in 1994 with the arrival of new names. 15 es2 presented a decentralized structure since its production, assembly, and testing plant was located at the rousset technology centre, near aix-en-provence, and one of the technologyintensive departments (software design) was located in the united kingdom. 16 in this sense, its birth coincided with the first phase of the microelectronics ‘technopole’ in the town of rousset, characterized by the emergence of a microelectronics cluster in the bouches-durhône region when the government aimed to enter the microelectronics industry via public enterprises and joint ventures with north american technological partners. 17 15 pruniaux: an engineer in electronics (toulouse), with two years at leti (grenoble ceng), and 4 years at bell labs (new jersey), which allowed him to acquire considerable technical expertise in semiconductors. at the french facility of texas instrument (nice), he was one of the pioneers of the reduction of the dimensions of the chips to increase their performance and reduce their cost. as an industrial director at eurotechnique, a st. gobain-national semiconductors joint venture (1979), he contributed early on to the launch of the microelectronics cluster in rousset. he retired in 2008 at atmel: letter to steve laub, president and chief executive officer at atmel corporation: ex-10.10 2 f51611exv10w10.htm exhibit 10.10, october 17, 2008. jean pierre demange was vice president and director of es2 for southern europe; the general manager was manfred koslar, developer of the signal computer. the situation in 1994 was as follows: managing directors w. koepf and bernard pruniaux; research director and technical director eric detoullin; product managers eric detoullin and lucien brau; purchasing manager jean louis palazzo; marketing manager and advertising/publicity manager christian fleutelot (graduated from the école centrale de lyon with a post-graduate degree in micro-electronics; quality engineer at matra defence from 1986–1988); sales manager jean yves lesaux (wedgwood ed. 2013, 36). two examples of the mobility of technicians in the big companies: lucien brau (eurotechnique and texas instrument), director of back-end operations at european silicon structures; christian dupuy (motorola) developed product engineering capabilities and analogue design capabilities at european silicon structures. 16 (european communities commission 1989, 48, 207); (telefónica, memoria 1985, 6). a decentralized structure of design centres was planned: first in paris, munich, and london, then, in 1986, in milan, stockholm, and edinburgh (prs report science & technology, november 8 1985, 36). three production plants were planned in the uk, france, and germany (le monde, september 4, 1985). it is worth noting the poetic vein of the french grand press: ‘si drapeau elle a, il est bleu avec un cercle de douze étoiles d’or, l’emblème de la cee’ (le monde, march 28, 1987). 17 training was possible at the university centre close to the factory (meister 2001, 159). for most people rousset was the capital of a provençal silicon valley with 25 per cent of french microelectronics located there. the us milken institute identified eight key ingredients in the creation of high-tech clusters to grant them success from the start. firstly, the presence of cutting-edge civil and military research centres and institutions, which, combined with a network of entrepreneurs and venture capitalists as the second noteworthy element, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 245 the entry into operation was a gradual process. as for many companies in the semiconductor industry, es2 was at the beginning a ‘fabless’ firm, or a firm without a plant, geared towards technological breakthroughs in microchip design, but subcontracting its products before manufacturing began. the rousset production plant, inaugurated in 1987, began to assemble and test circuits, with silicon wafer processing still being performed at exel microelectronics in california through a subcontracting formula. 18 as a horizontal alliance, es2 tried quickly to reach economies of scale and critical mass to carve a profitable niche of small production series in the region’s $5 billion semiconductors market. leading-edge e-beam technology (direct-write process designs onto silicon wafers with an electron-beam machine) was chosen and enabled it to drastically cut (by more than a half) the delivery time for prototype chips and the prices of its competitors, namely north american and japanese firms (saxby 2012; campbell 2003). 19 surprisingly, among future clients, es2 missed the two most dominant and in some ways opposing electronics companies in europe: thomson and siemens. 20 translate into the rapid adoption of technology. the remaining six components are: a skilled and educated work force; technology spillovers from nearby high-tech industries; the availability of venture capital; high quality of place; and two favourable elements related to low costs – cost of living and cost of doing business, including low land prices: strategy+business, july 1, 2001. 18 in february 1986, exar integrated circuits, a publicly owned californian company, acquired exel microelectronics for $5.5 million. exel operated as a subsidiary of exar and maintained an independent plant and r&d staff (dataquest 1988, 209). 19 prs report science & technology, europe & latin america, january 26, 1988, 11–12; business international, 33, 1986, 241. vlsi technology inc., a californian firm worth $125 million and founded in 1979, specialising in complex high-performance asics and assps, was one of es2’s main competitors. es2 was an early buyer of the aeble 150 machine since it bought the third machine manufactured by perkin elmer and installed it first at exel in october 1986, taking on asic designs from april 1987, 1-338. the vlsi subsidiary, compass design automation, inc., supplied software and design libraries to the broad commercial asic and electronic design automation marketplaces. grand-clement considered that the gate array market was dominated by ‘old-fashioned methodology and a clumsy, rough-and-ready approach’ (profiles: a worldwide survey of ic manufacturers and suppliers, 1998, 2-446; electronic engineering 60, 1988, 23). 20 siemens, engaged in the mega project with 1mbit technology from the toshiba family, showed signs of demoting the french-italian firm sgs-thomson, resulting in the irritation of sgs-thomson and the french http://revistes.ub.edu/index.php/jesb https://books.google.es/books?id=0yysaqaamaaj&q=european+silicon+structures,+horizontal+internationalization+strategy&dq=european+silicon+structures,+horizontal+internationalization+strategy&hl=es&sa=x&ved=0ahukewjxwotqm9vkahve6xqkht_ocw4q6aeiizab https://books.google.es/books?id=0yysaqaamaaj&q=european+silicon+structures,+horizontal+internationalization+strategy&dq=european+silicon+structures,+horizontal+internationalization+strategy&hl=es&sa=x&ved=0ahukewjxwotqm9vkahve6xqkht_ocw4q6aeiizab https://books.google.es/books?id=jz1jaqaaiaaj&q=es2,+elmer+perkins&dq=es2,+elmer+perkins&hl=es&sa=x&ved=0ahukewjvoazc19tkahxjqx4khayocswq6aeipdad volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 246 thomson and sgs stressed that their moves to attack this sector resulted from their own market analyses and were under consideration well before the creation of es2 was announced. thomson, moving to attack this sector on the basis of its own analyses, offered siemens to lock the market with a joint venture to manufacture circuits on request. after the germans’ refusal, thomson sought to enter the market with the technical support of the english and the americans (bonno 1986). the business plan failed because the e-beam lithographic machine had a tenth of the throughput anticipated for the specifications and the advantages on prices were not met. in reality, the technically feasible and differentiating plan placed es2 outside conventional chip manufacturing and inside a shared niche between fpgas and the semi-custom and fullcustom markets of several firms. 21 as saxby recognized, at the time es2’s members raised a ‘truckload of money very successfully, had a fantastic idea, failed at engineering implementation, then ran out of money… and were bought by atmel’, a californian firm looking for a european manufacturing base converted into a worldwide leader in the design, manufacturing, and marketing of advanced semiconductors. 22 government. sgs-thomson vindicated its leadership in erasable programmable read-only memory-chip (eprom) technology and equal financial participation from all three firms (sandholtz 1992, 293). 21 lsi logic corp., vlsi technology inc., and taiwan semiconductor manufacturing co. ltd.: ee times europe, january 9, 2014. in 1991, leading european suppliers often concentrating on niche markets and application-specific ics included, together with es2: abb-hafo (sweden); austria microsysteme (austria); gec plessey semiconductors (uk); matra-harris semiconducteurs (france); mietec (belgium); and telefunken (germany). non-european companies included, among others: amd (usa); analog devices (usa); fujitsu (japan); matsushita (japan); and mitsubishi (japan) (fletcher 2013, 168). some scholars present es2 as an illustration of how co-investment by semiconductor-using companies can facilitate access to key components while spreading the cost (collins and doorley 1994, 310). 22 (campbell 2003, 59; saxby 2012; le monde, september 10, 1995; “atmel and virage logic grow partnership for 0.13-micron soc designs”, pr newswire, january 21, 2003). in saxby’s words ‘the vision of es2 couldn’t happen really. and really they needed a change of business strategy which was forget the e-beam machine and become more conventional.’ advanced technology-memory & logic (atmel), founded by two members of the perlegos family and t.c. private funds, specialized in the design, manufacture, and marketing of high-speed http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 247 because of the narrowness of the european market, es2 paid a price to overcome the worst aspects of fragmentation and the high costs of coordination in the collaborative venture (guile 1987). possibly, the main reason for the let-down was in the conception, which was a sort of trap: a niche firm had advantages for expansion but also difficulties because of the strict limits of the market. es2’s share in the european semiconductor market in 1989 was 0.2 with $17 million in sales. the pan-european company ranked in the markets of different products as follows: 116 th in 1989 among european companies in the semiconductor market with $18 million; 35 th in the european digital mos ic; 33 rd in the european cmos ic; 21 st in the european mos logic; 19 th in the mos asic; and 42 nd in the european integrated circuit. with 17 million dollars in revenues for asic in 1989, es2 had 1.44 per cent of the total european revenues in the asic market (dataquest 1990). 23 es2 rearranged its organizational structure, came out of the european market, and worked to insert itself into wider networks. backed by some us venture capital, it set up united silicon structures, or us2, an unsuccessful north american subsidiary, which drowned due to financial and management problems. 24 in october 1987, es2 purchased a software and design firm in japan called best to convert it into a sales agency for es2’s products in japan. beyond these plans, es2 wanted to form a new production firm under the name of js2, or japan silicon structures. 25 es2 and development co. formed a joint venture, european cad and analogue products (dataquest june 1988, 113). es2 sold off the cad division to cadence where o’donnell helped integrate it. 23 dataquest, european semiconductor market share estimates final 1989, 1990; a european semiconductor industry service report (dataquest 1991, 6). 24 robin saxby was in charge of making us2 profitable; tim o’donnell also joined us2 (saxby 2012). 25 dataquest, june 1988, 207; business week, 3.094–3.097, 1989, 102. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 248 developments ltd., specialized in research and development activities within the eda and asic design markets. 26 later on, they planned to expand by linking with the united states and a leading venture from west germany, a country that was absent as co-owner. es2’s path was remarkably linked to that of lattice logic, a spin-off company and owner of an original automatic computer aided design (cad) system to layout integrated circuits in the gate array style. first, since 1985, es2 had been a customer of the pioneering silicon compiler from lattice logic, as was the case for several key enterprises, including ferranti ltd. the company’s solo 1000 was based on lattice logic’s chipsmith system, enabling designers to produce full-custom and optimized designs. 27 secondly, es2 strengthened its managerial and technical capacity with the arrival of john gray and irene buchanan to the software division, with gray serving as vp of design technology. 28 thirdly, es2 bought its former provider lattice logic in 1987 (dodgson1989; dataquest 1991). es2 formed agreements with several european, japanese, and north american companies, as displayed in table 2. 26 moody’s otc industrial news reports, 20, 1989, 1870; dataquest 1991, 105. european cad developments was registered on january 8, 1990 in london and later dissolved. 27 meanwhile, solo 2000 was based on the sda systems family of integrated cad tools and incorporated compiled macro blocks (dataquest june 1988, 205). es2 signed contracts for solo l000 and solo 1200 software and qudos quickchip plus software and arrangements for the supply to academic institutions were in hand: journal of semicustom ics, 7–8, 1989, 45. european silicon structures used cad sun 3/solo 1400 for the design, analysis, and simulation of an fsk technology 1.2u filter. es2 provided goods for educational activities in essex through the london university consortium (jones and buckley 1989, 16). 28 lattice logic was set up by two phd graduates of john gray’s, a lecturer in computer science, when in 1980 he left the university of edinburgh. it was hailed as one of the most exciting indigenous start-ups from silicon glen (business herald, april 28 1986, 15). irene buchanan, john gray, and tom kean founded algotronix in 1989, pioneering the use of fpga chips. japanese connection: lattice licensed its 64 ksram design and technology to seiko epson/s-mos (dataquest, october 1986, 28). http://revistes.ub.edu/index.php/jesb https://books.google.es/books?id=_yutaqaamaaj&q=european+silicon+structures,+annual+report&dq=european+silicon+structures,+annual+report&hl=es&sa=x&ved=0ahukewj4srqi9t3kahvd6xqkhan-btcq6aeirjah volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 249 in 1989, es2 had revenues of $19.3 million (45 per cent higher than in the previous year but substantially below the hope its founders had of $100 million in five years) and ranked number one among the participants in pan-european technology programmes (us congress 1991). 29 table 2. global european silicon structures agreements with companies partner year purpose etec systems* development of technology for direct-write gate array personalization jenoptika compass design automation compass would provide its customers with access to advanced risk machines siemens allowed es2 to produce chips with the siemens 0.5micron cmos process phoenix vsli united silicon structures would make the prototypes and vlsi would handle the volumes cascade design automation provide 0.7-micron process technology using cascade’s design tools and es2’s process technology mitsui&co. ltd lattice logic 1985 export lattice’s compiler to europe solomon design 1986 market sda systems’ design family in europe and use it in several design centres associates (sda) systems philips-elcoma-texas instruments 1986 cooperate on the system cell standard cell library philips-texas instruments 1987 manufacturing of the system cell: ti and philips would supply volume parts and es2 would provide prototypes and low-volume quantities exel 1986 subcontract production to the exel plant development co. 1990 r&d within the eda and asic design markets sun microsystems 1987 amalgamate the es2 solo 2000 v.i.s.i. design system with the sun-3 workstation source: compiled by author , * the agreement with etec systems was named eubeam and the agreement with development co. was called european cad developments ltd. 29 the strategic joint european semiconductor initiative (jessi), an initiative to restore european competitiveness in microelectronics, was one of the most ambitious collaborative projects launched under eureka together with the german-dominated high definition television (kassim and menon, eds. 2002, 233; marchipont 1997, 115), considered the upstream cousin of jessi, both involving chips (leuenberger and weinstein, eds. 2012, 28). the european research programmes tried to provide central coordination for european national companies and a platform to take a more pro-active approach towards developing standards for europe and worldwide (dataquest’s eighth annual european semiconductor industry conference, munich, 1989, 8). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 250 in 1989, es2 had revenues of $19.3 million (45 per cent higher than in the previous year but substantially below the hope its founders had of $100 million in five years) and ranked number one among the participants in pan-european technology programmes (us congress 1991). 30 es2 was a player in the general esprit and specific jessi projects, beginning with the idps, coordinated by philips international to provide the european it industry with the basis of a full service for designing and producing systems integrated on silicon in various different foundries. the rest of the participants were bull sa., france; gec marconi electronic devices ltd., united kingdom; and robert bosch gmbh, germany (cordis, publications office of the european union). another two projects were 5075 idps integrated design and production system with philips international, robert bosch, sgs-thomson microelectronics, siemens, plessey, stc-icl, and bull, and the 5080 jpl joint logic project with philips international, plessey, siemens-nixdorf, telefunken electronic, sgs-thomson microelectronics, mietec, and matra-mhs (esprit, 1991). european silicon structures entered into the technology initiative in bicmos for applications (tibia), coordinated by nederlandse philips bedrijven bv, which aimed to satisfy the components needs of the electron ic equipment industry for bipolar and bicmos ics technologies at the 0.7–0.5 micron generation, together with the design and cad expertise to exploit the technology. it enjoyed the participation of 17 scientific institutions and 30 the strategic joint european semiconductor initiative (jessi), an initiative to restore european competitiveness in microelectronics, was one of the most ambitious collaborative projects launched under eureka together with the german-dominated high definition television (kassim and menon, eds. 2002, 233; marchipont 1997, 115), considered the upstream cousin of jessi, both involving chips (leuenberger and weinstein, eds. 2012, 28). the european research programmes tried to provide central coordination for european national companies and a platform to take a more pro-active approach towards developing standards for europe and worldwide (dataquest’s eighth annual european semiconductor industry conference, munich, 1989, 8). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 251 10 manufacturing companies (annex 2), including some spanish firms and centres. 31 critical voices acknowledged that the increase in trans-european collaboration funded by the ec was a major success of the programme, but also made it sensitive to funding reduction (us congress, 1991). spain spain occupied modest positions in western europe as a producer in the semiconductor industry (5.5 per cent of the total, far from germany and the united kingdom (uk)), and as a consumer, with 6 per cent. this mediterranean nation lagged behind core western countries but was the major semiconductor market of a group of regional category, including southern and central countries (switzerland, austria, portugal, greece, turkey, and malta). several major telecommunications, data processing, and consumer electronics manufacturers have located plants in spain, attracted by low wages and cheap land (dataquest 1990). graph 1. total european semiconductor market, 1990 ($m) 31 cordis june 21, 1994. 3077 2730 1531 1179 894 691 559 197 0 500 1000 1500 2000 2500 3000 3500 germany uk and eire france italy rest of europe nordic countries benelux spain http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 252 in spain, the first initiatives in microelectronics succumbed to uncertainty and the ineptitude of the government in the first phase of the democratic transition after a long period of francoist dictatorship, as happened with the technical mission to silicon valley, heart of high technology, which encouraged the north american ami to make a plan to settle on spanish soil and which also failed. the project to manufacture chips with motorola as a technology partner also suffered a similar fate. the ctne (compañía telefónica nacional de españa) tried to assimilate know-how by sending technicians to motorola’s design centre in switzerland, but despite advances and good rapport, the multinational declined offers because of the unattractiveness of the spanish market, according to the company’s impression. in comparative terms, american micro systems prompted a similar project in austria and one of the negotiators of motorola, pistorio, created the società generale semiconduttori (sgs) in italy, an innovative joint venture between olivetti and telettra (calvo 2014). it teamed up with att in bipolar circuit technologies and merged with thomson in 1987, setting up one of the two major blocks in the european silicon industry, alongside the central european axis philips-siemens. this was in sharp contrast with italy, which was dedicated to the culture of the national champion in a context of world market predominance. 32 a pre-agreement with the american silicon valley supertex did not flourish either. this firm had been very interested in the infrastructure of the national centre of microelectronics to manufacture 32 juan mulet melià, conversation with the author, barcelona, 16/5/2013. the multinational motorola had five design centres in europe: east kilbride (scotland), geneva (switzerland), munich (germany), toulouse and bordeaux (france). motorola (fourth in the whole semiconductor industry in terms of revenue after nec, toshiba, and intel and, in 2003, 19 th among multinational companies in terms of volume of investment in r&d) was a pioneer in the introduction of the first 32-bit microprocessor (mc68020), containing 200,000 transistors (fletcher 2013, 129). its semiconductors section accounted for approximately 30 per cent of its sales; one-third of their total revenues was generated outside the us and 7.6–8.3 per cent of its revenues was allocated to r&d (dataquest 1989, 215). shortly before the end of the decade of 1980, the ctne leaned on amper to create the joint mobile venture telcel motorola (calvo 2014, 242; forsgren 2013, 19; oral history of pasquale pistorio interviewed by doug fairbairn, 26/4/2010; ‘interview with pasquale pistorio’, ee times, 25/3/2005). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 253 high-voltage chips for consumer goods in spain. according to solana, in order to favour the balanced location of cutting-edge technologies for factories throughout the spanish territory, barcelona was one of the sites considered to compensate for att and fujitsu projects in madrid and malaga. 33 without a doubt, the public sector, represented by the government and the ini, appeared in the first plans to create a joint venture with att but this road was closed. 34 spain was the scene of several international alliances in the microelectronics industry sponsored by the government, public institutions, and companies. california micro devices (cmd), manufacturer of high-performance electronic components through its thin film, asic, and microcircuits divisions, agreed with telefonica to form a subsidiary named california micro devices, spain. cmd would provide technology and training and about $2 million in investment for around one-third of the ownership and would market its components to military and civil, aerospace, medical, computer, and communications customers. products sold in spain would serve spanish defence needs. 35 33 minutes of the board of directors of telefónica (mbdot) 28/10/1987; telefonica compared the project with a company, no doubt supertex, advanced in the ‘smart power chip’ (several technologies integrated on a single chip), with that of att: popular science, november 1985, 85; el país, 15/10/1987. in 1986, ibm embarked on a decentralization process in successive steps: transfer of authority to the national subsidiaries; separating these into two groups according to a scheme of magnitude and speed of market growth (france, italy, and germany/rest of europe), linked to the central offices in paris (thakur et al. 1997, 304). ibm opened an international software development centre in barcelona (mbdot, 28/10/1987; smidt and wever 2012, 39. telefónica backed the everest project to develop tools for testing chips with $40 million dollars: minutes of the steering committee of telefónica (mscot), 30/1/1991. 34 agreement between att-compañía telefónica nacional de españa, 26/7/1984, ini historical archive. 35 cmd (1980) joined with capsco sales (1976), a thin-film company, and in 1982 it established custom mos arrays (cma), which designed, manufactured, and marketed hcmos cell-based ics and gate arrays in the 200 to 2,000-gate range before merging in 1986 with cma into one new firm. components: thin-film passive components for hybrid assemblies/gate arrays/cell-based ics/and non-impact print head substrates as well as asics (dataquest 1988, 135–137). cmd represents a typical case of fraud with a dozen or more accounting tricks, including fictitious sales and fictitious revenue recognition (one-third of the company’s $45 million in revenue in 1994 was spurious) (securities exchange commission 1999; macdonald 2000; jones 2011). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 254 the spanish market was of a similar size to the austrian, each covering around one quarter of the size for the total group, with the majority of users coming from consumer, telecom, and edp segments (european semiconductor consumption history and forecast 1985-1995). in this country, the socialist government in office, after a period of conservative inertia, conceived plans to boost production and research activities with the aim of incorporating the country into the mainstream of the electronic revolution and empowering the economy to gain competitiveness. this was done by segmenting the market according to technological level. in this way, moving towards cutting-edge plans entailed associating with multinational technology leaders, while for less sophisticated technology it resorted to national technological partners. the company (the phone monopoly), facing the challenge of inevitable technological change, situated itself at the forefront of initiatives in the field of microelectronics. personalities and associations in the sector had been pushed in the same direction with little success. the convergence of all the efforts resulted in a general action plan (plan electrónico e informático nacional: pein) and concrete business projects. the largest meant attracting investment and technology from the us multinational giant att in a joint venture called att microelectrónica de españa, with factory and research facilities located in spain, an unusual practice for att. both the ctne as a pioneer in the introduction of microelectronics and a natural client of the products and the state as the ‘sector lever’ contributed financial resources, support, and infrastructure to make the most advanced company in highly sophisticated integrated circuits possible (calvo 2016; majó 1997). this was not the only initiative of ctne in the sector; rather, it combined this joint venture with others with different characteristics. according to one of the protagonists, ctne used its http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 255 huge purchasing and investment power to make industrial policy. unlike the path adopted in general, in the case we examine now (european silicon structures), ctne used its purchasing power as a tool for international collective action. 36 demand as a tool for collective action: ctne ctne was a key enterprise in the national economy due to the considerable figures it presented in terms of customers that it had as subscribers (8.5 million) or users (several million), employment (61.500), and sales (380,000 billion pesetas). its decisive weight also stemmed from its large annual investments (180,000 million pesetas) and its net fixed assets of 1.3 trillion pesetas (morán and lada 1984). the semi-public spanish monopoly launched a four-year plan that intended to restructure the industry and telecommunications services with a colossal investment of some 800,000 million pesetas, half of which was earmarked for the telephone network. quantitative growth joined with the modernization of equipment with electronic and semi-electronic technology and the beginning of the adoption of optical fibre. 37 the ctne investment plan emerged almost in parallel to, but independently of, pein, which was the result of unprecedented joint planning with the government. still backing innovation, it supported technology overlap (soft modernization) as a way to curb unemployment, immediate colonization by multinationals, and the inability of workers to absorb new technologies (comparecencia, dscd, 10/10/1984, 6.498–6.526). in this context, partnerships with companies possessing knowledge seemed unavoidable. because of the implementation 36 conversation with luis solana, madrid, march 8, 2016. 37 more than two million urban lines and links equivalent to about 700,000 lines; 56 km of optical fibre: el país, october 23, 1983. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 256 of the plan, effective investment by the ctne in 1985 almost doubled compared to the previous year. 38 on 26 december, telefonica joined the initial group of seven high-tech companies involved in european silicon structures to develop and manufacture a type of integrated circuit and to place that high-technology product within reach of small businesses. the other members of the group were bosch, british aerospace, olivetti, saab scania, bull, philips, and brown boveri. 39 these partners were customers and providers of information on markets and technology at the same time as being recipients of training in the potential applications of es2 products. they joined in on all three major strategic goals, perhaps the most important of which was that es2 products and technology would serve as catalysts for innovation in the long term. the investment was also geared towards profitability and access to a manufacturing facility working with state-of-the-art silicon at low cost and risk levels. 40 telefonica was the only telecommunications firm in this european-labelled group, due to its foundation, headquarters, research centre, and factory. telefonica entered the pan-european company es2 with 5 per cent, the maximum amount of the project’s participants, in order to prevent any further pressures. 41 when it came to 38 the telefónica group, 1985, 40. 39 le monde, december 28, 1985. some sources excluded bosch, specified as a member saab-scania combitech, an electronics subsidiary of the swedish automotive and aerospace group, and added advent, a capital risk firm. british aerospace regarded the european silicon structures venture as an important new approach to european collaboration in a vital high technology industry: british business 20, 1986, 3. 40 mbdot, december 18, 1985; telefónica, memoria: balance social 1984-1985, 156. this type of cmos custom integrated circuit technology in short series fits exactly to the customer’s needs to help increase competitiveness by shortening development time, increasing functionality and performance, and reducing costs; the north american press greeted it as the new wave of european industry: the new york times, august 1, 1988. custom chips met the same needs as a tailor-made suit (cane 1987, 37). 41 prs report science & technology, november 8, 1985, 40. telefonica contributed $2.5 million and owned 45,000 shares of the total in the hands of spanish partners, which also included major banks (banesto, bilbao, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 257 presenting it in the spanish market, telefonica emphasized that the new firm was intended to serve the custom circuits market and to manufacture prototypes in europe with time-frames and prices that were lower than existing prototypes. the role of telefonica was summarized in its acting as guardian to the introduction of these components into spain through comelta y semiconductores s. a., specialized in the distribution and marketing of electronic components. on the other hand, telefonica would provide technical advice to both companies, complete design requests, and provide appropriate training courses. table 3. comparative view of att microelectrónica de españa and es2 profiles att microelectrónica de españa es2 city/country madrid, spain rousset, france products cbic* customs cbic, arrays, custom mil process technology cmos m2 cmos m2 min. line width 1.25 0.8 wafer size 6 5 max. wafer capacity 14,000 1,000 s. q. in start capacity (4wks.) 383,320 19,020 cleanroom (square feet) 25,000 0 cleanroom class 1 10-ene origin of owner usa pan-european market structure merchant merchant * cbic: cell-based integrated circuits: an asic device that is customized using a full set of masks and which uses automatic placement of cells and automatic routing. source: compiled by author using european fab database hispano, santander, and urquijo-unión): mbdot, november 26, 1986. the press reduced the contribution of spain to 4 per cent: el país, november 19, 1986. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 258 from a comparative perspective, the involvement of telefonica in att microelectrónica de españa and es2 presents several important differences. the more purely technical, contained in table 3, indicate that they did not compete in the same market since es2 relied on short series and att on long series. 42 other very notable differences are related to the scale, the nature of the alliance, the form of financing, the role of telefonica in the joint venture, and the territorial expression of the initiative. at&t microelectrónica de españa resulted from a bilateral agreement between the semi-public monopoly telefonica and the multinational at&t under the significant political guidance of the governments for several reasons, including economic and geostrategic reasons. unlike what happened with es2, the spanish government helped microelectrónica de españa with numerous grants, financial and fiscal resources, as well as with infrastructures as a counterpart to the location of the firm’s productive activity and its taxation in spanish territory. microelectrónica de españa was a case of attraction of fdi over export capital, which was the case of es2. an integrated market for es2 and spanish domestic and international markets for mede were the formulas adopted. telefonica’s role in the project was subordinate despite the apparent equality of participation, judging from the almost total absence of nationals in the management of es2. 43 mede was a joint venture with unequal participation from the partners and, therefore, with differing levels of control over the company among members. 42 this feature was stressed in le monde, december 28, 1985. 43 as an exception, carlos a. lópez barrio was chairman of the strategic partners committee of es2 and a member of the board of directors. lópez barrio is a professor of electronics technology at the universidad politécnica de madrid (upm) and director of the integrated systems laboratory (department of electronics engineering) (kabene 2010, 344). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 259 table 4. top 10 world digital mos cbic revenue ($million) ranking suppliers by revenue 1987 1988 1989 1989 vlsi technology 15 22 29 1 austria mikro systeme 13 16 24 2 texas instruments 5 12 24 3 european silicon structures 6 12 17 4 medl 5 11 17 5 siemens 15 15 17 6 sgs-thomson 2 3 15 7 at&t 6 9 10 8 harris semiconductor 4 8 10 9 honeywell/atmel 0 0 10 10 source: dataquest, january 1991 graph 2. top 10 digital mos cbic suppliers by revenue source: own from dataquest january 1991) 0 5 10 15 20 25 30 35 1987 1988 1989 $ m il li o n s vlsi technology austria mikro systeme texas instruments european silicon structures medl siemens sgs-thomson at&t harris semiconductor http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 260 table 5. total mos cbic suppliers by revenue ($million) revenue ($million) ranking suppliers by revenue 1987 1988 1989 1989 mietec 27 29 34 1 texas instruments 5 12 30 2 vlsi technology 15 22 29 3 austria mikro systeme 15 19 27 4 medl 5 12 19 5 sgs-thomson 2 3 19 6 european silicon structures 6 12 17 7 siemens 15 15 17 8 imp europe 2 7 11 9 lsi logic 4 7 11 10 source: dataquest annuary 1991 conclusion european governments eager to promote competitive industries in their respective countries, corporate elites, and the voracity of capital joined forces in high-tech industrial projects in the framework of the creation of a single market. without a doubt, one of the most representative cases was es2, a paneuropean initiative in the field of microelectronics and semiconductors. results were far from the ambitions of the initial plans, but quite possibly left traces in the configuration of differential features of the european industry with regard to the north american and the japanese industries. in the margins of the central axis of the project, spain played the role of secondary participant through the involvement of the ctne, the telecommunications monopoly very soon to disappear to conform to community rules. ctne in general used its purchasing and investment power as a tool for industrial policy but in the case we have surveyed (european silicon structures), ctne used its purchasing power as a means for a new supply source and for collective international action. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 261 acknowledgments financial support has been received from the spanish ministerio de economía y competitividad, research project har2013-41453-p. primary sources ini historical archive, madrid. securities exchange commission, us. telefonica, minutes of the board of directors, madrid. telefonica, minutes of the steering committee, madrid. oral sources computer history museum, mountain view, usa. juan mulet melià, conversation with the author, 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us congress. 1991. competing economies: america, europe, and the pacific rim. washington: diane publishing. vasudeva, p. k. 2006. international marketing. new delhi: excel books. wedgwood, c. g., ed. 2013. european electronics directory 1994: systems and applications. oxford: elsevier. yin, robert k. 1993. applications of case study research. applied social research series, vol. 34. london: sage. http://revistes.ub.edu/index.php/jesb https://books.google.es/books?id=r3a_1ogpqo8c&pg=pa225&lpg=pa225&dq=joint+venture+development+co.+and+european+silicon+structures&source=bl&ots=j3tuaiekqq&sig=3nzj3w0rmwwxbsjwhsyvxxs-qka&hl=es&sa=x&ved=0ahukewjhoqwxwn7kahvitxqkhucqdpwq6aeijtab https://books.google.es/books?id=q7qefvm_dtac&pg=pa48&lpg=pa48&dq=european+silicon+structures,+geocentric&source=bl&ots=eepe6ycgqk&sig=a6t7qvfoe5vrkymh00hlkvnnap4&hl=es&sa=x&ved=0ahukewiomsiazv7kahvmxswkhuplcfkq6aeijzab volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 264 annex 1. board of directors of european silicon structures, 1988 name position prior firm prior position j.l. grand-clement ceo/mngdir motorola vp europe group pierre lesieur vpfin/admin motorola dir finance rod attwooll vp/dirops texas instrument mng dir bedford bernard pruniaux vp/mfg thomson csf dir opns john gray vp/dirs/ wtech lattice logic founder/mng dir j.p. demange vp/dirs.europe national dir strat mktg h.p. friedrich vp/dircentra europe n/a mng dir francis courrèges wfrfabmgr sierra semicond prod eng mgr eric demoulin dirtechnology thomson csf dir mos tech source: compiled by author using dataquest, june 1988, p. 205. annex 2. participants in the technology initiative in bicmos for applications (tibia) companies alcatel bell manufacturing company, belgium; alcatel sel ag, germany; gec plessey semiconductors plc, united kingdom; philips consumer electronics b.v., netherlands; sgs thomson microelectronics sa, france; sgs-thomson microelectronics srl, italy; siemens ag, germany; semiconductores investigación y diseño, tres cantos spain; telefonica i+d, spain; temic telefunken microelectronic gmbh, germany. scientific institutions centro nacional de microelectronica, bellaterra, spain; centre national d’études des télécommunications (cnet), france; commissariat à l’energie atomique (cea), france; centre d’études de grenoble, france; delft institute of microelectronics & submicrontechnology, netherlands; école polytechnique federale de lausanne, switzerland; industrial microelectronics center, sweden; instituto de engenharia de sistemas e computadores, portugal; inter-university microelectronics center, belgium; linkoeping university, sweden; national http://revistes.ub.edu/index.php/jesb volume 2, number 1, 235-265, july-december 2016 doi.org/10.1344/jesb2016.2.j018 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 265 technical university of athens, greece; nmrc, university college cork, ireland; siemens entwicklungszentrum fuer mikroelektronik, austria; technical research centre of finland, finland; technische universitaet berlin, germany; tecnopolis csata novus ortus; university of catania, italy; university of dublin, ireland; scrl, italy. source: cordis june 21, 1994. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 nieves carrera ie business school – ie university (spain) what do we know about accounting in family firms? abstract in this study, we present a review of research of accounting in family firms. the aim is to summarize the main findings of prior studies and identify what we have learned so far about the role of accounting in family firms. specifically, we survey the contributions of accounting researchers to the study of family firms in four subfields: (1) financial accounting and reporting, (2) management accounting and management control, (3) auditing, and (4) accounting history. after considering some theoretical and empirical advancements of family business research in other disciplines, we conclude by identifying avenues for future research. keywords: accounting research; family firms; financial accounting; management accounting; auditing; accounting history; literature review 1. introduction family businesses play a significant role in the economy. in the european union (eu), they make up for more than 60% of all companies, including sole proprietors to large multinational corporations (eu 2017). in the united states (us), family firms represent close to 33% of the s&p 500 industrials firms and 48% of the s&p 1500 firms (khalil and mazboudi 2016). corresponding author: e-mail: nieves.carrera@ie.edu received 05 april 2017 accepted 21 june 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 following the development of research on family business in areas such as business, management and entrepreneurship, accounting researchers have increasingly showed an interest in the accounting and reporting practices of family firms. in order to understand to what extent accounting practices of family firms differ from those of non-family firms, accounting researchers have adopted the research questions, approaches and methods used in prior research investigating non-family businesses. if family firms “think and act differently” (moores and salvato 2009, 186), then we expect differences in their accounting and reporting decisions when compared to non-family businesses. their unique characteristics include the concentrated ownership in the hands of a controlling family, the power of the controlling family to pursue their goals, the involvement of the family in the governance of the firm, and the close relationship between managers and the family (anderson and reeb 2003; prencipe, bar-yosef, and dekker 2014; steier, chrisman, and chua 2015). importantly, the relevance of non-economic factors such as reputation, social capital and the long-term survival for family firms is significantly higher than in the case of non-family firms (arregle et al. 2007; gomez-mejia, cruz, and imperatore 2014). even though the interest of accounting researchers on family businesses is relatively new, several literature reviews have been published in the last few years with the aim to identify the dominant themes and avenues for future research (e.g., salvato and moores 2010; songini, gnan, and malmi 2013; prencipe et al. 2014). this study supplements these preliminary insights in several ways. first, we summarize and assess the findings of prior reviews. second, we update the state-of-the-art of accounting research in family business by examining the papers published since 2014 to present (2017). third, we add some insights from prior research http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 in accounting history, a subfield neglected in previous reviews. finally, we add some additional insights regarding future research. to focus the paper, we limit the review to certain areas of accounting research1. first, we focus on financial accounting and on what we have learned so far about financial reporting quality, earnings management, disclosures and accounting choices in family firms. this is by far the most developed area in accounting and family firms. second, we review studies on managerial accounting, with an emphasis on management accounting practices and the drivers of management accounting change in family firms. third, we review studies examining the demand for auditing, the choice of auditor and audit fees. finally, we discuss the contribution of accounting history research to our understanding of accounting in family firms. the challenges of research on family firms open a number of possibilities for future work. first, from a theoretical perspective, we concur with prior research (e.g., salvato and moores 2010) suggesting that future studies could benefit from adopting a theoretical approach beyond the agency framework dominant in previous studies. second, as far as the empirics is concerned, researchers should go beyond the dichotomy of family firms versus non-family firms in order to capture the heterogeneity within family firms. researchers should be more willing to use a mix of data (e.g., archival data together with survey data or case studies) to explore the universe of family firms. importantly, like in other research areas on family firms (e.g., see bravo et al. 2017) qualitative approaches could provide new insights about the role of accounting in family firms. 1 we do not include studies accounting information systems, corporate social responsibility and taxation. similarly, we do not include papers in corporate governance unless they have a clear link with financial accounting research (for a review of corporate governance studies on family firms see steier et al. (2015)). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 there are a number of areas in accounting research examining family firms worth exploring in future research such as the variation of accounting practices of family firms across jurisdictions, the influence of management accounting systems on succession, or auditor’s judgment in the context of family firms. finally, a historical perspective using single case studies may also help to grasp a better understanding of accounting in family businesses. we conclude by arguing that accounting scholars could benefit from adopting an interdisciplinary approach and collaborate with researchers with expertise on family firms from other areas of knowledge. the paper is structured as follows. we first introduce accounting research and the role of accounting in family firms. in this section we comment on prior literature reviews, explain how we conducted the review and show the main results. we also briefly discuss the concept of family business. in section 3, we examine studies related to financial reporting and provide a discussion of their main findings. in section 4, we focus on studies on management accounting in family firms. sections 5 and 6 focus on auditing studies and on accounting history respectively. section 7 provides some insights for future research and session 8 concludes. 2. the role of accounting in family firms the research area of accounting comprises a broad range of areas including financial accounting, managerial accounting, auditing, taxation, governance and accounting information systems. in this paper, we focus on four main sub-disciplines in the area: financial accounting and reporting, managerial accounting, auditing and accounting history. while financial accounting deals mainly with the communication of organizations to external users such as shareholders, investors, creditors or suppliers, management accounting involves providing information to internal users, primarily managers. research topics in the field include the quality of the financial information and the impact of accounting choices. managerial http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 accounting research topics include studies on formal and informal control systems and the decision to adopt different management control systems. auditing, although linked to the broad area of financial accounting, is considered a separate discipline. auditing research focuses on issues such as the demand of auditing services, the characteristics of auditors, and the pricing strategy of audit firms among other topics. accounting history aims to understand the development of accounting practices as well as how accounting affects individuals, organizations and society over time (walker 2009; carnegie and napier 2012). 2.1. accounting in family firms family firms have unique characteristics that explain why we expect their accounting and accountability practices to be different from those of non-family firms. these unique characteristics include the concentrated ownership in the hands of a controlling family, the power of the controlling family to pursue their goals, the involvement of the family in the governance of the firm, the interest of the controlling family in the long-term survival of the firm, the close relationship between managers and the family, and the relevance of noneconomic factors such as reputation, the emotional attachment of the family to the business, and the “dual” social capital (firm social capital and family social capital) present in family businesses (anderson and reeb 2003; villalonga and amit 2006; arregle et al. 2007; gomezmejia et al. 2011). these traits are key drivers of business decisions in general and of accounting decisions in particular. 2.2. prior reviews of research on accounting in family firms in the last few years we have seen a significant increase in the number of studies exploring accounting issues within the context of family businesses. the growing interest is reflected in the special issues published on family business review, journal of family business strategy http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 and european accounting review and in the publication of several literature reviews on the topic (e.g., bhaumik and gregoriou 2010; salvato and moores 2010; songini et al. 2013; prencipe et al. 2014; senftlechner and hiebl 2015; sousa-paiva, costa-lourenço, and castelobranco 2016; helsen et al. 2017). table 1 presents a short summary of prior reviews on accounting and family firms. salvato and moores (2010) develop a framework to identify the specific features of accounting practices in family firms and an agenda for future research. they find 47 articles published since the 1980s, most of them related to financial accounting (35 papers, 75%). they identify nine (19%) papers on auditing and three (6%) on management accounting. except for three papers, all are empirical and quantitative and the dominant approach was the agency theory. they develop a list of research questions in financial accounting, managerial accounting and auditing, with a suggestion of the possible approaches, methods and empirical contexts to consider. they also propose the adoption of theoretical approaches different to the dominant agency theory. songini et al. (2013) follow the methodology adopted by salvato and moores (2010) to identify the papers published in the period 2010 -2013. they identify 16 papers, half of them related to financial accounting issues such as earnings management, disclosure practices and earnings quality, and the other half to managerial accounting topics like balanced scorecard, management accounting practices and the role of the cfo. the authors conclude by arguing that the intersection between accounting and family studies has potential, particularly when it comes to managerial accounting. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 table 1. articles reviewing accounting and family firms research study journal* field** data source sample summary bhaumik and gregoriou (2010) jes fa em n/a n/a  discussion of the mechanisms by which families retain control over firms and the incentives of family firms to expropriate other non-family shareholders.  examination of the role of em to facilitate tunneling  opportunities for further research: expand the research on em in other settings and undertake cross-country comparisons. helsen et al. (2017) jes ma ebsco 32 articles, (1990-2015)  comprehensive review of literature on choice of management control systems (mcs) in family firms.  studies are organized in three areas: i) papers examining a specific management control tool; ii) papers examining the determinants of the choice of mcs; and iii) outcomes of the choice of mcs.  for each area above, discussion of the theoretical approaches, evidence and insights for future research. prencipe, baryosef and dekker (2014) ear fa ma au n/a 37 articles, (1980-2014)  discussion of the theoretical and empirical challenges of accounting researchers when analyzing family firms. review of the four main theoretical approaches used in family firms. discussion of how to define “family firms”.  comprehensive review of studies on accounting research in family firms. articles classified based on: a) key issues addressed; b) theoretical framework adopted; and c) operational definition of family firm.  insights and suggestions for future research. salvato and moores (2010) fbr fa ma au ebscohost, abi/inform and businesssource complete 47 articles, (1980-2010)  comprehensive review of literature on accounting and family firms. contributions in three areas: a) financial accounting, with an emphasis of em; b) management accounting; and c) auditing.  discussion of the potential extension of research in the area, with some suggestions for research questions and possible approaches, methods and empirical contexts. senftlechner and hiebl (2015) jaoc ma elsevier, sciencedirect, sciversem ebsco, business source elite, emerald, sage journals, springerlink, scopus, isi web of knowledge 33 articles, (1985-2012)  comprehensive review of empirical literature on management accounting (ma) and management control (mc) in family firms.  reviewed papers are classified based on type of article and geographical area, data collection and period, sample size and firm size and informant and analytical approach. discussion of definition of “family business”.  findings of prior research are classified based on three categories: antecedents, configurations and outcomes of ma and mc.  research questions for future research about informal and formal ma and mc systems, knowledge transmission, link between corporate governance and ma/mc, and changes in top executive positions and their impact on ma/mc. songini, gnan and malmi (2013) jfbs fa ma au sciencedirect, ebsco, emerald 16 articles, (2010-2013)  discussion of prior research around three key family business characteristics: i) involvement of the family in the management: ii) ownership and governance, and iii) the socioemotional wealth and succession.  following salvato and moores (2010), it updates of the state-of-the-art of accounting research for the period 2010-2013. it considers journals not included in the prior review.  summary of the papers included in the special issue and suggestions for future research. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 study journal* field** data source sample summary sousapaiva, costalourenço and castelobranco (2016) raf fa em n/a 17 articles (2006-2015)  comprehensive review of literature on em in family firms.  summary of the three main theoretical frameworks used in prior studies: agency, stewardship and sew approaches.  insights for future research. trotman and trotman (2010) fbr au n/a 2 articles on auditing, (2006-2008)  opportunities for audit judgment and decision-making (jdm) research in family firms. discussion about the theoretical framework for audit jdm research. discussion of the task, individual and individual interactions in this context.  review of some key prior studies on accounting, auditing and corporate governance of family firms. discussion on how their findings may contribute to future audit research. source: own elaboration. * see the list of journals and acronyms in the appendix. wp: working paper. **field: au (auditing), fa (financial accounting), ma (managerial accounting), em (earnings management) http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 prencipe et al. (2014) review four theoretical frameworks widely used in family business research in management (agency framework, stewardship theory, resource-based view (rbv) of the firm and socioemotional wealth (sew) approach) and discuss the key empirical challenge in this field: how to define and operationalize the concept of family firm. before giving some suggestions for future research, they provide a review of the papers since the 1980s. their search strategy is more limited than the one used by salvato and moores (2010) as they exclude terms such as “privately held firms” when there is no clear analysis or evidence related to family issues (prencipe et al. 2014, 369). they identify 38 papers, 16 (42%) were included in salvato and moores (2010), five (13%) were published before 2010 but not included in salvato and moores (2010), and 15 (40%) were published in the period 2010-2014. these reviews clearly show the dominance of studies on financial accounting issues. by far, the most popular topic is financial reporting quality, especially “earnings management” (em). bhaumik and gregoriou (2010) examine prior research on em in family firms, with a focus on the mechanisms by which families retain control and their incentives to expropriate resources from non-family shareholders. sousa-paiva et al. (2016) also review studies contributing to this specific area (see details in table 1). senftlechner and hiebl (2015) and helsen et al. (2017) argue that prior literature reviews omit a significant number of papers on management accounting and control in family firms published in the last few years. senftlechner and hiebl (2015) identify 33 articles examining management accounting and control in the context of family firms for the period 1985-2012 and helsen et al. (2017) identify 32 articles for the period 1990-2015. these reviews classified the contributions in three groups: (i) studies examining the antecedents of management accounting and control in family firms; (ii) studies analyzing the configurations of these practices; and (iii) studies focused on the outcomes of the choice of http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 management accounting and controls systems. in contrast with prior reviews, helsen et al. (2017) included papers related to compensation and human resources management (hrm) if they relate to management controls. as far as auditing research is concerned, trotman and trotman (2010) provide an interesting discussion about the potential theories and methods that can be used to address research questions on the audit of family firms from an audit judgment and decision making (audit jdm) research perspective. to our knowledge, no previous literature review has considered the contributions of accounting history research to the area of family firms. we complement these reviews by updating the state-of-the-art of accounting research in the area. we carried out an analysis of the papers published in the period 2014 to 2017. to identify the studies, we consider the journals in salvato and moores (2010), songini et al. (2013) and prencipe et al. (2014)2. for the search strategy, we use the keywords of salvato and moores (2010, 195). this search resulted in 31 relevant articles, four of which are the literature reviews displayed in table 1. table 2 describes the remaining 27 papers and one article published in 2013 (ho and kang 2013) which, in spite of its relevance, was not included in previous reviews. we also include two working papers (wp): cruz, imperatore and gomez-mejia (2015) and mengoli and pazzaglia (2017). out of the 30 papers displayed in table 2, 16 (53%) are related to financial accounting, five (17%) discuss issues related to management accounting and control and nine (30%) examine auditing issues. most papers are empirical and adopt an agency framework. 2 the list of journals included in these reviews and in our study are available in the appendix. we acknowledge the potential bias in our results due to the omission of some journals in the search strategy. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 table 2. reviewed research on accounting in family firmsperiod 2014-2017 (excluding accounting history) study journal* field** topic theory method sample/case findings achleitner, günther, kaserer and siciliano (2014) ear fa earnings management sew empirical 838 firms, germany family firms engage less in real em and exhibit more earnings-decreasing accruals-based em than non-family firms. family firms treat these two types of em as substitutes; nonfamily firms, however, treat them more as complementary tools for em. bardhan, li and wu (2015) ah fa internal controls agency empirical s&p 500 family firms exhibit more material weaknesses in their internal control over financial reporting than non-family firms. the greater likelihood of material weaknesses is driven by family firms with dual-class shares. results consistent with the entrenchment hypothesis that family owners are motivated to maintain weaker internal controls to extract private benefits. barroso, ali and lesage (2016) ear au audit fees agency empirical 7982 firm-year observation from 19 countries there is a u-shaped relation between blockholder ownership and audit fees in the shareholder corporate governance model; and an inverted u-shaped relation between blockholder ownership and audit fees in the stakeholder corporate governance model. the results hold when considering family firms, which suggest that the importance of the context goes beyond firm characteristics. cesaroni and sentuti (2017) jfbm ma role of accountants empirical. survey. 175 auditors, italy accountants are mostly concerned with technical elements/solutions and less careful about relations and communication between family members. they underestimate the relevance of the ability to empathize with the family. this may cause a discrepancy between family firm expectations and accountant’s professional practice. chen, chen and cheng (2014) ear fa conservatism agency empirical s&p 1500 conservatism increases with non-ceo family ownership (family owners have the incentives and the ability to implement conservative financial reporting to reduce legal liability and mitigate agency conflicts). this relationship is not significant in family firms with founders serving as ceos. chen, ding, wu and yang (2016) jsbm fa change in accounting regulation agency empirical 6950 firms from 80 countries in the transition to international accounting standards (ias), family firms tend not to voluntarily switch from local gaap to ias. ias adoption differentially influences private firms, family firms versus non-family firms, in terms of their access to debt capital. collin, ahlberg, berg, broberg and karlsson (2017) jfbm au role of auditors empirical. survey 309 auditors. sweden in family firms, auditors primarily perform the monitoring role of the audit. however, there are indications of the auditor performing the consigliere role, through performing the advisory and mediating functions and, to a smaller degree, the conveying function. corten, steijvers and lybaert (2015) abr au demand of auditing agency empirical 482 firms, us reviews/compilations done by auditors seem to be sufficient and more cost-effective in the context of family firms to mitigate type i agency costs compared to audits. the level of shareholder–debtholder agency costs seems to be a driver for the demand for audits. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 study journal* field** topic theory method sample/case findings corten, steijvers and lybaert (2017) jfbs au demand of auditing agency empirical. questionnaire 125 firms, belgium high quality auditors are hired by family firms to mitigate agency conflicts. monitoring effectiveness of the board weakens the association between the level of intra-family agency conflicts and audit (quality) demand. the audit demand effect caused by intra-family agency conflicts decreases when the firm is able to reduce the agency costs internally. cruz, imperatore and gomez-mejia (2015) wp fa earnings management sew empirical european firms. family firms are less likely to smooth earnings as capital market conditions deteriorate compared to non-family firms. family firms are less likely to opportunistically smooth earnings as financial crisis increases. dekker, lybaert, steijvers and depaire (2015) jsbm ma professionalization agency empirical 523 firms, belgium no evidence of a significant relationship between the use of formal financial controls and firm performance. however, the use of hrm control systems has a positive impact on financial performance. effering and hartono (2015) jaoc ma management control practices and leadership case study indonesian company. leadership and the management control system (mcs) of family firms are embedded in its societal culture. the owner and his/her circle may play crucial roles in producing and reproducing the legitimate mcs based on the extended family concept. cultural control based on shared family norms is the most dominant one and simplifies process and result controls. ghosh and tang (2015) jae au audit fees. financial reporting quality agency empirical 2000 largest industrial firms, us auditors charge family firms significantly less fees, and the fee difference shrinks in magnitude when family firms have high audit risk. overall, family firms have lower audit risk and their auditors work less to provide assurance. these results are consistent with family firms having superior reporting quality that lowers audit risk. golden and kohlbeck (2017) aa fa voluntary disclosures. compensation agency empirical s&p 1500 family firms are less likely to provide management earnings forecasts when their ceo's wealth is higher in contrast with non-family firms. the main result holds when a family member serves as ceo or on the board of directors. gomez-mejia, cruz and imperatore (2014) ear fa financial reporting quality sew conceptual integrated framework to financial reporting decisions in family firms based on the sew theory. several propositions regarding the probability of the firms to engage em and to produce voluntary disclosures depending on two dimensions of sew: “family control and influence” and “family identification”. greco, ferramosca and allegrini (2015) fbr fa accounting decisions agency empirical 142 firms, italy family firms use write-offs in a way that is consistent with performance. non-family firms, however, use write-offs for em purposes. this result is consistent with reduced type i agency conflict in the case of family firms as compared to non-family firms. there is no evidence of family entrenchment (i.e., family owners being concerned with the reputational damage associated with a decrease in assets’ value). ho and kang (2013) (a) ajpt au auditor choice. audit fees agency empirical s&p 1500 family firms are less likely to hire top-tier auditors and incur in lower audit fees than nonfamily firms. the tendency of family firms to hire non-top-tier auditors and to pay lower audit fees is stronger when family owners actively monitor their firms. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 study journal* field** topic theory method sample/case findings jara-bertin and lópez-iturriaga (2014) sjaf fa earnings management (em) agency empirical 3559 listed firms from canada, france, italy, spain, uk, us the contest to the dominant family shareholder is relevant for em: in family firms, the more challenge to the control of dominant shareholders, the less em. this contest is more important in civil law countries where shareholders’ rights are less protected. consistent with the view that non-family shareholders are under more public scrutiny and have more difficulty to agree with the largest family shareholder, a second or third non-family shareholder can reduce or alleviate em. kang (2014) ah au auditor choice agency empirical s&p 1500 family firms are more likely to appoint industry-specialist auditors than non-family firms. family firms with a family member acting as ceo or with dual-class shares have even a higher tendency to hire industry specialist auditors (entrenchment argument). khalil and mazboudi (2016) ajpt au client’s acceptance. audit fees agency empirical 562 firm-year observations, us big 4 auditors perceive family firms from which the incumbent auditors resigned as being less risky than their non-family firms’ counterparts. they are also more likely to serve as successor auditors following auditor resignations in family firms as opposed to non-family firms. the changes in audit fees following the resignations in family firms are significantly smaller than those in non-family firms after controlling for several factors. the likelihood of financial restatements in family firms in the post-resignation period is significantly lower than in non-family firms. ma, ma and tian (2017) ear fa corporate opacity agency empirical 705 firms, china family control is associated with a lower cost of debt on average and a negative impact exists mainly in firms with relatively low corporate opacity. the moderating effect of corporate opacity becomes more pronounced when investors’ perception of controlling families’ moral hazard of expropriation is higher. mengoli and pazzaglia (2017) wp fa financial reporting quality institutio nal and agency empirical 22,335 firms from 12 european countries the institutional development of a country influences the association between family ownership and reporting quality. well-developed formal institutions have a more beneficial effect on the earnings quality of non-family firms than that of family firms. informal institutions (families) have a positive influence on firm behavior in countries where formal institutions are lacking. martin, tochmancampbell and gomez-mejia (2016) jbe fa earnings management (em) sew and agency empirical s&p 500 founder family firms are less likely than non-founder family firms to use em. the effect varies with the firm size, the degree of ceo entrenchment and the stock structure of the firm. martínez-ferrero, rodríguez-ariza and bermejosánchez (2015) jfbm fa discretionary practices agency empirical 1275 nonfinancial listed companies from 20 countries family ownership is associated with greater control and monitoring of managerial decisions, thus avoiding information asymmetries. family owners impose a stronger discipline and dissuade non-family managers from using managerial discretion to act in their own interest. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 study journal* field** topic theory method sample/case findings muttakin, khan and belal (2015) aa fa disclosures of intellectual capital agency empirical 135 firms, bangladesh there is a non-linear relationship between family ownership and disclosures of intellectual capital. family duality (i.e., when the ceo and chairperson’s position are occupied by individuals of the same family) is negatively associated with the extent of such disclosures. nagar and sen (2016) cgir fa accounting decisions agency empirical 15,347 firm-year observations, india; 14,729 firm-year observations, us family ownership has different effect on the quality of cash flow reporting in different countries and country-level regulation moderates these effects differently. cash flow manipulation through classification shifting i) occurs in india and us, although it is stronger in the us; ii) in india it is stronger for family firms than for non-family firms; iii) it increased in india after changes in corporate governance regulation; and iv) has decreased (increased) for non-family firms after regulation in india (us) along with an increase of increase (decrease) of external financing. samuelsson, andersén, ljungkvist and jansson (2016) jsmed ma planning empirical. questionnaire 156 firms, sweden family firms use less formal planning than non-family firms. the results show a strongly positive relationship between entrepreneurial orientation and the use of formal short-term planning and long-term planning. songini and gnan (2015) jsbm ma management controls agency empirical 146 firms, italy the involvement of the family in the management is positively related to agency cost control systems. family involvement in governance, however, is negatively related to agency cost control systems. the use of these mechanisms affect firm performance. srinidhi, he and firth (2014) tar au financial reporting quality. audit specialization. agency empirical 13,899 firm-years observations, us strongly governed family firms are more likely to choose specialist auditors and exhibit higher earnings quality than a) non-family firms and b) other family firms. weakly governed family firms demand lower audit effort, exhibit earnings quality (no different from nonfamily firms. evidence that strong board governance can effectively mitigate the adverse consequences of the type ii agency problems on financial reporting in family firms. weiss (2014) ear fa financial reporting quality. internal controls agency empirical 324 listed firms, israel family ownership is associated with less material weaknesses in internal controls. material weakness in internal controls in family owned firms are associated with lower earnings quality than in the case of non-family firms. investors react more negatively to material weaknesses in internal controls of family firms than non-family firms. source: own elaboration. * see the list of journals and acronyms in the appendix. wp: working paper. **field: au (auditing), fa (financial accounting), ma (managerial accounting). (a) this paper published in 2013 is included because it was not included in the previous reviews. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 we complement the search by considering the contributions in the field of accounting history. for that purpose, we add to the list of journals described above several mainstream accounting journals where accounting historians publish their work (abacus, accounting and business research, and accounting, auditing and accountability journal) as well as specialist journals in accounting history (accounting, business and financial history, accounting historians journal, accounting history and accounting history review). the search resulted in 10 papers summarized in table 3. 2.3.defining family firms a key challenge in family business research is to define what exactly constitutes a “family firm” (astrachan, klein and smyrnios 2002; sharma 2004; diéguez-soto, lópez-delgado and rojomartínez 2015). the lack of a general definition, together with the variety of operational definitions adopted in prior studies, may explain the absence of conclusive results regarding the differences between family and nonfamily firms reported in prior research (casillas et al. 2015; diéguez-soto et al. 2015). the study “overview of family business. relevant issues”, conducted on behalf of the european commission (ec), reviewed the definitions of “family business” in 33 countries and found 90 different definitions (kmu forschung austria 2008). based on the results of this study, the ec proposes the following definition for family business: “a firm, of any size, is a family business, if: (1) the majority of decision-making rights is in the possession of the natural person(s) who established the firm, or in the possession of the natural person(s) who has/have acquired the share capital of the firm, or in the possession of their spouses, parents, child or children’s direct heirs. (2) the majority of decision-making rights are indirect or direct. (3) at least one representative of the family or kin is formally involved in the governance of the firm. (4) listed companies meet the definition of family enterprise if the person who established or acquired the firm (share capital) or their families or descendants possess 25 per cent of the decision-making rights mandated by their share capital.” (ec 2009, 10). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 table 3. research on accounting history and family firms study journal* field** topic theory method sample/case findings álvarez-dardet and capelo (2003) ahis ah accounting change relational contracts theory case study almacenes agüera. spain. 1770-1835 accounting change is driven by internal factors (e.g., the separation between ownership and management and others changes of the contractual relationships within the firm) and external factors (e.g., the general level of economic activity and government legislation). caution about the interpretation of concepts such as opportunism and morality today versus their meaning in the 19th century. baños-sanchez matamoros, araujopinzón and alvarezdardet espejo (2014) sjac ah ma management accounting change institutional entrepreneu rship case study medina garvey. spain. 1904-1969 management accounting change drivers are strongly influenced by actors’ interest and by the perception and interpretation that actors make about institutional contradictions or external critical events and their effects. both process and content of accounting change are shaped by the normative influences to which the actors are subject to. camfferman and zeff (2003) abfj ah fa innovation in financial reporting practices case study unilever. britain. 1920-1947 unilever and its top executives were considered a “retarding factor in the modernization of financial reporting” in britain, in relation to its role in the deliberations previous to the approval of the companies act 1947. the paper aims to rehabilitate the image of the company. it shows that unilever’s top executives were already considering consolidated financial reporting and other innovative financial reporting practices during the 1930s and 1940s. these changes coincided with the transformation of the company from a family-dominated firm into a professionally managed organization. fournès-datin (2014) ahis ah au statutory audit case study pont-a-mousson and saint-gobain. france. 1867-1935 the impact of the company act of july 1867 requiring statutory audit for french limited companies is illustrated by examining two companies: a family firm (personal capitalism) and a managerial firm. in spite of the differences in the governance and capital structure of the two companies, in both cases the auditor was considered above all “the right-hand man” of the board, playing the role of advisers to the board, and working very closely with directors. kininmonth and mckinstry (2007) ahis ah fa ma role of accounting information. organizational failure/survival. revisiting chandler’s theory of the firm. case study j & p coats ltd. britain. 1890-1960 the evidence shows that consolidation accounting, the control and funding of subsidiaries, the private and confidential ledgers kept by the company and the management accounting practices contributed to organizational control. discussion of chandler’s arguments regarding the role of accounting and finance in the success and failure of companies. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 study journal* field ** topic theory method sample/case findings matthew (2006) ahis ah au development of audit techniques archival study n/a the features of auditing techniques before 1960s were appropriate for the typical audit clients: family firms. auditors more like advisors for the accounting. family control of largest manufacturers declined from 50% in 1950 to 30% in 1970: significant impact on audit procedures. the decline of family control and professionalization of management explains changes in auditing procedures in the 1960s. significant changes in the 1980s due to the use of concepts such as risk assessments or analytical reviews. mcwatters (2002) ahj ah fa ma role of accounting information. organizational failure boyce’ thesis based on the agency framework case study kingston shipping company limited. canada. the accounting of the system reported and accounted for the operations of the company producing standardized information. but there were important shortcomings in the accounting information, which negatively impact on managerial decisions by creating the “accounting reality”. it is also highlighted that the role of accounting records in business history research must be underscored because accounting records are prepared within a specific organizational context. popp (2000) abfj ah au role of auditors case study mintons ltd. uk. 1870-1900 the paper argues that a “signaling strategy” may be behind the motivations of a family business like mintons to hire professional (“elite”) external auditors. auditors act more advisors than independent reviewers, giving strategic business advice beyond accounting issues –and auditors’ advices were sometimes rejected. robb, shanahan and lord (2006) ahis ah professionalization agency case study ernest adams ltd. new zealand. 19211999 the paper provides evidence of the changes experienced by a family firm, through restructuring under outside professional management, until being taken over by a multinational company. vent and milne (2000) abfj ah ma cost accounting procedures case study st. joseph lead company. us. 18641900. in spite of being the most successful and important lead-mining company in american history, the company did not adopt a system of cost accounts until late in the nineteenth century (later than other companies). close association of industrial accounts and the double-entry bookkeeping system, as in other mining companies in the uk. source: own elaboration. * see the list of journals and acronyms in the appendix. **field: au (auditing), fa (financial accounting), ma (managerial accounting). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 from an empirical perspective, the challenge is how to operationalize a given definition of family business. the focus of most prior research has been to identify the characteristics of family firms so that they can be distinguished from non-family firms (chua, chrisman and sharma 1999; sharma 2004; chua et al. 2012). however, more and more researchers have recognized the necessity of exploring the heterogeneity of family firms (wright and kellermanns 2011; chua et al. 2012)3. most operational definitions emphasize the involvement of the family firm in the business. from this perspective, family involvement is a sufficient condition to make a firm a family business –the components-of-involvement approach (chrisman, chua and sharma 2005, 556). this has been the dominant approach in accounting studies, which typically have adopted dichotomous variables based on proxies for family involvement such as “percentage of ownership of the family” (e.g., mengoli and pazzaglia 2017), “family members’ involvement on top management and/or board” (e.g., chen, chen and cheng 2014) or a combination of ownership and management/control indicators (e.g., cascino et al. 2010; martin, tochmancampbell and gomez-mejia 2016) to identify family and non-family firms. this approach has been criticized because it does not take into account the goals of family firms and how their views may change over time (chrisman et al. 2005). to overcome these limitations, researchers have focused on the “essence” of family firms (the essence approach) which aims to take into account factors such as a firm’s behavior, intention and vision (chua et al. 1999). from this perspective, family involvement is only a necessary condition –such family involvement must be “directed toward behaviors that produce certain distinctiveness before it can be considered a family firm” (chrisman et al. 2005, 557). accounting studies such as stockmans, lybaert and 3 studies such as chua et al. (1999), astrachan et al. (2002), sharma (2004) and more recently chua et al. (2012) and diéguez-soto et al. (2015) provide literature reviews on the definition of family business. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 voodeckers (2013) follow this approach and define family firms taking into account the involvement of the family (ownership, management and control) as well as the ceo’s perception about the firm being a family firm. in both the components-of-involvement and the essence approaches, researchers typically use dichotomous variables based on the relevant criteria to distinguish family and non-family firms. astrachan et al. (2002, 46) argues, however, that “artificially dichotomizing family vs. nonfamily firms when no such clear-cut dichotomy exists creates more problems than it attempts to solve” and that “there are discrete and particular qualities or characteristics of a business that are more appropriately measured on a continuous rather than dichotomous scale”. accordingly, they propose a more sophisticated measure of the extent and manner of family involvement in and influence on the firm using a continuous scale, which combines information about three relevant dimensions: power, experience and culture (the f-pec index of family influence; see also klein, astrachan, and smyrnios 2005). in our review, the only study that have adopted (indirectly) the framework proposed by astrachan et al. (2002) is dekker et al. (2015). they follow astrachan et al.’s (2002) work to develop a survey able to assess the amount of nonfamily involvement within the management team. the challenge of defining family firms is far from being resolved. furthermore, assuming that researchers agree on a definition of family firm, its operationalization is always problematic. as highlighted by evert et al. (2016, 28), the real difficulty lies in measuring the intangible attributes associated with any given definition of family firm. in the last section, we briefly discuss some opportunities for future research arising from this empirical challenge. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 3. financial accounting and reporting in family firms most prior studies on accounting and family firms are quantitative studies focused on the financial reporting characteristics of family firms. with few exceptions, they adopt the agency framework to investigate accounting choices (e.g., em and voluntary disclosures) that impact on financial reporting quality of family firms compared to non-family firms. the dominance of the agency theory is not surprising, since mainstream accounting research is based extensively on the agency framework. agency theory (jensen and meckling 1976) focuses on the relationship between managers and owners and to what extent this relationship influences on the agency costs –i.e., the costs of all activities designed to align the interests of managers (agents) and owners (principals). given the close relationship between the family and the managers, these costs are expected to be lower in the case of family firms. they are, therefore, less likely to be affected by the so-called “type i” agency conflicts related to the separation of ownership and management. however, we may expect more prominent agency costs related to the conflict between the family owners and other owners –the so-called “type ii” agency problem. specifically, there are potential agency costs to minority shareholders in those situations where the family acts as a dominant shareholder as the controlling family may try to maximize its private benefits at the expense of minority shareholders (villalonga and amit 2006; bhaumik and gregoriou 2010). furthermore, agency costs can also arise from lender-owner conflicts of interests (chrisman, chua, and litz 2004)4. research based on the agency theory has put forward two opposing views about the association between family control and the quality of accounting decisions. on the one hand, the interest 4 for an analysis of agency relations and agency costs in family firms, see schulze et al. (2001) and chrisman et al. (2004) respectively. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 of the controlling family in the long-term survival of the firm as well as the privileged position of the family to supervise and monitor managers may lead to better accounting decisions, which in turn will lead to higher reporting quality (the alignment hypothesis). on the other hand, the controlling family may manipulate the information about the actual performance to expropriate the wealth of other (minority) shareholders. from this perspective, the presence of a controlling family is expected to be associated to accounting decisions of lower quality (the entrenchment hypothesis). 3.1.financial reporting quality financial reporting quality refers to the usefulness of the information contained in the annual reports. earnings management (em) and voluntary disclosures are considered two key tools firms can use to influence the quality of financial reporting (gomez-mejia et al. 2014). given their relevance in prior literature, we explore them in the following sections. the results about the association between family ownership and financial reporting quality are mixed. studies such as wang (2006), tong (2007) and cascino et al. (2010) find that family firms provide accounting information of higher quality than non-family firms do. other studies, however, provide evidence of a negative relationship between family control and quality of financial reporting (e.g., prencipe, markarian, and pozza 2008; yang 2010). using conservatism as a proxy for financial reporting quality, chen et al. (2014) provide evidence of a positive association between conservatism and family ownership. they argue that family owners have both the incentives and the ability to implement more conservative financial reporting practices to reduce the risk of legal liability and to mitigate the potential agency conflicts with other shareholders (alignment hypothesis). their results support such prediction: conservatism increases with family ownership if and only if the founder is not acting as the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 ceo. such association, however, is not significant when the founder is serving as a ceo in a family firm. thus, the quality of financial reporting may vary depending on the governance characteristics of the family firm. srinidhi, he, and firth (2014) differentiate between strongly and weakly governed family firms and find that strongly governed family firms exhibit higher earnings quality than other family firms. this result suggests that strong board governance can effectively mitigate the adverse consequences of type ii agency problems. recent studies use material weaknesses in internal controls5 as a proxy for financial reporting quality, with no conclusive results. weiss (2014), examining a sample of israeli companies, find that family firms report less material weaknesses in internal controls suggesting higher financial reporting quality. however, in the presence of material weaknesses in internal controls, family firms produce lower earnings quality than non-family firms. interestingly, the market reaction is more negative in the case of family companies. bardhan, lin, and wu (2015), using a sample of us companies, finds opposite results: family firms exhibit more material weaknesses in their internal control over financial reporting than non-family firms. they also find that the greater likelihood of material weaknesses is driven by family firms with dual-class shares, in line with the entrenchment hypothesis. ma, ma, and tian (2017) provide evidence about the consequences of corporate opacity of family firms. using a sample of 705 chinese firms, they find that corporate opacity acts as a moderator in companies with controlling families. the results show that family control is associated with a lower cost of debt on average but there is a negative impact in firms with 5 in this context, a material weakness in internal control is “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis” (auditing standard no. 5 2007). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 relatively lower corporate performance, particularly when investors perceive a high risk of families’ moral hazard of expropriation. all papers above are based on the agency framework. gomez-mejia et al. (2014), in a conceptual paper, develop an integrated framework to financial reporting decisions in family firms based on the socioemotional wealth (sew) approach. the sew approach argues that family firms consider the nonfinancial aspects of the firm (socioemotional wealth) that meet the affective needs of the family, such as the perpetuation of the dynasty. using a cost-benefit analysis of accounting choices, the paper develops different propositions regarding the probability of a firm to engage in practices that influence the financial reporting quality (em and voluntary disclosures) depending on two dimensions of sew: “family control and influence” and “family identification”. the empirical validation of this model is an opportunity for future research. 3.2.earnings management earnings management (em) occurs when managers use the discretion within the accounting standards to alter the financial reports either to mislead shareholders about the economic performance of the firm or to influence contractual outcomes whose result depends on the reported accounting numbers (healy and wahlen 1999, 368). accountants distinguish between real em, which refers to decisions that affect the timing and scale of operating, investing and financing activities in the accounting period and accruals em, which relate to pure accounting decisions. em has been extensively examined in the accounting literature (for a review, see dechow, ge, and schrand 2010) and so on the research at the intersection between accounting and family firms –see bhaumik and gregoriou (2010) and sousa-paiva et al. (2016). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 a number of studies has explored to what extent family firms are more or less likely to use em techniques to manipulate earnings. adopting an agency framework, ali, chen, and radhakrishnan (2007) and jiraporn and dadalt (2009) use us data to show that family firms, when compared to non-family businesses, are less likely to manage earnings. this result is supported by studies examining data from other settings. prencipe et al. (2011) analyze a sample of italian family and non-family firms and find that the probability of income smoothing practices is lower for family firms. prencipe et al. (2008) find that family firms are less sensitive to income-smoothing motivations than their non-family firms’ counterparts, even though they have similar motivations to manage earnings to avoid violations of debt covenants. research has also showed that the role of the board of directors on monitoring em is affected by the presence of family members on the board (prencipe and bar-yosef 2011) and by the proportion of outside directors and ceo duality when the firm faces significant agency problems between controlling and noncontrolling shareholders (stockmans et al. 2013). some studies have compared em in family firms across countries, with no conclusive results. martínez-ferrero, rodríguez-ariza, and bermejo-sánchez (2015) examine a sample of listed companies from 20 countries and find that family ownership exerts a controlling and monitoring role on managerial decisions: the higher the degree of family ownership, the lower the risk of a conflict of interest between owners and agents, and of the expropriation risk of managers acting for their own benefit. these results are in line with the alignment hypothesis. cruz et al. (2015) compare the behavior of european family and non-family firms and find that family firms are less likely to opportunistically smooth earnings as capital market conditions deteriorate. studies using international samples have shown that the institutional setting matters. gopalan and jayaraman’s (2012) results suggest that a country’s institutional environment determines http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 whether insider controlled firms, including family firms, are associated with more or less em than non-insider controlled firms. specifically, insider controlled firms that operate in low investor protection countries are associated with more em than their non-insider controlled counterparts. mengoli and pazzaglia (2017), using a sample of family and nonfamily firms in 12 european countries, find that the institutional development of a country has a moderating effect on earnings quality. specifically, well-developed formal institutions have a more beneficial effect on the earnings quality of non-family firms than that of family firms. informal institutions such as families, however, are beneficial and have a particularly positive influence on firm’s behavior in countries with no formal institutions. within the agency framework, jarabertin and lópez-iturriaga (2014) use a sample of 3559 listed firms from canada, france, italy, spain, the uk and the us to examine how the distribution of power among shareholders affects em in family firms. they find that the more challenge to the control of dominant shareholders, the less em in family firms. the legal-institutional environment affects this result: in civil law countries where the rights of shareholders are less protected, the contest of control becomes more relevant. the differences in the institutional environment may explain why studies based on asian samples (e.g., data from taiwan and china) find that em increases with the level of insider ownership in family controlled-companies (e.g., yang 2010; ding, qu, and zhuang 2011; chi et al. 2015)6 in contrast with the results of studies examining us or european samples (ali et 6 consistent with the evidence from other asian countries, razzaque, ali, and mather (2016) show that bangladeshi family firms engage in more real em than non-family firms. however, they find a curvilinear relationship between family ownership and real em: it increases with the increase in family ownership and after reaching a certain ownership threshold, it tends to decline. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 al. 2007; prencipe et al. 2011)7. as suggested by sousa-paiva et al. (2016), this may indicate that the presence and influence of type ii agency problem in asian family firms is more severe than in western countries such as us or italy. in contrast to the studies discussed above, which are based on the agency theory, achleitner et al. (2014) adopt the sew approach to examine em in a sample of german firms. according to the sew approach, the motivation of em depends on whether or not the family owners give priority to the “family control and influence dimension” over the “family identity” dimension (gomez-mejia et al. 2014). in line with the predictions of the sew theory, achleitner et al. (2014) find that family firms are less likely to engage in real em and in earnings-decreasing em because of their interest to preserve the wealth of the company for future generations. following the sew approach, some studies have investigated to what extent em changes depending on the type of family firm (e.g., stockmans, lyabert, and voordeckers 2010; pazzaglia, mengoli, and sapienza 2013; martin et al. 2016). stockmans et al. (2010) find that when the financial performance is poor, the interest of the family to preserve the sew explains the decision to manipulate earnings upwards. accordingly, in case of low performance, first generation and founder-led family firms engage in more in upward em than other type of family firms. pazzaglia et al. (2013) find that firms that have been acquired by the current family owners as a result of a market transaction show higher em than firms created or inherited by the family. consistent with prior studies, martin et al. (2016) find that founder family firms are less likely than non-founder family firms to use em, suggesting that family owners are loss averse with respect to the sew of the family. 7 in the case of portugal, simões-vieira (2016) finds no significant differences in the incentive to manage earnings between family and non-family firms in a sample of public firms the period 1999-2011. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 3.3.voluntary disclosures voluntary disclosures refer to the managerial decision to provide information about the company beyond the requirements established by regulators. previous studies have paid attention to the quality and quantity of voluntary disclosures of family firms as compared to non-family firms. the results suggest that family firms are more likely to warn for bad news (e.g., ali et al. 2007; chen, chen, and cheng 2008), to make fewer disclosures about corporate governance (ali et al. 2007), and to provide fewer earnings forecasts and conference calls (chen et al. 2008). prior studies have also examined the impact of corporate governance mechanisms on financial disclosures (chen and jaggi 2000). we identify two studies on voluntary disclosures. golden and kohlbeck (2017) explore the voluntary disclosure practices of family firms and test whether there is an association between the disclosure of earnings forecasts by the management and the compensation of ceos in the context of family firms. using firms of the s&p 1500, they find that family firms are less likely than non-family firms to provide earnings forecasts on a voluntary basis when their ceo’s wealth is higher. these results holds when a member of the family is acting as ceo or is a member of the board of directors. muttakin, khan, and belal (2015) focus on non-financial disclosures. using a sample of 135 bangladeshi companies, they look at disclosures of intellectual capital to see whether there is an association between family ownership and nonfinancial disclosures. they find that there is a non-linear relationship between family ownership and the disclosure of intellectual capital, which are less likely when members of the family occupy the ceo and the chair’s position. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 3.4.other accounting decisions the first accounting studies providing indirect evidence on accounting decisions of family firms focused on the association between managerial ownership (typically high in a founder-family controlled firm) and accounting choices such as depreciation methods (dhaliwal, salamon, and smith 1982) and inventory accounting methods (niehaus 1989). recently, greco, ferramosca, and allegrini (2015) examine the decision to write-off long-lived assets using a sample of italian companies. they find that the write-offs of long-lived assets of family firms are coherent with the firm performance, thereby rejecting the entrenchment hypothesis. however, nonfamily firms tend to use write-offs to manipulate earnings. this evidence is consistent with family concerns about the reputation damage associated with a loss of a firm’s asset value, a characteristic that it is not detected in non-family firms. with the process of harmonization of accounting standards and the adoption of international financial reporting standards (ifrs) in many countries, the interest in the variation of accounting choices across firms in different countries has decreased (salvato and moores 2010). however, the adoption of ifrs has revived the interest in firms’ accounting choices and firms’ reaction to changes in accounting regulation. for example, chen et al. (2016) explore to what extent a change in accounting standards (adoption of ifrs) influences on family and nonfamily firms in their attempts to get debt financing from foreign banks. after examining 6950 firms from 80 countries, they find that family firms tend not to change from local generally accepted accounting principles (gaap) to ifrs on a voluntary basis and this has a negative impact on their ability to access to debt capital. nagar and sen (2016) compare us and indian companies to examine the quality of cash flow reporting after a change in the regulation of cash flow reporting. they also examine to what extent there are variations between family and nonhttp://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 family firms in the two countries. they find evidence of manipulation of cash flows in india and the us although such manipulation is different for family and non-family firms in india. 4. management accounting and management control in family firms research on management accounting and control has a long tradition in accounting (e.g., chenhall 2003). by management accounting practices we refer to tools such as product costing, budgets for planning and control, standard costing variance analysis among others. strategic management accounting is also a management accounting tool, which includes techniques such as the balance scorecard or target costing (lucas, prowle, and lowth 2013). in spite of its interest, this area of research is significantly less explored in the context of family firms than that of financial accounting –see senftlechner and hiebl (2015) and helsen et al. (2017) for a comprehensive review of the literature. one of the challenges in management accounting research is the access to data and most studies rely on information collected from surveys or interviews. prior studies on management accounting in family firms have focused on the following three areas: (i) drivers for the adoption of management accounting and control practices in family firms; (ii) type of management control practices adopted by family firms, and (iii) the role of management accounting in family firms. we explore them in the following sections. 4.1. drivers of adoption of management accounting and control systems prior studies have examined what drives the adoption of management accounting and control systems in family firms. business size and growth are consistently considered as key drivers of adoption of managerial accounting practices (giovannoni, maraghini, and riccaboni 2011; speckbacher and wentgest 2012). some studies have examined the role of trust, although the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 results are not conclusive. while some studies find that family’s trust in the management of the company may reduce the need for management accounting (moilanen 2008; tsamenyi, noormansyah, and uddin 2008; stergiou, ashraf, and uddin 2013), others (e.g., giovannoni et al. 2011) find that trust may be irrelevant in a scenario where the company is growing and facing increasing complexity. in those cases, there is a need for more formal control systems irrespective of the level of trust of the family in the management. other papers have explored to what extent the family orientation of the business may influence on the adoption of management accounting practices and control systems. by and large, results show that higher levels of family orientation have a negative effect on the adoption of management accounting and control systems and on their relevance for the organization (leenders and waarts 2003; tsamenyi et al. 2008; uddin 2009). results also show that the family’s involvement in the management is negatively associated with the use of performance measures in strategic target setting and incentive practices (speckbacher and wentges 2012). human agency plays a critical role in the process of adoption of management control practices and on management accounting change (hiebl, duller, and feldbauer-durstmüller 2012; stergiou et al. 2013; baños-sánchez matamoros, araujo-pinzón, and alvarez-dardet espejo 2014; efferin and hartono 2015). baños-sánchez matamoros et al. (2014), in a study on management accounting change in a spanish family firm, find that the drivers of accounting change are strongly influenced by actors’ interests and by their perception and interpretation of institutional contradictions and external events. both the type of change and the process are shaped by the normative influences to which the actors are subject to. efferin and hartono (2015), examining an indonesian firm, find that there is a close relationship between the leadership style and the management control system adopted. they also find that the owner and http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 her/his inner circle play crucial roles in producing and reproducing the legitimate management control system based on the extended family concept. as far as the role of management accountants is concerned, giovannoni et al. (2011) and hiebl et al. (2012) find that management accountants see themselves as drivers of change. cesaroni and sentuti (2017), however, find somehow a contradictory result. using a sample of 1756 italian certified accountants, they find that accountants are mostly concerned with technical issues showing relatively low interest in the interaction and communication with family members. this may cause a discrepancy between the accountant’s professional practice and the expectations of the family about her/his role in the company. 4.2. type of management accounting and control systems the evidence available suggests that family firms’ approach to managerial accounting differs significantly from the experience of non-family firms (e.g., durendez, madrid-guijarro, and garcía-pérez-de-lema 2011; samuelsson et al. 2016). specifically, research shows that small and medium family business consider management accounting and control systems as less relevant than similar non-family business (durendez et al. 2011) and that they tend to use less sophisticated tools (e.g., neubauer et al. 2012; samuelsson et al. 2016). samuelsson et al. (2016), after examining data collected from 156 swedish manufacturing firms, find that these firms use less formal planning than non-family firms. they also find a strong positive association between the entrepreneurial orientation and the use of formal planning mechanisms. differences between family and non-family business tend to disappear in the case of family business managed by non-family members, which in turn is related to the size and complexity of the company as suggested above (e.g., giovannoni et al. 2011; speckbacher and wentges 2012). as far as effectiveness of management control systems is concerned, speckbacher and http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 wentges (2012) find no evidence between family and non-family businesses in a sample of 304 austrian and german companies. 4.3. importance of management accounting and control systems there are mixed results regarding the importance of management accounting processes, such as strategic planning or informal management control systems, for family firm performance. while some studies find that they have a positive influence (e.g., songini and ghan 2015), others (dekker et al. 2015) find no association between formal financial controls and firm performance. songini and gnan (2015) use a sample of 146 italian companies and find that agency cost control systems in family business affect firm performance. dekker et al. (2015) examine the formal controls of a sample of belgian family business and find no evidence of an association between formal financial controls and firm performance. however, they do find a positive effect of hrm control systems on financial performance. the lack of consistency in the results is not surprising, given that comparability of studies in management accounting is difficult due to the type of data, the variation in practices across jurisdictions and firms and the different approaches used by researchers. studies examining the role of managerial accounting in family firms have also shown that management accounting practices can influence significantly the transfer of knowledge across generations as well as between the management team and the family (giovannoni et al. 2011). however, such influence depends on the size of the company, in line with the results described above. in the case of medium-size firms, in contrast to large firms, the presence of a controlling family has a negative influence on the use and institutionalization of management accounting practices (hiebl, feldbauer-durstmüller, and duller 2013). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 5. auditing in family firms the purpose of an audit of financial statements is to express an opinion on the fairness with which they present, in all material respects, the financial position, results of operations and the cash flow statement of a company in conformity with the gaap. the distinct characteristics of family firms compared to non-family firms are expected to influence on the demand for auditing, the audit process, and the audit outcomes (audit quality and audit fees)8. there are few studies on the intersection of family firms and audit research (see trotman and trotman 2010). these studies, adopting an agency framework, have focused on the demand of auditing, the demand for audit quality (auditor choice) and audit fees. 5.1. demand for voluntary audits what explains the demand for external audits of family firms? this has been the research question of some studies (e.g., carey, simnett, and tanewski 2000; corten, steijvers, and lybaert 2015). given the lower type i agency costs, family firms are expected to demand less voluntary external audits. carey et al. (2000) argue that family firms consider internal and external audit as substitutes. using a sample of australian companies, they show that family firms demand more internal audits than voluntary external audits and that nonfamily involvement has a positive correlation with the demand of voluntary audits. they also show that the demand of voluntary external audits increases with agency costs and leverage. corten et al. (2015), examining a sample of 482 us companies, argue that the level of shareholderdebtholder agency costs seems to be a key driver for the demand of voluntary audits by family 8 for a review of archival auditing research, see defond and zhang 2014. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 firms. with low presence of such agency costs, other work done by auditors such as reviews and compilations seem to be sufficient and more cost-effective for family firms. finally, it is worth mentioning the study of collin et al. (2017). using data collected from 309 swedish auditors, they find that in family firms, auditors perform primarily a monitoring role but they also act as consiglieres by performing the advisory and mediating functions and, to a smaller degree, the conveying function. the results suggest that for family firms, the demand for voluntary audits may be explained by factors not necessarily related to assurance of the financial statements. 5.2. the demand for audit quality and choice of auditor a recurrent research question in auditing is what explains the demand of “high quality audits”. many studies use the type of auditor as a proxy for audit quality under the assumption that “big audit firms9” provide audit services of higher quality as compared to other audit firms. studies on family firms have focused on two issues: a) whether family firms demand more or less audit quality than non-family firms, and b) what explains the decision to hire a “big auditor”. overall, the evidence suggests that family firms demand less audit quality (niskanen, karjalainen, and niskanen, 2010; hope, langli, and thomas 2012; ho and kang 2013). niskanen et al. (2010) and ho and kang (2013) find that increases in family ownership decreases the likelihood of hiring top-tier auditors. similarly, hope et al. (2012) show that for settings where the ceo is related to the major shareholders there is no greater demand for big auditors. these results are in line with the alignment hypothesis. in a recent article, corten, steijvers, and lybaert (2017) using a sample of 125 belgian firms show that high quality 9 the “big 4” today: deloitte, e&y, kpmg and pricewaterhousecoopers. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 auditors are hired to mitigate intra-family agency conflicts. such demand decreases when the family firm can reduce the agency costs internally. research has also used the decision of hiring an industry-specialist auditor as a proxy for high audit quality. kang (2014) find that family firms are more likely to appoint an industryspecialist than non-family firms, and such tendency is even stronger in the case of family firms where the ceo belongs to the family or there are dual-class shares. in contrast to the findings above, these results are in line with the entrenchment argument. in a similar vein, srinidhi et al. (2014) use as a proxy for audit quality being a specialist auditor. they find that for family firms with strong corporate governance mechanisms there is a higher demand of high quality audits. khalil and mazboudi (2016) explore the resignation and appointment of a new auditor in family and non-family firms using a sample of us firms. they find that, after the resignation of the incumbent auditor, big 4 auditors perceive family firms as being less risky than non-family firms and that big 4 are more likely to accept such engagements. 5.3. audit fees overall, research shows that family firms demand lower audit effort and, hence, pay lower audit fees (ho and kang 2013; ghosh and tang 2015; barroso, ali, and lesage 2016). ho and kang (2013) find that family firms incur in lower audit fees than non-family firms due to the lower demand for external auditing services and the auditors’ lower perception of risk in the case of family firms. the fees’ difference is stronger in the case of family firms where family owners actively monitor their firms. ghosh and tang (2015) report similar findings: auditors charge less audit fees because the superior reporting quality lowers audit risk and reduces auditors’ costs. barroso et al. (2016), in a study examining the moderating role of the corporate http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 governance model on the association between blockholders’ ownership and audit fees, investigate the effects of family ownership as an additional analysis with results consistent with those reported by ho and kang (2013) and ghosh and tang (2015). khalil and mazboudi (2016) examine the changes in audit fees after the resignation of an auditor and find that the change is smaller in the case of family firms as compared to non-family firms. however, hope et al. (2012), examining a sample of norwegian companies, find opposite results about the family involvement in the management and audit fees. specifically, they find that when the ceo is a member of the largest owning family, audit fees increase, which is consistent with the argument that when a family relationship exists, shareholders are less likely to act as independent monitors of the ceo. as a result, the probability of misappropriation by the ceo or extraction of private benefits by controlling owners increases. 6. accounting history accounting history is an expanding and maturing sub-discipline of accounting (walker 2009). it matters because it allows us to understand “accounting’s past and present and it provides insights into the future of accounting” (carnegie and napier 2012). although the research interest of accounting historians on family firms is limited if compared to research done by economic and business historians (fernández-pérez and puig 2013), some of the contributions bring relevant insights about the role of accounting in family firms (see table 3)10. these studies focus primarily on accounting change in the context of family firms, accounting as an explanatory factor of success/failure, and family firms and the development of auditing. 10 as suggested by mathias (1993) there is a potential synergy in the disciplines of accounting history and business history. while business historians can contribute by their knowledge and understanding of the context within which accounting evolves, accounting historians’ knowledge can help to interpret empirical, quantitative information as well as reduce the risks of misrepresentation. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 6.1. studies on accounting change we identify two studies whose aim is to provide insights about the drivers of accounting change from a historical perspective. using relational contract theory, álvarez-dardet and capelo (2003) examine a spanish company (almacenes agüera) during the period 1740-1835 and demonstrate that accounting change was driven by internal factors (separation between ownership and management and changes of the contractual relationships within the firm) as well as by external factors (general level of economic activity and government legislation). baños-sánchez matamoros et al. (2014) adopt an institutional entrepreneurship approach to examine the development of medina garvey, a spanish family firm, for the period 1904-1969. the case illustrates how the agent-owner “rationally” promoted the transformation of management practices, acting as an “institutional entrepreneur”. the study also shows how both structures and human agency played a “mutually constitutive role in fostering and shaping management accounting change” (baños-sánchez matamoros et al. 2014, 257). from a financial reporting perspective, camfferman and zeff (2003) investigate the origins of the modern and innovative consolidated financial reporting practices of unilever in the 1940s. before the world war ii, unilever and its subsidiaries were criticized for their uninformative reporting and the company was described as a “retarding factor in the modernization of financial reporting” (camfferman and zeff 2003, 197). however, the company and its top executives were already considering consolidated financial reporting and other innovative financial reporting practices during the 1930s and the 1940s. the paper shows that these changes coincided with the transformation of the company from a family-dominated firm into a professionally managed organization. besides rehabilitating the image of unilever in financial http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 reporting history, the paper also demonstrates that the company and some of its top executives influenced on the financial reporting reform in britain during the 1940s. 6.2. role of accounting in the success and failure of family firms some studies provide insights about the key role played by financial and accounting controls in the success and failure of family firms (kininmonth and mckinstry 2007; vent and milne 2000; mcwatters 2002; robb, shanahan, and lord 2006). kininmonth and mckinstry (2007) study the case of j&p coats ltd, one of the britain’s largest multinational company from the period 1890 to 1960, and show how the consolidation accounting, the control and funding of subsidiaries, the private and confidential ledgers kept by the company and the management accounting practices contributed to organizational control. the success of the company was partly due to its tight accounting systems and controls, the authors argue. vent and milne (2000) examine the accounting practices of st. joseph lead company. compared to other companies in the mining industry during the second half of the nineteenth century, the company used a crude double-entry bookkeeping system and did not use detailed cost accounting records. these practices were far behind the practices of the contemporary mining firms. mcwatters (2002) adopts an organizational-economics framework to examine organizational failure. the paper analyzes the case of the kingston shipping company ltd and the role of the accounting system in the development of the company at the early-twentieth century. the accounting system reported and accounted for the operations and produced standardized information although there were important shortcomings related the accounting treatment of investments and financing costs. by obscuring certain information, the accounting system created an “accounting reality” which was quite different to the actual results of the company. that is, “the lack of profitability would have been much more apparent had the accounting http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 reality been a different one” (mcwatters 2002, 83). while the examination of accounting records may provide insights into actions of individual firms, mcwatters (2002) argues that the role of accounting records in business history research must be underscored. accounting records, he argues, are the result of choices and decisions at a given point and setting (mcwatters 2002, 56). robb et al. (2006) examine the transformation of adams bruce ltd (a bakery in new zealand), from family ownership to public ownership and professional management. using both written and oral evidence, the paper shows three different narratives grounded on agency theory. the family narrative describes a company with more than 50 years with sustained growth. there was an accountant who was there for 40 years and the family felt that his skills and the accounting systems, focused on cost control through variance analysis, enabled the firm to achieve operational efficiency. the professionally managed firm narrative starts when an outsider was appointed as ceo. conflicts were frequent between the new appointed team and the “old school”. importantly, the use of informal communication networks common in the previous period declined, with negative consequences of the company. costs increased significantly leading to a less efficient company when compared to the previous situation. part of the problem was the lack of planning for the transition from a family controlled company to a non-family controlled company. finally, the narrative of the takeover period evidences that control can be quickly changed in the case of listed companies. this company is an example supporting the claim that family firms can be in some instances more efficient than non-family controlled firms. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 6.3.the origins of auditing and family firms some accounting historians have paid attention to the link between the development of auditing as a practice and family firms (e.g., popp 2000; matthews 2006; fourness-datin 2014). popp (2000) investigates the role of auditors and auditors’ reports in the context of “personal capitalism” (lloyd-jones and lewis 1994). the paper focuses on mintons ltd, a firm owned by a single family with no external investors, where the family is involved in the day-to-day management and the family name is considered as a guarantee of quality in the market. it provides some insights about mintons’ motivations to hire professional external auditors. like in other cases at that time, auditors acted more as advisors than as independent reviewers. the audit reports show how auditors positioned themselves as providers of strategic business advice beyond accounting issues, although their recommendations were sometimes disregarded. minton’s employment of “elite” auditors (deloitte, dever, griffith and co.) could be seen as a signaling strategy, “conveying images of status and professionalism commensurate with the reputation of this long-established firm” (popp 2000, 363). matthews (2006) collected data from interviews to retired and practicing chartered accountants and from postal questionnaires to investigate the changes in auditing techniques over time. the study shows that auditing techniques before 1960s fitted the needs of family firms, the typical audit clients at the time. in line with popp (2000), auditors were perceived as advisors willing to help owners to prepare the accounting of the business instead of an independent third party. however, the changes in family control of companies over time had a significant impact on audit procedures. specifically, he shows that the decline of family control and professionalization of management explains changes in auditing procedures in the 1960s. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 finally, fourness-datin (2014) examines the impact of the company act of july 1867 requiring statutory audit for french limited companies. to illustrate the actual practice of statutory auditing, the article examines two major industrial firms: pont-à-mousson, a family business example of what is called “personal capitalism”, and saint-gobain, a very old traditional company which could be considered as a managerial firm. in spite of the differences in the governance and capital structure of the two companies, in both cases the auditor was considered above all “the right-hand man” of the board of directors, playing the role of advisers to the board, and working very closely with directors. this evidence is consistent with the findings of popp (2000) and matthews (2006). 7. advancing accounting research in family firms the empirical and theoretical challenges faced by researchers interested in family firms are quite similar, irrespective of the field of knowledge. accounting researchers could benefit from the advancement of knowledge in other disciplines such as general management, business or economics to further develop an understanding of the role of accounting in family firms. next, we discuss some theoretical and empirical challenges and suggest some avenues for future research. 7.1. theoretical challenges – opportunities as noted above, agency theory is by far the most prevalent theoretical framework adopted in prior studies on family firms. interestingly, these studies have help to expand the theoretical boundaries of the agency theory by including agency problems and conflicts originally overlooked (madison et al. 2016). agency theory is also the dominant theoretical framework in accounting research in family firms. with few exceptions (e.g., achleitner et al. 2014; bañoshttp://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 sánchez et al. 2014), all papers identified in this review follow the insights of the agency theory. future research adopting the agency framework could explore in depth the association between complex ownership structures, the role of the family and accounting transparency. one example is the case of pyramidal ownership structures, very common but obscure control mechanisms which make it difficult to identify who is the most influential shareholder of the firm (levy 2009). for example, the controlling family may use pyramidal structures to manipulate earnings by means of related party transactions (bhaumik and gregoriou 2010). further evidence on this area is needed. future research could also explore the role of auditors in the context of complex ownership structures, where the opportunities and incentives of owners-managers may influence auditors’ fraud risk assessments. in spite of the dominance of mainstream agency theory, some researchers argue that it “oversimplifies the complexity of exchange that occur among the family firm’s decision agents” (schulze, lubatkin, and dino 2002, 247). in a family firm, the agency relationships are characterized by the past and ongoing parent-child relationships of the family and, therefore, by altruism (schulze, lubatkin, and dino 2003). while the classical agency view suggests that the ownership should align the interest among family agents, altruism, defined as “a moral value that motivates individuals to undertake actions that benefit others without any expectation of external reward” (schulze et al. 2002, 252) may generate other agency problems. specifically, it exposes family firms to adverse selection –the agency threat associated with the lack of ability (schulze et al. 2003, 477). schulze et al. (2003) use the insights of household economics and altruism literature to explain how altruism influences agency relationships in the case of family firms. an understanding of the dynamics of family firms taking into account the altruism component may help to bring light on issues related to accounting change (e.g., giovannoni et http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 al. 2011). specifically, altruism may help to explain the role of different management and control practices over the life of the firm, given the different impact that altruism may have on the different phases of entrepreneurship. future research could also explore the role of altruism in the demand of formal mechanisms of control, including external mechanisms of governance such as auditing. stewardship theory is another prominent perspective in prior research on family firms (davis, schoorman, and donaldson 1997; madison et al. 2016). instead of assuming the economic model of the individual as in the agency theory, the central assumption is a humanistic model where managers act as responsible stewards and whose behaviors are aligned with the objectives of principals (madison et al. 2016). in accounting, few papers have adopted the stewardship theory, always together with the agency theory (e.g., prencipe et al. 2008; speckbacher and wentges 2012). madison et al. (2016) review the literature on family firms through the lens of agency and stewardship theories and identify some future areas of research to push the theoretical boundaries of these two frameworks and offer new insights into the family firm that could be relevant for accounting researchers examining financial reporting quality. recently, several papers on accounting have adopted the sew approach, which is an extension of behavioral agency theory applied to the field of family firms (wiseman and gomez-mejia 1998; gomez-mejia, welbourne, and wiseman 2000; berrone, cruz and gomez-mejia 2012). the behavioral agency theory considers that firms make choices depending on the reference point of the principals of the firm. these principals will make decisions so that they can preserve accumulated endowment in the firm. in the case of family firms, the emphasis on preserving the sew becomes critical. importantly, the family may be willing to make decisions driven by http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 a non-economic logic in order to preserve the endowment. accounting studies assuming the sew approach (achleitner et al. 2014; gomez-mejia et al. 2014; cruz et al. 2015; martin et al. 2016) provide support for some of its insights of the sew approach. much more work in required on this area –e.g., to test empirically the propositions developed by gomez-mejia et al. (2014) on sew and earnings quality. the rbv approach assumes that firms are able to sustain their competitive advantage when they have valuable and rare resources that cannot be easily imitated or substituted by their competitors (barney 1991). in the case of family firms, the rbv focuses on identifying the strategic resources derived from the interaction between the family and the business systems, taking into consideration both economic and non-economic factors (le breton-miller, miller, and bares 2015). among the family-unique resources and capabilities, prior work places emphasis on factors such as human capital, social capital and governance structure and how they give advantages or disadvantages to family firms (sirmon and hitt 2003). habbershon and williams (1999) apply the theoretical framework provided by the rbv to family firms and define the concept of familiness. familiness refers to “the unique bundle of resources a particular firm has because of the systems interaction between the family, its individual members, and the business” (habbershon and williams 1999, 11). it is argued that the creation of distinctive and enduring familiness may be a driving force behind the vision and goals of family firms (for a literature review of the concept familiness see frank et al. 2010; also pearson, carr and shaw 2008). accounting research could consider insights from this framework and adopt the notion of familiness to investigate how and to what extent the relationships among family members and their relationships with the business influence on the implementation of management control systems and their success or failure. furthermore, it has http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 been argued that the effect of national culture may be stronger in family firms compared to nonfamily firms due to the influence of the national culture on the family organization and structure (vallejo 2011; fletcher, melin, and gimeno 2012). comparative studies examining the implementation of control systems in family firms located in different institutional environments may bring some interesting insights about the influence of culture on family firms compared to non-family firms. building on the work of habbershon and williams (1999), social capital theory has been adopted as a framework to examine some dimensions of familiness that the rbv does not take into account (pearson et al. 2008; frank et al. 2010). arregle et al. (2007) investigate the link between family’s social capital and family firms’ social capital and provide a conceptual framework to analyze family firms from a social capital perspective. research in the accounting field has shown that the social capital of board members influences on firm’s future performance and financial reporting quality (e.g., horton, millo, and serafeim 2012; carrera, carmona, and sohail 2017). future accounting research could investigate how family firms’ social capital, family’s social capital and the interaction of both influence on the control mechanisms for financial reporting. lastly, our literature review shows that there are examples of accounting studies going beyond the “traditional” approach and exploring accounting issues in family firms through the lenses of the institutional theory (bernadich 2015; mengoli and pazzaglia 2017) and the institutional entrepreneurship theory (baños-sanchez matamoros et al. 2014). we encourage accounting researchers to further explore the opportunities brought by alternative theoretical approaches. for example, consider the insights of systems theory (e.g., frank et al. 2010), the social exchange theory (daspit et al. 2015) or a combination of theoretical approaches (e.g., vallejo http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 2011; che and langli 2015; le breton-miller et al. 2015), all of which have been proved valid to examine issues arising in the context of family businesses.11 7.2. empirical challenges – opportunities as shown in the previous sections, most studies on accounting and family firms are empirical and quantitative. this trend is observed in other areas such as general management and business.12 in accounting, most studies rely on archival data, typically information from the annual reports, and apply statistical techniques such as regression analysis. besides the problems related to the reliability of data and missing information, particularly relevant in the case of small-and-medium family firms and in privately-held family firms (stewart and miner 2011), researchers face the challenge of defining what “family business” means and how to operationalize the construct as explained in section defining family firms. prencipe et al. (2014, 367-368) discuss this issue in detail and highlight how the focus over the past few years have shifted from dichotomous definitions to identify family and non-family firms to more articulated definitions, which allow to consider the heterogeneity within family firms. as stressed by prior studies (e.g., songini et al. 2013) there is a clear need to pay attention to within-group differences of family business. steier et al. (2015) refer to the importance of differentiate the controlling family as a “business family” and as a “family business”: in the former, the family owns one or more businesses and these businesses may change over time; in the later, the family owns the business and it wants the next generation to take over. another possibility is to use continue variables to measure family involvement, experience and power, 11 vallejo (2011) proposes a model to measure the culture of family firms that integrates propositions derived from the general system theory, socialization theory, neoinstitutional theory, transformational leadership theory, learning theory, field theory, and group dynamics theory. le breton-miller et al. (2015) combines agency theory, behavioral agency perspectives, and the rbv of the firm. 12 see evert et al. (2016) for a review of empirics in family business research and fletcher, de massis, and nordqvist (2016) for a review of qualitative research in this area. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 as suggested by astrachan et al. (2002) and klein et al. (2005). differences within family firms may influence on accounting decisions, as some prior studies have shown (e.g. corten et al. (2017) in the case of auditing). future research could further explore the heterogeneity of family firms and to what extent it influences on accounting decisions. for example, using content analysis of organizational narratives (e.g., kothari, li, and short 2009), researchers could explore the disclosures of different types of family firms, their drivers and their outcomes. on this review, few papers rely on data from questionnaires and surveys (samuelsson et al. 2016; cesaroni and sentuti 2017; collin et al. 2017; corten et al. 2017), none of them in the area of financial accounting. there is an opportunity in the use of these techniques for measuring dimensions related to family power, influence or control through, for example, psychometric instruments which could be used in studies assessing the financial reporting quality of the firm and/or accounting choices of family firms. these tools also allow the researcher to collect data on demographic characteristics (e.g., education, social ties and age of the founders) which may help to capture the “family effect”. berrone et al. (2012) provide some insights about how to operationalize and measure the different dimensions included in the concept of sew using data collected from surveys, content analysis or experiments. this data could be used to test the influence of the dimension “family identity” on financial reporting quality (gomez-mejia et al. 2014). surveys could also be used to collect data for multilevel analysis, exploring the impact of accounting at a firm level and at an individual level –for example, studies examining management control systems at family firms and/or about the perception of auditing. another area that could be explored further is the use of panel data and longitudinal analysis (benavides-velasco, guzmán-parra, and quintana-garcía 2011). as highlighted by evert et al. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 (2016), time is a key component in family businesses. most prior research on accounting and family firms does not consider explicitly the time dimension. future research should contemplate the possibility of developing longitudinal analysis and panel data, in line with the suggestions for future research examining family firms in other fields (evert et al. 2016; benavides-velasco et al. 2011). as highlighted by prior reviews, there is a lack of experimental and decision-making studies in accounting and family firms. trotman and trotman (2010) provide an in-depth discussion of the stream of research in auditing based on conceptual frameworks developed within psychology to evaluate, among other issues, the quality of audit judgments, the factors that influence auditors’ judgment performance and the cognitive processes used by auditors. they highlight the potential of this approach to get a better understanding of the differences in the audit task, the auditor and her/his attributes and the interaction between the auditor and other stakeholders between family and nonfamily businesses, and how these differences could potential influence on auditors’ judgment. like in the area of auditing, researchers examining managerial accounting issues at family firms could also benefit from adopting conceptual frameworks developed within family psychology to better understand what actually being a “family business” makes in the implementation of management accounting practices and control systems. as pointed out by prior studies (e.g., evert et al. 2016, fletcher et al. 2016), there are significant opportunities for qualitative studies adopting methods such as ethnographies or case studies that allow researchers to better understand the unique characteristics of family businesses. furthermore, compared to quantitative methods, qualitative approaches offer the researcher the possibility to “build a holistic perspective of the phenomenon under study and to observe the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 development of a phenomenon over time” (fletcher et al. 2016, 18). case studies are the most used qualitative methodology in family business research so far (de massis and kotlar 201413). while they are widely used by accounting historians and researchers exploring management accounting practices, its use in accounting research in family firms is still limited. case studies could be used to develop research on management accounting and control, an area where much more work needs to be done (e.g., songini et al. 2013; prencipe et al. 2014). they could also be used to investigate further the cross-country differences in the adoption and implementation of management accounting practices and how control and management accounting systems influence on succession in different settings. special interest could be paid to research in accounting practices of family firms in developing countries were these firms may play a significant role in the economic development. case studies can be fruitful for the analysis of the drivers and consequences of professionalization in family firms as well as for the analysis the role of accounting in family business failure and survival. they could also be applied to investigation of family leaders’ biographies to assess their role in fostering or hindering accounting change (e.g., parker 2014). finally, we should also consider the possibility of using mixed methods, combining quantitative and qualitative approaches (e.g., björnberg and nicholson 2012). 8. closing remarks this paper reviews research on accounting in family firms. overall, this study and prior literature reviews show that research on accounting in family firms has been dominated by accounting scholars with expertise in financial accounting interested in issues such as financial 13 de massis and kotlar (2014) provide good guidelines on how to use case studies in family business research. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 reporting quality, earnings management and accounting policy choices from an agency perspective. most of these studies provide insights about to what extent the financial reporting practices of family firms differ from those of non-family firms. we observe an increasing interest in family firms by researchers specialized in auditing as well as management accounting and control. interestingly, over time accounting researchers seems to be more and more open to adopt alternative theoretical approaches beyond the agency theory framework, as shown by recent studies using the sew approach. in this study, we include the contributions of accounting history to family business research, an area neglected in prior literature reviews. the studies reviewed show how fruitful can be a historical perspective to understand the role of accounting and accountants in the survival and failure of family firms as well as understanding their role in the development of accounting and auditing in society. the interaction between accountants and researchers from other areas of knowledge related to family firms such as management and economics can be particularly rewarding. an interdisciplinary approach to the study of family firms, bringing together researchers from different disciplines, could help to overcome some of the current challenges of studies on family firms and develop some of the ideas presented in this review. references achleitner, ann-kristin, nina günther, 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266-279. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 appendix 1. journals included in the literature reviews journals acronym 1 2 3 4 5 6 7 abacus aba o academy of management journal ama o o academy of management review amr o o accounting and business research abr x accounting and finance af o accounting auditing and accountability journal aaaj o accounting business and financial history abfj x accounting forum af x accounting historians journal ahj x accounting history ahis x accounting history review ahisr o accounting horizons ah x* x x accounting organizations and society aos x x o o administrative science quarter asq o o advances in accounting aa x x x x applied economic letters ael x x x o area area x auditing: a journal of theory and practice ajpt x x x cefs working capital series cefs x o contemporary accounting research car x o o corporate governance cg o corporate governance: an international review cgir x x x o x x critical perspectives on accounting cpa x x o economic and industrial democracy eid x entrepreneurial behaviour and research ebr x entrepreneurship: theory and practice etp x european accounting review ear x x x european journal of management ejm x european management journal emj x family business review fbr x x x x x x international business and economics research journal iberj x international journal of accounting ija x x x o international journal of accounting and finance ijaf x international journal of business and management ijbm x international journal of business research ijbr x international journal of business strategy ijbstrat x international journal of economics ije x international journal of entrepreneurial venturing ijev x international journal of human resource management ijhrm x international journal of management and enterprise development ijmed x international review of economics and finance iref x x http://revistes.ub.edu/index.php/jesb volume 2, number 2, 97-159, july-december 2017 doi:10.1344/jesb2017.2.j032 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 journals acronym 1 2 3 4 5 6 7 journal of accounting and economics jae x o x o x x journal of accounting and organizational change jaoc x x journal of accounting and public policy japp x o x o o journal of accounting auditing and finance jaaf x x x x o journal of accounting literature jal x o journal of accounting research jar x x o x o journal of business ethics jbe x x journal of business finance and accounting jbfa x o o journal of business research jbr o x journal of business venturing jbv o x x journal of change management jcm x journal of economic surveys jes x o x journal of family business management jfbm x x journal of family business strategy jfbs x x x x journal of financial economics jfe x o o journal of international accounting auditing and taxation jiaat x x o journal of management studies jms x o journal of small business and enterprise development jsmed x x journal of small business management jsbm x x x x x x long range planning lrp o o management accounting research mar x x x x o management learning ml x management science ms o o organizational science os x x o qualitative research in accounting and management qram x quarterly journal of economics qje x review of accounting and finance raf x x review of accounting studies ras x o revista innovar journal innovar x science and applied research sar x small business economics sbe x o southeast asian studies sas x spanish journal of finance and accounting sjfa x* x x the academy of management annals acama x the accounting review tar x x o x 1: salvato and moore (2010); 2: songini et al. (2013); 3: prencipe et al. (2014); 4: senftlechner and hiebl (2015); 5: helsen et al. (2017); 6: sousa-paiva et al. (2016); 7: current study. x = journals considered in the search strategy of the review with positive outcome (at least one paper on accounting and family firms); o = journals included in the search strategy of the review but no outcome (when available). * working paper at the time of the review; published later on in the journal indicated. http://revistes.ub.edu/index.php/jesb volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 adoración álvaro-moya cunef business school (spain) pierre-yves donzé osaka university (japan) business history and management studies “business history is today more interesting than it has been at any time since the founding of the subdiscipline in the 1930s.” (galambos 2003) abstract this article traces back the origins and nature of business history to stress its potential to dialogue with other social sciences and, in particular, with management studies. it also summarizes the main current trends in business history research to later propose the research lines that editors would like to promote from an interdisciplinary approach and in the direction of a fruitful exchange with scholars active in management and organization studies. keywords: business history; historic turn; internationalization; applied business history; entrepreneurship. introduction management scholars talk about a “historic turn”, calling for the use of historical reasoning to understand firms’ nature and behavior. management journals of different orientations have also shown their interest in history. and as business historians such as louis galambos stated at the turn of the century, business history matters nowadays more than it did decades ago. corresponding author. e-mail: adoracionalvaro@cunef.edu received 30 october 2015 accepted 03 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 but how have business historians received these messages? why doesn’t the dialogue across disciplines seem easy? what are the current trends in business history research and how can they connect with the demands of organizational studies? this article proposes to give an answer, although not definite, to these questions and explain how the journal of evolutionary studies in business can contribute to the multidisciplinary debate about organizations in the long term. 1. business history as an academic field business history is a field which emerged in the united states during the 1920s, in the response to the increasing complexity of firms’ organization and management due to rapid economic growth and the enlargement of corporations. in business schools, there was a need to understand the nature of these changes and the new challenges faced by companies. hence, business history was born as a practical and multidisciplinary academic field (yuzawa 2005). the business historical society was founded at harvard business school (hbs) in 1925 and started the following year to publish its own journal, the bulletin of the business historical society, which became business history review in 1954. moreover, in 1927, norman s.b. gras became the first professor of business history at hbs (hausman 2003). case studies of enterprises became a common tool for the training of managers in this school. business history began to expand as an academic field in the early 1960s, under the influence of alfred chandler, appointed professor at hbs in 1970. through his books on american large enterprises, strategy and structure (1962) and the visible hand (1977), he provided a theory explaining the success of us big business, as resulting from organizational capabilities which made possible the mass production and mass distribution of goods. the significance of chandler is the fact that he offered a theory of the firm based on historical work. volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 hbs and chandler had a deep impact on the spread of business history as an academic field around the world. in united kingdom, the journal business history was first published in 1958 under the direction of francis e. hyde, a professor at liverpool university who studied at harvard in the 1930s. in japan, keiichiro nakagawa introduced this field in the early 1960s, a few years after he came back from a stay at the same university (yuzawa 2005). in terms of organization, the us influence was also important, as the first association of business historians, the business history conference (bhc), was founded in this country in 1954. it was followed by the foundation of academic societies in japan (keieishigakkai, 1964), germany (gesellschaftfürunternehmensgeschichte, gug, 1978), in the uk (association of business historians, abh, 1990), and in europe (european business history association, ebha, 1990). moreover, the institutionalization also took the form of the foundation of centers within universities, mostly in europe, such as the business history unit at london school of economics (1978), the center for business history at glasgow university (1989), or the center for international business history at reading university (1997) (kurosawa 2014). even if business history is a discipline at the crossroads between history and management science, most of the scholars involved in this field are historians. they work usually in departments of history, so that their interest is much more related to economic, social and cultural history than management itself. as a result, very few business historians have an impact on management scholars, save chandler and some researchers engaged in international business and management history. historians’ lack of interest in generalization, conceptualization and theorization led also to the disinterest of management scholars (kipping and üsdiken 2008). yet some historians accept this critique, and claim the necessity volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 to distance new work from “traditional business history” and “to reconnect with multiple streams of research in collateral historical disciplines, and to enrich their stock of conceptual tools” (scranton and fridenson 2013, p. 8). there are a few exceptions, particularly in canada, denmark, japan, the netherlands, spain and the uk, where there are various chairs of business history within business schools and departments of economics. in spain, for instance, business history has grown much attached to economic history (carreras, tafunell and torres 2003, puig, 2012). this institutional context has led historians to engage for the last few years in an intense debate about the identity of the field of business history and to stress the necessity of discussion about methodology, epistemology and in particular the relation to management and economic studies (jones and friedman 2011, bucheli and wadhwani 2014, de jong and higgins 2015). finally, one must mention the calls for a “historic turn” that have taken place among management scholars from the turn of the century onwards, demanding historically contextualized approaches to the study and research of organizations (clark and rowlinson, 2004, booth and rowlinson 2006, rowlinson 2012). in the last few years, the publication of articles on historical research at top management journals, the emergence of journals such as management and organizational history and interdisciplinary academic forums like egos, and the recent publication of the routledge companion to management and organizational history, where editors and most contributors come from management and organizational studies, has illustrated that this historic turn is indeed taking place in a variety of management fields, including strategy, international business and entrepreneurship (o’sullivan and graham 2010, keulen and kroeze 2012, rowlinson 2013, rowlinson, hassard and decker 2014, greenwood and bernardi 2013, adorisio and mutch 2013, üsdiken and kipping 2014, volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 kipping and üsdiken 2015, mclaren, mills and weatherbee 2015). the idea that time and contextualization matters to properly understand business and management in an evolving perspective shows that the search for a “platform for future cooperation” (kipping and üsdiken 2008, 113) is not limited to historians. however, the dialogue across disciplines is still sparse. 2. relations between business history and neighboring disciplines as stated above, business history is a field at the crossroads of management and history. traditionally, works in business history used to consist of descriptive case studies of companies, entrepreneurs and industries. it was seen until the 1980s as a contribution both to a better understanding of companies and the economic system as a whole, and to historical knowledge (jones and zeitlin 2008). yet the disciplines most closely related to business history have evolved in new and divergent directions, so that business history itself has become a more and more isolated field. let’s have a brief look at the three closest disciplines. first, one must mention management studies, which used to be a close discipline, as business history appeared at first in a business school. history was at the core of weber’s, bendix’s, selznick’s and others’ seminal works in organizational studies (üsdiken and kipping 2014, 34-38), although the link between both fields has been particularly strengthened by the seminal work of chandler, which provides a theory of the firm’s organization, and has been widely quoted by scholars in management (hausman 2003). yet, chandler is largely an exception. management studies and business history have evolved in different directions since the 1950s. on the one hand, management was characterized since the 1950s by a “scientization” of research, with its own subfields (e.g. strategic management, organization behavior, and organizational theory), journals, conferences, and theories. on the other hand, volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 despite chandler, most business historians continued to write narrative case studies with few generalizations, and with little interest in discussing concepts and theories. moreover, when they engage in debate with scholars from other social sciences, it is usually economics, rather than management studies (kipping and üsdiken 2008). yet, this divide between business history and management studies is detrimental especially as numerous business historians have positions today in business schools in some countries like japan and the uk. this professional closeness supports the call for renewing debate and discussion between both disciplines, as exposed above. second, economic history used to be the “mother discipline” of business history in many countries with a strong tradition in this discipline, such as france, spain, uk, and most of us universities except hbs. focusing on firms was a way to provide qualitative evidence, while economic history was dominated by quantitative approach. for example, in france, the emergence and the development of historical studies of firms owes much to an economic historian, maurice lévy-leboyer. professor at paris x-nanterre since 1969, after stints at the london school of economics and harvard, where he get close to chandler, he trained the first generations of french business historians within the broader context of economic history (fridenson 2014). yet this closeness between economic and business history is challenged by the shift of economic history to econometrics. born in the united states in the late 1950s from a will to apply economic theory and quantitative methods to historical research, the “new economic history” gradually became the dominant approach throughout the world during the 1980s and the 1990s (cain and whaples 2013). consequently, most economic historians lost their interest in firms and management. volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 third, history as an academic discipline experienced a deep mutation in the 1990s within the context of the so-called cultural turn (burke 2008). while economic and social history was a major field of history in western universities during the 1960s-1980s, the attention of researchers in history changed to cultural and social issues in the following decade. as business history was mostly carried out by scholars in departments of history, this change had a strong impact. companies, entrepreneurs and resources (capital, labor, technology) are no longer at the center of attention for historians. consequently, classical business history became marginalized within departments of history as well as within history as a broad discipline. moreover, it became more difficult to have a common platform for discussion and exchanges between historians and management scholars. this does not mean that historians have no more interest in business in itself or for the study of the economic system, but the approach changed considerably. instead of firms and entrepreneurs, many historians look for example at consumers and workers with approaches inspired by cultural and gender studies (e.g. green 1997, scranton 2001). such works make important contributions to broaden our knowledge of the interactions between the economic system, social dynamics and cultural values. however, the absence of common methods and analytical concepts with management studies makes it somewhat difficult to share results and understandings. besides that, one must mention here the emergence after the global finance crisis of a new and fast-growing subfield of history, namely the “history of capitalism”. this is definitely an approach related to the need to understand the dynamic of the economic system. business historian lou galambos argued that the history of capitalism is essentially a rebranding of cultural and social history to answer a demand, but the firm itself is not tackled as a major volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 actor (galambos 2014). for example, harvard university professor sven beckert, one of the leaders of this new history of capitalism, published in 2014 a widely celebrated history of cotton around the world since antiquity. following the evolution of trade and markets, manufacturing technology, accumulation of capital and exploitation of workers, he provided a brilliant example of the history of global capitalism (beckert 2014). yet, the firm is not considered as a major actor and is only approached incidentally, so that we have an image of the driving forces of globalization that is very different from that offered by geoffrey jones in his works on multinational enterprises (jones 2005). these two works emphasize the different perspectives of the dominant (cultural history) and marginalized (business history) approaches within historical research. 3. current trends in business history research the management scholars’ historic turn discussed above has coincided with business historians’ reexamination of the scope and aims of their discipline. we would highlight first two ongoing debates: the reconsideration of the chandlerian firm’s efficiency and the contribution of history to management studies. starting with the latter, leading scholars recently discussed in the oxford handbook of business history, edited in 2008 by jones and zeitlin, the hybrid and complex nature of business history. this situated the field in an extraordinary position “to participate in vigorous two-way exchanges with scholars in adjacent fields”, including history, economic theory, economic development, and management and organization studies (jones and zeitlin 2008, 4). of those, management scholars seem, as aforementioned, to be the more interested in this exchange. those business historians interested in engaging in dialogue with them have paid great attention, after the pioneering works of kipping and üsdiken on the historical roots of volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 organizational studies (kipping and üsdiken 2008, to the identification and understanding of the epistemic, methodological and theoretical particularities of the discipline, in order to exploit these particularities to provide new perspectives on the nature of organizations and their behavior (bucheli and wadhawani 2014). instead of just providing longitudinal analysis as historically-grounded management studies usually do, and contrary to economists, sociologists and psychologists’ potential contribution, business historians can put actors and actions in historical context, give explanations based on embedded generalizations and theoretical claims (not universal ones), illuminate path-dependence theories on the firm and identify the interdependency of variables over time (jones and khanna 2006, bucheli and wadhawani 2014, quinn 2015). this can shed new light on what companies, managers, and governments know about the creation, development and transfer of organizational capabilities, the nature of innovation and entrepreneurship, and the impact of institutional settings on firms’ competitiveness, among other issues. for these reasons interdisciplinary historical approaches to the study of management-related fields, such as entrepreneurship, have great echo nowadays. by the 1990s, business history scholars started to reconsider the universal validity of the chandlerian firm, the ubiquitous academic paradigm until then. investigations carried out by these scholars revealed that the managerial enterprise was not necessarily the most efficient organizational form in every context and, in fact, had never been so widespread in western countries, not even in the united states (piore and sabel 1984; sabel and zeitlin 1997). a growing number of scholars began then to analyze other forms of business organization, such as industrial districts, business/economic groups, business networks and family firms. volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 as early as the 1960s a heterogeneous group of economics, management and business history scholars started to discuss the inefficiency usually attributed to family firms due to, compared to big business, their relatively small size, lack of professionalization and the dynasty problem (jones and rose 1993; casson 1999; fernández-pérez 2003; colli and rose 2008). without neglecting these disadvantages, the research carried out since then has pointed out that the very idiosyncratic nature of the family firm also implies several competitive advantages, such as psychological and financial capital, efficient mechanisms of transmission of knowledge and corporate values, and less agency costs thanks to the existing trust among its members (colli and rose 2008; colli and fernández-pérez 2013). the most recent research has focused on the identification of the economic role played by family firms in the long term, the reasons for their longevity and their internationalization trends. business historians are showing family firms’ widespread presence, and particularly in developing countries, their great capacity for adaptation and their locally grounded nature. they also highlight family firms’ capacity to internationalize successfully and the different internationalization patterns they have followed (graves and thomas 2008; colli and rose 2008; lubinski, fear and fernández-pérez 2013; colli, garcía-canal and guillén 2013; fernández-pérez and colli 2013; colli, howorth and rose 2013; fernández-pérez and lluch 2015). the study of the family firm is closely related to research on business networks, and business groups, which are also called economic groups, particularly in latin america. in developing countries, where the research has traditionally focused, business groups are usually understood as “collections of legally independent businesses, often extensively diversified, and interconnected by a medley of economic and social ties” (jones and khanna 2006, 455), which are usually organized around families or banks (amsden and hikino 1994; guillén volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 2000). both management and business history scholars are paying great attention to the study of business groups, which are presented as an alternative to the chandlerian firm due to their ability to adapt to different political and economic frameworks and to build and manage competitive skills (fruin 2008; colpan, hikino and lincoln 2010). recent trends in the study of business groups include extending their identification to mature industrial economies and the distant past, and investigating the reasons for their endurance (colpan and hikino 2016). both business groups and interfirm or business networks can be considered as “social networks wherein economic action is embedded in systems of actors and relationships linking actors” (fruin 2008, 245). the second, however, are much more decentralized and loosely held. the role of business networks in economic and managerial activity has long since been identified by sociologists and economists (granovetter 1973 and 1985; casson 1997), and implicitly by business historians (jones 2005, chapter 7). strongly influenced by sociologists’ interlocking analysis and the historical study of business elites, business history research on networks has recently focused on the study of corporate structure and interlocking directorates (westerhuis and david 2014), as well as how networks foster innovation and entrepreneurship both in developed and developing countries (laird 2007; casson 1997; fernández-pérez and rose 2010; tripathi 2014). interfirm networks are also at the core of the study of industrial districts and regional clusters. the efficiency of these alternatives to big business started in the 1980s, when the rise of specialized industries in some regions, like silicon valley, made the marshallian concept of industrial districts increasingly popular among economists. at the same time, in the management field, porter developed his well-known “diamond of national advantage” model, stressing the competitiveness of regional clusters (porter 1990). economic and volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 business historians have contributed to this debate by studying the role played by industrial districts during industrialization as well as the reasons behind their endurance in some industries and regions, showing that industrial districts are not a new phenomenon at all, and disentangling the dynamics behind interfirm relationships and the regional context in which they are embedded (zeitlin 2008; becattini, bellandi and de propis 2009; catalan, miranda and ramon-muñoz 2011; le bot and perrin 2011). historically, industrial districts have been particularly relevant in the case of consumer industries, such as fashion. in the last few years many researchers have paid attention to fashion, looking not only at how firms are organized, but also the economic, marketing and cultural aspects of this industry (polese and blaszczyk 2012; catalan and ramon-muñoz 2013) family firms, business groups and business networks are part also of recent research on a classic topic in the business history literature: the multinational enterprise (mne). scholars have long explored the role of firms as drivers and actors of globalization, following the groundbreaking works of authors such as mira wilkins (wilkins 1970 and 1974) and geoffrey jones (jones 2003, 2005, 2008 and 2014). most of the research, however, has focused on the western world and manufacturing industries, so there is still a lot to do regarding the globalization of services and, as discussed also later, mnes’ spillovers into developing and emerging markets (jones 2014). international business scholars, on the other hand, were among the first to address the relevance of business history to discuss the theory of the mne (casson, 1986; buckley, 2009). and business historians are increasingly accepting this invitation, as the emphasis of journals such as business history and business history review on theoretically-grounded manuscripts shows. in the above lines we have tried to present topics widely discussed by business historians in the last several years, but of volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 course, it is not an exhaustive list. the recent re-examination of the boundaries of the discipline has resulted in the rise of a broad array of new issues, such as, among others, retail distribution and marketing, cooperativism, cartelization, corporate reputation, and green governance. the 2007 financial crisis has also rekindled interest among business historians in finance, a classic issue in the literature. 4. business history in jesb business history is a field with a wide variety of methodological approaches. developing the dialogue with scholars in management and organizations studies or with other fellow historians – of capitalism or other subfields – leads however to different ways to address issues and to write papers. for example, the relation to theoretical models and the necessity to be explicit about methods differs significantly between articles published in historical journals and in journals of management and organization studies (yates 2014; decker, kipping and wadhwani 2015). hence, as the journal of evolutionary studies in business aims at promoting an interdisciplinary approach to the long-term analysis of the evolution of business, we encourage authors to submit business history papers, including high-quality and updated reviews, which engage in this direction of a fruitful exchange with scholars active in management and organization studies. this journal will promote generalizations, theorization, and implications based on historical case analysis. this editorial policy does not mean we have the ambition to make business history a social science, that is, a field dominated by theory development and hypothesis testing as proposed by de jong, higgins and van driel (2015). the application of theories developed to describe the contemporary business system to an analysis of the past can be misleading, due to the evolution of context, and the historical approach aims precisely at “theory building in volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 historical context” (yates 2014, p. 279). for example, the joint research carried out recently by a team of dutch business and economic historians on the evolution of the business system in the netherlands during the 20 th century analyzed through the varieties of capitalism approach stressed the difficulty of applying such a model to understand a widely changing system (sluyterman 2015). in particular, the journal of evolutionary studies in business will welcome business history papers focusing on the four following topics. all of them are innovative in terms of methodology and approach. they tackle moreover unstudied issues in business history with a high potential to contribute to discussion with other fields of management studies. 4.1 the internationalization of firms in emerging countries emerging countries have attracted the attention of business historians since 2000, with a strong focus on both the dynamic of business within specific countries (domestic market) and the action of western multinational enterprises (mnes) in these countries, often within the context of colonialism (e.g. jones 2010; donzé 2015b). for example, volume 88 of business history review (2014) includes seven articles on non-western countries, among a total of nineteen articles. this high proportion is explained by the publication of a special issue on india. these seven articles can be divided into research on direct investments from western firms (2), on the development of business at the domestic level (4), and on the growth of local enterprises and their extension towards other emerging markets (1). this last paper, which tackles the taiwanese pc industry, its growth and its investments in other emerging markets in asia, offers a promising perspective (yu and shih 2014). in management and organization studies, the nature of mnes from emerging countries is frequently discussed (ramamurti 2012). one important issue and point of disagreement is to volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 clarify whether such companies are competitive due to the advantage of their home country (cheap labor, natural resources) or due to their ownership advantages, like mnes from developed economies. some scholars argue that mnes from emerging countries are different. while western mnes are competitive due to the control of highly sophisticated technology, know-how, resources and global brands (unique ownership advantages, following the classical economic theory on the mne), the comparative advantage of emerging countries’ mnes would rely on their ability to produce very cheap goods, to adapt to difficult business environments and to understand customer needs in other emerging markets (guillen and garcia-canal 2009). mnes from emerging countries, in addition, have the ability to identify and bridge gaps, and to learn fast in technological areas and, above all, organizational terms (matthews 2006). by providing high quality case studies of mnes from latin america, asia, africa and even the european economic periphery –including former socialist economies– business historians can contribute to such a debate. one important point is to stress that some contemporary phenomena may not be as new as they seem (jones and khanna 2006; puig and fernández pérez 2009; jones 2014). for example, in asia-pacific in particular, there were already non-western trading companies organized internationally in the second part of the 19 th century (casson and cox 1993). such cases certainly offer a promising opportunity to engage in discussion with scholars in management studies, and we strongly encourage business historians to submit papers in this field. 4.2 mnes’ spillovers on host economies the study of foreign direct investment (fdi) and the multinational enterprise has a long tradition among international business scholars, whose works initially focused on the nature, strategy and organization of mnes (jones 2005, chapter 2; dunning and lundan 2008). volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 globalization and the fast growth of emerging economies have revived scholarly interest in fdi, leading to the identification of a range of channels though which multinational firms affect local industry, and challenging part of the existing theoretical scholarship. these include the presence of forward and backward linkages with local firms and the transfer of technology and capabilities. recent research from economic and business historians has also posed new questions to conventional wisdom on fdi, stressing, among other issues, the qualitative nature of many mnes’ effects on host economies and local entrepreneurship, and the existence of a strong relationship between entry modes and potential spillovers on host economies (colli 2014; puig and álvaro-moya 2015). as international business scholars have also pointed out (casson 1986; kogut and zander 2003; buckley 2009; burgelman 2011), business history has great potential for analyzing how the process of creation, accumulation, and retention of knowledge, along with distance between countries, can explain the strategic decisions behind internationalization. business historians, therefore, have a great opportunity to discuss in a multidisciplinary fashion how the capabilities embedded in the mne are transferred among countries, and how local actors, including local partners and governments, can develop the absorptive capacities required to internalize foreign knowledge (jones 2014). 4.3 the approach of “applied business history” the idea that business historians can communicate with scholars in other fields of social sciences and contribute to public debate, does not mean necessarily they must make wide use of concepts and theories developed by researchers in management and organization studies. the specificity of historians is the methodological approach they provide to look at evolution volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 – of firms, for example. they can contribute to discussion and research through the explicit application of their methods. this approach, called “applied business history”, has been developed by takeo kikkawa in japan since 2000. focusing on various industries with strong social concerns, such as energy, the environment, finance or professional baseball, he exposed the unique perspective offered by historians to discuss current issues and to contribute to a better understanding of the evolution of business and management (kikkawa 2012a). as kikkawa (2013) stressed, “business history is an academic discipline that focuses on using the historical method to perform empirical analyses of changes in organizational management.” in the context of other social sciences, history adheres to an ex ante perspective: analyzing events from the past to the present rather than looking back on the past from a present perspective. kikkawa (2012b) defines his approach as follows: “the study of applied business history is about identifying the dynamism of industrial and corporate growth through an examination of business history; then, based on the findings, such studies explore solutions to contemporary problems encountered by relevant industries and companies.” this mode allows historians to provide timely, contextualized analyses and focus on evolutionary processes, thereby avoiding the deterministic risks of a path dependency approach. a key issue is to re-construct the process of decision-making in an uncertain environment, even if the observer – the historian – knows the result and the outcome of this decision. such a constructivist approach makes it possible to avoid the traps of an ex post perspective, as often embodied by the path dependency approach, namely looking at the past from the present and identifying the chain of successive events which led to the origin of today’s situation. volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 hence, business historians can engage in communication with management scholars not only through discussing concepts and topics based on case studies of the past, but also through carrying out historical research until the present time. even if access to archives and primary sources can be difficult, the ex ante approach can provide meaningful contributions (donzé 2015a). consequently, the journal of evolutionary studies in business will welcome papers which engage in an explicit demonstration of methodology of historical approach and consider historical contributions with a wide scope, up to the present time. 4.4 entrepreneurship the study of the entrepreneur has been of growing interest from the 1980s onwards among management scholars and policy makers, who observe with enthusiasm the success of startups in high technologies and other industries, and regional clusters’ competitiveness (jones and wadhwani 2007). economic and business historians, however, started to investigate this issue much earlier, particularly after schumpeter put the entrepreneur at the core of innovation and stressed how economics and economic history could jointly contribute to a better investigation of this issue (schumpeter, 1934). entrepreneurship has been mainly understood since then, not only as new venture formation, like most current management studies, but as the different ways in which innovative activity has taken place, its implications for economic and business change, and the institutional and economic determinants (cassis and minoglou 2005; casson and godley, 2005; casson et al 2008; landes, mokyr and baumol 2010). firms, in fact, were actors and drivers of the industrialization process. corporate entrepreneurship, or organizational innovation and new business creation within the firm, has been, on the other hand, at the core of business history since the origins of the volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 discipline. chandler’s compelling work is concerned, in fact, with this issue (jones and wadhwani 2008). using biographies as the main source, economic and business historians have also recently looked at the individual entrepreneur. strongly influenced by some management studies, historians have tried to elucidate entrepreneurs’ cultural, social and psychological characteristics as well as their educational and professional background, stressing the role played by social capital and networks in the entrepreneurial process as well as making comparisons across regions and technological revolutions (jones and wadhwani 2008, 505509; corley 2008; garcía ruiz and toninelli 2011; tortella and quiroga 2013). management research on entrepreneurship has focused on entrepreneurs’ behaviour, abilities, and personal features, as well as how they identified business opportunities, the nature of such opportunities and the role played by the institutional, social, cultural and economic context in promoting, or hindering, entrepreneurship (cooper, 2003; shane 2003). although the advance of research on entrepreneurship in the last twenty years has been impressive, our knowledge on the aforementioned issues is still limited. furthermore, there is not yet a widely accepted unified theory on entrepreneurship (eckhardt and shane 2003; casson et al. 2008). a new trend in business history is revising precisely how to bring entrepreneurship researchers closer to historical reasoning, as well as re-examining how to exploit historical sources and methods for this purpose: see, for instance, wadhwani and jones 2014, the workshop organized in may 2014 by the centre for business history at copenhagen business school, and the bhc/ebha workshop "historical approaches to entrepreneurship theory & research" (june 2015). business historians, for instance, can offer insightful considerations volume 1, number 1, 122-151, january-june 2016 doi: 10.1344/jesb2016.1.j008 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 about how entrepreneurs exploit business opportunities as well as the influence exerted by the institutional, social and cultural context. the journal of evolutionary studies in business is particularly interested in business history papers focusing on the four topics described above. however, papers on other issues with a high potential to contribute to discussion with other fields of management 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network; strategy; knowledge intensive entrepreneurship corresponding author: e-mail: monika.petraite@ktu.lt received 21 november 2016 accepted 25 january 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 introduction knowledge-based entrepreneurship is referring to the new and innovative firms with high knowledge intensity in their activities, involved in the process of transforming knowledge into innovation new or significantly improved goods and services that may enter in market (kanellos 2013; witt and zellner 2005; johansson 2005). knowledge based entrepreneurial activity relies strongly on r&d as a core resource, and its commercialization via entrepreneurial activities, either deploying and maximizing r&d returns via development of new technologies. r&d globalization, and speed of new technology development, the need to deal with extremely complex conditions in searching and exploiting market, institutional and technological opportunities, the need to exploit r&d resources and their return globally leads to the new approaches towards r&d based entrepreneurship, namely the born global firms. the term of born global is applied for firms that operate internationally from at or near their inception. these firms did not seem to follow the traditional internationalization theories such as uppsala internationalisation process model, which considers the internationalisation of firms as gradual and evolutionary (eurofound 2012; dib et al. 2010). rather, they follow an early and accelerated process of internationalisation. recent empirical studies allow to distil the core characteristics of born global firm, such as high activity in international markets from or near the founding (cavusgil and knight 2009; gabrielsson et al. 2008; gabrielsson and pelkonen 2008), operation from the sme basis (sullivan mort et al. 2012; eurofound 2012; cavusgil and knight 2009) with limited financial and other material resources (sullivan mort et al. 2012; cavusgil and knight 2009), industrial variety (sullivan mort et al. 2012; eurofound 2012; cavusgil and knight 2009; crick 2009), strong international outlook of managers and international entrepreneurial orientation http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 (eurofound 2012; cavusgil and knight 2009; gabrielsson et al. 2008; weerawardena et al. 2007), emphasis on differentiation strategy (cannone et al. 2012; eurofound 2012; cavusgil and knight 2009; schulz et al. 2009), emphasis on superior product quality and innovations (eurofound 2012; sullivan mort et al. 2012; gabrielsson and kirpalani 2012; cavusgil and knight 2009; schulz et al. 2009; gabrielsson et al. 2008), knowledge intensity (gonzalezmenorca et al. 2012; jones et al. 2011; kudina et al. 2008), utilization of advanced ict (gabrielsson and kirpalani 2012; mettler and williams 2011; cavusgil and knight 2009), belonging to networks (eurofound 2012; renda 2011; schulz et al. 2009), using external independent intermediaries for distribution in foreign markets (taylor and jack 2012; cavusgil and knight 2009), global niche market orientation (bailetti 2012; gonzalezmenorca et al. 2012; olejnik and swoboda 2012). after systematic literature review on factors shaping the formation of born global firms in r&d intensive settings (dlugoborskyte and petraite 2013) we define the r&d intensive entrepreneurial born global firm as setting that conduct international business at or near the founding of the firm and create new value for the market while transferring unique knowledge to innovative products or services through commercializing its r&d activities. the eclectic composition of empirically found common characteristics of born global firm suggests that entire firms are not occasionally emerging, but are global by design and thus could be defined and explained while analysing the firm from the internal perspective that shapes the formation of r&d intensive entrepreneurial born global start up, and later firm. based on this problem formulation, the paper aims to provide the empirically grounded framework for the analysis of the key determinants leading to the formation of r&d intensive entrepreneurial born global firm with a special focus on entrepreneurial firm and network http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 theories while the early internationalisation is approached as a consequence of the latter. the factors shaping the formation of r&d intensive entrepreneurial born global firms was extracted via systematic literature review and synthesis, with a primary focus on the findings from empirical studies (dlugoborskyte and petraite 2013; halldin 2012; cannone et al. 2012; cavusgil and knight 2009; kudina et al. 2008; varma 2010). a comprehensive view of born global r&d intensive firms, from distinctive features of knowledge-based entrepreneurship and born global firms, to their early internationalisation issues considering conditions and factors causing such pathway, to theoretical grounding resulted in creating a systemic factors portrayal for the formation of enterprises under study. this systematic approach revealed that external factors, which are influencing rapid internationalization decision and the formation of r&d intensive entrepreneurial born global firm, mainly arise from the impacts of globalisation (halldin 2012; cannone et al. 2012; mets and kelli 2011; cavusgil and knight 2009). thus further study rather focus on explaining the internal factors constructing conceptual framework that represents the factors relevant for the formation of r&d intensive entrepreneurial born global firms grouped into three blocks, i.e. entrepreneurial behaviour of a founder, firm’s strategy, and use of network. the grouping of internal factors derived from the importance of an entrepreneur and his behaviour in young globally oriented firms on their inception, firm’s strategic choices, enabling it to compete in the global market, and its attitude towards networks. this analytical framework to study r&d intensive born global firms was grounded by dlugoborskyte et al. (2015) via the literature analysis and extraction of the characteristics of born global firms, as well as by the analysis of factors that affect global orientation and the conditions influencing the choice of an early and accelerated internationalization path. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 the study context chosen is an open economy in transition. so far the phenomenon of born global firm was mainly studied in economically developed countries. little attention has been given on the formation of such enterprises, especially in the post-soviet countries, where specific evolutionary conditions apply (malerba et al. 2015). thus the paper aims at exploring the field in a new set of conditions, which has been purely studied before. distinctiveness of born global firm enables entrepreneurs from small transition countries to overcome natural market, size, and resource limitations, acquire knowledge globally and benefit form participation in high value added production chains worldwide. this either supports rapid catch up of economy from resource and productivity based competitiveness towards innovation based competitiveness. even though the main aim of the article is not to focus on external factors which influenced the formation of born global firms in r&d intensive settings, the entrepreneurial behaviour, organization strategies and networking are strongly related to a specific time period and territory. the specific context for this study is offered by the transition of lithuania over the period starting 1990 up to 2015 which featured a dramatic transformation in former communist country, resulting in its reintegration into the global economy. thus the year of establishment of born global firms which formation in the global path up to today was being studied in the paper was no earlier than 1990. the study of lithuania, a relatively young market economy, rises particular interest because of rapid catch up of the economy within the european union accession period, and the specific role assigned to the r&d intensive firms in the process. lithuania over 25 years of independence has transitioned from the post-soviet economy with labour intensity driven competitiveness and low income country towards the productivity and innovation driven economy with the global competitiveness rank no 36 represented with high income and innovation driven exports http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 (world economic forum 2015), while overall innovativeness of the economy remains rather low. the research methodology adopted the case study, best suited to the objectives of our study: constructing theoretical approaches and revealing still relatively unknown aspects of the relationships being studied. the multiple case study method allowed triangulation between the cases under study and enabled to find richer explanations and a deeper insight into phenomenon. empirical objective determined entrepreneurial born global firms in r&d intensive sectors to be targeted. following the scientific literature on distinctive features of born global firms and the determined specific external (i.e. country in the catching up period) and internal (i.e. r&d intensive firm) context in which these firms should have started to operate, five criteria in order to select the case studies were identified: small or medium size of the firm; r&d intensity; early internationalization (export activities within three years from the establishment); exclusion of post – soviet restructuration based companies from the sample (year of company establishment no earlier than 1990); global vision and strong international entrepreneurial orientation, which stands for global activities from the inception of an enterprise. overall 13 in-depth case studies were conducted, based on multiple sources of secondary information and semi-structured in-depth interviews with the founders or ceos of r&d intensive born global firms from various industries. after individually described cases were then cross-compared using maxqda software in order to reveal their similarities and differences. such analytic approach allows the generalization of the results from all of the cases to disclose factors for the formation of r&d intensive entrepreneurial born global firm. the paper is structured as follows. in the first part we provide the framework for the analysis of the formation of the born global firm, whereas the entrepreneurial, strategic, and network http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 based factors are conceptually linked. the analytical model proposes the analysis of strategic choices as defining factors at the level of entrepreneurial behaviour, firm strategy, and network. the case study methodology is provided in a part two. the third part of the paper provides the empirical linkages of entrepreneurial, strategy based and network factors’ manifestations in r&d intensive entrepreneurial born global firms. these are followed by discussion and conclusions enclosing empirically grounded framework that explains the emergence of r&d intensive entrepreneurial born global firms from a perspective of entrepreneurial firm and network theories. linking entrepreneurial, strategy, and network constituents in explaining the formation of born global firm in knowledge intensive sectors the concept of r&d intensive born global firm defines the need to dedicate specific attention to the rising variety of networks, and knowledge acquisition and generation strategies in innovation processes. the firm’s networking and knowledge acquisition attitudes to a large extent define the innovation management models within an organization (hagedoorn et al. 2006; fukugawa 2006; gassler and nones 2008; love and roper 2001; van de vrande et al. 2006; williams and lee 2009). the interrelation between the firm specific internal capabilities and external partnership impact on innovation is also an important issue that has been studied by vega-jurado et al. (2009). the impact of the contextual conditions on the firm’s innovative behavior was proven to be an important factor, that affects firms search activities and innovation management approaches (tidd 2001; van beers et al. 2008; gassler and nones 2008). the choices of strategic orientations of high technology firms in transitional economies was also analysed by lau et al. (2008), who again proved the existence of the important link between the development, institutional factors and firms behaviors. the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 industry specific factors, and specifically the strategic groups and their behaviors were studied by the large number of authors (for example, erden et al. (2009) and zhang et al. (2007) in their studies provide the strategic group analysis, linkage and alliance formation behaviors in the biopharmaceutical industry; the specifics of r&d based innovation behavior in the electronic industries of catching up economies was also studied by kriaucioniene and ragauskas (2008)). the role of public policy and interrelations of r&d, growth and internationalization of new technology based firms was also presented in the study of filatotchev and piesse (2009), whereas authors focus on the determinants of growth and success of the new technology firms at the different maturity stages basing their analysis on the evidence of advanced countries. after systematic literature review of factors shaping the formation of born global r&d intensive firms, the set of systemic factors were extracted and categorized into three groups, representing industry/firm, organization/strategy and individual/entrepreneur (dlugoborskyte and petraite 2013). external industry/firm group factors portray the global market profile and market conditions for pushing or pulling for becoming born global firm, certain customer characteristics, internationalization level of competitors and distinctiveness of industry profile in which firm operates. internal organization/strategy group factors encompass product characteristics that are significant for international markets and trading, international orientation of management either managing resources internationally in an effective way, knowledge intensity and networking as a basis in value creating processes. individual/entrepreneur level factors stand for such characteristic features as global vision, proactiveness, indicating the ability to recognize potential in foreign markets, as well as international networking skills based on international network of professional contacts used http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 for business development. in this systematic view external factors help to explain the resource acquisition strategies of firm, with a particular focus on internationalization, globalization and networked knowledge economy, while internal factors rely on the theories of entrepreneurship and organization, with the specific focus on dynamic capabilities, networks, organisational learning and knowledge management. in the second step of literature review the conceptual framework was constructed (dlugoborskyte et al. 2015) with respect to characteristics of born global r&d intensive settings and systemic factors influencing the emergence of born global r&d intensive firm, and incorporating dib et al. (2010) framework, which was created in their study in order to explain the emergence of born global firms. external factors are excluded from the further study in order to deepen the analysis of born global phenomenon from “inside-out” and explain the core variables and their linkages, formed by strategic choices leading towards born global firm. furthermore, the literature review disclosed that the entire link between external factors influencing rapid internationalization decision and the formation of born global r&d intensive firm is based on the impacts of globalisation. at the entrepreneurial firm level the response to globalization is based on global networks (halldin 2012; cannone et al. 2012; cavusgil and knight 2009), which are considered as crucial conditions for early internationalization within our framework. globalisation creates a number of pull and push factors affecting the emergence of born global settings, as well as conditions for early internationalisation of the firm, such as decreased trade and investment barriers in a global scale (halldin 2012; mets and kelli 2011; cavusgil and knight 2009), increasing homogeneity among particular industries (cannone et al. 2012), global information flows (mets and kelli 2011), growing mobility of human capital (cannone et al. 2012; mets and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 kelli 2011), knowledge globalization (halldin 2012), emergence of global niche markets (halldin 2012; dib et al. 2010; cavusgil and knight 2009), global networks (halldin 2012; cannone et al. 2012; cavusgil and knight 2009), which are tested from the entrepreneurial opportunity exploitation perspective from our framework, but not as independent variables. following the intention to investigate born global r&d intensive firms from internal perspective, the entrepreneurial, strategic, and networking factors supporting the emergence of born global r&d intensive firm were extracted (see figure 1). these specific groups of internal factors has been previously extracted in the scientific literature (eurofound 2012; dib et al. 2010) to study born global firms after raising the importance of an entrepreneur in young globally oriented firms and significance of networks in international entrepreneurship and born global firms, besides their strategic composition. each group of factors relates to a greater list of sub-factors as characteristics, which were grounded by the literature analysis and extraction of the characteristics born global firms, as well as by the analysis of factors that affect global orientation and the conditions influencing the choice of an early and accelerated internationalization path. the entrepreneurial factors list a number of relevant features of an entrepreneur that leads the firm to a global path. the recent empirical studies underline high activity in international markets from or near the founding (tanev 2012; halldin 2012; cannone et al. 2012; cavusgil and knight 2009; gabrielsson et al. 2008; gabrielsson and pelkonen 2008), strong international outlook of managers and international entrepreneurial orientation (eurofound 2012; cavusgil and knight 2009; gabrielsson et al. 2008; weerawardena et al. 2007) as the core characteristics of born global firm. international orientation possessed by entrepreneur is highlighted to be one of the most relevant internal factor that may influence the choice of an http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 early and accelerated internationalization path (dib et al. 2010), and a desire to be involved in international business is claimed to impact the formation of born global firm (eurofound 2012; halldin 2012; cannone et al. 2012; cavusgil and knight 2009). so particularly global firm profile from inception is supported by the core individual entrepreneur level factor – possession of global vision, where international orientation goes together with managerial competences to exploit the opportunities in global markets (eurofound 2012; halldin 2012; cannone et al. 2012; cavusgil and knight 2009). the changing nature of customers and markets towards global level also changes the competitive environment where firms operates nowadays, and either causes the need to scale returns from international markets, in order to remain competitive also in the conventional markets, while acquiring the resources for keeping up with the r&d and innovation speed globally (kudina et al. 2008). proactiveness and ability to recognize potential in foreign markets (eurofound 2012; cannone et al. 2012; kudina et al. 2008), and tolerance to risk (dib et al. 2010) enables such entrepreneurial activity. that is usually strengthened by such personal management characteristics as networking skills, leading towards creation and exploitation of strong personal international network of professional relationships (eurofound 2012; halldin 2012; cannone et al. 2012; cavusgil and knight 2009; kudina et al. 2008), experience in international business (cannone et al. 2012; dib et al. 2010; kudina et al. 2008), education abroad, as well as technical knowhow (dib et al. 2010). in sum, entrepreneur level factors emphasize global vision, proactiveness in recognition and exploitation of opportunities globally, international networking as characteristics of top management that actually form the internal environment of the firm. thus entire entrepreneurial variables from the literature review were extracted: global vision, international orientation, international experience from the inception of an http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 enterprise, tolerance to risk, proactiveness, superior know-how, use of personal and professional relationships and networks. consequently strategic and organizational factors define specific characteristics of a firm to born global in r&d intensive settings that are excluded and highly linked in between in the scientific literature. many of these are already underlined as the core characteristics of the born global firm, such as knowledge intensity (gonzalez-menorca et al. 2012; jones et al. 2011; kudina et al. 2008), industrial variety (sullivan mort et al. 2012; eurofound 2012; cavusgil and knight 2009; crick 2009), emphasis on differentiation strategy (cannone et al. 2012; eurofound 2012; cavusgil and knight 2009; schulz et al. 2009), emphasis on superior product quality and innovations (eurofound 2012; sullivan mort et al. 2012; gabrielsson and kirpalani 2012; cavusgil and knight 2009; schulz et al. 2009; gabrielsson et al. 2008), utilization of advanced ict (gabrielsson and kirpalani 2012; mettler and williams 2011; cavusgil and knight 2009), global niche market orientation (bailetti 2012; tanev 2012; gonzalez-menorca et al. 2012; olejnik and swoboda 2012). particularly emergence of global niche markets (halldin 2012; eurofound 2012; dib et al. 2010; varma 2010; cavusgil and knight 2009) are identified as the core market based factors influencing the formation of born global firm. in these settings market opportunities are explored globally for the unique r&d intensive solutions either as the advantage to occupy global market niches in order to leverage returns from r&d investments is taken, which stands as one of the core factors for such enterprises formation (halldin 2012; cavusgil and knight 2009). certain product features are essential factors allowing the exploitation of global market opportunities with the niche based competition, these are unique and high value added products creating a significant first mover advantages. knowledge intensity and management are manifested in continuous learning and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 knowledge acquisition from foreign partners in order to develop knowledge intensive unique products and speed up innovation processes (cannone et al. 2012). particularly innovativeness, specialization and focus, customer orientation, product differentiation, technological advantages possessed by the firm, either the use of information technologies as well as all the spectrum of unique intangible assets acquired in the company are not only highlighted in the scientific literature investigating born global phenomenon but either are these variables excluded by dib et al. (2010) and certified in their study as internal factors that influence the choice of an early internationalization path of the firm. characteristics mentioned and in the conceptual framework excluded as strategic level factors in order for the firm to form as global from inception help the most frequently small and constrained by lack of tangible resources born global firm to successfully compete in global markets while commercializing the r&d activities and creating very specific but high value added products. entire organization and strategy based factors from the literature review were extracted: ownership of superior intangible assets: firm reputation, market or product knowledge, knowhow, intensity of knowledge and learning orientation, innovativeness, ability to sustain innovation, specialization/focus/niche strategies in a global market, product differentiation for competitive advantage, possession of superior technological advantages, market and customer orientation, international marketing competence, proactive use of information and communication technologies. networking factors derive from networking theory inherent to a born global phenomenon. the recent empirical studies allow to distil belonging to networks (eurofound 2012; renda 2011; schulz et al. 2009) as one of the core characteristics of born global firm. rapid internationalization decision is based on the supposed or existing impacts of global networks http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 (halldin 2012; cannone et al. 2012; cavusgil and knight 2009). networking is essential in acquiring and exploiting resources in r&d activities, innovation development and market access globally. thus the ability of the firm to develop networks and use them for growth is a core factor for the success of born global firm (halldin 2012; cannone et al. 2012; cavusgil and knight 2009; kudina et al. 2008). network can be reflected in various ways which stand for use of partnerships, business and personal networks, as well as participation in clusters (dib et al. 2010), insertion in international value chains either expanding to foreign markets or developing business model in order to achieve a competitive position in a global market. all network level factors stress the ability to form, develop and use professional and personal networks, as well as partnerships what is significantly important in order to start international activities from the inception and to compete with global players while being relatively small and new entrant. entire networking variables from the literature review were extracted: intensive use of partnerships, ability to form and develop networks, use of networks for the expansion to foreign markets, use of networks while creating and developing business model, insertion in international value chains, insertion in clusters or industrial district. extracted research factors are synthesized in the conceptual framework proposed in figure 1. the groups were later used for shaping empirical research methodology and testing the dynamics and interdependencies between factor groups. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 figure 1. conceptual framework on entrepreneurial, strategy and network based factors affecting the formation of r&d intensive entrepreneurial born global firm source: compiled by authors based on dib et al. (2010) and dlugoborskyte et al. (2015). methodology of the study the nature of the investigating topic determined the multiple case study method to choose: multiple case-based research serves as a basis for empirically testing previous theories (cannone et al. 2012), it allows to analyse pattern-matching properties between the cases under study (rialp et al. 2005), enables to find richer explanations and a deeper insight into entrepreneurial behaviour strategy network • ownership of superior intangible assets: firm reputation, market or product knowledge, know-how • intensity of knowledge and learning orientation • innovativeness, ability to sustain innovation • specialization/focus/niche strategies in a global market • product differentiation for competitive advantage • possession of superior technological advantages • market and customer orientation • international marketing competence • proactive use of information and communication technologies • global vision • international orientation • international experience from the inception of an enterprise • tolerance to risk • proactiveness • superior know-how • use of personal and professional relationships and networks • intensive use of partnerships • ability to form and develop networks • use of networks for the expansion to foreign markets • use of networks while creating and developing business model • insertion in international value chains • insertion in clusters or industrial district the formation of r&d intensive entrepreneurial born global firm http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 phenomenon and to use both literal and theoretical replication. in order to fulfil empirical objective, a particular type of firms was targeted born global in r&d intensive settings, where companies conduct international business at or near the founding of the firm and create new value for the market while transferring unique knowledge to innovative products or services through commercializing their r&d activities. research efforts have been dedicated to the extraction of core characteristics of born global r&d intensive firm, such as a time span between foundation and the start of international business operations, relevance of international activities to the business model design, geographic scope of international operations (dib et al. 2010), the firms‘ vision (gabrielsson and kirpalani 2012) of a global market place and management focus on global rather local operations and networks. incorporating these distinctive features of born global firms with the specific external (i.e. country in the catching up period) and internal (i.e. r&d intensive firm) context, determined by the aim of the research, five criteria in order to select the case studies were identified: small or medium size of the firm; r&d intensity; early internationalization (export activities within three years from the establishment); exclusion of post – soviet restructuration based companies from the sample (year of company establishment no earlier than 1990); global vision and strong international entrepreneurial orientation, which stands for global activities from the inception of an enterprise. cases were selected for extending existing theories by being typical representatives of the pursued population rather than by random selection. 13 cases were conducted, operating on global markets with ipr protected r&d intensive products (see table a1). data collection involved two main sources: multiple sources of secondary information, e.g. articles, websites and press releases, which provide more accurate and unbiased information http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 and semi-structured interviews with entrepreneurs. relying on different sources of information allowed data triangulation to ensure the validity of the study and to obtain a more comprehensive and accurate view of the topic analysed. semi-structured in-depth interviews with the founders or ceos key decision makers in each firm were conducted, as they possess the most comprehensive knowledge of the characteristics of the organization, its strategy and performance. the interviews ranged in time from 60 to 90 minutes and were semi-structured, allowing for collection of both factual information, such as major events in the firm’s history, and narrative data. most of the questions asked were open-ended, allowing the informants to describe and explain stories related to the firm’s internationalization or personal characteristics. an interview guide was used to ensure the completeness of data. interviews were recorded and later on rewritten to transcripts. the qualitative data from each case was analysed using qualitative content analysis, where sub-variables from the conceptual model of the study were as categories to group the information. subsequently cases were first briefly individually described following the model of the study and then cross-compared in order to explore the replication. maxqda software was used to code factors in order to analyse their manifestations within and between the cases and their relations. such cross-case synthesis was used to determine similarities and differences in terms of the characteristics mentioned in the model and their impact on the formation of the enterprise. the analytic approach used allowed the generalization of the results from the cases and disclose essential factors for the formation of r&d intensive entrepreneurial born global firm. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 interaction of entrepreneurial, strategy and network based constituents within the r&d intensive born global firms: key findings and discussion the data from 13 analysed cases of born global firms has proven all factors presented in the conceptual framework plays a role in the formation of these r&d intensive entrepreneurial settings. in figure 2 larger or smaller square in the axis of each factor shows it’s coding frequency within the cases, combined and separately. unified data from all of the cases distinguishes the most frequent, yet important, factors for the formation of born global firms. “intensive use of partnerships” from the network factors group is underlined to be the most important factor from the list. further, strategic choices of the firm such as “innovativeness and ability to sustain innovation” and “market and customer orientation” as well as “international orientation” of an entrepreneur can either be underlined. still, the analysis also shows factors that were less common, were not so frequently coded in the content analysis. “international experience from the inception” and “use of personal and professional relationships and networks” from the entrepreneur’s perspective, organisation’s “proactive use of information and communication technologies” and it’s network formed for “insertion in cluster or industrial district” were found to be the most sparsely coded from the interviews or secondary data as factors that would explain the formation of the firm. however, factor frequency in separate cases shows that the same factor can play a different role for the firm. while analysing each of the case the same factor that was important in the combined view can be significantly less important in an actual case, and opposite. the dynamics of factor frequencies in each case shows them all to be of different significance, yet all important as most of the factors can be seen in each case. such repetitive manifestation of factors proves http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 the conceptual framework expose core elements to explain how the r&d intensive entrepreneurial global firm is being born. figure 2. internal factors for r&d intensive entrepreneurial born global firm formation (evidence from 13 cases) source: compiled by authors, original calculations using maxqda. the analysis of the relationships between factors revealed the interrelationship and dynamics between entrepreneurial, strategy, and network based factors, and allowed to distinguish critically important ones, that act as linking variables in the formation of r&d intensive entrepreneurial born global firms (figure 3) from the general set of variables. the program calculated the overlapping in coded factors (i.e. how close each factor was mentioned in the interview, and how frequently). this allows to find connections or relationships between coded factors and to define their strength what highlights their importance compared with the rest in the list. factors that showed the strongest relationships within each factor group, i.e. entrepreneurial behavior, strategy or network, are understood as crucial components of that factor group. these factors as well as their connections between the groups are actually http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 disclosing how r&d intensive entrepreneurial born global firm is being formed. therefore these observed linkages are exposed in the unified framework in figure 3. the relationships of factors highlighted stronger links inside the single factor groups, i.e. entrepreneurial behaviour, strategy, network. the strongest relations of internal factors for the formation of r&d intensive entrepreneurial born global firm demonstrate the behavior patterns that later are discussed along entrepreneurial, strategy and network constituent axes. the key drivers affecting the global orientation from the entrepreneurial behavior stand point manifested through highly relating factors “tolerance to risk” and “proactiveness”. from the strategy and organizational capabilities perspective, “ownership of superior intangible assets” demonstrated strong relation with “intensity of knowledge and learning orientation”, as well as moderate relation with “innovativeness and ability to sustain innovation”, in this way the intrinsic capabilities of the firm resulting at higher importance than strategy orientations such as “market and customer orientation” and “intensity of knowledge and learning orientation”. “market and customer orientation” of a firm specifically demonstrates moderate relationship with adoption of “specialization/focus/niche strategies” and “product differentiation as competitive advantage” in the global market, i.e. indicating the global niche player strategy adoption. “specialization/focus/niche strategies in a global market”, “innovativeness and ability to sustain innovation” and “possession of superior technological advantages” at a firm level are connected together at a moderate level resulting in a combined r&d driven competitiveness in a global niche. the networks result as a tool for strategy execution, whereas firm’s choice to use partnerships intensively shows an exceptional relationship with its “ability to form and develop networks”; and the need of “insertion into international value chains” is achieved via “intensive use of partnerships” as strongly related http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 factors demonstrate. both factors are interrelated together and with “use of networks for creating and developing business model” at a moderate level, which indicates the openness of the business model and interactive dynamics of strategy as an adaptive behavior within the network. nevertheless, the dynamics of relations among factors demonstrate that in the formation of r&d intensive entrepreneurial born global firm entrepreneurial, strategy and network constituents are interrelated through particular specific variables rather than a full set of factors. “proactiveness” as an entrepreneurial behaviour parameter and firm’s networking patterns indicated through “intensive use of partnerships” and “ability to form and develop networks” have linkages with a number of various strategic choices of the firm provided in a conceptual model. “market and customer orientation” adopted by the firm can be highlighted as a strategic parameter which has the most linkages with entrepreneurial behaviour and networking choices of a firm. the orientation is caused by the “superior know how” and “proactiveness” of an entrepreneur and later manifests through “intensive use of partnerships” and “insertion in international value chains”. furthermore, the “use of personal and professional relationships and networks” from entrepreneurial behaviour factor group demonstrated relationship with “intensive use of partnerships” from network factor group. the strongest relations within internal factor groups disclose the essential factors for the formation of r&d intensive entrepreneurial born global firm which are the basis of newly formed framework, whereas interrelations between factors in different factor groups reveal logical sequence in which this formation happens. as it can be seen from the framework, entrepreneur’s proactiveness leads to different strategies adopted by the firm that dictate the way the born global firm use its network in order to reach strategic goals. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 figure 3. framework for the formation of r&d intensive entrepreneurial born global firm source: compiled by authors, based on original calculations using maxqda. the quantity and strength of relations between strategic factors and entrepreneurial and network groups leads to the observation that a firm strategy acts as a moderating factor, while entrepreneurship acts as an independent variable, and network behaves as a dependent variable. entrepreneurial factors are then observed to be as a starting and independent variable impacting strategy, while network is formed as a strategically intended resource for the firm. however, these points should be further investigated in a research to be firmly proven. tolerance to risk proactiveness market and customer orientation ownership of superior intangible assets innovativeness and ability to sustain innovation specialization/focus/niche strategies in a global market product differentiation as competitive advantage in the global market intensive use of partnerships insertion in international value chains possession of superior technological advantages entrepreneurship based factors strategy based factors network based factors ability to form and develop networks use of networks while creating and developing business model intensity of knowledge and learning orientation the formation of r&d intensive entrepreneurial born global firm http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 conclusions the study of the interplay of entrepreneurial, strategy and network constituents has revealed the strategy and organizational capabilities of the firm as a determining factor for the formation of r&d intensive entrepreneurial born global firm. within each category, i.e. entrepreneurial, strategy and networks, of the constituents, critical factors leading to the formation of r&d intensive entrepreneurial born global firm were extracted. the essential entrepreneurial constituents are tolerance to risk and proactiveness of an entrepreneur. the most important strategy and organization based constituents are ownership of superior intangible assets, intensity of knowledge and learning orientation, innovativeness and ability to sustain innovation, specialization/focus/niche strategies, product differentiation as competitive advantage in the global market, possession of superior technological advantages, market and customer orientation. network based constituents are intensive use of partnerships, ability to form and develop networks, use of networks while creating and developing business model, and insertion in international value chains. the critical interconnections between variables with regard to the formation of r&d intensive entrepreneurial born global firm were structured following the proposition: entrepreneurial behaviour acts as a trigger to develop proactive strategy based on firm innovative and dynamic capabilities that would link the firm with specific network of strategic importance. thus empirically testing the initial conceptual framework, that emanated from synthesis of scientific literature on characteristics of born global firms, factors that affect global orientation and the conditions influencing the choice of an early and accelerated internationalization path, the key determinants leading to the formation of r&d intensive entrepreneurial born global firm were enclosed. an internal focus to the strategically http://revistes.ub.edu/index.php/jesb volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 important firm decisions from the perspective of entrepreneurial firm and network theories, provided a distinct view on how entrepreneurial, strategy and network constituents are combined forming a specific globally oriented firm from the inception. a proposed framework helps to deepen our knowledge on how global firms in knowledge intensive sectors born. research limitations derive from the sample formation of relatively disadvantaged latecomer economy (lithuania), which has transited to the high level income country in 2015 (oecd). however, this also demonstrates the strategies of r&d intensive firms that actually contributed to the transition. still, the case studies demonstrate the directions of future research. it should focus on the exploration of the global interaction patterns and development of the typologies of born global firm. in terms of practical implications, the paper offers an insight into the design and strategies facilitating the formation of born global firms, including the opportunities for policy interventions in shaping the dynamics of global r&d intensive entrepreneurial smes. the initial analysis of this study was presented in the 8th annual euromed academy of business conference in 2015 and first drafts of the paper were discussed in the 14th globelics and 20th anniversary druid conferences in 2016. acknowledgements this research was funded by a grant (no. ger-001/2015) from the research council of lithuania. authors are thankful for the organizers of international workshop, entrepreneurship from an evolutionary perspective: new research challenges” held at the university of barcelona on the 6th september 2016 for the discussions on how to improve this paper. 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international journal of management & marketing research 1 (5): 67-78. hagedoorn, john, nadine roijakkers, and hans kranenburg. 2006. “inter-firm r&d networks: the importance of strategic network capabilities for hightech partnership formation.” british journal of management 1 (17): 39-53. halldin, torbjörn. 2012. “born global firms – do they perform differently?” centre of excellence for science and innovation studies (cesis) electronic working paper series 269: 2-26. johansson, mattias. 2005. “networking the knowledge-based entrepreneurial firm.” knowledge-based entrepreneurship: innovation, networks and systems (keins). milan: cespri. jones, marian v., nicole coviello, and yee kwan tang. 2011. “international entrepreneurship research (1989–2009): a domain ontology and thematic analysis.” journal of business venturing 6 (26): 632–659. http://dx.doi.org/10.1016/j.jbusvent.2011.04.001 kanellos, nikos stelios. 2013. “exploring the characteristics of knowledge-based entrepreneurship in 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(2015). dynamics of knowledge intensive entrepreneurship: business strategy and public policy, 38. ny: routledge. mets, tonis, and aleksei kelli. 2011. “are hi-tech ‘born-global-s’ really born global?” organizacijų vadyba: sisteminiai tyrimai 59: 81-94. mettler, ann, and anthony d. williams. 2011. “the rise of the micro-multinational: how freelancers and technology-savvy start-ups are driving growth, jobs and innovation.” lisbon council policy brief 3 (5): 1-28. olejnik, edith, and bernhard swoboda. 2012. “smes’ internationalisation patterns: descriptives, dynamics and determinants.” international marketing review 5 (29): 466 – 495. renda, andrea. 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from the start: the characteristics of born-global firms in the technology sector.” technology innovation management review 3: 5-8. taylor, murray, and robert jack. 2012. “understanding the pace, scale and pattern of firm internationalization: an extension of the ‘born global’ concept.” international small business journal 31 (6): 701-721. tidd, joe. 2001. “innovation management in context: environment, organization and performance.” international journal of management reviews 3 (3): 169-183. van beers, cees, elina berghäll, and tom poot. 2008. “r&d internationalization, r&d collaboration and public knowledge institutions in small economies: evidence from finland and the netherlands.” research policy 2 (37): 294308. http://revistes.ub.edu/index.php/jesb http://www.ceps.eu/book/next-generation-innovation-policy-future-eu-innovation-policy-support-market-growth http://www.ceps.eu/book/next-generation-innovation-policy-future-eu-innovation-policy-support-market-growth 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dynamic capabilities perspective.” journal of world business 3 (42): 294-306. http://dx.doi.org/10.1016/j.jwb.2007.04.004 williams, christopher, and soo hee lee. 2009. “resource allocations, knowledge network characteristics and entrepreneurial orientation of multinational corporations.” research policy 8 (38): 1376-1387. witt, ulrich, and christian zellner. 2005. knowledge-based entrepreneurship: the organizational side of technology commercialization. lausanne: cemi. world economic forum. 2015. “the global competitiveness report 2015-2016.” accessed january 4, 2016. http://www3.weforum.org/docs/gcr/2015-2016/ zhang, jing, charles baden-fuller, and vincent mangematin. 2007. “technological knowledge base, r&d organization structure and alliance formation: evidence from the biopharmaceutical industry.” research policy 4 (36): 515-528. http://revistes.ub.edu/index.php/jesb http://dx.doi.org/10.1016/j.jwb.2007.04.004 volume 2, number 1, 174-202, january-june 2017 doi: 10.1344/jesb2017.1.j026 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 annex table a1. profiles of r&d intensive entrepreneurial born global firms core product year of establishment size of the company company a computer accessories, small home appliances and lighting solutions 1998 medium enterprise company b laser optics, crystals, laser and optimechanical products 1996 medium enterprise company c wheat starch, gluten and wheat gluten feed 2008 medium enterprise company d cosmetics 1990 medium enterprise company e biotechnology company providing r&d and cgmp manufacturing services for biopharmaceuticals 2004 medium enterprise company f laser, laser systems and components 1992 medium enterprise company g high-tech, disruptive electronics and automated control systems technology 1991 medium enterprise company h appstore 2004 micro enterprise company i medical devices for respiratory support 1994 medium enterprise company j laser, laser systems and components 1994 medium enterprise company k robotics 2009 small enterprise company l molecular biology 1994 medium enterprise company m non invasive intracranial blood pressure measurement device 2002 micro enterprise source: compiled by authors based on the analysis of the cases. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 rahim ajao ganiyu university of lagos (nigeria) akintunde oluwafemi university of lagos (nigeria) afolabi abiodun ademola university of nsukka (nigeria) okikiola i. olatunji lagos city polytechnic (nigeria) the glass ceiling conundrum: illusory belief or barriers that impede women’s career advancement in the workplace abstract given the preponderance of women in the workforce, it remained a puzzle why the entry of women into higher managerial positions remains restricted and why the syndrome of ‘think manager think male is growing progressively? the objective of this paper is to examine the glass ceiling conundrum with a view of ascertain how it limits women’s career advancement in the workplace. extensive review of literature was presented and discussed. the paper revealed that women are not making it to the very top of their career not as a result of lack of requisite qualifications, and experience etc.; but as a result of factors that are rooted in cultural, societal, organizational, individual and psychological factors that inhibit women career advancement. against the aforementioned background, the paper concludes that women advance marginally to certain level in corporate executive cadre, before they experience ‘glass ceiling’ that impedes their prospect of attaining senior executive position. accordingly, women compared to men represent an insignificant fraction of those in managerial positions due to cultural prejudice, religion convictions, family related issues, individual and organizational influences. similarly, inadequate opportunity to networks and seek sponsorship limits women progression to top managerial hierarchy. the study recommends the need to articulate policy frameworks that promote strong organizational culture and a more helpful and supportive environment to develop women leadership skills. similarly, there is need to promote sponsorship for women in a way and manner that safeguard the relationships between sponsors and protégés. keywords: glass ceiling; women executives; gender; career advancement; work life balance; discrimination corresponding author: e-mail: abdulrahimajao@yahoo.com received 10 august 2016 accepted 08 march 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 introduction despite the progress recorded with the formation of numerous women’s movements and amendment to employment polices aiming at strengthening gender equality, women are still struggling to have remarkable representation in top managerial positions (davidson and burke, 2012). obstacles to secure top managerial positions are a global phenomenon where women, compared to men, are extremely concentrated in lower-level and lower-cadre leadership positions (mohammadkhani and dariush 2016). according to the report released by the american association of university womenaauw (2016), women have recorded significant improvement in labor participation and some headway in executive positions, but there is stark disparity in women representation in corporate leadership position not only in business, but across unions, religious bodies, academia, the legal occupation and many other institutions. glass ceiling (gc) is a phenomenon that portrays the relative disadvantage regarding career opportunities for women, revealing dilemmas that women experience when reaching advance stage of their career (kolade and kehinde 2013; jasielska 2014). hence, this situation is defined as “ceiling” because there are obstacles in the upward progress and “glass” (apparent) because the restriction is not openly observable and is commonly a workplace ethos that is not formerly written (hiau 2008). indeed, the obstacles to women career reveal discrimination and a border line that demarcate how women career progresses compare to their male counterpart. according to powell and butterfield (2003), glass ceiling is a form of barrier in the workplace that is so subtle and apparent, yet so tough that it proscribed women and minorities from occupying top position in management hierarchy. in contrast, to recognized barriers to career progression such as inadequate education and lack of requisite work experience, the glass ceiling barriers are less tangible and may be rooted in culture, society, organizational, individual and psychological http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 factors that work collectively to obstruct the progression of women to managerial positions (jain and mukherji 2010). according to morgan (2015), the glass ceiling obstacles can be categorized into artificial and natural barriers. in her opinion, artificial barriers can best be comprehended by contrasting with what might be called “natural” barriers founded on educations or career breaks which influenced career progression. literally, the representation of the “glass ceiling” suggests the reality of an impervious obstacle that blocks the vertical mobility of women as they rise through corporate ladder (eagly and carli 2007). as observed by morrison, white, and von-velsor (1987), the glass ceiling is an obvious hiccup that prevents women from rising beyond certain echelons, simply because they are women. ridgeway (2001) states that irrespective of the exact mechanism promoting glass ceiling, the phenomenon portray the relative disadvantages women face in securing jobs and promotions in the upper levels of managerial hierarchies. the invisible barriers confronted by women folks, according to baxter and erik (2000) are not peculiar to the top cadre position, but also in middle-level management and minorities (people of race, color, and disabilities; etc.). a report released by international labor organization-ilo revealed that between 1995 and 2015, female labor force participation rate diminished from 52.4% to 49.6 % worldwide. the corresponding figures for men according to the report are 79.9% and 76.1%, respectively. thus, women’s lesser participation proportions result into declining employment opportunities, with little difference over time, which depressingly upsets women’s earning capacity and economic security, thus, women continue to be overrepresented in informal sector and family workers (ilo 2015). as expressed by meyerson and fletcher (2000), women at the highest levels of corporate cadres are still rare and very few occupy the uppermost echelons of power. for instance, two-thirds of managerial-rank women at fortune 1000 firms cluster were below the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 top two steps of leadership levels (constance, dawn, and paul 2006). according to catalyst (2015), men are much likely than women to be considered for leadership position. their report further revealed that only five percent of the businesses in the standard and poor’s 500 index had women chief executive officers in 2015. statistics released by the equal opportunity for women in the workplace agency, revealed that only two of the top 200 enterprises are directed by women, and only four have women chief executives (hiau 2005). similarly, available data in developing country like nigeria reveals a high degree of discrepancy in levels of gender at top management positions. for illustration, in the nigerian federal civil service, which is the leading employer of labor in the country, 76% of civil servants are men, and 24% are women with women holding less than 14% of the total management level positions in the nigerian public sector (goldstar directories 2007). similar accounts is reported in lagos state, which is the nigeria’s largest commercial hub; private sector participation of women as directors and top management were 13.87% and 13.84% respectively in 2005, while 8.14% and 13.11% were recorded for women directors and top managers respectively in 2006, signifying further decline in their representation (goldstar directories 2007). discrimination in any form is prohibited in the workplace. yet, discrimination exists in varying nature and dimensions towards women career progression. while there has been some improvement, much remains unchanged. therefore, advancement of women career continues to be a challenge due to poor organizational support, bias corporate policies and practices, inadequate training opportunities to develop their capabilities, absence of role models and counselors, and cultural beliefs and rules (kunze 2008). as a result, women required different kind of support to break the glass ceiling that scholars like lombardo and meier (2006) and http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 hassim (2009) claimed might be accompanied by unconventional, unpleasant and unanticipated consequences. researchers have presented a multiplicity of theories to explain the occurrence of the glass ceiling phenomenon in the workplace. nonetheless, the conundrum behind this influence is still largely diverse and growing in intensity (george 2003). although in contrast to what was obtainable some decades back, career women are now building networks that will aid their career progression; however, there is still prevaricated assessment of leadership behavior and capabilities of women (davidson and burke 2012). in other words, the myopic conviction that men are well-matched for leadership position seems difficult to challenge (mordi et al. 2010). the “gentleman’s club” promoted by glass ceiling constitute double jeopardy for women; given the fact that women participation in labor market is disproportionate in favor of men, and the few that are employed and possess the requisite qualifications and experience represent a tiny fraction of those in managerial positions (ilo 2015). the erroneous notion that corporate organizations are gender unbiased and ignorance of discrimination in the workplace has further created difficulty in minimizing the obstacles associated with glass ceiling (kantor 1977). as observes by adler (1993), corporate organizations have structure and policies that support male socialization, which portrays that they are primarily created and dominated by men. consequently, men appear to have more disposition and arsenal for organizational politics than women (kantor 1977). to date, the glass ceiling constitute a topical challenge and there is abundant evidence that labor market discrimination against women persists, although it is difficult to conclude accurately how much of the disparity in men/women pay and career progression is due to discrimination and how much is connected to differences in choices or preferences between women and men http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 (morgan 2015). one of the main reasons for the aforementioned challenges is that it is difficult to connect glass ceiling conundrum to one domain of knowledge; and more worrisome is the scanty nature of systematic review of literature related to glass ceiling phenomenon (saul, ute, and suncica 2014). besides, some of these previous studies are patchy and inadequate to build a comprehensive understanding of the glass ceiling and its associated consequences (jerlando and o’challagham 2009). as a result, there is need for concerted effort to integrate the existing literature with a view of realigning and crystalizing the operationalization and manifestation of glass ceiling in the workplace. against the above presentation, the objective of this paper is an attempt to provide a review of the glass ceiling phenomenon as a deceptive belief or oppressive tendency that restricts women’s career advancement in the workplace. specific objectives of this paper are to: (1) evaluate the level of women representation in top managerial hierarchy, (2) identify the barriers that inhibit women career advancement, (3) determine how work-life balance hinders the career prospects of women, (4) examine how old boys’ network create discriminatory views for women in the workplace, and (5) assess difference in the level and form of sponsorship for women compared to their male counterparts in the workplace. to achieve the aforementioned research objectives, the paper attempts to answer the following research questions: 1. what is the level of women representation in top managerial hierarchy? 2. what are the barriers that inhibit women career advancement? 3. how does work-life balance hinder the career prospects of women? 4. what is the role of old boys’ network in creating discriminatory views for women in the workplace? 5. to what extent do the level and forms of sponsorship for women differ from their male counterparts? http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 theoretical and literature review the role congruity theory the role congruity theory has its origins in social role theory which describes the dissimilar social positions of men and women and how it creates differing gender roles (eagly, wood, and diekman 2000). the role congruity theory was developed by eagly and karau (2002) to provide a theoretical foundation toward a better understanding of the dynamics and diverse assessments of women and men in managerial positions. the role congruity theory explains the undesirable appraisals of female executives arising from perceived incongruity between managerial role and feminine character attributed to women (eagly and karau 2002). essentially, role congruity theory is founded on the notion that the impetus to accomplish role congruity is an important element in leadership effectiveness. on this note, women may be subjected to some form of stereotypes that contribute to their under-representation in managerial positions, which may further aggravate how female gender roles are observed as incongruent with the requirements needed for successful leadership (eagly and karau 2002). these scholars further maintained that since managerial position has been fundamentally view as male right, there might be perceived incompatibility between the feminine gender roles and leadership roles. accordingly, role congruity theory describes how stereotypes and agentic and communal individualities interact to influence women's accomplishment in the work place. agentic characters refer to some features more frequently attributed to males, which encompasses selfconfident, controlling, and assertive form of behavior (eagly and johannesen-schmidt 2001). communal traits on the other hand, consist of characteristics more commonly credited to females, such as interpersonally sensitive and nurturing form of behavior (eagly and johannessen-schmidt 2001). according to this theory, women are perceived less suitable to http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 occupy executive positions in organizations compared to men because they lack requisite behavioral characteristics such as articulate and authoritarian tendency required by leaders (eagly and karau 2002). hence, preference is given to men because it is assumed that men are better managers than women; hence the syndrome of ‘think manager think male (schein 2007). social role and identity theory one of the foremost explanations attributed to the ‘glass ceiling conundrum’ is the ‘social role theory’ formerly suggested by eagly in 1987. accordingly, social role and identity theory suggests that men and women act according to the social roles (e.g. class, gender and race) ascribed to them and which are dictated by the way their genders are stereotyped. according to eagly (1987), this theory was coined from the division of labor ideologies which echoes a biosocial interaction between male and female physical attributes and social configuration. according to this scholar, social role theory acknowledges that both men and women occupy numerous social roles (i.e. organizational role) which can surpass gender specific roles contingent on the situation. for instance, women are associated with characters such as caring, compassion and attention in their relationships with others (fondas 1997; rahim, dixxonogbechi, and ighomereho 2013). although these comportments are not typical of a corporate board room, it does not mean that they cannot be beneficial to the organization (daily, dalton, and albert 2003). in contrast to women, men are perceived as more competitive, autonomous and independent in nature (rudman and glick 2001). the aforementioned traits are to some extent the anticipated norms in corporate organization. thus, the notion of social identity theory in this context explains a deeper motive as to why women to some extent are being underrepresented in leadership position (singh and vinnicombe 2004). accordingly, while men seeking promotion to managerial level simply exhibit appropriate desired behaviors, women http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 must ‘first break that passive image of women holding diminutive power in a male-dominated domain’ which can be remarkably challenging if the organization is lacking female role-models and organizational support (eagly 2009). an overview of the glass ceiling (gc) glass ceiling was initially described as a perception or experience of women in the domain of business. the first writer to use the metaphor “glass ceiling” was marilyn loden in 1978 and it was later popularized at a conference of the women's institute for freedom of the press led by katherine lawrence in july 1979 (fernandez 2011; businessnews publishing 2013). the conventional use of the word “glass ceiling,” according to the oxford english dictionary and most of the conserved narratives on and off the web is illustrated in a remark in the american magazine world/adweek in 1984 (morgan 2015). a much more recent account of glass ceiling phenomenon originated in a wall street journal report on corporate women by hymowitz and schellhardt in 1986. essentially, glass ceiling connote a barriers encountered by women who endeavor, or desire, to occupy senior positions (as well as higher salary ranks) in establishments such as corporate organizations, government entity, and nonprofit organizations among others (mccarthy and burns 2013). in general, women’s under-representation in top leadership position has been regarded as a barrier that is holding women back from attaining managerial position in the workplace. women in the executive position may also experience the metaphors like “glass elevators” and “glass cliffs” which represent greater scrutiny and condemnation (ryan and haslam 2005). further expression such as “sticky floors” was coined by catherine berheide’s in 1992 to describe the circumstances where women and men having almost equal capabilities are employed to the same level or positions; but more often than not, appointment of the women is http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 prevalent at the lower hierarchy and men are promoted to higher level (erik and marita 2006). descriptions such as “perspex ceiling,” “sticky cobweb,” “labyrinth” and “greasy pole” among others have also been operationalized to represent glass ceiling phenomenon in gender and diversity management literature. however, irrespective of the metaphor adapted to describe glass ceiling, one thing that is common to glass ceiling representation is that women opportunities to progress along their career path disappear at various points along the route of their career development. according to ying et al. (2011), three key restrictions fuel glass-ceiling occurrence: customary gender roles, expressions of sexism in the workplace, and lack of sponsorships. janeen and erik (2000) maintain that two things must prevail to demonstrate and prove the existence of glass ceiling: (1) the proportion of women compared to men being promoted into or entering a given cadre of management drops as they move up the managerial hierarchy and (2) that this decline in comparative progression will likely decline further and deepened the hurdles of women promotion as opposed to some other factors. kantor (1977) noted that a number project based studies on glass ceiling were founded on a faulty analysis. for instance, those who presumed that the elements creating inequalities in workplace are some how conceded in the individual are relying on the wrong model to draw erroneous conclusions. such level of analysis according to her, anticipated that such disparities were due to either nature or nurture: that’s women were not the same as men by nature (so they were not so struggling or competitive), or women were fostered in a different way from men (hence, they are constrained not to be competitive or occupy positions of leadership). eagly and carli (2007) further contended the exactness of the “glass ceiling,” and argued that it suggests systematic upward movement that is then obscenely thwarted by an ambiguous http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 hurdle that obstructs further progression. these scholars further posit that, gc is not one ceiling or partition in one spot, but rather numerous and ubiquitous forms of gender prejudice that are multifaceted and occur in both obvious and hidden ways. wright (1997) observes that the “glass ceiling” appears to be established by casual observation, because it does not require logical research to notice that a much higher proportion of bottom supervisors other than chief executive officers are women. according to rai and srivastava (2008), glass ceiling is a relative term; hence, it does not exists, because women receive lower salaries due to career disruption, worked for lesser time and engaged in low-risk jobs. david et al. (2001) contend that if glass ceiling is proposed purely as a gender or any other form of inequalities, then researchers and advocacy of gender equality are merely promoting the concept to simplify communication in the public domain, which do little or no impact on effort to determine the root causes of inequality. perspectives on glass ceiling barriers women have occupied leadership positions both in business and other field of human endeavors. nevertheless, in almost all situations, male leaders significantly outnumber female and the latter have made very few inroads into senior managerial positions (ann et al. 2015). barriers in the workplace can be viewed from two distinct perspectives: formal versus informal barriers, where formal denotes biased government policy or rules, and informal about cognitive and cultural barriers. barreto, michelle, and micheal (2009) posit that the notion of glass ceiling is a symbolic obstacle which can be detached from formal or legitimate barriers to career advancement such as level of education or work experience. according to fagenson (1990), women’s progression to leadership position can be influenced by the individual factors within http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 the person, organizational factors which are situated within the organization, and societal and systemic factors. in some settings, particularly patriarchal societies, there are arrangements controlling the roles of women, making the under-representation of women in executive positions acceptable norms (kulkarni 2002). in general, traditions and laws against female leadership can be found throughout human history, most remarkably in every major religion (christ 2014). for instance, right from the childhood, women are compelled to obey some social rubrics which are firmly enrooted in their mind and as such they find it difficult to ignore the influence of those rules when they matured (kulkarni 2002). these traditional and cultural inhibitions according to the scholar are further fostered by parents and duly strengthened by socialization. correspondingly, society has consciously upheld the convention that a woman’s ideal place is at home (jacobs 1992) and this has promoted some practices that exceptionally violate their constitutional rights. for instance, in some tribal/ethnic group in nigeria women need to contend with many oppressive and discriminatory cultural practices such as: right of women to inheritance, marriage dissolution, widowhood practices, and son-preference syndrome among others (babatunde 2014; ifemeje and umejiaku 2014). likewise, barriers from the family tend to be more multifaceted and exert serious interruption on women’s career paths than those of men which are characteristically trajectory, and this obstructs women’s progression to top leadership positions (cansu 2013). as observed spector et al. (2004), family related complication and glass ceiling hurdles in the workplace could also be linked to culture. for instance, in anglo based cultures, research has shown that elongated working hours is not connected to work-family stress and productivity. possible reason for this could be that in these cultures, dual income families and partners are more supportive of each http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 other’s career ambitions. in contrast, in western culture, ‘male breadwinner’ notion is still common, relegating the significance of a wife’s career. accordingly, these forms of conception and associated demands create difficulty for career advancement of women and the degree of their career growth. notably, women often have to deal with the complications of the numerous roles played by them in the family and at work and in many instances they have to make sacrifices, prioritizing family demand over work life which further slows down their careers progression (sarika 2015). according to siew and geraint (2012), institutional barriers have also been documented to propel occupational segregation (i.e. gender-based employment discrimination) which works against the interest of women. according to these scholars, the discrimination may arise from horizontal or vertical dimensions. the horizontal discrimination echoes the fact that men and women are assigned differently across occupations while vertical segregation defines how men and women work in different status of occupations (siew and geraint 2012). as observed by the european commission’s expert group on gender and employment-egge (2009), horizontal discrimination is based on under-(over) representation of a given group in occupations or a sector, not founded on any criterion, and is often denoted to as segregation “tout court”. vertical segregation on the other, represents the under (over) representation of a noticeably recognize group of employees in a particular jobs or industry at the topmost based on ‘desirable’ characteristics such as income, prestige, job stability etc., independently of the sector or activity. anne and elke (2011) maintained that vertical segregation indicates the presence of observable or obscure hindrances that lead to certain fewness of women in top rank positions in organization. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 as regard individual barriers, a number of psycho-social attributes, such as self-esteem, self efficacy, assertiveness, emotional stability, sense of perceived control, optimism and inclination towards social relationship are somewhat weakly exhibited by women’s due to some of the aforementioned reasons (sarika 2015). the research carried out by wirth (2001) added to the debate surrounding glass ceiling conundrum. he reported that the “dissimilar career desires” of women prompt them to create a self-inflicted glass ceiling, deceptively considering that a glass ceiling would hinder their careers. for instance, women exert struggle to maintain balance between her motherhood and her career progression (koshal, koshal, and gupta 2006). in addition, effective management control/rewards system, boldness, aggressiveness and autonomy, have largely been acknowledged as “masculine” personality (sarmistha, arnab, and sovonjit 2014). in addition, the challenges to the barrier women’s experience are further complemented by lack of self-direction, independence of mind and poor self-motivation (kulkarni 2002). remarkably, it has also been reported than most women are less ambitious and this hinders their opportunity to climb the career ladder (ann et al. 2010). although the impression that women are not concerned about their elevation to high managerial positions due to the challenges of work life balance has been widely criticized (cansu 2013). accoding to morgan (2015), organizational barriers stimulated the structure beyond a single or primary dependence upon individuals and their work relations (the “attitudinal” components) towards organizational, systemic, or obstructions within which individuals acted. for instance, in many corporate organizations, gender stereotyping is very pervasive and this has become a kind of structural norms which further encourage double standard in term of administrative policy and rules that encourage glass ceiling. as a result, men in positions of authority are hesitant to recommend women to top managerial position for fear of their emotions, and the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 perceived idea that they will often take time off job to cater for their family (sarmistha, arnab, and sovonjit 2014). ironically, in a situation a woman is exceptionally self-confident and stands out as a potential leader, the prevailing masculine corporate culture is yet another obstacle for their career growth (eagly and carli 2007). likewise, men in position of authority feel threatened when there is a strong independent minded woman executive in the board room and they often try to heckle intentionally and create barriers in several form to prevent their upward mobility in the organization (sarika 2015). the glass ceiling conundrum and sponsorship effects desire for career progression and success for both men and women is a fact of life. simply, because everybody wants to see their capabilities and skills recognized and rewarded. therefore, in accomplishing meaningful career life, building sponsorship has become something of a struggle that promotes powerful coalitions across corporate ladder. a study conducted by ann et al. (2010) revealed that among the numerous paths to authority, sponsorship is underestimated—and thus, underutilized—by both men and women. according to their study, relatively, men are reaping the benefits of the old-boy networks, but women need to avail themselves of every benefit, every alternative pathway to the top echelons of power through improves sponsorship. ann et al. (2010) further observe that women’s lack of enthusiasm to actively seek sponsorship is amply justified. according to them, the deeper the ally of women to senior executive becomes the more the speculation that the relationship is more than professional. in recent times, academics and business practitioners have focused on sponsorship, as a form of mentorship in which sponsors acquired both status and opportunity. however, a sponsor is not to be mixed up with a mentor. although a leader can be both a mentor and a sponsor, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 however, the roles are distinctive (ann et al. 2010). a sponsor in the opinion of these authors sticks their neck out visibly towards their protégée performance and career progression. in contrast, they declare that it is possible to mentor and coach someone who is unpleasant without risking ones reputation, because mentorship can be done behind the scene. according to ann et al. (2010), the dynamic force in a mentorship lies with the mentee, whereas in sponsorship, it is the sponsor who guides and energies the relationship. in recognizing the difficulties generated by the glass ceiling, women have to realize that in order to crack it, they need to advocate and support each other in advancement efforts. ironically, it is disheartening to find out that women feel threatened by their women counterpart and more often they are the major critics and impediments to other women (jones 2014). this scenario is referred to as “queen bee syndrome” in management literature relating to what women experience while struggling to advance their career in the workplace. according to wrigley (2002) and drexler (2013), women in managerial positions tries to sabotage those in lower levels and are unenthusiastic in supporting and assisting other women in lower levels to progress to leadership position. also, given the disparity of women at the top echelon in the executive positions in the organization, it is equally possible that fewer women executives that make it to the top will join hands with the men to sabotage other female employees in junior cadre of the organizations to engage in severe criticisms that will project them as bad candidates for management position on the ground of envy and to promote the interest of men’s club. jones (2014) further remarks that women also experience confidence problem after securing leadership position. according to him, after fighting arduous battle of career progression for so long, they became battle scares; women tend to be self-condemn, instead of showing confidence http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 and appearing assertive. hence, their inability to fully integrate into board room politics and challenge the status quo of old-boy networks (jones 2014). gender characters and work life balance as a contributing factors to glass ceiling in the workplace according to williams (2000), men get preferential treatment whether they are in the majority or minority, while women are disfavored, particularly, if they are in the minority, and occasionally even when they belong to the majority. working women aside from their job career manage home affairs, which exemplifies a vital and associated social change (kirkton and greene 2000). more worrisome is the fact that even if a female executive struggle and break the glass ceiling, often time they find themselves trapped in a secondary form of glass ceiling “glass cliff”, which is more precarious (douglas and porcher 2012). in other words, women executive experience a gendered dual dilemma, for instance, if women’s is excessively self-confident and masculine she may be perceived as competent but not friendly and if her behavior is too womanly, she may be seen as pleasant but inept (eagly and carli 2007). furthermore, women that managed to shatter the glass ceiling are subjected to intense scrutiny than men and must overcome a complex tavern on a number of other issues such as sexual harassment, being labeled as arrogant and unsociable etc. (heilman et al. 1998). for instance, women must exhibit “executive posture” in their dress and manner, and if they go awry, is an opportunity to label them with bad names that may disqualify them for executive positions. similarly, women must navigate ordeal of unexpressed verdicts with regard to their personal life to climb managerial positions, and may be compelled to acquire male attitudes to scale through the hurdles (eagly and carli 2007). in addition, instances abound in some organizations that prevented women from getting married or pregnant for some period of years and when this http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 is violated they are dismissed from their jobs but the men who impregnated them keep their jobs. in other words, there’s a sharp difference in what men sacrifice compares to what women give up to whither the challenges associated with their career progression (babatunde 2012). arguably, work-life balance is imperative in accomplishing a flourishing career, hence, with enlarge responsibilities in the work place, the boundary between work life and private life require additional realization (fapohunda 2014). according to clark (2000), work life balance is the level of fulfillment and well-meaning functioning at work and at home, with the smallest level of role conflict. as observes by fapohunda (2014), employee that experience happy home tend to experience pleasant work life; on the contrary, where employees are unable to properly balance work and family life, they tend to find it difficult to manage tasks at the workplace and this subsequently shrinks productivity. the popular phrase in management literature “do we live to work or we work to live? has succinctly captured the concern and value of how and what individual place on work and home (or family) and the two domains represent the most important aspects in the life of a working individual (greenhaus, collins, and shaw 2003). for women employees the day is not over when they close from office, because another set of work starts at home. this is the reality most married women unavoidably assumed when they get home. perhaps, nature and cultural belief has bestowed on them the role of a wife and a mother. hence, the challenges of balancing work and family for women is particularly challenging and will continue to be a fundamental concern for both individuals and organizations (valcour 2007). remarkably, work-life balance challenges can influence women’s advancement and, if not proactively handled may trigger glass-ceiling phenomenon. generally, women are the prime family caregivers for children and/or the aged, which further handicapped many to make move that would increase the prospect of progressing up the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 corporate hierarchy. similarly, prospects for promotion often place men at advantage due to evolving privilege, arising from mentoring and networking; which their women counterparts may not have the benefit to build, thus, contributing to gender obstacles in the workplace (ann et al. 2010). discussion it is becoming a usual convention to ascribe the position of chief executive officer or managing director to male, not female, because the position is male dominated. similarly, it has become a recurring phenomenon, that women are able to progress marginally in corporate leadership ladder, before stumbling on a ‘glass ceiling’ that inhibits or decreases their prospect of reaching top executive status. in some sector, the phenomenon of glass ceiling is made of something much tougher to crack, hence, instead of breaking the glass ceiling; women have only succeeded to chip away at its surface. while the causes of glass ceiling are questionable, its impacts are very feasible and undeniable and the biases experience by women is readily obvious, however, the mechanisms underlying these prejudices remain impervious. this paper reveals that despite some promising improvements, gender inequality remains in the workplace and increasing gender equality in educational and work experience attainment does not stop women from being concentrated in middle to lower-paid occupations that echo traditional gender stereotypes and opinions about women’s and men’s ambitions and capabilities (ilo 2015). the reality is that in theory, nothing stops women from rising to the top position in their chosen career as men do. however, in practice there exist obscure barriers through which the advancement of women to top rank position is restricted. across the globe, discrimination in any form in the workplace is prohibited, yet it exists in numerous facets such as inequitable earning, recruitment practices, and promotional http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 opportunities among others which are mostly in favor of men for comparable positions in similar establishments. the glass ceiling conundrum is manifested in various ways: such as cultural and family induced issues (i.e., gender roles ethnicity, work life balance, and religious discrimination in the workplace). glass ceiling has also been observed to emanate from individual factors such as subjective personal obstacles passion for long term goal, pessimistic view, perseverance, degree of life satisfaction, and unpleasant affect among others (powell and butterfield 2003). correspondingly, numerous organizational induced factors have also been documented to obstruct the progression of women to senior positions such as lack of familyfriendly workplace policies (acker 2006), human capital obstacles (lower educational qualification, access to financial resources, and cognate experience); marginalization from informal networks; weak sponsorship, inadequate management support for work/life programs; absence of mentors and role-models; and attitudinal and organizational prejudices (bombuwela and de alwis 2013). more importantly, women also experience some form of role conflict between work and family demand which further affect their productivity and consideration for top managerial positions. in particular, research has revealed that one of the major dissimilarities between men and women are their capabilities to network. for instance, sponsor opportunity is more readily and easily accessible by men compare to women. ann et al. (2010) claimed that women progression to management position remain far outnumbered by male executives because they lack the influential sponsorship required to motivate, drive, and safeguard them through the terrifying channels of what is require to occupy leadership position. besides, even if women executives possess requisite qualification, competence, and zeal to progress in their careers, very few lucky http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 ones attain the same status as their male counterparts, for the sake of the so-called ‘glass ceiling’ (eagly and carli 2002). conclusion and implications this paper reviews the glass ceiling conundrum as a form of oppressive tendency that limits women’s career advancement in the workplace. from a rational point of view, women have the skills and competence to lead; the missing link is perhaps the inadequacy of the needed support to encourage, drive, and safeguard them through the terrifying canals of leadership position. put differently, it is not that women completely lack the knowledge and capability to progress to upper management levels, but at some point they are prevented by invisible barriers that block them from rising further to top executive cadre. this suggests that the impediments women experience compare to men steadily increase as they move up to the top hierarchy due to cultural bias, religion sentiment, individual and organizational factors. it has also been widely admitted that the traditional male-controlled policy and practices are slow to adjust to contemporary realities and may transpire slowly (bramham 1991); consequently, progressive societal and organizational reorientation are critical to challenge the prevailing beliefs, ethos, and authority relationships to change perceived male dominance in the workplace. for that reason, it appears necessary to advance exceptional campaigns action to increase women’s representation in top echelon of organization. likewise, most firms have been hooked to the generalized sense of the dictum of the traditional roles of women (house wife), which further aggravates discrimination of women in the workplace. furthermore, the struggle that women confront to advance to the top of their career cannot be entirely attributed neither to male conspiracy nor domestic responsibilities, but inadequate support and poor advocacy. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 this paper identified specific behaviors and workplace practices that fuel glass ceiling at work and it has offered ample evidences that revealed how female employees are discriminated against in the workplace. in particular, the authors noted that inequality between men and women continues in global labor markets, in respect of opportunities, behavior and consequences. furthermore, the paper offer a depiction of where women stand today and how they have advanced in the domain of work and more importantly the root causes of disparities and how they should be addressed based on what is feasible and sustainable. the impending factors that propelled discrimination in the workplace need to be address by ensuring on one hand, strict compliance of corporate organization to the contemporary human resource management policy and practices and on the other hand, there is need to advocate and propelled the needed strategies that will advance women progression in the workplace. recommendations this paper offers the following recommendations. 1. women’s under-representation in executive position will not upsurge significantly without major changes in the culture, policies, and practices of the organizations where women learn and work. therefore, there is need to endorsed policy framework that promote strong organizational culture that create a more helpful and supportive environment, adaptive workplace policies, and practices, and capacity building to develop women confidence level required for occupying top executive positions. 2. the notion of glass ceiling needs to be approached with fairness and equity in ensuring that individuals that bring the same capabilities to work (qualifications, knowledge and abilities), or accomplish the same task(s), get the same opportunity to advance their career regardless of gender, race or any other prejudice factors. this will provide avenue for http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 women to move from the sidelines to the mainstream of executive cadres, and by extension their willingness to collaborate and offers their best to organizational growth. 3. likewise, effort should be made to communicate and emphasis continuing obligation to workforce diversity throughout the organization with a view of removing artificial barriers at every level so as to promote feminist-based organizational transformation which is the latest management fad of advocating gender equity, ethical behavior and friendly/supportive organizational climate. 4. although numerous descriptions have been advanced about what obstructs women career advancement in the workplace; in adequate sponsorship is one of the most prevalent factors that inhibit women from attaining top leadership positions. therefore, there is need to make one-on-one relationships between sponsors and protégés “secure” and “transparent” to safeguard sponsorship opportunity for women competing for executive positions. the approach may also include promoting policy that sanctions mentors if their mentees are not promoted to the board within a certain period of time. limitations and suggestion for further studies the major drawbacks associated with this paper is the adoption of literature review approach which raises the likelihood of accommodating similar research paradigms or views of the previous studies that were not empirically validated and may reflect a common methodology bias. nonetheless, the adoption of survey approach (through questionnaire) has been documented to be inadequate for measuring phenomenon such as glass ceiling (mohammadkhani and dariush 2016). however, there is an important gap that needs to be filled, which requires further research attention. such research inquiry could adopt qualitative research approach specifically ‘face to face interview’ to unravel and deepen research effort http://revistes.ub.edu/index.php/jesb volume 3, number 1, 137-166, january-june 2018 doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 aiming at identifying the various forms of barriers women encounter in the workplace, and how to proffer solution to the menace of glass ceiling in the workplace. also, given the prominence of glass ceiling in the workplace, there is potential for future research into why significant improvement of women into top managerial position remains a mirage. therefore, an important research inquiry is to investigate glass ceiling from a broader point of view that encompasses the opinion of government, community leaders’, religious leaders, and internal customers among others. obviously, different strata of the society will have different opinions and it is natural such diverse approach will offer diverse points of view 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doi:10.1344/jesb2018.1.j040 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 wrigley, brenda j. 2002. “what glass ceiling? a qualitative study of how women view the glass ceiling in public relations and communications management.” journal of public relations research 14 (1): 27-55. ying, zhuge, joyce kaufman, diane m. sineone, herbert chen, and omaida velazguez. 2011. “is there still a glass ceiling for women in academic surgery?” annals of surgery 253 (4): 637-643. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 276 denis boyle university of barcelona (spain) historical drawbacks of limited liability abstract limited liability is a human invention which has facilitated enormous economic growth around the world, particularly since the time of its general application in advanced countries during the nineteenth century. the individual legal identity of companies, coupled with the limited liability of their owners, has provided protection for investors from the risks associated with their investments. it has thus contributed to increase the sources of capital available to finance projects which might otherwise have been considered unviable. however, the legal protection offered to investors has negative consequences for other participants in economies. speculation in stock markets often damages society. it is very important to study the drawbacks of limited liability and to suggest modifications to achieve a more stable, less volatile, economic growth in the world. although this article goes to some lengths to recognise the work of authors who emphasise the positive historical economic contribution of limited liability, its main objective is to provoke a reflection around texts which point out the drawbacks and propose solutions. keywords: commitment; financial speculation; corporate social responsibility; limited liability; multiple liability. corresponding author. e-mail: denisboyle@yahoo.com received 27 november 2015 accepted 7 march 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 277 introduction this article will analyse a variety of academic texts which describe a series of drawbacks associated with the historical development of the limited liability model of business ownership and management. it is not intended to be an exhaustive survey of the issues involved, but rather an examination of some specific reflections and ideas proposed by some selected scholars. 1 the ideas expressed will be compared with the extensive bibliography which defends contemporary financial institutions by studying the benefits they have provided throughout their history. to understand such theses, it will be important to examine the historical origins of limited liability and its development during recent centuries and to consider authors who express confidence in the future evolution of financial innovations. we will then proceed to evaluate studies which suggest proposals to improve the operation of limited liability, some of which have been implemented at certain times during the contemporary period of history. they aim at correcting the imbalance created by protecting shareholders at the expense of other participants in economic activities. drawbacks of the limited liability business model the limited liability company is a legal structure by which the capital ownership of a business is divided into shares. shareholders do not respond personally for business debts: their liabilities are limited to the amount of their investment. the model has deep historical roots and is a fully consolidated in day-to-day commerce practically everywhere. however, during 1 this article is based on a dissertation written in the summer of 2014 which formed part of the author’s studies towards a masters in economic history in the economic history department of the university of barcelona. the author wishes to acknowledge the advice provided by the department, with special thanks to yolanda blasco martel who supervised the original dissertation. thanks are also due to the anonymous jesb reviewers for their appraisal and for their improvement suggestions. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 278 the history of its application the advantages and disadvantages of limited liability have been subject to vigorous debate in universities and political circles (kindleberger 1988, shiller 2004). the joint stock companies act of 1856 generalised the creation of limited liability companies in england. in the parliamentary debate prior to voting lord curriehill 2 predicted three major problems. firstly, creditors would be subject to fraud either through their ignorance of the limited liability status of their debtors or through an excessive confidence in company accounts – often unreliable. secondly, speculation would be increased because of the transfer of investor risk to company creditors and the consequent seduction of gullible investors expecting easy profits. thirdly, for lord curriehill companies enjoying limited liability would benefit from a protection which would be unavailable to traditional businesses, thus creating unfair competition (bryer 1997: 47). the doubts which surrounded limited liability in england in 1856 were a reflection of the debate which had taken place forty-five years earlier in the united states prior to the approval of the 1811 new york act which generalised the institution of the limited liability company in certain industrial sectors in north america. robert j. shiller (shiller 2004: 271) refers to the work of the historian david moss who documented an impressive number of arguments against the law that were debated by the american legislators (moss 2004). many political representatives considered that the protection offered to shareholders from the consequences of business losses would provide them with an incentive to carry out excessively risky operations. under the new law shareholders would not have to pay all the losses incurred if 2 lord curriehill (1794-1868): a prominent scottish judge whose contribution to the debate is documented in parlamentary records. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 279 the results turned out to be negative, but would receive all the profits if the businesses were successful. for many present-day authors, speculative investment in financial markets constitutes the principal drawback in relation to the legal structure of the limited company. shareholders feel protected (due to the limitation of their liabilities) from the risks associated with the activities of the businesses in which they hold stock, and so they invest with a lower degree of caution than would be appropriate in other circumstances. in fact, speculation was worrying commentators as far back as the 18 th century, well before the general spread of limited liability companies, when they could only be created by special statute. charles p. kindleberger explains that many investors would sell their shares before paying for them in full and would show little interest in the progress of business projects (kindleberger 1988: 267). speculation forced the british government to severely restrict share operations and the bubble act of 1719-1720 practically prohibited the creation of new limited liability companies during a long period up to its repeal in 1825 (galbraith 1991: 58-63). although a majority of economists expresses strong reservations about protectionist commercial policies (krugman, wells and graddy 2011) few question protectionism as it applies to shareholders in limited companies. but the limited liability company is a legal creation that does not exist in any natural form, so it can and should be subject to review and modification in order to better satisfy the necessities of the human community. for this reason, the academic study of the corporate form is relevant for the future development of society (hiller 2013: 287). an important characteristic of limited liability is that the obligations of management to maximise shareholder profits are legal impositions. they do not stem from voluntary http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 280 agreements, as might be the case with their principle obligations towards employees, customers or suppliers. corporate laws impose on the directors a duty to direct their efforts towards the achievement of shareholder profit (mayer 2013: 28-32). the consequences of these legal obligations can be very profound in relation to the personal ethics of the managers and their sense of social responsibility. a series of experiments has been carried out which demonstrates that the great majority of top executives in north american companies place profits before moral beliefs when confronted with opportunities to work for the general benefit of society. even more interesting is that the same experiments have demonstrated quite different results in the case of partners in businesses which are not limited liability companies (rose 2007: 323-330). the implication is that whatever effort that might be directed towards educating company managers in professional ethics is practically useless: their decisions will always be determined by their legal obligations to maximise profits. there are many specific cases that can be studied in order to understand who might be the victims of this exclusive obligation to maximise benefits for shareholders whilst ignoring the interests of other business participants. here, due to the need for brevity, we will consider just one example. the history of the british confectionery group cadbury, and the struggle to control the company up to the time of its acquisition by kraft in 2010, provides an illustration of the way corporations have been managed under the limited liability model (bell 2013, mayer 2013, funding universe 2014, grace’s guide 2014). throughout the 19 th century and a large part of the 20 th century the cadbury family involved all the stakeholders 3 in the running of the business. the executives attended to the needs of the employees and demonstrated a 3 although the term stakeholder was not invented until the 1960’s its anachronic application in this text is justified because it defines those participants in limited liability companies who are not shareholders. such stakeholders can include employees, customers, suppliers, neighbours, regulators, governmental authorities, society in general and the environment. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 281 concern for the contribution of the business to the general well-being of society. however, important changes took place in the nineteen sixties when the company became an acquisition target for various shareholder groups interested in short-term gain. cadbury was perceived to be in play in financial markets, subject to the attention of venture capitalists and public company takeover specialists 4 . it became an example of imbalances in the management of limited liability companies. the interests of one particular group (shareholders, beneficiaries of the legal protection which limited their liabilities) took priority over the rest, and the longterm financial performances of the businesses concerned were jeopardised. in 2009 in the usa kraft foods inc. launched a takeover bid for cadbury plc. it met with fierce opposition from three groups: british public opinion because of the loss of a brand identified with the national culture; the main unions which feared a wave of redundancies as a result of the acquisition; and a significant number of politicians who were worried about the possible transfer of activities to other countries and a consequent avoidance of uk tax. protests were also heard relating to the multi-million pound fees charged by the banks involved in the deal. despite all these objections, however, kraft foods inc. was able to complete the acquisition in february 2010 because it met with shareholder approval. the acquisition price was £11,5bn (approximately €14,5bn), financed by borrowings of £7,0bn (approximately €9,0bn). paradoxically, the main lender turned out to be rbs, a bank controlled by the british government following the rescue of the banking sector during the financial crisis in 2008. 4 public company takeovers occur when a person (normally a limited company) makes an offer to buy the shares of a stock-market quoted company with the objective of achieving a significant participation in its capital and corresponding voting rights. in many cases takeovers constitute a threat to the employment of the directors of the target company who try to persuade shareholders to reject the offer. it should be noted that the term “public company” in the united kingdom refers to the company’s shares being held and traded by the general public and does not generally signify any kind of state ownership. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 282 later in 2010 kraft, despite earlier promises not to make lay-offs, began to announce the closure of english factories and the transfer of production to a series of countries with cheaper labour costs such as poland. furthermore, fiscal matters began to be dealt with in switzerland as a means of saving tax, again in spite of promises to the contrary made during the acquisition process. the british government ordered an investigation. the managing director of kraft, irene rosenfeld, was asked to appear on various occasions to answer questions from members of the parliamentary commission charged with preparing the corresponding report. however, rosenfeld rejected all the requests and did not appear before the commission at any time. in 2011, following a declaration of disappointing results, the directors of kraft decided to separate the confectionery business from the remainder of their interests. since then cadbury has formed part of a new company, mondelez international inc. the importance of the cadbury example is that it is not an isolated case in an unusual business sector. many other companies in very traditional areas of business have experienced a similar evolution, a fact which would seem to contradict the widely accepted notion, supported by frank h. easterbrook and daniel r. fischel (easterbrook and fischel 1985: 9596), of takeovers being healthy mechanisms which always bring benefits. the defence of limited liability based on history there are a number of prestigious authors who consider that modern financial markets, based on limited liability, provide the basis of economic growth in the world. for robert j. shiller (shiller 2004: 267-273 and 2012: 87-94) the essential aspects of limited liability became generally applicable to financial markets in the 19 th century. the 1811 new york act not only allowed any business within permitted sectors (complying with certain prerequisites) to adopt company status, but also took the radically innovative step of stipulating that the liabilities of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 283 all their shareholders would be strictly limited. before the passing of this act, limited liability companies were practically always created as a result of privileges granted by government, and their general spread was impossible. furthermore, before the changes creditors of companies in difficulties could impound the personal assets of shareholders – including the assets of small shareholders – until outstanding debts were paid. the new york experiment was successful and with the passing of time all other states passed their limited liability acts. california was the last to do so in 1931. the 1811 act, which enabled new york to become a financial world leader, inspired corporate legislation in the united kingdom, germany, france and eventually almost all developed countries. limited liability allowed investors to acquire large diversified portfolios of shares, previously unadvisable given that the failure of a single investment could result in financial ruin. it is interesting to observe that the inventors of limited liability legislation did not envisage diversification of portfolios, but one thing led to another and such diversification became a fundamental aspect of limited liability. shiller concludes that the history of humanity is a succession of financial inventions which have improved our lives (shiller 2004: 281). innovations which appear to be loaded with complexities and problems can turn into standard tools of risk management when professionals learn how to use them properly. so the invention of limited liability and its derivatives has and will have positive effects for everyone. even after the financial crisis of 2008 shiller expresses great confidence in the evolution of financial markets, considers the stock market to be a fantastic invention, distances the legal structure of companies from speculation stating that thanks to human weaknesses we are always subject to bubbles and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 284 bursts, and affirms that the enormous growth in the securitisation of mortgages in the united states arose …. because businesses tried to please regulators (shiller 2012: 17, 88, 102). max gillman and tim eade (gillman and eade 1995: 20) explain that the evolution of the corporate form was related to changes in trading practices during the industrial revolution, characterised by a greater degree of specialisation. the expansion of trade created a need for organisational improvements to reduce transaction costs 5 . just as manufactured products and workers were becoming more and more specialised, so the corporate structure needed to evolve. the incorporation of businesses and the limitation of the financial liabilities of shareholders appear to be products of this demand for specialisation in the corporate form. in this respect the observations of the great industrial historian alfred d. chandler jr. (chandler 1990: 9-10) are also relevant. for this author the advantages of limited liability are evident. in the usa the spread of the railway and telegraph networks demanded the appearance of a new type of business. the massive investments necessary for their construction brought about a separation between ownership and management. companies, now much larger, came to be managed by teams of professionals. shareholders, now protected from possible ruin in the case of business failure, could afford to distance themselves from the day-to-day affairs of the businesses they owned. other authors emphasise the social benefits of the limited liability company. for r. a. bryer (bryer 1997: 38-39) commentators who favoured limited liability in the first half of the 19 th century had a social vision of capital which anticipated marx’s criticism of the individualistic thought proposed by adam smith. for these commentators unlimited liability implied a concentration of capital in the hands of an elite who controlled the management of their 5 in economics a transaction cost is one which is incurred in order to carry out an economic interchange. such a cost can be reduced by organizational improvements as well as through collaboration between businesses or between departments within the same business. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 285 businesses (they assumed all the risk and so felt compelled to exercise full operational control). furthermore, for the capital to be social it was not only profits that had to be shared equally between investors but also losses – which was achieved by limiting such losses to the amount of capital invested. david mcbride (mcbride 2011: 3) explains that the legal corporate structure had a number of advantages over other forms, the most important being the doctrine relating to limited liability. 6 since the construction of railway networks in the middle of the 19 th century large capital investments became essential for progress. the creation of common funds for numerous investors became an important means of raising capital, but investors were not disposed to place money in businesses which they did not control if they were to expose themselves to an unlimited liability for debts. in this respect the limitation of their liabilities was critical not only for the development of the corporation but also for the national economy in general. other advantages of the corporate form included the use of modern management techniques which were developed during the late 19 th and the early 20 th centuries by professional managers who were not owners, as well as perpetual existence (considered below) and the ability to carry out mergers. for margaret blair (blair 2004: 3) one of the great advantages of incorporation 7 for north american businesses in the 19 th century was related to the difficulties in the financing of complex projects which depended on a series of inputs during a long period of time and where outputs were not easily divisible in portions or parts attributable to the inputs. a business controlled by partners had the major disadvantage that any one of them could withdraw at any 6 the word liability in english implies a legal obligation to make a payment. in some languages it has the same translation as responsibility although in english it does not have the moral connotation of such a term. 7 incorporation: the concession of an individual legal status to a business which thereby becomes a company or corporation. the liabilities associated with the business are passed to the company and no longer pertain to the shareholders as individuals. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 286 time, taking with him his part of the assets and so putting an end to the productive activity and dis-incentivising long-term projects. the invention of the joint stock company 8 in the 17 th century provided an important tool to overcome this problem. members could no longer withdraw their part of the assets but came to depend on the decisions of the directors regarding dividends. in this way companies were able to maintain the resources dedicated to their activities during a long-term horizon. nevertheless, on the death of a shareholder it was possible for his heirs to withdraw the investment, a fact which demonstrated the still imperfect separation of ownership from management. this defect would take time to correct, with the relevant legislation not being implemented in some north american states until the beginning of the 20 th century. it decreed that, once committed, any capital invested in a corporation by its investors could not be withdrawn. in summary, blair is an enthusiast of the commitment of capital offered by the institution of limited liability companies. their nature is perpetual and they are capable of contributing to the development of long-term projects independently of the time horizons of the owners of the shares at any one moment. the author notes the case of the american sewing-machine business i. m. singer & co., originally owned by two partners: isaac merritt singer and edward clark. the time came when singer left the management in the hands of clark and began to enjoy his wealth in the company of a succession of women with whom he had various children. clark feared the break-up of the business on the possible death of his partner due to withdrawals by his many heirs. finally, in august 1863 he managed to convince him by incorporating the business as the singer manufacturing company and so separating the 8 a joint stock company is a business owned by shareholders. its capital is divided into portions (or shares) such that ownership is proportional to the number of shares held. today most joint stock companies are incorporated and the liability of shareholders is limited to the amount of their investment. however, historically these last two characteristics were not always found in joint stock companies. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 287 affairs of the owners from the management of the business and thus avoiding its possible closure on the death of his old partner (blair 2004: 15-19). andrew a. schwartz (schwartz 2012: 765-830) also discusses the perpetual nature of the limited liability company. he attributes it the merit of ensuring a long-term future for the corporation which acts as an immortal investor. it allows for a sustainable growth in economies and implies a concern for the future which incentivises activities which are socially beneficial for the whole community. immortal investors by definition expect less short-term profit than mortal ones, thereby creating a longer-lasting and more sustainable wealth. it is an extremely optimistic vision of the corporation. schwartz considers that management short-termism can be solved by better education and by the use of techniques to promote a historical and long-lasting identity in the business (images, hymns, logos….). the same author recognises that many perpetual companies have human owners (and so can hardly be considered to be immortal in relation to their objectives), but points out that there are also a large number whose owners are other companies which do have a perpetual nature. many of these questions relating to the impact of limited liability on business management are to be found in a practical case studied by graeme acheson and john d. turner (acheson and turner 2006: 320-346). the basis of their work is data discovered in the archives of the ulster bank in ireland which pertain to years both before and after the conversion of the bank to a limited liability company. the two authors explain that during the major part of the 19 th century banks in great britain were dominated by unlimited liability companies. however, as a consequence of the failure of the city of glasgow bank in 1878 practically all banks decided to limit the liabilities of their shareholders. we therefore have a natural experiment by which it is possible to demonstrate http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 288 the impact of the change in relation to ownership, control and management in the banking sector. acheson and turner demonstrate that limited liability for the banks in question strengthened their ability to access capital, increasing the number of shares and their dispersion. shareholdings were no longer confined to the rich, and the number of shares in the hands of directors decreased implying that the role of director came to correspond to professional managers rather than shareholders (acheson and turner 2006: 329-334). another author who explains the history of the limited liability company from a positive perspective with respect to its contribution to economic growth is eduardo andrades rivas (andrades rivas 2011: 401-444). he investigated the very beginnings of the institution. his most interesting conclusion is that the shareholder company is not exclusive to capitalism but pertains to every advancing society. quoting the italian lawyer lorenzo mossa he sustains that it cannot be considered as the culminating achievement of capitalism and of liberalism which have favoured its existence and have coincided in time: it is the creation of every society and as such its destiny is to accompany society and, at certain times, to have its own destiny. the [socialist] revolution of this [20 th ] century, which planned its destruction, has ended up perfecting it instead of annihilating it (mossa 1951). for andrades rivas the origin of the limited liability company is to be found in the united provinces of the netherlands during the time of the war with felipe ii (king of spain between 1556 and 1598). the conflict provoked the creation of a society or company which, benefitting from legal privilege and financed by hundreds of small investors, was able to confront the challenges of international trade. later on, after its foundation in 1621, the dutch east india company would respond to this trading impulse. the liability of the investors would be limited to the price of the shares subscribed. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 289 the experience in france came later than in the netherlands. the french east india company was founded by the minister colbert in 1664, and in 1717 the new indies company was set up. new instruments were created such as bearer shares, limited liability and the establishment of boards of shareholders. after the traumas of the french revolution limited liability companies would again be authorised in 1796; and finally the trade regulations of 1807 would be applied to companies, thereby bringing them under state supervision. a very interesting aspect of andrades rivas’s work is that which relates to his observations surrounding the origins of the limited liability company in spain. it appears that they were unrelated to events in the netherlands and in france. this diversity of roots of the institution in different european countries backs up the author’s hypothesis that sees the limited liability company as an invention common to all advancing societies, independent of capitalism. so what has happened since those early days when the limited liability company offered such effective solutions in the development of commerce? for david mcbride (mcbride 2011: 18) it was created and was successful in a world which was simpler than it is today. the increase in the size and complexity of corporations and of financial markets has led to new problems with respect to the most efficient and fair organisation, combined with difficulties associated with the maintenance of the confidence necessary for its effective operation in society and in markets, and with the facilitation of a healthy flow of information and communication between interested parties. it may be that modern challenges demand an experimentation with new organisational structures in order to determine, by a process of trial and error, which are the ones that best overcome the difficulties. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 290 in his conclusions mcbride, rather than question the limited liability model, considers it to be an early step in economic evolution. corporate law should therefore be flexible in order to promote new social technologies and adapt itself to change. for example, the law should be sufficiently elastic to be able to tackle the perennial conflicts that exist between the interests of shareholders and other participants in business activities such as suppliers, customers and workers (mcbride 2011: 12-14). however, what for mcbride are gentle movements in an evolutionary process, for others respond to moments of crisis. an editorial about financial crises published in the weekly magazine the economist (12-18 april 2014: 47) states that institutions [and instruments] that enhance people’s economic lives such as central banks, deposit insurance and stock exchanges, are not the products of careful design in calm times, but are cobbled together at the bottom of financial cliffs. often what starts out as a post-crisis sticking plaster becomes a permanent feature of the system. in the same way for nicholas kyriazis and theodore metaxas (kyriazis and metaxas 2011: 364) decisions which change history are taken in response to shocks and lead to new paths. they provoke the development of new institutions and organisations which demand significant investments linked to benefits for society in general. during the periods that follow, these investments become sunk costs which impede a return to the previous path. the authors explain that the shock which caused the invention of the joint stock company in the united provinces of the netherlands in the 17 th century was the rebellion against spanish domination. the creation of the dutch east indian company permitted the capture of a lucrative spice trade from the enemies. in this way they conclude that the shock of the rebellion broke the evolutionary economic process. the implication is that it is very difficult to correct harmful deviations in the direction of economic evolution without the emergence of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 291 new shocks. from this perspective mcbride’s notion of the limited liability company forming part of a steady evolutionary process is not so clear. so how can the limited liability model be improved without waiting for some kind of major crisis or shock to forcibly change our economic systems? the next section looks at some ideas. possible solutions to improve the limited liability model multiple liability to look for a first possible solution to improve the limited liability model we can refer to studies carried out by richard s. grossman (grossman 2001: 143-159 and 2007: 59-80) into the concept of multiple liability as it existed between the end of the civil war in 1865 and the nineteen thirties’ great depression in the united states banking sector. the idea was to make shareholders liable up to a limit of a multiple (normally two, hence the denomination double liability) of the amount of their investment. expressed another way, under double liability shareholders in failed banks could lose, in addition to the initial acquisition value of their shares, a further amount equal to the nominal value. grossman concludes that double liability reduced the risks taken on by banks, although it did not necessarily guarantee stability in times of crisis. the identification of reductions in the risks taken on by businesses is important for this article because it implies a greater concern on the part of shareholders about the consequences of business activities. by sharing losses with other business participants, they have an incentive to demand a style of management more in line with the interests of everyone involved. furthermore, double or multiple liability is interesting because it offers an alternative to more http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 292 regulations in the banking sector. it foments self-regulation imposed by shareholders and acts as a market-driven mechanism to reduce banking risk. the practice of multiple liability terminated in the nineteen thirties, principally for three reasons. firstly, the financial ruin of many shareholders who had had no influence in the management of failed banks generated political pressure to change the law. secondly, the wave of banking failures in the nineteen thirties was believed to imply that the law had not fulfilled its objectives. thirdly and perhaps most importantly, the imposition of federal insurance for deposits was held to indicate that multiple liability was no longer relevant. early evaluations by contemporary authors concluded that the decision of the majority of states to abandon multiple liability in the nineteen thirties constituted irrefutable proof of its inefficiency (marquis and smith 1937: 502). however, more recent quantitative studies, like grossman’s, have thrown a more favourable light on the experience. in order to ascertain whether multiple liability affected risk-taking in banks grossman examined their balance sheets and looked at data surrounding bank failures as a means of evaluating management policy. he recognised that the use of such data had its limitations as a way of measuring operational risk but other options were just too complicated. grossman concludes that it is possible that shareholder liability laws did play a role in the assumption of risk by managers, and that multiple liability did reduce banking risk in the late 19 th century and early 20 th century. the effects could be seen in the rate of failures, capital / asset ratios, and liquidity rates of banks in states where multiple liability was adopted. it is true that these state banks were unable to avoid the effects of the crisis during the nineteen thirties, but such effects have generally been evaluated using data on liquidations and grossman suggests that in many cases prudent bankers would be the first to liquidate their http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 293 operations in order to prevent future losses. jonathan macey and geoffrey miller (macey and miller 1992: 53-54) have no doubts about this. they consider that the early closure of banks facing difficulties – before getting to the stage where liabilities exceeded assets – ensured that all creditors were paid. even in the most difficult period between 1930 and 1934 depositors’ losses in national banks (with multiple liability) amounted to no more than seventy-seven cents per thousand dollars. for these two authors history has demonstrated that in the usa a mistake was made when multiple liability was abandoned in favour of a deposit insurance scheme administered by the government. corporate social responsibility the idea of corporate social responsibility (csr) represents a continual commitment on the part of an organisation to behave ethically and contribute to economic development whilst endeavouring to improve the quality of life of its employees (and their families), local communities and society in general (lindgreen and swaen 2010: 3, watts and holme 1999). it could be said that its application constitutes a recognition of the need to compensate imbalances created by the legal form of limited liability which obliges business managers to work exclusively for the benefit of shareholders. for richard marens (marens 2012: 64-76) the earliest ideas relating to csr arose in the united states in the nineteen twenties as a consequence of the independence achieved by corporate executives with respect to worker demands. once the development of union organisations had been stunted (with the help of government), during the second and third decades of the 20 th century an important segment of corporate america tried to establish itself as a group of responsible employers and so consolidate the peace by nurturing satisfied and productive workforces and an understanding public. many executives considered http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 294 themselves to be intermediaries whose objective was to balance the interests of the different classes of person associated with their businesses (marens 2012: 75). although the term stakeholder wasn’t invented until the nineteen sixties, it seems clear that the concept was already being developed. in 1917 henry ford explained that the objectives of his company were for everyone to be able to contribute, to create employment, to manufacture a car which people wanted….and by the way to make a profit. he introduced the notion of business as a service to society (lee 2008: 54). during the great depression and the interventionist policies of the new deal, corporations paid less attention to their social obligations. however, once the second world war was over, csr began to grow. a book published in 1953 by howard bowen, social responsibilities of the businessman (bowen 1953), described the obligations of businesses with respect to the social consequences of their activities. it was a work which provided the necessary intellectual backing to reflect on the rapid social change which would take place in the following decades. during the nineteen fifties and sixties numerous new laws were enacted to regulate business and to protect employees and consumers. furthermore, the birth of a large number of consumer protest movements led to declarations by companies about csr and to hundreds of books and articles analysing the issue (lee 2008: 56-58). nevertheless, publications critical of csr also began to appear. in 1962 milton friedman (friedman 1962) argued that the only social responsibility of a corporation was to make money for its shareholders and considered csr to be a subversive doctrine. ned dobos (dobos 2011: 273) explains that for libertarians being a shareholder was not a manner of avoiding natural positive duties (benefitting from the participation in a company without assuming the associated responsibilities), because such duties did not exist. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 295 in the nineteen seventies new justifications of csr appeared based on the benefits it could provide for shareholders. in 1970 h. c. wallich and j. j. mcgowan (wallich and mcgowan 1970) argued that the long-term interests of shareholders were coherent with a correct social attitude on the part of business. their ideas were further developed in the nineteen eighties following a. b. carroll’s model of social corporate yield (carroll 1979) which integrated the economic and social objectives of business. the model was made practicable in the nineteen nineties following the establishment of concrete definitions for the various stakeholder groups involved in business activity (lee 2008). despite all this, the issue continues to be hotly debated. antonio tencati y laszlo zsolnai (tencati and zsolnai 2009: 369) comment that csr is no more than another element of the traditional company model. it does not create neither any kind of moral commitment nor any profound change in the way business is analysed. it is taken to be one more tool available to improve corporate economic performance. they refer to m. e. porter and m. r. kramer (porter and kramer 2006) for whom the corporate offer can be improved by a socially responsible positioning. tencati and zsolnai are not attracted by such a proposition. their perception is that csr has been turned into an instrument exclusively focussed on maximising profits for shareholders and as such is prejudicial to the environment, today’s society, future generations and finally the businesses themselves. they believe that the strength and sustainability of a company rests on its ability to adapt to its environmental, social and cultural context. it is only through the creation of values by and for the benefit of all stakeholders that companies can involve them and achieve a profound support based around their commitment. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 296 means to create greater investor commitment as has been observed in the case of cadbury, one of the major drawbacks of the limited liability company is the short-termism of shareholders who tend to speculate rather than invest. directors of quoted companies are constrained in their management by the presence in the shareholders’ register of new members who are looking for quick profits. these members provoke instability because they seek a rapid revaluation of their shares arising from the volatility which derives from rumours about a possible takeover, a higher takeover offer, a sudden change in sales or production strategy, the substitution of existing directors for new more aggressive managers, or even the cancellation of long-term investment projects. the ownership of quoted companies is often decided by short-term shareholders. in the case of cadbury roger carr, chairman of the board, explained in a speech in oxford university on 9 th february 2010 that in the end it was the change in the shareholders’ register that lost the takeover battle against kraft – the owners of the shares became progressively dominated by financial investors, interested only in quarterly results, in place of long-term administrators. in the final moments there were insufficient shareholders prepared to consider the long-term future of the company and sacrifice an immediate gain in favour of long-term prosperity…individuals who had controlled their shares during a few days or weeks decided the fate of a company that had been built up during the best part of 200 years (mayer 2013: 92). for colin mayer a corporation is characterised by a diversity of commitments – to shareholders and to other stakeholders. however, shareholders are able to practice speculative dealing which forces directors to offer them an immediate reward. in many cases they achieve http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 297 such rewards by investing in hedge funds 9 which buy shares in companies with the idea of control or acquisition, in both cases obliging directors to increase dividend payments. in this way, shareholders have an advantage over other participants in the business’s activities. they can take cash out of the company because they have voting rights over its future. by this means an investment fund can buy shares in a company subject to a takeover bid. by doing so it assumes no responsibility for the company’s operations nor any commitment to other participants. it can use the shares to vote in favour of the takeover and so achieve an immediate profit – a process which thus provides a means of diverting corporate profits in favour of one of the participants, the shareholder, at the expense of the others (mayer 2013: 185-186) one proposal to avoid such a diversion of profits would be to grant more independence to directors. however, this solution would create agency problems relating to the directors seeking personal gains in detriment to the corporation. other more interesting proposals focus on differentiating investors in accordance with their degree of commitment. currently any assessment of the commitment of shareholders is very difficult because there is no way for them to indicate their intentions regarding the time they expect to maintain ownership of their holdings. hence those who wish to sell after a few days have the same voting rights on company decisions as those who wish to retain their holdings for a number of years. the first group bear the consequences of their voting decision during an insignificant period, and the second group during an extended period. but both groups exercise the same influence at the time of taking a decision that can affect the results of the company for many 9 hedge funds are investment funds originally conceived to protect investors by providing a means of making small investments, the results of which were expected to inversely reflect the market (hence insuring an investment portfolio in the face of market movements). in practice they are often used as instruments of financial speculation. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 298 years. it is interesting to note in this context that, according to the german ex-banker rainer voss, two decades ago a share would be held by its owner for an average of a few days, whilst today the average length of ownership is twenty-two seconds (voss 2013). mayer proposes that shareholders should register the time period during which they intend to retain their shares and that they should receive voting rights corresponding to the time remaining up to disposal. thus a share with ten years to go before maturity should have ten times the vote of one with only a year up to maturity. those shareholders who do not wish to commit themselves to keeping their shares could maintain them outside the register and forego voting rights. in this way the company would be able to access short-term capital in the financial markets which would thereby continue to exercise a very important role in the fixing of share prices and the flow of information, but would be controlled by committed shareholders (mayer 2013: 206-214). this proposal of a register would concede voting rights in proportion to the future commitment of shareholders and would restrict decisions concerning takeovers to shareholders committed to the future prosperity of the company in the long term. conclusion since its beginnings the institution of the limited liability company has been subject to debate. the limitation of shareholders’ responsibilities transfers business risks to other participants in the company’s activities such as suppliers, customers and workers. limited liability’s main drawback relates to speculation in financial markets. the corporate form separates ownership from management, a fact which promotes diversification in investment portfolios by individuals who are not involved in the activities of the business nor http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 299 wish to be informed about those activities. the limitation applied to their liabilities is key to their sense of security in the face of investment risk. in this way acquiring shares in companies has been turned into a purely financial operation. investors are motivated by short-term profit objectives and managers are ever more obliged to work towards goals which have little or nothing to do with the prosperity of the company in the long-term. the study of the history of limited liability and its impact on economic development is very important in order to evaluate not just the drawbacks but also the positive aspects of its invention. it has made rapid economic growth possible, facilitating the provision of capital for projects which would otherwise been delayed or considered to be unviable. many authors not only praise these aspects of limited liability but consider that they form part of an evolutionary process, always positive, which will lead to ever more sophisticated forms of investment and which will bring greater economic success. nevertheless, the objective of this article has been to point out failures in the corporation. an increasing number of texts support the need to find ways of achieving growth which seek the commitment of all the members of a company in equal measure. they invite a reflection on the drawbacks of a legal form which stresses the relationship between two participants (shareholders and managers) in detriment to all the others. the historical application of the concepts of multiple liability and corporate social responsibility demonstrate the recognition by society of difficulties associated with the limited liability model; and recent proposals concerning the need to compensate the economic privileges that limited liability concedes to shareholders, by means of enforcing greater http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 300 commitment and voting rights proportional to that commitment, are worthy of serious reflection. references acheson, graeme, and john d. turner. 2006. “the impact of limited liability on ownership and control: irish banking, 1877-1914.” the economic history review, new series 59(2): 320-346. andrades, r. eduardo. 2011. “la sociedad anónima en la tradición jurídica hispano-indiana.” revista de estudios histórico-jurídicos (sección historia del derecho hispano-indiano), xxiii: 401-444. bell, gareth. 2013. “restoring trust in the corporation: an interview with colin mayer, peter moores professor of management studies at said business school and author of “firm commitment.”” strategic direction 29(6): 35-39. blair, margaret. 2004. “reforming corporate governance: what history can teach us.” berkeley business law 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www.fundinguniverse.com/company-histories/cadbury-schweppes-plc-history/ galbraith, john k. 1991. breve historia de la euforia financiera. barcelona: ariel editorial. gillman, max, and tim eade. 1995. “the development of the corporation in england, with emphasis on limited liability.” international journal of social economics 22(4): 20-32. grace’s guide 2014. “source for the history of uk industry and companies.” http://www.gracesguide.co.uk http://revistes.ub.edu/index.php/jesb http://www.fundinguniverse.com/company-histories/cadbury-schweppes-plc-history/ http://www.gracesguide.co.uk/ volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 301 grossman, richard s. 2001. “double liability and bank risk taking.” journal of money, credit and banking 33(2): 43-159. grossman, richard s. 2007. “fear and greed: the evolution of double liability in american banking, 1865-1930.” explorations in economic history 44: 59-80. hiller, janine s. 2013. “the benefit corporation and corporate social responsibility.” journal of business ethics 118: 287-301. kindleberger, charles p. 1988. historia financiera de europa. españa: crítica. krugman, p. wells, r., and k. graddy. 2011. essentials of economics. new york: worth publishers. kyriazis, nicholas and theodore metaxas. 2011 “path dependence, change and the emergence of the first joint-stock companies.” business history 538(3): 363-374. lee, min-dong paul. 2008. “a review of the theories of social responsibility: its evolutionary path and the road ahead.” international journal of management reviews 10(1): 53-73. lindgreen, adam and swaen, valérie. 2010. “corporate social responsibility.” international journal of management reviews 12(1): 1-7. macey, jonathan r., and geoffrey p. miller. 1992 “double liability of bank shareholders: history and implications.” wake forest law review rev. 31. marens, richard. 2012. “generous in victory? american managerial autonomy, labour relations and the invention of corporate social responsibility.” socio-economic review 10: 59-84. marquis, ralph w., and frank p. smith. 1937. “double liability for bank stock.” the american economic review 27(3): 490-502. mayer, colin. 2013. firm commitment. oxford: oxford university press. mcbride, david. 2011. “general corporation laws: history and economics.” law and contemporary problems 74: 1-18. moss, david. 2004. when all else fails: government as the ultimate risk manager. cambridge, massachusetts: harvard university press. mossa, lorenzo. 1951. trattato del nuovo diritto comerciale. iv:5. italy: padova. porter, m.e. and kramer, m.r. 2006. “strategy and society: the link between competitive advantage and corporate social responsibility.” harvard business review 84(12): 78-92. rose, jacob. 2007. “corporate directors and social responsibility. ethics versus shareholder value.” journal of business ethics 73: 319-331. schwartz, andrew. 2012. “the perpetual corporation.” george washington law review, 80. shiller, robert j. 2004. “las lecciones de los principales inventos financieros.” in el nuevo orden financiero. el riesgo en el siglo xxi, edited by robert j. shiller, 267-281. españa: ed. turner. shiller, robert j. 2012. las finanzas en una sociedad justa. barcelona: deusto. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 276-302, july-december 2016 doi.org/10.1344/jesb2016.2.j020 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 302 tencati, antonio, and laszlo zsolnai. 2009. “the collaborative enterprise.” journal of business ethics 85: 367-376. voss, rainer. 2013. master of the universe. documentary film produced in germany by katrin klöntrup. wallich, h.c, and j.j. mcgowan. 1970. “stockholder interest and the corporation’s role in social policy.” in a new rationale for corporate social policy edited by w. j. baumol. new york: committee for economic development. watts, p., and holme, r. 1999. meeting change expectations. corporate social responsibility. geneva: wbcsd. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 fernando merino universidad de murcia (spain) offshoring to promote the internationalization of family firms abstract this paper analyses the impact of sourcing abroad on exporting in the case of spanish manufacturing firms that are family-owned. sourcing abroad can be a channel that places the firm in a better position to export, not only because it increases the productivity of the firm, but also because it provides information, new managerial procedures or just the acceptance by the family owners of a more complex strategy. the empirical analysis presents the premium on the probability of being an exporter for those firms that offshore part of their production, and compares this with the results for non-family firms. the results show that there is a significant premium for smes on the probability of exporting, but not on the intensity of those exports, and that this occurs at the same levels in family and non-family firms. keywords: offshoring; exporting; family firms 1. introduction in spain, as in other advanced economies, family firms are an important part of the production system. for these firms, internationalization has become a strategy that cannot be considered exceptional. however, research has shown that the family character may introduce some specific elements to the exporting decision ( gallo and sveen 1991 ). there is no consensus on whether family firms have a corresponding author: e-mail: fmerino@um.es received 01 march 2017 accepted 09 june 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 higher or a lower tendency to enter foreign markets, since the traditional vision of family firms being more risk averse has recently been challenged (gómez-mejía et al. 2007) or the recent meta-analysis in arregle et al. (2016). beyond the attitude to risk, we find that the wish to preserve the family character of the firm limits its access to some critical resources for entry to foreign markets. for instance, the possibility of increasing the firm’s financial resources through an expansion in the number of shareholders, or of incorporating top managers with the necessary skills or valuable business networks, will be dependent on the strategy of the owners. as is widely known, many firms have adopted sourcing strategies that suppose changes in the location of some parts of their value chain from the home country to foreign locations. although a terminological discussion exists, this process is commonly known as offshoring, and it has been implemented with different modalities, depending on whether the development of those activities remain in-house of the firm (this is, the firm establishes some premises abroad where those activities will be developed) or contracts out to a third firm (and those activities will be developed and managed by a firm external to the company that will use the output of those activities). offshoring, or sourcing some of its intermediate inputs abroad, provides a firm with knowledge and expertise in relation to foreign countries, international economic operations, etc. moreover, it obliges a family firm to establish some kind of internal status that opens it up to the development of further international operations. then, beyond the advantage of the assumed improvement in productivity, offshoring may be an extra driver for exporting for those firms that source some of their intermediate inputs abroad. the aim of this paper is to analyse the importance of this driver for family firms, and to compare the position for non-family firms. it must be noted that family firms have an important weight on the spanish economy (for instance, faccio and lang (2002), show that among western http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 european large corporations 44% of them can be considered family business, that for spain reaches 55% of them or the instituto de empresa familiar (2015), which claims that 88% of spanish firms are family business supposing 57% of the value added in spain) as well on some of multinationals that have emerged in the last decades of the 20th century (guillén and garcíacanal 2010). the analysis is based on the relevance of non-physical resources that fuel internationalization (such as tacit or explicit knowledge, the networks in which the firm is inserted, the expertise of its managers, etc). the results may be interesting both for the research area of the internationalization of family firms, since it will highlight a factor that has not been included in most of the empirical research, and for managers of these firms, who can treat offshoring as a strategy not only for sourcing necessary inputs, but also as a learning process that is part of their internationalization strategy. the core idea of the paper is that this extra knowledge that offshoring may provide to the firm can be a catalyser of the proper firm’s exports. this paper is organized as follows. the next section discusses the concept of offshoring, and summarizes the main reasons found in the literature for adopting this strategy. section 3 establishes the links between offshoring and the internationalization of firms, and looks at why these links could be different for family firms. section 4 presents the empirical analysis; the strategies of spanish family firms on offshoring are shown, and an econometric analysis on the link between offshoring and the development of other international activities is discussed. the last section concludes the paper and presents some lines for further research. 2. reasons to offshore one of the most remarkable features of production processes in the last two decades has been the reconsideration of the value chain. this reconsideration has happened from a double http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 perspective. on the one hand, firms have redesigned the set of tasks that they find to be optimally performed in-house. as a consequence, some activities that were previously developed inside the firm, as part of the process of producing the final output, are now developed by third parties, external to the firm. in some way, that change implies to create (or to use) a market for the provision of some of the intermediate inputs (in the widest meaning of this phrase) that are needed by the firm. this process is usually called outsourcing and has encouraged firms to focus on their core activities, where they may exploit their core competences and become more competitive (for the spanish case, see galdón-sanchez et al. 2015). on the other hand, the geographical position of each activity has been re-considered and some activities have found a better accommodation in new places. as a consequence, firms have abandoned their traditional locations for some activities, searching for places with comparative advantages in which to develop them (see for example jensen and pedersen 2011, or merino 2017). the implementation of these strategies by firms creates an important change in their essential identity that has led some scholars to suggest that the proper nature of a firm must be reconsidered (see contractor et al. 2010). this double decision generates a set of four possible strategies for the firm. as is known, the economic literature, as well as business terminology, has used the terms offshoring and outsourcing in a non-uniform way, creating some confusion (see bhagwati et al. 2004 for a discussion). however, as time has passed it seems that some uses of the different terms have become standard. figure 1 shows the different situations that may be generated by these two strategies, giving the common names that will be used in this paper. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 figure 1. typology of offshoring and outsourcing production is: internalised externalised (outsourcing) location of production home country production kept in-house at home production outsourced to third-party service provider at home. (domestic) outsourcing abroad production by foreign affiliate intra-firm (captive) offshoring production outsourced to third-party provider abroad. offshoring / international outsourcing source: unctad 2004. for each of the two decisions, we find the justification in two sets of reasons with the same rationale: first, the differential costs between the two alternatives and, second, the inherent cost of the two options. the balance between the cost advantage, if any, of sourcing inputs externally or from abroad and the cost implied by the separation (agent/geographical) will determine the optimal strategy. the decision on internal provision or outsourcing is explained in the framework of transaction costs economics (williamson 1979, 2008); this focuses on whether the costs of a transaction between two agents, instead of being incorporated in the same firm, compensate for the cost differential of using an external and specialist firm. in relation to the decision on the provision mode, we find that companies specializing in those intermediate tasks have emerged; these companies can exploit the economies of scale, become highly competitive and use the most advanced state-of-the-art processes, making external provision more appealing. besides, the production of some intermediate inputs has become more sophisticated, making it more difficult for firms not specialized in them to exploit the advantages of new technologies and production processes. in the same way, transaction costs between the user (buyer) and the producer (seller) of the output of those intermediate tasks have reduced because of digitalization, the http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 standardization of production processes, and the extension and emergence of markets for those intermediate inputs. for its part, the optimal location of the production process has been affected by the eruption onto the world markets of countries like china or india, which are capable of producing labour-intensive products at lower prices as a consequence of their comparative advantages, and the reduction in transportation costs (not only in terms of moving merchandise, but also in terms of barriers to international trade or the possibility of transferring across borders anything that can be digitalized, which includes many business services). the combined effect of the two types of change has fostered the displacement of phases of the production process from traditional places to new ones. obviously these changes can be reversed if the cost differentials change, as some papers have shown (see freytag et al. 2012 or cabral et al. (2014) for insourcing or fratocchi et al. (2014) for backshoring). from this framework it must not be deduced that short-run profit maximization is the only reason for these strategies. in fact, the literature has shown that other reasons, such as the wish to be subject to a legal system that introduces fewer restrictions or the need to be more flexible to be able to respond to fluctuations in demand, underlie offshoring (see kedia and mukherjee 2009, for example). on the other hand, from a behavioural perspective (e.g., musteen 2016) factors such as the personal experience of managers and their attitudes, emotions and cognitive limitations are determinants of the offshoring strategy of a firm. however, those reasons are no more than a long-term “profit” goal. we may therefore conclude that offshoring is a strategy that aims to place the firm in a better situation in terms of profit, flexibility, etc. (see diaz-mora and gandoy (2008) for an analysis in the spanish traditional manufacturing industries). it will lead to a more productive/efficient situation, although the productivity/efficiency improvements cannot be measured in terms of total factor productivity, profitability or similar http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 measures, since they are only revealed in terms of the ability to handle volatile markets by implementing alternative strategies, or just of not reducing overall productivity by incorporating certain tasks into their activity. besides, some authors have signalled that outsourcing (and this argument can be extended to offshoring) requires the firm to make a better evaluation of intermediate costs, which may help to improve the organizational structure, thus increasing the firm’s competitiveness (antelo and bru 2010). 3. offshoring and exporting the most recent economic literature on exporting departs from models such as those of grossman et al. (2006) and melitz and ottaviano (2008), which introduce the variability among firms in the same industry as an explanation for why some firms export while others do not. the rationale for this different observed behaviour among firms in the same industry, according to those models, is based on the different level of productivity of the firms. a large body of empirical literature has analysed the extent to which the observed differences in productivity between exporters and non-exporters is based on the previous situation (self-selection of the most productive firms to be exporters) or on the knowledge acquisition process that is presumed by exporting (learning-by-exporting, where exporting is initiated by a minor characteristic that leads to further productivity differentials). see the survey by wagner (2007) on this topic. following the classical literature on this topic, this paper takes as its point of departure the wellknown fact that offshoring is presumed to give a basis for being more productive (olsen 2006 shows that the effect differs across industries, amiti and wei (2009), attribute around 10% of labour productivity growth between 1992 and 2000 in the us to the offshoring of services, schwörer, 2013, finds a positive effect for european firms too, etc.), so that it can be a strategy that promotes exporting. as was stated in the previous section, offshoring is a strategy that http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 allows a firm to reach higher productivity levels than it would if it chose the in-house option (because of the assumed lower costs, the possibility of accessing the most modern technologies to develop the intermediate inputs, the exploitation of economies of scale in the firm’s production, the viability of certain specific strategies, etc.). additionally, offshoring provides a margin of manoeuvre for variations in demand, making the firm more solid and allowing it to dedicate fewer resources to that eventuality. however, the core idea behind the specific analysis of family firms does not rely on the effect of offshoring on productivity, since it would not suggest a difference between family and nonfamily firms. the point of the analysis of offshoring and exports for family firms is based on certain characteristics of these firms. it must be remembered that the topic of whether some of the special features of family firms may affect their internationalization strategies has a long tradition in the literature (gallo and sveen (1991) provide a seminal paper in this field and specific analysis for the spanish case can be seen in papers such as fernández and nieto (2005)). for instance, in a recent paper, boellis et al. (2016), arguing on the basis of international business studies, corporate finance and the relevance of socioemotional wealth for family firms, conclude that, because of the greater risk aversion and lower access to information of family firms, their international strategies will be different from those of other firms. horgos (2013), on the basis of the models of antràs and helpman (2004), concludes that family firms will be less likely to develop fdi strategies, all other things being equal, so that those firms that actually invest abroad will have more resources to develop an international strategy. it must be noted that, beyond the productivity or cost advantage that may be generated by offshoring, it may constitute a source of additional knowledge for firms. firms that offshore (both intra-firm offshoring or proper offshoring as described in the strategies presented in http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 figure 1) will face the cost of handling operations in a different country, with other partners, but this knowledge may have externalities on other activities or contracts that may be developed by the firm. when a firm establishes productive premises in another country, it needs to invest in order to get the necessary information and expertise to do this. this includes knowledge on topics such as the legal system and industrial relations, but it will expand to areas such as the host country’s culture or some of the characteristics of the customers. additionally, the existence of production premises means that the firm starts to develop some social capital in the foreign country, on the basis of its relationships with suppliers of raw materials, business services, etc., as well as the networks established by representatives of the firm with business people in the foreign country. obviously, in the case of pure offshoring (international offshoring), when the firm only contracts for the production in another country, these elements will be somewhat smaller or non-existent. furthermore, offshoring impels the firm to learn how to develop certain international activities (contracts, asset management in different currencies, staff with foreign language and international business skills, importing and dealing with customs, etc.). then, although the offshoring decision requires some previous knowledge and expertise of international markets, continuing with this strategy will increase the firm’s experience abroad and its knowledge of the world beyond its domestic boundaries. we therefore find that the effect of offshoring on exports is not just the increase in productivity that may be presumed as the result of exploiting lower costs or a less constrained legal/institutional situation, or the additional flexibility it introduces, but includes the knowledge and experience of being in foreign markets. this expertise is especially valuable in relation to a firm’s willingness to develop further international activities, since it is not always http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 easy to acquire and incorporate such expertise in the firm’s structure. different authors have shown that offshoring is a factor that, for all these reasons, effectively promotes firms’ exports (e.g., coucke and sleuwaegen (2008) for belgian manufacturing firms; bakhtiari (2015) for australian firms; bertrand (2011) for french firms; digregorio et al. (2009) for us firms, etc.). as was stated in the introduction, the aim of this paper is to find particular insights into the offshoring–exporting relationship in the case of family firms. the family character of a firm is not limited to the fact that an important percentage of its shares are in the hands of a group of individuals who are linked by family ties. as is well known, the definition of family firm has been a topic under discussion in the specialist literature (see astrachan et al. (2002) for details) and no undisputed consensus has yet been achieved. the purpose of this paper is not to present a new definition of family firms, nor to discuss the adequacy of the existing definitions. the paper therefore takes as its point of departure the fact, shared by most of the existing definitions, that family firms are characterized by some of the features of the owning family being transferred to the firm, and by the firm’s decisions demonstrating the wish that the control held by the family will be passed on, to some extent, to future generations. these characteristics constrain the firm’s access to the valuable resources needed to develop an internationalization strategy. hiring managers with the required knowledge may conflict with the family’s wish to control the firm. access to financial resources to develop an internationalization strategy may be in conflict with the reluctance to dilute the participation of the current owners and/or increase the financial leverage. the social capital of the family that is transmitted to the firm is usually linked to the country of origin, and the development of the firm in other countries is constrained by the ties that may be established by the family. we therefore find that there are limits to the possibility of accessing foreign markets, such as access to knowledge, both explicit and implicit, http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 constraints on the expansion of business networks, and the transmission of some of the features of the owning family to the firm. it must be remembered that different studies have shown that family-owned firms and non-family firms present a different export activity in different countries and industries (boellis et al. 2016; minetti et al. 2015; sánchez-bueno and usero 2014; segaro et al. 2014; lin 2012; fuentes et al. 2007; etc.) it must be noted that some of the factors that constrain or, at least, impose conditions on the entry of a family firm into foreign markets could be modified for those firms that are offshoring (captive offshoring). since their sourcing strategy has obliged them to acquire a certain knowledge and expertise in international operations, they will be endowed with some knowledge when considering export decisions. besides, developing an offshoring strategy will increase factors such as trust in external relationships and international social and business relationships, as well as building agreements and reinforcing trust among family members in operations in different countries. all these elements may promote the firm’s exports, so we could expect that offshoring would be an additional driving force for exporting for family firms. 4. empirical analysis the database to analyse the effect of offshoring on exports by family firms, the encuesta sobre estrategia empresariales (esee) was selected for the years 2007–2013. the esee is run by the spanish ministry of industry and is an annual survey of a representative sample of spanish manufacturing firms with more than ten employees. the sample size is around 1500 firms every year, and it has been used many times for empirical analysis, including for topics dealing with offshoring, given its representativeness and quality. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 to explore the family character of a firm, the esee specifically addresses whether a family actively participates in the control/management of the firm. obviously, this information implies that the family character is considered just as a binary question, although there are many other aspects that the literature considers in order to qualify a firm as a family business (sharma 2004). it has been remarked in the literature that different aspects that shape the family character of a firm may have different influences on its performance (see specifically the case of sacristán-navarro et al. 2011, for spain) that extends to their internationalization path (see, for example, scholes et al. (2016), for the importance of socioemotional wealth or merino et al. (2015), for the different dimensions of the f-pec scale in the internationalization of spanish family firm, claver et al. (2009), for the role of long term orientation and the presence of external managers in spanish family firms too). however, the available data do not allow that approach but only permit us to compare family firms with non-family firms. as was discussed in section 2, the term offshoring is sometimes used for “captive offshoring” (when the firm invests abroad to establish premises where some of its intermediate inputs will be produced) and sometimes for “international outsourcing” (which refers to the use of contractors located abroad to supply some of the intermediate inputs needed in the production process of the firm). the hypotheses raised in the previous section for why offshoring may have a different influence on internationalization in family firms focus mainly on the “captive offshoring” case, since in this case the knowledge of foreign markets will be greater and there will have been an expansion of social capital into a foreign environment, although one cannot neglect the possibility that some extra push to internationalize may exist in the “international outsourcing” strategy too. the database includes a specific question on whether the firm imports products that are incorporated into its production process from a foreign firm that is either partly http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 owned by the (spanish) firm or integrated into the same group of companies as the (spanish) firm. for the empirical analysis, those firms that answered this question in the affirmative will be identified as offshorers, because a firm that is producing intermediate inputs abroad on premises (or by a subsidiary/affiliate firm) that belongs to it will be a candidate for obtaining an extra push to internationalize from its foreign production phase. it must be noted that the offshoring mode considered in this paper differs from the one analysed by digregorio et al. (2009), who focused on “international outsourcing”. those authors conclude that international outsourcing enhances the international competitiveness of a sample of us smes. other variables that will be used in the empirical analysis are the firm size, measured by the number of employees at the end of each year, the industry (based on the 2-digit nace classification), whether the firm exports or not, and the export propensity (export/sales ratio). the offshoring and exporting strategies of family firms the first conclusion about offshoring and exporting can be taken from the data in table 1. as we can see, offshoring is about three times more common among non-family firms than among family firms. this result holds both for small and medium firms (those with 200 employees or fewer) and large firms (those with more than 200 employees), although among this last group the difference is lower (18.3% of family firms offshore versus 35.5% of non-family firms). meanwhile, the percentage of exporters is similar between family and non-family firms, and the subset of small and medium family firms contains a slightly larger percentage of exporters than the set of non-family firms of the same size. looking at the export/sales ratio, this shows a smaller value for family firms, which points to a situation in which family firms enter international markets at a similar rate to non-family firms but are not as deeply involved in the international markets as non-family firms. it must be noted that the existing literature has not http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 achieved a sound consensus on this matter, either from the theoretical or from the empirical perspective, and the evidence is mixed, although the results of the meta-analysis of arregle et al. (2016) (with different definitions of family firms) show that the internationalization of these firms does not differ, in statistical terms, from the internationalization of non-family firms. table 1. internationalization and family character # obs. offshore (%) exporters (%) export/sales (%) family firms 5,694 4.85 66.47 28.01 non-family firms 7,702 14.84 65.32 30.38 total 13,396 10.59 65.81 29.51 chi2 test of equality 345.20** 1.93 note: ** rejection of the hypothesis at 99% offshoring and exporting: is it different for family firms? using the typology established by the family/non-family character of the firm and whether or not the firm has developed an offshoring strategy, an analysis can be performed of how offshoring affects the exporting activities of family firms and non-family firms. first, four types are established: (1) family firms that are not offshorers, (2) family firms that are offshorers, (3) non-family firms that are not offshorers, and (4) non-family firms that are offshorers. these four non-overlapping classes of firms allow us to construct four dummy variables that will be introduced in the regression models for the probability of being an exporter as well as for the export/sales ratio. these regression models will be estimated for small and medium firms (those with 200 or fewer employees), since size is a clear determinant of exporting behaviour and means that the percentage of exporters in the group of large firms is so high (over 90% in family as well as in non-family firms) that no effect can be observed. furthermore, large companies http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 usually have access to assets that will substitute for the experience, knowledge, etc. that lies behind the offshoring push for exporting. in the econometric model, a set of dummy variables to capture the industry of the firm (on a 2digit basis) as well as its size (measured by the number of employees) is included. the results for the logistic regression model for the probability of exporting are presented in table 2. note that, to make the interpretation easier, the constant has been excluded, keeping the four dummy variables for the four types of firms of interest. table 2. logit model for the probability of exporting family no offshorers 0.5971 ** (4.393) family offshorers 3.2220 ** (3.151) non-family offshorers 0.1484 (1.087) non-family no offshorers 3.0928 ** (8.332) size 0.0208 ** (30.748) 19 sectorial dummys included number of observations 10,265 correct predictions 73.31% tests h0 : joint significance 1,769.29 ** h0 : famnooff=famoff 6.7 ** h0 : nofamnooff=nofamoff 71.75 ** h0 : (famoff-famnooff)=(nofamoff-nofamnooff) 0.09 t-ratios in parentheses as we can see in these results, for both family firms and non-family firms, the estimated coefficient for offshorers is larger than that for firms that are not offshorers, and the specific test supports the null hypothesis that the difference is statistically significant. in other words, http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 those firms that offshore part of their production process show a premium on the probability of being exporters. to give an idea of this premium, the effect on the probability of being an exporter can be computed. the estimated logistic model suggests that, for each firm, the probability of being an exporter is given by: ( ) sec ( ) ( ) 1 pr(export) 1 i i itype i dum tor i variable i e          where: type(i) i=1,...4 which corresponds to: type(1) for family firms that do not offshore type(2) for family firms that offshore type(3) for non-family firms that do not offshore type(4) for non-family firms that offshore dum-sector(i) i=1,...20 are the 20 2-digit industries according to the spanish national classification (last category omitted in the regression to avoid multicollinearity) variable(i), which refers to the other explanatory variables; in the model presented, it represents the firm’s size, measured by the number of employees. figure 2 shows the estimated probability, for each of the four types of firm, of being an exporter, given the estimated values of the econometric model and the average values of the dummy variables. given the non-linear character of the logistic regression model, the premium is obviously not constant, and it is displayed for the whole range of the variable that captures the size of the firm. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 figure 2. probability of exporting source: own elaboration as can be seen in figure 2, the probability of being an exporter, everything else being equal, is larger among those firms that offshore than among those that do not, in the case of both family and non-family firms. this difference, the premium on the probability of exporting if the firm has implemented an offshoring strategy, is no more than the result of the estimated coefficients for the two kinds of firms. it can be computed on the basis of the implied probabilities of the estimated logistic model. for family firms, it will be: that is, the difference between the probability of exporting for a family firm that offshores (type(2)) and the probability of exporting for a family firm that does not (type(1)). in the same way, the premium for non-family firms can be computed as: 4 3(4) sec ( ) ( ) (3) sec ( premium(nofamfirms) pr(export / nofamfirms & offhore) pr(export / nofamfirms & do not offhore) 1 1 1 1 i i itype dum tor i variable i type dum tor e e                ) ( )ii variable i  2 1(2) sec ( ) ( ) (1) sec ( ) premium(famfirms) pr(export / famfirms & offhore) pr(export / famfirms & do not offhore) 1 1 1 1 i i i itype dum tor i variable i type dum tor i e e                   ( )variable i http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 these premia can be calculated for different values of the explanatory variables. in the results presented in figure 2, size is revealed as an important factor in establishing the size of these premia. in figure 3, the values of the premia for family and non-family firms are displayed for an arbitrary mean value of all the other explanatory variables. as figure 3 shows, the premium on the probability of exporting associated with the fact of offshoring decreases with firm size, which could be due to the fact that, as the firm’s size increases, the firm may have other resources that increase its probability of being an exporter. besides, it must be noted that the logistic model is in accordance with the upper bound of the probability at 1. in an estimation of a linear probability model, where, contrary to the definition of the dependent variable, such a bound is not included (although this kind of model is used, since it can provide informative results for non-extreme cases), the gradient of the variable size for family firms that offshore is negative but is lower (in absolute value) than for non-family firms. for the whole range of size, the premium for family firms is larger than that for non-family firms. from the corresponding calculations, we can see that the premium for family firms is about the same as the premium for non-family firms with 25 fewer employees. to validate the hypothesis that this difference is statistically significant, a test over the parameters that adjust these premia is computed (basically h0: α3α1 = α4α2). the result of this test, presented in table 2, rejects that hypothesis, so we conclude that the premium (on exporting) for offshoring firms is no different between family and non-family firms. in addition to the effect on the probability of being in international markets, offshoring may have an effect on the intensity of those exports. a similar analysis is presented where the explanatory variable is the export propensity (exports over total sales). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 figure 3. premium on the probability of export due to offshoring source: own elaboration in addition to the explanatory variables that were included in the binary dependent model, two variables have been included that have been revealed by the existing literature to be significant for the intensity of exports: expenditure on r&d and advertisement activities. both elements aim to capture to some degree the differentiation of the output of the firm (in different dimensions), which may foster sales in international markets. given that the export/sales ratio is a variable that suffers from sample selection (for values with zero exports) the inverse of the mills ratio is also included as a control variable. the results of the regression model are presented in table 3. as we can see, the dummy variables for offshorers are larger than those for firms that do not offshore, in the classes of family and non-family firms. however, the specific tests for the statistical significance of these differences reject the hypothesis that they are different, so the conclusion is that developing an offshoring strategy is not associated in a statistically significant way with a larger export/sales 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0 25 50 75 100 125 150 175 200 p re m iu m ( e xt ra p ro b a b il it y ) o n b e in g a n e xp o rt e r size (number of employees) family firms non family firms http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 ratio, once the higher probability of being an exporter is considered as well as all the other explanatory variables included in the model. table 3. regression model on the export/sales ratio (ols, heteroskedasticity robust errors) family no offshorers 38.3094 ** (13.900) family offshorers 42.9590 ** (11.135) non-family offshorers 39.9673 ** (13.015) non-family no offshorers 41.2505 ** (15.193) size 0.0791 ** (4.674) r&d/sales 0.1934 (1.582) advertisment/sales -0.6839 ** -(5.490) inv. ratio mills -11.4944 ** -(3.496) 19 sectorial dummys included number of observations 5,975 r2 0.6035 joint significance 305.29 ** tests h0 : famnooff=famoff 2.32 h0 : nofamnooff=nofamoff 0.40 h0 : (famoff-famnooff)=(nofamoff-nofamnooff) 0.97 t-ratios in parentheses concerning the other explanatory variables included in the model, we find the usual results: the export propensity increases with the firm’s size and technological activities, but this last variable does not reach the usual threshold of statistical significance, which could be due to the low level of technological activities. if the model is run with a dummy variable that reflects whether the firm develops r&d activities instead of the intensity of r&d expenditure, the associated coefficient becomes positive and statistically significant. the negative sign for the variable for advertisement intensity is usually attributed to the fact that those expenditures http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 suggest that the firm is more concentrated in the domestic market, where it advertising is done or, at least, where the cost of the advertisement is registered in the accounts. 5. conclusions international business studies have analysed firms’ internationalization from different perspectives. among the topics covered by these studies, the specific aspects of family firms are one of the topics that intersect with other research areas. family firms are usually a large part of the economic system, even in advanced economies. the “family” character introduces many aspects that can affect the adoption and success of internationalization strategies. the wish to keep control of the firm within the family group limits the possibilities of obtaining the financial and managerial resources that are required by internationalization strategies. a family firm, to the extent that it is managed by members of the family group that controls its capital, usually inherits some of the features of the family members in its management style; these feature include risk aversion, a greater concern for the firm’s reputation, the possibility of exploiting certain social capital but greater difficulties in increasing it, etc. implementing internationalization strategies requires not only that the firm’s output has certain characteristics, but also that the firm has a network of established relationships so that it can search for potential clients and distributors, obtain information and knowledge about important aspects of foreign markets like customers’ tastes and preferences, make links with officials in the public sector, etc. family firms, which by their nature are more dependent on the family owners, find it more difficult to bring in top managers who can incorporate this knowledge and set up a vast network of contacts abroad, and face internationalization with a different perspective. moreover, family-owned firms, to the extent that they are more risk averse, will http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 want to be more certain of success before becoming involved in a strategy like internationalization that is usually considered to be riskier than growth in the domestic market. for these reasons, the firm may perform other activities that reduce the inherent risks of internationalization in order to promote it. offshoring (understood in this paper as “captive offshoring”, using the unctad 2004 terminology) is one of the strategies that helps the firm to build an international network and become familiar with the characteristics of foreign markets, and that pushes the managers to develop an international framework. it can therefore be a factor that encourages the international activities of the firm. this paper has analysed how developing an offshoring strategy is associated with exporting activities for spanish manufacturing smes that are family-owned. to do this, the premium (that is, the extra probability of being an exporter and having greater export intensity) that offshoring brings for these firms has been estimated. the results show that those firms that offshore have a significantly higher probability of being exporters. that is, at the same time as these firms supply their production process by manufacturing abroad, they raise their efficiency levels, knowledge, expertise, efficiency, managerial techniques, etc., and this significantly increases their probability of being exporters. it must be noted that non-family firms also benefit from offshoring by being present in international markets in a similar way to family firms. so, the conclusion is that those family firms that are involved in offshoring get the benefit of this strategy to the same extent as nonfamily firms. an interesting result is that, among small and medium manufacturing firms, offshoring is rather less common among family-owned firms than among non-family firms, so it seems that there are a large number of family firms that could exploit the advantage of an offshoring strategy, and this could lead to an even higher percentage of family firms that export. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 44-69, july-december 2017 doi:10.1344/jesb2017.2.j030 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 in relation to export intensity, the results show that there is no difference between those firms that offshore and those that do not, either for family or for non-family firms. thus, it seems that offshoring is associated with a higher probability of selling in foreign markets but not with a larger proportion of the total sales taking place there. from the results of this paper, some topics for future research emerge. first, it seems to be necessary to carry out a more thorough analysis of the features of family firms that may be related to the existence of the observed premium on the probability of exporting for offshorers. the existing literature has shown that the character of family firms includes a series of dimensions (management style, family culture, family socioemotional wealth, etc.), that could be disentangled if the necessary data were available. another interesting aspect would be to analyse which countries show the linkage between offshoring experience and exporting. obviously, the 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"transaction-cost economics: the governance of contractual relations.” the journal of law & economics, 22(2): 233-261. williamson, oliver e. 2008. “outsourcing: transaction cost economics and supply chain management.” journal of supply chain management 44 (2): 5-16. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 pável reyes-mercado adrianela angeles guillermo larios-hernández anahuac university mexico (mexico) demand-oriented innovation policy: mapping the field and proposing a research agenda for developing countries abstract this article conducts a scoping review of demand side innovation policies and its associated instruments in relevant english language academic literature. demand-side innovation policies aim to improve contextual conditions to encourage innovation adoption to address government-defined societal challenges. from the demand approach, innovation policy is expected to involve a directionality, which originates from collective priorities around relevant problems. based on a scooping review of the innovation policy literature from the demand perspective, this research has characterized trends in the discussion about innovation policies that target such challenges, a perspective that complements the traditional supply side policy instruments. findings indicate that literature on demand-side policies has mainly addressed energy and sustainability issues in european countries and china. additionally, although demand-side policies have been advocated for a relatively long time, the literature recognizes that a policy mix involving also the supply-side can be more effective in encouraging innovation. in latin america, demand-side policies have been poorly understood, leading to a defective implementation of policies and instruments. the stage of research on demand-side policies is still evolving and this article advances research propositions on innovation policy, with a deep focus on how they can be implemented in innovation-lagging developing countries. keywords: innovation policy; innovation; supply-side, developing countries; problem-solving policy. corresponding author: e-mail: pavelreyesmercado@hotmail.com received 25 oct 2019 accepted 24 dec 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 1. introduction government institutions in charge of the development of science, technology and innovation have implemented policies and incentives to support academic organizations, companies and start-ups in their technology development and innovation. typically, these policies originate from an approach that aims to encourage the advancement of innovation through capacity building (cimoli 2013, 144; lundvall et al. 2011, 144), which may have resulted, in some cases, in the development of new products and services, usually technology-based, that are eventually commercialized in the market. however, little progress has been made in the study of those policies that lead these organizations to scalable results from a systemic perspective, beyond the behaviour of the individual or the conditions that foster innovation (acs and correa 2015, 5). hence, it is essential to place greater emphasis on the role of demand as a systemic element that encourages scientific and technological innovation, whose potential economies of scale have been identified as the key element associated with high-impact entrepreneurship (acs 2008, 63; acs 2010, 13). there is a variety of factors that encourage or discourage innovation (anisimov 2015), and innovation policy aims to identify the right combination of such variables that help the innovation process to develop, particularly those innovations that are relevant to society and governments (edler and fagerberg 2017, 4). innovation policy instruments are the public measures used by the state to achieve a desired effect (zhi et al. 2014, 309), whose application is context-dependent (edler and fagerberg 2017, 4). innovation policy makes sense in the case of market failure, innovation system failure, or to achieve a specific societal mission (bugge et al. 2018, 470). according to bugge et al. (2018, 478), innovation policy making is today widely inclusive towards solving societal challenges. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 in general, innovation policy has been classified in two groups: supply-side (ss) and demandside (ds). ss policies seek to build capabilities in economic agents to innovate and commercialize (edler et al. 2012, 35). this objective ought to be achieved through: 1) investment subsidies; 2) grants and fiscal incentives for r&d; 3) direct support to private innovation and start-up firms (e.g. training, consulting services, clusters, innovation networks and co-working spaces); 4) regulation to foster more innovation (e.g. intellectual property rights); and 5) financial support for new born or small and medium-side enterprises (langer 2001, 399; edler et al. 2012, 35; jang et al. 2015, 12603; edler and fagerberg 2017, 11; hanley and douglass 2014, 222). conversely, ds policies improve conditions for the uptake of innovations (edler et al. 2012, 34). their main goal is to encourage the use of the innovation (zhi et al. 2014, 318) by developing and creating new markets (langer 2001, 395). this objective is achieved through 1) consumer subsidies; 2) the influence of the state in its role as a purchaser (public procurement); 3) training and creating awareness mechanisms to build up and broaden absorptive capacity for innovation; 4) policies to mitigate deficiencies in the flow of information between buyers and suppliers; 5) feed-in-tariffs, net metering, green tags, renewable energy portfolios; 6) financial support for users; and 7) government mandates and regulatory framework to structure the market in favour of innovations (edler et al. 2012, 38). in general, network effects, aggregate demand, technological developments, changes in market structure, regulations, large buyers and pre-commercial public policies are some of the mechanisms identified as ds policies (edquist 2011, 1734; henrekson and stenkula 2010, 603; priem et al. 2002, 349). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 this study examines recent scholarly literature on innovation policy and classifies the empirical experience of ds and ss-oriented instruments by geography, sector and tactical combinations of such instruments, delivering a broad synopsis of innovation policy research. to achieve this objective, this paper conducts a research team-based scooping review of literature on innovation policy instruments, capturing trends and research perspectives on innovation policies from both the ss and ds perspectives. the article is structured as follows: section 2 details the steps taken to carry out the scooping review of literature. in section 3, a thematic analysis of existing literature is presented, which focuses on the identification of regional, sectoral and tactical approaches present in the scholarly literature. a discussion of findings along with research proposals is developed in section 4. the article closes with implications for policy makers and researchers in section 5. 2. method to include the broad body of theoretical and empirical studies and to map the main concepts underlying innovation policy, this article opted to conduct a scoping review of literature. a scoping study was deemed suitable since it investigates the extent, depth, and different types of existing studies, summarize them, and identify research gaps (arksey and o’malley 2005, 21). instead of handling the narrower research questions and quantitative nature of systematic reviews of literature, scoping reviews can handle a broad range of study designs in disciplines with emerging evidence that makes difficult to conduct a systematic review (levac et al. 2010, 3). since scoping reviews were originally devised to serve the purposes of medical and health needs, this study adapted the methodology according to the outline of arksey and o’malley (2005, 4) and informed by the refinements by levac et al. (2010, 4) and peters et al. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 (2015). the steps involved in the methodological framework include 1) identifying the research questions, 2) searching for studies, and 3) selecting relevant studies. 2.1. identifying the research questions consistent with the context provided above, this paper departs from the assumption that informing policy makers on the effects of demand-oriented instruments is critical to understand how development and commercialization of innovations can be fostered. however, theoretical reviews on demand-oriented policies are limited to summarizing existing literature instead of conducting thorough reviews and identifying research gaps worth to investigate in future studies. to address this issue, this study aims at identifying an overarching framework showing the preferred research targets in the literature, particularly for demand-oriented instruments. this is important to uncover the missing attributes needed to frame effective innovation policies in view of the critical societal challenges. in this sense, the research questions guiding the scoping review are the following: 1. what is the sectoral focus of ds innovation policy? 2. what lessons can be learned from a country comparison? 3. what combinations of policy instruments have been analysed in the scholarly literature? 2.2 searching for relevant studies to identify relevant studies, the scoping team agreed upon time span, language, sources of literature, and search terms. the time span runs from 2000 to 2018. this period was chosen after preliminary readings helped identify the seminal studies on demand-oriented studies. although previous studies exist, they lack the innovation focus that guides the review. language of choice was english to assure replicability of the review as well as future http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 extension by other researchers. search was conducted in electronic databases, including scopus and web of knowledge since they contain more high-quality journals than other databases and listings. the search terms were firstly defined to reflect the broad aspects of the demand-oriented perspective, innovation, and policy, and were refined after the scoping team gained a sense on the scope of the review. the search term ‘demand-’ was particularly challenging since initial searches resulted in extensive searches the broad discipline of economics beyond the focus on innovation policies. the database search string that was developed to guide this search is outlined in table 1. subsequently, the search terms were refined along with other inclusion criteria, outlined in table 2. table 1. database search string topic string search demand (“demand side” or “demand oriented” or “demand-side” or “demand-oriented”) and innovation (innovat* or “r&d” or “research and development” or invent* or “product development” or “new product development” or npd or “value proposition” or “process innovation” or “product innovation” or “service innovation” or “organi?* innovation”) and policy (policy or policies or “policy making” or policymaking or instrument* or initiative* or intervention* or tool*) and societal challenges (challenge* or objective* or mission or mandate or “societal challenge*” or needs or wants or goal* or development or problem* or prior*) source: authors’ own elaboration. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 table 2. inclusion and exclusion criteria for search refinement criterion inclusion exclusion justification type of study conceptual and empirical (qualitative/quantitative) studies. peer reviewed. research papers, conference papers, and book chapters. relevant reports from international agencies. working papers, magazines and lowertier journals. maintain a high quality of research debate. language english other than english easier to gather information and communicate results time frame 2000 to 2018 previous to 2000 seminal papers were published from 2007 onwards. field government, industry, academia, social and triple helix perspectives. relevance focus on demand-oriented policies and its instruments. level of analysis. firm, industry and market but also government (all levels), ngo’s, and social organizations. the term innovation consistent with the development, launch, and diffusion, and acceptance of new products, services, processes. relationships among stakeholders. specific types of demand as electricityrelated grid demand. focus on the research question. source: authors’ own elaboration. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 2.3 selecting relevant studies according to the inclusion criteria discussed, the search resulted in 636 articles. articles were screened by two members of the scoping team. after assessing title, abstracts, and key words, 78 articles were kept since article domain was in the scope of the review –innovation policy (see appendix 1). disagreements in the assessment were settled by the third member of the scoping team. grey literature from preliminary searches was included to the final search number. figure 1 illustrates the process of article selection. figure 1. flow diagram for article selection. source: authors’ own elaboration source: authors’ own elaboration 3. thematic analysis of the literature this section analyses the main characteristics of the data. to chart the resulting number of articles, the scoping team assessed descriptive attributes of the articles by country, industrial sector, research objectives, and type of article (theoretical / empirical). a rubric was used to http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 assess the core attributes of the articles, as robustness of theory, methodology, generalizability of results, and implications for practice. from the 78 articles in the final review, 30 are conceptual papers that propose different models and frameworks to assess a number of policy and instruments. from the remaining 53 empirical papers, 22 refer to qualitative studies while only 14 papers include quantitative methodologies. mixed methods are conducted in two papers. qualitative research involves case studies mainly. a thematic classification of the papers by industry show that 10 paper addresses energy issues, five paper analyzes environmental technologies, five papers analyzes innovations in the pharmaceutical sector, three papers analyzes innovations related to electric automobiles, and three3 papers refers to it innovations. urban issues are addressed in five papers and government policies are analyzed in by eight papers. the remaining 14 papers analyze issues in r&d as well as macroeconomic issues related to such policies. fig. 2 and 3 illustrates number of articles by country and by industry respectively. figure 2. number of papers by country/ region source: authors’ own elaboration. 7 6 6 5 4 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 0 1 2 3 4 5 6 7 8 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 in particular, fig. 2 shed light on the countries as unit of analysis for ds studies; crosscountry comparisons, along with china, european union, and united states ranks the first places (na: country data not available). this is consistent with early calls to develop alternate approaches to innovation policies which were firstly made in the european union. as shown in figure 1, though cross-country studies represent the majority of research, the innovation policy literature has targeted china, the european union (eu) and the united states (usa) as main innovation policy cases. however, if individual european countries are added to eu cases, the number of innovation policy research papers totals around 17, outnumbering any other region in the world. this is a clear indicator of the european dominion of the innovation policy literature. figure 3. articles by industry source: authors’ own elaboration. green energy; 6; 15% environmentfriendly construction; 4; 10% energy; 4; 10% environment; 4; 10% gov; 4; 10% health; 4; 10% e-gov; 2; 5% electric cars; 2; 5% ict; 2; 5% manufacturing; 2; 5% automotive; 1; 3% innovation; 1; 3% organic market; 1; 3% policy ; 1; 3% r6d; 1; 3% science; 1; 3% http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 from a sectoral perspective, fig. 3 shows that most of existing research on ds policies refers to energy and sustainability issues. most articles analyse innovation policies related to sustainability issues, namely, energy, environment-friendly construction, environmental solutions and clean-tech. health and other government-related activities follow. this is in line with seminal papers which call or new policy approaches mainly to solve societal problems and also to fulfil mission-oriented innovative products. 4. findings in this section, we discuss key findings from the literature, which are exemplified from a regional, sectoral and tactical perspective; the latter referring to how different types of innovation policy instrument are combined to deliver outcomes that are more effective. 4.1. the sectoral focus of demand-side innovation policy ds policies are expected to encourage immature markets (jiang et al. 2018, 9). in our scoping review the effectiveness of ds instruments identified by authors were clearly related with certain economic sectors, but at the same time presented incomplete or adverse effects. for instance, in the generic pharmaceutical market, the effect of aggressive ds policies such as mandatory generic substitution, increased demand for generics, although at the same time it had adverse effects on competition, in that the lowest priced option captured the majority of sales, reducing the number of competitors (kanavos 2014, 230). in the transportation sector, ds policies such as regulatory frameworks or mandates have prompted public and private investment in low carbon vehicle technologies, —these policies have been a key determinant of toyota’s investment in hybrid electric vehicles (whitmarsh and köhler 2010, 437). kesidou and demirel (2012, 867) found similar effects in the ecohttp://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 innovation sector. regarding green product innovation, the literature indicates that ss subsidies and voluntary agreements have positive effects, while taxes and regulations have negative effects on product innovation (stucki et al. 2018, 251). nevertheless, government regulation, although crucial for stimulating investment in innovations, is still insufficient and does not necessarily lead to the adoption of innovation (kesidou and demirel 2012, 866). similar to the ds policies, ss instruments have shown little effectiveness in the adoption of innovation by customers, particularly in the transport sector (whitmarsh and köhler 2010, 434). another ds instrument, the public procurement of innovations (ppi) adopted a number of definitions according to local contexts, for example, public end users driven technological innovation pdti (puig-pey et al. 2017, 167) and green public procurement of innovations or gppi (peñate-valentín et al. 2018, 408). regardless of the specific definition, the majority of case studies converge in that ppi influence the development and diffusion of innovations. exemplary cases include the cern research center (landoni 2017, 587) in which the industry r&d center interface has incentivized some innovations. pickernell et al. (2011, 650) argue that ppi has a role on local and regional economic development by engaging small and medium enterprises at varying levels of territorial government scales. at the city level, evidence shows the benefits from implementing ds policies in terms of market creation and urban competitiveness (lember et al. 2011, 1385). a similar case is offered by european cities that shared a list of urban needs in relation with urban robotic technologies whose development was successfully fulfilled through ppi (puig-pey et al. 2017, 169). an interesting case is the role of catalogues of technology-based products as an indicator of what products need to be developed and commercialized in china (li and georghiou 2016, 10). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 the previous discussion of literature shows that industries unrelated to energy and sustainability may also benefit from implementing ds innovation policies with a number of instruments to assess the extent to which innovation is enhanced. hence, we propose the following research proposition: rp1: the implementation of ds instruments in high impact industries (e.g. software, aerospace, or genomics) enhances innovation and technology-intensive outputs, and the outcome is heterogeneous across industries. 4.2. country comparison in the scoping review, we observe differences in the implementation of innovation policies across countries. it seems that, as jang et al. (2015, 12593) assert, the choice of instruments to support innovation is related to a country’s level of development. for instance, the innovation policies in united states, germany, japan, denmark, china, singapore and the republic of korea include both push technology (ss) and pull market (ds) instruments in balance (zhi 2014, 314 ; buen 2006, 3888; jang et al 2015, 12594). germany and japan place less emphasis on the ss compared with united states and china; this later country stands out for being a quick learner that follows international policy experience (zhi 2014, 314). a limited extent of innovation, especially in the wind technology has been reported in norway, which has a short-term focus on the policy instruments and lacks ds measures, despite being a developed country (buen 2006, 3896). from the scoping review, it is clear that studies focus on developed and industrialized countries, clearly noticeable by the fact that data from developing countries is not always available and is less reliable (wesseling 2016, 4). nevertheless, some scholars such as jang et al. (2015, 12591) have analyzed innovation policies in 17 asian countries, including developing economies such as thailand, indonesia, malaysia, and the philippines. they http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 observed that most of these countries just follow the trend of innovation policies implemented by developed nations. other less advanced countries such myanmar, lao pdr, brunei darussalam, and cambodia lack ss and ds policy instruments, and just rely on technology transfers to foster innovation (jang et al. 2015, 12608). latin american countries have had limited success in innovation policies by only "cutting and pasting" those policies implemented in oecd countries without any consideration the local context (arocena and sutz 2010, 573). in this sense, arocena and sutz (2010, 574) indicates that ss instruments, e.g. tax reductions and funds for innovations, have been more frequently adopted than ds instruments like public procurement, which has been hardly adopted in the region. clearly, innovation policies implemented in advanced countries have paved the way (kuhlmann and rip 2018, 448-450), and there is need to develop research avenues that aim to understand the potential of ds instruments in the contexts of emerging countries. while ds policies have been enacted in developed, economically stable but low-growth countries, little is known of the effects of such policy approaches in developing countries, which exhibit a different setting in socio-economic-political dimensions. therefore, we propose: rp2: adapting ds policies and their associated instruments to the latin american setting would complement the standard ss instruments already in place in such a way that local and multinational companies would increase innovation and technologyintensive output. 4.3. combinations of policy instruments ss innovation policies tend to focus on firm-level capabilities and economic outcomes, nevertheless, some authors claim that their effectiveness and distributional consequences are still unclear (hanley and douglass 2014, 228). subsidies have also gained scholarly http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 disapproval as they support r&d activity but not successful enterprising (jiang et al. 2018, 9). additionally, subsidies can generate distortions in business health perception, including the reliance disease and wrong financial reporting (jiang et al. 2018, 9). according to the literature, the effectiveness of ss and ds policies alone has been repeatedly questioned. for instance, in the study developed by karmarkar-deshmukh and carl (2009, 18) about ethanol, government subsidies and federal tax credits showed to be effective to encourage the production; nevertheless, this increase in production has led to a decrease in patents. in this sector, government research grants and awards have proved to be more effective to increase patents (karmarkar-deshmukh and carl 2009, 36-38). these heterogeneous results on the effectiveness of ss can be explained because of the emphasis on product or process innovation more positive effects are observed on process innovation than on product innovation (stucki et al. 2018, 255). the characteristics of the innovation players can help also to explain this variation, since negative policy effects were observed for “typical innovators” (those who develop products that are new to the firm), but not for “technological leaders” (those who create innovations that are new to the market) (stucki et al. 2018, 255). hence, an appropriate combination of ss and ds policies appear to be more effective, according to the literature. on the other hand, implementing demand-oriented instruments requires clear innovation policy transition strategies (alkemade et al. 2011, 127-128), coupled with a systemic approach in which technology development paths are aligned with all other government policies, such as the industrial and economic policy. the literature acknowledges that ppi is subject to contextual variables as policy regulation, interpretation, and interaction between tender participants and the government (dale-clough 2015, 18-21). similarly, instruments http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 from ss-oriented policies may interact with ppi to positively develop green innovations (peñate-valentín et al. 2018, 408-409). from the literature review that the design of effective innovation policies require considerations for both supply and demand perspectives, whose applications needs to be context-dependent, and designed according to the stage of innovation and the desired effect. hence, the development of an appropriate innovation policy requires a deeper understanding of those contextual elements that determine strengths and weaknesses of selected policies. finally, recommendations for establishing the appropriate policy mix involve considerations about the evolving stage of the sector: while ss policies are more functional in early stages, in the mature stages, ds policies should gradually replace them. once the industry enters a selfbalanced phase, the withdrawal of these policy instruments should be considered (zhi 2014, 318). denmark and germany are good models of balancing an innovation policy mix, according to the sectoral stage (buen 2006, 3889; zhi 2014, 318). however, the evaluation of innovation policy has been restricted to ss policies, as there is a research gap around ds indicators, complicating the identification of successful ds measures (edler et al. 2012, 44). the previous discussion calls for an assessment of interaction effects of instruments. hence, we propose: rp3: the interaction of ds and ss instruments leads to higher innovation and technology-intensive output. conclusion this study has reviewed key scholarly literature about innovation policy, particularly ds innovation policy and advances three research proposals. this type of policies is guided by government-defined interests around innovation development along with creating a demand http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 for such innovations. beyond capacity-building and technology-push models, ds innovation policy accepts directionality based on contextual understanding of societal challenges. however, the literature has mainly analysed ds policy cases in more developed economies, with some exceptions. europe stands out as the focus of academic research in the topic, indicating regional concerns about problem-solving policies, especially sustainability and energy-related issues. our analysis has been systematic from a methodological perspective and has been classified as a scoping review in consideration to the research questions posed in this article. this study has indicated the inclination of scholarly research around the ds innovation policy from a sectoral, geographical and tactical approach. cases of policy results at the sectoral and geographical level have been also provided, emphasizing varied degrees of success, leading to tactical recommendations around mixed policies, whose application depends on context and the maturity of the sector. given the limited experiences of ds innovation policy application in developing economies, this research identifies the need to build a research agenda around ds, mixed innovation policies and related instruments in developing countries. noteworthy, some studies advice for a combination at different degrees of ds and ss policies –a policy mix– which may provide deeper insights in achieving higher levels of innovation and fulfilment of societal challenges. in our review, only a handful of studies critically analyses such policy mix. hence, this research avenue remains open to academic debate and further research. this research has implications for public policy, such as inviting researchers and policy practitioners to assess the experience of advanced economies around the implementation of ds innovation policies, including ds-ss mixed models. particularly, developing economies such as latin american’s can take advantage of these experiences to design purposive ds http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 innovation policies adapted to their local contexts. ds or mixed innovation policy adoption should include a deep understanding of latin american’s priorities and conditions, demanding a positive attitude towards risk. managerial perceptions and data from a nationalwide survey in mexico on research and technological development (esidet) may serve as a basis for further research to address the research questions advanced in this paper. such studies are underway. acknowledgements this project is funded by grant conacyt pn2016-01.3218 references alkemade, floorje, marko p. hekkert, and simona o. negro. 2011. “transition policy and innovation policy: friends or foes?” environmental innovation and societal transitions 1 (1): 125-129. acs, zoltan j. 2008. foundations of high impact entrepreneurship. foundations and trends in 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whitmarsh, lorraine, and jonathan köhler. 2010. “climate change and cars in the eu: the roles of auto firms, consumers, and policy in responding to global environmental change.” cambridge journal of regions, economy and society 3 (3): 427–441. zhi, quian, honghang sun, yanxi li, yurui xu, and jun su. 2014. “china's solar photovoltaic policy: an analysis based on policy instruments.” applied energy 129 (15): 308-319. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 appendix 1. references in the scoping review # authors year title journal / conference 1 magdaniel, f c 2016 technology campuses and cities: a study on the relation between innovation and the built environment at the urban area level a+be architecture and the built environment 2 karmarkardeshmukh, r 2009 private sector innovation in biofuels in the united states: induced by prices or policies? agbioforum 3 tõnurist, p 2016 state owned enterprises as instruments of innovation policy annals of public and cooperative economics 4 qiang, zhi 2014 china's solar photovoltaic policy: an analysis based on policy instruments applied energy 5 anisimov, ivan 2015 innovation policy features in the oecd countries baltic journal of economic studies 6 minglei, d 2013 research on the technological innovation strategy and policies of china's new urbanization biotechnology: an indian journal 7 doran, j 2016 the importance of the diverse drivers and types of environmental innovation for firm performance business strategy and the environment 8 whitmarsh, l 2010 climate change and cars in the eu: the roles of auto firms, consumers, and policy in responding to global environmental change cambridge journal of regions, economy and society 9 janssen, m a 2000 climate change policy targets and the role of technological change climatic change 10 hanley, caroline 2014 high road, low road, or off road? economic development strategies in the american states economic development quarterly 11 baraškina, irēna 2009 development of organic agriculture in europe: from origins to the current level of life-cycle. economic science for rural development conference proceedings 12 zhang, h 2017 has government intervention effectively encouraged the use of waste cooking oil as an energy source? comparison of two chinese biofuel companies energy 13 mundaca, l 2018 demand-side approaches for limiting global warming to 1.5 °c energy efficiency 14 banales-lopez, s 2002 public policy for energy technology innovation a historical analysis of fluidized bed combustion development in the usa energy policy 15 christiansen, a c 2002 new renewable energy developments and the climate change issue: a case study of norwegian politics energy policy 16 kimura, o 2010 public r&d and commercialization of energy-efficient technology: a case study of japanese projects energy policy 17 lin, chen-chun 2013 a comparison of innovation policy in the smart grid industry across the pacific: china and the usa energy policy 18 stucki, t 2018 how different policy instruments affect green product innovation: a differentiated perspective energy policy 19 kuzemko, c 2017 policies, politics and demand side innovations: the untold story of germany's energy transition energy research and social science 20 pickernell, d 2011 competing agendas in public procurement: an empirical analysis of opportunities and limits in the uk for smes environment and planning c: government and policy 21 baldock, robert 2016 an assessment of the business impacts of the uk's enterprise capital funds environment and planning cgovernment and policy 22 groba, f 2015 chinese renewable energy technology exports: the role of policy, innovation and markets environmental & resource economics 23 wesseling, j h 2016 explaining variance in national electric vehicle policies environmental innovation and societal transitions 24 nemet, g f 2018 negative emissions part 3: innovation and upscaling environmental research letters 25 radosevic, s 2009 research and development, competitiveness and european integration of south eastern europe europe asia studies 26 hunt, richard a 2018 an opportunity space odyssey: historical exploration of demand-driven entrepreneurial innovation european journal of innovation management 27 georghiou, l 2011 from priority-setting to articulation of demand: foresight for research and innovation policy and strategy futures 28 warnke, p 2016 small seeds for grand challenges-exploring disregarded seeds of change in a foresight process for rti policy futures 29 grabowski, h 2005 perspective: encouraging the development of new vaccines r&d subsidies for new drugs to treat rare diseases are much larger than those for new vaccines to prevent more common diseases health affairs 30 kanavos, panos 2014 measuring performance in off-patent drug markets: a methodological framework and empirical evidence from twelve eu member states health policy http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 # authors year title journal / conference 31 hu, jia 2016 pharmaceutical pricing and reimbursement in china: when the whole is less than the sum of its parts health policy 32 arora, a 2015 public support for technical advance: the role of firm size industrial and corporate change 33 leimbach, t 2010 assessing national policies to support software in europe info 34 aberg, susanne 2015 does cern procurement result in innovation? innovation-the european journal of social science research 35 dale-clough, lisa 2015 public procurement of innovation and local authority procurement: procurement modes and framework conditions in three european cities innovation-the european journal of social science research 36 lember, veiko 2015 quo vadis public procurement of innovation? innovation-the european journal of social science research 37 neck, r 2018 how to achieve the take-off into sustained growth: a case study for slovenia international advances in economic research 38 su, y.-s. 2016 an assessment of innovation policy in taiwan's electric vehicle industry international journal of technology management 39 sartorius, c 2008 promotion of stationary fuel cells on the basis of subjectively perceived barriers and drivers journal of cleaner production 40 rizzi, f 2014 environmental value chain in green sme networks: the threat of the abilene paradox journal of cleaner production 41 rainville, anne 2017 standards in green public procurement a framework to enhance innovation journal of cleaner production 42 eisenberg, rebecca s 2017 promoting healthcare innovation on the demand side journal of law and the biosciences 43 spulber, d f 2013 how do competitive pressures affect incentives to innovate when there is a market for inventions? journal of political economy 44 gambardella, a 2017 the user innovation paradigm: impacts on markets and welfare management science 45 edler, jakob 2017 innovation policy: what, why, and how oxford review of economic policy 46 landoni, matteo 2017 innovation policy in progress. institutional intermediation in public procurement of innovation: satellite telecommunications in italy r & d management 47 edler, j 2012 evaluating the demand side: new challenges for evaluation research evaluation 48 edler, j 2007 public procurement and innovation-resurrecting the demand side research policy 49 edquist, c 2012 public procurement for innovation as mission-oriented innovation policy research policy 50 kesidou, effie 2012 on the drivers of eco-innovations: empirical evidence from the uk research policy 51 guerzoni, marco 2015 demand-side vs. supply-side technology policies: hidden treatment and new empirical evidence on the policy mix research policy 52 rogge, karoline s 2016 policy mixes for sustainability transitions: an extended concept and framework for analysis research policy 53 raiteri, emilio 2018 a time to nourish? evaluating the impact of public procurement on technological generality through patent data research policy 54 yi, h 2012 policy tool interactions and the adoption of state renewable portfolio standards review of policy research 55 puig-pey, ana 2017 public entities driven robotic innovation in urban areas robotics and autonomous systems 56 vonortas, n s 2000 technology policy in the united states and the european union: shifting orientation towards technology users science and public policy 57 arocena, r 2010 weak knowledge demand in the south: learning divides and innovation policies science and public policy 58 timmermans, bram 2013 coordinated unbundling: a way to stimulate entrepreneurship through public procurement for innovation science and public policy 59 leitch, s 2014 the fall of research and rise of innovation: changes in new zealand science policy discourse science and public policy 60 bergek, a 2015 integrating the supply and demand sides of public support to new technology-based firms science and public policy 61 georghiou, luke 2016 signaling and accrediting new technology: use of procurement for innovation in china science and public policy 62 boon, wouter 2018 demand, challenges, and innovation. making sense of new trends in innovation policy science and public policy 63 bugge, markus m 2018 governing socio-technical change: orchestrating demand for assisted living in ageing societies science and public policy 64 chicot, julien 2018 public procurement of innovation: a review of rationales, science and public policy http://revistes.ub.edu/index.php/jesb volume 5, number 1, 158-181, january-june 2020 doi.org/10.1344/jesb2020.1.j071 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 # authors year title journal / conference designs, and contributions to grand challenges 65 wesseling, joeri h 2018 public procurement for innovation to help meet societal challenges: a review and case study science and public policy 66 trindade, paula cayolla 2018 spp toolbox: supporting sustainable public procurement in the context of socio-technical transitions sustainability 67 jang, e k 2015 policy instruments for eco-innovation in asian countries sustainability (switzerland) 68 mengolini, a 2016 exploring community-oriented approaches in demand side management projects in europe sustainability (switzerland) 69 jiang, c 2018 the effectiveness of government subsidies on manufacturing innovation: evidence from the new energy vehicle industry in china sustainability (switzerland) 70 safarzyńska, k 2010 demand-supply coevolution with multiple increasing returns: policy analysis for unlocking and system transitions technological forecasting and social change 71 yun, s 2015 advancing societal readiness toward renewable energy system adoption with a socio-technical perspective technological forecasting and social change 72 caloghirou, y 2016 public procurement for innovation: a novel egovernment services scheme in greek local authorities technological forecasting and social change 73 steward, f 2012 transformative innovation policy to meet the challenge of climate change: sociotechnical networks aligned with consumption and end-use as new transition arenas for a lowcarbon society or green economy technology analysis and strategic management 74 tsoutsos, t d 2005 the sustainable diffusion of renewable energy technologies as an example of an innovation-focused policy technovation 75 cohen, b 2014 municipal demand-side policy tools and the strategic management of technology life cycles technovation 76 saastamoinen, j 2018 should smes pursue public procurement to improve innovative performance? technovation 77 lember, v 2011 urban competitiveness and public procurement for innovation urban studies 78 srinivas, s 2006 industrial development and innovation: some lessons from vaccine procurement world development this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 esther hormiga universitat de barcelona (spain) connie hancock university of chester (u.k.) natalia jaría-chacón universitat de barcelona (spain) going it alone or working as part of a team: the impact of human capital on entrepreneurial decision making abstract this paper endeavours to measure the effect that human capital has on the decision taken by the entrepreneur to pursue new venture creation either in a lone capacity or collaboratively. this study applies a logit model to investigate the research relationships. the results show that three factors (experience, social perception and extrinsic motivation) are relevant in the decision to initiate a new venture either in a lone capacity or as part of a collaborative undertaking. the results indicate that previous experience holds the greatest significance on the decision taken by entrepreneurs to ‘go it alone’, with factors relating to social perception and extrinsic motivation chiefly predicting a decision to work collaboratively. the findings of this study provide new insight and evidence with regard to the factors that influence a key decision in the start-up process: that of continuing in a lone capacity, or proceeding as part of an entrepreneurial team. keywords: human capital; entrepreneurial team; entrepreneurial decision; lone entrepreneurship corresponding author: e-mail: ehormiga@ub.edu received 04 january 2017 accepted 30 january 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 introduction significant numbers of studies into entrepreneurial endeavour over the years have considered the entrepreneur as an individual, acting in a lone capacity (lechler 2001). however, recent research reflects an increasing interest in collaboration between an entrepreneurial team. an increasing number of entrepreneurs decide to undertake business activities as part of a team and to pursue complementarity in order to support and balance the risk and undertaking of new business. thus, an entrepreneurial team is defined as the group of people involved in the creation and management of a new venture (forbes et al. 2006). several studies have suggested that firms founded and managed by teams are on average more successful than firms founded and managed by individuals (lechler 2001; vyakarnam and handelberg 2005; kamm et al. 1990; roure and maidique 1986). forming a new company as a group serves to decrease the level of uncertainty, spread responsibility, minimise risk and more effectively leverage support. in this context, literature on entrepreneurship has confirmed the importance of the collaborative entrepreneurship phenomenon (ribeiro-soriano and urbano 2009). despite the benefits that working as part of a team brings (zhou et al. 2015), many entrepreneurs prefer to create a business through their own auspices and in the literature related to this field there is a lack of discussion about why or which factors influence an individual to start a project alone or work as part of an entrepreneurial team. a decision to pursue entrepreneurial endeavour in a lone capacity does not indicate an inability to work as, or contribute to a team, simply that the decision to retain control of company strategy and operations rather than share ownerships and control. thus, we ask, which factors influence the decision making process? http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 this paper will consider the impact that human capital has on the different choices made by entrepreneurs towards initiating a new venture; lone venture or group endeavour. to achieve this objective, the empirical analysis carried out consisted of a logit regression model, with the entrepreneur’s decision as dependent variable. following this introduction, the article is structured in four sections. the first section sets out the theoretical framework that will be utilised to analyse approaches towards the formation of an entrepreneurial team and the influence of the entrepreneur’s human capital in the decision making process. the methodology of the work is addressed in section three. section four includes a demonstration and discussion of the results obtained with logit regression models. finally, the main conclusions, future lines of research and implications are presented. theoretical framework the decision to belong to a group: an application to an entrepreneurial team groups are formed in an effort to secure particular outcomes and objectives (cartwright and zander 1968; burn 2004; ben-hafaiedh-dridi 2010). in so forming, a decision has been taken that a group will more effectively and efficiently secure the targeted outcomes than an individual working alone would. or indeed a judgement had been made that particular objectives may not be obtained without working in collaboration (huici et al. 2011). entrepreneurial teams are more common than academic literature has historically suggested (lechler 2001; chowdhury 2005). this increase in interest can be attributed to the growth in collaborative start-up ventures. in the last two decades, a change of focus has resulted in less attention in respect of the competencies of the individual entrepreneur and more emphasis on the diversity of competencies demonstrated by the entrepreneurial team (watson et al. 1995; frances and sandberg 2000; lechler 2001; ensley et al. 2002; higashide and birley, 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 a number of definitions relating to precisely what is meant when referring to an ‘entrepreneurial team’ can be found in the literature. to this end, watson et al. (1995) posit that in an entrepreneurial team individuals jointly initiate a business and are involved in its joint operation. an entrepreneurial team has too been characterized as two or more individuals with financial interest jointly launching, actively participating and developing a business (kamm et al. 1990; watson et al. 1995; cooney 2005; chowdhury 2005). the reasons behind the decision to pursue an entrepreneurial career with other people instead of ‘going it alone’ can be very broad. the rational process model of team formation is based on economic and pragmatic instrumental criteria that makes the selection a new member as an issue of complementary skills or assets. in fact the main purpose of a team should be to meet the needs and to obtain the lack of resources (ucbasaran et al. 2003). based on this perspective, the decisions are taken with regard to the needs of the project and more specifically to the provenance of those resources (kamm and nurick 1993). in an entrepreneurial team, it is important that the entrepreneur is aware of both identify resource capacity and resource need towards project feasibility. the decision making process focuses on the identification of prospective team member(s) offering the best supply of critical resources to the project (forbes et al. 2006). during the ‘start-up’ phase of a business, it is common that founders may not have direct access to the required resources. the rational process model would suggest that the expectation is that resources will be secured from team members or alternatively, from networks (aldrich and kim 2007). from a financial point of view, individuals have an increased likelihood of securing initial funding if they have a partner. in the first instance a partner brings additional initial capital of their own towards the star-up entrepreneurial activity. this initial contribution can be http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 monetary or alternatively it may take the form of an unpaid worker salary in the first months. moreover, entrepreneurial teams are more likely to attract capital investment (timmons 1999). usually, the complementary knowledge and competences are perceived as a symbol of team strength and capacity to overcome the inevitable trials and tribulations related to new ventures. some financiers or even shareholders require a proactive team to support the management of the firm in return for their financial backing (tihula et al. 2009). on the other hand, the potential entrepreneur may choose to seek specific competencies, knowledge or skills that s/he does not have; technical, human or conceptual skills (hambrick et al. 1996). assertions that teams that are made up of members possessing different skillsets or complementary aptitudes, can positively influence the success of the team performance and, as a consequence, achieve more effective results in respect of the new venture (roure and maidique 1986; utterback et al. 1988; eisenhart and schoonhoven 1990; roberts 1991; friar and meyer 2003; vanaelst et al. 2006). thus, the variety of experience and knowledge that resides within a team can enrich the decision-making process and provide alternative perspectives. all of which would not be possible if team members possessed the same or similar profiles. roberts (1991) suggests that one of the key factors for business success is the formation of an entrepreneurial team where different, complementary skills are represented thereby adding value to the new venture. in the early years of the business, the lone entrepreneur must positively respond and tackle the requirement for very different and varied resources. thus, a variety of experience, knowledge and expertise among team members provides a synergic effect, which can be applied to the increasingly complex problems of firms (eisenhart and schoonhoven 1990). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 human capital in new ventures: a possible negative effect on team formation propensity while most previous studies have examined team composition, process and effectiveness (schjoedt and kraus 2009; west 2007; vanaelst et al. 2006; forbes et al. 2006; molleman and slomp 2006; vyakarnam and handelberg 2005; rafferty and tapsell 2001) they do not focus on the reasons that influence an entrepreneur to enrol in group activity as opposed to starting a company as an individual. it remains that a significant proportion of entrepreneurs take the decision to initiate a new venture by ‘going it alone’. based on the rational process model the reasons involved in taking this decision are related to arriving at the conclusion that the skills and complementarity of another are not required to achieve the desired objective. an explanation relating to why potential entrepreneurs in general decide to form a group has been posited, but what factors influence a potential entrepreneur to ‘go it alone’ or in a group? wood and bandura (1989) argue that perceived self-efficacy refers to people’s beliefs in their abilities to mobilize the motivation, cognitive resources, and courses of action needed to exercise control over events in their lives. in the context on entrepreneurial activity, entrepreneurial self-efficacy refers to the strength of an individual’s belief that he or she is capable of successfully performing the roles and tasks of an entrepreneur (boyd and vozikis 1994; scherer et al. 1989). self-efficacy and perceived feasibility have all been measured by responding to the question: how confident are you that you can perform the task? (segal et al. 2005). to this end, if the entrepreneur is confident that they can perform in a lone capacity and therefore the requirement and reliance upon others in an unnecessary inconvenience and therefore negates the need to work with others in a team approach. a crucial aspect of this http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 involves the reflection of which characteristics/factors influence a superior feeling of selfefficacy. human capital is consistently recognised as being an organisation’s most significant, intangible resource (johanson 2005; marr and roos 2005) by playing a fundamental role in the new knowledge-based economy (becker et al. 2001; edvinsson and malone 1997; sveiby 2000). the technological advances experienced both by firms and society in general have meant that the required worker profile is increasingly one with competencies, attitudes and intellectual agility that permit critical and systematic thinking within the changing and uncertain environment that he/she must confront (bontis 2002). therefore, human capital is considered the potential source of innovation and generation of ideas for the firm, thus providing added value of unquestionable importance (viedma marti 2001; bontis 1998). consequently, the lack of adequate human capital may have a negative effect on other activities that create value for the firm (edvinsson and malone 1997). the very nature of new ventures means that a fundamental part of this human capital lies with the entrepreneur or within the entrepreneurial team. studies on the important role that human capital plays towards securing team success has focused on aspects such as: the level of knowledge, social competences, motivation or commitment of the team members (vyakarnam and handelberg 2005). in the following we presented different components of entrepreneur’s human capital and how it can influence the decision to create the company by their own based on the rational process model. entrepreneur’s previous knowledge. the entrepreneur’s knowledge plays a key role in the first years of company life. to this end, knowledge acquired through professional activities carried out prior to creating the company is the most used indicator for measuring this asset http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 (stuart and abetti 1990; storey 1994; bosma et al. 2004; rauch et al. 2005). miller et al. (1999) believe that related experience is the most useful indicator for measuring both human and intellectual capital. the experience of the entrepreneur has been considered one of the most important sources of knowledge and a determining factor in the success and growth of newly-created ventures (basu and goswami 1999). level and engagement in formal education represents another source of knowledge acquisition that has received attention in the literature surrounding entrepreneurship. some argue that level of education is the basis for intellectual development, supporting the company enormously, providing the entrepreneur with higher levels of self-confidence in establishing a relationship with stakeholders or financing entities (vesper 1990; brüderl et al. 1992; storey 1994; van praag and cramer 2001; watson et al. 2003). thus in completing a higher level of education and acquiring a certain degree of experience in the sector it is more likely that the potential entrepreneur will perceive themselves as possessing the necessary skills and competences for initiating and running a business. based on this assumption we present the following hypothesis: h1_the entrepreneur’s knowledge is positively related to entrepreneurial lone decision h1a_ the higher entrepreneur’s experience the higher probability to create the company alone h1b_ the higher entrepreneur’s level of education the higher probability to create the company alone entrepreneur’s social competences. these can be deemed intangible assets that are not intellectual or “right-brain” oriented and as such often tend to be neglected even though they may be equally as important to the organisation’s future: we are referring to social http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 competences (andriessen 2004). social skills do appear to be important for entrepreneurial success, as they are generally necessary for an entrepreneur to convince others to invest in or buy a product or service (decker et al. 2012; baron and markman 2003; zhao and seibert 2006). two of these social competences, namely social perception and adaptation, have received empirical support in so far as the value they contribute to the firm in the initial stage of its life support the achievement of higher revenues and profits in the future (baron and markman 2003). it is these social capacities that permit the entrepreneur to interact with and engage in the cultivation of relationships with those with whom they are unfamiliar, and so display an aptitude for social adaptability as well as the ability to perceive the characteristics, intentions and motives of the other person (baron and markman 2003). a high level of competency is key for establishing core business relationships and vital for conducting effective negotiations with stakeholders. baron and markman (2003) found that entrepreneurs’ social adaptability and accuracy in perceiving others was positively related to financial success. entrepreneurs may not initially possess the knowledge and competences that can lead to new venture success (chandler and lyon 2009). potential entrepreneurs understand that personal networks can provide them with key resources in the form of information about the market, new opportunities, problem solving and/or even access to financial resources (hoang and antoncic 2003; nicolaou and birley 2003; shane and stuart 2002; walter et al. 2006). some authors assume that social relationships are established through seeking any type of complementarity (smith and ruiz 2007). based on the rational approach that indicates that individuals look for complementarity of competencies when forming a group, those potential http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 entrepreneurs with a higher degree of social competencies, will have the feeling of selfefficacy of make one important task for entrepreneur, which is networking (birley 1984). based on this assumption we present the following hypothesis: h2_the entrepreneur’s social competences are positively related to his entrepreneurial lone decision h2a_the higher entrepreneur’s social adaptability the higher probability to create the company alone h2b_ the higher entrepreneur’s social perception the higher probability to create the company alone entrepreneur’s extrinsic motivation. the motive that drives the founder to develop his business project can either produce added value for the firm or have a negative effect on it. various authors have studied the influence of entrepreneurs’ motivations on the subsequent organisational processes (gatewood et al. 1995; van praag 2003; van praag and cramer 2001; peña 2002; collins-dodd et al. 2004). most of the aforementioned draw the conclusion that the owner most successful are driven by intrinsic motivation. this could take the form of: the transformation from innovatory idea to practical solution, or by the need to be his/her own boss, feeling that they are more likely to create a business that will have greater chances of personal success as opposed to embarking on what they perceive as the far more difficult task of finding a job. on the other hand, we find the extrinsic motivation, we meant individuals that are pushed into entrepreneurship by negative external forces, such as job dissatisfaction, difficulty finding employment, insufficient salary, or inflexible work schedule (gilad and levine 1986). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 previous studies have demonstrated that unemployment has a detrimental influence on the self-efficacy (aviram 2006; zenger et al. 2013). creating a company with a very high extrinsic motivation related with the impossibility to find a job can imply a lower perception of self-efficacy and can serve to motivate the future entrepreneur to acquire support in an effort to share the uncertainty of the entrepreneurial project. based on this assumption we present the last of the hypothesis: h3_ the higher the entrepreneur’s extrinsic motivation, the lower the probability to create the company alone in the following figure 1 all the hypothesis are summarized: figure 1. relationship between entrepreneur’s human capital and the propensity to create the company alone source: own elaboration. propensity to lone business creation entrepreneur’s human capital knowledge experience level of education social competence social perception social adaptability extrinsic motivation difficulties to find a job h1 (+) h2 (+) h3 (-) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 methodology characteristics of the sample in order to verify the hypotheses that related the entrepreneur’s human capital to the decision towards initiating a team project, we collated primary data by means of a questionnaire. for eligible inclusion in the study, the firm in question must have been undertaking a new activity, that is, a company that has simply changed its legal form or ownership has not been included in the population of this study. the final sample consist of: (1) 45 lone entrepreneurs; (2) 44 teams of two entrepreneurs and (3) 41 teams of more than two entrepreneurs. the questionnaires were all completed by the company owner who, in addition, participated actively in the daily activity of the firm and was, preferably, the person with overall responsibility. if after the first contact the questionnaire was found to have been completed by one of the firm’s employees, it was immediately discarded. furthermore, all the firms were funded in spain and have between 3 and 42 months. variables dependent variable the dependent variable was based on the decision to start a company alone or as a consortium (two or more partners). the variable was measured as a dicotomic variable coded 0 if the company was created by a lone entrepreneur and 1 if the company was initiated by an entrepreneurial group. to distinguish between both categories we established a definition in respect to the term entrepreneurial group. thus, a company was considered an entrepreneurial group venture when two or more people were involved in the creation of the company and reflected both of the following characteristics: (1) had invested any money in company http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 capital, (2) was involved in the day to day activity of the company, either in a part-time or full-time capacity. moreover the possible differences in group decisions were analysed, (with two people (n= 44) and more than two people (n= 41)). however the two groups were homogeneous regarding the factors under analysis and no perceptible differences were found in the variables. independent variables entrepreneur’s previous knowledge: the entrepreneur’s experience was measured using number of years’ experience in the sector as the indicator (sandberg and hofer 1987; duchesneau and gartner 1990; chandler and jansen 1992; van praag 2003). in order to measure knowledge levels, we ascertained the level of study that had been acquired through formal education (e.g., compulsory studies, university studies, etc.). it was used a classification of seven items with all the possible level of studies, from primary education until postgraduate studies (van praag and cramer 2001; collins-dodd et al. 2004). the respondents were asked to mark the highest level of education attained. all the entrepreneurs completed primary and secondary level studies and so these categories were joined. thus, the final three categories of this variable are: undergraduate education, university education, post graduate education. entrepreneur’s social competence. this variable was measured following the research of baron and markman (2003) who confirmed validity of the scale. because of issues surrounding lack of precision and possible deviations with regard to self-reporting, baron and markman interviewed those close to the entrepreneurs in connection with the social competences of their associate. the findings confirmed that self-reporting was, on the whole, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 accurate when measuring the self-evaluation and reviews of entrepreneurs, against the responses provided by others. thus we used a total of six items to assess the social perception and adaptability of the entrepreneur. the measurements of social perception captures issues like the level of the individual's ability to know how others feel in certain situations, when is the right time to ask someone a favour or the capacity to sufficiently know a person after conversing once or twice. with respect to social adaptability, the proposed items are related to the degree of sensitivity and understanding of the respondent and their capacity to communicate with strangers and talk to them on a range of issues. entrepreneur extrinsic motivation: extrinsic motivation leading to company creation was studied by proposing options that the entrepreneur had to evaluate on a 7-point likert scale according to the level of agreement with the following: “i created my company basically because i was not able to find a job” (roberts 1989; gimeno et al. 1997; watson et al. 1998; peña 2002). because of the entrepreneur’s could feel that they have different motivation, this variable was measured as a scale. a range of responses were proposed with the entrepreneurs identifying and marking the grade that best corresponded to their perceptions. control variables finally, we analysed a series of control variables that could impact on the dependent variable and have an overall effect on the final results. these variables were: (i) the first company created by the entrepreneur (ii) the age of the entrepreneurs, and finally, (iii) the gender of the entrepreneur. the majority of these variables present significant differences between those who approach a new enterprise as a group and those working (see table 1). for example, a greater proportion of males had decided to create the company on their own. differences were also significant http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 when we compare the level of experience, extrinsic motivation and social perception of both groups. no significant difference was evident between both groups with regard to age distribution or level of education. table 1. comparison between entrepreneurial group decisions individual decision (n=45) group decision (n=85) x 2 / t (p-value) experience 4.311 3.023 -3.277 (0.001) education no university education 37.3% 62.7% 2.897 university education 25.5% 74.5% (.235) postgraduate univ. education 46.7% 53.3% extrins. motivation 1.444 2.741 -3.478 (0.001) social perception + -.3130 .1021 2.257 (.026) social adaptability + -.0450 -.0238 .372 (.710) previous company yes 36.6% 63.4% .101 (0.751) no 33.7% 66.3% gender male 39.0% 61.0% 4.739 (0.029) female 16.0% 84.0% age (in months) 39.000 38.50 -0.305 (0.761) notes: with the continuous variables we made t-test for the significance of the difference between the means of two independent samples. the rest of the differences are indicated using chi-square tests. sample observations are not weighted. + variables extracted from the factor analysis results before analysing the relations between the variables, we first examined the reliability of the scale used to measure the entrepreneur’s social competence. for this we used cronbach’s alpha coefficient for determining the internal consistency of a scale, analysing the mean correlation of a variable with all the other variables from which the scale was built. thus, we see that the scales show an acceptable level of consistency, with values upper that 0.7. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 table 2. analysis of the reliability of the entrepreneur’s social ability variables reliability (cronbach’s alpha) mean standard deviation social perception 0. 719 5. 11 1. 69 social adaptation 0. 712 5. 96 1. 14 table 3 shows the inter-factor correlation matrix used to evaluate the significance level of the existing relationships. there are significant and positive correlations between the entrepreneur’s experience and being male and the age, and negative relationship with the extrinsic motivation. moreover, there is a positive correlation between having a previous company, the entrepreneur’s age and being a male, and between age and gender. a series of tests revealed the non-presence of multicollinearity and in table 3 we can see that none of the correlations are superior to 0.4. table 3. correlation matrix 1 2 3 4 5 6 7 8 1 experience 1.000 2 education -.069 1.000 3 extrinsic motivat -.224* .053 1.000 4 social percep .124 .133 .105 1.000 5 social adaptab -.013 .179* -.043 -.011 1.000 6 previous company .138 -.103 -.129 -.028 .118 1.000 7 gender .219* -.141 -.211* .077 .021 .257** 1.000 8 age .323** -.025 -.115 -.051 -.052 .315** .247** 1.000 notes: spearman rank correlation (1-tailed significance); ** correlation is significant at the 0.01 level (1-tailed), * significant at the 0.05 level (1-tailed). sample observations are not weighted. because the dependent variables were binary choice variables, logistic regressions were used to test the hypotheses. reference cell coding was applied to the categorical variables as follows: (i) for the education variable, non-university study was used as the reference group; (ii) for previous company, not having a previous company served as the reference group; and (iii) for gender, female was the reference. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 a potential limitation to logit analysis is multicollinearity, which can occur when there is strong linear dependence among the independent variables (hosmer and lemeshow 2000). multicollinearity is manifested by extraordinarily large estimated standard errors (and sometimes by large estimated coefficients), which can result in a lack of statistical significance of independent variables, even though the overall model can be strongly significant. as shown in table 3, the model coefficients and standard errors in the present data were not extraordinary large, which suggests that multicollinearity was not a problem in this case. table 4 shows the results of the goodness of fit of the models (using the likelihood ratio test, pearson chi-square, and the hosmer-lemeshow test) and test of variance using the nagelkerke-statistic (pseudo r 2 ). the pearson chi-square tests demonstrated that the models were globally significant, and the p-value of the hosmer and lemeshow tests (greater than the significance level of 5%) indicated that the models fitted quite well. to test hypotheses, the model presented in table 4 logistic regressions were undertaken, with ‘the decision to initiate the company as a group or as an individual’ as the dependent variable and entrepreneur’s ‘knowledge’, ‘extrinsic motivation’ ‘social competences’ as the independent variables, and the variables ‘age’, ‘gender’, and ‘previous companies as control variables. table 4 shows the results of testing the hypotheses. in the sample analysed, if the entrepreneur had previous experience in the sector significantly decreased the likelihood of deciding to create the company with other people. in other words, if an individual has knowledge within the sector, their preferred choice is to start a company on their own. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 table 4. results of logistic regression for individual vs groups decision to create the company b std. err. sig. or experience -.327 .114 .004** .721 education no university education .309 university education .801 .697 .250 2.228 postgraduate univ. education 1.181 .770 .125 3.258 extrins. motivation .327 .151 .026* .721 social perception .575 .234 .014* 1.776 social adaptability .121 .228 .595 1.129 previous company yes -.428 .518 .408 .652 gender male .825 .660 .211 2.282 age .025 .030 .391 1.026 constant -.369 1.335 .782 .692 n 130 hosmer and lemeshow test 6.947 (0.542) chi square 32.651 (0.000) pseudo r 2 (nagelkerke) 0.319 -2 log likelihood 126.935 percentage predicted correctly 77.6 however, there is not a significant relationship between the level of study attained and the decision to engage in entrepreneurial activity as a group. hypothesis h1 was thus partially supported. it would seem that knowledge acquired through previous experience (h1a), as opposed to knowledge acquired through education (h1b), has a greater impact on deciding whether or not to pursue a collaborative new venture. these results confirm the significance of the role played by experience in the first years of company life. in this case, this experience can have a direct impact on the entrepreneur’s perception of their own capacity. thus the previous experience in the same sector can make the entrepreneur to know the future customers, market opportunities and resource needs. this fact can positively influence self-confidence and therefore indicates this group of entrepreneurs are more prone to lone company creation. regarding level of education, the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 results are inconclusive regarding having a direct impact in the very early stage of company life. thus, despite level of formal education, the potential entrepreneur does not feel so ready or confident to address a new and uncertain endeavour. regarding hypothesis 2, we can find significant differences in the entrepreneur’s social perception (h2b) between two groups but not in the social adaptability (h2a). thus social competences only partially affect the probability of creating a company as a group venture. the entrepreneurs that decide to collaborate in order to create a company have a higher social perception and have the ability to perceive the most appropriate opportunity to talk with someone or to elicit goodwill. these results are contrary to the theoretical arguments for supporting hypothesis 2. thus the results do not support that a positive self-evaluation and confidence relating to their effectiveness for the possibility of obtaining the resources they require from contacts and different networks make that the entrepreneur prefer to create the company alone, but it creates the opposite effect. in the following section, these results are discussed according to the literature. these differences were not observed in the entrepreneur’s social adaptability measurement, understood by the entrepreneur’s capacity to adapt to new situation and people. the ability to be with new people in new situations can favour a tendency to work as part of a team and feel comfortable in this situation, explaining why a negative effect was not found in the decision to create an entrepreneurial team. this social competence can be hiding an internal preference to work in team. thus hypothesis two is only partially accepted. finally, table 3 shows the empirical support for hypothesis 3. the results demonstrate that for this sample the entrepreneurs who decided to create a company with at least one other person is more likely to be extrinsically motivated towards creating a business. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 discussion of the results and conclusions in the field of entrepreneurship it is very common to forget alternative theoretical frameworks when the results are not as one would have expected (zahra 2007). the application of some theories often lack rigor and creativity, producing obvious or inconclusive results. for this reason it is very important to discuss the results critical analyzing the assumption of the theory in order to understand how other theoretical approaches can help to understand the phenomenon understudy (zahra 2007). johannisson et al. (2007) emphasized the value of analyzing a unique phenomenon from different theoretical perspectives. this exercise permits a depth of exploration of a phenomenon that supports the academic community to understand application and impact. in this case, the theory of rational approach does not support the results of the second hypothesis that argued that the entrepreneur’s social competences are positively related to his entrepreneurial lone decision. to this end, we utilise an alternative theoretical approach that attempts to explain the reason for group formation from a social psychological approach. this approach emphasises the interpersonal fit between team members and the need for a smoothly functioning group process (forbes et al., 2006; aldrich and kim, 2007). indeed, motivation for social contact is a central influence on human behaviour (baumeister & leary, 1995; hill, 1987). the results of our study reflect that individuals with higher social perception prefer to form a company adopting a group approach. these individuals have the ability to know how others feel in certain situations or they believe they have the capacity to sufficiently know a person after conversing once or twice. this demonstrates the reflective approach of someone aware of the importance of the social contacts and of all the benefits that this involves. decker et al. (2012) found a positive association between entrepreneurial careers and the need for http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 positive stimulation from other persons. therefore, persons with entrepreneurial interests enjoy interacting with other people, but are not, it would appear, emotionally dependent upon them. moreover, the entrepreneurs’ skills of understanding others and empathic recognition can indicate an understanding of the benefits of collaborate working brings and reduces the negative perceived effects towards that of building a team. thus social competences have been demonstrated to be important for making an entrepreneurial group more likely to experience success (ensley et al. 2002). these individuals can be looking for more a social regards that the rational process model can not explained, we meant positive affect, attention or reduction of negative affect through social contact. on the other hand, sector experiences instil confidence and support the capacity to pursue company creation as a lone project. those possessing greater sector experience have had time to learn about demand, customers, the innovative process and the environmental factors that influence his business activity. entrepreneurship literature has extensively demonstrated the importance of the entrepreneur’s prior experience, particularly sector experience, towards succeeding in a new venture (brüderl et al. 1992; lerner and almor 2002; van praag 2003; bosma et al. 2004). this experience supports key skills and core knowledge development, particularly in regard to: securing access to required resources through networks, understanding and analysing customer preferences or systems of production. moreover, experience can support a perception of confidence and decrease the uncertainty of the first years in a new venture. to this end, different authors adopting a psychological approach have suggested that knowledge reduces feelings of uncertainty. this notion may be applied to the uncertainty and risk surrounding entrepreneurial activity (janney and dess 2006). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 regarding motivation, the external pressure of, for instance, being unemployed and unable to find a job can influence an entrepreneur’s self-perception and competency in different ways. on the one hand being unsuccessful at gaining employment has a negative impact on confidence levels, makes them less secure in their own ability to pursue business start-up in a lone capacity. the need for support and the notion that they don’t possess certain competencies that others could provide increases the likelihood of collaborative company creation. on the other hand, they face a higher level of uncertainty, are less confident is their ability to achieve positive outcomes and are initially, less confident in the likelihood of securing an income from the business. a higher level of pressure is experienced in combatting the negativity and securing an income. this battle with self-confidence and the necessity to achieve an income makes it more likely to seek out others to work with in order to increase the probability of success and to share the uncertainty of the first years’ of company life. this study has investigated the differences between lone and group entrepreneurs in regard to human capital thereby contributing to how and why the different paths are pursued. the main conclusions of the empirical analysis demonstrate that certain entrepreneur’s human capital variables (previous experience, social competence and extrinsic motivation) are related to the decision to create a company as a lone venture or collaboratively as part of a group. the results of this research have several implications. from an academic point of view contribute to the knowledge of the entrepreneurial team formation phenomenon. the research of this topic is still scares if we compare with the research focus on individual entrepreneur. to understand why entrepreneurs decide to act as a team can helps consultants and institutions when they try to create teams ad hoc to exploit business opportunities. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 although the findings of this study are significant, some limitations are acknowledged. the sample is comprised by 85 entrepreneurial teams and 45 lone entrepreneurs. a larger and more diverse sample will help to enrich the results. moreover, future researches could include teams from different countries and cultures, to compare the cultural values in the propensity to work individually or in team. this study has been pioneering in identifying individual human factors that can influence the higher propensity to create a company alone or as a group however the results that not goes deeper to other factors that can be influencing this decision like the entrepreneur’s environment or his perception about teamwork. moreover, this study lays the foundations upon which further research on the important role that entrepreneurs’ characteristics and background can play in entrepreneurship and the impact it has on the decision making process: lone enterprise or group venture? future research could extend the study’s approach to the investigation of selfefficacy, using it for measuring the possible mediating effect between human capital variables and the entrepreneurial group decision. also, while the objective of this study is to measure the lone propensity decision, it would be of interest to investigate the performance as the last dependent variable in the model. references aldrich, howard e., and philip h. kim. 2007. “small worlds, infinite possibilities? how social networks affect entrepreneurial team formation and search.” strategic entrepreneurship journal 1: 147-165. andriessen, daniel. 2004. “ic valuation and measurement: classifying the state of the art.” journal of intellectual capital 5: 230-242. aviram, arie. 2006. “a study of factors that influence unemployed persons.” journal of employment counseling 43: 154-167. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 203-231, january-june 2017 doi: 10.1344/jesb2017.1.j027 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 baron, robert a., and gideon d. markman 2003. “beyond social capital: the role of entrepreneurs social competence in 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performance: moderating effect of shared leadership.” international entrepreneurship and management journal 11: 39-55. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 alejandro campos sánchez universidad de guadalajara (mexico) the study of the entrepreneur’s values and knowledge: influence in growth expectations abstract this study examines how entrepreneur’s values and knowledge can influence growth expectations in new technology-ventures. the study analyses six spanish cases with different level of growth expectations in their first years and with different characteristics in the entrepreneurial team. our research reveals that entrepreneur’s knowledge is not a factor that helps to differentiate the level of growth in this specific sector. however, we found certain values present in those new ventures with a higher growth expectations, mainly independence and wealth. the values that were not related are the need of exploitation and security. finally, we draw a model to understand the relationship between entrepreneur’s values and knowledge and their impact on new technology venture growth expectations. keywords: knowledge; values; new-technology venture; growth expectations introduction the regional development as a result of entrepreneurship, is being driven mostly by technology (mitra 2012). according to alvarez and marin (2013) the right combination of technological capabilities and external factors create competitive advantages for regions. corresponding author: a.campos@cucea.udg.mx received 08 october 2016 accepted 19 january 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 this is how new technology-based firms (ntbfs) play a key role on development and competitiveness of regions; (audretsch 1995; colombo and grilli 2010). this reason has led scholars to be interested in studying the main factors behind growth and success of this type of companies (collombelli, krafft and quatraro 2012; breznitz and taylor 2014; love and roper 2015); in fact one of the most studied drivers of growth in academic literature is the role of the entrepreneur. although growth is generally agreed as a good indicator of success and one of the aim of all the firms, not all the new ventures choose to grow (edelman et al. 2010; wiklund and shepherd 2003). in this sector, companies are created by a particular type of entrepreneurs, usually with very high levels of technical knowledge and skills. sometimes it is even scholars and researchers who create spin-off companies (prodan and drnovsek 2010). in this line, some authors argue that technical entrepreneurs need a correct combination between technical and managerial skills in order to be able to exploit such expertise (oakey 2003; keil, koo lee and deng 2013). when the company starts growing it is crucial that the founder has a support in finance, marketing and personnel areas (oakey 2003). but, is really the managerial knowledge what can make the difference between a success and non-success technological entrepreneurs? usually, entrepreneurs in this sector possess high-technical training; in many cases come from university environments and they have been researchers for many years. in the case of spain, many research centers and universities provide funding to researchers in order to turn the patents and innovations they are working with into real business projects. however, it is not unusual that these researchers had never thought about funding a company but they find this option the only way to continue developing their professional career. in this sense authors http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 such as elizur and sagie (1999) or evans, carney and wilkinson (2013) have highlighted the importance of the compatibility between life and work values. few researches have been found in terms of the role that personal values play when an entrepreneur set the growth expectations for new ventures. under these circumstances, the objective of this research is to analyze the influence of entrepreneur’s personal values and knowledge in the growth expectations for new technologyventures. this influence will affect the way in which individuals manage their new technology-ventures and how knowledge and values influence the intention of growing. this research was carried out through the analysis of six different cases. following this introduction, the next section presents the theoretical framework and the propositions. the first theoretical chapter reflects on the role of entrepreneur’s knowledge in the context of new technology ventures and in the next one, the role of entrepreneur’s values is developed from a theoretical point of view. the methodology of the empirical study is then described. the main results obtained from the case study analysis are then presented. the study concludes with a summary of the main findings, implications, limitations and future research topics. theoretical framework and research propositions entrepreneur’s knowledge in the context of new technology-ventures firms are considered by a great number of researchers, sets of resources systematically exploited and inter-related for producing and trading goods or services. for more than three decades now, scholars have explored firms and organizations' phenomena basing their http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 researches on the analysis of resources (wernerfelt 1984; grant 1991; conner and prahalad 1996; barney 2001; lin and wu 2014). from the wide variety of resources and capabilities that give birth to a firm, knowledge is undoubtedly one of the most explored assets in academic literature. in the last years knowledge has been strongly related to the study of business creation and performance in several ways and nowadays there exist as much academic papers about this issue, as topics relating human beings and entrepreneurship. knowledge related topics in entrepreneurship have been studied at different levels (campos and hormiga 2010); the entrepreneurs' knowledge at the individual level (dimov and shepherd 2005; arthurs and busenitz 2006; parker 2006, roxas 2013), the group of entrepreneurs' knowledge level (moreno-luzon and lloria 2008; west 2007; friar and mayer 2003; watson et al. 2003; de mol, khapova, and elfring 2015), the knowledge within the organization -organization level(deeds et al. 2000; collinson, 2000; corbett et al. 2007; junkunc 2007; sharder and siegel 2007; van geenhuizen 2008; palacios et al. 2009; lyles 2014) and the inter-organization level referring to the knowledge flowing and being constructed amongst groups of organizations (o’gorman and kautonen 2004; schildt et al. 2005; biggeiro 2006). particularly, the study of the entrepreneur’s knowledge –at the individual levelis the dominant topic in academic literature of the field during the last decade. individual level as the name implies, will refer to the creation or exploitation of all kinds of knowledge or sources of knowledge performed by an individual. undoubtedly, entrepreneur’s knowledge has been a reference topic for researchers when measuring variables related to the performance and growth of nascent business. most of the times factors of success and growth of new businesses have been strongly related to the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 possession, acquisition, development and implementation of entrepreneur’s knowledge indicators such as skills, information, foreign languages domain and the most common knowledge indicators, education and experience (almor and lerner 2002; kundu and katz 2003; williams and chaston, 2004; van gelderen, thurik, and bosma 2005; poon et al. 2006; dutta and thornhill 2008; west and noel 2009). as mentioned, education and experience have been the most commonly used entrepreneur’s knowledge indicators for measuring their impact on new businesses development. constantly these two indicators are found together as demographical variables affecting some other dependent variable of the firm (see table 1). table 1. dependent variables measured taking education and experience as knowledge indicators author dependent variable lin et al (2000); arenius and minniti (2005); de clerq and arenius (2006); kim et al (2006); vinogradov and kolvereid (2007); thomas (2009); thompson et al (2010) self-employment and entrepreneurial activity honig (2001); watson et al (2003); williams (2004); lee and osteryoung (2004); peña (2004); ven gelderen and bosma (2005); asterbro and berhardt (2005); dimovand and shepherd (2005); van gelderen et al (2005); zartutskie (2010) profitability, success, income and performance cowling and taylor (2001); ferrante (2005); koellinger and minniti (2006); ucbasaran et al (2008); hyytinen and ilmakunnas (2007); macdonald et al (2007); backes and werner (2007); seawright et al (2008) ability and attitudes to create jobs, opportunity identification, aspirations nziramasanga and lee (2001); peña (2004); marvel and lumpkin (2007) duration of business, innovation, economic growth. hindle and cutting (2002); van praag (2003); chrisman and mcmullan (2004) job satisfaction, risks and hazards, probability of survival source: own elaboration. as stated, knowledge plays a critical role on business creation, existence and prevalence in the market; actually there are certain sectors where specialized knowledge determines the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 length and width in the life cycle of a new venture. technology-based businesses require by nature greater and more specialized amounts of knowledge to be created and to be managed. in this sense we present the next research proposition: proposition 1a: the presence of high levels of technical knowledge implies high growth expectations in new technology ventures. besides all we have mentioned regarding the importance of technical knowledge in technology-based new firms, there has been a debate in academic literature about the real need for technological entrepreneurs of acquiring or not business management skills and if so, to what extent. in this sense, oakey (2003) argues that it is not the best choice that scientists entrepreneurs with strong technical expertise and that have succeed in the market so far, refuse to acquire management training in order to grow the business. this author considers important for entrepreneurs either to acquire this knowledge or even better, to hire or associate to someone who holds specialized business management skills, especially if financial assistance becomes an unavoidable need. in high-technology sector, companies are mostly created by a particular type of entrepreneurs, usually with high levels of technical knowledge and skills. sometimes it is even scholars and researchers who create spin-off companies (prodan and drnovsek 2010). in this line, oakey (2003) argued that technical entrepreneurs need a correct combination between technical and managerial skills in order to be able to exploit such expertise. when the company starts growing it is crucial that the founder has a support in finance, marketing and personnel areas (oakey 2003). but, is the managerial knowledge what can really make the difference between a success and non-success technological entrepreneurs? trying to shed some light on this http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 issue we present proposition 1b as follows: proposition 1b: the presence of high levels of management knowledge implies high growth expectations in new technology ventures. in order to understand in a deeper way this phenomenon, it is important to consider what lies behind it; it is crucial to consider the presence of many other factors that also influence the entrepreneur’s desire to make his business grow and how to do it. this important decision relies not only on the amount and specialization of technical and/or managerial knowledge that the entrepreneurs possess, but also on the personal and individual characteristics that guide his/her motivational aspirations. entrepreneurs’ values and new technology-ventures growth there has been substantial investigation related to why individuals create a business (cassar 2007). the motive that drives founders to develop business projects can either mean added value for the firm or have a negative effect on it. various authors have studied the influence of motivations on the subsequent success of the firm and on organisational processes (gatewood et al. 1995; van praag 2003; van praag and cramer 2001; peña 2002; collinsdodd et al. 2004). most of those authors draw the conclusion that the fact the owner is driven by intrinsic motivation -putting a personal idea into practice-, or by the need to be his/her own boss is an asset for the firm, which will have greater chances of surviving and obtaining future utilities than if he/she is driven by the impossibility of finding a job. the characteristics of the market in which high technology firms operate may influence the specific motivational tendencies (oakey 2003). oakey (2003) found that there were three major motives for beginning a new technology business: independence, wealth and exploitation; the desire for independence is divided into two, freedom and control. in this http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 sense, the frequently noted strong desire for control among many founders may negatively influence the capacity of growing or even lead to the death of the firm. this necessity can be higher in this sector in which knowledge properties are enormously important and where many competitive advantages are based on technical specific knowledge. cassar (2007) found that the need of independence of the entrepreneurs was not a motivation that helps firms to grow; but does this value influence the growth expectation of founders? the other group of motivations is the one based on wealth. cassar (2007) found that financial success motivation was a key determinant for new venture’s growth. this results were contradictory to some others studies that suggest that non-economic concerns were more important that financial outcomes in determinants of entrepreneur attitudes and expectations of growth (amit et al. 2000; wiklund et al. 2003), after all in this sector, the necessity of exploitation is one of the founders’ values commonly identified. most of the entrepreneurs in this sector have very high levels of technical knowledge and discover new ways of doing and improving their environments. because of the characteristics of the products or services, the need to exploit this opportunity and communicate to society these technological advances moves many of these individuals in a higher rate than in other sectors. there are many theories that have tried to explain the motivational process. theories focused on expectancy for success, theories focused on task value or theories that integrate expectancies and values (eccles and wigfield 2002). in the last group of theories we found a modern expectancy value theory which both these components expectancy and valueare more related to social/cultural determinants and positively related to each other (feather 1988; 1995). feather’s work on values is an extended of atkinson’s original expectancy-value model in important ways by broadening the conceptualization of value. he argued that values http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 are one class of motives that lead individuals to perform acts they think should be done (feather 1995). this author assumes that values function like needs to influence goal directed behaviour and can influence the choices that are made between alternative activities and the way situations are constructed. trying to shed some light on this issue we focus on a topic that has been usually related to work in academic business research: values. rokeach (1973, 5) defines values as “an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode or conduct or end-state of existence”. garcía and dolan (2003, 63) assume that value is a “strategic learning relatively stable about a way of acting is better than the opposite to obtain our goals or to make the things go well”. depending on the level of analysis we can find different levels such as (roe and ester 1999): country, group, and individual. cultural values represent the implicitly or explicitly shared abstract ideas about what is good, right, and desirable in a society (williams 1970). although culture values will influence individual values, in this research we will focus on the individual level, specifically in the figure of the entrepreneur. before that, it is important to understand which the precedence of these values is and how they influence in the behaviors. the beliefs are structures of thinking, developed through a learning process that helps individuals to explain the reality. the attitudes are consequences of the values and are tendencies to evaluate, positively or negatively, a person, thing or fact. the attitudes predict our tendency to act in a specific way (garcía and dolan 2003). in this sense, to modify behaviors it is necessary to change beliefs and values more than only the attitudes (garcía and dolan 2003). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 figure 1. sequence between beliefs and results source: adapted from garcía and dolan (2003, 72) rokeach (1973) divided values into two sets: terminal and instrumental. terminal values are existential objectives, which are end states of existence or ultimate modes of living, what has been idealized as “good life”. instrumental values are those values that represent the way of acting necessary to get the existential values. there are some personal values that it is quite clear what kind of behaviors or situations they are relevant to (e.g. money or good friends), but there are other values a little more diffuse such as meaningful life or work (elizur and sagie 1999). traditionally, general life values and work values have been investigated independently (elizur and sagie, 1999; roe and ester 1999) but most researchers seem to assume that work values do somehow derive from general values even though they are not very explicit about the causal nature of this process. in some cultures, work values could be a source from which general values arise, for example multinational corporations can play a role in the transmission of values but this is an approach with little empirical evidence (schwartz 1999). in this research, we focus on those values that can influence in new ventures’ growth results behaviours attitudes values beliefs learning experience http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 expectations –see figure 2-. first referring to terminal values, the importance and significance of work in a person’s life will be crucial for the entrepreneurs’ and for new venture management as well as for the growth expectations. since most of the times the initial stage of the firm lacks of stability, routines and processes are not formally established and it is necessary for the entrepreneur to be completely involved to overcome that deficiency. a high level of personal commitment by the entrepreneur contributes added value to the firm and may mark the difference between some entrepreneurial initiatives and others (timmons 1990). according to this, authors such as cooper et al. (1994) state that greater commitment from the entrepreneur has a decisive influence on the survival of the firm. other authors like peña (2002) and collins-dood et al. (2004) state that there is a positive relation between the level of founder’s dedication to the business and the level of success of the business and those founders with higher expectations of growth will present higher levels of commitment to the company. therefore, hard work as well as strong commitment has been highlighted as important elements for the smooth running of newly-created firms (rodríguez 2003). schwartz (1999) compares the importance of work relative to four other life areas – leisure, community, religion and family. we propose that a greater importance the individual gives to work lead to greater expectations of growth and greater opportunities to devote his efforts to be successful. proposition 2: the presence of entrepreneur’s terminal value “centrality of work” is related to high levels of growth expectations in new technology ventures. instrumental values are divided into moral and competences values and competence values (rokeach 1973). moral values have two particular characteristics: they are related to other people and when there are no-connection between values and behavior they cause feelings of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 guilt and shame (garcía and dolan 2003). the competence values are more individualistic and they have no direct relation to culpability and moral feelings. for example, honesty implies a feeling that you are acting morally while creativity implies that you are acting according to a competence. in our analysis we focus on these values –competencesthat can influence the growth expectations of new ventures -independence, exploitation, sacrifice, security, stability and wealth-. figure 2. entrepreneur’s values that influence new venture growth source: own elaboration. this study tries to understand how knowledge and values of new technology-ventures’ founders are related to their growth expectations and why the entrepreneur is willing to grow or not. based on previous assumptions we proposed the following propositions: proposition 3a: the presence of entrepreneur’s instrumental value “independence” is related to high levels of growth expectations in new technology ventures. proposition 3b: the presence of entrepreneur’s instrumental value “sacrifice” is related to high levels of growth expectations in new technology ventures. terminal values centrality of work respect to other terminal values: leisure community religion family individual values that influence new venture growth instrumental values competences values independence exploitation sacrifice security stability wealth cultural values group values http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 proposition 3c: the presence of entrepreneur’s instrumental value “wealth” is related to high levels of growth expectations in new technology ventures. proposition 3d: the presence of entrepreneur’s instrumental value “exploitation” is not related to high levels of growth expectations in new technology ventures. proposition 3e: the presence of entrepreneur’s instrumental value “security” is not related to high levels of growth expectations in new technology ventures. proposition 3f: the presence of entrepreneur’s instrumental value “stability” is not related to high levels of growth expectations in new technology ventures. method research design according to several qualitative methodologists multiple case-based research may serve as a basis for either empirically testing previous theories or building new theoretical explanation of the phenomenon being researched (eisenhardt 1989; yin 1989; 1998). to achieve the objectives of the research we followed a qualitative methodology -case study (yin 1989; eisenhart 1989), following different steps. first, the theoretical framework of the research was developed from a literature review. second, we use this framework as guide to organize our data collection and to analyze them. in this sense, the relationship between the theoretical perspective and the empirical findings is very close (yin 1989). to obtain the data we used primary and secondary sources. through the performance of deep interviews we gathered information related to their knowledge and personal values and how these two factors were affecting the management of the new venture. by adopting the founder/s as the main unit of analysis, our empirical research is based upon a systematic application of the multiple-holistic case study approach to new technology context http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 in which six new ventures created in catalonia (spain) were first judgmentally –not randomlychosen and then comparatively examined. this conceptual sampling design allowed us to introduce some degree of variance in our case selection criteria by including differences in entrepreneur’s gender and origin and individual entrepreneurs versus entrepreneurial teams. however, to be consistent with previous research on entrepreneurial firms which are regarded as typically young and small in size (zacharakis 1997), all firms in the purposeful sample had to be small, and independently managed. case selection and data collecting six cases were selected to make a deep analysis of the entrepreneur/s leading these new technology ventures. the six entrepreneurial stories for this study were selected in order to make a deep analysis of the entrepreneur/s leading these new technology ventures. these companies were selected based on the number, sex and the nationality of the founders. specifically, some characteristics of the entrepreneurs in this study are the following: three of them are entrepreneurial teams and three are individual founders. two companies have female components in the entrepreneurial team and four are male teams. two companies have at least one immigrant member in the entrepreneurial team and four were native teams. initial contact with these companies was made by telephone. during the initial telephone discussion with at least one of the founders, the aims and objectives of the case study were outlined. also our requirements about who should be interviewed and the approximate duration of the interview were explained. some of the company’s founders were concerned http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 about confidentiality issues, while other founders had no problems to talk about their personal stories. the interest to use the case study for publication was also revealed at the first contact. our data collection consisted on deep personal interviews conducted using semi-structured questionnaires as a guide. as mentioned, the interview content was drawn from literature and also guided by previous studies. the interviews included questions about general characteristics of the company and the founder’s characteristics. table 2. interview structure general structure discussion topics general characteristics company’s features entrepreneur’s features knowledge education experience type of knowledge perception of knowledge personal values terminal values instrumental values growth expectations company’s future source: own elaboration. during the visit to the companies, extended interviews were conducted with at least one of the founders of each company. each case company lasted approximately 2 hours. in addition to the interviews, we used secondary sources to verify the statements and to obtain supplementary information. the information gathered from each organisation was written up as a case study and the principal observations extracted. firm and interviewees characteristics as explained above, the data explained in this article refers to six technology-ventures. table 3 presents a profile of these cases. the sample is composed of companies with some diversity http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 within the industry although most of them correspond to young sectors: ic technologies and biotechnology. according to european commission recommendation (2003/361/ec), in terms of headcounts as main criterion, three companies (3, 5 and 6) were micro enterprises, employing fewer than ten people, whereas the other three (1, 2 and 4) belonged to the small enterprises category. table 3. sample profile cases economic sector no employees annual sales (€) 1 biotechnology 16 900,000 2 ic technologies 27 1,000,000 3 environmental technology 2 0 4 ic technologies 14 3,600,000 5 biotechnology 6 510,000 6 biotechnology 4 170,000 source: own elaboration. in table 4 we present our findings relating the characteristics of the new technology-ventures’ founders. the management of the firm consisted of a small team although in same cases only one of the founders took this role. only one out of six companies had a single female founder. table 4. new technology-ventures’ founders characteristics cases gender nationality no founders previous position 1 males spanish 2 students 2 female spanish 1 skilled worker 3 males argentinean 2 skilled workers 4 males spanish 2 skilled worker / professor 5 female/ male spanish 2 skilled worker 6 male italian 3 student / professors source: own elaboration. regarding the nationality of the teams, four of them were formed only by spanish people and two by an immigrant founder, which co-founded the company with native people. finally, concerning the previous position of the founders, we found that most of them were skilled http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 workers in other companies, only in case one the company was founded by students without professional experience and two companies had at least one university professor involved. in this study the units of analysis are founders of high-technology based companies that have received any support from a specific public institution from catalonia. findings and discussion knowledge regarding founders’ knowledge we found differences amongst the profiles of interviewees; even if all of them hold technical graduate degrees in at least one field close to the main company’s core business there are some of them that also have completed some businessrelated graduate program, some others just have attended certain management courses and one of them hold on to experience as the only source of management knowledge (see table 5) table 5. founders’ knowledge type of knowledge cases identified 1 2 3 4 5 6 informal experience x x x formal high technical knowledge, phd x x x x x management courses x x mba x x x source: own elaboration if we look at entrepreneurs’ informal knowledge, we found that cases number 1, 4 and 6, have some previous experience in managing business either if this experience come from business in the same sector or not. in these cases -1, 4 and 6we found some evidence of the contribution of their informal knowledge to management skills and intentions of growing. as an illustrative example of one of these experienced founders, in case 1 founder reveals that he has been in contact with successful entrepreneurs and since childhood he used to listen to http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 conversations among them; he admitted:“i’ve been my whole life preparing myself to be an entrepreneur”. concerning formal knowledge of the entrepreneurial teams, there are many different situations. in the sample, only case 2 does not have technical education at a higher level than undergraduate, while others have at least one of the members holding a doctoral degree, being university professors or even persons awarded with international academic prizes. we also found that in the four companies -1, 2, 4 and 5that stated to have strong intentions to growth at least one of the founder members has some type of management knowledge either acquired through formal higher education or through the attendance of some management courses (see figures 3.1, 3.2, 3.4 and 3.5) on the other hand, high technical knowledge characteristic does not imply the existence of growth intentions; case number 2 shows a strong intention to grow even without higher levels of technical education. according to data collected, case 6 is the only one that supplies the lack of managerial skills with the incorporation of another company in the company’s capital that contributes with funding and with management advice. the owner of this company does not state intentions to grow; he reveals to be happy with the actual situation of the company; not closed to some minimum growth in the future though (see table 5). it is worth to mention that all of them agreed that their knowledge at the beginning of company’s life was not enough to manage it, although most of them recognized that only experience provides the right scope to complement other formal learning like courses or master degrees. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 individual values individual values are other factors that affect entrepreneurial activity and we have analyzed the influence of these values on the way individuals manage their companies and the intention of growing. we took into account both terminal and instrumental values and these were the results of each case analysis: table 6. individual values individual values cases identified 1 2 3 4 5 6 terminal values strong centrality of work x x x x instrumental values willingness to sacrificing x x x x security x x stability x x x independence x x x wealth x x x exploitation x source: own elaboration regarding terminal values, most of the founders positioned work as the main priority in their spending-time-in list. only in cases 2 and 5 founders consider job as a mean to enjoy life, but family, friends and health were priority. by contrast, cases 1, 3, 4 and 6 have committed their life to work and have renounced to many aspects of their life, although one of the founders in cases 3 and stated that they would like to reduce the importance of work as soon as the company’s situation make it possible. sacrifice, security, stability, independence, wealth and the ethical need of exploitation were the instrumental values we analyzed for each one of our cases. half of the cases (2, 5 and 6) looked for stability when they became entrepreneurs, as they perceive that there is more risk of loosing their jobs if they work in a multinational or someone else’s company; although surprisingly only case 6 also recognized the scarify made for starting-up the company; cases 2 and 5 do not find this strictly necessary due to a proper management of the company. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 moreover, we found a relationship between those cases with high levels of sacrifice and without looking for security, stability or ability to earn money, and companies that grew up and have higher future growth expectation. the following quotes of a founder in case 1 is illustrative: “we renounced to youth” “i haven’t stepped on a discotheque since i was 24” independence as an instrumental value is factor for creating the new technology-ventures in half of the cases (2, 4 and 5). the sensation of freedom and not depending on other’s businesses or research lines is really important for some of the entrepreneurs. those founders with this need for freedom presented higher growth expectations (see figures 3.2, 3.4 and 3.5). some comments illustrate perfectly how this instrumental value had significant influence on founding the company: “i want things to depend on myself” “you are the master of your destiny” but if we look at founders with terminal values more related to wealth (cases 1 and 6), we notice that there are different personal objectives. case 1 likes generating business and get earnings for it; in this case growth expectation is strong (see figure 3.1); founder in case 6 needs a job with intellectual stimulation however, growth expectations in this case don’t go further than survival or perhaps a minimum future growth (see table 6). finally, only case 3 showed a strong need of exploiting his knowledge (see figure 3.3). this founder gave up the academic field to investigate “practical things”, although this is the case with the worst business performance. he defines himself as “an inventor with an ethical goal of sustainability” and wants his invents to be used. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 growth expectations comparing the situation of the six cases, we do not find clear differences between the way they manage their companies or even their growing expectations. only case number 3 recognizes the willingness to sell out the company if the technology developed is used; this shows a greater interest in survival in the meantime waiting for a good offer. case 6 recognized not having special interest on growing a big company as long as he achieves to market their products. when we asked the interviewees about their vision of the company 5 years in the future they showed different levels of growth expectations: table 6. growth expectations case growth expectations 1 “unlimited growth expectations” 2 “a bigger company, but with a higher role of the management team and more free time for me” 3 “i may sell the company if my technology is used” 4 “a big company with international reputation. we want to do something great, with great people!” 5 “a company with 60-70 employees, in london. if someone wants to buy it, we’d sell it and start another business” 6 “a company just slightly bigger than now to earn some more money, but i’m happy with the actual situation anyway” source: own elaboration. in cases 1, 2 and 4 founders have the highest growth expectations, and we check that these three companies have had a very successful activity. specifically, in cases 1 and 4 one of the founders has strong managerial skills and experience; these founders have “business spirit” and have always wanted to be entrepreneurs. nevertheless, the other founders in 1, 2 and 4 had never thought about being entrepreneurs as a career choice and they expect to have more leisure time, but they were encouraged to start the business by their co-founder or partner. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 concerning cases 3 and 5, we found that founders are willing to sell out the companies, however case number 5 have clear intentions to grow before that while case 3 would sell the company as soon as their technology is used and they receive a good offer. before presenting final remarks of this work, we present next a brief individual analysis for each case: figure 3.1. influence of entrepreneurs’ knowledge and values in growth expectation -case 1. source: own elaboration. in case one we find that founder(s) possess high levels of both technical and managerial formal knowledge as well as experience. centrality of work is strong and company looks for wealth and the highest growth expectations of the sample are identified. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 figure 3.2. influence of entrepreneurs’ knowledge and values in growth expectation -case 2. source: own elaboration. in case two we find that founder(s) possess undergraduate level technical formation and high levels of managerial formal knowledge. independence, security and stability are the most important instrumental values for this company; even though this company seeks for growth, they consider family, friends and own life more important than business among their priorities. figure 3.3. influence of entrepreneurs’ knowledge and values in growth expectation -case 3. source: own elaboration http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 case three shows that founder(s) possess high levels of technical knowledge and basic levels of managerial knowledge acquired by course or seminars attendance. work is the priority for founder(s), they are eager to sacrifice free time and other activities for the company, they feel secure of what they do and feel the major need of exploiting their expertise in the field. they are willing to sell out the company as soon as the technology developed is used and receive a good offer. growing is not a priority for them. figure 3.4. influence of entrepreneurs’ knowledge and values in growth expectation -case 4. source: own elaboration. in this case –number 4we find that founder(s) possess high levels of both technical and managerial formal knowledge as well as experience. centrality of work is strong and company looks for wealth; founder(s) want to be independent and they are eager to sacrifice other activities to work and produce more richness; growth expectations are high. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 figure 3.5. influence of entrepreneurs’ knowledge and values in growth expectation -case 5. source: own elaboration. case number five shows that founder(s) possess high levels of technical knowledge and basic levels of managerial knowledge acquired by course or seminars attendance. work is important for founder(s) but not as much as family, friends or personal interests; personal stability is very important for them; they have a clear idea of growing and if there’s a good offer, they wouldn’t hesitate in selling out the company to start a new one. figure 3.6. influence of entrepreneurs’ knowledge and values in growth expectation -case 6. source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 last case –number 6shows that founders have high levels of technical knowledge and some managerial experience. they are committed to work seeking for stability and richness, they sacrifice personal activities for the company and don’t have high expectations for growth; they seem to be happy with what the company is at the moment. conclusions, implications and limitations after analyzing the six cases we could extract some conclusions. first, in all the cases at least one of the entrepreneurs had never thought about being entrepreneurs as a career choice. those entrepreneurs that have partners with “business” spirit had a very successful company performance and high growth expectations. however, those entrepreneurs with brilliant technical knowledge but no managerial skills did not perform well even if they tried to fulfill this lack of managerial knowledge joining well recognized management masters or courses. curiously these entrepreneurs were pretty much alone or their partners were “technical”. these entrepreneurs argued that what they really liked in their job was “discovering new things” or “see the impact of their new technologies on the environment” but they had been forced to receive training and learn management basics to keep doing what they like. while performing the analysis of the cases we could identify some of their personal values such as security or money related values struggling with some other values considered important to develop an entrepreneurial activity. centrality of work is a terminal personal value that allocates work over any other activity in terms of importance and commitment on behalf of the entrepreneurs. this value according to the analysis is strongly related to higher levels of growth expectation. in terms of instrumental values we recognize that the seeking for wealth and independence are the most related to a http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 high expectation of company’s growth, while de feeling of security and the ethical need for exploiting certain expertise presents lower levels of relatedness to growth intentions (see figure 5). three out of the four cases that presented higher levels of growth intention, were founded by entrepreneurs with high levels of technical knowledge and the other one just professional level of this knowledge; however in all of these cases exists managerial knowledge in one of the founders (see figure 4). figure 4. overall impact of knowledge and individual values in new technology-business expectations source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 figure 5. influence of entrepreneurs’ knowledge and values on growth expectations source: own elaboration. according to the model proposed as a result of our findings, we finally conclude stating that both managerial and technical high levels of knowledge are related to higher growth expectations –proposition 1a and 1b-. this supports what cheraghi, zetti, and schott (2014) state about the presence of knowledge as one of the key predictors of growth expectations. in the same way, terminal value “centrality of work” is strongly related to high growth expectations –proposition 2-. this is also supported by gorgievski, moriano, and bakker (2014) who demonstrated a positive relation between hard work (work engagement) and the pathway to growth and success. despite the findings published by douglas (2103), who stated that growth intentions and independence intentions are driven by different cognitive aspects, in our research we found that instrumental values “independence” and “wealth” are highly related to higher growth expectations –propositions 3a and 3c-. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 regarding the rest of the instrumental values, “sacrifice” and “stability” were found to be partially related to a high expectation of growth -3b and 3f-, while instrumental values “exploitation” and “security” didn’t show a significant relation to high growth expectations – propositions 3d and 3e-. implications of this work contribute to further understanding the relationship between entrepreneurs’ knowledge and their values in the expectations of companies in a sector with a key role in regional economic development. in addition, the use of these case studies allowed us to access interesting data to be processed and understand the way the entrepreneurs’ personal values influence in new ventures management practices and performance. in accordance to cheraghi, zetti, and schott (2014), results of this research prove that growth expectation derives from a variety of factors including knowledge and motivational beliefs. moreover, these insights lead us to some recommendations for policy-makers. nowadays, a lot of efforts and public budget is invested on new technology companies and, especially oriented to turn research funding at universities into real business. besides the product and the market, it is important to look at the individual behind this new venture and to know if this person really wants to create a company or this is just a good way of continuing developing their technical tasks. the understanding of the individuals’ values will help institutions to understand why some of them have a very fast growth and others are stagnated even if they have the same level of technical and managerial knowledge. limitations of this study are on one hand that only six cases were analyzed in an emerging sector with an enormous role in regional development; due to this, it is difficult to generalize the model proposed; on the other hand only personal values were taken into account for the analysis putting aside cultural and sector values. future lines of research regarding this topic http://revistes.ub.edu/index.php/jesb volume 2, number 1, 29-65, january-june 2017 doi: 10.1344/jesb2017.1.j022 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 include analyses of a greater amount of cases, the inclusion of cultural and sector values for the analysis and exploring deeper the impact of each type of knowledge in firms’ 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zacharakis, andrew.1997. “entrepreneurial entry into foreign markets: a transaction cost perspective.” entrepreneurship: theory and practice 21 (3): 23-40. zarutskie, rebecca. 2010. “the role of top management team human capital in venture capital markets: evidence from first-time funds.” journal of business venturing 25 (2): 155-172. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 águeda gil lópez francisco de vitoria university (spain) ricardo zozimo lancaster university (uk) elena san román complutense university of madrid (spain) sarah l. jack lancaster university (uk) at the crossroads. management and business history in entrepreneurship research abstract recent calls for a historic turn in organization studies offer the opportunity to relaunch dialogue between management and business history research. focusing on the specific domain of entrepreneurship research, this article illustrates the potential of mutual contributions from management and business history. in doing so, it highlights how historical approaches strongly influenced the early theoretical developments within entrepreneurship and demonstrates the potential to contribute to future scholarly debates. in sum, this article brings closer together business history and management studies stressing that their different perspectives and approaches are very valuable to enriching entrepreneurship research. keywords: business history; management; entrepreneurship; literature review; historic turn. corresponding author. e-mail: agueda.gil@profesores.ufv.es received 26 february 2016 accepted 14 march 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 introduction although it is now generally accepted that “history matters”, there are certain areas of inquiry in which dialogue between management theories and business history remains undeveloped. entrepreneurship is an outstanding example. as jones (2008) asserted, “despite having too much to offer the study of entrepreneurship and management, business history has developed in a separated silo”. the declining attention to historical context in empirical entrepreneurial research is perplexing bearing in mind that entrepreneurship is a dynamic and contextual phenomenon (shane and venkataraman 2000). yet, recent works suggest that the moment is ripe for re-engaging historical dynamics, historical contexts and entrepreneurial processes (cassis and minoglou 2005; landström and lohrke 2010; wadhwani and jones 2014). while management scholars are calling for a “historic turn” (álvaro-moya and donzé 2016), drawing upon the use of historical reasoning to understand nature and behaviour of firms, business historians are being challenged to show higher theoretical aspirations. as álvaro-moya and donzé (2016) reflect, this historic turn is already taking place in a variety of management fields such as strategy, international business or family business among many others. this emerging historic turn also offers a key opportunity to the emergence of research that appreciates the outstanding influence that the spatial and historical environment play in shaping not only entrepreneurial behaviour but also any other kind of organizational phenomenon. the valuable positioning of research at the crossroads between business history and management has been already demonstrated in other research domains –family business, networks, international business, business groups or innovation– by scholars sensitive to http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 historicism 1 . as the present special issue of the journal of evolutionary studies in business stresses, appreciating the influence of the context must encourage for more work that explores environmentally-embedded business strategies and processes, attends to the microsphere that matters for organizational behaviours and, in short, investigates and appreciates how different organizations are and act when research acknowledges how different is the world itself. mindful of the advancements aforementioned, the purpose of this article is to further encourage dialogue between management and business history taking as an example the domain of entrepreneurship. for that aim, the first section reviews past historical and management contributions to the entrepreneurship literature. this review will demonstrate how theoretically distant management and business history studies have addressed similar issues within entrepreneurship. offering a renewed view on this issue, the article then follows on to develop insight into three particular entrepreneurial debates where the dialogue between management and business history seems to be highly promising: networks, corporate entrepreneurship and international entrepreneurship. these three debates constitute just a small example of the wide range of debates in which a multidisciplinary perspective combining business history and management can be extraordinarily fruitful. entrepreneurship as a research field academic research on entrepreneurship has grown extensively over the last decades. although the first theoretical contributions to the field date back to more than a century, since the mid-1980s the entrepreneurial phenomenon has reached a central, promising role in the 1 amatori (2009); amatori and jones (2003); bucheli and wadhwani (2014); cassis and minoglou (2005); colli (2011, 2012); colli et al. (2003, 2013); colli and rose (2008); fernández pérez and colli (2013); fernández pérez and rose (2009); jones and khanna (2006); jones and wadhwani (2006, 2007, 2008); kipping and üsdiken (2008); landström and lohrke (2010); lazonick (2003); mccraw (2006); o’sullivan and graham (2010); roscoe et al. (2013); rose (1995, 1999); wadhwani and jones (2014). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 understanding of economic growth and innovation processes of both economies and firms. this growing interest has generated a highly fragmented field of research, characterized by the proliferation of multiple theories and concepts borrowed from several disciplines such as sociology, psychology, economics or management. moreover, past studies have used multiple levels of analysis -individuals, firms, industries, countriesand different methodical approaches (low and macmillan 1988; acs and audretsch 2003; aldrich 2005; busenitz et al. 2003; cooper 2003; stevenson and jarillo 1990; veciana 2007) possibly limiting the width and breath of insight within the domain. undoubtedly, while the confluence of different perspectives has enriched the field, it has also generated substantial dispersion that has prevented the consolidation of a unified research paradigm. as a consequence, there is no unified theoretical basis for the study of entrepreneurship (eckhardt and shane 2003) and our knowledge about central issues like corporate behaviour, entrepreneurial opportunities, the skills and characteristics of people that identify and pursue them as well as the influence of the external environment on these activities remains limited. in short, the black box of entrepreneurship has not been opened up yet. making sense of this complex landscape is not easy. indeed, it is complicated even when we try to define the concept of entrepreneurship (cuervo, ribeiro and roig 2006), or when attempting to distinguish entrepreneurs from non-entrepreneurs. this is what schumpeter already highlighted when commenting on the criticism for its inaccuracy in defining this agent: “the distinctive element is readily recognized as soon as we make clear to ourselves what it means to act outside the pale of routine. the distinction between adaptive and creative response to given conditions may or may not be felicitous, but it conveys an essential point; it conveys an essential difference.” (schumpeter [1951] 1968, 259). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 what is entrepreneurship? for some, entrepreneurship implies an organizational process that consists of setting up a new organization (gartner 1985, 1988). others, however, have stressed that this phenomenon has much more to do with personal capabilities, especially those related to the discovery of opportunities that lie behind the market (kirzner 1973; stevenson and jarillo 1990). while the debate is still actual , one of the most well-known definitions of entrepreneurship relates to the process of discovery, exploration and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and raw material through organizing efforts that previously had not existed (venkataraman 1997; shane and venkataraman 2000; eckhardt and shane 2003). these ‘opportunities’ have become the commonly cited unit of analysis in entrepreneurship over the last years (hsieh et al. 2007). according to this approach –not exempt from criticism– the entrepreneur is an innovative agent seeking to exploit new business opportunities with the ultimate goal of making a profit. he/she is also an agent that has the potential to change the trajectory of a market or industry and therefore is the essential source of dynamism in the economy (schumpeter 1928, 1934, 1942; drucker 1985). but, in order to exploit business opportunities, the individual capacity of this agent is not the only factor: the economic, political and cultural context is also decisive (shane 2003). therefore, to study and properly understand entrepreneurship we should go beyond the individual level and recognize, at least, three dimensions: the entrepreneur as an individual, the company as an organization and the external environment which ultimately influences the decisions and determines how to act. in this endeavour, management and business history have a common path with some shared concerns: the study of processes of economic change, business agents and institutions and their interaction with the political, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 economic and social environment that surrounds them (cassis and minoglou 2005; jones and zeitlin 2008). the next two subsections show how both disciplines approached entrepreneurship research. historical approaches to entrepreneurship. historical reasoning has played a profound role in the early development of entrepreneurship research (landrström and lohrke 2010, 8). the importance of historical approaches to entrepreneurship and their development can be summarized into five major milestones. firstly, historical perspectives have played a key role in giving entrepreneurship its first and more precise economic meaning. although classical and early neoclassical economic thought in the nineteenth and early twentieth centuries eschewed both the notion of entrepreneurship and the legitimacy of historical reasoning, a number of social scientists with some historical awareness such as jean baptiste say and richard cantillon started promoting the theoretical development of entrepreneurship. yet, as a whole, entrepreneurship remained strongly connected to the classical and early neoclassical economic thought. in the early twentieth century a number of historians and historical sociologists reversed this unfortunate trend. they brought entrepreneurship back into the research agenda considering it as a dynamic phenomenon. this was the second milestone in the shared journey between historical research and entrepreneurship. sociologists and historians of the german school, especially max weber, questioned the validity of the typically static theories of classical and neoclassical economics and called for the use of historical perspectives to explain industrial change and the dynamics of capitalism (hodgson 2001; jones and wadhwani 2007). weber's major contributions were reflected in the work the protestant ethic and the spirit of capitalism (1904/1970), which highlighted the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 influence of certain religious influences -in particularly protestant ethicsin building a work ethos. in his work, weber argued that the protestantism and its positive attitude to work motivated entrepreneurship and thus facilitated the development of modern capitalism. in later works, this author extended his interpretation of the entrepreneurial phenomenon by establishing a clear distinction between the entrepreneur and the bureaucrat: for weber, the "rationality" of industrial capitalism is eminently bureaucratic and the entrepreneur, as a dynamic and energetic agent, was the only one who can keep bureaucracy at bay (swedberg 1998; landström and benner 2010). within this historical sociologist approach to entrepreneurship schumpeter is particularly outstanding. he argued that historical research should have a logical priority in the study of entrepreneurship (schumpeter 1949). schumpeter –who represents the third landmark in the historical study of entrepreneurship along with the harvard schoolproposed a continuous exchange between the history and theory of entrepreneurship so that the primary task of the researchers should be to develop a historical understanding of this complex phenomenon. according to schumpeter, the essence of entrepreneurship went a step beyond the one proposed by say. the schumpeterian entrepreneur is essentially an innovative agent, responsible for the process of creative destruction, a concept he popularized as a way to describe the transformation that accompanies all innovation and that defines the dynamic character of capitalism. according to schumpeter (1934), the entrepreneur is able to respond to a particular opportunity through innovation understood as a process of substitution of some products, processes or organizational forms for new ones, that is, through the creation of "new combinations" of resources. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 the centre for research on entrepreneurial history, at harvard university, further developed the essence of schumpeterian thinking. following the recommendations of this author, in the 1940s a group of researchers became interested in the entrepreneur and the obvious interlinks between this actor and the influence of the historical, institutional and social environment on economic development. led by arthur cole, the harvard center for research on entrepreneurial history joined a group of historians, sociologists and economists who fuelled entrepreneurship research from a multidisciplinary perspective. cole pointed out the guidelines to be followed by the scientific research on entrepreneurship. these guidelines included the biographies of businessmen and the history of their companies; the analysis of different types of business; the study of business leaders in each industrial sector; and the study of entrepreneurship in different historical stages (veciana 2007). the journal explorations in entrepreneurial history became the main channel of diffusion of the centre. there were some other important contributions outside the journal as the work developed by leland jenks (1944, 1949) and thomas cochran (1950, 1960). both authors analyzed the influence of entrepreneurial attitude on economic development. they were interested in social, cultural and institutional factors as determinants of entrepreneurship, and they considered entrepreneurship as an engine for economic development. after jenks and cochran's contributions, historical research on entrepreneurship focused on the study of regional differences, using the comparison as a tool to highlight the influence of historical and cultural factors on entrepreneurial behaviour (sass 1978). this "regionalist" view of entrepreneurship is the fourth milestone mentioned in the historical trend of entrepreneurship. david landes was a prominent author within the approach focused on regional differences. in one of his most famous studies, landes attributed the slowness of the nineteenth century http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 french economy to the conservative attitudes of the french entrepreneurs. according to landes, these french entrepreneurs were determined by the predominance of family businesses, considered poorly dynamic (landes 1949). there were some other historians engaged in studying entrepreneurship across countries. sawyer (1954), ranis (1955), hirschmeier (1964) and gerchenkron (1962, 1966) could be quoted as the main references. since the late 1970s, the historical approach on entrepreneurship weakened. the entrepreneur as an individual became the most common level of analysis while regional, sectorial or national studies were often disregarded in the mainstream entrepreneurship and management literature (jones and wadhwani 2006). while psychologists, sociologists and management scholars focused on the individualistic approach to entrepreneurship, economic historians devoted to emerging disciplines like cliometrics and the analysis of large professionally managed corporations following alfred d. chandler's path (1962). the most significant example of this shift in the research agenda was the disappearance of the journal explorations in entrepreneurial history. significantly the journal changed its name and aim to become explorations in economic history, a publication focused on the new quantitative studies (landström and benner 2010). however, there were some interesting exceptions to this trend. by the end of the 20th century, new generations of economic historians recovered the lost research agenda, paying new attention to the historical context. this is the fifth milestone in this shared journey between historical research and entrepreneurship. new studies explored the influence of the institutional framework in the development of entrepreneurship and, thus, in the economic growth (baumol 1988, 1990; north 1990; davis and north 1971; north and weingast 1989; murmann 2003). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 values and culture also returned to the research agenda (casson 1986, 1991, 1995, 2003; walker 1986; morawaska 1996; tennenbaum 1993). biographies of entrepreneurs, an ancient tradition among economic historians, and historical studies on companies, have also played a key role in bringing back the historical approach to entrepreneurship’s contemporary research agenda. another stream of recent research, rooted in chandler's approach (1962), has focused on entrepreneurship at an organizational level (corporate entrepreneurship). this approach studies how the historical context affects the entrepreneurial behaviour of organizations and identifies the factors that promote or hinder innovation in large companies (hounshell and smith 1988; graham and schuldiner 2001; cuff 2002; lazonick 2003; díaz morlan 2009). another debate among business historians from a point of view that acknowledges the primary influence of the historical and spatial contexts refers to the correlation between entrepreneurial determinants and the positive or negative link to economic growth. specifically, and regarding less developed regions, historical research has played a profound role. literature on the case of southern europe is abundant and multiple debates have arisen. one of most well-known streams, rooted on economic development literature, has focused on the existence or absence of an entrepreneurial spirit in less developed countries. as entrepreneurship is considered a prerequisite for development, the “absence of entrepreneurship” argument has been used by some authors to explain the slowness of development in countries of southern europe (tortella 1994, 1996). this appreciation was in fact the core of the position hold by gabriel tortella, regarding spain, later criticised by others. this debate has its roots in the early twentieth century when intellectuals linked to the generation of '98 and the political regenerationism attributed the slow economic development of spain to the absence of an entrepreneurial spirit. almost a century later, the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 debate was recovered by gabriel tortella (1994, 1996) who defended this argument by pointing out that the low educational levels in conjunction with certain social and cultural values associated with the so-called “castizo” model had been the main factors preventing the emergence of a true entrepreneurial ethos in spain. the weakness of spanish entrepreneurship constituted, for this author, the fundamental explanation for the slow economic development of the country in the nineteenth and early twentieth century. the tortella’s thesis was immediately criticized by sudrià (1995) and, ten years later, valdaliso (2005) noted that the roots of the slow economic growth had much more to do with institutional problems than with the mere lack of entrepreneurship. tortella (2000) ended up nuancing his initial position to finally incline himself to this latter view. thus, the final conclusion of this debate leads us to the statement that “education improves the quality of entrepreneurship rather than entrepreneurship itself” (garcía ruiz and toninelli 2010, 8). in recent years, the spanish economic historiography has tried to go deeper into the study of entrepreneurship, its determinants and its contribution to economic growth, using existing theoretical literature and, in many cases, drawing on quantitative indicators allowing results to be contrasted nationally and internationally (valdaliso and garcia ruiz 2013). relevant contributions in this line of research are tortella, garcía ruiz ortiz-villajos and quiroga (2009), díaz morlán (2009), garcia ruiz (2010), tortella, quiroga and moral-arce (2011) and tortella and quiroga (2012). taken together, this group of works highlights how the slow spanish economic development appears not to be due to the absence of entrepreneurship but rather to the combination of factors such as geography, the slow growth of the internal market and its lack of integration and, above all, the lack of an optimal institutional and supportive framework including the prevailing low educational levels. these factors favoured http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 unproductive combinations at the expense of business efficiency and competitiveness of companies and the spanish economy as a whole. the study of the determinants of entrepreneurship can also be seen in other south european countries. garcía ruiz and toninelli (2010) provide evidence on spain, italy, greece as well as latin america showing the wide range of factors that determine the quality and success of the entrepreneurial function and define its distinct typologies. education, kinship networks, family and, interestingly, the capacity to enhance technological transfer, appear to be key factors that lie beyond the existence of ambitious entrepreneurs in countries where institutional rigidities have been recurrent obstacles to economic development. management approaches to entrepreneurship during the 1970s, deep technological and industrial changes led researchers to question the efficiency of large corporations. this significant moment re-launched theoretical and policy driven discussions on entrepreneurship and those around the relevance of small and medium sized enterprises. in spite of growing attention paid to the large industrial corporation, management scholars focused on the entrepreneur and the small entrepreneurial business. as a consequence the first journals in entrepreneurship and small entrepreneurial organizations appeared: journal of small business management in 1963, american journal of small business in 1975, renamed entrepreneurship theory and practice in 1988, journal of business venturing, created in 1985, small business economics, in 1989 and entrepreneurship and regional development in 1989 (cooper 2003). the new field of research on entrepreneurship focused on four aspects that, in most cases, excluded the space-time coordinates: (i) the individual traits of the entrepreneur, (ii) their behaviour, (iii) the environment in which they operate and (iv) the existence, identification http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 and exploitation of entrepreneurial opportunities. in the following discussion, these perspectives are developed. (i) according to the "traits approach," the entrepreneur displays particular and distinctive features in terms of propensity to take risks, creativity, imagination or need for achievement. in summary, he has got an “entrepreneurial personality” (mcclelland 1961; kihlstrom and laffont 1979; schere 1982; bridge, o'neill and cromie 2003). in consequence, this approach takes the view that it is possible to identify the most likely individuals to start businesses (brockhaus 1975, 1980; hocher and ganrose 1985). in short, this individualistic approach implies that the "entrepreneur is born, not made." this simplistic statement has received many criticisms. william gartner, ian macmillan and murray low, among the most prominent, pointed out that this research was "inherently useless" in the absence of a comprehensible understanding of the context surrounding every entrepreneur (gartner 1988; low and macmillan 1988; shaver 1995). (ii) during the 1980s and 1990s there was a second approach based on cognitive models of human behaviour. it was an alternative to the previous individualistic approach focused on the entrepreneurial personality (mason and harvey 2013). this approach includes two main fields of research. the first applied the concept of self-efficacy, i.e. the belief in one’s capabilities. it has been used to explain why some engage and others do not in start-up processes. it has also been used to explain differences in the performance of small and medium sized businesses. drawing particularly on attitude-based models such as ajzen’s theory of planned behaviour (ajzen 1988), this approach considers the intention of a particular individual as the best indicator or predictor of subsequent behaviour. consequently, it can be used to anticipate the decision to undertake and to explain entrepreneurial behaviour (krueger and carsrud 1993; http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 krueger and brazeal 1994; kolvereid 1996; lüthje and franke 2003; souitaris, zerbinati and al-laham 2007). so, the study of "entrepreneurial intentions" focuses on the distinctive character of the entrepreneur but it has received heavy criticism, both inside and outside the area of business organization (gartner 1988). (iii) the previous criticism led to new approaches. one of them focused on the environment. studies, mostly quantitative, sought to link the entrepreneurial phenomenon with the external environment in which it operates. technological change, industrial structure, the institutional framework or geographical context itself are some of the factors that have been identified as determinants of entrepreneurship. the work of tushman and anderson (1986), hannan and freeman (1987), acs and audretsch (1990), grant (1996), dobbin and dowd (1997) and mcmillan and woodruff (2002), among others, are particularly representative of this approach. however, they have also received criticism. for example shane (2003), points out that this approach continues to rely on sole determinants to develop insight into the complexity of entrepreneurial activity. the context alone does not determine or explain entrepreneurship. it also requires the action of individuals that identify and exploit opportunities. (iv) a more comprehensive explanation of the entrepreneurial phenomenon should therefore consider together the environment, individuals and businesses (shane 2003; shane and venkataraman 2000). this is precisely the core of the recent stream of research in entrepreneurship which focuses on the study of sources of opportunities, the process of discovering and exploiting these opportunities as well as individuals who discover and exploit them (shane and venkataraman 2000; shane 2003). indeed, business opportunities have become the most frequent approach within the area of entrepreneurship analysis and have http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 gathered a vast body of literature difficult to categorize (hsieh, nickerson and zenger 2007). despite the growing interest, this research lacks a unified theory and a clear definition of concepts. within this approach focused on opportunities, major contributions have ranged from perspectives related to the psychological traits of individuals ("trait-based perspectives") to the analysis of the economic, social, institutional and technological environment in which opportunities arise (popp and holt 2013). at the crossroads: business history and management is there any intersection between the empirical evidence provided by business history and the theoretical and conceptual reasoning provided by management? the answer is a resounding yes and this article attempts to encourage dialogue between them. history provides the proper ground for discussing theoretical problems by offering the space-time coordinates in which the entrepreneurial phenomenon effectively operates. meanwhile, management offers solid theoretical and conceptual tools that help us to understand explain and analyze entrepreneurial experience in its various expressions. drawing on both history and management theory together constitutes a valuable tool to advance the study of entrepreneurship, contrasting existing theories and bringing new ideas that, in turn, develop new ones (casson and godley 2005). without denying the wide range of debates in entrepreneurship research in which bridging business history and management theory is potentially rewarding, this article provides the example of three of them: networks, corporate entrepreneurship and international entrepreneurship. they both offer a real opportunity to respond to the “historic turn” and to build a “theoretical history” and a “historical theory”. indeed, although the three debates have been successfully developed during the last decades by management scholars, the very nature http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 of these debates, and their remaining gaps, point out the valuable contribution that history can offer. entrepreneurship and networks the effects of the interaction within a network are now well recognized to play a significant role in the shaping and forming of entrepreneurial processes, practices and outcomes (aldrich and zimmer 1986). network relationships are known to enable, constrain and stimulate entrepreneurial activity, through providing connections and access to knowledge, information, physical and monetary assets. indeed, having a network of relationships can be a powerful asset and one which within the entrepreneurial setting facilitates change and the development of organizations. so through activating their links, individuals make entrepreneurship happen, or not as the case might be. literature on networks is wide as debates have grown extensively over the last decades. management scholars have played a profound role in this issue, building a powerful theoretical and empirical background that can be categorized into three distinctive perspectives, including three essential components of networks: the “structural” approach, the “relational” approach and the “cognitive” approach. these approaches provide three different views on the role played by networks on entrepreneurship. (i) network structure is defined as the pattern of relationships that are engendered from the direct and indirect ties between actors (hoang and antoncic 2003). this approach to network research has focused on determining how this pattern of relationships between entrepreneurs and other individuals affects the performance of the entrepreneurial venture. this view assumes that both, the network size and the position of the entrepreneurs in the network (centrality), influence the transfer of information and resources and, therefore, may increase http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 or decrease the likelihood of success of the enterprise. research in this field has obtained contradictory conclusions. regarding the position of the entrepreneur in the network (and according to network density), there are two opposing views. the first, based on the contributions of coleman (1988, 1990), suggests that dense networks with highly interconnected actors promote the development of trust between its members which, in turn, benefits the sharing of resources and information (semrau and werner 2013). in contrast, research by burt (1982, 1997, 2005) highlights the advantages of a loose network with disconnected members. this perspective indicates that an actor that has a central position in the network (that connects other members unrelated to each other) is more likely to access a variety of resources and may obtain the benefits from bridging structural holes (the absence of ties between actors) (semrau and werner 2013). from the viewpoint of the network size, findings are neither coincident (hoang and antoncic, 2003; jack, 2010). some authors have noted that the size of the network is positively related to the access to resources. thus, it is expected that an extensive network provides a greater amount (aldrich et al. 1987; liao and welsch 2005) and a greater variety of resources for entrepreneurs (grandi and grimaldi 2003; greve and salaff 2003). the reasoning behind this proposal is that, because people differ with respect to their stock of knowledge and resources, including more people in a network should also increase the variety of resources available for new entrepreneurs (greve and salaff 2003). this is especially true in the early stages of development of a company, when the network size is small and its actors are mainly limited to members of the family, friends and co-workers (reagans and zuckerman 2008). however, not always a greater size means better access to resources. once the network has reached a considerable size, the inclusion of new members may provide the entrepreneur with redundant http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 resources and information, therefore hardly valid for the exploitation of new opportunities (semrau and werner 2013). conversely, other studies indicate that the size of the network does not have a decisive impact on business performance (batjargal 2003, 2005). (ii) in contrast to the structuralist approach, the relational perspective is concerned with the content and nature of personal relationships that entrepreneurs built through the history of their interactions. while it is accepted that relationships to others are important for entrepreneurs because of the benefits they bring, for some time now it has been said that we simply do not know enough about how such links influence organizations and the role they play in firm emergence, evolution and development (elfring and hulsink 2007; hoang and antoncic 2003; jack 2010; slotte-kock and coviello 2010). we know that in the early stages those individuals with whom the entrepreneur is more likely to interact with, will be people he/she has an association or experience of dealing with such as family, friends and close personal contacts often referred to as strong ties and with whom he/she has developed trust over time through loyal and mutual commitments (elfring and hulsink 2007; newbert et al. 2013; smith and lohrke 2008). such strong ties are particularly important at the beginning of the venture because they provide access to critical resources, in addition to emotional and practical support (aldrich et al. 1987; lechner and dowling 2003). but we also know that as organizations emerge, networks of strong ties are constraining and inefficient (hills, lumpkin and singh 1997; ibarra 1993; lechner and dowling 2003). hence, entrepreneurs are encouraged to develop networks based on weaker ties (hansen 2002; rowley, behrens and krackhardt 2000). this is because such networks offer the opportunity for diversity in information and resources and connections to other social systems (aldrich et al. 1987; elfring and hulsink 2007). so over time an entrepreneur should expand his/her network by http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 adding weak ties. indeed, the common assumption of the extensive benefits this can bring appears well grounded both theoretically and practically. while it is generally accepted that networks of relationships play a key role in the development of entrepreneurial organizations, debates about the applicability of strong ties and the role they play over time continue to exist (elfring and hulsink 2007; newbert, tornikoski and quigley 2013; simsek, lubatkin and floyd 2003). the literature leads us to believe that weak ties play a more prominent role than strong ties, primarily because they offer specific advantages and connections to other social systems as well as the likelihood of new resources (burt 1992; ibarra 1993; jack 2005). however, recent studies have implied that actually context may play a bigger role in influencing who the entrepreneur interacts with and why. for instance, stam et al. (2014) found that homogeneous networks of strong ties are better suited to entrepreneurs operating in developing economies. likewise, xin and pierce (1996) argued that a network primarily formed of strong ties is crucial to entrepreneurial success in contexts with little institutional support. indeed in the absence of institutional support -generally found in developed economiesthe challenges faced by entrepreneurs may well motivate them to develop their ventures with the support of a close network of trustworthy partners (arregle et al. 2015; bruton et al. 2008; kwon and arenius 2010). (iii) finally, nahapiet and ghoshal (1998) offer a third perspective to study the influence of networks on entrepreneurship: the cognitive approach. this dimension assumes the existence of shared values and common paradigms that allow for the construction of meanings and ways of acting. this institutionalist vision, contrary to the concept of entrepreneurship as an individualistic process, proposes that social networks provide entrepreneurs a set of rules that determine their behavior. the "institutionalized" rules set a socialized behavior of the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 entrepreneur who must subordinate individual desires to group objectives. thus, the network generates confidence and pushes entrepreneurs to take a long term view, realizing that their interests will be satisfied to the extent that collective purposes are achieved. based on this cursory literature review on networks, it can be concluded that the structural approach has received more attention than the relational one (hoang and antoncic 2003; o'donnell et al. 2001). we know a lot about the structural features associated with networking (kim and aldrich 2005). however, we still do not know enough about how a network is actually formed, and how it develops and changes because few studies have addressed entrepreneurial networks as an evolutionary process (anderson, drakopouloudodd and jack 2010; slotte-kock and coviello 2010). the literature acknowledges the scarcity of studies exploring the relationship between networks and business results beyond the start-up phase (renzulli and aldrich 2005), as well as the content and nature of the relationships rooted within a network (uzzi 1997; rodan and galunic 2004). regarding the strength of ties, discussion on the role and importance of strong ties not only in the establishment but also in the subsequent development of an organization remains (newbert et al. 2013). in sum, one of the major challenges facing network research is to explore how entrepreneurs create and activate social networks, how they manage their evolution and how the development of networks determines the performance of the business. if this is the aim, the way forward in the research seems to point to two key tools: (i) qualitative studies and (ii) perspectives of processes that take into account the evolutionary character of the entrepreneurial process. (i) firstly, to explore the dynamic nature of social networks, their evolution and their impact on organizations’ performance requires adopting a qualitative http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 perspective. from qualitative evidence, the case studies are research tools particularly suitable if the researcher seeks to deepen and analyze a phenomenon in its real environment. in the words of eisenhardt (1989), the case study is “a research strategy that focuses on understanding the dynamics present within single settings” (p. 534). within the field of entrepreneurship, case studies are a very popular research method (bryman 2004). they stand out as being very useful to show how networks are embedded in the development of entrepreneurial ventures and to provide a detailed explanation of the context in which entrepreneurs operate (eisenhardt 1989; eisenhardt and graebner 2007). business history is undoubtedly familiar with this research methodology and therefore is well situated to advance the research gaps described above. business history is used to provide detailed descriptions of specific cases of enterprises and entrepreneurs, to recognize the influence of the past on present events, to provide an understanding of the space-time contexts surrounding entrepreneurship and to work with a wide range of both oral and written sources. thus, business history should be called to participate in advancing research on networks. (ii) secondly, management literature has emphasized the importance of studying networks over time (anderson et al. 2010; slotte-kock and coviello 2010). it has been claimed that networks are not static but rather dynamic and flexible, and they change over time as new ties are activated or others are excluded. therefore, if the research goal is to appreciate the relational and evolutionary nature of networks, studies should adopt a long-term perspective. otherwise it would be very difficult to appreciate the causal mechanisms underlying networks, the processes, the nature of the ties, the actual reasons that motivate an entrepreneur to create a network and its consequences and, especially, the actual environment in which networks are created and develop over time (coviello 2005). although we already have some http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 longitudinal studies in this area they are still scarce, and the research agenda is called to cover this gap. in this endeavor, business history appears again as a tool of great potential. the history of companies and entrepreneurs is an excellent research field as long as we accept it not only as the ground to test theory and evidence, but also as the origin of new ideas to expand our knowledge. as the example demonstrates historical research may be able to provide new answers to questions like how, when and why a network is created, develops and changes over time. corporate entrepreneurship besides the creation of new businesses, entrepreneurship is also a process that takes place in established organizations. since the late 1980s the study of entrepreneurial behavior within established organizations has gained growing scholarly attention (miller 1983; sharma and chrisman 1999; zahra 1986, 1995, 1996; zahra and covin 1995). corporate entrepreneurship as a research field dates back to the work of robert burgelman (1983) who defined it as the set of entrepreneurial activities that take place within existing companies. although research on this field started earlier, burgelman was the first to place corporate entrepreneurship in the organization and management literature. the growing interest in this issue has resulted in a proliferation of theoretical and conceptual perspectives that have caused conceptual perplexity (morris and kuratko 2002; hornsby et al. 2002; parker 2011). sharma and chrisman (1999) helped to solve this problem by reconciling the research agenda and an active process of standardizing and clarifying terminology in this field. after a thorough review of the plethora of concepts, sharma and chrisman (1999) define corporate entrepreneurship as “the process whereby an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization, create a http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 new organization or promotes renewal or innovation within the same” (p. 18). from this definition, three main processes related to corporate entrepreneurship are implicitly assumed: (i) strategic renewal –significant changes in the organization’s strategy or structure-, (ii) corporate venturing –the creation of new organizations either inside or outside the existing organizational domain-, and (iii) innovation – intrinsic to both strategic renewal and corporate venturing-. apart from the terminology, other important concern of scholars has been measuring corporate entrepreneurship as a way to distinguish companies that are entrepreneurial from others that are not. the most successful effort in this issue has been the model proposed by miller (1983) based on the concept of "entrepreneurial orientation". he defined that "entrepreneurial orientation" emerges from the interplay of three distinct components: (i) innovation, (ii) risk taking and (iii) proactivity. thereby, an entrepreneurial organization is defined as the one that innovates, assumes risks in its activities and shows a forward-looking approach by introducing new products or services ahead of the competition and by anticipating future needs or preferences of the market (lumpkin and dess 1996, 1997; miller 1983, 770). while these concepts maybe applicable to other types of entrepreneurial processes, they undoubtedly capture the essence of corporate entrepreneurship (zahra and covin 1995). scholarly literature also has also investigated how entrepreneurial orientation can be stimulated or constrained by sets of either external and/or internal environmental dimensions (kearney, hisrich and roche 2009). scholars appear to believe that the most consistent intraorganizational dimensions are: the organizational structure (morris and jones 1999), decision making (bozeman and kingsley 1998; nutt 2005), motivation (baird and st-amand 1995; http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 hornsby et al. 2002) and organizational culture (covin and slevin, 1991). in general, it is assumed that organizations with less formalized structures, more flexible and decentralized decision-making procedures, a lower degree of formalization in the control system and higher rewards and motivation also demonstrate higher levels of entrepreneurship. regarding the external environment, research has demonstrated that external conditions have a strong, if not deterministic, influence on the existence and effectiveness of entrepreneurial activity (covin and slevin 1991; kearney, hisrich and roche 2009). dynamism, hostility and heterogeneity are the environmental dimensions most cited by research (lumpkin and dess 1996). in essence, dynamism and heterogeneity of the environment reflect the uncertainty faced by an organization as a result of political, social, technological and economic changes. hostile environments, meanwhile, refers to the degree of rivalry and competitive intensity and the abundance or scarcity of resources in the market –environmental hostility increases as competition and resources scarcity become intense–. dynamism, hostility and complexity of the environment tend to be positively related to the entrepreneurial orientation of organizations (kearney, hisrich and roche 2009). the business history literature on corporate entrepreneurship has evolved in parallel and with little interaction with the burgeoning managerial literature on the field (zahra et al. 1999; jones and wadhwani 2008). during the 1950s, scholars like arthur cole and edith penrose approached the study of business performance using the schumpeterian approach to innovation. since then, all attempts to reintegrate the corporation in historiography draw undoubtedly on the seminal work of chandler. the well-known professor of business history at harvard university noted that the modern industrial corporation could be considered entrepreneurial and innovative in the schumpeterian sense (chandler 1990). in his book the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 visible hand, chandler described the emergence of large corporations as an entrepreneurial response to the opportunities arising from technological and market changes. in strategy and structure references are also found to the way that a corporation can be considered an innovative entity: the stories of dupont, general motors, sears and standard oil show clear examples of companies making strategic decisions, anticipating market trends and adapting to structural change, -processes that chandler presented in a chapter entitled "organizational innovation". the separation of ownership and management, the professionalization of management and the new corporate governance structures were all evidences of innovative behaviors that also meant a revolution in the structure and functioning of large industrial and service companies in the united states, germany, france, japan and the united kingdom in the years preceding world war ii (fernández pérez 2014). however, chandler also noted that extent of management control, by itself, might not be enough to make the corporation an innovative and entrepreneurial entity. in fact, with large historical evidence, chandler confirmed proposals for organizational theory stating that large corporations face greater obstacles to innovation due to technological lock-ins and routine and cultural rigidities (brown and eisenhardt 1995; jones and wadhwani 2008). as cuff (2002) pointed out, the work of chandler should not be interpreted as the separation between business history and entrepreneurship but rather as a reformulation of study on entrepreneurship beyond the individual to conceive the organization as the unit of analysis. the work of chandler constitutes therefore the first and most recognized attempt to characterize the phenomenon of corporate entrepreneurship from a business history approach. following chandler, a number of business historians developed research on the large managerial enterprise. in fact, until the 1980s the most recurrent unit of analysis in business http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 history research, especially american, was essentially the corporation (amatori 2006). from the countless case studies of companies in many countries and in different historical periods we have inherited a better understanding of innovation within large enterprises, and how the historical context determines corporate behavior. however, most of the research output has grown separately from other disciplines in the social sciences and, in particular, from the theoretical contributions of management (zahra, jennings and kuratko 1999). this lack of interaction has limited results in both areas: in history it results in absence more advance theories, and in management theory it originates the lack of historical contextualization. redirecting research towards a common point between the two disciplines offers the possibility of enriching the study of corporate entrepreneurship. it is undoubtedly a task that requires recognizing the usefulness of the concepts proposed by management and the evidence provided by business history. within corporate entrepreneurship research, business history constitutes an especially valuable tool in understanding entrepreneurship in both, large and small organizations, as a process of discovery and exploitation of opportunities that evolves, ultimately, as a result of the combined influence of external and organizational environmental conditions. international entrepreneurship entrepreneurship and international business are two fields of research with a growing interface (mcdougall and oviatt 2000; jones and khanna 2006). a cursory review of current academic contributions on both fields confirms it. some of the recently proposed definitions of entrepreneurship include certain components of internationalization: “the competitive behaviors that drive the market process” (davidsson 2005, 6); “the introduction of new economic activity that leads to change in the market place” (davidsson 2005, 8), or “new http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 business creation, that means introducing a new product, entering a new market or both” (sathe 2003, 5). lu and beamish (2001, 567) also add that “internationalization is an act of entrepreneurship, because it is a strategy in search of opportunities for firms growth and wealth by expanding into new markets”. the connection between these two research fields, entrepreneurship and international business, has given rise to a research interface known as “international entrepreneurship”. zahra and george (2002, 261) define international entrepreneurship as “the process of creatively discovering and exploiting opportunities that lie outside a firm’s domestic markets in the pursuit of competitive advantage”. even though the initial literature on this topic focused on new firms –the so-called born global firms– or companies that experienced some critical event –the so-called born-again born global companies(coviello and munro 1995), international entrepreneurial opportunities can arise in established firms (zahra and george 2002; zahra et al. 2000). building upon this accepted definition, the academic domain of international entrepreneurship has moved beyond the study of young and yet small firms to cover any kind of business of any king of ownership. further, internationalization is thus seen as an entrepreneurial process as described by oviatt and mcdougll (2005). however, this emerging research field seems to face the same challenges that have affected entrepreneurship and international business in their own individual trajectory: fragmentation in the theoretical state of art and a very few regard to the historical reasoning. although historical approaches have provided some pioneering thoughts into these two research fields, both entrepreneurship and international business seem to have become areas dominated almost exclusively by the management abstract reasoning. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 yet, business history and, particularly, the history of transnational corporations can contribute to many extant debates on international entrepreneurship, a research field which is growing and becoming as fertile as its two independent components. we acknowledge that there is much work to do on improving understanding of how entrepreneurs and entrepreneurial organizations operate in different institutional environments, how the home environment may shape the way in which organizations internationalize their operations, how international organizations build institutional arrangements or create and build in networks to face problems related to international business activities and how these organizational arrangements, embedded in different institutional contexts in home and host countries, are relatively enduring and influential over time. moreover, while much has been done to identify drivers of international entrepreneurship (zahra and george 2002), the role of family has largely been ignored as it has in the entrepreneurship literature in general (aldrich and cliff 2003; kellermanns and eddleston 2006; kellermanns et al. 2008). as it has been demonstrated that families have significant influence on decision making and performance of their businesses (fernández pérez and lluch 2015; mustakallio et al. 2002), it would be expected that they could also strongly affect international entrepreneurship. although the relationship between family ownership and internationalization has been a controversial topic in the literature, some studies note that family ownership is a relevant and positive component in the internationalization of businesses (colli et al. 2013; puig and fernández 2010; zahra 2005). thus, the study of the internationalization of family business is another field of research in which interdisciplinary approaches between history and management can shed light on the contribution of family firms to exploiting international entrepreneurial opportunities. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 management theory and history: final reflections the entrepreneurial phenomenon is by nature multidisciplinary: it comprises human behaviors and personal attributes –studied mainly in the area of psychology and individual analysis–; social and cultural influences –often led by the field of sociology–; organizational processes and corporate strategies –economics and management interests-; but it also includes spatial and temporal dynamics determined by economic, industry and institutional conditions. therefore, “history also matters”. due to the multidisciplinary character of entrepreneurship phenomenon, entrepreneurship research should also meet the same premise: been able to gather different approaches and methods but from a coherent and unified way. the challenge is therefore to aggregate contributions from different disciplines and endeavor on a shared path. what does history offer to management theory and, respectively, management theory to history? our argument is that history provides management theory with two core components: context and time. the context brings to the forefront the spatial reality in which the phenomenon takes place and develops. appreciating contextual circumstances allows for enriching any research as it involves taking into account as a whole the economic, social and institutional conditions of a given territory. in turn, this creates an appreciation of how these elements determine the performance of organizations or individuals. in short, the context offers the rich, complex reality in which all phenomena are embedded. moreover, an understanding of context matters for the kind of generalizations we draw based on studies of a selected place as it restricts misleading assumptions. to appreciate the context leads to clearly assume that what is or has http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 been successful at a particular place does not necessarily work in another, especially if its characteristics are significantly different. this appreciation achieves a critical role when we compare territories with different levels of development or with a different timing in its historical growth. regarding the main topic of this article, entrepreneurship is far from being a flat phenomenon so that the way it happens, develops and changes over time has been distinct in early-developed regions and in late-developed ones. indeed, late-developed regions have encouraged entrepreneurs to draw on organizational strategies and actions that might not be accessible in environments granted with inclusive institutions and well-performing markets. drawing on personal relationships might be one the most outstanding examples of entrepreneurial strategies that have historically allowed business survival under uncertain environments (casson 1999; colli, fernández pérez and rose 2003; colli and rose 1999; fernández pérez and rose 2009; granovetter 1995; rose 1999). history also offers accurate descriptions of the timeframe within which crucial actors operate. appreciating time determines a method of research that is necessarily dynamic, supplementing theory reasoning with a rich description of temporal processes and change dynamics that accompany any investigated phenomena. moreover, reality is stubbornly dynamic so that time also acts as a core boundary constraint that should be taken into account when building “general theories” that attempt to transcend time and place. an understanding of historical context helps to correct for the empirical bias created when generalizations occur using a narrow band of evidence centered on the present (jones and wadhwani 2006). historicism is predicated on the understanding that the foundational basis of social or organizational behavior varies significantly over time and place. thus, a theoretical generalization that may be valid today may not be applicable to behavior in the past or the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 future (jones and wadhwani 2006). the purpose of understanding this type of historical and geographic variation in context is not necessarily to create “general theories” that transcend all time and place but rather to create valid generalizations that hold true for meaningful boundaries of period and geography. management studies also have much to offer business history research. it is to be argued that management theorizing provides business historians with a valuable dose of abstraction that allows us to detach from the flat description of case studies in order to create generalizations that, although derived from actions grounded on specific time and place contexts, may be sensibly applicable to other similar periods and geographical contexts. as a consequence this has the potential to create valuable tools for analysis. the concepts and theories from management also bring induction techniques that help deepen the concrete evidences of case studies to develop interpretations and theoretical implications. this does not mean that business history should deny its descriptive essence. far from it, and following the recommendations of chandler, business historians need not to aspire becoming management theorists: whatever the theoretical aspirations of business historians, "traditional case studies must continue to provide the absolutely essential information on which any broad generalizations and concepts about the history of business and business institutions can be based’ (chandler 1984, 7). in short, the engagement between management theory and business history must not involve the loss of the essence that defines each of the disciplines. regarding business history, debates about what should constitute its essence continue. as this discipline is placed halfway between history and organization studies, one might ask what should be the right road to take: should business history address the multiple issues of history or, on the contrary, should it be http://revistes.ub.edu/index.php/jesb volume 2, number 1, 156-200, july-december 2016 doi.org/10.1344/jesb2016.2.j016 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 placed as part of the scientific organizational research and so should it try to make valid generalizations on the trajectory of entrepreneurs and businesses? perhaps the answer to this dilemma does not necessarily imply the renunciation of the tradition of historical, humanistic reasoning, nor the rejection of a closer engagement with the more contemporary theoretical and scientific apparatus. history and theory are not antithetical and the arguments for and the recourse to history in organization studies have been advocated in different ways: some advocate position history as the quintessential empirical field of theoretical reasoning and other, more ambitious, consider the 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commons license 4.0 52 maría luisa flor josé luis blasco díaz maría lidón lara ortiz universitat jaume i (spain) innovation policy instruments through the lens of open innovation. an analysis in the spanish context abstract open innovation (oi) involves the deliberate use of external and internal knowledge flows by organisations in order to accelerate their innovations and expand the markets for the external use of innovations. despite the relevance of oi for firms’ competitiveness, firms’ abilities to leverage and combine internal and external knowledge flows cannot be taken for granted. in this context, innovation policies can play a crucial role in stimulating firms’ oi strategies. the objective of this research is to examine the degree to which existing public innovation policies promote open innovation by companies. in doing so, we review the set of innovation policy instruments developed by governments within the spanish national and regional innovation systems and examine the extent to which they support open innovation by companies, either by facilitating firms’ open innovation practices or by acting on the external factors that influence them. our results show that innovation policies in spanish national and regional settings partially promote firms’ open innovation, since governments base their actions on the interaction between science, industry and government, sometimes with intermediaries that promote it. we propose the development of instruments to encourage firms to implement open innovation practices in such a way that they complement the existing ones and can fully achieve the benefits associated with open innovation. keywords: innovation policy; national and regional systems of innovation; open innovation practices; inbound open innovation; outbound open innovation; coupled open innovation; erosion factors; spanish context corresponding author: e-mail: mflor@uji.es received 25 oct 2019 accepted 18 dec 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 1. introduction the importance of the interrelation between the actors of regional and national systems of innovation for economic development and the increase of competitiveness has been repeatedly acknowledged, and it has been translated into the public policies that promote innovation. these policies usually contain various actions and initiatives that seek to involve and foster interaction among universities, companies and governments, as well as other entities and organisations. the rationale underpinning all these efforts is to establish a context that allows organisations to leverage their internal innovation capabilities by taking advantage of external conditions and contributing to regional economic growth and improvement of socioeconomic conditions. the concept of open innovation is intimately linked to the foundations of innovation systems, insofar as it describes an innovation process characteristic of organisations that interact with their external environment through exploration, exploitation and expansion of knowledge (de jong et al. 2010). open innovation (oi) has been defined as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.” (chesbrough 2006, 1). firms’ increasing adoption of open innovation is a consequence of a series of changes in the environment, such as increased mobility of skilled workers, growing access to venture capital, greater dissemination of knowledge throughout the world or the higher capability of firms’ external suppliers, which have stimulated companies to adopt a significantly different model of innovation (chesbrough 2006). indeed, it has had a major impact on business practice, where many companies have become aware of the advantages of opening their innovation process, since oi can lower costs in their innovation process, reduce the time needed to http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 generate new products, or achieve creativity by incorporating external talent in the organisation (chesbrough and bogers 2014). despite the relevance of the open innovation model for firms’ competitiveness, neither the availability of external knowledge and other innovation resources ⎯such as human capital or financial resources⎯ nor companies’ ability to leverage and combine internal and external knowledge flows can be taken for granted (de jong et al. 2010). in this context, the way governments configure the institutional and legal framework is critical to foster and help firms achieve the benefits of open innovation. that is, although it is companies that face opportunities and challenges and implement open innovation, instruments for innovation policy at a national and regional level represent the most direct form of intervention in a firm’s innovative behaviour and in national and regional systems of innovation (herstad et al. 2010). hence, innovation policies can play a crucial role in stimulating firms’ open innovation strategies, by shaping the systems of innovation in which the agents that form them interact, create and jointly exploit new technological and market opportunities. based on these premises, in this paper we examine the degree to which existing public policies designed to encourage innovation support the development of open innovation by companies. in doing so, we review the set of innovation instruments developed by spanish governments at both national and regional level. this work contributes to building a bridge between the innovation policies and open innovation literatures, insofar as it allows us to enrich the bases of innovation policy with the contributions of open innovation. as cano-kollmann et al. (2017) have stated, despite the substantial body of literature on the relationships between public policies and private innovation, the relationship between open innovation and public support for innovation has http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 attracted scant research attention. from the point of view of policymakers, we propose recommendations aimed at developing actions to promote firms’ open innovation practices in such a way that they fully achieve the benefits associated with open innovation. the work is structured as follows. first, we present the foundations of public policies for innovation. we then describe the basic aspects related to the open innovation model and the rationale for considering public intervention. next, we introduce the spanish institutional context, describe the procedure followed to gather the data and analyse the instruments launched by spanish national and regional governments through the prism of the open innovation paradigm. the final sections include the discussion, and the main conclusions and implications for policymakers. 2. innovation policy an innovation policy has been defined as a public intervention to support the generation, market introduction and diffusion of innovation, whereby an innovation is a new product, service, process or business model that is to be put to use, commercially or non-commercially (edler et al. 2016). hence, although innovation policy overlaps with and is linked to science, research and technology policy (as it involves knowledge generation), rather than being restricted to the production of underlying knowledge or technology, it is much broader and includes commercialisation instruments and measures aimed to develop artefacts and models for the marketplace (doern and stoney 2009; martin 2016). edler and fargerberg (2017) identify three main types of innovation policy, depending on the perspectives of innovation adopted: mission-oriented, invention-oriented or system-oriented. mission-oriented innovation policies are aimed at providing new solutions to specific challenges. invention-oriented policies concentrate on the r&d/invention phase. systemhttp://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 oriented innovation policies take all the phases of the innovation process into account and, in addition to the capabilities of the actors involved, also consider the interaction between them. with the latter type, based on the system of innovation approach, an innovation policy pursues the establishment of an institutional environment in which companies, organisations and governments are able to learn, develop and share new knowledge, products and services. accordingly, the instruments for innovation policy are diverse and can be related to different areas, embracing aspects such as (edler and fagerberg 2017; edler et al. 2016): (1) creating new knowledge and innovation; (2) supporting non-financial capabilities and skills to generate and commercialise innovation; (3) increasing interaction and learning at the national and/or regional level; (4) influencing demand for innovation; (5) regulation and standardisation; and (6) understanding and benefitting from future technological trends. these instruments can also be classified according to whether they focus on the supply or the demand side of innovation; and whether they are monetary or non-monetary (aschhoff and sofka 2009; cano-kollmann et al. 2017; edler and fagerberg 2017). whereas innovation policy instruments that target producers of innovation (i.e., focus on the supply side) aim to support firms to innovate more quickly, be more interactive, or do so with different kinds of partners, instruments that target users of innovation (i.e., intervene on the demand side) support firms’ and public actors’ demands for innovation, for example, with public procurement programmes (edler and fagerberg 2017). monetary instruments for innovation, through grants or subsidies, reduce the cost and risks of taking on complex projects. in addition to funding, there must be both a proper institutional environment and a set of conditions that facilitate collaboration between different parties, which can be promoted by http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 non-monetary instruments (e.g., providing information, facilitating networking, etc.) (canokollmann et al. 2017). 3. the open innovation model the traditional view of firms’ innovation process, as represented by the closed model of innovation, is that a company’s knowledge is internally generated and exploited and does not transcend the boundaries of the organisation. under this view, the company conceives, develops, commercialises and finances its own innovation through internal processes (chesbrough 2003). in contrast to this closed model of innovation, the concept of open innovation was introduced by henry chesbrough to reflect how companies open up their innovation processes, incorporate external knowledge inputs and exploit their knowledge outputs externally. this opening up, according to chesbrough (2003), was a consequence of a series of environmental elements, which he called “erosion factors”, such as the intensification of global competition and technological progress, the global dissemination of knowledge and integration of technologies, the need for interdisciplinary research, a growing mobility of researchers and engineers, or the growing importance of venture capital. these erosion factors brought additional challenges (and opportunities) for firms, and induced companies to adopt a significantly different model of innovation, the open innovation model, characterised by purposively managing knowledge flows, focusing on collaboration with external agents and the combination of internal and external knowledge to carry out innovation activities (chesbrough and bogers 2014). under the open innovation model, some companies seek value creation by identifying and incorporating external knowledge, while others seek external markets for their innovations. accordingly, companies can carry out three core innovation processes or types of open http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 innovation (chesbrough and bogers 2014; gassmann and enkel 2004): (1) outside-in or inbound open innovation, (2) inside-out or outbound open innovation, and (3) coupled open innovation. with inbound open innovation, a company incorporates external knowledge into its own innovation process, either through sourcing or by acquiring the external knowledge (chesbrough and bogers 2014; dahlander and gann 2010). outbound open innovation makes it easier for other businesses to take advantage of internal innovations, which may or may not involve some form of monetary compensation (dahlander and gann 2010). coupled oi links inbound and outbound processes and involves two (or more) partners through joint invention and/or commercialisation activities (chesbrough and bogers 2014). thus, implementation of open innovation by firms is not a clear-cut practice; rather, it entails a set of mechanisms through which firms may search, source and collaborate to different degrees, depending on the sectoral contexts in which they operate and the institutional contexts in which they are located (herstad et al. 2010). the literature has identified a wide range of practices that firms can carry out when implementing inbound, outbound and coupled open innovation (flor et al. 2019). table 1 shows examples of practices and mechanisms related to each type of open innovation. although the decisions to implement the oi innovation practices are mainly taken in companies, both the rapid diffusion of the phenomenon in the business world and the relevance of open innovation practices to favour firms’ results, suggest that governments still need to support firms’ efforts through public policies that stimulate their open innovation activities. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 table 1. firms’ open innovation practices oi type examples of practices inbound sourcing ▪ linkages with customers ▪ linkages with suppliers ▪ technological scouting ▪ crowdsourcing technology and knowledge purchase ▪ innovation intermediaries ▪ intellectual property in-licensing ▪ r&d outsourcing ▪ funding start-up companies in one’s industry ▪ competitions and tournaments research partnerships ▪ collaborative arrangements with universities and research centres ▪ r&d cooperation outbound ▪ donating ip and technology ▪ intellectual property out-licensing ▪ external corporate venturing ▪ participation in public standardisation ▪ spin-offs ▪ corporate venture capital ▪ corporate incubators ▪ alliances coupled ▪ participation in networks ▪ innovation communities ▪ ecosystems and platforms ▪ consortia ▪ joint ventures ▪ regional clusters ▪ sharing facilities source: adapted from flor et al. (2019) 4. innovation policy and open innovation many current innovation policy actions have their roots in the closed innovation era and stem from the rationale of developing large national or regional markets, protecting local companies, restricting foreign workers and students, and subsidising large local firms to keep them innovating (chesbrough and vanhaverbeke 2018). in order to promote open innovation, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 public policies should enable external conditions to motivate firms to adopt oi processes, and develop instruments that facilitate their open innovation processes. with regard to external conditions, as stated by chesbrough and vanhaverbeke (2018, 457), the same erosion factors that have caused private firms to move away from the closed innovation mindset are also forcing innovation policies to change. in this line, innovation policy to improve external conditions that favour firms’ open innovation should aim to (1) create a strong base of public knowledge that facilitates firms’ access to external knowledge, (2) increase mobility of knowledge workers, and (3) improve access to financial sources (de jong et al. 2010; wang et al. 2012). the availability of and access to a solid public knowledge base is important for companies to participate in innovation, since it makes their search for innovations more effective and efficient (cockburn and henderson 2000; de jong et al. 2010). despite being a traditional action within innovation policy programmes, government funding of basic research constitutes an important element for the development of the open innovation approach. research carried out by universities is critical as a seed for future innovations and greatly enriches the knowledge landscape. in addition, the fact that companies increasingly devote their efforts to research for immediate application, which results in less basic research being conducted inside corporate research laboratories, translates into a growing need for public funding of scientific discovery (chesbrough and vanhaverbeke 2018; de jong et al. 2010; wang et al. 2012). policymakers can also directly target the diffusion of knowledge and, by doing so, ensure that the current stock of basic knowledge becomes more widely accessible. specifically, public intervention can encourage university researchers to put their basic knowledge into practice http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 and create mechanisms that facilitate diffusion such as knowledge valorisation grants, public– private partnerships or technology transfer offices at universities (de jong et al. 2010). additionally, as highlighted by bogers et al. (2018), effective policy making around oi must consider the benefits of openness in science, as exemplified by the requirement for researchers to publish open access articles, and refund the costs incurred in paying the publishers for the service. education and mobility of workers also favours open innovation, since a high-quality workforce allows knowledge to be extended to other organisations and increases the capacity of companies to absorb external knowledge (chesbrough 2003). although developing a mobile, well-educated labour force is primarily a matter for education and labour market policies (de jong et al. 2010), specific actions to facilitate mobility of researchers between public and private institutions can be deployed in the context of an innovation policy. support for industrial doctorates and for firms to hire technologists and scientists are examples of such interventions, which are already being implemented in several countries (herstad et al. 2010). also, knowledge diffusion and exchange between universities and business would be improved if academics could be temporarily employed in private companies and vice versa (chesbrough and vanhaverbeke 2018). as for access to funding, innovation is a risky undertaking that requires the allocation of financial and intellectual resources under specific conditions (wang et al. 2012). as a consequence, innovating firms face considerable problems in acquiring external funding. innovation policy programmes have traditionally acknowledged this market failure and funded r&d research carried out by firms (herstad et al. 2010). nevertheless, it is not only a matter of providing funding to generate innovations, but also of being aware of difficulties in http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 later stages and supporting the commercialisation of innovations. the funding chain conceptualises the need for appropriate types of financing, from the initial research to the establishment and growth of a new venture, and the type of funding and partners involved will vary in each stage (chesbrough and vanhaverbeke 2018). in addition to direct subsidies, policymakers can also facilitate innovating companies’ access to finance through options such as seed capital, guarantees or matching funds; and well-functioning capital markets that allow for corporate venturing (de jong et al. 2010). hence, together with traditional direct incentives for r&d, policymakers might stimulate private investors including banks, venture capitalists and business angels, as they are specialised in judging and financing business opportunities (chesbrough and vanhaverbeke 2018). innovation policies can also design actions specifically aimed to develop a firm’s oi processes. instruments can assist and facilitate implementation of inbound, outbound and coupled oi practices, either by facilitating these practices or by eliminating barriers to their implementation. with inbound processes, companies access knowledge from outside their boundaries to complement their internal innovation base, in such a way that they can increase their understanding of the market or identify new directions to explore. in order to apply inbound oi, firms can source and acquire external knowledge (dahlander and gann 2010). hence, firms can collaborate informally with customers and suppliers and acquire external knowledge by purchasing technology through the market place (e.g. through innovation intermediaries, outsourcing r&d activities, in-licensing, etc.) and through active and deliberate cooperation on r&d with other firms and institutions (e.g., competitors, universities, research institutes, public research laboratories). with regard to technology http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 purchase, in addition to supporting firms’ r&d outsourcing or in-licensing, public initiatives can foster less traditional modes of inbound oi, related to creating better conditions for technological scouting –which would also help to identify potential partners– and using services from innovation intermediaries. innovation intermediaries (or innomediaries) provide innovation platforms that link companies with potential problem-solvers. policymakers could design actions aimed to lower participation costs for firms, since they facilitate the diffusion of knowledge and, in addition, can help make the market for knowledge and intellectual property (ip) more transparent (chesbrough and vanhaverbeke 2018). collaboration requires partners to possess similar or complementary competences and may entail the development of innovation projects that require a minimum scale to be carried out. support for collaboration is important in innovation policies adopting a systems approach, since interaction between firms and other organisations is one of its key elements. in this context, in addition to providing financial support for collaborative innovation projects, public action can also target non-financial aspects, aimed to remedy system failures that may result in aspects such as lack of abilities to initiate collaboration agreements, especially for small firms, lock-in to specific collaboration partners or sources of ideas, or excessive overall closure of learning processes (de jong et al. 2010; herstad et al. 2010). specifically, in order to stimulate formal collaboration, actions might not only be directed towards identifying potential partners, but also creating a stable environment that fosters trust among partners and the development of skills with which to manage the formal aspects of collaborative innovation (e.g., design of contracts, governing the alliance, etc.). outbound practices allow firms to exploit their existing technological knowledge outside the markets they serve directly and to commercialise unused ip assets (chesbrough and garman http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 2009). they can do this by revealing their internal knowledge with no immediate financial gain (e.g., donation to commons, participation in standard setting processes) or by commercialising their inventions and technologies (e.g., out-licensing). public intervention to facilitate firms’ outbound oi practices can focus on different areas. governments could support standard setting processes, as the more technologies are standardised, the better they can be traded, which may be done by backing standard setting organisations such as the iso (de jong et al. 2010). out-licensing is a challenging activity for most firms due to its high complexity, as significant transaction costs are involved in transferring technologies between organisations (dahlander and gann 2010). policymakers should help firms develop the skills that are needed to commercialise technologies and explicitly support trade by establishing instruments or rules to value ip adequately, enhancing technology markets and fostering the role of intermediaries to connect potential buyers and sellers of technology (de jong et al. 2010). as for corporate venturing, it is a common concern for companies to outsource their knowledge if they feel that they cannot find suitable partners and transfer their knowledge effectively (chesbrough 2006). public actions can promote this option in different ways, some of which go beyond innovation policy areas, such as providing direct support, better access to finance, entrepreneurship education, support for technology markets, and entrepreneurial skills development (de jong et al. 2010). coupled oi includes practices such as participation in strategic networks, innovation communities, regional innovation clusters and shared facilities (chesbrough and bogers 2014; flor et al. 2019). in general terms, these practices allow companies to quickly fill specific knowledge needs through interaction between parties, usually resulting in an intensive exchange of knowledge and mutual learning. governments may implement policies to http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 develop networking skills, directly stimulate interaction, facilitate intermediaries and back up emerging clusters (de jong et al. 2010). another important way to reinforce this type of practice is by promoting environments –platforms, networks, forums, etc.– in which to identify shared problems and search for scientific-technical and innovation solutions, including coordination with supra-national and regional policies. 5. methods and findings in this section we assess the extent to which current innovation policies in spain contribute to firms’ open innovation. we start by describing the situation of innovation policies in the spanish context. next, we explain how we gathered the data for our study and their analysis. the last subsection reports the findings of the analysis. 5.1. the spanish innovation context according to the european innovation scoreboard (eis) 2017, spain is a ‘moderate innovator’, with innovation performance relative to that of the eu declining by 1.8% between 2010 and 2016 (european commission 2017). in an attempt to address this weakness, the government developed strategies and plans to improve innovation activities and outputs (fernández-zubieta et al. 2018. in this context, the creation of the spanish system of science, technology and innovation (secti, from its initials in spanish) explicitly considered the set of agents, both public and private, involved in the functions and structures related to the research, development and innovation policy. the secti was implemented through the spanish strategy for science, technology and innovation (eecti), the framework for the government’s policy on innovation. the eecti, which is aligned with the european framework programme for the funding of horizon 2020 r&d and innovation activities, was http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 implemented through the national plan for scientific and technical research and innovation and through regional innovation plans. in particular, the national plan for scientific and technical research and innovation (pni+d+i 2017-2020), initially pecti 2013-2016 and extended in 2017, constitutes the multi-year frame of reference for coordinating innovation policy actions at a national level. at a regional level, the autonomous regions formulated their own strategies and plans. in 2014, each region adopted its research and innovation strategy for smart specialisation (ris3), strategies aimed to identify comparative advantages for each region and consider the diversity of regional potential (erac 2014). at both the national and regional levels, it is assumed that universities and the economic and social agents must work together, each with their own characteristics, but with complementary functions, to configure a system of research and innovation (blasco díaz 2017). consequently, in the spanish context, both a structural and a functional approach are integrated in a complex system in which one national system and different regional innovation systems coexist, developed by the state administration and by the autonomous regions in their respective regional contexts. 5.2. data gathering and analysis to examine the extent to which existing innovation policy initiatives promote open innovation in spain, we reviewed the actions carried out by the government at a national level and the regional actions deployed in a number of autonomous regions. we focused on the four autonomous regions with the highest expenditures on innovation activities in 2016 (instituto nacional de estadística 2019), where internal expenditure on r&d activities was highly concentrated within the spanish context (data for 2017): madrid (26.3%), catalonia (23.3%), the basque country (9.6%) and the valencian community (7.7%). we examined the areas that have traditionally been included in an innovation policy and that apply in most countries http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 and regions. in line with previous research (e.g., herstad et al. 2010), we only addressed policies and instruments explicitly formulated to nurture innovation and did not consider other policy areas such as labour market regulations with more indirect impacts. specifically, to make an inventory of the instruments, we reviewed the public announcements of actions implemented within the spanish national plan (pni+d+i 2017-2020) and, also, for the regions, studied the announcements in the existing regional innovation plans for that period. we then classified them into the six categories identified in the previous section, related to the improvement of external conditions (erosion factors) that favour firms’ oi and the development of oi processes by the companies. accordingly, the policy innovation actions were classified in the following areas: (1) creation of a strong base of public knowledge; (2) promotion of workforce mobility; (3) improvement in access to financial sources; (4) promotion of inbound open innovation practices; (5) promotion of outbound open innovation practices; and (6) promotion of coupled open innovation practices. then, within each oi policy area, the actions were linked to specific instruments. in the process, we focused on the objectives described in each action. although some actions can be related to more than one oi instrument, we decided to match each action only with the instrument that it was most directly related with. although this approach is debatable, it is more simple and provides a clearer picture of the situation. 5.3. findings table 2 summarises the findings of our analysis. it shows the policy areas for oi, the set of innovation policy instruments related to each oi policy area identified in our review of the actions related to the innovation plans, and the total number of actions related to the specific http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 instruments deployed in each national/regional innovation plan. the score in each cell is the result of considering all the actions matching a particular instrument. table 2. innovation policy areas and instruments for oi in spanish national and regional innovation plans (selected regions) area for oi innovation policy actions national plan valencian community basque country madrid community catalonia 1.public knowledge creation and diffusion r&d funding ii i iiii ii i open access of research findings i 2. employee mobility industrial doctorate i i i i i hiring of technologists and researchers i i short staying of researchers in firms i 3. access to financial resources funding for new high-tech start-ups i i iii ii support/funding of r&d and innovation projects iiiii iiiiiii iiii support for private funding i ii ii i 4.promotion of inbound oi innovation intermediaries i support for inter-firm cooperation i support for international cooperation iiii ii ii i project cooperation between firms and other organisations iii iii ii i technical support from technological centres and specialised firms i knowledge valorisation and transfer iiii ii iiii public procurement of innovation ii i i 5. promotion of coupled oi technological and digital platforms i i support for clusters i consortia iii i ii support for shared infrastructures i i note: each symbol, i, indicates one specific action related to the identified oi instrument source: the authors http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 the results of our analysis show that the spanish national plan includes a diverse group of actions, which are related to all the areas that foster oi in firms, with the exception of promotion of outbound oi practices. as regards regional interventions, in general terms, although they contain a smaller set of actions than the national plan, they follow a similar pattern, as they cover all the identified innovation policy areas for oi except for outbound oi. the innovation plans of the basque country and valencian community include the most diversified set of actions, followed by the catalonia plan; the innovation plan for the madrid community has the narrowest focus. as for the innovation policy areas related to external conditions (erosion factors) that facilitate implementation of firms’ open innovation, the set of instruments aimed to strengthen the creation of a public knowledge base is mostly focused on traditional mechanisms, namely funding of research carried out by universities and research institutions. the diffusion of public knowledge base is adopted in the national plan, which includes actions devoted to funding the promotion of open access to research data by scientific communities, and the recognition of works published in open access in repositories. with regard to mobility of workers, although researchers’ mobility can also be associated with geographical mobility, inter-institutional and inter-sectoral mobility are essential elements for stimulating the spanish innovation system. in this vein, stimulus of industrial doctorates is an action implemented in the national plan that is also considered in all the regional plans. also, hiring of technologists and researchers and the mobility of researchers between the public research sector and firms are actions that are part of this oi policy area in the valencian community. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 access to funding for innovation is an important part of the spanish national plan, which seeks to activate both public and private investment in the different phases of the innovation process. the plan contributes to the achievement of this objective through funding of firms’ r&d and innovation projects. the valencian community and the basque country are the other two settings where this type of projects is supported. this instrument is complemented with actions designed to consolidate start-ups with a technological and scientific base. the increasing relevance of these actions is confirmed by their inclusion in most of the regional settings. in addition, private funding from specialised investors is explicitly stimulated in the national plan and the basque country, catalonia and madrid regional plans through actions to foster interaction between firms seeking private funding and entities meeting these needs. regarding actions aimed to promote open innovation by firms, in general terms, all the plans give the highest weight to improving inbound open innovation, with a wide variety of actions aimed at fostering cooperation. the role of traditional instruments in innovation policies is widely acknowledged, such as establishing mechanisms for collaboration in r&d projects, both inter-firm and public-private cooperation (especially small and medium-sized ones). external knowledge acquisition through technical support from technical centres and specialised providers is also stimulated in madrid regional plan. specific instruments for knowledge valorisation and transfer are included in most regional plans, with actions oriented to strengthening transfer activity through official technology transfer offices, and from science and technology parks, technology centres and other innovation-stimulating structures. while these instruments can be considered to focus on the supply of innovations from an innovation policy systems approach, both at the national and the regional levels there is also presence of instruments focusing on the demand side of innovation, such as public http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 procurement of innovation. although described as inbound oi actions in table 2, most of these instruments can also be understood to enhance the public knowledge base. as regards facilitating of coupled oi, innovation plans combine traditional actions, such as support for consortia and clusters, with new instruments, as represented by support for technological and digital platforms and shared infrastructures. specifically, the national plan, offers the broader set of actions, and the basque country plan does not implement any. 6. discussion in this study, we examined the innovation actions implemented at a national level and in four innovative spanish regions through the lens of potential areas of application of an open innovation policy. we derived the areas by considering three external elements or erosion factors –creation of a public scientific knowledge base, mobility of workers and access to finance– that can facilitate firms’ adoption of the open innovation model, and the three types of open innovation –inbound, outbound and coupled– that firms can implement. from our analysis, we identified that existing policies support open innovation to different degrees, the most popular being actions to facilitate firms’ access to financial resources and to promote their inbound oi practices. surprisingly, we were not able to identify any action designed to promote firms’ outbound open innovation. the spanish national innovation plan is the most ambitious and complete, as it covered all the oi policy areas and deployed the highest overall number of actions. in general terms, it is an innovation policy based on the interaction between science, industry and government, sometimes with intermediaries that promote it, and, with regard to open innovation, that partially adopts the open innovation approach. as de jong et al. (2010) note, the fact that many policy measures are in place indicates that http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 designing an innovation policy to facilitate open innovation does not imply a great change to the existing policy measures. as for encouraging open innovation in firms through actions related to external factors, the initiatives in the national plan, the valencian community and the basque country go further than the slightly narrower approach adopted in the madrid and catalonia regions. concerning the creation of a strong public knowledge base, all regional systems include traditional actions related to r&d founding. at this point, we must highlight that a number of actions to foster inbound and coupled oi are also relevant instruments in the diffusion of a public knowledge base as they promote the valorisation of knowledge in universities and public research organisations, and stimulate the interaction with companies in order to adopt new basic and applied knowledge. employees’ mobility is supported in all plans through the promotion of industrial doctorates, and particularly complemented with short mobility of researchers and hiring of researchers and technologists by firms in the valencian community. access to financial resources is important in most of the plans, being catalonia’s support very limited in this oi area. the acknowledgement of the need for access to financial resources for new hightech start-ups is present in the rest of innovation plans, which in the cases of the national plan and the valencian community and basque country also strongly provide support and funding to r&d and innovation projects. in the case of all the plans the res. assistance to private funding is an emerging aim, in line with the need identified by chesbrough and vanhaverbeke (2018) to provide support for funding in further stages of the innovation process. thus, as stated in the national plan, business investment should be favoured through the development and consolidation of risk capital funds in all its phases, including seed capital and equity funds with co-participation from public entities that support innovative http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 companies with a high growth potential in strategic sectors for the spanish economy. at a regional level, the incorporation of actions encouraging funding from private investors for firms is noteworthy in most of the plans. as regards the promotion of firms’ open innovation practices, our results show that the current instruments in innovation plans offer more support to promote inbound oi processes, and that they mostly concentrate on research partnerships. specifically, the focus of both national and regional innovation policy measures has been on providing support for inter-firm cooperation and collaborative arrangements with research institutions. in particular, international cooperation is explicitly encouraged in all the innovation plans, with exception of madrid’s. in contrast, r&d outsourcing through technical support from technological centres and specialised firms is only present in madrid. in addition to more traditional actions related to r&d funding, the fact that there are actions explicitly designed to promote knowledge valorisation and transfer in three autonomous regions is a sign that more stages of the innovation process are carried out with external partners. although cooperation with individual users is still missing, the inclusion at a national and a regional level of public procurement of innovation as an innovation action shows the increasing recognition that it is important to foster innovation from the demand side (oltra et al. 2017). in turn, specific actions aimed at facilitating outbound open innovation are missing. the absence of actions aimed to facilitate ip management is a limitation to advancing open innovation. many companies find it too difficult to value their technologies, or apply for patents. as other authors have pointed out, the absence of a well developed technology market represents a critical limitation to the advance of open innovation (bogers et al. 2018; de jong et al. 2010). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 coupled open innovation is mainly promoted in many plans by means of specific legal formula for cooperation, such as consortia, in which the partners share investment, project execution and/or exploitation of the research results. new instruments are encouraged in the national plan and the valencian community, which offer their support through actions to promote technology platforms. this government support in creating technology platforms can be seen as an indicator of the increasing relevance of new channels for collaboration through knowledge sharing, as represented by users or innovation communities. in a certain way, these actions are reflecting the change in the innovation policy approach, as suggested by chesbrough and vanhaverbeke (2018), in that policymakers should redirect their policies towards networks or ecosystems in which innovation partners jointly create new business opportunities. also, the inclusion of actions to foster shared infrastructures, which is implemented in catalonia and madrid community, confirms the role that new instruments can have in stimulating interaction between firms and organisations. other interaction measures, such as support for clusters, although traditionally included in many innovation programmes, are not so common. 7. conclusion public policies to favour the competitiveness of companies, industries, regions and countries through innovation have been part of national and regional government policies in recent decades. however, in many cases they were designed for a closed model of innovation, where access to external knowledge sources was not a priority and firms did not seek new uses for their knowledge so intensively (chesbrough and vanhaverbeke 2018). the fact that opening their innovation process can enhance firms’ competitiveness firms suggests the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 appropriateness of examining the alignment of innovation policies with the open innovation paradigm. in this study, we examined the extent to which existing innovation policies offer support for firms’ open innovation by reviewing the set of innovation policy instruments developed by national and regional governments in spain. spain is a moderate innovator (european commission 2017) characterised by the coexistence of different innovation systems with their respective innovation policies developed by the national and regional governments. in this context, in response to innovation challenges, a number of public instruments were designed to foster r&d activities, to increase knowledge transfer between public and private sectors, to redress human resource weaknesses, and to increase the coordination of policies among national and regional administrative units (fernandez-zubieta et al. 2018). most of these initiatives were conceived through the prism of a system-oriented innovation policy, deriving from the creation of the spanish system of science, technology and innovation and the formulation of the spanish strategy for science, technology and innovation at a national level and the regional innovation strategies and plans. with this systems approach, the focus is on the creation of an environment where interaction and knowledge generation and sharing between firms, research organisations and governments contributes to socioeconomic prosperity. the variety of actions related to the oi policy areas identified in our analysis illustrates the connection of the innovation systems approach with the open innovation framework, not only in terms of fostering collaboration among different agents but also in creating a strong base of public knowledge that can help solve societal problems and improve innovative performance in the regions. as has been stressed, although both approaches examine different levels of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 analysis, they focus on similar phenomena, as the open innovation framework reveals what happens inside the ‘nodes’ of innovation systems (de jong et al. 2010). nevertheless, despite the fact that the emphasis on national and regional systems of innovation has shifted the focus of innovation policies towards a more interactive and open approach, our results show that it is still necessary to incorporate actions to promote more widely the development of open innovation by firms, which suggests several implications for policymakers. with regard to improvement of external conditions that favour firms’ open innovation, in addition to traditional r&d funding and employees’ mobility, public intervention should pay more attention to actions designed to facilitate new instruments that support public knowledge diffusion. with regard to instruments to assist and facilitate implementation of oi by firms, current instruments offer more support to promotion of inbound oi processes, and they mostly focus on research partnerships, with financial support for collaborative innovation projects, actions to promote knowledge valorisation and transfer, and measures of public procurement of innovation. in this context, help for companies with non-financial aspects is an important area that deserves to be covered through public intervention. in addition, policymakers should broaden the set of measures by backing less traditional modes of inbound oi, such as technological scouting or using services from innovation intermediaries, as they are barely stimulated through explicit actions in existing innovation plans. promotion of outbound open innovation is absent in all the plans. policymakers should create measures that encourage firms to exploit their innovation results beyond their current markets by facilitating commercialisation of their inventions and technologies. in this sense, given the difficulties that many firms face in valuing their new developed technologies, finding buyers and http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 negotiating contracts, actions that offer guidance and assist firms to value their intellectual property and facilitate their trade by making the supply and demand for technologies more visible can constitute fruitful avenues (de jong et al. 2010). finally, as regards coupled open innovation, it largely relies upon consortia creation and, at a lesser extent, on the provision of platforms and environments for interaction. nevertheless, coupled open innovation practices are still difficult to implement for certain companies, as they require networking skills. accordingly, a line of action for encouraging coupled oi practices is linked to reinforcing this type of skills, aimed to directly stimulate interaction and help firms build trust and encourage knowledge exchange. despite being more traditional modes, since currently the locus of innovation is no longer in the firm but in the network (chesbrough and vanhaverbeke 2018), policymakers should still consider shifting their support from single firms to the innovation ecosystem through a variety of forms. this study has some limitations. firstly, although we focused our attention on the national and regional innovation plans, we focused on the public announcements of actions implemented within them, which are more limited than the set of potential initiatives described in the plans. this circumstance may have offered a more restrictive view of the open innovation policy. gathering data on additional sources would have provided us with a more accurate view of the implementation of an oi innovation policy. another limitation stems from the fact that we only considered the number of actions related to each oi instrument. additional information of the actions implemented, such as the amount of resources assigned by the government, would allow us for a richer analysis. finally, we only examined the most innovative regions in a moderate innovating country. study of innovation policies in other regions and countries might illustrate different needs on the basis of the oi actions implemented. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 52-80, january-june 2020 doi.org/10.1344/jesb2020.1.j068 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 acknowledgements research carried out with financial support from spanish ministry of science, innovation and universities through project rti2018-099295-b-100. references aschhoff, birgit, and wolfgang sofka. 2009. “innovation on demand–can public procurement drive market success of innovations?” research policy 38 (8): 1235–1247. blasco 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estadística. 2019. encuesta sobre innovación en las empresas (data file). october 20. retrieved from https://www.ine.es/jaxi/datos.htm?path=/t14/p061/a2016/l0/&file=03001.px martin, ben r. 2016. “r&d policy instruments—a critical review of what we do and don’t know.” industry and innovation 23 (2): 157–76. doi:10.1080/13662716.2016.1146125. oltra mestre, maría. j., m. luisa flor, and sandra romero vallés. 2017. “competencias empresariales para la compra pública de innovación. análisis desde la innovación abierta.” in innovación y sector público: retos y contexto, edited by josé luis blasco díaz, 293-103. valencia: tirant lo blanch. wang, yuandi, win vanhaverbeke, and nadine roijakkers. 2012. “exploring the impact of open innovation on national systems of innovation — a theoretical analysis.” technological forecasting & social change 79:419–428. doi:10.1016/j.techfore.2011.08.009 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.ine.es/jaxi/datos.htm?path=/t14/p061/a2016/l0/&file=03001.px http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 joan-lluís capelleras universitat autònoma de barcelona (spain) ignacio contín-pilart inarbe, universidad pública de navarra (spain) martin larraza-kintana inarbe, universidad pública de navarra (spain) victor martin-sanchez king's college london (u.k.) regional and individual determinants of entrepreneurial growth aspirations abstract this paper investigates the unique and joint effects of population density and early-stage entrepreneurs’ human capital endowments (higher education, entrepreneurship training and owner-manager experience) on entrepreneurial growth aspirations. we test a number of hypotheses using data that combine individual and province level information in spain over the period 2008-2010. we argue that growth aspirations of early-stage entrepreneurs are higher in more densely populated regions, but that such environmental influence is stronger for individuals with greater human capital. this is because they will be more aware that denser regions offer more favorable conditions for new businesses and also requires greater firm growth to compensate for a higher risk of business failure. consistent with our view, we find that the growth aspirations of entrepreneurs with higher education are higher in densely populated provinces. keywords: growth aspirations; early-stage entrepreneurship; population density; human capital; global entrepreneurship monitor (gem) corresponding author: e-mail: victor.martin@kcl.ac.uk received 01 nov 2016 accepted 26 sept 2017 note: authors are listed alphabetically and contributed equally to this study. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 1. introduction the aspiration of entrepreneurs to grow reflects their respective individual beliefs about the potential of their ventures (levie and autio 2013)1 and plays an important role to explain subsequent firm growth (baum et al. 2001; wiklund and shepherd 2003; davidsson et al. 2006; capelleras and hoxha 2010). this has led to an increasing interest in the antecedents of entrepreneurial growth aspirations. there is some evidence that external conditions and also the entrepreneur’s background affect the formation of growth aspirations (autio and acs 2010; autio et al. 2013; estrin et al. 2013). yet more study is required to develop a better understanding of how regional conditions affect growth aspirations, and particularly of how the regional context interacts with entrepreneur’s individual characteristics to influence aspirations. the lack of knowledge on this latter topic is surprising when one considers that entrepreneurship itself results from the interplay between environmental conditions and individual attributes (shane and venkataraman 2000; shane 2003; grichnik et al. 2014). in this matter kibler (2013) notices that “objective” regional conditions have an effect on cognitive processes, which in turn affect entrepreneurial growth aspirations. in this paper, we contribute to the emerging literature on the formation of entrepreneurial growth aspirations by analyzing the joint effect of environmental conditions and individual characteristics. toward that end, we develop a framework for investigating the unique and joint effects of population density and entrepreneurs’ human capital on the growth aspirations of early-stage entrepreneurs. this framework is mainly grounded on insights from the regional entrepreneurship literature and human capital theory. 1 researchers have used such terms as “growth intentions”, “growth ambitions”, and “growth aspirations” interchangeably (levie and autio 2013); however, we follow the current trend in this field of using the term “entrepreneurial growth aspirations” (see e.g. autio and acs 2010; estrin et al. 2013). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 we first argue that the regional context in which a firm is created affects entrepreneurial growth aspirations. the role played by the regional environment in entrepreneurial activity is widely acknowledged in the entrepreneurship and economic geography literatures (e.g. malecki 1997; trettin and welter 2011; kibler 2013; fotopoulos 2014). although several regional factors have been shown to affect entrepreneurial growth aspirations, no study to date has considered the effect of population density. however, population density is a key region level variable as it determines not only the opportunity structure (on the demand side) but also the resources and abilities of individuals and their attitudes toward entrepreneurship (on the supply side). hence, it captures features of the environment that are central to understanding entrepreneurial behavior and thereby the growth aspirations of entrepreneurs. greater population density stimulates the creation of new firms owing to the consequent relatively high number of entrepreneurial opportunities to be discovered and exploited (ucbasaran et al. 2008; dencker et al. 2009; dencker and gruber 2014). but it also intensifies competition that leads to increases in the failure rate of businesses (bosma et al. 2008; kibler et al. 2014; lööf and nabavi 2014; pe’er et al. 2014). under these conditions of fierce competition in densely populated areas, prospective entrepreneurs may devise the need for a larger size of their new ventures. therefore, greater opportunities and the higher size threshold would cause the growth aspirations of such entrepreneurs to be higher when population density is greater. second, and more importantly, we draw on the notion that “objective” characteristics of the regional environment interact with human capital (kibler 2013) to shape entrepreneurial growth aspirations; thus, we examine how population density and the founder’s knowledge endowments jointly affect entrepreneurial growth aspirations. we postulate that the relationship between population density and aspirations will be moderated by entrepreneurs’ human capital. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 more specifically, we argue that their education and experience will play a key role in shaping how population density affects growth aspirations. human capital gained through formal educational processes or previous experience allows entrepreneurs to gauge more accurately the environment’s opportunities and threats, and greater human capital also increases the selfefficacy of entrepreneurs (autio and acs 2010). overall, then, we expect that growth aspirations in regions with greater population density will be higher for those entrepreneurs with larger endowments of human capital. this is the main contribution of our study. our empirical analysis is based on a sample of 1835 early-stage entrepreneurs in spain. we concur with the view of the global entrepreneurship monitor (gem) project and define an early-stage entrepreneur as an individual who is active in the process of starting a new firm for less than 42 months. the data set we employ combines individual-level information obtained from the gem project in spain with province-level information gathered from the spanish statistics institute during the time period 2008–2010. the rest of the paper is organized as follows. we start by developing and justifying four testable hypotheses; next we describe the data as well as our variables and methods used. after presenting the results of our empirical analysis, we conclude by discussing the implications of this research. 2. theory and hypotheses 2.1 population density and entrepreneurial growth aspirations individual behavior takes place in a particular location and in an environment, that is partly region specific (fritsch and storey 2014). entrepreneurs exhibit a strong tendency to locate their respective businesses close to their place of residence (figueiro et al. 2002; dahl and sorenson 2009), from which it follows that firm founders will be heavily influenced by the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 context of the region where they live. in this sense, researchers have shown that regional factors affect individual decisions in the entrepreneurial process (mueller et al. 2008). studies in the economic geography literature have found that such factors as population growth (reynolds et al. 1994; fritsch and storey 2014), regional share of the labor force employed in small businesses (fritsch 1997), and unemployment rates (bosma and schutjens 2011) all affect the rate at which new firms are created. the conditions of the entrepreneur’s immediate environment—for example, the economic, demographic, and physical features that constitute the regional context—are likely to shape aspirations (kibler 2013). because regions differ in their availability of resources and opportunities (stam et al. 2012), individuals will encounter regional environments that are relatively more or less receptive to and supportive of an ambitious entrepreneur. so depending on the environmental conditions, individuals may aspire to different degrees of growth for their new businesses. however, not much is known about the regional influences on entrepreneurial growth aspirations. in this paper, we focus on the regional level of population density as a potential determinant of entrepreneurial growth aspirations. population density has previously been linked to higher rates of new business formation. in effect, more densely populated regions offer more local market opportunities related to the consumer market and more of the necessary inputs (tödtling and wanzenböck 2003; wagner and sternberg 2004) than do sparsely populated regions (reynolds et al. 1994; armington and acs 2002), an advantage that attracts new firms and facilitates their entry. densely populated regions are often also characterized by a more diverse population and more variety in demand, a combination that stimulates new firm start-ups (frenken and boschma 2007; bosma et al. 2008). in addition, the conditions for entering a http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 market are usually viewed as being more favorable in densely populated regions (audretsch and fritsch 1994) because of the closer proximity to a consumer market, the relatively more developed business infrastructure, and the presence of specialized suppliers and a more skilled workforce (rotefoss and kolvereid 2005; pe’er et al. 2014). networking and collaboration with potential customers, suppliers, and other organizations are also more likely to occur in regions with a greater population density (liao and welsch 2005; kibler et al. 2014; mole and capelleras 2017). together these various effects stimulate the creation of new firms in densely populated regions. that being said, entrepreneurial activities can be undermined in such regions by intense competition, high entry barriers, and the reduced leeway for product differentiation (bosma et al. 2008; kibler et al. 2014). yet as fritsch and storey (2014) point out, there is a clear evidence of a positive impact of population density on the formation rate of both service and manufacturing businesses. continuing this line of work, we argue that population density affects not only new firm formation rates but also the growth aspirations of entrepreneurs. access to greater and more diverse demand, resource availability, and the greater networking opportunities—all of which are associated with more densely populated regions—make for an environment that facilitates business growth (li et al. 2016). as already mentioned, however, business failure rates are higher in such regions (lööf and nabavi 2014) because of the associated strong competition (bosma et al. 2008; kibler et al. 2014); this downside will increase the perceived risk of business failure among entrepreneurs. in this highly competitive environment having a larger size may become essential for survival. new firms might seek to reach an efficient scale of operation to overcome their ‘liability of smallness’ that emerges from their lack of resources in comparison to their larger counterparts (aldrich and auster 1986; stinchcombe 1965). a larger http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 size also provides more visibility and may have a positive incidence on the social standing of both the firm and the entrepreneur (chatterjee and hambrick 2007; autio et al. 2013). visibility and prestige can, in addition, bring the benefit of improving the firm’s access to resources, for example rising its capacity to attract, retain and motivate talented workers, or its ability to find financial support. as a result, individuals from highly populated regions will set a higher size threshold before initiating a new venture than do entrepreneurs from regions of lower population density. overall, we suggest that greater regional population density will have a positive impact on entrepreneurial growth aspirations owing to the expected higher growth potential of businesses in these regions and the required size threshold. accordingly, we formulate our first hypothesis. hypothesis 1: the growth aspirations of entrepreneurs are higher in more densely populated provinces. 2.2 the moderating role of human capital so far, we have argued that the regional context—more specifically, the region’s population density—affects the growth aspirations of entrepreneurs. we now suggest that this effect will likely vary with the entrepreneur’s endowments of human capital. thus, our framework is based on the human capital approach (becker 1964), together with insights from entrepreneurial cognition (mitchell et al. 2002) and the so-called judgmental approach to entrepreneurship (knight 1921; mises 1949). such approach views entrepreneurs as decision makers who invest resources based on their judgment of future conditions. the decisions entrepreneurs make are grounded in their beliefs or conjectures about the future, which are likely, we argue, to be influenced by their human capital. following becker (1964), we define human capital as knowledge and skills that individuals acquire through investments in education, on-the-job http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 training, or other types of experience.2 according to mitchell et al. (2002, 97), “entrepreneurial cognitions are the knowledge structures that people use to make assessments, judgments, or decisions involving opportunity evaluation, venture creation, and growth.” thus, entrepreneurial cognition concerns “how entrepreneurs use mental models to piece together unconnected information that may help them to assemble the necessary resources to launch and grow their businesses” (mitchell et al. 2002, 97). in other words, entrepreneurial cognition links the human capital of knowledge and skill endowments with entrepreneurial judgment, which is understood to be the act of evaluating opportunities and deciding which resources must be assembled (and how they should be combined) so as to capitalize on entrepreneurial opportunities (foss and klein 2012). since entrepreneurial cognition is shaped by human capital and since judgment is an integral part of that cognition, it follows that entrepreneurs’ understanding of conjectures about opportunities and threats in the environment—and ultimately about their respective ventures’ future prospects—must be affected by their own endowments of human capital. through work experience and various educational processes, individuals gain knowledge and build mental frames and models that are used to interpret and make sense of the reality surrounding them (mitchell et al. 2002; shepherd and detienne 2005; gregoire et al. 2010). education and experience influence how an entrepreneur perceives the environment; hence they affect opportunity identification and assessment and, ultimately, growth aspirations. because human capital influences entrepreneurial cognition and judgment, it also affects how individuals 2 human capital attributes—including education, experience, knowledge, and skills—have long been identified as a critical resource for entrepreneurial success (see e.g. sexton and upton 1985; pfeffer 1994; florin et al. 2003), and empirical evidence has confirmed those positive relationships (unger et al. 2011). in addition, other research has showed that human capital (and especially higher education) has a positive effect also on the aspirations of entrepreneurs (autio and acs 2010; stam et al. 2012). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 perceive and understand their environment. a prime example is the shaping by human capital of entrepreneurs’ aspirations about their firms’ growth potential, as when entrepreneurs interpret “regional context” signals differently depending on their level of human capital. we therefore expect to observe differences in the growth aspirations of entrepreneurs within a given regional context as a function of their human capital endowments. in this paper, we distinguish among three critical endowments of human capital: higher education, entrepreneurship training, and owner-manager experience. entrepreneurs with higher education are expected either to embrace or to scale back ambitious growth targets in accordance with regional conditions (dutta and thornhill 2008; capelleras et al. 2016). recall that the higher risk of business failure in regions with greater population density, which is due mainly to greater competition (pe’er et al. 2014), leads entrepreneurs to set a higher size threshold and thus to harbor higher growth aspirations. highly educated entrepreneurs will naturally possess more general and also technical knowledge, which renders them better suited to gather, process, and analyze relevant information (forbes 2005; kim et al. 2006; capelleras and greene 2008). in addition, the knowledge gained through higher education may give entrepreneurs greater insight into the possible consequences of their decisions. highly educated individuals may also have access to a large and resource-rich network of contacts (batjargal 2003; capelleras et al. 2010) that favors their awareness of changes in the local environment— including the recognition and exploitation of opportunities (kibler et al. 2014). early-stage entrepreneurs with higher education will thus be more aware of the advantages and disadvantages of densely populated regions; hence such individuals will be more likely to recognize that the competition in densely populated regions demands a higher growth rate threshold, so their growth aspirations will be higher. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 previous research has found that the opportunity cost of being involved in entrepreneurial activities is greater for individuals with higher education because of their better job market prospects (autio and acs 2010). this finding accords with more highly educated entrepreneurs requiring higher growth potential of their ventures and therefore having higher growth aspirations. the opportunity cost dynamic is exacerbated in densely populated regions because there are usually more and better employment opportunities in those areas (armington and acs 2002; bosma and sternberg 2014: hundt and sternberg 2014). even so, entrepreneurs with higher education also rate higher on self-efficacy (autio and acs 2010)—a trait that leads such individuals to suppose themselves capable of capitalizing on the greater growth opportunities typically associated with more densely populated regions (bosma et al. 2008). in sum, highly educated entrepreneurs in densely populated regions are expected to have higher growth aspirations than do entrepreneurs without higher education in the same regions. we express this notion formally as follows. hypothesis 2: the relationship between growth aspirations and population density varies with the educational level of the entrepreneur: the growth aspirations of entrepreneurs in more densely populated provinces are higher for those with higher education. individuals who have received training in entrepreneurship likewise exhibit higher growth aspirations in more densely populated regions. entrepreneurship training focuses mainly on the identification of opportunities (fiet and barney 2002; detienne and chandler 2004), and skills related to identifying highly credible opportunities can definitely be isolated and taught (fiet and barney 2002). some evidence suggests that individuals who have received entrepreneurship training are more likely to undertake opportunity identification tasks than those who have not received such training (detienne and chandler 2004). in other words, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 individuals can learn about opportunity-seeking processes via entrepreneurship training and, perhaps, thereby improve both the number of ideas generated and the innovativeness of those ideas. we suggest that this focus on opportunities may affect an individual’s understanding of the surrounding environment. specifically, early-stage entrepreneurs who underwent entrepreneurship training will tend to use their specific knowledge to explore their immediate environment, search for new opportunities and choose to what extent grow their ventures. therefore, they will be more aware that high-density regions offer better potential for growth and also that greater growth is required in such regions to compensate for the associated higher failure rates. it follows that those individuals who—while aware of the opportunities and risks associated with new ventures in densely populated regions—decide to create a new firm will demand higher growth rates and consequently have higher growth aspirations. also, the learning process enabled by entrepreneurship training programs should have a positive effect on entrepreneurs’ beliefs about their capacity to exploit the growth opportunities available in regions with greater population density (autio and acs 2010). thus, we expect entrepreneurs who have received entrepreneurship training and are located in regions with greater population density to hold higher growth aspirations than entrepreneurs without such entrepreneurship training located in the same regions. these considerations lead to our third hypothesis. hypothesis 3: the relationship between growth aspirations and population density varies with the extent of entrepreneurship training: the growth aspirations of entrepreneurs in more densely populated regions are higher for those with entrepreneurship training. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 finally, we expect that also entrepreneurs who own or manage another established existing business will have higher growth aspirations in regions with greater population density. new firms suffer from the liability of newness: the greater propensity to fail as compared with established firms (stinchcombe 1965; aldrich and wiedenmayer 1993). the liability of newness is attributable, in part, to skill gaps and lack of information. therefore, human capital in general—and an individual’s owner-manager experience in particular—should help reduce or eliminate that liability (aldrich and auster 1986). entrepreneurs with previous manager-owner experience have a “track record” as well as routines and established practices upon which they can rely to minimize the liability of newness and to develop a good understanding of their environment. they will be more likely to possess an organizing framework that facilitates the interpretation of data from the environment (capelleras and greene 2008; kiss and barr 2015). consequently, individuals with prior experience will have different cognitive mechanism or mental models than others without such experience, which in turn will enable them to better process information they get from the environment that will influence, in our case, growth aspirations (wood et al. 2014; gruber et al. 2015). as discussed, it follows that entrepreneurs with prior owner-manager experience are more likely to recognize that a higher rate of growth is required in denser regions (shepherd and detienne 2005). in addition, past owner-manager experience is likely to increase confidence about the possibility of making the most of growth opportunities available in regions with greater population density. we therefore expect entrepreneurs with prior owner-manager experience and located in more densely populated regions to have higher growth aspirations than entrepreneurs in the same location but without such experience. thus, we have our last hypothesis. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 hypothesis 4: the relationship between growth aspirations and population density varies with the entrepreneur’s prior owner-manager experience: the growth aspirations of entrepreneurs in more densely populated provinces are higher for those with prior owner-manager experience. figure 1 offers a schematic summary of the paper’s conceptual model. figure 1. conceptual model and hypotheses 3. methods 3.1 data and sample in testing the four hypotheses we employ two levels of analysis—namely, individual and regional levels. more specifically, our empirical model combines primary data on individuals population density entrepreneuri al growth aspi rati ons higher education h1 entrepreneurship training regional-level effects owner-manager experience i ndividual-level effects h2 h3 h4 http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 in spain and secondary data consisting of information at the province level. our analysis covers the years 2008, 2009 and 2010. individual observations are obtained from the adult population survey (aps) of the spanish global entrepreneurship monitor (gem) project, which allows us to account for the characteristics of entrepreneurs who are in the process of starting up and managing a new business (reynolds et al. 2005). the aps is designed to obtain a representative sample of the spanish population aged 18 to 64. from the original aps database, we selected observations corresponding to early-stage entrepreneurs. that is, those entrepreneurs who own and manage a business that is less than 42 months old (reynolds et al. 2005). after omitting observations for which there were any missing values and nonvalid answers, we are left with a sample of 1835 early-stage entrepreneurs. regional variables were collected from the spanish statistics institute (instituto nacional de estadística, ine) at the province level. the spanish territory is divided into 52 provinces, which are the second-level territorial and administrative divisions and so correspond to “nuts 3” under eurostat classifications. we have confidence that the variables gathered from ine adequately capture the regional characteristics referenced in our study. 3.2 variables and measures dependent variable. in accordance with our conceptual model, the dependent variable is entrepreneurial growth aspirations. following previous studies (e.g. estrin et al. 2013), we calculate entrepreneurs’ growth aspirations as the difference between (the natural logarithms of) the entrepreneurs’ expected number of employees in the next five years and the actual number of employees, exclusive of owners, at the firm’s inception. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 regional-level predictor. prior work has found a link between population density and entrepreneurial activity (e.g. keeble and walker 1994; reynolds et al. 1994; brixy and grotz 2007; anyadike-danes et al. 2005). to test our first hypothesis on the relationship between density and growth aspirations, we use the variable population density measured as the number of inhabitants per square kilometer (km2) in each province and rounded to thousands for presentation purposes. cross-level interactions. with regard to human capital variables, we capture higher education with a dummy variable set equal to 1 if the entrepreneur has post-secondary (university degree) education and set equal to 0 otherwise. entrepreneurship training is a dummy variable set equal to 1 if the entrepreneur has received some training activities related to starting an enterprise (and 0 otherwise). finally, owner-manager experience takes the value 1 only for individuals who either own or manage another existing business. consequently, to test hypotheses 2, 3, and 4, we create the following three cross-level interaction variables: population density × higher education; population density × entrepreneurship training, and population density × owner-manager experience. in these three cases, population density is mean-centered before the calculation of the interaction terms (aiken and west 1991). individual-level controls. we control for entrepreneur age (in years) and gender (1 = male, 0 = female). opportunity perception is a measure of the entrepreneur’s optimism (cassar 2010). specifically, it is a dummy variable set equal to 1 for entrepreneurs who perceived good opportunities to found a business within the next six months in the area where they live. we also control for fear of failure, a variable measuring whether that fear would discourage an entrepreneur from starting up a business, since this variable can be an important constraint for http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 entrepreneurial activity (vaillant and lafuente 2007). immigrants tend to exhibit lower levels of sociocultural fit (contín-pilart and larraza-kintana 2015), which affects their understanding of the environment and so may influence their aspirations. hence spanish nationality is an indicator variable set equal to 1 for entrepreneurs who were born in spain and 0 otherwise. another relevant control variable, particularly in the spanish context, is necessity entrepreneurship, which takes value 1 if the business was created by necessity or 0 if it was as a consequence of opportunity motivation (bolívar-cruz et al. 2014; justo et al. 2015). regional-level controls. we control for the annual unemployment rate change that is measured in terms of the change observed in the average unemployment rate from year t − 1 to year t. provincial unemployment rates (in percentage) are published every three months, so we compute the yearly average unemployment rate as the average of the four quarters’ reported rates. the annual population change is based on the number of inhabitants in each province each year. as in the case of unemployment rates, the change is measured (in percentage) relative to the previous year’s value. by calculating the relative change in these two variables, we account for the influence of the past on province-year individual current growth aspirations. additionally, the gdp/c denotes the gross domestic product per capita in each province and is given (for presentation purposes) in thousands of euros. we include time dummies to enable controlling for the years of the pool—while excluding one (here, 2008) as a reference category. industry controls are also included in all our specifications to account for sectorial differences on growth aspirations (estrin et al. 2013). additionally, we have considered the potential influence of spillover effects of neighboring regions (brixy and grotz 2007; kibler 2013). specifically, we included the weighted average of population density and gdp/c of neighboring regions. none of the variables introduced to capture the spatial effects were significant, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 suggesting that spillover effects were negligible (kibler 2013). for this reason and the sake of simplicity, we report the results without these latter variables. 3.3 methodological approach our data set has a pooled cross-sectional time-series structure whereby individuals are hierarchically grouped by province. because we are using two levels of analysis, data are analyzed using hierarchical linear modeling methods (autio and wennberg 2010; estrin and mickiewicz 2011; autio et al. 2013; estrin et al. 2013; bosma and sternberg 2014; stuetzer et al. 2014). we do not employ standard multivariate methods because they would preclude our assuming the independence of observations (hofmann et al. 2000; autio and wennberg 2010). in other words, those methods would require us to view individuals as acting homogenously but would not account for how the environment affects their decisions (autio and wennberg 2010). to estimate the direct effect of population density on entrepreneurial growth aspirations, as well as the moderating effect of human capital endowments, we use a multilevel random effects specification (autio et al. 2013; estrin et al. 2013). random effects analysis allows regression coefficients and intercepts to vary across provinces (aguinis et al. 2011). in studies with more than one level of analysis, researchers have agreed that lower-level entities (e.g., individuals) are nested within higher-level ones (e.g., provinces) (aguinis et al. 2013). this perspective has the advantage of facilitating multilevel analysis of cross-level interactions (hundt and sternberg 2014). in that sense, a multilevel random effects specification is more accurate than the multivariate methods (e.g., moderated multiple regressions) normally used in the management literature to estimate interaction effects (aguinis et al. 2005). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 we adopt a three-step strategy for testing the direct effect of population density—and the moderating effect of human capital endowments—on entrepreneurial growth aspirations. first, we devise a “null model” for estimating between-province variance in order to ensure that both the intercept and the slope vary across provinces. our observation of significant province-level variance mandates the use of multilevel techniques (model 1 in table 2). next, we add individual and province-level controls (model 2 in table 2), and then the province-level predictor (model 3 in table 2). finally, we add cross-level interactions to estimate the moderating effect (models 4, 5, 6 and 7 in table 2). the model we use to estimate both the direct effect of population density and the moderating effect of human capital endowments on entrepreneurial growth aspirations takes the following form (snijders and bosker 2004; autio and acs 2010; autio et al. 2013; stuetzer et al. 2014). individual-level component log(πij)t = β0j + βcj {individual-level controls t} + rij. (1) regional-level component β0j = γ00 + γ01 {regional-level predictor t} + γ02 {regional-level controls t} + μ0j, (2) βcj = γp0 + γp1 {regional-level predictor t} + γp2 {regional-level controls t} + μpj. (3) in this model, πij is a continuous measure of the growth aspirations chosen by individual i in region j. as we use the logarithm to normalize this measure, then β0j is the coefficient for the effect of each individual—hierarchically nested in a specific province—on growth aspirations. βcj are the coefficients for the individual-level variables. the term γ00 is the mean of all intercepts (sometimes called the “constant”; autio and wennberg 2010) across provinces, and γp0 is the mean of all slopes across provinces. we use γ01 and γ02 to signify the coefficients for http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 regional-level variables in the model 3; similarly, γp1 and γp2 are coefficients for the cross-level variables in models 4, 5, 6 and 7. individual and regional-level residuals capture the setup’s random aspect; we use rij for the individual-level residuals and μ0j and μpj for regional-level ones. in other words, the variation in μ0j and μpj quantify the degree of heterogeneity in intercepts across provinces, and the variation in rij quantifies the within-group variance (aguinis et al. 2013). in sum, regional characteristics could affect individual-level regressions as a consequence of variation, at the individual level, in the intercepts and/or slopes across provinces. in addition, we estimate the variance inflation factors for all our variables. the values range between 4.73 and 1.04, which indicates the absence of any serious multicollinearity problems. we follow the strictest standard by which values should be lower than 5 (studenmund 1997). we remark that tolerance values are all above 0.1, which further indicates that our variables do not suffer from multicollinearity (autio et al. 2013). finally, skewness and kurtosis test validate the univariate normality assumption. 4. results 4.1 descriptive results table 1 provides descriptive statistics and correlations; it shows that the average age of individuals in the sample is 40 years and that almost 60% of them are men. most entrepreneurs (63% of the sample) do not view the next six months as a good opportunity to set up a new venture in their area. this may be due to the economic downturn that the spanish economy suffered during our period of analysis. the overwhelming majority (88%) of individuals was born in spain. a total of 17% indicate that their entrepreneurial activity is driven by necessity. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 table 1. descriptive statistics and correlation matrix mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1. entrepreneurial growth aspirations (ln) 0.46 0.65 1.000 2. age 39.85 10.65 -0.109*** 1.000 3. gender 0.60 0.48 0.062** -0.017 1.000 4. opportunity perception 0.37 0.48 0.161*** -0.009 0.052** 1.000 5. fear of failure 0.32 0.46 -0.070** 0.014 -0.088*** -0.129*** 1.000 6. spanish nationality 0.88 0.31 -0.051** 0.024 0.025* -0.067*** 0.023 1.000 7. necessity entrepreneurship 0.17 0.37 -0.040* 0.051*** -0.047** -0.069*** 0.068*** 0.014 1.000 8. higher education 0.33 0.47 0.090*** -0.074*** -0.002 0.039** -0.059*** -0.028* -0.026* 1.000 9. entrepreneurship training 0.36 0.48 0.086*** -0.045** 0.024 -0.015 -0.044** -0.023 -0.005 0.136*** 1.000 10. owner-manager experience 0.11 0.31 -0.082*** 0.110*** 0.003 0.039** -0.048** 0.047** -0.015 -0.007 -0.060*** 1.000 11. annual unemployment rate change (in percentage units) 0.36 0.25 -0.089*** -0.015 0.022 -0.028* -0.008 -0.039** -0.059*** -0.015 0.053*** -0.030** 1.000 12. annual population change (%) 1.52 1.07 -0.027 -0.025* -0.012 0.075*** -0.010 -0.075*** -0.073*** -0.016 -0.156*** 0.075*** 0.413*** 1.000 13. gdp/c (€ in thousands) 23.47 4.51 -0.034 0.024 -0.008 0.072*** -0.060*** -0.068*** -0.067*** 0.059*** -0.008 0.023 -0.022 0.207*** 1.000 14. population density (inhab/km2 in thousands) 0.33 0.74 0.097*** -0.049** 0.018 0.025 -0.015 -0.010 -0.023 0.008 0.044** -0.003 -0.182*** 0.157*** 0.030* 1.000 *p < 0.1, **p < 0.05, ***p < 0.001 http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 with regard to the human capital variables, the table shows that 33% of the entrepreneurs have higher education qualifications (university degree), nearly 36% of them consist of individuals who have received entrepreneurship training, and 11% are accounted as owners or managers of another existing business. turning to the regional variables, the average population density is 336.38 inhabitants per km2. the unemployment rate increased (on average) 36.6% annually at the provincial level, which reveals how hard the spanish economy was hit by the economic crisis. the annual population change is about 1.52% inhabitants, and the average gdp per capita (all provinces) is about €23,470. bivariate correlations indicate that entrepreneurial growth aspirations are positively related to population density, entrepreneurs’ education, and entrepreneurship training. however, there is a negative association between growth aspirations and owner-manager experience. 4.2 multilevel model results table 2 reports results from multilevel random intercept models predicting entrepreneurial growth aspirations. model 1 devises the “null model” to estimate between-province variance in order to ensure that both intercept and the slope vary across provinces. our observation of significant provincial-level variable mandates the use of multilevel techniques. model 2 provides results for the individual and regional-level control variables. model 3 incorporates the effects of the regional predictor and thus shows the influence of population density on entrepreneurial growth aspirations. in support of hypothesis 1, the values describe a positive relationship between those two variables. in all models we find that highly educated entrepreneurs are more likely to have higher growth aspirations than the rest of entrepreneurs. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 table 2. multilevel random intercept model predicting entrepreneurial growth aspirations notes: reported values are non-standardized β coefficients. robust standard errors are given in parentheses. a aic is akaike’s information criterion = 2k – 2 x (log likelihood), where 𝑘 indicates the degrees of freedom. *p < 0.10, **p < 0.05, ***p < 0.001; two-tailed significance. model 1 model 2 model 3 model 4 model 5 model 6 model 7 individual-level controls age -0.0069*** -0.0069*** -0.0068*** -0.0069*** -0.0069*** -0.0068*** (0.0011) (0.0012) (0.0011) (0.0012) (0.0012) (0.0011) gender 0.0119 0.0129 0.0150 0.0125 0.0124 0.0141 (0.0415) (0.0415) (0.0409) (0.0410) (0.0416) (0.0408) opportunity perception 0.1888*** 0.1903*** 0.1903*** 0.1887*** 0.1902*** 0.1887*** (0.0439) (0.0434) (0.0430) (0.0426) (0.0434) (0.0424) fear of failure 0.0193 0.0216 0.0219 0.0232 0.0220 0.0235 (0.0446) (0.0449) (0.0450) (0.0452) (0.0449) (0.0454) spanish nationality -0.0266 -0.0248 -0.0296 -0.0253 -0.0245 -0.0293 (0.0599) (0.0597) (0.0580) (0.0580) (0.0596) (0.0565) necessity entrepreneurship -0.0277 -0.0249 -0.0255 -0.0230 -0.0245 -0.0234 (0.0611) (0.0617) (0.0610) (0.0613) (0.0616) (0.0606) higher education 0.0804** 0.0797** 0.0883** 0.0797** 0.0800** 0.0881** (0.0327) (0.0327) (0.0284) (0.0329) (0.0328) (0.0285) entrepreneurship training 0.1132** 0.1146** 0.1159** 0.1233** 0.1145** 0.1237** (0.0423) (0.0422) (0.0420) (0.0381) (0.0422) (0.0379) owner-manager experience -0.0709 -0.0718* -0.0754* -0.0722* -0.0779* -0.0818** (0.0439) (0.0435) (0.0436) (0.0434) (0.0413) (0.0410) regional-level controls annual unemployment rate change (t-1) -0.0003 0.0343 0.0289 0.0220 0.0290 0.0128 (0.1238) (0.1214) (0.1204) (0.1215) (0.1223) (0.1217) annual population change (t-1) 0.0171 0.0098 0.0113 0.0117 0.0104 0.0136 (0.0275) (0.0265) (0.0262) (0.0265) (0.0265) (0.0262) gdp/c -0.0077 -0.0101** -0.0104** -0.0102** -0.0099** -0.0104** (0.0049) (0.0043) (0.0042) (0.0043) (0.0043) (0.0043) regional-level predictor population density (h1) 0.1518** 0.1001* 0.1077* 0.1548** 0.0662 (0.0634) (0.0566) (0.0588) (0.0636) (0.0608) cross-level interaction population density * higher education (h2) 0.1556** 0.1473** (0.0637) (0.0590) population density * entrepreneurship training (h3) 0.1217 0.109 (0.0797) (0.0726) population density * owner-manager experience (h4) -0.0654 -0.0664 (0.0813) (0.0815) random effects parameters intercept 0.4722*** 0.6451*** 0.6777*** 0.7374*** 0.7347*** 0.7299*** 0.7362*** (0.0231) (0.1564) (0.1436) (0.1421) (0.1452) (0.1482) (0.1425) variance of random intercept 0.0131** 0.0092** 0.0054** 0.0052*** 0.0054** 0.0055** 0.0053*** (0.0047) (0.0035) (0.0043) (0.0045) (0.0045) (0.0043) (0.0047) variance of overall residual 0.4072 0.3607 0.3615 0.3610 0.3611 0.3614 0.3606 (0.0351) (0.0241) (0.0241) (0.0242) (0.0241) (0.0241) (0.0242) industry fixed effects yes yes yes yes yes yes yes years fixed effects yes yes yes yes yes yes yes n of observations 2116 1835 1835 1835 1835 1835 1835 n of groups (provinces) 51 51 51 51 51 51 51 wald chi-squared 153.42*** 147.60*** 244.46*** 192.19*** 352.60*** 783.79*** log-likelihood -2442.0037 -1991.9429 -1989.2362 -1987.5111 -1988.1462 -1989.1328 -1986.5165 degrees of freedom 0 17 18 19 19 19 21 aica http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 this result is consistent with previous research in this topic (autio and acs 2010). entrepreneurship training is also positively related to aspirations. in contrast, results show that experienced entrepreneurs are more likely to have lower growth aspirations. model 4 of table 2 examines the cross-level interaction between population density and higher education. in line with hypothesis 2, we find that the positive effect of population density observed in model 3 varies as a function of the entrepreneur’s higher education level, a result that holds in the full model as well (model 7). while in all models entrepreneurship training is positively related to aspirations, neither model 5 nor model 7 support hypothesis 3 by which the relationship between population density and entrepreneurial growth aspirations varies with the incidence of entrepreneurship training. finally, model 6 does not provide support for hypothesis 4. we find that the positive effect of population density observed in model 3 does not seem to vary with the entrepreneur’s owner-manager experience; this result holds in the full model (model 7). a clear implication of these findings is that higher education (but not ownermanager experience nor entrepreneurship training) may lead to entrepreneurs understanding more completely the benefits and risks of new ventures into a densely populated region. to gauge these results more precisely, we next present the corresponding interaction plot. figure 2 depicts the interaction effect—on growth aspirations—of population density and higher education. observe that, consistently with our prediction, the relationship between population density and growth aspirations changes with entrepreneurs’ educational level. in particular, growth aspirations in densely populated provinces tend to increase with the educational attainment of entrepreneurs. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 figure 2. moderating effect of higher education on the relationship between population density and entrepreneurial growth aspirations we find several control variables to be statistically significant. not surprisingly, entrepreneurs who are younger, and also those who see good opportunities for starting a business in the area where they live, have higher growth aspirations. one of the regional variables, gdp per capita, has a negative effect on aspirations, a result that is consistent with the view that high growth opportunities for entrepreneurs are available in developing economies and regions (estrin et al. 2013). 4.3 robustness tests given that growth aspirations are observed only for those individuals who have been identified as early-stage entrepreneurs, it could be that self-selection into entrepreneurship has biased our findings. in other words, there might be unobservable characteristics of the individual (e.g. ability, motivation, (risk) preferences) that influenced her decision to become an entrepreneur, 0 0.5 1 1.5 low population density high population density e n tr ep re n eu ri a l g ro w th a sp ir a ti o n s low higher education high higher education http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 which might be also correlated with her growth aspirations afterwards. neglecting this potential self-selection bias may produce unreliable estimations. to address this issue, we apply a two-step heckman selection model as follows. first, we estimate the probability of entering entrepreneurship (the first-stage or “selection” equation). as an exclusion restriction, we include in this equation a variable that is correlated with the decision of entering entrepreneurship, yet uncorrelated with the outcome variable of interest (growth aspirations). specifically, we use a variable that captures the entrepreneur’s social capital, which in gem data corresponds to a dummy variable indicating whether or not the focal individual personally knows another entrepreneur who has initiated a start-up venture within the last two years. the validity of this exclusion restriction is confirmed by our further analysis. second, we estimate the growth aspirations equation (the second-stage or “outcome” equation) and introduce in the set of regressors the inverse mills ratio obtained from the estimation of the first stage. we do not detect any significant selection bias arising from the possibility that the unobservable factors determining the decision to become an entrepreneur also determine the entrepreneur’s employment growth aspirations. accordingly, the conclusions from our hypothesis testing do not change once we address potential biases caused by individuals’ self-selection into entrepreneurship (autio et al. 2013; estrin et al. 2013). with the purpose of assessing the robustness of our results, we also estimate a model replacing our central regional predictor variable (population density) with the percentage of people living in highly urbanized areas within the province. this can be considered an indicator of urbanization as it captures general benefits of locating in dense regions (reynolds et al. 1994; bosma et al. 2008; goerlich gisbert and cantarino martí 2015). the results show that this variable has a positive impact on entrepreneurial growth aspirations and, thus, are consistent http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 with those presented above on the positive relationship between population density and aspirations. detailed results for our robustness tests, though not formally reported here, are available from the authors upon request. 5. discussion and conclusions this paper contributes to the knowledge about the formation of entrepreneurial growth aspirations by examining two under-researched but important issues: (1) the unique effects of regional population density, and (2) the joint effects of population density and founder characteristics. we have used a rich data set that combines individual data on early-stage entrepreneurs taken from the spanish gem adult population survey with regional data from the spanish statistic institute. our research extends prior research to show not only the tight connection between overall regional conditions and individual growth aspirations but also that this connection depends on the human capital of these entrepreneurs. our results thus underscore the importance of higher education. our research yields a number of important insights. first, we confirm our expectation that regional population density has a positive effect on the growth aspirations of early-stage entrepreneurs. this result highlights the importance to new businesses of local demand and of access to resources, since entrepreneurs evidently do assess whether their surrounding environment offers them the opportunity to initiate a venture. furthermore, the higher size threshold required in densely populated areas would have a positive effect on growth aspirations during the first few years of a new business. we conclude that the regional context affects not only entrepreneurs’ start-up decisions, as shown by extensive previous research (e.g., malecki 1997; mueller et al. 2008; bosma and schutjens 2011; trettin and welter 2011; kibler 2013; kibler et al. 2014), but also their aspirations as indicated by this study. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 second, this paper shows that the positive effect of population density on entrepreneurial growth aspirations is partly shaped by the human capital endowments of entrepreneurs. we observe in particular that the effect of population density on growth aspirations varies with the higher education of the entrepreneur. as hypothesized, the joint effect of higher education and population density also has a positive effect on entrepreneurial aspirations. therefore, we find support for the notion that university-level education provides entrepreneurs with the knowledge and frame of mind conducive to recognizing that a higher required size threshold is required in densely populated regions to compensate for the greater risk of business failure. third, our results indicate that owner-manager experience does not moderate the relationship between population density and entrepreneurial growth aspirations. however, we find that such experience has a direct negative effect on aspirations. this result is interesting as it opens the floor to question about the accuracy of entrepreneurial growth aspirations. are the aspirations of experienced entrepreneurs more accurate and realistic than those entrepreneurs without experience? clearly, they have first-hand valuable information concerning the difficulties and prospects of new ventures. but also, we should take into account that the experienced managers and/or entrepreneurs have experienced the recent economic downturn (remember that our observations cover the 2008-2010 period). witnessing and suffering these negative environmental conditions leads them to an excess of caution and even to pessimism about the prospects of their ventures? fourth, our results indicate that entrepreneurship training has a positive effect on growth aspirations. indeed, the resource-based theory of the firm suggests that the recognition of opportunities, a skill that can be learned via entrepreneurship training, is a distinctive ability of individuals (alvarez and busenitz 2001; brush et al. 2001). yet we unexpectedly find that the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 joint effect of population density and entrepreneurship training is not statistically significant. the knowledge and skills related to opportunity identification and exploitation, which individuals can gain through entrepreneurship training, should allow trained entrepreneurs to discover and exploit promising entrepreneurial opportunities and also to recognize the greater size threshold required in densely populated environments. the data, however, seem not to support this account. we might surmise that an individual with entrepreneurial training holds higher growth aspirations regardless of the context—or at least irrespective of the region’s population density. the question is: what drives this attitude? does entrepreneurial training facilitate the discovery of opportunities even in less favorable environments? maybe, and contrary to the case of entrepreneurs with managerial and/or entrepreneurial experience, such unremittingly high aspirations simply reflect overconfidence (koellinger et al. 2007). future research should address these questions because the answers are of considerable practical importance to those involved in entrepreneurship training (e.g., business schools, governmental agencies). as in the case of experienced entrepreneurs, additional research is needed to assess how realistic are the growth aspirations of those who receive entrepreneurship training; in the meantime, one should not disregard the extent to which such training might nurture an excess of self-confidence in entrepreneurial abilities. moreover, these differences in how individuals with different types of human capital adjust their entrepreneurial growth aspirations to environmental conditions (in our case to population density) prove that different individuals react in different ways to the same stimulus coming from the environment that surrounds all of them. therefore, it is worth to continue investigating how the different features of those individuals, like their human capital, shape individual responses to environment stimuli. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 this study has some limitations, which open opportunities for relevant future research. our research is based on data for a single country. a useful extension would be to test our conceptual model on the determinants of growth aspirations with data from other countries. and notwithstanding the value of examining cross-level interactions among factors at the individual and regional level, future research should extend this approach by incorporating national-level determinants. the binary character of some of our key variables may also be seen as a limitation. as indicated we use primary data obtained by the gem project in spain. binary variables in these large questionnaires are often included to simplify data gathering process and subsequent coding. the need for simplicity is reinforced by gem’s global character: binary scales help minimize bias due to cultural interpretations (autio et al. 2013) and also reduce problems of translation equivalence (ter hofstede et al. 2002). we remark that our moderating variables (higher education, entrepreneurship training, and owner-manager experience) are measured as binary outcomes for the reasons just presented. interesting insights could be gained if future research accounts for the nature of higher education and the type of training (e.g., voluntary or compulsory) while also distinguishing clearly between entrepreneurial and manager experience. in our analyses, we have taken the individual endowments of human capital as given, and have looked at how reactions, in the form of entrepreneurial growth aspirations, to environmental conditions vary across the heterogeneity (in terms of human capital) of entrepreneurs in the region. nonetheless, it may be argued that those environmental conditions may also have some influence on the human capital levels of the inhabitants in a region. for example, there might be different levels of spatial mobility among entrepreneurs according to their human capital http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 endowments. in the particular case of spain, however, this is unlikely to happen because regional mobility rates are among the lowest in the european union (bonin et al. 2008). in addition, it could be added that the aggregate levels of human capital may have a say in the environmental conditions. these complex bidirectional influences between individual and environment need to be explored in the future in order to reach a better understanding of the environment-individual nexus and its effect on entrepreneurial action. in sum, this paper has analyzed and documented for the first time how the population density of the region in which the entrepreneur is located influences the growth aspirations of these entrepreneurs. entrepreneurs in more densely populated regions hold greater growth aspirations. however, the educational level of the entrepreneur plays an important role in shaping how the entrepreneur understands this environment and consequently how the characteristics of such environment, such as population density, impact entrepreneurial growth aspirations. acknowledgements the authors acknowledge financial support from projects eco2013-46954-c3-1-r, eco2013-46954c3-2-r, eco2013-48496-c4-2-r and eco2013-48496-c4-4-r (spanish ministry of economics and competitiveness). we also thank the gem project for its support to this research. references aguinis, herman, james c. beaty, robert j. boik, and charles a. pierce. 2005. “effect size and power in 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“differences in the perception and exploitation of entrepreneurial opportunities by immigrants.” journal of business venturing insights (1-2): 31-36. bonin, holger, werner eichhorst, christer florman, mette okkels hansen, lena skiöld, jan stuhler, konstantinos tatsiramos, henrik thomasen, and klaus f. zimmermann. 2008. “geographic http://revistes.ub.edu/index.php/jesb volume 3, number 1, 17-53, january-june 2018 doi:10.1344/jesb2018.1.j036 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 mobility in the european union: optimising its social and economic benefits.” iza research report 19. bosma, niels, and veronique schutjens. 2011. “understanding regional variation in entrepreneurial activity and entrepreneurial attitude in europe.” the annals of regional science 47:711-742. bosma, niels, andré van stel, and kashifa suddle. 2008. “the geography of new firm formation: evidence from independent start-ups and new subsidiaries in the netherlands.” international entrepreneurship and management journal 4:129–146. bosma, niels, and rolf sternberg. 2014. “entrepreneurship as an urban event? empirical evidence from european cities.” regional studies 48:1016-1033. brixy, udo, and reinhold grotz. 2007. “regional patterns and determinants of birth and survival of new firms in western germany.” entrepreneurship and regional development 19:293-312. brush, candida g., patricia g. greene, mark hart, and harold s. haller. 2001. “from initial idea to unique advantage: the entrepreneurial challenge of constructing a resource base.” academy of management executive 15 (1): 64-78. capelleras, joan-lluís, and francis j. greene. 2008. “the determinants and growth implications of venture creation speed.” entrepreneurship and regional development 20 (4): 311-337. capelleras, joan-lluís, and durim hoxha. 2010. “start-up size and subsequent firm growth in kosova: the role of 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doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 fritsch, michael, and david j. storey. 2014. “entrepreneurship in a regional context: historical roots, recent developments and future challenges.” regional studies 48 (6): 939-954. goerlich gisbert, francisco j., and isidro cantarino martí. 2015. “estimaciones de la población rural y urbana a nivel municipal.” estadística española 57 (186): 5-28. gregoire, denis a., pamela s. barr, and dean a. shepherd. 2010. “cognitive processes of opportunity recognition: the role of structural alignment.” organization science 21:413-431. grichnik, dietmar, jan brinckmann, luv singh, and sophie manigart. 2014. “beyond environmental scarcity: human and social capital as driving forces of bootstrapping activities.” journal of business venturing 29:310-326. gruber, marc, sung min kim, and jan brinckmann. 2015. “what is an attractive business 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online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 regional milieu: lessons for entrepreneurship support policies from german micro data.” the annals of regional science 38:219–240. wiklund, johan, and dean shepherd. 2003. “aspiring for, and achieving growth: the moderating role of resources and opportunities.” journal of management studies 40:1919-1941. wood, matthew s., alexander mckelvie, and j. michael haynie. 2014. “making it personal: opportunity individuation and the shaping of opportunity beliefs.” journal of business venturing 29:252-272. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 juan reyes álvarez benemérita universidad autónoma de puebla (mexico) jaume valls-pasola universitat de barcelona (spain) entrepreneurial and innovation ecosystems: ibero-american perspective abstract this article introduces the special issue of the journal of evolutionary studies in business about entrepreneurial and innovation ecosystems. it sums ups significant changes that have taken place in the world of business innovation and entrepreneurship in recent years. start-ups are growing at the centre of a change of paradigm where connections and global networks are key in order to develop new and disruptive technologies. in such a framework, this article presents the nine contributions of this special issue that provide research results related to the topic of entrepreneurial and innovation ecosystems from an ibero-american perspective. keywords: innovation ecosystem; entrepreneurial ecoystems, ibero-american countries, innovation policies. introduction the concept of ecosystem has been widely recognised in the last decade. in the field of business research, moore (1993) is seen as the pioneer of the introduction of the term. corresponding author: e-mail: jaume.valls@ub.edu received 07 january 2020 accepted 09 january 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 he suggests that in a context of a competitive dynamics firm, the strategy should move away from a narrow-minded industry perspective to a business ecosystem. it has become a key issue in the current business world, where we identify the business competitiveness with the so-called network economy. the term has been consolidated in different business settings, but, in any case, it is especially associated with two core business concepts of the 21st century: entrepreneurship and innovation. the digitalisation of the economy has significantly contributed to this relevance. malecki (2011) defines the ecosystem as a regional agglomeration of individuals, organisations, and regulatory institutions interconnected between them in a concrete geographic area. jackson (2011) defines an innovation ecosystem as the complex relationships that are formed between actors or entities whose functional goal is to enable technology development and innovation. connections are a key concept within ecosystems, since connections between economic agents are crucial for the development of innovations and entrepreneurial initiatives. in such a framework, the origin of this special issue is the x international conference of the red de investigación y docencia en innovación tecnológica (ridit). this conference took place at the university of barcelona on 20–22 november 2019, and its main issue was ‘entrepreneurial and innovation ecosystems’. the articles of this issue correspond to a selection of the research works that were presented at this conference.1 they provide research results related to the topic from an ibero-american perspective. in this introduction, we sum up key concepts on the topic and the contributions of the nine papers. 1 with the exception of the paper by fernandez moya et al. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 from an academic point of view, two main ideas need to be highlighted. regarding innovation, ecosystems are the ‘next stage’ after the national systems of innovation approach (lundwall 1992; freeman 1995; acz et al. 2014) and the developments related to clusters (porter 1990) that took place during the 1990s. they lead to a deeper analysis of the regional innovation dynamics where formal institutions are important but where all types of economic agents (people, communities, platforms, etc.) play a key role for business development. concerning entrepreneurship, ecosystems contribute to the understanding of the role of entrepreneurial activities for competitiveness. start-ups have a leading role in the reconfiguration of innovative processes and especially in the development of disruptions, what davila and epstein (2014) identified as the ‘innovation paradox’. furthermore, entrepreneurial ecosystems are associated with a major conceptual change: the main idea is that we have the entrepreneur at the centre of the analysis instead of companies (stam and spigel 2016). in the past, within old paradigms like clusters or national systems of innovation, that was not the case. entrepreneurship promotion was a policy option, but startups and/or entrepreneurs were not a unit of analysis but a consequence that was not a clearly defined policy objective. in addition, analysis of entrepreneurial and innovation ecosystems needs to focus on the economic and social conditions that surround the entrepreneurial process. ecosystems are strongly linked with the importance of ‘stakeholders’; that is to say that beyond formal organisations (universities, governments, companies, etc.) there is a large variety of agents of all types, communities, platforms, and individuals that play a significant role in the success of entrepreneurial and innovative processes, where open innovation (oi) strategies are key. stam and spigel (2016) define an entrepreneurial ecosystem as a group of actors and interdependent http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 factors that are coordinated between them, so that they make possible the productive entrepreneurship in a determinate territory. this productive entrepreneurship is directly connected with the idea of opportunity entrepreneurship and with the development of entrepreneurial initiatives that are looking for success through new and differentiated products and services — in other words, a type of entrepreneurship in which intensive use of technology is required and the probability of failure is high. obviously, this approach moves away from the necessity entrepreneurship clearly related with self-employment. start-up is the business concept that represents this opportunity entrepreneurship that creates opportunities for innovation. oh et al. (2016) review the literature and analyse the concept of innovative ecosystem. they consider that there are at least seven types of these ecosystems: corporate/oi, regional, digital, city-based, high-tech smes-centred, university-based, and incubators/accelerators. this typology shows that start-ups are at the junction where the concepts of entrepreneurial and innovation ecosystems intersect. the academic research about ecosystems has increased in a significant way in the last decade. but that happened using a large variety of terms, concepts, and approaches: entrepreneurial ecosystems, innovative ecosystems, communities of innovation, oi, etc. for some researchers, entrepreneurial ecosystems and innovation ecosystems are complementary concepts. for others, entrepreneurial ecosystem appears in a later stage within the process of development of innovation systems. there are many different research approaches to be taken into account in order to study the phenomenon. but, in any case, a large majority of them are concerned with the search for an appropriate definition of an ecosystem and how to measure its economic, technological, and social impacts (audretsch et al. 2019). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 today, literature, public policy, and institutions linked to entrepreneurial ecosystems in developing countries have several challenges that could be defined as global, because, in most cases, these elements are almost impossible to ignore. a first challenge is the presence of a global economic recession, where there is a reduction in the growth of the chinese economy, important industries such as the automotive industry have problems in demand for their products, and recessions are declared by important economies like germany. it is in this sense that the economic recession (and in this case, the crisis) is an important challenge for the ecosystems of developing economies, when they are more sensitive to a crisis than most advanced economies. on the other hand, global value chains today have an important maturity in which it is perceptible that they cross into different ecosystems (whether at the country, region, or sector level). in this sense, institutions must contemplate the role that an ecosystem plays along these chains. does it play a central or peripheral role in creating value and appropriating it? the challenge is to position oneself in a place where appropriability and capacity building is beneficial to the ecosystem. in that line, the understanding of the interdependence between ecosystems may be more relevant than the interdependence within it. technological change is differentiated for each ecosystem. the whole process of change does not follow the same logistic curve (‘s’ form), and in some cases it does not even close it up. the change in developing economies can be slow, and in others, exponential. the challenge is to build institutions that escape a slowed process and that can be adaptive. overview based on the above, a primary objective is to recognise the current nature of technological change by type of ecosystem, not only to recognise the existing competition, but also the level http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 of complementarity in the chains of each participant. given these challenges, it is imperative to characterise the entrepreneurial ecosystems in developing countries, leading to a better understanding of their problems. the papers presented in this special issue aid in that direction. in an increasingly changing scenario, it is necessary to know whether ecosystems are prepared to allow oi. in this regard, the work of flor et al. entitled ‘innovation policy instruments through the lens of open innovation: an analysis in the spanish context’ aims to examine the degree to which existing public policies to support innovation promote oi by companies, specifically in spain. through a regional analysis, the paper describes the spanish institutional context and analyses the instruments launched by spanish national and regional governments. this will be of vital importance because the study allows to recognise the limitations and capacities at national and regional levels. the work recognises the absence at the regional level of corporate venturing support (which limits outbound oi, that innovation goes out and is shared) and of network creation (limiting the coupled oi or that is shared by both parties). on the other hand, at the national level, there are austere actions for the public procurement of innovation, support for collaboration among system agents, and knowledge valorisation and transfer (promotion of inbound oi, incorporation of external technology). for policymakers, the document identifies the main lack of policies that encourage oi in spain, and in that sense, it guides entrepreneurs to find new markets. entrepreneurial ecosystems are differentiated by the evolution of their trajectory and by their context. differences are greater between the ecosystems of developed and non-developed countries; knowing them allows identifying opportunities. in this way, the article by kantis and federico entitled ‘ecosystems developed and developing: an evolutionary approach’ not http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 only identifies differences but also analyses how four ecosystems have evolved: silicon valley, israel, buenos aires, and santiago. this allows them to identify the processes of evolution, supported in the concepts of interdependence, self-reinforcement, and route dependence. the analysis focuses on the evolutionary process in terms of emergency and development. in that sense, four forces that allow the emergence and development of the ecosystem are identified: business, institutional, investment, and government dynamics. an important result (among others) in the case of developed ecosystems is the presence of private substantial incentives throughout the entire process, specifically the presence of private and specialised financing. on the other hand, in the case of developing ecosystems, the government would play a central role in generic financing. an important barrier for the emergence of an innovation is, by definition, the market. this is related to the dissemination of the innovations, its acceptance. in the case of developing countries, such as in latin america, this limitation increases, as the process of diffusion of technology cannot be accelerated. therefore, a good demand-oriented innovation policy would be central to the case of developing countries. the research entitled ‘demand-oriented innovation policy: mapping the field and proposing a research agenda for developing countries’ by reyes et al. deals with this topic. it is based on the systematically documented tracking and review of research on demand-oriented policies in developing countries. one of the results is the great presence of studies focused on environment and alternative energy. for innovations in these areas, the government's role is core, because it allows maturity of the markets. the paper emphasises that while research has focused on developed countries, it has found that its results can be oriented towards a good combination of policies, supply, and demand. research in this regard is oriented on at least two lines: sectors and maturity of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 technology. the work emphasises that a good combination of supply-side and demandoriented policies would allow developing countries to strengthen their innovations. in addition, the research takes into account two axes: sectors and maturity of innovation. developing economies tend to find barriers to the appropriability of their innovations. thus, identifying company strategies to achieve it is relevant. petelski et al., in ‘strategies of innovation and appropriation: sectoral analysis of argentine manufacturing firms’, do just that. from the analysis of the national survey of employment dynamics and innovation for argentine manufacturing firms, the researchers look for determinants as innovative effort and structural factors to choose some kind of appropriability strategy. in addition, the authors identify that high-tech industries access a greater number of appropriation strategies than other industries. the main mechanisms of appropriation are complementary assets, customer communication, and first mover. in terms of public policy concerning ecosystems, it is necessary to promote different incentive mechanisms to appropriate benefits. the paper allows to identify the mechanisms. ecosystems always have a regional basis, and for actions on innovation to be efficient, an agenda is required in which ecosystem actors are part of their planning. in that sense, solleiro et al., propose a research–action methodology, where the researchers themselves can provide feedback on the agenda, once they recognise the problems of the actors in the region. in their paper entitled ‘building a regional innovation agenda: the case of san luis potosí, mexico’, the authors identify the main issues in the region. in addition, the dislocation between the actors is identified. then the elaboration of the agenda required the consensus of the different actors. the research shows that innovation is not merely a technological issue, nor a market http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 one. innovation is a matter of discussion and participation of the actors, and of the support of institutions. entrepreneurship has permeated cultural activities, especially with the rise of creative industries. in this regard, corona's work entitled ‘culture and university entrepreneurship’ manages to detail the case of various activities for the mexican case. this research note focuses on the units of university institutions that promote cultural entrepreneurship. these activities represent an important market niche. the work is relevant once those involved in these activities usually have little advice to follow, so that the actions of universities in this area can accelerate the process. the study also shows that there are few universities that carry out these activities, and that they are usually those with the highest national and public budgets. some ecosystems begin to bear great fruits and make an important leap globally, so it is necessary to know their experiences in order to replicate them. this is the case of barcelona city, which is today at the level of cities like amsterdam, berlin, or paris in the generation of start-ups. in this regard, pere condom-vilà in ‘how technology evolution and disruption are defining the world's entrepreneurial ecosystems: the case of barcelona's startup ecosystem’ outlines the factors present in the barcelona ecosystem. condom discusses the definition of start-up, which has evolved in the face of abrupt changes in the economy and as new needs arise, so they are also transformed. although innovation is crossed over virtual technologies, specifically software (from the production of consumer goods to the same biotechnology), for its generation innovation needs physical spaces in which various technologies are generated systemically. condom insists that the city and citizens are core in the entrepreneurial system, the place where the entrepreneurship ecosystem is located. he points out that in the face of an http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 increasingly accelerated process of change, the basis for success could be located in a start-up ecosystem (not only entrepreneurial), with its foundations being the talent and risk preference guided by technological singularity. in that sense, the author clearly manages to specify the importance that these factors have represented for the catalonia region. finally, the text of moya et al., analyses the external factors that determine family firm longevity through an approach that recovers the role of public policy. longevity is a key indicator to understand the success of companies; it also helps to know the best public policies. from the study of four cases of both the spanish and german economies within the metallurgical and publishing industries, the influence of institutions and institutional change in the evolution of business strategies is identified. the analysis can help to understand the importance of external factors in explaining the long-term survival of the family firm. the paper becomes relevant when in europe an important part of the most prominent companies is familiar. in terms of public policy, it would allow better design to maintain the growth of firms. the study suggests that ‘institutional protection alone is not enough and needs innovative technological and scientific organizations’. in addition, the differences between the two countries are stressed. as noted, the different articles allow contrasting different experiences of components of the entrepreneurial ecosystems of ibero-american countries. firms, governments, universities, and especially entrepreneurs have different challenges within ecosystems. this is what this special issue of the journal tries to shed light on. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 policy implications in the process of developing entrepreneurial and innovation ecosystems, many changes have taken place: the way we approach university technology transfer has evolved; the role of cities has been more significant in relation to these ecosystems on a global scale; and innovation and entrepreneurship policies have been merged or are strongly connected in many countries. the ecosystems group a number of agents, and success seems related to completeness. in other words, the presence of all types of required agents, critical mass, access to all kinds of relevant resources (talent, services, capital), and a good level of connections are crucial. in addition, an enabling role of government is required and global dimension matters. there are more and more global events where entrepreneurs and their start-ups can activate projects, look for finance, or interact in order to develop new initiatives. this change of scenario leads, in an implicit way, to a reorganisation of support policies. entrepreneurial and innovation ecosystems have to be placed in a context of what some authors have designated as holistic innovation policies (borrás and edquist 2018). in such an approach, the starting point is a wider definition of the concepts of policy and ‘system’ of innovation and their determinants. in other words, it is necessary to incorporate the notion of ‘ecosystem’ to face policy challenges. from this approach, policies have to provide components for the system of innovation and improve support services. it is important to create or to have the necessary organisations to develop innovation and entrepreneurship and to foster networking and interactions between organisations potentially involved in processes of innovation (‘interactive learning’). this holistic approach is not far from the so-called ‘mission-oriented’ policies that have been defended in recent years, between others, by mazzucato (2017). this researcher proposes that the policies have to reduce sectoral strategies http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 and move in order to deal with social problems, supporting the cooperation of private–public partnerships, boosting interaction between agents, and contributing to the creation of new markets. as mentioned, the redesign of public policies is linked to the importance of the strong connections between entrepreneurship and innovation policies. moreover, it is impossible to think about public policies that are far from political, cultural, health, ecological, and, especially, social problems. ibero-american countries have other problems in which public spending has to focus on and define priorities. however, these priorities can also be supported by technological development and entrepreneurial efforts. in this sense, the role of entrepreneurs can also be oriented to meet local, regional, and national needs of a different nature, and in order to achieve that aim, public policies (expenditure, legislation, and coordination) play a key role. the conceptualisation of the generation of innovations has changed, as mentioned at the beginning. it has been changed from national innovation systems to ecosystems, from the firm's capabilities to entrepreneurship. somehow, it has returned to the original schumpeterian perspective. however, as new ways of understanding economic growth and development have been proposed, new policy alternatives are required. this, in turn, generates new research questions. in this way, this special issue intends to do so. acknowledgement this special issue has received support from de spanish ministry of science, innovation and universities in the framework of the activities of the research project pgc 2018-093971-b100 (mciu/aei/feder, ue). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 01-13, january-june 2020 doi.org/10.1344/jesb2020.1.j066 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 references acs, zoltan j., autio, erkko, and lászló szerb. 2014. “national systems of entrepreneurship: measurement issues and policy implications.” research policy 43(3): 476–494. audretsch, david b., james a. cunningham, donald f. kuratko, erik e. lehman, and matthias menter. 2019. “entrepreneurial ecosystems: economic, technological, and societal impacts.” the journal of technology transfer 44:313-325. doi.org/10.1007/s10961-018-9690-4 borrás, susana, and charles edquist. 2018. holistic innovation policy: theoretical foundations, policy problems and instrument choices. oxford university press. dávila, antonio, and marc j. epstein. 2014. the innovation paradox: why good businesses kill breakthroughs and how they can change, san francisco: berrett-koehler publishers. freeman, chris. 1995. “the national system of innovation in historical perspective.” cambridge journal of economics 19:5–24. jackson, deborah j. 2011. “what is an innovation ecosystem.” national science foundation, arlington, va. 1-11. lundwall, bengt-ake, ed. 1992. national systems of innovation. towards a theory of innovation and interactive learning. london: pinter pubishers. malecki, edward j. 2011. “connecting local entrepreneurial ecosystems to global innovation networks: open innovation, double networks and knowledge integration.” international journal of entrepreneurship and innovation management 14 (1): 36–59. mazzucato, mariana. 2017. “mission-oriented innovation policy. challenges and opportunities.” rsa-ucl papers. institute for innovation and public purpose. university college london. http://www.thersa.org/globalassets/pdfs/reports/mission-oriented-policy-innovation-report.pdf moore, james f. 1993. “predators and prey—a new ecology of competition.” harvard business review 71 (3): 75–86. oh, deog-seong, freed phillips, sehee park, and eunghyun lee. 2016. “innovation ecosystems: a critical examination.” technovation 54:1–6. porter, michael e. 1990. the competitive advantage of nations. new york: the free press. stam, erik, and ben spigel. 2016. “entrepreneurial ecosystems.” u.s.e. discussion paper series 1613. tjalling c. koopmans research institute. utrech university. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 felix barahona márquez eu mediterrani and universitat de barcelona (spain) the presence of chinese businesses in the world abstract this article introduces the special issue of the journal of evolutionary studies in business about the global presence of chinese businesses and explains some important aspects in order to understand outward chinese investments. the article also presents the seven special issue articles that provide new insights about the international presence of chinese companies, in general in the world but with a particular attention paid to investments in latin american countries. keywords: chinese multinationals; international business; foreign direct investment (fdi); latin america and the caribbean (lac) it gives great pleasure to present this special issue of the journal of evolutionary studies in business, which aims to extend the knowledge of chinese overseas investment, an increasingly visible topic. this scenario triggers many questions and the articles of this special issue offer some answers and explanations. in the following lines i first describe some important characteristics of the chinese international presence in the world economy, and then introduce the seven articles included in the special issue. corresponding author: e-mail: felix.barahona@ub.edu received 18 june 2019 accepted 28 june 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 the outward investment from developing countries is not a new phenomenon. in the early 1980s, the first studies appeared in the literature explaining the international expansion of a large number of enterprises from emerging economies (kumar and mcleod 1981; lall 1983; wells 1983). however, the existence and importance of chinese companies in the global arena is fairly recent. this has been particularly evident in recent years since they are able to compete effectively against global rivals in both developed and emerging countries (child and rodrigues 2005; guillen and garcía-canal 2009; luo and tung 2007; mathews 2006). indeed, the growth of chinese enterprises is clearly evidenced in terms of foreign direct investment (fdi). according to unctad (2019), in the last twelve years (2006-2018), fdi outflows from china have risen dramatically, from us$ 17,634 million to us$ 130,000 million, corresponding currently to 13% of the global outflows. consequently, this vigorous growth has translated into an even more spectacular increase of chinese fdi outward stock, from us$ 317 billion in 2010 to us$ 1,939 billion in 2018. however, it also appears that the investment from chinese multinationals declined for the second consecutive year, due mainly to chinese government policies to restrain overseas investments, as well as controls exercised by united states and europe (unctad 2019). it is also true that the chinese economy recorded in 2018 the lowest economic growth since 1990. nevertheless, a gdp growth rate of around 6.5% remains quite high, especially compared with all developed countries. despite this overall decline in outward fdi and economic slowdown, it is still clear the ambition of chinese businesses to continuously grow and climb positions in the global arena. in fact, several chinese companies have emerged as large multinationals leading their respective sectors. a clear example thereof is the increasing number of chinese multinationals that appear http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 in fortune’s ranking of the world’s 500 largest companies: in 2006, only 23 were listed (5%), growing progressively up to 111 in 2018, representing 22% of the firms in this ranking (fortune 2018). moreover, there are many chinese companies with great prospects for growth, some of them within huge economic projects by chinese government such as the belt and road initiative or made in china 2025. at this point, in order to contextualize the global presence of chinese firms is important to stress the most prominent elements which characterise this phenomenon. first, chinese investments abroad have been traditionally dominated by state-owned enterprises. in fact, before 2004, private firms were not allowed to invest overseas and access to foreign exchange was allowed only to approved state-owned enterprises (buckley et al. 2008; ramasamy et al. 2012). thus, these public firms have been the main driver of the country’s fdi, accounting for more than two thirds of total chinese fdi worldwide (mofcom various; morck et al. 2008). however, the participation fdi by chinese private firms is growing, thus confirming that several private brands have gained ground in recent years (ramasamy et al. 2012). second, a relevant characteristic of chinese investments is their accelerated pace of internationalisation (child and rodrigues 2005; mathews 2006; luo and tung 2007). within these operations it can be observed a great ambition to grow on one hand, and the need to obtain some very basic resources to survive on the other. consequently, one of the main motives of china’s fdi is the opportunity to expand their market share in other host economies (luo and tung 2007). this is confirmed by various econometric tests conducted on chinese investment patterns (buckley et al. 2007; kolstad and wiig 2012). the second leading motivation for chinese investment is strategic asset seeking (mathews 2006; luo and tung 2007). that means http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 that chinese companies are especially interested in acquiring natural resources, technological knowledge and marketing skills in order to improve their competitive advantage in manufactured products (cui and jiang 2010; deng 2009; rui and yip 2008; wang et al. 2012). due to this, mergers and acquisitions are mainly the entry mode choice used by chinese enterprises in their international adventures (deng 2009; zheng et al. 2016). third, chinese companies also often face specific cross-border problems when entering other markets, particularly developed countries (barahona et al. 2016; klossek et al. 2012; si and liefner 2014; wong 2012). because of the cultural distance between their respective institutional environments, chinese companies entering developed markets for the first time face what is known as a ‘liability of foreignness’ (zaheer 1995), a heavy burden that is not easily shed and which may result in additional costs for those firms that are new to a foreign market. moreover, chinese companies’ liability of foreignness is even more acute because of country-of-origin effects (bartlett and ghoshal 2000; marano et al. 2017; moeller et al. 2013). according to moeller et al. (2013), the country-of-origin information has a significant impact on the quality perception of a product/brand as well as the corporate reputation in the host country. consumers of developed countries usually expect poorer features from products or services associated with chinese firms, due to the lack of maturity of the home institutions, which in turn often results in low legal quality requirements. in this regard, chinese companies are likely to possess an inherited negative image, making it more difficult for these firms to successfully operate in advanced economies (yu and liu 2016). lastly, another aspect is the progressive change that a good number of chinese companies are experiencing in their international competitive strategies. that is, they are increasingly opting more for quality of their products and services, something that has come under criticism, the http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 lack of quality. therefore, many chinese companies, especially, those that operate in sectors of high added value, are abandoning a clear cost leadership strategy for a hybrid approach (kim et al. 2004; spanos et al. 2004). this means that they combine moderate prices with good quality. this change has been partly motivated because in developed markets, increasingly important destination of chinese companies, the price is not everything, that is, quality concerns. until very recently, china's competitive advantage was marked by low manufacturing costs (rugman 2009). however, with the progressive increase in the price of inputs and due also to the fact that companies from developed countries are increasingly opting more for automation to close the cost gap with chinese companies, this way to compete is no longer sustainable. for these reasons, chinese enterprises have to create a new value based on technological innovation. this strategic change is a real challenge given the prejudices suffered by chinese brands in developed countries. this special issue seeks to present new empirical evidence, descriptive analysis and theory development on chinese businesses in the international arena. in the first article, titled “chinese companies conquering the world: a descriptive analysis of the rapid rise of chinese acquisitions”, casanova and miroux address the study of the global investments of chinese firms. they put great emphasis on the evolution of mergers and acquisitions (m&as) but also include greenfield investments and outward foreign direct investments. the study shows that china has become a major global acquirer in recent years, also being increasingly involved in very large transactions. in this sense, the authors found that after the global financial crisis, developed countries were the most important destination, with europe being the preferred. surprisingly, asia (the main recipient of chinese outward direct investment stock) does not have a significant place in the chinese companies’ acquisitions. is also remarkable the growing http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 interest of chinese m&as in latin america, motivated mainly by currency devaluations. furthermore, the work shows how the chinese outbound m&as has diversified in the last years. thus, while the energy and materials sectors accounted for the majority of the chinese investments abroad before the global financial crisis, between 2009 and 2016 many other industries such as industrials, financials, consumer or information technology have become more important. in “chinese investments in latin america: an analysis of host country determinants” quer, rienda, and andreu, examine the role of two host country factors on location decisions by chinese mnes in several latin american countries. drawing on institutional theory (north 1990), quer et al., demonstrate that cultural distance and political risk, the two most usual institutional factors considered by scholars when studying location decisions abroad, have different impacts on chinese decision-making process. on the one hand, the authors find evidence that cultural distance has a conventional negative effect when entering latin america. that is, chinese firms tend to invest less in those latin american countries where there is a greater cultural distance from china. on the other hand, they discover that chinese companies show a less common behaviour as regards the political risk as an institutional factor. that means that chinese firms are less risk-averse about political issues. this may be because of the prevalence of chinese state-owned mnes and the fact that china maintains good diplomatic relations with many countries that are perceived as riskier by other investors. in fact, the authors found empirical support for this potential explanation trough the analysis of the control variables considered in the study. this research also concludes by highlighting that marketseeking motivation is more important to chinese mnes than natural resource-seeking. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 dalla costa, fang yi, and althaus, explore “chinese companies and foreign direct investment in brazil between 2000 and 2018”. they develop a descriptive analysis of the evolution of chinese investment in brazil from several databases, thus understanding better this phenomenon. the results show that both chinese fdi inflows and chinese firms’ presence in brazil experienced strong growth from 2009, probably due to a significant rise of bilateral trade agreements between the two countries. the analysis also reveals that chinese investments are mainly concentrated in three sectors: financial activities, insurance and related services; manufacturing industries; and extractive industries and electricity and gas. however, from 2014 on, these investments are gradually diversifying in other industries, as for example in services sectors. moreover, the authors go in depth into the case of four chinese mnes in brazil such as sinopec (petroleum sector), didi chuxing (technology/startup), state grid (electric power) and chery automobile (auto industry), trying to explain the way they operate in the latin american country. the authors conclude that given the great differences between both nations, there is still some way to go before chinese companies achieve an effective adaptation in brazil. the fourth article, “the chinese project ‘one belt one road’ toward latin america and the caribbean. economic-financial implications” is also focused on the chinese investment in the latin american and caribbean region. however, this time gonzález focuses on the importance of one belt one road (obor), one of the top chinese projects in recent years. although latin american and caribbean countries were not originally included in this large investment project, they will play a very active role within the initiative because this region is one of the main sources of raw materials that china requires to sustain its economic growth. not only this motive, but latin american and caribbean countries represent new opportunities to expand the commercial ambitions of china. the author also notes that the integration between these http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 countries as well as the commitment of latin american governments to change their economic models are vital to ensure the success of this cooperation. the fifth article of this special issue, “the creation and transfer of entrepreneurship in emerging economies of the world. an approach through large family-owned corporations of china, mexico and brazil” by fernández and fernández, explains the process of creation and transfer of entrepreneurial spirit in three large family-controlled business groups. more specifically, through a qualitative case study they compare the strategy for the intergenerational transfer of entrepreneurship of hutchinson whampoa in china with grupo carso (mexico) and pao de açúcar (brazil). the authors build some theoretical elements such as the role of institutions, the relevance of social networks and dynamic capabilities perspective which support the empirical study. but the importance of networks is the central hypothesis of this research, owing to its great influence on the entrepreneurial process, providing information flows, resources and new business opportunities. although family and cultural circumstances vary, the study reveals some common practices which favour the successful transfer of entrepreneurship from one generation to another in the analysed companies: creating extensive and valuable networks, promoting the university training in management of family members or recruiting professional managers, among others. the sixth article, by palma and montt strabucchi, “chinese business in latin america and the caribbean: a historical overview”, analyses from a historical perspective the chinese presence in the region since the arrival of the first chinese workers in the 1850s until the great depression. through an extensive literature review and exploring the international chinese business directory of the world of 1913, an important source that registers chinese businesses in latin america and the caribbean, this research presents a very interesting analysis which http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 conveys some key messages. first, despite the large chinese investments in the region are relatively recent, this study demonstrates the existence of chinese businesses in latin american countries, particularly in mexico, cuba and peru date from the early twentieth century. the authors explain that it all started as an immigrant movement when chinese workers came to these countries as slaves. but, as time went on, the chinese diaspora progressed until part of it become entrepreneurs. second, and perhaps most important, the article shows that during this period chinese people and their businesses in latin america and the caribbean suffered serious hardships because an important proportion of the local population saw it as a threat to local companies. therefore, it might resemble with the current perceptions by some people who are concerned about the growing chinese presence almost everywhere. finally, a research note closes this special issue, “chinese companies in the world” by nueno, where the author presents a personal evaluation on how the chinese internationalization should be considered. the author in this research note explains that given the great size of china’s economy, few chinese companies have a global presence. an interesting aspect is the positive message sent towards this recent phenomenon. on the one hand, in contrast to many opinions, the international expansion of chinese firms are creating several jobs, and will continue to so in both home and host countries. in fact, nueno claims that this happened in the past when american or european companies emerged as multinationals. on the other hand, chinese companies expanding their markets are doing exactly the same that american, japanese and european ones did decades ago and this led to greater competitiveness which benefited many stakeholders around the world. for these reasons this work encourages to contemplate the chinese firms’ internationalisation process as an opportunity and not as a threat. references http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 barahona, felix, fariza achcaoucaou, and paloma miravitlles. 2016. “mitigating the isomorphic conflicts faced by emnes in southern europe: the case of chinese subsidiaries in spain.” journal of evolutionary studies in business 1 (2): 201-234. bartlett, christopher a., and sumantra ghoshal. 2000. “going global: lessons from late movers.” harvard business review 78 (2): 132-142. buckley, peter j., jeremy clegg, adam r. cross, xin liu, hinrich 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business studies 38:481–498. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 1-12, july-december 2019 doi.org/10.1344/jesb2019.2.j058 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 marano, valentina, peter tashman, and tatiana kostova. 2017. “escaping the iron cage: liabilities of origin and csr reporting of emerging market multinational enterprises.” journal of international business studies 48 (3): 386-408. mathews, john. a. 2006. “dragon multinationals: new players in 21st century globalization.” asia pacific journal of management 23:5–27. moeller, miriam, michael harvey, david griffith, and glenn richey. 2013. “the impact of country-oforigin on the acceptance of foreign subsidiaries in host countries: an examination of the ‘liabilityof-foreignness’.” international business review 22:89-99. mofcom. various years statistical bulletin of china’s outward foreign direct investment. beijing: 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committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 wong, loong. 2012. “’liability of foreignness’: chinese investment in australia.” transnational corporations review 4:46-75. yu, yang, and yulong liu. 2016. “country-of-origin and social resistance in host countries: the case of a chinese firm.” thunderbird international business review 58 (6): 1-17. zaheer, srilata. 1995. “overcoming the liability of foreignness.” the academy of management journal 38:341-363. zheng, nan, yingqi wei, yabin zhang, and jingjing yang. 2016. “in search of strategic assets through cross-border merger and acquisitions: evidence from chinese multinational enterprises in developed economies.” international business review 25 (1): 177-186. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 deborah besseghini università degli studi di torino (italy) ander permanyer-ugartemendia universidad autónoma de madrid (spain) https://orcid.org/0000-0002-6266-5521 https://orcid.org/0000-0002-0330-7740 the hispanic world at war and the global transformation of commerce. global merchants in spanish america: business, networks and independence (1800-1830) abstract this special issue investigates how in the times of war, political turmoil, and disruption of commercial practices during the age of revolutions two centuries ago, merchants appear as demiurges of a new order. this is part of a polycentric reading of epochal transformations that does not deny the primacy of politics and military power in establishing relations of force, but which underlines the complex negotiations at their base. the collection of essays looks at the profound global consequences of the fall of the spanish american empire, particularly as they related to the decline of mercantilism and the reconfiguration of both atlantic and inter-pacific commerce. a crucial element in this transformation was the war economy, which had implications not only in spanish america, but in the whole of the hispanic world and beyond. global merchants or businessmen —foreigners and hispanic— strategically located in the hispanic world, whose networks and affairs linked europe, asia and the americas, worked within the vacuum created by the crisis of the spanish monarchy in what was a fluid and foundational moment. the essays investigate how the napoleonic wars and the wars of independence against spain accelerated the emergence of new actors, practices, rules and commercial circuits, by analyzing the personal and business networks that built, redefined and renegotiated the role of hispanic america in the global economy. this prosopography of merchants thus shows trajectories through which, despite infinite difficulties, global and transregional merchants appear as one of the maieutic forces in the birth of the modern world. keywords: mercantilism; open trade; informal imperialism; age of revolutions; imperial reconfiguration; globalization; microhistory; global history el mundo hispánico en guerra y la transformación del comercio mundial. comerciantes globales en la américa española: redes, negocios e independencia (1800-1830) resumen este número monográfico investiga cómo los comerciantes contribuyeron a la construcción de un nuevo orden en tiempos de guerra, conflicto político y disrupción de las prácticas comerciales durante la era de las revoluciones, dos siglos atrás. este conjunto de artículos forma parte de una lectura policéntrica de transformaciones históricas que –sin negar la primacía de la política y del poder militar– subraya las negociaciones complejas que estuvieron en la base del establecimiento de nuevas relaciones de fuerza. analiza así las profundas consecuencias globales de la caída del imperio español en américa, particularmente en lo que se refiere al declive del mercantilismo y a la reconfiguración del comercio atlántico e inter-pacífico. un elemento crucial de esta transformación fue la economía de guerra, que tuvo implicaciones no tan solo en la américa española, sino en el conjunto del mundo hispánico y más allá. hombres de negocios y comerciantes globales, tanto extranjeros como hispánicos, estratégicamente situados en un espacio imperial en fragmentación, y cuyas redes y negocios unían europa, asia y las américas, actuaron en el vacío creado por la crisis de la monarquía española, en lo que fue un momento flu ido y fundacional. mediante el análisis de las redes de negocios y personales que construyeron, redefinieron y renegociaron el rol de la américa hispánica en la economía global, los trabajos en este número investigan cómo las guerras napoleónicas y las guerras de independencia contra españa aceleraron la emergencia de nuevos actores, prácticas, reglas del juego y circuitos mercantiles. esta prosopografía de comerciantes trans-regionales y globales, por consiguiente, muestra trayectorias a través de las cuales, a pesar de la dificultad, dichos comerciantes aparecen como una fuerza mayéutica en el nacimiento del mundo moderno. palabras clave: mercantilismo; comercio abierto; imperialismo informal; era de las revoluciones; reconfiguración imperial; globalización; microhistoria; historia global el món hispànic en guerra i la transformació del comerç mundial. comerciants globals a l’amèrica espanyola: xarxes, negocis i independència (1800-1830) resum aquest número monogràfic investiga com els comerciants van contribuir a la construcció d’un nou ordre en temps de guerra, conflicte polític i disrupció de les pràctiques comercials durant l’era de les revolucions, dos segles enrere. aquest aplec d’articles forma part d’una lectura policèntrica de transformacions històriques que –sense negar la primacia de la política i del poder militar– subratlla les negociacions complexes que hi va haver a la base de l’establiment de noves relacions de força. analitza així les profundes conseqüències globals de la caiguda de l’imperi espanyol a amèrica, particularment pel que fa al declivi del mercantilisme i a la reconfiguració del comerç atlàntic i inter-pacífic. un element crucial d’aquesta transformació en va ser l’economia de guerra, que va tenir implicacions no tan sols a l’amèrica espanyola, sinó també en el conjunt del món hispànic i més enllà. homes de negocis i comerciants globals, tant estrangers com hispànics, estratègicament situats en un espai imperial en fragmentació, les xarxes i negocis dels quals unien europa, àsia i les amèriques, van actuar en el buit creat per la crisi de la monarquia espanyola, en el que va ser un moment fluid i fundacional. mitjançant l’anàlisi de les xarxes de negocis i personals que van construir, redefinir i renegociar el rol de l’amèrica hispànica en l’economia global, els treballs d’aquest número investiguen com les guerres napoleòniques i les guerres d’independència contra espanya van accelerar l’emergència de nous actors, pràctiques, regles del joc i circuits mercantils. aquesta prosopografia de comerciants trans-regionals i globals, per tant, mostra trajectòries a través de les quals, malgrat la dificultat, aquests comerciants apareixen com una força maièutica en el naixement del món modern. paraules clau: mercantilisme; comerç obert; imperialisme informal; era de les revolucions; reconfiguració imperial; globalització; microhistòria; història global corresponding author: e-mail: deborahbesseghini@gmail.com | apermanyeru@gmail.com received 18 september 2022 accepted 1 december 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-6266-5521 https://orcid.org/0000-0002-0330-7740 mailto:deborahbesseghini@gmail.com mailto:apermanyeru@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 1. agent of global change: the hispanic world after the collapse of the atlantic empires1 two centuries ago, the independence wars in latin america marked a turning point in the birth of the modern world, with the fall of the first great european empire in the americas. an unintended consequence of this was the end, in general, of a particular nexus between empire and trade —mercantilism— which was based on the protection of power reserves in a context of relative equilibrium among empires. notwithstanding the idea of a balance of power that characterized the new post-revolutionary european order in vienna, in fact, the end of the napoleonic wars saw the affirmation of a global military hegemon, britain, and this provided the framework for accelerating integration of different political and economic systems. nineteenth century globalization, however, did not rise automatically from this pax britannica. this special issue proposes to consider one of the main actors of the previous phases of globalization, the hispanic world, as a fertile terrain for experimenting with new global practices, which pushed the world towards free trade. the spanish empire was for centuries not only a porous fortress, but a privileged channel for commerce. in defiance of the mercantilist logic that was for a time prevalent in spain and europe, the merchandise of disparate nations flowed across europe, the new world and asia through that channel. that empire was a walled city on the atlantic, from which passages and gateways opened, among them a “backdoor” from the americas to asia. and as the walls holding up the vital and enterprising citadel of the global spanish monarchy crumbled, the powers of the north atlantic became the indisputable industrial, commercial and financial centers of the globe. did this fall, in fact, play a role in the emergence of these global powers? although merchants, especially from britain and the united states, acquired some strategic 1 this text has been conceived and written by the two authors collectively, and to adhere to italian academic conventions, deborah besseghini has dealt with the macro-imperial issues in sections 1 and 3, and ander permanyer with issues related to political economy in section 2. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 economic control in the hispanic world, great hispanic merchants2 did not disappear overnight. did the ties between hispanic and non-hispanic merchants play a role in the global reconfiguration of commerce that followed latin american independence? this special issue brings together six essays that demonstrate how the crisis of the spanish monarchy was a principal motor of change in one of the most profound periods of transformation in human history, the age of revolutions. applying the method of microhistory to analyze epochal structural changes (levi 1985 and 1992; trivellato 2009, 2011 and 2015),3 the included essays illuminate transformations in commercial habits in a context of war, linking the local to the global, and revealing significant elements from which we can begin to define macrohistorical trends. research highlights the concrete initiatives that merchants with translocal interests carried out to adapt to the fall of the empire, which, above all, had structured the globalization of the early modern era. these adaptations profoundly influenced the trajectory of the new nineteenth-century empires. the authors look at how the collapse of the spanish empire forced hispanic americans to experiment with the praxis and rules of the open market, and how through this experimentation, they transformed what in colonial times had been exceptional and discretional “free trade” practices into “modern” trading relations. and we will see the implications of all this in asia and in the asian detachment of the spanish imperial 2 the authors use “hispanic” to refer to all the merchants who were born or naturalized in the territories of the spanish monarchy, regardless of their ethnic origin, place of birth, or political positions and loyalties. this is a convention, based on the authors’ reflections on the ambiguity of more traditional, and specific, definitions in a context of imperial disintegrations, in which identities were shifting. the authors use more specific categories (spanish, creole, indiano, chilean, peruvian, etc.) only when appropriate. 3 the authors use the concept of microhistory with full awareness of its metamorphosis over the years, from the first italian school to its more recent, multifaceted, re-significations (bertrand and calafat 2018). the works in this special issue adopt an acception of the word “microhistory” that emerged in relation to global history studies. they, indeed, look at trans-local and global connections through case studies (often biographical trajectories, which the authors follow like ariadne’s thread through different geographical and historical settings), which illuminate significant mechanisms of social and network relations in specific contexts. the essays focus mostly on “mediators” – between cultures, interests, empires, and conflicting spaces. these go-between figures help clarify aspects of the social history of globalization, including the complex relations between individual behaviors and the redefinition of collective norms in time of radical changes. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 “citadel”—the philippines. without concealing or ignoring the negative effects of armed conflicts, we maintain that instead of hindering such transformations, the war context fostered them in territories that were traditionally strategic as hinges between worlds. after all, war was and is structurally crucial for economic growth (baran and sweezy 1966; rodger 2010). the micro-historical approach provides paths to sneak post-independent latin america in the field of global history (brown 2015). even if global historiography pays great attention to turning points, it focuses above all on the role the iberian world had in the more ancient economic globalization, at the time of the construction and consolidation of the oceanic european empires. it centers on the “discovery” or the colonial epoch, and particular attention is paid to the eighteenth century (pearce 2007; marichal 2007; stein and stein 2009; aram and yun-casalilla 2014; del valle, more and o’toole 2019). in general, excellent narratives on the iberian world’s trajectory in global history stop at the age of revolutions, as if the period were an endpoint and not a turning point (e.g., bouza, cardim and feros 2020). studies on the global economic implications of the great fracture procured by hispanic american independence are relatively rare. of this early-nineteenth century economic transition, scholars of the hispanic world have investigated above all roots and “heritage” —this includes the studies on the unequal integration of latin america in the industrial world (e.g., frank 1967; stein and stein 1970). hispanic merchants with their international and trans-imperial networks are protagonists in several works on global history in the early modern era (crespo solana 2009; herrero sánchez and kaps 2017), but not so much in the age of independence. seminal books on international merchants in independent latin america open with 1810 or 1820, but they generally deal relatively little with the period till 1830 (reber 1979; llorca-jaña 2012; llorca-jaña and miller 2021). almost a terra incognita of economic history, the 1800-1830 transition straddles production systems and trade association practices, and the functioning as http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 vectors of change of trade networks. this transition is hard to analyze, but crucial, for, as matthew brown has pointed out (2015), in global history the independence era is a strategic junction: between the “ancient” and the “modern” world, between monarchy and republics, between old loyalties and “the invention” of national traditions, between mercantilism and free trade, and between policies suited to agricultural societies and those suited to an emerging industrial capitalism. also due to the region’s political separation from the philippine islands —which are a crucial hook for the global approach in historiography on the early modern era— the postindependence hispanic american trajectory is hardly connected to the history of asia (bayly 1989 and 2010; bonialian 2019, 13-31). yet hispanic american independence had repercussions in asia, as shown in studies that look at the circulation in the region of spanish coins (irigoin 2009), or chilean copper, which opened new opportunities between europe, asia, australia, and the americas in the 1820s (evans and saunders 2017; navarrete-montalvo and llorca-jaña 2020). but only a few authors address the immediate economic consequences of the imperial crisis in the asiatic side of the empire (valdés lakowsky 1987, 241-313; legarda 1999 and 2002; pérez lecha 2014, 259-93; garcía gimeno 2017; elizalde 2020). in the field of atlantic history, hispanic american independence has been widely analyzed, and the literature shows how conflicts in hispanic america activated complex (and contradictory) transitions to modern republicanism, finance, and fiscality in the atlantic space.4 however, although the historiography no longer interprets the hispanic world as a totally passive player in the global nineteenth century, it still treats it as a peripheral actor (wallerstein 4 literature on the mentioned research fields is too broad to be quoted properly. here we mention, as nonexhaustive examples: marichal 1989; guerra 1992; lempérière et al. 1998; grafe and irigoin 2006; irigoin and grafe 2008; verdo 2006; adelman 1999 and 2010; garavaglia 2010; brown and paquette 2013; entin 2010 and 2018; morelli 2019; sabato 2021; moutoukias 2021; ternavasio 2021. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 1974-1989; osterhammel 2014; bonialian 2019). the participation of hispanics in the “great game” of hegemonic reconfigurations, and the commercial, neo-colonial and cultural aggressiveness of nineteenth-century imperialism and sub-imperialism of spain and the new hispanic american states, are no longer underestimated (garcia balañà 2008; fradera 2005 and 2018; paquette et al. 2018; bartolomei, huetz de lemps and rodrigo y alharilla 2021), but modernity in the hispanic world is still interpreted almost as a reflection of the structures created by the new hegemons, and particularly by the main character in the literature on global history, britain. we share the interpretation of formal and informal empires as superimposable networks for strategic protection, and there is no doubt that the british navy —the largest in the world, which protected the dominant commercial fleet around 1815— in good measure structured the nineteenth-century international order from “the sea” (benton and ford 2016). yet the implicit idea that the winners in the geopolitical arena invented all the structures of modernity, almost out of an ineffable moral superiority, does not hold, as change has demonstrable multilateral origins (berg 2004; hobson 2020; yazdani and menon 2020; riello 2022). that questionable assumption has not been challenged enough, while the idea that the opening of hispanic american ports fostered commercial liberalization on a global scale, and that hispanic america played a role in the impact that the revolutionary and napoleonic wars had on global trade and economy, have been disregarded (o’rourke 2006, 148). perhaps because the region’s commercial opening has been traditionally seen as externally imposed, the moment of rupture has seemed less interesting than the search for its long-term origins. yet independence was a backbone of change, not just the inevitable superstructural outcome of some structural long-term economic causes. the eighteenth century was an age of reform, of attempts to reinforce the state for war. it is possible that this weakened traditional social structures to the point that they pulled out at the first wind, but the principal cause of the atlantic http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 revolutions was the wind itself, i.e., the final geopolitical clash between the atlantic empires (guerra 1992). with the clash came reconstruction, however, and this, not the eighteenthcentury reforms, was the foundational political moment of a new economic framework. eighteenth-century reforms comprised new and more aggressive mercantilist policies, in keeping with the struggle among empires. in the spanish empire, reforms were aimed to reinforce colonial loyalty and alliances of interest, including some with discontented colonists of rival powers, in the context of a synergy with france that remained structural despite the trauma of the french revolution. and despite the name of the most famous among the bourbon reforms, “comercio libre,” bourbon “free trade” had none of the possible modern meanings of the word. although physiocratic ideas and colonial requests played a role, spain’s late eighteenth-century economic reforms were often tools for productive development aimed at attracting and retaining precious metals (for example, by exchanging colonial goods with means for their production, like slaves). this was the case of the comercio de colonias and the comercio de negros in the americas. even the opening of manila to international trade in 1789 was aimed at protecting the royal philippine company’s interests, the principal reformist project in the islands, and to consolidate the spanish crown’s weak authority in asia vis-à-vis the british interests in the archipelago through economic development. furthermore, in many regions these reforms were applied in the wake of new conflicts with britain, which imposed more barriers. trade with neutral powers, the comercio de neutrales, was a war measure, precarious by nature, which had been introduced during spanish support for the us independence and renewed intermittently during the french wars. it served to strengthen imperial control and the spanish monarchy’s alliances in a bluntly anti-british function. thus, generally, british ships could not enter the spanish american ports legally, while us ships could. since indirect trade flourished, this was a strategic injury for london more than a http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 commercial injury (which the existence of indirect and illegal trade lessened). other merchant communities could interfere for their countries’ interests in spanish america, where they had tolerated informal consuls, and commercial intermediation strengthened their maritime presence in the atlantic, which exacerbated anglo-us relations. after the reversal of alliances in 1808, the spanish anti-french government allied to britain did not allow a generalized direct trade between hispanic america and britain —not even france had obtained it before— and the commercial relations occasionally established remained precarious (besseghini 2021). although the warring empires were not watertight compartments, as adrian pearce (2007) has brilliantly demonstrated, it was not the reforms, but the collapse of the spanish empire, which put an end to the mercantilist struggle. the independence of the british colonies had not been enough to cease the clash between france and england in the atlantic, which finally overwhelmed the spanish empire. during hispanic america’s independence process, a trade structure began to be welded that (despite all existent continuities) no longer found support in the reciprocal closure between porous systems of imperial protection. the special issue’s aim is to understand how the wars of independence concretely accelerated the rise of new actors, practices, rules and circuits for commerce. the micro-historical analysis highlights the interaction between global and local dimensions that allow us to deepen the furrow that jeremy adelman (2008 and 2015), j.h. elliott (2006) and others have traced. imitation among empires was a foundation for global modernity (subrahmanyam 2006, 261262). the hypothesis is that latin america contributed to “make the modern world” —to provocatively paraphrase niall ferguson (2003)— because in the period of independence it was a crucial terrain for some of those transformations that signaled the passage to new forms of power and imperial control, and an agent of a new phase of economic globalization, particularly important as just preceding the spread of the industrial revolution (cipolla 1974). one element http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 of this change was the substantial fall of mercantilist empires, even though this did not stop the search for state protection in long-distance trade (bartolomei 2021). we are interested in this fracture, whose origins stem from simultaneous factors, such as the maturation of political and technical-scientific revolutions from the most varied origins; the british victory in the napoleonic wars (which consolidated a military and financial hegemony); and, above all, the generalized need to open ex-colonial ports in the hispanic world, a world that was crucial for trade in the previous globalization phase. this helped to transfer elements of strategic control from an imperial structure to structures oscillating between post-imperial and neo-imperial —a first case of modern decolonization (delgado 2006; thurner 2019). the transformations in hispanic america were triggered by geopolitical factors, including attempts by the warring powers to exert indirect control over hispanic american resources. geopolitical pressures unleashed local reactions that dismantled the euro-atlantic imperial concept. yet although the golden era of free trade —the mid-nineteenth century— was also the golden era of british imperialism, the opening up of new commercial opportunities in latin america was not a consequence of interferences linked to a project of “imperialism of free trade,” which have been overvalued in some debates –as deborah besseghini has recently highlighted (2021). the post-independent “opening” of latin american ports was not imposed by the impersonal needs of industrial capital to access cheap raw materials and new buyers, but by a series of political and military circumstances. in the 1810s, industry was embryonic even in britain, primary production was valued and protected with tools such as the corn laws, and the economic reasoning was still mercantilist and aimed at procuring silver. on the other hand, the hispanic atlantic’s demand for indian cotton textiles was already important in britain’s trading and manufacturing developments in the eighteenth century. therefore, although the opening up of direct trade with latin america may have helped the british economy in the context of the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 napoleonic wars, this change in hispanic american ports was not caused by the external imposition of a modern free trade culture for a newly emerging industry. the transformation originated instead from the needs imposed by the local repercussions of global war on territories that for centuries had been part of an imperial system extended over continents, and which were particularly unfit to survive in isolation. in other words, the ports were opened to almost all nations and goods because it was the only economically wise option for regions formerly included in a global economy protected by a “colonial pact,” i.e., a framework of negotiations, which was crumbling. by opening trade in a rather generalized form, hispano-americans remained part of global commercial circuits through new channels and with new forms of protection, without having to change empire. they thus avoided isolation, even among themselves, after 1810. and they exploited the geopolitical rivalries of foreigners and their neutrality in the wars of independence to continue trading in the old imperial spaces, and to permanently access new opportunities and spaces. hispanic americans’ need for networks and protection, not foreign powers’ hunger for markets, favored the informal-imperial intrusion as a new pact that linked hispanic america to new imperial spaces. this helped to break down and make obsolete residual mercantilist barriers. latin america gave a clear push to commercial liberation, not for the sake of others, but for its own needs, and in a sense pushed britain towards free trade (howe 2017). we can, therefore, overcome the contradiction between imperialism and autonomy (platt 1980; stein and stein 1980). the political phenomenon we call “informal imperialism” (robinson and gallagher 1953), an external cause of independence (besseghini 2021), forced hispanic actors to look for a new balance between political and commercial, collective and individual interests. yet with their initiative, hispanics became a pivot of change. global merchants emerged in this process who were almost free from imperial barriers and less dependent on the mediation and protection http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 of trans-imperial groups. a change of circumstances —and not “beneficial influences” of “more advanced” cultures— paved the way for a contradictory but fairly stable commercial opening in historically key territories for global trade. the process created a domino effect on the remaining imperial structures and a space for the implementation of ideas on “free trade” from the most varied origins. looking at things in these terms, we understand why in some areas the immobility of the new republics contradicts an allegedly imported liberal mentality, and why foreigners easily obtained certain “reforms” but not others. initially they did not have to fight for commercial opening, because it was in the interest of hispanic americans to grant it. foreigners had to fight for other advantages, but the most important change occurred when hispanic americans took the opportunity of the crisis to tear down the walls of the spanish imperial citadel. in this shared terrain of initiative, in a new political framework characterized by a hegemonic military power, in the evolution of relationships and networks partially established during the “colonial period”, and in negotiations and adaptations originated from the independence war context, we found motors of a new phase of globalization, which would lead to both “free trade” and imperialism. the essays deal with this terrain of shared initiative in a wide-ranging geographic space: from california to china; from the río de la plata to the united states; from chile to india; from europe to peru; from the philippines to mexico. they show the role of trans-local and global merchants in the definition of new trading practices and in the adaptation of old practices to new circumstances. 2. the pacific side of the mercantilist citadel the identification of the iberian empires as “mercantilist” has conditioned approaches made so far, especially as far as the period under study is concerned. concepts such as “mercantilism” and “monopoly” conceal more complex realities. the spanish monopoly in the overseas trade http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 did not comprise the strict control of all the elements of a specific area of production and trade, but the establishment of certain economic, geographical, and institutional limits to the system so as to serve the purposes of the fiscal-military state; anyone having the means to do so could participate in the system, being thus coopted by the state (grafe and pedreira 2020). as abovementioned, apart from the strict stipulations that made up the formidable citadel of spanish mercantilism, this encompassed new geographic areas and economic actors as the imperial economy developed. this section analyses the particularities of the pacific ocean, which constituted a space of relative liberty since the mid-eighteenth century: while the atlantic side of the citadel was fortified for the war, its pacific side was more precarious, making imperial control over the commercial life of the ocean more difficult.5 as this section will describe, such particularities represented the limits of monopoly and the difficulties of its implementation, which forced ad hoc adjustments. for instance, actors from outside the hispanic sphere were allowed to participate in the philippine trade since the establishment of the spaniards in the late sixteenth century; during the eighteenth century, new actors in and beyond the trans-pacific trade appeared. in so doing, this section shows the centrality of the philippines and the pacific in the process of reconfiguration of the spanish trade during the independence wars. this pacific —and philippine — role was indeed relevant, yet more often than not it has been cast aside in the great narratives about the spanish empire and the transformation of the imperial economy. on its asian side, the centuries-old manila galleon system, based on the transshipment of silks and other chinese productions in exchange for american silver, gave way to a more diversified productive and commercial economy. on both sides, metropolitan 5 pierre chaunu (1960), insisted on the contrary on the lack of autonomy of the pacific vis-à-vis the atlantic ocean, claiming the former was strictly controlled by the “iberians.” http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 intervention increased. in all cases, the connection between the two pacific shores was, since the sixteenth century, a promising perspective for the economic actors, whether hispanic — indianos and peninsulares— or foreigners, who participated in the transformations here analyzed. and yet, the pacific was always perceived as a problem from the metropolitan policymakers’ viewpoint. the galleon system had been, since its inception, a mercantilist means to avoid the excess of asian merchandise in the american markets —where they competed with manufactures sent from spain— as well as to contain the leakage of silver outside the imperial borders (legarda 1955). still, this control was not easy to implement. the spanish system in the pacific included a great deal of indiano initiative, which fitted badly in the mercantilist preoccupations of the metropolitan policymakers. as emphasized by mariano bonialian (2012 and 2019), the pacific was, until the mid-eighteenth century and before the reformist intervention, an indiano space, with great autonomy with respect to the political economy established by the crown. the non-abidance of its mercantilist stipulations was widespread; for instance, the limits on the volume and value of merchandise on board of the trans-pacific galleons were ignored more often than not; on the american shore, trade between viceroyalties was important until the mid-eighteenth century, while in the philippines, direct trade with the asian ports took place despite being strictly forbidden according to the galleon stipulations (herrera reviriego 2014; tremml-werner 2017). as the reforms advanced, the trans-pacific trade fitted less in the big metropolitan schemes by which the colonial economies were supposed to furnish commodities to the metropolis. the galleon’s transshipment trade especially, for it was blamed for the underdevelopment of the philippine plantation system, and for keeping the archipelago from becoming a relevant market for metropolitan manufactures (permanyer-ugartemendia 2020, 117-118). this metropolitan caution explains the belated establishment of the royal philippine company (real compañía http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 de filipinas), in 1785, when compared to other earlier companies in the territories of the house of bourbon (rodríguez garcía 2005), notwithstanding previous failed attempts focused on the asian trade (díaz-trechuelo 1965, 3-30). and yet, the reform process in the philippines should not be seen only as an imposition from the imperial center but also as an attempt to coopt indiano initiative, which was continually adapting to the problems that the galleon trade faced since the late seventeenth century, and mostly, the dwindling profit margins of the trade (yuste 2007, 269-271). thus, experiments on the plantation economy —already taking place in southeast asia throughout the early modern period (reid 2015)— and in the regional trade can be seen even before the reform. the philippines’ distinctiveness with respect to other peripheries of the spanish colonial world is explained by the distance of the archipelago from other imperial centers as well as by its location in southeast asia. in addition, its territorial model was more autonomous when compared with other spanish possessions, resulting from its geographical distance and dispersion. war disruptions also changed the rules of the game, but as explained hereafter, trade was relatively stable, for necessary readjustments and adaptations were constantly made. as we will see, it was imperial competition rather than the wars —from the british in particular—6 that worried spanish policymakers when dealing with the philippines. another difference of the archipelago vis-à-vis other spanish territories was that, together with cuba and puerto rico, it remained in the spanish imperial sphere throughout the nineteenth century —even though, as ruth de llobet (2012 and 2020) has shown, serious challenges to the authority of the crown also took place there. thus, although the nineteenth-century philippines were opened by the 6 together with the widely quoted british invasion of manila between 1762 and 1764, british advancements in the asian trade should be mentioned, especially as they increased after the 1784 commutation act (mui and mui 1984), which drastically reduced the import taxes on the chinese tea, thus boosting its demand and trade; also the 1786 establishment of the british colony of penang as an east india company outpost. in addition, and during the nootka conventions, the transfer of luzon to the honourable company was contemplated (furber 1935). http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 colonial authorities to foreign interests, the absence of independence meant there were no such opportunities for foreign investors as those resulting from the setting up of new republican institutions, nor the financing of new governments, nor furnishing them with arms, which took place in latin america. resulting from its location in southeast asia, the philippines were targeted for the development of a plantation economy —rather belatedly, as it did not bear fruit until the late eighteenth century— and were characterized by a greater porosity vis-à-vis foreign actors. there was a prominent chinese diaspora in the islands since the institution of the spanish colonial order, a presence that perhaps represents one of the most outstanding features of the philippine system when compared to others within the spanish empire. other diasporas with presence in southeast asia were also in the philippines —more as a result of ad hoc decisions rather than metropolitan directions— and especially, since the early nineteenth century, western traders and particularly british, french, and us traders would become more prominent. since 1789, metropolitan policymakers opened up manila to western navigation, with the condition that the ships entering its port could not carry european merchandise, a limitation that was bypassed by the comercio de neutrales during the french wars (martínez shaw 2007, 48). in this sense, the measure tried to make the most of the diversity of the asian region, so as to meet metropolitan priorities in a context of increasing commercial and imperial competition. the 1789 opening of manila resulted from a similar rationale to that of the comercio de colonias in america after the american revolutionary war in 1784 (delgado 2007). in the philippines, the measure was above all destined to promote the trade of the royal philippine company, the flagship of the reform project in the archipelago, by which the advancements of rival powers in the region were to be counteracted. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 nevertheless, the study of philippine singularity is hindered by the scarcity of studies on this period. while some things are known about the bourbon reforms as well as about the consolidation of the philippine productive and commercial system throughout the nineteenth century (fradera 1999, 71-131; legarda 1999, 51-90; alonso álvarez 2009, 305-338), this is not the case with the transition period between the two. in all likelihood, the economic diversification and, in particular, the development of the plantation system, bore their fruits. we know that commodity exports were developed to a certain degree during the 1820s, and that the regional connections of the spanish trade developed in the decades prior to 1830. not in vain, this coincided with the end of the manila galleon and the crisis of the royal philippine company (permanyer-ugartemendia 2014). carlos martínez shaw’s (2007, 52-70) figures allow us to see, in broad terms, how the manila foreign trade slightly increased after 1789, but decreased as a result of the war with britain in 1797, followed by a noticeable increase in the first decade of the nineteenth century in spite of the crisis of the galleon trade and the wars. in this period of stability, ships with western flags increased —british and us flags in particular— foretelling the dominance of british and us traders in the philippine economy by the central decades of the nineteenth century (legarda 1999). as for the british, they managed to maintain their trade during their war with spain by resorting to other flags and to the private services of the calcutta factory of the royal philippine company (permanyer-ugartemendia 2013, 95). the development of the export economy and the opening up of manila were possible thanks to the archipelago’s permeable and cosmopolitan character, and the factories of the royal philippine company in the two most strategic western outposts in asia —canton in 1787 and calcutta in 1796— were particularly crucial. there the spanish company tried to coopt the developments in the initiatives undertaken by philippine traders through its integration in the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 productive economy and the regional and intercontinental trades stemming from the archipelago. in their private undertakings, the employees of the company —most of whom were peninsulares— set up important networks of collaboration with philippine traders, and were active in the regional “country trade,” that is, the western private trade in asia, mostly british (permanyer-ugartemendia 2020, 128-130). hispanics in asia provided means of access to sources of silver and to philippine credit, which helped in developing the western trade in canton and the opium traffic in particular. as will be shown in permanyer’s article, spaniards were heavily involved in the boom in the opium trade between india and china in the 1820s. despite the commercial developments experienced during the transition from the eighteenth to the nineteenth century, the fait accompli forced the philippines to reorient its economic model after the latin american republics were established (legarda 2002). in the process, the philippines consolidated its integration in the asian —and particularly southeast asian— economy (elizalde 2020) while the trans-pacific link became secondary. as shown in permanyer’s article here introduced, right after the end of the galleon in 1815 the trans-pacific trade continued on behalf of the philippine traders until 1821 (legarda 2002; pérez lecha 2014; garcía gimeno 2017), in an iteration of the secular route, where textiles were exchanged for silver —yet by the late 1830s textiles will be mostly british fabrics, and old imperial coins would eventually be replaced by new republican coins (permanyer-ugartemendia 2013, 365366).7 the problems in resuming the trans-pacific trade from manila prompted the spanish traders to use canton instead, yet this trade would become secondary in the redefinition of the 7 between 1826 and 1828, the wide circulation among filipino merchants of independent hispanic-america’s coin led the manila government to the decision of countermarking them “habilitado por el rey n. s. fernando vii”: taccuino (notebook) viii, doc. 4, 1828, archivio storico di casale monferrato (ascm), fondo famiglia vidua di conzano: viaggi di carlo vidua (herafter ascm, fv). deborah besseghini is currently doing research in the mentioned vidua collection. see also: yrisarri & co. to john gillies, canton-manila, 29/4/1826; yrisarri & co. to yrastorza, brodett & co., canton-manila, 1/5/1826, cambridge university library, department of manuscripts and university archives, jardine matheson archive, c2/4. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 economic model of the islands. after initially having collaborated with spanish subjects for the development of the plantations and commodity exports as well as the silver-for-textiles transpacific trade, these would eventually be dominated by non-hispanics actors, mostly british and us traders. as besseghini’s article shows, the reconfiguration of trade between asia and south america was sometimes crucially linked to businesses related to the wars of independence, involving arms, silver, copper, and opium. the definition of the mercantilist institutions in the philippines as well as their collapse and the eventual redefinition of a new economic order, were dominated by the archipelago’s remoteness and consequent higher degree of autonomy. one of the mercantilist institutions par excellence, the manila galleon had been quickly appropriated by its actors, colonial subjects, who would watch over its control so as to avoid metropolitan interference (yuste 2007; bonialian 2012). even the royal philippine company, the main institution representing the bourbon reforms in the colony, used to strengthen the developments already taking place, particularly the plantation economy and a greater integration in the asian trade, provided opportunities used by the philippine economic actors, of access to knowledge, markets, products and contacts with foreign traders through the factories in the most important western trading posts in asia. furthermore, the re-definition of the economic model in the philippines after the crumbling of the mercantilist order took place in different circumstances when compared to the rest of the spanish empire. not only remoteness, but the interruption of the trans-pacific link —which did not disappear but lost its raison d’être— confirmed the path of the colony to a greater integration in the asian and global trades. thus, experimentation in the philippines took place not only as a result of the final collapse of the imperial order —as the islands remained in the spanish empire until 1898— but as the consequences the loss of the american colonies inflicted on the old mercantilist model, which rendered it unfeasible: not only the galleon ended, but the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 trans-pacific trade could no longer be led by philippine traders, for, as spanish subjects, they were not allowed to trade in the new republics as long as these remained unrecognized by spain. this paved the way for others, mostly foreigners, in the trans-pacific trade. moreover, the royal philippine company, which depended on the trans-pacific and trans-continental trade, could no longer resort to these. the new philippine economy in the three colony system left mercantilism behind, and both local economic actors and metropolitan authorities would work towards the development of the plantation system, where the exclusivity of the means of production and trade was not conceived, and therefore foreigners could participate fully, even to the degree of controlling the remaining colonies’ economic activities throughout the nineteenth century. in all, the transformations on both sides of the pacific ocean show how, rather than the british and the us traders bringing in the gospel of free trade to unwilling local merchants, the latter in fact took the initiative in a context of crisis and change. showing the porosity of the mercantilist citadel, collaboration between hispanics and foreigners was common in different places of the spanish empire even before the imperial collapse: instead of using a clean slate, foreign traders benefitted from the knowledge, access to capital and credit, commercial networks, and connections to the old and new political powers, possessed by the hispanic traders on both sides of the pacific ocean, and there was thus a period of collaboration between the two groups until at least 1830. as shown in the articles here presented, collaboration among traders of very different origins —from britain, the us, other western countries, hispanics in america and the philippines, and asians in the latter— set the pattern during the period under study here, where everything seemed open. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 3. hispanic america and a few submerged pillars of nineteenth-century globalization long distance trade is tied with intricate laces to imperial or transnational protective structures. this happened in “colonial” times but also when new imperial systems arose in the nineteenth century that tended to englobe independent territories informally. in a sense, the extensive administrative independence of provinces had been a feature of the global composite monarchies of the old regime and a new tacit form of imperial integration was a feature of the new powers. being protection systems, empires are by nature partially exclusive, but being potentially global, they need external inputs. this oscillation between control and openness is crucial in the rise of trade and power systems till today. foreigners found legal ways to enter the hispanic world in the bourbon era, because this sometimes corresponded to the fiscal-military state’s needs, but also because the center received pressures from below to obtain limited and protected commercial openings. yet contraband was a huge phenomenon during the eighteenth-century mercantilist wars, notwithstanding imperial reforms.8 contraband was indeed structurally functional to the survival of the porous mercantilist citadels, and guaranteed an ample power, as well as profits, to the men of the spanish empire who allowed it, acting as filters and pocketing informal duties and gabelles. in some spaces, illegal trade strengthened the colonial pact until the eve of the spanish system’s crisis and beyond, as can be inferred from the cases explored in duggan’s article. contraband and “exceptional” legal exchanges between empires were not a premise of nineteenth century “free trade” globalization, but in it lay the origins of some of the trans-imperial networks that contributed to the great transformation by working as connectors of commercial worlds even after the collapse of the atlantic empires. 8 zacarias moutoukias has much researched the topic in his work. see also: romano 2007. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 empires are consolidated from below and from the outside, and, especially in moments of transformation, foreigners are precious collaborators to imperial centers, for they are free from local traditions and structures. hispanics probably provided essential collaboration to the creation of the formal and informal empires of the nineteenth century. this special issue partially leaves out, by design, the fundamental political sphere —even if trade and politics are never separate— and looks at the practical needs “from below,” of traders who collaborated in imperial transformations without necessarily being involved in imperial plans. these “autonomous actors” found creative solutions to adapt some strong imperial structures to their needs, and to tear down the useless ones. therefore, transformations were born from the interaction between surviving elements of the mercantilist systems and empirical innovation, and the hispanic world was a privileged field for such interaction. the substantial economic success of great britain at the time of the global war against france was at least partially linked to an organized public-private synergy that supported the navy thanks to high government spending. this navy-based system favored infrastructural, agricultural, and manufacturing development. britain’s “aggressive mercantilism of the fiscalnaval state,” as nicholas rodger (2010) defined it, although assimilable in intent, was different in many practical aspects both from the somewhat proto-keynesian policies of the french crown —which with the pomp of the court financed french manufacturing development—, and from the system of vertical integration based on state concessions in the hispanic world. british “naval mercantilism,” in fact, was probably better than any other at producing strategic military benefits linked to the protection of trade. moreover, the war fed, rather than breaking, the mechanism, which, however, functioned even in peace, unlike those that fed the terrestrial military power. far from having been arrested by the napoleonic wars, the war overall fueled productive development (neal 1990, 218), while the “authentic” modern free trade, a laissezhttp://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 faire policy, had nothing to do with the affirmation of british hegemony in 1815. to function at its best, also as a multiplier of economic development, this navy-based mercantilist system needed a global reach: to control the main strategic keys of the world —a process that lord castlereagh declared completed in 1816. the crisis of the spanish monarchy made britain’s victory in the napoleonic wars, with all its consequences, more probable. among other things, the spanish crisis facilitated the survival, expansion and consolidation of this naval mercantilism. rather important naval stations with their detachments were gradually extended in latin america, especially in the south. the possible consolidation of the french power over latin america during the napoleonic wars had represented a potential threat to britain before 1808: an enemy able to control the southern cone, for example, could have obstructed the passage from cape horn, but also the route from the cape of good hope to india, which passed close to brazil. the issue was strategic, and only secondarily commercial: to prevent the consolidation of napoleonic domination in europe from weakening british control of the seas, which among other things prevented napoleon from monopolizing spanish-american silver, london planned to bring spain to her side: the porous spanish system was fine, provided it was allied with britain. but after the austerlitz battle and the tilsit treaty this seemed impossible. to hinder napoleon’s immediate prospects for controlling the region —and perhaps to scare spain— plans were drawn up for spanishamerican independence, to be carried out through a british-backed independence army. the goal was realized, however, thanks to the transfer of the portuguese royal family to brazil and the french invasion of spain, when london acutely chose to protect the rights of the spanish bourbons. britain protected the passage of the hispanic american territories into the antifrench camp, and the british navy extended its presence in latin america (besseghini 2021). after this change in alliances, british support for hispanic american independence fluctuated, http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 but eventually, the commercial openings prompted london to tacitly support the breaking of imperial ties with spain. by opening ports while trade was the only “diplomatic” channel, indeed, hispano-americans took advantage of geopolitical rivalries to secure allies and independence. after the 1810 revolutions in hispanic america, open trade nourished alternative alliances that had temporarily weakened after the comercio de neutrales crisis around 1807. in 1813-1814, for example, open trade justified the presence in valparaíso of a us warship active against the spanish in peru, while the united states were at war with britain. meanwhile, us envoys were pushing for the “rebel” colonies’ absolute independence, and in that moment, this would favor france (besseghini 2020b). therefore, to preserve the anti-french alliance with all the hispanic world, london found itself forced, paradoxically, into a closer tacit synergy with the independentists, especially during the 1812 anglo-american war. after 1815, hispanic america became an element in the european balance, and the british defensive imperial strategy implied that influence in “rebel” hispanic america could not be lost. by choosing this path, britain discouraged and sometimes impeded hispanic american alliances with its explicit or implicit enemies and extended the control necessary for imperial security: a process definable as informal imperialism. in 1953 british historians ronald robinson and john gallagher noted that in the nineteenth century there was a large, submerged part of modern imperial constructions which, like the submerged part of icebergs, was the most important. henceforth, the expansion of imperial control that did not lead to annexations was referred to as “informal imperialism,” although following robinson and gallagher, informal imperialism is more precisely a tacit project of imperial control by indirect means. in their scheme, starting from 1815, an initial intrusion by informal means would normally generate local crises, followed by a greater commitment of the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 imperial power or powers during the nineteenth century. this could take various forms, including conquests or the creation of a control firm enough to be defined as an “empire,” albeit informal, but it could also take the form of a more limited attempt to strengthen support points for imperial security that were not so cumbersome as to suffocate local autonomy, and yet sufficient to ensure basic imperial interest. for many reasons, this minimal necessary, implicit, control of a few strategic elements was all that was worth getting in latin america. london, for example, continued to prevent others, whether foreign or local powers, from monopolizing resources and strategic positions, preying on hispanic divisions in the crisis. these submerged, defensive imperial pillars are interpretable as a pivot of the “swing to the east” of british imperial strategies, as they secured an acceptable settlement of the west. a thread of historiography has discussed the role of businessmen as vectors of informal imperialism (platt 1972b; cohen 2019; baeza 2019), and for platt, hispanic american external trade was too small to be a goal of imperialism (1972a) —an idea questioned in the recent historiography. however, businessmen and merchants are not automatically vectors of imperialism, and trying to demonstrate or, more often, to deny the existence of informal imperialism on the basis of the study of random merchants’ trajectories is absurd. although it may seem obvious, it is worth stating that merchants are not imperial agents or agents of imperialism unless they have duties in an imperial sense in connection with the center of political decisions. trade may be a goal of imperialism, but the interest of individual traders is not an objective of imperial expansion, to which, however, traders can provide support. merchants sometimes invoked and obtained imperial intervention, but explicit intervention was not always in their interest, nor in the imperial interest. however, all this does not mean that traders had no imperial function. the massive presence of traders justified that of warships. warships were both a threat and a deterrent vis-à-vis the extension of rivals’ geopolitical power, http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 while a large presence of armed merchant ships in certain political circumstances served almost as a military presidio.9 due to their neutrality in the conflicts with spain, foreigners almost acquired a monopoly and maintained hegemony in latin american long-distance trade during the wars of independence. this gave great bargaining power to the warships’ captains, who, until the new republican governments obtained recognition, exercised a semi-diplomatic role, settling political, strategic and commercial conflicts of interests, all converging in the export of coins and bullions. yet foreigners were indispensable for the continuity in change, crucial for the supply of essential goods and for capital circulation during the wars. the fact that some foreigners controlled strategic sectors in the independence period, in brief, brought benefits to a wide variety of subjects. in the interested entente, not only between hegemonic centers and nascent republics, but also between foreign and hispanic traders, we find some submerged pillars of the global commercial reconfiguration. british and us merchants, in alliance among each other and with the hispanics, became major mediators in direct trade from the americas to india and china. this contributed, as we have seen, to “asianize” the philippines. the centers of anglo-saxon commerce in asia were also those where trade with hispanic america took place. under the protection of the british navy, the ships from chile, then from peru, mexico, and buenos aires, arrived, above all, in calcutta. there as well as in canton, the important hispanic-asian community could find the hispano-american silver and copper that merchants carried there through new channels after independence. links between arms suppliers for the independence wars in latin america, who were also major exporters of copper and silver, and the anglo-indian trading community, especially in calcutta, or important us firms in canton,10 evidence the wars of independence’s 9 in 1808-1809 colonial authorities wrote about the impossibility of driving out british armed merchant ships because they did not have the sufficient military strength to do so. 10 ascm, fv, taccuini i and ii. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 influence in trade reconfiguration. the firm begg, barnard & co., referred to in besseghini’s article, active in the arms trade in chile and peru, had business referents in bengal, including charles myles, brother-in-law to libertador san martín’s british aide-de-camp. joshua waddington, from a group of arms dealers mentioned in mazzeo’s article, had a business contact (and probably relative) in calcutta as well, henry waddington.11 the partner and friend of the main british arms supplier in buenos aires, john mcneile, was a relative of the alexanders of calcutta, the powerful traders —of opium among other things— and well-known bankers who were active as referents in india of british and us arms merchants in chile. independence struggles in latin america encouraged the exchange of commodities available in europe during the post-war crisis —like firearms— for cheap copper and silver in demand in asia, and there with opium, and then rice, indigo, cotton, tea, silks, and other commodities sought in the west. this was a partial consequence of the support that foreigners provided for the construction of the new american states, which in turn favored merchants suitable for use as political mediators for the recognition of independence. as a few articles here show, especially after 1815, when war material became overabundant in europe and the united states, some foreigners were strategic in the conquest of independence as suppliers of arms and credit; as semi-diplomatic mediators in the establishment of public-private synergies to manage war expenditure; and in the opening of new, or in the restructuration of existing, global trade circuits. putting aside a priori judgments, we therefore see an imperial reconfiguration that created opportunities in new pacts. just as the bourbon empire was strengthened in the negotiation between the practices of trade and the needs of the fiscal-military state, so was informal 11 ibid. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 imperialism established in the negotiations between practices born of the crisis and the objectives of the new hegemonic centers. these centers also established subtle networks of strategic control by adapting to the initiative of the global merchants, hispanic and foreign, who built a commercial revolution from below. 4. global merchants in the imperial crisis: transformations from below the articles in this special issue explore specific elements of the initiative from below, both in the transformations of imperial trade, and —mostly— in the initial role of the hispanic world in the nineteenth-century globalization. collaboration among hispanics and foreigners was crucial to reconnect hispanic america to global trade during the crisis as well as to consolidate the goal of independence. in the philippines, such collaboration was fundamental to consolidate the new plantation economy and the integration of the archipelago in the regional and global trade after the old galleon trade was discontinued. in this process, hispanics were among the protagonists, as becomes obvious if one abandons pre-conceived ideas of dependent underdevelopment. the special issue shows them as active players in the transformations which led to a new global economic order. marie christine duggan weaves a tapestry about changes in global trade between the end of the “colonial” period and the beginning of the independent era from the vantage point of the mexican pacific coast, california and san blas, from where the overview leads to china. through the analysis of the networks and initiatives, legal and illegal, of one man, josé de la guerra y noriega, and his collaborators, duggan shows how in a few years this frontier area became central in trade to asia. the author emphasizes how the fall of the spanish empire profoundly transformed trade practices even in long-desired directions, but also destroyed the primary and secondary channels of the hispanic protection system. the personal trajectories of men like de la guerra y noriega depended on the use, at the margins of the system, of the http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 power tied to mexico city’s consulado. the oscillation between the center’s will to control and local pushes towards their own interests, along with the multiple possible alternative alliances in this game, led frontier hispanics to manage relationships with foreigners with great contractual power, while their main alliances remained inside the imperial system during the crisis of the monarchy. de la guerra adapted to independence by building a matrimonial alliance with a british merchant. contrary to what is assumed in part of the us historiography, new england merchants were not the country’s first important trading community. in fact, long before their emergence, hispanic networks and, gradually, alliances between these and the british networks had set up the flourishing california trade. after the fall of the system that allowed him to minimize risks, de la guerra reinvented his role and became one of the crucial hispanic middlemen in the boom in the inter-pacific trade. the article by deborah besseghini analyses how the firearms trade from europe and the united states incentivized this temporary explosion in exchanges between america and asia. the independence conflicts created an important arms trade to hispanic america that boomed after the end of the napoleonic wars, when the now superabundant arms in europe found a market in hispanic america through foreign middlemen, who, however, collaborated with active hispanic partners and networks. among the arms dealers, the british john mcneile and the us merchant david curtis deforest stood out, and both were politically well-connected at home and were indirectly involved in plans of foreign “imperial agents” in south america. the arms sales to the independent governments produced, for various reasons, benefits that encouraged the expansion of these merchants’ trade and of their networks to asia, but also in new sectors, such as loans to the independent governments and mining investments. the arms were paid with promissory notes, copper, and mining concessions that fostered the exportation of bullion and coins. in addition, the normalization of direct trade with asia from south america http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 undermined residual mercantilist barriers, such as those linked to the east india company. besseghini underlines the role of the leading arms traders, mcneile and deforest, who were close to various pro-independence factions, as mediators of geopolitical interests between their respective countries and the independent governments. furthermore, some of their associates were among the few foreign merchants able to settle in loyalist peru, establishing the bases to foreign merchants’ massive insertion after san martín’s arrival. if untied to the local context, however, foreigners ran into serious obstacles. laurine manac’h investigates the initiatives of a few significant french merchants and their opportunities and difficulties in the río de la plata during the revolutionary and civil wars. dealing with the case of the french informal consul in buenos aires, antoine françois leloir, she also analyzes some elements of the political role of global merchants. leloir’s integration in the local elite and support of a specific political faction —pueyrredón’s centralist one— end up being quite important in his trajectory. these elements stand out, at least in comparison to any other informal foreign consul and british and us great merchants mentioned here. basing her research mostly on documents from the buenos aires’ commercial court, the author analyzes the different fate, respectively, of the french traders who were well integrated into the local power groups, and of those who were not. manac’h underlines that french merchants received little support from their homeland at the beginning of the independence period and during the civil wars —probably even less than in the british and us cases, as this special issue shows. therefore, french merchants who lacked sound alliances in the local societies had no support networks to fall back on, and felt even abandoned by their fellow countrymen, as was the case of françois touchard. even the circulation of credit between france and the río de la plata was complex, sometimes also due to political circumstances. yet it remained possible during the revolutionary turmoil, through specific institutional supports and personal channels. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 francisco betancourt-castillo explores the role of warfare in the commercial reconfiguration of hispanic america by focusing on the corsair activities that provided a group of hispanic traders in chile the opportunity to diversify their investments. in the brief period after the arrival of the libertador san martín and before the creation of the national navy, traders such as antonio arcos and felipe santiago del solar showed an extraordinary initiative by engaging in profitable privateering. this contradicts the traditional historiography’s focus on the prominent role us merchants had in hispanic american privateering, which corresponds to coeval british and french fears. the corsair activities of hispanic ship owners based in chile was very important: it extended from acapulco to manila, compromising the interests of a few peruvian merchants. all this encouraged the successful presence of these same chilean merchants and privateers in the export trade and the consolidation of chilean centrality in the pacific. cristina mazzeo’s essay underlines how transformations in the regional, mostly peruvian, economic balances occurred alongside some degree of continuity with the colonial period in the practices and the geography of 1820s commercial networks. the most important change was the centrality of foreign merchants as connectors between the centers of lima, buenos aires, and valparaíso. there, where hispanic family networks operated, new relationships (including, but not limited to, family relations) started to function among foreign merchants, which reinforced the links between these three ports. mazzeo illuminates such relations by reconstructing personal trajectories such as that of frederick bergmann, and the networks of the groups active in hispanic american trade and tied mainly to the winter and brotherston houses in england, all involved in the business of war. independence could not be reached without the contribution of capital and goods that the foreigners could supply. the cases explored by mazzeo suggest that the idea that latin america came under foreign economic control perhaps originated from the exceptional circumstances of the independence wars, http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 probably the moment of greater opportunity for foreign merchants (platt 1972a, 48), particularly in the case of peru, which was harshly hit by the war and afflicted by capital flight. the characteristic of this exceptional moment had implications in the medium term, but hispanics were not entirely removed by foreigners and still operated in their flanks. ander permanyer’s article explores the hispanic commercial networks between the philippines, china, and the mexican pacific in the process of dismantlement of the manila galleon and the independence of mexico, during the 1820s. as the galleon —a mercantilist institution that survived even the “comercio libre”— disappeared, and the royal philippine company entered into crisis, the “private” trade —thus called because it worked outside these mercantilist structures— between the philippines, china, and india prospered, while further integrating the islands in the asian economies. in the process, mexico was not forgotten, and the reestablishment of the old silver-for-silks trans-pacific trade was envisaged. a hispanic-british trade was developed in the western trading networks in asia in the 1820s, a crucial collaboration for the advancement of the india-china opium trade before 1830, with financial support from the philippines —whose investors were looking for new investment outlets after the end of the galleon— and with the hopes of restoring the trans-pacific trade. permanyer looks at the steps taken in this direction by francisco xavier de ezpeleta and juan nepomuceno machado, who benefitted from their close connections with the royal philippine company together with the british commercial milieu, as well as with the forebears of the famous british firm of jardine, matheson & co. in china. these connections were fundamental for the development of new trans-pacific relations between china and mexico in particular, thanks to their alliance with the firm of barron, forbes & co., established on mexico’s western coast, which dominated trade in the central pacific in the middle decades of the nineteenth century. even in the midst of the uncertainty generated by the collapse of the mercantilist structures, http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 collaboration between hispanics and british took place after the consolidation of the latter’s hegemony in the world of trade in the pacific. the trajectories of the merchants here analyzed are astoundingly intertwined in distant settings that are usually studied separately, in the new structure that linked hispanic america to global traffics. not surprisingly, family ties were strategic to business expansion (fernández-pérez and lluch 2015). relatively few individuals, in fact, met each other in fundamental crossroads of this system, and many of them were foreigners in the hispanic world. without their author’s previous concurrence, some of these characters reappear several times in the various essays of this issue. the brotherstons and john begg are referred to by duggan and mazzeo; françois antoine leloir and juan pedro varangot are present in besseghini and manac’h’s articles; estanislao lynch is dealt with by betancourt, mazzeo, and besseghini; john parish robertson and thomas kinder by besseghini and mazzeo; eustace barron appears in besseghini and permanyer’s essays. all this shows the extraordinary power of these merchants in setting up and shoring up wide commercial, even global, circuits in moments of crisis. there are foreigners and hispanics among them, some of irish ascendancy like lynch, and even characters able to adopt diverse identities depending on the circumstances. eustace barron, the british vice consul in san blas, sometimes taken as an example of an agent of informal imperialist practices for his enduring role in silver smuggling, was born a hispanic-irish in cádiz. as a spanish and loyalist merchant linked to the royal philippine company, he lived and traded in peru and manila, only to be co-opted by the british consul in guadalajara, mcneile’s former partner, as a key man to defend british interests in the pacific coast of mexico (mayo 2006; besseghini 2020a). barron’s is a paradigmatic case of the reinvention of the tradition of the trans-imperial mediator, typically of the irish catholics at the time of the clash between mercantilist empires. the british and us commercial hegemony was not built from http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 scratch after the collapse of the spanish empire, but precisely because of the transition period where collaboration between hispanics and non-hispanics took place, through which there was an exchange of knowledge, access to commercial networks, as well as of capital and credit, to markets, to power and social and political influence, etc. as has already been mentioned, these hispanic merchants were more often than not individuals who held extensive trans-continental and trans-oceanic networks who benefitted from the profound changes taking place since the late eighteenth century, in coexistence with the mercantilist citadel that, before its collapse, attracted experiences and initiatives of hispanic and foreign actors for its reconfiguration. and these experiences served in the foundational moment of the fall of the last great european empires in the americas to create a new commercial order, with new roles suited to a new imperial framework. foreigners were indispensable “global connectors” in the context of the disintegration of the spanish empire and the wars of independence. the hispanics thought globally, in alliance with the emerging centers for finance and trade of london, new york, and paris —and for the new or renewed empires— but also of calcutta and canton. this micro-history of global merchants in the hispanic world at the time of independence partially rewrites the story of global macroeconomic and macro-imperial changes, addressing the centrality acquired by new actors, but also showing all the baselessness of what remains of the black legend on the hispanic trade. in addition to the intertwining of foreign and hispanic networks, the centrality of the hispanic world at war as a testing ground for global merchants’ initiatives in a revolutionary age has been underestimated so far. the following essays fill that lacuna. http://revistes.ub.edu/index.php/jesb volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 acknowledgments this special issue is the outcome of several discussions between the guest editors and the contributors. most of the main ideas were already put forward in the panel organised by deborah besseghini at the 2018 congress of the latin american studies association, barcelona, “global merchants in spanish america: business, networks and independence (1808–1830),” where both guest editors presented, together with cristina mazzeo and marie christine duggan, whose inestimable feedback the authors would like to thank. the guest editors would also like to acknowledge the support from several research institutions and fellowship programs, such as the university of turin, the fondation maison des sciences de l’homme (paris), the fondazione luigi einaudi (turin), the isral (alessandria), the chiang ching-kuo foundation (taipei), the institute of modern history, academia sinica (taipei), the grimse group (universitat pompeu fabra, barcelona), and the transcap group (universidad autónoma de madrid). we are deeply grateful to all the colleagues who read previous versions of this article or discussed with the authors the themes addressed in the special issue. the interpretation of history, especially of global history, is a complex, collective, construction with an ever-uncertain balance. the authors are responsible for any imbalance present here. references adelman, jeremy. 1999. republic of capital: buenos aires and the legal transformation of the atlantic world. stanford: stanford university press. adelman, jeremy. 2008. “an age of imperial revolutions.” the american historical review 113(2): 319-340. doi:10.1086/ahr.113.2.319. adelman, jeremy. 2010. “iberian passages: continuity and change in the south atlantic.” in the age of revolutions in global context, c.1760–1840, edited by david armitage, and sanjay subrahmanyam, 59-82. basingstoke: palgrave macmillan. adelman, jeremy. 2015. “mimesis and rivalry: european empires and global regimes.” journal of global history 10(1): 77-98. doi:10.1017/s1740022814000291. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1086/ahr.113.2.319 https://doi.org/10.1017/s1740022814000291 volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 alonso álvarez, luis. 2009. el costo del imperio asiático. la formación colonial de las islas filipinas bajo dominio español, 1565-1800. san juan michoacán: instituto de investigaciones dr. josé mª luis mora. aram, bethany, and bartolomé yun-casalilla, eds. 2014. global 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https://doi.org/10.1093/oso/9780199499717.001.0001 volume 8, number 1, 1-42, january-june 2023 https://doi.org/10.1344/jesb2023.8.1.40640 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 yuste, carmen. 2007. emporios transpacíficos. comerciantes mexicanos en manila, 1710-1815. mexico city: unam. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 araceli almaraz el colegio de la frontera norte (mexico) eloi serrano escse tecnocampus – universitat pompeu fabra (spain) latin american economic history, business history and economics of enterprise: current trends abstract recent studies about latin american business are worried about their position on the emerging and global economies. in this article we want to remark the important role of the universities, institutes, schools, and research centers in latin america that make possible the research work and the publication of bulletins, journals and books on business history. in this way, we observe the recent activities of associations and international groups that focus in latin american business history in the last twenty five years. we identify the advances and goals in this arena and agreed with carlos davila about the thematic diversity and the need to achieve methodological rigor and theoretical propositions. for this reason, we emphasize the historical role of latin american enterprises and the role of the family business, and their position in the global economies. this article has a double aim, on the one hand, we offer an overview and a state of the art about latin american business history. and, on the other hand, we emphasize, within the field of latin american business, emergent studies that show the potential of this discipline to participate in broader debates about innovation, corporate governance and learning. keywords: latin american business history; emerging economies; family business; corporate governance; innovation and learning corresponding author. e-mail: almaraz@colef.mx received 30 october 2015 accepted 30 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 studies on latin american economic history and economy of enterprises are related to entrepreneurial history and organizations, respectively. different efforts have been launched from different economic history associations, all of them constituted formally in the last twenty-five years by the asociación de historia económica del norte de méxico (1992), asociación uruguaya de historia económica (1992), asociación argentina de historia económica (1997), asociación mexicana de historia económica (1998), grupo iberoamericano de estudios empresariales e historia económica (2006) -unique in its scope because of the permanent participation of researchers from argentina, colombia, méxico, perú and spain-, the asociación colombiana de historia económica (2007), asociación chilena de historia económica (2008), associação brasileira de pesquisadores em história econômica (2009), asociación de historia económica del caribe (2010), and asociación peruana de historia económica (2011). these groups have organized national and international conferences like the annual latin american economic history conference and the annual economic history workshop from amhe where most experts on latin american economic history participate. also an important role has been played by universities, institutes, schools, and research centers, that make possible researching work and publishing of bulletins. bulletins and specialized journals have been the main diffusion framework of debates on economic history in latin america and evolution of businesses. before 1980, the participations were rarely published in international journals like the business history review edited by cambridge university since 1953 1 ; the family business review edited since 1988 (lansberg and perrow 1991, 127-147) and the revista de investigaciones de historia 1 started in 1926 as bulletin of the business historical society. volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 económica edited by the asociación española de historia económica, which started to be published in its current online format in 2005. since 1983, a new space was opened in the revista de historia económica journal of iberian and latin american economic from cambridge university published every trimester. other spaces were being added to these platforms headed by different associations on economic history (table 1). other journals and reviews close to economic history which have allowed the publication of studies on latin american entrepreneurial development have been: historia mexicana (mexican history), el colegio de méxico, revista de investigación económica (economic research review), unam; historelo colombian local and regional history review; desarrollo económico (economic development) –an electronic review in collaboration with jstor-; estudios gerenciales (management studies) by elsevier, revista económica del caribe (caribbean economic review), universia business review, trimestre económico (economic trimestral), fondo de cultura económica, revista innovar (innovation review) in argentina, and apuntes social sciences review in perú, among others. the publishing of books related to economic and business history has been conducted with regularity in colombia, argentina, brazil and mexico for the last two decades. this period coincides with the launching of most latin american associations on economic history. in this way, the academic debates incorporated data and thought about big business in globalization, the conformation of local elites, and the regional productive models. in these countries, since 1970, research work on entrepreneurial history related to businesses and some economic sectors, from the 19 th century to the 21rst century, has been very much active (derossi 1977; cerutti 1992; szmrecsányi and maranhao 1996; cerutti and marichal 1997; basave 2000; basave 2001). volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 table 1. economic history journals and bulletins in latin america name / year type country institution história econômica & história de empresas (economic history & enterprises history [1993] 2 printed brazil brazilian association economic history américa latina en la historia económica (latin america in the economic history) [1994/2004] 3 electronic mexico josé maria mora institute boletín de la cátedra corona (corona chair) [2001] 4 printed / electronic colombia management faculty of los andes university bulletin of mexican economic history [2001] 5 electronic mexico mexican association of economic history uruguayan economic history review [2002/2011] 6 printed uruguay uruguayan economic history association anuario ceed (yearbook of the center of business and development economic studies) [2007] 7 printed argentina economic research institute of buenos aires university h-industri@ [2007] 8 electronic argentina buenos aires university time & economy [2014] 9 electronic colombia jorge tadeo lozano university source: own elaboration based on public information. 2 published every six months. 3 between 1994-2004 the title was boletín de fuentes. published every three year since 2004. 4 published every six months. 5 published every four months. 6 between 2002-2010 the title was boletín de historia económica de audhe. since 2013 published every two years. 7 published every year. 8 published every six months. 9 published every six months. volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 thematic diversity requires methodological rigor and theoretical propositions (dávila et al. 2013). this is why we want to remark two discussions about latin american businesses: a) the role of enterprises and the role of family businesses, and b) their position in the global economies, as developed in the lines below. in contrast to the discussions in the united states where one of the main issues is on corporate governance and the family in small and medium size businesses, 10 for the latin american historians it is very important to understand: the adaptation and internationalization processes of businesses in specific productive sectors, as well as to analyze how the family has gained presence in the endurance of entrepreneurial networks (kosacoff and ramos 2010, 56-75), in the technological change processes, and the managerial alternative routes -contrasting with chandler´s managerial theory-. however, it is necessary to expand the dialogue among latin american and north american, asian, and european communities of scholars, about innovation, technological change, and learning in family business and business evolution in latin america. the recent discussions about business perdurability and the participation of family business in different spheres of latin american economies deserve theoretical, methodological and empirical comparative reflections (lansberg and perrow 1991; poza 1995, 301-211; morlán 2007, 13-38; fernández 2012, 96; miller 2010a, 90; barbero 2014, 95), which will allow discussion about the accomplishments of latin american enterprises in globalization. specialists in economic history, like erro, amatori and jones, warn us about how the challenges of this discipline face this era of globalization (erro 2003; amatori and jones 10 according to muntean: «although family controlled firms permeate finance, economics, and politics in the united states, they are infrequently studied by leading economists and organizational theorists, who assume an ideal type … with complete separation of ownership from management». (muntean 2008, 4). volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 2003). debates about learning, organizational development and the continuity of business networks will be added to issues such as latin american bank development and big enterprises -widely studied until the 1990s (marichal and cerutti 1997; peres 1998; cerutti 2006)-. the recent positioning of multinational businesses, from -so calledemerging economies, deserves to be analyzed in depth as pointed out by ma. inés barbero a few decades ago (barbero 2014; barbero 2003; miller 2010a). the most of native latin american businesses before 1850 corresponded to colonial productive models (1542-1810). once the independence movements expanded in latin america along early 19 th century, new forms of mercantile and productive associations were defined as part as modern business history (tortolero 1996). parallel to formal business registrations regulated by the commerce codes in different countries, new business registration appeared. the registration acts show us different kind of shareholders: foreigners with foreign residence, foreigners with local residence, and often mexicans by naturalization. after a few decades we can found the first descendants of first businessmen generation the combination of all these groups gave way to the emergence of local elites and to different forms of establishing businesses and strategies for accumulation (cerutti 2000, 3-27; cerutti 2002, 262). in the last century and a half, in latin america, we find a high entrepreneurial diversity which later will be discussed more consistently, especially when dealing with the evolution of latin american businesses recently positioned in international competitive markets, and with the validity of the family observed in the corporate governance of firms (casanova 2015; cerutti 2015, 71-94 and 153-187; lane et al. 2010, 155-169). mainly economic historians from argentina, colombia and mexico are heading latin american debates on these aspects (barbero 2008; fernández 2010, 147-167; barbero and lluch 2014; volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 almaraz 2007a, 113-142; almaraz 2007b; bueno et al. 1979, 39-92; cerutti 2005; gilbert 2009, 43-72). nevertheless, the consolidation of a mainstream scholarship about latin american businesses is still under construction. rory r. miller emphasized that: «on the one hand, case studies of individual firms have proliferated during the last two decades, especially in mexico, argentina, and colombia, as a new generation of researchers has entered the field… yet, on the other hand, studies of latin american business have not yet entered the disciplinary mainstream» (miller 2010b, 637-674). family business and entrepreneurial families in recent revisions of family business literature in latin america, we can observe some studies conducted in the 1970s -1980s, where the perspective has been anthropological and regional, as in the case of mexico. in this perspective, we can highlight the work of luis alfonso ramirez who has studied entrepreneurial families of lebanese origin in the yucatan peninsula. 11 meanwhile, gamboa had made the role of families in the business from an historic perspective visible (gamboa 1986, 57-81). the works of lizama and valerio have also applied a sociohistorical perspective (valerio 2002; lizama 2000), and recently the research of gonzález and almaraz has been integrated, focusing specifically on the northwest region of mexico (gonzález 2001, 13-28; almaraz 2007a, 113-142; almaraz 2007b; almaraz 2010, 87-122). nonetheless, the great advancement in family and enterprise studies has been conducted by cerutti, who is one of the main historians on economic history and business 11 mexican anthropologists rarely incorporated economic issues. between the 1970s and 1980s some works related to business and family were published: (bueno et al. 1979, 39-92; icazuriaga 1979; von mentz et al. 1988; lomnitz and pérez lizaur 2001, 1993, 1979). volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 development in mexico. in his review on business research in the north of mexico he mentions: «[since 1990 highlight] the research on family business, individuals, and ceo in economic activities studies [which explains…] the explicit intention to investigate and verify the trajectory of regional bourgeoisie, whose existence and eventual significance had been literally denied by a historiography saturated by anti-entrepreneurial prejudice and very dependent of the national and centralist view of the socioeconomic processes», (cerutti 2007, 122). in other latin american countries, the studies related to family business have been focused on the development of economic sectors. nevertheless, the contributions in the last decades have been of great importance, which puts us on the threshold of corporate history and a much clear definition of our subject of study, as noted by dávila (2007, 39-70). we are observing a growing discussion about the definition of family business and some enquiries about its continued existence, the specialization of family business versus the diversification over time, and its presence in the corporate governance. a related topic is the conceptualization of entrepreneurial families or family entrepreneurs. the research work developed until now allows us to infer about some aspects of organizations like the strong family foundations, and the new institutional, mercantile and technological environments. therefore, we can refer to the work of josep tapies et al. (2014) who revealed how the family based enterprise organizes and subsists with generational changes, acquiring a relevant positioning. in this same line, fernández has presented in recent years the topic of family property at the center of the current entrepreneurial and businesses discussion (fernández 2010; 2015). we must be reading other works related to family business focused on technology and management of volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 family to contrast the pathways of latin american businesses (del giudice et al. 2011; hougaz 2015). the economics of enterprise in latin america a revision of literature related to the economics of the enterprise in latin america allows us to identify the main trends and favorite thematic areas developed by the scientific community. to identify these areas, for the past four years, we have analyzed scientific articles published in international reference magazines. the first thematic approach to these articles, whose typology has been determined by a quantitative analysis of the scientific production in this field of work, suggests a general classification into two criteria easily identified: the research referring to innovation and entrepreneurship, and the rest of the work to be classified under a diversity of areas which include the economics of business, with special attention to the latin american case in areas related to information technologies and communications, corporate social responsibility, entrepreneurial financing, and general management. in relationship to the related research on innovation and entrepreneurship, we have authors like amorós, fernández and tapia (2012, 249-270); chaston and scott (2012, 1161–1177); lederman et al. (2014); castellacci (2015, 43–58); o crespi (2012, 273–290); who have performed a regional analysis on the variables that boost innovation in latin america. there are common aspects in the perspective of these investigations. first, the authors assume innovation as an analytical valid variable, and endogenous to the entrepreneurial development. after considering this assumption, there is the tendency to confirm the existence of a minimum innovative dynamic in the region because they claim there are no conditions for its promotion and development, neither from an institutional macro perspective (politics), nor from a micro point of view (management-corporate culture). in this sense, for volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 example, the title of lederman’s et al. (2014) is paradigmatic: «latin american entrepreneurs: many firms but little innovation». regularly, researchers try to identify the variables that may promote innovation processes in emerging economies by using the latin american ones as a case study. in most of the cases, corporate culture is defined with those aspects related to training and qualification, generation of technology and applied knowledge, and to incentives, as well as to the most important causes of its technological gap. in the same way, we observe a certain proliferation of literature, which incorporates the sectorial analysis and case study approach for different countries in the region with a clear preference for colombia, mexico and brazil. in this segment, the work by and páez (1998, 91-90); vizcarra, lópez torres and yánez ruiz (2013, 55-66); araneda-guirriman, pedraja-rejas and rodríguez ponce (2015); and santos, basso, kimura and kayo (2014, 527–535) are considered to be paradigmatic and paradoxical. in relationship to different publications, we appreciate that international journals –those which have included this research in their table of contentstend to set a thematic profile but not a preconceived preference for the region. when studies on latin america are published, they are set as case studies within a concrete methodological analysis. therefore, journals like management decision, journal of business research, international entrepreneurship and management journal do not center their interest in investigating about the becoming and procedures of latin american economies and businesses. we think that this is an important variable to consider at the moment of positioning the journal, since we are sure there is a tendency to understand the corporate behavior and evolution from a perspective that works in a concrete and specific manner in latin america. nevertheless, the most likely publications to promote development of this type of research with a genuine undertone of interest for latin volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 american businesses issues are linked to universities and research centers in different cities within the region, as revista ean, revista global de negocios, la mpra, revista virtual universidad católica del norte, la revista idesia, or supranational organisms of analysis like the comisión económica para américa latina y el caribe (cepal), the world bank or the world development. regarding the literature identified as belonging to the field of economics of enterprises, we have confirmed a considerable production of work related to icts, corporate social responsibility, business financing, and general management. we consider that the concern researchers have is correlated to the classic challenges of regional economy, as testified by a contextualized document about the minimum common denominator of the corporate, political and social reality in latin america. the research by botello peñaloza et al. (2015, 3-15); quinones, nicholson and heeks (2015, 179-208), may be examples that illustrate the growing preoccupation about the impact of new technologies in the performance of latin american businesses. within the work related to management, the concern for corporate social responsibility and management mechanisms of control is much present; the work of penfold, oneto and rodríguez guzmán (2015); wendlandt, valdés, martínez and ochoa (2015); bae et al. (2012, 412–435); cardona (2014); mccarthy, et al. (2012, 27-38); and garay and font (2013, 38– 46) address their interest to the influence of internal management processes as well as to the elements that coincide with the social impact of the business and its environment. the heterogeneity in the approach of this type of research tends to fall mainly in a study case methodology, centered on the size of the corporation in an endogenous variable that conditions it, or in a concrete geographic area. as we have observed in the work related to volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 entrepreneurship and innovation, highly qualified international journals tend to show a clear thematic profile, but not a pre-established preference for the latin american region. when studies are referred on latin america surface, they are considered as study cases within a concrete methodological analysis. in this regard, we have identified the journal of financial economics, journal of business ethics, tourism management perspectives, emerging markets review. as well as in the previous case, the publications which are more inclined to foster development of this type of research focusing in latin america tend to be related to universities or research centers in different places of the region. some titles are revista de estudios gerenciales, cuadernos de administración (universidad del valle) o los cuadernos de economía. other works related to enterprise economics in latin america as an axis of scientific interest have been related to business financing. the research of servina, lensinkb and van den berg (2012, 2136–2144); and maquieira, preve and sarria-allende (2013, 118– 148); may be of great information. the journal of banking & finance, emerging markets review are two of the journals that see latin america as a laboratory where they can test theories related to difficulties in financing that corporations may find in emerging economies. once more, we find articles that address research towards an analysis related to the environment and consider the region as the main object of study: ibáñez et al. (2015). in recent years, latin america has also been the object of study, and an abundance in the production of research related to entrepreneurial governance has been observed: carmen briano turrenta and saavedra garcía (2015, 275–286); jardon and martos (2012, 462-481); blancoa and golik (2015, 1865-1888). at the same time there is a growing number of studies about the impact of globalization in the performance of latin american corporations: botello (2014); staats and biglaiser (2012, 193–202); and iacovone, rauch & winters (2013). volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 final remarks latin american studies can offer excellent platforms for discussions about global debates around innovation, knowledge, family businesses, technological adaptation and change, and issues related to internationalization processes. all of them are methodologically relevant as case of study. and we need to construct a solid theoretical framework to understand origins, transitions and adaptation processes. the recent position of latin american businesses in global markets must be analyzed in a much broader debate. 61 in latin american contexts there seems to be a clear correspondence between the discussions about family adaptation patterns and the entrepreneurial continuity, but there are a lack of discussions about industrialization and technological development of the corporations and big family business in those emerging economies. as regards the research on the economics of the enterprise, we observe that international journals tend to accept works where latin american enterprises are conceived as study cases of brics; and when the focus is on the study of firm behavior from the latin american perspective, the publications commonly refer to regional analysis or to descriptions of international organizations. the dialogue among different groups of specialists about entrepreneurial history and latin american entrepreneurial development cannot be postponed if we want to understand the different business evolution processes and new entrepreneurial networks. references almaraz alvarado, araceli. 2007a. “el boom de las empresas extranjeras en el valle de mexicali y sus efectos en las relaciones empresariales locales (1912-1930).” frontera norte xix, 37:113-142. almaraz alvarado, araceli. 2007b. origen y continuidad de los empresarios de mexicali, baja california (19121939). phd diss., ciesas-guadalajara. volume 1, number 1, 95-115, january-june 2016 doi: 10.1344/jesb2016.1.j006 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 almaraz alvarado, araceli. 2010. “la configuración del tejido empresarial en el noroeste de baja california: empresarios y sociedades mercantiles en mexicali y su valle de 1874 a 1939.” in 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ernesto alonso carlos martínez and beatriz ochoa silva. 2015. “grandes organizaciones empresariales en méxico y chile: un análisis de perfiles con respecto a sus comunicaciones sobre responsabilidad social.” cuadernos de administración (universidad del valle) 31(53). this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 javier vidal olivares candelaria saiz lluís torró juan zabalza instituto universitario de estudios sociales de américa latina, universidad de alicante (spain) the internationalisation of family smes in the valencian region: the growing role played by latin america, 19802018 abstract sme's and family businesses are central elements in spain's modern economic growth. however, their process of internationalization has been little explored in recent research, particularly when it has been primarily aimed at emerging economies. the article aims to understand and explain the internationalisation process of sme's in the valencian region in latin america. through a set of cases of companies from different sectors (metal, machinery, chemical, ceramics, textile, furniture) it is showed that since 1990, the different latin american countries have been increasing their presence in the preferential markets of most of the 22 companies studied. the growing role of the region in the investments of valencian sme's shows the diversification and expansion of destination markets, including geographically not only the traditional european or arab countries but also those of latin america. different reasons underlie this internationalisation: but the enterprises analysed based on a case studies approach showed different models of expansion. the common denominator being that of strategies specifically developed and adapted to the destination country's local environment: from an incremental and gradual expansion. keywords: family firms; internationalisation; small and medium enterprises; region of valencia corresponding author: e-mail: jvidal@ua.es received 24 february 2020 accepted 9 may 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:jvidal@ua.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 introduction the differences between new forms of internationalisation of family businesses and smes are related to the mechanisms underlying companies’ choices of market insertion. the so-called international entrepreneurships challenge the traditional internationalisation theses that justify how smes and family businesses approach foreign markets. (ripollés and menguzzato 2004; ripollés, menguzzato and iborra 2002). they underscore how new internationalised companies are of a different nature. while companies used to follow gradualist approaches, internationalised start-ups present different characteristics. the so-called born global present remarkably different and new features with respect to classic internationalisation processes. the first, international entrepreneurships, internationalise rapidly (+– 3 years), and start off with high export levels (60-80%). their customer base is highly diversified in each country, and they remain proactive, not only in their search for alternatives to local or saturated markets; the driving businessman or businesswoman has an entrepreneurial nature and is highly experienced. companies from different sectors predominate, not just one sector. for their part, the born global conduct a large number of their value chain activities outside their country of origin. they have thus been described as global smes, who achieve 20/30% of their sales outside their native continent. generally, these companies launch their activities in simultaneously local and international markets, operating in different sectors. these differentiations emerge once family smes have undergone a first wave of internationalisation. this first wave is usually linked to external stimuli, as markets that had previously been far-off or closed open up. the stimuli may also consist of endogenous changes, mostly linked to structural changes in economic policies in the country of origin. the expansion, stability or recession cycle in which the economy may find itself is an http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 additional factor. in any event, aspects relating to the environment and cycle are also determined by the historical trajectory of the different sectors’ productive structure, the characteristics of the company’s territory, and the companies’ sectorial composition. in the case of spain and more specifically the valencian region, these variables have been explored overall, but no systematic progress has been made regarding the most widespread and prevailing business component: family-owned and run smes. taking this into consideration, the literature has been highlighting how the major factor underlying the sustained growth of sme-structure family businesses is internationalisation (casillas and acedo 2005; arranz and arroyabe 2009). entering foreign markets allows them to achieve improvements in productivity through the adoption of accumulated innovation. the latter eventually has an impact on the entire production fabric they are part of. the present study focuses on the internationalisation of family smes in valencia, a region with a historically export-oriented economy. first, the major approaches explaining the international expansion mechanisms of family businesses are reviewed. particular attention is given to ownership structure, as well as external actors and financing needs as the main drivers of internationalisation. second, we overview how these approaches have been applied to the case of spain and we then address the case of the valencian economy. the analysis then focuses on a sample of the most notable companies, spanning a range of productive sectors in which valencian family smes have adopted an internationalisation strategy. particular emphasis is given to those directed towards latin american markets because the latter represents a new geographical area of expansion that was not significant until 1980. the study focuses mainly on the conditions of exit more than the existing in arrival countries. in any event, we insist upon the new features of these markets that were of little importance http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 before 1990. to conclude, we advance that valencian family smes have followed an adaptive strategy, have exploited specific accumulated resources and have been mostly driven by second and third generations. the sectors are varied, but especially worthy of note are ceramics, the metal/mechanical industry, industrial machinery, chemistry and plastics. in chronological terms, the entering of foreign markets began in the 1990s, coinciding with the expansion of national and european markets and the internationalisation of big spanish companies in latin america as multinationals (guillén and garcía canal 2010). the internationalisation of smes and family businesses family businesses and smes constitute the prevailing and hegemonic type of production fabric; they are one of the linchpins of modern economic growth (colli 2012; colli and fernández 2013). aspects related to their export activity and internationalisation have been pivotal to economic expansion and growth, whether in developed or emerging countries. these processes have been studied ever more cumulatively since the early 1990s, when gallo and sveen (gallo and sveen 1991) highlighted the critical importance of internationalisation for smes and family businesses. undoubtedly, internationalisation has been the issue that has attracted the most attention in terms of sme and family business expansion. the work of casillas and moreno menéndez (casillas and moreno menéndez 2017 identifies up to six research areas relating to the internationalisation of family companies, combining both international businesses and the family businesses themselves: companies’ mission and objective adjusted to their trajectory (performance); international business and corporate governance; attitude toward risk and internationalisation; time processes, rhythms and speed of the internationalisation; http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 management of internationalisation and interculturality; and the perspective of company social capital and networks. within this wide range of themes, worthy of note is that of the speed or pace of internationalisation. in this area, hilmersson and johanson (hilmersson and johanson 2016) conclude that speed increases as markets get bigger; and that the more diversified these markets are, the more the companies depend on resources located abroad. an important question is why some family smes operate solely in domestic or local markets and tend to maintain local activities only; and, why, on the other hand, others are more dynamic in their search for international markets. some authors (d'angelo, majocchi and buck 2016) have studied this issue considering the role of family business governance structures and whether the latter enhance the scale and scope of internationalisation. applying the social capital theory and theories on corporate governance, they note that professional managers recruited outside the family play a central role, but only in companies with a low percentage of family ownership. the latter indicates that the key is a combination of family ownership and external management i.e. it is the combination of external capital and external managers that really allows family companies to internationalise dynamically. in addition to the governance structure as a determinant of company internationalisation, the present work also focused on the role of ownership structure and composition as a stimulus or obstacle to increasing internationalisation (sánchez bueno and usero 2014). some authors have shown that ownership composition in family companies has a negative impact on the degree of international diversification. based on a broad sample of european and asian family businesses, the presence of a financial partner coming second in terms of degree of ownership participation facilitates international diversification. the existence of this second http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 owner partner with links to the financial sector encourages growth in international markets and therefore accelerates internationalisation. external resources play a similar role, as shown by sascha kraus et al. (2016). based on the study of 426 german family companies, these authors show how the launching and development of internationalisation depends on the configurations of what they call “socioemotional wealth” (gomez-mejia et al. 2007) and the extent of its accumulation. this wealth is the combination of external ownership, the presence of a non-family ceo, the presence of non-family members on the board of directors and the scope of international networks. the combination of all or part of these components enhances or limits “emotional wealth”. its different types and varying degrees of development suggest that family businesses are willing to accept relying on external resources and to alter their strategic baseline. the issue is open to discussion because within family smes, the question of access to external financing or non-family partners is highly divisive: it alters the structure of strategic decision-making. with regard to the family sme use of human capital to rapidly internationalise, research shows that its presence is key when adopting a fast and premeditated internationalisation strategy, but it is not more effective when companies internationalise more slowly (onkelinx, manolova and edelman 2016). it is therefore essential to take in to account the mechanisms that make family businesses more prone than others to internationalisation (merino, monreal-pérez and sánchez-marín 2015). in this sense, the different studies carried out have been explaining these processes, emphasising various aspects as described above. kontinen and ojala have established these companies’ ownership structure as the determinant of processes of internationalisation http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 (kontinen and ojala 2012) . according to them, in the case of all the finnish companies studied, it was the ownership structure that was primarily responsible for determining how internationalisation was conducted. thus, a fragmented ownership structure brought about a traditional path to internationalisation. conversely, a concentrated property structure leads to a born global or born global again company and, therefore, to different internationalisation pathways. this perspective is based more on stewardship theory than on agency theory. in this regard, having studied italian companies, d'angelo, majocchi and buck (2016) affirm, based on a sample of companies, that governance/corporate governance studies and their characteristics with respect to family ownership majorities or minorities can significantly affect internationalisation within family smes. applying the theory of social capital and corporate governance, they conclude that the optimal scenario is the combination of external capital and external managers: this scenario has the biggest impact on driving and consolidating smes and family business internationalisation. in any event, it should be noted that the studies available on the internationalisation of family smes do not always agree on the factors underlying internationalisation. they depend not only on the questions pointed out above, but also on the sample used and the techniques employed (qualitative or quantitative). thus, kalinic and forza argue that differences do not always exist between the gradualist and the born global models (kalinic and forza 2012). the conclusion they drew from their five-case study was that successful internationalisation was determined by specific strategies, rather than the extent of market knowledge, as well as by the international networks accessed or previously acquired international experience. a seminal work regarding this comparison between the incremental model(s) and the born global model is that of knight and liesch (knight and liesch 2016). following their http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 literature compilation study on explanations of multinationals, whether based on the incremental model or the more recent born global and internationalisation process models, they point out that there is still no general agreement on the causes and characteristics that explain internationalisation; the debate is open to new ideas and explanatory mechanisms. in this sense, the literature continues to grow in line with the topics put forward by casillas and moreno menéndez cited above. the empirical evidence underlying the analyses seeking internal and/or external explanations to the internationalisation paths of family companies is varied and the main issue remains open. there have been no conclusive explanations. the valencian economy as a framework for family businesses: a perspective on their historical evolution to approach how valencian companies have established themselves in foreign markets, we must first contextualise the industrial development of the valencian economy, which for the most part took place in the 1960s. most authors have acknowledged being somewhat perplexed as they have sought to characterise valencian industrial development. what some call the “valencian model” (ybarra 2006) can be described as a constellation of small enterprises engaged in the production of consumer goods grouped into sectoral and territorially homogeneous clusters1. alongside them, a small number of large industrial enterprises have developed, which, with few exceptions, stem from the initiative of foreign capital. initially, this capital was coming from the basque country and was placed in sagunto steelmaking at the beginning of the xx century. later it came from the usa, with the arrival 1 for the characterisation of valencian industrial districts in recent decades, worthy of note are the works by julia salom (salom and albertos 2013). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 of ford and ibm factories in the 1970s. this peculiar configuration, similar in some respects to the so-called terza italia (lluch 2001, 211) is the result of a unique historical journey. at the dawn of industrialisation, the valencian region seemed to possess all the necessary attributes to initiate this process2: a highly productive agricultural sector with a significant concentration of ownership (although a lesser degree of tenancy), a rapidly growing market, both internal and external, a dense urban network of medium-sized towns organised around a large capital, and finally, a highly capitalised and developed textile industry arranged into a variety of territorial clusters (especially drapery), in particular in valencia’s capital itself (silk products). despite this, no accelerated industrialisation ensued but rather a slow transition, focused less on the so-called leading sectors and more on other types of more weakly capitalised activities, together with a major agrarian transformation (vidal 1993). the combination of continuing traditional, pre-industrial manufacturing activities (such as paper, ceramics, textiles or boilers), factories, experience and synergies of the decaying silk product industry, and the agricultural boom eventually shaped the key factors of valencian industrialisation in its early stages (martínez gallego 1995). together with the industrial textile enclave of alcoy, most industrial initiatives tended to concentrate in valencia and its sphere of influence. the development of metal-mechanical industries (that started with the boiler industry, was first stimulated by agricultural demands for irrigation facilities, and much later by the production of railway equipment), of the wood industry (the manufacturing of packaging to export agricultural products would later give rise to a proliferation of furnituremaking workshops) and the chemical sector (suppliers of agricultural fertilisers) are good 2 the research and confronted visions that have led to a long, extensive and largely unfinished historiographic debate are beyond the scope of this article. overlooking the most recent contributions, which have not brought any substantial alterations to previous approaches, a brief review can be found in (torró and cuevas 2002, 22– 24). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 examples of the forward supply chains experienced by valencian manufacturing (torró and cuevas 2002, 37–45). manufacturing became increasingly capitalist in nature due to its capitalisation and the slow but constant adoption of technical innovations and spread outwardly from towns (textile and leather footwear) (ceramics) during the last third of the nineteenth century (estall 2007). thus, before the first world war, the valencian region was the third spanish territory in terms of industrial weight, behind catalonia and the basque country. though agriculture remained the main activity in terms of employment and contribution to growth, unlike these two other latter regions, the industrial sector maintained itself and grew. urban development and the creation of the transport network (particularly railways and ports) were, to varying degrees, both the cause and consequence of this industrial growth (vidal 1992). this expansion also intensified during the world war i, given spain’s neutral position and its particular impact (soler 1984). as the 1930s great depression flared up, the valencian economy was an export economy based on primary products. it was mostly agricultural in terms of employment structure but it possessed notable industrial and service activities. these activities (and the corresponding degree of urbanisation) were concentrated in cities and widespread throughout the territory. no studies or monographs delimit the valencian business structure before the 1950s comprehensively and clearly, but this structure visibly seems to have been highly atomised. except in the case of sagunto’s steelmaking (which took advantage of aragon iron ore and coal), there was very little industrial concentration. exceptions are found in the transport sector, in some metal construction companies, in urban services and in somewhat isolated local initiatives in industries such as paper, footwear or ceramics. this latter feature reflects http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 how the native financial sector was relatively frail, it undertook few initiatives and maintained a solid local and small banking sector (along with foreign businesses and savings banks) until after the 1936-39 civil war (soler 1990b). valencia's industrial development was clearly affected by the spanish civil war (1936-1939). spain’s autarkic policy clearly promoted basic industries. but this was not the only adverse consequence for a manufacturing fabric focused on consumer goods. foreign trade difficulties accentuated technological backwardness due to the difficulties in acquiring new technology or simply the components and spare parts needed to maintain existing machinery or factories. as a result, an energy regression also occurred, especially because of difficulties in producing the electricity that supplied most of the installed industrial machinery. the economic policy developed under franco significantly harmed a diversified economy that tended towards industrialisation —which was truncated by the dictatorship. in the medium term, however, low wages allowed maintaining profits. but these profits could not be invested due to a shortage of opportunities, in turn the result of a depressed internal market and an external market from which it was not possible to obtain goods. consequently, a forced accumulation took place that would fuel investments from the mid-1950s and especially from the 1960s onwards. the gradual elimination of barriers to the creation of new enterprises eventually cleared the institutional investment barriers and led to an industrial boom. during the 1950s and, especially after the liberalising measures of the 1959 spanish economy stabilisation plan, spanish industry grew very rapidly in the following decade, a process which many authors since lluch have described as valencia’s true industrialisation (lluch 2001). this growth was not led by new sectors: there was in fact a remarkable continuity http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 between the existing activities and the main actors of the 'boom'. however, the new growth pattern was not without major changes driven by other activities or affecting other activities3. the most decisive transformation was the shrinking of the primary sector, in terms of employment and wealth generation. the rural exodus began as early as the 1950s and accelerated during the 1960s. rural inland areas were slowly and inexorably depopulated, except in coastal regions, which were highly diversified thanks to the development of industries and services, particularly those linked to tourism. depopulation continues today. agriculture diversified without losing its export orientation. nevertheless, huge productivity gains in the sector (deriving both from technical modernisation with the spread of the 'green revolution' and the transfer of workers with nil or negative marginal productivity to other sectors) led to deteriorating exchange relationships with other sectors and a sharp drop in their gva contribution. although the valencian region was also affected by migration flows to central european countries, its migration balance was positive and its population grew and urbanised rapidly. the growth of tourism also played a decisive role. in line with the changes mentioned above, the territory’s natural conditions (in particular the existence of coastal areas with beaches and exceptional weather), the income increases in central european countries and favourable exchange rates launched coastal urbanisation, based, first, on the formation of a massive hotel offer and then on the construction of second homes. this latter activity, whose main factor of competitiveness has been price and not quality, underlies the growth of the construction sector. the weight of construction rose continually until the 2008 crisis. 3 regarding this and what follows, worthy of note is the synthesis by soler 1990a and the general analysis, focusing on macroeconomic variables, by reig and picazo 1997. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 urbanisation and the growth of per capita income in spain, coupled with growing demand for goods from developed capitalist countries, boosted valencian industry during the late franco era. though the main stimulus was domestic demand for consumer goods, the 'export calling' of the valencian economy would soon be visible in the industrial sector as well. until the 1990s, favourable exchange rates and low–albeit rising–wage costs shaped the industry's competitive advantages. in fact, added to the institutional incentives of the franco regime, the investments of multinationals such as ford or ibm cited above also sought to benefit from these advantages in the european market. thus, although the original industrial boost came from areas and sectors that we can now describe as 'traditional', emerging large multinational companies also led to the creation of an auxiliary industry, notably the automobile sector. the 1973 energy crisis caused a sharp economic downturn and resulted, given the specificities of spain's political regime, in a surge of social protest bringing about the so-called democratic transition. although the crisis initially affected the capital goods sectors, which had a very limited weight in the valencian industrial structure, unemployment rates had been rising sharply since 1976 eventually deeply affecting the consumer goods industry. some large companies that had emerged in sectors such as metal-mechanical construction, paper or footwear irrevocably collapsed, leading the industrial business fabric to atomise further (reig 2006). the structure in districts and resulting externalities, however, preserved a large part of the industrial activities, although often at the cost of generalising the so-called informal economy —which was widespread in still labour-intensive sectors such as footwear and textile-clothing (ybarra, san miguel and hurtado 2002). the industrial structure, organised into districts and composed mostly of smes, has proved to be highly resilient, but it has also revealed big weaknesses, particularly regarding the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 introduction of technical innovation. the development of the democratic system led to competences being highly decentralised; this resulted both in an exponential increase in invested public capital (reig and picazo 1997, 112–114), and the design and execution of a peculiar industrial policy by the first regional governments. spain's integration into the then european community forced the industrial conversion process into reducing a significant part of its basic industries. the valencian region was not spared, and the main victim of this strategy was sagunto’s steelmaking. the cancellation of investment projects in steel factories and their ultimate closure aggravated the dispersion of the industrial business fabric (reig 2006). the valencian industry can be described as organised into relatively homogeneous clusters from a sectoral and territorial perspective and made up of a multitude of sme companies. based on this latter correct analysis, and in response to this situation, an institutional network was structured around so-called “technological institutes” (albors-garrigós, del val and rincón-díaz 2010). they were conceived as public bodies that would encourage publicprivate collaboration, and were designed to compensate an obvious lack of drive towards innovation. this innovation deficit can be explained by the difficulties faced by small businesses: due to the scale of their operations, they can consume innovation but hardly lead it. despite the above, new industrial policy orientations and evolutions in the international position of the spanish and valencian economies since the mid-1990s have led to a sharp decline in the weight of the valencian industry. this change, clearly encouraged by the creation of the eu single market and currency as well as increasingly liberalised international trade is conditioned by the specificities of the valencian industrial fabric: poorly http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 differentiated produced consumer goods in terms of brands or prices, micro-enterprise structures and difficulties in accessing capital markets. until the 2008 crisis, the valencian economy was driven by the construction sector (enhanced in the case of the valencian region by the weight of tourism-related activities and specifically by the construction of second homes to meet demand from other european countries), leading to highly speculative development (gil, llorca and picazo 2006). however, this generic situation of the industry as a whole should not belie the efforts and changes put forward by smes and family businesses to trace back the structural problems of the valencian production fabric. while adverse situations emerged in the 1990s, movements towards internationalisation began to be felt. they accompanied the search for foreign markets, a tradition that had begun to be visible in the 1960s in some production sectors. valencian smes and family businesses: internationalisation processes in the case of spain, a vision more focused on regionally-based family companies has prevailed. nevertheless, evolutionary and historical works start from the 1960s, when the spanish economy started to grow (caruana, larrinaga and matés 2011). within the general subject on how business structures develop and are historically shaped, the literature on internationalisation at the regional level has concentrated on regional economies (garcía ruiz and manera 2006). in the valencian case, research has been concentrated in the last decade, failing to include an evolutionary or historical perspective on the roots of domestic economic growth, let alone of internationalisation. as pointed out above, the valencian economic structure established in the 1960s and 1970s underwent significant changes after entering community markets once spain joined the european economic community. specifically, new trends reached the heart of smes that had http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 developed on the basis of family ownership in agri-industrial sectors but also in specifically industrial sectors. textile, wood, footwear, basic and industrial chemistry and metal were responding to the stimulus of expanding european markets by continuing the export tradition rooted in the valencian economy of the late nineteenth century and throughout much of the twentieth century, especially from the 1960s and 1970s. the 1980s and, above all, 1990 marked a fundamental change, since valencian family companies and smes gradually began an internationalisation process that had an impact on all sectors, though it particularly affected construction and associated sectors (ceramics and building materials), metal and its processed materials, wood and furniture, machinery, textiles, chemistry and agri-food. all stemmed from the valencian economy’s previous specialisation and in the case of some sectors, even from the first third of the twentieth century (vidal 2006). in the sectoral sample used4 all these sectors are fully represented: table 1. valencian family businesses, smes and cooperatives: internationalisation established main sector gradual/born global employees generation internationalisation actiu 1968 furniture gradual 268 1st subsidiaries anecoop 1975 horticulture gradual 187 cooperative subsidiaries beniplast/benitex 1961 technical textile gradual 246 2nd mexico/argentina domingo ochoa 1970 automotive gradual 212 1st mexico ecisa 1968 construction born global 421 2nd qatar, portugal, chile esmalglass 1978 ceramic gradual 297 1st mexico and brazil 4 the sample is based on 22 valencian companies with sme and family-owned characteristics. the sample, taken from the commercial register (registro mercantil) using the database published by valencia plaza http://epoca1.valenciaplaza.com/ranking_empresas_valencianas, classifies the enterprises by turnover, profits and employees; it includes the major historical specialisation sectors and covers the entire regional territory. this information was complemented with the einforma website at https://www.einforma.com the system of cooperative and labour limited company (sociedad anónima laboral) was also taken into account to the extent that the prevailing form of original production ownership is that of family-owned firm. only distribution and marketing are part of production internationalisation. http://revistes.ub.edu/index.php/jesb http://epoca1.valenciaplaza.com/ranking_empresas_valencianas https://www.einforma.com/ volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 established main sector gradual/born global employees generation internationalisation frost-trol 1957 refrigeration machinery gradual 165 3rd mexico gestamp 1967 automobile supply gradual 262 2nd mexico and mercosur dominguis group 1932 industrial painting energy industry gradual 356 3rd mexico, panama, usa, brazil istobal 1957 machinery gradual 260 3rd subsidiaries brazil, usa itc 1971 plastics gradual 248 2nd subsidiaries, brazil pamesa 1972 ceramic gradual 471 1st subsidiaries, brazil porcelanosa 1973 ceramic gradual 766 2nd subsidiaries/own brand proaliment 1920 food gradual yes 3rd mexico, venezuela, argentina, cuba, dominican republic químicas oro 1955 chemical gradual yes sold french group altair, 2nd cuba, dominican republic rover 1962 diversified gradual 272 1st subsidiaries, mexico, colombia, perú royo group 1973 furniture gradual 900 2nd méxico segura group 1970 metal/automobile supply gradual yes 2nd subsidiaries/china mexico perspectives textiles pascual 1965 textile gradual 65 2nd export/ subsidiaries 10 countries latin américa vento maquinaria 1940 agri-food machinery gradual 14 cooperative argentina, chile, colombia, mexico, uruguay textiles mora 1962 textile gradual 85 cooperative (1991) ecuador, colombia robotnik 2002 technological services born global 24 limited labour company usa/argentina source: valencia plaza and einforma based on the commercial register (registro mercantil). based on all the companies analysed, different internationalisation behaviours can be distinguished, starting with the variety of industrial specialisations. the latter include metalmechanical and associated industries; then construction and ceramics; chemistry with its different specialisations (agrochemical, plastics); textiles; agriculture and food and, finally, wood and furniture. taking the various specialisations into account, internationalisation http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 processes also share similar characteristics, regarding the timeline of entering foreign markets and the exogenous reasons underlying internationalisation. in accordance with the motivations to enter international markets, the first issues to consider relate to which factors prevail when making strategic internationalisation decisions. in these sme and family companies, the first aspects to consider are those linked to the companies themselves; that is, characteristics that could be classified as endogenous, originating within the family business corporation itself. notable among them, as described above: the existence of external relational social capital; an executive outside the family business itself that manages the company's growth strategy (claver, rienda and quer 2008); the predominance of a proprietary partner external to the company with a majority share; and family succession coinciding with the company’s international expansion. with regard to the exogenous changes that drive internationalisation, the following should be considered: the impact of general crises or those of the industrial sector the family business is part of; adapting to new open markets that have created opportunities; expectations of strategic organic growth through mergers, acquisitions and takeovers. the internationalisation processes in the sample companies followed their own timelines with respect to the production sector. in terms of number of family businesses, the metal, automobile and automotive sectors grew the most. this group is constituted by domingo ochoa, gestamp, grupo segura, grupo dominguis and istobal which were mostly established in the 1960s and 1970s as small workshops, subsequently experiencing constant production growth in their respective specialisations (tooling, stamping, manufacturing of light metal and engine components, industrial paint) until ford, the multinational company, opened its factory on the outskirts of valencia in 1976. having supplied automobile factories in spain with http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 modest turnovers until then, such as seat, ford’s arrival boosted the entire sector. the progressive specialisation and links with other automotive or locomotive manufacturing companies (macosa, vossloh) with factories in spain and europe (hungary or china as in the case of the segura group) transformed the production scale, opening new lines of specialisation and their own technological innovation. internationalisation unfolded in the 1990s. in the case of latin america, the preferred destination has been mexico and the mercosur countries (brazil and argentina). in both cases, the reason is the impact produced by economic integration on the continent (tlc, mercosur): production increased and automobile factories established themselves leading to a multiplication of opportunities in these production markets. in addition to this external stimulus to market expansion, some companies underwent internal transformations, coinciding with generational handovers, in which the second generation, accessing ownership, adopted internationalisation strategies. this was the case of the dominguis group as from 2012 and domingo ochoa in 2011. other family-owned companies internationalised through mergers, acquisitions or takeovers. gestamp's case is a good illustration of this strategy: in 1990, the company engaged on a path of acquisitions and partnerships with international business groups and has thus given the spanish parent company (now located in madrid) a global dimension. the istobal company is an example of organic growth: a family business structure that has evolved smoothly, transiting to the third generation. the second generation had already targeted internationalisation and in 2000, the company ranked second in europe in the sector of car wash tunnel manufacturing. international production accounts for 50% of its total production and it has a subsidiary and an assembly plant in sao paulo as well as distributors in all latin american countries. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 in the case of construction and ceramic companies, particularly notable is the internationalisation of companies that simultaneously undergo constant endogenous and exogenous changes. ecisa is starting to approach foreign markets in the near east, which coincides with an endogenous change: in this family succession process, the first generation is handing over decision-making and there is no reliance on external capital or any managers outside the family. the second generation is pursuing the strategy of internationalisation in latin america but also in africa and the european union, though now via external capital (vidal 2020). rover alcisa, linked to the fernández verdugo family is expanding through acquisitions, starting with the buying of construction companies. in 2003, it grouped its business activities of construction, development, real estate, engineering, mining and new technologies under the rover group, which is ready to invest more. a special case is that of ceramics, with companies such as pamesa, porcelanosa, esmalglass. these companies constitute a cluster in the province of castellón, which has grown on the basis of its own factories that maintain their family structures. they have internationalised by establishing factories in brazil and in some cases using big external capital (investment funds) and external managers (esmalglass). nevertheless, for the most part (porcelanosa and pamesa), the families themselves, transitioning to the second generation, have maintained an organic growth strategy with their own subsidiaries or networks of logistics warehouses in latin america. also worthy of note is the group of chemical companies that includes: itc, benitex/beniplast and químicas oro. these companies illustrate the vigour of chemistry as a key valencian industry line of specialisation since the beginning of the twentieth century as well as its links with agriculture and its industrial implications. beniplast benitex manufactures textile http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 products for agricultural and industrial uses (materials and plastic fabrics for crop protection) and was acquired in 1998 due to succession problems by a british capital financial group. the family took back control in 2001 with local valencian financial support, allowing it to relaunch and continue its internationalisation initiated in the 1990s. it has gained a foothold in argentina, its favourite market. for its part, plastic chemistry and its applications emerged as an ancillary of the toy industry. one example is the packaging company itc. the crisis in the sector coincided with the second generation’s access to ownership and management. this brought about a change of expertise oriented towards industrial packaging. europe is its major internationalisation destination but the company is also present in latin america. the case of químicas oro reflects the valencian tradition of chemical/ insecticide products for agricultural production. due to difficulties in growing because of financial problems, it was acquired by a major european industrial group. in the case of the textile industry, worthy of note is the classic specialised valencian production of blankets and new technically innovative products. among the biggest are textiles pascual and mora, established in the 1960s and located in the interior mountainous counties. the first, textiles mora, included within a big group of enterprises called aquaclean, is managed by the second generation and has subsidiaries in latin america (grau 2017). the second, mora, turned into a cooperative after the 1990s crises though the family continues to influence the management following legal changes in the company. the most technologically advanced offspring is beniplat/benitex, a company mentioned above specialising in chemistry, specifically in plastic textiles. it was created in 1961, and the second generation has established its own subsidiaries in mexico and argentina. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 proaliment, anecoop and vento illustrate how family businesses have travelled through the valencian economy’s particular history towards cooperative formulas in agri-food, as they had to overcome the restrictions of small business size to internationalise production (fayos, calderón and mir 2011). this theme has been left unaddressed in valencian historiography and needs to be researched further given the weight of agriculture in the regional economy and the organisation of the property structure based on small and medium-sized holdings. the proaliment company was created in the 1920s and is now run by its third generation. it began by specialising in saffron production, mechanising its production from 1950 onwards and remaining focused on the internal market. after engaging in commercial contacts to locate its production in venezuela and argentina, the second generation followed a strategy of agreements with multinationals to strengthen its leading position in local markets, of which it controlled 30%, and to secure financing to expand its markets. the acquisition of proaliment by ebro puleva and the recovery of control over the company reinforced an internationalisation strategy that focused on two markets: the north african arab world and latin america and the united states5. anecoop, for its part, is a separate case due to the significance of the cooperative movement. emerging in 1975, anecoop resulted from the merger of small cooperatives and agricultural family companies. it is spain’s leading export and vegetable company, present all over europe as well as in latin american and asian markets (font de mora 2001). the case of the vento company is a much clearer illustration of how family businesses in the valencian economy have evolved into cooperative forms. josé vento founded the agri-food machinery company in 1940 by transferring it to the employees 5 the implemented strategies vary greatly according to the areas. while companies bet on technological differentiation and marketing in european and american markets, they turned to relocating production in the arab market (moreno and vidal 2011) http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 themselves in 1977. the latter, as new owners, firmly established the company in argentina, chile, colombia, mexico and uruguay. the company itself created its own engineering subsidiary, named indetec in 1988, through which it develops its own technology in the r&d&i department, especially applied to alcohols and fruit juices. finally, worthy of note is the furniture sector with a long tradition of production specialisation within the valencian economy. actiu, created in 1968, and grupo royo, founded in 1973, are the family companies that stand out the most regarding internationalisation. the first belongs to the berbegal family. it started in 1948 as a carpentry workshop in a county traditionally dedicated to toy manufacturing. internationalisation began in the 1980s, through the exhibiting of products at specialised fairs. the transition from home furniture to office furniture was linked to computing, and more specifically to chair design. the preferred strategy for commercial internationalisation is the showroom as an introductory mechanism, as well as that of reaching agreements with local partners. the crucial factor during this phase was the technology and know-how built-up by the regional toy industry regarding the processing of plastics and metals. they were present in latin america at a very early stage, as far back as the 1980s. in the case of the second firm, the royo group is managed by the family’s second generation which, supported by the hig fund for its external financing, has rapidly internationalised, and is physically present in mexico, where it has a production plant specialised in bathroom furniture. among the significant cases of family business internationalisation in newer industries features robotnik, a technology services company. robotnik was created in 2002. it is a typical born global company, mainly specialised in applied computing and artificial intelligence (leonidov and samiee 2012). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 the available literature quoted in the previous sections highlights the central elements that drive the internationalisation processes of smes. in addition to the review above and our sample of cases, it is relevant to address the most characteristic aspects of the valencian business structure. three of them are worth noting: the role of changes and transitions in family ownership between generations; the different implications of relational capital endowment; and the relevance of commercial agreements between firms. in the valencian case, the major endogenous elements are those driven by generational change, especially the second generation, which in some cases has led to the creation of born global enterprises. the first generation of these companies focused on the domestic market while the succeeding generation drove the internationalisation process (ecisa, robotnik). this behaviour is followed by companies from both developed and emerging countries (fernandes and meneses 2012). these are companies whose generations have successfully promoted their businesses during the first generations and are oriented towards long-term survival, companies in which the succeeding family members have a higher educational level than the previous one and greater knowledge of international markets (stieg et al. 2017). from this point of view, the family businesses in the sample having achieved successful second or third generation changes did so through internationalisation, though not always with the characteristics of born global companies or in the economic sectors where the latter have predominated. it is difficult to say whether most of the companies under study having followed the path of internationalisation have done so on the basis of boards of directors with a majority of family members or with a significant share of partners from outside the company. our sample includes both cases. further questions remain regarding our sample: whether the majority of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 family members involved in the governance of internationalised companies has been particularly active in defending rapid internationalisation; whether the members of the boards of directors belong to several generations; and whether there has been an active commitment to internationalising towards more geographically distant markets as opposed to those closer to home. this path is still unexplored in the valencian case (dou et al. 2019). the issue is related to generational changes and dynasties’ governing styles. our analysis has not yet yielded sufficient results to generate substantial contributions to existing debates. an important and connected issue is the valuing of relational capital as an asset that facilitates innovation and drives internationalisation. in family businesses, family social capital that is strongly developed inside the company translates less intensely into innovation management than in the case of non-family capital from abroad. the literature indicates that generally, family involvement in management negatively affects the relationship between internal social capital and innovation (sánchez-famoso, maseda and iturralde 2017). in other words, the greater the family’s involvement in management, the lesser the capacity for innovation, unless governance mechanisms are introduced to consciously encourage the incorporating of external partners and managers from outside the family. in the case of the valencian companies under study, some incorporated external relational capital to support innovation, eventually fostering internationalisation. this was the case of proaliment and ecisa. in the case of valencian family businesses, external social capital, understood as relational capital (human capital that circulates within the district, a shared vision of the businesses, cooperation based on trust) has played a central role (molina-morales and martínezfernández 2006). the contacts between managers and business owners, and the involvement of clients and suppliers has contributed to family businesses acquiring knowledge, http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 competitive advantages and facilitated internationalisation. the system of industrial clusters or industrial districts in sectors such as metal (vento, domingo ochoa, segura group,istobal), textiles (pascual, mora, beniplast) and ceramics (pamesa, porcelanosa) has historically facilitated internationalisation (belso 2006). generational changes and stable relationships with other companies through partners, shareholders or agreements encourage international expansion. these mechanisms provide smes with the necessary sources and key factors to support a process of internationalisation (fernández and nieto 2005). the historical configuration of industrial districts and local productive systems in the valencian economy has favoured this process of export first and international expansion later (mas 1996). the problem of resource scarcity affecting sme-sized family businesses in their adopting of an internationalisation strategy could be overcome through business networks, i.e. through equity capital. this aspect is decisive when companies implement an internalised mode of internationalisation (launched from within the companies) in which the greater the firm's control over its international activities, the greater its control over its internationalisation mode. this allows for a combined role of internal support (management of the process from within the firms) and external support, i.e. through the business networks, which facilitates the financing and capital contribution to launch the internationalisation. the cases of proaliment, royo, segura group and rover are good examples of this. not only the funding, but also changes to the control of the internationalisation can be based on the use of companycontrolled management with different mechanisms according to the firms’ interest at each stage. a change in internationalisation mode focuses on a change from higherto lowercontrol modes, and vice versa. increasing control entails switching from intermediary (e.g. agent, distributor) to direct exporting or from direct exporting to subsidiary (or joint-venture). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 decreasing control entails switching from subsidiary (or joint-venture) to direct exporting or from direct exporting to the use of an intermediary. therefore, the focus is on the direction of change in control (chetty and agndal 2007). the significance of the business networks developed historically within the valencian industrial districts for the different sectors of specialisation made it possible to consolidate internal markets and then stimulate exports to europe. the jump to latin american markets was facilitated by these same business networks supported by cultural proximity and the use of a common language that facilitates more extensive information and ensures trustworthy business relationships (musteen, francis and datta 2010). this was helped by the fdi of the largest spanish multinational companies, which had a demonstration effect on smes. the consequent trade agreements with various latin american countries, the activity of the institutional foreign trade agencies (icex) and the network of spanish chambers of commerce in the region were also a stimulation. the export path dependence of the main industrial sectors of the valencian economy supported the transition to different forms of internationalisation according to companies’ internal and external conditions. their export histories had been supported by growing specialisation fostered by various kinds of innovations in accordance with the different productive branches. what appears decisive in our sample of companies is that the role of international partners, joint ventures, and the use of showrooms promoted cumulative innovations in companies such as actiu, textiles pascual, frost-trol and beniplast/benitex. trade agreements between partners (zucchella and siano 2014) and international treaties between countries facilitated the path towards innovation and specialisation implied in all forms of internationalisation. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 conclusions the internationalisation of valencian family firms has followed a historical process linked to the path dependence of the regional economy’s general and sectoral productive specialisation. research shows how the valencian economy’s industrialisation was marked by an important structural legacy going back to the early twentieth century. the literature also illustrates how changes in the export orientation and internationalisation of family businesses began to be visible in industrial sectors specialised in production from the 1960s/1970s onwards. though for different motives, i.e. the company’s own internal reasons or changes in national and international markets, or both, family smes went from exporting to considering the need to internationalise. this process accelerated in the 1990s: due to the changes imposed by the need to join the european economic community on the one hand, and by the generational replacement that began to take place in companies’ ownership structure and, therefore, in their corporate governance on the other. while internationalisation strategies differ according to the sector, adaptive strategies predominate. this can be explained by the nature of the sectors concerned: they all belong to the light industry and processing industry, linked to the regional economy’s path dependence, where the possibilities of generating born global or born global again enterprises are much reduced by the fact that new technologies play a key role and the latter are less significant in the valencian economic structure and specialisation. on the other hand, there clearly seems to be no single international expansion model based on the companies under study, i.e. gradualism or born global strategies are not the only models; rather, specific strategies determine companies’ choice of internationalisation. the preferred strategy is to create subsidiaries using prior experience of import-based representation rather than market entry http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 through local partners. mergers and acquisitions also represented a useful mechanism to gain size, including alliances with financial groups to obtain assets. there was, however, no unique internationalisation pattern in the valencian family companies analysed. these patterns depend on the production sector, on the product’s characteristics and also on the degree of management professionalisation, in turn highly contingent on the companies’ generational evolution. also worthy of note, the speed of internationalisation has depended on external financial contributions and the integration of non-family managers and executives coinciding with the second or third generation’s access to executive tasks. also notable is the existence of external relational capital in destination markets, which helps companies to establish themselves. it should be highlighted that companies that were formerly family-based have adopted cooperative management system forms as a mechanism of durability and these cooperative forms have not stopped companies from adopting internationalisation as a production growth strategy. historically, the preferred destinations for family company exports or foreign establishment have been the european continent and north african and arab countries. however, latin america is increasingly targeted by leading family companies in their respective production sectors in the valencian economy, such as the metal-mechanical industry, automobile supplies, ceramics and construction, furniture, chemical and agri-industrial industries (cámara de comercio de valencia 2018). the major markets of preference are mexico, brazil, argentina and colombia, which has grown substantially in recent years. latin america was not a priority for the valencian family firms before 1990 but massive privatisations —which took place at notable speed— in the region attracted more interest ; increasing direct foreign spanish investments and the economic integration of the continent offered additional http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 possibilities to gain markets. the new opportunities in latin america not only benefitted the big spanish multinationals but also smes deeply rooted in the export tradition of the peripheral regions as valencian family firms have historically showed. the biggest contribution to debates on the internationalisation of sme-structured family businesses focuses in the valencian case on the special characteristics adopted by industrial districts or sectorial clusters. this informal organisation of the productive system has favoured an evolution towards a system that has permanently provided relational capital to carry out innovation processes. the accumulation of market knowledge from previous export stages has driven internal and external changes within businesses, using all the mechanisms available to implement internationalisation. all in all, it is necessary to continue to deepen our understanding of the evolutionary structure of the internal governance of family businesses: this way we may acquire further knowledge regarding the behaviour followed by smes to achieve successful innovation and international expansion. what emerges from our study based on the sample of 22 companies is the lack of a unique internationalisation model. there is evidence in support of various differentiating factors such as the intervention of new generations and the emergence of the born global, as well as greater speed of internationalisation through the adoption of differentiated strategies. specialisation within the enterprises, the industrial sector and its historical path dependence have marked the differences in modes of internationalisation and market insertion. acknowledgment research for this paper has received support from the generalitat valenciana project “la internacionalización de las empresas familiares valencianas en américa latina: evolución histórica y modelos de expansión”, aico/2017/143 (2018-2019). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 115-149, july-december 2020 10.1344/jesb2020.2.j078 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 references albors-garrigós, josé, maría del val segarra, and carlos a. rincón-díaz. 2010. “los institutos tecnológicos en el sistema de innovación regional valenciano. propuesta de un modelo contingente de estrategia y desempeño.” dirección y organización, 42:54–62. arranz, nieves, juan carlos fernández de arroyabe. 2009. “internationalization process of spanish small firms: strategies, transactions and barriers.” international small business journal 27(4): 420–441. doi: 10.1177/0266242609334968. belso-martínez, josé antonio. 2006. “do industrial districts influence export performance and export intensity? evidence for spanish 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international studies of management & organization 44(1): 21-41. doi:10.2753/imo0020-8825440102. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://dx.doi.org/10.1504/ejim.2017.086693 https://doi.org/10.2753/imo0020-8825440102 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 juan geymonat universidad de la república (uruguay) industrial business groups in a context of deindustrialization. the uruguayan case, 1980-2015 abstract during the 1990s, a series of institutional transformations took place that strongly affected the national productive structure, as well as its agents. among the main effects of the new openness and liberalization policies are: the loss of relevance of the manufacturing sector in the economy, the abandonment of the complex system of tariffs and subsidies and the accelerated growth of foreign direct investment. how have these transformations impacted the structure of national industrial business groups? this is the central question that guides the article. the paper takes two samples from large industrial business groups in the late 1980s and in 2015, comparing their evolution in both benchmark years. in the construction of both samples, information was taken from the central bank of uruguay, the montevideo stock exchange, official newspaper and press sources, in addition to previous work. the evidence presented shows that aspects such as size, level of diversification and the form of family control have not varied much in each period. in this sense, the groups have remained stable around certain attributes. on the other hand, there are notable variations in the formation of alliances, the sector distribution of the business portfolio and the links with the government in different modalities. these variations and permanence can be explained by the impact of the new institutional context in the framework of a small economy like uruguay. although similar reforms in other countries in the region have strengthened national business groups (promoting their internationalization and their internal expansion into new business areas), the uruguayan case seems to represent the opposite. in this way, the paper contributes to the discussion about family groups and their adaptation to the context of the second globalization in peripheral economies. keywords: business groups; liberalization policies; institutional change, uruguay corresponding author: e-mail: juangeymonat@gmail.com received 27 september 2019 accepted 21 march 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:juangeymonat@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 1. introduction in the late 1980s, manufacturing activity was a core area in the business portfolio of the main uruguayan business groups (stolovich, rodríguez and bértola 1987). these groups had consolidated under the framework of the import substitution industrialization model (isi), which sheltered their businesses in a strongly protected economy (jacob 1991; trías 1961). at the end of the 80s, 82% of the large groups of the national economy participated in the ownership of at least one industrial company. economic opening and liberalization policies adopted by the uruguayan government in the 1990s modified the national productive structure, reducing the importance of the manufacturing. the foreign capital increased its presence, first in the 1990s, then strongly after 2005, displacing national capital in some key economic sectors, including private banking. the transformations that affected the national economy and its agents call for an assessment of the status of national business groups. as much of the literature has highlighted, business groups are business structures with a high capacity to absorb and adapt to changes in context (khanna and yafeh 2007; leff 1978). the changes in the structure of the groups are largely explained by the implementation of this adaptive capacity (peres 1998; barbero 2011; acosta and londoño 2003; colpan and hikino 2016). the institutional context is, therefore, a decisive variable to understand the future of the structure of business groups and their strategies. but the set of institutions that influence economic performance act on a certain structure and previous trajectory (greif 2006). the effects of secular market-focused institutions may be dissimilar to national agents in one economy or another. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 the uruguayan case presented here reinforces this hypothesis. the impact of opening and liberalization policies in the framework of a small economy and with lagging relative productivity, affect the possibilities of insertion of business groups in this new scenario. changes in economic structure are absorbed as a way to adapt to the new economic environment. hence, your business portfolio is modified. however, the loss of participation of the groups in some key sectors of the economy (among them the financial system) and the advance of foreign capital in those sectors, have affected the survival capacity of national groups as major players in the business. unlike other national cases such as mexico, chile, colombia or brazil, the uruguayan case shows a negative effect of the structural reforms of the 90s on national business groups (peres 1998; hoshino 2010; jones and lluch 2011). this uniqueness is part of its appeal when thinking about future comparative studies. this article is divided in four sections. the second section develops the methodology used to compare the structure of industrial business groups at the end of the 1980s and to the present. the third section aims contextualize the deindustrialization process undergone by the country, the characteristics of foreign direct investment (fdi) and its impacts of them in the structure economy. the fourth section develops the main argument of the study, in terms evolution of the structure of industrial business groups according to six variables: firm size, forms of organization and control, sectoral structure, level of diversification, alliance development, and governmental linkages. studies on business groups for the uruguayan case are almost nonexistent after the 80s1, so this work and especially this section, constitute an important empirical contribution to national historiography. in the last section the conclusions of the work are 1 the latest systematic general studies on the economy as a whole were coordinated by economist luis stolovich (stolovich, rodríguez and bértola 1987; stolovich 1989, 1994). in recent times, only one study has addressed business groups, but its scope is limited to media groups (lanza and buqet 2011). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 presented. there it can be seen that institutional changes have impacted some characteristics of the groups such as the structure of alliances, the sectorial distribution of their businesses, the level of unrelated diversification, and their income-obtaining strategy based on political linkages. however, other characteristics are maintained, such as the average size and the way of organization and control. 2. methodology the methodological strategy of this study is based on the comparison of industrial business groups in two periods: the late 1980s and from 2010 to 2015. we take as a business group the well-known definition of khanna and yafeh (2007). different sources were taken into account for both periods to construct the business groups. for the late 1980s, we mainly used information from stolovich, rodríguez and bértola (1987), which included data for 1985, in some cases complemented with data from stolovich (1989, 1993). for the recent period, we used as initial source data published by the central bank of uruguay (bcu) in the central credit risk registry. to complement this information, research was conducted taking into account sources such as the press, company websites, montevideo stock exchange reports, official gazette publications and national registry of commerce data, as well as information provided by qualified informants linked to the business world2. to make the information comparable, we started by identifying a set of 120 large industrial companies for each point, stratifying them based on sales. different sources were used to construct both rankings. for the late 1980s, a study by stolovich and rodríguez (1988) was 2 see geymonat (2019) for a thorough explanation about the methodological process used to construct the 2015 business groups. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 used. from this work, we used the data presented by the mentioned authors for the year 1987, disaggregating industrial companies from all the rest. for the second period, we used the microdata from 2010 annual economic activity survey (eaae), provided by the national statistics institute (ine), and selected companies whose main activity was classified as part of the manufacturing industry division. after stratifying the set of the main 120 companies according to sales, we proceeded to identify them because the microdata is anonymous. to this goal, we did crosstab data from the permanent register of business activity, also published by ine, and from customs export data. based on both rankings, we identified the integration of large companies into larger structures, such as business groups or transnational companies. thus, we established two samples of industrial business groups. for the 1985-1989 period, the 120 most important companies in the industry had links to 80 national groups, while in 20102015 the industrial upper tier was linked to 58 groups. the decrease in the number of groups is largely explained by the increase in foreign capital in industrial company control, as discussed below. 3. uruguayan deindustrialization the 1980s reflected a period of crisis of the industrializing model in uruguay, after a pronounced stagnation dating back to the 1950s, then were exercised some attempts to reorient the sector to export during the 1970s (notaro 1985; astori 1989). the beginning of this decline in the industry is showed in figure 1. the proportion of industry in the gross domestic product varies depending of current or constant currency. although, in any case, it is clear that it was during the 1990s where the greatest decrease was made. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 figure 1. proportion of the manufacturing industry in gdp at current and constant prices (1970 = 100) source: banco central de uruguay (bcu) y montevideo oxford latin american economic history database (moxlad). a series of liberalization and economic opening policies were established during this decade, resulting a net negative effect on the industrial sector that according to rama (1990), olesker (2001) and finch (2005) depended to a great extent, on protectionist policies. the number of companies and the number of employees decreased during this decade. at the same time, and despite the fact that the industrial product remained stagnant, productivity grew because of a technological modernization process and elimination of lagging signatures. table 1. variation of companies, employees and industry performance 1988-1997 variation 1988-1997 (%) total industrial companies -42.3 companies with more than 5 employees -33.2 labor productivity 84.5 staff employed -42.9 physical volume 1.7 source: iii y iv censo económico. instituto nacional de estadística (ine). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 the economic model established in the 1990s pushed to a deep economic crisis in uruguay until 2002. from 2005 onwards there was a modification in the political scenario after the electoral triumph of a left-wing political coalition (named “frente amplio”). at the same time, the external conditions impacting clearly in uruguay because the increase of prices of raw materials exported, which translated into important gdp growth rates –the most important of the country's economic history. the recovery that followed uruguay after 2002 led to sustained industrial growth, although similar to the growth of the total economy. therefore, the industrial sector continued to represent a portion of gdp similar to that of the previous decade. the distinctive features in terms of industrial policies of the 1990s were maintained and consolidated. economic opening increased and domestic prices adjustment policies were not deployed. the market remained as the allocator of resources, and the industrial structure continued its course based on agribusinesses. the sectors linked to the primary sector presented comparative advantages and were able to remain successful and in expanding, while those focused on labor-intensive processes or linked to the domestic market declined. a group of "non-traditional" branch sectors should have an outstanding performance, protected –to a large extent– by regional and commercial integration based on trade agreements, such as mercosur3. some of these manufacturing sectors were synthetic rubber, plastics, basic chemicals or pharmaceuticals. 3 the southern common market (mercosur) is a regional integration treaty signed in 1994 by argentina, brazil, paraguay and uruguay. among the agreements was the fixing of common tariffs, and the progressive reduction of tariffs for most of the products marketed among the bloc's member countries. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 figure 2. industrial structure in percentage of manufacturing product 1978-2015 source: own elaboration based on encuesta industrial del actividad (eia), encuesta anual de actividad económica (eaae) y banco central del uruguay (bcu). table 2. manufacturing product in uruguay, according to the main type of input used and the export level (1985-2010) 1985 2010 non exporter moderately exporter strongly exporter non exporter moderately exporter strongly exporter national primary inputs (%) 3.5 4.4 17,3 national primary inputs 1.6 0.8 33.9 national industrial inputs (%) 13.0 5.2 6.7 national industrial inputs 17.5 8.8 9.2 imported imputs (%) 29.7 12.3 0.0 imported imputs 3.9 21.0 3.3 source: bértola and bittencourt (2013) note: for 1985 a set of branches equivalent to 7.9% of the manufacturing product were not classified. the transformations in the size of the industrial sector and average unit size led to increased sectorial concentration. measured as the ratio between the sales of the 100 largest companies and total industrial sales, this level went from 0.55% in 1986 according to buxedas (1992) to 0.68% in 2010. most importantly, and especially after 2005, there was a sharp expansion of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 foreign capital in the sector, in line with an increased fdi over the national economy as a whole. between 2006 and 2016, the average annual fdi, as proportion of gdp, was around 4.6%, with a strong growth of capital from the region (mainly brazil and argentina). this number is quite high, considering that in 1970-2000 the same ratio was 0.6% (reig 2013). an analysis of the 120 main industrial companies in 1987 and 2010 will reveal that this sector was no exception (see table 3). table 3. property of the 120 main manufacturing companies national foreing associated (national and foreing) total 1987 20 16 84 120 2010 50 12 58 120 source: own elaboration based on eaae 2010 microdata, stolovich and rodríguez (1988), press sources and qualified informants. as suggested shaick (2006), foreign capital would tend to be a modernizing agent, operating with greater technological endowment, and presenting higher levels of productivity in a country. this, and its presence in sectors having comparative advantages could explain its high level of participation in the operating surplus, suggesting that large foreign industrial companies have high levels of profitability compared to domestic ones (see table 4). table 4. participation on different variables of the main 120 industrial companies according to origin of capital (in %) foreing (and associated) national output value of production 49.01 50.99 gross value added 52.03 47.97 staff employed 48.62 51.38 capital stock 62.28 37.72 operating surplus 67.84 32.16 source: own elaboration based on eaae 2010 microdata. an increased foreign influence would tend to displace domestic capital from some branches of the economy. this is confirmed by the recent performance of national economy, because of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 100% of private banking is owned by foreigners and more than 70% of exports are carried out by these companies. 4. changes in the structure of domestic industrial business groups it is possible to assume that uruguayan groups have undergone significant changes in their structure in the face of events such as the loss of relative importance of industry, its own structural transformation, and the new flow of fdi. in this section, we propose to analyze this issue based on some variables that have been highlighted by the literature (colpan, hikino and lincoln 2010; khanna and yafeh 2007; granovetter 2005) and for which we have been able to compile data. 4.1 family control and horizontal organization when we approach to main business groups in uruguay during the years selected, we found that most correspond to family groups. to define a group as a family group, we considered the participation of more than one family member (by blood or marriage) in the boards of the companies and/or the existence of inheritance mechanisms and generational transferences in their history4. based on this, we identified in 2015 that 45 were family groups from 58 total groups. from total of 13, two clearly were cases of non-family groups, and 11 did not presented a clear family imprint. in some of those cases the groups were controlled by a single entrepreneur but not by another member of his family. it makes impossible to identify in a specific way the factor (or factors) behind the replacement or alternance of the leader or the intergenerational continuity. 4 a similar criterion was adopted by almaraz and ramírez (2018), and by fernández and lluch (2015), when referring to business families. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 it is likely that some of these seemingly non-family groups are actually family groups. therefore, it is also likely that the relative imprint of family groups is underestimated. outstanding to this lack of information, the percentage of family groups in the late 1980s could vary between 77% and 90% of total groups that were identified. both in the 1980s and nowadays, the family structure of most groups follows a single-lineage, nuclear family pattern. there are few cases where one or more nuclear families are combined with other relatives constituting extend family business or composed family business as explained by almaraz (2018, 82). another characteristic of these industrial groups is their horizontal organization. the organization of national groups is more similar to a loose network form, where there is no control over a group entities by a set of parental or differentiated companies, we found that unicity and coordination is based on direct participation by family members in different firms that making up the group (jones and colpan 2010, 84-85). this form of organization has been a constant throughout the history of national groups, with few exceptions. from 111 groups studied by stolovich, rodríguez and bértola (1987), only one of them displayed a pyramidal structure with a holding company (hard core) participating in the other entities. by 2015, this type of structure was visible in a single group, although it was not a family group. 4.2 size another important variant is the size of the groups, here we consider the number of connected companies that can be an approximate measure to understand the structure size, before to analyze the economic power of each group. although in some cases the number of controlled companies and the magnitude of controlled capital matches, this is not a rule. table 5 shows for 1985 and 2015 the national industrial groups according to the average size related to the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 number of companies controlled. differences founded suggest us that an upward reading over the period. however, it is likely the number of connected companies in the 1985 groups was underestimated. mainly, because of the way in which agricultural firms5 are accounted for. therefore, it can be concluded that average group size has not changed substantially during the period studied. table 5. size of national business groups in number of companies in uruguay (1985-2015) 1985 2015 mean 6.8 7.5 median 6 6 maximum 26 36 minimum 2 2 1st quartile 3 4 3rd quartile 8 9 total of groups over the 120 most important companies 80 58 source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). this data is still striking. it gives an account of a structure that, in general terms, has not advanced in its complexity. it is even possible to notice that their size does not seem to have changed strongly in at least sixty years. from a sample of 20 industrial groups, reconstructed based on the data extracted from a work by trías (1961) for the 1950s, we can observe similar values: an average of 7.8, a minimum value of 2 and a maximum of 21 for the set of cases taken. this stagnation in size may be part of the explanation of the low variability in the forms of organization and control of national groups (see section 4.1). as there is no growth in productive units and business diversification (see section 4.3), the incentives to advance in more complex organizational forms do not exist. 5 stolovich, rodríguez and bértola (1987) includes several references to land tenure, without specifying the number of firms. in our study, we identified agricultural firms by company name. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 what elements explain this stagnation in the size of national industrial groups? a first guess has to do with the size of the national economy. it is small, with a reduced domestic market (3,300,000 inhabitants in 2015). this aspect affects the scale of the firms and with it the possibilities of accumulating capital and expanding to other sectors and / or regions. another aspect that affects the size of the groups has to do with reforms in the economic institutions during the 1990s. this set of reforms has opened the national economy to competition of imported goods, as well as inflow of foreign capital. in different ways, this new scenario generates several incentives for the specialization of activities. in the first place, the economic opening allows the export development of some sectors, removing the restrictions to the growth of the size of the internal market. this means that accumulating capital and growth can be achieved in the same sector, and not only through expansion into other activities. on the other hand, the possibility of importing inputs without restrictions reduces the need for firms to create subsidiaries to produce these items. finally, in a scenario of total foreign control of the national private banking sector, part of the possibilities of obtaining capital for the groups consists of selling assets and companies. this situation has meant that several groups reduce their number of companies by concentrating capital in those with greater possibilities of development. unlike other countries in the region, in uruguay the period of opening and liberalization did not advance in the privatization of public companies. therefore, there were no opportunities for business in these areas either. at the same time, national companies were not large enough to launch themselves into conquering regional markets and becoming trans-latin american, a phenomenon that did occur in countries such as chile, mexico and brazil. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 4.3 diversification patterns the integration of related activities is follows different strategies, either horizontally (when companies are controlled in the same productive or commercial phase) or vertically (when different links in the same value chain are integrated). the first kind of related integration tends to follow an expansion strategy for dominating the same market. vertical integration responds to other specific needs. this kind of diversification may be aimed at controlling certain strategic stages of the business, either because they are concentrated links, with the possibility of setting prices backward or forward, or simply because they imply a higher turnover. controlling strategic inputs, or those that have a certain specificity, appears to be another reason for groups to diversify vertically (chandler 1987; hopkings and wallerstein 1994; williamson 1985). table 6. business groups in uruguay, with unrelated diversification in 1985 and 2015 1985 2015 diversified groups in more than one value chain 39 32 total analyzed (%) 55 55 average value chains of groups with unrelated diversification 3.3 2.8 median value chains of groups with unrelated diversification 3 2 source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). however, horizontal and vertical movements in the same value chain are not the only form of diversification. we will use the term unrelated diversification when referring to the coexistence of activities that are not technically or commercially related to each other. this type of diversification responds to other needs, also highlighted in the literature on business groups, resulting from institutional uncertainty, economic cycle variability, or the use of know-how acquired in previous activities, among other factors (colpan, hikino and lincoln 2010; khanna and yafeh 2007; barbero 2011). the uncertainty that characterizes peripheral economies, and http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 especially growth cyclicality and volatility, could explain this kind of expansion toward unrelated activities tending to diversify risks. the percentage of diversified groups in unrelated activities was stable over the period as show in table 6. what seems to be decreasing, however, is the number of activities in which they diversify. this is consistent with what is expected in terms of the overall economic performance. in the 1980s, the uruguayan economy was not characterized by an expansive phase of the economic cycle. quite the opposite. the way in which individual capital expanded consisted largely in diversifying into other activities. at the same time, diversifying activities was a way of diversifying risk. the country's economic structure had been accumulating a set of tensions and contradictions resulting from its protected industrial structure and its productive backwardness. this set of contradictions foretold a change in economic policy, sooner or later. it is important to visualize this aspect as part of the incentive structure in place for industrial entrepreneurs at the time. in addition to volatility, there was the perception that the activity that was being increasingly questioned, and that without support its chances of success were uncertain. the 1990s were a turbulent decade when it came to changes in economic structure and the rules of the economic game within the national and regional space, leading to a new set of incentives. maintaining a lagging industry was no longer a priority and the commercial and "technological update" was perceived as a prerequisite to continue operating in some sectors. it was also evident that several branches would have great difficulties in processing these transformations. in this context, it is likely that the existing business groups preferred to focus on their most profitable operations, liquidating those lagging behind or with fewer chances to integrate in the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 new context. in parallel, the service sector began a relative expansion and diversification phase, offering attractive business opportunities. in this century, the arrival of large flows of fdi to the country encouraged asset sales that capitalized some national groups, especially those highly indebted to the financial system. this mechanism reinforced the existing trend to reduce unrelated diversification, promoting specialization in activities that began to show greater development prospects. similarly, groups created and/or "emerging" in 2004-2015 did not benefit from strong incentives for unrelated diversification. economic growth in the last decade may have allowed for constant surplus reinvestment in the same activity or value chain. 4.4 alliance structure by alliance we understand the convergence of different groups and/or businessmen in the control a company. an analysis of the tendency of national groups to make alliances among themselves or with other national entrepreneurs –either inside or outside the industry– reveals a decrease in this strategy at both the relative and absolute levels. this trend seems to be in line with the specialization process described above, where groups tend to concentrate in fewer activities. table 7. alliance structure of national groups in uruguay, 1985-2015 alliance structure of national groups 1985 2015 groups maintaining alliances with other national groups or entrepreneurs (%) 67 46 groups maintaining alliances with foreign companies (%) 35 32 source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). we identified three types of alliances according to their motivation. the first motivation for an alliance between different groups can respond to the need to reach (improve) the size that can be a necessary condition to operate in certain branches and upgrading. another motivation to http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 seek alliances between groups can be more natural because responds to the existence of common strategic linkages as part of chains of production or distribution. this situation enables and sustains alliances around the control of certain inputs, secondary services connected to the main activity and access to credit. as we can see further, there are groups that combine both aspects. the development of more secular economic institutions would result in lower transaction costs, and thus in fewer incentives for developing alliances to controlling of the chains production and distribution but is not the case to the alliances to scale. this element should be more complex with the effect of the structural reforms adopted in the 1990s that affected the links of internal economy (hirschman 1983). the possibility to obtaining imported inputs and services can produce productive delocalization processes and can affect the possibility of deploying the alliances to control chains. an analysis of the main motivations for group alliances seems to corroborate this hypothesis as showed in table 8 if we consider the importance of fdi is the las period. the underlying needs for alliances development for controlling strategic inputs and services have diminished. table 8. reasons that support alliances between national groups in uruguay, 1985 and 2015 reasons that support alliances 1985 1985 (%) 2015 2015 (%) scale 22 50 17 63 control of related activities 6 14 2 7 both 16 36 8 30 total 44 100 27 100 source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). nevertheless, the national alliances with foreigners were relatively stable over the period as showed table 7. in 1985, 35% of the industrial groups in uruguay sharing the control with foreign companies. in 2015 this pathway was very similar (32%). the structural motivation that drives national capitals to seek this type of alliance is not very different from that which http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 supports the search for alliances between national capitals. the emphasis here is distributed between the possibility of capitalizing companies by adding a foreign partner, and the possibility of establishing alliances with capitals that provide technology or strategic inputs, or which have potential for market expansion (stolovich, 1989). so far, we outlined some hypotheses regarding to the needs of driving national capital to seek an association with foreign capital in a context of high level of fdi. we should then ask the following question about the other side of the equation: why would foreign capital be interested in partnering with a domestic counterpart? a possible answer can include several elements. first, in the context of a closed economy and a more incipient development of information and communication systems, and the weakness of global institutions to norm the fdi, the alliances with domestic capitals becomes an asset to deal with the local institutional framework. in one hand, the domestic groups, strong in the local economy and with a good portfolio of political connections, would act as an agent to reduce the transaction costs in a market characterized or marred with imperfections. on the other hand, minimizing costs or making economies of scale in face to common needs could be a motivation for the alliances with domestic actors in a stock of subsidiary and/or complementary activities linked to a core activity which is developed by foreign capitals. the paradox is that market imperfections were reduced, and the secular development of economic institutions were enhanced, the local agents should lose their advantage and their possibilities of internalizing key aspects to make alliances to begin their own growth. this seems to be the case if we analyze the alliances between foreign and domestic capitals in the industrial sector in both periods of our study. considering exclusively the point of view of foreigners the results are showing in the table 9. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 table 9. foreign capital in alliances with uruguayan capitals, 1985 and 2015 1985 2015 a.foreign capitals maintaining alliances with domestic groups in large industrial companies 18 14 b.-total foreign capital in large industrial companies 29 46 alliances as % (a/b) 62.1 30.4 source: prepared by the author based on stolovich (1989), eaae 2010, press sources, company websites and qualified informants. the opening and liberalization of trade and financial flows in uruguay also promoted a growing institutional convergence with other countries in the region and around the world too. in this way, it would have resulted in a sort of secularization of economic institutions, reducing the efficiency of behaviors based on personal power and on direct access to incumbent administrations. in the other, an improvement in the supply of technical teams, capable of performing efficiently in local level, would be a perfect replacement for economic and political power as a supporter to move through the domestic institutional environment. in addition, currently a large share of foreign investment comes from within the region. as these entrepreneurs have deployed significant capacities to operate in volatile and uncertain contexts, the need for a local guide tends to become irrelevant. all these elements could have contributed to reduce the incentives to establish new alliances by foreign capital. 4.5 sectoral composition of industrial groups regarding to sectoral composition of industrial groups in uruguay, the first aspect to highlight is the decline of manufacturing in business portfolios since 1985 until now. this can be appreciated by comparing some central position measures with respect to the number of industrial firms over the total of companies in each group. as we pointed out when we referred to group size, agricultural firms are likely to be underestimated in the 1985 data. to ensure a http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 more accurate the interpretation, for 2015 we included industrial participation data and excluded the agricultural firms. table 10. industrialization level (industrial companies / total companies of each group) 1985 2015 2015* average of the relative sharing of the industry in the groups 0.55 0.35 0.44 median of the relative sharing of the industry in the groups 0.57 0.29 0.40 * no groups with rural businesses source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). even after removing the predisposition that can be the difference in the accounting of agricultural firms, it clear that in 2015 industrial groups are less than those of the 1980s decade. in the one hand, the groups can follow the general behavior of the economic structure, when the manufacturing sector has declined, they had too, but they don’t dissolve their structure. on the other, we can see that growth of industrial groups with investments in agricultural activities has increased. the large margins of cases without data complicate a full conclusion in this regard. however, assuming that in both periods the set of cases the tendency is distributed equally, showing that groups combined relative sharing in the industrial and agricultural sectors to increase as we can see in table 11. table 11. industrial groups with at least one agricultural company in uruguay, 1985 and 2015 1985 (%) 2015 (%) with agricultural companies (at least one) 50.0 60.4 without agricultural companies 28.8 15.5 cases without data 21.2 24.1 total 100.0 100.0 source: own elaboration based on stolovich, rodríguez and bértola (1987) and geymonat (2019). to a large extent, this increase may be associated with two phenomena. first, to diversification towards primary activities that became increasingly important during the period of study, and which always is represented as the country´s "safe" productive advantages. against the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 backdrop of a major branch transformations and the growing of uncertainties in this regard, the strategy to maintain or invest in primary activities may have been sensible because the country has historically depended on them. secondly, investment in "land" is often used as a kind of financial asset, and a haven for accumulating capital. finally, is particularly important remarks that industrial groups and national business groups in general departure the national financial system. this divorce is associated to a deeply rooted process. since the 1960s, the number of business groups linked to bank ownership had been declining (stolovich, rodríguez and bértola 1987). in 1980, 22% of the groups studied participated in the ownership of a bank. after the 2002 crisis, all private banking sold their assets to foreign investors. the loss of relevance of business groups in the financial system it left them in a position of vulnerability and subordination with respect to foreign private banks and public banking.6 as banking became entirely foreign owned in last ten years, the financing strategies of the national groups has been upended. for this additional reason the groups investing in "safe" assets, such as land or another type of real estate. at the same way, they have opting to sell part of their companies to foreigners as a quick via to recapitalize them and to obtain cash. both ways became important to the subsistence of groups. 4.6. governmental connections large national groups have maintained close ties with the political system. during the emergence and expansion of isi, large company owners and business organizations were integrated into the management of several key government entities, such as public banking, or 6 other mechanisms, such as the montevideo stock exchange, have not played a dynamic role in the capital market. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 the export and import commission7. business groups were able to co-opt some of the economic engineering of the time (for example, setting tariffs or multiple exchange rates), using it as a mechanism to obtain particular benefits (zurbriggen 2006). although this type of participation changed over time (trías 1961, 1971; stolovich and rodríguez 1987), business groups have maintained their presence in the arena of politic and they still closing to government control. until the 1980s, entrepreneurs influencing specific policies through individual or collective lobbying. the most prominent example was the increase of effective tariff protection (rama 1990). however, given the economic opening and liberalization policies in which the country had been boarded, this mechanism disappeared as a general strategy. the government had to establish clear rules and face the necessity of social cost to enforce them, under the condition that institutions would act on growth and development processes. this is the scenario that should be interpreted of how the reforms passed by the national party in the 1990s. during the process of correspondent administration, in any case, members of the economic power were government officials (stolovich and rodríguez 1987). after 2005, during the center-left government administrations, the proportion of representatives from big national capital have been largely reduced in occupy government seats. this apparent development conceals a larger and possibly a more persistent phenomena, which is related to the different kinds of relationships between economic powerful and government. they have evolved from an attempt to use the state as part of an income strategy to an increasingly impersonal rapport, based on general common rules, and with a lower level of particularization (viñales 2019). the possibility of generating isolated particular conditions (specific tariffs, 7 export and import control were entrusted to a government regulatory entity that included to national businessmen. its fundamental mandate consisted in controlling currency flow and setting import sectoral volumes, as well as preferential exchange rates (garcía repetto 2017). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 subsidies, etc.) is detrimental to the institutional sense of the model. business lobbying as a practice is now very limited; it does not go away but is reduced in the face of a more general and impersonal system. it is clear that part of the economic promotion legislation and instruments grant specific benefits to companies. an example of this is the investment promotion act,8 but the access mechanism to this kind of benefits is standardized, and its successive reforms have tended to reduce –although not always effectively– its biases. 5. conclusions this paper provides evidence on a subject that has been marginally addressed by uruguayan economic history. although its main contribution is descriptive, part of this dynamic description requires explaining its variation. in this sense, in this paper we have introduced some attempted explanations, which remain hypotheses for future research. during the period under study, national business groups constitute a structure with broad capacities to mitigate adverse and volatile context effects. a proof of this seems to be its business portfolio reconversion to the tune of the change undergone by the general economic structure. internally, industrial business groups are less industrial than in the 1980s, concentrating a good part of their business in other sectors. their agrarian base –land portfolios investments and agricultural activities– seems to have increased during the period, also in line with context incentives. in general terms, during the period business groups tended to concentrate control and ownership of their companies, doing away with alliances, to a large extent. on the other hand, in companies where the confluence of several groups in control or ownership is maintained, the motivation 8 an instrument granting tax exemptions to investing companies. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 of this alliance also changes. the need to reach specific levels of capital accumulation to operate at a certain productive scale in one sector displaces other motivations, such as the need to control strategic inputs and services. a new institutional and technical context, which brought about a reduction in transaction costs, operates as a disincentive to this type of internalization. given their dwindling presence in the financial system, and in a context of pronounced economic growth (for the historical characteristics of uruguayan economy), business groups have tended to specialize their activities in fewer value chains than during the 1980s. the possibility of recycling surpluses while getting rid of lagging businesses, as well as the sale of some companies to foreign capital as a source of liquidity, is part of the explanation for this phenomenon. but the groups have also maintained some structural aspects, including their average size and their forms of organization and control. these aspects can also be explained by determinations of the institutional context. the stagnation in the growth of the groups is due to the scale limitations of the uruguayan economy, as well as to the difficulties that national entrepreneurs have encountered in the framework of an economic opening process. the inflow of foreign capital into key sectors of the economy has deepened this backwardness of the national ones. in this framework, there are no real needs for groups to adopt more complex forms of organization. horizontality continues to be a characteristic of these groups, as does family control. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 150-176, july-december 2020 doi.org/10.1344/jesb2020.2.j079 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 references acosta, nora, and carlos londoño. 2003. grupo empresarial antioqueño: evolución de políticas y estrategias, 1978-2002. vol. 74 of monografías universidad de los andes. bogotá: universidad de los andes. almaraz, araceli. 2018. “la empresa familiar y las familias empresariales en méxico: una propuesta teórica.” in familias empresariales en méxico. sucesión generacional y continuidad en el siglo xx, edited by araceli almaraz and luis alfonso ramirez, 57-93. tijuana: el colegio de la frontera norte. almaraz, 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http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 universidad de la república. available in: https://www.colibri.udelar.edu.uy/jspui/bitstream/20.500.12008/2251/1/dt%20e%20201304.pdf. shaikh, anwar. 2006. valor, acumulación y crisis. buenos aires: ediciones ryr. stolovich, luís. 1989. poder económico y empresas extranjeras en el uruguay actual. montevideo: centro uruguay independiente. stolovich, luís. 1994. poder económico en el mercosur. montevideo: centro uruguay independiente. stolovich, luis, and juan manuel rodriguez. 1987. “gobierno y empresarios: sus vínculos personales.” in ¿hacia dónde va el estado uruguayo?, edited by gerónimo de sierra, 163-201. montevideo: fundación de cultura universitariaciedur. stolovich, luís, and juan manuel rodriguez. 1988. ranking de empresas. montevideo: consultora rym. unpublished material. stolovich, luís; juan manuel rodríguez, and luís bértola. 1987. el poder económico en el uruguay actual. montevideo: centro uruguay independiente. trías, vivian. 1961. reforma agraria en el uruguay. montevideo: ediciones el sol. trías, vivian. 1971. imperialismo y rosca bancaria en el uruguay. montevideo: banda oriental viñales, gustavo. 2019. uruguay. evolución del sistema tributario 1990-2018. montevideo: banda oriental and la ley uruguay. williamson, oliver. 1985. the economic institutions of capitalism: firms, markets, relational contracting, new york: the free press. zurbriggen, cristina. 2006. estado, empresarios y redes rentistas durante el proceso sustitutivo de importaciones. los condicionantes históricos de las reformas actuales, montevideo: editorial banda oriental. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.colibri.udelar.edu.uy/jspui/bitstream/20.500.12008/2251/1/dt%20e%202013-04.pdf https://www.colibri.udelar.edu.uy/jspui/bitstream/20.500.12008/2251/1/dt%20e%202013-04.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 pere condom-vilà university of barcelona (spain) how technology evolution and disruption are defining the world’s entrepreneurial ecosystems: the case of barcelona’s startup ecosystem abstract this article provides a critical overview of the development process of entrepreneurial ecosystems and the role played by technology and startups within such process. the analysis focus on the characteristics and components of entrepreneurial ecosystems with special attention to startups, as they are the main actors of these ecosystems. the objectives are reached through a critical literature review. results show the evolution of these ecosystems, and an in-deep analysis of the role played by startups, big companies and governments in such evolution. the knowledge paradox between universities and startups is also taken into account together with and the importance of cities in the development of successful entrepreneurial ecosystems. we apply the result of our critical review to the analysis of the case of the barcelona ecosystem. last section is devoted to policy implications for the strengthening of entrepreneurial ecosystems with special reference to the universities and the need for a redesign of technology transfer strategies. success factors analysis and specific policy recommendations can help to a better understanding and policy planning of entrepreneurial ecosystems. keywords: startups; entrepreneurial ecosystems; innovation ecosystems; barcelona corresponding author: e-mail: pere.condom@ub.edu received 07 oct 2019 accepted 10 january 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 introduction technological change is the most important factor driving economic growth. technological changes in key sectors of the economy are like a series of explosions that give impetus to future prosperity. these lead sectors guide the economy and provide economic growth. technology as the engine of economic development has been studied from various points of view. one group of economic theories takes an evolutionary perspective of technological change and economic growth, its main characteristics being neatly summed up as follows: technology is dynamic, constantly changing, continually improving. new varieties and new options appear relentlessly. technological change is also considered to be systemic, which means that technology does not appear without provoking change in its environment. new technologies appear in conjunction with the infrastructure required to produce and distribute them: the car needs roads and service stations; internet has evolved alongside fibre infrastructure. this technological interdependence means that major changes are slow and costly (archibugi and simonetti 1998). on the other hand, technological change is also cumulative. what we can do today depends on the actions and decisions taken in the past. finally, technology, by definition, is synonymous with uncertainty and insecurity. but there are huge expectations invested in technology, above all in the initial stages of technology, that is, in the so-called emerging technologies. indeed, expectations are the driving force behind the evolution of current systems. expectations move the respective actors of technology change, forcing them to act and to attract investors and other economic agents. such expectations are, in short, “executive” by nature and define the dynamics of the production of technology. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 it has been well documented that user adoption of technology traditionally followed an sshaped curve, as first defined by rogers (1962). yet, today, the adoption of certain new technologies evolves practically along a vertical line. innovative technologies are quickly introduced to the market and are accepted, almost without hesitation, by society. the s-curve today is virtually non-existent (downes and nunes 2014). another way for us to consider it is to time how long it takes for an innovation to be adopted by one hundred million users – and we would find that today it is a mere fraction of the time that was required in the past. the current age is characterised by “big bang” disruptions and by the very rapid pace of innovation adoption and both factors present traditional companies with major challenges (schmidt and druehl 2008). it should not be forgotten that the introduction of a new technology in many cases spells the disappearance of existing companies and, sometimes, of entire sectors. technology and innovation have tended to concentrate geographically. this spatial component of technology and innovation has been studied from different points of view: alfred marshall’s industrial districts, the italian industrial districts, the french innovative milieu, porter’s clusters, and local, regional and national innovation systems. the industrial district (marshall 1920) placed the emphasis on the local division of labour within a sector and on the interaction between the community of workers and a group of firms in the same territorial entity, in order to achieve success in international markets. porter’s clusters focused on “geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutions in a particular field that compete but also cooperate” (porter 1998). most studies of clusters focus on firms and sectors, including their dynamics. finally, regional innovation systems (ris) refer to the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 networks and institutions that link together the knowledge-producing centres of a given region, that is, its universities and public research centres, and the innovative firms operating in the same area. these links ensure that knowledge circulates between the different organizations, increasing the region’s overall innovation and competitive capacity (cooke et al. 1997). the technological characteristics of current times are transforming the dynamics and the focus of the analysis of technology and innovation concentrations. earlier models of innovation systems are no longer so effective. today, we need to speak in terms of ecosystems of entrepreneurs or entrepreneurial ecosystems. this is the latest concept to emerge from academia. stam and spigel provided us with a description of the concept of entrepreneurial ecosystem they claim that the approach of the entrepreneurial ecosystem differs from that of the industrial district, the cluster and the innovation system insofar as it is the entrepreneur, rather than the firm, that is at the heart of analysis (stam and spigel 2016). most cluster studies focus on firms and sectors and are concerned with their dynamics. yet, startups – geared towards high and rapid growth – are not usually included in models of clusters and industrial districts. and although these earlier conceptual frameworks include the role of entrepreneurs, they do not place a specific emphasis on them. unlike clusters, industrial districts and the literature on innovation systems, entrepreneurial ecosystems place their focus of research very much on the entrepreneur, and not on large, traditional companies or on smes. entrepreneurial ecosystems also concern themselves with the economic and social conditions in which the entrepreneurial process is played out. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 in such a framework, the aim of this article is to provide, through a critical literature review, an overview of the development process of entrepreneurial ecosystems and the role played by technology and startups within such process. firstly, we review the definition of startup, the main economic agent of the entrepreneurial ecosystems. in section two, the concept of individual entrepreneur is broadened in the framework of the development of the ecosystems. section three deals with the useful indicators to analyse an ecosystem. after that, we discuss the role of traditional firms in this new setting and the new instruments for innovation activities within the startup economy. we conclude our theoretical work with the knowledge paradox and the role played by cities in the development of successful entrepreneurial ecosystems. we apply the result of our critical review to the analysis of the barcelona ecosystem. last section is devoted to policy implications for the strengthening of entrepreneurial ecosystems with special reference to the role played by universities and the need for a redesign of technology transfer strategies. a new actor: the startup an entrepreneurial ecosystem can be defined as a set of actors and factors coordinated in such a way that they facilitate “productive entrepreneurship” in a specific territory, where “productive entrepreneurship” is considered as that which results from the success of “ambitious” entrepreneurship (audretsch 2009). ambitious entrepreneurs are individuals that seek opportunities by discovering and evaluating new products and services and who exploit them by adding as much value as possible. this type of entrepreneurship has absolutely nothing to do with self-employment nor with those entrepreneurs who simply want to be their own bosses. ambitious entrepreneurs achieve stronger rates of growth and greater innovation http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 or internationalization than the average entrepreneur. ambitious entrepreneurs focus on the performance and success of their businesses and seek rapid growth. traditionally, technology has been created in two places: in well-established companies and in public and private research centres (universities, etc.). but, in the last few years, due to the phenomena we have just described – the acceleration of technology change and the expectations placed in technology – a new actor has emerged: the startup. the characteristics of startups are radically different from those of traditional companies. they are linked to high expectations and have specific characteristics. also, they constitute an explicit value chain, with their own support entities (accelerators, for example), public policies and investors. in each territory, and always centred on a big city, this value chain has generated the entrepreneurial ecosystems. startups are firms oriented towards rapid growth. they achieve the velocity with money provided by forms of financing that have no place in traditional companies (business angels, seed capital companies, crowdsourcing platforms, etc.). entrepreneurs are actively and constantly seeking changes, or making the most appropriate strategic choices as a means of overcoming problems and influences that the ventures face, leading to business success (hormiga et al. 2018). startups represent a high-risk model with considerable turbulence and volatility. many firms are created but a high percentage perish. they are created by talented individuals that are willing to take risks, an entrepreneurial talent that originates in the main within our universities. and this is a relevant characteristic since the commitment of territories (countries and regions) to promote education and research acquires now sense. the knowledge or innovation paradox that has worried western societies for three decades has partly been overcome by “ambitious” entrepreneurship (kijek and kijek 2019). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 literature review shows that there is no one correct definition of a startup. each actor in the entrepreneurial system will define a startup in their own way. yet, at the same time, the concept is perfectly clear and well-defined in the minds of everyone. one of the research results of the seminal startup genome report (marmer et al. 2011) was that startups are temporary organizations designed to scale into large companies. this report defends that: startups evolve through discrete stages of development. each stage can be measured with specific milestones and thresholds. there are different types of startups. each type evolves through the developmental stages differently. learning is a fundamental unit of progress for startups. more learning should increase chances of success. blank and dorf (2012) believe that a startup is essentially an organization built to search for a repeatable and scalable business model. graham (2012) argues a startup is a company designed to grow fast but stresses that being newly founded does not make it a startup. it does not have to engage with technology or take venture funding or achieve an exit of some sort. its essential element is growth. damodaran (2012) says that the value of a startup lies entirely in its future potential. cheung (2015) claims that a startup is a state of mind. neil blumenthal, founder of warby parker, notes that a startup is a company that works to solve a problem that does not have an obvious solution and where success is not guaranteed. dave mcclure, founder of the well-known 500 startups accelerator, says that it is a company that is confused about what its product is, who its customers are and how to make money. from this approach, when the startup has answers to all three questions, it ceases to be a startup and becomes a traditional business. eric ries defines a startup as a human institution designed to deliver a http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 new product or service under conditions of extreme uncertainty. according to rahaman (2015) the most important part of eric ries’ definition is what it omits. it has nothing to do with the size of the company or the sector in which it operates. the objective of a startup is to figure out the right thing to build (as quickly as possible) that customers want and are willing to pay for. people often tend to lose sight of the fact that a startup is not just about a product, a technological breakthrough, or even a brilliant idea. a startup is greater than the sum of its parts and the learning process is an essential unit of progress (ries 2011). in short, the fundamental differences between a startup and a traditional company can be summed up as follows: speed of growth, investment, expectations, exit, disruption, global market, risk, talent, growth process, management techniques and culture. we address each of them in greater detail below. the growth of a startup is much faster than that of a traditional firm, which may need decades – generations even – to achieve global leadership. to inject this greater speed, startups concentrate their targets in a period of just a few years. this can only be done with money, provided by investors, who acquire shares or equity in the startup. in general, traditional companies do not transfer part of their equity in exchange for the financing of new developments. projects of this type in traditional companies are financed by “other kinds of money”. investors, in exchange for their funding, want to see evidence of future potential. they have high expectations and faith in a profitable end result. this means an exit is the primary focus of investors. this can be achieved by the acquisition of the startup by a large corporation or by being listed on an equity market. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 these are the two ways in which investors can get rid of their holdings in the company and obtain a return on their investment. to uphold expectations of future growth and attract the interest of corporations, startup products or services (or their proposals for a new business model) must be characterised by elements of disruption. investors also seek a great potential impact. thus, the market must be the largest possible: global is desirable the risk run is much greater in a startup. traditional, consolidated companies have to be conservative. they can run risks in some projects but, unlike startups, they cannot put the whole company at risk. startups have very different human resource requirements to those of traditional companies. in general, startups are promoted by highly trained people, with a certain personality. often, all founders and employees share this profile. the growth process is different: there are incubators, accelerators, venture builders, etc. that provide startups with support and a specific and almost universal roadmap to growth. startups adopt innovative management practices: lean startup, agile, design thinking, etc. some of these practices are now being exported to traditional companies. the different culture is palpable: in startups there are no fixed work schedules, the offices have a characteristic design1, key personnel receive equity in the company, the entrepreneurs organize and attend events that are very different in format to those of traditional firms. 1 the unicorn wework has spread the concept globally. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 beyond the individual entrepreneur: the broadening of the concept the empowerment of the individual creator has been extended to other areas of economic and social activity, not just that of entrepreneurship, in a process that is completely redefining the shape and organisation of ecosystems as understood until now (audretsch et al. 2019). from our literature survey, a range of distinct characteristics, as listed below, have their basis in this new perception of the ability of individual entrepreneurs to be disruptive: the global circulation of talent, a permanent circulation that opts to wash ashore in the world’s most attractive ecosystems and cities. part of this talent is made up of digital nomads, who have created a new way of life, at least at certain moments in their lives. it is a talent with a desire to address the great challenges faced by society. ‘crowd’ concepts – that is, crowdsourcing, crowdsolving, crowdfunding, etc. – originate precisely from this desire to use intelligence and collective resources to address these challenges. social entrepreneurship identifies new channels (the so-called impact entrepreneurship) for solving major challenges. entrepreneurs and ecosystems alike are keenly motivated to address these challenges, be it to fulfil social or economic goals or for market purposes. thus, we have witnessed a proliferation of such events as hackathons and the like: ideathons, cybathlons, codeathons, startup challenges, etc. the challenges have entered the education system, in both schools and universities. these challenges, along with massive online open courses or moocs and other platforms http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 (that are turning training into a commodity) point to an overhaul of the traditional education system. business schools have also been shaken up by the new context. new talent is not interested in receiving long periods of training. it wants information and immediate training. they seek other forms of the added value that business schools can offer. consultants are also seeking their space in the ecosystems and are beginning to act as a link between traditional companies and startups, as major sources of disruption. entrepreneurship has flattened the world’s playing field. startups can originate anywhere, providing opportunities in environments previously considered complex. accelerators have been set up to promote such activities 2. young people in the ecosystem want to be active and to construct. they are more concerned with what they can contribute than with their education. ‘makers’ have become key actors of ecosystems. fab labs, coders and co-working and co-living are all expressions of the new context. as is the collaborative economy – sharing – and the emergence of many saas business systems and models that supply traditional assets: including, cars, housing, workspaces, etc. highly informal presentation and networking events have little in common with traditional events and conferences. they are programmed as parties; but it is evident that they are effective. new management techniques are emerging from startups and are being taken up by traditional companies. 2 as an example, many young africans today have the chance to access this global entrepreneurial dynamic. as an example, the accelerator fledge invites entrepreneurs from africa to the barcelona ecosystem in order to facilitate the growth of its startups. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 and, today, certain technologies of great disruptive potential, such as blockchain, point the way forward and identify the next major opportunities for startup ecosystems. but the new context also has its perverse effects, generating new types of inequality. richard florida (2017) claims that this “new activity”, so highly concentrated in big cities, is leaving other smaller cities behind. at the same time, inequalities are emerging between two “social classes”: those that participate in this phenomenon and those that do not. these are the challenges that the big cities will have to face. entrepreneurial ecosystems and startups: towards a definition entrepreneurial ecosystems integrate all the actors described above as well as all the phenomena outlined. arguably, the work of stam and spigel (2016; 2018) clearly illustrates these ecosystems from the perspective of startups. they introduce the idea of productive entrepreneurship and relate it to an ambitious, growth-oriented entrepreneurship. from its side the entrepreneurial ecoystems report of the world economic forum considers that an entrepreneurial ecosystem can be said to comprise the following eight components (wef 2013, wef 2014): accessible markets, both domestic and foreign, with large companies, smes and governments as customers. talent and human capital: management talent, technical talent, entrepreneurial company experience, territorial capacity to assume the outsourcing of services, access to immigrant talent. funding: availability of three fs (family, friends and fools), angel investors, seed capital, venture capital, access to debt. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 support system: mentors and advisors, professional services, incubators and accelerators, networks of entrepreneurial peers. regulatory and legal framework and institutional backdrop: ease of creating a business, tax incentives, business-friendly regulations, access to basic infrastructure, access to broadband and telecommunications, access to transport. education and training: available workforce with pre-university and university education, entrepreneur-specific training. major universities of the territory as catalysts promoting a culture of respect for entrepreneurship, playing a key role in idea-formation for new companies and providing graduates for new companies. cultural support: tolerance of risk and failure, social preference for entrepreneurship, success stories, research and technology culture, positive image of entrepreneurship and celebration of innovation. from a purely economic viewpoint, there are three essential elements making up a startup ecosystem: talent, money and the possibility of achieving an exit, a return on the investment. talent is crucial. it is what nurtures the entrepreneurial flow, giving rise to proposals for new initiatives, as well as the necessary scientific and technical personnel to implement them and ensure their growth. in other words, an entrepreneurial ecosystem can be illustrated simply as a box containing entrepreneurial initiatives or startups in different stages of evolution. the box has two main inputs: 1) new ideas, opportunities, business proposals generated by entrepreneurs. these entrepreneurs are willing to dedicate their time to these ideas and proposals; and 2) money, contributed by investors, who also -like entrepreneursassume risk. the box’s outputs comprise both the successful and unsuccessful proposals. the unsuccessful http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 proposals are those that fail to survive and achieve success. but the key to an entrepreneurial ecosystem is to ensure that the entrepreneurs who fail do not give up but try again. next time round, they do so with more experience and self-confidence, and with more likelihood of achieving success. repetition is a key element in the ecosystem, both for entrepreneurs and investors. the successful proposals are those that manage to achieve a specific exit, that is, an outcome thanks to which the entrepreneurs and investors monetize the time and money they devoted to the project. the exit can be achieved basically by the acquisition of the startup by a large corporation or by going public on a stock exchange – one, that is, that can guarantee adequate volume and liquidity, which is not currently the case of spain’s alternative equity market. successful actors (entrepreneurs and investors), in the same way as their unsuccessful counterparts, then reinitiate the whole entrepreneurial process. from this approach ideas and incipient proposals are converted, with time and money, into economic returns for that city or region. but we are dealing with a high-risk economic process, one of great uncertainty, because the proposals developed by startups are by definition highly innovative and disruptive. but when successful, they can result in rapid change and have the potential for a high return. society’s acceptance of failure is a result, another output of this process, not an input. failure analysis has to go beyond the traditional interpretation of entrepreneurial failure (khelil 2016). when the city or region and its corresponding society understand what this economic process means, they learn to accept that failure is a likely outcome for the entrepreneurs and investors who decide to participate in this ecosystem. failure is not an input. an ecosystem is not built when society has culturally learnt to accept failure. rather it is just the reverse. once an ecosystem is up and running, society gains an awareness of failure. obviously, this means http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 the pioneering work involved in the construction of ecosystems (entrepreneurs, investors, etc.) is a thankless task. an ecosystem learns from experience. when it learns to accept failure and recognises failure as a likely outcome, then failed startups can generate entrepreneurs with more experience, with the desire to try again, but this time with stronger guarantees of success. the box described above (the ecosystem) is as such an artefact (we should stress, an economic process) that converts ideas, time and money into solid businesses that are sold to other firms (which preferably should be located in the same territory) or which are listed in the equity markets. this artefact, the ecosystem, is made up of various component parts and is responsible for a variety of processes. from our literature review, an entrepreneurial ecosystem can be simplified and broken down into ten components or indicators (table 1). those indicators facilitate the comparison of ecosystems. table 1. ten key indicators of an entrepreneurial ecosystem 1. number of startups in the ecosystem 2. number of new startups entering the ecosystem each year 3. volume of investment, from pre-seed to advanced rounds of funding 4. list of the main investment operations 5. entities that educate entrepreneurs 6. accelerators, incubators, venture builders, mentors, etc. 7. specialist consultancy services: patent agents, lawyers specialized in technology, stockbrokers, etc. 8. actions, events, investment forums 9. corporate venturing programs 10. number and volume of exits (acquisitions or ipos) source: self elaboration http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 a global movement this phenomenon has already become a global movement. these entrepreneurship ecosystems are created from colonies of talent and creativity, from research and innovation. such a huge number of startups has emerged on the world stage that this boom has been compared to the boom to the “explosion” of biological life that occurred in the cambrian period (the economist 2014). companies with a high growth potential have penetrated almost every corner of society and for each company from the industrial era that has gone into decline or has had to transform itself, we can find one or several emerging businesses to replace them from the new information age. some companies analyse and compare startups ecosystems around the globe. startup genome produces a key reference report: “the global startup ecosystem” where they identify the world’s top 30 entrepreneurial ecosystems. but startup genome has identified up to 60 highly active startup ecosystems around the world. the movement is well and truly global, and no continent has been left out3. these are today the main places in the world that produce technology through startups. the traditional firm in this new setting as the new ecosystems are characterised by technology, disruption and rapid growth, it is not surprising that traditional businesses see startups as an opportunity – yet, at times, also as a threat that must be closely monitored. indeed, startups have begun to impact these longstanding “traditional businesses”, who have begun to enter into commercial relations with startups, to invest in them and to acquire them. 3 the cities included in the top 30 of the 2019-list of startup genome are: new york city, london, beijing, boston, tel aviv, los angeles, shanghai, paris, berlin, stockholm, seattle, toronto-waterloo, singapore, amsterdam, austin, chicago, bangalore, washington, d.c., san diego, denver-boulder, lausanne-berngeneva, sydney, vancouver, hong kong, atlanta, barcelona, dublin, miami, munich. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 today, traditional businesses can innovate by taking two paths: the one that has always been distinctive of them, the path that has typically characterised each company and sector, a path that includes the subject of much debate in recent decades: technology transfer and the university-business relationship; and the path of startups, which is useful for all businesses and sectors (schaeffer 2015). in most of the value chains, the customer is not usually the motor of radical technological change. customers are not usually aware of the potential of a better option; they cannot imagine it. and for reasons of pragmatism, customers do not seek major changes. they value improvements in quality and price. the value chains of many sectors are based precisely on this, improving performance and price of the existing products and services. at the other end of the value chain, the suppliers, although they are often major contributors to incremental innovation, have, in many sectors, only a limited capacity to make radical technology changes. for this reason, it is often the new, small, dynamic firms (the startups, rather than universities or technology centres) that supply the disruptive technologies, generating huge improvements in competitive capacity. these new, small, dynamic firms are created in a quite unplanned mode, from other companies in the sector or alternatively -and mainlyfrom outside it. cooperation between traditional businesses and startups might also be seen from a different perspective: traditional businesses delegate part of the risk of the development of new innovations to startups in open innovation contexts (huizingh 2011). biotechnology is the best example here, and one that is now followed and copied in other sectors, resulting in this explosion of startups around the world. today, most of the new products in the world’s pharmaceutical sector originate from biotech companies. as an example, 63% of all new http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 prescription drugs approved by fda in the period 2013-2017 are the results of research that stems from biotech start-ups (geilinger 2018). pharmaceutical companies seek above all the flexibility and creativity afforded by startups and more and more renounce the risk of developing new products themselves, something they entrust to entrepreneurs and startup investors. pharmaceutical companies are prepared to pay high prices for biotech and biomed firms. but what they purchase are the successful businesses, those that have successfully passed the development risk filter. washed up along the way lie the best years of the professional life of many entrepreneurs as well as huge investments in unsuccessful startups. corporate venturing activities have traditionally been cyclical. for example, in 2004 dell offloaded their investment portfolio. other large corporations did the same at that time. but in recent years, the investment activity of large companies has picked up and not just that of the major technology corporations. there are more and more examples of global companies that have adopted this method as they seek to monitor the future – that is, forging relationships with startups through their own incubation and acceleration programs. as we have seen, the pharmaceutical and biotechnology sectors were the ones to initiate these mechanisms. today we see companies in all sectors that are highly active in corporate venturing activities. the investment arms of large corporations do not want to be seen simply as another investor; their goals are quite distinct. indeed, entrepreneurs know that these “investors” are not the same: entrepreneurs know that it is not the same to approach a traditional investment company that contributes money to keep the business growing (and which expects an exit in the next years) as it is to approach a corporate fund, which will be less interested in profitability and an exit than in the technological capabilities of the startup. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 corporate funds set themselves various objectives, but their primary concern is identifying and monitoring disruptive innovations and, if considered appropriate, integrating them within the corporation. it is this objective that has led to the massive convergence of these corporate funds with global startups. many corporations begin as minority investors in the startup, monitoring the small company from within, and then later opt to acquire it. this is the case, for example, of medimmune and its acquisition of cellective therapeutics in 2005, as well as intel and its purchase of indisys, partly owned by catalan investors. lisa lambert, head of intel capital, said that intel first opted to invest in the startup but after a short time acquired the company.intel was seeking to cultivate new technologies and plant the seed of new markets that could serve as the destination for intel’s core products. she stressed that the idea was not to control the company, but if it was to intel’s liking then they would buy it. but how exactly can corporations benefit from taking this second path to innovation, the path of startups? they can: • complement their own products with external innovations from startups. • use startups to diversify into areas in which the company does not have great knowledge, with base technologies and markets that differ from those the company is used to. • improve their organization. • use them as mechanisms for attracting talent. • gain contact with specific business opportunities. • become immersed in a global ecosystem. • have a window and springboard into the future. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 blank (2013), says that large companies once again face the need to make strategic changes – as important as those that 50 years ago saw these companies become multi-divisional, with the aim of meeting the challenges of multiple customer segments, diversified product lines, expanded markets, as well as those of vast geographic distances. corporations today are obliged to adjust themselves to a new context, characterised by a world that is completely flat and instantaneous, in which both consumers and entrepreneurs are connected. moreover, the cost of market entry for new companies has plummeted and the speed at which new users and customers can be reached is accelerating. competition is no longer found solely in local, regional and national markets but it has gone global. innovation now comes from every corner of the earth and many markets have been completely reimagined. there is a relentless wave of disruptive innovation that not only affects the technology industries. at the same time, disruption is also changing – and destroying – sectors we thought would last forever: energy, healthcare, education, construction, transportation, finance, newspapers, entertainment, etc. most of the innovation and disruption today are coming from new entrants – young, fearless, and quite unafraid to take on the status quo. the democratisation of entrepreneurship from silicon valley and from startup ecosystems around the world is creating new strategies for that disruption and innovation. following blank (2013), it is the strategy lessons taught by startups that will light the way for the massive restructuring of corporate structures in the short term. it is becoming increasingly clear that technology entrepreneurship will be the main driver of growth in this new economic era. in short, to date technology has given birth to traditional companies and public research centres, but from here on in startups are being shaped as the third great source of disruption generation. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 years ago, when we spoke of company innovation, a distinction was drawn between the following sources of innovation: customers, suppliers, specialized company personnel, company executives, fairs and exhibitions, r&d, the firm’s production department, its marketing department, the firm’s other departments, outside experts and consultants, competition analysis, universities and research centres, patent analysis, congresses and scientific publications, technology centres and laboratories – all of these were the source of ideas for innovation. we have learned that, while everything has its importance, in relation to the above, each sector and each company has sources that predominate over others. to exploit all these sources of innovation, firms have many tools at their disposal, which they have used for years and which they continue to employ: r&d projects, benchmarking studies, quality circles, publication databases, technology consultants, r&d agreements with universities, etc. but things have changed within the so-called “open innovation” strategies (chesbrough and bogers 2014). sources of innovation have expanded, albeit that the previous sources have been maintained. in this new context, companies need to be aware of the new sources of innovation and they must be prepared to use new instruments in their innovation activities. table 2 sums up a list of main instruments now being widely used. startups, universities and the knowledge paradox if we review the economic growth policies of the western countries in the middle and second half of the last century, we see that the biggest companies occupied a central role: famously “what’s good for general motors is good for america”. countries that did not have big companies of their own went to great lengths to attract foreign investment (atkinson and lind 2018). later, the west would commit itself to the so-called knowledge economy, to r&d, universities, and research centres, etc. europe was to clearly back this model. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 table 2. new instruments for innovation activities within the startup economy • setting challenges for schools and universities, using management networks that are already operative on the market. for example, telanto, a platform created for the barcelona ecosystem. • creating a corporate mentoring program so that a company’s management personnel can mentor the young talent of university students. large technology companies have been using these mechanisms for some time. but it is not restricted to the technology sector, today almost all the big world companies run programs of this type, oriented both to the outside world and their own employees. • networks of innovators, including external agents. these networks can be either open or closed and typically target a specific challenge. when open, they can include a wide variety of businesses and institutions. • crowdsourcing platforms for open innovation. innocentive is a global reference in this field. but today there are an enormous number of proposals on the market that facilitate this activity for businesses. • technology transfer platforms, which facilitate access to proprietary technology, frequently from universities and research centres. for example, the association of university technology managers (autm) global technology portal, which provides information about the inventions made by the major american universities. • use of technology intermediaries, such as advanced technology innovations, inc. • creating your own open innovation portal for soliciting external ideas and proposals. yet2 promotes and manages initiatives of this type. examples include the philip morris international idea submission portal and the dupont technology bank. • running a dedicated corporate venturing program. • setting challenges for entrepreneurs all over the world. • operating one’s own incubator-accelerator. • using global startup databases to identify initiatives of potential interest. • attending some of the world’s largest startup fairs. • participating in both real and virtual innovation bridges. • acting as an investor in crowdfunding platforms. • creating one’s own startup investment fund. • locating some of the business’s units in environments (buildings, science parks, co-working places, etc.) where disruption concentrates. • using tools such as trend extrapolation and scenario creation to identify alternative future models, exploring their possible threats and opportunities. • building – using different techniques and methods – mental bridges in company leaders (board of directors, executives, etc.) between the present and the future. source: self-elaboration. at the same time, globalization shifted the west’s manufacturing units to other places around the world, resulting in the loss of jobs. the claim was made that the world’s competitive capacity was no longer based on capital but on knowledge. however, europe and the united states were to encounter unforeseen results from their policies as the following paradox emerged. first sweden, then the united states and, finally, europe realised that while they http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 invested heavily in knowledge, these investments were not being transferred to society. many scientific publications were being generated but few patents, few products, and little technology. during many years, western societies have sought (and continue to seek) solutions to this paradox. many resources have been invested in order to create and operate technology transfer structures (offices, science parks, etc.) and the cultural and organizational characteristics of universities have been analysed to detect where the problem lies. yet, today there is a strong consensus among academics and politicians alike that entrepreneurship and startups are the very tools that make it possible to exploit this commitment to knowledge. the great investment made in knowledge and in r&d over all these years by western societies (and in recent years, by countries all round the world) has created individuals that are highly versed in science, innovation and technology. but not only that, they are also open, creative, tolerant, well-travelled and experienced. society has generated people who in turn can generate or recognize ideas and, with entrepreneurship, put them into practice. ideas are the driving force behind economic activity and in order that people can derive profit from these ideas, they must become entrepreneurs. and as the knowledge resulting from this commitment to universities and research centres is geographically concentrated, entrepreneurship also concentrates geographically in local ecosystems. in other words, when investment is made in knowledge, in r&d, in science, in human capital, etc., its commercialisation tends to occur in fairly close geographical proximity to the sources of knowledge. entrepreneurship is responsible for knowledge spillovers. when people have access to ideas, they are likely to create businesses near the sources of these ideas. this concept underpins entrepreneurial ecosystems – and it is typical http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 to speak of entrepreneurial ecosystems being based on powerful ecosystems of talent and creativity, and of research and innovation (audretsch 2009; audretsch et al. 2019). there are two main reasons why universities, research centres and technology hubs play a critical role in the establishment of entrepreneurial ecosystems: first, they provide the foundations on which opportunities can be generated and, second, they afford the appropriate environment and education so that entrepreneurs are motivated to set up their own businesses. today the role of the university can no longer be limited to the transfer of research results. the mandate of the university in this new entrepreneurial society is to provide leadership in the creation of entrepreneurial thinking, to motivate actions and consolidate institutions that strengthen entrepreneurial capital. universities need to inculcate their students in science, innovation and technology and motivate them to identify disruptive opportunities that they can put at society’s disposal. the concept of the entrepreneurial university has been spoken of for years. it was henry etzkowitz who perhaps best defined the idea (etzkowitz 2003). he talked in terms of a revolution of the universities that included fostering the economic development of the territory as its third mission, in addition to teaching and research. for etzkowitz it was a university that was very much involved with its industrial setting and with the commercialisation of its research results. audretsch (2014) took the concept and developed it further, stating that universities should be doing more than transferring patents or creating businesses. what distinguishes an entrepreneurial university from a university in an entrepreneurial society is the scope of its mission. in an entrepreneurial university, the core competences are not changed. in contrast, in a university in an entrepreneurial society, the whole institution has to contribute to the generation of entrepreneurial capital. the distinction http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 drawn by audretsch is critical since it places the university system under even greater pressure and justifies the changes that certain institutions will have to make. therefore, as we have seen, the regions’ commitment to r&d, to their universities and to knowledge, now makes sense. technology transfer has become of lesser importance. but students must be inculcated in science and technology at these universities so that they can create disruptive startups. cities centred on the production of knowledge and the circulation of talent. gradually, therefore, we have witnessed the mutation of the idea of the “innovation ecosystem” to that of the “entrepreneurial ecosystem”. moreover, this change has been accompanied by others that have derived from it. for example, the entrepreneurial ecosystems – much more than was the case of the “former” innovation ecosystems – vie with each other to obtain a good ranking on the global list. today’s rankings – such as that published by startup genome – employ a range of metrics to periodically compare entrepreneurial ecosystems, the results of which are then published and disseminated globally. and because these ecosystems are centred on the big cities, reports and classifications of technological and entrepreneurial cities are being produced. as we will see below, in recent years, barcelona’s ecosystem has been recognised as one of the world’s most active. this has served to reaffirm the idea expressed by more than one scholar about the relevance of cities, based on the ideas set out by richard florida (florida 2002). cities are being shaped as the sites of globalization, the points of origin and destination of massive international interconnections. the evolution of these places, the changing nature of our cities, also affects the surrounding territory (vidaechea and pareja 2017). the new entrepreneurial classes – the creative classes – that live in the city are increasingly seen as citizens of the world capable of living first in barcelona http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 and later in berlin, new york or shanghai. entrepreneurial and creative citizens want to move between the world’s cities. digital nomadism, which has attracted much attention of late, is the extreme case of this willingness to shift location. as a result of this phenomenon – and of the economic wealth that entrepreneurship generates – cities want to take on an increasingly more prominent role in public policies, they want to be able to participate more in the definition of regional and national policies. for example, they want greater autonomy and power in policies governing immigration. the attraction of talent is essential for an ecosystem and each ecosystem needs the necessary leverage to manage and attract this talent. but – as seen – these phenomena also have their negative effects. cities end up polarizing their citizens, between those who can and those who cannot. obviously, life in the city is very different for the two groups. the effects of airbnb, for example, are the same in most big cities around the world. these global cities, with their respective ecosystems, will be, in the words of thomas kösters (2017), like popular night clubs: crowded and very expensive. we must be willing to pay a premium to live in a place where things happen, where opportunities are generated. this author also says that smaller cities and towns from the metropolitan areas or the surrounding region need to stay connected and seek to absorb the dynamics of some of these big cities. the case of barcelona and the catalan ecosystem in 2014, barcelona received the european capital of innovation award icapital, in recognition of the healthy position it has carved out for itself within the phenomenon described in this article. barcelona was ranked eighth among the world’s best cities 2018. the ranking considers 23 factors, in six categories – the ‘6 ps’: place, product, programming, people, prosperity and promotion. in mid-2017, the world economic forum listed the 25 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 most high-tech cities in the world, in which barcelona was ranked 24th, the only city on the european continent located south of amsterdam to appear on the list. the startup heatmap europe asks european entrepreneurs if they had to create their startup afresh where they would go and which ecosystem they consider best to startup in. in the survey for 2017, barcelona is the third favourite hub in europe, behind only london and berlin. digital nomads, too, express a preference for barcelona. in january 2018, in a list of 978 dynamic cities around the world published by nomadlist, barcelona was ranked number one by digital nomads. the 2017 edition of the state of european tech report places barcelona fourth in terms of the volume of investment received and the fifth in number of operations. in the report 10 things you did not know about europe’s tech scene focused on the analysis of european businesses that had attracted a minimum investment of 1 million euros that same year (mohout 2016). the author wielded data of 1,100 operations in 30 countries. on the basis of this, he ranked barcelona fifth behind london, berlin, paris and stockholm. milan was ranked tenth. neither rome nor madrid appeared among the top 10 and were left trailing some distance behind (for example, in barcelona there had been 28 operations of more than 1 million euros while in madrid just 8). finally, in the report which european cities generate the largest vc returns? barcelona’s ecosystem occupied top spot (putz 2016). in short, barcelona and catalonia have succeeded in creating a hub of entrepreneurship, a concentration of technology startups of significant global importance. some sources report that there are more than 2000 technology startups in the barcelona and some 30 private accelerators. at the same time, the seed capital invested in 2017 exceeded 600 million euros while the ecosystem’s acquisitions and equity market listings (exits) are beginning to be significant, exceeding 500 million euros a year. however, the most remarkable aspect of the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 barcelona hub has been its relatively rapid evolution and its growth dynamics. catalonia in the nineties, in common with many other western countries, committed itself to r&d and knowledge. in keeping with the european goal of defeating the productivity paradox and impacting society, the region strove hard to forge the university–business link: first with r&d contracts, later – at the end of the 90s – with patents and, after 2000, with the so-called spinoffs. fractus, oryzon and scytl, today major global businesses, are the direct result of that period. in parallel with these public actions, catalan entrepreneurs (with weaker links to the universities) riding the internet wave originating from silicon valley during the 1990s, created numerous startups and have continued to do so over the last few years 25 years. these were the years of companies such as intercom, which until recently was a leading incubator. against this backdrop, and complementing the work of intercom, barcelona activa, the barcelona city council incubator, was created in the late 80s and has played a key role as one of europe’s first incubators. the current ecosystem, therefore, results from two movements: one, a public movement, underpinning catalonia’s potent biomedical and biotechnology sector and, the other, primarily a private movement, and which enjoys continuity today with the promotion, in general, of ecommerce and the internet in our ecosystem. the generalitat manages the barcelona catalonia startup hub, the map of catalan startups. this tool has already identified 1,300 startups and continues to grow (accio 2018). the map highlights the enormous weight of ecommerce and the internet in general, mobile technology, the iot and big data (barcelona catalonia startup hub 2018). other key fields are biotechnology, engineering and energy. money is fundamental for guaranteeing the growth of those startups. in 2017, 140 investment operations were completed in startups and spinoffs to http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 the tune of more than 620 million euros, that is, an increase of more than 50% on 2016’s figures. in 2018, the amount was close to 1000 million euros. two key agents in the process of the creation and growth of startups are the accelerators and venture builders. there are more than thirthy in the ecosystem of barcelona. also, among other key agents we should mention lawyers, coders and fab labs. specialized lawyers are crucial players in the ecosystem, given their role in managing investments in startups, mergers and acquisitions and helping companies go public. the leading law firm in this field in catalonia, and across the whole of spain for that matter, is rousaud costas duran (rcd). they have been involved in the creation of startups and spinoffs from the very outset of the movement and have an excellent understanding of the processes involved. subsequently, other firms have joined the field: for example, metricson, legal & tax meeting, fornesa, delvy, across legal, roca junyent, emindsetlaw, bellavista, cirial180, etc. in short, this is another area in which the ecosystem is now well consolidated. the so-called coder academies supplement the need for programmers. here, we might highlight ubiqum, skylab coders academy, barcelona code school, codeworks code cafe, ironhackcoding academy by epitech and @scratch_school. finally, another key element in the ecosystem are the fab labs, makers and co-working spaces, which are now well into their hundreds (capdevila 2017). barcelona’s ecosystem comprises six initiatives created within the framework of the global network of mit’s fab labs: fab lab barcelona, made, testlab21, green fab lab, tinkerers fab lab and beach lab sitges. corporate initiatives we should note that the two paths open to businesses for innovating (the traditional path and the path associated with the new context that we have analysed in previous sections) oblige http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 the public sector to modify and adapt its innovation policies. thus, technology transfer between the public research sector and business continues to be an essential area requiring stimulation. but governments must be aware of this second path for innovating, that of startups. the catalan government – the generalitat – leads the way in spain and has already adopted clear policies for promoting corporate venturing. the generalitat has initiated various programs aimed at fostering this second path of innovation, including, for example, funding that helps traditional firms implement methods for forging relations with startups, and projects that help identify companies that implement these programs in international startups. the agreement signed between the generalitat and the chamber of commerce has resulted in various events promoting this concept. as for corporate venturing initiatives, in catalonia today there are more than 30 traditional corporations that work systematically with startups: including, bayer, seat, telefónica, banco sabadell, agbar, hotusa, ogilvy, ficosa, fluidra, promaut, sorigué, torras, grupo z, open trends, suara, casa ametller, grupo sifu, zobele, vallformosa, port de barcelona, celsa and sanofi. this number is growing rapidly, given awareness that companies have developed regarding the potential of startups. concluding remarks: how can the catalan ecosystem be strengthened? an entrepreneurial society is one in which knowledge-based entrepreneurship has been established as a driving force for economic growth and as a generator of employment and competitiveness in global markets. an entrepreneurial society is one that facilitates entrepreneurial economic growth by promoting an institutional context that is favourable to, and which fosters, entrepreneurial activity (audretsch 2009 and 2014). the example of the barcelona case analysed with the theoretical framework of this article has been used in order to illustrate the characteristics and the relevance of the entrepreneurial ecosystems and the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 role played by technology disruption in the so-called startup economy. once reached a recognition within the international rankings of an entrepreneurial ecosystem the challenge is how the ecosystem can be nurtured and how it can be strengthened. the entrepreneurial capital of an economy or a society refers to the institutions, culture and historical context that are conducive to the creation of new businesses. this implies a series of characteristics including society’s acceptance of entrepreneurs, that is, of those who are willing to take the risk of creating new companies and of individuals, banks and venture capital firms that are willing to share the associated risks and profits. for this reason, entrepreneurial capital is made up of a set of different legal, institutional and social factors and forces, which when brought together constitute an economy’s entrepreneurial capital, which underpins its capacity for entrepreneurial activity. innovation and entrepreneurship policies have no political colour. all modern societies, via their states and governments, are committed to strengthening a whole range of areas that make these societies and their corresponding territories competitive in the face of other societies and territories. a state committed to science, technology, innovation and entrepreneurship as essential factors of economic growth is an entrepreneurial state. if we take israel as an example, we can see that in that country startups are part of a powerful economic process. the number of startups (with around 6,000) is three times higher than that in catalonia and each year the israelis are creating three times as many startups as the catalans (c. 1,000 new startups per annum in israel). the seed and venture capital that these startups receive is also much higher – somewhere in the order of seven times more. there is still a more marked difference in exits with israel selling technology “encapsulated” in the form of startups for an annual figure of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 between 10 and 15 billion dollars, which is somewhere between 10 and 20 times more than the exits produced in the catalan ecosystem. based on the foregoing description of the global context and the current state of the ecosystem, let’s assume that catalonia has set itself the target of becoming one of the world’s leaders of disruptive production, based on its emerging technology firms. what can we do to achieve this? what are the policy implications in such scenario? investment in universities and science first and foremost, the system needs to be scaled to generate more projects, projects that must be disruptive and have growth potential. young talent should be in front of new projects. this means this young talent must be inculcated in science, innovation and technology, by targeting students at university, high school and those on vocational training programs, consolidating stem education, on the understanding that teachers are drivers of change. we also need to consider, from the other end of the entrepreneurial value chain, how investors and entrepreneurs “monetize” their effort and how an exit can be facilitated. but other measures will be necessary, including, the challenges of the so-called “new university” and the ones related to the redesign of technology transfer strategies. the new university it has become clear in this analysis that entrepreneurial ecosystems are entirely underpinned by education and research. as such, no country can hope to create a global startup ecosystem without a potent public research system formed by universities, research centres, research hospitals and technology centres fed by the state’s corresponding r&d plans and with the capacity to attract international financing for its research. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 in 1999, it was said that the universities were having to face a second revolution, one that meant them taking on a new role: namely, that of promoting the economic development of their immediate territory by way of technology transfer and the forging of university-business ties. over the last 20 years, efforts have been made to construct universities of this type and, overall, the goal has been achieved: our universities have successfully taken on board their three missions. so, how should we now define the university of the future? universities today face several different challenges. broadly speaking, two major changes are occurring: the first is the evolution undertaken by the universities’ third mission. technology transfer, university science parks, and cooperation with the wider society have led to a model in which –as this article has stressed– individuals have become key elements in innovation disruption and creativity. students are aware that they are the ones that have to contribute this innovation and disruption and, as such, they demand the means to develop their potential in this regard. the second change calls into question the universities’ first mission: namely, that of teaching. global innovative companies no longer place any great value on the certificates issued by universities, accrediting a person’s knowledge. rapid technological and scientific change means that that some university courses are obsolete before the first students enrolled on them graduate. training today has been universalized via platforms such as coursera that allow access to courses taught by some of the most prestigious universities without having to leave the comfort of your own home. the khan academy which began by offering video lectures is today a global platform. various specialized agents have likewise committed themselves to online training. for example, barcelona football club has set up its barça innovation hub, where barça universitas offers 12 courses in sport: including, a certificate in technology and sciences applied to sport, a certificate of sports nutrition and a master’s http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 in football business. chris weller (2017) cites the futuristic vision of thomas frey who reckons that by 2030 there will be a much more sophisticated and massive version of the present-day moocs in operation. but, what’s more, the teachers will be robots that personalize the training to meet the needs of each individual student. the current role played by the universities in the dissemination of knowledge hangs very much in the balance. the university basically comprises spaces, scientists and students. what will happen if students no longer have a need to go to universities to train? teaching spaces lose any sense they might once have had. what will happen to the university of the future? a possible vision may be the following: training will be shifted away from the university. yet, the spaces operated by the university will serve to further the training of these students, allowing them to perfect their knowledge and to specialise in science and technology. how will it achieve this? by making them participants in the university’s second mission: namely, that of research. the universities will be distinguished by the quality and interest of the research projects in which their students participate. the universities will also have to channel and facilitate the employability and creativity of their students by making them participants of their third mission: namely, the economic development of their immediate territory, by accepting the challenges set by both businesses and institutions. universities will be distinguished by their ability to develop creativity, innovation and the disruptive capacity of their students. they will also be distinguished by their ability to find suitable companies and institutions in which their students can work and/or their ability to help them create and grow businesses. therefore, a university, instead of classrooms, should be equipped with laboratories, workshops, co-working spaces, spaces for advanced creation, fab labs, companies and projects in which students (all students) can put into practice what they learn http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 from the corresponding moocs or training pills. at the same time, the university will have to help find work for (all) these students or help them create their own firms based on their creative skills. this type of university will contribute to accelerating the pace of technology. new technology transfer strategies when speaking of the two paths followed by traditional businesses, an assertion was made that certainly would not have gone unnoticed. it was claimed that typically it is the new, small, dynamic businesses – the startups – that develop disruptive technologies, “more so than the universities or technology centres”. this is perhaps too bold a claim. but, at the same time, this statement means that the two paths open to traditional firms as they seek to innovate cannot be entirely hermetic and must be linked in some way. in other words, it raises a question of pressing interest for universities and technology centres: how can startups help in the mission of technology transfer? despite the enormous differences between traditional businesses and startups, the former are better able to forge relations with the latter than they are with a university. the distance between what companies do and what research groups do is so great that some kind of adapter is needed: and this is precisely the role startups can play. startups allow knowledge to flow and to be channelled along the value chain of public r&d, bringing it into the arena of the market. and this is not solely the case of spin-offs (researchbased startups), but all firms created by students. therefore, in the short term, we shall see actions aimed at strengthening the role of startups as adapters in this process of public transfer. as stressed above, to achieve this inculcating all university students in science and technology is the path that has to be taken. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 14-51, january-june 2020 doi.org/10.1344/jesb2020.1.j067 online issn: 2385-7137 cope committee on publication ethics 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report summary for the annual meeting of the new champions. world economic forum. september. wef. 2014. entrepreneurial ecosystems around the globe and early-stage company growth dynamics. world economic forum. january. vidaechea, juan, and montserrat pareja. 2017. “outlining spaces for the emergence and fertilization of creativity: the case of audiovisual festivals in barcelona.” in the global management of creativity, edited by wagner, m., j. valls-pasola, and t. burger-helmchen. routledge. weller, chris. 2017. “online learning taught by robots could be widespread by 2030.” ideas reporter, business insider www.weforum.org this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 esther hormiga university of barcelona (spain) sylvia rohlfer cunef (spain) a call for novel research in entrepreneurship abstract the article outlines selected issues that are of particular relevance in entrepreneurship research, including comparative research, studies at lower levels of enquiry as well as contextualized enquiries, and where we see special interest from the journal of evolutionary studies in business when it comes to receiving submissions. keywords: entrepreneurship; small business; call for papers; literature review introduction with the launch of the journal of evolutionary studies in business and its thematic area on entrepreneurship, we provide yet another space to make your research in the field of entrepreneurship public and to help you reach out to a wide research community. through the articles published, we, the associate editors, aim to illustrate the contemporary issues that new and established researchers are investigating within the broad area of entrepreneurship. in this introduction and call for submissions, we outline selected issues that are of particular relevance in entrepreneurship research and where we see special interest from the journal of evolutionary studies in business when it comes to receiving submissions. corresponding author. e-mail: ehormiga@ub.edu received 30 october 2015 accepted 22 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 an examination of selected issues: what we know and what we need to know as the editors-in-chief have already pointed out, one significant theme in current research is the importance of context, i.e. the geographical, political, and socio-economic environment within which entrepreneurship takes place. within the strand of academic literature addressing context, veciana and urbano (2008), for instance, have called for researchers to look at how context promotes or inhibits the emergence of entrepreneurs and the rate of firm creation. they argue that researchers should move away from an approach that sees entrepreneurs as autonomous and ‘given’ actors, and should instead demonstrate that the process of becoming an entrepreneur is highly conditioned by contextual factors. in fact, it is now widely acknowledged that individual entrepreneurs respond to the incentives embodied in business, social, spatial, and institutional contexts (welter 2011). however, entrepreneurship research over the last 20 years focusing primarily on context remains scant in comparison to the high percentage of papers focusing upon a more general managerial approach (veciana 2006; fayolle and liñán 2015). a related point is the existence of comparative research in entrepreneurship. with the greater emphasis placed on contextualization, cross-national comparisons have served increasingly as a means for gaining a deeper understanding of diverse and changing societies, their structures, and their institutions. but how much cross-national research is really conducted in entrepreneurship? we note that entrepreneurship researchers have gone some way in incorporating an international dimension into their conceptual and empirical work. this is perhaps best illustrated by the growing body of research on entrepreneurship in emerging markets, which has become a trendy focus in entrepreneurship research. however, much work is needed to move beyond analyses conducted mainly at the level of the organizational field (i.e. focusing on the environment in which firms operate), in order to use the firm and lower levels as the level of analysis. this has led to calls for studies that take into account how institutional processes manifest themselves within small enterprises or even how an organization itself ‘might be treated as an institutional context for understanding intraorganizational behavior’ volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 (greenwood et al. 2008, 29). nevertheless, there is room for more comparative research from different theoretical perspectives to identify successful entrepreneurial practices and policy initiatives as well as to identify convergence and divergence in entrepreneurial dynamics. however, moving towards lower levels of enquiry requires questioning our assumptions and broadening our knowledge as entrepreneurship researchers. some commentators observe that at present the debate on the link between entrepreneurs and specific contexts has been held back considerably because viewing the entrepreneur as an ‘individual’ has led us into the trap of thinking in terms of ‘self-identities… rather than the less obvious working interactions which constitute and support them’ (chia 1995, 596). the people who actually work in start-ups (who are often critical of the process of entrepreneurship) rarely figure within prevailing discourses (ogbor 2000). without doubt, the entrepreneur is important for the success of the start-up, but in most firms some form of teamwork is normal and essential to firm performance and we need to learn more about dynamics in work and intra-organizational relations that influence the operation of smaller establishments. through these illustrative examples, we want to trigger thoughts on the research carried out by academics in the field of entrepreneurship with regard to its level of contextualization, and on the depths and substance of research that may provide new insights into the dynamics of entrepreneurial processes (which may not necessarily be initiated solely by the entrepreneur him/herself). remarks on the origin and evolution of the entrepreneurship research field due to the multidisciplinary approach taken by the journal of evolutionary studies in business, we consider it particularly rewarding to review the origins of entrepreneurship as a field of research. here, for this purpose, we select important developments based on the review by carlsson et al. (2013) found in small business economics. the term ‘entrepreneur’ has been used by various academics repeatedly for more than 250 years. the origin of the word is french and roughly translates as ‘business person’. there is some consensus that the first scientific use of the term dates back to richard cantillon (1680-1734), whose main work was volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 published after his death in 1755 (pleitner 2003). cantillon believed that an entrepreneur is someone who exercises business judgement to deal with uncertainty. however, for a long time classic economic theory failed to understand the role of entrepreneurial activities in the economy (carlsson et al. 2013). in fact, some economists such as jean-baptiste say or john stuart mill merely hinted at the concept. the first economist to focus on the role of entrepreneurship in economic development was joseph a. schumpeter (1885-1950) (carlsson et al. 2013). the second edition translated into english of his work the theory of economic development was published in 1934. it argues that economic development arises when ‘new combinations appear discontinuously’. these new combinations must include: (1) the introduction of new products or new product quality; (2) new methods of production; (3) the opening up of a new market; (4) the achievement of a new supply source for raw materials; or (5) the reorganization of a sector (bull and willard 1993). schumpeter asserted that carrying out a new combination is what we call business, and the individuals whose role it is to carry it out we call ‘entrepreneurs’ (schumpeter 1936, 74). a few years later, schumpeter reiterated that the role of the entrepreneur is ‘...to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of material or a new outlet for products, by reorganizing an industry and so on’ (schumpeter 1942, 132). he distinguished between economic growth and economic development, the latter being facilitated by the creation of new opportunities through ‘creative destruction’. from the mid-1940s, a series of events took place that became the first steps towards the formation of the entrepreneurship field. for example, in 1947 peter drucker gave the first ‘entrepreneurship and innovation’ lecture at harvard business school. one year later, the university of st. gallen organized the first conference focused specifically on small business problems, and arthur cole founded harvard university’s research center in entrepreneurial history. during the 1950s, other events took volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 place such as the first conference organized by the national council for small business management development, which since 1977 has been widely known as the international council for small business (icsb). in 1953, peter drucker started a new entrepreneurship and innovation course at new york university (carlsson et al. 2013). david mcclelland published his landmark study the achieving society in 1961. this is one of the first empirical studies in entrepreneurship based on the psychological school of thought and focusing on personality traits. the ‘acquired needs theory’ or ‘learned needs theory’ developed by mcclelland (1961, 1987) has been of great importance for the identification of the personal characteristics of entrepreneurs. the motivational model approach is easily applied to the study of individuals who carry out activities based on some inner motivation and that lead to the formalization and development of start-ups despite the lack of favourable surrounding conditions. mcclelland (1961) stated that entrepreneurs were self-confident individuals with a high need for achievement and a preference for situations with medium-level risk. thus, mcclelland’s contribution has not only become a major landmark in the development of entrepreneurship research associated with the behavioural and personality traits of entrepreneurs, but has also demonstrated the relationship between economic development in countries and their populations’ need for achievement. however, it was not until the late 1960s that economists became interested in the role of entrepreneurship in economic development and economic theory. examples include the work of harvey leibenstein (1968), entrepreneurship and development, or william j. baumol (1968), with his work entrepreneurship in economic theory. in 1970, purdue university celebrated the first research conference in entrepreneurship and in 1974 created the first entrepreneurship group under the auspices of the academy of management (carlsson et al. 2013). in the 1980s, the academic community started to talk about entrepreneurship as an academic discipline in its own right. this became evident through the inauguration of the first babson college entrepreneurship research conference (now considered by many to be the premier entrepreneurship volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 research conference in the world) and through the creation of the entrepreneurship division in the academy of management, today ‘a large, growing and very strong division,’ according to the latest aom five-year-review (wright 2012). another key factor was the establishment of some currently renowned academic journals in our field (carlson et al. 2013). leading entrepreneurship researchers calling to action given the state of development of our discipline, leading researchers in the field of entrepreneurship have started to reflect on the type of research conducted so far and to critically discuss the directions in which research inquiries should go. here we point to some of the key aspects highlighted in distinguished papers published since 2010. one noteworthy development was entrepreneurship theory and practice’s special issue the future of entrepreneurship research (2011), which offered important reflections on recurrent topics and key methodological elements. in particular, sarasvathy and venkataraman asked themselves: ‘what if we have been thinking about entrepreneurship the wrong way?’ ‘what if we temporarily suspend our thinking of it as a sub-discipline of economics or management?’ (sarasvathy and venkataraman 2011, 114). these authors support the idea of the method of science or of entrepreneurship. researchers should observe experienced entrepreneurs in action and identify ways to study their day-to-day practices through particular techniques and mechanisms in order to better understand the phenomenon and thereby contribute valuable new knowledge. that same year, entrepreneurship and regional development published a special issue in honour of the (editorial) work of bengt johannisson. the editors of the special issue, chris steyaert, daniel hjorth, and william b. gartner, specifically emphasized the importance of keeping entrepreneurship studies imaginative. in particular, william b. gartner (2011) proposed new paths for building entrepreneurship concepts in his article, suggesting a break with linear studies in order to encourage researchers to think in new ways. in 2015, dean a. shepherd celebrated the journal of business venturing’s 30 th anniversary and made volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 an explicit call for entrepreneurship research to be more interactive, activity-based, and prosocial. he argues that ‘the future of the field of entrepreneurship is bright but only if we continue to be entrepreneurial in our research’ (shepherd 2015, 489). as we have indicated, these authors insist on the idea of further developing the field of research rather than simply making it grow. the crucial question that remains is whether there really is an opportunity for such imaginative, non-linear development. according to our judgement as active researchers, this depends not only on those who carry out research, but also on other actors. these include editors, who market our research and provide the opportunities for publication; policymakers and practitioners, who put research results into practice and therefore often finance research endeavours; and, lastly, fellow researchers and the academic community, who enable the opening up of new approaches to understanding what scientists previously would hardly have considered valid. despite this, an assessment of publications in many entrepreneurship journals over recent years reveals that there is more incremental research than disruptive research. firstly, the number of researchers publishing in entrepreneurship has increased considerably in the last decade, accompanied by growing pressure leveraged by employing research institutions to publish. yet this has not gone hand in hand with increased diversity in existing research. journals tend to continue publishing a larger percentage of classical quantitative research: large samples and sophisticated statistical analyses in order to contrast hypotheses. however, it is difficult to develop imaginative, non-linear, and disruptive research while sticking to the dominant methodologies. already ten years ago, pittaway (2005) criticized the ‘tendency’ of researchers to take established concepts, methodologies, and empirical operationalization for granted in entrepreneurship research. time to act: a call for novel papers in entrepreneurship in response to the question ‘does the academic community really need another journal?’, one might argue that it would be more logical for already established journals to begin to accept more transformational and less incremental publications. if we compare a new journal with a new venture, volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 authors like hamilton and singh (1992) argue that new firms are better suited to develop radical rather than incremental innovation. studies show that investment in r&d is much more profitable, i.e. generates more patents per euro invested, in a new company compared to an already consolidated company. we mentioned above that several actors related to the academic community play crucial roles here, and this includes us as thematic area and journal editors. if we call for novel research but subsequently are very cautious as an academic community when it comes to accepting research based on novel perspectives, addressing new issues, and adopting non-dominant research methodologies, then researchers back away from new endeavours. for this reason, we believe that there is room for a journal that opens the door to more entrepreneurial entrepreneurship research. moreover, the journal of evolutionary studies in business is being launched with the aim of providing a window for well-crafted manuscripts. the increasing competition from management scholars in traditional and emerging academic economies such as asia, the americas, and eastern europe, suggests that the demand for new journals is going to continue (corbett et al. 2014). nevertheless, we also believe that broader audiences and the convergence of disciplines and communities of scholars addressing entrepreneurial issues justify a new publication venue. finally, authors might ask why they should publish in a general management journal, which is what the journal of evolutionary studies in business is. while specific entrepreneurship journals can have large audiences, the issue for authors is often scope (corbett 2014). scholars will not get a wide scope or the opportunity to cross-fertilize their research with other disciplines or create an impact by publishing only in entrepreneurship-specific journals. the latest impact factors (from the 2014 social sciences citation index – ssci) show that on average the top five management journals have a considerably higher impact than the top five entrepreneurship journals. indeed, the top entrepreneurship journal has an impact that is nearly two full points lower than the leading general management journal. while the newly established journal of evolutionary studies in business cannot volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 yet demonstrate such impact factors from the outset, it is certainly true that authors publishing in the journal of evolutionary studies in business will reach a wider audience and therefore are more likely to cross-fertilize their research with other disciplines. we invite well-crafted submissions from established and new researchers in the entrepreneurship field. we welcome multidisciplinary and interdisciplinary approaches as applied to the study of entrepreneurship that show an emphasis on research that helps to understand entrepreneurial processes and the entrepreneurial field, which are contextualized and perhaps comparative in their approach and are not necessarily situated in the dominant management research disciplines. therefore, articles published in the entrepreneurship area of the journal of evolutionary studies in business will reflect the methodological diversity that is typical of entrepreneurship research as well as heterogeneity in terms of the topics studied. in addition, we invite theoretical reflections on concepts and approaches in the existing literature on the evolution of the entrepreneurial field by focusing on research content as well as the methodologies used. in line with the publication priorities outlined by the editors-in-chief, the journal prioritizes the following types of papers:  literature reviews with a specific focus on the evolution of trends, methodologies, theories, etc., within the field of entrepreneurship and small businesses;  critical assessment of existing entrepreneurship and small business research by drawing on different academic disciplines with the aim of enriching the understanding of the phenomenon under investigation;  well-designed studies based on a methodology that evaluates how themes and topics evolve over time to provide new insights for researchers, practitioners, and policymakers; and  studies analysing how entrepreneurial processes at the firm level change and evolve over time, bearing in mind that studies evaluating such processes from a cross-national perspective and/or in different contextual settings are particularly welcome. volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 as a final comment, we would like to stress that entrepreneurship research is an applied field of study and it is important that academic researchers maintain a dialogue with policymakers and practitioners. publications in the journal of evolutionary studies in business are not necessarily aimed at practitioners and policymakers and there are organizations such as the ecsb and its international counterpart icsb that provide the appropriate forums in which such dialogues can take place. nevertheless, we would like to see articles featuring themes and approaches that have potential implications for policymakers and practitioners as well as entrepreneurs, and we invite authors to reflect on this. we look forward to receiving your submissions. maría esther hormiga pérez and sylvia rohlfer, associate editors references baumol, william j. 1968. “entrepreneurship in economic theory.” the american economic review 58(2):64-71. bull, ivan and gary e. willard 1993. “towards a theory of entrepreneurship.” journal of business venturing 8(3):183-195. carlsson, bo, pontus braunerhjelm, maureen mckelvey, christer olofsson, lars persson and hakan ylinenpää. 2013. “the evolving domain of entrepreneurship research.” small business economics 41(4):913-930. chia, robert. 1995. “from modern to postmodern organizational analysis.” organization studies 16(4):579-604. corbett, andrew. 2014. “positioning entrepreneurship research for general management journals.” in how to get published in the best entrepreneurship journals, edited by alain fayolle, and mike wright, 250-264. cheltenham: edward elgar. volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 corbett, andrew, joep cornelissen, andrew delios, and bill harley. 2014. “variety, novelty and perceptions of scholarship in research on management and organizations: an appeal for ambidextrous scholarship.” journal of management studies 51(1):3-18. fayolle, alain. and francisco liñán. 2015. “a systematic literature review on entrepreneurial intentions: citation, thematic analyses, and research agenda.” international entrepreneurship management journal 11(4):907-933. gartner, william b. 2011. “when words fail: an entrepreneurship glossolalia.” entrepreneurship and regional development 23(1-2):9-21. greenwood, royston, christine oliver, kerstin sahlin-andersson, and roy suddaby. eds. 2008. sage handbook of organizational institutionalism. london: sage. hamilton, william f and harbir singh. 1992. “the evolution of corporate capabilities in emerging technologies.” interfaces 22(4):13–23. leibenstein, harvey. 1968. “entrepreneurship and development.” the american economic review 58(2):72-83. mcclelland, david. 1961. the achieving society. princeton, nj: von nostrand. mcclelland, david. 1987. “characteristics of successful entrepreneurs.” journal of creative behavior 21(3):219-33. ogbor, john. 2000. “mythicizing and reification in entrepreneurial discourse: ideology-critique of entrepreneurial studies.” journal of management studies 37(5):605-635. pittaway, luke. 2005. “philosophies in entrepreneurship: a focus on economic theories.” international journal of entrepreneurial behavior & research 11(3):201-221. pleitner, hans jobst. 2003. “entrepreneurship: fashion or diving force?”. in creación de empresas: homenaje al profesor josé maría veciana vergés, 33-48. barcelona: servei de publicacions de la universitat autónoma de barcelona. volume 1, number 1, 51-62, january-june 2016 doi: 10.1344/jesb2016.1.j004 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 sarasvathy, saras d. and sankaran venkataraman. 2011. “entrepreneurship as method: open questions for an entrepreneurial future.” entrepreneurship theory and practice 35(1):113-135. schumpeter, joseph. a. 1936. the theory of economic development. second edition. cambriddge: harvard. university press. schumpeter, joseph. a. 1942. capitalism, socialism and democracy. new york: harper & brothers. shepherd, dean. 2015. “party on! a call for entrepreneurship research that is more interactive, activity based, cognitively hot, compassionate, and prosocial.” journal of business venturing 30(4):489-507. steyaert, chris, daniel hjorth and william b gartner. 2011. “six memos for a curious and imaginative future scholarship in entrepreneurship studies.” entrepreneurship &regional development: an international journal 23(1-2):1-7. veciana, jose m. 2006. “the rent conferences over the last 20 years. highlights and research trends.” keynote speech presented at rent xx, brussels, november 22-24. veciana, jose m. and david urbano. 2008. “the institutional approach to entrepreneurship research.” international entrepreneurship and management journal 4(4): 365-379. welter, frederike. 2011. “contextualizing entrepreneurship – conceptual challenges and ways forward.” entrepreneurship theory and practice 35(1):165-184. wright, m. 2012. “ent division receives very positive five-year review.” http://www.division.aomonline.org, accessed december 7, 2015. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://www.division.aomonline.org/ http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 araceli almaraz alvarado el colegio de la frontera norte (mexico) perdurability, families, and internationalization processes: approaches from business history in latin america abstract the main purpose of this text is to present an special issue with a set of researches that describes the history of companies, groups, and business families managed in latin america from diverse approaches. additionally, this article introduces the mid-range concept “durability of entrepreneurial process” as part of an agenda to business history in latin america encouraging complementary methodologies and the theoretical debate. economic and business history in latin america has become open to a vigorous debate, strengthening. the analysis of sectors, large companies, national economic groups, longeval non-family business, and family-based companies as major lines of study. as emerging sublines, business historians in latin america have also approached the study of internationalization, the evolution of organizational structures, the performance and corporate governance of businesses, women and business, and recently family succession and business families in latin america. in a much smaller proportion emerging research sublines, with great potential, have focused on small and medium-sized family businesses, immigration and ethnic descent-business. an agenda that more firmly promotes a theoretical and methodological proposal in business history studies in latin america is urgent. the countries in which scholarship has progressed in these lines and sublines of research for over three decades are colombia, argentina, mexico, chile, peru, brazil, and uruguay. the latin america congress of economic history (cladhe in spanish) is the primary engine of discussions between economic and business historians which have held six events from 2007 and also, we must recognize the breach that the business history conference opened in their 2019 and 2020 meetings to discuss business history in latin america. this presentation highlights contributions in this special issue about mexican business groups and families, and the empirical and theoretical most relevant elements of the articles included about argentina, uruguay, colombia, the valencian smes in latin america, and the political risks to invest in the region. keywords: business history; durability of entrepreneurial process; generational succession; latin america corresponding author: e-mail: almaraz@colef.mx received 18 may 2020 accepted 2 june 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:almaraz@colef.mx http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 i. old discussions and new inquiries? the strongest discussions carried out by research groups on business history in latin america can be divided into major lines and sublines all of them connected depending on the approach subject and object (dávila 1996; dávila and miller 1999; dávila 2003b; barbero 2011; topik, marichal and frank 2006; fernández and lluch 2015) —see table 1. the characteristics of business groups had been discussed and debated from different statements as family capitalism (barbero 2014; barbero and lluch 2015); business networks, characters, and families (cerutti,1992/2000/2005/2007/2015/2018; cerutti and barragán 1993; gilbert 2003; ripoll, 2003; dávila 2003a; carrillo, vidales and rivera 2005; palacios 2005 and 2018; barbero, 2006 and 2011; román 2005; almaraz 2007; cañedo 2009; gámez 2009; cerutti, hernández and marichal, 2010; gonzález 2010; marichal, 2010; romero 2010 and 2018; almaraz 2011; aguilar 2013; cerutti & almaraz, 2013; barbero 2014, cerutti 2015; recio, 2016; llorca & barria 2017; almaraz and ramírez 2018), consolidation of business elites (cerutti 1983; cerutti 1992 and 2015; dávila 1996; dávila 2003a; gilbert, 2003; ludlow, 2010; dávila, 2015; llorca & barria 2017); multi-national corporations (mnc) from latin america or family businesses and patterns of internationalization (barbero 2006, 2011 and 2014; rougier, 2006; castro, 2008; lópez 2011; casanova 2015); changes in the organizational structure and performance and corporate governance, included mnc and family business, stand out (monsalve 2014; casanova 2015; galve and hernández 2015; fernández and lluch 2015). in a much smaller proportion, but with great potential, studies on immigration and ethnic descent-business included understanding new objects of study (marichal, 2008; lanciotti and lluch 2018; almaraz 2020b; nazer and llorca, 2020), and http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 contributions to teaching and methods in business history (campuzano, 2006; almaraz, 2018; cerutti, 2018; lluch and fernández, 2019). table 1. approaches in latin american business history major lines 1990-now case study and descriptions of sectors and firms case study of large companies and economic groups and relation to national-states description of longeval non-family business description of the family business, elites and, bourgeoisie in national and local levels sub-lines 2000-to date 2010-to date 2020 in progress  case study of the internationalization of large companies  description of organizational evolution of companies  case study of performance & corporate governance  analysis of female and smes reconstruction of biographies  family business and smes  family networks  foreign business  new phase in business history  smes and internationalization  family and smes  family smes and performance  successions and configuration of business families  comparative organizational evolution, performance and corporate governance in large companies  biographies and legacy  description of family networks  family capitalism  discussion about the influence of immigration and ethnic ancestry in business and family  reconstruction of business genealogies  sab and business family  specialization and upgrading & family business  succession and perdurability in debate  new categories in business history for latin america source: author’s elaboration considering 708 published researchers in north of mexico by cerutti (2018) whose business history studies represent 37% of cladhe´s percentage of business history paper works. in the past three decades the cross tabs between main lines and sublines have increased the interest of business history in latin america (almaraz and serrano, 2016). now we need to move faster and with denser steps towards theoretical and methodological proposals. for example, the waves of entrepreneurial immigrants in the different countries of latin america have been studied through excellent descriptions, but far from special methodology and debates. some of these gaps try to be overcome in the article of bandieri and almaraz published in this issue. this study recovers the first steps of regional development in southern http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 patagonia, identifying figures of foreign entrepreneurs who formed business families. the authors have produced a text which introduces the key questions, theoretical and methodological frameworks, and a coherent presentation of empirical evidence of a fascinating case study of families in business in southern patagonia in the transition between the end of the 19th century and the first three decades of the 20th century. the authors attempt to take a step forward to develop an analytical category: intermediary entrepreneurial agents. this advance seems central to discuss capitalism in the late eighteenth century in latin america. the research of russo and gutti develops a study of sme family business. besides incorporating the family structure, the authors place special interest in the productive performance and technological evolution of the businesses based on industrial specialization and product diversification within the metal-mechanical branch. they study the performance of small companies over a long time through two family generations and how the transition from the workshop to the factory takes place and the moments that make it possible to survive in the national markets for parts and spare parts. this study opens a vein in the analysis of industrial smes and family trajectories in latin america. the family industrial escalation, learning, and organizational changes are discussed in the light of the recurring economic disasters that argentina experienced, especially the great crisis of 2001. however, the generational changes in this article invite us to think in heterogeneous trajectories not only in the technical-organizational field but also in that of succession. generational succession continues to be the subject of debate in the young field of business history in latin america to give rise to the notion of a business family. they could even see http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 this notion as an explanatory category about the duration and continuity of companies and families. one of the strongest consensuses in the study of business families as study subjects refers to the number of generations (two at least), to corporate control by the family (fernández and lluch 2015; barbero and lluch 2015; cerutti 2018; almaraz 2018), and the participation of successors in both start-up companies and new business activities. however, in some countries in latin america the family business is not recognized (lluch and fernández 2019, 3). trying to close up the mexican business families, they control various types of companies and parental ties correspond to differentiated structures in each generation, as shown in the article's case on southern patagonia. as table 2 shows, among the mexican family largest business today, some groups gained other family businesses; business families gained companies with a related trajectory to the control of the state and/or private capital, and business families are made up of business networks which include both public limited companies (sociedad anónima or s.a. in spanish) and public limited companies. therefore, it is important to expand the investigation on the family structure of the controlled units of latin american business families. we believe that findings for mexico can be consistent with trajectories in other latin american countries. it also required to delve into the sabs of mexico and the rest of the countries of the latin america region, the forms and changes in shareholding, and family control among the various generations. the contents of table 2 concern recently discussed research advances.1 1 the project associated is “grandes empresas mexicanas: los retos de las multilatinas. una versión comparada con chile, argentina y brasil”, during 2018-2019 as visiting scholar at the centro de estudios económicos de la empresa y el desarrollo, university of buenos aires. the recent findings were discussed in the annual meeting of the business history conference, 2020 (almaraz 2020). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 table 2. eight largest business families in mexico: structure, property and history. family business group business name and structure current participation ethnic descent-business and property /a date of foundation business slim family 3 generations a. america movil, s. a. b. stock company a. mexico [lebanon] a. 2000 a. [ericsson de mex.] b. [ericcson de mex. & itt] c. [telmex by nationalization] d. telefonos de mexico s. a. b. de c.v. stock company a. sweden b. [sweden] & [usa] by fusion c. [mexican government] d. mexico [lebanon] + fdi by acquisition a. [1905] b. [1947] c. [1958] d. 1999 a. telmex internacional s. a. b. de c. v. stock company a. mexico [lebanon] a. 2007 a. grupo carso s. a. b. de c. v. 2 stock company & holding a. mexico [lebanon] a. 1980 a. [sanborn american farmacy] b. [sanborns stores selled to walgreen drug company] c. [sanborns] d. grupo sanborns s. a. de c. v. corporation a. usa b. [usa by acquisition] c. d. mexico [lebanon] by acquisition & change of name a. [1903] b. [1946] c. d. 1985-1999 a. grupo financiero inbursa s. a. b. de c. v. b. [inversora bursatilpromotora carso] c. seguros inbursa [seguros de mexico & la guardiana] stock company & holding a. mexico [lebanon] b. mex [lebanon] & mex [lebanon] by fusion & change of name c. – d. mex [lebanon] & mex [lebanon] by acquisition mexico [lebanon] & [mexico] by acquisition a. 1965 b. [1985] c. 1984 [1935] c. 1984 [1942] a. [anaconda conductores electricos] b. [anaconda pirelli] c. grupo condumex s. a. de c. v. corporation a. [mexico + usa] b. [mexico + usa] & [italy] by fusion c. [mexican government] d. mexico [lebanon] by acquisition a.1 954 b. 1955 c. 1964 d. 1992 a. cicsa s. a. b. de c. v. (carso infraestructura y construcción) stock company and holding a. mexico [lebanon] a. 1999 a. [fundos mineros] b. [la compagnie minière de san frncisco del oro et annexes/ comañía minera de san francisco del oro y anexas s. a.] c. – d. [san francisco oro mines] e. [san francisco del oro mines ltd] f. minera frisco s. a. b. de c. v. stock company a. [mexico] b. [mexico + france] c. – d. [france] & [england] by separation + [usa] by acquisition & [england] e. [fdi + mexico] f. mexico [lebanon] by acquisition a. 1789-1852 b. 1853-1899 c. – d. 1903-1904 e. 1915 f. 1962-1985 a. inmuebles carso s. a. b. de c. v. stock company a. mexico [lebanon] a. 1965 2 in 1976 grupo carso acquired 60% of shareholders of galas s.a. a painting company founded in 1913 by santiago galas in mexico city; in 2008 part of the company actives were sold to kuri harfush by carso. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 family business group business name and structure current participation ethnic descent-business and property /a date of foundation business a. afore inbursa s. a. de c. v. stock company a. mexico [lebanon] a. 1985 a. patrimonial inbursa s. a. stock company a. mexico [lebanon] a. 2000 salinas family 4 generations a. [salinas y rocha] b. grupo salinas s. a. b. de c. v. stock company and holding a. [mexico] b. mexico a. 1906 b. 1999 a. [elektra mexicana] b. grupo elektra s. a. b. de c.v. c. – d. [salinas y rocha] stock company and holding a. [mexico] b. mexico by transformation c. – d. [mexico] by internal fusion a. 1950 b. 1987 c. – d. 1999 a. tiendas elektra s. a. de c.v. corporation a. mexico a. 1987 b. banco azteca s. a. de c.v. corporation a. mexico b. 2002 a. [canal 13] b. c. [canal 13] d. tv azteca s. a. b. de c. v. stock company and holding a. [mexican government -somex-] b. – c. [mexican government] d. mexico a. 1968 b. c. 1972 d. 1993 a. seguros azteca s. a. corporation a. mexico a. 2003 bailleres family a. grupo bal s. a. de c. v. stock company and holding a. mexico a. 1961 a. industrias peñoles s. a. b. de c. v. stock company and holding a. france / mexico a. 1850 a. nacional provincial s. a. b. de c.v. stock company and holding a. mexico nd a. fresnillo plc s. a. b. de. c.v. stock company and holding a. mexico nd a. grupo palacio de hierro s. a. b. de c. v. stock company and holding a. mexico a. 1996 b. afore profuturo gnp s. a. corporation nd c. profuturo gnp pensiones s. a. corporation a. mexico a. 1997 a. sky mexico, s.a. de. c. v. corporation a. mexico a. 1996 a. [cablevision] b. [empresas cablevision s. a. b. de c. v.] c. – d. izzi telecom (commercial name) stock company a. [mexico] b. [mexico] by acquisition c. – d. mexico by internal fusion a. 1960 b. 1969 c. – d. 2016 a. [cablemas s. r. l.] b. [cablemas s. r. l.] c. d. dissolved dissolved a. [mexico] b. [mexico] by acquisition c. – d. mexico dissolved a. 1968 b. 2009 c. d. 2015 dissolved a. [editorial america] b. editorial televisa nd a. usa outside mexico b. mexico by acquisition a. 1960 b. 1992 senderos family a. grupo kuo s. a. b. de c. v. stock company a. mexico a.1 899 a. kuo quimico, s. a. corporation a. mexico nd a. grupo herdez, s. a. corporation a. mexico a. 1979 http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 family business group business name and structure current participation ethnic descent-business and property /a date of foundation business a. kuo consumo, s. a. corporation a. mexico a. 1980 a. kuo automotriz, s. a. corporation a. mexico a. 1973 garza sada family a. grupo alfa s. a. b. de c. v. stock company and holding a. mexico a. 1931 a. alpek s. a. de c. v. corporation a. mexico a. 1997 a. nemak s. a. de c.v. corporation a. mexico a. 1979 a. [grupo brener] b. [grupo brener] incorp to alfa c. d. [salumi s. a. de c. v.] e. sigma alimentos s. a. de c.v. changed of name corporation a. [mexico] b. [mexico] fussioned c. – d. mexico internal changes a. 1939 b. 1980 c. – d. 1986-1987 e. 1992 a. alestra s. a. de c. v. b. alestra s. a. de c. v. + axtel corporation a. mexico b. mexico by fussion a. 1996 b. 2015-2016 garza laguera family a. femsa comercio (oxxo) corporation a. mexico a. 1977 a. [cerveceria cuauhtemoc] b. [fabrica de vidrios y cristales] c. [grupo monterrey] d. fomento economico mexicano (femsa) s. a. b. de c. v. stock company and holding a. [mexico/germany] b. [mexico] c. – d. mexico by internal division of grupo monterrey a. 1890 b. 1899 c. – d. 1957 e. 1974 a. coca-cola femsa s. a. b. de c. v. stock company and holding a. mexico/usa a. 1993 garza garza family a. [conductores monterrey] b. [grupo primex] c. [conalum] d. grupo xignux s. a. b. de c.v. stock company and holding a. [mexico] b. [mexico] regorganization c. – d. [mexico] constitution e. [tisamatic] constitution f. [mexico] a. 1956 b. 1968 c. – d. 1979 e. 1981 a. viakable, s. a. division of xgnux a. mexico incorporated to xignux a. 1956 a. [productos industriales cm as factory in grupo primex] b. prolec ge, s. a. nd a. [mexico incorporated to primex] b. mexico a. 1976 b. 1995 source: based on public websites, archives of companies, annual reports from mexican stock exchange, palacios (2018), cerutti (2015 and 2018), romero, 2018, almaraz 2019b and 2020. a/ a. ethnic descent-business by private capital or public; b. ethnic descentbusiness by fusion or transition; c. ethnic descentbusiness by nationalization; d. ethnic descentbusiness first incorporation or acquisition; e. ethnic descentbusiness second incorporation or acquisition, f. ethnic descentbusiness and third acquisition. symbols: [brakets = transformed], in box = active. this information is valuable in the study of business perdurability and generational continuity in latin america, for at least two reasons. the first has to do with the possibility to understand family nuclei in corporate governance, and how socio-parental culture and ethnic http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 descent-business influence business organization. it links the second one, to the potential of extended and compound family structures in the continuity of companies, but in the configuration of business families, when the companies of a family move to the third generation. in this way it will be feasible to discuss processes of continuity of families considering the durability of companies and vice versa. this overview allows to investigate the relationships between business birth rates and processes of internationalization, commercial policies and agreements, and the maturity of business families. in 1993 wilson peres3 identified three limits so that the leading companies in latin america could transfer part of their assets: i) the general agreement on customs and trade tariffs (gatt), ii) the existence of closed and open areas for international trade associated with the signing of agreements, and iii) international financing associated with an expectation of real capital shortages. the three indicators are exogenous to companies, but they must take them into account at the moment to record latin american companies and their processes of slow and rapid internationalization (peres 1993). the signing of new trade agreements has tended for the past 25 years to the elimination and/or modification of tariff barriers on a global scale, which undoubtedly was an incentive for the leading companies in latin america to transfer part of their investments abroad (guillén 2000, guillén and garcía-canal 2009). in the subline of internationalization studies historians must recover the implications to family and non-family business of commercial agreements. however, by eliminating trade barriers in latin america, this region also became a destination for european, asian, and american companies, including smes family industries such as spain. 3 at this moment the principal technical advisor of the regional project rla /881/039 of cepal / undp. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 the article by vidal et al., warns about the strategies of family businesses of valencian origin to internationalize. the authors discuss considering family-based business behavior, which is another relevant topic in contemporary business studies. they identify how the experience in north africa and arabian countries and european countries influenced the family business to seek fresh markets in latin america. likewise, it is important to note that the authors identified as another strategic element in the search for external markets, upon the second and third generations. finally, one aspect that is little discussed in this article, but which is placed as a central variable, is cultural closeness. the authors’ research makes clear the interconnections between spain and latin america, delving into how they encouraged the proximity, installation, and financing of valencian companies outside the european continent. in the third article of this special issue, geymonat corresponds to one of the major lines in business history but trying to explain the organization and changes of the uruguayan groups between 1980 and 2015, focusing on the deindustrialization process of the country and adding important elements to understand internal alliances. this study achieves extensive work on the business in uruguay in the contemporary context of the neoliberal model. the method used by geymonat gives a specific approach to family and dominant groups and their horizontal organization. the author analyzes how uruguayan business groups tended to specialize in their activities in fewer value chains during the decade of 1980 and how they have maintained the business control after a new economic model and their strategic alliances. some questions in this special issue about the groups, family and smes businesses in latin america are relative to historical changes outside latin america and how it had been possible to boost internationalization, not only in the current moments but in the past centuries, and recently since the incorporation of foreign companies (lanciotti and lluch 2018). as vidal et http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 al. show, in the case of valencian smes they arrived in latin america as the second stage of internationalization led by members of the new generations of family businesses. monitoring business trajectories, families and brands imply that at least they track the historical size of companies, productive performance, and corporate governance. in terms of family structure, it is pertinent to discuss the changes in the original stock pattern once the companies have internationalized or have become public, acquired, unified, or incorporated. regarding the financing of family businesses and the installed capacity outside the country of origin, it is important to record the type or types of financing: self-financing by reinvestment, indirect by incentives of the receiving countries: through alliances by policies of internationalization in the countries of origin (guillén and garcía-canal 2009). for example, the case of orbia —formerly mexichem— whose origins date back to the 1950s in mexico, begins with two medium-sized family-type companies —made up of strategic alliances with foreign partners. as one of the founding companies grows and organizes the first industrial group, and from there it strengthened the specialization. subsequently, there is a recent period of strategic alliances with foreign partners and the first internationalization. a third stage focused on acquisitions (fifteen between 2004 and 2019), alliances, and strategic agreements with private and public actors. two generations have headed this family business group, and a third is positioning (almaraz 2019a and 2020). therefore, it is a fact that family smes can belong to global supply chains, but it depends on the maturity of the buyers and the connection to the chain. then is possible to observe the influence and each of the variables that affect the family’s business history or the economic groups. the work of vidal et al. notes that firms of born-global type from mature and specialized smes have not occurred for valencian companies, but rather an http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 internationalization trajectory boosted by members of the second generation, first in europe and second in latin america markets and specific brands. latin american internationalized firms in the region can go in the future to foreign markets in europe or the usa. is the experience in near markets an attribute to conquer far away markets? hence, the approach to cases and successful experiences from the valencian region represents one more reason to broaden the current debates on the internationalization processes of family businesses in latin america, either from smes or from larger family groups and businesses. therefore, it is an example that reinforces the idea about the role of internal and external markets, and trade agreements according to the stages of development experienced by companies and business families, be integrated into the field of latin american business history (kipping 2003). at the same time, it will depend on the temporality studied, that the commercial arrangements between regions and countries may be incorporated. they have simple forms, as in the postcolonial period and more complexity along the 20th century, until the new generation of regional trade agreements since the 1990sb. in all cases, this exogenous variable refers to the impact on the global and local value chains and durability of business, not only in organizational areas and governance corporative. for this reason, this special issue would not be complete without conceptual suggestions. we propose to concentrate the efforts in a large process: the durability of business in latin america, based on the notion characteristics of business survival and continuity, especially in the succession process and regional continuity, business immigration, and ethnic descent — business and longeval non-family business. businesses which last over time and part of productive and family networks or shareholders for two or more generations, confirm how generational succession is more complex than other processes in a business organization. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 unlike material resources management, family succession, and shareholder’s succession obey long-term processes and makes up itself as one of the keyways of survival. in the succession, different kinds of learning overleap provoking complex processes of diversification and/or specialization in family and non-family businesses, in smes and large companies. another of the greatest challenges for business historians in latin america is to rethink questions about economic transformations emanating from colonization and specific economic agents. business immigration and ethnic-business ancestry are two variables to keep present different capitalisms and understand the latin america business durability from the multiple dependencies generated since the colonial presence. the most important dependencies are monetary. in the current model of trade opening, it is not enough to identify that more foreign companies are arriving in latin america. we need to know the history of latin companies and groups taking part abroad and becoming multilatin, as tested by barbero (2014) and casanova (2015), and how they are taking part in global value chains (gvc). the existence of a few large groups in latin america in one or more gvc and their continuity must be studied in detail crossing tab information about business groups and firms (table 2). if the internationalization of companies in latin america has been slow, we need to know what socio-historical factors and international regulatory frameworks have impacted both business and family business. in 2009 amatori wrote “business history seems to be one of the liveliest areas of economic history” (amatori 2009, 17). therefore, it is necessary to advance to a distinct way of analyzing the role of companies, entrepreneurs, business groups, and particularly the business families in the organization of markets in latin america. it is necessary to integrate the discussions on family capitalism as suggested by barbero and lluch http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 (2015), with a renewed drive that includes broader historical contexts and multiple trajectories. for example, it is necessary to have data on the supply of latin american merchandise to world markets since the colonial period, not as a factor of unity, but as a common factor that led to different commercial agents, which made possible new forms of expansion of european capital and gave meaning to the accumulation of large family fortunes in latin america. comparisons between unique periods of expansion could lead to new debates on the internationalization of capital. the discussion on the internationalization of valencian smes is highly relevant in expanding markets to emerging economies, like latin-american, as recipients although not for the first time. in the future, it is also important to debate the main latin american markets and emerging market multinationals considering not only cultural affinity and maturity but the behavior of mncs and the different political risks to invest there such as gonzález highlighted in the last article of this issue. it needs consistent information on the structures and families of businessmen that defined the regional spaces in latin america in the face of european expansionism before the first globalization (1870-1914), to make clear the durability and export capacities from latin america. the so-called commodities from broad latin american regions had linkages and intermediaries that brought the major cities of europe closer to latin america and defined important international trade routes. global commodity chains importance, since the 16th century, is in the discussion again. an example is the book from silver to cocaine: latin american commodity chains and the building of the world economy, 1500–2000, edited by topik, marichal and frank, 2006.4 paul gootenberg (2017), points out the need to overcome 4 few years later, this book was published in spanish version as “de la plata a la cocaína, cinco siglos de historia económica en américa latina, 1500-2000” (marichal, topik and frank 2017). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 “the traditional divisions between internal and external factors, or economic versus noneconomic factors in the history of latin america countries, shared by both the neoclassical and the dependency perspectives.” we assume that several moments in latin america associated with business development after the colonial phase remains in some way active. one of them emerges from the independence movements (since 1810) and implies the relationship with the creditor countries with which indebtedness contracted and lasted until the end of the 19th century. another is the stage of primary exports that lasted until the world war i and then until the financial crisis of 1929 as pointed out by barbero and lluch (2015). the historical waves of immigrants also produced effects on economic organization, in the appearance of new commercial relations, business and companies in a collective name or anonymous association, and in the configuration of local elites. since the 19th century, the processes of industrial and agro-industrial expansion boosted by the import substitution model (isi), allowed the emergence of additional business groups. for example, argentina experienced the application of the isi model early, successfully implementing it from the end of the 19th century to the first decades of the 20th century. other countries like mexico applied the isi model until the end of world war ii (1945), allowing the consolidation of the new regional bourgeoisie in the country and the emergence of companies protected by the state. other key moments of the companies´ development and the durability of latin america have occurred from relations with nation-states. in most latin american countries, the stewardship of the economy and the significant function of state-owned companies with protectionism schemes gave rise to a specific relationship between political elites and latin american business families. with the fall of protectionist models, starting in the second half of the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 1980s, business groups and families in latin america repositioned themselves. however, it is necessary to record the strategies of the business groups in latin american economies. researches like geymonat and rodríguez in this issue approach these processes for the last five decades. the first of them addresses the case of economic groups settled in uruguay, and in the second work the orientation is towards colombian business groups since the 1980s. therefore, the business history in latin america implies discussing the history of international trade, organizational structures in local and global production chains, internationalization processes, and the continuity of families and business. if the debates on entrepreneurship and business history include these topics to ask new questions and reveal new pathways and actors, the encouragement of amatori and jones 2003; jones and wadhwani 2006; amatori 2009 barbero 2008; fernández and lluch 2015; dávila 2003b; marichal 2010; and cerutti 2018, among others, will not have been in vain. latin american business history requires this breadth of debate, and the transition from descriptive case studies to the selection of multiple trajectories and comparative studies, with an increasingly solid conceptual base. from this special issue, we make a call to strengthen an upper line of study focused on the durability of business in latin america with an agenda that continue past efforts and visions (table 3) and includes the business family and intergenerational succession as a priority. it is urgent that business historians in latin america dialogue with other groups of specialists of economic from europe,5 and usa. in those regions, researchers have advanced by leaps and bounds since the 1980s (jones and wadhwani 2006, 6). until the 1980s, articles on the history of the family business and companies have been published in the business history 5 the european commission (ec) has paid great attention to the family business since 2007. see the european family business http://www.europeanfamilybusinesses.eu/ and fernández and colli (2013). http://revistes.ub.edu/index.php/jesb http://www.europeanfamilybusinesses.eu/ volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 review, business history, enterprise & society and economic history review (amatori 2009). from 1985 to 2002, most of the publications in these journals concentrated on automotive, transportation, telecommunications, and banking systems and their services; to a lesser extent in the history of large companies and mncs, especially those of american and british origin, and to a lesser extent on companies of italian and japanese origin, and on the trajectories of businessmen and family businesses, which was analyzed from the “theory of the organization of the firm.” and “the new institutionalism”. in family business discussions women recently are being included,6 and also the evolution of family smes and processes of internationalization and corporate governance. table 3. statements about business history and latin american business history scholars statements franco amatori and geoffrey jones (2003, 7) “[…] business history is today an academic subdiscipline of remarkable potential and diversity. its diversity is reflected in the fact that its academic practitioners are to be found contributing in many different contexts, and this is reflected in its eclectic methodology and stilldeveloping research agendas. what is evident is the potential for business history research.” geoffrey jones and r. daniel wadhwani (2006, 2) “[…] that there are now exciting opportunities for renewing the research agenda on entrepreneurship, building on the strong roots already in place, and benefiting from engaging with advances made in the study of entrepreneurial behavior and cognition” maria inés barbero (2008, 555) “business history is a relatively new area of study in latin america. the continent itself is large and in large heterogeneous, and scholarship in the field has been slow to gain a foothold in latin american universities. franco amatori (2009, 17) about the vitality of business history: “– because in our discipline human beings —individually or collectively— never disappear; they are always at the center of the stage – because the enterprise —that is our major unit of analysis— can be tackled or observed under an almost infinite number of variables – and, finally, because business history (with its capacity to often link micro and macro) gives an important contribution to understanding the evolution of national and international economic development”. franco amatori (2009, 22) “even i am willing to admit that we now have to go beyond chandler. in my opinion, four directions of research seem to be particularly fruitful. these include: 6 in family business studies, women's participation has revealed significant progress. gálvez and fernández (2007, 496) show areas of specialization for women entrepreneurs and how women have been essential in the historical development of capitalism in spain, especially as service providers. however, studies in latin america that consider women in business are insufficient, both in large companies and in smes. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 scholars statements • the study of the network-form; • the historical perspective of globalization; • issues related to the relationship between enterprise, society, and culture; and, finally, • entrepreneurship”. joseph h. astrachan (2010, 6) “if ever a field needed greater attention and more outlets for theory and research, a family business is it”. carlos marichal (2010, 3) “the formation of the field of research on business history experienced a slow take-off: it started with a few jobs in the 1970s and 1980s, then sped up in the 1990s and achieved special vigor in the last 10 years. this work spurred by a contemporary generation of economic historians who have been investigating the trajectory and experiences of large and medium-sized mexican companies of the 19th and 20th centuries.” mario cerutti (2018, 24) “[…] the empirical evidence has insisted on showing that: a) frequently, the business activity was born, reproduced and endured closely to what we have called business families; [and that] b) in societies such as the mexican it could extend to the world of enormous companies and economic groups that were generated with their development.” source: based on cited authors. the uniquely positioned journals that examine the dynamics of family-controlled businesses regardless of size are family business review (1988-now) and journal of family business strategy (2010-now). in 2016 journal of evolutionary studies in business emerged, tending to accept contributions of economic history, business history, and family business. but in all those reviews latin american dynamics had of little relevance. this special issue is an excellent initiative from the chief editors to include latin american business discussions in the middle of international debates. ii. the study of successions and business families to zellweger et al. (2010) it is important to sustain the necessity to explain the differences between family firms and non-family firms, variations in behaviors among family firms, and how does the family contribute to firm success (e.g., chrisman, steier, and chua 2008). the analysis model proposed by zellweger et al. (2010) is based on multidimensional aspects: a) components of involvement —family ownership and control, setting a minimum threshold of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 family influence—, b) essence —behaviors and synergistic resources and capabilities a family contributes to a business— and c) family firm identity. all of them, according to zellweger et al. (2010), “reflects a unique way that families can influence the family firm, […and where] dimensions often overlap and intermingle.” nevertheless, for astrachan and shanker (2003) the problem is not these differences “but the extent and manner of family involvement in and influence on the enterprise”. the argument of authors, about the theoretical approach to study family business, is that “all research and theory should report an operational definition of family business used, [and] definitions are advised to have a business and family component defining how each effect and are affected by the other” (astrachan and shanker 2003). for the authors, the family business has three rings. the outer i) “is the most inclusive and requires only that there be some family participation in the business and that the family have control over the business’ strategic direction”; the middle ring ii) requiring that the business owner intends to pass the business on to another member of his or her family and that the founder or descendant of the founder plays a role in running the business; the last, iii) “separates out those businesses where the original family”. here the planning and strategic decisions to durability permit the long run business existence and family continuity. meanwhile, “power, experience, and culture”, suggested by astrachan and shanker, needs to be operationalized in each ring, and along the run of generations and firms, to the understanding of succession process being or not family business. to longeval non-family business in latin america is relevant to analyze the successions following the internal history of control, as shareholders participation history, and changes in performance and governance corporate. to family business the analytical route implies http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 recovering the changes in nuclear, extended, or composed family structure, as proposed in almaraz (2018) following the name history embedded in a business group or business history embedded in a business family. this is the case of those mexican largest business families that acquired business emerged as private or governmental. another example corresponds to john lee, glen matson, james marshall, and batson borger who in 1929 in brazil constituted lojas americanas s.a. the original idea led two american entrepreneurs who originally arrived in buenos aires, argentina, and later moved to brazil (almaraz 2019a): “in 1940, lojas américanas s.a. became a corporate company; in 1982, it generated an agreement with banco garantía to accelerate its growth; in 1994 the company held a joint venture with walmart brazil and walmart stores inc., but a year later it sold to walmart stores inc. 40%; in 1998 the group made a large sale of 23 supermarkets to comptoirs modernes linked to the carrefour group with the aim of investing in technology and logistics […]; in 1999 the company had two spinoff […], at the same year boosted americanas.com an online platform.” in 2014 tàpies, san román and gil wrote about 100 family businesses to discuss the industrializing process in the world. the impressive work permits to rethink the industrialization from the family business using a descriptive model to synthesize the information and cases of study and also the succession’s process. the selected family businesses were born between the 18th century and 1913 and active at the time of the study. latin american discussions, from this work, can reveal the possibility to change the perception of the family business and the perdurability respect to the continuity of family names in control of the longeval non-family and new business.7 7 other work about spanish family business is tàpies 2009. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 recent work focused on family business and specifically on succession, wrote by nazer and llorca (2020), analyzed three large chilean family businesses between c.1860s-1940s. the authors consider that “little attention has been paid to succession in family businesses in developing countries, including those in latin america” (nazer and llorca 2020, 2). the authors warn of a problematic situation to study the succession and transitions of generations and consider that “despite its importance as a process, there is still no general theory of succession planning in family businesses” (e.g., bjuggren and sund 2001; morris, williams and nel 1996; sharma et al. 2003; wortman 1994). we believe that the problem is the paucity of research on family successions in more countries and the use of unique mainstream to make new contrasts. basco, omari and abouchkaier (2020) also published a survey report titled “family business ecosystem in the united arab emirates” where he exposes family firm demographic characteristics, some data of family-business relationship, corporate and family governance, and succession focused on criteria for choosing successors. this is another important contribution, especially to describe the family business context and succession process in emergent economies as the middle east. nevertheless, we need to consider that variables in businesses’ family evolution, imbricate a not linear perdurability business process that can include firms controlled by families or longeval groups in the long run. in this case the continuity of family names and family brands, and group brands can be an indicator of perdurability but nor lineal. in the case of evolution of family business, and its transformation to a family business, corresponds to i) specific management of intergenerational succession in one or more firms, ii) cultural and transmission of values and iii) specific pathways of learning inner and outside of firms (figure 1). family members act depend on product cycles, technological changes, http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 and changing of commercial flows that take place where the value local or global chains operating. to latin america business history is urgent the addition of two variables: business immigration and ethnic-business ancestry as cultural elements (figure 1). in 2009 amatori wrote: “we have not deepened very much the cultural aspects of business history nor have we done much investigation of the impact of the company on society, its relationship with the environment and with politics” (amatori 2009, 25). figure 1. configuring and business family evolution: perdurability business process economic history: colonialism / first globalization / second globalization source: author’s elaboration. an agenda oriented to latin american family businesses is urgent to carry out contrasts of the family structure evolution in long-term businesses. tàpies (2014) and dávila (2003b) took an exceptional step that must be continued. this special issue is also an invitation to include the variables of business immigration and ethnic-business ancestry. no-linear business external changes: gvc/lvc technological economic policy models demand cultural and values family businesses: intergeneracional successions and governance corporative learning process t e rr it o ry http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 perdurability and continuity of family names came as categories that need testing their heuristic potential in the analysis of economic groups and business families, family businesses, and reconstruction of company stories, biographies, and business genealogies. iii. final thoughts until the 1980s, many specialists focused on the last two economic models adopted in latin america —protectionism (1945-1981) and neoliberalism (1982-today)—, specifying the entrepreneurial positions in each one. business history emerged as a perspective beyond political negotiations to remark entrepreneurial regional differences, describe sectors, large business —public and private—, economic groups, and family groups. since the 1990s, new studies in business history have led a description of entrepreneurial behavior of groups and regional pathways. however, the colonialism era and its impact on business, and the family groups, are not systematically. these last two have become relevant in latin america business historiography with the use of mixed methodologies and the recovery of macroeconomic statistics and annual company balances, besides public records and company directories. it is also pertinent to carry out business genealogy reconstructions proposing nomenclature and special symbols, using the biographical method and applying semi-structured and in-depth interviews. with this itinerary, this special number invites to strengthen the business durability as an analytical concept to discuss the development models implanted in latin america along with history. the historical perspective of the family business must be departing from the contributions of institutional economic theory, theories of international trade, and management theories, as well as of family continuity where succession, learning, and transmission of family values processes discussions are relevant as internationalization is. the task is hard, but the latin american business history is making http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 progress. in mexico it is “one of the most recent but productive fields of research” (marichal 2007, 43). the upcoming agenda requires fewer instrumental visions and cuts that do not separate completely the disciplinary fields of history, economics, and administrative sciences. echoing díaz morlán’s approach to business history as a “testing ground”, the course of latin america work must move to the second moment of greater conceptual precision and heuristic capacity (diaz 2007). the economic history and latin america business history must move towards new research agendas in which we articulate local or domestic business with other national, and international processes, and expect the co-evolution of economic and organizational structures. from my concern it is imperative to develop an epistemology of business, family business, and historical trade to latin american business. the economic and business history of latin america, with more than three decades of experience, may raise new debates around the business configuration. we believe that it is possible to anticipate: a) new theoretical and methodological discussions; b) emergence of business categories ad hoc to the dynamics of latin american capitalism, c) business configuration in border areas, d) immigration and ethnic descent-business, e) characteristics of main business families in latin america, f) latin american business networks, g) technological and business history and i) construction of business assets in latin america as photographic collections, visual materials, bibliographic archives of companies, public records and business testimonials. this field needs to understand not the success, but the origin and the continuity of groups and families in business, and family business over time anticipating discussions and using midrange concepts and theories on the perdurability of entrepreneurial process and interdependencies between family and business. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 1-32, july-december 2020 10.1344/jesb2020.2.j075 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 the debate on family business in latin america remains open, and it is very important to show multiple cases studying comparative trajectories and periods. although not always the texts advance generating new theoretical debates, they do suggestions and new pertinent questions related to family structure, shift and share of the family business, successions, internationalizing process, and intercultural. the commercial agreements are too relevant factors to speed up the internationalization not only at the contemporary crisis periods, and not only in the recent political-economic models. for this reason, it is pertinent to propose as an analytic framework latin-american business perdurability and a specific agenda to the family business. at this moment is relevant to insist on other challenges far away from what chandler methodology suggests (amatori 2009, 18-22), closer to latin american perdurability business processes. references aguilar, gustavo. 2013. familias empresariales en sinaloa (siglos xix y xx). culiacán: universidad autónoma de sinaloa/asociación de historia económica del norte de méxico. almaraz, araceli. 2007. “origen y continuidad de los empresarios de mexicali, baja california (19121939).”, phd diss. ciesas-occidente, guadalajara, mexico. almaraz, araceli. 2011. “de intérprete y apoderado a empresario. arturo guajardo y las redes mercantiles en mexicali, baja california.” meyibó, 3:97-122. almaraz, araceli. 2018. “la empresa familiar y las familias empresariales en méxico. una propuesta teórica.” in familias empresariales en méxico sucesión generacional y continuidad en el siglo xx, 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which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1111/j.1741-6248.2003.00001.x https://doi.org/10.1111/j.1741-6248.2003.00001.x https://doi.org/10.1111/j.1741-6248.1994.00003.x https://doi.org/10.1111/j.1741-6248.1994.00003.x https://doi.org/10.1016/j.jfbs.2009.12.003 http://creativecommons.org/licenses/by-nc-nd/4.0/ sin título volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 qing xia xining university, qinghai university for nationalities (china) pierre-yves donzé osaka university (japan) https://orcid.org/0000-0001-7933-8722 https://orcid.org/0000-0003-2854-5531 innovation in the japanese tea industry, 1970–2020 abstract this paper studies the technological innovation and new marketing strategies that enabled firms from traditional industries to pursue their existence in a disruptive environment. as a case study, we follow an approach from classical business history and industry studies, focusing on the japanese tea industry to analyse how it has innovated to survive in a fast-changing environment over the last five decades. based on various resources (official data from tea industry association, patents and trademark data, reports, interviews, etc.), this paper emphasises three marketing strategies that supported its survival: product development based on technological innovation (transformation of the true nature of green tea from a commodity to a branded good), brand management (repositioning of some specific teas in the growing luxury market) and internationalisation (expansion in foreign markets through exports). this research also emphasises the major role played by large corporations to support industrial transformation. keywords: marketing strategy; innovation; traditional industries; japan; tea industry; ipr innovación en la industria japonesa del té, 1970-2020 resumen este artículo estudia la innovación tecnológica y las nuevas estrategias de marketing que han permitido a las empresas de industrias tradicionales continuar su existencia en un entorno disruptivo. como estudio de caso, seguimos un enfoque desde la historia empresarial clásica y los estudios de la industria, centrándonos en la industria japonesa del té para analizar cómo ha innovado para sobrevivir en un entorno que ha cambiado rápidamente durante las últimas cinco décadas. basado en varios recursos (datos oficiales de la asociación de la industria del té, datos de patentes y marcas registradas, informes, entrevistas, etc.), este artículo enfatiza tres estrategias de marketing que respaldaron su supervivencia: desarrollo de productos basado en la innovación tecnológica (transformación de la verdadera naturaleza del té verde de un producto básico a un producto de marca), gestión de marca (reposicionamiento de algunos tés específicos en el creciente mercado de lujo) e internacionalización (expansión en mercados extranjeros a través de exportaciones). esta investigación también enfatiza el papel principal que juegan las grandes compañías para apoyar la transformación industrial. palabras clave: estrategia de marketing, innovación, industrias tradicionales, japón, industria del té, ipr innovació a la indústria japonesa del te, 1970-2020 resum aquest article estudia la innovació tecnològica i les noves estratègies de màrqueting que han permès les empreses d’indústries tradicionals continuar la seva existència en un entorn disruptiu. com a estudi de cas, seguim un enfocament des de la història empresarial clàssica i els estudis de la indústria, centrant-nos en la indústria japonesa del te per analitzar com ha innovat per sobreviure en un entorn que ha canviat ràpidament durant les darreres cinc dècades. basat en diversos recursos (dades oficials de l'associació de la indústria del te, dades de patents i marques registrades, informes, entrevistes, etc.), aquest article emfatitza tres estratègies de màrqueting que van donar suport a la seva supervivència: desenvolupament de productes basat en la innovació tecnològica (transformació de la veritable naturalesa del te verd d'un producte bàsic a un producte de marca), gestió de marca (reposicionament d'alguns tes específics al creixent mercat de luxe) i internacionalització (expansió en mercats estrangers a través d'exportacions). aquesta investigació també emfatitza el paper principal que juguen les grans companyies per donar suport a la transformació industrial. paraules clau: estratègia de màrqueting, innovació, indústries tradicionals, japó, indústria del te, ipr corresponding author: e-mail: dear.frog@163.com received 28 january 2022 accepted 10 august 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0001-7933-8722 https://orcid.org/0000-0003-2854-5531 mailto:dear.frog@163.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 1. introduction traditional industries provide unique cultural merchandise, contributing to the cultural diversity and intangible spiritual heritages of modern society (burenhult 1994). by "traditional industry" we mean those economic sectors that developed before industrialisation and integration into the world economy. this dual change has had a considerable impact on industries with a strong cultural identity, particularly in asia (miyamoto and kasuya 2009). in japan, there is a special term for traditional industries that existed before the opening up of the country: "zairai sangyo". today, traditional industries are still important, not only because they provide job opportunities but also because they define and represent the identities of the people who take pride in the traditions and cultures passed down from their ancestors (islam and burmester 2020). however, the transformation of the world economy over the last five decades has had a profound impact on traditional industries in numerous countries (bird and stevens 2003). companies in traditional sectors were challenged by both a new generation of firms that offered innovative goods and the changing habits of consumers who turned to branded goods manufactured by global corporations (ritzer and malone 2000). consequently, a broad range of traditional industries declined with the rise of fully-fledged, mass-marketed goods and changing lifestyles (robertson 2018). in japan, the westernisation of lifestyles since the 1960s, combined with the decline of domestic consumption since 2000, has had a major impact on the survival of numerous traditional industries (ōhoku sangyō kassei-ka sentā 2004). the production and consumption of clothing (such as kimonos and geta sandals), necessities (japanese paper and towels), handicrafts (wood/stone sculptures and handwoven rugs) and drinks (sake and tea) were significantly influenced (hashino 2018; teikoku data bank historical museum 2018). however, instead of being trapped in this long-term decline, a few companies in traditional industries were able to http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 transform their businesses and usher in a new period of growth through various innovations. these changes have not yet received much attention in international literature as scholarly works have mostly focused on the product, market and organisational innovations of single firms (kaneko and maruyama 2017; xia and donzé 2021). such an approach contributes to theories on firm survival, but limits discussions regarding the ability of a whole industry to adapt. however, industries evolve based on sequences of innovation as firms compete with each other and seek new opportunities, resulting in the diffusion of such innovations (reinganum 1985). hence, our objective is to analyse innovation at the industry level and discuss how it led to the structural transformation of an individual sector. by “innovation”, we mean broadly new technologies developed to improve the production process and create new products. however, as our discussion focuses on the various uses of these innovations by firms, we use the term “marketing strategy” when focusing on the way companies implement innovations into new businesses. as a case study, we focus on the japanese tea industry with the main narrative on green tea, which was the most produced (97%) and consumed (76%) form in that country in 2016 (cha kankei shiryo 2020, 9–48). tea was introduced to japan from china as early as the heian era (794–1185). like other traditional industries, the tea industry has long contributed to spiritual and aesthetic heritages through a wide range of ceremonies. nevertheless, japan was the first country to experience the challenge posed by global competition from other drinks in the 1970s. despite its previous popularity, tea consumption began to decline severely in this decade due to pressure from new types of drinks, such as carbonated drinks (coca-cola became fully operational in japan in 1960; see mason 1992, 161–173). however, unlike most traditional japanese industries, which fell into long-term decline, the tea industry was able to enter a new period of growth in the 1990s. xia and donzé (2022) demonstrated that the development of bottled green tea by the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 wholesaler ito en not only transformed this firm into a big modern beverage company but also played an important role in revitalising the entire industry. however, this work only explored the innovation of one big player, highlighting the shortcomings of a single-firm approach mentioned above. on the other hand, pilapitiya, de silva and miyazaki (2020) showed that the japanese tea industry was highly innovative, creating a high additional value when compared to the tea industry in sri lanka and other major tea-producing countries. for example, in 2019, the per-unit export value for japan was $26.4 per kilogram, compared to $5.8 for china, $4.2 for sri lanka, $3.2 for india and $2.3 for kenya (faosta 2021). pilapitiya, de silva and miyazaki (2020) argued that the innovation capabilities of tea companies in japan relied on a large number of smalland medium-sized enterprises (smes), tea-processing factories and supporting services. however, they did not offer any quantitative data to support their argument. some questions that were not explored include who the major innovators were and what conditions enabled these innovations. our study addresses these literature gaps, focusing in particular on various innovations from numerous players in the japanese tea industry to answer our main research question: how did the japanese tea industry innovate to survive in a fast-changing environment over the last five decades? the secondary questions are as follows: who were the main players that innovated this industry over the last 50 years? were these companies inside or outside the industry? what were their innovations? what were the conditions that enabled these innovations and how did they change dynamically over time? 2. methodology to address these questions and understand the conditions that allowed innovation to occur in the japanese tea industry, we follow an approach from classical business history and industry studies. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 the classical business history approach mainly focuses on the largest companies in an industry, analysing the sources of their competitiveness (chandler and hikino 1990; scranton and fridenson 2013). one of the major aims of our research is to shed light on the way these firms adapt to social and technological changes to maintain or lose their dominant position. the industry studies approach argues that each industry has its respective specificities in terms of products, technology, economic function and market, each of which impact the dynamics of competition between companies (kurosawa 2017). therefore, the contextualisation of industry specificities is important to make sense of innovations. to examine innovation changes among firms in the general evolution of industry-specific determinants of competitiveness, we thus adopt a mixed methods approach combining industry studies and business history (bouwens, donzé and kurosawa 2017). first, we identified the specificities of the tea industry. this process involved using statistics published by the tea industry association and the ministry of agriculture, forestry and fisheries; publications by nikkei group, the largest business news media in japan since 1975 (https://t21.nikkei.co.jp); and company market shares published by nikkan keizai tsushin (1974–2019). these various sources provided the information necessary to analyse the evolution of the environment in the tea industry, the conditions of innovations and the evolution of these conditions over time. second, we conducted a quantitative data analysis of industry innovators and their innovations. we used the official registration of patents to quantitatively assess technology innovations in the tea industry over time. patent data offers a detailed and consistent chronology of how firms solve problems and search for solutions. this source is frequently used in economics and economic history to estimate a firm or country's level of innovation (fontana et al. 2013). only http://revistes.ub.edu/index.php/jesb https://t21.nikkei.co.jp/ volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 2.5% of the patent applications in our database are joint applications, the overwhelming majority of which are from a large company conducting joint research with a university or research institution. we have attributed these applications to the company (see table 2) and focused the discussion only on firms in section 4. similarly, firms use trademarks to signal to consumers that a product is of a certain, consistent quality to differentiate it from competitors, shape consumers’ interests and tastes and develop loyalty. trademarks act as important weapons in the arsenal of competition (da silva lopes and duguid 2010). although trademarks were only partially associated with firms’ new offerings in the marketplace, they reflect the outcome of a firm’s marketing efforts and competencies (fosfuri and giarratana 2009). therefore, we used trademark registration as a quantitative benchmark for marketing strategy. finally, to overcome the limitations of the quantitative patent and trademark data analysis, we qualitatively analysed different strategies adopted by firms, showing how they used innovations to implement new marketing strategies and expand into new markets. we conducted interviews and fieldwork to collect data on how the research and development (r&d) and marketing strategy were implemented by various actors in this industry. as information disclosed by listed companies enables the understanding of their branding, product development strategies and organization changes, our interviews and fieldwork mainly focused on unlisted smalland medium-sized firms. hence, we selected five smes among those with the most patents and trademarks (see table 1). we conducted interviews with their chief executive officers (ceos) and visited their headquarters, retailing stores, factories and tea plantations. information published in trade journals and business newspapers complemented data gathered during interviews. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 table 1. list of interviews no. occupation place and date 1 ceo of sasaki seicha, shizuoka online, 22 october 2021 2 chairman of fukujuen, kyoto kyoto, 8 november 2021 3 ceo of uogashi meicha, kakegawa kakegawa, 10 november 2021 4 manager of ippodo, kyoto online, 14 january 2022 5 ceo of sugimoto seicha, shizuoka online, 28 january 2022 source: own elaboration. this article comprises six sections, including the introduction and methodology. section three provides an overview of the evolution of the japanese tea industry from the 1950s. section four introduces the quantitative analysis of patents and trademarks. section five presents different marketing strategies adopted by firms, while the final section provides some concluding remarks. 3. long-term structural changes in the japanese tea industry after world war ii, the japanese tea industry achieved substantial development as a result of expanding domestic consumption, which became the driving force of growth in the context of a rapidly expanding mass-consumption society. domestic consumption increased from 24,455 tons in 1950 to 112,108 tons in 1975 (see figure 1). simultaneously, the share of exports decreased gradually from 21.3% in 1955 to 1.7% by 1970. to meet the challenges of low production capabilities and growing demand, industrial production and distribution embarked on major shifts, with the tea agricultural association leading the way in popularizing chemical fertilisers, pesticides and agricultural machinery. first, innovations such as the development of the vegetative propagated tea “yabukita” shortened the harvest lifecycle of the previous seedling propagation, with the mechanisation of picking and processing improving productivity (takeda 2020). second, tea-related firms organised the tea market as a middle institution to allow new entrants and speed up distribution (masuda 1986, 78). tea packagers (large-scale tea traders who manufacture packaged tea and distribute it to supermarkets, grocery shops, etc.) emerged http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 as a new type of distributor during this period. as a result of the fast-growing segment of selfservice stores, tea sales delivered through package makers to self-service stores increased from 11.6% in 1965 to 27.3% in 1977 (masuda 1986, 92). from 1966 to 1979, the number of tea wholesalers (including wholesalers of tea, coffee, cocoa, herbs, etc.) increased from 1,910 to 2,934, while the number of tea speciality retailers (tea stores selling mainly tea) grew from 10,488 to 14,487 (cha kankei shiryo 2020, 93–94). figure 1. production, consumption and foreign trade of tea in japan (volume in tons), 1950– 2019 note: figures for years prior to 1960 are averages of the previous 5 years (e.g. data for 1955 represents the average from 1950–1955); figures for years after 1960 are the annual numbers (ōishi 1983, 279; cha kankei shiryo 2020, 39). the most consumed and produced form of tea in japan is green tea (tea producer association 2020; cha kankei shiryo 2020, 9). source: ōishi (1983) for 1950–1960 and cha kankei shiryo (2020) for 1960–2019. however, the domestic boom in tea consumption did not last forever (see figure 1). the popularisation of fast food, convenience stores and vending machines impacted young people’s consumption habits severely, particularly from the 1970s onwards. the consumption of tea 0 5 10 15 20 25 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 1950 1960 1970 1980 1990 2000 2010 2020 domestic production of green tea import of green tea domestic consumption of green tea percentage of export (%) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 leaves per household dropped from 2,024 g in 1973 to 1,540 g in 1984 (yanagawa 1994). masuda (1984) also showed that tea leaves were mainly consumed by japanese people over 60 years of age in the 1970s. by contrast, the consumption of modern bottled beverages (mostly carbonated drinks in the 1970s and coffee drinks in the 1980s and 1990s) was growing tremendously in both volume and breadth of categories annually, increasing from 477,324 kl in 1960 to 16,241,134 kl in 2000. the latter figure is 34 times the consumption of bottled beverages 40 years ago (murayama 2006). after 15 years of decline, tea consumption entered a new phase of growth after 1990 that lasted until its historical peak of 116,823 tons in 2004. this boom relied on the disruptive innovation of bottled green tea, which was developed in 1985 and first marketed by ito en in 1989. fierce competition from later entrants who possessed organisational capabilities, such as coca-cola and the large beer manufacturers asahi, kirin and suntory, further propelled bottled green tea consumption (murayama 2006). the volume of tea leaves consumed as bottled green tea increased from only 2,660 tons in 1993 to 31,266 tons by 2019, equivalent to 39% of the total tea-leaf consumption that year (cha kankei shiryo 2020, 50). in less than three decades, over half of the tea wholesalers and special retailers vanished. the number of wholesalers dropped from 3,519 in 1991 to 1,607 in 2014, while the number of special retailers decreased from 14,282 in 1985 to 6,381 in 2014 (cha kankei shiryo 2020, 93–94). some tea companies that lost their shares of the domestic market searched for foreign markets to counterbalance these shrinking sales, targeting customers who could afford higher prices. the export of japanese tea increased, rising from 1,096 tons in 2005 to 5,108 tons by 2019. these figures represent 1.1% and 6.3% of national production, respectively (figure 1). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 ito en was the largest firm in this business in 2019, with over 25% of japan's total volume of crude tea production (ito en 2019). thus, the industry was reorganised from numerous smes to the coexistence of both big companies with financial and distributing resources and a large number of smes. the evolution of their innovation strategy is explored in the next section. 4. quantitative data analysis of tea patents and trademarks we extracted tea patents and trademarks from the official japanese database j-platpat (https://www.j-platpat.inpit.go.jp). as the domestic market has been the primary market of the japanese tea industry since the 1970s, we mainly focused on domestic data. however, we also double-checked trademarks from the global brand database of the world intellectual property organization (wipo) (https://www3.wipo.int/branddb/en/) to understand the trends of internationalisation regarding japanese tea brands. j-platpat provides information on patents and trademarks issued by the japan patent office since the meiji era (1868–1912). it includes 52 classification codes with “tea” as a keyword, varying from tea planting and processing to packaging techniques. many codes represent not only tea but also other types of goods, such as coffee. to focus our data on tea, we selected patents with the keyword “tea” in their title to collect the most relevant examples. in terms of trademarks, requiring the keyword “tea” in the title is not reliable as, for example, a trademark could be “harmony, respect, purity or tranquillity” without the keyword “tea”. consequently, we had to rely on the class codes that include “tea” as a keyword. as a drink, tea was specifically contained in class code number 30, subcategory number 29a01. as trademarks are generally shared in different types of goods, codes are automatically and broadly related to each other in the system. we used the exclusion function to exclude trademarks that were shared with other products and retained only the trademarks applied for class code number 30. this criterion enabled us to focus on the core to present a general trend regarding the major innovators and innovations in tea over time. http://revistes.ub.edu/index.php/jesb https://www.j-platpat.inpit.go.jp/ https://www3.wipo.int/branddb/en/ volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 however, our data has a limitation and variation to represent the tea patents and trademark applications over the past 50 years. figure 2. patent and trademark applications for tea, number of cases, 1971–2020 source: j-platpat. we identified a total of 7,595 patent applications and 15,778 trademark applications from 1971 to 2020 (see figure 2), with both showing different dynamics over time. patent applications increased dramatically during the 1970s. the objective of innovation was mainly to improve productivity through mechanisation to meet the rapid expansion of domestic consumption at that time. however, from the late 1970s onwards, patent applications declined severely due to manufacturing capacity exceeding demand. companies consequently turned to product development to fight for a larger market share of a declining domestic market. while the number of trademark applications was once smaller than that of patent applications, the former 0 100 200 300 400 500 600 700 patent number trademark number http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 overtook the latter in the mid-1980s and has remained higher to this day. in 2020, the number of trademark applications was approximately 11 times larger than for patent applications. hence, we can observe a dramatic shift in innovation from technology to marketing. next, observing the nature of the applicants clearly emphasises the domination of firms over individuals. of the 7,595 patent applications, 5,157 were made by firms (67.9%) compared to 32.1% by individuals. similarly, of the 15,781 trademark applications, 12,529 were made by firms (79.4%) and 20.6% by individuals. unfortunately, databases do not provide any details about individuals. as such, their background, and notably their relationships with private companies, is unknown. therefore, we focus our discussion on the main actors: firms. we identified 1,355 applicants for patents and 3,675 for trademarks. among them, only 250 applied for both patents and trademarks (5% of the total number of firms). hence, specialisation is a major feature of their strategy. moreover, most of these firms had a low number of applications. for patents, 94.4% of firms had five or fewer applications and only 0.8% had more than 50. for trademarks, these proportions were 90.4% and 0.7%, respectively. this demonstrates that patent and trademark applications in the japanese tea industry were extremely polarised, characterised by only a few firms holding a strong marketing or r&d ability. it also shows that most of the firms specialise in either manufacturing (both tea machinery and tea production) or retailing. in the following subsections, we analyse the evolution of the characteristics of the dominant firms in technological innovation and marketing over the years. 4.1. changing leaders in technological innovation (patents) table 2 shows the top 10 tea patent applicants by decade. although tea-related patent applications decreased in the long run (see figure 2), we can observe a dramatic transformation in both the profile of the main innovators and the nature of their innovations. over the past 50 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 years, the top 10 innovators include approximately half or over half of all applications. during the 1970s, the major innovators were all manufacturers of machinery for tea plantations, such as kawasaki kiko and terada. although their share declined in the following decades, they held a strong position and continued to be ranked among the top 10 applicants during the 2010s. however, since the 1980s, a new type of innovator emerged; namely, companies from the beverage industry with modern mass-marketing and mass-production capabilities, such as asahi, sapporo, suntory and ito en. most of these firms were dominant players in the beer market that then diversified into the fast-growing non-alcoholic beverage market after 1990 following a decline in beer consumption. these firms applied for patents related to product development (tea-concentrated liquid and new beverages). hence, technological innovation, as seen through patents, became increasingly related to marketing strategy. these firms were also major trademark applicants (see section 4.2). table 2. main innovators in tea manufacturing, number of patent applications (n) and share (%), 1971–2020 1971-1980 n % 1981-1990 n % 1991-2000 n % 2001-2010 n % 2011-2020 n % kawasaki kiko 156 26.1 kawasaki kiko 237 17.6 terada seisakusho 248 17.4 terada seisakusho 124 11.2 suntory 77 11.3 terada seisakusho 77 12.9 terada seisakusho 190 14.1 kawasaki kiko 244 17.2 kao 122 11.1 terada seisakusho 76 11.1 ochiai hamono 35 5.9 ochiai hamono 49 3.6 ochiai hamono 87 6.1 ito en 76 6.9 ito en 72 10.5 suzuki tekkōjo 17 2.8 suzuki tekkōjo 40 3.0 miyamura tekkōjo 38 2.7 kawasaki kiko 74 6.7 kao 47 6.9 toshiba denki 13 2.2 panasonic 24 1.8 hoshizaki denki 35 2.5 ochiai hamono kōgyō 34 3.1 asahi 43 6.3 uchida hamono kōgyō 11 1.8 miyamura tekkōjo 22 1.6 ito en 32 2.3 suntory 34 3.1 kirin 39 5.7 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 1971-1980 n % 1981-1990 n % 1991-2000 n % 2001-2010 n % 2011-2020 n % hoshizaki denki 10 1.7 ken-ki kōgyō 17 1.3 sapporo 31 2.2 mitsui norin 31 2.8 mitsui norin 19 2.8 sanyo denki 10 1.7 hoshizaki denki 16 1.2 asahi 16 1.1 asahi 28 2.5 sapporo 17 2.5 toyo denki 9 1.5 suntory 14 1.0 panasonic 14 1.0 kirin 21 1.9 kawasaki kiko 11 1.6 miyamura tekkōjo 9 1.5 ito en 14 1.0 fuji denki 13 0.9 hasegawa kōryō 20 1.8 fukujuen 10 1.5 top 10 347 58 top 10 623 46.1 top 10 758 53.3 top 10 564 51.1 top 10 411 60.2 note: grey cells represent applicants outside tea machinery. source: j-platpat. finally, in the 2000s and 2010s, a few well-established tea smes, such as fukujuen and mitsui norin, also emerged as new major innovators by investing in technology to transform their businesses. fukujuen launched the “cha” (meaning “tea” in the japanese language) research centre in the 1990s in response to radical changes in consumption and lifestyles. it extended its product line by applying for patents ranging from innovative tea powder and bags to liquid beverages (takehara 2010). on the other hand, mitsui norin focused on developing the nutritional functions of various types of tea extracts for broad usages, including beverages, cosmetics and medicines. its r&d is not only for its brands but also for other makers (mitsui norin 2021). 4.2. changing leaders in marketing (trademarks) in contrast to patents, where the top 10 innovators had approximately half of all patent applications, the top 10 applicants for trademarks hold a much lower share of about 20% (see table 3). this suggests there are significantly more small players engaged in trademark applications in addition to the big beverage makers. these small players include regional tea wholesalers, retailers, agriculture associations and small producers, as well as a broad number of small firms from other industries and countries. beyond this general trend, important changes http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 have occurred over time. during the 1970s, almost all of the top 10 applicants were traditional tea wholesalers and retailers, such as kanbayashi shunsho honten, harada and ippodo. however, since the 1980s, much like with patent applicants, a small number of modern beverage companies have emerged as the main players. these firms, such as ucc and asahi, gained growing importance and became dominant in the 1990s. these modern companies not only applied for trademarks but also massively invested in branding and advertising, targeting mass consumers. further, since 2000, we can observe a divergence between these modern firms. while some reduced their number of applications (e.g., sapporo), others increased them dramatically (e.g., ito en). with the business of bottled beverages becoming increasingly concentrated in the hands of a few makers, companies with weaker marketing and distributing resources faced challenges to achieve growth. one of the largest and most successful applicants, ito en, is a former tea wholesaler that transformed into a beverage maker (xia and donzé 2022). it increased from only 17 trademark applications in the 1970s to 308 in the 2010s. this firm developed bottled green tea in the late 1980s and became the largest tea maker in japan. it holds 10.5% of all trademark applications in the tea industry in the 2010s, a share that has never been achieved by any applicant over the previous decades. in contrast, 90.4% of trademark applicants were not active at all: 60.4% have registered only one trademark, while 30% have registered between two and five trademarks over the past five decades. in addition, most of these small companies have abandoned tea production despite the registration of trademarks. indeed, statistics on the number of companies active in this industry show that more than half of tea wholesalers and retailers have disappeared over the last thirty years (see section 3). this suggests that these small, uncompetitive companies have registered trademarks in an attempt to survive, imitating the strategy of larger companies. however, this has not prevented their decline. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 finally, a review of tea trademarks in the wipo global brand database reveals that applications by global tea brands from japan increased significantly. the overall total domestic consumption of tea began to decline in 2005 due to increased competition from other types of drink (takeda 2020). therefore, internationalisation was a strategy employed by tea companies to compensate for their declining domestic sales. while these amounted to only 16 in 1992–1999, this number grew to 114 in the 2000s and 252 in the 2020s. the major applicants were the modern beverage firms, small tea firms and tea associations. table 3. the main actors in tea marketing, number of trademarks (no.) and shares (%), 1971– 2020 1971-1980 no. % 1981-1990 no. % 1991-2000 no. % 2001-2010 no. % 2011-2020 no. % kanbayash i shunsho honten 38 6.8 ito en 49 2.9 ucc 149 4.1 ito en 204 5.4 ito en 308 10.5 harada 26 4.7 shohokuen 41 2.4 sapporo 88 2.4 asahi 83 2.2 asahi 68 2.3 ippodo 23 4.1 ippodo 31 1.8 asahi 76 2.1 mitsui norin 58 1.5 mitsui norin 56 1.9 maruyama en 21 3.8 maruyama en 25 1.5 mitsui norin 62 1.7 meiko chagyo 56 1.5 sasaki seicha 39 1.3 marukyū koyamaen 18 3.2 aavan 25 1.5 meiko chagyo 57 1.6 sasaki seicha 45 1.2 yoshimura 30 1.0 hi-shidai seicha 17 3.0 ucc 23 1.3 nihon tobacco 54 1.5 ucc 44 1.2 key coffee 28 1.0 ito en 14 2.5 asahi 21 1.2 shanson keshōhin 49 1.4 key coffee 43 1.1 kodani kokufun 28 1.0 kawasaki kiko 9 1.6 yasunaga shōkai 15 0.9 ito en 41 1.1 sapporo 41 1.1 meiko chagyo 24 0.8 mitsui norin 8 1.4 marukyū koyamaen 14 0.8 shirataki seicha 39 1.1 osawa sinise 34 0.9 nihon shiko 24 0.8 osawa sinise 8 1.4 mitsui norin 13 0.8 sasaki seicha 35 1.0 fukujuen 32 0.8 showa seiyaku 22 0.8 top 10 182 32.6 top 10 257 15.1 top 10 650 18.1 top 10 640 17 top 10 627 21.5 note: grey cells represent applicants outside traditional tea wholesaling. source: j-platpat. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 in conclusion, the japanese tea industry has experienced deep changes in innovation over the past 50 years. this transformation has entailed three major characteristics. first, large modern beverage makers have become the dominant actors after establishing themselves as major applicants for tea patents and trademarks. second, a large number of smalland medium-sized tea retailers have engaged in japanese green tea branding. although no single firm has pursued the same volume of applications as the big beverage companies, such firms collectively are the main applicants for trademarks. third, large modern beverage makers, smalland mediumsized tea retailers and tea associations have actively explored foreign markets, resulting in a significant increase in global tea trademark applications from japan. this quantitative analysis of patent and trademark applications in the japanese tea industry shows the growing importance of marketing strategies as technological innovation shifted from production technology to product development after the 1980s. significant growth in trademark applications followed this change. in the next section, we adopt a more qualitative approach to discuss the nature of the major marketing strategies adopted since the 1980s. 5. marketing strategies in this section, we analyse various strategies adopted by tea companies. the objective is to examine their impact on the development of firms. we have identified three major strategies: product development, luxury branding and internationalisation. the discussion is based on data from business news databases and interviews. 5.1. product development: from green tea leaf to branded bottles the growing number of patents and trademarks related to bottled green tea suggests the increasing importance of such a product. bottled green tea was developed in 1985 by the small tea wholesaler ito en in response to the crisis posed by the declining consumption of green http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 tea leaf (xia and donzé 2022). this product was sold until 1989 as “sencha”, which means “green tea” in the japanese language, without receiving much customer interest. in 1989, ito en changed the name to “o–i ocha”, which means“hey! tea, please!”, and initiated mass advertisement campaigns to build a brand with a natural and healthy image (kajiwara 2012). ito en was then listed on the tokyo stock exchange in 1996 and transformed into a large beverage company (ito en 2020). in 2000, to bring marketing and r&d—including its central research laboratory, product research section, agriculture section and agricultural technology section—closer together, it merged the two departments to synchronise innovations in valuechain activities with marketing (ito en 2001). hence, as expressed in our quantitative data, ito en was keen to develop new products and accordingly applied for a large number of patents and trademarks. the successful development of ito en attracted large companies from the beverage industry, particularly beer makers and coca-cola, to develop their products and brands. for example, the brewer kirin targeted younger consumers than ito en by launching specific brands and advertisements (itoku and shibuya 2018). a major issue for companies from outside the tea industry was to acquire knowledge and legitimacy to develop tea products, even as bottled drinks. small traditional tea firms that had a long history in the japanese tea business became their targeted business partners in this context. simultaneously, the shift in daily necessity drinks from japanese green tea leaf to bottled beverages threatened the survival of the small traditional tea firms. although many such firms had accumulated know-how and heritage in japanese green tea production over centuries, they lacked the financial resources, distribution channels and mass marketing knowledge needed to diversify into green tea beverage drinks. this dilemma finally resulted in the co-building of competitive tea brands between beverage makers and traditional tea firms. for example, suntory collaborated with fukujuen (a tea http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 retailer with more than 200 years of history) to develop the green tea brand “iemon” in 2004. its brand addressed the functional value of “high-quality taste and aroma”, with an emotional value that was “comfortable and premium” to differentiate it from old green tea brands. both companies extended their cooperation and extended their number of joint brands from two in 2004 to 21 in 2015 (itoku 2016). as for coca-cola, it collaborated with kanbayashi shunsho honten (a tea retailer with 450 years of history) to develop a new product (bottled non-filtered tea) and a specific brand (ayakata) in 2007 (kajiwara 2012). these types of cooperation between large beverage businesses and specialised small tea companies led to the application of a large number of trademarks and patents. the mass distribution and easy availability of bottled green tea have made it a big success since the 1990s. 5.2. small tea companies: from commodity to luxury the co-development of products and brands with large beverage companies was a strategy that supported the development of a handful of specialised tea companies. however, this was insufficient to support the entire industry. in the 1990s, rather than selling high quantities at low prices, some small tea companies adopted a luxury strategy to improve their profitability. in this context, trademark applications were made largely to protect this marketing creativity from small specialised tea firms. the small scale of production and inability to meet the growing demand for new bottled beverage drinks were viewed as disadvantages in the mass market. however, some companies were able to turn this weakness into a competitive advantage by following the marketing principles of luxury branding to create a sense of rarity and uniqueness that popular tea brands lacked (kapferer and bastien 2012). the long-established tea wholesaler uogashi meicha, which was founded in 1931, changed its image in this context (fujimori 2001). it planted tea in the high mountains to ensure a traditional http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 taste and high quality (interview no. 3). since the 1990s, it has applied for tea brands such as “tote shan” (super beauty), “unubore” (self-esteem), “haikara” (stylish) and “osekkai” (nosy) to promote the uniqueness and high-end image of its tea (j-platpat 2021). in 1993, it launched a fashionable and stylish japanese tea-drinking room with the brand name “chanomikurabu” (tea fruits club) for customers to socialise and hold tea parties. in 2002, an artistic and elegant store “cha ginza” was built based on the following concept: “a tea shop provides tea that seems everywhere but actually is nowhere else except in ginza” (uogashi 2021). they collaborated with tea farmers, designers and young staff to interact with customers online and offline in co-creating small quantity but high-quality tea brands. sasaki seicha, a former tea manufacturer founded in 1921, participated in various competitions to present itself to the public as a high-quality tea maker. it increased its number of trademark applications from only 13 in the 1980s to 46 in the 1990s and 52 in the 2000s (j-platpat 2021), while mostly hiring female employees to its marketing team to adapt to the market shifting from males to females over recent decades. thus, several brands and product ideas came from female employees (interview no. 1). the “chanoniwa” (tea garden) brand (j-platpat 2021) established in 2020 is a good example. all the products and menus in the tea garden, located at its headquarters in shizuoka, are designed by its female staff members for female consumers. this includes, among others, mixed teas with fruits and herbs, tea cakes, tea puddings and tea chocolates. ippodo, founded in 1717, responded to the declining demand for tea leaves by paying attention to tea users’ experiences (interview no. 4). for example, in 1993 it established a tea room called “kaboku” (meaning the most precious tea tree from an ancient chinese tea book) at its kyoto headquarters, where customers could taste various types of tea and traditional confectioneries. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 the trademark “tekiro” (drop of dew), applied in 1996, represents a light taste of gyokuro green tea. it was possible to extend its brand’s product line based on taste preferences from strong to light. outside of the traditional tea leaves, it also developed “ippodo tea”, a fresh takeout premium green tea (ippodo 2012). fukujuen, located in kyoto and founded in 1790, appeals to the heritage, crafts and culture of former imperial capital kyoto to build the “unusual consumption” of luxury tea beyond the reach of mass consumers (takehara 2010). to support the growth of its luxury tea brands, it hired professional designers and marketing personnel from department stores. in 2008, it opened a nine-storey headquarters in downtown kyoto that embodies the luxury and elegant lifestyle of the emperor's kyoto palace (interview no. 2). each floor has a different tea theme, such as “kyō no chazen” (tea meal of kyoto) on the third floor and “kyō no chaan” (traditional tea room of kyoto) on the fourth floor. in addition to the various types of well-established tea firms, many new companies were created based on innovative ideas. for example, royal blue tea, founded in 2007, developed a wine glass-bottled handmade green tea designed to be consumed with special desserts and dishes in luxury restaurants and on first-class flights. it is sold at a much higher price than the massconsumed pet-bottled green tea (nikkei mj 2017). in tokyo, it also opened the “t bar” (tea bar) to offer different tastes of wine-bottled luxury teas (yoshimoto 2015). apart from the luxury strategy adopted by individual firms, one can observe the development of regional brands in tea districts, such as “shizuoka cha” and “uji cha”. these districts include numerous cities, villages and streets that developed common brands, such as “yame cha”, “sayama cha”, “ureshino cha” and “yamato cha” (kajiwara 2012). these were the result of cooperation between multiple local stakeholders, including small-scale producers, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 japan agricultural co-operative (ja), retailers, regional administrative agencies, research institutions, design firms, food companies and universities. these actors collaborate, from product development to promotion campaigns, to raise awareness and increase the value of their regional brands. some examples of joint activity include the development of beverages and other goods using tea, the organisation of fairs at hotels and guided tours (gotō 2015). numerous districts have united their local tea resources to compete with each other and have branded their district to add more value to their tea. 5.3. internationalisation of markets the various marketing strategies described above are strongly linked to the domestic market. however, foreign trade statistics also show an increase in the export of japanese green tea since the 2000s (see figure 1). macha powder accounts for a significant share of these exports. for example, in the united states, which is the largest export market for japanese green tea, 70% of macha powder imports come from japan. it is mainly distributed by the major coffee chains (mizuno 2015; japan tea export promotion council 2017). although numerous tea companies have explored overseas markets, the small quantity of exports, which accounted for only 6.3% of national production in 2019 (faosta 2021), indicates the difficulties japanese tea companies face to expand abroad. a look at the overseas sales from ito en ($350 million) in comparison with the overall export value of tea from japan ($142 million) in 2018 (comtrade 2021) suggests overwhelming domination by multinational firms, although this figure for ito en includes products other than green tea and goods manufactured outside japan. ito en, the leading tea company in japan, is a good example of the process of internationalisation in marketing capabilities. much like in its domestic market, ito en applied the fabless method and focused mainly on marketing and product development in overseas http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 markets, where the manufacturing of beverages was outsourced to local partners (nobukawa, suzuki and chō 2018). it launched a market research office in new york in 2000, which became ito en (north america) in 2001. the marketing objective in the united states was to build a healthy and luxurious image of japanese tea by promoting japanese tea culture, ceremonies and different ways of enjoying japanese tea. it registered various trademarks and developed a line of products, such as “teas’ tea” and “matcha green tea”, to suit the tastes of local consumers (kitabata 2014). to expand its distribution routes in north america, it acquired distant lands trading co., a company that specialises in the manufacturing and distribution of coffee and other beverages, in 2015 (kitabata 2014). it also opened five “matcha love” speciality stores catering to the japanese green tea healthy boom in the united states (nikkei sokuhō 2017). in addition to its main overseas market of north america (87.5% of its overseas sales), ito en has expanded its business to china, southeast asia and australia by establishing local corporations or joint ventures (nobukawa, suzuki and chō 2018; ito en 2018). smes expanded into foreign markets either through trading companies or by establishing their own sales subsidiaries, which manage mono-brand outlets, to control retail and brand image (sugita 2006). these mono-brand stores enable japanese tea makers to diffuse their message to foreign consumers, mostly emphasising tea ceremony, philosophy, craft, traditional design and healthy functions. fukujuen has established three overseas shops in department stores since 2000 (kirishima 2015), assigning salespeople from japan to overseas markets to interact with local consumers and market its brand. public relations activities not only include visiting consumers, retailers and dealers but also holding japanese tea seminars (kirishima 2015). sugimoto seicha launched sugimoto tea company in the suburbs of seattle, the united states, in 2007 and continued steady promotion activities, such as introducing traditional tea ceremonies and recipes using matcha to increase brand awareness (nihon keizai shimbun http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 2020; interview no. 5). tsujiri, meanwhile, opened stores in 15 countries through franchises with local partners (tsuji and uda 2017). in addition to the marketing efforts of individual firms, the ministry of agriculture, forestry and fisheries (maff), the japanese tea export association and the jetro (japan external trade organisation) have also played an important role in promoting and marketing japanese tea in the overseas market. these institutions hold trade exhibitions, conduct marketing research and provide training and seminars for foreign trade practices and branding techniques (sugita 2006). moreover, they promote japanese traditional food and culture to overseas consumers, importers and restaurants to improve the general brand value of japanese food (mizuno 2015). 6. conclusion the objective of this research was to understand the conditions that enabled the revitalisation of the traditional japanese tea industry in the context of globalisation. this transformation was not only propelled by the innovators in this industry, but also by players through marketing capabilities that diversified towards tea business from other sectors. in addition to the major beverage firms analysed by xia and donzé (2022), our quantitative and qualitative data also show the important role played by smes and supporting institutions. we have demonstrated three successive marketing strategies that supported the survival of the tea industry: the transformation of green tea from an agricultural commodity to a branded consumer good; the building of luxury tea brands based on user experience, heritage and creativity management; and the expansion to overseas niche markets. our research provides the following implications. first, this study contributes to the academic debate on the ability of traditional industries to survive in the context of globalisation. while most previous studies on this topic have highlighted the importance of innovation for single firms to survive in declining traditional http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 industries, few, if any, have researched innovations and their implementation in new marketing strategies at the industry level. our case study shows that the renaissance of the japanese tea industry has been through a profound transformation from a onefold traditional tea leaf industry, part of the primary sector, to a composite industry which is in fact a non-traditional industry in itself. this includes not only the old traditional tea leaf manufacturers but also modern beverage companies and newly created food ingredient companies (green tea powder). as a result, the renewed green tea industry has completely different specificities in terms of product, technology, market and value chain structure. while the consumption of traditional tea leaves alone continued to decline, the total consumption of green tea was revitalised (see figure 1). by contrast, japanese sake consumption fell to a third of its 1975 peak in 2019 and clearly lacks the capacity to achieve a similar structural change to green tea (xia and donzé 2021). second, the significant attention paid to marketing strategy in our research does not mean that japanese tea companies abandoned technological innovation as a base for growth. the dramatic shift from technology to marketing highlights the importance of marketing in revitalising both the japanese tea industry and other consumer goods industries. however, despite the general overall declining trend of patent applications, as shown in figure 2, patent applications from large beverage firms show a clear growth trend. for example, patents with the keyword “tea” applied for by ito en have increased significantly since the 1990s: from only 14 in the 1980s to 32 in the 1990s and 77 in the 2000s (j-platpat 2021). unlike most smaller tea firms that did not apply for any tea patents, innovation by the big beverage firms demonstrates a distinguished pattern. technological innovation (patents) is closely related to marketing strategy (trademarks) and serves as a basis for branding and product development. this new pattern requires heavy investment, meaning only a few resourceful large firms can pursue such a strategy. thus, most small companies continue with the traditional production method. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 third, the emergence of big firms is a key factor in the resurgence of the japanese tea industry. the fast-growing demand for beverages since the 1970s has impacted the consumption of tea leaves. ito en, which invested heavily in farming, r&d, marketing and vending machines, built a competitive bottled green tea brand in response to the growing demand for bottled beverages. the success of this branding strategy attracted large beverage firms to join the japanese tea industry. these large firms demonstrated a new paradigm of integrating value chain activities to achieve competitiveness, therefore providing a new model for smaller players to survive in this industry. some specialised tea firms control both the supply of raw materials and tea quality to stay relevant in this new environment. the presence of big business with advanced marketing capabilities is thus important to regain industrial competitiveness (donzé 2017). a major contribution of this paper to the academic debate is the impact of the relationship between large and small firms on the ability of traditional industries to survive. this is in line with the evidence of some european business historians, who have demonstrated the importance of the presence of large firms with globalised resources in industrial districts (miranda and montaño 2017; catalan 2017). however, the japanese green tea industry differs from these cases in that it is not organised like european industrial districts. large companies are based in the tokyo metropolis, while small tea manufacturers are located in various productive regions throughout the country. there is no geographical proximity between large and small companies. moreover, many traditional industries in japan that are trapped in a longterm decline have only small firms, such as the sake and kimono industries (hashino 2018; xia and donzé 2021). the role of large companies, notably multinational enterprises, in revitalising traditional industries is an issue that should attract the attention of scholars for further research. finally, although tea is present everywhere in asia, our case study on the japanese green tea industry is not transposable to other asia countries. this is because the tea industry in each of http://revistes.ub.edu/index.php/jesb volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 these countries has its own specificities (bouwens, donzé and kurosawa 2017), notably due to historical experience, the importance of the domestic market and traditional export markets. for example, india and china have followed very different development paths, with the former developing specific products for uk consumers while the latter focuses on ever-expanding domestic demand. the culture of tea consumption and the development of various national tea industries over the past five decades has therefore been very different from that of japan. the purpose of this article was not to discuss the transformations of the global tea industry but to explain how the industry in japan has been able to transform itself to survive in the context of a sharp decline in domestic demand. references bird, allan, and michael j. stevens. 2003. “toward an emergent global culture and the effects of globalization on obsolescing national cultures.” journal of international management 9(4):395407. accessed july 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http://hdl.handle.net/2065/00057291 https://www.nikkei.com/article/dgxlasdz26h06_w7a820c1mm0000/ volume 8, number 2, 106-137, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.38278 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 pilapitiya, herath mudiyanselage chamila gayani, saliya de silva, and hideo miyazaki. 2020. “innovative value addition in tea industry: sri lanka vs. japan.” research square. accessed july 28, 2022. doi:10.21203/rs.3.rs-27492/v1. reinganum, jennifer f. 1985. “innovation and industry evolution.” the quarterly journal of economics 100 (1):81-99. accessed july 28, 2022. doi:10.2307/1885736. ritzer, george, and elizabeth l. malone. 2000. “globalization theory: lessons from the exportation of mcdonaldization and the new means of consumption.” american studies 41(2/3):97-118. accessed july 28, 2022. https://www.osti.gov/biblio/1027196. robertson, roland. 2018. “social theory, 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2010. “furukute atarashī `kyōto no kaisha' ni manabu (4) sekai kijun de "cha" michi o kiwameru (kabu) fukujuen no `nito o ou' keiei [learn from old but new company from kyoto (4) master cha with global standards: the management of chasing two hares from fukujuen].” php business rebyū 59:64-71. accessed july 28, 2022. https://cir.nii.ac.jp/crid/1521417755048895360. teikoku data bank historical museum. 2018. jiba sangyō: dentō to kakushin no kiseki (traditional industries: the miracle of tradition and innovation). tokyo: teikoku data bank historical museum. tea producer association. 2020. cha no jukyū cha-rui no kokunai shōhi-ryō no suii [the supply and demand of tea: changes in domestic consumption of tea]. accessed december 27. https://www.zennoh.or.jp/bu/nousan/tea/seisan01b.htm tsuji, toshiyuki, and hiroshi uda. 2017. “mise hito ima (291) nihon cha bunka o hasshin shi aratana hanro de nanto sekaikakukoku ni 15 tenpo o tenkai tsuji toshiyuki-shi (kabu) tsujiri chaho (nissenren 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old-fashioned craftsmanship lives on today: enhance the power of the hometown and local brands]. tokyo: nihon chiiki shakai kenkyūjo.uogashi. 2021. official website of uogashi. accessed december 27. https://www.uogashi-meicha.co.jp/shop_ginza/. xia, qing, and pierre-yves donzé. 2021. “surviving in a declining industry: a new entrepreneurial history of nihonsakari since the 1970s.” business history:1-20. accessed july 28, 2022. doi:10.1080/00076791.2021.1991318. xia, qing and pierre-yves donzé. 2022. “making japanese tea a big business: the transformation of ito en since the 1960s.” shashi: the journal of japanese business and company history 7(1): 22-34. accessed july 28, 2022. doi: 10.5195/shashi.2022.64. yanagawa, takayuki. 1994. “mēkāmāketingu no seikō rei to shippai rei [manufacturer marketing successes and failures].” hakuōdaigaku ronshū 9(1):141-170. accessed july 28, 2022. http://id.nii.ac.jp/1510/00001142/. yoshimoto, keiko. 2015. waga sha no ocha ga 1-pon 30 man-yen demo ureru riyū [the reason why our tea could be sold even at the price of 300,000 yen per bottle]. tokyo: shōdensha. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://cir.nii.ac.jp/crid/1523669554639369856 https://www.uogashi-meicha.co.jp/shop_ginza/ https://doi.org/10.1080/00076791.2021.1991318 https://doi.org/10.5195/shashi.2022.64 http://id.nii.ac.jp/1510/00001142/ http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 hugo kantis juan federico prodem, institute of industry. national university of general sarmiento (argentina) a dynamic model of entrepreneurial ecosystems evolution abstract recent contributions on entrepreneurial ecosystems (ee) literature tend to highlight the need for a deeper theory-based discussion of the concept and a dynamic approach on the ee evolution. the objective of this article is to contribute to this on-going discussion by proposing a novel theoretical model to understand the origin and evolution of ee, paying special attention to the drivers that are relevant to explain the successive developments in the ee trajectory and the differences between developed and developing ee. we draw our model from the study of four different empirical settings: two well-known and developed ee (silicon valley and israel), and two less developed and less studied ee (santiago de chile and buenos aires). our model is composed by two ontologically different levels of dimensions: (i) framework conditions (culture, sti platform, business structure, social conditions and social capital) and (ii) five dynamics or drivers (the entrepreneurial dynamic, the business dynamic, the investment dynamic, the institutional dynamic, and the government and policy dynamic). evolution, in our model, is conceptualized as a selfreinforcing process by which ee are constructed and developed over time, resulting from the co evolution and interactions of the five dynamics and the framework conditions. consequently, each ee would follow its own trajectory, moulded by its initial conditions, the relative importance of the different dynamics, and the interaction process between dynamics and framework conditions. keywords: entrepreneurial ecosystems; evolution; latin america; silicon valley; buenos aires; santiago; israel corresponding author: e-mail: jfederico@campus.ungs.edu.ar received 25 oct 2019 accepted 24 dec 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 introduction the entrepreneurial ecosystem (ee) concept has captured the attention of policy makers in the last years and nowadays it is widely used. however, the interest in the ee within the academic community is quite recent (alvedalen and boschma 2017). due to its novelty, ee literature has grown in an accelerated, dispersed and fragmented way (stam and van de ven 2018; acs et al. 2017). in addition, recent reviews tend to highlight the need for a deeper theory-based discussion of the concept and particularly, a dynamic approach on the ee evolution (e.g. brown and mason 2017; stam and van de ven 2018; alvedalen and boschma 2017; cavallo, ghezzi, and balocco 2018). in addition, much of the previous research tends to be based on the examination of case studies from highly successful regions and mature ecosystems, giving a tautological character to the phenomenon (stam and van de ven 2018). this type of approach, although illustrative of the functioning of a virtuous ecosystem is not so valuable to understand less developed ecosystems, with different types of actors, relations and trajectories (spigel 2017). precisely, this article tries to contribute to this on-going discussion by proposing a novel theoretical model of ee evolution, paying special attention to the drivers that are relevant to explain the development process in the ee trajectory and the differences between developed and developing ee. we rely on a multiple case study research design (yin 1989; eisenhardt and graebner 2007) by analysing four different empirical settings: two well-known and developed ee such as silicon valley and israel, and two less developed and less studied ee such as santiago (chile) and buenos aires (argentina). the insights derived from this model and its constituent propositions may open new discussions among scholars but also would be http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 very informative to policy makers trying to understand how to intervene on their own cities and regions in order to develop or strength their ees. recent contributions about ee evolution mack and mayer´s study (2016) is one of the first that directly and explicitly address the evolutionary process of an ee. based on a historical analysis of the phoenix ee, these authors portray an evolutionary model that comprises four stages: birth, growth, sustainment and decline. each stage is characterized by a different entrepreneurial dynamic (the net result of firm births and deaths) and the co-evolution of several ee components that resemble isenberg’s (2010) domains: policy, finance, culture, markets, support institutions and human capital. interestingly, this conceptual model illustrates how the relative importance of each ee component varies as the ee evolves. at the beginning, some contextual factors like culture, human capital and market opportunities matters the most, whereas in subsequent stages, specialized support organizations and policies have a more relevant role. in the same vein, more recently, colombelli, paolucci, and ughetto (2017) elaborated a model which focuses on the changes in the governance structure throughout the ee evolution, from a hierarchical mode towards a more relational mode as long as the complexity of actors involved in the ee increases. appealing, though, this kind of approach remains descriptive to some extent and shares most of the criticisms that growth-stage models received from the organizational literature (levie and lichtenstein 2010). in particular, the idea of an immanent growth sequence from an early less developed stage towards a more mature, specialized and differentiated one. given its biological nature the adoption of the ‘ecosystem’ analogy would lead in principle to this kind of assumptions. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 also inspired in the biological analogy, but without such restrictive assumptions, auerswald and dani (2017) propose an adaptative life-cycle model to understand washington´s biotech ee evolution, based on the literature of clusters evolution and complexity (martin and sunley 2011). unlike mack and mayer (2016) this model recognizes some stages but accept non-linear paths and recursive loops during the evolution. nevertheless, it lacks a deeper discussion of the drivers that move the ee from one stage to the other and the actors behind these drivers. in this regard, brown and mason (2017) make an explicit mention to the leading role of entrepreneurs in the evolution of the ee by means of the self-reinforcing process of the ´entrepreneurial recycling´ (mason and harrison 2006). ‘scale up’ ecosystems (i.e. their definition of mature ecosystems) are characterized by its ability to create growing firms that become large corporations; an outstanding level of social capital and dealmakers and a comprehensive pool of funding sources that ease the transition from seed investment towards the ipo (brown and mason 2017). this idea of a self-reinforcing and path-dependent evolution is also present in the recent model proposed by stam and van de ven (2018). based on stam (2015), this contribution distinguishes between systemic and framework conditions and establishes some causal relationships between them. they state that ee elements are “…mutually interdependent and co-evolve to enable or constrain entrepreneurial outputs in a territory over time.” (stam and van de ven 2018, 7). these authors test this and other two theoretical propositions using an index for 12 regions of the netherlands. their results show on the one hand the existence of positive feedback effects between outputs (proportion of high-growth firms) and the rest of the ee elements, providing support for the existence of a self-reinforcing process led by entrepreneurs and their growth prospectus. on the other hand, these authors found significant http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 positive autocorrelations for each ee element (i.e. systemic and framework conditions), showing the prevalence of path-dependent patterns of resource accumulation in each ecosystem. finally, they demonstrate the co-evolution of some framework and/or systemic conditions, for instance, the triad between culture, talent (workforce) and intermediaries (support network). all in all, this model points to the need of adopting also a systems perspective when it comes to understand how an ee evolves over time. summing up, the dynamics of ee has been signalled as a vacancy area within the recent ee literature. therefore, some efforts have started to provide a deeper understanding of the dynamic nature of the ee and its evolution. in common, these contributions highlight the selfreinforcing, non-linear and path-dependent nature of ee evolution. as well, they tend to focus on entrepreneurial outputs (i.e. blockbusters, growing firms, spin-offs) as the main indicator of ee vitality. however, there are still some unanswered questions like the role of each ee element in the evolution of the system, how each element relates to the rest and how to capture different growth trajectories departing from different initial conditions and ee configurations. this is especially relevant to understand less developed ee and its contrasts with developed ee. some of these questions will be addressed by in the following case studies and in the conceptual model proposed in this paper. methodology the research methodology adopted in this article is a multiple case study design (yin 1989). this research strategy is particularly useful for theory-building when there is not enough extant theory and where the research tries to address “how” and “why” questions (eisenhardt and graebner 2007). in addition, qualitative research is well suited for the study of the complex nature of the ee concept and its evolution as roundy, bradshaw, and brockman (2018) clearly http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 stated. finally, the adoption of a multiple case design would allow us to identify conceptual relationships within and between the studied cases, a fact that is of paramount importance since one of our objectives is to analyse similarities and differences in the evolution of developed and developing ee. giving this objective, we choose two cases of well-developed ee, the silicon valley and israel (in particular, the ecosystem located in the triangle constituted by tel aviv, jerusalem and haifa). although these ecosystems may be considered as international benchmarks, there are important contrasts among them especially when it comes to the incidence of deliberated versus spontaneous forces in their evolution. on the other hand, we choose two less developed and less studied ee (santiago de chile and buenos aires). both are ranked in the runner up category of the global start-up ecosystem report (startup genome 2017) but again, showing some differences as regard the initial framework conditions and the profile of the actors leading their evolution. multiple case studies use a myriad of different source of data (yin 1989). hence, we rely on previous research but also on personal interviews with key informants and in-site visits to each ecosystem held by the authors (kantis 2018)1. in addition, for the latin american cases we depart from previous studies carried out by the authors (diaz and kantis 2017; federico and álvarez martinez 2017; álvarez martinez et al. 2016)2. secondary information from the web 1 the following list refers to the interviews held in the silicon valley case: robert eberhart (stanford university), jorge zavala (techba, sv), rebeca hwang (rivet ventures, sv), magdalena coronel (institute of americas, san diego, california), adolfo nemirovsky (latipnet, sv) and agustín di marco (entrepreneur at 500 start ups). in israel the following persons were interviewed: greg horowitz (t2vc), igal erlich (yozma fund), saul singer (start up nation), elio nudelman (link2sur), morris teubal (hebrew university of jerusalem), oren gershtein (ideality roads), harry yuklea (technion), harold weiner (terra ventures), laura altschuler (duo.idb), miriam erez (technion), rafi nave (technion), yoav tzrura (jerusalem venture partners vc), aaron mankovsky (pitango venture fund), itai bek (advisor of the chief scientist office) and uri gabai (chief scientis officer). 2 the authors gratefully thank the helpful collaboration of sandra díaz from ematris (chile). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 pages of several ecosystem’s organizations has been also used in this research to elaborate the case studies. results silicon valley the history of the silicon valley started at the first decades of the 20th century. at that time, stanford graduates had to migrate to find jobs on the eastern coast. in order to chage this reality, stanford university decided to build a new institutional vision which favoured leveraging capacities and institutional resources (for instance, r&d projects from national government). this new institutional project was devised and led by frederick terman who was a professor at sandford university and a former member of mit (kaplan 2000; blank 2008). in this context, the creation of hewlett-packard played also a pioneering role at the end of the 1930’s. hewlett and packard were both terman’s students, who used to encourage his students to open their own firms, and even invested and mentored some of them. in the case of hewlettpackard, its founders gained experience in eastern coast companies and returned to the valley following terman’s advice (blank 2008). over time, some others followed their steps. iconic silicon valley firms like litton and varian associates also based their innovative technological developments on the knowledge platform fostered by stanford university. graduates’ and students’ entrepreneurial initiatives would find an unparalleled place to develop ideas and a powerful “feed” in the projects that stanford had reached with the department of defense thanks to terman’s proactive leadership. again, this process did not occur in the vacuum. it stemmed from the knowledge constructed from researching in some extremely useful http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 technologies in the second world war, such as the developments coming from the radio institute or the microwave laboratory. during the 1950s stanford’s scientific and technological park was created, attracting to the valley companies such as ibm, g.e, westinghouse, ames research center and lockheed aircraft and giving room to some 150 companies (kaplan 2000). a different business dynamic started to take place. we cannot state that terman and stanford university had a deliberate strategy to build “an ecosystem” such as silicon valley. however, we can underline their vision and role in seeding some basic conditions, i.e., the knowledge base and the entrepreneurial spirit. these two factors would let grow some other unforeseen ones which were vital to enhance the growth and excellence of stanford’s knowledge platform and the emergence of the ecosystem. in the mid-fifties, the national aeronautics and space administration (nasa) and the defense advanced research projects agency (darpa) were created as a response to the space race started after the soviet union launched the sputnik-1. by means of increasing military contracts, these agencies fuelled the knowledge base from the universities and gave incentives to the creation of new firms (mazzucato 2015). in parallel, new companies were created in the valley and became iconic. the nobel prize winner william shockley founded his pioneer firm in the field of semiconductors. years later he was abandoned by eight engineers with outstanding academic credentials who persuaded the industrialist shairman fairchild from new york to invest in their project. fairchild was interested in researching on satellite and missile systems and the relevance of transistors (semiconductors). they lured him with the idea of becoming the primary partner in a hybrid company that would be both a start-up and an affiliate http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 of fairchild company. fairchild semiconductors was key in the valley´s technological revolution by generating many spin-offs such as intel. additionally, in 1958 a key point in the development of the venture capital (vc) industry took place when the small business investment company (sbic) act was passed. this regulatory initiative would foster the financing of new innovative companies through a new incentive in which each dollar invested by a private company was matched with three dollars invested by the state. this incentive led in the 1960’s to the creation of several venture capital firms levered with public resources (e.g. bank of america, american express continental capital, pitch, johnson & draper and sutter hill). however, it was not until the 70s that the vc industry really started to grow. current venture capital funds such as sequoia capital, kleiner, perkins, caufield & byers, the silicon valley bank, greylock, new enterprise associates and accel, andressen horowitz, or founders fund all date back to the 1970s and 1980s. and it boomed in 1980 with apple´s ipo. the emergence of this vc industry paved the way for the advent of new specialized service providers, such as law & accounting firms. these events laid the foundations for the increasing emergence of new companies that enhanced the valley’s conditions and contributed to building a stronger base of companies, mainly in the semiconductors area. in the early seventies, the valley was plenty of new firms in this sector providing to the computing industry. as long as this entrepreneurial development process took place, some experienced entrepreneurs started to act as mentors, and new institutions acting as bridges between the entrepreneurs and mentors were created. the confluence and co-evolution of different companies, on the one side, and investors, on the other, shaped a virtuous cycle with the universities. the latter provided their knowledge base for innovations and often facilitated contacts because of the dual activism displayed by some http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 professors that were also in the business sector. over time, the trust base grew stronger and favoured the development of a dense social capital based on an open, creative and horizontal culture supported by the territorial proximity typical of the western coast of san francisco. this social capital was materialized in the creation of informal spaces, events, and the emergence of dealmakers (napier and hansen 2011; brown and mason 2017) who moved from place to place laying bridges to make things happen and giving room to new possibilities. since this entrepreneurial process took place in different technologies over time, it helped silicon valley to mature without specializing just in one single industry. this helped the valley to overcome serious challenges such as the end of the cold war (and its impact on defense contracts), and the japanese competition starting in the 1980’s (saxenian 1996). the spin-offs have been the most significant component in silicon valley dynamics for decades. without them, the system could have never matured. however, this platform of newly created firms developed, scaled and coevolved together with the vc industry. later, the phenomenon of the so called “entrepreneurial recycling” (mason and harrison 2006) enhanced this dynamic. as a result, successful entrepreneurs and executives from technology companies were enrolled in the creation of the most recent wave of new support organizations such as accelerators, co-work spaces, venture builders as well as new vc funds. in sum, from an organizational perspective, silicon valley is an ecosystem defined as an emerging collective endeavour starting with the capabilities and resources activated by the action of institutional entrepreneurship. opportunity identification and context exploitation were part of the game. over time certain dynamics leveraged pre-existing conditions contributing to transform the valley into a fertile ground due to the presence and dynamic emergence of some factors and actors, each one with its institutional and entrepreneurial logic http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 and drive. on the one hand, culture has always been open and risk tolerant. on the other, universities and companies played a key role in the formation of an important stock of entrepreneurial human capital. furthermore, academics and entrepreneurs have been crucial as mentors and investors facilitating the emergence of social capital. also, lawyers have acted as business builders bridging entrepreneurs. these different actors have been vital to build networks and facilitate the emergence of new firms. they have furnished entrepreneurs with new ideas, data, advice and resources, not only in the individual processes but also in the development of a collective dynamics. however, all this process took place without an explicit, collective leadership or a deliberate shared and devised strategy. it was the confluence of different forces and their interaction with the opportunities and resources existing in the broader national context. the silicon wadi (israel) although israel could be considered as a single ecosystem due its dimensions, the largest hightech companies’ concentration is localized in the geographical area around tel aviv, haifa and jerusalem. this ecosystem shows different features. there has been a clear state leadership for many decades and the business supportive institutional platform has relied on a public-private partnership, with public and private components levered over time. in the initial phase, the state played a key role through an important investment process that gave rise to some companies and enterprise groups that have contributed to building primary housing infrastructure, the defense industry and universities (nitzan and bichler 2002). the state proactively led the process by attracting and absorbing several jewish immigration waves http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 that contributed to a population increase from one million inhabitants at the foundation of israel (1948) to almost nine million today, forging an extremely open culture led by pioneers. it has been said that the whole process of state-building was entrepreneurial itself, being the collective farms (kibbutzim) a clearer expression of this entrepreneurial spirit and a cornerstone for social capital development. at that time, israel’s economic structure was characterized by a large agricultural base combined with a growing manufacturing traditional sector, particularly during the post world war ii period. some decades after this initial phase of the pioneers, a crucial event occurred after the yom kippur war. a jewish engineer who had been one of the first employees at intel in silicon valley convinced the company to set up an innovation center in israel under his leadership (senor and singer 2011). this center was vital to intel’s technological development globally. the feasibility of this process showed that the country could become a platform to welcome other international tech companies as from 1990. despite the ongoing conflict in the region, this process took place amidst the tech revolution acceleration. thus, intel’s experience may be seen as emblematic. it showed that some actors had a pivotal role in opening paths in the ecosystems, in this case, towards other international tech companies. it also showed the proactive jewish diaspora protagonism. from a more general perspective, some talents helped place some building stones in the emergence and development of the new ecosystem (from the foundation of the collective farms or kibbutzim to the setup of firms’ technology centers). the hyperactive role of an “entrepreneurial state” (mazzucato 2015) was also vital to build the science and technology platform (avnimelech and teubal 2004). the israeli army also contributed to the generation of technological knowledge and entrepreneurial skills. in fact, one http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 of the first successful waves of start-ups in the 1980’s can be attributed to entrepreneurs coming from the elite military school (talpiot) and from the intelligence unit of the army technology development area (nitzan and bichler 2002). the most salient examples are the tech companies comverse, dscp and libit founded in the 1980’s or checkpoint in the early 1990’s (senor and singer 2011; avnimelech and teubal 2004). their founders are also thought to have founded some thirty start-ups in the so-called infant phase of this ecosystem. however, the development of entrepreneurial skills in the army has not been restricted to elites. during their two or three years of military service, youngsters develop useful competencies in one of the most effective “schools for entrepreneurs”. individuals learn hands-on how to lead teams, assume responsibilities, run risks, solve problems, face challenges, and so on. since israeli citizens are taken for a period of reserve duty every year, the army becomes also a potent source of contacts in their lifetime that help them build social networks. after a relatively short period of adolescence, the system reached maturity after two significant moves. one was the need to face the challenge posed by an increasing wave of jewish migrating from the former soviet union with broad scientific and engineering background. this led to the creation of the state/public incubators programs at the early 90´s. at the same time, these human resources would become an important feed for the technology move in the start-ups or were hired by already settled firms. the state financed the installation of these organizations that were usually created by municipalities and universities. the aim was to contribute to transforming r&d efforts into market solutions with technology. the second move was the creation of the yozma fund, one of the most successful international initiatives that fostered the venture capital industry. the state came to be an example of proactive institutional entrepreneurship in the context of a public-private alliance (mazzucato http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 2015). this initiative allowed for the system growth towards a new phase when it multiplied the venture capital offer and accelerated the increase of start-ups. at the beginning of the 2000’s, the ecosystem was guided to a new stage were incubators were reconverted to be led by private actors, strongly levered with public subsidies allocated to innovative entrepreneurial projects. the previous development of the ecosystem enabled investors, enterprises and former entrepreneurs to develop capabilities and to take over the incubators and to engage with high-risk new companies based on their previous experience. this allows them to see better where to invest and channel the resources in the next phases. in turn, the state partially recover the investment through royalties. a second moment of this “privatization” phase of the incubators occurred when the licensing system to run them was institutionalized and multinational companies were invited to join in. thus, a pool of venture investors, former entrepreneurs and large international firms came to be the head of the incubators. recently, a current flow of investments in technology firms has also played a pivotal role by setting up their innovation centres and profiting from the innovative capacity of the ecosystem. over time, the ecosystem has become a “manufacturer of start-ups and innovations” with high rates of start-ups and exits. we can identify salient features in this ecosystem trajectory led by the state strategic vision, aimed at transforming the economy through technology and innovation. some opportunities and challenges emerged on the road and the state capitalized them with high pragmatism, flexibility and learning capacity. the state, as a dynamic entrepreneur, has learned to change with time and provided the conditions for creating an ecosystem from very early stages levering on existing pre-conditions and building what was left. over time, it handed the leadership over to the private sector when the development and http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 the dynamics were gaining momentum and business incentives were in place, but it never dropped its leading role, as incubator franchisor, pre-seed/seed capital provider, infant industries promoter, and so forth. santiago de chile since the 70s, chile experienced important transformations being santiago the core of its economic organization. the openness of the economy challenged the leading role that the manufacturing sector have had in the previous decades being the new dynamic sectors agriculture, food and beverages and mining (de mattos 1999). at that time was born, as a rare case, sondaan ict firm born in the mid-70s being today the largest latin-american ict solutions provider. during the 90s a new wave of reforms led to a modernisation of the entire economic structure, being the services (specially the financial services) the new dominant sector in the city economy. in turn, this stimulate the emergence of some related software service activities. the economic performance, even today, both at the local and at the national level, relies on large companies exploiting natural resources from mining, the agribusiness and some services, which results in a highly concentrated economy (de mattos 1999). in addition, santiago continued (and still continues) to have a great social inequality, with a relatively large proportion of wealthy individuals and a narrow middle-class, with closed social circles rising important barriers to access to social capital of qualified networks. access to higher education is also a sort of ‘privilege’ positively associated with income levels, what reinforces the previous comments. within this framework, the first available information about today’s santiago innovation and entrepreneurship ecosystem dates to 1992 when the first chilean incubator was created under http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 the umbrella of santiago innova with the support of the municipality of santiago and the participation of several universities and representatives from the private sector. six years later, endeavor settled in chile, but the experience did not meet the expectations and decided to close. the lack of deal flow due to the almost inexistence of an ecosystem was behind this failure. in the late 1990’s, the chilean government launched some regulatory initiatives to foster the investment activity. with the multilateral investment fund of the inter-american development bank, it created a pilot fund managed by an american company due to the absence of capabilities needed in this sector. then, the first financing lines to develop the private vc industry were introduced. the funding tool was a long-term loan considered as a quasi-capital which would be paid back only if results were positive. however, results were disappointing. at that moment, the diagnosis, showed that there was not an ongoing flow of innovative projects (rivas 2014). shortly afterward, in the early 2000´s, the corporacion de fomento (corfo) the main state agency fostering innovation and entrepreneurship-, decided to address these gaps with two programs; seed capital and incubators. this period could be characterized as the early phase of the nascent ecosystem. since then, the different versions of these programs have contributed to “structure” the activities and resources, shaping the institutional architecture of the ecosystem. some new more sophisticated instruments, like supporting angel investors’ networks or the spin-offs platform, were introduced later but they did not meet the expectations. at the bottom line, the limited private sector’s response to corfo’s incentives seemed to show the ecosystem immaturity (rivas 2014). by the end of the last decade, corfo carried out several studies that showed, on the one hand, that supported entrepreneurs exhibited a low capacity to internationalize their ventures as well http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 as to raise external capital. on the other hand, they pointed out some deficiencies of the incubators such as closedowns, limited capabilities, low quality services, and the lack of a clear incentive scheme based on new firms’ performance (innova chile 2010). another study showed the relative absence of spin-offs or innovative new business trying to capture demands from the main economic activities (e.g. mining, forestry, agribusiness) (kantis and diaz 2008). these conclusions triggered a second phase of public policy. although they were not a part of a masterplan, the main central issues were: (i) the redesign of the seed capital program, (ii) the implementation of new incentives to incubators and (iii) the launch of start-up chile. in the first case, the reform of the seed capital program was aimed at gaining agility and flexibility by decentralizing in the incubators part of the selection of the projects and the administration of the funds. besides, new incentives were adopted to align incubators behaviour with new firms’ performance (navarro 2014). within this framework, a new generation of incubators was born. many of them have profited from corfo’s flexible funding, and advanced towards becoming more like accelerators or have already become ones. besides university incubators some private organizations have started to operate their incubators. another key step in the evolution of the ecosystem was start-up chile, a program designed to invigorate the entrepreneurial environment by attracting foreign entrepreneurs to set up their businesses in chile giving them a visa for half a year and seed capital. start-up chile put santiago´s ecosystem on the radar of entrepreneurship at a global level and seemed to have strengthen chilean entrepreneur´s competencies by the contact with foreign entrepreneurs (leatherbee and eesley 2014).3 3 after five years of operation, more than 1,000 entrepreneurs from more than 75 countries went through the program. however, only a very small proportion of them remain in chile as the original design expected (endeavor insight, 2016). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 at about the same time, new private players also came up: wayra (telefónica´s accelerator), emprende claro and masisalabs. other examples are 3m’s entrepreneurial program and innovation center, and telefonica’s international r+d center (an alliance between telefónica and universidad del desarrollo, also supported by corfo). a recent study shows that chile occupies the second place in latin america as regards the number of corporate venturing initiatives, even surpassing méxico (kantis 2018). after the change of government in 2014, a new policy of dynamic entrepreneurship was announced aimed at scaling up the chilean ecosystem. the initiatives were: i) incentives to venture capital funds at the early stage to foster private industry development; ii) a new fund scale was set up to follow-on the promising projects from the start up chile in order to increase the rate of business created in chile by foreign entrepreneurs; iii) a scale fund for chilean entrepreneurs; iv) a mentoring networks program aimed at enhancing the support services to entrepreneurs and iv) incentives to the creation of co-working spaces. as a result of all these efforts, santiago shows today a growing ecosystem. about 1000 projects are supported every year and more than 160 young firms were created during the last five years in the ict, media and technology activities (endeavor insight 2016). some “fruits” seem to have been harvested in the last two years such as the important investments received by some new firms such as the cornershop, bought by wall mart; and notco, invested by jeff bezos. however, the same report from endeavor highlights that there are not so many scale-ups in santiago (endeavor insight 2016). so, the main challenges are still scalability and the involvement of the private sector. in fact, the evolution of the santiago ecosystem shows that it is an unevenly developed ecosystem mainly focusing on start-ups rather than scale ups, being http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 much more advanced at the institutional level than at the entrepreneur and investors level and still relying mainly on public resources. buenos aires buenos aires’ city ecosystem has emerged and evolved over time based on a set of positive initial conditions, such as the significant role played by the middle class, the economies of agglomeration typical in major urban areas and a cultural diversity showing the traces of successive immigration waves. precisely, the local culture is one of its main differentials. rooted in the european tradition, buenos aires has been throughout its history, a sort of “piece of modernization” in the country. mirroring what happen in the main western cities, the cultural scene of buenos aires and its inhabitants have been always in the vanguard, willing to take new ideas and developments. this fact has contributed to forging an open, tolerant and creative atmosphere. in addition, there is a horizontal and informal culture in the city which facilitates the development of social capital and networks. other positive initial condition is the level of education of its population, thanks to the prevalence of a tuition-free public university system which allows the continuous formation of talented people and a knowledge platform in basic science and technology. most of the pioneering entrepreneurs in the software and biotech sectors that showed up in the city around the 90s, belong to this tradition of public education and basic research. the economic structure of the city also reflects subsequent phases of modernization registered throughout its history. first, since it is inception the city was linked to its harbour and the commercial activities. associated with the primary exporting activities, many industries (e.g. tanneries, slaughterers) started to be located at the southern bank of the city. then, when the european immigrants came at the turn of the twentieth century, they gave birth to many small http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 and middle-sized companies (smes) many of which are still alive nowadays. nevertheless, during the last decades and particularly since the mid-70s, the manufacturing sector in the city started to lose its importance, giving room to a structure where smes coexist with domestic and foreign large firms and where retail and service sectors (banks, consultancy and insurance companies) tend to prevail. against this background, we could trace back the first steps of the current entrepreneurial ecosystem to 1990’s. at that time, some large software companies, such as microsoft, sap, oracle, symantec and others, settled in the country. an early group of new it service providers seized the opportunities given by such big companies in the banking and insurance sectors, giving birth to a new wave of new firms. the internet wave brought some successful cases at the regional level, i.e., patagon.com (wenceslao casares) and officenet (andy freire and santiago bilinkins), that caught the attention of the investment community, attracting the first foreign venture capital funds. even after the burst of the dotcom companies bubble, some high impact ventures kept on emerging such as the argentinean unicorns mercado libre, despegar, and globant, among others. they have become iconic, role models and the symbol of a new wave of entrepreneurs who would feed the dynamics of an incipient it sector (endeavor 2016). with respect to biotech, the seeds were sawed during the 80s, when two companies, biosidus and grupo chemo, were created, laying the foundations of a sector which would start gaining momentum two decades later built from the collaboration of pharmaceutical companies and universities. these firms have played a pivotal role as sources of entrepreneurs (by means of spin-offs), investments and opportunities, whereas universities have provided their research findings and knowledge (endeavor 2016; gutman, lavarello, and grossi 2006). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 an important period in the history of the country was 2001-2002 economic turmoil. this crisis affected in different ways. many mature and new companies closed down but, when the macro economy was stabilized, they generated the platform for a new generation of resilient entrepreneurs that lead the economic recovery first and the economic expansion later, when the crisis was over, boosting the creation of new companies in most sectors, especially in the software industry and biotechnology. the robust economic recovery after the strong 2001-2002 crisis and some public policy initiatives, like the software law and the sectorial fund fonsoft (software sector act) provided specific incentives and improved the entrepreneurial development in this industry. ict entrepreneurs managed to seize opportunities offered in the local market and by the growing trend towards worldwide outsourcing. in this way, it became one of the most dynamic vertical drivers in the buenos aires ecosystem and contributed to the significant increase of the number of companies and jobs during that decade. on the institutional dimension, a snapshot of the ecosystem taken early in the first decade of the 21st century showed unctad’s empretec program and a few entrepreneurial centres and private universities stood alone, such as instituto de altos ejecutivos de empresa de la universidad austral (iae business school), the instituto tecnológico de buenos aires (buenos aires technological institute, itba) or the universidad de san andrés (san andrés university). in addition, the endeavor foundation, came to buenos aires at the end of the 90s being a relevant player since then. at this time, the buenos aires city government opened the centro metropolitano de diseño (cmdmetropolitan center for design), and it created incuba, the public incubator for design, media and tourism industries, which catalysed all the creative entrepreneurial energies around these sectors. shortly afterward, the government gave birth to baitec –a technology-based http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 incubator. by the same time, the facultad de ciencias exactas y naturales de la universidad de buenos aires (faculty of exact and natural sciences university of buenos aires) also launched its business incubator. in 2003, the government of the city of buenos aires launched buenos aires emprende (baebuenos aires starts up) which was a crucial milestone in the development of the ecosystem’s institutional dimension. this program not only offered seed capital for entrepreneurs but also it contributed to the strengthening of the institutional platform by giving them some resources in exchange of their support for start-ups. it also helped expand the ecosystem organizational capillarity through intermediaries. several institutions operating today started working under this program that overcame successive governments until 2011. the new decade witnessed the arrival of some new actors from the private sector. first, some seed accelerators started their activities like wayra from telefónica group or nxtp labs, an independent accelerator founded by former successful entrepreneurs inspired on y combinator model. other example of such ´entrepreneurial recycling´ was the creation of kaszek ventures fund by two former mercado libre co-founders. furthermore, new actors joined the financing arena of the ee the meli fund created by mercado libre, nazca ventures, lyon ventures and 54 ventures. despite this situation, the availability of financing, particularly in the early phases, is still embryonic and mainly biased towards the ict sector. in 2014, the government revised the strategy and reoriented buenos aires emprende program. it became a tool to co-finance the operation of a reduced number of accelerators, using subsidies in exchange for their commitment to invest with the state as a co-investor in their ventures. the organizations in the ecosystem had to re-engineer in a new scenario when the government decided to leave its role as an activator. the institutional platform has downsized. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 more recently, when the national government changed in 2015, a new phase in the national level entrepreneurship policy started. a cornerstone in this evolution has been the ley fomento del capital emprendedor (venture capital and entrepreneurship act) which created incentives for accelerators and venture capital funds to boost the development of this industry. as a result, six new accelerators were created in the city in the last two years, joining the existing wayra and nxtp. as well, two additional vc funds started operations thanks to the incentives provided by the new entrepreneurial act. interestingly, this new law had an active contribution of the newly created national association for entrepreneurs, whose creation was led by some early blockbuster entrepreneurs. all in all, the dynamic and governance of the ecosystem has evolved. now the leadership is more spread on co-work spaces and accelerators, the private sector and the entrepreneurs’ side, with some support from the national level government. discussion once we described the historical path followed by each of the cases, it is interesting to identify whether there are some common patterns among them and to discuss some contrasts. this discussion would allow us to gain some insights into the main drivers and determinants of ee evolution, particularly between ee with different levels of development. in silicon valley, an open and creative culture, former r+d centers, stanford university’s strategy and terman’s leading role as an institutional entrepreneur contributed to set the basis of an initial phase of the ee. during these early decades, research centres provided a favourable context for new technologies development, matching public procurement contracts demands (defense and airspace authorities). this institutional dynamic produced a first wave of startups and spin-offs which, fed and renewed the existing business structure. this entrepreneurial http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 dynamic was reinforced later by attracting other firms, once the science park was created. this process was catalysed some decades later by the sbic initiative fostering the emergence of venture capital industry. from that moment up to now the evolution of the silicon valley has been under the leadership of a vibrant entrepreneurial/investors driving force that actively interact with universities and tech companies. mentors and dealmakers became also key players in the ecosystem bridging the entrepreneurial, business and investors dimensions. since mid2000´s, some institutional innovations, such as the accelerators, have taken place in the context of the new wave of digital technologies. however, this historical process took place without an explicit, collective leadership or a deliberate shared and devised strategy. the evolution was the result of the confluence of different forces and actors and their interaction with the opportunities and resources existing in the broader national context. in the israeli case there were in place several intangible assets such as the culture and social capital, the entrepreneurial capacities moulded by the army, the technological and the scientific platform of universities and the finance provided by government r+d grants, which could be identified as preconditions that sparked the entrepreneurial dynamism of the ee. this could explain a first wave of start-ups during the 80s. however, throughout the evolution of this ee the state has played a significant and explicit entrepreneurial role as part of a deliberate strategy aimed at transforming israel in a tech economy. the state was essential in the creation of the vc industry by means of the yozma fund but also it was critical to develop the institutional dimension (the technological incubators) trying to profit for a serendipitous event, like the russian migration. most of these interventions from the public sector were at the origin of the ee we witnessed today. since vc industry development first and the “privatization” of the business incubators later the role http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 played by private actors has been growing in the israeli ee but without erasing the leading role of the state. in the developing latin american ee, some important structural differences among them could be identified besides some similarities with respect to the role of government. the open and notso hierarchical culture of buenos aires, rooted in the successive waves of european migrants, has facilitated the development of social capital more than in santiago. furthermore, the existence of public tuition-free universities that contribute to a broader skilled population and the presence of a wider middle-class segment fostered the emergence of entrepreneurs that throughout the years nurtured a more diversified business structure, especially in the tech sector where some unicorns emerged. however, it was not until the city government decided to intervene after the big economic crisis (2003) that the ee moved forward. this impulse nurtured some previous and embryonic institutional setting, creating new support institutions that enrich the stock of existing incubators, and providing seed capital. but as time goes by, and the local public policies started to decline as a result of the change of government, the strength of the institutional platform slowed down. investors have been scarce until the new law has been approved in 2016 as the expression of a renewed stimulus of the government, at the national level in this case, but also a result of new institutional actors fostered by serial and ‘recycled’ entrepreneurs like the association of entrepreneurs, co-works spaces, accelerators and also early-stage funds. santiago´s ee stands out by a significant institutional and political stability and the proactive role of the national government agency (corfo). corfo has been the cornerstone of the ee whose evolution followed to a great extent the changes in corfo’s programmes. arguably, because of the structural weaknesses of much of the framework conditions (social conditions, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 culture, social capital, sti platform) that made up the initial configuration of the ee, its development was more dependent on the active role of the national government. in the last years, a scale up of the chilean ee appears associated with new public instruments but also with the emergence of new players such as some large firms’ supporting entrepreneurs through open innovation processes and some private incubators/accelerators and investors. therefore, the current ecosystem is much more diverse, nourished and sophisticated that before. however, the government’s leading role is still vital to allocate resources. in sum, the evolution of four different ee analysed in this paper allow us to identify different drivers and leaderships among these ee and how the strength and relative relevance of each driver changes over time. we could also evidence the importance of some structural preconditions for the emergence and development of the ee. this fact helps us to identify different levels of development in the four studied cases as well as the differences in the relative weight of the institutional and governmental level in the evolution of the ee vis a vis the role of existing business and investors. in more developed ecosystems, business incentives are crucial in understanding private actors’ behaviour. clearly, the quality and size of the deal flow (i.e. entrepreneurs) in such ee constitutes a strong incentive for the involvement of the private sector and the existence of a deep and complete financing offer (from seed capital and early-stage funds up to the ipo) altogether with incubators and other vertically-specialised services providers (kantis 2018). on the contrary, in the developing ecosystems, the government’s incentives are still more relevant as moulding entrepreneurs’ and institutions’ behaviours and incubators and services providers are more generic. some recent ‘entrepreneurial recycling’ processes and the emergence of large companies supporting entrepreneurs in the analysed latin american cases may evidence a growing role of the private sector. clearly, the level of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 development of each ee would be determined by the relative balance between the different actors and factors involved. corollary: towards a dynamic model of ee evolution based on previous cases and discussion we propose a novel interpretative model to understand ee evolution, paying special attention to the drivers that are relevant to explain the development process in the ee trajectory and the differences between developed and developing ee. first, we should define what ee evolution means. we describe evolution in terms of emergence and development. both phenomena are intrinsically associated. it is not possible to trace back a precise moment in time when the ee begins – a sort of big bang – just as it is not possible to identify a moment when the origin finishes, and the development starts. ee are neither natural nor accidental. they are the result of a process of social construction (roundy 2016). what we could certainly identify are some roots, that is, a series of factors, actors and situations which define the initial conditions from where an ee starts to emerge and develop. to discover these roots and the current stage of development of an ee is always an analytical challenge for the researchers. however, at every moment and space, there is a specific configuration of actors and factors upon which some dynamics and relations start to take place defining a trajectory of development of an ee. in the silicon valley, stanford university’s strategy and terman’s leading role as an intraentrepreneur together with an open and horizontal culture, the r+d centres and the public procurement contracts, set up these initial conditions. in the israeli case there were a rich social capital base, a culture that rewarded the individual initiative, a sound scientific platform built by the public r+d grants and the role played by the army and the military service. in the latinamerican cases the initial conditions were less favourable. nevertheless, some differences http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 could be observed. buenos aires stand out because its cultural and social capital conditions and a wider middle-class segment (relative to other latin-american countries) whereas santiago showed a more stable and institutional and political setting and a proactive role of the national government. we could label this configuration as framework conditions. as the reviewed cases show, these framework conditions include the educational system, the culture and social conditions, the social capital, the knowledge platform (science and technology), business sector (diversity and density), demand conditions and the institutional system. all these variables may be considered as space-specific idiosyncratic ‘assets’ that influence the potential surge of would-be entrepreneurs and the size and wide of the opportunity space for the emergence of new ventures (acs et al. 2016; kantis, federico, and ibarra garcía 2018). the degree of development of each of these framework conditions and their relations define the configuration of the ee at any moment. the second component of our model are five dynamics or sources of “energy” (drivers). ee evolution is, hence, conceptualized as the result of the interaction between the configuration of framework conditions these dynamics (kantis 2018). these five dynamics are: entrepreneurial dynamic: conceptually, this is the core of the ee and its strength constitutes a sign of its energy and vitality, as many previously reviewed models stated. it encompasses not only the entrepreneurial process of newly born firms (start-ups) but also the growth of existing young firms (scale-ups). the multiplication of high-growth firms and blockbusters is one of the expected results of this dynamic. but there are other manifestations that include the organic growth of the remainder businesses and the surge of spin-offs, serial entrepreneurs and the ‘entrepreneurial recycling’, which constitute the self-reinforcing drivers of the entrepreneurial http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 dynamics. all these outputs contribute directly to the densification of the productive structure and the emergence of new activities and sectors. the existence and development of institutional entrepreneurship is also a key result from this dynamic that links and could activate the institutional dynamic explained below. institutional dynamic: it includes the initiatives of organizations such as incubators, accelerators, mentoring networks, coworking spaces and others supporting entrepreneurship. as well, this category refers to the general institutional dynamic comprised by the initiatives led by universities and other educational and science and technology institutions, chambers of commerce, and the emergent phenomenon of entrepreneurial associations. the institutional dynamic is influenced by the business dynamic (i.e.: providing mentors); the government dynamic (i.e. by means of direct incentives and entrepreneurship policy) and the entrepreneurial dynamic (i.e. providing institutional entrepreneurs as a result of the entrepreneurial recycling). business dynamic: this refers to the role played by the existing firms located in the ee, particularly the large companies and their initiatives towards entrepreneurship (for instance, open innovation, investments in start-ups, and so forth). it is also the source of spin-offs, potential mentors, and dealmakers, fuelling other dynamics of the ee such as the already mentioned entrepreneurial dynamic but also the institutional dynamic (by providing mentors for support institution) and the investment dynamic (by means of corporate venture capital funds), which will be explained bellow. investment dynamic: this involves the role played by different funding sources ranging from banks, business angels and their networks, seed funds, early stages funds, venture capitalists to other actors that directly or indirectly influence the availability of deals and investments (capitalists, lawyers, dealmakers). this investment dynamic contributes to the ecosystem by http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 feeding the entrepreneurial dynamic with financing. at the same time, it is influenced by the entrepreneurial recycling and business dynamic, as it was seen above and by the institutional and government dynamic, explained bellow. government dynamic: on the one hand, it encompasses all the deliberated interventions made by the government to support entrepreneurs and young firms. but on the other hand, it includes all the changes in regulations that influence the development of start-ups and young firms (entry regulations, taxes, bankruptcy, etc) as well as those that may affect the demand conditions (public procurements) and the investment dynamic (financial regulations, incentives, direct investments or co-investments). this dynamic includes government intervention at different levels, national and subnational. figure 1. the interaction between framework conditions and driving forces source: authors’ own elaboration http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 so defined, our model is composed by two ontologically different levels of variables: the framework conditions on the one hand, and the dynamics or drivers on the other. the former influence the latter, which in turn transform the previous configuration of framework conditions into new configuration. based on this interactive process between framework conditions and driving forces, our model conceptualizes evolution as a self-reinforcing process, resembling the one proposed by stam and van de ven (2018). hence, we could formulate the following proposition: proposition 1: ee evolution is defined as the result of the self-reinforcing interaction at any moment in time between a configuration of framework conditions and the dynamic of five driving forces: entrepreneurs, existing firms, investors, institutions and governments. in some models of ee evolution, it is defined as the transition from initial phases towards maturity, assuming some archetype of how a mature ecosystem would looks like (mack and mayer 2016; brown and mason 2017). in our understanding, evolution is explained in terms of ‘quantum leaps’ which do not follow a unique pattern. we can hypothesize two possible extreme cases. in the first one, ee evolution is defined as a cumulative process where framework conditions and drivers interact over the same trajectory. therefore, small but incremental quantitative changes are accumulated over time achieving then a qualitative change. this pattern of ee evolution would be illustrated by the phenomenon of the water which is transformed into vapour once it reaches its boiling point. as well, ee evolution could take place by means of certain (internal or external) factors and/or actors which produce by itself a qualitative transformation of the existing configuration into a new one. in this case, we refer to this pattern as catalysation and the above-mentioned factors and/or actors would be the catalysers. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 furthermore, it is possible to identify combinations of the two patterns. for instance, some ee would exhibit some periods of accumulation that will generate certain ‘geological layers’ of actors and factors which in turn will be qualitatively changed by the intervention of some catalysers, whose transformative effect would not be possible without the previous accumulation. in the analysed cases, in silicon valley there were accumulative processes of start-ups until sbics initiative led to a superior stage of development with the creation of vc industry. the same could be said about yozma initiative in israel or the “privatization” of incubators. in both cases the strength of the drivers could be identified in its capacity to trigger more diversified drivers and actors (i.e. entrepreneurial, investment) and in the output of start-ups and scale ups. on the contrary, in the developing ecosystems the government seemed to have played this role of catalyser, but it was not enough to activate in the same manner the entrepreneurial dynamic, giving the less favourable framework conditions. these arguments led us to state the following proposition: proposition 2: ee evolution could take place as the result of two types processes: a) accumulative processes over the same trajectory which sometimes could reach certain momentum and generate a new configuration, and/or b) processes led by factors/actors which transform itself the previous configuration in a more radical way, “catalysing” the accumulated conditions. in the context of such evolution, the different dynamics (or driving forces) co-evolve and interact each other by means of economic incentives (public or private), institutional projects and missions and the motivations and engagements from actors such as entrepreneurs, deal makers, investors mentors, institutional entrepreneurs and policy makers as figure 2 illustrates. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 some of these connections are explicit and deliberate, while others have been the result of emergent strategies. in this vein, serendipity plays an important role in the ee dynamic and evolution but as all our cases show the role of the framework conditions and the driving forces, particularly, public policy is crucial. figure 2. interrelations within the driving forces source: authors’ own elaboration. the interaction between these driving forces would lead to non-linear dynamics and feedback effects (roundy et al. 2018). precisely, the amount and strength of these interdependencies between the different driving forces, will explain the different trajectories of evolution that an ee could follow. in the analysed cases some differences on the trajectories could be identified, such as the relative role of the public and private sector as the ee evolve; the sources of motivations and incentives of the different actors; the level of deal flow and specialization of the organizations and providers of services. these contrasts are the result of different initial configurations and drivers along the time. the differences between the most developed ee http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 illustrate this situation. the more explicit role and influence of the government in israel (government dynamic) vis a vis the relative power of the not so planned role of mentors and spin-offs (business dynamic) in the silicon valley may explain the contrast between them. based on the above commented we will state proposition 3. proposition 3: the different dynamics are interdependently and intertemporally related by a myriad of economic incentives and personal engagements, resulting from deliberated and emergent strategies. the strength of these forces and its connections will explain the different possible trajectories of the ee evolution. in addition, ee are open systems and they are multi-scalar in nature (brown and mason 2017; roundy et al. 2018). this means that the external (to the territory) actors and factors may influence the evolution of a single driving force and the ee as a whole. in other words, ee evolution would be also the result of the ability of the local driving forces to successfully accommodate these external influences and leverage from them. the cases show the influence of national and local forces, altogether situated in an increasingly global context. in particular, the developed ee show how they were capable to profit from external influences, i.e. the decline in the military contracts in the silicon valley and the russian migration in israel. proposition 4: ee evolution is also influenced by the presence of external (to the territory) factors and actors that may affect the framework conditions and/or the driving forces and their interactions. by means of this process of evolution, ee are constructed and developed over time, resulting from the co-evolution of framework conditions and driving forces. consequently, ee evolution and ee development are intimately associated, moulded by its initial conditions and the relative importance of each of the driving forces and the interaction process between dynamics and http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 framework conditions. a positive sign of ee development is the existence of certain balance between the relative importance of each of the driving forces without which the results of the ee in terms of the quantity and quality of the firms generated and scaled will not be fully realized. the examples of silicon valley and israel showed that despite the leading role of the ecosystem may varied throughout the time, there has always been a tendency towards some balance. on the contrary, in the less developed ecosystems, some degree of unbalance is still evident, especially in the chilean case. so, we propose the following proposition: proposition 5: the level of development of each ecosystem will associated with the framework conditions and the strength and balance of its dynamics (or driving forces) and their interrelations. summarizing, the present article tries to contribute to the on-going debate about ee evolution from a systemic perspective. based on the examination of four different ee, we propose a novel interpretative model of ee evolution with an emphasis on ee with different levels of development. this model and its five constitutive propositions will surely open new dialogues and research agendas. in addition, it has several political implications, starting from the most basic one referring to the idiosyncratic nature of the ee and the consequently discouragement of any replication attempt. the second most fundamental recommendation is to take into consideration the structural and framework conditions. this would help to understand not only the current situation of the ee but also its future possibilities given their influence over the driving forces of the ee. as well, to intervene in the ee promotion implies the recognition of the complex nature of the interdependencies among the different dynamics that constitute the driving forces that help explaining the evolution of the ee. hence, policy making must be systemic itself, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 182-220, january-june 2020 doi.org/10.1344/jesb2020.1.j072 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 considering not only the effects over the direct beneficiaries (the entrepreneurs) but also over the broader context of the remaining actors and factors. finally, a closer look into the entrepreneurial dynamics invite to widening the focus on the output, to embrace other manifestations of it such as young firms’ growth, spinoffs and institutional entrepreneurs. acknowledgment authors would thank the comments from two anonymous referees and those received from colin mason, david audretsch and harry yuklea to earlier versions of this manuscript. the usual disclaimers apply. this study has been financed by the national agency for research, development and innovation. project foncyt-pict 2018-03027. references acs, zoltan, david audretsch, erik lehmann, and george licht. 2016. “national systems of entrepreneurship.” small business economics 46 (4): 527-535. acs, zoltan, erik stam, david audretsch, and allan o’connor. 2017. “the lineages of the entrepreneurial ecosystem approach.” small business economics 49 (1): 1-10. álvarez martínez, paola, sabrina ibarra garcía, cecilia menéndez, juan federico, and hugo kantis. 2016. “el ecosistema emprendedor de la ciudad 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publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 spigel, ben. 2017. “the relational organization of entrepreneurial ecosystems.” entrepreneurship theory and practice 41 (1): 49-72. stam, erik. 2015. ‘entrepreneurial ecosystems and regional policy: a sympathetic critique.” european planning studies 23 (9): 1759-1769. stam, erik, and andrew van de ven. 2018. “entrepreneurial ecosystems: a systems perspective.” u.s.e. research institute, working paper series 18‐06, utrech university. startup genome. 2017. global startup ecosystem report 2017. san francisco: startup genome. yin, robert. 1989. case study research: design and methods. newbury park: sage publications. this is an open access article distributed under the terms of the creative commons attribution -non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 joshua eckblad elena golovko tilburg university (the netherlands) organizing for innovation abstract knowledge diffusion and knowledge externalities are important sources of economic growth. it is becoming increasingly difficult to maintain competitive advantage through the pursuit of internal r&d alone, due to changing business environments and the acceleration of technology development, as well as the increasing costs associated with r&d activities. consequently, firms purposefully search for novel knowledge outside their boundaries, adopting an “open innovation” approach. in this paper, we focus on external knowledge sourcing strategies and discuss the challenges that firms encounter in managing interorganizational collaborations that such external sourcing implies. in particular, we focus on two ways to organize external knowledge sourcing: learning from foreign environments and the use of corporate incubators as a part of corporate venturing strategy. we conclude by highlighting possible topics for review articles including knowledge exchange and external knowledge sourcing strategies; performance effects of different knowledge sourcing strategies; new organizational forms for managing innovation processes within and between firms. keywords: open innovation; external knowledge sourcing; learning from foreign environments; corporate incubators. corresponding author. email: e.golovko@uvt.nl received 30 october 2015 accepted 17 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 opening for innovation knowledge is central to organizational growth. penrose’s seminal work on the growth of organizations 1959) asserts that new knowledge forms the basis of organizational growth through the recombination of existing knowledge resources. the resource combination mechanism is essential to the concept of schumpeterian innovation, which is considered an endogenous phenomenon (see romer 1986; lucas 1988; aghion and howitt 1990). this implies the role of agentic action by top management teams within organizations. in the schumpeterian tradition, technological advances that flow from private investment in research and development (r&d) catalyze economic growth. the underlying rationale is that as r&d investment activities create new knowledge, the externalities associated with innovation lead to increasing returns to scale due to knowledge spillovers. there is consensus among scholars that the pursuit of innovative activities is a decisive factor in firm growth (see chandler 1962; ansoff 1965). as discussed, purposeful investment in r&d makes a vital contribution to firms’ sales performance, productivity, and profit (see griliches 1998; romer 1990; geroski 1993; van reenen 1997). the view that knowledge stimulates internal r&d is reinforced in recent knowledge-based views of organizations, which emphasize knowledge as a key competitive asset (grant and baden-fuller, 1995; conner and prahalad 1996; alcacer and chung 2007). knowledge-based perspectives extend the resource-based view (rbv) as to the importance of the internal asset base of an organization, by emphasizing knowledge as a primary resource, as well as knowledge as a source of competitive advantage. despite the importance of knowledge as an input to organizational r&d activities, knowledge has largely been sourced exclusively from within a focal organization. for instance, organizations have historically volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 developed new products, processes, and services principally by depending on resources within a focal organization's boundaries, rather than on externally sourcing innovation inputs. however, it is becoming increasingly more difficult to maintain competitive advantage through the pursuit of internal r&d alone, because of the acceleration in the increase of knowledge, the development of technology and change of business environments, as well as the increasing costs associated with r&d activities in the last decades. teece (1986) keenly observed the breadth of “know-how” required for even modestly complex technologies, and claimed that individual organizations are often unable to keep pace in these multiple technologies themselves. consequently, under conditions of technological uncertainty, organizations are more likely to seek external knowledge rather than to merely pursue internal r&d (see walker and weber 1984; balakrishnan and wernerfelt 1986; harrigan 1986). fritsch and lucas’s (2001) empirical study, for example, provides evidence for this view, finding that firms that engage in r&d and that are attempting to introduce higher-level innovations (i.e., new to the market rather than new to the firm), are much more likely to engage in cooperative arrangements to access external knowledge. similarly, arora and gambardella (2010) pointed out that organizations’ innovation processes are increasingly relying on externally sourced information. the management literature has investigated the positive link between external knowledge sourcing and accelerated organizational growth through the updating of innovation processes and capabilities (e.g., levinthal and march 1993; katila and ahuja 2002; chesbrough 2006; cassiman and veugelers 2006; laursen and salter 2006, 2007). therefore, organizations pursue external knowledge sourcing when, among other factors, they encounter uncertainty that cannot be attended to by internal r&d alone. additionally, the literature generally characterizes the dual role of internal and external volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 r&d activities, as complementary, rather than as substitute capabilities. chesbrough (2003), for instance, addresses the purposeful acquisition of knowledge outside of a focal organization's boundaries by introducing the concept of open innovation, defined as a “paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as firms look to advance their technology”. external knowledge sourcing external knowledge may be acquired, formally or informally, from numerous sources, such as formal technological agreements, licensing, consulting services, and r&d outsourcing activities. knowledge may also spread through informal channels such as conferences or trade fairs, research collaborations, purchasing equipment, or informal contacts (veugelers and cassiman 2004). moreover, organizations can learn by hiring employees locally, by using local suppliers (almeida 1996; anand and kogut 1997), or by making contacts with customers, competitors or universities. in addition, recent technological and socio-technical developments, such as the internet and the ubiquity of web-based platforms, have opened new channels for organizations to access external knowledge by reaching out to potential contributors outside of a focal organization's boundaries. organizations, for instance, may gain access to new product ideas and potential innovations by soliciting suggestions (dahlander and piezunka 2014) from specialist "crowds" that are likely employed by other organizations. the crowdsourcing of novel ideas, using expert online digital platforms, has emerged as one of many instruments that large established organizations deploy to obtain external services, ideas, and/or resources that may be used as inputs into organizational innovation processes. volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 in our discussion, we focus on two specific strategies as examples of knowledge sourcing activities that deserve further investigation: foreign markets as a potential source of knowledge spillovers and corporate venturing activities, more specifically corporate incubators. learning from foreign environments among numerous potential sources of external information, research highlights foreign environments as a source of novel technological knowledge not available in the home market. firms may also use foreign direct investment (fdi) in search of capabilities that cannot be accessed in the home countries (chung and alcacer 2002). international business literature emphasizes that firms may start operations abroad not only to exploit their existing ownership advantages, but also to tap into areas with high technological strength to access new technological knowledge not available in their home countries (ghoshal and bartlett 1990; cantwell 1989). knowledge spillovers tend to be highly localized (jaffe et al. 1993). hence, multinational firms may locate r&d overseas to get into the local knowledge networks and to benefit from locally concentrated technological knowledge. analogously, exporting markets may constitute an advantageous terrain for such knowledge inflows, as they bring firms into contact with a diverse portfolio of knowledge, not available in the home-market, a phenomenon labeled by recent research as "learning by exporting". an exporting firm with no fdi abroad differs from an asset-seeking multinational company in at least two respects. first, it lacks the degree of foreign market involvement available through fdi, which in turn might imply a lower information exchange between the exporting firm and the host market (salomon and shaver 2005). second, the decision to export and the choice of export destination markets are more likely to be led by other considerations than volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 explicit technology-seeking objectives. as a consequence, the host markets for exporters are not necessarily the regions that are rich in new technological knowledge. nonetheless, exporting firms can still get access to new technological information, utilizing some of the mechanisms of technology acquisitions available in the case of foreign direct investment. evenson and westphal (1995) suggest that “… a good deal of the information needed to augment basic capabilities come from the buyers of exports who freely provided product designs and offered technical assistance to improve process technology in the context of their sourcing activities. some part of the efficiency of export-led development must therefore be attributed to externalities derived from exporting”. if anecdotal evidence, mostly derived from case studies, appear to highlight the learning opportunities that export can potentially offer, the econometric evidence on the learning effects provided by exports is still inconclusive. this suggests that research should look for the boundary conditions that might help explain inconsistencies in findings. such moderating factors can shape the ability of firms to tap into foreign markets knowledge and the way this knowledge is profitably exploited. these factors can be at the geographic, industry, or firm level. opportunities, therefore, exist to systematize what we know and delineate the most promising paths for research ahead. corporate incubators large established corporations are increasingly pursuing external corporate venturing as a strategic tool for enhancing innovation processes (gompers 2002; birkinshaw and hill 2005; dushnitsky and lenox 2005, 2006; mcgrath et al. 2012). corporate venture capital (cvc) activity, which is one type of external corporate venturing, can be defined as minority equity investments by a large established corporation in a portfolio of entrepreneurial ventures that volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 originate outside the focal organization. cvcs can be distinguished from the activities of traditional venture capitalists insofar as cvc investments are made by focal corporations for whom finance is not a core business (maula 2001; rauser 2002), and insofar as a relatively large share of the return on investment be strategic in nature (van de vrande et al. 2006). cvcs are playing an increasingly important role as an external innovation sourcing strategy, especially for large established corporations based in the u.s. (napp and minshall 2011). among a plethora of external corporate venturing strategies (e.g., corporate venture capital (cvc)), corporate incubators can be deployed as well as part of a purposeful, open innovation strategy (chesbrough 2003). corporate incubators, in contrast to cvcs, provide physical infrastructures and offer spatial proximity to incubated ventures. corporate incubators have existed since the 1950s, but they exist in discrete organizational forms and, thus, are subject to ambiguous taxonomies. one categorization defines corporate incubators, for example, as an entity providing entrepreneurial ventures with resources (allen and mccluskey 1990) that improve their chances of foundation and survival (see löfsten and lindelöf 2002; hackett and dilts 2004; dettwiler et al. 2006). for our purposes, we consider a corporate incubator as an instrument to enhance the external sourcing of innovation inputs by creating relational ties between a large established corporation and incubated ventures, as well as ties between the incubated ventures themselves, that result in knowledge spillovers. corporate incubators can be considered as a network composed of the focal organization and its portfolio of incubated ventures, which serves to introduce novel knowledge, enhance interorganizational collaboration, and facilitate knowledge flows. a seminal paper that continues to form a crucial reference point for social scientists interested in the role of networks in social and economic life is granovetter’s (1973) essay on the "strength of weak ties", where volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 weak ties are important for the introduction of new ideas and perspectives. the portfolio of incubated ventures can be seen as constituting "weak" ties at first, as the entry of a new venture to the incubation portfolio introduces variance to both the focal organization, as well as to the incumbent incubated ventures. over time, lyons (2000) observes that inasmuch as incubated ventures are all physically located "under the same roof", it makes collaboration much more likely. as scholars suggest that networks are important pathways of information, knowledge, and capabilities (granovetter 1973; hansen 1999; ahuja 2000; sparrowe et al. 2001), focal organizations and their respective incubated ventures can potentially explore and exploit external knowledge through this network. however, network structures can either impede knowledge flow (dougherty 1992; dyer 1999) or improve knowledge flow within and across organizations including teams, liaisons, formal interventions, and meetings (see almeida 1996; brown and eisenhardt 1998; hargadon 1998; inkpen and dinur 1998; okhuysen and eisenhardt 2002). the implication is that corporate incubators are a particularly powerful instrument to foster ties between high-quality ventures and slackendowed focal organizations, because they effectively institutionalize the mechanism that cultivates repeated exchange. the various constellations of ties between individuals that possess high-levels of human capital across these organizational boundaries constitute valuable social capital resources. according to adler and kwon (2002), social capital has been found to facilitate inter-organizational resource exchange and product innovation, and to strengthen inter-organizational relations. similarly, inkpen and tsang (2005) found that the benefits of social capital include privileged access to knowledge and information, preferential opportunities, and influence. volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 corporate incubators can create value for either, or both the corporate sponsor and the ventures participating in the corporate incubator. from the corporate sponsor’s perspective, the value of a corporate incubator for the innovation process is twofold. first, a corporate incubator can provide explorative benefits to the focal organization by providing insights into new markets and technologies, and offering valuable options through privileged access to a portfolio of innovative ventures that are members of the corporate incubator. through these benefits, the corporate incubator can help a corporate sponsor to build the capacity towards long-term innovativeness. second, corporate incubators can offer the focal organization new opportunities to exploit specific technological areas by accessing complementary technologies from ventures, or by leveraging existing products and technologies in new markets through ventures (tidd and trewhella 1997; gompers 2002). this combination of benefits can make corporate incubators a potentially valuable element of an organization’s overall external venturing program -that is, the capability to gain market knowledge, access complementary technologies and windows on new technology, as well as anticipate the trajectory of an industry earlier on, likely reinforces the focal organization's competitive advantage in the long-run. the strategic and financial value of corporate incubators is not limited to corporate sponsors. as much as the established corporation benefits from a venture’s resources, technologies, and "know-how", an incubated venture itself can draw advantages from the corporate incubator, as well as receive benefits in the exchange with other incubated ventures. for instance, an incubated venture can develop a customer-supplier relationship, whereby the focal organization becomes a user of a venture's services and products. in addition, an incubated venture can engage in product development agreements, or agreements for joint research, or volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 marketing, sales, distribution (msd) agreements. the venture may also gain value via the credibility attained by its tie with the focal organization (maula 2001; mcnally 1997). besides technological and financial advantages, an incubated venture can reap benefits from a focal organization's management advice and operational support. incubated ventures have the opportunity as well given spatial proximity to each other to interact closely and frequently with other incubated ventures. a venture first selects a particular corporate incubator based on the expectation of benefits from cooperating and learning with complementary ventures already present in the incubator, as well as from more mature ventures that have graduated from the incubator (ruping and von zedtwitz 2001). this also agrees with other findings, which showed that ventures tend to use incubators to facilitate relationships with other incubator residents one can think of incubated ventures as an informal network that reflects communities of practice, characterized principally by the transference of tacit knowledge among actors. that is, incubated ventures have many opportunities to get to know each other, as well as to work together in a variety of ways that fosters venture growth, and, ultimately, that renders incubated ventures more strategically valuable to a focal organization. in this fashion, corporate incubators can be understood as both the driver and concrete manifestation of inter-organizational collaborative processes, which foster the recombination of knowledge in focal organizations and their respective incubated ventures. as a privileged knowledge network, corporate incubators can be thought of as innovation platforms that produce a competitive advantage to both the participating individual ventures, as well as to the focal corporate sponsors. to the extent that a corporate incubator embodies a network with these advantages, incubated ventures as well as the focal organization gain competitive advantage through quasi-rents (i.e., higher than normal returns). volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 the corporate incubator can be considered as a hybrid organizational form between hierarchies and markets selected for its ability to mitigate against the uncertainty that focal organizations face in terms of sourcing external innovation inputs to generate sustained competitive advantage. therefore, the ability of a focal organization to deploy and manage a corporate incubator can be regarded as a valuable capability that varies across organizations. however, the challenge to a focal organization is to produce competitive advantages that survive high velocity environments, which is an extreme form of dynamic markets where even basic industry characteristics such as boundaries, competitors, and customers are in flux. superior performance thus, results from continuously creating temporary advantages and recalibrating resources to fit the environment, which requires finely tuned sensors as well as the ability to overcome inertial forces and engage in organizational change and realignment. therefore, the search for, identification of, access to, and transference of novel knowledge are crucial activities for organizational survival. this suggests that a corporate incubator is a complex adaptive system, which has the potential to become collectively more adaptive and generate more sustained competitive advantages for all stakeholders involved, than if the actors operated on their own without such ties. in this manner, corporate incubators can be analyzed from different perspectives such as network theory, resource-based view (rbv), knowledge-based view, dynamic capabilities, resource dependency theory, organizational learning, and organization design. further research is needed to examine the antecedents to the decision to establish corporate incubators, as well as the effects of corporate incubators on performance outcomes such as innovation performance. moreover, as corporate incubators represent one of many corporate venturing strategies available to large established corporations, the relative performance of volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 corporate incubators as compared to alternative modes of sourcing external knowledge (e.g., mergers and acquisitions, strategic alliances, and corporate venture capital investments) would be beneficial to theory development in the field as well as to corporate practitioners and venture founders. furthermore, organizations may decide to pursue multiple external knowledge sourcing strategies simultaneously. future research that considers interactions among multiple strategies and contingencies such as time and sequence would provide valuable insight into the incubation phenomenon well as insight into external corporate venturing more generally. managing inter-organizational collaborations the search for novel knowledge (i.e., new to a particular firm) requires organizations to work with and draw knowledge from many actors outside their organizational boundaries (shan et al. 1994; rosenkopf and nerkar 2001; katila 2002; laursen and salter 2006). therefore, organizations increasingly depend on inter-organizational relationships (iors) to search for knowledge outside their boundaries (chesbrough 2003). in this manner, r&d activities are viewed as becoming increasingly interactive and distributed processes, as fewer firms are able to pursue technological development in isolation (see carter and williams 1957; rothwell 1977; von hippel 1988; lundvall 1992). teece (1992) has argued that the rise of iors, promoted by the diversity of inter-organizational collaborative methods, has upset our existing understanding of the organization of innovation, as the boundaries of the firm are becoming increasingly blurred. the implication is that arm's length relationships are not sufficient, and that organizations have a greater disposition to forging close and relatively enduring inter-organizational ties. the literature supports the prediction of a positive link between repeated iors and the capacity to innovate (cornish 1997; propris 2002). volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 additionally, there is a positive relationship between repeated iors and organizational performance (lööf and heshmati 2005). this reveals some of the limitations of the resourcebased view (rbv), which asserts that an individual organization should work to prevent knowledge spillovers, rather than exchange valuable “know-how” as transference is thought to diminish or eliminate competitive advantage. the underlying rationale, according to rbv, is based on the idea that an organization comprises a collection of "sticky" and difficult to imitate resources (penrose 1959; wernerfelt 1984; barney 1986). in this view, economic rents are captured uniquely through the protection and deployment of these valuable resources. in contrast, dyer and singh (1998) emphasize the adoption of an ior stance and the development of resources and capabilities (e.g., relation-specific assets, knowledge sharing routines, effective governance) to achieve competitive advantage. similarly, the dynamic capabilities perspective extends the static nature of rbv to include the notion that dynamic external networks are central to competitive advantage in rapidly changing environments (teece et al. 1997; eisenhardt and martin 2000). for example, brown and eisenhardt 1997) suggest that a diverse portfolio of external knowledge sourcing activities increases opportunities for experimentation and learning. those authors also assert that broad portfolios are particularly suitable when the knowledge objective is to have an expansive insight into the trajectory of future product and market domains, rather than some specific piece of technical knowledge. that is, a portfolio of outwardly oriented relationships leads to a broader knowledge search, resulting in more innovation. indeed, organizations invest considerable amounts of time, money, and other resources in their search for these opportunities (cohen and levinthal 1990). part of this search effort is expenditure on r&d, but this is only one volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 element in the search process and may account for only a small portion of investment in the search for innovations (patel and pavitt 1995). furthermore, there is an increasing tendency to emphasize the role of local knowledge and “collective learning” in broad knowledge searches. the argument is that in a globalized economy the key resources for competitiveness depend on localized processes of knowledge creation, in which individuals and firms learn about new technology, learn to trust each other, and share and exchange information (cohen and fields 1999). the emphasis is on the role of “tacit” as opposed to “codified” knowledge, in that the former is viewed as being especially dependent on localized face-to-face contacts and spillovers (breschi and lissoni 2001). according to leamer and storper (2001), not only is the role of “tacit” knowledge increasing, this, in turn, is increasingly accentuating the demand for face-to-face contact in interorganizational collaborations. for example, in studying the networks in california’s silicon valley, saxenian (1990) emphasizes the value of face-to-face communication between individuals, which facilitates the transmission of knowledge across agents, firms, and even industries, over and above the high endowment of workers’ knowledge (i.e., human capital) that is favorable for innovative activity. greater intensity of r&d activities relates to the development of more complex or novel innovations, which, in turn, are more likely to require close interactions between discrete organizations. effective external venturing, thus, requires not only securing the most relevant external knowledge for a focal organization, but also depends on relational capabilities to both establish and dissolve constellations of external partners, as the environment provides cues that change is fast-approaching. this poses far-reaching challenges to organizations in terms of selecting the "right" external partners and the "right" collaboration modes, as well as the volume 1, number 1, 15-37, january-june 2016 doi: 10.1344/jesb2016.1.j002 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 task of managing these iors over time. as organizations often pursue multiple external knowledge sourcing strategies in parallel, the growing complexity of external collaboration networks will be clearly onerous on the attention demands and carrying capacity of top management teams within focal organizations. management challenges at jebs thematic area “management challenges” invites submissions that lie in the broad research areas of strategic management, and innovation and technology management. the general topics in this area include strategic decision making processes, inter-firm competition and competitive dynamics, diversification and portfolio strategies, cooperative interorganizational arrangements (such as alliances and joint ventures), as well as a range of questions related to management of technology and r&d processes, product development strategy, innovation processes and innovation diffusion. in particular, submitted research may focus on the topics of knowledge exchange and external knowledge sourcing strategies; performance effects of different knowledge sourcing strategies; new organizational forms for managing innovation processes within and between firms. the review articles should aim at integrating the existing research, providing its critical evaluation and indicating future research paths and questions to address. references: adler, paul, and seok -woo kwon. 2002. “social capital: prospects for a new concept.” academy of management review 27(1):17-40. aghion, pillippe, and peter howitt. 1990. “a model of growth through creative destruction.” national bureau of economic research, working paper 3223. volume 1, number 1, 15-37, january-june 2016 doi: 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charmianne lemmens, and wim vanhaverbeke. 2006. “choosing governance modes for external technology sourcing.” r&d management 36:347–363. veugelers, reinhilde, and bruno cassiman. 2004. “foreign subsidiaries as a channel of international technology diffusion: some direct firm level evidence from belgium.” european economic review 48(2):455-476. von hippel, eric. 1988. the sources of innovation. new york: oxford university press. walker, gordon, and david weber. 1984. “a transaction cost approach to make-or-buy decisions.” administrative science quarterly 29(3):373-391. wernerfelt, birger. 1984. “a resource-based view of the firm.” strategic management journal 5(2):171-180. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 yoel modesto gonzález bravo universidad católica andrés bello (venezuela) political risk management practices of multinational corporations: their approaches to deal with developing countries under economic sanctions abstract this article explores adjustments to the traditional political risk management practices followed by multinational corporations (mncs) in their international operations to incorporate an increasingly concerning risk arising from the more frequent imposition of economic sanctions on developing countries over the last ten years for political purposes. in order to identify the main determinants of this risk and its consequences, a literature review is conducted, highlighting the models proposed by tsebelis (1990) and kakutami (2017) as the main frameworks to understand the dynamics for sanctions impositions, their frequency and the management of this risk by traditional mncs from developed countries. kakutami’s model is further enhanced in this article with a game theoretical model to understand the dynamic behavior of mncs under this context, considering evidences of a growing presence in international markets of mncs from developing countries, whose motivations for their expansion are explored. finally, different political risk mitigating strategies are reviewed to explore their suitability to mncs, with particular emphasis on the use of insurance to cover this risk and its effects on mncs’ willingness to engage with sanctioned countries. as a general finding, from a reputational point of view, mncs should take a more active role in their network analysis to identify their direct and indirect exposure to this risk, given the more frequent imposition of sanctions with an extraterritorial reach. keywords: political risk; economic sanctions; multinational corporations; developing countries; least-developed countries; emerging market countries; games theory corresponding author: e-mail: ygonzale@ucab.edu.ve received 21 july 2019 accepted 25 march 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:ygonzale@ucab.edu.ve http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 introduction the study of the political risk management practices by multinational corporations (mncs), mostly from developed countries, in their dealings with developing countries1 has been mainly focused on risks arising from these countries, especially due to actions taken by their own states and other local actors, such as expropriations, local regulations, etc. little attention has been placed by the academic literature on political risks related to those countries but arising from abroad (brink 2004; gregory 1988). among the latter group of risks, mncs’ trade and investment relations with developing countries have been recently challenged by the more frequent imposition of international economic sanctions with an extraterritorial reach by foreign governments and other international entities (senders) for political purposes on a growing number of governments of non-developed countries (targets)2 over the last ten years. this is a growing area of concern for mncs as reflected in recent surveys, such as the annual political risk survey reports published by oxford analytica and willis towers watson, which places country sanctions as one of their top three political risks in 2019, ahead of other traditionally researched political risks. giving this evidence, this article is aimed at establishing an integrated framework, based on the review of the existing literature on country economic sanctions and their modelling, which 1 countries are classified from developed to developing countries according to their income per capita and other measures related to their inhabitants’ life quality summarized in the human development index (hdi), with developed countries reporting the highest values in those dimensions. developed countries report hdis above 0.8 (in a range from 0 to 1) and high income per capita, set above usd 12,376 according to the world bank (2018). all other countries are deemed as developing countries (international monetary fund 2015) ranging from emerging market countries (displacing traditional activities from the agriculture and raw materials exports to more technologically advanced activities) to least developed countries (with mostly traditional economic activities, constraints for their sustainable economic growth and income per capita below usd 1,025 in 2018 as per the world bank). 2 in the academic literature, the sanctioning and the sanctioned parties are respectively known as “the sender” and “the target” (kaempfer and lowenberg 2007). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 can be used by mncs to face this emerging risk concern before and after their imposition (kakutami 2017; tsebelis 1990). the setting of this integrated framework for mncs will also consider its relevance to the specific characteristics of mncs from developed and developing countries. from this perspective, the traditional literature on mncs has described them as entities from capital exporting developed countries that display converging political, economic, legal, environmental and social systems, posing little risk for mncs entering into these markets. on the other hand, within the context of developing countries, a new group of mncs is arising from emerging market countries over the last 30 years through the process of economic globalization, procuring their international expansion with more flexible approaches that differ from those applied by mncs from developed countries. those distinctive approaches to deal with target countries will be also reviewed to identify their motivations. in order to understand the mncs’ behavior risking likely penalties by senders due to their dealings with targets, the original static model proposed by kakutami (2017) to explain this behavior will be further adjusted through a game theoretical approach to explain the dynamics of the interactions between mncs and senders. the practical implementation of these strategic moves by mncs will also involve the review of different tactics to mitigate their expected loss impact through their retention, avoidance or transfer of this risk. these tactics will be analyzed to discuss their relative usefulness for mncs in the management of their operations with targets from developing countries, with particular attention to understand the effects of the use of insurance to cover this risk on the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 behavior of insured mncs based on an extension to the game theoretical model proposed by tsebelis (1990). economic sanctions: characteristics and effects economic sanctions have been used by international organizations such as the united nations and different sovereign states to obtain desirable political and humanitarian changes in their sanctioned targets. those targets are generally sovereign states and can also include companies, non-profit organizations, groups (such as terrorists, drug dealers, cybercriminals and the alike) and individuals. the most frequent goal to impose these sanctions over the period 1914-2000 (hufbauer et al. 2007) corresponded to political regime changes and subsequent democratization, representing 39.22% of cases, especially against regimes that maintained a hostile stance toward the sender. other frequent goals were aimed at causing modest policy changes (21.08%) that do not represent a change of the target’s government, other major policy changes (16.18%), military impairment to prevent a potential powerful hostile regime (14.22%) and disruption of military adventures undertaken by the target (9.31%). in general, the imposition of sanctions for political aims can take different types, namely: a. trade sanctions: measures to limit trade relationships with the target, especially to reduce its exports to the sender or to the rest of the world through the imposition of trade quotas, higher tariffs, import licenses in the sender’s country as well as to limit the sender’s exports to the target. b. financial sanctions: comprising the seizure of the target’s assets abroad as well as restrictions on investment and financial transactions with the target such as mandatory disinvestment, suspension or restrictions on lending and payments related to the target, etc. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 c. targeted sanctions: such as travel, transportation and communications bans. d. embargoes: aimed at prohibiting all kind of dealings with the target. hufbauer et al. (2007) found a success rate of 34% for imposed country sanctions for political reasons during the period 1914-1990. morgan et al. (2009) enhanced the research on sanctions’ success by including sanctions threats in 888 cases of sanctions threats and impositions during the period 1971-2000 finding a success rate of 35% for imposed sanctions and 45% for sanctions threats that were not finally imposed. it is important to distinguish these kinds of sanctions for political aims from sanctions that emerge due to international trade breaches as well as from new sanctions proposals based on violation to environmental issues according to the 2016 paris climate agreement.3 these violations are dealt with economic countermeasures by the sanctioning party, mainly imposing compensating trade barriers, rising import duties, etc., until the sanctioned party changes its unfair trade practices, without procuring any political change from its part (stanglin 2010).4 some of these trade countermeasures can be avoided by mncs from the target by setting local operations as subsidiaries in the sanctioning country to supply its market and to circumvent these higher import duties. this strategy is totally unpractical in a context of economic sanctions for political / humanitarian purposes as these consider that any kind of trade or investment deal with the target is illegal with an extraterritorial reach beyond the sender’s jurisdiction. the dynamic interaction between sender and target countries before any sanction enforcement has been described under game theoretical frameworks by authors 3 colman, zack. 2019. “europe threatens u.s. with carbon tariffs to combat climate change.” politico.com, december 13. accessed march 20, 2020. https://www.politico.com/news/2019/12/13/europe-carbon-tariffclimate-change-084892. 4 stanglin, doug.2010. “brazil slaps trade sanctions on the u.s. to retaliate for subsidies to cotton farmers.” usa today, march 9. accessed march 20, 2020. http://content.usatoday.com/communities/ondeadline/post/2010/03/brazil-slaps-trade-sanctions-on-us--toretaliate-for-subsidies-to-cotton-farmers/1#.xlliyshkjiu http://revistes.ub.edu/index.php/jesb https://www.politico.com/news/2019/12/13/europe-carbon-tariff-climate-change-084892 https://www.politico.com/news/2019/12/13/europe-carbon-tariff-climate-change-084892 http://content.usatoday.com/communities/ondeadline/post/2010/03/brazil-slaps-trade-sanctions-on-us--to-retaliate-for-subsidies-to-cotton-farmers/1#.xlliyshkjiu http://content.usatoday.com/communities/ondeadline/post/2010/03/brazil-slaps-trade-sanctions-on-us--to-retaliate-for-subsidies-to-cotton-farmers/1#.xlliyshkjiu volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 such as tsebelis (1990) with further refinements by pradiptyo (2007). the use of game theoretical models is considered as suitable to describe this risk as it involves different strategic actions and reactions between its players, yielding different outcomes. tsebelis (1990), considered a 2x2 game between a sender country and a target country. the target country follows two strategies: to violate the international law or to comply with it; whereas the sender country can choose two strategies: to enforce and not to enforce sanctions on the target. under this game, no player follows a particular strategy with probability equal to one. assuming complete information, rationality, continuous choices and simultaneous moves, tsebelis determines the probabilities for the target’s compliance (x) and for the enforcement of sanctions by the sender (y), from the following matrix in table 1: table 1. general payoff matrix for the sender and target countries sender sanction no sanction target violate a1+e1x; a2+e2y b1+e1x; b2 comply c1; c2+e2y d1; d2 source: tsebelis (1990). the terms a1, b1, c1 and d1 represent the average payoffs to the target under different scenarios adjusted by the asymmetric information correction factor e1 (if the payoffs to the target are unknown to the sender) whereas a2, b2, c2 and d2 are the payoffs to the sender adjusted by the asymmetric information correction factor e2 (if the payoffs to the sender are unkown to the target). in equilibrium, the probabilities x* and y* are obtained as follows: optimal target’s compliance probability (x*): x* = (d2 c2 e2y) / (d2 c2 -e2y + a2 +e2y b2) (i) optimal sender’s sanctions imposition probability (y*): y* = (b1 + e1x d1) / (bl + e1x dl + cl al e1x) (ii) http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 when the terms e1 and e2 are equal to 0, then, both players are playing under conditions of complete information, rationality, continuous choices, and simultaneous moves. if one of these players chooses a strategy different to x* and y*, the other party has incentive to change his strategy, keeping simultaneous actions and counteractions between the parties. according to these results, the sender country is unable to affect the target country’s compliance probability (x*) by influencing the target’s payoffs under the different scenarios described in table 1. on the other hand, the probability expressed in (ii) should be taken into account to determine the expected loss for an mnc due to sanctions impositions on its dealings with a target country. this loss probability depends on the perceived payoffs to the target (violator) country under different scenarios. new mncs players in sanctioned countries: the increasing presence of emerging markets mncs (emncs) the growth of different emerging market countries over the last 30 years has favored the transformation of their local corporations into large mncs, best known as emerging market multinationals (emncs). the increasing presence of these emncs is reflected in the fortune global 500 list of firms according to their revenues in 2015 where 30% of these firms are emncs versus 10% ten years ago. by 2019, emncs from china have a leading representation in this list, with 119 companies, followed by corporates from brazil, india, indonesia, korea, mexico and russia among other seven emerging market countries (mourdoukoutas 2019). these emncs tend to invest in regional markets with some kind of cultural affinity with the emncs’ countries of origin, with fewer concerns for political risks and place more importance on their revenues growth in their current overseas expansion phase rather than on http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 their profit margins, which is the focus for mncs from developed countries (gomez-mera et al. 2014). at the same time, the internationalization of emncs from 20 top emerging market countries has contributed to 20% of the current global outward investment flows in 2015 in comparison to 2% at the end of the twentieth century (casanova and miroux 2016). many leading emncs are characterized by a relatively higher labor intensity in their production techniques as it is the most abundant production factor (rather than capital) in their countries of origin. the use of labor intensive techniques leads emncs to procure their entry into foreign markets with high levels of labor supply to be used in combination with their technologies (tolentino 2012). their entry into targets with high labor intensity contributes with the target’s efforts to achieve autarky conditions for their local supply of goods and services. these emncs have mainly addressed their international expansion by using innovative and eclectic business models, which are suitable to the unstable economic and political conditions of developing countries as these corporates are used to similar problems in their countries of origin. this practice makes them comfortable to engage in less transparent business practices aimed at obtaining benefits from local authorities in their countries of operations, as denounced by transparency international (2016). at the same time, emncs can leverage their presence in new markets by recurring to mergers and acquisitions (m&a) of local companies to obtain faster access to local know-how and social capital (networking) with connections to key political entities that can grant them with privileges for their local operations. by contrast, mncs from developed countries place their competitive advantages on the possession of key resources or in their leading positioning http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 within their economic sectors, with more concern for their reputational risk (madhok and marques 2013). in particular, emncs operating in regulated sectors such as utilities, etc., are more willing to engage in political negotiations with sanctioned targets as described by garcia-canal and guillen (2008), who mention the entry experiences in latin america of spanish companies from regulated sectors in the period 1987-2000. these companies have been more inclined to invest in more politically unstable countries if their authorities have more discretionary decision-making processes to grant favorable entry conditions to these companies that otherwise should undergo relatively stricter entry conditions than the non-regulated ones if they attempt to enter into more stable developed countries with more regulated grating processes by their authorities. on the other hand, many top emncs in the previous 2019 fortune global 500 list are stateowned enterprises (soes), such as sinopec group, china national petroleum and state grid from china, gazprom and rosneft from russia, which is a condition that makes more difficult their international expansion through m&a abroad. this restriction is due to the perception that soes from countries such as china have received subsidies to acquire targets abroad, which is considered as an unfair advantage under current international trade and investment standards. this practice led to reforms in the united states (us) and the european union (eu) to control foreign direct investment through changes to the committee on foreign investment in the united states (cifius) and the enactment of the eu framework for screening foreign direct investment (fdi) in 2019 under the regulation 2019/452 of the european parliament. the eu framework for screening fdi has similar objectives as the cifius (adesnik and ghasseminejad 2018). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 these restrictions in developed countries for soes from emerging countries have encouraged them to procure other counties for their investments and trade flows (business and sanctions consulting the netherlands 2019). as the number of sanctioned countries has recently increased, it is important to consider the economic weight of those sanctioned allied countries in relation to the economic weight of their senders to assess the success rate and likely duration of these sanctions, which should be taken into account by mncs to decide whether to leave, enter or delay their entry into a sanctioned country. this new pattern of alliances should be also incorporated into empirical studies to assess its impact on sanctions duration and success rates, which have been previously focused on the comparison between the gnps of a single target and its senders. modeling mncs’ dynamic behavior to deal with country economic sanctions risk based on the framework proposed by kakutami (2017) and as a contribution to further understand the dynamic behavior of mncs under country economic sanctions, this framework will be analyzed by analogy to the auditing games originally proposed by rasmusen (2001) between tax authorities and taxpayers. the adjustment of these games to this political risk involves considering mncs and senders as players sharing similarities with the behavioral patterns of taxpayers and tax authorities, respectively. under the sanctions game, an mnc evaluates two decisions: sanctions-bursting (sb) and sanctions compliance (sc). the sender considers two levels of observance on an mnc’s sanctions compliance: high and low observance, which determines two levels of conspicuity detection for an mnc: high conspicuity (hc) and low conspicuity (lc). an mnc faces a fine (f) if detected in sb and makes a decision to engage in this activity with a probability equal to α. in parallel, the sender runs observance activities on an mnc, http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 which determines a hc with probability β. at the same time, an mnc can obtain a payoff equal to p if engaged in sanction-bursting without being detected and p-f if detected whereas its payoff is expected to be equal to u as sanctions-compliant. it is assumed that p>u. on the other hand, the sender enacts a legal framework as well as promotes compliance campaigns with a total cost of s, such as s>0 to achieve a probability β to detect, to expose and to penalize sanctions-bursting activities by an mnc. the sender expects to obtain an economic payoff 5 equal to a if an mnc is sanctions-compliant and a net economic benefit of a – s after deducting its enforcement and campaigning costs. the sender sets a fine (f) at a level high enough to prevent sanctions-bursting so that f>p. the sender can obtain, at least, an economic payoff of e from an mnc if the sender follows a lc detection policy. for simplicity, it is assumed that s=0 under the latter policy. considering the previous scenarios, the net benefits for both parties can be expressed as a 2by-2 simultaneous-move game stated in table 2 by analogy to the rasmusen’s auditing games: table 2. sanctions-bursting game by an mnc in a target country mnc sender sb(α) sc(1-α) hc (β) (a-s, p-f) (a-s, u) lc (1-β) (e,p) (a, u) source: author’s own elaboration. the game in table 2 is a discoordination game with mixed rather than pure strategies for its equilibrium. the equilibrium can be obtained by equating the strategies followed by each player: 5 if mncs act in compliance with sanctions then economic sanctions are expected to last shorter until obtaining the desirable results aimed by the sender, increasing future expected returns to the sender (through tax and tariffs revenues, etc) from normal dealings of mncs with previously sanctioned targets. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 a. for the mnc: their profits under sanctions-bursting (πsb) and under sanctionscompliance (πsc) are expressed as follows: expected sanctions-bursting profits: e(πsb) = (p-f)β + p(1β) (iii) expected sanctions-compliance profits: e(πsc) = u (iv) then, (iii) and (iv) are equated to achieve the optimal situation for an mnc facing both scenarios in expression (v), so it can be indifferent between them: e(πsb) = e(πsc) (v) by replacing (iii) and (iv) in (v), the following re-expression for (v) can be obtained in (vi): (p-f)β + p(1β) = u (vi) expression (vi) can be rearranged to obtain an expression for the determinants of β, as the optimal conspicuity detection probability β* in (vii), which should make an mncs indifferent between sanctions-bursting and sanctions-compliance: β* = (pu)/f (vii) b. for the sender: its profits under high-conspicuity detection (πhc) and low-conspicuity detection (πlc) policies are stated in (viii) and (ix): expected profits from a high-conspicuity detection policy: πhc = a – s (viii) expected profits from a low-conspicuity detection policy: πlc = eα + a (1α) (ix) then, expressions (viii) and (ix) are equated in (x) to express an indifferent scenario for the sender between both detection policies: http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 πhc = πlc (x) expression (x) is re-expressed by replacing both sides by (viii) and (ix) to obtain (xi): a – s = eα + a(1-α) (xi) expression (xi) is rearranged to obtain a function for the determinants of the optimal probability, α*, of sanctions-bursting by an mnc, yielding: α* = s/(a-e) (xii) as expressed in (xii), the optimal strategy to be followed by an mnc is related to the level s of compliance-detection costs for the sender. a lower level of s to achieve a given probability β of conspicuity detection, leads to a lower sanction-bursting probability α by an mnc, since it will be cheaper to detect its sanctions bursting activities. in order to ensure this equilibrium, the sender should focus its auditing efforts on a consistent proportion of mncs that had been engaged with the target before imposing sanctions. this proportion should be also consistent with the track record that the sender keeps in its sanctions-detection efforts. if an mnc is aware that a sender is focused on auditing a proportion of mncs lower than β*, such as β = 0, then the mnc is likelier to engage in sanctions-bursting with probability α = 1 considering that p > u, namely, its payoff under sanctions-bursting practices (p) will be higher that its payoff following sanctions-compliance practices (u). if a sender knows this reaction by the mnc, then the sender will pursue a higher level of β, such as β = 1, which is also known by the mnc and will procure not to engage in sanctions bursting with α = 0. but the latter reaction is also known by the sender that will procure a lower β and the mnc will react to it with α = 1. these reactions will be repeated successively without achieving an equilibrium. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 within this dynamic between senders and targets, mncs might attempt to consider different strategic approaches to mitigate the effects of these sanctions on their operations, which will be reviewed in the next section. mncs’ risk management tactics under country economic sanctions for political aims in the management of political risks, mncs follow different strategies to reduce their potential losses as well as the occurrence probabilities. those strategies traditionally correspond to the following approaches (brink 2004; gregory 1988): a) integrative strategies, and b) protective -defensive strategies. integrative strategies are focused on mitigating the potential adverse impact of political risk factors on corporates by reducing their likelihood. this is mostly achieved by lobbying practices with host governments where mncs operate and integrating their practices to the local market conditions and regulations to reduce the frequency of local hostilities towards companies that, otherwise, may be perceived as foreigners or allied to national enemies. on the other hand, the use of protective-defensive strategies is oriented to minimize the magnitude of total losses arising out of political events in the host country such as expropriations, confiscations, foreign exchange controls, etc. these strategies procure to reduce their aggregated losses through the diversification of mncs’ functional areas and supply chains across different jurisdictions worldwide. the main concern to choose among those strategies has been traditionally centered around risks emerging from governments in the host countries where mncs operate. especially, after an expropriation or confiscation of mncs’ operations, mncs may lose their control on the local production of key goods or services for their supply chains. as alternative to obtain their needed supplies, mncs can follow trading with those operations under new owners. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 however, these transactions are likely to be banned under the current context of economic sanctions on a growing number of target governments in countries where those operations are based, which may produce a significant collapse to mncs’ global activities. this concern for mncs is reflected in table 3, which reports the top political risks for their operations based on a survey by oxford analytica and willis towers watson in 2019 among top mncs: table 3. main political risk concern in 2019 for mncs risk % of total responses trade sanctions or import/export embargo 31 political violence or forced abandonment 22 currency transfer restrictions or inconvertibility 17 expropriation or creepy expropriation 14 sovereign non-payment 9 others 7 source: oxford analytica and willis towers watson (2019) the previous survey was conducted in a group of mncs across different industries from developed countries (the us, europe and japan), mostly at the top 500 fortune companies according to their revenues, obtaining responses from 41 of these companies. in this group, 61% of the firms affirm that their levels of political risk have increased since 2018, mainly due to the imposition of economic sanctions on countries such as iran, russia and venezuela. trade sanctions is at the top of this list, displacing other risks that have been traditionally rated as more concerning, such as expropriation and currency inconvertibility (oxford analytica and willis towers watson 2017). in all cases, mncs procure to avoid the use of direct financial transactions using conventional international institutions as the existing bureaucracy responsible for the supervision of sanctions compliance can track them more easily though financial institutions. this bureaucracy is highly specialized in the united states and in the european union (freshfields bruckhaus deringer 2017). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 230 in the united states, the office for foreign assets control (ofac) issues the specially designated nationals and blocked person list (sdn list) containing the names of persons and entities that are banned from engaging in business deals with us nationals. in relation to the european union, its sanctions are implemented as follows: a) in compliance with resolutions by the un security council under chapter vii of the un chapter, b) according to the common foreign and security policy (cfsp) under article 29 of the treaty on the functioning of the european union (tfeu) and implemented at eu or national levels in conformity with cfsp council decisions whenever those involve arms embargoes or admission restrictions. the responsibility to impose penalties for sanctions breaches corresponds to eu member states rather than to eu institutions. it also involves the issuance of lists of sanctioned entities and individuals. financial institutions in the us and the eu have to verify any transaction with those mentioned in these lists, otherwise they may face civil and criminal penalties. if mncs insist on dealing with targets whose governments are deemed as violators of human rights, then, they are more likely to face boycotts from their consumers and sizable sanctions from senders. in this case, mncs might prefer to use strategies in their operations with target countries that contribute to reduce their visibility to the international public opinion. among these strategies, the following ones can be identified: abiding to international ethical standards, use of alternative suppliers from non-sanctioned countries, trading triangulation practices, changes in transport practices, exiting their investments in the sanctioned countries, use of offshore investment vehicles to avoid sanctions, exploiting loopholes in the enactment of those sanctions, lobbying with the sender to be granted sanctions exceptions and use of risk financing products to cover losses from political risks. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 231 mncs might abide to international ethical standards conducting their businesses regardless their jurisdictions. from this perspective, kakutami (2017) stresses that the public opinion in the sender country as well as in non-sanctioning third countries do not necessarily support sanctions imposed by senders on targets. people from the sender country can show indifference or consider that these sanctions may be unfair with mncs engaged with the target, minimizing the impact of consumer boycotts that might add to losses imposed by senders. by following international ethical standards, mncs could be well positioned with the public opinion to manage their reputational risk for their dealings with sanctions targets. this observance is particularly important to emncs if they are interested in improving their business reputation in developed countries. among those standards, it is important to consider guidelines such as the un guiding principles on business and human rights (unhr 2011) as well as the oecd guidelines for multinational enterprises (oecd 2000). these guidelines are mainly aimed at the best practices dealing with potential or already troubled countries. mncs should observe those guidelines whenever these confer superior rights6 than those under local laws. the use of alternative suppliers from non-sanctioned countries can be an effective mechanism for mncs depending on the characteristics of their required goods or services. this practice is advisable for the procurement of non-commodity goods and services whose origin can be easily tracked by parties related to the sender. on the other hand, the extraterritoriality of many sanctions, like those imposed on iran by the us, might lead to sanctions on suppliers from non-sanctioned countries that already deal with 6 rights such as child labor, dealings with irregular/armed groups, etc. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 232 sanctioned countries. this reach might also affect mncs that deal with these alternative suppliers, demanding a more intensive due diligence on their current or potential suppliers. trading triangulation practices are used to avoid direct linkages with targets. through those practices, mncs purchase goods or services to a vehicular non-sanctioned party under their control that is able to trade with a target. the non-sanctioned party arranges for the delivery of those supplies to mncs operating under the sender’s jurisdictional reach. for goods that are considered as commodities it is simpler to avoid any trace to identify their origin as it is possible to mix commodities to produce a blended variety that can evade chemical controls, such as the coal exports by south african producers under the anti-apartheid sanctions. a solution to mitigate those practices called for the requirement of “mining origin certificates” at customs declarations (international labour office 1992).the same avoidance can be applied in the case of services with a non-tangible nature such as back office support, provision of labor force and others, especially if their origin cannot be tracked through technological devices, etc. there is an intense international campaign to detect these kinds of practices among mncs. a recent example of this practice was evidenced with the chinese mnc huawei in 2018, which has been accused by us authorities of using non-declared related companies in hong kong and mauritius to directly sell goods with us components to iran and syria. those components had been banned for sale to iran and syria under current us sanctions.7 in relation to changes in transport practices, some authors (davarzani, zanjirani and rahmandad 2015) have found evidence of mncs constantly changing transport modes and 7 stecklow, s.; dehghanpisheh, b. and pomfret, j. 2019. “exclusive: new documents link huawei with suspected front companies in iran, syria.” reuters, january 9. accessed march 20, 2020. https://www.reuters.com/article/ushuawei-iran-exclusive/exclusive-new-documents-link-huawei-to-suspected-front-companies-in-iran-syriaiduskcn1p21mh. http://revistes.ub.edu/index.php/jesb https://www.reuters.com/article/us-huawei-iran-exclusive/exclusive-new-documents-link-huawei-to-suspected-front-companies-in-iran-syria-iduskcn1p21mh https://www.reuters.com/article/us-huawei-iran-exclusive/exclusive-new-documents-link-huawei-to-suspected-front-companies-in-iran-syria-iduskcn1p21mh https://www.reuters.com/article/us-huawei-iran-exclusive/exclusive-new-documents-link-huawei-to-suspected-front-companies-in-iran-syria-iduskcn1p21mh volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 233 routes for their provision of critical items to make more difficult their tracking. those changes are attributed to more intense checking by customs authorities on direct deliveries to or from targets. these limitations also involve cargo insurers, which are less willing to cover deliveries related to target countries, increasing the insurance costs for these operations as a more limited number of insurers will be willing to underwrite these cargoes. at the same time, mncs might consider exiting their investments in target countries to avoid sanctions. their exit can be voluntary or forced under sanctions enactments and should take into account their assessment on how long these sanctions are expected to last according to the sanctions’ ambitiousness. their exit can comprise the sale of their local operations to domestic or international nonaffected players by these sanctions. domestic players might be closely related to local elites that are supposed to be affected by these sanctions (kaempfer and lowenberg 2007). in other instances, mncs can consider the sale of their local operations to their local employees under employee buyout (ebo) transactions and similar practices involving local parties. another exit mechanism could include the liquidation of different assets corresponding to their local operations. however, local governments could ban this exit strategy and temporarily occupy local mncs’ premises in order to avoid any activity that may be regarded as deindustrializing. these occupation practices have been evidenced in countries such as venezuela, where the local government under the chavez and maduro’s administrations took over premises of mncs such as kellogg’s, clorox, etc., to avoid the disposal of their assets and their dismantling, which may disrupt their provision of goods to the local market.8 8 bbc. 2018. “venezuela: kellogg, fabricante de los corn flakes, cesa sus operaciones en el país tras más de un siglo”. bbc, may 16. accessed march 20, 2020. https://www.bbc.com/mundo/noticias-america-latina-44134446. http://revistes.ub.edu/index.php/jesb https://www.bbc.com/mundo/noticias-america-latina-44134446 volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 234 in all cases, it is expected that those sales will be closed at undervalued prices. if their new owners are related to the ruling elites, then, these elites could procure their acquisition with a sanction-rent-seeking goal as they will be facing fewer competitors from abroad operating in the local market, making the imposition of sanctions more unlikely to inflict damages on that elite. many mncs could also set offshore investment vehicles outside the jurisdictional reach of the sender. these vehicles can act as direct holders of the mncs’ operations in the target. in this way, mncs procure to avoid direct forced divestments in the target. in addition, the ideal jurisdictions for this purpose are those that have entered into investment protection treaties with the target’s jurisdiction. in general, these treaties are aimed at procuring investment protection guaranties to mncs from the target’s authorities against risks such as expropriation and confiscation under their jurisdiction. the protection against forced divestments in targets under economic sanctions should be incorporated into these treaties whenever one of their parties acts as a sender imposing sanctions on the other party, which may affect operations of mncs from the sender in the target’s jurisdiction. senders could also include the granting of tax and other incentives to their affected mncs as compensation for their restrictions to deal with sanctioned countries. by exploiting loopholes, mncs also procure to use unclear wordings and waivers in economic sanctions to keep dealing with the target.9 among these common loopholes the following ones can be cited: allowances to continue preexisting businesses with the target as technical assistance, use of payments mechanisms not considered under sanctions (use of 9 some loopholes allow foreign mncs’ subsidiaries to keep dealing with targets. however, under the iran threat reduction and syria human rights act of 2012 (us congress 2012) us mncs may become liable if their foreign subsidiaries violate us sanctions on those countries. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 235 local currencies and cryptocurrencies as described by abraham 2018), 10 employment of labor force from the target countries in non-sanctioned jurisdictions, bartering between countries, among others. 11 in addition to the identification of loopholes, mncs may also procure sanctions exceptions through lobbying practices on the basis of livelihood exceptions, among other considerations. these exceptions are granted through the issuance of licenses to follow trading with targets. for example, in the case of exceptions granted by the us office of foreign assets control (ofac) on us sanctions to different targets such as cuba, iran and sudan, more than 10,000 licenses to approximately 4,000 us mncs had been granted under the bush and obama administrations.12 these licenses allow business dealings with those targets amounting to more than usd 1bn under “humanitarian” exceptions. a closer look at these exceptions by becker (2010) shows deals in different areas from medical and food items to tobacco and entertainment. this evidence reveals a high flexibility in the granting of these licenses, mainly benefiting mncs from the sender. further to the previous tactical moves by mncs, it is important to consider the role of political risk insurance to mitigate the loss impact on mncs from their trade flows and investments in target countries. from this perspective, it represents a costlier risk transfer mechanism in comparison to investment protection treaties. among the most active 10 abraham, chris. 2018. “sanctioned countries looking to cryptocurrencies to bypass embargoes.” newconomy.media, september 9. accessed march 20, 2020 .https://newconomy.media/news/sanctioned-countrieslooking-to-cryptocurrency-to-bypass-embargoes/. 11 the use of workers from the target in non-sanctioned jurisdictions, who may be forced to send remittances to the target’s authorities such as in the case of north korean workers working in neighboring countries such as china (bbc. 2017.“how does north korea do business under sanctions?.” reality check, bbc. december 29. accessed march 20, 2020. https://www.bbc.com/news/world-asia-pacific-42314219). 12 becker, jo. 2010. “licenses granted to us companies run the gamut.” new york times. december 24. accessed march 20, 2020 https://archive.nytimes.com/www.nytimes.com/interactive/2010/12/24/world/24sanctions.html?_r=0 http://revistes.ub.edu/index.php/jesb https://newconomy.media/news/sanctioned-countries-looking-to-cryptocurrency-to-bypass-embargoes/ https://newconomy.media/news/sanctioned-countries-looking-to-cryptocurrency-to-bypass-embargoes/ https://www.bbc.com/news/world-asia-pacific-42314219 https://archive.nytimes.com/www.nytimes.com/interactive/2010/12/24/world/24-sanctions.html?_r=0 https://archive.nytimes.com/www.nytimes.com/interactive/2010/12/24/world/24-sanctions.html?_r=0 volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 236 providers of this type of insurance, the following ones can be cited: miga (multilateral investment guarantee agency) of the world bank group, ati (african trade insurance agency), the asian development bank, the inter-american development bank, iciec (islamic corporation for the insurance of investment and export credit), lloyd’s of london syndicates, export credit agencies (ecas) of many countries as well as private insurers such as american international group, zurich re, munich re, hannover re, general re, sompo international and sovereign risk insurance, mostly members of the berne union, which currently reports more than 80 members (the berne union 2020). their typical covers comprise risks arising from the host country of insured investments and exports: political violence in the host country (terrorism, civil unrest, war and the alike), expropriation and confiscation of assets, contract frustration by local governments, wrongful calling of financial guarantees, inability to repatriate funds and business interruption (the berne union 2020; miga 2011). the use of this insurance could be useful for mncs to cover their investments in countries that are not included under investment protection treaties. in addition, this insurance could provide a safer risk financing mechanism in cases of affected investments in target countries whose governments are financially constrained to settle losses arising from political risks considered in investment protection treaties. however, the current coverage offerings for mncs’ losses from economic sanctions on target countries is very limited by the previously mentioned carriers. mostly private carriers such as axa (france), sovereign risk insurance (bermuda) and sompo (japan) publicly announce a limited and tailor-made cover to protect against financial losses under trade embargoes as at the first quarter of 2019 (axa 2019; sovereign risk insurance 2019; sompo international http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 237 2019). ecas from sender countries are less likely to provide this kind of cover for their mncs as the main backers of these agencies are the senders’ governments imposing these sanctions. on the other hand, the traditional offering of political risk insurance requires the underwriting of these risks before committing any investment or trade transaction. it turns to be difficult to obtain this cover for investments already undertaken by mncs. under this circumstance, mncs should understand how to assess their expected losses for their dealings with current or potential targets after the imposition of economic sanctions this assessment enables them to self-insure against the impact of these risks on their preexisting investments and trade dealings. in addition to the previous difficulties, one of the main critics to the use of insurance is related to its likely incidence on a riskier behavior by insureds once covered by an insurance policy. from this perspective, it is also important to assess how the availability of political risk insurance to cover losses from country economy sanctions might encourage mncs to engage more often in dealings with potential targets. this patterns in plausible considering the previous research by afesorgbor (2019), who evidenced an increase in trade deals with target countries in the threat phase. given this evidence, the imminence of sanctions might encourage mncs to procure insurance coverage against this risk. in order to understand the effect of insurance on an mnc’s engagements with a target (prior to sanctions) in trade deals, the following game theoretic framework is considered: mnc’s behavior without insurance availability: http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 238 in this case, the mnc have two strategies: engage with a potential target with probability γ and not to engage with probability 1γ. the mnc is assumed as a risk-neutral agent, able to diversify its risks across different geographical markets. the sender has two choices in this game: impose sanctions with a probability equal to y* (in equilibrium as expressed in equation ii) and not to impose them with probability 1 – y*. the payoff matrix for this game without insurance is represented as follows in table 4: table 4. engagement of an mnc with a target country without insurance mnc sender engagement (γ) no engagement (1γ) sanctions (y*) (m-s, -l) (m-s, 0) no sanctions (1-y*) (t, p) (r, 0) source: author’s own elaboration. where m, t and r are the payoffs to the sender under different scenarios. in the scenario of sanctions imposition, the sender faces a cost of s to ensure sanctions compliance. the payoffs for the mnc are –l (cost of sales), p (including cost of sales and mark-up), whereas its payoff amounts to 0 if not engaged with a target. the expected payoff to an mnc engaging without insurance (πewi) with a target is: e(πewi) = -ly* + p(1-y*) (xiii) for this game with insurance covering an mnc for its engagements with a target, its corresponding payoff matrix is expressed in table 5: http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 239 table 5. engagement of an insured mnc with a target country mnc sender engagement (γ) no engagement (1γ) sanctions (y*) [m-s, -(y*+e1)l] (m-s, 0) no sanctions (1-y*) [t, p-(y*+e1)l] (r, 0) source: author’s own elaboration. in this case, the mnc pays a premium for (y*+e1)l, where l is the insured amount (cost of sales), the term (y*+e1) corresponds to the premium rate considering the optimal sanction enforcement probability as in (ii) and e1 corresponds to a mispricing factor due to asymmetric information between the insurance underwriter and the sender in relation to the probability of sanction imposition. the insured mnc might perceive e1 and procure to take advantage of this mispricing whenever its expected payoffs with insurance are superior to those without insurance. the expected payoff to an mnc covered with insurance to engage with a target (πei) is: e(πei) = -(y*+e1)ly* + [p-(y*+e1)l](1-y*) (xiv) the mnc will be better-off if its expected payoff with insurance is superior to its payoff without insurance, as follows: e(πei) ≥ e(πewi) (xv) replacing (xiii) and (xiv) in (xv): -(y*+e1)ly* + [p-(y*+e1)l](1-y*) ≥ -ly* + p(1-y*) (xvi) expression (xvi) can be rearranged to obtain the range of values for the insurance carrier’s mispricing factor, e1: e1 ≤ 0 http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 240 the mispricing factor most be strictly equal to or lower than 0 for the mnc to be better-off with insurance coverage when dealing with target countries before any sanctions imposition. the feasibility of this cover requires limiting or suspending its coverage once sanctions are imposed on a target, especially if these sanctions have an extraterritorial reach on an mnc that might demand this kind of insurance. in this case, it has been assumed that the insured is unable to influence the probability of sanction imposition by the sender, which is different to other kinds of insurance covers in which insureds can influence the loss occurrence probability with their misbehavior after obtaining insurance cover (moral hazard). this assumption can be modified whenever an mnc can influence the sender’s decision to enforce sanctions on a target without any involvement of the insurer, such as forcing a target to introduce changes that might benefit an mnc once it has been granted insurance coverage. in this latter scenario, e1 might also reflect this effect. further to the use of insurance, it is also important to explore new risk financing mechanisms to cover country sanctions-related risks in the alternative risk transfer market through the use of capital markets instruments to transfer these risks from mncs. at the moment, a manmade risk like terrorism is expected to be traded in capital markets with catastrophe bonds and the same kind of instrument could be used to cover other political risks. 13 it could be also possible to hedge sanctions-related risks with the insurance linked securities (ils) by making use of generally accepted indexes tracking these risks such as it has been attempted to 13 terrorism risk is expected to be covered through capital markets with the issuance of cat bonds by pool re, a uk government-backed mutual terrorism reinsurance facility (“pool re sponsors first terrorism risk catastrophe bond, baltic pcc.” 2019. artemis.bm, january 14. accessed march 20, 2020. http://www.artemis.bm/news/pool-responsors-first-terrorism-risk-catastrophe-bond-baltic-pcc/). http://revistes.ub.edu/index.php/jesb http://www.artemis.bm/news/pool-re-sponsors-first-terrorism-risk-catastrophe-bond-baltic-pcc/ http://www.artemis.bm/news/pool-re-sponsors-first-terrorism-risk-catastrophe-bond-baltic-pcc/ volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 241 cover another man-made risk like cyber risk.14 the development of tracking indexes in the political risk area might be possible through the use of modern technologies making use of artificial intelligence and machine learning breakthroughs developed by insurtech companies. one of these companies is geoquant, which has developed a software that applies these technologies and whose output is an index that reflects political risk levels in real time (geoquant 2019). the levels of this index could be used as triggers for the payment of payouts to the holders of these securities. conclusions and future directions from the previous literature review, it is important for mncs to take into account the elements that may lead to the imposition of economic sanctions on each country where they plan to start operations or are already operating as well as to assess their impact for potential senders and targets under different scenarios by using a game theoretical framework like the one proposed by tsebelis (1990). this framework is suitable to understand the evolving pattern of man-made risks, like this political risk, and to assess the optimal sanction enforcement probability that influences the expected losses for mncs whenever they decide to avoid further dealings with already sanctioned targets. once mncs decide to keep dealing with targets (such as in the case of emncs and soes from emerging-market countries) their conspicuity detection (β), according to the previous enhancement of the kakutami’s model, demands their attention to the sustained senders’ track record in their sanctioning efforts as well as to mncs’ management of their reputational risk, 14 pcs has developed a pcs global cyber index that can be used as trigger to determine payoffs corresponding to ils related to cyber risks ( “pcs aims to help understanding of the silent side of cyber risk: johansmeyer.” 2018. artemis.bm, september 10. accessed march 20, 2020. http://www.artemis.bm/news/pcs-aims-to-helpunderstanding-of-the-silent-side-of-cyber-risk-johansmeyer/). http://revistes.ub.edu/index.php/jesb http://www.artemis.bm/news/pcs-aims-to-help-understanding-of-the-silent-side-of-cyber-risk-johansmeyer/ http://www.artemis.bm/news/pcs-aims-to-help-understanding-of-the-silent-side-of-cyber-risk-johansmeyer/ volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 242 regardless their optimal sanction-bursting levels. this detection seems to be of less concern for many mncs from developing countries, more prone to employ non-market entry strategies into developing countries to reduce their observance to many regulations that, otherwise, they must meet in the context of developed countries, as suggested by different authors (garcia-canal and guillen 2008; kobrin 2009; li and gaur 2014; salazar et al. 2018). a mismanagement of this risk might also expose mncs to further losses from consumer boycotts. the intensity of these boycotts is expected to be highly related to the values that are shared by the public opinion in the sender country as well as in the target country and third countries where mncs operate. a robust way for mncs to minimize the impact of this risk is by conducting their operations in compliance with high corporate and social responsibility standards such as the ones suggested under the un guiding principles on business and human rights (unhr 2011) as well as the oecd guidelines for multinational enterprises (oecd 2000). at the same time, a decrease of the senders’ costs to detect sanctions-bursting activities for any level of conspicuity detection should lead mncs to follow a more sanctions-compliant behavior whenever they act as profit maximizers and interested in keeping the possibility to deal with senders. otherwise, mncs might act pursuing other purposes to keep dealing with a growing number of targets, such as geopolitical interests or due to the impossibility to compete in markets under the sender’s jurisdictions, as revealed by emncs and soes from emerging market countries. facing the possibility of penalties for their dealings with targets, mncs should make the decision either to keep operations with the target or to assume losses from their temporal or permanently exit from these operations or to even transfer those risks to third parties. they http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 243 can pursue different strategies to retain these risks by reducing the visibility of their direct dealings at high reputation risk costs, recurring to lobbying practices to be granted sanctions exceptions or transferring those risks to third parties. the transfer of this risk demands updates to investment protection treaties to include trade and investment losses due to economic sanctions when one of the parties acts as a sender. the use of political risk insurance as traditional risk transfer mechanism of political risks also requires its adjustment to include mncs’ losses arising from these sanctions. in addition, the use of capital markets to transfer this risk can be also explored by promoting the issuance of instruments such as catastrophe bonds and insurance linked securities using triggers related to these risks. the feasibility of these instruments should consider the assessment of this risk by exploring the different elements that may lead to the imposition of sanctions as discussed in this article. of particular importance is the understanding of the use of insurance as risk financing instrument as it could encourage moral hazard in the behavior of insureds (mncs) whenever they have privileged information on the likelihood of sanction impositions by senders in comparison to the insurance providers. this risk requires adjustments to the design of insurance contracts, such as the use of deductibles, to discourage moral hazard. for further research, it is recommended to explore business cases and empirical evidence on how the growing presence of emncs in many target countries, the increase in the number of target countries dealing among them and the use of financial mechanisms outside the traditional international financial systems, such as cryptocurrencies, are contributing to reduce the effectiveness of the current types of trade and financial sanctions. this comprehension is important as senders might react to these trends with countermeasures such as extraterritorial sanctions involving all kind of dealings with targets that might affect third parties indirectly http://revistes.ub.edu/index.php/jesb volume 5, number 2, 215-247, july-december 2020 10.1344/jesb2020.2.j081 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 244 related to targets. the reach of these extraterritorial sanctions also demand the use of methodologies such as network graphs and others to explore the levels of interconnectedness among different business players that might be negatively affected by these sanctions. references adesnik, david, and saeed ghasseminejad. 2018. “foreign investment in iran: multinational firms’ compliance with us sanctions.” research memo, foundation for defense of democracies – fdd. accessed december 10, 2019. doi:10.2139/ssrn.3257581. afesorgbor, sylvanus. 2019. “the impact of economic sanctions on international trade: how do threatened sanctions compare with imposed sanctions.” european journal of political economy 56:11-26. doi:10.1016/j.ejpoleco.2018.06.002 axa insurance. 2019. “products / trade credit insurance.” accessed december 28, 2019. 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https://datahelpdesk.worldbank.org/knowledgebase/articles/906519#high_income. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.congress.gov/112/plaws/publ158/plaw-112publ158.pdf https://datahelpdesk.worldbank.org/knowledgebase/articles/906519#high_income http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 susana bandieri conicet-ipehcs (argentina) araceli almaraz el colegio de la frontera norte (mexico) business families in southern patagonia: from the end of the 19th century to the first decades of 20th century abstract the groups of settlers who arrived in punta arenas in southern patagonia in the second half of the 19th century, established the trade in hunting products, leather and exotic feathers. they organized the first companies as trading houses between individuals and friends. the capital accumulation of these immigrants promoted take-off and productive control based on external trade routes, an evidence of prior connections abroad. from 1881, the multiplication of some family companies boosted out controlling branches and suppliers of value productive chains through different association to foreign groups encouraged by the offer of land concessions. partnership by friendship and family also added anonymous societies with a shareholder scheme including family members. the major article’s goal is to analyze first family business in this context, through a genealogy business approach. theoretical concepts and method used here include debates of economic history and entrepreneurial history focused on family business. the core is social and commercial structures for understanding the family continuity, and also business survival in specific contexts. we elaborate three intertwined commercial and family genealogies that worked first in punta arenas before 1908 and later in argentina. and, we analyze strategies by family members of second and third generations achieved for survival, and configuration of the braun-menéndez behety business family. we relate some findings to the connections between punta arenas economy and european capitalism; interregional connections; the family as a sociocultural dimension in entrepreneurship; management innovations in rural contexts and the pathways followed to establish the firsts mother-firms in austral patagonian area. keywords: businessmen; patagonia; family business; mother-firms; business genealogies corresponding author: e-mail: almaraz@colef.mx received 17 october 2019 accepted 1 april 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:almaraz@colef.mx http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 introduction business groups were established in argentine patagonia to lead regional development, based on the diversity in political, economic and social strategic activities and social alliances, including those of family nature. this article analyzes the origin, development and expansion of the family business in punta arenas, a port locality, through the first companies established in strait of magellan (chile) and the argentine patagonia. with a simple example of family and non-family investments, we will see how a small group ventured into the most varied activities at the regional level until it led to a national emporium of warehouses. the following questions lead the research: what elements made possible the origin of family businesses in the patagonian region between 1868 and 1908? how were the family businesses of the braun and menéndez behety strengthened since the commercial merger of 1908? and what elements they arranged for a successful first generational succession? we found our theoretical and methodological basis on the history of business. the assumption is that some groups of businessmen in peripheral regions such as argentine patagonia had different institutional support to settle in the area. besides the concessions that allowed productive and commercial takeoff, is necessary to talk about the important group of settlers and businessmen who arrived in the second half of the 19th century and how they developed the first productive activities to sustain the capital accumulation. the second moment came with livestock and the production processes, altering with that the local productive organization. the durability of some first companies and the continuity of families depended on the rapid participation of members of the second generation, and the marriage, exports and control of value chains in punta arenas. therefore, adaptability depends on the parental structure and personal relationships with representatives of the governments of chile and argentina. the http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 third generation exemplifies the victory of family businesses successions whose members implemented internal specialization-diversification strategies associated with a familycontrolled corporate government. an important element of these early stages was the rise of one of the most important family companies, la anónima, which remains in force until today in south of argentina. our findings are that the organization carried out by the first groups of european immigrants established in the strait of magellan reflects the abilities to visualize and guide regional productive development trough commercial alliances at national and international levels; we must see the land concessions as a key to increase foreign capital stock and the global connections; a simultaneous impulse of local branches and global markets to make possible the control of local productive chains with a few number of suppliers; a high specialization and innovation in livestock in early 20th century familiarly controlled; an entrepreneur dynamic to forming limited partnership, collective business, specifically family business, organized as anonymous societies and combined with informal commercial agreements to reduce transaction costs. this article concludes in the 1930s when generational relay from third to fourth generation of business families occurs. this confirmed the importance of social and parental structure for continuity and perdurability of business despite the conditions in communication channels, population and a changing political context. i. business and family the complexity of family ventures and their continuity over time has been studied from unique approaches. the relevance to identify, characterize and analyze businesses that have been controlled by family groups has been discussed in the last decade by fernández and lluch, (2015, 19-21), and fernández-roca and gutiérrez (2017); these authors focused on european http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 and latin american cases to debate organizational structures, management and internationalization of family business. in latin america, studies on the presence and continuity of family in business remain an exercise in construction. barbero and lluch (2015, 220), have discussed “family capitalism” where the strategic is: ownership by at least two members of one family, at least two family members in the board of directors, members of over one generation controlling property rights, and the companies managed and controlled by original families. however; the heterogeneity of family businesses and trajectories in latin america (latam ahead), implies unique ways and origins that led to theoretical and methodological challenges. to historians studying latin american companies is essential to move forward definitions allowing understand the configuration of family business, business family and business group. it is necessary to highlight the territorial and historical contexts in the analysis of changes and perdurability of family business. cerutti (2015, 152), recognizes the overlap between business family and business group, pointing out guide-companies (mother-firm) that born and endure linked to business families and contribute to business development and dynamic of specific economic spaces. we study the family business structures evolution. to cerutti (2015), nuclear families articulate with others to control businesses and generations. the author´s perspective is based on the regional and historical dimension of business and parental ties. other studies focused families, their early ventures, and family management. here, the parental structure of companies and its continuity are the unit of analysis. the success or failure of family businesses does not directly associate the configuration of business families, but the continuity of family’s networks and transmission of business and knowledge to successors can provoke accumulation of capital and new business (almaraz 2018, 82-85). this approach uses as control variables the number of generations and businesses created by successors. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 considering structures of family businesses and business networks understanding the business family configuration, and also like barbero and cerutti, starting when two or more generations exist. a constant concern to almaraz is the configuration of business families in late capitalism of latin america (almaraz and serrano 2016), and how foreign business groups and modern firms overcame, joined and / or changed the native business groups if there was. this work added discussions about latin family groups, specifically to argentine approaches where major of family over the non-family firms has evidenced by barbero and lluch.1 this work also has proposed to adjust the balance around of heterogeneity of family businesses and avoid assumptions about their inevitable failure in argentina. the theoretical justification took a major step in the historical analysis of economic, and social structures in latin america. the family is a structure that allows facing risks. when considering on the one hand, the principles of veblen's institutional economic theory we are recovering the notion of human action as an economic activity that transforms and evolves by being influenced by structures of social meanings and behaviors (veblen 1965; figueiras and morero 2013). therefore, we assume that a family business represents a social and economic structure that is organized and culturally transformed. we consider that institutions and their evolution affect the behavior and performance of family businesses as north proposes from the new institutional economy (1990), then they are changing in part respond to institutional scope. and also, we assume that in family businesses there are transaction costs that are not contractual or commercial (untraded), permitting them to survive. then should study in the long run to specify its features and influence in the business perdurability. 1 to these authors between 1918 and 2010, family firms outperformed non-family firms in the largest argentine companies’ group, participation percentages ranging between 60% and 80% (barbero and lluch 2015, 242). lópez (2011) also analyze argentine firms focusing in agribusiness sector. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 i.1. conceptual bases and methodology we base our analysis theoretical basis of veblen's economic institutionalism and some north’s ideas about uncommercial transaction costs applied to the study of the family business following the next categories. ethnic business origin, family business structure as a core of social links,2 relational capital, family business extension, family corporate governance and generational succession, and institutional scope. these concepts proposed to analyze the continuity of social structure and business perdurability. the study focused in first on the configuration of initial businesses in the patagonian area when produced the settlements. it´s continued with a long-run observation of businesses to rebuild business genealogies family ties linked that. the methods used were biographical and historiographical following the general perspective of entrepreneurial historians (gilbert 2003 and 2009; fernández and lluch 2015; cerutti 2015; moyano 2015; almaraz and serrano 2016), and also making a triangulation of facts of individuals and structural to understand institutional conditions in family and land legislation levels. the primary and secondary sources were biographies, public registers, directories, newsletters and yearbooks, personal letters, and specialized bibliography. ii. the scenario of argentine patagonia: santa cruz and tierra del fuego. the study of business groups begins when production networks established, but it is rare to rethink them from the early stages when they emerge. in the austral area of patagonia emerges in 1868 as a budding economic space when arrived foreign settlers to implement business 2 regarding family business structure, we following the next classification: i) nuclear family businesses whose shareholder structure is only direct parental ties, ii) extended family businesses where shareholders have direct and indirect parental ties, and iii) composite family businesses where core group of shareholders is a family but it includes partners who have no parental ties (almaraz 2018). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 activities. the "productive network", as defined by cerutti (2015, 154), at patagonian area must understand since it began the first stage. in this section we show the coming of some settlers and how they created the former business in this region. historical studies on peripheral societies and poor industrialization such as chile and argentina in the middle of the19th century, argue that expansion of several chilean economic sectors towards argentine patagonia presented at least until the 1920s, and others show that was until 1930s-1940s (martinic 2001a). and until a few years ago some others findings achieved by researchers of argentine economic historians affirmed as an indisputable fact that set of patagonian territories had incorporated into national and international economic system with exclusive atlantic orientation through raising of sheep and get-selling of wool as activities that displaced from the pampas plain due boom in cereals and recovery of beef. however, beyond territorial limits -provincial and / or national-, becomes evident links with outside markets businessmen (bandieri 2001 and 2013). the business association of these agents represented multiple forms of capital accumulation and linkages with investors and shareholders from other countries. had persisted to affirm of an "autarkic region" (martinic 1972, 1975 and 1976; barbería 1991 and 1995) integrated by santa cruz and tierra del fuego, accepting that the economy was significantly to chilean area of magallanes and its capital city punta arenas because of production of sheep and wool. hence, must be nuanced these limitations and inaccuracies lighting the many international business contacts founded and the wide range of productive activities during and after the largest stage of land concessions. this article focused to recognize the imprint of first settlers without ignoring that its abrupt arrival generated deep conflicts with the native communities. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 ii.1. institution of land grants and arrival of foreign groups chilean government promoted new settlers at the end of the 1860s. the border treaty between argentina and chile (signed in 1881) and the creation of national territories of santa cruz and tierra del fuego (in 1884) were foundations to new measures and to promote the distribution of expropriated land to indigenous communities and to register the first magellan settlers in southern patagonia (bandieri 2005; bandieri and blanco 2009; bandieri 2018). specifically, in the carlos maría moyano government (1884-1887) contacted buyers in santa cruz to complete the leases and / or buy low-cost public lands in patagonia. in 1885, moyano got permission to grant grazing lands to malvinenses who wanted to settle in the continental area. this encouraged sheep producers of british such as waldron brothers and wood & tomas greenshields, who occupied south and center areas of santa cruz (coronato 2018). likewise, the concession of lands between important groups of punta arenas (chilean town) delivered fiscal lands to malvinense investors in northern tierra del fuego island. some beneficiaries were juan hamilton, thomas saunders, hyle and ness from falkland, and settled local merchants such as josé nogueira (portuguese origin) and josé menéndez (spanish origin). for "activating the formation of a patagonian land market" in the 1890s, argentine government began an intense campaign in europe to sell land implementing express advertising strategies. a contract signed in 1888 between president carlos pellegrini and adolfo grünbein, who was a german lender and broker land living in buenos aires, gave authorization considering the special law (no. 3,053) approved in 1894 to sell lands. this law endorsed a direct sale for one million hectares in unbeatable conditions to buyers. the agents interested could opt for lands in chubut or santa cruz, latter being the area where significant transfers took place. they distributed the lands transferred by grünbein among 21 buyers, 14 of them corresponded to http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 livestock companies installed already in different areas of chile and santa cruz (bandieri 2006 and 2018).3 these land concessions had an important impact on santa cruz and tierra del fuego. at the end of the 19th century punta arenas became the most dynamic point in southern chile because of its strategic position. it was the only interoceanic communication between puerto montt and the magellan region until before 1915, at the opening of the canal of panama. these structural conditions influencing the groups linked to economic dynamics of strait of magellan to transfer wool and frozen sheep meat for sale in european markets through magellanic port. at the beginning of the 20th century, the participation of merchants from punta arenas expanded rapidly. some of them become owners and / or tenants of new fiscal lands at tierra del fuego island and santa cruz, argentina. to speed up the settlements, president roca installed a telegraph line between cabo vírgenes and punta arenas, while the chilean government eliminated all customs taxes to transform punta arenas into an economic capital of a vast region that, over the international limits, extended from payne to cape horn and from chubut to tierra del fuego (map 1). also, at the end of the1910s, strait of magellan had its greatest commercial boom; 50% of the sheep sent to foreign markets came from argentina (martinic 1975, 305). 3 adolfo grünbein, married with sofia seeber, was a land broker. he supported to the augusto link & co. started up in 1886, —german company dedicated to export and foreign trade—, the bank of antwerp, and the farmers juan hamilton and tomas saunders. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 map 1 influence area of city-port of punta arenas (century xix and first decades of xx) source: http://www.estrecho-de-magallanes-punta-arenas/mapa.htm one important fact is that the land concession stage favored the first foreign inhabitant groups in the magellan region. but how do they established in previous decades and how they developed commercial abilities to establish agreements in outside markets in europe? a general answer is that the relational capital accumulated by them carried out to establish political contacts in chile and argentina and to achieve incipient internationalization, which forcing to relativize the cited notion of autarchy. although some of the first commercial networks become weak in 1868, they permitted to seek markets outside the region and to organize the production. while foreign investments had effects not only in the nascent installed capacity, but in new associations for exploring and exploiting commercial routes abroad. some individuals and families became success agents and their companies advancing throughout the 20th century overcoming to adverse local conditions as we'll see ahead. http://revistes.ub.edu/index.php/jesb http://www.estrecho-de-magallanes-punta-arenas/mapa.htm volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 iii. businessmen: 1868-1908 from punta arenas to most austral area of argentine patagonia, men like josé nogueira rua, elías and mauricio braun, and josé maría menéndez arrived by the same period. in a short time, they become important merchandise and businessmen. but where did these characters come to the magellan region? what elements defined the first commercial, social and personal alliances in punta arenas? were their ventures a key piece in the emergence of new business associations to improve regional productive development? only they responded temporally to foreign demand of products or directed their offers in foreign markets? since the 1860s most foreign settlers arrived at punta arenas from spain, switzerland, portugal, france, germany, falklands and great britain. the multicultural landscape at the territory of magellan (ethnicity bases) helped them to establish commercial networks and new political ties —after the concessions occur— with officials and legislators from chile and argentina, as bandieri has pointed out (2015). then, some agents promoted the expansion of their local businesses and a structure as a definition of their companies and speed-up connecting with capitalism abroad. the next three business genealogies offer some clues. the groups arrived between the decades of 1870 and 1930, their businesses had a family organization in the majority and among all of them they started up the family business network braun-menéndez behety. iii.1 from portugal to punta arenas: the “sea lion” captain josé nogueira rua (1845-1893) was born in via nova de gaia, a small and humble rural town of porto, portugal. without educational instruction and the age of 12 approximately, he embarked on a sailboat towards havana (martinic 2001c, 19). after passing through rio de http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 janeiro, montevideo, buenos aires and el callao, he arrived at punta arenas at 21 years old (1866) to try his luck. he had no capital, no family, and only he had the knowledge gained during his marine vessel’s trips (lafuente 2015, 10). for martinic. (2001c, 26-27), the first contact of josé nogueira to local activities in punta arenas enjoy hunting of sea lions “of two hairs”.4 he had knowledge of boats but learned to hunt because of his friendship with luis piedra buena, an argentine neighbor. this rough activity projected to josé nogueira who rapidly upgrading his local economic position. then nogueira could extend its first commercial networks to foreign markets and buy his first ship "anita", and integrate his fleet of vessels that later included to "san pedro", "san josé", "ripplig wave", "martha gale", "rescue", "express" and " pichincha". the next step carried out simultaneously the development of hunting with the sale of products. it allowed the portuguese to establish the josé nogueira & co. a warehouse that operated between 1869 and 1874. the firm included trade of "general stuff" and sale of naval items. the collaboration with one of the most important interoceanic companies in the region, called compagnie maritime du pacific, helped nogueira to join his firm shipping services. (martinic 2001c, 59). this learning process will be decisive in his career. combined these early activities with the rescue of shipwrecked loads called "raques". later started timber trade, parking and, cabotage services. in 1876, almost a decade after arriving, specialization distinguished josé nogueira’s career in maritime activities focused on sea hunting, commerce and specialized services. in this year his fleet had an important mission to sheep’s transportation to punta arenas. when end border disagreements between chile and argentina in 1881, the economy of punta arenas intensified because of raising rates of population and a number of firms established. they domiciled some 4 this activity started by real compañía marítima founded in 1789 in puerto deseado, north of punta arenas in the argentine (barbería 1994). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 companies in valparaíso —an important regional business hub— where many businessmen in patagonia could take part as shareholders and earn profits to get new companies. it applies to say that route from punta arenas to valparaíso opened the new ties with europe.5 after offering his services to the first farmers, nogueira considered another activity the getting of land concessions and an alternative route of commercial projects from sheep breeding. its possibilities of expansion depended on sound investments (own resources) and the relational capital accumulated until that moment to successful political lobby. thus, in 1881 he got directly the first of three land concessions on the north bank of pescado river. as a visionary, nogueira introduced administrative innovations to get money: the formalization of land transferences to next partners must be through a social firm to establish an effective mode to capitalization. we would define the role of his partners and the terms of the collaboration in the new society. for the first concession he started up the nogueira & co., in partnership with juan hurtado. the following year (1882) he constituted the tierra del fuego sheep farm co., to establish the peckett harbor a first high farm in getting have wiring. to install the cabo negro farm, josé nogueira invited as partner to elías braun and in partnership with him also supplied top meat through the braun & nogueira co. (martinic 2001c). this association was the beginning of a long relationship between nogueira and braun’s family members that resulted in marriage jose nogueira and sara braun. by the 1880s, nogueira was a successful businessman in the commercial, maritime and farm activities, and was the beginning in mining exploration. to merge his commercial networks, he avoided intermediaries and controlled directly internal and external distribution and supply 5 this area, absolutely peripheral in the agro-export structure of argentina and chile, centered in the ports of buenos aires, in the first case, and of valparaíso and concepción (martinic 1972; 1975 and 1976; barbería 1991 and 1995). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 routes. in chile, nogueira had nine suppliers established in valparaíso and two more in concepción and talcahuano (martinic 2001c, 66-67). the nogueiras’ international networks included suppliers and buyers from uk, uruguay, germany, france and portugal. to fulfill all commercial commitments, nogueira turned to "attorneys" -legal representativestake decisions allowed in his name6. closely nogueira’s collaborators were dr. thomas fenton an export agent and commercial promoter, mauricio braun who was his apprentice and later nogueira's agent and partner, walter curtze, and thomas greenshields. in 1885 josé nogueira associated to ramírez and fuhrmann to do mining activities, also to ramírez, braun and mancilla. unlike commerce and shipping firms, he only was as a capitalist partner. the mining concessions that nogueira got "américa" (transferred by juan manuel frías), "anita", "san pedro" and "san josé", while encouraged to his collaborator mauricio braun to getting the mining belongings "sofía", "sara" and "ana". although mauricio not yet related to nogueira as family, the relationship of trust between the two allowed him to expand his possessions and save transaction costs based on friendship. in 1886, nogueira showed his management and business capabilities when restructured his main business. he contacted the french specialist gastón blanchard, who had been a collaborator of the a. trouillé co. a company established in valparaíso. firstly, nogueira dissolved the josé nogueira & co., to replace it with the nogueira & blanchard co., which registered 80 thousand pesos paid in equal parts by the partners in 1887. internal changes involved the creation of commercial, maritime and representation sections. the management was by juan blanchard, mauricio braun, and walter curtze respectively, while gastón blanchard was the general manager (martinic 2001c, 113). it should be note that reorganization 6 rarely the literature on entrepreneurs has discussed about legal representatives in latam, despite of they are very important characters in business accompaniment, performance and business success. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 was blunt in nogueira's businesses. by then the shipping activities were emerging as an important local and foreign business niche. nogueira’s practices allow us to identify another two important agents: the concessions broker and the land broker. they were key for agricultural and livestock activities. the firsts conducted lobby to get land contracts, and the second were allies for the operation of farms. once got the concessions, nogueira formalized new companies, as anonymous, to transfer land and exploit them. for example, after the second concession got by nogueira in 1889 in tierra del fuego (equivalent to 180 thousand hectares), he started up the sheep farm company of tierra del fuego (lafuente 2015, 78). in the same year nogueira contacted to cattle-financial group waldron & wood co. represented by mont e. wales to reallocate titles and make up in 1890 the land of fire farming co. (based in london).7 in coordination with nogueira, mauricio braun got another concession for 170 thousand hectares. unfortunately, the partners not found immediately and nogueira contacted again to group waldron & wood co. two years later they accepted the terms of transference land and started up the philip bay sheep farming co. in similar conditions as before company, being braun the principal (martinic 2001b and 2001c). these two operations of nogueira confirm his assumption about a previously planned land petition, and the strong trust between he and braun. the greatest of nogueira's successes presented in 1890 upon receiving the third concession for 1,009,000 hectares. this unluckily coincided with growing deterioration of jose's health. in 1891, josé worsened affecting both business and family relationships (martinic 2001b, 88, 2001c, 138). in 1892 the scenario for nogueira aggravated when unexpectedly gastón blanchard, his partner and friend, dead. a surprising decision came when josé instructed his 7 in the company nogueira was one of five shareholders, contributing £ 250,000. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 attorneys and partners to start the liquidation of the nogueira & blanchard co., setting a term not exceeded six months from july of that year (martinic 2001c, 139-141). before the end of 1892, nogueira caused surprise again when agreed the session of a third of grand concession to his friend and partner ramón serrano montaner, who was the "concession broker". the one who was now part of nogueira's family, mauricio braun, asked his brother-in-law to stop the liquidation. without success in the negotiation, braun had to advance in the company´s liquidation but not to lose the company, proposed to juan blanchard buying the share holds to get the transfer of the company. the braun alternative finally proceeded after nogueira’s death, who was his mentor, partner and friend. tenacity and perseverance that became a commercial and an economic legacy must distinguish nogueira. in his best moments nogueira, instances from chile and brazil as a distinguished citizen. his productive achievements and projection of local development were indisputable (martinic 2001c). one of nogueira's social relations impacting in business durability was her marriage to sara braun, mauricio's sister. besides allowed increasing his relational capital in the political sphere at the highest levels. braun’s family was respectable and known in a political environment. the celebration of the nogueira and braun marriage was in 1887 and finished in 1892. nogueira´s marriage had no descendants. his widow and brother-in-law. as a petition of sara, reproduced the capital, business companies, and land. in consequence, sara braun became in the greatest heiress. this projected the second generation of braun’s family, including to josé menéndez, who was the nogueira's business rival in punta arenas (table 1). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 table 1. the business genealogy of josé nogueira period productive activities as founder type of networks building type of capital accumulated skills 1866 — social: no family and friendship links when he arrived at punta arenas (age 21) business: - — marine 18671876 commercial and early international projection hunting sealion trade of feathers and wild skins raque social: local friendship property: landowner commercial: local buyer (indigenous) and abroad buyer, local and abroad seller business: owner financial relational (friendship) commercial marine deal maker visionary 18761882 shipping by sea local livestock from 1876 to 1882 through innovative management methods foreign commerce social: trust personal land: land applicant and landowner commercial: local and abroad seller service provider: local and abroad maritime shipping employer: local and foreign specialized workers business: owner financial relational commercial political deal maker visionary applicant of land concessions shareholder businessman 18861890 specialization of own business with an internal reengineering and new partnerships exploring in mining getting concessions social: trust personal, 2nd marriage and family land: land applicant, landowner, land grabber service provider: local and abroad commercial, maritime shipping, representing farm: sheep breeder, employer of foreign specialized workers business: owner, partner in formal societies (foreign and local), land brokers’ informal partner, land intermediaries’ formal partner, mining intermediaries’ formal share, friendship partner financial commercial relational (friendship, parental and political) applicant of land concessions innovative visionary shareholder businessman http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 period productive activities as founder type of networks building type of capital accumulated skills 18901892 searching new profits by land concessions social: trust personal and family land: land applicant, landowner, land grabber service provider: local and abroad commercial, maritime shipping, representing farm: sheep breeder, employer of foreign specialized workers business: owner, partner of formal societies (foreign and local), land brokers’ informal partner, land intermediaries’ formal partner, mining intermediaries’ formal share, friendship and family partner financial commercial relational (friendship, parental and political) applicant of land concessions shareholder businessman source: authors’ elaboration. synthesizing, the last name nogueira did not continue, although the companies formed by josé survived because of the intervention of his widow sara and mauricio braun. mauricio was a member of the heiress's nuclear family, and also his position was important because he had worked in the nogueira business network. this succession was successful because the family structure continued by the successor family, who was the main administrator of a network of merged companies. the corporate governance changed in the minimum, and totally in the property. a branch that allowed continuity followed the second generation of these two families. nogueira's brother-in-law followed his legacy in business, endured the main firm and advanced in his business career, taking advantage of the social network in which, he already took part. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 iii.2 the braun hamburger family after settling in telsen, a town in the russian empire —today republic of latvia— elías braun and sofia hamburger emigrated to hamburg, then to london and finally to south america. in 1872, the family of five members arrived at buenos aires,8 where a chilean diplomat offered to elías braun basic goods to settle in the south`s country. like other families, families’ braun received 24 hectares and 12 additional for each child over 14 years old. the context for the settlement in southern chile will be the first institutional resource used by the head of the braun family, as nogueira did. individuals and groups take advantage of the institutional environment. meanwhile, the institutional effects revealed in social continuity and the organizational in business. because of this, as implied in the first section of this article, business families and family businesses are units that led to analyze institutions —in the long term— and sociobusiness behavior. in 1874 elías arrived at punta arenas, where had access to housing materials, one cow, one mare and food for the first six months (lafuente 2015, 128). originally braun dedicated to sale leather, wool and ostrich feathers. these activities permit us to infer his first contact with josé nogueira. historical references show that elías braun installed a small hotel —the kosmos— and also worked to extract coal. they strengthened their relationship when elías started a business to merchandise imports from europe through the braun and co. and receiving financial support from nogueira. later in 1881, both started up the braun & nogueira co. to supply meat (martinic 2001b). as previously mentioned, in 1889 josé nogueira and elías braun ventured into livestock sharing land. the settlements built a small context for business 8 the children sara, mauricio and oscar were born in telsen, and ana was born in paraguay. the three minors, fanny, mayer and juan were born in punta arenas (lafuente 2015, 18). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 in punta arenas, which was conducive to consolidate an internal network of owners and businessmen. mauricio braun hamburger, the second son of his family, was a provisional employee used as a child in the bloom, schröeder & co. and later in the josé menéndez’s stores. in 1880 (15 years old), he became a formal employee at the nogueira’s company. without knowing it, braun would become nogueira's trusted staff. he worked as a sales agent, in representation of nogueira’s company and partner in the nogueira & blanchard co. nogueira was also his teacher, friend and later brother-in-law. being yet young, braun started his own business, although with nogueira’s approval. in 1885, his boss encouraged mauricio to apply for concessions of land and mines, placing them next to those of nogueira. in 1888, mauricio established the scott & braun co. to manage the la fortuna sawmill and two others: río seco and tres brazos. in 1889, taking advantage of nogueira's relational capital, mauricio got 170,000 hectares to be exploited in santa cruz and san julian areas. in 1890, mauricio established the braun & guillaume co. and two years later he joined to the cameron campbell co. in partnership with james campbell, and john cameron (scottish) hired as a sheep specialist by nogueira’s farms. in the same period, without apparent nogueira's vigilance, braun got the representation of new york life insurance at punta arenas. the greatest business opportunity for mauricio came in 1893 with his sister sara braun widowed of josé nogueira. she became the wealthiest and youngest businesswoman in the region. to follow the succession of inherited assets and capitals, mauricio legally represented sara as she wanted. the peckett harbor farm was the most profitable of nogueira's commercial primaries. mauricio managed it between 1893 and 1897 as requested by sara. from 1898 onwards, oscar braun administrated this farm. the family is an institution that collaborates http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 with the endurance of companies. in addition, nuclear families strengthen control, as did the second generation’s braun. with the death of his brother-in-law, mauricio concluded the transfer of the nogueira & blanchard co., agreed with juan blanchard. once proportions corresponding to nogueira and blanchard widows were paid. the old firm changed its name to braun & blanchard co. to restart activities that were still in force (martinic 2001a, 152-153 and 2001b, 98). if josé dissolved the josé nogueira & co. to restructure it implementing the commercial and shipping sections and later to started up the nogueira & blanchard co. —in collaboration to juan—, then the third firm braun & blanchard co. —reorganized by the successor mauricio braun— represents the perdurability of the two early business. the changing of this company is a succession of names and associates where braun is the last and also the successor of nogueira by kinship. this organizational example confirms that durability of a company does not require the same corporate name, the importance is how shareholders control the company; it sustained the survival process when the roots maintained but adapting to new circumstances. some trajectories also are perdurable by external buyers. here the business perdurability associates to continue the braun’s family sustained it by marriages of the second generation. business trajectories depended on the management capabilities of sara and mauricio braun. also, decisions taken by them around the large concession of one million hectares were crucial to family continuity. the interdependence between the social and the commercial is so strong in the family businesses of the secondgeneration braun and depended on the nuclear members. with a few months braun's brothers rushed the constitution of new company to make effective the commitments gained by josé nogueira. in 1893 was organized the "operating society of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 tierra del fuego” (onwards setf —acronym in spanish—). the capital was one million pesos divided in 2,000 shares. sara braun gained 350 shares; mauricio braun on his own and representing to juan blanchard, and elias and oscar braun acquired 425; josé menéndez gained 200; guillermo wilms 100; cruz daniel ramírez 100; gustavo a. oehninger 100; and ramón serrano montaner 100 shares.9 in the negotiation with the british duncan fox co., peter h. mc clelland was the president and mauricio braun manager-director. the setf became one of the most relevant companies in the austral region for decades. in this business braun developed corporate transformations and perfected the rural management capabilities introducing the figure of “farm stay administrator”, which was considered by martinic (2001b, 107) as a new “executive labor institution in rural stewardship”. the company came to own 1,700,000 hectares and 12 million sheep in the fields on both sides of the magellan strait and international chile and argentina border, generating multiplier effects on the businesses of braun’s family and promoting an integrated diversification process during the following decades. the setf became a mother-company in braun’s family and joined another local family. in 1895 mauricio married josefina menéndez-behety, josé menéndez’s daughter. the marriage has 10 children. carlos, alejandro and oscar braun menéndez-behety took part in family businesses, contributing to the configuration of a strong business family. in 1896 braun was pointed as consul of the u.s. in the magellan area; the same year stubenrauch & braun loading dock society could not reinforce shipping services converting the local dock in a multiservice platform. during this period the braun & blanchard co. already had a fleet of 6 ships.10 9 as a result of the agreement between braun’s brothers and ramón serrano montaner who was nogueira’s friend and broker land and owner of third part of great concession. 10 fifteen years later, the maritime section of this company, offered too passenger cabotage, freight transport, as well as ship rescue services eliminating the old “raque” carried out by private boats since 1860s at magellan strait. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 the commercial section expanded to ports río gallegos (1896), santa cruz (1899) and san julian (1900), all in national territory at this moment, then santa cruz province. braun had shareholders outside family businesses which included electric light company punta arenas (since 1897) and bank of punta arenas (since 1900). in banking, braun took part in the opening process and later as a shareholder and also served as vice president in the first board. during next periods 1903-1909 and 1913-1932, he was the bank president. braun also managed the braun & blanchard co. which absorbed the bonacich hnos. & co. in 1899 to control activities of assembly and reparation to his fleet of ships (martinic 2001b and 2001c). between 1903 and 1904, braun managed the transfer of new lands to attract settlers and boost livestock farming in association through the aysen industrial society and the baker-mauricio braun operating co. the transition to the 20th century meant to mauricio braun the incursion into new activities. the opportunities go beyond the search for land the federal government encouraged that at the end of the 19th century at tierra del fuego area. since 1905 braun visualize in the refrigeration industry a niche of opportunities. this year he formed the south american export syndicate associated to english backing through the houlder brothers & co., bermúdez & co., and other british partners (martinic 2001a, 199-200). braun also ventured into whaling in partnership whit owner of the bruyne, andersen & co., 11 and since 1906 through the own firm the magellan whaling co., in which alejandro menéndez behety and josé menéndez (brother-inlaw and father-in-law), among others, also took part as shareholders. the building sector, 11 following nogueira's footsteps, society was made possible by the inclusion of adolfo andresen who was the expert in the "whaling" activity and knew how to handle modern technology. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 mauricio created at the same year the braun & foretich co. associating with natalio foretich, who was a croatian building specialist. the expansion of the second-generation businesses to which mauricio braun belonged advanced in the number of businesses. for this he used the extended family, but especially third parties. this was so because braun's children in 1910 decade were not of age to be part of the business. braun's trajectory shows how the management of social relations accompanied the management of new businesses and the management of a local network of suppliers. when braun completed land transferences and concluded the inclusion of the philip bay sheep farming co., into setf (1906), he finishes his participation in this company. then braun started a new stage in business as a land grantee in argentina. his sister sara continued doing business associated to farm activities in chile and later in argentina. she formed the livestock and commercial corporation "sara braun". shareholder structure in its company was a nuclear family business type to control the business. while mauricio braun in less than one decade became an important landowner and industrial. was lessee of 461,288 hectares, and leaser of 175 thousand hectares using the name of third parties in argentina. the tordillo rocks co. (san julian union) applies to get concessions in the san julian area in 1907. in partnership with alejandro and josé menéndez behety, braun, also gained in 1908 the stock package of pastoril society glencross and bought the farms el librún and la carlota. while the santa cruz trade union society managed the creation of the southern patagonia sheep farming co. (martinic 2001b). by 1908 mauricio braun's business career has already merged, but the best was yet to come for him and the braun and menéndez behety families. the same year mauricio agreed with josé menéndez the merger of a commercial branch, applying a social capital for 1.5 million http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 argentine pesos. the companies of the braun and menéndez behety until 1908 did not expand to argentina because the place of residence of the two the families was punta arenas. this was a family strategy for expanding outside chile. as a result of this agreement they created the import and export corporation of patagonia anonymous society operating with a council in buenos aires and attended at punta arenas. this is the moment of birth of la anónima. josé menéndez was the first president of new company and as vice president mauricio braun, while juan blanchard was director in the first place, and pablo dietert and alejandro menéndez behety alternated as directors, and esteban ferrari as general manager (martinic 2001b). table 2. first stage of business genealogy of mauricio braun 1874-1910. period productive activities as founder type of networks building type of capital accumulated skills 1874-1880 — social: family. he arrived in punta arenas being a child (age 9) business: - relational (parental) — 1880-1888 sawmills manager in supervision of josé nogueira insurance social: family and trust personal land: landowner business: apprentice, owner in first company, partner in formal societies, land brokers’ informal partner, land intermediaries’ formal partner, representing, friendship partner relational (parental) apprentice business assistant applicant of land businessman 1888-1892 livestock sector social: family and trust personal business: owner, partner in formal societies, land intermediaries’ formal partner, friendship partner relational (parental) and commercial applicant of land concessions businessman http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 period productive activities as founder type of networks building type of capital accumulated skills 1893-1906 testamentary succession officer shipping and commercial livestock sector refrigeration industry bank and light services social: family, trust personal, marriage land: landowner, land grabber service provider: local and abroad commercial and maritime, bank, light manufacture: family business, partner in formal societies (local and foreign), business: owner, partner in formal societies, land intermediaries’ formal partner, friendship partner mining intermediaries, member of board farm: sheep breeder, employer of foreign specialized workers relational (parental), financial, commercial, and political applicant of land shareholder businessman 1906-1910 (with address at chile and argentina) commercial whale's hunt livestock sector social: family and trust personal land: landowner, land grabber service provider: local and abroad commercial and maritime, bank, light manufacture: refrigerator industry business: owner, partner in formal societies, land intermediaries’ formal partner, friendship partner, merge business relational (parental) commercial political union applicant of land shareholder businessman source: authors’ elaboration. braun had taken part as a founding partner and / or partner in 48 companies (31 in chile and 16 in argentina) with two mother-companies: the setf and la anónima. the braun’s associations continued in alliance with suppliers through the formal partnership. for example, http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 in 1910 braun had an association with the founder of “minerva” workshop maestranza active since 1897to take the control in reparation of machinery and not to depend of external services. the reconstruction of braun’s business genealogy permits to identify the important milestones in the business career of mauricio and the networks operating between 1874 and 1910 (table 2). the durability of family businesses depended on mauricio braun's associations with his sister sara and his partner josé blanchard. la anónima, which functioned as a merge commercial company, positioned a new era of business and the continuity of the braunmenéndez behety lineage since 1908. the same table shows that companies merged and acquired by braun were formal suppliers, but they did not operate as a family association. iii.3 asturians in punta arenas josé maría menéndez menéndez (1846-1918) was born in santo domingo de miranda in asturias, spain; from there embarked towards havana at 14. historians show that in 1866 he got a position as "bookkeeper" (accountant) in buenos aires in a naval hardware store called corti riva & co. and also in the german company etchart & co. in 1875 he traveled to punta arenas representing to last one for recovering a debt from josé piedra buena, who owned a commercial office dedicated to different branches (lafuente 2015, 12-15; martinic 1971, 1920). this event was crucial in the business life of this spanish visionary, as we can see later. the references consulted show that menéndez paid the pedro debt to be in charge of his commercial store, which he would register as josé menéndez & co.12 josé (33 years old) got married to maría behety chapital, who was a daughter of félix behety and maría chapital, a basque-french origin family. 12 piedra buena was the master of josé nogueira in the hunting of sea lions. it can be explained the rivalry between nogueira and josé menéndez. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 since 1878 josé menéndez and family arrived at punta arenas, chile. his first activities were the hunting sea lions and rescue of ships "raque" like few others in the town. menendez also offered maritime services and traded feathers and wild skins, making agreements with indigenous people. between 1880 and 1881 menéndez borrowed a sawmill named "union" for two years. associated with federico arnald and josé montes,13 josé also managed the hotel del puerto. between 1882-1885, enabled the ranch of san gregorio (lafuente 1996). through this farm, he developed a successful livestock system that gave him local economic and social prestige. because of his local achievements, in 1892 menéndez was appointed vice consul of punta arenas (martinic 2001b, 72). later josé started up another farm associated to francisco bilbao through the bilbao & co. this farm at tierra del fuego called primera argentina (1894) and had 80 thousand hectares. the institutional context of land concessions encouraged to commercial agents to take new risks and seek shareholders in the locality and europe. in 1897 menéndez also took part in the constitution of the electric light company of punta arenas being partner of mauricio braun, juan blanchard and walter curtze, among others. in this company he was the first board’s president. two years later, josé gained 100,000 hectares in concession to the name of his sons alejandro and josé, which allowed him to start the second argentina (later maría behety farm stay); josé took advantage of concession legislation and international market context and turned it far in one of most modern in fuegian area. to be more efficient, josé menéndez introduced advance machinery as modern shears for shearing sheep (martinic 2001b, 116-118). in 1907, almost in parallel to mauricio braun, josé introduced to punta arenas the refrigeration industry through the refrigerating company of 13 josé montes was the daughter's father-in-law. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 patagonia. and in 1908, as it mentioned, achieved the merger of his commercial branch with mauricio braun. a relevant fact to josé’s family and himself was the death of his wife maría behety in 1910. according to available biographical information, maria's forced josé to divide properties and actives among members of his nuclear family and to make up a new society organized as a nuclear family business. this succession can see as a strategic transfer of property rights because of the constitution of livestock and commercial corporation menéndez behety and likewise considered an indicative of continuity of family bases and the nascent of a family office. for this reason, the typology of family a business is important. the new nuclear family business was the basis of continuity. in this family group the mother —maría behety— was a capital contributor and therefore could inherit, although she has not been a founding partner in business. in her perspective, only the nuclear shareholder can save the family. table 3 shows josé menéndez business and a different style from josé nogueira and his son-in-law mauricio braun. table 3. the business genealogy of josé menéndez 1875-1910. period productive activities as founder and in collaboration type of networks building type of capital accumulated skills 1875 employed to recover a debt social and business: - he arrived temporally to punta arenas (age 29) commercial accounting 18781881 hunting of sea lion trade of feathers and wild skins raque sawmills (c) lodgings (c) social: trust personal and family business: apprentice, owner in first company, partner in formal societies, land brokers’ informal partner, land intermediaries’ formal relational (parental), commercial, financial and political partner businessman http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 period productive activities as founder and in collaboration type of networks building type of capital accumulated skills partner, representing, friendship partner 18821908 livestock sector refrigeration industry bank and light services social: family and trust personal land: landowner service provider: local and abroad commercial and maritime, bank, light manufacture: family business business: partner in formal societies, land intermediaries’ formal partner, friendship partner farm: sheep breeder, employer of foreign specialized workers relational (parental) commercial financial political partner applicant of land businessman 19081910 commercial whale's hunt livestock sector social: family and trust personal land: landowner, land grabber manufacture: family partner in formal societies business: owner, partner in formal societies, land intermediaries’ formal partner, family business, merge business farm: sheep breeder, employer of foreign specialized workers relational (parental) commercial financial political partner applicant of land businessman shareholder source: authors’ elaboration. jose menéndez trajectory was so compact in terms of formal collaboration networks. family and friendship linkages appeared as part of the majority of his companies. the heritage of a wife's family it was crucial in that regard to last part of his business life. to finish the period 1908-1910 menéndez only took part in 10 companies, being the most important the anonymous society importing and exploiting corporation of patagonia known as la anónima (a merger http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 of the josé menéndez & co. and braun & blanchard co.). the last menéndez mercantile participation was in 1916, two years before his death. this businessman adds in total 16 participations as a founder, in which nine also do mauricio braun. iv. two family groups and one business family: 1908-1935 in punta arenas, the first group of settlers established since the second half of the 19th century until 1900 supported the first business activities and promoted slowly the family association. if punta arenas gained importance in trade and exports not all initial businesses enduring the next decades. established groups initially experienced informal and limited partnership small businesses and then emerging gradually collective societies between two or more partners according to local and markets. when the range of action was broadened and more partners were included, it was that new types of firms emerged, with different structures, including family-type ones. in decades 1901 and 1920 had transformations suffered by businessman rooted in this region allowed some of them to remain active. despite the geographical distance, the transport conditions and the peripheral condition in the commercial routes and political sphere, some settlers accumulated capital and developed bases to continue as family businesses. unlike other contexts in latam that experienced arrival of foreign groups for settlement with participation of "land brokers", punta arenas evidenced the valuable of foreign ties and foreign families. their members build commercial agreements with abroad to strengthen trade routes and achieve the expansion of economy in the southern patagonian region; first in chile, and then in argentina. the differences in the composition of business groups and local trajectories show multiple ways to control value chains of production and distribution in europe to accumulate capital. the three business genealogies reconstructed in this article related to control of the internal market and the foreign trade expansion process. among the initial http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 businessmen at punta arenas were henry reynard, josé nogueira, rodolfo stubenrauch, guillermo bloom, l. l. jacobs and juan hurtado, and as the blanchard brothers, mauricio braun, josé menéndez and josé montes and their families, among others. iv.1 towards the second generation of businesses family businesses at punta arenas, chile experienced the first stage of growth between 1868 and 1881 based on commercial business to export hunting products, leather, and the increase the exotic feather traffic. with the offer of land concessions at the end of the 19th century, the rise of livestock began another phase of the local dynamic. by 1892 the companies of josé nogueira and josé menéndez represented 36.1% of total commercial traffic (martinic 2001b, 90). for period 1913-1918 punta arenas had: “[…] four commercial banks, 200 industrial and artisan establishments, over 400 commercial offices and many others [business] dedicated to the hotel industry; 300 cattle ranches ... and countless minor agricultural properties, and dozens of livestock companies, shipping, fishing, mining and oil businesses, communication by telephone, electricity and insurance, representing large capitals and investments [...]” (martinic 2002, 84). some changes in assignation land legislation between 1903 and 1905, encouraged an incipient union of ranch owners through the “committee for defense of the interests of the pioneer farmers”. two years later, the owners of farms started up the society of estancieros unidos de última esperanza (1905), with participation of josé menéndez, stubenrauch and mauricio braun (martinic 2001b). according to revised documents, the collaboration between mauricio braun and josé menéndez started in 1906 in the whale of magellan co. two years later produced the merger of their commercial companies to operate in argentina through the la anónima, giving rise in http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 1908 a new family business of an extended type with two nuclear family business. next generations will start up anonymous societies and take a further step towards the configuration of a strong business family. the new century will be a new époque to braun business family, to shareholders, oriented by the expansion and combination of three types structure in family business: nuclear, extended and composed. a notable fact in menéndez family was the division of properties in 1911 through the menéndez behety livestock and commercial corporation as successor of the josé menéndez & co., after to maría behety´s death. the new society represented a type of family control that favored the durability of commercial livestock, maritime, mining and sawmill activities in chile, and the control of shares by family members. after josé menéndez was death, all sons-in-law were added to the family company. according to the anuario de sucesos 1919-1920 published by e. gómez & company (1919, 732) the firm´s board in 1918 included to alejandro, josé, alfonso and julio menéndez-behety, and mauricio braun (josefina's husband), arturo gómez palmés (herminia’s husband), and francisco campos (maría's husband). in this way, the second generation of the braun-menéndez-behety became part of la anónima, merged it as the largest family business in the region. while the nuclear structure transformed in one of extended type. before finishing his career in business, josé menéndez was a partner of the next formal companies: sociedad rural de magallanes (1912), industrial, and livestock society of magallanes and fishery company of magallanes (1914), and insurance company "la austral" (1915). the final company was the last branch of the business family. sara braun remained active in business creating family-type businesses, especially in the branch of cattle; in 1914 she established the "sara braun" livestock corporation in punta arenas, as a nuclear familyhttp://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 type company.14 the society of estancias "la armonía" was one of those organized by sara braun, although it was a composed family-type company, in which his brothers-in-law alejandro and josé menéndez-behety, as well as casimiro gómez were part of the board. figure 1. total mercantile societies created by mauricio braun and josé menéndez (1875-1949) source: author's elaboration. in summary, mauricio braun and josé menéndez took part in 82 companies (figure 1), coinciding in 9 since 1897. and mauricio braun between 1904 and 1908, was part of founders and shareholder groups in 34 companies, in which 20 were based on chile and 14 in argentina. those businessmen lived a key moment to enforce development of southern patagonia, becoming the pillars for next generations of business families and anonymous societies. iv.2 continuity of the braun-menéndez behety family in argentina and the firsts decades of a business family rooted to la anónima after the mergers of companies that gave life to la anónima in 1908, atlantic ports of río gallegos, santa cruz, san julian, comodoro rivadavia and puerto madryn established the first 14 the board included elías braun father and her brothers mauricio, oscar, mayer and juan (ruffini 2017, 47). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 commercial subsidiaries. from there, the progressive penetration of this company in the patagonian interior began with new offices that secured the supply of food and agricultural production, and acquisition of building materials. the success of la anónima was teamwork and coordination, which had positive effects from the early stages. the company's capital increased 300 percent only in the first six years. when finish the first decade, la anónima had increased its capital over 1,000 percent and had arrived at 30 establishments in the south of argentine patagonia functioning as matrixes or subsidiaries. the management functioning with a central, but each office had autonomy to solve own problems and decision making immediate, due to communication context of the time. although in 1914-1915 maritime traffic in the magellan port had serious problems when opening the panama canal provoking contraction in commercial flows, the world war i represented a new opportunity for primary merchandise trade to patagonia. then the region increased its presence in international wool markets and offering courier services. a big mistake was during the last years of world war, when bigger patagonian producers starting a speculation of wool stocks, encourage by constantly growing of demand. those actions caused indebtedness that extended when finished the bonanza period. the due imposition of customs duties in patagonia between the ending of 1918 and by1919, businesses in southern chile had negative effects in cabotage routes, part, in shipments of meat and wool to argentine and chilean ports that had monopolized the freight handling. in 1920 la anónima experienced a reduction in the loans gotten by argentine and anglo-south american banks, so must explore domestic credit schemes and sales "to trust", as was usual. according to the expansionist policy in times of crisis, the members of the second generation agreed to http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 establish in 1922 a second refrigerator named s. a. cooperative refrigeration society of puerto deseado, being alejandro menéndez behety and mauricio braun the ceos. la anónima also installed another commercial agency in buenos aires dedicated to maritime affairs and purchases. in 1918, argentine federal government granted legal status to the company. then la anónima turning into an argentine company. the proprietary shareholders and general management moved to buenos aires,15 settling in a classic building of the av. roque sáenz peña, in the heart of city porteña, which opened a new stage in the company´s history and family braun-menéndez behety, in coincidence josé menéndez death this year. in 1920 the situation did not improve because the livestock boom reversed. the fall of international currencies that came from wool and sheep meat affected la anónima, leading to members of families to implement new changes. one of most important was the abolition of dividends from 1920. was until 1928 that profits returned in 1.5%; by 1931 were 3%, but in 1932 back down to 2%. the 10% paid between 1910-1919 never returned. another effect of the wool market contraction to the constant exploitation of rural employees who were not organized and did not have any labor protection.16 the climate of rural conflicts in chile and argentina increased at the same time that the police severely repressed by police with the consent of farmers and merchants (fisch 1933; bayer 1972; bonaudo and bandieri 2000). the braun-menéndez behety family reacted to this crisis implementing organizational changes in la anónima. contrary to what we might think, at end of second decade of the 20th century, josé menéndez jr. and mauricio braun carried out new investments and implement changes in 15 the build of new headquarters was inaugurated being director mauricio braun and vice president alejandro menéndez behety. 16 the control of seasonal work has been possible due to large concentration of livestock and strong monopoly of trade, also the population had not labor alternatives. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 commercial strategy introducing a cooperative scheme. headquarters and supply centers in punta arenas, and connection centers with england, germany, spain and other offices abroad, would be to import products to patagonia and some products were acquired from northern chile and nascent argentine industry. members of the second generation of the braun-menéndez behety family invested in vessels to control regional trade as it was in the past. in 1922 the company had four cargo ships and other 17 vessels. likewise, shareholders approved the constitution of public limited company, argentine refrigeration company of tierra del fuego (1917) having the support of most important cattle farmers in southern patagonia as shareholders.17 this was a modern refrigerator installed in the port of rio grande to operate using a collective model and to benefit all investment farmers. the basis of family structure did not change although included no family members.18 the company consolidated in a short time. the first year the new company processing almost 150,000 animals and shipping 1,000 tons of meat sold in england markets. other products sending to us were leather, tallow and visors. by 1929 la anónima already showed an excellent recovery; it had 10 commercial houses in the territory of santa cruz, 10 in chubut and 3 in río negro, and as agencies in magallanes chile-, new york, london, barcelona and berlin, and an allowed capital of 20 million in sealed gold.19 as the regional crisis was overcome, the company also showed renewed economic vitality. then were integrated the companies astilleros río de la plata, astarsa (naval, railway and road constructions branch), austral (aerial branch and communication), emecé (publishing 17 the company had farms as anonymous shareholders to link more local people to rise exports. 18 alejandro menéndez behety was the president of board, mayer braun vice president, and as directors francisco campos torreblanca (son-in-law of josé menéndez) and josé montes thurler. while dr. carlos menéndez behethy was a trustee. 19 revista argentina austral, 1929. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 industry), and other linked to insurance, financial, real estate, tourism, selling agricultural machinery and medical help services (barbería 1995,71). the company ships were part of fleet named enosis -greek word meaning "union”-. it departed every month to southern seas loaded with the most varied merchandise to supply to la anónima subsidiaries. simultaneously, the firm worked as distributor of fruits, wool and meat, transported and banker offering replacement credits to primary production becoming (jaca 1941 and 1968). also, become to an active participant in community life of patagonian localities. all collaborated to install electrical services, telephones, hospitals, schools, radio stations, airlines, etc. on june 10, 1933, la anónima celebrated its first 25 years with the second generation in command. also, the board included members of nuclear and extended family being the first time the members of third generation sharing in it.20 next decades the family members of braun-menéndez behety worked around mothercompany. in 1935, la anónima incorporated the section of interoceanic agencies with regular routes to transfer of cargo and passengers to different continents.21 in response to the growth company were incorporated social activities to allow their employees (called "collaborators") feeling as part of "enosis family". the vacations and entertainment for the firm's staff promoted trough company social clubs, and including the castle in villa elisa, at buenos aires. a scholarship system was also organized for the employees' children. la anónima edited to its own advertising magazine named “argentina austral”, published from 1929 to 1968 (ruffini 2017). the goal to those years was each subsidiary supplied all items of a large general store, 20 mauricio braun, alfonso, alejandro and armando braun menéndez. 21 in 1950s were constituted next companies: austral airlines (1957), it was the second commercial airline after aerolineas argentinas; later came the chilean interoceanic navigation company (1958) as a branch of blanchard section; and the maritime company of punta arenas anonymous society in which a member of menéndez behety family was the ceo (1958). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 complemented with a skillful credit policy that allowed the company to keep its clientele secured. in summarize, mauricio braun remained active and forming companies until 1949. he died in 1953 when family successors fully integrated la anónima. the continuity to third generation will be analyzed in forward studies, for here is the evidence of continuity in international connections, and familiar strategies associated to successful succession. extended nuclear and family ties were not only strategic for business continuity and learning, but for establishing a family corporate government visible in alternating positions in the directories. mothercompanies since first stages experienced a vertical integration model, also with his own new suppliers to control production and distribution chains as in the past. the deepest crisis resolved to implement expansion and include practices to control markets and encourage the use of loyalty. the original families of braun and menéndez behety in punta arenas and their next generations exemplify a path towards settlement and internationalization at a stage in the evolution of capitalism that required significant supplies of raw materials and food. the first step was the settlement of families, the context of the transferring of land and the agreements between chile and argentina. after decades, studies on families who arrived after 1870s to punta arenas, started up more businesses in argentina, this does not mean that punta arenas was more important than tierra del fuego or vice versa. they visualized a regional development encouraged commercial links with europe and a new form to expand around the world very early in the 20th century. this article reopens a discussion to global connections from latam. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 v. contributions to the study of inheritance, family businesses and business families the genealogical business reconstruction presented in this article offers evidence on european immigration in the accumulation process and the building of productive links in southern patagonia. the institutional context was the “colonization laws” and agreements between chile and argentina on austral patagonian area. consequently, the arrival of european groups improved schemes of learning as part of emergence of abroad commercial networks. they expose the permanence of families and constitution of family businesses with variations of global markets since middle of the19th century. the first businesses were informal, through collective, and limited partnerships led by founders. the succession of braun-menéndez behety groups with the company’s local survival has observed in some business branch family and access to new activities like the refrigeration industry linked to livestock sector. adaptation and complex organizational systems processes were linked to business expansion. these show the trends of global economic demand in sheep meat derivate and its local impacts were technological and foreign linkages. as regards of abroad connections, the local families became in promoters and had commercial links with agents in england, france and germany, and another one. in case of institutional frameworks, patagonian families responded to foreign demand and influenced them. the local and national political and social alliances were as important as international trade networks to get permits and lands. the first groups endowed to resources to inhabit the patagonian area, arrived and found natural resources used by indigenous groups to commerce mining and shipping sea services. the second productive embryo was the transport to enlarge regional accumulation based on exports and third the fridges. first two generations of family business networks were built on friendship, marriages, and formal partnership. 1860s-1870s period complemented rapidly to nascent exploitation of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 breeder sheep in last decades of this century. people such as josé nogueira and members of menéndez and braun families, stand out by skills as visionaries and promoters of investments and introduces of technological tools, communications, lighting and banks. they implemented a rural management through innovative practices in livestock activities. the management and adaptation to local conditions produced the arrival of european technicians and technological changes which reinforcing the early accumulation process despite a double peripheral position of patagonia in america and europe. the built of commercial agencies, farm stays and the boat fleets are important evidences. the land concession laws, started in the 1880s by chile and argentina, projected unique forms of transferences and collaboration between new settlers and european partners. the ways to get and enable land had at this moment diverse management win-to-win styles. the three business genealogies allow to distinguish: i) leadership to control the production value chains without intervention of intermediaries as local suppliers in part through mother-companies, ii) absorption by co-participation of companies, iii) family partnership and friendship partner following formal agreements in associations and social enterprises, iv) introduction of figure of rural ceo, v) land brokers and formal land intermediaries, vi) accumulation of capital to reinvest by purchase and / or lease agreements post-grant with financial companies and individuals, vii) productive diversification and new value chains associated to livestock. the family member’s successors of braun’s family managed since the early 20th century some mother-companies: braun & blanchard co., setf that included livestock, shipping and a commercial services, and the refrigeration industry, and la anónima a merge of commercial branch of braun and menendez-behety businesses and the most important to third and next generations whose members grew with it. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 after the expropriation of land to natives’ groups and started official allocation of concessions, the immigrants should secure an efficient exploitation scheme. this goal led to the purchase of machinery and equipment for breeding, processing and packing of sheep products, and the hiring of pawns and specialized sheep-men. in the commercial and distribution chains ship fleets ensuring buyers in different countries. mauricio braun and josé menéndez controlled shipyards and machine repair shops to reduce maintenance costs and the family businesses help to control and reduce other transaction costs as negotiations vis-à-vis or signing of special agreements. adding foreign partners as shareholders or buyers, the first and second-generation members supported the mutual learning and ensured future diversification of their commercial societies. to understand the family continuity and survival of businesses, it needs family a researching of networking, for this reason, rebuilt three business genealogies. families like nogueira-braun were disintegrating, and the heirs must take the control of continuity. family disintegration by death can be a problem for survivors who have no commercial experience, so it can lose control. it can also be a problem when the family size is small. fortunately, to business perdurability with nogueira’ firms, his widow had the support of her brother. and mauricio that had been his brother-in-law's apprentice could ensure survival. in the menéndez family, the second generation made lineage continuity possible through marriages. meanwhile, the durability of the companies by the sons-in-law and the children who worked together and alternating positions in the family business directories. intellectually, maria behety was a visionary by stipulating in her will the division of family actions and assets for business durability. and sara braun was a visionary when she relied on her brother to inherit the businesses of nogueira. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 in summary, the business trajectories in the southern patagonia between the end of 19th and the beginning of the 20th centuries conducing to argue that: a) the friendship as a trust value to start a business in adverse conditions b) the attorneys and concession land brokers and applicants as trustworthy individuals help to expand the relational capital of the petitioners c) the austral patagonia area endorsed the interchanges of food and natural resources starting links abroad for the continuity of capitalism in latam d) the financial accumulation of the first groups of immigrants established in punta arenas promoted takeoff and a productive control based on commercial, national and international alliances e) the multiplication of some family companies was carried out controlling branches and suppliers in the value productive chains through different associations f) the emergence of new agents and management practices in latam; in this case followed the specialization in sheep farming and increase in concessions g) the crisis opened opportunities to family groups h) the structure of the first family business is very important to understand the configuration of business families i) the new generations started up family’s business contributing to configurate a strong braun business family business genealogies are elemental to business historians. they permitted to apply the biographic method, compile registers of companies, and personal information, as the patagonian groups were addressed in this article. the study of family business and business families undoubtedly offer hints to debate about perdurability and continuity in business http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 succession. the continuity of families is part of a socio-cultural process that imbricate to survival, learning (circulation of knowledge), trust and local economic development. the family business is an institutional structure as veblen's arguments and is a receptive agent of institutional context as north argue. to study the family business composition in the long run, reinforce the importance of family environment in the building of capacities and businesses propagation. finally, the business families configured upon to remoteness of austral patagonian between last decades of 19th and early 20th centuries, as another in latam, are part of the capitalist history and they need to be more in debates and comparative analysis. references almaraz, araceli. 2018. “la empresa familiar y las familias empresariales en méxico. una propuesta teórica.” in familias empresariales en méxico, sucesión generacional y continuidad en el siglo xx, coordinated by araceli almaraz, and luis alfonso ramírez, 47-84. méxico: colegio de la frontera norte, second edition (on line). almaraz, araceli, and eloi serrano. 2016. “latin american economic history, business history and economics of enterprise: current trends.” jesb, journal of evolutionary studies in business, 1(1): 95-115. doi: 10.1344/jesb2016.1.j006. bandieri, susana, coord. 2001. cruzando la cordillera... la frontera argentino-chilena como espacio social. neuquén, argentina: second edition educo –editorial universitaria universidad nacional de comahue. serie publicaciones cehir-unco. bandieri, susana, coord. 2005. cruzando la cordillera... la frontera argentino chilena como espacio social. neuquén: argentina [second ed.] educo – editorial universitaria, serie publicaciones cehir-unco. bandieri, susana. 2006. “del discurso poblador a la praxis latifundista: la distribución de la tierra pública en la patagonia mundo agrario. revista de estudios rurales 6(11). https://www.mundoagrario.unlp.edu.ar/article/view/v06n11a01. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1344/jesb2016.1.j006 https://www.mundoagrario.unlp.edu.ar/article/view/v06n11a01 volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 bandieri, susana. 2013. “la 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globalización en argentina y chile: empresas y empresarios, edited by geoffrey jones, and andrea lluch, 101-131. buenos aires, argentina: editorial temas. martinic beros, mateo. 1972. magallanes, síntesis de tierra y gente. buenos aires, argentina: f. de aguirre. martinic beros, mateo. 1975. las actividades iniciales de josé menéndez, 1875-1885. punta arenas, chile: instituto de la patagonia, serie monográfica 8. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 33-79, july-december 2020 doi.org/10.1344/jesb2020.2.j076 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 martinic beros, mateo. 1976. “la expansión económica de punta arenas sobre los territorios argentinos de la patagonia y tierra del fuego, 1885-1925.” anales instituto de la patagonia 7:5-42. martinic beros, mateo. 2001a. “patagonia austral: 1885-1925. un caso singular y temprano de integración regional autárquica.” in cruzando la cordillera... la frontera argentino chilena como espacio social, coordinated by susana bandieri, 459-486. neuquén: argentina [segunda edición] educo –editorial universitaria, serie publicaciones cehir-unco. martinic beros, mateo. 2001b. menéndez y braun. prohombres patagónicos. chile: ediciones universidad de magallanes. martinic beros, mateo. 2001c. nogueira el pionero. punta arenas: ediciones universidad de magallanes. martinic beros, mateo. 2002. breve historia de magallanes. punta arenas: ediciones universidad de magallanes. moyano, daniel 2015. desde la empresa. firmas familiares y estructura empresarial en la industria azucarera tucumana, 1895-1930. buenos aires: prometeo libros. north, douglass c. 1990. institutions, institutional changes and economic performance. cambridge: cambridge university press. ruffini, martha 2017. la patagonia mirada desde arriba. el grupo braun-menéndez behety y la revista argentina austral (1929-1967). rosario: prohistoria. sociedad anónima importadora y exportadora de la patagonia. 1929. revista argentina austral i (2). veblen, thorstein. 1965. teoría de la empresa de negocios. buenos aires: eudeba. originally published in english: theory of business enterprise (new brunswick: transaction books, 1904). this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 viviana román universidad de buenos aires (argentina) https://orcid.org/0000-0002-2177-8503 small publishing houses in argentina. their dynamism and limitations within the publishing industry abstract the goal of this article is to analyze the market insertion that small argentine publishing houses underwent between the late twentieth century and 2015. we take into account the sector’s evolution in the country, the worldwide concentration of the publishing market, and the business strategies these firms adopted, from a historical standpoint. sources are institutional and periodical publications, oral sources obtained through interviews with key actors, statistical sources, repository information, and secondary literature. some comparisons with other latin american countries are also presented. the conclusions highlight elements such as the publishing houses´accumulated historical experience, business strategies, speed of adaptation to digital and multimedia formats, production focused on specific areas or topics, and the leveraging of a minimal and flexible structure, many times in unfavorable circumstances, as key factors that allow a correct understanding of the complexities of the business of publishing for small and medium enterprises in argentina. keywords: argentine publishing industry; small and medium publishing houses; business strategies and editorial policy; publishing industry; publishing history in argentina corresponding author: e-mail: vivi.romanjasienowski@gmail.com received 15 june 2020 accepted 23 july 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-2177-8503 mailto:vivi.romanjasienowski@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 1. introduction small publishing houses are interesting, due partially to their worldwide dynamism lately, and partially due to their importance as part of the “cultural” sector. this area has become so important for “measuring culture” that argentina created the cuenta satélite de cultura (satellite account for culture), within the sistemas de cuentas nacionales (national accounts systems), acknowledging its importance in the country’s development. in the past few years, a significant number of these publishing firms have appeared in the country. speaking in relative terms according to their scale, many have become cultural reference points. this is a fundamental turn of events since it ensures bibliodiversity in the midst of the process of economic concentration and growing control by foreign capital that the industry is experiencing. regarding the dynamism that these smaller firms have recently shown, the interest they have sparked can be seen in several international academic articles about the role they have played in the context of the second global economy. different authors have pointed out the important role these small companies assume in various economies, regardless of their level of development: how many there are vis-a-vis the total number of companies, how much they add to gdp, how many jobs they generate, how they help diversify the economy, and how they help contribute to the development of entrepreneurial skills (romero 2006; orlandi 2006). according to data from the organization for economic co-operation and development (oecd), in the majority of member countries, at the beginning of the 21st century, small and medium companies accounted for between 96% and 99% of all companies, for one-sixth of industrial production, and for approximately 60 to 70% of jobs, as well as the majority of jobs http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 in the service sector (oecd 2002). there is a great deal of specialized literature regarding the business articulation, either vertically, between a small or medium company, and a large one, or horizontally, between small or medium-sized companies. several authors state that this is a crucial factor in determining the strength and competitiveness of a production system in a given territory, within the context of said second global economy (romero 2003; cepal 2004; capóvicedo, expósito-langa and masiá-buades 2007; humphrey and schmitz 2002). in this review of argentina’s publishing sector, we have detected horizontal connections between smaller publishers. the identified networks, which are described later in this article, show these mentioned horizontal connections. however, there do not seem to be any vertical integration between small or medium publishing houses and large publishers, which are mostly multimedia, given the concentration and dominance of foreign capital in the country’s editorial sector. in regards to the creation of small and very small publishing houses in argentina, which were launched mostly in the 1990s, several authors (velázquez 2017, 77) state that they offer a sort of resistance to the process of profound economic concentration and increasing foreign capital that has taken place in the sector. this aspect, however, does not explain the phenomenon in its entirety: small printing houses were not born in the last few decades. the argentine publishing industry has historically had a number of these companies, located mainly in buenos aires. the city has maintained its centrality in the publishing sector, followed in importance by cordoba and rosario (the second and third cities of the country in terms of population). without disregarding the notion of resistance, it is essential to take historical experience into account, which shows us that small businesses are a feature of this publishing industry. the more recent small operations have generally focused on certain subjects, carved out a market niche, relied http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 on the possibility of printing fewer copies, and used their small structure and flexibility to their advantage in hard times. in the midst of the economic transformations that took place in argentina in the 1990s, publishing house merged, or were incorporated into business conglomerates mainly focused on multimedia.1 it is essential to point out two things: first of all, that these transformations took place alongside the cycle of concentration and arrival of foreign capital that was taking place in the rest of the economy, and, secondly, that the process of mergers and acquisitions within the publishing industry happened all over the world. these aforementioned multimedia business groups have required their publishing divisions to yield profit margins between 10 and 15%, similar to those made by their other companies. this is three to four times higher than what the publishing industry has historically produced. large multimedia conglomerates began placing their book “products” in their “leisure and entertainment” departments (getino 2008, 77), establishing that every book should yield a profit, setting aside a criterion that established that books with bigger sales subsidized those destined to smaller audiences. this is particularly relevant, given that the publishing houses analyzed here found their niche in these markets that were not suitable for mass production (penrose 1959). the acceleration in the renewal rate, the expansion of available markets brought on by globalization, and the increase in the speed of purchasing stand are distinctive features of the problems the publishing industry faced. also, published content became obsolete due to new 1 we are aware of literature that analyzes how business conglomerates are built, but since this article focuses on small and medium publishing houses, we have not taken it into account. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 information in books, and a highly diversified demand pressured traditional sales levels downwards. there were other factors that played a role in the crisis the publishing industry has faced since the end of the twentieth century: the explosion of photocopies, illegal reproductions, the expansion of online information, videotext and reference material on cd-rom, among others (rama 2003, 125 -126). by the first decade of the twenty-first century, the publishing industry came to be seen as an industry that produced editorial content in several formats and platforms. in argentina, important publishing houses, such as kapelusz, javier vergara editores, emecé, paidós, sudamericana, el ateneo, estrada, as well as most local publishing houses specialized in law, such as abeledo – perrot, depalma, and la ley, among others, fell into the hands of major actors of the international publishing industry. according to data from 2005, they controlled up to 75% of the argentine market (informe cep 2005, 65). the economic concentration was also visible in the commercial realm, which was made up of two large chains (yenny-el ateneo and cúspide), some medium sized operations, and a few bookstores considered “independent” or “traditional.” this article focusses on the period between the early 1990s and 2015. the timeline begins when the process of economic concentration and arrival of foreign capital started to become evident. its end point is directly linked to the significant advantages in publication and distribution made possible by new technologies. also, to the speed with which small and medium publishing houses started to appear, especially after the crisis in 2001, up until 2015. at that point in time, argentina’s economic direction began to change. also, the historical aspects of the argentine publishing industry are taken into account. for this analysis we have adopted the size criteria used by the publishing industry. large, medium-sized, small, and very http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 small firms can be identified according to the number of new titles they publish annually. large publishers churn out 100 or more per year, whereas medium sized firms publish between 20 and 99. small and very small firms are under 20 titles a year (libro blanco de la industria editorial argentina 2015, 6). a few questions are posed. can we establish any historical continuities regarding the dynamism of the smallest publishers by identifying them from the very moment the publishing industry in argentina began? can the appearance of so many of them in this timeframe be ascribed to the competitive advantages that became available due to new technologies? does the fact that many of these founders saw themselves as cultural agents play a significant role? or does the cultural aspect, dear to many of them, also play a significant role? what is the connection between the staying power of these publishing houses, their editorial policies, and their business strategies? what mechanisms have they used to promote, sell and distribute their work? this article, therefore, focuses on how these small and medium publishing houses have inserted themselves into the market place since the end of the twentieth century. we have used source material such as institutional and periodical publications, interviews with key actors, statistics, information from several archives and analysis of the topic conducted by different researchers. we conducted interviews with 17 key informants that carry out their professional activities and business ventures within this sector. they were chosen based on their background, the fact that they belong to different age groups (ranging from 18 to 30), and because they occupy, or have occupied, different positions within the publishing industry. some of them have owned medium and small publishing houses, distribution and logistics companies, and bookstores. also, among them are those who have had positions in large distributors, as well as people who have played http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 a significant role in the publishing industry since the 1950s, and have been involved in different entities related to this sector. they are representatives of the industry as a whole. we employed a qualitative analysis that uses historical oral sources to discover how the subjects, insofar as individuals who are part of a social collective, define the situation. we take into account that “oral history” chooses new social subjects in light of phenomena and events. they can add a qualitative interpretation of processes and historical and social events, trying to focus this analysis on the vision that manifests itself through experience (aceves lozano 1994, 143-144). this use of analytical language allows us to question the interviewee’s discourse and explore its inherent contradictions (grele 1989, 125). by doing this, we add new layers of complexity to the study. in addition to the introduction, this article has the following parts: a brief explanation of the historical origins of argentina’s publishing industry, which is relevant in order to understand the historical continuity of small and medium publishers, a section that connects business strategies with editorial policies, a section focusing on commercialization strategies, and, finally, the conclusions. in all of them we have added analyses of the publishing industry in latin america and other parts of the world. this allows us to understand the publishing industry in argentina and its connection to the international context. 2. a brief history of argentina’s publishing industry the argentine publishing industry started in the second half of the nineteenth century. it was made up of small companies located mainly in buenos aires. the number of bookstores and publishers, most of them located in the civic and historic district and usually run by foreigners, started to rise in the 1850s. new publishing technology became available in the second half of http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 the nineteenth century, which led to an increase in the number of published books. companies like kraft (1864), peuser (1867) and estrada (1869) were launched: these were the early stages of the publishing industry in buenos aires. we should also point out that an expansion of the reading public took place at the end of the nineteenth century, and the beginning of the twentieth (valinoti 2016, 31). new printing technology also became available in the second half of the nineteenth century, which in turn boosted production. among them we can point to the steam rotary, in 1864, the linotype machine, in 1867, and type casting, in 1869. thus, the basis of argentina’s nascent publishing industry began to emerge. the first professional editors appeared around this time: people who did not own a bookstore nor a printing machine, and were able to turn teaching books, local texts, and the first collection of popular writings into bestsellers. bookstores and publishing houses many times diversified their activities. sometimes, they even received work outsourced by the commercial graphic industry, mainly by printing commercial stationery (de sagastizábal 1995 43 – 44). in 1885 there were eleven bookstores, ten printing houses and two lithographers. according to information from the printing and publishing activity record of buenos aires, in 1859 there were fifteen bookstores and twelve printing houses. based on a study of ads that appeared in the press, we know that by 1870 there were 18 bookstores located around the cabildo of buenos aires; the municipal census of 1887 showed that there were 100 bookstores and 89 printing houses (eujanián 1999, 559). towards the end of the nineteenth century, the diversity of the reading public also grew: this can be seen in the products advertised by different businesses, which tended to satisfy the public’s demand through specialization, either with books in different languages, ancient books, or scientific texts (eujanián 1999, 559). the growth in literacy should also be taken into account, since it http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 played a role in the increase of the reading public. in absolute numbers, the national population census showed that in 1869 there were 310,259 people aged 6 and above who could read and write. in 1895, the number of people in this age bracket who could read and write had grown to 1,479,704. in 1914, the number of literate people aged 7 and above was 3,915,949 (censos nacionales de población 1869, 1895 y 1914. república argentina). the expansion of the education system played a role in this process of literacy growth: considering the number of students and their elementary school attendance rates, according to data from the national census and the memories of the national education board, between 1850 and 1895, the student population grew from 183,000 to 877,810. attendance also grew from 11,903 up to 246,132 (tedesco 1994 131). in 1914, the student population between ages 6 and 14 was 1,485,785, and 828,987 boys and girls were attending school (censo nacional de población de 1914. república argentina). this evolution took place within the context of an economic growth that occurred in argentina at the end of the nineteenth century and the beginning of the twentieth, during its integration into the world economy, based on the exports of its primary sector. even though its industry began to experience a gradual and sustained growth starting during the final decades of the nineteenth-century, agricultural production was the main driver of the argentine economy until the aftermath of world war i. in the first decades of the twentieth century, we can point to collections from tor, sopena (spain) and editorial cooperativa claridad, as well as serialized romance stories and local texts, known as criollistas, among many others. around this time there were about 800 different titles published annually. all this speaks to the beginning of the publishing sphere, which consolidated itself through the expansion of the market of cheap books: serialized stories, written by local and foreign authors, and local literature, known as gauchesca. towards 1910, http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 there was also a substitution in the process of importing books. the growth of the reading public allowed, for the first time, large print runs of highbrow literature at a low price (aguado 2006, 97). in the first decades of the twentieth century, there was also a significant surge in the number of public libraries. a new urban subject began to emerge: the educated citizen. particularly in the years between the two world wars, a series of publishing houses that offered a significant variety of works of literature and universal ideas–reinforcing a tendency that had already been seen earlier–appeared in buenos aires. during the 1920s, there was a greater diversification of industrial activity: new production and management technology, as well as innovations in commerce, became available (barbero, 2004, 206). the “modern editor” appeared during this time. the activities of the publishing industry started differentiating themselves in the 1930s: book dealers, writers, editors, proof readers, translators, and collection directors, among others. this modernized the sector and gave it certain characteristics that are part of its founding morphology. it also aided in its configuration, which started with a number of small and medium publishing houses that showed great dynamism and the ability to adapt. publishing houses such as losada (1938), emecé (1939) and sudamericana (1939) were created; espasa-calpe set up a headquarters in argentina, the bookstore el ateneo started publishing, and paidós was created in the 1940s. the bookstore el ateneo, which belonged to pedro garcía, started to publish a variety of topics, from philosophy and art to history and medicine. before launching his own bookstore and publishing operation, this editor of spanish origin had already worked in the bookstore his brother martín had in the city of la plata. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 many publishers sought to satisfy the demands of a reading public that continued to grow and diversify. one key factor is that some of these editors, which came from europe and launched these small and medium publishing houses, had previous experience in the publishing world. some of them had worked as booksellers. others had gained their experience in other sectors: either the book industry or in magazines, or because they came from a family connected to the editorial industry, or because they had previously worked with important editors or booksellers. the editorial businessmen who shone in the argentine publishing industry first arrived between the end of the nineteenth century and the beginning of the twentieth, as part of the great international migration that took place around that time. they also came in the final years of the 1930s, due to the situation unfolding in spain in the years leading up to world war ii, such as the spanish civil war and the advancement of fascist forces in several places of europe. in argentina, as was the case in large portions of the world, the economy in the 1930s was also suffering due to effects of the world economic crisis. the economic policies of those years were drawn up as a response to the instability of the world economy, as well as to the changes in the economic structure of argentina that became, to a certain degree, a consequence of the great depression. a series of counter cyclical economic measures were set into place. several broadly accepted studies from several years back point out that the expansion of the industrial sector in argentina during that decade had to have been based on the idle capacity generated during the previous decades. based on this perspective, investments in the industrial sector had already occurred prior to the 1930s (villanueva 1972). within this context, the task differentiation process within the publishing industry took place, as well as the aforementioned creation of small and medium publishing houses in the 1930s. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 gonzalo losada founded the publishing firm losada in 1938, along with a group of intellectuals and people specialized in publishing. he based this venture on the same business model used by other important publishers around the world. they set up subsidiaries in uruguay, colombia, peru, and chile. from the beginning, they used different strategies to encourage literary activities; for example, writing competitions, that not only offered a chance to be published, but also a possible income (gudiño kieffer 2004, 13 – 15). we should point out that gonzalo lozada was the manager of espasa–calpe in argentina, but decided to leave and start his own publishing house. he was born in madrid in 1894, and before even turning 20, he was working as a representative for the spanish papermill of nicolás maría urgoiti (gudiño kieffer 2004, 25 – 26). after this he worked for espasa – calpe, and later emigrated to argentina with his wife and children. from the very beginning, emecé set itself apart from most argentine publishers that also had a large number of best sellers. its directors also deployed other strategies that entailed significant benefits, such as the purchase of the compañía impresora argentina (argentine printing company) (de sagastizábal 1995, 83-85). when mariano medina del río, a spanish citizen who came to argentina in exile after the spanish civil war, created emecé, he received literary contributions from álvaro de las casas. the visual artist luis seoane,2 and the writer arturo cuadrado, who were both spanish exiles, also participated. in its early days, the firm published books related to galicia, in spanish as well as in galician, since their first collections were aimed at readers of this origin. 2 luis seoane was a sketch artist, painter, engraver, and, also, an editor, who was born in argentina to a spanish family. in 1916 he went to live in spain. after the spanish civil war, he sought exile in his country of origin (costa 2014). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 as we have already pointed out, sudamericana was founded in 1939. antoni lópez llausás was hired to run it. after a while, he started to acquire the majority of the shares. the company set out to accomplish two initial goals: promote latin american authors, and translate and promote contemporary foreign literature. lópez llausás belonged to a family of publishers and booksellers: his grandfather owned a bookstore in barcelona that started publishing between 1869 and 1870. he later had his own publishing house, and published his own books. as other spanish publishers who harbored republican ideas, the spanish civil war forced him into exile, and he emigrated from spain to argentina (lópez llovet 2004, 11– 27). the editors society was created at the end of the 1930s. in 1941, it would become the cámara argentina del libro (argentine chamber of books, cal, for its initials in spanish) (giuliani 2016, 95). the 1940s, and most of the 1950s, were the years of largest prosperity for the local publishing industry. the problems the industry was having in spain because of the civil war contributed to this bonanza on argentine soil, and the spaniards in exile played a significant role in its development. another important event in the 1940s was the creation of editorial abril, by césar civita (1941. they published important magazines, and also book collections aimed at children and young people, which were run by boris spivacow. césar civita was a jewish italian publisher who emigrated to argentina due to the racial laws of 1938. his first publishing experience was a magazine for the clients of a company owned by his father in milan that imported industrial machines. later on, he met alberto mondadori and started working in edizioni disney. in 1936, he started working regularly in the milan publishing industry: he collaborated with several publishers, and even became general co-director of the publishing house mondadori, where he worked alongside arnoldo mondadori (scarzanella 2016, 22). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 children’s literature in argentina had grown and developed independently from schools since the end of the nineteenth century. it should also be noted that it experienced significant growth starting at the beginning of the twentieth century, a tendency that deepened after the 1940s and 50s. in addition to abril, other publishing firms created during these years, like sigmar, codex and acme, focused on this audience as well. other publishers that had traditionally geared their titles towards this segment –such as atlántida and peuser– also increased their production (gociol 2010, 80-81). this is important in the long run, given that these books have always been known for their dynamic nature. since the rearrangement of the publishing sector in the 1990s, a significant number of small, very small, and medium publishing houses have inserted themselves in this market niche, which constitutes an element of continuity in argentina’s publishing history. in regards to the most prosperous years of the publishing industry, which took place in the 40s and 50s, we should consider some facts that may have influenced the domestic consumption of books: the growing literacy, and, at the same time, certain elements pertaining to salary levels. regarding literacy, the population census of 1947 registered a total of 11,318,896 people who were 14 years old and above; 1,541,678 of them were illiterate, about 13.6 % of the total. this is indicative of high literacy levels in the population. the census showed that, if we only took the urban population into account, the illiteracy rate dropped to 8,8%. this is important for our analysis, given that book sales have historically been concentrated in urban areas (iv censo general de la nación. población. república argentina 1947). during juan domingo perón’s first presidential term, which started in 1946, the government favored the domestic market. the economic policies of peronism were aimed at strengthening the state, as well as making industrialization a state policy, and promoting the expansion of the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 demand for consumer products in the domestic market. at the same time, and without diving into the complexity of measuring and analyzing the sectorial evolution of real salaries in argentina, investigations show that in the second half of the 1940s, certain sectors, like industry, experienced an increase. workers also received more labor benefits that were not directly remunerative, which lasted for the following decades (newland y cuesta 2017; belini 2014). in the final years of the 1940s, the shortage of imported paper started to become an issue, as well as the increase in production costs, and the lack of funding. offset printing started to expand locally in the mid-1950s, and this technical improvement revolutionized visual arts, but production output showed important variations. the editorial universitaria de buenos aires (university of buenos aires publishing house, eudeba) was created in 1958. two iconic editors played a role in this: arnaldo orfila reynal, and boris spivacow. in the 1960s, publishing firms such as de la flor, periferia, tiempo contemporáneo, jorge álvarez editor and centro editor de américa latina (ceal), among others, were a part of a renovation of the publishing industry. in the 1950s and 60s, production costs rose, as well as the lack of foreign currency. the publishing industry, however, started to recover towards the second half of the 1960s, and exports started to rise (informe cep 2005, 62). between 1964 and 1974, argentina’s economy experienced a period of sustained growth evidenced in its gdp, in the increase of labor demand for its industrial sector, and in the reduction of cycles originated by external sectors, among other variables. at the end of the 1970s, some authors stated that this characterization of argentina’s economy could be clearly seen between 1964 and 1971 (portantiero 1977, 541–542). more recently, others have said that there was sustained growth between 1963 and 1973, with an estimated 6% annual increase in http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 gdp for those years (gerchunoff and llach 1998, 309 313). within this context, companies like sudamericana, emecé and losada, for instance, were reference points of the so-called boom of latin american literature in spanish. another institution that represented the sector, one that has managed to remain active, came along in 1970: the cámara argentina de publicaciones (argentine chamber of publications, cap). the publishing industry was severely affected by the last military dictatorship. the renovation process that had begun the preceding decade was cut short. when democracy was restored, the industry’s performance was not up to par. the statements of publishers published during those years revolved around issues such as inflation, the cost of paper, the lack of credit, and a graphic industry that was obsolete, among other things (aguado 2006, 99 – 100). the economic instability in the second half of the 1980s created difficulties in the commercialization chain. therefore, we should note that between 1980 and 1989, 176 million books were printed, a figure well below the 312 million copies printed between 1970 and 1979, taking the whole decade into account. following the military-civic dictatorship, the publishing industry suffered a strong collapse, and went from 41 million copies produced in 1976, to 31 million in 1979 (informe cep 2005, 63). in the last few years of the 1980s, the editorial production process went through a series of technological changes that led to a decrease in production costs. the early signs of the industry’s reconversion that would take place in the following decade also became visible in those years. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 a polarized publishing sector was born: on the one hand, there were publishers of large conglomerates focused mainly on multimedia; on the other, an uneven group of small, very small and medium publishers. it should also be noted that this realignment did not bring about a change in location. in the twenty-first century, the majority of companies that produce books were still located in buenos aires and its metropolitan area. in our view, this geographic concentration is linked to at least two causes: 1. buenos aires has become a cultural node in south america; and 2. historically, many important productive, commercial and service industries of the argentine economy have concentrated in buenos aires; in turn, this is where the highest levels of consumption and purchase are registered. as we have already mentioned, numerous publishing houses in argentina were either sold or merged with large corporate multimedia holdings in the 1990s. this also happened in other latin american countries, like mexico, for example. the economic concentration and growth of foreign capital within the publishing industry has been a worldwide phenomenon since the 1980s. in the united states, for example, 80% of its publishing industry ended up in the hands of a very few large conglomerates –bertelsmann, holtzbrinck, longman, news corporation and viacom–, which absorbed other prestigious publishers. in france, something similar happened, where lagardère –the multinational multimedia communication group that belongs to hachette– purchased the largest share of vivendi universal publishing in 2003. italy and the united kingdom also had similar scenarios; in the uk, mergers like this were already taking place in the 1970s. in germany, the internationalization of the publishing house bertelsmann, and its transformation into a business group, has been an important development. in spain, the planeta and santillana groups have both expanded their businesses internationally (fernández moya 2010, 79 81). the “americanization” strategy implemented by some publishers http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 materialized through the mergers and acquisitions done by some of the main publishers on the american continent (fernández moya 2011, 230), a particularly important feature in the case of argentina and mexico. the following table shows the amount of business done by the 12 largest european publishing groups, based on data from 2006. some of them have acquired argentine publishers, like, for example, the aforementioned sudamericana and emecé. table 1. the 12 largest european publishing groups, according to data from 2006. (amount of business done – in millions of euros) group ammount (millions of euros) reed elsevier 5,851 pearson 5,616 thomson 5,108 bertelsmann 4,612 wolters kluwer 3,693 hachette livre 1,975 mac graw – hill education 1,942 readers digest 1,835 scholastic 1,757 de agostini editore 1,607 holtzbrinck 1,227 grupo planeta 1,015 source: self-made based on data from the dossier de livres hebdo 2007. within this context, in the 1990s argentina experienced a sharp increase in book production. this growth, albeit with some ups-and-down, remained constant until 2001. the broad set of structural changes introduced in the 1990s included economic deregulation, privatization, and the adoption of a conversion system that set the exchange rate at a fixed amount, tied monetary policy to the outcome of foreign accounts and eliminated controls on the movement of capital. tariff reduction and a real appreciation of local currency reduced the relative prices of capital goods and intermediate imports; this in turn stimulated modernization and an increase in productivity (bouzas 2004, 158). publishing started to grow between 1991 and 1992 after a series of dispositions, such as the aforementioned economic deregulation, which made it possible to print books abroad and reimport them; a reduction in postal tariffs; as well as the http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 elimination of copyright taxes and taxes on book exports. the editorial activity in the 1990s was greater than in the previous decade, the number of published books grew two and a half times, surpassing even the figures of the 1970s (perelman 2003, 21). in line with a worldwide tendency, the number of registered titles also grew. alongside this process of economic concentration and growth of foreign capital, numerous smaller publishers were created in argentina. this was not something unique, and many other countries underwent similar developments. the proliferation of small publishers could also be seen in mexico. in 2004, the publishing houses aldus, ediciones arlequín, ediciones educación y cultura, ediciones el milagro, ficticia, itaca, juan pablos editor, lunarena, mangos de hacha, mantis editores and nitro-press, among others, created the alianza de editoriales mexicanas independientes (alliance for independent mexican publishers). some of their stated goals were the promotion of reading, of books, and of new and upcoming literature. amongst these types of publishers worldwide, there is a strong belief in the importance of bibliodiversity, and that small, very small, and medium publishing houses can guarantee it (alianza de editoriales mexicanas independientes, 2019). regarding the historical development of their publishing industry, the significant similarities that argentina and mexico share in the way this process took place are interesting: given their economic and cultural influence, they both were two major centers of spanish speaking publishing in the 1940s and 50s (fernández moya 2016, 132-135). towards the end of the twentieth-century, and the beginning of the twenty first century, book publishing in both countries experienced the growing concentration and dominance of foreign capital previously explained, as well as the aforementioned growth of smaller publishing operations. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 taking into account that argentina is located at the southern end of latin america, this analysis can be considered also valid for countries like chile and uruguay. both have small publishing markets, and have also seen the appearance of small, very small, and medium publishing houses. when reviewing chile and uruguay’s publishing history, a series of similarities with argentina and mexico become apparent. these countries went through modernization processes at different times, which in turn led to the expansion of reading and publishing. also, certain events of the twentieth-century, like the great depression, the spanish civil war, and world war ii, left their marks. the publishing industry in these four countries received spanish publishers who fled in exile after the spanish civil war. we can also see some differences in the 1970s and 80s, given that the publishing industry in argentina, chile and uruguay, suffered due to appearance of dictatorships, which shut down different processes that had begun in previous decades, especially in the 1960s. in this sense, the mexican case was different. in the first decade of the twenty first century, chile witnessed the appearance of many very small publishers linked to youth collectives. they were located in its capital, santiago de chile, as well as in other parts of the country, where they worked on combining arts-and-crafts techniques with new technologies of scanning, digitalization, and photocopying. some of these publishers were punto ciego ediciones, lanzallamas libros, rabiosamente independientes, canita cartonera, corriente alterna, and la piedra de la locura, among others. some of them no longer operate as a formal business; in some cases, they publish between 1 and 10 books a year, and in others, none at all. there is another group of small publishers, with a greater track record and more formal business practices, such as uqbar ediciones, el mosquito ediciones, metales pesados, among many others. there is also a number of medium-sized publishers that print between 30 and 80 titles a year, many of which started in the 1990s. we can point to http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 cuatro vientos, lom, cuarto propio, ril editores, among others, as well as some of the older ones, like universitaria and andrés bello. unlike the ones mentioned previously, these firms had tried to keep an economic balance in order to sustain a constant workflow (subercaseaux 2010, 290-293). small publishing firms also appeared in uruguay at the end of the twentiethcentury and the beginning of the 21st-century. we can point to ediciones trilce, editorial fin de siglo, más pimienta, topito ediciones and criatura editora, among others. one firm that stands out is banda oriental, a small publishing house created in the 1960s that has managed to stay in business, and continues to publish uruguayan writers. in any case, publishers agree that independent publishers, as well as smaller operations, have serious market limitations (machado 2021). at the same time, chile and uruguay also suffered the impact of economic concentration and the arrival of foreign capital in the publishing sector. the sale of the argentine publishing house, sudamericana, impacted the region; random house mondadori/grupo bertelsmann appeared in uruguay after buying sudamericana, since this company had a branch office in montevideo (estol 2014); in chile, sudamericana was part of a group of publishers that were active in the literary field (subercaseaux 2010, 263). sudamericana was known for promoting latin american writers, and thus fulfilling a very important intellectual task in the region (estol 2014). in the case of argentina, the profound economic crisis it suffered in 2001 and 2002 deeply affected production and sales in the publishing sector. it is important to take into consideration that, within this context, the chain of payments was broken: since bookstores were unable to sell, they could not keep up with their payments, and, therefore, saw their credit lines cut, and stopped receiving new books. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 the prices of imported books grew up to two and a half times following the devaluation of 2002. the prices of locally produced books also went up, since the cost of supplies, like paper and ink, were determined by international markets. despite all this, books published in argentina became affordable for the latin american market. according to data from the cámara argentina del libro (book chamber of argentina, cal), the abrupt end of convertibility, the deepening of the recession, and the immobility of deposits in the financial sector, introduced strong changes in the publishing sector’s performance (getino 2008, 72-74). figure 1. combined reading formats source: 2011. encuesta nacional de hábitos y prácticas de lecturas. secretaría de cultura de la nación. between 2002 and 2008, argentina’s book industry experienced a recovery. in 2009, however, it started to feel the effects of the global crisis of 2008. it experienced a relative recovery between 2010 and 2011; according to data from the cal, between 2003 and 2015, a peak 32 20 9 5 6 2 17 0 10 20 30 40 reads everything newspapers and books newspapers and personal computer books and personal computer only through books only through a personal computer only through newspapers http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 number of books were published in 2014 (informe anual de producción del libro en argentina 2016 2017, 8). on the other hand, the growing use of new technologies has allowed the owners and publishers of small argentine publishing houses access to the publishing sector, not only with physical books, but also through other formats and platforms, working with different possibilities in terms of promotion, commercialization and distribution. according to data from 2011, 56% of the argentine population 12 years old and above used computers, and 48% read for more than 10 minutes on a screen (encuesta nacional de hábitos y prácticas de lecturas 2011, 134). at the same time, this way of reading overlapped with traditional formats in a complementarily way. the following graphic, which takes into account reading traditional formats and texts on screen, highlights this issue. taking age differentiation into account, the data showed that, in 2011, 76% of the younger segment read on screen, which led us to assume that this trend would continue to grow (encuesta nacional de hábitos y prácticas de lecturas 2011, 93). in 2013, personal computers were the fastest growing format for cultural consumption in general, encompassing 45% of argentina’s population (encuesta nacional de hábitos y prácticas de lecturas 2013). as far as specific data regarding book production, in 2015, 17% of all new publications were texts for digital formats. this was a very slight variation when compared to 2014, where it reached 18% of new publications. taking into account the interannual evolution of different formats, in the following graphic we see that, in 2011, it represented 14%; in 2012, 18%; and in 2013, 16% (informe estadístico cámara argentina del libro 2015). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 figure 2. interannual evolution of different formats note: total publications: 28. 966 new works. source: 2015. informe estadístico cámara argentina del libro (statistical report of the argentine chamber of books from 2015). this information regarding digital publications does not allow us to analyze the multiple digital options available to produce editorial content. smaller publishing houses adopted these new technologies at different rates. 3. business strategies and editorial policies an editorial policy becomes a business strategy insofar it limits the market segment in which a publishing house operates. it tends to display motivations present at the time the company started, and later remain in place. at the same time, and taking into account observations made by authors who have analyzed smaller publishing houses, these policies are linked to issues such as flexibility, the capability to adapt to different circumstances, and an innovative attitude http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 37 (piore and sabel, 1984, 29 and 435, julién, 1998 35-37; kantis, angelelli and gatto 2000, 1). the characteristics of these companies indicate that their “individual related origin” is a factor in their decision-making process. this is a key element in understanding the vitality of smaller firms, since, to a certain degree, they are strongly intertwined with the personal qualities of their owners (boutillier 2011/2012, 20). the following cases are examples of all which has been previously laid out. the founder and owner of dialektik —a publishing house created in the mid-2000s that specializes in social sciences— says that the decision was due to “an affinity with the field, a knowledge of the authors, and a know-how regarding how to get it done” (interview with stukalsky 2009). the publishing firm adriana hidalgo —granddaughter of a publisher named pedro garcía3—, created in the late 1990s, carved out its editorial policy by identifying books or authors that were “missing” within a legitimized tradition, and embarking on either the publication, republication, or translation of a text. they also by published new manuscripts by authors that had considerable symbolic capital (botto 2006, 231). serapis, a publishing firm created in rosario in 2006, has focused on the translation of fiction, essays, short stories and poetry (editorial serapis, 2019). the publisher, carolina lieber, said in 2014 that “there are certain curious and attentive readers who go to bookstores looking for the kinds of books we publish. there are not many, which is why we do not make large print runs (…)” (la capital 2014). las cuarenta (interview with gonzález 2013), a publishing house created in buenos aires also in 2006, favors books that allow an escape from modernity, and aim at broadening the reader’s 3 adriana hidalgo is the granddaughter of pedro garcía, the founder of el ateneo, a bookstore and publishing house created in 1912/14. she started the small publishing house named after her in 1999. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 horizons, in line with the founder and owner’s preference. the owner’s background in philosophy was the reason they took this direction, satisfying the demand of a niche interested in these topics. caballo negro, a publishing house launched in the city of cordoba in 2009, publishes fiction. alejo carbonell, the publisher, defined his editorial policy by saying that “it was easier to talk about what we did not want: an endogamous catalogue, books that follow the aesthetic mandates of the present for the sole purpose of garnering a bit of symbolic capital on the author’s facebook page. we are not interested in that” (la voz 2014). gourmet musical ediciones is a publishing firm created in buenos aires in 2005 (interview with donozo 2013). it publishes books about music, musicians “from rock and tango, all the way to classical music,” as well as musicology devoted to argentine and latin american topics. the publisher has a background in musicology research, and, before he started the company in 1998, he ran an internet site called gourmet musical. years later, he turned it into a publishing house. ediciones disconario is a publishing house born in 2010 that specializes in books about music and musicians, and shares a similar target audience with gourmet musical ediciones. it began with a series of books about argentine rock and roll, while noticing that downloading music from the internet left the experience a bit vacant, since all the accompanying information was now lost: “(…) the object, and the information that came with it, have been lost (…) the rest of the graphic information, the design element, who are the musicians playing, you do not have that anymore (…) there are very few sites that provide (…) this kind of documentation (…) our goal is to gather all this information by author (interview with dente 2013). arte a babor is a publishing house created in 2009 that specializes in art books for children. it started within the metropolitan center of design in buenos aires, where the publisher worked as a designer (interview with sirkis 2014). the firm began by noticing that “(…) argentina has http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 a very important architectural and artistic heritage (…) that children do not know, they eventually learn about it later; if we think about france, children are aware of their cultural heritage (…) their artistic, cultural and architectural heritage.” bajo la luna —a literary publishing house that started in rosario in 1991 and moved to buenos aires in the early aughts—stood out at first for their poetry. it later began including other literary genres. in the last few years, they have added books written by argentine and foreign authors. through the purchase of copyrights, it has translated authors from several languages, especially from “those that are not considered central languages” (interview with balaguer, 2013), such as islandic, korean, and portuguese from african countries. calibroscopio is a publishing house created in buenos aires in 2006. it specializes in illustrated books for children and young people (interview with wilhelm 2013). they broadened their scope, from children’s books to illustrated ones, because they started publishing books for all audiences. they started out as the expansion of a project from 1997 called el libro de arena, an exhibition of school books aimed at children and young people in buenos aires. publishing decisions are made jointly by the two founding partners. comiks debris is a small publishing house that started in buenos aires in 2010. it specializes in comic books for children. marcelo danza, the founder, is a graphic designer, and in charge of book design. they originated from a proposal made by those who run the collection with which the firm started: roberto sotelo, director of revista virtual imaginaria, and césar da col, who is part of the movimiento de banda dibujada (drawn band movement)4 (interview with danza 2013). 4 this is a non-profit cultural movement created in 2004 in argentina. its goal is to promote and encourage the reading, creation, edition and expansion of comics for children and young people. it includes artists, writers, strip cartoonists, journalists, editors and cultural managers from the entire country https://sites.google.com/site/bandadibujada/home, available as of december 15t, 2018. http://revistes.ub.edu/index.php/jesb https://sites.google.com/site/bandadibujada/home volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 la brujita de papel is a family enterprise run by the firm’s creator, gloria lópez llovet de rodrigué, along with her daughters. they are, respectively, the fifth and sixth generation of publishers. they specialize in children’s books, and their catalogue has a literary and an educational section. as most of these publishers, the owners are in charge of certain aspects of editorial production —which in line with their background—, and they outsource others. lópez llovet de rodrigué started working with her grandfather, antoni lópez llausás, at sudamericana publishing house. after it was sold, she started la brujita de papel in buenos aires (interview with lópez llovet de rodrigué, 2013). the literature on family business’ in latin america and spain has covered this subject from different angles (lozano 2000, fernández pérez 2003, colli, fernández pérez and rose 2003, fernández pérez and colli 2013, fernández pérez and lluch 2015, barbero and lluch 2015, among others), and has established a few definitions. we define a family business as one owned by a number of families with varying degrees of biological or spiritual bonds, that, over the course of several generations, has tended to invest in different businesses they do not necessarily own nor control, with the goal of ensuring that the values and continuity of said family persist over time (fernández pérez y lluch 2015, 19). in the case of these publishers, we use the concept of family business, albeit with a few particularities, like the fact that their business is concentrated in the publishing sector, and that they are characterized as a “family of editors”. the decision to count the generations of editors of a same family is based on this idea. this is the case of gloria lópez llovet de rodrigué (sudamericana, la brujita de papel, among others) and her descendants. the same can be said of adriana hidalgo, the granddaughter of the creator of el ateneo, pedro garcía, who has a publishing house named after her; or miguel balaguer (bajo la luna), whose mother started the firm, which he later started managing along with his wife. the common http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 denominator in all these cases has been a transference of knowledge regarding the know-how of publishing, and also of established networks within the publishing world built. it depends on the subsequent generations to later strengthen their knowledge and skills, as well as those inherited connections. alción was created in the city of cordoba in 1983. its founders, juan carlos maldonado and julio castellanos, spent their first decade struggling for survival. in the second decade, they started “building a catalogue with books on ‘philosophy, translation, poetry, critical essays and fiction.’” they later turned their attention to “(…) ‘learning the art of publishing, treating it like an art form, which has nothing to do with creating books that are graphically beautiful, but instead books that are precious due to their content’” (rodríguez 2013/interview with maldonado 2019). the use of new technologies is present in these publishing houses. it has allowed them to gain access to the publishing subsector not only through physical books, but also by other formats. as we shall later see, it has also allowed them to expand their promotion, commercialization, and distribution operations. the path from the twentieth century to the twenty-first was marked by the appearance of new way of consumption, as well as ways of producing editorial content with new elements, such as internet sites, youtube videos, facebook pages, and other social media platforms. the development of icts gave smaller publishing houses the chance to use cheaper technology. this changed the way editorial content was produced and consumed, although it did not erase its more traditional features (román, ruffolo and d´ángelo, 2018). in the following chart, we establish a distinction between “traditional” and “new” business strategies. the production of physical books is prevalent in the first group; as well as books for http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 children and young people –as previously mentioned, this has been a historically dynamic segment–; we can also mention the production of comic books for a diverse audience, and the nationalization of the catalogue through authors and topics from different parts of the country. the “new” strategies are closely linked to the use of new technologies. they are based on doing short book runs of a single title. thanks to new technologies, this does not have a significant impact on the cost of production. the segmentation is greater, with multiple “niche markets”, and editorial content for new formats can be produced thanks to the possibilities afforded by digital platforms (for example, multimedia content can be produced to be read, watched, and listened on several electronic devices). the production of “books as objects” is advanced, which usually entails a story told through the intervention of an artist, many times a visual one, who uses techniques that include new materials. table 2. business strategies, “traditional” and “new” in the production of editorial content “traditional” strategies “new”strategies the production of physical books is predominant short book runs book production for children and young people very segmented production. market niches. comic book production for audiences in different age groups production of editorial content for digital platforms. new formats. nationalization of the catalogue, including authors and topics from different parts of the country. production geared towards “books as objects” source: self-made based on information received through interviews with key informants. following porter (porter 2008, 3 4), we can state that the internet does not erase traditional competitive advantages. these publishing houses were either created when it already existed, or have incorporated it into their operations, and have standardized its use. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 4. business strategies and commercialization the promotion and sales division of publishing houses have always been linked to their catalogues, which is defined by its editorial policy. in the domestic market, the traditional channels for promotion and distribution have been retail bookstores. over time, they have become the main environment where publishers and readers have come into contact. another current possibility is through book fairs, which are now more regular occurrences. this is not exclusive to argentina, and also happens in other latin american countries. table 3. number of bookstores (retail commerce) in different countries of latin america in 2003 argentina brazil colombia ecuador honduras mexico chile guatemala number of bookstores 800 1500 300 200 50 650 384 200 distribution through bookstores 70% 70% 37% 50% 30% 38% 60% 35% percentage of bookstores located in the federal capital 50% no available informati on 40% 25% 24% 38% 49% 70% source: made by brunetti, collesei, vescovi and sòstero 2004, based on data from the centro regional para el fomento del libro en américa latina y el caribe (cerlalc), an intergovernmental body that operates under the guise of unesco. proyecto estudio de canales de comercialización del libro en américa latina y el caribe, with an emphasis on bookstores, 2003 (dato 2019). based on data from 2004, the following table shows the number of bookstores5 (retail commerce) in different countries of latin america, what percentage of distribution they do compared to the different ways they carry out this operation, and the percentage of bookstores located in the federal capital of each country. argentina and brazil are at the top of the list of countries where books are distributed mainly through bookstores; argentina is also one of the 5 in this case, we are talking about brick-and-mortar bookstores. we must take into account that bookstores that operate on the internet are referred to as “virtual bookstores”. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 countries with the largest number of bookstores in its federal capital, ciudad autónoma de buenos aires. in 2015, there were 1210 stores in argentina where books were the main item sold: brick-andmortar bookstores. this figure does not include stores that sell old books, used books, or books at a discount. the following table shows the type of bookstores that exist, and how many stores are in each category. we can say that there were 855 traditional or independent bookstores, 265 stores belonging to chain bookstores, and 90 stores of booksellers with 3 or 4 branch stores. table 4. different types of brick-and-mortar bookstores in argentina, 2015 (in number of stores and percentages) different types of bookstores number of stores percentages traditional or independent bookstores 855 71% chain bookstores 265 22% bookstores with branch stores 90 7% source: 2016. libro blanco de la industria editorial argentina. informe de datos estadísticos. cámara argentina de publicaciones (argentine chamber of publications). drawn from promage. the feria internacional del libro de buenos aires (international book fair of buenos aires) started in the 1970s, but there are also others in different parts of argentina. there are also specific fairs for small publishers (esses 2017). they not only allow small publishers to sell their books, but also allow them to show their catalogues. there are also other channels for sales, like the internet, direct sales, and other environs directly linked to a publisher’s catalogue. we should also point to sales made to government and state entities, even though some smaller firms think this should not be a central feature of their operation due to its instability. they choose to consider them a supplementary business channel. distribution has always been a thorny subject for these publishing houses. some publishers in buenos aires, and also in the rest of the country, have chosen to do their own distribution. there are others who work with this model and also use distribution companies, and others who http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 instead have opted to outsource all their distribution. some interesting ventures have also sprung up, such as distribuidora llegó. it began in 2004 as a distribution operation for books and other related content of psychoanalysis, bundling together small publishers, magazines and/or self-made print runs that lacked the necessary infrastructure to do direct distribution. in june of 2004, it advertised its activity with the following words: “there is a void between bookstores and small publishers. we are trying to fill this void and offer a solution so we can prevent these texts and books from ending up in moist boxes and empty shelves, books we know how much work they require” (distribuidora llegó, 2013). there are also publishers that use logistic and distribution companies. ignacio arrieta (interview with arrieta 2014), the head of libro express —logistics for publishers— works on load consolidation from buenos aires to the rest of the country, picking up packages from several publishing houses and setting them up for shipping. transportation costs are reduced, since the minimum transportation weight is 20 kilos. along with the arrival of foreign capital and economic concentration, the sales and distribution process also changed: bookstores began turning more to allocations from publishers to keep up with such a large and diversified offer. the number of published books has grown steadily in the last few decades. another aspect to consider is that these books started appearing in large chains like yenny-el ateneo and cúspide, where the sales percentage (known as “the bookseller discount”) they require since the early 2000s is very high, in some cases as high as 50%. some small publishers even stopped working with these chains. in the second half of the 2000s, yenny-el ateneo decentralized its purchasing operation. from that moment on, every branch was responsible for their own acquisitions (interview with winnik 2014). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 some publishers (interviews with ávila huidobro 2013, balaguer 2013, wilhelm 2013, kulesz 2010 and donozo 2013) have tried different options, such as doing their own distribution and outsourcing logistics, or outsourcing both; sometimes, even outsourcing the deposit where they keep their stock. others have continued doing some of these operations since they started. some publishing houses have chosen to do their own distribution, trying to work with bookstores as well as small operations that are mindful of the books and commit to putting them on display. other small and medium publishing houses have even put together their own distribution structure, and brought smaller firms with fewer titles into their operation. ediciones disconario, for example, has adopted two forms of distribution. on the one hand, it supplies books to twenty-five stores in buenos aires city directly from the publishing house; on the other, there are three different stores that buy books from them through the allocation system and operate through internal distribution. one of these stores is a distributor that, in 2013 —according to miguel dente, one of its co-founders—, had eighteen stores of its own in buenos aires province: we are talking about the librerías el aleph distributor. ediciones disconario has also distributed its books through the publishing house calibroscopio, without any route overlap. since disconario is a publisher devoted to books about music and musicians, their initial plan was to distribute to record stores: according to data from 2013, 80% of stores they distributed to were “places you could buy music” (interview with dente, 2013). editorial comiks debris distributes its books through two different channels: the publishing house calibroscopio (the same as disconario), and two comic book distributors. one of them is districomix, and the other is plan t. they are in charge of getting these books to comic bookstores all around the country. the publisher, marcelo danza, also offers supplies to stores that sell comic books (interview with danza 2013). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 bajo la luna has always considered distribution a key component of their operation. they tried many different formats, until they decided to do the distribution themselves. they now use a logistics company like the one mentioned earlier, libro express. they have changed the way they handle distribution over the years, particularly after they moved to buenos aires (they started in rosario). between 2003 and 2009, their distribution was handled by tusquets, a distributor with a significant number of publishers “which allowed us to be close to some very good publishing houses, we would say that it was a challenge to compete with them, and, at the same time, it was a huge support. after that, we tried a system of cooperative distribution, we started a distribution company (…) we worked with four different publishers trying (…) to do a collective distribution, it was very convenient economically because all the expenses we now have to pay ourselves, we split four ways (…).” the publishing houses involved in that operation were cactus, la cebra and caja negra (interview with balaguer, 2013). the books of ediciones iamiqué have made it all over the country, especially through the exclusive distribution of alberto luongo (interview with baredes 2013, dalsa 2019). this distributor has a great presence and reach across argentina, and has been distributing books and content, mostly educational material, for many years from 150 different publishers of all sizes. editorial serapis from rosario sells its books in bookstores around the country through liber distribuciones, which is based in buenos aires, and through a distribution company from rosario: julia ossana, publishing representative (la capital 2014, editorial serapis, 2019). with regards to distribution, alejo carbonell —head of the publishing house caballo negro, from córdoba— said in 2014 that distribution was one of their problems. “(…) for publishers of our size, using a distribution company puts your entire economic fragility at risk, because the percentages are overwhelming, and the payment chain is really long. (…) it is very http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 important that every publisher know what their actual range of production and reach is, so that they can build a strategy that allows them to function properly” (la voz 2014, interview with carbonell 2019). in 2010, adriana astutti, who co-founded beatriz viterbo editora in 1991 — together with sandra contreras and marcela zanin—, a publishing house devoted to argentine and latin american literature, critical essays, and cultural studies (beatriz viterbo editora 2019), talked about how they resolved this issue. “we went through a lot of ups and downs, a lot of distributors, until 2002, when tusquets, in the middle of the crisis, put together a catalogue of independent publishers and called us. we have been with them ever since, and are still with them today. at the time, adriana hidalgo, bajo la luna and elefante blanco were also there” (vignoli 2010). it is evident that not all these publishers have found the same distribution format to be useful. by 2010, bajo la luna had already changed the way it handled distribution, and had left the tusquets operation. the following chart summarizes the different distribution strategies these publishers have used in the domestic market. some of them avoid reaching the public through chain bookstores, and favor working with “traditional” or “independent” booksellers; others aim for a distribution that grants them access to the public that consumes their products through a diversity of channels, which include chain bookstores. when it comes to commercialization, foreign markets are another issue that needs to be taken into account. some smaller publishing houses have managed to do exports through distributors in other countries. however, libros del zorzal (a publisher created in buenos aires in 2000), discovered it was more profitable to open a local branch in a foreign country (interview with kulesz, 2010). there are also some publishing houses that have made exports the key component of their operation. this is the case of ediciones manantial (created in buenos aires http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 in 1984): they specialize in books on social sciences, education and psychoanalysis, and have been exporting to spain ever since they started (interview with de santos 2010). table 5. distribution strategies in the domestic market through a logistics and distribution system distribution done by the publisher only in “traditional” or “independent” bookstores distribution done by the publisher and an outsourcing of logistics distribution and logistics are outsourced distribution done by the publisher in traditional or independent bookstores plus distribution of books from other publishers with less titles distribution through a consignment system distribution through a consignment system and sales system distribution through a sales system without consignment distribution in stores that specialize in other cultural products destined to the same market segment in which the publisher operates. cooperative distribution source: self-made based on information received through interviews with key informants. it is important to point out that the cal offers counseling on how to export books. the comisión asesora para la exportación de libros (advisory committee for book exports, cael, for its initials in spanish) is a department within the cal, which offers information on book commercialization, as well as how to navigate the exportation and importation process. judith wilhelm —the head of calibroscopio— points out the importance of the advice these organisms provide, adding that there are customs officers that work alongside publishers in meetings organized by this committee regarding the foreign exchange of books (interview with wilhelm 2013). regarding the placement of books abroad, international fairs are also an opportunity for smaller publishers to commercialize books, as well as for purchasing and selling copyrights of original works and translations. ediciones del naranjo (created in buenos aires in 2004) points out that, in order to connect with latin american publishers, and librarians from los angeles, it is necessary to have a presence in the guadalajara fair (interview with ávila huidobro 2013). http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 thanks to connections made at this fair, calibroscopio started selling books to the mexican government through agreements draw up with publishers from that country. calibroscopio has also made sales through bookstores of other latin american countries, like colombia and chile (interview with wilhelm 2013). small publishers have managed to place their books in several international fairs thanks to other publishing houses who were interested in taking certain titles they had not published (interview with dente 2013). international fairs are also environments ripe for networking with publishers and distributors: editors from different countries connect and share information on titles. social media is key since it allows publishers to establish a system of formal and informal contacts and relationships, which tend to compensate for weaknesses associated with the company’s size (szarka 1998, 311). in 2001, a group of editors and small publishing houses started working to export books together, and to participate collectively in international fairs. in 2006, this led to the creation of the colectivo de editores independientes por la bibliodiversidad de la argentina (collective of independent editors for bibliodiversity in argentina). argonauta, asunto impreso ediciones, biblos, de la flor, del zorzal and ediciones del signo (fernández moya 2011, 232), were some of the publishing houses involved in the creation of this organization. 5. conclusions this article has analyzed how small and medium publishing houses have gained access to the argentine market since the end of the twentieth century. we have included a brief explanation of the historical origins of argentina’s publishing industry, as well as some considerations regarding the link between business strategies, editorial policies, and commercialization http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 strategies. in order to do this, we started with some questions about the historical continuity of smaller publishing houses, the appearance of so many of them in recent years due to the comparative advantages in publication and circulation of editorial content afforded by new technology. another aspect we covered was the role of the cultural aspect, and, finally, the connection between these publishers staying power, their editorial policies, and their commercialization strategies, with the way they handle their operations of promotion, sales, and distribution. there are a few things we can say. first, the cumulative historical experience, and the ability this sector has shown at adapting to technological and organizational changes for over a century is significant. this includes individual actions as well collective ones, through associations and network generation. from this point of view, dynamism presents itself as a long-term continuity. the fact that some of the publishers who created these small operations come from families with long traditions in this realm also strengthens this idea. secondly, editorial policies, seen as strategies, have allowed many smaller publishing houses to have a strong dynamism, insuring diversity in editorial content in regard to subject matter, treatment of the subject, authors, formats, platforms and proposals. growing market segmentation can explain, to a certain degree, the multiplication of market niches that has taken place in the last few decades. these are the spaces where smaller firms operate. in third place, the generational renovation, seen in the growing number of small publishing houses that have appeared since the end of the twentieth century, seems to be an important factor in explaining the speed with which they have adopted digital and multimedia platforms. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 in fourth place, and regarding the ways in which these companies have sought to gain access to foreign markets, we have seen that building a catalogue capable of sparking interest in other countries has had direct implications in their commercial policies. in fifth place, there is a certain interest in firms that have managed to sustain themselves over time by publishing only sporadically, due to the fact that they have minimal infrastructure, and that their owners have worked simultaneously on other jobs –many times within the publishing sector. there are also publishers that maintain a certain presence but have only managed a short life span as a business. their importance lies in the fact that they contributed to the development of bibliodiversity and, in many cases, have helped identify new authors and subjects. finally, their innovation and display of creative energy deserve 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dossier de livres hebdo. 2011. encuesta nacional de hábitos y prácticas de lecturas. secretaría de cultura de la nación. 2013. encuesta nacional de consumos culturales. 2015. informe estadístico cámara argentina del libro. 2015. el libro blanco de la industria editorial argentina. informe de datos estadísticos. cámara argentina de publicaciones. 2016. libro blanco de la industria editorial argentina. informe de datos estadísticos. cámara argentina de publicaciones. http://revistes.ub.edu/index.php/jesb volume 7, number 2, 13-58, january-june 2022 doi.org/10.1344/ jesb2022.1.j098 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 web sites alliance internationale des éditeurs independents. 2019. “alianza de editoriales mexicanas independientes.” accessed april 20. https://www.alliance-editeurs.org/alianza-de-editorialesmexicanas,096?lang=fr. . beatriz viterbo editora. 2019. accessed march, 6. http://beatrizviterboeditora.com.ar/int/la_editorial.php. dalsa. 2019. accessed february, 28. http://www.dalsa.com.ar/. editorial serapis. 2019. accessed january, 7. https://www.editorialserapis.com.ar. distribuidora llegó. 2013. accessed november, 15. www.distribuidorallego.com.ar. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://www.alliance-editeurs.org/alianza-de-editoriales-mexicanas,096?lang=fr https://www.alliance-editeurs.org/alianza-de-editoriales-mexicanas,096?lang=fr http://beatrizviterboeditora.com.ar/int/la_editorial.php http://www.dalsa.com.ar/ https://www.editorialserapis.com.ar/ http://www.distribuidorallego.com.ar/ http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 nuria puig university complutense of madrid (spain) adoración álvaro-moya cunef (spain) the long-term impact of foreign multinational enterprises in spain: new insights into an old topic abstract the role of foreign capital and technology in the economic and social progress of late-developing countries remains a controversial issue in both academic and policy circles. in this essay, we examine the case of spain in the light of the academic literature from the 1960s to the present. first, we identify and contextualize the intellectual concerns and controversies of two important generations of economists and historians and their approaches to the specific issue of multinational enterprises (mnes). we then discuss what we consider to be the seven major contributions of recent spanish scholarship in terms of: (1) new quantitative evidence on fdi inward flows and firm demography analyses of foreign mnes; (2) new approaches to the transfer of technology by mnes; (3) collective and individual case studies of foreign mnes, with a focus on their impact on local capabilities; (4) identification of patterns of investment by mne home countries; (5) identification and study of the local actors of inward fdi; (6) new perspectives gained from the history of international relations; and (7) new evidence on processes leading from inward fdi to outward fdi. we argue that the time is ripe for comprehensive re-assessments of the long-term impact of foreign mnes and the role of spain in the global economy. keywords: multinational enterprise; foreign direct investment; spain; spillovers corresponding author. e-mail: nuriapuig@ccee.ucm.es received 29 april 2016 accepted 30 may 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 this essay explores an old controversy that has confronted generations of political economists: do mnes contribute to the social and economic progress of late developing countries, enabling the development of local actors and assets, as the international business literature predicts (dunning and lundan 2008, 314-318)? or, rather, do mnes tend to perpetuate backwardness, by constraining institutional arrangements and increasing technological dependence through production enclaves, alliances with local oligarchies and corrupt practices, as the theories of dependency point out (vernon 1971; moran 1974; cardoso and faleto 1979; evans 1979)? after more than fifty years of academic research on the multinational enterprise, there is still no convincing answer to these questions. research in the fields of international business, technology transfer and the history of multinationals has certainly produced a wealth of quantitative and qualitative evidence across the globe. according to scholarship, the transfer of knowledge and capabilities tends to work well within advanced countries, promoting convergence, but this is not the case in less developed economies, where this process is frequently hindered by inadequate institutions and low levels of human capital (jones 2014). there is, anyway, little or no aggregate evidence of spillovers from mnes to local firms, and no strong empirical evidence of the positive impact of foreign mnes beyond positive linkages between mnes and local suppliers (jones 2014, 191-194). the impact of multinational firms on host economies is, furthermore, multifaceted (wilkins 1998, 2009, 2010; jones 2005, 2014). mnes can be important modes of technology transfer and are quite often sizable employers of labor, as international business and economics have noted (lipsey 2002; dunning and lundan 2008), but, they also have major social and cultural impacts which cannot be captured by the usual tools of the aforementioned disciplines. in this sense, the historical perspective and method employed have great potential to assess both the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 desirable and adverse outcomes –externalities– of foreign mnes. despite this, economic and business history literature, although strong “on the drivers of the growth of global business and its organizational structures and diversity”, has until now failed to answer convincingly “whether the net impact of global business was positive or negative” (jones 2015, 404). mira wilkins, the dean of mne history, gives some directions for future research, linked to the challenges faced by historians at the macro and micro levels: to determine why the same mne affects host states in both similar and dissimilar manners, eventually shaping national capitalism; to discover which interactions and which government policies in what context stimulate national economic growth; and to find out what makes one society and not another able to borrow from, and effectively shape, the contributions of mnes toward national goals (wilkins 2010, 645). this essay goes into this controversy about the long-term impact of foreign mnes on host economies focusing on the case of spain, as a late industrializing country, with a twofold aim: to examine major scholarly contributions to identify new directions for future research, and to encourage new comparative and multidisciplinary research. the article is structured as follows. first, we argue why spain is an attractive case study to later contextualize in section two the intellectual concerns, controversies and approaches of the earliest scholarship on inward fdi in the country. we then discuss what we consider to be the seven major contributions of recent spanish research on this issue, focusing on economic and business historians’ works. last section is, finally, devoted to conclusion and directions for future research. spain as a case study spain became an attractive destination for foreign direct investment with the spread of industrialization in the 19 th century (g. tortella 1973; t. tortella 2000). although the existing http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 evidence on historical inward capital flows and the number and operations of foreign firms is rather fragmented, we know that four countries have traditionally concentrated foreign concerns in the country: france, britain, germany and the united states (puig, álvaro and castro 2008a). whereas french and british capital was prominent in the 19 th century, focusing on mining, railway and banking, german and american firms would take the lead during the second industrial revolution and from the 1880s onwards. their influence reached peaks during the early 1940s and the 1960s, respectively. after spain became a full member of the european union in 1986, european investors gained in importance among spain’s total inward capital flows. spain’s economic and institutional performance and, in particular, economic policy, shaped foreign mnes’ operations in the country at least in terms of entry strategies and staffing and recruiting patterns. protectionism (between 1892 and the 1960s), economic nationalism (from the 1930s to the 1960s) and international isolation (from the 1930s to the 1950s) indeed promoted joint ventures and strategic alliances with local partners and the recruitment of local managers and staff. (puig and álvaro-moya 2015b). mnes, moreover, contributed to the rise of powerful business groups, which used the capital, knowhow and contacts provided by their foreign partners to grow and diversify (muñoz, roldán and serrano 1978; guillén 2000; kock and guillén 2001; valdaliso 2006; valdaliso and torres 2012; puig and torres 2008, 2015; álvaro-moya 2011). spain, therefore, constitutes an excellent testing ground for the longterm impact of protectionist policies on foreign mnes and their interplay with local actors, a traditional issue, recently revisited, among scholars who have examined inward fdi in the country. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 early research on inward fdi in spain early research on inward fdi focused on spain’s historical backwardness and the spanish “nationalistic path to capitalism”. under the influence of both postwar modernization theory (rostow 1960; gerschenkron 1962) and marxist development economics (prebisch 1950), economists and historians would embark on a fruitful interdisciplinary dialogue to assess whether mnes had helped or prevented the rise of modern capitalism in 19 th -century spain. the absence or irrelevance of spillovers from massive foreign investment in mining and railways led many economic historians to adopt a rather negative view. according to this, mnes were not a push factor in the overall process of industrialization, but instead reinforced spain’s backwardness (sardà 1948; campillo 1963; tamames 1967; sánchez-albornoz 1968; cameron 1971; nadal 1975; broder 1979). scholars interested in more contemporary issues built on such statements to construct a comprehensive theory of spanish capitalism. mounting economic nationalism under successive political regimes, they affirmed, paved the way for general franco’s self-sufficiency project (1939-1959) (roldán and garcía delgado 1973; clavera et al. 1973). other scholars, however, argued that foreign investment was crucial to developing not only strategic industries such as railways but also universal banking, which could not have developed without foreign investors due to the lack or insufficiency of private savings and the chronic problem of public deficit (tortella 1973). indeed, both foreign and national enterprises behaved similarly, responding to economic incentives and seizing business opportunities. governmental efforts to attract foreign capital explains not only how opportunities were exploited by mnes, but also the introduction of the more liberal policies which encouraged inward capital flows and spain’s integration into world markets (costa campí 1983). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 mnes became particularly visible during the 1960s and early 1970s, the period of rapid growth that allowed spain to complete its industrialization. this gave rise to scholarly analyses on two interrelated issues. the first was the study of spain’s structural dependence on foreign, primarily american, capital and knowledge, supported by aggregate data on imports of capital goods, patents registered by foreign firms and contracts of technical assistance (velarde 1975; gallego 1975; braña, buesa and molero 1976; garcía delgado and segura 1977; fanjul and segura 1977; molero 1979). the second concerned the relationship between foreign investors and the local business and financial elite (muñoz 1969; tamames 1977). these analyses were based to a large extent on the first comprehensive reconstruction of the inward flows and vehicles of foreign capital in spain during the 1960s and 1970s, a seminal work authored by three economists and entitled la internacionalización del capital en españa, 1959-1977 (muñoz, roldán and serrano 1978). its publication coincided with the elaboration by the spanish ministry of trade of the first census of spanish firms with participation by foreign corporations (ministerio de comercio 1977). this study showed that foreign, and in particular, american firms played a prominent role in the spanish manufacturing sector, especially in the motor, chemical and electrical industries. interestingly, most of the literature held a critical view of foreign mnes and their local partners, blaming them for spain’s relative backwardness. some authors, however, pointed at local institutions and the lack of an entrepreneurial drive as the main causes of spain’s economic and social deficiencies (velarde 1969; tortella 1973). the traditional view of spain’s backwardness, dependency and entrepreneurial failure has had a lasting influence on spanish social scientists. nevertheless, the dynamism of the spanish economy in the late 20 th and early 21 st centuries, in particular the firms that went international in the late 20 th century or even earlier, began to challenge the traditional, pessimistic http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 approach. what is more, the wave of corporate mergers and acquisitions prompted by spain’s entry into the european union in the late 1980s would shed new light on the potential and capabilities of spanish firms, encouraging scholars to reconsider the role of foreign investment in the organizational development of spanish companies. the topic has turned out to be a remarkably fertile one, particularly for management scholars investigating the rise of what have been recently called the “new multinationals” (guillén and garcía canal 2010). these new multinationals, that include companies from emerging markets, have been able not only to imitate the established ones, but also to develop their own competitive advantages based on the exploitation of firm-specific competences (durán 1996, 1998, 2005, 2006) and the exploration of new patterns of innovation and ways of accessing markets (guillén 2005; guillén and garcía canal 2010). recent historical research on inward fdi in spain in contrast to the fruitful dialogue between economists and historians that characterized the previous period, recent academic research on inward fdi has been carried out with little interaction across disciplines. it should be noted that spanish economic and business historians, most of whom are affiliated with departments of economics and management, have integrated theoretical frameworks such as dunning’s eclectic paradigm and uppsala’s gradual internationalization model into their studies. needless to say, they have been also influenced by the work of international business historians like mira wilkins, alfred chandler and geoffrey jones. their university colleges, however, have been considerably less receptive to the extensive historical research conducted in the past decades within or outside spain. therefore, in this section we want to discuss what we think of as the main contributions of recent historical http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 research regarding inward fdi and mnes in contemporary spain. we have identified seven lines of research: new quantitative evidence on fdi inward flows and firm demography analyses of foreign mnes; new approaches to the transfer of technology by mnes; collective and individual case studies of foreign mnes, with a focus on their impact on local capabilities; identification of patterns of investment by mne home countries; identification and study of the local actors of inward fdi; new perspectives gained from the history of international relations; and, finally, new evidence on processes leading from inward fdi to outward fdi. fdi inward flows and firm demography inward fdi flows did not begin to be systematically recorded by the bank of spain until 1975. there is only fragmented quantitative evidence, recorded by the spanish administration, on spanish firms controlled by foreign mnes between 1959 and 1975, and this has been used by successive generations of scholars to assess the relevance and long-term impact of foreign capital in the spanish economy, particularly in the industrial sector. as a result, early reconstructions of fdi inward flows did not provide a long-term overview, nor did the first efforts to build corporate censuses. as the latter were based on the directories of joint-stock companies, they focused on mining and railways (campillo 1963; sáinz 1965). a new wave of research has overcome these limitations by looking for alternative sources, such as diplomatic, counter-intelligence and corporate records, which include contemporary censuses of foreign firms and broad estimations of foreign stakes in spain (tascón and carreras 2001; tortella 2000 and 2008; loscertales 2002; castro 2010; puig, álvaro and castro 2008a; broder et al. 2014). when dealing with us investment in spain, economic historians have also used the annual estimations of american stakes abroad published since the early 20 th century by the treasury department (tascón 2003, 2008; álvaro-moya 2011, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 2012; tascón and lópez zapico 2014). despite the limitations posed by such sources, these authors have added to the existing information about fdi distribution by home country and industry. they have also revealed a remarkable continuity in capital flows and business relationships between locals and foreigners during the middle decades of the 20 th century, under franco’s rule. moreover, new research shows that the spanish government was proactive in its search for foreign investors and technological assistance to undertake large industrial projects. indeed, technological dependence prevented the spanish government from taking full advantage of the nationalization opportunities that arose after the second world war. the expropriation and public auction of german industrial assets is a case in point. instead of transferring them to spanish owners, most firms remained under the control of their former shareholders and managers. this procedure not only ensured the continuity of the business operations of german mnes during the difficult postwar years, but would facilitate the full takeover of the spanish subsidiaries in the new context of the 1960s and after (puig and álvaro 2007). new approaches to the transfer of technology the examination of technology transfer has traditionally relied on quantitative data on patents and licensing. some of the studies conducted from the 1990s onwards have applied the same methodology. they offer a broad picture of the last two centuries consistent with traditional ideas of the spanish economy as being structurally dependent on foreign technology (molero 1979, 1993; miranda 1998; ortiz-villajos 1999; sáiz 1999, 2005; cebrián 2001, 2005). however, technology transfer goes beyond patents and licensing. aware that it can also occur outside the industrial sector and/or through qualitative venues that call for alternative approaches and research methods, historians have begun to identify new areas, such as management education (puig 2003b, 2003c, 2008; puig and fernández-pérez 2003; torres http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 2016), management consulting (kipping and puig 2003; kipping, üsdiken and puig 2004) and engineering consulting (álvaro-moya 2014; castro and sánchez 2014). as in other european countries, management education and business schools arose in the mid-20 th century under a strong us influence. the technical assistance program included in the american aid of the 1950s (in the marshall plan in the case of other western europeans) was the basis of the first, state-promoted business schools, an initiative soon followed by private groups very close to spanish business and political elites. particularly in the last case, business schools were a response to the challenges posed by mnes entering the market, in a context, however, of increasing professionalization and labor rationalization of domestic firms. management and engineering consulting also emerged under a strong foreign (this time us and french) influence. while management and engineering consulting and us firms entered the spanish market through consulting services, joint ventures and strategic alliances with domestic firms (kipping and puig 2002, 2003; álvaro-moya 2014), the french engineering firms achieved a prominent position in the spanish economy in the 1960s and early 1970s through technical assistance contracts (castro and sánchez 2014). finally, a broader and less quantitative approach to the transfer of technology is leading historians to explore the relationship between foreign mnes and brands and trademarks (sáiz and pretel 2014; pretel and sáiz 2012). these studies suggest that patenting was closely related to direct investment and geographic proximity before 1880. by contrast, in the following decades, and at least until 1939 (the period these works focus on), multinationals used patenting as a way to protect future businesses as their international expansion accelerated, interests which would be exploited later on or (more frequently) not. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 case studies on mnes transferring knowledge in the last few years, many collective and individual case studies on foreign mnes have explored the formation of local entrepreneurial and managerial capabilities as well as the determinants of this process (gómez mendoza 1994; lópez morell 2013; álvaro-moya 2007, 2014; llonch 2014; fernández-pérez 2014; puig 2003a; puig and álvaro-moya 2015a, 2015b). according to these studies, although expatriates were crucial in the early stages of new subsidiaries, they tended to soon be replaced by spanish-educated managers, even in technology-intensive areas. economic nationalism certainly encouraged such practices, but the adoption of adaptation strategies by foreign mnes and the availability of either experienced or promising spain-based professionals played a significant role as well. recent research highlights, in fact, the high technical level of spanish managers and engineers, but also their lack of marketing, distribution and advertising skills. technical and organizational knowledge spread within the subsidiaries through more or less institutionalized in-house training and personnel exchange programs. finally, historians have identified an issue worth further exploration; i.e. the circulation of codified and uncodified knowledge beyond subsidiaries and joint-ventures through the professionals moving on to other companies and/or teaching at educational and scientific institutions, eventually helping to establish new institutions and build lasting ties between these institutions and the multinational firms these professionals had once worked for puig and álvaro-moya (2015b). this link between foreign mnes and the local educational infrastructure constitutes, therefore, a new approach to technology transfer in line with what has been discussed in the previous section and of great interest to assess the long-term influence of multinationals in host economies. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 patterns of investment international business scholars have paid considerable attention to fdi national patterns and home-country effects on the strategies and behaviors of mnes. persuaded that such patterns and effects can be best understood in historical and comparative perspective, spanish economic and business historians have set out to examine the dynamics of french, german, and american direct investment (castro 2010; loscertales 2002; lópez-morell 2013; puig, álvaro and castro 2008a; puig and castro 2009; sánchez 2006). by combining foreign trade and fdi flow statistics with highly detailed information from public and private archival sources, these studies have added considerably to our knowledge of the history of foreign mnes in spain. we know, for example, how and with what partners the rothschild bank operated in our country (lópez-morell 2013). we also have in-depth knowledge of the main actors and strategies of german investment in spain from 1870 to 1920 (loscertales 2002). and we have exhaustive analyses of the role played by the french administration and banking sector in french direct investment activities in 19 th and 20 th century spain (sánchez 2006; castro 2010). last but not least, a long-term comparative analysis of french and german investment in spain reveals that the core capabilities of foreign firms and their relationships with local partners spurred the rise and development of two distinct models of international investment, characterized as “political” and “technical”, respectively (puig and castro 2009). seeking for new markets, american capital, by contrast, used both technical and political local partners to accommodate to domestic politics and opportunities. in any case, these investment patterns worked also as a response to successive waves of capital inflows headed by different actors, but traditionally monopolized by french, british, german and american companies (puig, álvaro and castro 2008a). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 the local actors of inward fdi firm demography studies and case studies have allowed the identification and analyses of the local actors of inward fdi, from business groups and family firms to professional associations, educational institutions and chambers of commerce (otazu 1987; loscertales 2002; sánchez 2006; puig and torres 2008, 2015; garcía-ruiz and puig 2009; castro 2010; álvaro-moya 2011, 2015; puig and álvaro-moya 2015b). the historical alliances between mnes and local firms have also been illustrated by national and regional entrepreneurial biographies (torres 2000; vidal 2005; cabana 2006; parejo 2011) and business monographies, as well as by new comprehensive studies on spanish large family businesses (fernández-pérez and lluch 2015). as noted in section 2, early research on fdi in spain had already highlighted the role played by business groups and family firms in the entry of foreign capital through the exchange of local contacts and know-how for financial and technological resources. the recent studies aforementioned, however, stress the multi-sided character of the relationships between local and foreign actors and the continuity of such relationships in the long term. moreover, fdi was facilitated by professional associations, educational institutions and chambers of commerce, which not only provided foreign firms with host market information, but helped create and strengthen effective and lasting social networks. existing studies also suggest that these institutions might have played a key role in the dissemination of ideas beyond subsidiaries, as well as in the development of a social and business environment favorable to mne operations in spain (sánchez 2006; puig and álvaro 2004; puig, álvaro and castro 2008a; álvaro-moya 2011; castro 2010). “soft” diplomacy might have enhanced these dynamics. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 international aid programs and soft diplomacy the fiftieth anniversary of the marshall plan prompted a wave of research on the effects of the economic aid and technical assistance provided that the us provided to its allies. the “americanization” of western and japanese firms and institutions became a favorite research topic (djelic 1998; kipping and bjarvar 1998, gourvish and tiratsoo 1998; engwall and zamagni 1998, zeitlin and herrigel 2000, barjot 2002, barjot and réveillard 2002, barjot and schröter 2002, barjot, lescent-giles and fèrriere 2002, kipping and tiratsoo 2002, schröter 2005). although spain was not invited to join the marshall plan, in 1953 the spanish and us governments reached a bilateral agreement that granted spanish firms and other public and private institutions access to american know-how. in the early 21st century, spanish economic and international relations historians joined efforts to assess the extent and long term effects of such agreements (niño 2003, 2015; delgado and elizalde 2005; delgado and león 2011). some of these studies identified a number of professional associations created in the context of american aid with close ties with foreign firms (puig and álvaro 2004; álvaro-moya 2012). the construction of the american military bases, as well as the “productivity missions” of spanish businesspeople and managers sent to the united states would pave the way for modern engineering consulting firms and contributed to the later expansion of domestic construction companies (puig and torres 2008; torres 2011; álvaromoya 2014). international relations and cultural historical research has paid increasing attention to “soft” diplomacy; that is, the set of initiatives that seek to gain public support abroad by creating a positive social environment (delgado 2009a, 2009b; jiménez et al. 2015; sánchez 2006; león 2006, 2011; rodríguez 2011; rodríguez, delgado and cull 2015; lópez-zapico 2012; montero 2008). this includes cultural, educational and scientific exchange programs. none of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 these studies, which have focused on france and the united states, have among their aims an analysis of the impact of these programs on inward fdi. but these initiatives facilitated the operations of foreign firms in at least two ways: by training the personnel of future foreign affiliates and by compensating for the state’s nationalism and protectionism with a social and business environment favorable to fdi. these programs, moreover, might have helped to manage cultural diversity within the firms. in the case of the us, research has also shown how some of these soft-diplomacy initiatives, particularly those related to the motion picture industry, were used by foreign firms to overcome the strict limits imposed on outward capital flows during the autarky (león 2006, 2011). from inward to outward fdi the rise of spanish multinationals, a late yet quite remarkable phenomenon that has underpinned the rapid growth of the spanish economy in the late 20 th and early 21 st centuries, poses interesting questions about the many ways that spanish firms learn and benefit from foreign mnes (durán 1996, 2005; sánchez and durán 1981). do multinationals help local firms to go international? do local partners learn from foreign mnes? to what extent did economic nationalism promote the transfer of knowledge from mnes to their spanish subsidiaries and joint ventures through local management? historians are making a relevant contribution to our understanding of spain’s new multinationals by unveiling strong and enduring links between some of these firms and their historical multinational partners (puig, álvaro and castro 2008a, 2008b; fernández-pérez 2014). many of such alliances were lasting and influential, what not only explains the continuity of foreign investments in spite of increasing governmental restrictions, but also created a path of dependency which favored a fruitful interaction between foreigners and local actors, including local managers and spanish professional and educational institutions (puig and álvaro-moya 2015b). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 management scholars, however, have approached this topic far more effectively, examining the rise of multinational firms based in emerging markets with the tools of international business and developing new perspectives (guillén 2005; guillén and tschoegl 2008; guillén and garcía-canal 2010). this leads us to a crucial issue: the limited impact of historical research outside its own academic boundaries and the inability or resistance to re-engage in a fruitful dialogue with other disciplines. spanish historians, like their international peers, excel at borrowing and discussing concepts and theoretical frameworks taken from other disciplines, but often fail to disseminate their findings among their colleges. historical theorizing should be a priority for future research. conclusions and directions for future research over the past two decades, economic and business historians have used new sources and perspectives to shed new light on the role of foreign mnes in spain’s economic and social development. this research has resulted in a wealth of new empirical evidence, as well as a more critical approach towards the relationship of inward fdi and the spanish variety of capitalism. by pointing to the persistent influence of foreign mnes throughout spain’s long industrialization process, the contradictory effects of economic nationalism, the proactive role of local actors and the processes of internalization of foreign knowledge by both mne subsidiaries and local firms, scholars have shifted their focus away from the roots of economic backwardness towards the complex world of mnes and their interaction with local business actors. although failed projects and disinvestment processes, which underpin the history of mnes in contemporary spain, continue to be neglected or under-researched, we contend that there is enough evidence to update and review the groundbreaking work of muñoz from a historical and comparative perspective (muñoz et al. 1978). this would help http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 foreign mnes find the place that they lack today in the many textbooks used by thousands of students of spanish economic history. the relatively late development of spain makes it an ideal case study for testing international business theories, not only classical theories inspired by the historical experience of advanced, mainly anglo-american, firms, but alternative theoretical frameworks based on emerging markets. however, one of the problems of the recent historical research is a lack of interaction with economists and management scholars. this explains the relatively low levels of academic relevance and visibility of most of the research reviewed in this article. to promote an interdisciplinary dialogue akin to that of the 1960s and 1970s and to increase their visibility in the highly competitive environment of the 21 st century, historians need stronger theoretical foundations and historical theorizing (bucheli and wadhwani 2014; jones 2015). in our view, internalization theory (verbeke and kano 2015) has a high potential for historians concerned with at least five issues: 1) the entry and operation modes of foreign mnes; 2) the bundling of mne firm-specific advantages and local assets (including host country advantages), examined through joint ventures and other historical strategic alliances between foreign and spanish actors; 3) the transfer of knowledge and organizational capabilities from mnes to local firms; 4) the development of local managerial and entrepreneurial talent; and 5) the implications of previous international experience for the internationalization of spanish enterprises. the interplay between the foreign and local actors of international direct investment is at the core of the major reinterpretation of the long-term effects of mnes in contemporary spain that we are proposing here. we need to re-examine the historical evidence regarding the development of organizational capabilities under foreign influence, as well as link this process to the recent internationalization of spanish firms. such an approach should allow us http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 to test internationalization theory against relevant historical experience, shedding light on the microeconomic dynamics of inward and outward fdi flows and thereby adding to the investment development path theory (dunning and narula 1996). finally, we propose that students of mnes in spain take a critical look at the impact of the period of economic transition between 1960 and 1986 on foreign and spanish enterprises. existing evidence does not deny the disrupting effects of spain’s entry into the european union (the focus of recent management scholarship), but it reveals that by 1986 many spanish businesspeople and institutions had already learned to deal with change and to look for and seize investment opportunities both inside and outside the country: this is the very nature of entrepreneurship, and an excellent starting point for integrating historical research into the study of international business. references 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barcelona: planeta. tascón, julio. 2003. “capital internacional antes de la “internacionalización del capital” en españa, 1936-1959.” in los empresarios de franco. política y economía en españa, 1936-1957, edited by glicerio sánchez and julio tascón, 281-306. barcelona: crítica. tascón, julio, ed. 2008. la inversión extranjera en españa. madrid: minerva. tascón, julio, and albert carreras. 2001. “investissements étrangers et intérêts suisses en espagne (1936-1946). ” in la suisse et l’espagne. de la république à franco (1936-1946), edited by mauro cerrutti, sébastien guex and peter huber, 463-481. lausanne: antipodes. tascón, julio, and misael a. lópez zapico. 2014. “u.s. direct investment in spain during the latefrancoism and the transition to democracy. reasons for its behavior.” historia actual online 34:7-24. torres, beatriz. 2016. los orígenes del iese. madrid: lid. torres, eugenio. 2000. los cien empresarios españoles del siglo xx. madrid: lid. torres, eugenio. 2011. origen, crecimiento e internacionalización de las grandes empresas españolas de la construcción (1900-2008). bogotá: universidad de los andes, cátedra corona. tortella, gabriel. 1973. los orígenes del capitalismo en españa. banca, industria y ferrocarriles, 1829-1874. madrid: tecnos. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 14-39, july-december 2016 doi.org/10.1344/jesb2016.2.j011 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 tortella, teresa. 2000. una guía de fuentes sobre inversiones extranjeras en españa (1780-1914). madrid: banco de españa. tortella, teresa. 2008. “la inversión extranjera a través del archivo del banco de españa (19161966).” in la inversión extranjera en españa, edited by julio tascón, 49-84. madrid: minerva. valdaliso, jesús maría. 2006. la familia aznar y sus negocios (1830-1983). madrid: marcial pons. valdaliso, jesús maría, and manuel torres. 2012. grupo aznar: 150 aniversario 1861-2011. madrid: ediciones el viso. velarde, juan. 1969. sobre la decadencia económica de españa. madrid: tecnos. velarde, juan. 1975. “las inversiones privadas extranjeras en españa en el periodo 1960-1970.” boletín de estudios económicos 30 (96): 911-930. verbeke, alain, and liena kano. 2015. “the new internalization theory and multinational enterprises from emerging economies.” business history review 89 (3): 415-445. vernon, raymond. 1971. sovereignty at bay: the multinational spread of us enterprises. new york: basic books. vidal, javier. 2005. cien empresarios valencianos. madrid: lid. wilkins, mira. 1998. “multinational enterprises and economic change.” australian economic history review 38 (2): 103-34. wilkins, mira. 2009. “the history of the multinational enterprise.” in the oxford handbook of international business, edited by alan m. rugman, 3-38. oxford: oxford university press. wilkins, mira. 2010. “multinational enterprises and the varieties of capitalism”. business history review 84 (4): 638-645. zeitlin, jonathan, and gary herrigel. 2000. americanization and its limits. reworking us technology and management in post-war europe and japan. oxford: oxford university press. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 álvaro ferreira da silva nova school of business and economics (portugal) multinationals and foreign direct investment: the portuguese experience (1900-2010) abstract this paper reviews the evolution of inward and outward fdi in portugal over more than one century. this long term perspective provides an overview of the portuguese economy in different phases of the world markets integration since the immediate pre-wwi period to the contemporary global economy, moving through the interwar period of neo-mercantilism and witnessing the slow revival of the world economy after wwii. the domestic economic and institutional experience has been at least so diverse as the global context: portugal moved from a developing to an advanced economy, facing several economic and financial crises, different institutional and political environments more or less conducive to the integration in the world economy. four issues are especially emphasized: the analysis of the so-called autarchic phase during the estado novo period; the role of fdi during the period of the most intense growth of the portuguese economy (1960s and early 1970s); the entry strategies followed by foreign mnes during a period of structural transformation in the volume of fdi inflows (1960s-1970s); the reasons for the surge in outward fdi after the late 1990s. keywords: inward fdi; outward fdi; portugal; entry strategies by mnes; joint-ventures corresponding author. e-mail: alvaro.silva@novasbe.pt received 20 may 2016 accepted 20 june 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 introduction a long-term perspective on the evolution of inward and outward foreign investment in portugal over the twentieth century is largely absent from the literature. in a few cases the analysis has a greater chronological depth, namely in the studies by matos (1973). however, even in this case the author zooms in a specific period of time: the 1960s and early 1970s. other studies provide a long-term synthesis on foreign direct investment (e.g. leite et al., 2001; moreira and dias 2008), but they rely on a descriptive and very superficial approach with the exception of taveira’s doctoral dissertation (1984). the chapters dedicated by the recent and in-depth história económica de portugal (lains and silva 2005, 3) to the internationalization of the portuguese economy or to capital as a factor of production never address fdi, which is one important weakness of this work. in the absence of studies with an historical matrix, the disciplinary tradition of economics clarifies some important issues on foreign investment. firstly, foreign direct investment is approached as a component of the balance of payments (matos 1973; lopes 1996; leite et al. 2001). a second perspective seeks to understand the geographic location and microeconomic impact of foreign investment (barbosa et al. 2004; barbosa 2009; barbosa and eiriz 2009; cardoso 2011; crespo et al. 2009; farinha and mata 1996; forte and sarmento 2014; gonçalves and guimarães 1996; guimarães et al. 2000; melo 2012; melo et al. 2015; pantea 2011; pinheiro and sarmento 2013; silva et al. 2013; simões 1993). finally, other studies investigate the factors attracting fdi, in a much more policy-oriented perspective, in order to design the most effective public policies to attract foreign capital (barroco et al. 2014; faria 2015; júlio et al. 2013; leitão 2011; severiano 2011; simões 1988 and 1992; wenseleers http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 2014). international business studies with a more explicit relationship to management studies are scarcer (fonseca et al. 2015; silva and simões 2012). foreign investment has also sparked interest in a literature that seeks an economic approach dictated by a clear opposition to the adverse effects of foreign capital (castro 1972; martins 1976; sideri 1970). the impact of the dependency theory (gunder frack, celso furtado) is especially visible in the case of sandro sideri. these different approaches surely lack a long-term approach of foreign investment, both in the interpretation of their flows and identification of the protagonists, and in the analysis of the public policies and institutional rules framing fdi. the macroand micro-economic impact of foreign investment is a topic in which studies are scarce, mostly those with an historical perspective. the field of international business is by definition cross-disciplinary (dunning 2009). however, the cross-fertilization between economic and business historians, on one hand, and scholars working on international economic and business studies is absent from the studies about foreign investment in portugal. the business strategies leading foreign multinationals and entrepreneurs to invest in portugal and their alliances with portuguese firms are also a missing issue (barbosa and louri 2002 is one exception). some case studies exist on the internationalization of portuguese firms through foreign operations abroad (fonseca et al. 2015; martins 2005), but they remain few in number and without in-depth historical analysis. this text does not intend to answer to these gaps. it aims, nevertheless, to be more than a revision and synthesis of the literature on foreign investment in portugal. using a metainterpretation of the available interpretation, combined with – very limited – empirical research, this paper addresses the following topics: understanding the institutional framework http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 and the public policies directing inward fdi; the evolution of inward and outward fdi flows, trying to characterize their main phases over more than one century; the identification of the main questions for debate and research coming out from this long-term perspective. institutional framework and public policies attracting foreign investment has been seen as an important engine of economic growth by economists and policy-makers. the creation of specialized institutions to promote the influx of fdi is a trend developing in developed and developing countries over decades (see the case of ireland, ruane 2001). in portugal, no such an autonomous and specialized agency existed until 1977. however, a 1965 law may be considered as the first legal framework to support inward foreign investment. this new legislation guaranteed the property rights of foreign investors, integrating into the domestic law principles stated in the international monetary fund code for the liberalisation of capital movements (1959) and in the convention for the protection of foreign property (equal taxation regarding domestic firms, free repatriation of capital and a guarantee against expropriation). these property rights had not previously been in danger, but were firmly stated in the new law. two more important clauses were included in the law. the first was the possibility to apply for tax exemptions in “projects with superior interest to the social and economic development of any part of the country”. it supported an active policy to attract investment from abroad. the second novelty established free capital investment in many sectors, beyond the very strict rules defined in the industrial conditioning act. the 1965 law thus introduced a considerable legal framework for promoting foreign investment in portugal. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 the first institution for supporting fdi was created in 1977, exactly the same year that portugal applied for eec membership – the instituto de investimento estrangeiro (iie). it developed an important effort in mapping the presence of foreign firms in portugal and diffusing information abroad on the actual conditions of foreign entrepreneurs in portugal. the main task for the new institution was restoring confidence of foreign investors after the effects of the 1974 revolutions and the ensuing nationalizations (see below). in 1990 the iie disappeared, on the grounds that the liberalization of capital flows in the ec would not justify the existence of a specialized body to promote fdi. it was integrated into the instituto de comércio externo português, responsible for supporting exports and trade from portugal to foreign destinations. in 2002 a new institutional change occurred when the agência portuguesa para o investimento was created, but it was short-lived: five years later the activities for supporting fdi inflows became again part of a single institution to promote exports and fdi, the agência para o investimento e comércio externo. in addition, after 2005 the government institutionalized fast-track mechanisms for supporting foreign investment, streamlining and providing more rapid administrative decisions on investment projects: pin and pin+ (projectos de potencial interesse nacional) – this was especially directed to projects in tourism or other activities in which the administrative steps to approve a project are numerous (environmental impacts, decisions at central and municipal administrative level) these volatile and swinging policies regarding the promotion of fdi are difficult to understand in a country with low levels of foreign investment. some sort of countercyclical policy affects the institutional framework of fdi: in 1977, when there were very low levels of fdi the iie was created; in 1990 there was a peak of fdi, but the iie disappeared and its activities were integrated into icep; in 2002 there was a sharp decrease in fdi inflows, and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 the government decided to create a new agency; finally, in 2006, a new peak in fdi coincided with the end of the former agency. the lack of stability and erratic policies, as well as the partisanship in the nominations for the boards of these different agencies, characterize this institutional framework. the case of ireland, in contrast, is particularly revealing. an autonomous agency for attracting foreign investment has existed since 1949 (o’gráda and o’rourke 1995). notwithstanding the inevitable changes in policies and agency organization, the institutional continuity of the investment development agency has been sustained (ruane 2001; tavares-lehmann 2007). the evolution of inward and outward fdi fdi in portugal has a history prior to the twentieth century, particularly during the period of time of global economic growth after the mid-nineteenth century. however, the portuguese economy seems to have benefited little from the global capital flows during the pre-wwi years (more optimistic view in mata 2008), despite the absence of aggregate statistical data comparable to the period after wwii. during the late nineteenth and early twentieth centuries, fdi clustered in natural resources (mining, agriculture, raw materials) and infrastructures (railways, utilities) (jones 1996). portugal was not well endowed in natural resources and its poverty and backwardness prevented large capital inflows to transport infrastructure or utilities, explaining the low evidence of inward fdi. however, some foreign investment existed: electricity and gas (lisbon and porto); mining; cork and canned fish manufacturing; colonial ventures (diamonds, plantations). the black hole in statistical data on inward fdi continues after wwi and until the wwii. however, the scarce information points to very low levels. it is not difficult to imagine a more unfavourable situation regarding fdi inflows to portugal. the aftermath of wwi was http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 characterized by high levels of inflation (surpassed only by the hyperinflation in the defeated countries), monetary instability, very high currency devaluation, as well as high political instability (silva and amaral 2011). only in the mid-1920s did the financial situation start to stabilize and in the late 1920s the authoritarian regime ended the fragile parliamentary regime. however, this financial and political stabilization happened at a time when the great depression was dramatically decreasing global investment flows. the second world war accentuated the international instability, even though portugal, as a neutral country, became a shelter for thousands of refugees fleeing war and persecution. this condition as a neutral country rarely attracted an important volume of foreign investment, with some exceptions, as in the case of sofina, the multinational firm headquartered in brussels. in short, the first half of the twentieth century was characterized by very low fdi levels, continuing the same structural profile that fdi had during the late nineteenth century. the first wave of inward fdi starts during the golden age of portuguese economic growth (1960-1974), when rates of per capita gdp growth attained levels never again reached in the economic history of portugal (amaral 2010). it was the first time fdi attained some expression, emphasizing the novelty of the period (see figure 1). the sharp increase in foreign investment started in 1960, with a stagnation in the late 1960s, but another surge after 1971. this breakthrough in the evolution of fdi justifies its historical singularity. in fact, before 1960 investment coming from abroad was relatively low. the annual average of fdi between 1943 and 1960 was 1.2m us dollars at fixed prices, but it increased more than 30 times (38.1 million dollars per year) throughout the 1960s. the total of all fdi in the 1950s is the same value as the fdi in the single year of 1961. the importance of the 1960s with regard to foreign investment in portugal is also clear if we look at another indicator. in 1979 about http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 two thirds of the foreign firms operating in portugal had been created in the period from 1961 to 1973 (simões 1982). this result is impressive considering that there was foreign disinvestment after the 1974 revolution, which means that some firms created before 1974 disappeared during the period 1974-1979. figure 1. inward foreign direct investment in 1970 usa dollars and as % of portuguese gdp source: banco de portugal, 1997 and 1990-2012 (own calculations). the external environment also influenced the evolution of fdi. immediately following the agreement with efta (1959) fdi inflow had a six fold increase. following the 1970’s agreement with the eec the level of fdi trebled. this period of large capital inflows ended in 1975, after the fall of the authoritarian regime (estado novo) in 1974, when the political instability and the anti-business policies of the new governments installed fear in foreign markets. in 1975, the government nationalized every domestic financial institution, as well as the largest firms in industries such as energy, steel, transportation, media, shipbuilding and repair, cement, paper pulp, chemicals, and petrochemicals. there was not a single foreign investment affected by the nationalizations. 0 1 2 3 4 5 6 7 8 9 10 100 1000 10000 100000 1000000 10000000 1 9 4 3 1 9 4 6 1 9 4 9 1 9 5 2 1 9 5 5 1 9 5 8 1 9 6 1 1 9 6 4 1 9 6 7 1 9 7 0 1 9 7 3 1 9 7 6 1 9 7 9 1 9 8 2 1 9 8 5 1 9 8 8 1 9 9 1 1 9 9 4 1 9 9 7 2 0 0 0 2 0 0 3 2 0 0 6 2 0 0 9 fdi 1000 us$ % fdi/gdp http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 even so, foreign capital fled the country, facing a surge in labour costs, industrial unrest, and political instability. as a result, inward fdi flows decreased sharply in the period after the nationalizations. the ratio of the fdi stock to gdp dropped every year between 1975 and 1980. foreign investment flows regained traction after the mid-1980s. this was the beginning of a period characterized by economic liberalization, european integration and privatization of the firms nationalized in 1975. the privatization process started in the late 1980s, reducing in 20 years the number of state-owned firms: by the mid-1990s only cgd remained a state-owned bank; in the non-financial sector and by 2010, state ownership remained only in rail, air and urban transport, and water supply. this was the period of time when foreign investment gained an important stronghold in the portuguese financial sector (neves and silva 2016). the recent effects of the financial crisis in the portuguese corporate structure not only increased this presence of foreign capital, but also the dominance of foreign ownership in some of the largest incumbent firms privatized after the late 1980s (telecoms and electricity, for instance) (silva and neves 2014). the privatization of the last state assets in the energy and telecommunications industries, combined with the retrenchment and divesting strategies of portuguese business groups and firms, attracted foreign investment to assets sold at a discount (“fire-sale fdi hypothesis” – alquist et al. 2016; weitzel et al. 2014). the fdi flows increased after entering the eec in 1986, surpassing the 1960s and early 1970s levels: in 1990 it attained more than 4% of the gdp against less than 1% before the 1974 revolution. this surge in the fdi inflows was short-lived: after 1991 it started a rapid decline to levels very low (0.5% of gdp). only after 1996 was there a new wave of growth, increasing rapidly until 2000. in short, the 20 years followung the late 1980s saw a constant http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 volatility in foreign investment, with two short-lived, but distinct waves of inward fdi: from 1986 to 1990 and in the late 1990s. the early twenty-first century is characterized by a new pattern in the levels of fdi: increasing volatility, with yearly movements in a positive or negative direction and negative net inflows of fdi in some years (simões and cartaxo 2013). there is no significant outward foreign investment before the late 1990s (figure 2). the largest portuguese firms and business groups before 1975 nationalizations did not target foreign markets as an investment destination (for a different opinion, see simões 1985). investment in the colonial territories had been the most important destination for capital flows originating in portuguese firms. the 1960s and early 1970s were particularly important for the interest to invest in africa. the most important business groups at the time expanded their activities to the portuguese colonial territories (silva, amaral, and neves 2016), repeating a similar interest visible in the late nineteenth and early twentieth centuries, but vanishing with the impact of the great depression (silva and neves 2014). figure 2. outward foreign direct investment in 1970 usa dollars and as percent of portuguese gdp source: banco de portugal, 1990-2012 (own calculations). -4 -2 0 2 4 6 8 10 10000 100000 1000000 10000000 1970 1000 usa $ % fdi/gdp http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 the political instability and the decolonization in 1975 interrupted this flow and was even responsible by a reverse flow of capital repatriation from the former colonies. no other territory replaced this overseas investment, explaining why outward fdi was so low for two decades. it was not until the 1990s that outward fdi became truly important in the portuguese economy (fonseca 2015). after 1995 the pace of growth is impressive and between 1998 and 2002 outward fdi flows were even greater than inward flows (simões and cartaxo 2013). nevertheless, sharp volatility characterizes these capital movements, emphasizing the small number of players involved. in addition, there is a strong concentration of outward fdi in only a few markets characterized by geographical proximity (spain), cultural proximity (brazil, angola), and new eastern markets (poland). these locational characteristics stress the limited ownership-advantages portuguese firms have, as emphasized by castro (2004). the model of an investment development path (idp) was introduced by dunning as a dynamic approach to the oli paradigm and is an interesting attempt to merge the evolution of inward and outward fdi into a single analytical framework. the country’s level of development (by gdp per capita) interacts in a dynamic and recursive relationship with its international investment position (outward fdi stocks minus inward fdi stocks per capita). the country economic development affects the conditions facing both domestic and foreign firms, influencing the flows and characteristics of inward and outward fdi. the flows and patterns of inward and outward fdi influence the country’s economy, closing the recursive interaction (dunning and narula 1996). the first attempt to apply the idp framework to portugal was in a paper by buckley and castro (1998). the analysis of the portuguese investment development path supports john http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 dunning’s claim of a permanent interaction between a country’s economic structure and the volume and characteristics of both inward and outward fdi (see castro 2004, figure 11). it suggests that portugal was a stage 1 country until the early 1960s. the transition to stage 2 of the idp happened during the 1960s, but may have not been concluded as the institutional shock represented by the regime change and nationalizations affected the normal course of investment flows. after the 1980s and until the mid-1990s, the portuguese idp points to a stage 3 country, and by the mid-1990s portugal seemed to have started the transition to stage 4 (see also fonseca et al. 2007). international comparisons suggest that portugal is now a stage 4 country (duran and ubeda 2001), but its position in the international production network seems not to be fully established, according to castro (2004). the growth of outward fdi in the late 1990s matched a significant decline of inward fdi, which became more local-market oriented than before. in the previous boom periods of inward fdi, export-oriented manufacturing subsidiaries of multinational enterprises accounted for a substantial part of new investments in portugal. this suggests that export-oriented fdi was the most affected for the current decline and supports the idea that it results from the declining competitiveness of portugal as a location for fdi. multinationals are choosing other locations for manufacturing activities, explaining why employment in foreign subsidiaries is the lowest for oecd countries, with the exception of japan. in the same vein “portugal's transnationality index (unctad) is only slightly above half that of greece or spain, and about one quarter that of ireland” (castro 2004). multinational enterprises escape the productivity gap revealed by the portuguese economy by locating their export-oriented investment in other countries. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 this perspective on the evolution of inward and outward fdi highlights some questions of debate and interpretation. firstly, the idea is repeatedly stressed in different syntheses on the evolution of fdi in portugal during the estado novo period, stating that the regime was characterized by an autarchic turn and a hostility toward foreign investment. the second question, much more intractable in the current state of the research, regards the role of fdi for the period of the most intense growth of the portuguese economy – the 1960s and early 1970s. it will also be important to understand the entry strategies followed by foreign firms during the periods when a structural transformation took place in the volume of fdi inflows (1960s-1970s, late 1980s, and late 1990s). especially interesting must be the situation in the former period, when the influx of fdi coexisted with some protection. finally, the reasons for the surge in outward fdi following the late 1990s remain largely unexplored. questions of interpretation autarchic phase and hostility to fdi during the 1930s and 1940s almost every work on inward fdi in portugal has a short synthesis on its evolution during the twentieth century, namely during the estado novo. expressions like “autarchic economic policy” and “prejudice against foreign investors” are used to characterize the estado novo until the mid-1960s (simões 1985, 1993; leite et al. 2001). however, more than a deliberate economic policy aimed at pushing away foreign investors, the drop in fdi was the result of very unfavourable economic and political events: the impact of financial and political instability in the 1920s; the effects of the great depression in the international capital flows; the outbreak of world war ii. this context provides the backdrop to understand the very low levels of fdi, as well as the particular institutional and policy http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 framework during the 1930s and 1940: protectionism, domestic-oriented policies, and lack of interest of foreign investors regarding risky investments. in addition, there are other reasons explaining why portugal had witnessed low structural levels of fdi before the 1960s. the first is the deficiency of natural resources at a time when fdi was motivated by supply-oriented investment and not so much by a market-oriented investment. geographical and cultural proximity is one of the reasons for foreign investments. being the southwestern-most peripheral country in europe and having as neighbour a country with a similar pattern of economic specialization helped to accentuate the low structural levels of fdi. nevertheless, the capital nationalization law (lei da nacionalização dos capitais, 1943) is routinely invoked in the literature as an illustration of this autarchic phase, as it constitutes the first specific legal framework for fdi in portugal. it reserved to domestic firms investment in several sectors: public services and utilities; sectors subject to exclusive concession by the state; defence industries; and “strategic sectors” to be defined in future legislation. this law was a threat to foreign interests in certain areas of the portuguese economy in which foreign investment was higher, such as transport and communications, public utilities, and agricultural concessions in the colonies. still, no deadlines were established for the transfer of foreign control to domestic, and the results were very slight, especially when compared to what was expected given the wording of the law. some foreign companies in the colonies were nationalized (companhia de moçambique and companhia do porto da beira), but this law was never used as a legal device to take over foreign firms acting in urban and railway transport, power or communications, for instance. moreover, “the regime never used the most severe mechanism against foreign capital, the prohibition to repatriate profits.” http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 therefore, the capital nationalization law seems more a legislative act that must be understood within the context of a war economy and a vague programme of importsubstitution than a strategy to attack foreign economic interests operating in portugal. this programme of import-substitution is in line with other measures seeking to overcome the disarticulation between the provisioning circuits in the world economy and the deviation by the belligerent countries of productive capacity to the war effort. to sum up, the second quarter of the twentieth century with the sequence of economic crisis and war explains the collapse of capital flows in the international economy, as well as the attempt to preserve the domestic market for national entrepreneurs through the development of nationalistic economic policies. this was a common tendency and not so much a refusal in principle of fdi. when conditions changed and capital flows reanimated after the war, the country was also affected by this new favourable trend – even before any legal change. what was the real importance of fdi in the golden age of economic growth? this is one of the most important questions for understanding this critical period in portuguese economic growth, but is also one of the most intractable. alfredo de sousa (sousa 1969) estimated that 30% of private investment in portugal was financed through foreign sources and simões lopes states a similar conclusion (lopes 1996). other approaches to the importance of foreign firms in the portuguese economy of the 1960s and early 1970s stated that fdi was responsible for 37% of exports (fernandes 1992). in addition, the importance of fdi to productivity gains associated with better technology is emphasized in other studies and related to the performance of the portuguese economy at the time, but more as a generic appreciation than anchored in any empirical basis (amaral 2002; mateus 2001; neves 1994). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 the importance of fdi should not be overrated. there is a complete lack of analytical studies on this issue for the 1960s and early 1970s, in contrast with what occurs when we look at the second surge of fdi after the mid-1980s (e.g., barbosa 2009; cardoso 2011; farinha and mata 1996; pantea 2011). however, the importance of foreign investment for the portuguese economy can be better understood if put into a comparative perspective, assessing its weight within overall public and private investment, and comparing it with the evolution of the gdp at the time. the period between 1985 and 1994 helps to place the volume of fdi throughout the 1960s in its real dimension. the late 1980s and early 1990s were exceptionally good periods for attracting foreign investment into the portuguese economy. in 1990 and 1991 it accounted for 3-4% of the gdp. however, throughout the 1960s the fdi never reached a similar level. even in the most favourable years, the fdi rate never rose above 0.7%. in the same way, when fdi is compared with total investment in the portuguese economy in the 1960s, its importance becomes mitigated, always under 5% of private and public investment. the same happens if we compare the fdi in portugal to the foreign capital flows to other european countries at the time. between 1960 and 1973 portugal had the lowest proportion of the total fdi received by the former eu cohesion countries of greece, ireland, portugal and spain, receiving less than 10% of the total fdi in these countries. the foreign capital flows into portugal were around 50% of the fdi into greece for the same period. the per capita comparison with spain is also illuminating: it was 50% lower in the portuguese case (coelho 1992; baklanoff 1978). to sum up: the impact of fdi during the most important phase of economic growth in the history of portugal deserves a thorough investigation. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 entry strategies for foreign firms in the 1960s and early 1970s fdi may cluster in some specific industries and the study of this issue becomes particularly interesting to understand the profile of foreign investment during this period of economic growth. even more important is the analysis of the business strategies followed by foreign firms to enter into the portuguese market (barbosa and louri 2002 from an econometric perspective). table 1 shows the significance of fdi in different industries and the following paragraphs address the most important conclusions resulting from an analytical framework that may be applied to other periods of time. table 1. relative weight of foreign firms in different industries, 1971 percent of equity (%) type of industries industries > 40 technologically advanced capital goods chemicals electrical machinery transportation equipment rubber products natural resources paper other sectors cement 20 – 40 labour intensive consumer goods apparel other capital goods primary metals natural resources mining tourism other sectors wholesale distribution real estate and services < 20 gas, electricity, water consumer goods food textiles transports finance construction and public works agriculture retail distribution source: matos, 1973; iie, 1978 (own calculations) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 three types of industries have a small presence of foreign firms:  the consumer goods industries oriented to household consumption (food, beverages, around 10%), illustrating that the small and low-income domestic market did not attract foreign investment.  industries dominated by domestic firms since the beginning of the twentieth century (5 to 13%): textiles, banking and insurance, transports and communications (public utilities is a special case with two large foreign firms).  construction and public works (4%). other industries, in contrast, concentrated fdi:  technologically developed industries dedicated to the production of capital goods: chemicals, electrical machinery, transportation equipment (40-81%). these industries were characterized by the importance of ownership advantages detained by mnes.  consumer goods, like apparel and footwear, in which foreign investment was mostly export-oriented, constituting a specific case of supply-oriented investment increasing its importance after the early 1960s.  pulp paper and tourism, which take advantage of portugal’s natural resources. marketor supply-orientation can be associated with three different situations.  capital-intensive industries, like the production of industrial chemicals, rubber, and other chemical products, were directed to the domestic market.  some other modern industries, like electrical machinery and transportation equipment, exported 30 to 40% of their production.  finally, labour-intensive consumer goods (apparel and footwear) had most of their production directed to foreign markets. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 table 2 summarizes the available evidence and proposes a taxonomy of the entry strategies used by mncs in several industries (jones 1996). the first possibility concerns the advanced technological sectors, with strong ownership advantages, derived from research, branding, or organizational capabilities. in this case, a wholly-owned firm is established, usually through greenfield investment. this solution is found in the electronics and telecommunications sectors (texas instruments and vitrohm); the production of electrical machinery, with the creation of firms like efacec (westinghouse), rabor (itt), and motra (siemens); the inorganic chemistry and the synthetic resin sector, with sociedade portuguesa de ar líquido (air liquide), soda póvoa (solvay), cires (mitsui), and resiquímica (hoechst); the manufacture of synthetic fibres, with cife (akzo) and fisipe (mitsubishi); and finally in the car industry. when there is domestic involvement this is by means of the association of portuguese banks to these projects. for instance, efacec (electrical machinery and engineering) is a joint-venture between westinghouse and banco fonsecas & burnay; cires (pvc manufacturing) results from the alliance between the japanese firm mitsui and two portuguese banks, banco português do atlântico and banco sotto mayor; fisipe (synthetic fibres) links mitsubishi with banco espírito santo e comercial de lisboa. the presence of banks in the equity of some of these advanced-technology firms in chemicals and electrical engineering may explain the position taken by maria belmira martins (1976, 59), but without further confirmation, who claims that in the 1960s the volume of fdi was lower than the volume of firm creation by foreigners, considering the resort to the domestic capital market. the resort to domestic sources of capital was justifiable, considering the very low level of the real interest rate in portugal throughout the period (amaral 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 table 2. typology of business strategies for fdi investment (1960s-1970s) type of industry strategy of entry industries new technology, strong ownership advantages subsidiaries, without any alliances with domestic firms telecommunications, electronics electrical machinery synthetic fibres financial partnership with domestic banks automobiles consumer goods joint-ventures with domestic distribution firms food (margarine and icecreams) household and laundry products industries with a previous presence of large domestic firms joint-ventures with domestic manufacturing firms paper pulp shipyards fabricated metal products glass primary metals “protected” industries joint-ventures with domestic firms energy tourism fdi, without any alliances with domestic firms financial partnership with domestic banks source: own elaboration from table 1 and qualitative evidence about entry strategies mentioned in the article. in the consumer goods sector, there is an joint-venture between unilever and a portuguese retail distribution firm, jerónimo martins. this joint-venture created fima (margarine and oil), iglo (ice-creams), and lever portuguesa (personal, household, and laundry products). in some traditional industries, in which the presence of domestic business groups was important, joint-ventures with local manufacturing firms were also common. the largest portuguese business group (cuf) has several partnerships in different industries: with ludlow corporation (usa) it created sitenor, a textile firm that manufactures jute and sisal; in the paint and varnish industry it established tinco, with british ici, and flexcote, with the french firm, roussel-nobel; in primary metals it created the companhia portuguesa http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 de cobre, with the french firm trefimetaux; in paper pulp it joined the swedish firm billerud to set up celbi; and the creation of lisnave (shipyards), with swedish and dutch participation. although only the example of the cuf group is considered, identical combinations between mncs and portuguese firms can be found in other industries, where there was already a long-established presence of domestic capital, as was the case of cement, glass, and metal products. tourism and real estate is another sector in which one finds cases of association between mncs and portuguese financial groups, side by side with isolated initiatives by foreign firms. for instance, the foreign group leon levy launched its own firms as explotel and finalgarve, but is associated with the banco nacional ultramarino in albel and findal. the sheraton hotel, in lisbon, was the result of an alliance between itt and the banco espírito santo e comercial de lisboa. meanwhile, the costain group acts alone to create tourist undertakings, such as vale do lobo and costimar. this overview of different entry strategies of foreign firms during a period of structural change in fdi inflows points to some characteristics: 1. when foreign firms had strong ownership advantages (technological, managerial or organizational) they likely dominated these industries and operated without any jointventure with domestic firms. the exceptions are industries in which large domestic firms and groups were already present (chemicals, shipbuilding, primary metals, paper pulp). specific joint-ventures may also take place between foreign mnes and portuguese financial institutions. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 2. in industries in which administrative decisions are critical (e.g. real estate, tourism, energy), joint-ventures with domestic interests are common, both with financial and nonfinancial firms. this pattern of entry by mnes in a developing economy with strong, but indirect (without major state-owned firms) state intervention and diversified business groups raises other reasons for joint-ventures besides the ones presented by buckley and casson (2010). political risk and a constricted institutional environment (even when free foreign capital entry was formally instituted after the mid-1960s) may be an important driver to promote joint-ventures between foreign multinationals and local firms. reasons for the rise of outward fdi after the late 1990s the industry distribution of outward fdi is difficult to assess. figures are based on the industry of the investing rather than the recipient company, and most firms invested through holding companies. it is safe to say, however, that outward fdi is by and large the responsibility of a very small number of firms in a relatively small number of industries (castro 2004): telecommunications, electricity, financial services, and retailing. the examination of the reasons for the rise of outward foreign investment (fonseca 2015; fonseca et al. 2015; simões 2001) does not take into consideration changes in the business strategy by the largest firms and groups over time. portugal may be characterized by two waves of business groups (silva and neves, forthcoming): the first, ending with the 1975 nationalizations; the second, starting with the massive privatizations program and liberalization policy followed after the late 1980s. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 the new business groups after the 1990s (sonae, jerónimo martins, amorim, espírito santo, mello, and mota-engil) become more active in the international markets, moving from domestic-centric to multinational groups, in contrast with the first wave of business groups nationalized in 1975. their turnover abroad already represents the largest share of the group’s operations. for instance, the sonae group, in shopping mall construction and management or laminated wood manufacturing has the largest part of these activities developed abroad. in the case of the production of laminated wood (the original manufacturing activity of the group and where it is a world leader) it has 21 plants across three continents. the amorim group is present in different business segments, but it originated in cork manufacturing. it is today the world’s largest producer of cork products and its manufacturing company is one of the most internationalized portuguese firms. business groups based on construction but having a trend to unrelated diversification (mota-engil) also have the largest share of their business activities outside portugal. therefore, second wave business groups turned to a multinational strategy after the late twentieth century as a way to escape the constraints of the small domestic market and also to increase competitiveness. in fact, internationalization acts in a recursive relationship with the accumulation of competitive resources and capabilities. they are needed to compete abroad and, simultaneously, being exposed to foreign competition strengthens their competitiveness. this contrasts with the domestic orientation of pre-1975 business groups. finally, and as was mentioned above, these investments abroad were geographically (spain) and culturally (brazil, angola) close. this also testifies to the limited ownership advantages by many portuguese firms (exceptions are some of the groups mentioned above). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 conclusion the internationalization of the portuguese economy today faces the “productivity gap dilemma”, which prevents growth and is behind the lost years of the early twentieth-first century. more than the effects of the global 2008 financial crisis and the european sovereign debt crunch, the portuguese problem is fundamentally economic, associated with declining competitiveness and the productivity gap with the developed european economies (about 50% of its average) and with the new european union eastern countries. the new economic geography of europe and the challenges posed by the entry in the european union of eastern european countries led to a reconfiguration of fdi inflows, affecting the portuguese economy. export-oriented foreign investment has been particularly affected by this new trend, unlike foreign investment in the financial or other services sectors. the challenges lying ahead to the portuguese economy, economic agents, and policy makers also constitute challenges to the research about international business in portugal. this review, even though incomplete in its scope, reveals that much has to be achieved to scholars working in the different fields of international business. references alquist, ron, rahul mukherjee, and linda tesar. 2016. “fire-sale fdi or business as usual?” journal of international economics 98:93-113. amaral, luciano. 2010. economia portuguesa: as últimas décadas. lisbon: relógio d’água/fundação francisco manuel dos santos. amaral, luciano. 2002. “how a country catches up: explaining economic growth in portugal in the post-war period (1950s to 1973)” phd diss., european university institute. baklanoff, eric n. 1978. the economic transformation of spain and portugal. n. york: praeger publishers. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 banco de portugal. 1997. séries longas para a economia portuguesa – pós ii guerra mundial, vol. i séries estatísticas. lisboa: banco de portugal. banco de portugal. 1990-2012. estatísticas da balança de pagamentos. lisboa: banco de portugal. barbosa, natália. 2009. “determinantes do investimento estrangeiro em portugal.” in sem fronteiras. os novos horizontes da economia portuguesa, edited by pedro lains lisbon, ics, 131-163. lisboa : imprensa de ciências sociais. barbosa, natália, and vasco eiriz. 2009. “the role of inward foreign direct investment on entrepreneurship.” international entrepreneurship and management journal 5(3) : 319-39. barbosa, natália, and helen louri. 2002. “on the determinants of multinationals' ownership preferences: evidence from greece and portugal.” international journal of industrial organization 20 (4): 493-515. barbosa, natália, paulo guimarães, and douglas woodward. 2004. “foreign firm entry in an open economy: the case of portugal.” applied economics 36 (5): 465-72. barroco, carlos, eduardo anselmo castro, and carlos costa. 2014. “attractiveness factors for foreign direct investment (fdi) in the portuguese tourism sector.” revista turismo & desenvolvimento 21/22 vol. 4: 13-23. buckley, peter, and mark casson. 2010. “the future of the 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nuno, maria paula fontoura, and isabel proença. 2009. “fdi spillovers at regional level: evidence from portugal.” papers in regional science 88 (3): 591-607. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 40-68, july-december 2016 doi.org/10.1344/jesb2016.2.j012 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 dunning, john h. 2009. “the key literature on ib activities.” in the oxford handbook of international business, edited by alan m. rugman, 2 nd ed.,39-71. oxford: oxford university press. dunning, john h., and rajneesh narula. 1996. “the investment development path revisited: some emerging issues.” in foreign direct investment and governments: catalysts for economic restructuring, edited by john h. dunning and rajneesh narula, 1-33. london and new york: routledge. durán, juan j., and fernando ubeda. 2001. “the investment development path: a new empirical approach and some theoretical 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inward investment attraction and the quality of multinationals' activities: the contrasting cases of ireland and portugal. ms thesis, faculdade de economia, universidade do porto. pinheiro, cátia, and paula sarmento. 2013. “r&d offshore insourcing in portugal: drivers and motivations.” vol. fep working papers. universidade do porto, faculdade de economia. ruane, frances. 2001. “reflections on linkage policy in irish manufacturing – policy chasing a moving target?”. paper presented at the unece/ebrd expert meeting – financing for development, geneva, december 3. severiano, andreia alexandra faria. 2011. the determinants of fdi in portugal: a sectorial approach. ms thesis, universidade católica portuguesa. sideri, sandro. 1970. trade and power. informal colonialism in anglo-portuguese relations. rtterdam: university press. silva, álvaro ferreira da, and luciano amaral. 2011. “a economia portuguesa na i república.” in outubro: a revolução republicana em portugal, edited by luciano amaral. 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cheltenham: edward elgar. simões, vítor corado. 1993. impacto do investimento direto estrangeiro (ide) na estrutura industrial portuguesa. lisbon: dgi. simões, vítor corado, and rui manuel cartaxo. 2013. “portugal”. in inward and outward fdi country profiles, edited by k. p. sauvant, p. mallampally, and g. macallister, 479-512. new york: vale columbia center on sustainable international investment. simões, vítor corado, alberto de castro, and vasco rodrigues. 2001. a internacionalização das empresas portuguesas: uma perspectiva genérica. lisbon: epe/semário ecomómico. sousa, alfredo de. 1969. “o desenvolvimento económico e social português: reflexão crítica.” análise social 8 (27,28): 393-419. tavares-lehmann, ana teresa. 2007. “public policy, fdi attraction and multinational
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palgrave macmillan. taveira, elisa maria ferreira. 1984. foreign direct investment in portugal: the present structure, determinants, and future evolution after the accession to the eec. phd thesis, university of reading, department of economics. weitzel, utz, gerhard kling, and dirk gerritsen. 2014. “testing the fire-sale fdi hypothesis for the european financial crisis.” journal of international money and finance 49:211-34. wenseleers, guillaume. 2014. the determinants of foreign direct investments attraction in portugal and spain: a comparative analysis. ms thesis, nova school of business and economics, universidade nova de lisboa. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 elena catalán martínez igor goñi mendizabal isabel mugartegui eguía university of the basque country (spain) business networks and social capital in basque industrialization (1886–1925) 1 abstract the aim of this article is to analyse the potential role that social capital played in the industrialization of the basque country. the province of gipuzkoa, together with the neighbouring bizkaia (biscay), was one of the most dynamic provinces in spain in terms of the creation of companies. using information obtained from the registration of new companies in the mercantile register, and through social network analysis, we try to measure the importance that social capital may have had in this process. the methodology is tested with the case study of the arms industry in eibar, one of the most important sectors in the region. keywords: business networks; social capital; industrialization; basque country; arms industry. introduction and objectives the special characteristics of the industrialization process in gipuzkoa, in contrast with bizkaia, are well-known and have been studied for some time in spanish historiography. corresponding author: e-mail: elena.catalan@ehu.eus received 24 may 2016 accepted 19 september 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 1 this project was financed with funds from the spanish ministry of economy and competitiveness’s micinn har2012-30948 research project and from the basque university system’s it-807-13 research group, financed by the basque government’s department of education, universities, and research. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 gárate (1976, 1995) and catalan (1990) indicated the importance that the local bourgeoisie had in the industrial development in gipuzkoa, with family capital predominating and a weak role for the financial sector. they also highlighted the relatively small size of the companies and the enormous industrial diversification, which were no hindrance to achieving a significant degree of innovation and external competitiveness. recently, gonzalez portilla et al. (2015), focusing on the analysis of the deba valley, also highlighted the special characteristics of the gipuzkoan industrialization model, which, concentrated in medium-size cities with scant foreign immigration, gave rise to a territorial and population configuration that differed from the neighbouring bizkaia. the dynamism of gipuzkoan entrepreneurs resulted in the creation of a rich and diverse industrial fabric, with the following industries gaining particular significance: consumer goods (paper, textiles, beer, chocolate, footwear…), processed metal products (arms, machine tools, metal fittings, railroad material), and intermediate goods (iron and steel, cement…). this high degree of activity was led, mainly, by local entrepreneurs who also showed great initiative by expanding industry to new productive sectors, thus contributing to even greater diversification in the province’s industrial fabric. the concept of social capital, although initially used in the field of sociology, has gained certain standing in economic analysis and is considered by some authors to be a determining factor for regional development (putnam, 1993). although it has received a multitude of definitions, social capital is composed of a series of shared values, norms, or attitudes that emerge from the existence of social relations among members in a particular community. from an economic point of view, the existence and density of social networks generates a stock of social capital that facilitates cooperation between the agents that form them, as well http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 as reducing transaction costs and boosting business initiatives. these would not be exclusively limited to the creation of new companies, but could also encompass other spheres such as research, training, or internationalization. 2 one of the main problems associated with social capital is its intangibility, with abundant criticisms received by some of the indicators proposed by putnam, as well as the active policies promoted to boost its creation. 3 throughout this article, we aim to determine the importance that the accumulated social capital in the province may have had in the development of the gipuzkoan industrialization process. for this, the study approaches the subject from three different perspectives. firstly, and through the information contained in the gipuzkoan mercantile register (gmr), we analyse the origin and amount of the capital used for the creation of companies in the period 1886–1925. with this, we try to examine the characteristics of the investments made, identifying the most attractive sectors at any given moment, as well as the existence of capital transfers between sectors that reveal potential strategies for vertical or horizontal integration and for productive diversification. the characteristics of gipuzkoan industry, which has very few large corporate structures, prevent us from using boards of directors as an instrument for determining the degree of business cohesion in the province. however, the predominance of limited and family partnerships offers us the opportunity to turn to social network analysis (sna), examining the business links among the people that appear in the gmr as company founders. the second part of our study is based on the fundamental premise that, in this context of companies with a relatively low number of partners, the people that share the business have common interests 2 there is abundant literature related to social capital, its definition, and its influence in different areas of economic development. see etxabe and valdaliso (2016) for a recent overview of the issue. 3 see a summary of the critiques of putnam’s approach to social capital and the associated active policies in urteaga (2013). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 and a certain degree of social interaction. therefore, the conclusions we reach through sna will be an excellent indicator of the social capital that existed in the period of study. our hypothesis is that the high level of social capital in the territory is one of the factors that explain gipuzkoan industrial dynamism, since greater intensity in the social relations between potential investors would have positively impacted on the implementation of new business initiatives. in the final part of the article, we study the network corresponding to the industrial arms district in eibar in greater detail. the creation of companies in this area during the period researched presents some particularities that provide us with the opportunity to measure the representativeness of the model used, drawing on the qualitative information available. methodology and critical assessment of sources there is general consensus among business historians when it comes to considering the mr as a relevant source for measuring investment prospects and capital formation in a specific geographic area (jiménez araya 1974, 148). in fact, the creation of companies is a great indicator of the entrepreneurial spirit that exists among the members of a community, since it not only demands the prior establishment of a relationship, but also other factors such as recognizing a business opportunity, gauging and trying to solve the possible technical limitations, achieving funding, and, finally, deciding on the organization and workings of the new project (garrués and rubio 2011, 10). in this sense, the province of gipuzkoa was, together with bizkaia, among the most dynamic provinces in spain, occupying the top http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 positions in the creation of public limited companies during the period of study (jiménez araya 1974, 164) 4 . in order to prepare the sample of companies to carry out our analysis, a series of prior constraints were taken into account. firstly, we only considered companies that were established in the province and that carried out their business there, leaving aside those that spread their business to the rest of the national territory and those that operated in the province, but were established elsewhere. that is, we have treated the gipuzkoan business fabric as purely endogenous, although obviously this was not the case. secondly, in order to examine the corporate links as intended, it was necessary to clearly identify the agents involved in them. this is the reason why we have only taken into account those companies that offered unambiguous personal details on their partners, excluding those that were formalized through third parties and that did not specify the identity of their members or the amount of the investment. in this regard, the nominal capital that features in the creation of general or limited partnerships should not be very different to the actual paid in capital. on the other hand, for public limited companies it is difficult to establish what the real investment was since some of them, despite having been on the register, did not manage to become active or paid in only a minimal part of the amount committed to. moreover, some subsidiaries even included the nominal capital of the parent company on their record, rather than the capital that corresponded to the subsidiary itself (gárate 2009, 253). for all of these reasons, in the case of public limited companies we have only taken into account those in which the identity of the partners and their nominal contribution appeared. we thus excluded subsidiaries, companies 4 there are several authors that have also used the mr as a source to analyse entrepreneurship in the same geographical area. see valdaliso (1993) and galarza (1996) for bizkaia, and erro (1995, 1997) for navarre. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 that did not specify the involvement of each partner in current pesetas, or companies that clearly formed part of nationalor international-level enterprises. lastly, we also excluded one-person companies, which, in the industrial production census for 1923–1924, represented 80 per cent of establishments, but contributed only 15.45 per cent of capital. with these exceptions, we obtained the establishment data of 1025 companies for the period 1886–1926, representing 48 per cent of the total recorded in the gmr for those years. this sample presents considerable balance in terms of representativeness of the different sectors of activity when we compare it to the data provided by the industrial statistics of gipuzkoa for 1915 and the industrial production census for 1923–1924 (table 1). table 1. comparison of the percentage weight of sectors in gipuzkoa gmr sample 1886–1926 1915 1923–1924 consumer goods 36.81 39.17 50.60 production goods 57.49 57.85 44.29 energy 5.70 2.98 5.11 source: compiled by authors using the gipuzkoan mercantile register (gmr, books no. 1–40), the industrial statistics of the province, year 1919, data from the provincial council for development, san sebastián, 1915 (castells and luengo 1988, 260), and the agg-gao (general archive of gipuzkoa – gipuzkoako artxibo orokorra), census of industrial production for 1923-24, section ‘inventario topográfico’. note: in the calculation of these percentages we did not take into account the services sector since the statistics for 1915 and 1923–1924 only covered industrial sectors. once the empirical basis was set, we undertook the process of homogenization of the data, excluding the effects of variations in the membership base, name, or capital of the companies to avoid duplication and, therefore, an upward skew in the investment. subsequently, the companies were classified according to company purpose following a classic division by sectors: consumer goods (food, textiles, leather, paper, wicker, and umbrellas), production goods (wood, construction material, metallurgy, and iron and steel) mining, chemicals, energy, and services (tourism, hotel trade, entertainment, transport, and financial services). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 due to its special relevance in the sample, the arms industry was considered as a sector in itself, though it could have been included in the group of production goods. one of the most important factors when it came to processing the data obtained from the gmr was the identification of each individual, a key aspect for establishing the corporate relationships between them. this is no trivial matter. as well as the typical problems of indiscriminate use of b and v or y and i, or transcription errors that could lead to confusion around very common surnames like echebarria or echeberria (written with b or with v indiscriminately), there are many double surnames that at times appear in full and at times shortened, such as arizmendiarrieta, which is at times written simply as arizmendi. on the other hand, in certain valleys in gipuzkoa, there are surnames that are so common that it is not unusual for different people to share first names and both surnames in the same historical period. and to complicate things further, there is a tradition of baptizing male children so that they share one of their first names (for example, names accompanied by maría or josé), which means that if the personal information is not complete we may confuse one person with another. the place of residence can also cause problems, since often the same person appears as a resident of two different places. in these cases, we opted for respecting the first residence assigned since, almost always, the second location tended to correspond to san sebastián or madrid, cities of common residence for established business owners. the same thing happens with the professions recorded, given that a single individual can appear in different public documents as trader, owner, or industrialist. often, the assignment of one profession or another has more to do with the social status reached than with the performance of a specific activity. in this case, we followed a common approach in similar jobs; that is, we gave http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 preference to one activity over others: industrialist over trader or engineer, and the latter two over owner activity. the nobility were always assigned the category of ‘rentier’ and the different public posts were framed together under ‘administrative personnel’. in the case of the liberal professions, we respected all those activities considered as such today, while under the label of ‘trades’ we included multiple technical professions related to the most diverse sectors. arms manufacturers were considered as a specific category given that they have their own particular characteristics and business activity. in order to establish the total amount of capital invested by each individual, we used a very similar approach to that followed with the companies. an aggregate was set considering the value of the initial investment in each of the businesses and the positive differences between this and the successive variations recorded. all that was left was to identify and quantify shared investment plans, interests, and strategies in certain groups. social network analysis (sna) provides a theoretical and methodological framework for identifying the role played by social capital in the consolidation of business structures. our analysis excludes some variables that could positively skew the generation of social capital in order to focus on a single relationship criterion: the participation of the individuals in more than one company. our hypothesis is that as the individuals participate in the establishment of a greater number of companies, the social relations linked to that participation increase the stock of social capital in the territory. this accumulated capital fosters entrepreneurship among the individuals that form the overall network and would explain, to a large extent, the economic dynamism of the region. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 characteristics of industry financing in gipuzkoa after moving the inland customs to the border and the coast in 1841, the internal spanish market was opened up to basque producers and this boosted capital investment. this investment was shared across different sectors, modifying the gipuzkoan sectoral structure, while the crisis of the traditional iron and steel industry took place (gárate 1976, 236–261 and carrión 2010, 80–93). with the implementation of import substitution policy and industrial tariffs at the beginning of the 20 th century, the establishment of companies and the amount of capital invested increased significantly in gipuzkoa. as in the rest of spain, the five years prior to the beginning of the first world war and the first two of the conflict were years of uncertainty before the new international situation, which meant that, despite the increase in the number of companies, the capital deposited decreased to pre-1900 levels. subsequently, spanish neutrality and the proximity to the french border favoured innumerable business opportunities that resulted in a genuine investment boom, which was especially intense in the 1920s (jiménez araya 1974, 164). in gipuzkoa, the new industrial fabric was boosted by capital from the family and social spheres, forming a dense network of family and sectoral relationships. the great war gave rise to the emergence of industrial sectors that required a type of funding that was more flexible and of a greater volume than what the traditional partnership system could provide. therefore, these needs were covered by public limited companies, which facilitated 70 per cent of overall investment. in any case, these companies were established on the already existing industrial base and among their shareholders they brought together many of the families that were until then key to the development of the province. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 table 2. geographical origin of investors in gipuzkoa 1886–1926 (in percentage) * 1886–1913 1914–1926 1886–1926 no. % ptas. no. % ptas. no. % ptas. gipuzkoa 48.81 36.01 51.95 36.82 50.48 34.81 san sebastián 25.60 25.75 24.90 24.91 25.22 25.95 álava 0.46 0.12 0.58 0.23 0.53 0.18 bizkaia 5.31 5.23 5.70 5.99 5.52 5.78 navarra 0.73 0.07 1.51 0.90 1.15 0.53 madrid 5.04 10.33 3.26 19.85 4.09 15.74 catalonia 0.33 0.24 1.69 5.67 1.05 3.18 spain 2.39 1.10 2.56 3.61 2.48 2.49 france 8.49 17.08 2.21 0.74 5.14 8.68 europe 0.80 0.93 1.75 0.91 1.30 0.94 america 0.07 0.01 0.41 0.09 0.25 0.05 asia 0.17 0.03 0.09 0.01 n/s 1.99 3.13 3.32 0.24 2.70 1.65 totals (investors, and pesetas) 1,508 102,065,145 1,719 113,930,560 3,494 215,995,705 source: compiled by authors using the gmr, books 1–40. * the total number of investors from 1886–1926 does not coincide with the disaggregated sum of investors for the periods due to the fact that there are people that invested in both periods but in the total calculation they were considered as a single entry. as we can see in table 2, the capital necessary for fostering the modernization and diversification of industry in gipuzkoa was chiefly local (around 60% in the entire period studied), with a greater presence of investors from the overall province over those from the capital. however, and in contrast with bizkaia, the most noteworthy feature is the strong presence of investors from france and madrid from the very beginning of industrialization, as well as the limited importance of spanish-american capital. the french presence was very frequent at the beginning of industrialization with a clear preference for consumer goods industries, primarily textiles. as the paper, cement, wood, or chemical derivatives industries developed, french investment withdrew, although it did not disappear. at the end of the 19 th century and especially after the first world war, trans-pyrenees capital, alone or in alliance http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 with gipuzkoan capital, began a process of diversification that included factories for chemical, iron and steel, and food products. the contribution of national capitalism, especially from madrid, to gipuzkoan industrialization stands out more so due to the amounts contributed than to the number of investors. without a doubt, the move of the royal court to san sebastián during the summer period must have generated significant business opportunities in both directions. investment from madrid became more intense after the great war and was present in all types of activities. it appeared in traditional sectors such as food, paper, or metallurgy, but also in the most innovative sectors such as aeronautics, the automotive industry, or the manufacture of phonographic devices and discs. likewise, its presence was significant in the development of the financial sector, with the promotion of insurance brokerage firms, local banks, and tourist services. however, the sector where it was most predominant was the publishing business, which absorbed 73.8 % of the capital publically recorded from people residing in the capital. on the other hand, the presence of catalan capital, linked mainly to the textile sector, was merely token. however, once the new century began, catalan investment increased its presence and diversification, backing, for example, the production of new rubber products, investment in financial services, or the promotion of cinematographic entertainment. regional investment from the other two basque provinces and navarra had, in terms of recorded capital, relative importance. nevertheless, it is worth highlighting the bizkaian contribution to the expansion of the iron and steel, energy, and tourism sectors. when initiatives and investment come primarily from local capital, as is the case in gipuzkoa, investor occupations acquire considerable relevance. thus, the analysis of professional activity allows us examine the characteristics of this process of endogenous industrialization. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 table 3. professional activity of investors in gipuzkoa 1840–1926 (in percentage) 1886–1913 1914–1926 1886–1926 no. % ptas. no. % ptas. no. % ptas. industrial 14.59 20.22 16.29 26.56 15.88 25.77 arms 9.35 3.31 10.49 4.82 10.68 4.01 commercial companies 0.46 2.11 1.28 4.44 1.03 8.73 engineers 3.85 7.77 3.07 2.45 3.52 3.77 trades 14.26 6.10 20.75 10.73 16.89 10.80 industrialist 42.51 39.51 51.88 49.00 48.00 53.08 trader 16.58 21.94 15.07 9.68 15.37 15.10 owner 12.33 13.62 4.06 3.44 8.16 7.52 administration 3.38 2.61 1.74 1.19 2.32 1.49 rentier 2.92 2.87 2.20 5.41 2.06 4.04 liberal professional 9.28 6.94 7.42 9.71 9.02 8.82 banker 0.73 1.81 0.93 2.80 0.31 1.13 employee 4.11 2.49 9.16 2.40 7.21 2.47 homemaker 3.98 5.77 4.35 3.91 4.04 3.86 others 0.20 0.12 0.29 0.38 3.21 0.97 not specified 3.98 3.31 2.90 12.08 0.31 1.53 totals (cases and pesetas) 1,508 102,065,145 1,719 113,930,560 3,494 215,995,705 source: compiled by authors using the gmr, books 1–40. while in the first phase of industrialization the modernization of manufacturing was made possible thanks to the transfer of fixed preindustrial assets from a steel and iron sector in crisis (catalán and mugartegui 2013, 149), in the period between 1886 and 1926 industrialists contributed more than half of the capital recorded. the reinvestment of profits and the diversification of investment portfolios would gradually consolidate throughout the 20 th century, driven by people with prior experience in industrial investment or who were dedicated to a variety of trades. adjusters, mechanics, lamp makers-plumbers, engine drivers, engravers, turners, bricklayers, carpenters, marble cutters, canvas sandal makers, or simply factory workers merged to found family, limited, or general partnerships in sectors that they were perfectly familiar with. for this reason, the quantities paid in were not very significant nor did they reach a considerable percentage weight despite the number of partners involved. however, if we group these people according to the sector they are linked to, we can gain a http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 more precise picture of the characteristics of local funding, which is one of the features that defines gipuzkoan industry. table 4 looks at industrial capital in gipuzkoa with greater precision, taking into account the sector in which it was invested. in the first block, the relative weight of capital from industry is established in relation to other professional activities. table 4. characteristics of gipuzkoan investment from industrial activity, 1886–1926 (in percentage) sectors professional origin of the capital industrial origin recorded capital ptas. other origin (%) industrial origin (%) with interests in other sectors (%) single investment (%) consumer goods food and drink 16,893,413 73.18 26.82 31.65 68.35 textiles 22,207,827 64.55 35.45 40.23 59.77 canvas sandals and footwear 2,169,907 68.52 31.48 38.13 61.87 paper 17,418,980 66.27 33.73 44.77 55.23 graphic arts 22,062,342 36.32 63.68 46.08 51.35 others 3,702,209 40.52 59.48 48.65 50.17 production goods wood 3,560,304 40.15 59.85 33.85 66.15 metallurgy 33,425,136 29.59 70.41 43.96 56.04 iron and steel 4,569,968 34.59 65.41 26.38 73.62 naval construction 5,048,500 32.56 67.44 31.88 68.12 construction materials 9,398,695 67.31 32.69 32.96 67.04 arms 10,855,703 16.24 83.76 49.83 50.17 mining 14,508,314 69.34 30.66 1.7 98.3 electricity 11,809,073 63.34 36.66 30.23 69.77 chemical 11,874,096 38.34 61.66 9.93 90.07 services financial 7,086,271 45.64 54.36 10.4 89.6 transport 897,400 49.69 50.31 14.31 85.69 leisure 18,507,566 62.77 37.23 17.75 82.25 totals 215,995,705 46.92 53.08 34.91 65.09 source: compiled by authors using the gmr, books 1–40. in the second column, the percentage of industrial investors that participated in more than one company is calculated in relation to those that appeared in only one establishment. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 as we can see, industrial capital had greater relative weight in production goods than in consumer goods, with the exception of the graphic arts and the ‘others’ category in which umbrellas, wicker furniture, and tanning are included. it is worth highlighting the considerable predominance of industrialists in iron and steelwork activities, naval construction, and in the arms industry, a completely logical fact if we consider the degree of specialization and greater production scale required by these activities. we must not assume that the industrial origin of this capital comes from the reinvestment of profits. this was decisive in pioneering sectors such as the textile sector (30% of the total) or the paper sector, which diversified into related sectors such as paper manufacturing or graphic arts. but without doubt, throughout the period studied, new business opportunities emerged that were attractive not only to already established industrialists but also to small savers, liberal professionals in a comfortable economic situation, and qualified workers that decided to merge together to embark on business ventures. analysis of corporate relationships in gipuzkoa in an effort to systematize the analysis of the investment interests and the transfer of capital between the different sectors, we used social network analysis (sna 5 ) applied to corporate relationships. for this, we considered that there is a corporate relationship, and hence a convergence of interests, when a partner participates in more than one company. therefore, for this analysis we have only taken into account investors that fulfilled this condition. from a temporal point of view, the establishment of companies was much more intense after the beginning of the great war than in the previous years. therefore, we have divided the analysis of the corporate network into two chronological blocks according to the date of 5 for the sna we used ucinet software for windows (borgatti, everett, and freeman 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 registration of the companies. 6 the first encompasses the period between 1886 and 1913, in which 425 companies were considered, involving 1875 partners, and the second covers from 1914 to 1926, with 585 companies and 2224 partners. there were people that carried out investments in both phases and, therefore, when it comes to identifying corporate relationships, we have excluded investments made after 1913 in the first phase, while for the second phase we considered investments for both periods. thus, for example, if we consider an investor that shared a company with another in 1912 and with a third in 1914, we would have a single relationship for the first period and two for the second, since we consider that the personal relationship with the first of the partners is maintained, even if the period of study has changed. the statistical markers resulting from the sna for both periods confirm the consolidation of the corporate network in the period following the outbreak of the first world war, both in terms of its density and the degree of betweenness among the participating members (table 5). the graphic representation of the sna provides us with quite a clear idea of the possible convergence of interests among the businesses that shared partners. the companies are represented by nodes of different colours according to the sector to which they belong and of different sizes according to the degree of centrality that each of them has (i.e. how many nodes they are directly connected with). in order to make the graph clearer, we eliminated the nodes that remained isolated (none of their partners participated in another company) and we applied principal component analysis. 7 6 when there were changes in the company’s information due to alterations in the business name or capital increases, we applied the last business name used in the period analysed. 7 on social network analysis methodology see borgatti et al. 2002 and 2009. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 table 5. measures of centrality in the gipuzkoan corporate network, 1886–1926 1886–1913 1914–1926 1886–1926 density (%) 1.222 1.535 2.370 degree of connection (%) 0.091 0.132 0.266 centralization index (%) 0.360 3.27 3.73 betweenness 0.007 0.060 0.078 closeness 0.111 0.123 0.140 number companies 425 585 984 number partners 1,875 2,224 3,835 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). the first network (figure 1) shows a typical small-worlds structure with an extremely high degree of compartmentalization and low relational density. however, in it we can distinguish two groups in which the corporate relationships between the companies are more intense: 1. the group formed around the compañía de asfaltos de maeztu, the banco guipuzcoano, the maquinista guipuzcoana, and several electricity companies, such as the compañía eléctrica de san sebastián or electra del urumea. there are also several power companies, paper mills, and companies from the services sector in this network. 2. the metallurgical group, which forms around the unión cerrajera and links, through this, with the eibar arms district formed around la eibarresa. after the first world war (figure 2), the network continues to present a small-worlds structure, but much more internally cohesive and connected by key companies that take on a high degree of centrality. 1. the first subgroup is formed by the arms industry united around la eibarresa and the cooperativa eléctrica eibarresa. from this, another subgroup emerges dedicated to construction materials and whose central company is cementos zumaya, linked to the previous group through canvas sandal factories and knitted goods factories in azpeitia and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 azcoitia. we must point out that the arms and canvas sandal manufacturing activities form industrial districts that emerge as geographic areas capable of generating nodes. 2. linked to the previous network by carpintería mecánica la fe and the sociedad explotadora canteras de ulía, both with headquarters in san sebastián, we find the network formed around the banco de crédito hipotecario and the café guria. hotel and leisure businesses develop around this network, together with various companies dedicated to paper manufacturing (manufactura de papel record, sociedad española de papelería, and fábrica española de papeles químicos) and the graphic arts (sociedad editorial omnium, aldus, and editorial saturnino calleja). the chemical company compañía industrial española, dedicated to the production of arsenic and sulphuric acid, serves as a nexus with another subnetwork. at the centre of this sub-network we find the chemical company franco española de petróleos, the automotive company urcola, vignau y compañía, and the papelera del araxes. this last sub-network would form a completely innovative and highly technological group with companies dedicated to the manufacture of cars (urcola, vignau y compañía), aeronautics (compañía española de navegación área), lifts (ascensores muguerza), pyrotechnic material (el caos), and several shipyards. 3. the chemical companies moelline lubricating company (oiling and lubricants) and puig y compañía. (dry wood distillation) connect the previous network with another more dense one formed by several electricity companies (hidráulica sumbilla, compañía eléctrica de san sebastián, and electra del urumea) and linked, in turn, with the paper sector and the banco de tolosa. electra tolosana and the san jose-belauntzako-ola paper mill connect this network with another subgroup formed by unión eléctrica vasco-navarra and the sociedad industrial minera guezala. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 in short, the gipuzkoan business fabric gradually evolved from a very compartmentalized corporate structure (with multiple small investors interested in activities with a prior tradition in the region) towards another more organized network formed by several business cells that incorporated electricity or financial companies with a high degree of betweenness. this gives us an idea of how the local business sector participated through the provision of electricity and funding instruments to the industrial districts. as we can deduce from the betweenness data for the period 1886–1926 (table 1 in the appendix), the paper companies, followed by those dedicated to energy production, had a leading role in the transfer of capital, as well as significant influence in the network. the paper companies were pioneers in the establishment of public limited companies and, therefore, in the attraction of capital from very diverse fields, while also fostering a strong publishing sector (la voz de guipúzcoa). moreover, by backing a model that involved having their own power station, their links to the energy sector became even stronger. despite this, the energy companies with the highest degree of centrality were those linked to the arms industry (such as the cooperativa eléctrica eibarresa, which brought together a large number of partners from the district) or to the urban development of the province (compañía eléctrica de san sebastián, electra de arditurri, compañía eléctrica de portugal, or hidráulica sumbilla). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 figure 1. gipuzkoa’s corporate network 1886–1913 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 figure 2. gipuzkoa’s corporate network 1914–1926 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 figure 3. gipuzkoa’s corporate network 1886–1926 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 the construction materials subsector experienced a sharp rise in the province driven by increasing demand for housing and factory buildings. wood and ceramic materials, cements, or the quarrying of minerals used in construction were all adapted to the needs of a growing economy. the modernization process was carried out from within the sector, with costs and risks being taken on in a collective manner. cement plants and oil products attracted many partners since they required sizeable investments, such as that made by the hijos de josé maría rezola when they turned a hydraulic lime factory into a portland cement factory. the traditional sectors, such as food or textiles, attracted less capital, with the exception of the canvas sandal-making district represented by epelde, larrañaga y compañia, or the production of flours (londaiz, ubarrenechea y compañía). the metal industry, for its part, had very special quantitative and qualitative importance since it represented the region’s manufacturing tradition. la maquinista guipuzcoana or unión cerrajera attracted a great number of investors from the hardware and arms sectors. the development of elite tourism favoured investment in entertainment services such as lalanne y compañía (bullfighting), fomento de san sebastián (bullfighting and hotels), bernau y compañía (hotels), and companies promoting coffees, restaurants, or spas. last, but not least, the financial sector would be very present in all of the corporate networks, with the exception of the arms network which was fed by industrial capital. the banco de tolosa was located in and provided service to the paper district, the banco de crédito hipotecario was linked to the services sector, while the banco guipuzcoano diversified its relationship with different sectors and companies with a high degree of betweenness, such as la maquinista guipuzcoana, compañía de asfaltos de maeztu, or la voz de guipúzcoa. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 added to the confirmation of the pre-eminence of local capital in the gipuzkoan industrializing process, the graphic representations obtained allow us conclude that social capital played a decisive role during the period studied. thus, on the one hand, we have been able to confirm the importance that san sebastián (province capital and summer vacation spot for king alfonso xiii and his court) gained in the creation of diverse and innovative businesses. the concentration of a large number of influential people with investment capacity in this city made it a breeding ground for new business initiatives. in this context, social relations must have played a key role. on the other hand, the industrial districts (paper, arms, canvas sandals, etc.) also occupied a significant place in the provincial network as the source of multiple intraand inter-sectoral relationships. the higher degree of social capital present in these industrial agglomerations boosted collaboration between entrepreneurs and drove, therefore, the creation of companies that offered financial services, energy, or other types of inputs to the predominant sector in each agglomeration. the arms industry the basque arms industry was geographically concentrated in eibar and surrounding towns, forming a classic marshallian industrial district (goñi 2010). in 1914, there were 46 factories and workshops dedicated to the manufacture of pistols and revolvers and 12 specialized in the manufacture of shotguns, which covered practically all industrial activity in the area. 8 in many of these companies, above all in the case of small arms, only the final phases of the production process were carried out, with parts manufacturing and other operations being subcontracted to other companies. for this reason, together with the larger establishments, 8 there were also three foundries with a total of 114 workers as well as other similar establishments that employed some 48 operators (goñi 2010, 110). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 there was a significant number of small workshops or individual arms manufacturers. the majority of the entrepreneurs were old operators that had managed to prosper, generally in association with other arms manufacturers. this favoured relations between employers and workers within the district, thus tempering labour conflicts (goñi 2010, 115–117). this structure granted the arms industry a productive flexibility that allowed it adapt to variations in demand and to specialize in the manufacture of medium-to-low quality products. the growth in production at the end of the 19 th century and the beginning of the 20 th century was mainly linked to the strength of exports, which represented at least 80 % of small arm manufacturing in eibar. in the case of shotguns, on the other hand, the internal market represented a much greater proportion of sales and it was still an activity with a marked artisanal character, dominated by small workshops and individual gunsmiths. 9 the information obtained from the mr indicates that the arms company model was that of the general partnership (very rarely the limited partnership), where all of the partners contributed the same amount of capital and took on risks on equal terms. often the capital contributions were not monetary, but rather corresponded to machinery or patents from previous failed business initiatives. one of the characteristics of industrial districts is the creation of collective institutions such as training, research, or quality control centres, and also including joint ventures for complementary activities or the procurement of inputs ( piore and sabel 1990, 51; valdaliso and lópez 2007, 286). thus, in eibar, the escuela de armería (armoury school) (1913) and the banco oficial de pruebas (proof house) (1923) were set up on the initiative of the local institutions and with the support of a large part of the business and working class sectors. 9 the average size of the establishments dedicated to the manufacture of hunting rifles was 12.5 operators, while those making small arms employed an average of 42.5 workers. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 some of the business initiatives that emerged during the period of study also responded to that collective spirit and, although they were registered as public limited companies, the relatively high number of partners they had and the modest and equal individual capital contributions made mean we could consider them as cooperatives. in other cases, this is not so evident since the number of registered founders is limited, even if the company name leaves no room for doubt, such as in the case of the cooperativa de producción de armas de fuego alfa, s.a. 10 . the arms scene was, therefore, a pioneer in gipuzkoan productive cooperativism, even if under this category only two companies were actually registered as such: danok bat (1919) and industrial obrero armera (1920) 11 . when it came to applying the sna methodology to eibar, two types of networks were used. firstly, as for the overall province, we developed what we have called corporate networks, created on the basis of the relationships established between the companies set up in the period studied through their shared partners. secondly, another type of network was developed in which the nodes correspond to the investment partners from eibar. in this case, the nexuses are generated when they have a shared presence in one of the companies. figure 4 shows us a panoramic view of the companies in eibar and the existing relations between them. the arms industry is predominant among the companies created and presents a very heterogeneous network structure and a low degree of density (17.33%). moreover, there are various unrelated subgroups that almost exclusively maintain family ties or that diversify their production by extending the business towards other types of activities. this 10 this was a project promoted by socialist arms manufacturers in eibar after the strike of 1919, with the aim of manufacturing revolvers under favourable salary conditions for the workers. from 1929, it began to substitute its arms production for the production of sewing machines, which ended up becoming its primary activity (izagoñola 2005, 17–44). 11 this company was dedicated to the manufacture of eibar-type pistols, with no sign of activity beyond 1929 (calvó 1997, 231). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 diversification intensified after the first world war due to the serious crisis that arms manufacturing experienced, with bicycles and sewing machines standing out among the new products (goñi 2008, 214–215). figure 4. network structure of companies in eibar 1885–1925 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). however, the most characteristic element of the corporate network in eibar is the unifying role played by three companies: aurrera, la eibarresa, and cooperativa eléctrica eibarresa. the first was set up in 1891 as a public limited company on the initiative of gunsmiths from ermua (bizkaia) and a handful from eibar (35 in total), with each contributing 2775 pesetas. two years later, in 1893, almost half of the aurrera partners, together with other industrialists, promoted the creation of another public limited company (la eibarresa), with the intention of manufacturing shotgun barrels for the entire district. this initiative received a very positive response among arms manufacturers since it managed to unite 113 partners with http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 an equal investment per capita of 1096 pesetas. among them there were small and large producers, as well as figures with significant social and political weight such as juan josé larrañaga, mayor of the town, or antonio iturrioz and nemesio astaburuaga, who would occupy that same post some years later. the importance of la eibarresa in the cohesion of eibar’s corporate network is decisive, with its partners participating in another 38 companies. however, its trajectory as a business project was not very successful. from the beginning it experienced many difficulties and although two years after its creation it was still active, we have found no reference to it beyond that period (bustinduy 1894, 125). figure 5 focuses only on the partners of the three large companies analysed and shows their degree of betweenness, which is especially high for the cooperativa eléctrica eibarresa. this company, founded in 1918, had 43 partners (32 arms manufacturers) that the press at the time described as ‘prestigious neighbours’ of the district and that contributed an equal capital of 2000 pesetas each to the company. 12 in the graph there are no direct nexuses detected between the partners of aurrera and those of the cooperativa eléctrica eibarresa, and they are also scarce between the latter and the gun barrels cooperative: only víctor sarasqueta, julián aramberri, and eusebio arrillaga invested in the last two. this situation is most likely attributable to the time lapse between the founding of these companies. aurrera and la eibarresa were created in 1891 and 1893, respectively, while the electricity cooperative was set up in 1918. in 1891 víctor sarasqueta had just begun manufacturing full shotguns in a small workshop that he owned, while in 1918 he was the most renowned arms manufacturer in the area as well as the owner of the largest shotgun factory (calvó 1997, 302–305; larrañaga 2001, 219; goñi 12 la voz de guipúzcoa, 28/05/1918, p. 5. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 2013). in the deed of incorporation, eusebio arrillaga was attributed the trade of carpenter, although we also found reference to his activity as a homebuilder in eibar. 13 for his part, julián aramberri was the son of víctor aramberri, one of the most important shotgun manufacturers at the end of the 19 th century, although neither julián nor his father participated in aurrera (calvó 1997, 103–104; larrañaga 2001, 62). the latter is the only one of the three that participated in the board of directors of the electricity cooperative. figure 5. corporate relationships between aurrera, la eibarresa, and the cooperativa eléctrica eibarresa source: compiled by authors using the gmr, books 1–40. sna: unicet para windows (borgatti, everett, and freeman 2002). if we extend the analysis of the relationships between partners to the overall municipality of eibar the result is as depicted in figure 6. once again we can clearly verify the unifying role that the three aforementioned companies played in the overall network. the groupings with 13 minutes from the session of 26 october 1893, book of session minutes of the city council of eibar, municipal archive of eibar/eibarko udal artxiboa, sign. a 11.17. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 the greatest density and centrality are those formed around aurrera (green nodes), la eibarresa (pink nodes), and the cooperativa eléctrica eibarresa (blue nodes). linked to these, with weaker nexuses, there is a second group with indirect links to the central nucleus. lastly, in the periphery of the network we find the investors with the smallest number of nexuses and endogamous corporate relationships. figure 6. network of partners of companies established in eibar (1885–1925) source: compiled by authors using the gmr, books 1–40. sna: unicet for windows (borgatti, everett, and freeman 2002). the analysis of the nodes’ degree of centrality and betweenness allows us see which partners managed a greater quantity of information and which ones served with greater intensity as intermediaries between another two partners from the same group that had no relationship of their own (see tables 2 and 3 in the appendix). we have already emphasized the role played by víctor sarasqueta in the network when we analysed the three central companies (figure 5). the participation of this arms manufacturer http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 in two of the companies that brought together the most partners grants him a high degree of betweenness (1 st ) and centrality (2 nd ), which is consistent with his position as the most important and prestigious shotgun manufacturer of the period. among the most important actors in the network, and with a privileged position in it, we also find jacinto orbea alberdi (1 st centrality, 5 th betweenness) and his cousin juan orbea areitio (6 th centrality). the orbea y compañía factory, a firm created in the mid-19 th century, occupied a dominant position in eibar’s industrial district. in 1914 it was the largest company in the town, with 404 workers. the members of the orbea family were the main representatives of the conservative party in the city council of eibar and their presence in and influence on political and social life in the town, and even in the overall province, was very significant (echevarría 1990, 29). jacinto orbea alberdi was the leader of the conservative party in eibar at the beginning of the 20 th century and his brother, miguel maría, held the post of mayor between 1904 and 1908. a third brother from the same family, wenceslao orbea alberdi, held important offices in the provincial council and was elected on two occasions as a member of parliament for the bergara district, which eibar was part of. he was also the founder and president of the board of directors of the savings bank caja de ahorros provincial de guipúzcoa (1911–1916 and 1918–1919), as well as of the banco guipuzcoano (martínez artola 2016). another name that appears among the top positions is josé felipe artamendi. this investor participated both in aurrera and in la eibarresa, as well as setting up (together with his children) a well-known razor blade factory during the first half of the 1920s. we also find eulogio anitua garmendia, who belonged to one of the families that owned the company http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 gárate, anitua y compañía (g.a.c.), the second most important company in eibar. 14 this company was linked to la eibarresa through eulogio and to aurrera through his brother josé francisco. another important person in the network was martín antonio bascaran, partner of both aurrera and of la eibarresa, and also one of the main manufacturers of automatic pistols at the beginning of the 20 th century. 15 greater qualitative knowledge of the industrial district of eibar allows us verify the potentialities of sna as an instrument for analysing the business reality of the period. the collective nature of three of the network’s key business initiatives (aurrera, la eibarresa, and the cooperativa eléctrica eibarresa) could lead us to consider them as products of the high degree of social capital present in industrial districts (putnam 1993, 142). the dense and dynamic social fabric, the special links with the territory, the existence of shared values, and the intensity of the intercompany relationships (due to the subcontracting of production operations) explain, to a large extent, the existence of these types of initiatives. these companies, in turn, could mean a future source of social capital for the arms industry by strengthening existing relationships between different investors in the area, favouring the exchange of information and, probably, the subsequent implementation of new initiatives. from this perspective, participation in these institutions could also be interpreted as a means to increase social relations and, therefore, as an investment in social capital. although we do not have detailed information on the identity of each and every one of the partners in these companies, we do in fact have some examples that cast doubt on the applicability of this last interpretation to the case at hand. there are several people that coincided as investors in those companies, but that elsewhere strongly clashed. thus, for 14 the factory, which was dedicated to the manufacture of pistols and revolvers, employed 200 workers in 1914 (calvó 1997, 210–212; goñi 2010, 110). 15 his factory had 30 operators in 1914 (goñi 2010, 110). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 example, antonio iturrioz and jacinto orbea participated in la eibarresa as leaders of the republican party and the conservative party, respectively, and were the protagonists of heated personal confrontations. a similar case is that of tomás echaluce, correspondent for the republican newspaper la voz de guipúzcoa, and the socialist leader aquilino amuategui. both participated in the subscription of shares of a project for a shotgun factory backed by the escuela de armería in 1918 to tackle the foreseeable post-war crisis. 16 this company did not materialize in the end, nor was it ever placed on public record, but it is similar to the aforementioned collective projects in eibar. the correspondent from eibar was quite a politically active person and had frequent collisions with the socialists in general, and with amuategui in particular, even resulting in personal attacks. 17 another person that also appears among the shareholders of this initiative is esteban barrutia, who was the first socialist to get a councillorship in eibar in 1905, but who later suffered the heated hostility of his old fellow party members when some years later he joined the republican party. 18 in our opinion, these examples show that participation in these collective initiatives did not respond exclusively to business investment interests, but was imbued with a feeling of belonging to the community, and probably also of a certain degree of public commitment (sincere or not) to the initiatives that were considered beneficial for the economic future of the town. this would explain the co-existence in shared projects of people who displayed manifest personal enmity. putnam (1993, 152–163) grants this commitment to the community, or civic virtue, a key role in his explanation of unequal economic development in 16 tomás echaluce was in the workers group with 500 pesetas and aquilino amuategui was in the manufacturers group with 2000 pesetas: municipal archive of eibar, sign. b 53. 17 la voz de guipúzcoa, 08/11/1914, p.3 and 06/05/1915, p.4. 18 la voz de guipúzcoa, 13/08/1915, pp. 2–3 http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 italian regions. the propensity towards cooperation will be, likewise, more intense in those communities where historically we find an accumulation of a high stock of social capital (putnam 1993, 167), which fits perfectly with the case of eibar. the case of eibar also allows us check for other weaknesses in the methodology used as an indicator of the degree of social capital in the province. we considered that kinship could play an important role in the network’s cohesion, both at the local and the provincial level, but the overlap of surnames makes its assessment difficult. likewise, we know of some corporate relationships that would link eibar’s arms district with other industrial sectors, but which the source does not identify as such. this is the case of víctor bernedo, who in the sample of companies used appears as an eibar-based partner in the firm bernedo, echeverría y elorza (legazpia), founded in 1920 with the purpose of manufacturing nuts and bolts. however, we also know that víctor bernedo was a renowned manufacturer of automatic pistols in eibar (calvó 1997, 140–141). the existence of these cooperative companies or projects favourably skews the degree of betweenness and centrality of the partners that participated in them, despite the fact that some of them, such as la eibarresa, would be short-lived or would never materialize. on the other hand, the criteria used for the selection of companies caused other business projects with similar characteristics to be excluded from the sample. this was the case of the aforementioned shotgun factory, which was never established, or the public limited company industrias bakelan, which was excluded from the database because it did not fulfil the general conditions established in the methodology. this company was promoted in 1919 by several of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 eibar’s most prestigious businesspeople in order to carry out the transformation of the arms industry into a type of metal production not related to armoury. 19 conclusions generally, sna in the business field has been used as a means to demonstrate the existence of business groups through the identification of common members on the boards of directors of public limited companies in a specific geographic area. in the gipuzkoan case, and in the period studied, this type of analysis would involve a reductionist skew due to the elevated presence of general and limited partnerships in the province’s business fabric. in any case, with the general rule being that the number of partners involved in these types of partnerships is reduced and bearing in mind only the founding partners of the public limited companies, we consider the methodology used to be appropriate for the overall province. thus, it seems clear that the strengthening of personal relationships between partners, through the shared creation of companies, was a source of new business initiatives and formed a reserve of valuable social capital for the overall territory. likewise, the graphs obtained have allowed us visualize the intense links that gipuzkoan industrial activities had with the territory. san sebastián, as capital of the province and summer location of the spanish oligarchy of the period, concentrated greater business diversity, while in the rest of the counties we observe significant territorial specialization. we thus find the paper district of tolosaldea, the canvas sandal district of azcoitia, or the metallurgy district in the deba valley. among these districts, we also find the arms district of eibar, which has allowed us carry out a more exhaustive analysis of one of the groupings of nodes identified in the overall provincial network. 19 la voz de guipúzcoa, 01/02/1919, 7. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 the detailed study of the eibar case reveals the complexity of the social relations that supported the industrialization process. at the same time, the investment dynamism shown by the arms manufacturers of eibar, and its channelling towards collective projects, suggests that the social capital accumulated in this town was decisive for the success of the arms industry during those years. this investment dynamism was also reflected at the provincial level; among the capital that came from industry, the arms sector was the one that showed the greatest interest in investing in other industrial activities. however, through this case we have also been able to detect some weaknesses that, extrapolating them to the overall territory, add nuances to the degree of representativeness of the methodology used. this obliges us to consider the results obtained as an approximation to a much more diverse and complex reality than that revealed by the networks shown here. references borgatti, stephen p., martin g. everett, and linton c. freeman. 2002. ucinet 6 for windows: software for social network analysis. harvard, ma: analytic technologies. borgatti, stephen p., ajay mehra, daniel j. brass, and giuseppe labianca. 2009. “network analysis in the social sciences.” science 323: 892–895. bustinduy, nicolás. 1894. la industria guipuzcoana en el fin de siglo. san sebastián: la unión vascongada. carrión, ignacio. 2010. “una aproximación a la intensidad industrial vasca: la industria guipuzcoana en 1860.” investigaciones de historia económica 16: 73–100. castells, luis, and félix luengo. 1988. “el proceso de modernización en guipúzcoa.” ekonomiaz: revista vasca de economía 9-10: 255–276. calvó, juan l. 1997. la industria armera nacional 1830-1940. fábricas, privilegios, patentes y marcas. eibar: ego ibarra batzordea. catalan, jordi. 1990. “capitales modestos y dinamismo industrial: orígenes del sistema de fábrica en los valles guipuzcoanos, 1841-1918.” in pautas regionales de la industrialización española (siglos xix y xx), coordinated by jordi nadal oller and albert carreras i odriozola, 125–158. barcelona: ariel. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 catalan, elena, and isabel mugartegui. 2013. “cambios en las pautas de consumo energético en la industria guipuzcoana (1862-1925).” revista de historia industrial 52: 51–82. echevarria, toribio. 1990. viaje por el país de los recuerdos. san sebastián: sociedad guipuzcoana de ediciones y publicaciones. etxabe, igor, and jesús m. valdaliso. 2016. “measuring structural social capital in a cluster policy network: insights from the basque country.” european planning studies 24(5): 884–903. accessed june, 2016. doi: 10.1080/09654313.2015.1117582. erro gasca, carmen. 1995. “creación de sociedades mercantiles y formación de capital en navarra, 1830-1910.” documento de trabajo 9506. madrid: fundación empresa pública. erro gasca, carmen. 1997. promoción empresarial y cambio económico en navarra. 1830-1913. pamplona: cámara oficial de comercio e industria de navarra. gárate, montserrat. 1976. el proceso de desarrollo económico en guipúzcoa. san sebastián: cámara de comercio, industria y navegación de guipúzcoa. gárate, montserrat. 1995. cien años de la vida económica de san sebastián (1887-1987). san sebastián: fundación social y cultural kutxa. gárate, 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editorial. goñi, igor. 2008. “imitación, innovación y apoyo institucional: estrategias de penetración en los mercados internacionales de las empresas armeras vascas durante el siglo xx.” revista de la historia de la economía y de la empresa 2: 207-234. goñi, igor. 2010. “eibar y la industria armera: evidencias de un distrito industrial.” investigaciones de historia económica 16: 101–133. goñi, igor. 2013. “la industria armera vasca, 1900-1959.” phd diss., university of basque country. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 iza-goñola, francisco javier. 2005. alfa, s.a. motor social y económico de la vida eibarresa, eibar: ego ibarra batzordea. jiménez araya, tomás. 1974. “formación de capital y fluctuaciones económicas. materiales para el estudio de un indicador: creación de 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la industrialización de vizcaya, 1879-1913.” revista de historia industrial 4: 159–172. valdaliso, jesús maría, and santiago lópez. 2007. historia económica de la empresa. barcelona: crítica. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 appendix table a1. gipuzkoan companies with the highest degree of betweenness established via their partners 1886–1926 company degree sector location capital ptas. la eibarresa 39.000 arms eibar 125,000 compañia de asfaltos de maestu 30.000 chemical ss 300,000 electrica del urumea 29.000 energy ss 650,000 compañia electrica de san sebastian 27.000 energy ss 500,000 banco guipuzcoano 27.000 financial ss la maquinista guipuzcoana 26.000 metallurgy ss 1,307,000 cooperativa electrica eibarresa 25.000 energy eibar 105,000 la voz de guipuzcoa 22.000 graphic arts ss 16,746 banco de credito hipotecario 20.000 financial ss 20,000,000 epelde, larrañaga y cia 20.000 textile-canvas sandal azcoitia 408,000 cafe guria 19.000 services-hotel sector ss 16,100 mendia s.a. 18.000 continuous paper hernani 1,300,000 fomento de san sebastian 17.000 servicesentertainment ss 3,000,000 aurrera 16.000 iron and steel eibar 97,151 londaiz, ubarrechena y cia 16.000 food-flours ss 2,200,000 arana, unibaso y cia 16.000 services-hotel sector ss 600,000 electra de arditurri 16.000 energy pasajes 125,000 bernau y cia 16.000 servicesentertainment ss 225,000 union cerrajera 15.000 metallurgy mondragon 7,707,500 machimbarrena y cia 14.000 servicesentertainment ss 450,000 arcaute y cia 14.000 paper tolosa 400,000 hidraulica de sumbilla 14.000 energy ss 1,150,000 http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 company degree sector location capital ptas. la salvadora 14.000 continuous paper villabona 250,000 banco de tolosa 13.000 financial tolosa 1,500,000 brunet y cia 13.000 cotton fabrics ss 4,000,000 ubarrechena hermanos y cia 13.000 cement ss 85,000 ruperto rezola 12.000 hand-made paper tolosa 90,000 cia electrica de portugal 12.000 energy ss 200,000 cia del ferrocarril a ulia 12.000 services-transport ss 530,000 ruiz de arcaute y cia 12.000 continuous paper tolosa 1,600,000 sociedad española de piedra-vidrio y construcciones garchey 12.000 chemical-glass ss 5,000,000 astilleros del deba en deba 12.000 metallurgyshipyard eibar 300,000 la vinicola vasco-riojana 12.000 food-drink eibar 55,000 echeverria y cia 11.000 chemical-soap ss 10,000 irazusta, vignau y cia 11.000 continuous paper tolosa 2,500,000 papelera del araxes 11.000 continuous paper tolosa 250,000 cementos zumaya 11.000 cement zumaya 250,000 la prudencia 10.000 coal mining ss 175,000 la papelera vasco-belga 10.000 paper renteria 600,000 hijos de jose maria rezola y cia 10.000 cement plant ss 1,010,000 lalanne y cia 10.000 servicesentertainment irun 95,000 blake y cia 10.000 wood ss 60,000 sociedad industrial minera guezala 10.000 mining ss 10,000 arizmendi hermanos 10.000 arms eibar 98,999 nazabal y cia 10.000 paper manufacture tolosa 327,000 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 88-127, january-june 2017 doi: 10.1344/jesb2017.1.j024 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 table a2. classification of partners in eibar according to degree of centrality partners no. of relations degree of centrality (%) jacinto orbea alberdi 174 7.487 victor sarasqueta suinaga 170 7.315 julian aramberri muguerza 166 7.143 eusebio arrillaga arriola 160 6.885 josé felipe artamendi amesti 154 6.627 juan orbea areitio 151 6.497 tiburcio albistegui 150 6.497 eulogio anitua garmendia 149 6.411 martín antonio bascaran ibarra 143 6.153 manuel arguiano 143 6.153 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). table a3. classification of partners in eibar according to degree of betweenness betweenness nbetweenness victor sarasqueta suinaga 9336.474 5.541 julián aramberri muguerza 6171.330 3.663 eusebio arrillaga arriola 6083.192 3.610 baltasar urresti juaristi 6010.261 3.567 jacinto orbea alberdi 5763.857 3.421 silverio mandiola aranceta 5324.544 3.160 eduardo orozco urigoitia 5249.324 3.116 josé mª elorza uria 4630.766 2.748 tiburcio albistegui idarraga 4499.465 2.670 martín errasti ibarzabal 4228.177 2.509 josé mª cruceta izaguirre 4076.081 2.419 eulogio anitua garmendia 3632.642 2.156 source: compiled by authors using the gmr, books 1–40. sna: ucinet for windows (borgatti, everett, and freeman 2002). this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 rajeev kumar panda national institute of technology rourkela (india) dibya nandan mishra symbiosis international (deemed university), pune (india) https://orcid.org/0000-0003-1351-7167 https://orcid.org/0000-0002-9918-115x preferred channel choices in vegetable marketing: role of macro and micro environmental factors in odisha abstract the globalization of agriculture has opened new opportunities, challenges and stiffer competition in india. this paper explores and evaluates various macro and micro factors influencing the marketing channel choices made by the vegetable farmers in odisha. responses were collected from 323 vegetable farmers and 110 commission agents, and 192 retailers across five districts of odisha. data were analyzed using spss to confirm reliability, validity and data reduction. amos was used to design the structural equation model. access to market knowledge has a positive sign for both organized and unorganized market choices, which is consistent with the hypothesis. hence, the value suggests that increasing market knowledge can increase market participation. the improvement in practices and expertise in grading also shows an increase in the involvement of both organized and unorganized markets. given these marketing challenges, this study suggests improving emerging farmers' participation in the export markets. keywords: market channel choice, agriculture, vegetable, macro factors, micro factors, sem elecciones de canales preferidos en la comercialización de vegetales: papel de los factores ambientales macro y micro en odisha resumen la globalización de la agricultura ha abierto nuevas oportunidades, desafíos y una competencia más dura en la india. este documento explora y evalúa varios factores macro y micro que influyen en las elecciones de canales de comercialización realizadas por los agricultores de hortalizas en odisha. se recopilaron respuestas de 323 agricultores de vegetales y 110 comisionistas, y 192 minoristas en cinco distritos de odisha. los datos se analizaron con spss para confirmar la confiabilidad, la validez y la reducción de datos. amos se utilizó para diseñar el modelo de ecuación estructural. el acceso al conocimiento del mercado tiene un signo positivo tanto para las elecciones de mercado organizadas como para las no organizadas, lo cual es consistente con la hipótesis. por lo tanto, el valor sugiere que aumentar el conocimiento del mercado puede aumentar la participación en el mercado. la mejora en las prácticas y la experiencia en la clasificación también muestra un aumento en la participación de los mercados organizados y no organizados. dados estos desafíos de comercialización, este estudio sugiere mejorar la participación de los agricultores emergentes en los mercados de exportación. palabras clave: elección del canal de mercado, agricultura, hortalizas, factores macro, factores micro, sem opcions de canal preferides en màrqueting de vegetals: paper dels factors ambientals macro i micro a odisha resum la globalització de l'agricultura ha obert noves oportunitats, reptes i una competència més dura a l'índia. aquest article explora i avalua diversos factors macro i micro que influeixen en les eleccions de canals de màrqueting fetes pels productors d'hortalisses d'odisha. s’han recollit respostes de 323 agricultors d'hortalisses i 110 comissionistes i 192 minoristes de cinc districtes d'odisha. les dades s’han analitzat mitjançant spss per confirmar la fiabilitat, la validesa i la reducció de les dades. amos s’ha utilitzat per dissenyar el model d'equació estructural. l'accés al coneixement del mercat té un signe positiu per a les opcions de mercat tant organitzades com no organitzades, que és coherent amb la hipòtesi. per tant, el valor suggereix que augmentar el coneixement del mercat pot augmentar-ne la participació. la millora de les pràctiques i l'experiència en la qualificació també mostra un augment de la implicació dels mercats organitzats i no organitzats. tenint en compte aquests reptes de màrqueting, aquest estudi suggereix millorar la participació dels agricultors emergents als mercats d'exportació. paraules clau: elecció del canal de mercat, agricultura, hortalisses, factors macro, microfactors, sem corresponding author: e-mail: dibyanandanmishra@gmail.com received 9 october 2021 accepted 8 arpil 2022 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0003-1351-7167 https://orcid.org/0000-0002-9918-115x mailto:dibyanandanmishra@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 1. introduction india's agriculture, the backbone of the economy, dictates the livelihood system of farmers and millions of people. india's economic development depends heavily on the agricultural sector (agarwal and agarwal 2017). at the same time, the globalization of agriculture has opened new opportunities, challenges and stiffer competition in india (mandal et al. 2017). the food agricultural organization of the united nations (fao) has predicted that india’s population will overtake china's by 2030. in that scenario, where millions of people are malnourished and below the poverty line, there is a need to improve the quality of life through food and nutritional security (kehoe et al. 2019). the challenge, thus, demands adjustment of the structure of the agricultural system to resonate with internal stipulations. the significant development in horticulture practices is that farmers are now extending their business from self-consumption to commercial production, which has also attracted various private sector investments (anesbury et al. 2020). urbanization, enhanced income, and a growing health-conscious population have increased the demand for horticultural products, which has enthused the farmers to adopt horticultural crops for better returns (icar 2001). the sector has attracted educated youth since it is intellectually satisfying and economically rewarding. in the last decade, the agriculture sector has experienced a technological shift, such as e-agriculture, iot implementation, and intelligent sensor-based farming, which led to the development of the agricultural industry, but such action has also caused various issues (akhilesh and sooda 2020, nedumaran 2020, singh et al. 2020). at the same time, though technology has introduced a positive impact, it is still less inclusive and quite far from the reach of the rural farming population of india (akhilesh and sooda 2020). the intermediaries retain most of the consumer's money, frustrating farmers. many studies have identified the vegetable http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 business as the most profitable and rewarding among other horticultural produce (mohapatra, mohapatra and mishra 2017). this study, "preferred channel choices in vegetable marketing: role of macro and micro environmental factors in odisha," analyzes the dynamics of marketing practices of selected vegetables in odisha. the study's main objective is to investigate various macro and micro factors and the extent to which such factors affect the marketing decision of farmers. though many studies have discussed various macro and micro factors and their impact on marketing channel preference decisions (panda and sreekumar 2012, sarkar et al. 2021, singla, chaturvedi and sandhu 2020, yet few studies have taken a holistic approach in empirically testing all the elements in a single model (kumar, roy and mukherjee 2018, singh and chauhan 2004). this research objective is to understand the overall impact of assured markets, market knowledge, grading and packaging, society, govt. aided education, personal property, storehouse facility, market infrastructure, road transport facility, market transport facility on the organized and unorganized market channels. in addition, very few studies have been done in odisha. odisha is one of the significant vegetables producing states blessed with a good climate, fertile soil and irrigation facility. this gives a huge opportunity to develop the technological and infrastructure aspect of the agricultural industry. but still, improper infrastructure, poor marketing practices, and no storehouse facility are hindrances for the vegetable growers to gain a quality return on their investment. the study identifies the issues related to the vegetable business and suggests measures to improve the system by optimizing the marketing efficiency of vegetables. the study addresses the issue by identifying the micro and macro factors through literature and principal components analysis (pca) and confirmatory factor analysis (cfa) to prove the hypothesis of what are the important factors http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 which helps to make a decision to choose organized vs an unorganized marketing channel as the preferred choices. the implications of these study is to help farmer to provide them the right channel, right price opportunity and right market rate for the vegetation they produce. govt plocies can be formed taking into consideration of the findings and suggestion from this article. this article is produced from a field study in odisha which gives an overview of the real problem faced by farmers to sell their produce. 2. literature review as per the definition of the national commission of agriculture (1976), "agricultural marketing is a process which starts with a decision to produce a saleable farm commodity, and it involves all aspects of market structure or system, both functional and institutional, based on technical and academic considerations and includes preand post-harvest operations, assembly, grading, storage, transportation, and distribution". the assessment of agricultural marketing can be done by analyzing the farmers' marketing ecosystem, i.e., practices, channels, and structure (aggarwal and narayanan 2021, yadava and jayanna 2017; yankson, owusu and frimpong 2016). studies have shown prices were comparatively favourable and remunerative when sold through society, as opposed to open markets and decided at a good time. sen and maurya (1998) organized a study on the working of cooperative marketing of veggies based in bangalore, india. they concluded that the operative cost of the society was 85% of the net income, which is considerably high. also, the organization fails to mobilize specific resources for expansionrelated activities. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 table 1. breakthrough studies on vegetable marketing source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 the literature discusses various relevant problems and suggestions from previous research on distribution channels. in their study, kumar, roy and mukherjee (2018) assessed the marketing dynamics of several farm produce such as potatoes, onion, and rice in a regulated market in bangalore. they contend that marketing efficiency largely depends on the intermediaries' performance. such performance leads to the competitiveness of the market. also, the study reveals that cooperative marketing agencies are absent from the marketing system. due to the greater risk involved in managing the perishable items, their production is confined to only a few traders, particularly onion and potato. singh and chauhan (2004) examined the existing distribution channels for marketing g of vegetables, associated income and expenses, as well as the efficiency of different media. the study revealed that most of the vegetable produce was marketed through four-stage distribution channels. it involves producer to wholesaler/commission agents to the retailer and then to consumer, marketing channel. these distribution arrangements often lead to wastage of resources and increased marketing costs; such issues can be addressed by efficiently regulating the existing marketing facilities. additionally, they contend that vegetables being perishable items are problematic to store, primarily due to overproduction. as a result, farmers receive low prices for the perished vegetables, leading to huge losses and debts. therefore, sufficient warehousing facilities should be developed nearby the production and marketing area. the literature also covers a few international case studies and researches about distribution channels and the problems and development across the globe. cadilhon, fearne and moustier (2003) introduced a conceptual framework to analyze the vegetable market's supply chains and the south east asian context; here, the role of wholesale markets and the collaboration among stakeholders were highlighted. it can help the policymakers to understand how the whole http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 174 network of the vegetable market works in a coordinated way. midmore and jansen (2003), in their paper, analyzed the relationship between suburban farmers and their evolving production and marketing techniques in asia by referring to the examples of southeast conglomerates. ricardo hernández, thomas reardon and julio berdegué (2006), in their paper "supermarkets, wholesalers, and tomato growers in guatemala", analyze the factors affecting the asset procurement capacity of the small farmers and the influence of their participation in supermarkets as compared to the conventional distribution channels in guatemala. they found that farmers dealing in supermarkets are more efficient, self-reliant, and skilled in producing commercial crops than selling through traditional distribution channels. table i shows the important literature followed to deduce the crucial variables impacting the choices of organized and unorganized market channels. organized retailers service customers differently than unstructured ones. understanding these contrasts can help explain how they coexist in emerging countries. unorganized retailing is characterized by family-run stores serving a small number of nearby families. natural land, financing, and management know-how limit such stores' size. due to their modest size and regular clientele, the shopkeepers of neighbourhood stores are aware of their customers' tastes and offer customized services (child et al. 2015). consumers buy regularly but in modest quantities for budget, storage, and waste control reasons (often multiple times a week, as the need arises for a product; child et al. 2015). an organized retailing outlet serves many households over a vast area. customers make a few shopping excursions per month, frequently drive significant distances, and buy large quantities of cheap products to store and consume over time. buying is impersonal, and individual service is rare. organized merchants operate fewer, larger stores that are further apart than uncontrolled retailers (typically in large shopping plazas). buying from organized retailer stores requires time, gas, and other http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 175 in-store costs (child et al. 2015). organized merchants offer reduced pricing due to their scale, logistical knowledge, and efficiency. this section focused on previous research on the marketing of vegetables in the context of price behaviour, marketing cost and margin, market conditions etc. international research works on vegetable marketing were also referred to for a better understanding of the issue at the global level. this section also developed the conceptual framework based upon two markets, i.e., organized and unorganized markets. we identified the variables that impact the organized and unorganized market from the literature review. the variables are grouped as individual and micro factors. the paper proposes the following conceptual framework and hypothesis for factors affecting farmers' organized and unorganized marketing channel choices as follows: figure 1. framework for organized market source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 176 h1a: assured markets directly and significantly affects organized marketing channel choice. h1b: market knowledge directly and significantly affects organized marketing channel choice. h1c: grading and packaging directly and significantly affect organized marketing channel choice. h1d: society support directly and significantly affects organized marketing channel choice. h1e: govt. aided education directly and significantly affects organized marketing channel choice. h1f: personal property directly and significantly affects organized marketing channel choice. h1g: storehouse facility directly and significantly affects organized marketing channel choice. h1h: market infrastructure directly and significantly affects organized marketing channel choice. h1i: road transport facility directly and significantly affects organized marketing channel choice. h1j: market transport facility directly and significantly affects organized marketing channel choice. figure 2. framework for unorganized market source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 177 h2a: assured markets directly and significantly affects unorganized marketing channel choice. h2b: market knowledge directly and significantly affects unorganized marketing channel choice. h2c: grading and packaging directly and significantly affect unorganized marketing channel choice. h2d: society support directly and significantly affects unorganized marketing channel choice. h2e: govt. aided education directly and significantly affects unorganized marketing channel choice. h2f: personal property directly and significantly affects unorganized marketing channel choice. h2g: storehouse facility directly and significantly affects unorganized marketing channel choice. h2h: market infrastructure directly and significantly affects unorganized marketing channel choice. h2i: road transport facility directly and significantly affects unorganized marketing channel choice. h2j: market transport facility directly and significantly affects unorganized marketing channel choice. 3. research methodology 3.1. sampling leedy and ormrod (2004) suggested in the sampling process; numerous units are selected from an intended and substantial group of populations that have particular relevance to the study. through minute observations and analysis of the samples, we can categorize various sources: 'districts' were selected as primary entities, 'villages and gram panchayats' were included in secondary entities, and the 'vegetable farmers' were considered as tertiary entities. a three-stage stratified random sampling technique was exercised randomly to design the structure of such sampling sources further. in the case of selecting respondents from the above sample areas, simple random sampling was undertaken to determine the farmers or vegetable growers. to make the collection process convenient without hampering quality, a few factors such as resources, funds and manpower were utilized efficiently. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 178 the study region and directions were made on the state of odisha due to numerous reasons; a few of them includes the volume of production, diversification regarding cultivation techniques, soil quality and fertility, favouring weather, varieties in output, presence of a large number of small and marginal group of growers, and significantly low amount of investment in infrastructures. apart from all these parameters, farmers' adaption to new and innovative farming techniques was commendable and quite encouraging in the survey. during the initial sampling process, five districts, based on the maximum cultivation acreage for vegetables, were deemed suitable for inclusion in the study: bolangir, ganjam, keonjhar, mayurbhanj and subarnapur. in subsequent stages, ten blocks, ten gram panchayats, and thirty villages were picked from the above districts to diversify the sampling based on vegetable productivity. regarding the selection of vegetables that must be included in the study, five commonly grown products (vegetables) were chosen: cauliflower, cabbage, tomato, ladyfinger, and brinjal. apart from individual farmers, middlemen (intermediaries like commission agents, wholesalers, and retailers) were networked and included in the study from the five districts above. for the collection of relevant data from intermediaries and other affairs, separate questionnaires were formatted and distributed among the appropriate respondents, including significant events of a survey like a customer satisfaction rating, transactional values of vegetables, availability and accessing of markets, daily commutes to urban and rural routes etc.; all above data were collected by employing a likert scale (5 points). 3.2. data collection and questionnaire development designing a questionnaire in the survey context is tricky and is key to accessing all relevant primary information in qualitative and quantitative data. there are numerous ways a questionnaire can be imposed on the respondents, such as the telephonic method, self-designed http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 179 questionnaires (leedy and ormod 2004), and face-to-face interviews. the latter approach (faceto-face interviews) can have multiple beneficial attributes over other methods of enquiry; hence it is more suitable for the survey. an interview is a better mode of data collection because it does not allow the respondents to skip or omit a question, and they can always ask the interviewer to clarify their understanding. additionally, most of the respondents involved in the study are farmers by profession; in such occupations, literacy level can burden data collection and interpretation of information. people unable to read or write cannot be expected to answer a questionnaire independently; no matter how simple the preface, an interviewer must devote their time and presence to accumulate the data without altering the quality. also, the presence of a person improves the efficiency of data collection and is more effective than selfadministered methods. while dealing with farmer families, heads of the households were selected for the role of prime respondents and were interviewed respectively. if leaders failed to represent the household, the concerned spouse or any other member directly related to vegetable farming was chosen as a replacement for the household head. most of the answers and discussions were projected towards the head respondent because of the richness of experience and farming information. in case of doubts or discrepancies, other members were allowed to brainstorm to arrive at a particular conclusion the collection of secondary data regarding prices, cost, production, and marketing of vegetables were collected from multiple government repositories, including the district-level agriculture and horticulture department; ministry of agriculture, govt. of india, new delhi; ministry of statistics and programme implementation, govt. of india; directorate of horticulture, govt. of odisha, bhubaneswar, directorate of agriculture and food production, govt. of odisha; http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 directorate of economics and statistics, govt. of odisha, bhubaneswar; district agriculture offices of districts mentioned above; and few websites such as www.indiastat.com and www.orissastat.com. also, the same departments provided a detailed list of respondents based on the cultivation area, and from that list, a few respondents were chosen randomly. significantly, the frequent and regular farmers dealing with vegetable and product marketing (roughly for the past five years) were considered suitable for listing. 4. data analysis and findings this section aims at several macro and technological dimensions identified in the study that affect the farmers' market choice decisions in odisha. the present area focused on providing the dynamic results of the modelled constructs presented in section 3, conforming to the study objectives. the independent factors were analyzed, and results were given based on the findings. the section offers the farmers' comprehensive model for market choice based on the variables of each factor's conclusions. a total of ten independent factors were identified in the study, and their respective variables were assessed based on their characteristics and how the farmers perceived them. the study presents insightful results by developing a comprehensive model, discussing the significance of each factor incorporated in the model. 4.1. socio-economic characteristics of the respondents 4.1.1. statistics samples three hundred twenty-three vegetable farmers, 110 commission agents/ wholesalers and 192 retailers were included in the socio-economic study. the section focuses on agricultural cultivation, marketing and various factors affecting the distribution process. varieties of descriptive statistics were equipped to represent the data distribution pattern, such as mean, standard deviation, ranges, and frequencies: five regulated markets, namely bolangir, ganjam, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 keonjhar, mayurbhanj and subarnapur from the total odisha. samples were collected from different marketplaces and different vendors selling within those markets. 4.1.2. demographic characteristics of sample households seventy-nine per cent of the farmers questioned were male, while the rest were female. eightytwo per cent of the wholesalers were male, and the rest were female. similarly, 73.4 per cent of the retailers were male, making an average of 78% male and 22 % female respondents for the whole study. in the study, age is used to determine a person's experience in a particular farming type; conversely, such incidents benefit household members' farming processes since they constantly gain guidance from the head's orchestration. the farmers in the sample were classified into various groups, and a chi-square test was adopted to analyze the dispersion among the age of different vegetable farmers. a significant portion of the vegetable farmers has an age count of more than 50 years, while the majority of the wholesalers have their age between 30 and 40 years, and most of the retailers fall under the age category of 40 to 50 years. in a nutshell, the production formats of vegetables witness an older and more experienced type of farmers. still, the fields of distribution and marketing require comparatively young individuals in terms of mobility. 4.1.3. literacy/ education level of respondents the section elucidates the extent of literacy of a household head that determines their ability to evaluate, interpret, and understand the applicability of the information in relevant activities; also, it enhances the worth of human capital in different households. hence, the literacy level http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 or education level clearly impacts the farmers' understanding and interpreting nature and stimulates them for effective market participation. according to mather and adelzadeh (1998), the interpretive capacity of people with a higher literacy quotient is more than those with less or no education. the illiteracy quotient is higher in cases of farmers (30.03%), which indicates most of the farmers have expertise in cultivation methods and may have issues accumulating market knowledge or participation. further, it can be seen that approximately 15.5% of commission agents have received education beyond the higher secondary level; and this statistic shows a visible concentration of educated individuals in the wholesaling format. if we divide our sample based on the education we receive, the increasing literacy mandate will be farmers, vendors, and commission agents. 4.2. descriptive analysis of the dataset the dataset considered for final analysis exhibits satisfactory psychometric properties with skewness and kurtosis well within the acceptable limits. the present study attempts to analyze two different models to identify the antecedents that affect the farmers' decisions to opt for a) an organized market channel and b) an unorganized market channel. barlett's test and kaisermeyer-olkin (kmo) tests of sample adequacy were conducted to assess the research data appropriateness for conducting exploratory factor analysis. also, the kmo procedure was carried out to ensure variable groupings' suitability effectively. the kmo value for the organized market channel choice was computed to be 0.895. further, the kmo value for the unorganized market channel choice was calculated to be 0.892. according to kaiser (1974), the kmo value greater than 0.80 is within the acceptable limits. however, field (2009) suggests that 0.50 can still be considered. the kmo value >0.80 indicates that the items were interrelated and explained by common factors. also, barlett's test of sphericity for the organized market http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 channel choice x²=22102.677, df= 1225 and unorganized market channel choice x²=22269.216, df= 1225 and p<.001 shows that correlations between items were adequate for serving the purpose of principal component analysis. specifically, these two tests ensured the feasibility and suitability of the data for factor analysis (hair 2009). the assessment of inter-item reliability was calculated using the alpha coefficient (cronbach 1951). nunnally (1978) recommends coefficient alpha values should exceed 0.70. for the present research, cronbach's alpha(α) was 0.896, establishing internal consistency among the measurement items. 4.3. principal components analysis (pca) – organized and unorganized market channel choice employing the principal component analysis (pca) with varimax rotation, for model i, 50 out of the total 64 variables in the questionnaire were clubbed into eleven factors, which depicts 72.224 % of the total variance. the variables of each of these factors indicate a loading value greater than 0.5, which meets the recommended criteria (hair, ringle and sarsted 2013). apart from showing high loading values, the factors also depicted sufficient internal consistency. factor reliability was tested using cronbach's alpha method. the results exhibited that factor reliability scores based on alpha coefficients ranged between 0.77 and 0.86, significantly higher than the threshold level. nunnally and bernstein (1994) recommended a 0.7 reliability coefficient in the context of social science and management research. according to gorsuch (1990), retaining and classifying factors depends on eigenvalue, which should be equal to or higher than one. subsequently, all the elements in this study followed the suggested guidelines in terms of eigenvalue. the factors having eigenvalues less than one were not taken into account. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 the eleven factors explain 72.2% of the total variance in the farmers' organized market choice model dataset. further, for model ii, 50 out of the total 60 variables in the questionnaire were clubbed into eleven factors, which depicts 72.543% of the total variance. the variables of each of these factors indicate a loading value greater than 0.5, which meets the recommended criteria (hair, ringle and sarstedt 2013). apart from showing high loading values, the factors also depicted sufficient internal consistency. larose (2015) delineates that the commonality coefficient reflects the variance shared by a particular variable with other variables. according to nunnally (1978), communality values less than 0.5 are considered significantly low, implying that one specific variable shares less than 50% of the variance with other variables. communality values for all the variables conformed to the cut-off level of 0.5, which means they duly explain more than 50% variance in every factor and don't require to be dropped. in the generic sense, factor loadings represent the extent to which a factor explains the respective variable. generally, per the recommended limits, a factor loading score >0.5 lends empirical support towards a high impact on the variables. with pca model results, all the factor loadings meet the cut-off threshold level of 0.5, suggesting the appropriateness and reliability of the determining factors. 4.4. confirmatory factor analysis (cfa) for organized and unorganized marketing channel choice 4.4.1. construct validity for organized and unorganized marketing channel choice construct validity can be established through empirical assessment of uni-dimensionality, convergent validity, discriminant validity (o'leary-kelly and vokurka 1998) and nomological validity (sureshchandar, rajendran and anantharaman 2002). according to hair 2009, construct validity is the extent to which a set of measured variables represents the latent http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 theoretical construct designed to be measured. in the context of the present study, we have demonstrated reliability and validity by effectively measuring face validity, convergent validity, composite reliability, and discriminant validity. the aspect of face validity was supported by adapting and introducing modifications in the existing scales (panda et al. 2012) used by prior researchers to suit the objectives and context of the research. cronbach's alpha value of the research instrument equals 0.897, which exceeds the threshold level of greater than 0.7; therefore, exhibiting the reliability of the questionnaire. the cfa procedure was conducted to calculate reliability, convergent and discriminant validity, and model-fit statistics. convergent validity comprises standardized factor loadings, composite reliability (cr), average variance extracted (ave) etc. table ii exhibits the reliability and validity assessment results for organized marketing channel choice. the standardized factor loading of the research constructs ranges from 0.632 to 0.938 and shows statistical significance (p-values). table 2. reliability and validity assessment for organized market channel constructs and items standardized factor loadings composite reliability average variance extracted organize d market unorganize d market organize d market unorganize d market organize d market unorganize d market assured market 0.812 0.859 0.523 0.608 am1 .888 .886 am2 .886 .885 am3 .883 .883 am4 .871 .869 am5 .868 .868 market knowledge 0.966 0.966 0.849 0.849 mk1 .858 .862 mk2 .802 .807 mk3 .790 .794 mk4 .756 .761 mk5 .756 .758 grading and packaging 0.902 0.902 0.649 0.648 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 constructs and items standardized factor loadings composite reliability average variance extracted organize d market unorganize d market organize d market unorganize d market organize d market unorganize d market gap1 .820 .820 gap2 .783 .785 gap3 .780 .781 gap4 .730 .731 gap5 .720 .718 society support 0.874 0.874 0.582 0.582 ss1 .778 .802 ss2 .767 .773 ss3 .761 .771 ss4 .715 .720 ss5 .701 .712 govt. aided education 0.888 0.889 0.615 0.616 gae1 .796 .794 gae2 .745 .754 gae3 .736 .738 gae4 .735 .738 gae5 .728 .726 personal property 0.852 0.855 0.536 0.544 pp1 .770 .773 pp2 .754 .754 pp3 .754 .753 pp4 .715 .721 pp5 .688 .690 storehouse facility 0.861 0.861 0.556 0.555 sf1 .832 .807 sf2 .811 .799 sf3 .717 .727 sf4 .711 .713 sf5 .703 .695 market infrastructur e 0.846 0.845 0.525 0.524 mi1 .856 .859 mi2 .819 .824 mi3 .765 .770 mi4 .739 .738 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 constructs and items standardized factor loadings composite reliability average variance extracted organize d market unorganize d market organize d market unorganize d market organize d market unorganize d market road transport facility 0.895 0.895 0.681 0.680 rtf1 .864 .756 rtf2 .862 .676 rtf3 .795 .671 rtf4 .683 .667 market transport facility 0.853 0.805 0.597 0.513 mtf1 .755 .832 mtf2 .676 .822 mtf3 .672 .764 mtf4 .667 .518 organized/ unorganized market choice 0.853 0.831 0.660 0.623 omc1/ uomc1 .803 .853 omc2/ uomc2 .775 .821 omc3/ uomc3 .758 .726 source: own elaboration. further, cr for all the research constructs meets recommended levels of 0.7 or above and the average variance extracted exceed the cut-off grade of 0.5 (fornell and larcker 1981). hair et al. (2010) suggest that the research construct should exhibit std. factor loadings greater than 0.5 have statistical significance; ave values higher than the proposed values of 0.5 determine sufficient convergence, and composite reliability scores of 0.7 or more indicate good reliability. according to the results provided in this study, the standardized estimates, ave and cr meet the threshold cut-offs implying adequate validity and reliability. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 discriminant validity becomes of utmost importance to show that the factors are distinct from each other. the discriminant validity assessment depends on the ave values and the matrix that indicates the square root of ave values for the constructs. table iii and table iv shows that the square root of ave values for all the constructs are more significant than the interconstruct correlations, which lend adequate support for the discriminant validity. table 3. discriminant validity for organized market channel choice constructs 1 2 3 4 5 6 7 8 9 10 11 am 0.723 mk 0.617 0.922 gap 0.376 -0.010 0.805 ss 0.517 0.652 -0.062 0.763 gae 0.286 0.017 0.554 -0.037 0.784 pp 0.142 0.000 0.299 -0.032 0.507 0.732 sf 0.193 0.047 0.439 -0.053 0.499 0.676 0.745 mi 0.129 0.104 -0.068 0.048 -0.014 -0.041 -0.029 0.724 rtf 0.298 0.019 0.567 -0.029 0.564 0.433 0.488 -0.110 0.825 omc 0.079 -0.014 -0.025 -0.013 0.011 -0.029 -0.030 0.564 -0.090 0.773 mtf 0.276 0.036 0.504 0.031 0.615 0.449 0.466 0.008 0.500 0.040 0.813 source: author's calculation. table 4. discriminant validity for unorganized market channel choice constructs 1 2 3 4 5 6 7 8 9 10 11 am 0.780 mk 0.009 0.921 gap -0.030 -0.010 0.805 ss -0.006 0.652 -0.062 0.763 gae -0.013 0.017 0.554 -0.037 0.785 pp -0.009 0.004 0.306 -0.027 0.508 0.737 sf -0.018 0.047 0.440 -0.053 0.499 0.668 0.745 mi 0.555 0.100 -0.067 0.046 -0.013 -0.042 -0.027 0.724 rtf -0.082 0.019 0.567 -0.029 0.565 0.434 0.488 -0.110 0.825 omc 0.779 0.024 -0.037 0.045 0.019 0.025 -0.020 0.599 -0.107 0.789 mtf 0.082 0.619 0.383 0.516 0.281 0.146 0.188 0.126 0.299 0.101 0.716 source: author's calculation. after the convergent and discriminant validity was established, the measurement model fit was assessed. the measurement model for factors affecting organized market channel choice http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 affirms adequate model fit with χ2/df=2.398, gfi= .856, agfi=0.834, cfi=0.928, nfi=0.883, srmr=0.0420, and rmsea=0.047. further, the measurement model for factors affecting unorganized market channel choice affirms adequate model fit with χ2/df=2.374, gfi= .857, agfi=0.836, cfi=0.930, nfi=0.885, srmr=0.0424, and rmsea=0.047 respectively, therefore, indicating the uni-dimensionality of factor model. model-fit indices of the measurement model considerably fall within the recommended level, evidencing its appropriateness and robustness. 4.5. structural model evaluation and hypothesis-testing results a structural equation modelling procedure was carried out to examine and validate the impact of the potent antecedents of organized market channel choice. the predictive power of individual antecedents was analyzed using a combination of structural models testing the direct relationships. the structural indices show a satisfactory degree of model fitness to data against the combination of fitness parameters such as χ2, gfi, agfi, cfi, nfi, srmr etc. the structural model for factors affecting organized market channel choice affirms adequate model fit with χ2/df=2.442, gfi= .853, agfi=0.832, cfi=0.926, nfi=0.881, srmr=0.0427, and rmsea=0.048. additionally, the structural model for factors affecting unorganized market channel choice shows a satisfactory model fit with χ2/df=2.470, gfi= .853, agfi=0.832, cfi=0.925, nfi=0.880, srmr=0.0435, and rmsea=0.049. hence, the goodness-of-fit indices for the structural model provide empirical support that the model fits the data well. figure 4.1 and 4.2 shows the structural model depicting the hypotheses, while table v and table vi exhibits the test results for organized market channel choice and unorganized market channel choice, respectively. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 figure 3. structural model for organized market source: own elaboration. table 5. hypothesis-testing results (organized market channel choice) structural linkage std.beta estimate standard error significance decision h1: am→ fmc 2.720 1.312 0.038* supported h2: mk→fmc 6.518 1.414 0.000* supported h3: gap→fmc 3.698 1.050 0.000* supported h4: ss→ fmc 1.454 1.020 0.154 supported h5: gae→ fmc 2.076 1.022 0.042* supported h6: pp→ fmc -1.255 0.944 0.183 supported h7: sf→ fmc 1.111 0.965 0.250 unsupported h8: mi→ fmc 2.917 0.954 0.002* unsupported h9: rtf→ fmc 2.511 1.007 0.013* supported h10:mtf→ fmc 3.417 1.045 0.001* unsupported source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 figure 4. structural model for unorganized market source: own elaboration. table 6. hypothesis-testing results (organized market channel choice) structural linkage std.beta estimate standard error significance decision h1: am→ ifmc 2.723 1.152 0.018* supported h2: mk→ifmc 3.397 1.214 0.005* unsupported h3: gap→ifmc 1.674 0.749 0.025* unsupported h4: ss → ifmc 0.895 0.816 0.273 unsupported h5: gae→ ifmc 0.130 0.806 0.872 supported h6: pp→ ifmc -0.828 0.727 0.254 supported h7: sf→ ifmc -0.193 0.747 0.797 unsupported h8: mi→ ifmc 1.360 0715 0.050* unsupported h9: rtf→ ifmc 1.022 0.801 0.202 supported h10:mtf→ ifmc 1.557 0.823 0.058 unsupported source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 the covariance-based structural equation modelling (cb-sem) results identify the prominent factors that affect the market choice decision of the farmers in the state of odisha. the hypothesis testing results of organized and unorganized market choices are presented in table v and table vi, respectively. findings highlight several factors that significantly influence farmers' decisions regarding selecting effective markets to sell their produce. out of ten identified antecedents, seven factors substantially impact the farmers' decision-making criteria for selecting organized market choice at p<0.05. further, four out of ten factors affecting unorganized market choice significantly affect (p<0.05) farmers' decision to opt for a cluttered market. market knowledge has emerged as a crucial factor for organized and unorganized market channel choice, as the significant unorganized market choice at the significance level of p<0.005 and for unorganized market choice at the p<0.000 level. a plausible reason for such findings can be that proper market knowledge like pricing supply and demand to the farmers can educate them about the market trends. this can further enhance their confidence in the market operations, thereby providing them opportunities to either select the organized or unorganized market to sell their products. value addition by the farmers to their products is also found to be significant in both organized and unorganized market choices at the significance level of p<0.000 and p<0.025, respectively. consist value addition practices like grading, sorting and standardizing enhance product quality, further providing avenues for farmers to participate in organized and unorganized markets. assured market positively influences organized and unorganized market choice at p<0.05. finding implies that if the farmers are assured about the customers and market demand for their produce, their likelihood of participating in both markets increases. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 as hypothesized in h8, the availability of efficient market infrastructure positively impacts the farmers' choice of a different form of market. the present study suggests that a reasonable market infrastructure is a prerequisite to selling agricultural produce swiftly in both organized and unorganized market settings. the statistically significant relationship among constructs reveals that an overall improved market infrastructure like warehousing facilities, cold storage, and efficient channel members could facilitate farmers in realizing more profits by minimizing the crop losses arising due to the perishability of the produce. the impact of road transport facilities is statistically significant in organized market choice, thereby supporting hypothesis 9 for the methodical market choice model. such a finding indicates that the farmers could engage in organized market settings far off their production centre only if they get adequate road transport facilities. good road conditions can minimize the farmers' time, cost, and effort to reach the market. also, it will reduce spoilage of the products, which generally occurs due to loss in transit. on the contrary, the relationship between good road transport facilities and unorganized market choice is unsupported. the plausible reason for such finding is that messy markets are situated nearby the production point of the produce. thus, farmers often don't require to travel to distant places to sell their farm products. therefore, improved road transport facility is not crucial for farmers when selecting unorganized markets. the impact of own transport on organized market choice is found statistically significant. this positive relationship suggests that farmers' vehicles can facilitate the free, timely, and cost-effective movement of the produce from the agricultural field to the marketplace. as owning a car reduces the time taken to reach the organized market, it reduces the spoilage of vegetables due to their perishability. in contrast, the relationship between own http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 transport and unorganized market choice stands insignificant. farmers do not have to travel far to sell their produce because the unorganized market is located near the farm area. therefore, they do not require owning a vehicle as they can easily reach the market with a bicycle or bullock cart. hence, own transport does not act as a driver for the cultivators to select unorganized markets. 5. conclusion and implications to improve the vegetable sector as a whole, we need to work on every aspect of the business, from planting and harvesting to advertising and shipping (tilman 2001, khanal and shrestha 2019; chalise et al. 2017). there is real potential for odisha's vegetable growers to influence economic growth through their contributions to rural development, poverty reduction, and income inequality. many flaws in the system prevented each farmer from realising his or her full potential. in order to address issues and boost market efficiency, this research looked into several facets of vegetable marketing. according to the results of the research, it has become necessary to overcome the challenge of recognising marketing information and issues. issues including poor access to potential markets, cheap prices for the business, severe driving conditions, and a lack of communication are explored. as a corollary, the low levels of literacy among farmers make it difficult for them to access the plethora of data they would need to effectively address the issues at hand. vegetables are problematic to market and distribute due to their rapid loss of freshness and usefulness after harvest, in addition to the difficulty inherent in their production. it is also worth noting that farmers now have less farmable land, fewer sales outlets, and lower product prices. as a result, it is crucial that market mechanisms and product distributions operate well and swiftly (singh 2019, devaraja 2000). a crucial microscopic function was found to contribute http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 to the expansion of odisha's vegetable industry. vegetable crop planting patterns are increasingly a major factor on the farm. vegetable farming has become a viable commercial enterprise as a result of increased crop yields brought about by the cultivation of multiple vegetable crops. the foregoing discussion leads us to the conclusion that the farmers' and producers' cut of the consumer price decreases as the number of market intermediaries rises, and that the situation shifts decisively in favour of profit when a manufacturer sells the product directly to consumers (deogharia 2017). new farmers have a tough time breaking into the market. to be successful, smallholder farmers not only require substantial assistance, but also substantial earnings. vegetable growers who want to make a profit should stay abreast of market developments and develop a strategy for targeting the most lucrative market niches (mohandoss and subramanian 1979, sood and singh1993). since marketing requires a certain level of textual fluency, interpretability, and logical delineation with the market dynamics, many farmers lack these talents yet excel at more conventional agricultural operations. it has been proposed that the government increase vegetable production through the implementation of sound policies and the funding of rigorous scientific study (azad et al. 2014). it is advised that substantial resources be allocated to enhancing marketing strategies, and that a corresponding infrastructure be put in place, so that the marketing and trading of vegetables may proceed more smoothly. the distribution and promotion of vegetables can undergo a revolutionary change if the public and commercial sectors work together (panda et al. 2012, gandhi and namboodiri 2002). even yet, a lot of pieces, like a well-functioning market, collaborative public-private research, a growth-minded approach in organisational leadership, and solid technological chops, are required to make this a reality. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 the primary purpose of this research was to identify and assess the micro and macro characteristics that influence the behaviour of odisha's farmers in the agricultural market. the identified micro and macro factors helps further theoretical development in understand the other factors which might influence farmers selling decisions. in addition, the poll looked at what prompted farmers to adopt market-driven choices that ended up being useful to their operations. a farmer's decisions to sell and target market selection are constants. a farmer's ability to successfully transport a product to market depends on several factors, not the least of which is the selection of an appropriate market channel. the research indicates that deciding on a successful marketing channel presents various difficulties for farmers. they have to settle for reduced profits from an unorganised market channel due to the short shelf life of their items. taking into account the foregoing concerns, the study has presented recommendations for enhancing channel alternatives and farmer participation to capitalise on favourable conditions in emerging and export markets. the survey's focus was on the myriad of microscopic elements that influenced the marketing decisions of farmers in odisha (panda et al. 2012). for farmers, the choices boil down to doing nothing, doing something organised, or doing something disorganised. this study has the potential to alter household dynamics by encouraging hitherto market-averse individuals to engage in informal market channels and, in some situations, gain access to the market in its entirety (mruthyunjaya abd subramanyam 1979, deogharia 2017). value addition, product positioning, access to excellent market infrastructure, and assured market spaces are all factors that push households to transition from the informal to the formal market (mohandoss and subramanian 1979, azad et al. 2014). farmers may benefit economically if they are encouraged to take a more active role in the market and adopt a more productive agricultural system. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 the research suggests setting up the right kinds of institutions to help farmers turn their disadvantages into advantages (sood and singh 1993, kiresur et al. 1989, gandhi and namboodiri 2022, negi and anand 2015). opportunities for farmers to earn more money can improve thanks to recent developments like contract farming, future contracts, cooperatives, and the establishment of groups. the accompanying risks of uncertainty will be mitigated, and solid ties between production and promotion will be established. that is why, to create longterm strategies that contribute to the growth of all parties involved in the vegetable sector, dishonesty in the dissemination of information about institutional, economic, and micro policies is an absolute must. 5.1. limitations of the study although the executed survey method is broad, it has few limitations. for example, at an intermediate level, data is not collected at once. the most pronounced restriction of the survey is that vegetable farmers barely account for their packaging systems and practices and rely on their memories to recollect the information about their products. the research is based on critical data; therefore, the limitations are applicable. an open-ended questionnaire would help get more insights, and sentiment analysis may be implemented for better and faster analysis (mishra and panda 2021). it excludes the arrival of a market for vegetables from outside the particular region. the study does not consider kitchen garden vegetable productions or the exchange program in this business. the study uses cross-sectional data, which is limited by the time frame. longitudinal research can help understand the real problems in detail by considering a longer time frame and repeated surveys from the same respondents. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 5.2. future research scope the cfa was used to determine which factors were the most essential. additional research could rank the factors using techniques such as the analytic hierarchy process (ahp) and fuzzy logic. additional research can be conducted by taking into account other influential aspects, such as economic and political considerations, which influence the channel decision that farmers make when marketing their veggies. it is possible that one of the outcomes of the forthcoming research will be a risk management plan that will assist farmers with vegetable production and marketing. it is possible to experiment with an integrative model, which will assist in lowering the level of risk and increasing the effectiveness of the marketing channel. acknowledgement the author is the awardee of the icssr impress project. this 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https://dx.doi.org/10.2139/ssrn.3551994. negi, saurav, and neeraj anand. 2015. “cold chain: a weak link in the fruits and vegetables supply chain in india.” iup journal of supply chain management 12(1):48. http://revistes.ub.edu/index.php/jesb http://dx.doi.org/10.5958/0974-0279.2017.00024.6 https://www.africabib.org/rec.php?rid=19166832x https://doi.org/10.1016/s0306-9192(02)00067-2 https://doi.org/10.30519/ahtr.784232 https://doi.org/10.9734/jeai/2017/37379 https://www.indianjournals.com/ijor.aspx?target=ijor:jcmsd&volume=14&issue=1&article=011 https://www.indianjournals.com/ijor.aspx?target=ijor:jcmsd&volume=14&issue=1&article=011 https://krishi.icar.gov.in/jspui/bitstream/123456789/806/1/new.pdf#page=120 http://indianculture.gov.in/reports-proceedings/report-national-commission-agriculture-1976-5 http://indianculture.gov.in/reports-proceedings/report-national-commission-agriculture-1976-5 https://dx.doi.org/10.2139/ssrn.3551994 volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 nunnally, bernstein, and i. r. bernstein. 1994. psychometric theory. new york: oxford university press. nunnally, jum c. 1978. “an overview of psychological measurement.” in clinical diagnosis of mental disorders: a handbook, edited bya b.b. wolman, 97–146. doi:10.1007/978-1-4684-2490-4_4. o’leary-kelly, scott w., and robert j. vokurka. 1998. “the empirical assessment of construct validity.” journal of operations management 16(4):387–405. doi:10.1016/s02726963(98)00020-5. panda, rajeev kumar and sreekumar. 2012. “marketing channel choice and marketing efficiency assessment in agribusiness.” journal of international food & agribusiness marketing 24(3):213–30. doi:10.1080/08974438.2012.691812. parthasarathy, p. b., v. rammohan, and p. k. hemachandra. 1988. “price behavior of vegetables in hyderabad markets.” indian 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https://isaeindia.org/wp-content/uploads/2020/11/07-article-sukhpal-singh.pdf volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 singla, naresh. 2017. “innovations in agricultural marketing in india: a case study of supermarket in punjab.” in financing agriculture value chains in india: challenges and opportunities, edited by gyanendra mani, p.k. joshi and m.v. ashok, 109–23. doi:10.1007/978-981-10-5957-5_6. somashekhar, i. c., j. k. raju, and h. patil. 2014. “agriculture supply chain management: a scenario in india.” research journal of social science and management 4(07):89–99. sood, a. k., and b. m. singh. 1993. “prevalence of bacterial wilt of solanaceous vegetables in the mid-hill subhumid zone of himachal pradesh, india.” in aciar proceedings, 358–358. australian centre for international agricultural research. subrahmanyam, k. v. 1982. “economics of production and marketing of important vegetable in karnataka.” the lal-baugh 27(2):7–16. https://agris.fao.org/agrissearch/search.do?recordid=in8203473. subrahmanyam, kv. n.d. “marketing of horticultural crops in india.” encyclopaedia of agricultural marketing 8: 1. sureshchandar, g. s., chandrasekharan rajendran, and r. n. anantharaman. 2002. “the relationship between service quality and customer satisfaction–a factor specific approach.” journal of services marketing 16(4):363-379. doi:10.1108/08876040210433248. tilman, david. 2001. “functional diversity.” encyclopedia of biodiversity 3 (1): 109–20. https://www.cedarcreek.umn.edu/sites/default/files/public/t1797.pdf yadava, thimmaraja g., and haradagere siddaramaiah jayanna. 2017. “a spoken query system for the agricultural commodity prices and weather information access in kannada language.” international journal of speech technology 20:635–44. doi:10.1007/s10772-017-9428-y. yankson, paul wk, alex barimah owusu, and stephen frimpong. 2016. “challenges and strategies for improving the agricultural marketing environment in developing countries: evidence from ghana.” journal of agricultural & food information 17(1):49–61. doi:10.1080/10496505.2015.1110030. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1007/978-981-10-5957-5_6 https://agris.fao.org/agris-search/search.do?recordid=in8203473 https://agris.fao.org/agris-search/search.do?recordid=in8203473 https://doi.org/10.1108/08876040210433248 https://doi.org/10.1007/s10772-017-9428-y https://doi.org/10.1080/10496505.2015.1110030 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 appendix questionnaires background information: name of respondent ……………………………………………………… name of village……………………………………………........................ name of gram panchayat & block………………………………………. contact phone number…………………………………………………… a. demographic details (fill in the relevant information or where required mark with an ✓) family information (name) a1. gender a2. age a3. marital status a4. education a5. income per month a6. any other occupation a7. household size (no. of family members)………………………………………… a8. assets information ………………………………………………………………. a.9. since how long have you been engaged in farming of vegetables? ……………… a.10 indicate the number of employees who engage in vegetable farming work in your firm full-time employees part-time employees unpaid family members others total a. 11. where do you get money (capital) to invest in vegetable farming? source amount per season borrowing from bank/cooperatives borrowing from friends borrowing from your family your own saving state aid/ farmers schemes other (such as:) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 b. land and farming b. 1. mention the type of vegetable farming you do and the amount of land in use? total land holding: vegetables (list the vegetables you grow) amount of land for a particular crop 1. 2. 3. 4. 5. b. 2. please tick the land tenure system on the land in use and how you acquired it? tick.. land tenure system: owned rent lease if you own the land, how did you acquire it? bought inherited other. specify b. 3. if you do not own land, are you satisfied with the arrangement on the land that you are using? explain ………………………………………………………………………………………………… …………………………………………………………………………………………… b. 4. where do you get the production inputs that you use? list input place you get it distance (km) reason for using the market b. 5. how do you cultivate your land? (tick as appropriate) own borrowed hired cost per harvesting tractor animal drawn manual other (specify) b. 6. indicate the average production inputs that you use per harvesting. input amount per acre cost per acre treated seeds fertilizer pesticides insecticides other (specify) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 b.9. how have you acquired the knowledge of farming for vegetables business? tick… experience education observation b. 10. have you attended any training programs to learn about farming practices? many few never b. 11. what specific training do you need at your farm? areas tick reason why you think it is important marketing related production related finance & budgeting related record keeping related others. please specify b. 12. do you keep any vegetable business related information? if yes. which type tick? tick sales related cost related market price related profit related others. specify b.13 mention the average profit per harvesting from the vegetable farming business. crop amount of land human labour cost other labour cost total cost of cultivation gross return in quantity http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 b.14 mention the total vegetables available as marketable surplus after various stages. vegetables total production in quintals quantity used for family and self consumption quantity given as wage payment, gift etc loss of produce during handling b.15 mention the average production cost, marketing cost and margin in vegetables. vegetables production cost in rs/ quintals marketing cost in rs./qtl marketing margin in rs/qtl b.16. what are the shares of other costs in marketing cost of the vegetables you grow with. vegetables farmer’s marketing cost per quintal transport/loading/ unloading commission total c. marketing related information rate the market related information based on the following questions how will you rate the overall market infrastructure? not satisfactory satisfactory ok good excellent how will you rate the storage facility provided at the market place to sell your produce? not satisfactory satisfactory ok good excellent how will you rate the cold storage facilities provided to you? not satisfactory satisfactory ok good excellent http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 how will you rate the dry storage facilities provided to you? not satisfactory satisfactory ok good excellent how is the grading or standardizing facilities in the market? not satisfactory satisfactory ok good excellent how will you rate the overall road quality? not satisfactory satisfactory ok good excellent do you feel safe while driving/ riding? very dangerous not safe ok safe very safe how will you rate the traffic control measures? not satisfactory satisfactory ok good excellent do you agree that the road reduces your transportations time? not at all sometimes its situational often every time how will you rate the transportation facilities provided to you? not satisfactory satisfactory ok good excellent how will you rate the road condition specially during rainy seasons? not satisfactory satisfactory ok good excellent do you get market information about your product in time? not at all sometimes its situational often every time do you get to know how much of your product will be in demand before going to sell it? not at all sometimes its situational often every time do you get to know where to sell it your product for better price and return? not at all sometimes its situational often every time do you get to know at what price to sell your product for more profit? not at all sometimes its situational often every time how will you rate the grading process of fresh vegetables? not satisfactory satisfactory ok good excellent how will you rate the sorting process of fresh vegetables? not satisfactory satisfactory ok good excellent http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 how will you rate the cutting process of fresh vegetables? not satisfactory satisfactory ok good excellent how will you rate the packing process of fresh vegetables? not satisfactory satisfactory ok good excellent how will you rate the overall processing and grading technology used on your produce? not satisfactory satisfactory ok good excellent how will you rate the training programs provided to you? not satisfactory satisfactory ok good excellent how far is the training workshop located from your home? very far far not that far queit near very near do you get information on the training programs organized by the government? not at all sometimes its situational often every time how do you evaluate yourself in the agricultural technology know-how? very poor poor ok good excellent how much has technology helped you in increasing your produce quality and quantity? not at all sometimes its situational often every time how would you rate the storage facilities provided in your region? not satisfactory satisfactory ok good excellent do storage facilities help you in increasing your vegetables lifespan? not at all sometimes its situational often every time how often do you participate in group activities? not at all sometimes its situational often every time how helpful is group participation? not at all sometimes its situational often every time do you prefer group participation to sell your products? not at all sometimes its situational often every time http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 does group participation help in getting better price for your produce? not at all sometimes its situational often every time how often do you get a guaranteed market to sell your products? not at all sometimes its situational often every time does guaranteed market offer you better price? not at all sometimes its situational often every time does guaranteed market helps in quick selling of your product? not at all sometimes its situational often every time does guaranteed market reduce extra cost such as transportation, storage etc.? not at all sometimes its situational often every time does guaranteed market help you in reducing wastage of produce? not at all sometimes its situational often every time does your own land help you in better produce? not at all sometimes its situational often every time does your own land help in getting you better price? not at all sometimes its situational often every time d. risk in vegetable business rankthe risk in vegetable business a scale of 1 to 5 ( 5most important/1-least imp.) 5 4 3 2 1 costly fuels (petrol/ diesel) lack of/ poor electricity supply water-scarcity/ inadequate water supply lack of irrigation facilities lack of new varieties/ hvy seeds timely unavailabilityfertilizer/pesticide/seed insufficient/shortage of seed poor/little education insufficient/lack of training lack of storage facilities (cold chain) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 high post-harvest losses lack of capital lack of farm credit/financial institution land shortages land fragmentation weak research and extension linkages inadequate/ unavailability labour family conflict & violence poor healthcare fallen underground water seasonality/ weather dependency insufficient rainfall/drought/delayed rainfall flood/high rainfall lack of canal/tube-wells deterioration of water quality infertile land /poor soil quality climate changes low yield or productivity high cost of production expensive inputs low quality seed damage by pests and disease lack of technical knowledge in production etc. high post-harvest losses lack of processing techniques infrastructural bottlenecks traditional methods of farming over-cultivation high perishability of horticultural produce low price for the products high marketing costs lack of proper pricing system lack of coordination among producers lack of marketing centres/ institutions exploitation by middlemen lack of transparency in marketing system high processing costs poor product handling& packaging lack of market information lack of marketing infrastructures lack of markets to absorb the production e. problems & issues in vegetable business rank the following issues in vegetable business in a scale1 to 5 (5-most imp/1-least imp) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 168-212, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.39830 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 e.1. production related: 5 4 3 2 1 lack of information regarding horticultural varieties and package of practices non-availability of manpower (mechanical or manual) non-availability of finance/credit non-availability of timely inputs (seeds, fertilizer, pesticides etc) low level of crop production non-availability of irrigation from government sources problems of insect, pests and diseases lack of synchronous maturity in horticultural crops problems of theft of produce e.2. marketing related: non-availability of cheap transportation lack of information regarding standardization and grading at grower level poor infrastructure at market place unfair deductions by marketing agents non-availability of storage facilities at village/producer level non-availability of market-related information regarding prices of produce & their trends at producer level too much bargaining regarding prices of produce e.3. suggest ways in which such problems/issues can be addressed! ………………………………………………………………………………………………… ……………………………………………………………………………………… …………………………………………………………………………………………… thank you http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 guadalupe calderón universidad nacional autónoma de méxico (méxico) pilar pérez instituto politécnico nacional (méxico) academic patents and entrepreneurial intention. to what extent are other knowledge transfer mechanisms affected in a mexican university? abstract this research aims to expand the explanations about the debate on academic entrepreneurship and other knowledge transfer mechanisms, to respond to what extent entrepreneurial intention affects the diffusion and dissemination of knowledge in a mexican university. the lack of indicators of commercial activity, leads us to propose the analysis of a pre-commercial stage of technology that we call entrepreneurial intention. after the literature review, we present a database of academic inventors in patents granted to the university, identifying patenting with an entrepreneurial intention, following lomas (1993) knowledge transfer taxonomy. data about publications and received citations by academic inventors is also considered for knowledge diffusion; as well as the supervision of end-of-degree projects in undergraduate and graduate studies; before and after the patent was granted, for knowledge dissemination. using a binomial model, we estimated two data sets, one for the period 1984-2000 and the second for 2001-2020. our findings reveal, an average increase of 60% in the number of patents obtained. we also found that the characteristics of the research group are significant in both models, but in the 2001-2020 period it is more important to integrate foreign inventors than patenting with firms, the dissemination of knowledge is more significant and has greater importance in the model. to respond to what extent entrepreneurial intention affects the diffusion and dissemination of knowledge, greater attention should be paid to the diffusion of knowledge since in both models the variable that represents publications after patenting is not significant. the explanation about the dissemination of knowledge improves substantially from one period to another. keywords: academic entrepreneurial intention; academic patenting; knowledge transfer; mexican university corresponding author: e-mail: mgcm@unam.mx received october 31, 2019 accepted february 12, 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:mgcm@unam.mx http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 1. introduction the role of the entrepreneur has changed with the capitalist system. the success of the entrepreneur is increasingly based on knowledge value. in this context universities have an important role as support agents. this new role of universities is analyzed from different approaches, one of these approaches is the third mission. the third mission describes promotion of economic development, from this approach university requires business management, marketing of the research results, either as patents, r&d contracts and the creation of spin offs (guerrero, cunningham and urbano 2015; clark 1998; etzkowitz and leydesdorff 2000; smilor 1990). perkman et al. (2013), consider that the third mission involves rethinking universities’ traditional roles. other approaches identify these functions with the capitalist system, so they call attention to academic capitalism (rhoades and slaughter 2004). the bayh-dole act allowed american universities and their researchers to market the knowledge created with public resources. this was a fundamental moment for universities, which took an active role in technology transfer, giving rise to the entrepreneurial university (baldini 2006). university patents have gained attention, both from academics, and from policy makers to promote innovation (baldini 2006; verspagen 2006). in latin america, since the 1990s the demands and pressures on universities grew, including moving towards an entrepreneurial university model, integrating social, market and political demands. a latin american version of the entrepreneurial university occurred characterized by: a) the growing internal differentiation, b) postgraduate growth, c) mechanisms to formalize the relationships between the university and the market, d) allocation of incentives and the growth of postgraduate programs in response to the new evaluation mechanisms implemented http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 for the expenditure distribution, and e) interaction with the market as a new source of income. in this context, the figure of the academic entrepreneur, describes the research professor who also develops relations and networks with the market, obtaining funds and taking active participation in technology transfer (acosta 2000; díaz 2019). in mexico, modernization processes in the 1990s were followed by the establishment of public policies to encourage universities to obtain resources from the commercialization of diverse activities. since then, public resources in universities were allocated through the compliance of governmental constraints, identified in the modernizing programs (díaz 2019). mexican universities lately entered the process of incorporating entrepreneurship into their institutional purposes, although entrepreneurship is not part of the country's culture first actions arose in the mid-eighties (pérez and varela 2019). continuous modifications in public policy and management have limited the creation of indicators of commercial activities in public universities in mexico. making it difficult to design adequate models for this context, we use proxy indicators of entrepreneurial intention in a precommercial stage of technology, and a knowledge transfer taxonomy. lomas (1993) provides a useful taxonomy of knowledge transfer that consists of diffusion, dissemination, and implementation. this research aims to expand the explanations about the debate on academic entrepreneurship and other knowledge transfer mechanisms to respond to what extent entrepreneurial intention affects the diffusion and dissemination of knowledge in a mexican university. for bennett and gabriel (1999), useful knowledge results when the recipient of the information understands, translates and applies it to specific tasks. knowledge is perishable, but when http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 properly harnessed it can be used in multiple tasks. the activities of appropriation, storage, dissemination and use of knowledge are at the center of knowledge management. the following is the measurement to make the knowledge visible, codify it and process it, to share it with the members of the organization. as initial assumption, we consider that during the last twenty years the universities have generated responses to balance the demands from government and society. even though the professors' mission could be oriented towards the diffusion and dissemination of knowledge, there is evidence that identifies their participation in knowledge implementation activities such as patenting. since knowledge implementation is an active process that involves systematic efforts to encourage adoption of the research findings by identifying and overcoming barriers to their use (gagnon 2013; lomas 1993), can be related to an entrepreneurial intention. after this introduction, the literature review is presented. in the methods section we explain how the database was integrated and using a binomial model, we estimated two data sets, one for the period 1984-2000 and the second for 2001-2020. the comparison of both time series allows to observe changes in protection and diffusion and dissemination of knowledge. each time series represents the moment before and after the mentioned modernization processes followed by the establishment of public policies in the country. these changes permeated inside the universities modifying their internal regulations. 2. theoretical framework 2.1. debate on academic entrepreneurship an entrepreneurial university is characterized by: a) the commercialization of knowledge, which would become the basis of economic and social development; b) interaction with firms http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 and public sector; c) university independence; d) creation of hybrid administrative structures that incorporate business sector practices, e) reflexive process, to continuously adapt to changes in its relations with the government and business; f) diversity in its sources of financing; g) autonomy to promote systematic links with the market; h) promotion promotion to adopt a culture oriented towards entrepreneurship (clark 1998; etzkowitz and leydesdorff 2000). several studies have documented the process by which the university generates and transfer knowledge and how new innovative firms are created from knowledge (powell, kopu and smith-doerr 1996, mowery 2005, bresnahan, gambardella and saxenian 2001). from the perspective of academic capitalism, slaughter and rhoades (2004) highlight a link with the market, rational, structured and promoted by universities. under this proposal, universities produce, and the market commercializes, maintaining the process of wealth creation (slaughter and leslie 1997). academic capitalism affects the dynamics of university through the policy design. policy makers promote, fund and support commercialization of products and activities generated in the organization, the incorporation of entrepreneurship culture and promote economic relations with industry. patent licensing and sale, and the creation of spin off companies are some of the most valued activities (slaughter and rhoades 2004). literature also identifies positions against these new functions in universities, sánchezbarrioluengo (2014, 1760) reflects to what extent universities can effectively perform all the functions that society demands. in particular, whether it is possible to incorporate social and business commitment, in response to the social changes that demand that knowledge, created in the university may be productive (sánchez-barrioluengo 2014, 1765). author’s studies on innovation policies define for universities a central role as producers of knowledge applied to the creation of firms. however, conclude that there is no compatibility between the missions of http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 the university and that universities are not able to meet the expectations of society simultaneously (sánchez-barrioluengo 2014, 1770). vence (2010, 80) states that, in developing countries, firms do not frequently value universities’ research results, because their requirements are more specific. according to this author another conflict between industry and universities’ rationale, is in the knowledge diffusion and dissemination. academic sector motivates the diffusion of research findings, even in early stages, and knowledge dissemination through the academic and research training of human resources. in contrasts with industrial protection strategies, an essential condition for private appropriation of knowledge. academic entrepreneurship, university-business relationship, academic capitalism and inclusive innovation are fields of research that address this problem based on a specific ideological position. although we do not ignore this critical part of academic entrepreneurship, we consider important to determine the extent to which mexican universities have redirected their efforts to academic entrepreneurship and test its effect on other knowledge transfer mechanisms. 2.2. academic patents and entrepreneurial intention research on entrepreneurial universities has increased over the years, expanding to interconnected topics, such as entrepreneurship education or academic entrepreneurship (riviezzo et al. 2019, 232; fayolle and redford 2014). academic entrepreneurship refers to any activity that goes beyond the traditional academic roles of research and teaching and implies innovative activities (abreu and grinevich 2013). five types of academic entrepreneurship can be distinguished: the direct commercial involvement of universities and laboratories, the entry http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 into large-scale capital intensive ‘big science’ by creating and funding large research projects and laboratories, the promotion of supplemental income through consulting, the mobilization of industry support for university science, and patenting and licensing (dalmarco, hulsink and bloisa 2018, 101; slaughter and leslie, 1997; rhoades and slaughter 2004). perkman et al. (2013) define that industry academy collaboration refers mainly to collaborative research, by contract, consulting, informal activities and networking with practitioners. these activities are usually considered informal knowledge transfer mechanisms. on the other hand, in the protection of intellectual property, patenting implies disposition to exploitation, commercialization, licensing, and profiting. a latent hypothesis is that both activities can be part of a continuum where collaboration could be a first stage of formal commercialization. a common feature is that these activities are developed at academics’ decision. patenting and licensing have not registered significant changes in mexico. either nationally or abroad, there is no evidence of the incorporation of mexican universities in the international knowledge markets (aboites and soria 2008). under this set of approximations, we consider remarkable the effort made by professors and researchers to get involved in the task of patenting abroad. patenting has demonstrated to foster entrepreneurial activities. stronger intellectual property rights protection protection increases the returns to innovation via a decrease in the risk of unauthorized expropriation (gans and stern 2003), which may act to encourage entrepreneurial entry (hsu, roberts and eesley 1991). in mexico, the influence of other regions generated different initiatives to impulse academic entrepreneurship. two phases can be identified. first, in the early nineties, some initiatives to link academia — high educational institutions (hei) and public research centers (prc) — http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 and firms were characterized by the creation of a few business incubators. efforts were isolated in academia. an incubator program of technology based enterprises (tbe) was launched in 1992 and interrupted in 1997 due to the lack of skills to support the new firms, as well as rigidity in management and financing mechanisms. second, starting in 2001, public policies aimed for promoting technological transfer and innovation from a systemic approach. however, in mexico, science and technology programs did not have an explicit orientation to the development of new tbe (almeida, terra and pérez-hernández 2011). the study of entrepreneurial intention is a rapidly evolving field that still requires further research (fayolle and liñán, 2014; liñán and fayolle, 2015). to advance the understanding on entrepreneurial intention it is necessary to focus on its characteristics (bell 2019). in the industry the concept based on risk propensity, innovation, and proactiveness has been extensively researched (covin and slevin 1989) including other variables such as competitive aggressiveness and autonomy (lumpkin and dess 1996). under perkman et al. (2013) definitions about the protection of intellectual property, patenting implies the disposition to exploitation, commercialization, licensing, and profiting. in this context, we lack from commercial activity indicators to model academic entrepreneurship, therefore we have identified three categories in which academic researchers add value to pre-commercial technology (bjørgum and sørheim 2014). ‘characteristics of research group’ is a broad category comprising value-added activities such as collaboration with firms, with other universities and international collaboration which literature review found central (acosta et al. 2020, 1004; olmos-peñuela, castro-martínez and d’este 2014; hormiga et al. 2017; barletta et al. 2017), and to some extent the accumulated number of patents granted to the researcher as an indicator of their previous experience http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 (rasmussen and borch 2010). according to fini and toschi (2016) skills and abilities are also predictors of entrepreneurial behaviors because they provide individuals with a better evaluation of the focal behavior, encouraging individual action. for organizations like universities prior knowledge has been conceptualized as determinant of entrepreneurial intention, since it allows recognizing opportunities and triggers the entrepreneurial process (fini and toschi 2016; shane 2000). the awareness of technical and managerial skills develops specific mindsets, prompting the ability to engage in value creation (baum, locke and smith 2001; fini and toschi 2016). furthermore, ‘knowledge diffusion’ category is relevant when evaluating knowledge as valueadded asset to technology and it is especially important in a pre-commercial industry with long and complex technology development processes (bjørgum & sørheim 2014). and finally the category ‘knowledge dissemination’ comprises value-added activities such as the production and use of knowledge in human resources training (hernández and díaz 2007), this indicator was constructed with the number of degree final projects of pre-grade and postgraduate students supervised by patenting researchers. at the individual level dohse and walter (2012), found that role models facilitating the transfer of tacit knowledge and the expectation that strong ties, will provide know-how and know-who positively impact entrepreneurial intentions. 2.3. characteristics of research groups unlike most extant analyzes that focus on the university level, we follow the latest strand of literature that consider the factors affecting the production of university outputs at the level of researchers and groups (acosta et al. 2020, 1004; olmos-peñuela, castro-martínez and d’este 2014; hormiga et al. 2017; barletta et al. 2017). individuals’ attributes are conditioned by the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 immediate university context. and the establishment of mechanisms to balance academic and commercial interests, and the capabilities to integrate new resources, show a dependence on previous experiences (rasmussen and borch 2010). in addition to patenting, we considered data about the characteristics of the research groups, including international participation or collaboration with firms, with other universities in mexico or with other inventors in the university and the accumulated number of patents granted to the researcher as an indicator of their previous experience. academic researchers do not only produce and implement new knowledge, but their performance is also valued in other activities of knowledge diffusion, and knowledge dissemination. 2.4. knowledge diffusion diffusion can be defined as those efforts that are passive and largely unplanned, uncontrolled, horizontal or mediated by peers. publishing in peer-reviewed journals and presenting research results at an academic conference are examples of this type of dissemination (gagnon 2013; lomas 1993). in this category the responsibility is on the potential adopter to seek out the information. d’este and perkmann (2011) suggest that: a) commercialization has positive effects on productivity, inventors publish more than academics who do not patent, in collaborative research there is not enough evidence; b) university industry collaboration or marketing activities shifts basic research toward applied research; c) links with industry restrict open communication of research findings with peers (particularly in life sciences) although there is limited evidence; d) there is an increase in the prestige and reputation of academics who carry out these activities and e) there is no evidence of the impact on teaching. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 the knowledge diffusion is a fundamental activity for researchers and universities’ mission. we consider important, especially in the case of mexico due to the statements presented above, to know to what extent these activities can be affected by professors’ entrepreneurial intention, at a pre-commercial stage. data were extracted from the inventors' publications and the citations received before and after patenting. 2.5. knowledge dissemination dissemination of knowledge focuses primarily on communicating research results by targeting and tailoring the findings and the message to reach others than academics and researchers. more active dissemination approaches include linking researchers and knowledge users through different mechanisms (gagnon 2013; lomas 1993). in mexico, incentive and promotion systems consider the training of human resources through teaching and supervision of degree final projects. this activity is mandatory and highly valued. being a main demand for public universities, human resources training may be a potentially effective mechanism for knowledge dissemination and application. even though it is not its main purpose, this activity can connect people who might not otherwise have an opportunity to interact, enable dialog, stimulate learning, and capture and diffuse knowledge. this interaction of researchers and professors with students and training researchers, may result in communities of practice, knowledge networks, and soft networks. an indicator used to identify the production and use of knowledge in human resources training is the degree final projects supervision (hernández and díaz 2007), this indicator has also been used to explain the underlying concept of research utilization in the social sector (huberman 1987). undergraduate and graduate end-of-degree projects supervised by academic researchers http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 were included in database as an indicator for the dissemination of knowledge. this indicator is measured before and after the granted patent. 3. methods some authors emphasize the importance of the university’s location in places of high economic dynamism in the country, as well as the performance of research activities in scientific fields that are important in the industry (tijssen 2006). we study the case of universidad nacional autónoma de méxico (unam), due to the availability of information, and its scientific and technological capabilities. according to the data of execum (2020), in mexico ten heis hold the 49.3% of academic patents, 26% of this granted to unam (figure 1). the first article of university’s ley orgánica establishes purposes of unam. these are to provide higher education to train professionals, researchers, university professors and technicians useful to society; organize and perform research, mainly on national conditions and problems, and extend the benefits of culture as widely as possible. there are different orientations in the development of these three substantive activities, schools and faculties academic activities are oriented, but not limited, towards teaching and centers and institutes that are mainly oriented to research activities. the present analysis focuses on schools and faculties (last are the university schools that offer postgraduate studies). incentives and promotion mechanisms are the same for professors and researchers, so it is important to investigate to what extent the entrepreneurial intention can affect other substantive missions identified in this research as diffusion and dissemination of knowledge. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 figure 1. top 10 hei and prc in academic patents in mexico (accumulated to 2018) source: authors with data of execum (2020). to build the data base a search for patents granted to unam in mexico and in other countries was conducted. we used espacenet, — platform of the european patent office (epo) — because it detects the greatest number of results as it contains documents in patent offices around the world including the american patent office (uspto). this search was completed with data from siga (platform of the mexican institute of industrial property, impi). our database contains all patents granted from 1984 to 2020. we completed the database with professor’s publications, cites, and supervised end-of-degree projects in undergraduate and graduate studies, before and after the patent granted. variables were grouped into three categories: a) characteristics of research groups, b) knowledge diffusion, and c) knowledge dissemination mechanisms (table 1). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 table 1. variables variable description pat value 1 represents granted patents abroad and 0 granted patents in mexico* patnum number of patents granted to the inventor characteristics of research group intlcolab international collaboration. dichotomous variable, value 1 represents participation of foreign inventors instcolab institutional collaboration. dichotomous variable, value 1 represents participation of more than one inventor from unam extacadcolab collaboration with external academic institutions. dichotomous variable, value 1 represents co-patenting with inventors from another university firmcolab collaboration with firms. dichotomous variable, value of 1 indicates co-patenting with firms knowledge diffusion prevpublic average of publications from the year of the first document in the database and up to the year of patent application prevcites average citations received from the year of the first document in the database and up to the year of patent application postpublic average of publications from the following year to the patent application up to 2020 postcites average citations received from the following year to the patent application up to 2020 knowledge dissemination prevundgrad average of under degree projects supervised, from the year of the first entry in the database until the year of patent application prevmast average of master end-of-degree projects supervised, from the year of the first entry in the database until the year of patent application prevphd average of doctoral end-of-degree projects supervised, from the year of the first entry in the database until the year of patent application postundgrad average of under degree projects supervised, from the following year to the patent application up to 2020 postmast average of master end-of-degree projects supervised, from the following year to the patent application up to 2020 postphd average of doctoral end-of-degree projects supervised, from the following year to the patent application up to 2020 sources: espacenet patent database, siga patent register, scopus and tesiunam. * applicants patent first at the impi mexican patent office and then at other countries. the empirical model specification is like e.g., lach and shankerman 2008; caldera and debande 2010 and calderón-martínez and garcía-quevedo, 2013. the following equation was estimated: http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 pat = β0 + β1 rcharact + β2 kdiff + β3 kdissem + at + εit (1) where pat are patents granted where the inventors are professors from schools or faculties at unam. explanatory variables are rcharact an indicator that explains research groups characteristics, kdiff is an indicator linked to the diffusion of knowledge through scientific articles and citations and kdissem controls the dissemination of knowledge measured by the supervision of undergraduate and graduate end-of-degree projects before and after patenting. the estimation also includes number of patents granted to the inventor (patnum) as a weighting variable. the following aspects were considered for the model estimation (1). first, patents are counting data, so poisson or negative binomial models, which consider endogeneity, are preferable to linear regression models estimated by ordinary least squares (cameron and trivedi, 1998). however, poisson models are very restrictive when assuming equality between mean and variance. consequently, negative binomial models are an appropriate alternative to poisson models and allow the existence of over dispersion. as in the aforementioned procedure, a relevant problem is the possible endogeneity mainly due to the existence of omitted variables such as, for example, scientific specialization or experience in commercial technology transfer activities. 4. results and discussions as our hypothesis consider that during the last twenty years the unam has generated responses to balance the demands from the government and society, we analyzed two different sets of time 1984-2000 and 2001-2020. the comparison of both time series allows to observe changes in protection and diffusion and dissemination of knowledge. each time series represents the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 moment before and after the mentioned modernization processes followed by the establishment of public policies in the country. these changes, of course, also permeated inside the universities, modifying their internal regulations. among professors who have patented, the average number of patents granted increased from 2.33 to 3.66 during the analyzed periods of time (figure 2). figure 2. average of patents granted to professors at schools and faculties in unam source: authors. the variable that measures the number of patents granted to the inventor is included, since it is highly significant and improves the estimation. results in table 2, show during the first analyzed period 1984-2000, that the characteristics of the research group are significant for patenting abroad. institutional collaboration, external academic collaboration and firm collaboration mainly, this variable shows that academic inventors in schools and faculties that do not collaborate with firms are nine times less likely to patent abroad. however, during the following period 2001-2020, this variable is not significant for the model. this may be relevant in the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 sense that professors could have generated the skills to patent abroad independently of a relationship with a firm. table 2. model estimations variable 1984-2000* 2001-2020** exp(b) sig. exp(b) sig. intlcolab 2.053 .270 3.949 .001 instcolab .291 .001 .441 .001 extacadcolab 6.044 .047 .278 .024 firmcolab 10.129 .019 1.026 .928 prevpublic .156 .009 .489 .083 prevcites .920 .366 1.008 .682 postpublic 1.755 .148 .996 .974 postcites 1.026 .047 1.010 .051 prevundgrad .114 .035 .824 .376 prevmast 5.699 .196 .213 0.78 prevphd .911 .977 6.668 .003 postundgrad .630 .609 .639 .015 postmast 10.337 .138 2.433 .010 postphd .002 .047 .058 .058 note: model fitness measures * chi squared 58.67% ** chi squared 63.59%. we consider that this finding is an important reflection for entrepreneurial intention, because in this model the variable that measures collaboration with foreign inventors has become significant, showing that professors that do not collaborate with foreign inventors are almost three times less likely to patent abroad. this may represent the preference for the establishment of agreements with persons than the formalization of relationships with firms. our data does not allow to know if foreign inventors belong to a specific organization. but this could be a result of the continuous changes in regulation over the last thirty years in mexico. this is an opportunity research area for universities and for decision makers at the governmental level. regarding the variables that represent the diffusion of knowledge, similar results are observed in both periods of time. publications before patenting are significant, as well as citations received after patenting. this must be considered since it could provide information about the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 debate between entrepreneurial activity and the diffusion of knowledge. variables that measure professors’ publications after the patent granted are less significant in the period 2001-2020. we observe a greater significance of variables related to knowledge dissemination in the period 2001-2020. supervision of doctoral end-of-degree projects before patenting, and the supervision of end-of-degree projects in both undergraduate and graduate after patenting are significant. conclusions as in previous research, we report a growing demand for universities, not only in mexico, to participate in knowledge transfer activities. regulatory changes have been continuous in the last thirty years in mexico. some of these changes were intended to promote greater participation between universities and firms for knowledge commercialization, to impulse entrepreneurship in universities. our study shows greater significance in the collaboration between persons, as well as between researchers from the university and with other academic institutions in the country. in a pre-commercial stage of technology entrepreneurial intention is observed in the active process that involves systematic efforts to encourage adoption of the research findings by identifying and overcoming barriers to their use, as seen in the group of variables that represents the characteristics of the research group. the importance of each variable changes in the model in each time frame. research results lead to open discussion about the debate on academic entrepreneurship and other knowledge transfer mechanisms to respond to what extent entrepreneurial intention affects the diffusion and dissemination of knowledge in a mexican university. this work has http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 focused on the analysis of academic patents that, although it is still a rare way of interaction, have experienced a notable increase in the last two decades. variables that measure professors’ publications after patenting are less significant in the period 2001-2020. this must be considered since it could provide information about the debate between entrepreneurial activity and the diffusion of knowledge. we observe a greater significance of variables related to knowledge dissemination in the period 2001-2020. supervision of doctoral end-of-degree projects before patenting, and the supervision of end-ofdegree degree projects in both undergraduate and graduate degrees after patenting are significant for the model. results are relevant since they report advances in the relationship between professors’ entrepreneurial intention and the dissemination of knowledge. according to the results obtained, we consider necessary to obtain stronger evidence in order to generalize research findings, so it is necessary to include unam’s institutes and research centers granted patents. as seen on figure 1, this institution can be highly representative of the patents granted to universities in mexico. as an initial assumption, we consider that during the last twenty years universities have generated responses to balance the demands from the government and society. in this study we consider patents in schools and faculties, because professors' mission could be oriented towards the diffusion and dissemination of knowledge. lack from commercial activity indicators to model academic entrepreneurship led us to consider a pre-commercial patent stage. under definitions about the protection of intellectual property, patenting implies the disposition to exploitation, commercialization, licensing, and profiting. literature review and http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 characteristics of research groups show evidence that identifies professors’ participation in knowledge implementation activities such as patenting, motivated by an entrepreneurial intention. since knowledge implementation is an active process that involves systematic efforts to encourage adoption of the research findings by identifying and overcoming barriers to their use. to respond to what extent entrepreneurial intention affects the diffusion and dissemination of knowledge, greater attention should be paid to the diffusion of knowledge since in both models the variable that represents publications after patenting is not significant. the explanation about the dissemination of knowledge improves substantially from one period to another. probably because it is a closer stage to knowledge implementation or because the supervision of final degree projects and the training of human resources are highly valued in incentive and promotion systems. we consider that significance of supervised end-of-degree graduate projects may also be explained by the relationship between the orientation towards applied research. while diffusion is usually considered as basic science. our estimation can be improved by including data from centers and institutes that, due to their research orientation, can expand the explanation of the debate between the different missions of the public university in mexico. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 126-150, july-december 2021 doi.org/10.1344/jesb2021.1.j094 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 references aboites, jaime and manuel soria. 2008. economía del conocimiento y propiedad intelectual. lecciones para la economía mexicana. mexico city: uam xochimilco y siglo xxi editores. abreu, maría and vadim grinevich. 2013. “the nature of academic entrepreneurship in the uk: widening the focus on entrepreneurial activities.” research policy 42: 408-22. doi: 10.1016/j.respol.2012.10.005. acosta, adrián. 2000. “bajo el cielo ¿protector? de la globalización. poder y políticas en la educación superior en américa latina.” perfiles latinoamericanos 9: 69-93. acosta, manuel, daniel 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del conocimiento y la empresa privada.” in construir el futuro de la universidad pública, coordinated by albert corominas y vera sacristan, 77-100. barcelona: icaria editoria. verspagen, bart. 2006. “university research, intellectual property rights and european innovation systems.” journal of economic surveys 20(4): 607-632. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1016/j.respol.2006.09.025 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 paloma fernández pérez jaume valls pasola university of barcelona (spain) evolutionary studies in business: a presentation of a new journal abstract the journal of evolutionary studies in business is a new open access journal led by an international interdisciplinary team of scholars located in eight institutions from three continents who wants to attract contributions that help shed light on the new questions, challenges, methodologies and realities, faced by businesses in an evolutionary perspective. the journal calls particularly for review essays that deal with new research topics about business, and provide useful overviews of the key ideas, scholars, and debates about important research topics concerning business and its environment. the strategic areas of interest for submissions from authors are: management challenges, entrepreneurship, science and business, creative industries, international business, business history, and latin american businesses. jesb will also publish articles about relevant online resources that contain information of interest to academic scholars and business practitioners. keywords: evolutionary perspectives; management challenges; entrepreneurship; science and business; creative industries; international business; business history; latin american businesses; online resources for business. corresponding author. e-mail: palomafernandez@ub.edu received 15 november 2015 accepted 22 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 key issues behind this new open access journal the academic publishing industry is moving in the direction of a dual market. on the one hand, we have an oligopolistic concentration of big publishers that are increasingly accumulating elite high impact factor authors and articles. on the other hand, we are witnessing the multiplication of online open access journals where quality factors beyond citations are difficult to homogenize as they differ in the diversity of their quality criteria. moreover, many of these journals are produced for free and others are extremely expensive, some are sponsored by institutions while others by unknown individuals. the journal of evolutionary studies in business is a free open access journal led by an editorial team of experts located in eight institutions from three different continents. the editors-in-chief and associate editors are well-known researchers with expertise in a diversity of fields related to business, and a shared willingness to prioritize the publication of high quality reviews and surveys that take into account dynamism and context in the analysis of business organizations, as well as the relationship between businesses and the environment. there are many quality academic journals that publish original research and compete at a global level in order to attract authors and citations and increase their impact factor indexes year by year in order to, in turn, increase their number of authors and citations and the level of influence they have among the globalized academic community. in the midst of this process, the question many researchers are increasingly asking themselves is: what for and why? professional and promotional reasons stand out for many as a powerful key to understanding the current pressures of ‘publish or perish’ academic life. one must not overlook the contextual environment of institutions, from the regional to the continental level, that provide volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 subsidies for academic jobs, promotions, and projects based on impact factor indexes as the almost standardized homogeneous global criteria of excellence in science. some researchers think this is not easily sustainable in the long run due to the current instability in the creation of academic jobs around the world and the bottleneck in access to high impact factor journals, as well as the relatively high prices many impose on authors in order to publish quickly in an open access way that facilitates increased citations and promotion. our most important goal, in this context, is to have an open access journal that imposes internationally accepted high-quality criteria with the chief aim of satisfying the increased demand for online high quality contributions about business from an evolutionary perspective. our long-term editorial strategy, from this volume onwards, will be in this regard to publish online peer-reviewed contributions, use standard international publishing criteria, and apply as soon as possible for an impact factor index that will mean additional benefits for authors and readers. a second contribution this journal will make to the current needs of academic researchers is to invest our efforts in giving new explicit added value to high quality reviews, overviews and surveys of existing research. this is not completely new since top academic journals in diverse areas studying business like the journal of management and business history or the international journal of management reviews are starting to pay attention through calls for reviews for special issues in their journals, thus acknowledging the need to have experts select and analyze relevant knowledge and research in areas of interest to the academic community. excellence and social impact in all scientific disciplines have often (in the last three decades) been measured and evaluated in peer-reviewed high impact factor journals by considering the quantity and quality of original research based on primary sources or new methodological volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 contributions. however, the internet has multiplied the number of journals that publish original research at such a speed that it is extremely and increasingly difficult to keep track of and be up-to-date on key contributions, key questions, and new fields of research. besides, since greek and roman times, the foundations of science have been based above all on the socratic search for quality in the kinds of questions and hypotheses scientists discuss among themselves and with others, not just in the accumulation of new original evidence. a good journal that focuses on excellent reviews can contribute, using schumpeterian terminology, to creative destruction in the combination of ideas and resources, helping to build new thinking and thus making room for new understandings of past events, innovative research, and new questions. in the age of mass flows of information online and the effects on increasing speed in the global network of brains, science requires, more than in the pre-internet past, not just accumulated new original pieces of research or new methodological contributions to add to the ones that already exist. it requires tools for synthesis that help prioritize key issues and key questions. a journal specialized in overviews of key research topics around business from a dynamic perspective can contribute to this major challenge faced by science and business today. it is for this reason that the editors of the journal of evolutionary studies in business firmly believe that today there is a very attractive market niche that is wide open for journals that use new technologies to publish excellent surveys on research that may appeal to diverse readers of different origins and interests. surveys are, therefore, the priority target of the journal of evolutionary studies in business since to our understanding they are a specialized type of text that prioritizes ideas and questions that can reach a global academic audience. our surveys will involve the work of expert authors that develop, in a clear and synthesized way, volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 thought-provoking overviews of relevant topics, highlighting the key questions, the key debates, and the key authors, suggesting further readings and new research for a scholarly audience, and guiding policymakers and practitioners involved in the business environment. thirdly, the journal of evolutionary studies in business contributes to the abundant supply of journals on business and management with its own original voice. it does so not just by using an open access online platform and providing high-quality overviews and theoretical insights about evolution in business. its originality lies, additionally, in the fact that it focuses on evolution, not just change. these are not exactly synonyms. that business is in constant movement is nothing new. but from an evolutionary perspective, change, rather than equilibrium achieved by supposedly rational and perfectly informed agents, is the focus. capabilities learned and changed over time define strategies and influence the structure and performance of firms. selection occurs, in an almost darwinian way (nelson 2015, 770), through the process by which resources, organizations, and firms adapt and survive in a changing environment (malerba and orsenigo 2015, 665). path dependence and the accumulation of previous tacit knowledge are often behind apparent luck and success (chandler 1990). adaptation often involves learning processes for selecting the most adaptive ways of doing things. there are quality established academic journals that publish in english like business history, business history review, industrial and corporate change, entreprises et sociétés, enterprise and history, technological forecasting and social change, revista de historia industrial, investigaciones de historia económica, and revista de historia económica, which have been paying attention to the role of time and the influence of context on business for many decades. there is also a journal of evolutionary economics published by springer, but our journal of evolutionary studies in business is the first one that volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 explicitly introduces the word ‘evolution’ in combination with the word ‘business’ in the very title of the journal. this combination has a significance that goes beyond terminology. it aims to contribute to a whole theoretical conception around the role of evolution in business organizations and the environment that surrounds them. jim quinn recently observed that evolution is not just change involving variation, selection, and survival, and suggested instead that we should consider the perspective of historians, who ‘concern themselves with change in all its diversity’ (quinn 2015, 655). evolutionary economic perspectives have contributed a lot to studying institutions and long-term changes in the organization of sectors and companies (mowery and nelson 1999; nelson and winter 1982; quinn 2015; murmann 2015; nelson 2015). the implications of these studies for evolutionary perspectives in business are clear: firstly, the study of context is essential for understanding long-term entrepreneurship in sectors, regions, or types of companies like family businesses; secondly, the creation of capabilities to adapt to changes in markets, institutions, and technology determine the creation, survival, or the demise of organizations or the resources that made them competitive. main research challenges there have been dramatic changes in the management field in the last thirty years. it is well known that the mass dissemination of new technologies, especially icts, has transformed organizations, the way they work, and their business strategies. the academic world has evolved in order to understand the changes that have taken place and to contribute with useful research results that address the future of organizations and that help us understand their competitive challenges. in the following paragraphs we will highlight the major changes that have occurred in the management field and their connection with academic research. volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 the importance gained by horizontal ‘processes’ in business competitiveness is one of these changes. terms like innovation management, knowledge management, quality management, and logistics have acquired key relevance due to the fact that they reflect processes that cut across organizations and require matrix structures. indeed, such horizontal processes question the classical functional areas. companies can only be competitive when mastering these horizontal processes and the compulsory relationship with networks that their implementation entails. kotter (2014) describes this phenomenon as the need for dual organizational structures, and points to the importance of taking advantage of this approach. the declining role of the classical functional areas is also clear in the production process where we have moved from pure ‘production management’ to ‘management of the value creation chain’. globalization and the ict revolution have brought about significant changes that have required and still require a lot of research in order to gain an understanding of their scope and consequences. the concept of the value creation chain can be linked to three important issues. firstly, the need for cutting-edge research activities in internationalization in order to better analyse and understand the relevant value chain models and business strategies. secondly, in these global competitiveness scenarios, the role played by ‘servitization’ strategies within the value creation chain must be taken into account. finally, new business models have been developed where new technologies and globalization highlight the key role of scalability. the change from production chains to value creation chains is also associated with a third phenomenon: corporate social responsibility and management control indicators. in fact, management control has expanded its scope of activity to more sophisticated cost-tracking systems and the development of kpis. this shift shows the growing importance of the volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 connection between management control, strategy, balanced score-cards, and csr. for us, the next step is now the change from pure csr to the ‘company with socially expanded aims’. as segretin et al. (2014) have pointed out, the introduction of social aims into the statutes of companies seems a necessary step in a context where sustainability forms an irreversible part of the new business culture. mintzberg (2015), in rebalancing society, goes in the same direction and emphasizes the changes that, from his point of view, large corporations need to adopt in relation to this issue. in short, management has evolved from service and product development to a broader and more global vision of organizations involving innovation and creativity. in other words, cooperation becomes more important than hierarchies, and networks become more important than vertical organization charts. with regard to human resources, excellence is linked to managing people and talent. finally, in this new competitive scenario, reference must also be made to the so-called startup economy. within the entrepreneurship field, the role played by start-ups, their links with entrepreneurial universities and innovative ecosystems, and the scale of the phenomenon are major changes and raise many research issues. indeed, start-ups can even act as regional economic promoters, developing effective and strategic links with big corporations. the obvious relationships between innovation and start-ups bring us to entrepreneurship as a research field. this is a domain where research encompasses many different activities carried out by individuals and/or organizations resulting in new business in either new or already existing organizations. it is a field where intensive research has been carried out during the last decade and to which our journal also wishes to contribute. but, as casson (2013) points out, there is no common theoretical framework or central research paradigm. it is in fact a volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 research area with no clear boundaries because of the fact that entrepreneurial activities are viewed from multi-disciplinary perspectives and at various levels of analysis, using a variety of methods. besides economics, there is a growing body of entrepreneurship research in politics, sociology, psychology, economic anthropology, business history, management, strategy, marketing and finance, and geography. this growing interdisciplinary character fits well with our journal’s approach. analyses of entrepreneurial activities can be developed at different levels: the individual or team level, the venture and firm level, and the macroeconomic level. the socioeconomic environment may influence entrepreneurial activities at all of these levels. each of the components of this environment can play a significant role: institutions, regulations, and culture, as well as the availability of finance, knowledge creation processes, economic and social policies, or the presence of industry clusters. with regard to the start-ups movement, in our journal we would like to prioritize the explorative side of entrepreneurship: the role and characteristics of individuals and teams (organizations). this is because the results of explorative entrepreneurship are mainly related to opportunity recognition, innovation, and venture creation, and the latter can take the form of the creation of new organizations or of new activities in existing organizations. the combination of the social dimension of companies and the spread of the collaborative economy raise relevant questions concerning our current view of business and management activities. profit models and market rationale are being questioned because of the fact that market and competition rules change with globalization. global scalability in business networks creates multinational companies that are nearly intangible, where hierarchies and operational processes have nothing to do with the conventional approach of a manufacturing volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 company rooted in the old industrial 20 th -century model where ‘big is beautiful’ was the motto. within such a framework, the global vision of organizations in terms of innovation and creativity that we mentioned earlier leads to the issue of the organizational mindset. some authors argue that a change is taking place from a ‘dominant organizational mindset’ where industry is the core (and where culture and the arts play a secondary role) to an ‘emergent organizational mindset’. in this new mindset, the creative sectors (and their links with culture and the arts) are the core, and industry and services lose their leading role. the academic world has not been exempt from this trend and analyses of creative industries have progressed notably in recent years. for cohendet and simon (2015), companies must reinvent themselves and to do so they need a) to rethink structures in terms of open and transverse forms; b) to reformat processes by questioning projected values, risks, and ideas, and c) to reboot culture by assessing and cultivating cognitive work and the interplay of individual talents and communities. and all of this needs to take place in dialogue with the hierarchy and market values of the firm’s current identity. we strongly believe that the fields and subjects we have described here are relevant and that they raise more and more new challenges for academic research on management and many different obstacles for researchers to overcome. but subjects evolve rapidly and this calls for the development of research activities as fast as possible. the need for a quick response is crucial in order to avoid situations where publications appear when interest has been lost in the subject and it has been overtaken by new topics. can we foresee how the world of business is going to change with the mass spread of the ‘internet of things’? in a few years, volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 financial organizations and banks, for example, will have little or nothing to do with their current form. the set of factors and challenges related to management and business that we have summarized here are at the root of a new way of understanding competitiveness that calls for reinventing organizations and constantly rethinking reference frameworks. this must be one of the starting points for the research papers that our journal hopes to promote and publish. our editorial team due to the heterogeneity of organizations, of their capabilities, and of their learning processes over long periods of time, diversity in terms of structures, strategies, and pathways has been and is the standard in business. it is precisely for this reason that this publication contributes to the group of journals about business and change with an original asset, which is the large and diverse makeup of its editorial team. our authors and readers have the opportunity to receive feedback and advice from associate editors located at eight institutions with headquarters in europe, asia, and america. our strategy in this regard has been to select experts that can provide constructive and thought-provoking ideas for authors and readers in areas of expertise where most progress seems to be happening today in academia. for surveys on management challenges, the associate editor is elena golovko from tilburg university in the netherlands. on creative industries, we have montserrat pareja from the university of barcelona. for submissions received on entrepreneurship esther hormiga from the university of barcelona and sylvia rohlfer from cunef, madrid. paloma miravitlles from the university of barcelona and ying ying zhang from cunef will be associate editors for submissions on international businesses. for business history articles we have as associate editors adoración alvaro from cunef and pierre-yves donzé from osaka university in volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 japan. for the expanding and flourishing area of businesses in latin america, the associate editors are eloi serrano from tecnocampus/pompeu fabra university and the university of barcelona and araceli almaraz from el colegio de la frontera norte in mexico. finally, our journal wishes to publish articles about two non-traditional fields of interest in academic journals on business: science and business, and online resources for researching business. the associate editor for submissions dealing with science and business is santiago lópez garcía from the university of salamanca, and our associate editor for articles about online resources for business research and teaching will be bernardo batiz-lazo from the bangor university in the united kingdom. paloma fernández pérez and jaume valls, whose expertise is in business history and entrepreneurship, are the first editors-in-chief of this journal, and welcome submissions from the diverse community of scholars interested in business from an evolutionary perspective, including organization studies, economics, business studies, history, sociology, politics, engineering, anthropology, and law. we particularly look forward to attracting contributions from recent master’s and phd dissertations, in which excellent reviews of significant literature, debates, and questions can be regularly found, but which have no efficient platform for dissemination in academic journals. expert knowledge from senior colleagues combined with current state-of-the-art work and debates about changes in business from new researchers can help our readers get involved in the essential mission of the scientist, which is, as enlightenment thinking put it two hundred years ago, to help shed light in darkness and let readers think for themselves. the current search for useful synthesized knowledge to guide business practices and business research today can only benefit from quality overviews and new ideas. volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 references casson, bo; pontus braunerhjelm; mauren mckelvey; christer olofsson; lars persson and hakan ylinenpää. 2013. “the evolving domain of entrepreneurship research.” small business economics 41:913-930. chandler, alfred d. 1990. scale and scope: the dynamics of modern capitalism. cambridge, ma: the bellknap press of harvard university press. cohendet, patrick and laurent simon, l. 2015. “introduction to the special issue on creativity in innovation.” technology innovation management review 5(7):5-13. kotter, john p. 2014. accelerate (xlr8). united states of america: harvard university press. malerba, franco and luigi orsenigo. 2015. “the evolution of the pharmaceutical industry.” business history 57(5):664-686. mintzberg, henry. 2015. rebalancing socxiety. radical renewal beyond left, right, and center. san francisco: berrett-koehler publ. mowery, david c. and richard nelson. 1999. the sources of industrial leadership. new york: cambridge university press. murmann, johann peter. 2015. “deepening the conversation between business history and evolutionary econòmics.” business history 57(5):705-715. nelson, richard. 2015. “evolutionary economics and recounting of business history.” business history 57(5):769-772. nelson, richard and sidney winter. 1982. an evolutionary theory of economic change. cambridge, ma: the belknapp press of harvard university press. quinn, jim. 2015. “editorial: re-introducing evolutionary theory to business history: making sense of today´s structures.” business history 57(5):655-663. volume 1, number 1, 1-14, january-june 2016 doi: 10.1344/jesb2016.1.j001 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 segrestin, blanche; levillain, kevin; vernac, stephane and armand, hatchuel. 2015. la “société à objet social étendu”. collection economie et gestion 15. paris: presses des mines. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 mercè bernardo universitat de barcelona (spain) raúl escalante universitat de barcelona (spain) anna arbussà universitat de girona (spain) analysis of the catalan haute cuisine success: the role of education and network creation abstract this paper analyses two of the success factors of the catalan haute cuisine: education and network creation. fifty-four interviews with michelin-starred restaurant chefs were done, using two questionnaires, one for each factor studied. cross-case studies were analysed. results show that both factors are important and mutually correlated. education is important to have the bases to understand and enrich the current cuisine, and also act as a pool of relationships creation. regarding the second factor, the majority of chefs started their relationships at a professional level and some became personal. a framework of collaboration, respect, admiration and joint objectives are the most highlighted key results. the future of this sector, according to the interviewees, is ensured by the new generations of chefs but also because of the society interest. additional aspects explaining the success of the cuisine are presented. to the best of the authors’ knowledge, this is one of the first works presenting the success of this cuisine studying these two factors in-depth. keywords: haute cuisine; michelin stars; education; network creation; success factors corresponding author: e-mail: merce.bernardo@ub.edu received 26 december 2016 accepted 10 may 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 introduction in recent years, the hospitality sector and specifically the gastronomy sector have experienced a great success. several classifications, awards and quality standards have appeared to proof the success this sector is experiencing (michelin 2015; the restaurant magazine 2015; bernardo et al. 2017). all the evaluations of culinary experiences has an important subjective component, however, one of the most internationally accepted classifications in the haute cuisine sector is the michelin star system. the michelin guide, which began as a directory listing garages and petrol stations, evolved into a gourmet guide that is published in eight european country editions (aubke 2014). nowadays, the michelin star rating can be considered synonymous of quality gastronomy (johnson et al. 2005) and is accepted by the entire gastronomy sector and consumers (winkler 2008). the inspectors of the guide award a restaurant into three levels with a maximum of three stars, which means: one michelin star: "a very good restaurant in its category" two michelin stars: "excellent cuisine, it is worth a detour" three michelin stars: "exceptional cuisine, it is worth a special trip" as already mentioned, all the guides have a subjective component; however, the evaluation criteria and the methodology used by michelin are objective. the most important aspects are quality of the products, mastery of flavour and cooking techniques, the “personality” of the cook in his/her cuisine, value for money and consistency (gastroeconomy 2015). the inspectors of the guide visit annually the restaurants of the guide and evaluate them acting as anonymous clients. no report or feedback is provided to restaurants and they only know the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 results in a ceremony that the guide holds once a year. each year the restaurants are evaluated and can (or cannot) renew the award or achieve a higher recognition (bernardo et al. 2017). the edition of the guide for spain and portugal began in 1910 and since then the number of restaurants with michelin stars has not ceased to grow. internationally, with data from 2015, france leads the world ranking with 603 starred establishments, followed by japan with 516, italy with 330 and germany with 283. in catalonia, the total number of starred restaurants in 2016 was 50 or equivalently, 29% of 174 restaurants in spain. in addition, about 88% of all the catalan restaurants awarded in catalonia are located in the provinces of girona and barcelona. this fact is an evidence of a certain geographical concentration of top restaurants in a specific territory, as also noticed in the media, even more since 2013, when el celler de can roca was awarded for the first time as the best restaurant in the world according to the recognised and popular list of "the world's best 50 restaurants" (the restaurant magazine 2015), the proliferation of culinary news on press, radio and television was overwhelming. the success of the roca brothers and the rest of starred chefs in catalonia has contributed to the social role of chefs and spread the wealth and value of the catalan cuisine (svejenova et al. 2007). the haute cuisine restaurants have become tools to promote a territory and attract tourists for whom gastronomy plays an important role in their trips (apicius 2013). today, the haute cuisine restaurants act as showcases of creativity, design and taste of the culture of a region (svejenova et al. 2010). the renowned gastronomic excellence of the current catalan cuisine is probably the result of several factors, which has mainly been analysed from the perspective of the innovation and creativity process of these chefs (svejenova et al. 2007, 2010). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 thus, the aim of this study is to analyse two additional factors not analysed in-depth before for the concentration phenomenon and their impact on the success of the catalan haute cuisine: education and network creation. these factors together with other aspects such as the society interest, culture, products and territory could explain the geographic concentration of michelinstarred restaurants in catalonia (an in-depth analysis could be found in bernardo et al. 2016). success factors in restaurants engle (2008) defines success factors as: "the most efficient and effective methods of accomplishing a task or achieving a goal, based on repeatable procedures that have proven themselves over time for large number of organizations" (engle 2008, 20). nonetheless, as pointed by cameron (1986), deciding how to measure business success is always problematic because of the difficulties in defining success. several classifications have been proposed for the success factors. dickinson et al. (1984) classified them into internal and external factors. external factors are those that are beyond the control of the business manager such as economic climate, market conditions and competition (boardman and vining 1996; brotherton and shaw 1996). in contrast, internal factors involve company's competencies that could be modified and have influence in the likelihood of survival of the business, for example product quality, staff and processes and procedures (berry et al. 1997). taking into account the challenges and difficulties to start a business, and given that a high ratio of start-ups fail, some researchers view survival as the key factor of business success (van de ven et al. 1984; barney 1997; haber and reichel 2005). as noted by van de ven (1993), entrepreneurship studies should not focus only on behaviours of individuals but also should http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 examine external environment. under this view, some studies have analysed the relationship between external environment and business creation (reynolds et al. 1994) and bankruptcy (keeble and walker 1994), using business survival as a success factor. in the hospitality sector some researchers have carried out studies and proposed models about specific hospitality success factors. geller (1985) and goldman and eyster (1992) identify and use some of them to the negotiations of hotel, food and beverages leases. croston (1995) applied success factors theories to define the strengths of a successful hospitality businessman/businesswoman and make succeed hotels. most of the studies have focused on hotels but parsa et al. (2005, 2011) and camillo et al. (2008) have proposed specific models for the restaurant sector. parsa et al. (2005, 2011) designed a model to improve the likelihood of success in american restaurants and camillo et al. (2008) added emotional factors to parsa et al. (2005, 2011)’s model for independent restaurants in san francisco. karim et al. (2011) identified the success factors of the little malaysian restaurant sector in order to help owners focusing on their specific problems. camillo et al. (2008) suggested a classification of success and failure factors for independent restaurants in northern california. according to them, restaurant success or failure hinges on five groups: (1) strategic decisions, (2) competitive factors, (3) marketing, (4) resources and capabilities, and (5) owner-manager or chef traits. all the success factors obtained from the review are classified in table 1 according to the dimensions proposed by camillo et al. (2008). all of them are described below. the first dimension, strategic decisions, refers to those involving a substantial amount of resources and/or generating subsequent decisions. they are complex and difficult to structure and are not a routine, as they are taken occasionally, even once. strategic decisions are normally http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 top management responsibility and are usually taken after thoroughly studied. decisions such as the location (kotler et al. 1996; parsa et al. 2005, 2011; wang et al. 2011) or the business plan (perry 2001; parsa et al. 2005; camillo et al. 2008; cabrera 2015) cannot be changed in the short time. these factors, such as location, are important indicators because constitutes a means of attracting many costumers (yang et al. 2013). nevertheless, a strategic location is insufficient to guarantee success if other factors, such as management, are inefficient or poor (rey-martí et al. 2016). the second dimension, competitive factors, joins together all factors that influence the competitive position of a restaurant in the sector. the relationships with competitors (kotler et al. 1996) as well as the performance (ottenbacher 2007) are key elements to succeed in the restaurant sector. mandabach et al. (2011) classified the factors between external environment (general for all the companies of an economy and specific for the restaurant sector) and internal environment (operational factors of a particular restaurant), similarly to dickinson et al. (1984)’s classification. the third dimension is marketing and involves all activities and procedures related to customer satisfaction. in the restaurant sector the two most important variables are price (parsa et al. 2005; gupta et al. 2012; agarwal and dahm 2015) and loyalty (kotler et al. 1996; agarwal and dahm 2015). in some cases a strong brand is also important but often depends on the parent company, which is out of the scope of this study (itthiopassagul et al. 2009; vazifehdust et al. 2011). some of the success factors proposed, such as customer satisfaction (brown et al. 2014; jacob et al. 2014) and quality standards (bernardo et al. 2017) are currently analysed in the literature but more research is needed as well as for innovation (ottenbacher 2007) and creativity (balazs 2002; stierand 2012). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 the fourth group of factors is labelled as resources and capabilities. it aims to identify the factors that differentiate the restaurants from the rest and can provide a competitive advantage. resources are all the assets that the restaurant has to carry out its actions. these can be physical, technological, human and organizational (détrie 1995). the restaurant facilities (mamalis 2009) and the physical environment (gupta et al. 2012) are examples of key resources for the restaurant. capabilities are skills (individual or collective) that allow a restaurant to perform specific activities and organizational routines (détrie 1995). cost controls (schmidgall et al. 2002; agarwal and dahm 2015), food quality (parsa et al. 2005; gupta et al. 2012) and service quality (enz 2004; gupta 2012; chin and tsai 2013) are necessary capabilities in the restaurant sector. the last dimension proposed by camillo et al. (2008) is owner-manager or chef features. originally this construct did not include chef traits but in most of restaurants the kitchen staff has an important role for the success of the establishment, as a matter of fact they are responsible for the service. both business experience (lee 1987; haswell and holmes 1989; sharlit 1990; camillo et al. 2008; agarwal and dahm 2015) and culinary experience (agarwal and dahm 2015) are basic characteristics for a successful manager. an honest, dedicated and determined leadership (camillo et al. 2008) is also commonly pointed out by successful restaurateurs. haute cuisine as a proposed dimension it has been detected that, according to the existing literature, camillo et al. (2008)'s classification is not covering all the success factors and, therefore, it has been decided to add an extra dimension named haute cuisine (see also table 1). it refers to the specific success factors of the high-quality restaurants. johnson et al. (2005) identified four success factors of http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 thirty-six restaurants having two or three michelin stars over a period of ten years in europe. the key factors attributed to the haute cuisine restaurants are: (1) investment and investment types, (2) sources of financing, (3) pursuit of excellence and (4) culinary craftsmanship involved. the first two refer to the financial success of the restaurant while the pursuit of excellence and the culinary craftsmanship are related to qualitative goals. although the restaurant location has been analysed in the literature (parsa et al. 2005, 2011; wang et al. 2011; tzeng et al. 2002), most of the studies are focused on the term location as a precise place in a city. therefore, one research line to be developed is to analyse the role of a restaurant location in a broadly meaning. each location has specific factors that are difficult to imitate in other places that are related to sociocultural and economic characteristics of its inhabitants, networking and resources availability, among others. identifying these specific factors and characteristics of a region may help to understand the influence of location in the success of restaurants. related to this, another factor that could be studied is association (parsa et al. 2011), weather it is formal or informal. related also with location is the geographical concentration. several factors can explain the geographic concentration of restaurants in a specific territory; hence it can be divided into two groups of factors. on the one hand the internal factors, related to the circumstances of the chef, such as his/her education (lee 1987; haswell and holmes 1989; sharlit 1990; agarwal and dahm 2015) or his/her personality (kouzes and posner 2006; camillo et al. 2008). on the other hand, the external factors those are beyond chef’s control. the specific culture and the economic environment of where the restaurant is located (kotler et al. 1996; parsa et al. 2005, 2011; wang et al. 2011) and the social networks created among chefs (parsa et al. 2011) and their impact on the sector and restaurants are examples of research gaps in this dimension. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 table 1. success factors in the restaurant sector proposal and their dimensions dimensions brief description supporting literature strategic decisions location place of the restaurant kotler et al. (1996); parsa et al. (2005,2011); wang et al. (2011) marketing and business plan long-term plans that fix restaurant objectives perry (2001); parsa et al (2005); camillo et al. (2008); cabrera (2015) size physical dimensions, capacity gaskill et al. (1993); parsa et al. (2011) affiliation belonging to a group or association parsa et al. (2011) quality and environmental standards management systems implemented llach et al. (2013) differentiation strategy or theme specifications or type of restaurant kotler et al. (1996); camillo et al. (2008); gupta et al. (2012) competitive factors competence adequacy in the restaurant sector kotler et al. (1996) external environment (general and specific) variable outside the control of the restaurant owner: economic climate, market conditions and competitors mandabach et al. (2011) internal environment (operational and personal) controllable variables that influence the restaurant likelihood of survival mandabach et al. (2011) customers typology of people who come to the restaurant, economic status mandabach et al. (2011) management of restaurant how the restaurant is directed mandabach et al. (2011) positive goals favourable and optimistic objectives mandabach et al. (2011) philosophies principles and values applied to the restaurant parsa et al. (2005); mandabach et al. (2011) market performance behaviour of the restaurant in the marketplace ottenbacher (2007) financial performance results of the restaurant operations in monetary terms ottenbacher (2007) employee performance results in workers activities and the way they were executed ottenbacher (2007) transportation availability of raw materials and its displacement tzeng et al. (2002) http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 commercial area location in an area with commercial activity tzeng et al. (2002) marketing market driving pricing ability to influence in the prices of the market parsa et al. (2005); gupta et al. (2012); agarwal and dahm (2015) loyal patrons ability to build customer loyalty kotler et al. (1996); agarwal and dahm (2015) marketing strategies methodologies to achieve marketing goals balazs (2002); brown et al. (2014) market oriented strategy focus the marketing activities on the customer brown et al. (2014) development of a strong brand creating a well-known restaurant brand itthiopassagul et al (2009); vazifehdust et al. (2011) resources and capabilities cost controls active application of procedures to limit costs schmidgall et al. (2002); agarwal and dahm (2015) positive customer relationships having affinity with the customer kotler et al. (1996); camillo et al. (2008); jacob et al. (2014) service quality staff treatment enz (2004); gupta et al. (2012); chin and tsai (2013) family support family involvement parsa et al. (2005); ghiselli et al. (2001); strickland (2013) physical ambience restaurant atmosphere and cleanliness gupta et al. (2012) food quality characteristics and gastronomic level of the food served parsa et al. (2005); gupta et al. (2012) adaptation to locality adjust restaurant features to local requirements williams (1997); mamalis (2009) interaction with service staff communication and relationship with employees gupta et al. (2012) interaction with other customers communication and relationship with clients gupta et al. (2012) product served quality of the raw materials and processing mandabach et al. (2011) facilities characteristics of the restaurant mamalis (2009) owner-manager/chef features http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 leadership ability to achieve support of the staff in the accomplishment of restaurant tasks kouzes and posner (2006); camillo et al. (2008) emotional traits personal motivations camillo et al. (2008) competent management appropriate way to run the restaurant lee (1987); haswell and holmes (1989); sharlit (1990); agarwal and dahm (2015) prior business experience previous business opportunities lee (1987); haswell and holmes (1989); sharlit (1990);camillo et al. (2008); agarwal and dahm (2015) culinary experience accumulated gastronomic knowledge, especially of practical matters agarwal and dahm (2015) business acumen astuteness and sharpness for restaurant business lee (1987); haswell and holmes (1989); sharlit (1990) family life cycle specific family conditions parsa et al. (2005); mandabach et al. (2011) personal values includes ethical, ideological, social and aesthetic beliefs brown et al. (2014) reliability ability to be trusted chin and tsai (2013) empathy ability to identify another's (customers, employees) feelings and thoughts chin and tsai (2013) haute cuisine investment and investment types use of funds in gastronomic activities johnson et al. (2005) sources of financing how the restaurant obtain economic resources for its activities johnson et al. (2005) pursuit of excellence philosophy of perfection johnson et al. (2005) culinary craftsmanship involved availability culinary artisans johnson et al. (2005) source: own elaboration based on camillo et al. (2008) http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 related to the social networks factor, some authors have pointed out the relationship between cooks and how this relationship makes better sharing of knowledge and also contributes to the success of the sector (aubke 2014; aldamiz-echevarría et al., 2014) but more research and analysis is needed in order to explain the concentration phenomenon. finally, it should be mentioned that all these factors are not independent. for instance, continuous improvement is closely related to both internal and external factors. it means that restaurant location and its environment may influence the networks created with other restaurants and chefs and vice versa. therefore the professional and personal relationships among chefs can be an enabler for the emergence of successful restaurants in a region or country, as well as how education on culinary arts, governmental support, etc. thus, the aim of this study is to analyse two additional factors not analysed in-depth before for the concentration phenomenon and their impact on the success of the catalan haute cuisine: education and network creation. these two factors come from the literature review and have been already analysed by some authors. nevertheless, to the best of the authors’ knowledge, none of them have used these factors to explain the geographic concentration of haute cuisine in a specific territory. the methodology used to test these two factors is presented in the next section. methodology in this section both the participants’ selection and data collection are explained. participants’ selection in order to achieve the research objective, the participants’ selection was based on an existing and accepted sample of restaurants, which is the michelin-starred restaurants list 2013 in http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 catalonia (michelin 2015). as explained previously, this region was selected because of its high number of awarded restaurants but also because two of them, el bulli and el celler de can roca, have been ranked in the top five positions of the world’s 50 bests restaurants in recent years. a pilot test with the most awarded restaurants was performed and additional chefs were added, those who did not have a michelin star in 2013 but had had in the past and contributed to the success of the sector. the final sample was built up with 54 participants: 49 interviewees belonged to michelin-starred restaurants in 2013 (50 chefs), three chefs with no star in 2013, but whose restaurants had, and the director of the alicia foundation, because of its key role in the sector. although some changes in the list occurred during the study (some restaurants lost the star or some chefs changed the restaurant), it was decided not to change it to avoid losing data validity. interviews data were collected by interviews, thus, applying a qualitative methodology (denzin and lincoln 2011). interviews allow collecting more in-depth information about the phenomenon analysed (creswell 2013). two different semi-structured questionnaires (yin 2009) were used to collect data for each of the analysed factors. the advice of experts in the field was requested to review both questionnaires. the first questionnaire is about the education of each participant and the aspects asked were five: courses longer than 6 months, in which, for example, the cooking vocational and education training courses were mainly classified. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 shorter courses more focused on specialising some aspects of the cooking process, such as deserts, chocolate, etc. practicum in restaurants working experience in restaurants conferences and seminars participation in addition, at the end of the questionnaire, participants were asked to rate these aspects based on the importance they give to them when analysing the education portfolio of a chef. also, an open question asked for other aspects not considered in the questionnaire that could be important to be highlighted. for the second factor analysed, network creation, another questionnaire was applied and consisted on two main blocks: relationship among two and three michelin-starred restaurants and relationship among one michelin-starred restaurants. this differentiation was done because it was considered that the first group of chefs was the spill over of the sector and more information about their relationship was collected. the length of the relationship was also asked. the aspects analysed in this questionnaire were: relationship with chefs of restaurants with two and three michelin stars (personal and professional) relationship with chefs of restaurants with one or none michelin stars (personal and professional) geographic concentration (interviewee’s opinion on the reasons of this concentration) future the protocol applied in the interview has followed the steps shown in figure 1. all restaurants awarded with michelin stars in 2013 were contacted by e-mail with the presentation of the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 project. the following step was contacting each restaurant by telephone to arrange the appointment. a pilot test was performed in july 2013 in one of the restaurants to validate the content of the questions and measure the time needed to perform both questionnaires. the mean duration of each interview was 60 minutes to complete both questionnaires. in the restaurants with two and three michelin stars, the interviewing team was built up with two members and in the restaurants with one or none michelin star the interviewer was one researcher (yin 2009). all the interviews were recorded and only one chef asked for not being recorded. the field work started in july 2013 and finished in december 2014. fifty-one interviews were done face-to-face, two were self-reported and 1 was done through skype. as shown in figure 1, a case study was built for each restaurant and then e-mailed to the chef in order to validate the content (satolo et al., 2013; yin 2009). figure 1. protocol of data collection and validation source: adapted from satolo et al. (2013) http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 results the results of the 54 interviews are summarised below. a more in-depth and wider presentation of the results can be found in bernardo et al. (2016). in this section, the results are presented by topic analysed, i.e., first the results regarding the education questionnaire and then the results related to the network creation (relationships, geographical concentration and future of the sector). education results the majority of the chefs in the sample has attended vocational and education training courses related to cook combined with specialisation courses in a long life learning. the practicum in other restaurants has been highlighted by the majority of participants as well as the labour experience in other restaurants. the difference in this case is with whom these chefs have worked. in other words, the more experienced chefs worked mainly with french chefs while the younger catalan chefs have worked with other catalan chefs, thus, the scope of best practices has changed. the conferences have become one of the most important aspects in the openness of the sector. it should be taken into account that in this sector there are not patent neither intellectual property rights and thus, presenting their creations both new recipes and techniques in conferences has allowed them to register their originality and to share knowledge. nowadays, all the participants attend and participate as speakers in the most important conferences presenting not only their creations but also explaining their experiences in managing and other practices beyond cuisine. conferences are also a meeting point for the chefs and sometimes they are the starting point for collaborating. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 related to this aspect, ethics have been also highlighted, as it is important to reference to the creator of a technique or to whom is the dish based on when presenting. this practice makes the creator receiving the recognition deserved as well as showing the respect that these chefs have one for each other. in addition, it helps in measuring the impact of their creations, i.e., as more chefs use other chefs techniques and dishes, more impact has this chef on the sector. finally, the chefs were also asked to rate these factors by importance level. in general terms, courses taken in the vocational and education training programs and labour experience have been the most highlighted. the practicum are also important as well as the conferences. in addition, these chefs mentioned as important to complement the education the fact of visiting other restaurants as clients which allow them sharing knowledge with other chefs and to read gastronomic magazines and online blogs. network creation relationships the relationships among the sampled chefs could be summarized as good, based on respect and admiration, and where each of them knows their role within the network. as mentioned previously, the great majority of relationships start because of professional reasons and some of them become personal. the relationship has been analysed more in-depth for those chefs of two and three michelin-starred restaurants among them and with the rest of the sample. for these chefs, the relationship among them is close and last for more than 10 years. they meet in conferences very often and are also invited to the same initiatives and events, such as workshops or co-authors of cooking books. they also share members of their teams who want to do a practicum in one of the other restaurants. the relationship with the youngest members http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 of this subsample is a bit different because they have not shared the same experiences and because these young chefs are working with other more experienced chefs with whom the relationship is closer. regarding the recipes, they can co-create for special events, but they do not do it for their own restaurants. the reason is because recipes are the key element of a restaurant and is what shows the personality and image of the restaurant and thus, this is kept private. afterwards they would share them in conferences but not during the creation. however, if during the process of creation they have questions, they can ask for recommendations or advice to other chefs and vice versa. the relationship among these chefs and chefs with one or none michelin star is heterogeneous. the amount of participants in this subsample explains this diversity. this means that in some cases, they are close friends because they studied or worked together and in some others, they have only met once in a conference. another highlighted practice among these chefs is visiting their restaurants as clients which give them the opportunity of knowing each other but also share knowledge. in addition, the chefs of the two and three michelin-starred restaurants act as promoters of the rest of the restaurants, recommending them and making diffusion of their advances. finally, the chefs of one or none michelin-starred restaurants declare they follow the evolution and career of the rest of the chefs. the more experienced and awarded chefs are the example to be followed for the sample and they have accepted this role. the heterogeneity explained in the previous relationship could also be applied to the relationship among chefs of restaurants with one or none michelin start. in this case, the main reason to start the relationship is because the geographic proximity, as those more close establishes first the relation. the second reason is partnership, i.e., those chefs that met in the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 practicum or working in a restaurant, have maintained the relationship, and also meeting in conferences or other events. the last point of relationship is belonging to specific associations such as slow food. these chefs highlighted that they do see each other as friends rather than as competence. other aspects have been also analysed, such as the chefs’ opinion regarding the geographic concentration or success of the sector and the future they forecast for the sector. they are summarised below. geographic concentration the participant chefs classified the success of the sector in seven main factors and they are explained below. all the factors have been considered with the same level of importance: great chefs’ contribution the great majority of the sample highlighted that the tipping point on the evolution has been ferran adrià, one of the most outstanding catalan chefs. he had been able to experiment with different products and techniques, he has created the novelty and shared it and this has given the rest the opportunity to open and to try new things. other chefs continued with this behaviour, such as santi santamaria, carmen ruscalleda or joan roca, working hard and contributing positively to the sector during a long period of time, mainly in two different ways: opening the catalan cuisine to the world and acting as knowledge transfer catalysers among the sector trough their transparency. gastronomic culture, interest for gastronomy and socioeconomic level catalan society has always been very open to new experiences in gastronomy and interested in knowing these restaurants. this has also been possible for the socioeconomic level of this society which has been able to afford this type of cuisine. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 in addition, the culture and tradition are closely related to cuisine as all the celebrations are around the table. products and territory the territory provides a huge array of different products from the sea, mountains, orchards, etc., and these products are of a high quality. there is collaboration with the local farmers to have the best products possible. all this variety gives the possibility to cook many different dishes with local products although they are also open to introduce new products from other cultures. the influence of the french cuisine the proximity of catalonia with france has been important as some chefs have made the practicum or worked in french restaurants. education the role of cooking schools or vocational and education training programs, courses and practicums are also crucial to explain the success. each generation is better trained and prepared on cooking and this is ensuring a good future too. the new generation of chefs this is related to the previous factor, as the younger chefs have learnt from catalan chefs and have followed their steps. this generation tries to improve their former generation but looking also to the past to enrich the future. the socialization of the cuisine this means putting the haute cuisine closer to the society. nowadays, some of these restaurants have prepared more affordable menus to arrive to other clients but also, the role of the media http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 has made these restaurants more known. this makes people from different levels of socioeconomic characteristics to visit these restaurants to celebrate events. figure 2 relates the factors analysed which contribute to the success of the sector. figure 2. analysed success factors of the catalan haute cuisine the expected future one of the most highlighted aspects has been the importance of acting with responsibility. the other, is to take profit from the role of the media in the impact of this cuisine on the society. media have been very important to make this sector well-known for the society and professionals and this should be maintained and improved. more and more specialized magazines and periodical publications on gastronomy and haute cuisine are available not only http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 for professionals but also for the society in general and managing this relationship is also important for the sustainable success of the sector. related to the sustainability but from the economic point of view, is another aspect to be improved in the future. make these restaurants achieving good economic results to be able to concentrate in the core business will be important. a great number of chefs have diversified their businesses in order to increase their incomes such as consultancy, opening new related business, etc. new generations of chefs are also ensuring the continuity of the sector, who have learnt from the best and are following their steps. the touristic framework as well as the participation and interest of the society will be needed to ensure this positive and promising future. conclusions this paper aimed to analyse two factors which could explain the success of the catalan haute cuisine shown by the high geographical concentration of michelin-starred restaurants in this territory: education and network creation. based on a qualitative methodology in which 54 participants were interviewed and case studies built, the following conclusions could be extracted. first, the education factor is important itself for the knowledge transfer and creation in the sector but also as a starting point for the network creation. education on vocational and education training programs have been highlighted as important but also the working experience in other restaurants. these two factors are crucial for a chef’s curricula. another important aspect in education is conferences. these events are giving the chefs the possibility of sharing knowledge http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 among peers, to register their creations, to gain recognition and also to establish new connections to enrich the network. regarding the relationship among chefs, it has been confirmed that the two and three michelinstarred restaurants chefs are acting as spill overs for the rest of the sector. they are who represent the sector in different events and platforms but also who promote the sector. their importance and contribution has been also mentioned by all the participants. the relationship is based on respect, admiration, recognition, effort, dedication, hard work and collaboration. each chef contributes to the success of the sector with their possibilities but all are important to explain this phenomenon. different subnetworks could be drawn based on geographic proximity, experience, age, education, etc. regardless these differences, the transparency, collaboration and openness of all the chefs have been mentioned as important aspects. the only aspect not covered by all these characteristics is the creation of recipes. as highlighted, the recipes for their own restaurants are not co-created as they are the sign of their personality and differentiation. according to these chefs, the geographic concentration could be explained by several factors, such as the products and territory, the interest and culture of society, the influence of great chefs and french chefs, the new generations, the education, and the socialization of gastronomy. all these factors are related among them and transferred to new generations. the future of the sector is clear for them: positive. a set of aspects will contribute positively to this future: responsibility, society acceptance, education and relationship with the media. implications of this project are for the academia, for chefs and also for the government. for the academia because this is one of the first studies, to the best of the authors’ knowledge, to analyse the success of haute cuisine based on education and network creation. this opens a new research http://revistes.ub.edu/index.php/jesb volume 3, number 1, 84-111, january-june 2018 doi:10.1344/jesb2018.1.j038 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 line on this topic to be analysed from different perspectives. implications for chefs, because this study reinforces their behaviour and encourages them to continue collaborating and maintaining these relationships. governments now have evidences that promoting collaboration within the sector is a source to create value for the economy and culture of the country. it is worthy to invest on it as it will have impact on complementary sectors such as tourism, which is very important in spain. the main limitation of this paper is geographical. only one territory, with specific characteristics, was analysed not allowing the generalization of the results. future research will be based on widening the territories analysed and also analysing more factors conditioning 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"modeling sequential tourist flows: where is the next destination?." annuals of tourism research 43:297-320. yin, robert k. 2009. case study research. design and methods. thousand oaks, ca: sage publications inc. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 josé c. casillas-bueno universidad de sevilla (spain) maría concepción lópez-fernández universidad de cantabria (spain) angel meroño-cerdán universidad de murcia (spain) juan corona-ramón instituto de la empresa familiar (spain) evolution of research into the management of family businesses that are part of the instituto de la empresa familiar network of chairs (1992-2016) abstract the family business field of study has grown considerably in recent years in spain. in fact, it is no exaggeration to say that twenty years ago there was barely any research in this field. in 1992, exactly 25 years ago, a group of family entrepreneurs founded the instituto de la empresa familiar (ief). ief created the chair in family business at spanish universities to foster its inclusion in business administration syllabuses and promote its research by spanish academics. this paper analyses the evolution of research into family businesses carried out by academics who are part of the ief network of chairs, both at international and management level. to do this, the isi web of knowledge database and scopus were used as sources of information. keywords: family business; review; spanish research; family business chairs corresponding author: e-mail: casillas@us.es received 07 march 2017 accepted 26 june 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 introduction the family business field of study has grown considerably in recent years in spain. in fact, it is no exaggeration to say that twenty years ago there was barely any research in this field. studies into family businesses began in the 1980s (casillas and acedo 2007; puig and fernández 2009), with the publication of a special edition of the sloan management review in 1983 and the publication of the first edition of family business review, in 1988. a number of academicprofessional authors emerged basically in the united states (landsberg, poza, davis, handler, etc.). in spain, the first references also appeared at this time from professor gallo (1985). at the time, research was still in its infancy, largely because concern from professionals and business also was. however, the situation began to change from the late 1990s. in 1992, exactly 25 years ago, a group of family entrepreneurs founded the instituto de la empresa familiar (ief). despite being a non-profit-making business association, from the start the ief believed that including research into the specific nature of this type of business was essential for improving the management of family businesses, also a major feature of developed economies (ifera 2003). to do this, the ief created the chair in family business at spanish universities to foster its inclusion in business administration syllabuses and promote its research by spanish academics. agreements with different universities were signed starting in 1998, creating a network of professionals who began studying family businesses from an academic perspective and a number of independent chairs that had not existed previously were incorporated into this network (e.g. the prasa chair at the university of córdoba). there are currently chairs at 37 spanish universities and, according to the ief, these are held by over 200 spanish university lecturers. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 since then, research in spain into family businesses has been carried out essentially by the professors responsible for these chairs and the teams that they have created over the years, which have become the main point of reference for research into family businesses in the spanish-speaking world (lópez-fernández et al. 2016) and one of the most important in the english-speaking world. meroño and nieto (2015), celebrating the 25th anniversary of one of the most relevant academic association in management in spain (acede), offer a review paper of spanish research into the family business field from 1989 to 2014, although this paper is not focused on the ief’s network. it should be said that not all spanish research into family businesses is carried out by lecturers from this network of chairs. however, as we will see later on, the network has become the main driving force behind this research and is the glue that holds together around three-quarters of spanish research into family businesses. there is not any other network as this one in the world. for that reason, there is interesting to know how a professional institution as ief can have an impact on academic research. this is the gap we try to fulfil, studying how an initiative of a group of practitioners is able to improve research on a growing topic, as family business field. the aim of this paper is to analyse the evolution of research into family businesses carried out by academics who are part of the ief network of chairs, both at international and management level. to do this, the isi web of knowledge database and scopus were used as sources of information. we will be examining the effect of the ief's role as catalyst (a private, professional and not strictly academic institution) that fosters scientific research into the family business reality. it is a unique example of professional-academic and public-private collaboration of huge interest that could be used as a model in other countries. this is the first paper to analyse the impact of a network of researchers linked to a practitioner’s association. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 the paper is divided into the following sections. following the introduction, the second heading gives a brief description of the ief network of chairs. the next section describes the methodology used to select the papers published by the members of the network of chairs and then (description and analysis of the results) goes on to describe the results of the analysis of these papers. finally, sections four and five summarise the main conclusions derived from the review process. network of chairs of the instituto de la empresa familiar research into family businesses in spain is a recent phenomenon. until only about a quarter of a century ago, this field of research did not exist with only a handful of forerunners such as professor gallo (1985) who were the torch-bearers at national and international level. the situation has changed radically since then and is now one of the most productive fields of research. as meroño and nieto (2015) point out, research into family businesses in spain underwent a turning point in the 1990s with results published in leading journals in the field, as we will be analysing later. however, the development of this field of study in spain is not due solely due to the spontaneous interest of spanish researchers into family businesses. although it is true that the rise in interest in this type of business did not only occur in spain and that its subsequent development runs parallel to the development of this field at an international level (casillas and acedo 2007; chrisman et al 2008), it is also true to say that the interest of spanish researchers was incentivised by the explicit action of a private institution, the ief, which initiated a strategy to bring family businesses closer to academia and vice versa. the ief is a non-profit-making association that includes the major spanish family businesses, around a hundred of the leading companies in their respective sectors. since it was founded, http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 the ief has known that a cornerstone of its strategy for conveying the importance of family businesses in society is their link to academia, which has a dual objective: (1) the development of training programmes that cover family businesses as part of university degree syllabuses, and (2) the creation of a group of spanish researchers of international renown into family businesses. to achieve this, the ief is carrying out a strategy to foster the creation of chairs in family business at universities throughout the country. the model is based on the promotion of agreements in which the ief, the university, a sponsor and, where necessary, certain regional family business association take part. the idea is not a new one as before the ief initiated this strategy there were already isolated projects in place throughout spain, at the university of barcelona, run by antoni tapies, the university of córdoba, run by rodríguez alcaide, and at the university of jaén, run by mª jesús hernández. these chairs were created independently, through the individual initiative of an academic or business particularly interested in this type of business and acted as a reference or model for the new ief project. following the creation of the ief, the number of chairs in family business began to grow quickly at spanish universities. the process began in 1998 with the incorporation of the chair at the university of barcelona. this was followed a year later with four new chairs: complutense of madrid, carlos iii of madrid, las palmas de gran canaria and salamanca. the speed at which new chairs were created rose during the first ten years until the start of the recession. consequently, in the decade 1998-2007, the rate at which chairs in family business were created was over three a year. coverage of most of spain, together with the recession, led to a slowing-down of this pace, making funding existing chairs difficult and limiting the creation of new ones. even so, from the start of the recession, the network has hardly seen any http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 reduction in size. figure 1 represents the evolution of the number of chairs in family business in the ief network of chairs between 1998 and 2016. there are currently 371 active chairs that bring together around 200 university researchers throughout spain. appendix 1 represents the 37 chairs arranged by the date when they were created or joined the network. this network is present in 16 of the 17 spanish autonomous communities, with andalusia the region with the highest number of chairs at eight, one for each province. these in turn form a network whose characteristics are very similar to the national one, carrying out joint research work (diéguezsoto, lópez-delgado, and rojo-ramírez 2014; martínez-romero and rojo-ramírez 2017, among others) through frequent meetings to foster the exchange of knowledge. figure 1. number of family business chairs of the network between 1998 and 2016 source: own elaboration 1 there is an inter-university chair, the mare nostrum chair includes the university of murcia and the technical university of cartagena. 1 5 9 12 14 17 21 25 29 31 32 35 35 35 35 36 36 37 37 0 5 10 15 20 25 30 35 40 n u m b e r o f f a m il y b u si n e ss c h a ir s http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 ief’s family business chairs develop three main types of activities. the first one is to teach in universities degrees family business topics, though different types of subjects. this is the more important function of the chairs is spain, connecting family businesses to students mainly in management courses. secondly, family business chairs develop an intense work showing and sharing family businesses experiences among practitioners and also with academics and students (seminars, workshops, and so on). and finally, these chairs develop research activities, basic and applied in order to generate new knowledge about these type of firms, majority in our environment. the ief help and give support to the network facilitating the connection between the university and the family companies, improving their knowledge and capabilities through training programs, and helping them to find financial support for chair’s activities. ief promote the diversity of university chairs in order to cover different perspectives of the phenomenon. for that reasons, there are family business chairs more oriented to practice and others more oriented to research. there are chairs with expert in very different areas, as management, law, economics, taxes, finance, marketing, etc. however, looking beyond the number of chairs (spain is one of the countries that has the most), what is truly interesting is their coordination and integration into a network. this integration can be seen in different aspects. firstly, the network holds frequent meetings, generally twice a year, where ideas and in-depth knowledge from researchers can be exchanged, irrespective of the usual academic forums (national and international conferences, workshops, academic associations, etc.). secondly, it is a multidisciplinary network with academics from a wide range of fields of knowledge (business organisation, finance and accounting, marketing, civil law, mercantile law, applied economics, sociology, etc.). thirdly, the network has led to the creation of studies and research with inter-chair collaboration on different subject areas (ief 2015). of http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 all these, the recent study into family businesses in spain is of particular interest as it is the first to be carried out by the chairs in the network, it has developed an innovative methodology for estimating the importance of family businesses and it has contributed new figures regarding this (ief 2015). the creation of the network of chairs has promoted teaching about and dissemination of the specific nature of family businesses at spanish universities. the chairs provide teaching at their respective universities to students on different management-related bachelor's degrees. similarly, thanks to the collaboration with the institution and regional family business associations, they have created closer links for these entrepreneurs with the university. similarly, the existence of the network of chairs has led to numerous researchers working in the field of family business. to this effect, and after over twenty years of work, two different generations of researchers have been identified. on the one hand, an initial generation of researchers of academics who work in other specialist areas and whose incorporation into of the chair has meant reorienting their research fields and interests. they are usually established researchers, whose interest in family businesses grows and increases as a result of them joining the chair. this is the case of authors such as fernández and nieto (carlos iii), crespí (the balearics), iturralde (the basque country), lópez (cantabria), among others at national level, and in andalusia casillas (seville), rojo (almería) and rodríguez (granada). on the other, is a second generation of researchers who began their academic careers directly in the field of family business, generally with their phd thesis, such as vallejo, fuentes, cacho and martínez (jaén), marqués (girona), etc. there are exceptional cases, such as cabrera (las palmas de gran canarias), who completed her phd on family businesses in 1998, making her one of the leading international researchers in the field (lópez-fernández et al 2016). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 research methodology the aim of this paper is to analyse the role of the ief network of chairs in the development of spanish research into family businesses at international level. unlike other previous studies (meroño and nieto 2015, lópez-fernández et al 2016), only the research carried out by ief chair in family business associate professors has been analysed, leaving out the rest of the research. similarly, we decided to narrow the review process to the field of management, leaving out areas such as law, history and applied economics. to this effect, to ensure the international nature and quality of the research, only articles published in journals listed scopus (sjr) have been chosen. article’s impact has been measured by the number of cites using scopus. additionally, we have test checked the paper that were also at journal citation report (jcr). we have not considered papers given at conferences, as many of them are papers currently being developed and may subsequently be published as articles. the search was conducted through the chair directors (in the author field on the database) and their usual co-authors (who appear as the co-author on a paper about family businesses and come from the same academic institution) once these authors had been selected, only articles that researched family businesses directly were chosen after the title of the paper and the abstract had been analysed. the analysis period covers 25 years from 1992-2016. for the classification of the papers into topics, we proceeded to make a classification each author separately and, later, we compare the results. in case of disagreement (less than 10%) we discuss the case until we decided a final decision by consensus. once the methodology and the time distribution of the papers had been described, we then moved to the next section to take an in-depth look at the characteristics of the selected articles. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 to do this, the papers were read and some of their essential variables, such as the authors, their affiliation, their impact and number of times each of them was quoted were subsequently coded. description and analysis of the results in total, we have identified 112 articles about scopus, of which 74 (66.1%) are listed in the jcr. this number is somewhat lower than that identified by meroño and nieto (2015) for the total number of spanish researchers. these authors identified 127 papers in scopus and 96 of which were in the jcr (they included papers from spanish researchers, not necessarily involved in the ief network), from which we can draw an initial conclusion, with the exception of one year's difference in the timescale analysed: of the total national production in scopus, 85% was by members of the network of chairs, reaching a total of 76% for papers published in jcr journals. the first paper to be identified was published in 2001. figure 2 represents the evolution of papers published between 2001 and 2016. the rate of growth throughout the period can be seen and three stages identified. an initial introduction stage (2001-2008), where the number of papers is around two articles a year. a second stage (2009-2014), where the average number of papers published reached eight a year. and finally, a third stage, which saw a huge rise in articles published online, with an average just above twenty-one articles a year. of these, around 67% were published in journals listed in the jcr, a percentage which remained stable throughout the period and above all in 2007 (figure 3). now, we will analyse some of the features of the research conducted by the network of chairs in family business from a descriptive perspective. specifically, the analysis will focus on the platforms in which the 88 selected works have been published, the chairs that have provided support to their authors and their evolution over time. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 figure 2. number of papers published between 2001 and 2016 source: own elaboration figure 3. percentage of articles published in jcr journals source: own elaboration 1 1 0 0 5 3 5 2 7 8 12 6 8 10 20 24 0 5 10 15 20 25 n u m b e r o f p a p e rs 60% 33% 60% 50% 71% 75% 58% 67% 63% 56% 70% 75% 30% 40% 50% 60% 70% 80% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 jcr/total http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 consequently, with regard to the platforms, the 112 works are primarily articles in indexed journals. specifically, there are 102 articles (91.1%) compared with just nine that appear as book chapters (8.0%), and a last document is a book. of these 102 articles, 72.5% (74 articles) are published in journals indexed in the citation report. arranged from largest to smallest, table 1 sets out the 15 journals in which at least two articles appear, developed by spanish researchers attached to the ief network of chairs. table 1. main publications of the fb chairs of ief network journal number of papers family business review 16 journal of family business strategy 11 handbook of research on family business second edition 4 journal of business ethics 4 journal of management and organization 4 journal of small business management 4 corporate governance (bingley) 3 european journal of international management 3 international journal of globalisation and small business 3 journal of corporate finance 3 brq business research quarterly 2 cuadernos de gestion 2 international business review 2 international journal of entrepreneurship and small business 2 investigaciones europeas de direccion y economia de la empresa 2 journal of business research 2 new challenges in entrepreneurship and finance 2 review of managerial science 2 small business economics 2 source: own elaboration the leading role can be seen of the only two specific indexed journals in the field, namely family business review (fbr; created in 1988 and incorporated in the jcr in 2007), with 16 works, and journal of family business strategy (jfbs; created in 2010 and incorporated in the jcr in 2014), with 11 articles. the two journals concentrate 24.1% of all the articles published http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 in journals, and specifically 36.5% of those published in jcr journals. we should similarly highlight the position of directors of chairs on the editorial and review boards of the two main journals in this field. consequently, katiuska cabrera (las palmas de gran canaria) is on both, while rafel crespí (university of the balearic islands) is on the fbr committee and josé carlos casillas (university of seville) is on the jfbs committee. an analysis of the productivity of the different chairs allows us to highlight, firstly, that the 112 works have been produced by researchers from 25 chairs, i.e. approximately two-thirds of those in existence. table 2 represents the number of works published by authors from each of them. of these 25 chairs, just ten account for two-thirds of the works. to this effect, the chairs of the universities of jaén, las palmas de gran canaria and the basque country exceed ten works each. if we analyse the authorship of the 27 works published in the two specific journals in the field (fbr and jfbs), we see again a high level of dispersion, such that a total of 14 different chairs have managed to publish in both journals. of these, six have managed to publish in both journals (burgos, las palmas de gran canaria, complutense of madrid, girona, oviedo and seville) and three chairs have published more than three works in both journals (las palmas de gran canaria, with four articles; oviedo and seville, with three articles). with regard to the temporal distribution of publications in both journals, figure 4 allows three periods to be identified. consequently, until 2010, works were centred on the only journal that had the academic monopoly at that time in relation to research into family business (fbr). however, the appearance of jfbs led to a reorientation of researchers towards this new and promising journal. consequently, between 2011 and 2013, no chair published in fbr, whereas in the same period, there were five works in jfbs produced by researchers in the network of http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 chairs. however, between 2015 and 2016, the focus appears to have returned to the original journal, probably due to the high impact indices achieved in the web of knowledge jcr (thomson-reuters), and its high position in the field of business (position four in 2013 and 2014 and position seven in 2015 in the business category). consequently, in the last three years, the same number of works has appeared in both journals (four). table 2. number of papers published by each fb chair and main author chair number universidad de jaén 14 universidad de las palmas de gran canarias 11 universidad de país vasco 11 universidad de oviedo 7 universidad de salamanca 7 universidad de zaragoza 7 universidad de granada 5 universidad de murcia 5 universidad de sevilla 5 universidad de burgos 4 universidad de cantabria 4 universidad carlos iii de madrid 5 universidad de almeria 3 universidad de baleares 3 universidad de girona 3 universidad de valencia 3 universidad de cartagena 3 universidad complutense de madrid 2 universidad de coruña 2 universidad de málaga 2 universidad de valladolid 2 universidad de barcelona 1 universidad de castilla-la mancha 1 universidad de deusto 1 universidad de extremadura 1 source: own elaboration http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 table 3. papers published in fbr and jfbs family business review journal of family business strategy cabrera-suárez, de saá-pérez, garcía-almeida (2001) garcía-álvarez, lópez-sintas, saldaña gonzalvo (2002) fernández y nieto (2005) jaskiewicz, gonzález, menéndez y schiereck (2005) casillas y acedo (2007) blanco-mazagatos, de quevedo-puente, y castrillo (2007) carrasco-hernández y sánchez-marín (2007) vallejo (2009) basco y pérez rodríguez (2009) martínez (2009) casillas, moreno y barbero (2010) feito-ruiz y menéndez-requejo (2010) marqués, presas y simon (2014) cabrera-suárez, déniz-déniz y martínsantana (2015) revilla, pérez-luño y nieto (2016) diéguez-soto, manzaneque, rojo-ramírez (2016) arosa, iturralde y maseda (2010) casillas, moreno y barbero (2011) cabrera-suárez, de la cruz, déniz-déniz y martín-santana (2011) basco y pérez rodríguez (2011) aguilera y crespi-cladera (2012) simon, marqués, bikfalvi y muñoz (2012) cabrera-suárez, déniz-déniz y martínsantana (2014) barros, hernangómez y martin-cruz (2016) arrondo-garcía, fernández-méndez y menéndez-requejo (2016) blanco-mazagatos, de quevedo-puente y delgado-garcía (2016) figure 4. number of articles published in fbr and jfbs source: own elaboration 1 1 0 0 2 0 3 0 3 2 0 0 0 1 1 2 0 0 0 0 0 0 0 0 0 2 3 2 0 1 0 3 0 0.5 1 1.5 2 2.5 3 3.5 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 n u m b e r o f a rt ic le s fbr jfbs http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 another interesting aspect to be analysed is that of the authors. although almost all of the chairs have a single director (except in the case of the university of seville, which has two codirectors), there are chairs that have a deputy-director and others that have a more or less extensive team. according to the ief, the 37 existing chairs bring together approximately 200 lecturers, which means an average of a little over five researchers per chair. this is in addition to some chairs that have worked intensely in supervising doctoral theses, which have brought new researchers into the field. consequently, the 112 works are penned by 289 authors, which means an average of 2.58 authors per article, with three being the most frequent number of authors penning each article. however, the total number of different authors reaches the figure of 160. this means that the average number of articles per author is 1.42 works. we commented previously that there are chairs that have more extensive teams than others. notable here is the university of jaén, which has a wide variety of authors on the chair's team (vallejo, fuentes-lombardo, martínez, núñezcastro, hernández, etc.). other chairs have a smaller but more stable team, with almost all the works being penned by all of them, as is the case of university of carlos iii of madrid (comprised of researchers fernández and nieto), salamanca (with three authors who appear in four of its six works: pindado, requejo and de la torre) and the basque country (with two authors, iturralde and maseda). other chairs base all their works on a single researcher who works with others in their same team. this is the case of chairs such as zaragoza (galve, with co-authorships with salas and hernández-trasobares), seville (casillas, in collaboration with acedo and moreno-menéndez) and las palmas de gran canaria (cabrera, together with déniz and martín).the majority of the works have authors from the same chair, with collaborations with other researchers being very rare. even so, we can find some foreign researchers (sánchezhttp://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 famoso, et al. 2015, jaskiewicz, gonzález menéndez and schiereck 2005; aguilera and crespícladera 2012) and other national collaborations (diéguez sotoet al. 2016). with regard to the most prolific authors, table 4 shows the 26 researchers who have at least three works. most notable are two researchers, one from the chair at the university of the basque country (iturralde) and the other from the university of las palmas de gran canaria (cabrera-suárez), with eleven works published. along with these, we should mention other researchers from the chairs at the universities of zaragoza (galve) and salamanca (pindado), with seven works. finally, with five works are researchers from the universities carlos iii of madrid (nieto), jaén (vallejo) and seville (casillas). table 4. main authors of the ief network author chair number iturralde, t. universidad del país vasco 11 maseda, a. universidad del país vasco 10 vallejo-martos, m.c. universidad de jaén 9 cabrera-suárez, k. universidad de las palmas de gran canarias 8 galve-górriz, c. universidad de zaragoza 7 pindado, j. universidad de salamanca 7 martín-santana, j.d. universidad de las palmas de gran canarias 6 casillas, j.c. universidad de sevilla 5 menéndez-requejo, s. universidad de oviedo 5 nieto, m.j. universidad carlos iii de madrid 5 requejo, i. universidad de salamanca 5 arosa, b. universidad de jaén 4 de la torre, c. universidad de salamanca 4 hernández-trasobares, a. universidad de zaragoza 4 lópez-fernández, c. universidad de cantabria 4 rodríguez-ariza, l. universidad de granada 4 sánchez-marín, g. universidad de murcia 4 serrano-bedia, a. universidad de cantabria 4 de quevedo-puente, e. universidad de burgos 3 duréndez, a. universidad de cartagena 3 garcía-sánchez, i.m. universidad de granada 3 martínez-ferrero, j. universidad de granada 3 moreno-menéndez, a.m. universidad de sevilla 3 salas-fumás, v. universidad de zaragoza 3 simón, a. universidad de girona 3 http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 however, as well as the number of works, it is interesting to analyse the citations from them, as this tends to be an indicator of the quality of the research, derived from the impact that they have on subsequent research at international level. we have use scopus as a source to measure the number of cites. to this effect, according to the databases of the 1271 citations used (scopus), the 112 papers have had a total impact, with an average of 11.35 citations per article. however, this average is not at all representative, as 44 papers have no citations at all (39.2%) and a further 13 (11.6%) have only one citation. the reason why many of these papers have very few citations is due partly to their very recent publication date. consequently, of these 56 papers with none or one citation, which constitute half the total number of papers analysed, 36 have been published in the last two years considered in this study (2015 and 2016). according to the statement, there is a very considerable concentration of citations. consequently, the well-known pareto's law is fulfilled almost to perfection, where only 21 articles (18.7% of the total) account for 80.2% of the quotes. to this effect, two articles by fernández and nieto (2005, 2006) stand out as the most cited, both with a total of 155 quotes. far below these, and with over 50 citations, are papers by basco and pérez-rodríguez (2009), with 68 citations, casillas, moreno and acedo (2010), with 63 citations, blanco-mazagatos, de quevedo-puente, castrillo (2007) with 51 citations, jaskiewicz et al (2005), with 53 citations. figure 5 shows the different chairs in terms of the number of articles and their number of citations, which allows us to compare the quantity and the quality of their scientific production in the field of family businesses. we can see that most of the chairs have a reduced number of articles and citations. however, some of the extreme cases are interesting. on the one hand, the chairs at the universities carlos iii of madrid and seville have a higher number of citations, despite the fact that the number of articles for each is not very high (five articles in both cases). http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 the opposite is true for the chairs at the universities of jaén, the basque country and las palmas de gran canaria. these three chairs have a greater number of publications, although their number of citations is much lower. in other words, while the latter universities stand out for the amount of papers published, the first two are notable for the quality of their papers, measured by their impact on international literature on family businesses. figure 5. family business chairs in relation to number of papers and number of cites once the productivity of researchers in the network of chairs in family business fostered by the ief had been analysed, we then analysed the fields where researchers had concentrated their more widely recognised papers. to this effect, the 112 papers were classified according to two different aspects: the subject of the study and the type of paper by its methodology (theoretical, empirical – quantitative versus qualitative – or review study). starting with the type of paper, we observed that the majority of the research was empirical, with 98 papers based on business data that accounted for 87.5% of the total. also, of these, 15 7,5 175 350 alm bal bar bur can cat c-iii clm com cor deu ext gir gra jae mal mur ovi upv sal sev val vll zar car http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 almost all were quantitative. as a result, only five papers used methodology based on case studies, compared to the 93 quantitative papers (94.9%). apart from the empirical papers, we were able to identify nine theoretical papers and a further five aimed a reviewing papers in general terms about family businesses (casillas and acedo 2007; benavides-velasco, guzmánparra, and garcía 2011; benavides-velasco, quintana-garcía, and guzmán-parra 2013) or about a certain aspect of them, such as entrepreneurship in family businesses (lópez-fernández, serrano-bedia, and pérez-pérez 2016), or the role of women in this type of company (martínez 2009). these data show that the chairs in family business have made a great effort in providing quantitative data about family businesses, despite there not being any type of census or general database about them in spain. one significant aspect regarding this is the role the chairs play, through the ief, in incorporating a specific question about the family nature of spanish businesses in the spanish survey on business strategies. this survey comprises a panel of industrial businesses and has been carried out from 1990 to the present-day, collecting information about aspects related to economic activities, the markets, innovation, etc. from a cross-section of spanish manufacturing businesses. the survey is conducted by the sepi foundation, which is attached to the spanish government and is often used by spanish researchers in the field of management. consequently, at the beginning of the twenty-first century, at the initiative of the network of chairs, the ief contacted the relevant ministry, which allowed it to include a question about the family nature of businesses in its annual survey. it is in fact a categorical variable that indicates whether a family group participates actively in controlling or managing the business. this variable has been available since 2006, is annual and has been widely used. http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 finally, analysing the contents helps identify which aspects are of greater interest to the spanish researchers who are part of the ief network of chairs. this analysis was carried out after the abstracts in the 109 papers considered in this review had been read. to this effect, it has to be said that there is a very wide range of topics. we have identified a total of 42 different topics, bearing in mind that we assigned a maximum of two topics per article. the following is a description of the most frequent. the largest number of papers are concerned with financial aspects of family businesses, with a total of 14 papers. they cover aspects such as the financial structure of family businesses, dividend policy, investor protection, etc. to this effect, the most noteworthy papers were from the chairs at the universities of salamanca (five papers), burgos (three papers) and granada (two papers). a second topic concerns the boards of administration and corporate governance of family businesses. there are 12 papers that consider this topic directly. the most-researched topic is the role of family and external board members in how family businesses behave and their results. there are two outstanding chairs in this field: those at the universities of las palmas de gran canaria and the basque country (with three papers each), followed by the chairs at the universities of the balearic islands and salamanca (with two papers each). as described below, four different topics have a total of nine papers: (1) internationalisation, (2) entrepreneurship and entrepreneurial orientation, (3) ownership and (4) innovation. in terms of the first, most of the topics concentrate on analysing the differences in the internationalisation process between family and non-family businesses. of particular note in this field is the chair at the university of carlos iii of madrid with five papers. entrepreneurship papers tend to be combined with other topics to check the difference that entrepreneurial orientation has on http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 performance, the differences between entrepreneurial orientation among family businesses or according to the degree of family commitment in the business. the chairs at the universities of seville (three papers) and the basque country (two papers) are of particular interest in this field. in terms of the study into the ownership structure of family businesses, most of the research focuses on the influence it has on company performance. the papers by the universities of zaragoza (four papers) and the basque country (two papers) are of particular interest on this topic. finally, a number of chairs have analysed innovation and family businesses, with papers by the mare-nostrum chair at the universities of murcia and the technical university of cartagena (three papers) and the chair of cantabria (three papers) being of particular interest. the following research groups focus on analysing the performance of family businesses and their growth. therefore, if we focus solely on the financial performance of this type of businesses, we can identify eight papers, whereas if the focus were on growth, we would have a further seven different papers. from this point on, we find a wide variety of topics, most interesting of which we have listed in order or importance: corporate social responsibility and innovation (six papers), share capital (five papers), culture, inheritance (four papers), the role of the different generations and the study into family businesses as a field of study (three papers). conclusions since its creation 25 years ago, the instituto de la empresa familiar in spain (ief), which brings together the biggest family businesses in the country, has promoted the creation of university chairs in family business. after this quarter of a century, there are chairs in 38 spanish universities, which bring together around 200 university researchers, making spain the second http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 country in terms of the number of this type of chair (after the united states) and the first if we consider their forming a network. this network has incentivised research in a number of fields, since the various chairs are led by academics in different spheres of knowledge (management, law, finance, applied economics, etc.). in this work, we have sought to analyse the evolution of international research in the management sphere, derived from the work of the researchers in the ief network of chairs. for this, we have selected all the publications of the directors and members of the teams in the ief network of chairs that are included in the scopus database with the aim of adopting an objective criterion. in all, we have identified 109 works, the vast majority of which have been published in high-impact science journals, as is borne out by two-thirds of them also being included in the lists of the journal citation report (jcr), drawn up by thomson-reuters and published in the web of knowledge. the results allow us to ascertain that the network of chairs promoted by the ief is a cornerstone of spanish research in the field of family business. in fact, practically three out of every four spanish work of international relevance on family business have been done by researchers in the network of chairs (meroño and nieto 2015). analysis of the structure of the 109 works allows us to extract a series of relevant conclusions. firstly, the evolution over time is clearly growing, with a sustained increased in the number of publications throughout the last two decades. secondly, the great majority of research in the management sphere are concentrated in approximately half the existing chairs. this is due to two essential reasons. the first refers to the difficulty of publishing in journals with an international impact, which means that, probably, some chairs are publishing their work in other journals, books and conference papers that do http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 not reach this level, while the second refers to the existence of chairs geared towards other branches of knowledge than management, most notably those relating to law (university of córdoba, university of lleida, inter alia). thirdly, quite a few chairs have been able to publish in the two most prestigious journals in the field (family business review and journal of family business strategy), which highlights the international impact of the ief network of chairs' research in the sphere of management in family business. this impact is borne out by both the quantity and the quality of the publications. in this sense, we have identified chairs in which the quantity of published works predominate (universities of jaén, las palmas de gran canaria and the basque country), compared with others that publish fewer articles but which are highly cited internationally (universities carlos iii of madrid and seville). finally, the various chairs that comprise the ief network tackle a wide range of different subjects. we have identified a total of 42 different topics. however, we have identified a certain specialisation of some chairs in specific topics. consequently, of note are works of a financial nature, followed by those relating to corporate governance, the structure of ownership, internationalisation and the entrepreneurial orientation of family business. despite the difficulties in maintaining a network of chairs of this nature in an environment in which securing funding is increasingly difficult, the results show the international value of the research conducted by the network. it should also be remembered that this research work is just one of the three main missions and tasks entrusted to the chairs, along with university education and dissemination and advice to family businesses. it is a network with a scientific production that is high, growing and of demonstrable international quality, as is gleaned from the results http://revistes.ub.edu/index.php/jesb volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 of our work. the ief network of chairs is a unique example in the world. we hope that our work contributes to its enhancement, nationally and internationally. references aguilera, ruth, v., and rafel crespi-cladera. 2012. “firm family firms: current debates of corporate governance in family firms.” journal of family business strategy 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analysis of german and spanish family-owned businesses.” family business review 18 (3): 179-202. lópez fernández, mª concepción, ana mª. serrano bedia, m. pérez pérez, r. hernández linares, and manuel palma ruíz. 2016. “a review of the academic literature on family business in spanish.” in the routledge companion to family business, edited by franz kellermanns, and franz hoy, 522-548. new york (usa) & abingdon (uk): routledge. lópez-fernández, mª concepción, ana m. serrano-bedia, and marta pérez-pérez. 2016. “entrepreneurship and family firm research: a bibliometric analysis of an emerging field.” journal of small business management 54 (2): 622-639. martínez romero, mª josé, and alfonso a. rojo ramírez. 2017. “socioemotional wealth’s implications in the calculus of the minimum rate of return required by family businesses’ owners.” review of managerial science 11 (1): 95-118. martínez, rocío. 2009. “research on women in family firms current status and future directions.” family business review 22 (1): 53-64. meroño cerdán, ángel l., and mª jesús nieto sánchez. 2015. “empresa familiar.” 111-120 in acede xxv años de historia. evolución de la investigación en economía y dirección de la empresa, edited by santiago garcía echevarría, juan josé durán herrera, 111-120. madrid: asociación científica de economía y dirección de la empresa. puig, nuria, and paloma fernández pérez. 2009. “a silent revolution: the internationalisation of large spanish family firms.” business history 51 (3): 462-483. sanchez-famoso, valeriano, naveed akhter, txomin iturralde, francesco chirico, and amaia maseda. 2015. “is non-family social capital also (or especially) important for family firm performance?” human relations 68 (11): 1713-1743. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 2, 70-96, july-december 2017 doi:10.1344/jesb2017.2.j031 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 annex 1. family business chairs per date of foundation (or integration in the network) university year current director (2016) universitat de barcelona 1998 pilar saldaña universidad carlos iii de madrid 1999 zulima m. fernández rodríguez universidad complutense de madrid 1999 jesús gimenez, and mª josé pérez universidad de las palmas de gran canaria 1999 maría katiuska cabrera suárez universidad de salamanca 1999 julio pindado universidad de córdoba 2000 ignacio gallego domínguez universidad de girona 2000 pilar marqués universidad de la rioja 2000 juan carlos ayala calvo universidad de león 2000 mª teresa mata universidad de jaén 2001 maría jesús hernández ortiz universidad de sevilla 2001 josé carlos casillas, and adolfo vázquez universidad de valladolid 2001 juan hernangómez barahona universidad de oviedo 2002 rubén arrondo garcía universidad de zaragoza 2002 concepción garcés ayerbe universitat abat oliba ceu 2003 juan corona universidad de alicante 2003 fernando olivares universidad de burgos 2003 esther de quevedo puente universidad de cádiz 2004 josé daniel lorenzo gómez universidad castilla-la mancha 2004 felipe hernández perlines universitat de les illes balears 2004 rafel crespí-cladera universidad miguel hernández de elche 2004 nunci serrano universidad de a coruña 2005 berta rivera universidad de extremadura 2005 tomás m. bañegil palacios universidad de santiago de compostela 2005 josé díez de castro universidad de vigo 2005 santiago lago peñas universidad de granada 2006 lázaro rodríguez ariza universidad de málaga 2006 vanesa guzmán universidades de murcia y politécnica de cartagena 2006 ángel meroño universidad de valencia 2006 alejandro escribà universidad de huelva 2007 maría jesús moreno domínguez universidad del país vasco 2007 txomin iturralde universidad de cantabria 2008 m. concepción lópez fernández universidad de almería 2009 alfonso a. rojo ramírez universidad europea miguel de cervantes 2009 josé antonio otero parra universitat de lleida 2009 josé luis gallizo universitat internacional de catalunya 2013 antoni bosch universidad de deusto 2015 cristina aragón source: own elaboration http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 ainhoa marzol aranburu university of barcelona (spain) the film industry in china: past and present abstract this study is about the development of the chinese movie industry through the economic and political opening of the country, from 1979 to 2015. it overviews, in the first place, the main regulations that have shaped the industry and then it goes deep into the business of moviemaking through the analysis of the studio system, the evolution of the chinese film market and the shift in international relations the country has had regarding this cultural industry. keywords: china; cinema; filmmaking industry; regulation; structural overhaul; political opening; economic growth introduction since the opening of china in 1978, the country has gone through gradual reforms in all areas of the economy, as well as modernizing and liberalizing almost all industries that were previously owned by the government. although the main propellers of the economy were those industries behind the production of consumer goods, other secondary industries emerged from a deteriorated state and one of the best examples is the film industry. in just 30 years, the industry has evolved from almost a non-existing point to becoming the second biggest cinema market in the world. corresponding author: e-mail: ainhoamarzol@gmail.com received 03 october 2016 accepted 07 december 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 in december of 2015, the government of the united states issued a report concerned about the protectionist measures of the chinese cinema. apparently, the main reason of concern was that in february of that same year and for the first time since the creation of cinema, another country –chinahad got a higher monthly box office than hollywood. but behind it there was a big case of incompliance with the world trade organization and a complex case of forces that have dictated the fate of a market that is stipulated to top the american one in just two years. the chinese film history: a timeline the history of chinese cinema can be traced as far back as 1905, when the beijing fengai photo studio and tan xinpei adapted a beijing opera called the battle of dingjunshan. taking into consideration that the first “movie” ever created worldwide was “journey to the moon” by georges méliès, just three years before the first chinese movie was done, it could be said that china was fast on the track towards the movie industry. however, the film industry in china is considered to be started in 1913, with a movie called the difficult couple, made by the filmmakers zheng zhengqiu and zhang shichuan. following the path and style of the also newly established hollywood, studios started appearing mainly in the zone of shanghai and hong kong, where they laid the foundation of their own channels of distribution and a channel of contacts. 1 chinese movie industry moved as fast as to have two golden ages before the communist revolution of 1949 changed the way of film production and eventually shut it down completely. the first golden age occurred during the 1930s while the industry was still 1 http://dfat.gov.au/trade/agreements/chafta/documents/cfta_submission_6se05.pdf http://www.nationalmediamuseum.org.uk/~/media/files/nmem/pdf/collections/cinematography/averyshort historyofcinema.pdf http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 maturing. during this time approximately 60 films were produced every year, and were strongly influenced by an increase in the sense of national identity, given that the japanese had just invaded manchuria. the second golden age happened in the 1940s in which the industry grew and flourished. when the communist party rose to power in 1949, the industry started being state-owned, a thing that would be retaken after the cultural revolution. during the 17 years that followed until the cultural revolution, the state produced a total of 603 movies and 8342 reels of documentaries. after mao zedong died, and deng xiaoping started with the economic opening, which included reforms in the film industry that would be a reflection of the overall changes the country would go through in the following years. the first stones that would indicate the path of said reforms were laid in december of 1978, in the 3 rd plenary meeting of the chinese communist party. this meeting was followed with the creation of the china imports and exports company the following year, which symbolized the xiaoping’s political opening in the sector. after being closed for the cultural revolution, film studios started reopening in 1978 too, with a total of 12 studios making altogether 46 feature films. during those first years the studio system would operate the same way the american studio system did during the 1930s and 1940s, which clearly reflected how underdeveloped the cultural revolution left the creative industries of the country (semsel and xia1990). the demand responded to the end of the cultural revolution with positivity, and in 1979, the attendance in theaters hit 29.3 billion. consider that at that time, china had a population of one billion; this meant that on average each person went to the cinema more than 29 times a http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 year. taking into consideration that rural and very poor areas are counted in this data, it is statistically astonishing. however, this was pushed by the novelty the new scene offered, because soon after that year, moviegoers started declining steadily. by the time of 1991 the number of admissions to the theaters would have declined in a 50 percent(ni 1994; gomery and paford-overduin 2011). the 1980s during a short period of time during the 1980s, china enjoyed a third golden age of cinema. this was where films from all types started being made: drama movies, satirical movies, science fiction movies and even kung-fu movies which were not as common in chinese film history as it might seem. although the chinese public had its own trends and tastes, the international impulses started to be felt in the mainland. the best example is that as a result of how famous the star wars movies had become since its release in 1977, the first chinese science fiction movie was made: dead light on the coral island (1980) (sazatornil and alonso 2012). most of these movies were produced by just a few studios that had the dominance of the market: beijing studio, changchun studio and shanghai studio produced on average ten to twenty-one films per year, which was above the combined production of the rest of the studios. facing this inequality, the smaller studios had to retreat to the production of a varied catalogue of specific genres, like agricultural films, scientific and educational films, documentaries or animations (semsel and xia 1990). within the smaller studios, xi’an studio resulted to be one of the most important ones of the 1980s, and one of the few that was able to compete in the international arena. the studio’s turning point happened in 1983, when wu tianming got in charge. he started to produce http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 films of rather experimental filmmakers that got right out of the beijing film institute: chen kaige, tian zhuangzhuang or zhang yimou. these filmmakers would be later considered as “the fifth generation” of chinese filmmakers, and the ones that would help the rest of the world, situating china in the international cinema map by winning dozens of awards in different film festivals. as a strategy to make this investment possible, xi’an studio also produced a large number of entertainment films per year, which subsidized the art-films (zhang 2004). the main redefinition of the industry came in 1984, when the state argued, for the first time, that cinema was an integral part of the cultural industries instead of just an instrument to reinforce the government’s ideology. this statement incorporated a new system called the “self-responsibility system”, which withdrew the government’s financial aid to the studios and left them seeking financial backing outside. however, in these studios that functioned with an institutional structure that resembled the soviet style, the results of this reform were crippling. before the reform, chinese film studios were still making films according to the annual plans designed by the headquarters of the film bureau, and received a flat fee of 700000 rmb per title from the china film corporation for the rights(xiao and zhang 2002). after this, studios got their profits from the china film corporation, by either getting paid 9000 rmb per print or splitting the revenue by a pre-agreed percentage, which put a lot of pressure on the studios (song 2009; zhu 2003). pressured by this changes, the inefficiency of the studios started coming out to light: being state-run enterprises they had very low productivity problems. each studio was filled with staff members, who were writers, directors, cinematographers, designers or technicians. most studios also had a fixed group of actors and were extremely well equipped in comparison with http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 other state-run sectors, but at least they saved some money by contracting the extra cast in the place of the location of each film (semsel and xia 1990). in january of 1985 the china film bureau held a conference in which two sub-reforms were announced: a price reform that would consist on the adjustment of each individual film to its market value, and an enterprise reform, which aimed to give managerial autonomy and financial incentives for increasing the production to the involved companies (zhu 2003). the state also passed the responsibility of distributing from the china film corporation to local distributors which started functioning as middleman. in january of the following year the leadership of the film bureau was transferred from the ministry of culture to the newly created ministry of radio, film & television, also known as the rft (xiao 2004). the power struggles came soon after, due to the fact that the reform had only been made at state level, leaving provincial institutions unattended and causing glitches with the bureaucratic bickering. the only ones that were not affected by this managerial confusion were the nationalized studios (zhu 2002). instead of helping ease the chaos, the ministry of rft went one step further and issued the “document 975”, which was centered in a distribution reform that allowed the studios to share box-office profits with the distributors (zhu and rosen 2010). the instability could be perceived just as soon as 1985, when in the first quarter of the year the number of tickets sold were 30 percent smaller than during the same period in the previous year. the result of those first three months was a loss in the revenue of 9.36 million rmbs, or 1.17 million dollars. all the sectors in the industry – production, distribution and exhibitionlost money due to this, which pushed the further implementation of measures by the government and the rush in the negotiations by the studios with the china film http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 corporation (zhu 2003). the losses that year were present even in rural audiences, which seemed to have a crosscurrent pattern until then. by 1986, over 40000 mobile projection teams had surrendered and closed their doors (zhang 2004). by the end of 1986, the organizational confusion and continuous shrinkage of the domestic film market lead to a loss of revenue of one third of all chinese distribution companies. because of this, many of these companies were obliged to branch out by seeking revenues from other commercial ventures. however, the state-owned studios that were under complete governmental control were still immune to this managerial chaos (zhang 2004). shanghai studio and xi’an studio made echo of this problem by starting negotiation with the china film corporation with the aim of sharing the box-office receipts. their negotiation was a success; they both got what they wanted, but the results, not that much. both companies failed to make any real profits that year. shanghai studio discovered that their films were totally out of sync with the shifting tastes of the chinese spectators. xi’an studio on the other hand, produced films that were big hits in the chinese market, but also discovered that profits from the box-office were not as fast and as liquid as selling directly to the cfc. in order to ease the situation, the government started funding for these studios to produce main melody films, best known in the west as “propaganda films”. the government gave between one and two million rmbs per year to produce these films, which ended up being up to 25 percent of the total annual output of films (zhu 2003). in 1988 the boundaries were pushed even further with a symposium known as the “strategic planning for the film industry” for a further relaxation of price controls. the only reform that prevailed through the 1980s was the price reform: while in 1980 the film prints could be purchased at 9000 rmb. by 1989, their cost was of 10500 rmb. however, instead of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 connecting a film’s price to its market value, the price adjustment in 1989 retreated to the centralized mandatory system, contradicting the overall reform goal of reaching a market economy (zhu 2002, 2003). overall, during this first decade, the chinese government kept adjusting passively and partially to the economic reforms the country was facing, and focusing only in the sectors of exhibition and distribution, forgetting almost completely about the production sector. 1990s when the 1990s began, with the implementation of the new shared-revenue regulations, the distribution system took control of the studios. the china film corporation was still the one deciding how many prints it would need to distribute, and then it gave this copies to the provincial and local branch agenciesthat worked as a subordinate of the corporation. these prints were sold at a fixed price of 10500 rmb, no matter what the expectation or cost of the film was. the branch agencies accorded the distribution contracts with the projection units, who had no control over the titles that were offered at the local level. the studios were put out to deal with the risks, while the profits were kept in other parts of the channel. the screenings only gave losses to the projection units, which can be deducted from comparing the high costs of a screening (and increasing, from the 51 rmb that cost in 1983 to the 99 rmb that a single screening cost in 1988), with the very low cost of tickets (about 0.2 rmb) (pickowicz 2012). with these high levels of expenses almost none projection units showed profits, and if they did so, the regional branch agencies of the cfc recollected the funds in order to pay their costs. then, these agencies gave the after-expense profits to the office in beijing, and from that moment on, profits were divided: 29 percent of the money went to the film studios, and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 71 percent was held by the corporations. but that was not the end of it: if the studios were to show any profit after that, they had to pay a high 55 percent industrial tax, which meant that during the 1980s, only two to three studios were able to show a positive balance each year (pickowicz 2012). however, and against all odds, in 1991 the box-office started turning around, but still at a very low speed. to propel this growth, in 1993 the government allowed the entrance of foreign movies for the first time in chinese theaters. soon, these movies started outnumbering the chinese counterparts, in both the number of films screened and ticket sales. even if the chinese studios were not gaining almost anything directly from the foreign films, the novelty brought more people than ever to the movies that year, even to the screenings of the local movies. the reform that had been issued on the 11 th of october of 1992 might as well had had something to do with that decline in the box office. this reform stated that now the ticket pricing would reflect better the market price of each individual film by having the owners of the movies setting the ticket prices themselves (nilsson 2015). these new prices ranged from 2 rmb up to 80 rmb, depending on the geographical zone and the theater. during the 1990s the government’s goal became clearer than ever: to eliminate the multilayered distribution process under the old bureaucratic system which would dredge the clogged distribution channel and encourage competition among both distributors and studios. in 1993, and following the previously mentioned reform of 1992, the ministry of rft issued the “document 3 – suggestions on the deepening of chinese film industry’s institutional reform”, considered the new peak of the distribution reform, which also connected the print prices and ticket prices to the market (zhu 2003; su 2016). the document was continued by http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 another regulation the following year, which removed the obligation of producers within china to sell their films to the china film corporation and tired to normalize the transit between china, hong kong and taiwan (zhu 2002). in january of 1995 the ministry of rft issued a reform that had a direct impact in the boom of new films involving private investment, by relaxing the licensing policy of production. from this point on, any investor, even from outside the filmmaking industry, could have the right to coproduce if he were to cover 70 percent of production costs. in an attempt to imitate the western distribution method, the government also induced a division of the profits and losses among the producer, distributor, and the exhibitor. all the efforts to open to an international cinema worked in both directions: not only foreign films were pushing the chinese box offices towards profits, but chinese films were also being a success overseas. chinese filmmakers apparently also had discovered what attracted to the foreign spectators, who boosted the profits of these artsy films. the best examples of this pattern are the wedding banquet (1993), which just five months after its release had earned 6.5 million dollars, or farewell my concubine, only after three months since the release had already sold 4.2 million dollars worth of tickets, and just in the us commercial circuit. at that point everything was going towards the opening of the market of the industry, and in the path of creating the chinese hollywood which could easily be as big as bollywood in a few years. but in march of 1996, the ministry of radio, film and television held what is known as the changsha meeting. scandalized by the risqué literature, the politically explicit and exploitable artworks and pirated rock music, the state launched a program to criticize what they called “spiritual pollution”. because of this, the government started sponsoring public viewings of biographies of socialist heroes and model communist members. fifteen http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 percent of the screen time would now also be given to key films (nilsson 2015), specially selected by the ministry which represented the values of the main melody films.these movies would be especially focused on historical events, mainly for the education of children, peasants and the army. the involvement of the government in sponsoring cinema made the total films of 1995 to increase to 146, up from the 133 films released in 1990 – but that would go back down to 83 by 2000. another big issue of the meeting was that the government, quite scared by the success foreign films were having in the country -the box office of domestically produced films had declined to a record of 20 percent that yearand afraid they would tarnish the good spirit of the chinese, started forbidding their entrance. the attempt to control the entrance of foreign films went even further when the ministry of rft issued the “9550 project”, which stipulated that china would just let 10 foreign high quality films enter the market each year between 1996 and 2000 (hemelryk donald, hong and keane 2014). it also linked the imports to these “domestic quality pictures”, by giving the rights –and profitsfrom one import to the studio that produced one quality picture. all this steered away the private investors who, being much more profitable, shifted to producing tv dramas. (zhang 2008; zhu 2002) nevertheless, this did not stop the negative trend of diminishing the domestic film’s share in the home market. it would not be until 1999 that the domestic share started improving a bit, but once again, this was just an outcome of the decrease the entire market was having. during the 1990s films started having budgets more accordingly to the international market in order to adapt to them. in 1991, the average budget for a domestically produced film was 1.3 million rmb, a number that increased to 3.5 million rmb by 1997 (zhu 2003). with the nearby entrance of the new millennia, the local tastes were shifting and the public was waiting http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 for movies with much higher budgets and with a more hollywood-esque look. these big budget films would be done with governmental aid by adopting “main melody film” values and based on certain historical events that left the country in a good light. in march of 1998, the ministry of radio, film and television was suppressed, and in its place two new authorities on film were created: the state administration of radio, film and television (the sarft) and the ministry of information industry. this supposed an end. the 2000s the 2000s were the time for what the westerners called “the propaganda movies”. the previously mentioned trend of using governmental aid to make main melody films with a hollywood look accentuated over the years. one of the most famous of these, made by the same zhang yimou that made ‘red sorghum’, was ‘hero’ (2002), a historical drama that cost 250 million rmb and just by itself made up to 42.2 percent of the total box-office of the whole country in 2002 (zhang 2012). ‘hero’ also set a new trend in the budget for promotion, which had never been too important for the chinese movie producers. during a time when an average of 10000 rmb was spent in the publicity for each film, ‘hero’s budget exceeded 15 million rmb. there were a few big changes that lead to the actual film industry with the entrance in the new millennium. in 2002, the sarft announced that china film group would have to share its distribution authority with distribution companies from the municipalities. 2 the following year, the “temporary regulations on access to film production, distribution and exhibition” gave the same rights and responsibilities as the state-owned studios to the private enterprises, which lead to an increase of private studios in the following years (song 2009; van der berg 2 http://dfat.gov.au/trade/agreements/chafta/documents/cfta_submission_6se05.pdf http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 2013). these regulations have had direct impact in the current situation. nowadays, the studios that once dominated the chinese market have almost disappeared. in their place, other companies have arisen, oligopolizing almost completely the chinese movie industry. although the total number of studios has remained more or less the same, the number of movies has increased fivefold. these data do not show the disparity of the numbers: four big studios produce the vast majority of the movies, which have grown big due to fusions and acquisitions. these four studios are called the china film group corporation, the huayi brothers, the polybona film distribution company, and the shanghai film group. the biggest of these corporations was born in 1999 under the name of china film group corporation (the cfg), which is a conglomerate governed by the state. it has the most complete industry chain of all, which assures its obvious dominance in the chinese film industry. the cfg also produces more than 30 percent of the whole country’s film output year by year, and owns the only movie channel in the state, called cctv-6. this conglomerate also includes a share-owned theater, whose circuit takes up to 40 percent of the total domestic box-office. since 2004, the cfg has a joint-venture with warner bros and the hengdian group, who is the owner of the hengdian world studios (song 2009). huayi brothers was founded in 1997 and was one of the first and biggest private film corporations of china. it works in both the film production and film distribution and it takes 30-40 percent of the film market. 3 polybona film distribution company is, as its name states, a distribution company that has been shifting into movie production in the most recent years. poly bona is still the largest shareholding distribution company, managing 120 domestic and foreign films in the last five years and taking up to a 20 percent of the overall market share. with its 3 http://www.prnewswire.com/news-releases/imax-and-chinas-huayi-bros-group-expand-film-partnership169408446.html http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 immersion in film production, in 2006 alone it produced and coproduced over twenty films(song 2009). finally, and integrated by the government in 2001, shanghai film group is one of the top five largest film production enterprises and top fifteen tv series production enterprises. this large conglomerate also owns a movie channel called the oriental movie channel and the largest theater chain in china, the shanghai lianhe cinema circuit. it holds up to 25 percent of the box-office. however, and although the production of big budget films by these few studios is the major trend, there is an alternative one that has appeared from the impossibility of small studios to compete with them. there are over 300 private film corporations and 20 other state-owned studios operating independently without having any vertical or horizontal integration (song 2009). these film corporations have two ways of succeeding: the first one is by working on the production of artsy movies, usually joined by partners in hong kong or taiwan, and aiming to reach overseas niche markets that ask for oriental-style independent movies. the second way is by producing main melody films financed by the government, a path that usually the state-owned small studios follow. regarding the actual profits of the films, after the nineties regulations for controlling the international entrance the box-office was declining incessantly to the point where in 2003 the earnings from ticket sales got under 1 billion rmb. this revenue was generated mainly in the big cities and their theater chains which were much more used by people than small independent theaters. however, and partially because of the agreements china started having with other countries pushed by the inclusion in the world trade organization in 2001, during the mid-2000s the things started to speed up a bit, not having any yearly setbacks since 2003. in 2007, china’s http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 box-office revenue hit the 3.3 billion rmb, 6.7 billion if we count the whole chain of the industry. this revenue kept coming from the urban theater chains, or at least 83.8 percent of it did. the following year, the revenues reached the 4.3 billion rmb and for the first time in the history of china, this situated the country in the top 10 markets of the world for cinema (zhang 2012). this trend was enhanced with the creation of more big productions. one of the best examples of its exuberance is the film ‘founding of a republic’ (2009) by han sampling. the film, which was ordered by the government due to the 60 th anniversary of the founding of the people’s republic of china was produced and directed by the state-owned china film group’s ceo. because of the importance of the event, the film includes the appearance of 177 chinese leading stars and directors, including worldwide famous ones such as jackie chan, jet li, or zhang ziyi. the film got earnings of over 400 million rmb, which reassured that the country was entering the era of “main melody commercial blockbusters” (tang 2015). the movie market was skyrocketing. in 2009 the numbers were at 6.1 billion rmb, and by 2010 a new record was set up, with 10.17 billion rmbs in a sole year, with a growth of 43 percent compared with the previous year (su 2016). in 2009, something new also happened, an american blockbuster called ‘2012’ won the top of the box-office, but this was what could be called an american “propaganda film”, one in which only china can save the world. the success that came with this film raised many issues over how to market films and how the audience responded to certain patriotic storylines. with the skyrocket raise of box-office revenues, the number of screens started going up exponentially. before 2010 a little more than a screen per day was opened though the country. but after that year, the number doubled, even entire cinemas were built at a speed larger than http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 one per day. things only got faster after that, from the 4.2 screens per day that were inaugurated in 2010, to the 8.3 screens of 2011, up to the 10.5 screens that were opened daily in 2012 (leung and lo 2015). from 2010 onwards chinese films started having more and more leadership in the box-office share. the majority of top ten box-office films started being productions or coproductions of state-owned film studios, and in 2012 and 2013 the number one films were solely produced by china. during the last fifteen years alone, the domestic share has increased from 33 percent to 60 percent, which is considered a high share for a market (nilsson 2015). it is also important to acknowledge that the box-office tends to concentrate in big cities. in 2008, one-eighth of the total box-office was collected just in beijing. this reintroduces the idea that the migration patterns of people from rural to urban areas increases the overall box office, which has increased more than 25 times in less than fifteen years. and then, in february of 2015 an historic event happened, the chinese box-office surpassed the american one for the first time in history (brzeski 2016). this made all the alarms jump. it seemed to be just the very tip of the iceberg as to what was actually going on between china and hollywood, or at least what made it to the surface. in the last 20 years, the quota of international films being able to enter in china had changed very little, while the environment that surrounded it had evolved to an absolute competition between the country and the rest of the world. china versus the world from the start,the filmmaking industry had always depended in the relationship between different countries due to the demand of the public forvariety and the need of producers to get as much profit as possible. prints are easy to export, import, and have run around, and are http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 great subjects to economies of scale for this reason, so their cost of exportation tends to be much lower than the possible profits. for china, having a closed economy until 1978 did not make things easy for the adaptation of the speed that other countries were going at with importing and exporting, nor did the attempts of china to maintain protectionist measures to promote internal production. although before 1979, only the us blacklisted the american drama,‘the salt of the earth’ thatwas imported to china (sandhu 2014).it was not until the 1990s that the state started addressing seriously the foreign film production, most likelybecause before the structural overhaul, chinese studios were too unproductive to compete with the big hollywood studios. therefore the first film that was imported to china from the united states of america under this objective of opening the market was ‘the fugitive’ in 1993. it grossed 3 million dollars in china by itself, which alarmed the chinese authorities over the power these foreign movies had withthe local spectators (tempest 1994). during 1995,between 70 and 80 percent of the whole box office profits came from imported pictures (zhu and rosen 2010). this did not just mean gains from foreign pictures, but it also boosted the big domestic pictures.the chinese film ‘red cherry’ was placed on the boxoffice ratings, topping other international films, and the total return increased in 15 percent. hollywood’s high cost of production was set as a standard measurement for quality in the chinese studios, companies that had been budgeting on average a low 10 million rmb per film during the mid-90s. with movies like ‘in the heat of the sun’, ‘the king of lanling’, ‘red cherry’, or ‘shanghai triad’, the chinese industry started setting some investment records in the history of its national cinema. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 the government saw that regulating the entrance of these films was necessary. it was then when the ministry of radio, film and television introduced the “9550 project” that had been explained before, and which stated that a maximum of 10 foreign films would enter per year from 1996 to 2000. these films would be those which the government deemed excellent, and principally, the quota was filled almost entirely by american films, followed by those made in hong kong, which still counted as “foreign”(hemelryk donald, hong and keane 2014). the regulation linked the right to distribute these foreign imports with the studios that were involved in the production of “quality picturefilms” which the government wanted to subsidize indirectly for showing the good morals of chinese culture. in 1996 the three big studios that produced the main 10 box-office hits, beijing studio, changchun studio and shanghai studio, got the distribution rights of movies like toy story, waterworld or jumanji, in a shared box-office returns basis with hollywood (zhu and rosen 2010). on the other face of the coin, at the same time, chinese films started being distributed in overseas countries by the home studios.the profits created by these imports were not reaped by the studios. these imports were run by the china film import and export corporation, and the studios that distributed the movies ended up getting only 14 percent from this corporation, who managed the solo rights to foreign buyers. when in the 2000’s china entered in the world trade organization (wto), the chinese government accepted the increase in the import quota to 20 revenue-sharing foreign films per year, which still did not seem to be enough for the american authorities (zhang 2008). things started steering up in april 2007, when the usa won a case against china through the world trade organization for the restriction on imports. 4 it took another two years for the wto to 4 https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htm http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 consider china’s constraints, a violation of its rights and obligation as a member state, and was obliged to comply with the norms by march of 2011. in december of 2009 the wto rejected china’s appeal against the ruling, which said china should stop forcing owners from the united states to use chinese state-owned companies to distribute movies and books, which broke the monopoly that the china film group and huaxia film distribution (partially owned by china film) had. however, this ruling ignored the claim against the twenty revenue sharing foreign films per year, and it also agreed with china that their authorities had the right to ban foreign films that the censors deemed objectionable (zhang 2012). as the chinese rules are established, even with an increase in the quota, the future of each foreign film that enters the chinese market is uncertain. the government can take measures as it pleases throughout different times during the year when foreign movies cannot be shown. for example, without prior warning, on the 18 th of may of 2004, the authorities announced that the films that had been already agreed to be imported in would be banned from chinese cinemas during july and october because of the anniversary of the founding of the people’s republic of china in october 1 st ,as well as the anniversary of the tiananmen square events the 4 th of june. this tends to happen continuously, such aswhen the state administration of radio, film and television announced that during the year there would be three times – june 10 th to july 31 st , september 25 th to october 10 th and december 1 st to december 20 th – when only domestic blockbusters should be shown. 5 these times had the lowest box-office figures of the year, but still the policy continued. other indirect instruments are also used by the chinese authorities to reduce the presence of american films from the chinese theaters, such 5 http://dfat.gov.au/trade/agreements/chafta/documents/cfta_submission_6se05.pdf http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 as the reluctance to keep these films in the theaters once they reach the 100 million rmb mark, with the exception of “super-blockbusters” and sagas, which could be harry potter or james bond (zhang 2012). as the chinese government failed to modify its practices according to what was established in the wto ruling of december of 2009, it was forced to reach a temporary settlement with the united states’ government.this settlement between the united states and china, official in february of 2012, was called the memorandum of understanding, which increased the access of foreign films to the chinese market. the exact numbers were 34 films in comparison with the previous 20 per year, and a share in the box-office of the 25 percent instead of the 13 percent that had beenstipulated before. the settlement is to be consulted in 2017 again, with the aim of producing an official agreement by the 1 st of january of 2018 (o’connor and armstrong 2015). even if the entry barriers are very high, the returns american movies can get out of the chinese film market are even higher. experts have continuously stated that at the actual rate the chinese film market will overcome the american one by 2018 (child 2015). the increase in the chinese middle class will make the citizens spend more money on entertainment, and with a gdp that has increased eightfold in the latest fifteen years the chinese film market taking the first position seems unavoidable. while the chinese market is growing, the american one is stagnant. the cost of producing a hollywood movie keeps growing as the average production cost at present is approximately200 million usd, with an additional 50 or 100 million usd for marketing, which is a significant increase compared to the numbers in 1996 when the average cost was just of 60 million usd. this forces hollywood to look at foreign markets in order to just get http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 profits, making the chinese seem the more succulent one. just in 2014, the 6 biggest hollywood studios got 70 percent of their revenue from markets outside north america (o’connor and armstrong 2015). the united states are at the point where the need to enter into the chinese film market is so essentialthat american screenwriters alter scripts, scenes or castings taking the chinese censors and the 34 film limit into account. for a hollywood movie, sometimes being between those 34 films is not a privilege, but a necessity. big blockbusters such asx-men have been adapted to please the chinese.the film even added scenes in hong kong and a cameo of a famous chinese boy-band for it to be liked. this worked in fact; the film got 116 million usd of gross revenue just in china. other films that include space programs like ‘gravity’ or ‘the martian’ have to take into consideration that the chinese authorities do not like films thatimply their inferiority in military or spaceships, and that is why they both had to add scenes in which the chinese helped them –even in a minimal wayin the outer space. this way, gravity obtained 71 million usd in china, 10 percent of its worldwide gross profit. sometimes these changes are imposed directly by the censors who give vague guidelines over what is prohibited to the american scripts and once the film is made, they ban entire scenes. in ‘mission: impossible 3’, for example, a scene of clothes drying on flat rooftops had to be erased because the censors indicated that this showed a negative portrayal of shanghai as a city where no one owned clothes dryers –a sign of poverty(o’connor and armstrong 2015). another way of making investment in china, although it is a less popular one, works the other way around, the authorities allow foreign investors to invest in chinese companies up to a 49 percent in revenue sharing films. this way leaves aside the focus from the chinese market and centers in the production factors from the country. the law also allows investors to put http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 money in theaters, up to 49 percent of said theater’s cost, a number that goes up to 75 percent in the largest cities.they however, cannot create their own cinema chains (xu 2007). in this way foreign companies can either produce chinese films for the chinese market or for foreign markets, as it is common in the artsy films. sneaking by the quota: the coproduction the way to avoid the annual film quota is an easy but compromising one in order to find a company in china willing to coproduce afilm. this type of filmmaking has been present throughout the whole opening process of the industry. although it has gained importance in the last year, quite a few big names bet on this way of making films in order to assure themselves the entrance to the ‘red dragon’ country. the china film coproduction corporation was founded as soon 1979, a state branch that handled the films chinese studios formed a joint venture with other countries and regions – most commonly with hong kong during those first years, which was became the third main producer of films during the 1980s, right after hollywood and bollywood(cheung and marchetti 2015). according to the chinese legislation, a coproduction should include two or more parties of investors, having one of them from home and other one at least from a foreign country. it should be taken into account that the home investor could perfectly be the state itself, a case that has happened in numerous occasions, especially in the early years of the opening. in 1997 a new regulation about coproductions was introduced, thisstated that a maximum of 25 percent of movies could be done through the international coproduction method. things would be done that way from that point on until approximately 2002, when the government established the cultural industries division of the ministry of culture. this division http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 formalized the idea of using culture as a tool to promote china and the chinese government’s political agenda. this had a lot to do with the signing of the closer economic partnership arrangement (also known as cepa) on the 29 th of june of 2003. this agreement’s aim was to strengthen trade and investment cooperation between mainland china and hong kong. translated into filmmaking industry terms, this meant that hong kong would not need to be in the coproduction block anymore, and could freely make films using chinese cultural assets (peng 2015). however, china used this agreement in its own favor too, by being able now to use hong kong directors who already had a high profile films in hollywood as its own, for example, john woo or ang lee. nowadays, coproductions are arranged through the china film coproduction corporation and take up to 43 percent of ticket sales (peng 2015). this corporation is state-owned, and like other film production enterprises, is supervised by the saprft. coproductions have been increasingly common, for example, from 2002 to 2012 a total of 37 films were produced via coproductions, while in 2013 alone 5 films were made this way (o’conor and armstrong 2015). however, in order to be accepted as a coproduction, the film has to follow certain minimum requirements and guidelines. the film must have at least one scene shot in china, cast one chinese actor, have a minimum of one third of the investment from chinese companies and to illustrate “positive chinese elements”. the easiness to enter into the chinese market just by following these guidelines makes it a good incentive, and many big foreign filmmakers are willing to comply with the requirements to enter. the most recent and famous one is the new ‘avatar’ movie, which will be completed http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 through a joint-venture by cameron pace group and china’s tianjin northfilm group and tianjin hi-tech holding group, who will take care of the 3d effects of the movie and will grant james cameron’s movie a greater access to china in his upcoming film (o’connor and armstrong 2015). a look into the future predicting what is going to happen in the following years in the chinese cinema industry requires looking at the different forces that are involved, these forces can be predicted not to be going in the same direction but not in the opposite either. the boom of the industry has had more to do with the constant growth of the population than with the direct intervention of the government in the sector. the regulations have almost always been passive and a consequence of overall economic policies rather than a specific will to reform the creative industries of the country. the conflict caused by the government wanting to liberalize the economy of the country and the will to keep having ideological monopoly through cultural industries has caused contradictions in the past, and it would not be rare to have more of those in a future. however, the true propeller of the industry –the change in the demography of the countryis still on track. even though the economy will suffer from the long-term failure of past policies such asthe one-child policy, which has destined the country to an inevitable aging of the population that will require a change in the taxstructure and the overall economy.statistics say that even if china grows at a rate of a third part of its past growth rate, it will outstrip the united states in size by 2030 and will also become a high income country. 6 the increase in the living standards, altogether with the migration to urban centers and to the eastern part of 6 http://www.worldbank.org/content/dam/worldbank/document/china-2030-complete.pdf http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 china makes people climb in the maslow pyramid of needs. this change, and the already huge population the country allows for a skyrocketing market other countries could not even dream of. nowadays, the change is represented in the incremental creation of cinema chains and projection screens throughout the whole country. the truth is, china is able to absorb even more screens, and the habitants-per-screen ratio is still very high compared to other more modernized countries, which means that if this trend goes on, china’s film industry could easily double its size in just some years. although, as it has been said that the government´s intervention in the film industry has been somewhat deficient, the strategy china is using to protect its local production is an interesting one. in a globalized state of the world and participating in organizations such as the world trade organization, protectionist measures are difficult to apply by themselves. nevertheless, china has found the legal vacuum for it using censorship not as an ideological instrument but as an economical one. the wto already dictated that china should relax its quota of international movies entering the country, but it also announced that china would still have the right to censor whichever movie they wanted. so if a foreign movie surpasses certain amount of box-office revenues, the government can use its right to ban it from the theaters alleging censorship motives. insiders from the sector have commented that the quota is going to be expanded soon, but no official statement has been made yet. it would be advised to have an eye on the revision of the memorandum of understanding that is going to be announced in 2017 and made official on the 1 st of january of 2018. the necessary steps to be taken after the memorandum to appease the international conflict remain uncertain and will depend to a large degree in which will be stated in this revision. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 references brzeski, patrick. 2016. “china box office pulls in massive $1b in february, topping north america.” the hollywood reporter, march 1. accessed june 2, 2016. http://www.hollywoodreporter.com/news/china-box-office-pulls-massive-871688 cheung, esther m.k., and gina marchetti. 2015. a companion to hong kong cinema. hoboken, nj: john wiley & sons. child, ben. 2015. “will china’s growing box office dominance change hollywood for ever?”. the guardian, september 10. accessed june 2, 2016. https://www.theguardian.com/film/filmblog/2015/sep/10/will-china-box-office-dominancechange-hollywood development research center of the state council, the people’s republic of china. 2013. china 2030, building a modern, harmonious, and creative society. washington d.c.: the world bank. http://www.worldbank.org/content/dam/worldbank/document/china-2030-complete.pdf gomery, douglas, and clara pafort-overduin. 2011. movie history: a survey. abingdon: taylor & francis. hemelryk donald, stephanie, ying hong, and michael keane. 2014. media in china: consumption, content and crisis. london: routledge. imax corporation. 2012. “imax and china’s huayi bros. group expand film partnership.” pr newswire, september 11. accessed june 4. http://www.prnewswire.com/news-releases/imaxand-chinas-huayi-bros-group-expand-film-partnership-169408446.html leung, chi-cheung, and sonny shiu-hing lo. 2015. creativity and culture in greater china: the role of government, individuals and groups. piscataway, nj: transaction publishers. media entertainment and arts alliance to the department of foreign affairs and trade. 2004. “history of the chinese film industry” australia-china free trade agreement feasibility study. http://dfat.gov.au/trade/agreements/chafta/documents/cfta_submission_6se05.pdf national media museum. 2011. “cinematography, a very short history of cinema.” accessed june 4. http://www.nationalmediamuseum.org.uk/~/media/files/nmem/pdf/collections/cinematograp hy/averyshorthistoryofcinema.pdf ni, zhen. 1994. reform and chinese cinema. beijing: china film press. nilsson, pierre. 2015. “chinese government’s role in commercialisation of the film industry.” thesis diss., lund university, school of management. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 o’connor, sean and nicholas armstrong. 2015. “directed by hollywood, edited by china: how china’s censorship and influence affect film worldwide.” staff research report.washtington, d.c., us – china economic security review commission. http://origin.www.uscc.gov/sites/default/files/research/directed%20by%20hollywood%20edit ed%20by%20china.pdf peng, weiying. 2015. “china, film coproduction and soft power competition.” thesis diss., queensland university of technology. pickowicz, paul. 2012. china on film: a century of exploration, confrontation and controversty. lanham: rowman & littlefield. sandhu, sukhdev. 2014. “salt of the earth, made of labour, by labour, for labour.” the guardian, march 10. accessed june 3, 2016. https://www.theguardian.com/film/2014/mar/10/salt-of-theearth-labour-workers-blacklisted-filmmakers sazatornil, miguel, and maria cruz alonso. 2012. cine chino: breve mirada histórica. madrid: imagine press ediciones. semsel, george stephen and hong xia. 1990. chinese film theory: a guide to the new era. portsmouth: greenwood publishing group. song, tingting. 2009. “a new definition for today’s chinese independent cinema.” ejournalist 9, 1:157-70. accessed june 1, 2016. http://eprints.qut.edu.au/32233/1/c32233.pdf su, wendy. 2016. china’s encounter with global hollywood: cultural policy and the film industry, 1994-2013. kentucky: university press of kentucky. tang, xiaobing. 2015. visual culture in contemporary china. michigan: university of michigan. tempest, rone. 1994. “how do you say “boffo” in chinese? “the fugitive”.” los angeles times, november 29. accessed june 3, 2016. http://articles.latimes.com/1994-11-29/entertainment/ca2665_1_american-movie van der berg, jordi .2013. “entrepreneurship in china: the dynamics of the development of entrepreneurial and private initiatives in the chinese film industry in relation to the support and resistance of the initiatives of the chinese formal institutions, since the reform and opening of 1978.” thesis diss., universiteit van amsterdam. world trade organization. 2010. “measures affecting the protection and enforcement of intellectual property rights.” dispute settlement, dispute ds362. accessed june 3, 2016. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htm xiao, li. 2004. “reeling back the years: development of a film industry in china.” beijing this month. accessed june 3, 2016. http://www.btmbeijing.com/contents/en/btm/2004-08/art/film xiao, zhiwei, and yingjin zhang. 2002. encyclopedia of chinese film. london: routledge. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 1-28, january-june 2017 doi.o doi: 10.1344/jesb2017.1.j021 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 xu, gary g. 2007. sinascape: contemporary chinese cinema. lanham: rowman & littlefield zhang, rui. 2008. the cinema of feng xiaogang: commercialization and censorship in chinese cinema after 1989. hong kong: hong kong university press. zhang, yingjin. 2004. chinese national cinema. abingdon: routledge zhang, yingjin. 2012. a companion to chinese cinema. malden, ma: wiley-blackwell. zhu, ying. 2002. “chinese cinema’s economic reform from the mid-1980s to the mid-1990s.” journal of communication 52, 4:905-21. doi: 10.1111/j.1460-2466.2002.tb02580. zhu, ying. 2003. chinese cinema during the era of reform: the ingenuity of the system.wesport, ct: praeger. zhu, ying, and stanley rosen. 2010. art, politics, and commerce in chinese cinema. hong kong: hong kong up. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 38 montserrat pareja-eastaway university of barcelona (spain) creative industries abstract this journal welcomes contributions exploring the intrinsic features of the field of creative industries and activities of entrepreneurs who use creativity as the basis of their work; analyses of literature concerning evolutionary developments in companies and their adaptations linked to the management of creativity; and, finally, reviews of books in cutting-edge research on the evolution of the creative enterprise. keywords: creativity; knowledge; creative disruption; project ecology; network. the organic changes taking place in forms of production and business management respond to new perceptions around the needs of different actors participating in the market (castells 2001). the 20 th century has witnessed major alterations in the international context: successive globalizing waves have transformed the internal relations of production as well as patterns of consumption, distribution, supply… internationalization and economic, social, and cultural interdependence, together with the increase in flows of capital, people, raw materials, etc., shape a new environment which companies must adapt to (amin and cohendet 1999; pitelis et al. 2006). corresponding author. e-mail: mpareja@ub.edu received 30 october 2015 accepted 10 december 2015 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 39 the lamarckian principles of adaptation refer to the intrinsic tendencies of organisms to improve themselves by developing new characteristics that allow them better adapt to their surrounding environment. thus, in the case of the social sciences and economics, in particular, the managerial view of businesses responds to an evolutionary process of adaptation in which disruptive innovation acts essentially as a driving force for change and development (schumpeter 1942). according to these arguments, the essence of change is found in the creative destruction of products and processes enabling restructuring and adaptation to contextual macroeconomic change both in the shortand the long-term. there is no doubt that in periods of economic recession, disruptive tension and permanent innovation bring about advances in general dynamics and, at the same time, a revolution in the microeconomic business fabric, giving rise to new corporate metabolisms. while there are many productive sectors that demonstrate transformations of this kind, creative activities present less resistance to change, a higher propensity for creative destruction, and greater adaptability to the demands of the new international context (potts 2011). the technological revolution and improvements in connectivity and infrastructure present a new challenge for companies in the 21 st century: comparative advantage has ceased to depend solely on keeping costs to a minimum, giving way to new alternative formulas in enterprise creation and to radically innovative organizational models in business management. digitalization and the non-standardization of the relations of production have contributed decisively to this: they are the tools that will give rise to a new division of labour that breaks with traditional class structures, determining novel but far-reaching transformations in the business world. the use of ‘creativity’ as an innovative element in academic studies related to economics, business, or sociology, where the ‘creative class’, the ‘creative industries’, or ‘creative cities’ volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 40 act as leitmotifs in a more and more substantial body of literature, finds its antecedents in other more classical approaches such as the role of ‘bohemians’, marshallian nodes, industrial districts, or regional innovation systems. in fact, creativity as such has led to different paradigm shifts in productive relations and in the generation of innovation over the course of history. as argued by fonseca (2008), the peculiarity of current change is related to the degree of novelty and the complex participation and importance of context, formed by the convergence of technologies, globalization, and growing concern around the unsustainable nature of the international scenario: ‘the novelty is actually found in the acknowledgement that the context (…) gives creativity the responsibility of motivating and founding new business models, organizational processes, and an institutional architecture that stimulates economic and social sectors and agents’ (fonseca 2008, 24). regardless of the approach used in the study of creativity, whether it is interpreted as a psychological characteristic, a certain type of behaviour, or a cognitive process, many researchers on creativity agree that it should be studied within its social context, understood as the result of different processes of interaction (csikszentmihalyi 1988; amabile 1996; sternberg and lubart 1991, among others). the knowledge economy that dominated the productive scene in the second half of the last century, with more and more knowledge-intensive industries and sectors, has continued its transformation towards what many call the ‘creative economy’. the strategic resources of the new creative economy are concentrated mainly in talent and human capital: the creative economy does not do without knowledge as an essential input, but does include creative ‘genius’, both individual and collective, in the production of innovation in different spheres. the delimitation of what is understood by creative economy involves, firstly, product analysis, where the qualifications of the worker, their talent, their skills, the singularity of the volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 product, and changes in competition based on the creativity accumulated by the final product (‘added creativity’) define new supply tendencies. secondly, it involves the complex analysis of new emerging forms of organization in productive and business activity precisely within these sectors where creativity serves as a connection between initially disparate activities. as defined by scott (2006), the creative economy is framed within a new cognitive cultural capitalist model in which technology, the scientific/technical intensity of work, symbolic output, and the ‘aestheticization of commodities’, among other elements, come to shape a new relational framework between agents. before moving on to the issues that will be considered relevant in this thematic field, it is worth commenting on the definition of the creative industries. many international organizations (unctad 1 , unesco 2 ) and academics (caves 2002; hartley 2005; markusen et al. 2008; and florida 2002 among others) have contributed to a typology of the characteristics that define the creative industries. without entering into discussions around the incorporation or not of cultural industries under the same rubric, the definition used by the majority coincides in distinguishing between the creative industries as those based on individual creativity, skills, and talent, and the potential for wealth and job creation through the development of intellectual property. the united kingdom has been a leader in recognizing the creative industries at the heart of the creative economy through the development of ad hoc studies, statistical identification in terms of the creation of employment and productivity, the territorial mapping of these activities, and the creation of the pioneering agency nesta 3 . many of the studies that consider the creative industries follow this model. however, currently, the creative industries 1 creative economy report 2010 2 creative economy report, special edition 2013 3 http://www.nesta.org.uk/library/documents/a-manifesto-for-the-creative-economy-april13.pdf volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 have a relevant function both in developed economies and in those that are undergoing growth and development. their contribution is associated with processes that go beyond the analysis of businesses and interweave with parallel processes such as urban revitalization, the emergence of new spaces for creation, and the stimulation of other traditional sectors. beyond the arbitrariness of the selection of sectors on the basis of national accounts or other criteria of statistical representativeness, the journal of evolutionary business will approach the creative industries on the basis of the characterization of their activities. it is often the case that quantitative research requires strict definitions of the sectors considered. however, here, we strongly commit to a broad vision of creativity, both qualitatively and quantitatively, applied to different businesses in terms of its contribution to process innovation and to product innovation. the rise of industries that use creativity as an essential production input and as a mechanism for adaptation to the changing environment represent the central theme of all of the articles published in this section. with regard to the generalized transformation of the circumstances that affect companies on a global scale, the aim is to show how certain sectors and activities respond to the challenge of this transformation. the ‘aestheticization’ of consumption, the importance of new technologies, new forms of governance in these sectors, the values and functions of the creative entrepreneur, and new business models particular to these activities will be, among others, some of the key features to be taken into account in this publication. one of the aspects generalized across the creative industries is the small size of the companies. for example, creative companies in europe are especially small, with those with 3 workers or less representing approximately 60 per cent on average (unesco 2013). as indicated by the utrecht school of arts-khu (2011) in its study on entrepreneurship and the creative industries, the entrepreneurial character of the workers in creative industries is a volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 differentiating feature in relation to other sectors or activities that explains, in part, their small size. this feature decisively influences the growth patterns of these industries since they are limited by their size both in terms of investment in infrastructure and their ability to take on projects of a certain scale. the small size of creative companies and the inevitably high risks involved in creative endeavours that move beyond normal criteria for evaluating the viability of business activities represent an additional difficulty for these companies when it comes to accessing resources. this has given rise to the proliferation of new models for acquiring resources that are very common among these types of activities, such as, for example, crowdfunding or online investment opportunity platforms, revealing a set of formulas based on the possibilities offered by new technologies in matters of interconnection and access. these channels are in themselves financial product innovations that require compensation that is not necessarily based on financial returns. the conception and attributes of the ‘industry’ as such do not fit with the cultural and creative sectors (horkheimer and adorno 1976). how does competitiveness work in these sectors? specialization and, consequently, knowledge exchange are common elements in industries that use creativity as a main input for the production of value. in this regard, instead of focusing on the value chain, the ‘projectification’ of production characterizes the creative sectors, enabling the reuse, to a certain extent, of the knowledge acquired in a specific project in other possible subsequent projects (grabher 2002). beyond the consideration of their size, this fact has a direct impact on the organizational formulas of the companies, giving way to systems based on the ‘projectification’ of outputs. the importance of networks is crucial in the creative industries since to a large extent project development is firmly based on participation and recognition in explicit and tacit, formal and volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 informal networks. the lineal value chain of activities based in more traditional sectors is replaced by a tapestry of contacts that are relatively stable during the time it takes to carry out a certain project, but with no guarantees of continuity once the project in question has been completed. knowledge exchange and the search for complementarities between agents become essential elements for the articulation of many business model proposals. for this system to work, the networks that workers in creative industries establish among themselves should be enhanced to generate specific ‘project ecologies’ (grabher 2002). the contextualization of each business plan in the creative scene responds to the articulation of mechanisms that allow for the survival of an amalgam of latent relationships that are concretized in specific projects. the role of territory (whether it is a city or a district) facilitates or impedes the proliferation of connections between different local agents working in creative activities. in fact, territory transforms and adapts constantly to new paradigms, acting simultaneously as cause and effect for their articulation (scott and storper 2003). the idea of the ‘project ecology’ is understood as the practice of temporary and episodic collaboration based on a complex fabric of links and institutions. networks are, therefore, the basis of the articulation and success of project ecologies, where the context and the setting acquire their most important meaning as active scenes for temporary collaboration. multiple personal, professional, and organizational networks are the basis for the interaction between the different actors that participate in a project. project ecologies not only represent a particular set of organizations and institutions linked temporarily together for the completion of a specific task. the notion of project ecologies also refers to a set of organizational logics, individual identities, values, and loyalties (grabher 2004). experience, reputation, and legitimation become key ingredients for the development of interrelations based on projects. there are agreements, conflicts, and tensions among and between the practices of different volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 networks. the magnitude of these difficulties will determine the success or failure of the project ecology: ‘who you know matters almost as much as what you know’ (christopherson 2002, 2008). the multiplicity of meeting spaces, virtual or physical, temporary or permanent, enables the configuration of genuine spaces for creation. this is where knowledge exchange takes place, collaborations are generated, and traditional business models are reconsidered (spinuzzi 2012). one feature that characterizes the activity of the creative industries is the use of innovative spatial forms, from co-working spaces to online platforms and permanent computer-based interaction. new physical production models give rise to novel research exploring in detail both the legal nature of these spaces (public or private), their temporality (permanent or ephemeral), or the typology of interactions generated between the different users. often, the creation of professional communities is associated with these types of spaces where freelance workers, entrepreneurs, or very small enterprises resolve longstanding problems of establishment in a region or territory (adler and heckscher 2007). moreover, the proliferation of the creative industries has given rise to the emergence of a new model of managed workspaces in creative activities, which are especially relevant in the embryonic stages of business development (montgomery 2007). the creative industries present changing dynamics with the introduction of novelties across different spheres both in terms of the products they offer and the production of those products. the importance of soft innovation (stoneman 2010) in creative activities goes beyond technological or scientific innovation; we are referring here to activities associated with product innovation and differentiation. as mentioned above, symbolism in the production of goods and the aestheticization of consumer products represent challenges in the context of the creative economy. most soft innovation is not included categorically in profit and loss volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 accounts, but, without doubt, intangible elements acquire economic value and are one of the most important assets in the creative industries. additionally, hybrid forms of innovation flourish in the creative industries given the blurred boundary between productive and consumption activities. the strict differentiation between the consumer and the producer or between the supplier and the client disappears, giving way to unexpected relations that alter depending on the place or the time. the democratization of technology as a basic input promotes and stimulates this type of innovation in the forms of relationships between agents. the business models that emerge from this transformation in productive relations take this change and incorporate it into new company definitions. additionally, these models take on the challenge of incorporating the active participation of other agents, beyond those of the company itself. some of these models can be seen in specific examples of co-creation, developing agreements between collaborative partners in the production of process innovation (den hertog 2000) or product innovation, and even through user-generated content. the context of prosperity and growth that took a turn for the worse in 2008 has unequivocal consequences for workers in general and creative workers in particular: multiple jobs, precarious labour, and below-market salaries also have an impact in the world of activities focused on the stimulation and development of creativity. there are several authors that have geared their research towards this field (banks and deuze 2009; gill and pratt 2008; and ross 2009, among others), debunking the concept of the creative class ‘à la florida’, providing empirical evidence from different creative sectors or activities that shows the relative insecurity and/or instability of the workers, counterbalanced with new forms of relationships between workers which have more in common with the collaborative economy than competition in the strict sense. also surprising is the overlap that exists between the private volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 and professional lives of creative workers, brought about, among other things, by the passion they share for their work, and serving at the same time as a way to overcome isolation and satisfy the need to seek alliances. hence the importance of bottom-up initiatives in a predominantly informal context involving innovative formulas of collaborative work that are strongly determined by the socio-economic context in which they are produced. some authors (maliszewski 2004; peck 2005; musterd and murie 2010) juxtapose this vision of the world of creative workers to florida’s (2002) own presentation of the new lifestyle of the creative class. particular emphasis is placed on the notion of ‘makers’ (creative entrepreneurs that are the basis of the new 21 st -century industry), which reflects the importance placed on the figure of the artist, the creator, and the implementation of the authentic values of the entrepreneur and their creative genius (banks 2010). from this thematic field of the journal of evolutionary studies in business, we invite contributions that fully or partially coincide with the elements discussed here, including: papers exploring in detail some of the intrinsic features of creative industries and activities or of entrepreneurs who use creativity as the basis of their work; analyses of literature concerning evolutionary developments in companies and their adaptations and innovations linked to the management of creativity; and, finally, reviews of books in cutting-edge research on the evolution of the creative enterprise. references adler, paul s., and charles heckscher. 2007. “towards collaborative community.” in the firm as a collaborative community, edited by charles heckscher and paul s. adler, 11-105. new york: oxford university press. volume 1, number 1, 38-50, january-june 2016 doi: 10.1344/jesb2016.1.j003 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 amabile, teresa m. 1996. creativity in context: update to the social psychology of creativity. boulder, co: westview press. amin, ash, and patrick cohendet. 1999. “learning and adaptation in decentralised business networks.” society and space 17:87-104. banks, john, and mark deuze. 2009. “co-creative labour.” international journal of cultural studies 12(5):419-431. doi:10.1177/1367877909337862 banks, mark. 2010. “craft labour and creative industries.” international journal of cultural policy 16(3):305-321, special issue: creativity and cultural policy castells, manuel. 2001. the internet galaxy: reflections on the internet, business, and society. new york: oxford university press. caves, richard e. 2002. creative industries – contracts between art and commerce. cambridge: harvard university press. christopherson, susan. 2002. “project work in context: regulatory change and the new geography of media.” environment and planning a, 34(11):2003-2015. christopherson, susan. 2008. “beyond the self-expressive creative worker: an industry perspective on entertaintment media.” theory culture society (25)73. doi:10.1177/0263276408097797 csikszentmihalyi, mihaly. 1988. “society, culture, and person: a systems view of creativity.” in the nature of creativity, edited by r. j. sternberg, 325-339. new york, ny: cambridge university press. den hertog, pim. 2000. 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and technical communication 26(4): 399-441. doi: 10.1177/1050651912444070 sternberg, robert j., and todd i. lubart. 1991. “an investment theory of creativity and its development.” human development 34(1): 1-31. stoneman, paul. 2010. soft innovation: economics, product aesthetics, and the creative industries. oxford scholarship online isbn-13: 9780199572489. doi: 10.1093/acprof:oso/9780199572489.001.0001 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 felix barahona márquez fariza achcaoucaou paloma miravitlles university of barcelona (spain) mitigating the isomorphic conflicts faced by emnes in southern europe: the case of chinese subsidiaries in spain abstract emerging market multinational enterprises (emnes) are rapidly increasing their foreign direct investment around the world and, in particular, in the countries of southern europe. although, international business scholars have been quick to put the spotlight on this new phenomenon, the cultural adaptation of emne subsidiaries to host-country environments, especially those of europe, has remained largely unexamined. this question acquires particular relevance owing to the considerable cultural distance between emerging and developed economies and the isomorphic conflicts that can arise at the subsidiary level. here, we examine this situation by reporting two case studies of chinese subsidiaries operating in spain. our findings suggest that guanxi – the deep-rooted system of personal relations and social connections founded on mutual interests – plays a major role in the search for legitimacy undertaken by chinese subsidiaries located in southern europe. the adoption and adaptation of chinese cultural values and practices to the local environment allow the subsidiary to align itself with the culture of the parent organization at the same time as it embeds itself in the host environment, thus resolving any isomorphic conflicts. keywords: emnes; subsidiaries; liability of foreignness; legitimacy; cross-cultural management; cultural adaptation; expatriates. corresponding author. e-mail: felix.barahona@ub.edu received 01 february 2016 accepted 17 april 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 introduction the rise of emerging market multinational enterprises (emnes) is a recent phenomenon that is gaining in significance in the international business field. not only are these companies, with their origins in emerging countries, able to compete effectively in their home markets, but they are also investing successfully in the most advanced economies, the birth place of many of the world’s leading players. indeed, the growth of emnes is clearly evidenced in terms of foreign direct investment (fdi). according to unctad (2015), the share of global fdi outflows from emerging economies has increased from 5% in 1990 to 14% in 2004 and 39% in 2014. moreover, an increasing number of emnes appear in fortune’s ranking of the world’s 500 largest companies: in 2005 47 emnes were listed, in 2013 the number had risen dramatically to 132, reaching 158 in 2015, representing 32% of the global 500. among the countries of southern europe, spain was ranked 12th in the list of global fdi inflows (unctad, 2015) with a total of 18,249 million euros, that is 18.68%, originating from emerging economies. indeed, spanish fdi inward stock from emerging countries has risen dramatically by 159.90% in just six years (2007-2013). consequently, investments in spain from emerging economies are clearly on the upturn, with an average growth rate of 26.65%, compared to just 1.57% in all other foreign countries. in this regard, latin america is gradually being pushed aside by asia, whose share of total stock has risen from 1.53% to 20.06% in only six years. in fact, in the latest fortune 500, china had 92 (106 if we include hong kong and taiwan) of the world’s 500 largest corporations by revenue. this rise of emnes has aroused considerable interest among academics, resulting in a broad range of empirical studies and theoretical works aimed at analysing their characteristics, determinants, pathways and performance (buckley et al. 2007; child and rodrigues 2005; http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 cuervo-cazurra 2007; gammeltoft et al. 2010; guillén and garcía-canal 2009; luo and tung 2007; mathews 2006; ramamurti 2009). against this backdrop, a number of specific questions arise concerning the spanish context, most notably: what is the degree of penetration of emnes, particularly chinese emnes, in spain? how do chinese firms interact with the spanish host-environment in adapting to a new distant market? the aim of this paper therefore is to use micro-data to determine the extent of the chinese presence in spain and to adopt a qualitative approach in order to examine the cultural adaptation of chinese subsidiaries to the host country. this latter question is of particular relevance, especially given the paucity of studies conducted to date examining issues of cultural fit and despite its obvious importance to the success of fdi. chinese fdi has, on the other hand, been the subject of a number of studies, including analyses of how chinese subsidiaries address their disadvantages in developed countries (klossek et al. 2012; si and liefner 2014; wong 2012), the factors that determine the decision-making autonomy of chinese subsidiaries in germany (schüler-zou et al. 2013) and the role played by taiwanese subsidiaries and their overall performance (chang et al. 2012; chen et al. 2013; chiao and ying 2013). to fill this gap in the literature, we present case studies of two chinese subsidiaries operating in spain that provide valuable information about how they resolve the isomorphic conflict (forsgren 2013), by seeking internal and external legitimacy at the subsidiary level. thus, the main contribution of this paper is to illustrate the way in which deep-rooted chinese values and practices, especially guanxi, play a significant role in the subsidiaries to balance pressures from both the homeand host-environments. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 204 the rest of this paper is structured as follows. the next section describes the extent of the presence of chinese emnes in spain. then, we examine the main theoretical arguments concerning the institutional and cultural features of chinese subsidiaries. section 4 discusses the research methods employed here. in the fifth section, we present our analyses and the results of our case studies of chinese subsidiaries. finally, we discuss our findings and identify both the limitations of this paper and future avenues of research. presence of chinese emnes in spain among its asian partners, china has recently become the key player in the world economy in terms of fdi. despite the ongoing slowdown in china, with an economy that is expected to grow at 6.3% in 2016 compared to 7.3% in 2014 (imf 2016), the country is set to continue its investments in the most developed countries, thus playing a major role in the fdi arena. spain is the 9 th largest destination for chinese fdi among the eu-27 countries, behind the united kingdom, germany and france (rhodium 2015). indeed, spain’s position as a recipient of chinese investment has grown rapidly in recent years. according to the spanish foreign investment registry (datainvex) 1 , the evolution of chinese fdi in spain accelerated dramatically from 2008 onwards, increasing from 26 to 610 million eur between 2010 and 2014 (see table 1). in just a few years, china rose to second place in the rankings behind only mexico, having occupied a distant 19 th place in 2009. this rapid growth means that today 1 datainvex is an official database recording all fdi in spain since 1993. to eliminate any speculative capital movements that might blur our interpretation of this fdi, flows received by entities holding foreign securities were excluded from the analysis. additionally, investments were included only by the ‘last country of origin’, as this is where the last owner of the investment resides. this approach is more reliable than including the investments by the ‘immediate country of origin’, since this might be a mere country of transit for tax reasons. the emerging countries included in our study are argentina, bahrain, brazil, bulgaria, chile, china, colombia, czech republic, ecuador, egypt, hong kong, hungary, india, indonesia, kazakhstan, korea (south korea), kuwait, latvia, lithuania, malaysia, mexico, morocco, peru, philippines, poland, qatar, romania, russia, saudi arabia, singapore, south africa, thailand, taiwan, turkey, ukraine, united arab emirates, uruguay and venezuela. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 205 china accounts for 5% of spain’s total fdi inflows, when barely four years ago it represented just 0.42%. in terms of stock, china is also second only to mexico, overtaking in a very short period of time the united arab emirates, brazil, saudi arabia, argentina and south korea, which had been the emerging countries that invested most heavily in spain. table 1. spain’s fdi inflows from china and hong kong (2007-2014) source: spanish foreign investment registry (datainvex) we identified 86 chinese capital firms in spain in 2013 in the sabi database 2 . these subsidiaries represent 6.14% of employees, 4.70% of operating revenue and 2.27% of assets of all the emnes with a direct presence in spain (see table 2). in terms of mean size, chinese firms have caught up with their counterparts in other emerging asian countries, including korea. therefore, among the many emerging countries included in this study, china is increasingly establishing itself as a highly relevant player in spain. however, if we compare chinese mnes located in spain with their counterparts from other developed countries, they still represent just a small fraction. this is in line with the data described above for chinese outflows from the country. indeed, the vast majority of chinese 2 the sabi database (iberian balance sheets analysis system) includes financial data from more than 2,000,000 spanish companies. the firms selected in our sample had to be subsidiaries in which at least 50.01% of their capital belonged to mnes from the emerging countries selected. note, we do not differentiate between investments from china and hong kong, given that hong kong serves as an important bridge for chinese firms wishing to venture overseas (aminian et al. 2008), providing a platform for tax purposes and allowing them to avoid chinese government regulations (ramasamy et al. 2012). besides, given hong kong’s role in roundtripping, we have sought to exclude investments from developed economies or other foreign countries. year 2007 2008 2009 2010 2011 2012 2013 2014 china (total eur million) 2.16 1.05 2.85 26.41 62.16 141.68 526.54 610.31 hong kong (total eur million) 2.61 0.26 1.12 25.58 5.22 40.33 241.16 245.20 china and hong kong (total eur million) 4.78 1.30 3.97 51.99 67.38 182.01 767.70 855.50 china and hong kong as asian emerging countries (%) 0.77 0.94 5.15 46.54 62.56 29.92 90.80 64.77 china and hong kong as total emerging countries (%) 0.27 0.30 0.10 12.31 7.86 13.37 36.33 25.09 china and hong kong as total foreign countries (%) 0.02 0.00 0.03 0.42 0.27 1.24 4.56 4.69 http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 206 subsidiaries featured only established in spain from 2007 onwards. consequently, the chinese presence in spain is a nascent phenomenon, particularly when compared with fdi from developed economies. table 2. comparison: chinese subsidiaries and other foreign mne subsidiaries in spain (2013) chinese subsidiaries (including hong kong) emerging asian subsidiaries (including china and hong kong) emnes subsidiaries total foreign subsidiaries % chinese subsidiaries as total asia % chinese subsidiari es as total emnes % chinese subsidiaries as total foreign companies absolute values 86 247 700 15,906 34.82 12.29 0.54 employees absolute values 3,618 11,186 58,920 1,320,213 32.34 6.14 0.27 average values 50 60 127 137 operating revenue* absolute values 2,911 8,323 61,988 481,106 34.98 4.70 0.61 average values 37 41 119 42 total assets* absolute values 1,795 5,150 78,974 785,389 34.85 2.27 0.23 average values 23 25 140 65 *absolute values in eur million source: based on data taken from sabi chinese firms operate mainly in the services sector, 77.91%, compared to 19.77% in manufacturing industries 3 . within the services sector, most companies operate in less knowledge-intensive activities (83.58%) as wholesale traders of a diverse range of products (electronic, chemical and different types of industrial materials), while the remaining chinese firms (16.42%) operate in knowledge-intensive sectors, such as financial or technical activities (table 3). as for those operating in the industrial sector, a high proportion of chinese emnes work in medium-low-technology industries (52.94%), such as metal products. however, a fairly large proportion operates in medium-high-technology industries (41.18%), such as chemical or machinery and equipment manufacturing. table 3. classification of chinese subsidiaries in spain by level of technology and knowledge intensity (2013) 3 to analyse these companies at the sector level, we opted to apply eurostat (2011) criterion. this approach leads to a classification based on different levels of technology and knowledge intensity of the vast range of economic activities. thus, services are divided into knowledge intensive and less-knowledge intensive, and manufacturing industries comprise high technology, medium-high technology, medium-low technology and low technology. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 207 companies % industries without technological classification (fishing, electricity) 2 2.33 manufacturing industries 17 19.77 medium-high-technology (manufacture of chemicals and chemical products, machinery and equipment, electrical equipment) 7 41.18 medium-low-technology (manufacture of fabricated metal products, basic metals, rubber and plastic products, other non-metallic mineral products, repair and installation of machinery and equipment) 9 52.94 low-technology (manufacture of beverages) 1 5.88 services 67 77.91 less-knowledge-intensive services (wholesale trade except of motor vehicles and motorcycles, warehousing and support activities for transportation, retail trade except of motor vehicles and motorcycles, wholesale and retail trade and repair of motor vehicles and motorcycles, office administrative and other business support activities) 56 83.58 knowledge-intensive services (management consultancy activities, financial service activities, activities auxiliary to financial services, architectural and engineering activities, information service activities, cultural activities) 11 16.42 total 86 100.00 source: based on data taken from sabi and eurostat if we examine the degree of diversification of chinese emnes in spain, half the subsidiaries (51.16%) are active in just one sector, preferring to focus their efforts on just one business and tending not to diversify 4 . among diversified subsidiaries (48.84%), 17 firms (19.77%) have opted for a relational diversification strategy, while the remaining 29.07% have opted in favour of non-relational diversification. this latter strategy is a typical characteristic of emnes (khanna and palepu 2006; cuervo-cazurra 2007). an analysis of the capital ownership of chinese subsidiaries in spain reveals a degree of balance between public and private equity firms. while 52 firms (60.47%) are wholly owned by private investors, the remaining 34 companies (39.53%) are state-owned enterprises 4 in line with hitt et al. (1997) to measure the degree of diversification we adopt the following criteria: a firm presents no diversification if it does not have a secondary nace classification; a firm implements a relational diversification strategy if it has a secondary nace that differs from its primary nace at the three -digit level and which is equal at the two-digit level; finally, a firm presents non-relational diversification if its secondary nace differs from its primary at both the twoand three-digit levels. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 208 (soes). in general, the spanish subsidiaries of soes tend to be larger than privately owned enterprises, with a few exceptions, including hutchison, huawei and lenovo. half the chinese subsidiaries do not engage in any form of international commerce (32.6%) or are involved solely in the import trade (17.4%). this might indicate that their primary motive for investing in spain is market-seeking (esade 2014, nicolas 2014). in contrast, the other half does operate an export business (with 12.8% engaged just in exports and 37.2% in exports and imports). as such, their presence in spain extends beyond the seeking of new market opportunities and these chinese emnes consider spain a channel for accessing adjacent markets as well as for acquiring strategic assets. theoretical framework the success of emnes in advanced countries challenges present fdi paradigms. the traditional theories that explain the activities of mnes, and which were originally developed using empirical evidence from advanced economies, may be insufficient to account for the experiences of emnes (buckley et al. 2007; child and rodrigues 2005; gaffney et al. 2014; guillén and garcía-canal 2009; mathews 2002-2006; ramamurti 2009). as a result, in recent years diverse emne-specific fdi theoretical perspectives have emerged (see matthews 2006; luo and tung 2007; luo and rui 2009), which seek to explain the internationalization of emnes as a process for acquiring globally competitive resources and capabilities. these perspectives suggest that emnes differ from traditional multinationals in one key respect: their accelerated pace of internationalization. in order to expand more rapidly they sometimes prefer to enter developed markets first using cross-border acquisitions rather than to enter other similar developing economies (luo and tung 2007). by so doing, emnes can quickly http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 209 acquire the strategic assets required to compete more effectively against global rivals at home and abroad, while avoiding institutional and market constraints. among the many emerging countries, china is the most active in outward fdi (mofcom various). in 2014, china and hong kong alone accounted for 48% of the emerging economies’ fdi outflows, 41% of stock and 64% of the value of cross-border mergers and acquisitions (m&as) (unctad 2015). in contrast to the fdi from developed countries and from other emerging economies, chinese fdi presents a number of distinctive characteristics. on the one hand, the main motivation of chinese emnes is the opportunity to expand their market share in other host economies (see luo and tung 2007). this is confirmed by various econometric tests conducted on chinese investment patterns (buckley et al. 2007; kolstad and wiig 2012). according to nicolas (2014), the european union is no exception and market seeking is found to be the main motivation for chinese investment, with strategic asset seeking being ranked second. indeed, chinese mnes are especially interested in acquiring natural resources and superior managerial and marketing skills in order to improve their competitive advantage in manufactured products (chen 2008; cui and jiang 2010; deng 2009; rui and yip 2008; nicholson and salaber 2013; wang et al. 2012). however, the chinese government plays a major role in its mnes and its state-owned enterprises (soes) dominate the scene. before 2004, private firms were not permitted to invest overseas and access to foreign exchange was allowed only to approved soes (ramasamy et al. 2012). thus, chinese soes have been the main driver of the country’s fdi, accounting for more than two thirds of total chinese fdi worldwide (mofcom various; morck et al. 2008). given this legacy of institutional dependence, chinese fdi projects today continue to be subject to governmental approval (child and rodrigues 2005) as it seeks to http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 210 ensure that investments are made in line with its resource allocation plans and priorities and that they reinforce china’s global influence (luo et al. 2010). for this reason, the government monitors all foreign exchange outflows and all firms are required to report data to their corresponding provincial bureau of commerce (hong et al. 2015). the chinese government strongly encourages outward fdi in those sectors considered a priority and these firms receive greater backing in terms of organizational support, access to capital and other key inputs than their counterparts in sectors where fdi is not a priority (ramasamy et al. 2012; si and liefner 2014). given the active role played by the chinese government in the fdi processes, institutional theory (north 1990; scott 1995) provides a good explanation of its overseas investments, highlighting the marked differences in the institutional frameworks of the emerging and developed economies. indeed, several authors stress this perspective in seeking to understand the emne phenomenon (gaffney et al. 2013; wei et al. 2015). for example, peng et al. (2008) argue that the institution-based view constitutes, along with the industryand resourcebased views, the third leg of the emne strategy tripod. institutions are “the humanly devised constraints that structure human interaction” (north 1990), and according to scott (1995) they can be conceptualized as a set of three pillars (regulative, normative and cultural-cognitive) 5 . these three elements generate isomorphic pressures that may either encourage or constrain the behaviour of a subsidiary in a host-environment, thus affecting the firm’s legitimacy in that setting (dimaggio and powell 1983; scott 1995), where legitimacy refers to “actors’ perceptions of the organization, as a judgment with respect to the organization, or as the 5 the regulative pillar consists of formal institutions and related rule systems, such as laws and regulations as well as state-sanctioned enforcement mechanisms. the normative pillar comprises institutions, such as professional societies, that specify roles and guidelines for their members. the cultural-cognitive pillar consists of the shared social beliefs and values of a society’s culture. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 211 behavioural consequences of perception and judgment, manifested in actors’ actions— ‘acceptance, endorsement, and so forth’” (bitektine 2011). as such, firms achieve legitimacy by means of becoming isomorphic as a result of their adopting practices and structures that are institutionalized in a certain environment (kostova et al. 2008). according to wong (2012) adaptation to local institutional pressures is more challenging when having to contend with normative and cognitive differences than when facing regulative differences. while regulatory features tend to be more formalized and more widely accepted as a motive for local adaptation, norms and cognitive elements require intensive cross-cultural communication as they tend to be more difficult to grasp, and local knowledge is largely tacit (boyacigiller et al. 2004). moreover, the governments of emerging countries may influence the inclination of emnes to expand abroad by placing soes under regulative and normative pressures to accommodate political objectives and “wave the national flag” (deng 2009; peng et al. 2008; wang et al. 2012). thus, the pressures that soes face are great when they have to make their location decision and may not be relevant to their local adaptation in the host country. for these reasons, it is our contention that the cultural-cognitive pillar takes on considerable importance when these chinese subsidiaries interact to become isomorphic in the host-environment. given their distinctive institutional and social environments, chinese mnes face a considerable cultural distance when making cross-border acquisitions in europe. the chinese institutional environment is characterized primarily by a centralized, state-controlled, authoritarian culture (hofstede 2001), and the importance of guanxi (the ancient system of personal relationships and social connections based on mutual interest and benefit) in business dealings (hwang 1987; kipnis 1997; wang 2007; yang, 1994). basically, guanxi can be http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 212 considered to comprise various elements, including renqing (similar to the owing of a ‘favour’), ganqing (translated into english as ‘feelings’) and xinren (closely related to ‘trust’), which together are considered as reflecting the quality or strength of guanxi (chen and chen 2004; kipnis 1997; wang 2007; wang et al. 2008). because of the cultural distance between their respective institutional environments, chinese companies entering the european market for the first time face what is known as a ‘liability of foreignness’ (buckley and casson 1976; hymer 1960, zaheer 1995), a heavy burden that is not easily shed and which may result in additional costs for those firms that are new to a foreign market. the greater the cultural distance, the greater this liability of foreignness will be. according to zaheer and mosakowski (1997), there is a close link between the liability of foreignness and the need of legitimacy of foreign firms in different cultural and institutional environments. by entering a host country by means of an m&a, foreign firms seek to overcome their lack of local knowledge and these liabilities (klossek et al. 2012). additionally, the subsidiaries of emnes in developed countries not only have to achieve external legitimacy (i.e., the acceptance of local players in the host country), but also retain internal legitimacy (i.e., the adoption of the institutionalized practices of the parent company and conformity with its cultural values) (kostova et al. 2008). these often diametrically opposed environments can simultaneously exert isomorphic pulls on foreign subsidiaries, in what has been described as an ‘isomorphic conflict’ (forsgren 2013). this seems to be especially challenging for chinese subsidiaries as their requisites of internal legitimacy can differ substantially from those of their external legitimacy, because of the great institutional distance between china and europe. therefore, a balance has to be struck between the two pressures in order to achieve the right levels of external and internal legitimacy and, so, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 213 ensure the subsidiary’s success in the host country. in this context, subsidiary managers play a key role in adapting the multinational to the new institutional environment. specifically, they have to promote the integration of the chinese multinational within a distant institutional environment while, at the same time, seeking to understand guanxi practices so as to maintain good relations with their multinational corporation. comparatively little research has been conducted to illustrate how chinese subsidiaries struggle to adapt to their host-environment, and even less research has been devoted to examine how guanxi business practices are adapted to western business styles. of the few existing studies, si and liefner (2014) introduced the concept of cognitive distance into the analysis of chinese subsidiaries to study the knowledge gap that exists between parent and subsidiary; and, wong (2012) analysed the difficulties faced by a chinese soe seeking to acquire a company in australia due to institutional frictions and fear amongst the host population. here, it is our contention that an exploration of the use of guanxi outside chinese borders may help explain how a chinese subsidiary in a developed country balances its need to manage globally (alignment of practices with parent organization culture) with its need to manage locally (conformity to institutional pressures of the host country) as it seeks to resolve issues of isomorphic conflict and achieve both internal and external legitimacy. methods given the current lack of understanding of the isomorphic conflict faced by chinese subsidiaries in developed countries, we adopt a qualitative case study methodology to examine the cultural adaptation of chinese subsidiaries to the host country. this is particularly apposite when seeking to further our understanding of a phenomenon employing an inductive approach, since it allows us to address more fully the complexity of the problem, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 214 the nature of the context and the behaviour of the agents involved and the relations between them (gummesson 2006). the case study includes two chinese subsidiaries based in spain. the selection of these two cases fulfils the criteria of theoretical sampling, given that they were chosen for their relevance and expected contribution to the objectives of the research (eisenhardt 1989). more specifically, the criteria guiding the choice of the two subsidiaries were: (1) they had to be state-owned enterprises, since the government has considerable influence over chinese mnes; (2) both service and manufacturing industries had to be represented; (3) they had to be located in the same geographical area, so that they enjoyed the same opportunities for integrating within the local environment and establishing guanxi connections; and finally (4) they had to be managed by both local and expatriates managers, so that they were exposed to similar cognitive differences. table 4 provides an overview of the two companies selected and their basic characteristics. table 4. characteristics of the two subsidiaries organisation year of entry into spain industry subsidiary activity location in spain interviewees china shipping spain agency, sl 1999 service public shipping agency, international freight forwarding and related extension services, with its headquarters in shanghai. barcelona general manager huayi compressor barcelona, sl 2012 manufacturing designing, manufacturing and selling hermetic compressors and condensing units for the light commercial refrigeration market. sant quirze del vallés (barcelona) human resource manager the data were collected through in-depth, personal, semi-structured interviews (conducted between april and november 2015) that lasted approximately three hours. meetings were http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 215 held with local managers of the chinese subsidiaries (see table 4). these informants were selected on the basis of their being directly involved in the integration process of the subsidiary within spain, their close relationship with chinese managers both in the subsidiary and the mne, and their first-hand knowledge of the subsidiary’s guanxi practices. the interviews were structured in two blocks in accordance with a predetermined script based on a review of the literature: the objective of the first block was to obtain an overview of the firm’s entry strategy and development, the difficulties encountered in integrating within the host institutional environment and the dynamics associated with their strategies and interactions with the parent office. in the second block, respondents were asked to describe the dynamics associated with the subsidiary’s guanxi practices, the motives for applying them in spain and the way in which this was achieved. once the data had been collected we began our analysis by processing all the information and filtering out any irrelevant content. all the interviews were recorded, transcribed and coded in order to structure the data and to make sure that they could be reassessed if inconsistencies were found. we used narrative techniques to construct the story of the chinese subsidiaries in spain from their arrival to the present day. subsequently, we identified the three component elements making up guanxi (that is, renqing, ganqing and xinren) based on the conceptual framework provided by yen et al. (2011) and wang (2007). any inaccuracies identified were resolved through mail exchange and direct phone calls. these data was triangulated with information taken from complementary sources. we contrasted our results by conducting three in-depth, personal interviews with chinese fdi experts holding positions of responsibility in local public organisms. specifically, we met with the business intelligence director of acció-invest in catalonia (government of http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 216 catalonia), the city promotion advisor of barcelona activa for the asian region (barcelona city council) and the economic manager of casa asia. these official organisations are responsible for attracting fdi to spain and so they are also actively involved and have an indepth understanding of chinese investment processes. results entry strategies: motivations and entry mode the entry strategies of the two chinese mnes in spain are similar despite the 14-year gap separating the two experiences. china shipping entered the spanish market in 1999 via a joint-venture with pérez y cía. the main purpose of this local alliance was to promote the commercial interests of china shipping group in spain, whereby the local company serves as the consignee of the chinese shipping company in the port of barcelona. in spain, as in many other countries, the law of maritime traffic obliges shipping companies to operate in ports through local consignees that act as mediators with port authorities, performing custom duties and being responsible for loading and unloading cargo and all commercial activity in the hostcountry. thus, the entry of china shipping group into spain was a strategic response to the barriers of entry (dunning 1979) to the spanish market protected as it was by the legislative requirements of maritime transit. the enterprise’s motivation to enter the market fits well with what luo and tung (2007) refer to as seeking new market opportunities for two reasons. first, china shipping vertically integrates upstream activities by establishing its own consignee agencies in host-countries so as to achieve absolute control. according to the general manager of china shipping spain, “all the big shipping companies try to cover all activities of the value chain [fully integrated logistics, consignment and containerized transportation] to communicate better orders and meet with quality standards and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 217 commitment requirements. it is the best way to impact on clients and capture the whole margin”. second, the fact that market entry was overseen by a local partner alleviated the firm’s lack of knowledge of the spanish environment and, at the same time, provided it with immediate access to strategic resources so that it could compete with its global rivals. as the general manager mentioned, “… it was a simultaneous process which they repeated around the world, they were looking for local partners to create companies, joint ventures, around the world…”. these comments provide evidence of an accelerated internationalization typical of emnes (see luo and tung 2007), often strengthened by the application of springboard strategies. indeed, the introduction of the chinese group in spain was motivated in large measure by a springboard strategy, as “the country has an excellent image in arab and latin american countries […] and also the connections of the spanish ports with latin america and the middle east are strategic”. in contrast, the fdi history of huayi compressor in europe began just a few years ago in 2013, when it took over a well-known catalan company, cubigel, in sant quirze del vallès (barcelona), which was experiencing financial problems. during almost three decades, cubigel had been completely catalan-owned, but in 1988 it joined the swedish group, electrolux compressors. in the years that followed the firm changed hands several times: in 2003 it was acquired by the italian group, acc appliances components companies; in 2009 it was bought by the north american private equity firm, aiac; and, then, in 2013 huayi compressor gained control. the acquisition of cubigel by the sichuan changhong group, a leader in consumer electronic products and appliances, was the chinese company’s first incursion into manufacturing activity outside china. huayi’s activity in spain is closely linked to its operations in china; however, there are differences in the application of the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 218 compressors manufactured 6 . thus, while the subsidiary focuses its efforts on compressors for industrial and commercial refrigerators, the activity in china focuses on producing domestic compressors for home appliances. huayi’s reasons for investing in spain coincide in some respects with those of china shipping. thus, the firm was also seeking new market opportunities (luo and tung 2007), but here it not only targets the spanish market but other adjacent markets too. indeed, in 2014 the chinese subsidiary exported 98% of its production to european countries as well as to turkey, israel, russia and latin american. in this respect, barcelona acts as a springboard subsidiary of huayi activities to latin america. as the hr manager reported: “we have sales agents exclusively devoted to latin american markets who sell the products of both businesses (commercial and domestic compressors). for us, it is easier to sell there since we share the same language and culture”. however, unlike china shipping, in this case access to technology acquired special relevance as a motivation for investing in spain. thus, the arrival of huayi in spain responded to the horizontal diversification of its business portfolio, which had previously been focused solely on domestic compressors, to include commercial/industrial compressors. despite the shared technology of commercial and domestic compressors, the components have different specifications: first, technological characteristics, such as size, power and energy consumption, are more highly valued in industrial compressors than they are in domestic compressor; and, second, commercial elements, including, for example, the client profile, distribution methods and sales agents, differ considerably from domestic to industrial compressors. consequently, new knowledge with regards to technology, operations, logistics, 6 a compressor is a component of a vapor-compression refrigerating machine for engines, lowering the temperature of an enclosed space by removing heat from that space and transferring it elsewhere. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 219 suppliers and commercial activities was required. in addition, barcelona boasts highly trained r&d personnel while china operates some of the most advanced laboratories and infrastructure in the world; therefore, mutual knowledge transfer is extensive and frequent. indeed, the hr manager reported, “exchanges between chinese and spanish engineers are very common in huayi”. institutional distance and liability of foreignness: isomorphic conflict once chinese investors are physically present in a developed market, they encounter a considerable cultural distance due to markedly different institutional and social environments. despite choosing external entry modes (as illustrated by china shipping group and sichuan changhong) to overcome the liability of foreignness and to access local institutional knowledge, emnes face a major cultural clash, which makes the integration of their subsidiaries a highly complex affair. chinese culture contrasts with spanish culture in many respects; according to the general manager of china shipping: “we are not only talking about the language problem as a major constraint to communication; gestures, manners and nonverbal communication are also really difficult to understand … everything is new for both parties”. at the outset, in both emnes, the chinese managers had a poor command of english and spoke no spanish, making language skills the most obvious manifestation of the liability of foreignness suffered at the subsidiary level. in china shipping, despite the broad internationalization of the company group, corporate communications are still sent to foreign subsidiaries in chinese. the general manager explained: “translating letters and internal communications all the time implies a loss of time when it would be easier if everything was written from the beginning directly in english”. in huayi, we observed that most chinese expatriates consider the chinese subsidiary a temporary destination, and so have little http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 220 motivation to learn spanish given that they have no intention of staying in the country long. as the hr manager pointed out: “we roughly understand each other in english because they hardly speak spanish”. a further obstacle for chinese managers is attributable to problems of non-verbal communication. in fact, this mode of communication, which differs greatly in the two cultures, often hinders the exchange of views and, hence, the possibility of coming to a rapid understanding. in huayi, the hr manager mentioned that: “the things that are very common for us are not so common for them; on the contrary, they do not assimilate certain modes of conduct that are quite distinct from their own forms of behaviour”. in addition to these communication barriers, other key factors highlight the distance between chinese and spanish cultures. one such factor is the great power distances that characterize chinese mnes, which means hierarchies can never be called into question (hofstede 2001). overall, the respect for the hierarchy and authority is an essential value in china shipping group. for instance, the general manager explained, “for chinese managers it is difficult to understand that spanish employees will not wear the same corporate t-shirt to work on casual fridays, just because a top executive has come up with this idea”. likewise, in the sichuan changhong firm, the vertical hierarchy and the horizontal organizational structure are clearly defined and cannot be transgressed. in relation to the vertical hierarchy, the hr manager reported: “it is a question of authority, you can never challenge a decision that comes from above. if your boss orders you to do something, however trivial it might seem, he expects you to stop the job you have in hand immediately and to do it without discussion”. these boundaries, moreover, are also very evident at the horizontal level. for instance, the scope of human resources management in european countries is much broader than in china (for a review see cooke 2009). at huayi, the hr staffs is actively involved in all functional http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 221 areas of the subsidiary, in line with western leadership styles; however, this clashes with perceptions of the role of hr management in sichuan changhong where functions are carefully delimited in just one department. thus, they are forever saying “you are human resources, do not get involved in anything else”. another important difference is the selflessness of chinese workers. unlike western employees, the chinese have a high spirit of self-denial and are highly committed to their work. the general manager of china shipping reported that: “in china there is no separation between life and work. for chinese employees, work is more than work, it means their life and there are no borders between them. they are unable to say no to work.” in a similar vein, the huayi hr manager explained that “chinese managers do not understand why spanish employees do not want to work at the weekend and why they do not consider working overtime as a great honour and as an opportunity to show the bosses how hard they work”. in contrast to china, european societies place great value on their free time and, hence, strive to find a good work-life balance. thus, these two different points of view are evidence of conflicting isomorphic pressures that are likely to result in misunderstandings. finally, the degree of centralization of decision-making at the multinational level is a further factor that reflects the marked power distances in chinese culture (hofstede 2001) and which gives rise to the evident subordination of the chinese subsidiaries. it should be noted that this relationship is further strengthened in the case of soes. consequently, our two chinese subsidiaries have very little room for manoeuvre. in this respect, the general manager of china shipping reported: “we receive very clear guidance regarding how to work, how to report and how to proceed. we only have some leeway in aspects associated with the links established with local authorities, human resources and national suppliers and sales issues”. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 222 likewise, the hr manager of huayi noted: “we have zero autonomy. in the chinese subsidiary everybody does what the general manager says, and the general manager only does what the parent company orders”. contrary to this approach, a european management style advocates the creation of more horizontal relations where the power distance between a group’s companies is not so obvious. here again, there is a risk of isomorphic conflict due to the differences between the two environments and the great cultural distance that separates them. all in all, these circumstances highlight the difficulties the chinese expatriate managers face in adapting to the host-country. although these managers are willing to adapt for the sake of the subsidiary’s performance, their deep-rooted cultural values prevent them from full integration into the new environment. in the words of huayi’s hr manager “although chinese managers are open to adaptation, their habits and values are so different and well established that when they come back from china, after a long time, you have to remind them and explain it to them again and again”. once again, these differences between the two cultures accentuate the isomorphic conflict which has to be tackled in order to facilitate understanding. mitigating isomorphic conflict the differences characterizing the two institutional environments, that is, the specific requirements for achieving both external and internal legitimacy, make cultural integration a great challenge. in their awareness of this, parent companies typically appoint mixed chinese and spanish subsidiary boards of directors. for example, in the case of huayi, while the board is predominantly chinese, the managers of the r&d and sales departments are spanish, while in the case of china shipping, although the board of directors is made up primarily of spanish managers, the managing director and financial controller are chinese. similar evidence has http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 223 been reported by si and liefner (2014) and klossek et al. (2012) in germany, who likewise report the existence of mixed teams. in china shipping, the spanish managers play a key role as enablers of the adaptation of chinese expatriates, acting as a bridge between the local way of behaving (embedded in relationships with local agents) and the parent office’s values (embodied in the chinese expatriates). in this regard, the general manager explained: “we have to remind chinese managers that they have no choice other than to adapt to certain cultural or legal norms if they want to operate with success in spain”. in order to ensure adaptation, local subsidiary managers have to make great efforts to understand the will and actions of chinese expatriates and, at the same time, teach them which procedures are welcome in the new environment and which are not. moreover, local subsidiary managers also have the responsibility to learn from the chinese culture and its values and to transfer an awareness of them to the local employees. according to the manager of china shipping spain: “we try to transfer chinese customs and modes of conduct to our local employees. we celebrate the chinese new year, we hold dinners together […] we try to transfer all this information and at the same time we also try to communicate to them our habits, customs and spanish ways of behaving […] all this is very different for them”. a useful way to approach chinese cultural values is via the adoption of guanxi – the ancient system of personal relationships and social connections based on mutual interest and benefit (hwang 1987; kipnis 1997) and one of the more deep-seated business practices in china – by local subsidiary managers. in the cases analysed, local subsidiary managers are encouraged to promote guanxi in their local relations so as to give a chinese meaning to their actions, to increase their legitimacy in the eyes of expatriate managers and to win the favour of the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 224 parent company. however, to avoid becoming overly detached from their spanish environment, they must at the same time adapt guanxi, as far as it is possible, to the local requirements of business relationships. we found that both chinese subsidiaries seek to implement the three components of guanxi identified above (i.e., renqing, xinren and ganqing) in their attempts to respond to different institutional forces and, in short, as a vehicle to resolve the isomorphic conflict. for chinese managers, reciprocity and empathy are essential for the success of their commercial relationships (hwang 1987), which are based on the continuous exchange of favours (renqing). although it would seem that these principles form part of the universal language of business, in china personalized networks of influence, largely based on understanding and long-lasting linkages, constitute an especially strong guiding principle. as explained by the local subsidiary managers interviewed here, the subsidiaries have internalized these ways of proceeding and adhere to these rules of favours. in the case of china shipping, “if you have a good commercial relationship it is normal to do favours in a business context; however, the chinese have a longer conception of time due to the social beliefs of confucianism. you are under no obligation to return the favour immediately, on the contrary, years may pass until you pay back the favour”. according to huayi’s manager, “in business, you have to take care of your commercial networks and knit good relationships with customers. that sometimes implies doing favours. nevertheless, chinese businessmen never forget. if somebody owes you a favour, even if it was a long time ago, you expect it to be returned”. as a matter of fact, in the chinese culture, the exchange of favours often transcends business dealings into personal relationships. here, the relationships forged between chinese expatriate http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 225 and spanish managers acquire particular prominence. for example, we found evidence in both companies of local subsidiary managers solving the day-to-day problems of their chinese counterparts. “they usually ask you if you can introduce them to a person of interest to them or help them with a personal matter … anyway, chinese managers tend to rely on us”, explained the general manager of china shipping. in this way, over time, by means of repeated favours, a useful channel of communication is opened up between the spanish managers and the chinese expatriates. in other words, spanish managers have learnt to successfully apply the guanxi code of conduct in their dealings with chinese expatriates and have, thus, built strong relationships of trust. the essence of any business relationship for a chinese manager is continuous and repeated evidence of trust. only over time and with the achievement of good outcomes is it possible to gain credibility (xinyong) and, so, build the bases of mutual trust and confidence (xinren) (yen et al. 2011). in this respect, the general manager of china shipping claims: “trust is a basic aspect of successful professional relationships, but for the chinese it is much greater than this. it is very difficult to enter in their circle of trust; you have to gain it day by day, gradually, by demonstrating good results. in that sense, the spanish subsidiary has won considerable credibility within the chinese mnc, obtaining better quality indicators than those obtained by other european subsidiaries”. and he adds: “once you have eventually won their confidence it becomes a much deeper friendship than others”. therefore, it is not until spanish managers manage to win the confidence of chinese expatriates that they can enter into their closed circle and develop friendly ties, thus increasing understanding between chinese expatriates and local employees and fostering cultural integration. to this end, local managers also take great care in getting chinese managers http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 226 emotionally involved (ganqing) with the chinese subsidiary by promoting regular social interactions. for instance, the general manager of china shipping reported, “in order to work properly with chinese managers you have to respect and show interest in their culture and life style. going out for dinners, tasting chinese food or going singing are things that you must do to be kind and make things work”. in a similar vein, huayi’s hr manager noted: “huayi shows great concern for its employees, giving them many gifts on different occasions (fruit, wine, ‘jamón serrano’, chocolates, etc.). the intention is to get them involved and to be grateful to the firm”. he added, “huge meals, toasts of friendship and football matches between the spanish and chinese take place often. since the chinese managers are a long way from their country and families, they feel the need to make friends here”. this common ground serves as a ‘social glue’ for the sharing of experiences and for learning more about each other’s culture, prompting mutual adaptation and resolving isomorphic conflicts (forsgren 2013). thus, thanks to the efforts of the spanish managers and their attempts at promoting guanxi practices a mutual adaptation and rapprochement of cultures that facilitate understanding can be achieved. indeed, by balancing these two forces, chinese subsidiaries attain both internal and external legitimacy. in this context, and given the great cultural distance between china and spain, spanish managers have to be very careful to manage in accordance with the parent company’s culture (internal legitimacy) without neglecting local requirements (external legitimacy) if they want to guarantee the success of the investment in the host country. in short, our results indicate that the greater the institutional distance between the mne’s home country and the subsidiary’s host country, the more the subsidiary will seek to adapt the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 227 parent office’s practices to the host country environment in an attempt at resolving the isomorphic conflict. conclusions and future research our findings show that, in line with the growth in global fdi from emerging countries, chinese direct investment in spain has experienced an upward trend in the last decade, above all during the period of international financial crisis. the phenomenon remains new and is relatively small compared to the investment of multinationals based in developed countries; however, there is evidence that it is set to become more and more important in the future, despite the forecasts of a slowdown in the china economy. much of the success of chinese fdi in southern europe is attributable to the integration of cultures in contexts where the distance between the respective institutional environments is great (kostova and zaheer 1999) and the way in which they go about resolving their isomorphic conflicts (forsgren 2013). in this respect, previous research has highlighted the significance of the chinese tradition of guanxi and its widespread use in chinese society (see, for example, hwang 1987; yang 1994; lee and dawes 2005; huang et al. 2010). however, to date little has been written about how chinese firms interact with the cultures of their hostenvironments and how they deal with guanxi in foreign countries. in that sense, this article goes some way to filling this gap through its analysis of two chinese subsidiaries located in spain. our results show that guanxi is in widespread use beyond the borders of china too. although chinese expatriates are fully aware of their liability of foreignness in developed markets precisely because of the marked cognitive-cultural distance between both environments, they are unable to discard guanxi practices as they are deeply-rooted in the chinese way of doing http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 228 business and, moreover, they do not wish to jeopardise headquarters’ confidence in them as most hope to take up a position there on their return home. this being the case, foreign subsidiaries adopt and adapt guanxi practices, insofar as this is permitted by the institutional environment of the host country. local subsidiary managers play a role in converting the guanxi practices of chinese expatriates in legitimate actions in relation to the rest of the local employees and local actors, including suppliers, customers and the public administration. to do so, spanish managers have to involve themselves in guanxi practices in order to win the confidence of chinese expatriates. it should be noted that without the rapprochement of cultures that facilitates mutual understanding, the communication channel between the two parties would remain quite ineffectual for transferring knowledge and resolving the isomorphic conflict (forsgren 2013). the adaptation of guanxi practices to the local cultural environment can act as a ‘social glue’, allowing the subsidiary to align itself with the culture of the parent organization at the same time as it embeds itself in the host environment. indeed, the subsidiary has to strive to achieve this balance between homeand host-country institutional contexts by adapting guanxi practices to local requirements. within this process of isomorphic conflict resolution, local subsidiary managers take on a key role in the success of chinese fdi in developed countries. they act as a bridge, reducing the cultural-cognitive distance by transferring mutual knowledge between the host’s institutional environment and that of the corporation. here, we have highlighted the fact that adapting guanxi practices to the context of a developed country, such as spain, is essential in enabling chinese subsidiaries to balance their need to manage globally (in accordance with their parent organization’s culture and, hence, to ensure their internal legitimacy) with the need to manage locally (in accordance with the social beliefs and http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 229 values of the host country and, hence, to ensure their external legitimacy) (see figure 1). in short, this study provides additional insights to the guanxi literature by exploring how chinese mnes, and in particular their western subsidiaries, adjust their guanxi practices outside china in order to resolve the isomorphic conflict. figure 1. conceptual framework finally, we need to acknowledge certain limitations of the present study, which in all circumstances provide clear indications for future research. first, in our analysis we have only examined the point of view of local managers of chinese subsidiaries. the present results would undoubtedly be greatly enriched by integrating the opinions of chinese expatriates as well as those of members sitting on the boards of directors back at the chinese headquarters. these additional perspectives would provide us with a more complete vision of cultural integration. second, as in other studies based on a sample of just two firms, our results cannot be generalized. in that sense, a broader sampling of chinese subsidiaries in other countries of southern europe is needed. finally, we have opted to focus solely on chinese fdi; however, extending the research to include other emerging countries would enable us to compare the emnes from different environments and report more compelling findings about the host-country home-country isomorphic conflict chi nes e s ubs idiaries local actors chi nes e headquarters cul tural -cogni tive 'guanxi ' http://revistes.ub.edu/index.php/jesb volume 2, number 1, 201-234, july-december 2016 doi.org/10.1344/jesb2016.2.j017 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 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yang, mayfair. m. 1994. gifts, favors, and banquets: the art of social relationships in china. ithaca, ny: cornell university press. yen, dorothy. a., barnes, bradley. r., and cheng l. wang. 2011. “the measurement of guanxi: introducing the grx scale.” industrial marketing management 40: 97−108. zaheer, srilata. 1995. “overcoming the liability of foreignness.” the academy of management journal 38: 341-63. zaheer, srilata, and elaine mosakowski. 1997. “the dynamics of the liability of foreignness: a global study of survival in financial services.” strategic management journal 19: 439-63. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 tomàs fernández de sevilla université libre de bruxelles (belgium) international business in southern europe: renault in italy, portugal, and spain (1908–2007) abstract according to peter buckley, business history provides sources for testing international business theory such as internalization theory; the eclectic paradigm; the uppsala internationalization process model; the evolutionary theory of the firm; and the resource-based view of the firm. for her part, mira wilkins has highlighted that an important contribution from business historians is to instil recognition of the complexity of business enterprises as they emerge and mature, as managers and managerial directions change, and as the environment in which managers operate takes on different characteristics. furthermore, as julian birkinshaw explains, the mne subsidiary can be used as the primary unit of analysis, considering that it has its own strategy and makes effective use of its farflung network. using a business history approach, the aim of this article is to study how renault entered spain, italy, and portugal, and how it evolved its presence over time. this article shows that the development path of renault subsidiaries in southern europe has not only been determined in the mne headquarters, but also through the subsidiaries’ own development of their organizational capabilities. keywords: business history; multinationals; subsidiaries; southern europe; renault acknowledge: i would like to express my gratitude to the organizers of the international workshop 'international business in southern europe in a long term perspective' which was held on the 24th november 2015 at the barcelona university. financial support from project har201564769-p (ministerio de economía y competitividad and erdf, european union) is gratefully acknowledge. the usual disclaimers apply. corresponding author: e-mail: tfernand@ulb.ac.be received 29 march 2016 accepted 08 may 2016 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 introduction renault was among the world’s top ten car manufacturers in 2003, with an output close to 2.5 million vehicles (oica 2003). that same year, its spanish subsidiary reached a peak of 550,000 cars, which consolidated it as the primary centre of renault car production outside france (renault histoire 2011). spanish factories have been in this position since the mid1960s. however, renault considered making italy its main platform in southern europe at the beginning of the 1960s. likewise, in the early 1980s, renault fostered its portuguese facilities to replace the role played by spanish facilities up until that time. however, none of these initiatives succeeded, with fasa-renault (renault spain since 1995) remaining as the primary and most successful foreign operation of all those undertaken by renault. as peter buckley (2009) explains, despite differences in approaches, there are complementarities between international business and business history. business history provides sources for testing international business theory such as internalization theory (buckley and casson 1976; rugman 1980); the eclectic paradigm (dunning 1979, 2001); the uppsala internationalization process model (johanson and valhne 1977); the evolutionary theory of the firm (nelson and winter 1984; chandler 1992; teece and pisano 1994; dosi and nelson 1994; dosi 1995); and the resource-based view of the firm (conner 1991; peteraf 1993; montgomery 1995). for her part, mira wilkins (1977, 1998, and 2015) has highlighted that an important contribution from business historians is to instil recognition of the complexity of business enterprises as they emerge and mature, as managers and managerial directions change, and as the environment in which managers operate takes on different characteristics. wilkins has also called on business historians to pay more attention to the development of european multinationals, suggesting both that the history of the expansion of http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 enterprises across borders is an important subject and that understanding the history of multinational enterprises is vital for grasping the experiences of individual firms over time. therefore, the mne subsidiary can be used as the primary unit of analysis, considering that it has its own strategy and makes effective use of its far-flung network. 1 several studies have sought to understand the different roles that subsidiaries play within the mne (jarillo and martinez 1990; birkinshaw and morrison 1995; taggart 1997; nobel and birkinshaw 1998; birkinshaw, young and hood 2005). other complementary literature is concerned with both the evolution of subsidiary roles over time (malnight 1996; birkinshaw 1997; birkinshaw and hood 1998) and the links between the subsidiary and its local business environment (enright 2000; frost 2001; nell and andersson 2012). the aim of this article is to study how renault entered spain, italy, and portugal, and how it evolved its presence over time. the structure of the paper is as follows. in section 2, the presence of renault in southern europe before wwii is analysed, focusing on the establishment of a commercial subsidiary in spain. after a brief summary of renault’s international strategy during the golden age, section 3 explores the establishment of renault in italy and spain, where it tried to install industrial subsidiaries, achieving success only in the case of spain, which became the primary centre of renault car production outside france. section 4 analyses renault’s international strategy from the stagnation crisis to the long recession, focusing on the evolution of the spanish subsidiary and renault’s desire to develop the portuguese subsidiary as its main production centre abroad. finally, some conclusions are presented. 1 the literature on the mne subsidiary as a field of research took shape in the early 1980s (bartlett and ghoshal 1986; leksell 1981). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 renault in southern europe before the second world war renault’s international strategy the automaker renault fréres was founded in billancourt, near paris, in 1898 by louis renault and his brothers fernand and marcel. renault’s victories in many automobile races across europe were its best advertisement. seeing this, the renault brothers did not hesitate to quickly expand their commercial network, both in the domestic market (where renault had more than 100 commercial agents only five years after its establishment) and abroad. 2 the reinvestment of the profits accumulated during wwi permitted the company to expand. renault, re-named société anonyme des usines renault (saur), reshaped its workshop into a vertically integrated modern industrial plant. in 1929, renault had international subsidiaries in 49 countries (friedenson 1998; loubet 2000). the first commercial agents were established in london and milan as early as 1900. shortly afterwards, more agents were added in chicago, new york, vienna, buenos aires, and berlin. even though some of these networks soon became commercial subsidiaries, as happened in london, new york, and berlin, this was not the case in milan, where the strong competition of ford and fiat blocked renault’s expansion. from 1905 to 1910, new commercial subsidiaries were opened in spain, hungary, japan, and china. the first foreign factory was set up in saint petersburg at the dawn of wwi. once the great war was over, renault built two more factories in haren-vilvoorde (belgium) and acton (uk). in both cases, renault sought to negotiate protectionist policies. in addition, new commercial subsidiaries were established in belgium, austria, the netherlands, and switzerland (friedenson 1998; loubet 2000). 2 in 1907, renault produced 3,066 cars, less than half of ford’s output, which was at 8,423 (bardou 1977, 67). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 renault in spain in january 1909, shortly before his death, fernand renault founded a commercial subsidiary called ‘sociedad anónima española de automóviles renault’ (saear) in madrid, with a share capital of 500,000 pesetas. 3 its major shareholders were his wife and his brother louis. 4 in 1929, its share capital had only multiplied by three, revealing a low level of activity. in fact, its results were actually quite poor. 5 together with the commercial office in madrid, saear opened more offices across spain. however, they had a short lifespan. not only was the spanish market unable to consume luxury goods such as cars, but also renault was unable to compete with ford or gm. 6 the great depression crushed the saear, which finished every year in the red from 1930 to 1936 (maison 1996). the worst moment was in march 1933, when a one-million-peseta loss (two thirds of its share capital) left the subsidiary in dire straits. however, the company was saved by a capital increase of six million pesetas fully provided by renault (cebrian 2010). with the victory of the fascists in the civil war (1936–1939) and the beginning of the autarchic phase, the saear entered into a period of lethargy. only when a spanish firm acquired the production licences for the renault 4cv in 1951 did the saear recover its activity, since renault made it the only distributor of that vehicle. 7 3 saear, actas de la junta (board minutes), 17/3/1910. 4 due to health reasons, fernand renault sold his shares to his brother louis in 1908 and the company was transformed into the société des automobiles louis renault (saur). for his part, marcel renault, the third brother, died in a car accident that took place during a race between paris and madrid in 1903. 5 the worst results were obtained in 1917 with a profit of 12,700 pesetas, while the best year was 1929 with a profit of 321,600 pesetas. profits rarely exceeded 50,000 pesetas up until 1919, while they were around 200,000 pesetas during the 1920s (cebrian 2010, 154). 6 saear sold around a thousand cars per year from 1924 to 1935, its peak being 1,654 units in 1929 and its lowest point being 180 units in 1932 (cebrian 2010, 156). 7 saear, actas de la junta (board minutes), 30/3/1951. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 renault in southern europe during the golden age renault’s international strategy louis renault died in prison in october 1944; he had been accused of collaborating with the nazi occupation. his company was nationalized a few months later. the first ceo of the new ‘régie nationale des usines renault (rnur)’ was pierre lefaucheux, a renault engineer and member of the french resistance. since then, the state, as the only shareholder, pointed to renault as a model enterprise for recovery and economic growth (fridenson 1997, 2014). the régie’s first success was the launch of the renault 4cv, a small and inexpensive passenger car that received a great response both in france and abroad. after lefaucheux’s death in a car crash in 1955, pierre dreyfus, renault’s vice president since 1948, was appointed as the new ceo. dreyfus quickly set an export rate of 50 per cent as one of his main goals. 8 renault established renault-export in order to prepare its expansion abroad. billancourt concentrated its major efforts on entering the us market, where volkswagen was experiencing significant success thanks to the beetle. the first goal was to sell 10,000 units of the dauphine per year; this was the replacement of the 4cv. despite lacking a commercial network, renault sold 80 dauphines per day in 1957. two years later, this amount had increased to 350 units per day and new targets were announced: 100,000 units in 1960 and 150,000 in 1961. the 120,000 cars sold in 1960 surpassed expectations. however, renault experienced losses because the dauphine was sold below its cost. 9 the failure of the american adventure was made evident in 1961. while the us subsidiary’s debt increased to 27 million dollars, its share capital was 8 at that time, the percentage was in the region of 15% (loubet 2000). 9 the dauphine’s price was set under 1,600 dollars, which covered a mere 75% of its cost (loubet 2000). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 around five million dollars. 10 in 1962, nobody doubted that the eec was the main foreign market for renault. 11 in the 1950s, renault’s international strategy was determined by its financial constrictions and it was forced to establish alliances with local companies. renault only built assembly plants abroad when it could find local groups that would take on the investment. as a result, renault never controlled its international operations, with the exception of the belgian factory. 12 on the one hand, this meant it did not have to make large investments and it also had the opportunity to make some use of obsolete machinery. however, on the other hand, it was captive to local interests. in southern europe, the failure of the italian operation represents a clear example of this situation. taking advantage of the success enjoyed in france, renault intensified its efforts to enter developing markets during the 1960s. most of the time being present in those markets demanded local assembly. only foreign factories that were able to achieve scale economies were integrated into renault’s international strategy. renault set up renault-holding in switzerland in may 1963 in order to place its international investments under swizz tax law, specifically the factories in argentina, brazil, and spain. with this structure, the goal was to remove the impact of those investments from the profit and loss account presented in france. six years later, and with the aim of yielding the dividends from the international shares in switzerland, renault-holding set up renault-finance. in order to manage and coordinate both 10 during the rest of the decade, renault only sold 15,000 cars of the models r-10, r-12, and r-16 per year, a very poor result if we take into account that the break-even point was in the region of 50,000 units per year (loubet 2000). 11 renault sold 120,000 cars in the common market, 31,000 in the united states, and 5,000 in the united kingdom (loubet 2000). 12 factories in israel (1956), brazil (1959), argentina (1960), and venezuela (1963) belonged to the kaiser group, while the japanese factory (1953) belonged to hino diesel. in south africa (1953) and chile (1964), renault was associated first with american motors and then with peugeot. other factories belonged to public enterprises and holdings, as was the case of mexico (1960), quebec (1965), and colombia (1970), and socialist countries such as algeria (1960), bulgaria (1966), and romania (1968) (loubet 2000). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 the exports and the factories abroad, in 1971 renault established an international affairs department, which renault-finance became part of (freyssenet 1998). renault in italy in the early post-war period, both the protectionist policy and fiat’s supremacy had dissuaded renault from establishing a commercial subsidiary in italy. 13 likewise, volkswagen and ford had refused to establish factories in sicily and naples respectively, due to fiat’s threat of promoting a specific law that would force foreign firms to export all the cars produced. with this mind, a decade later, renault knew that an alliance with a local carmaker was the only way to enter the italian market. however, in 1957, fiat not only refused to negotiate with renault, but also dissuaded innocenti and lambretta from speaking with them. renault was only able to find a potential partner in alfa romeo, another public enterprise. aldo fascetti, iri’s president, thought that the alliance could be a great opportunity to challenge fiat’s hegemony (loubet 2000). the cooperation agreement between renault and alfa romeo was signed in october 1958. they shared their commercial networks and renault could use alfa romeo’s factory in milan to produce the dauphine. once the agreement was reached, fascetti himself encouraged alfa romeo’s managers to continue with their alliance with renault. seeing the italian inclination, dreyfus proposed that they join their international commercial networks and study the viability of sharing mechanical components with the final goal of undertaking the joint production of diesel engines. however, fascetti’s death in 1960 spoiled the alliance. giuseppe petrilli, the new iri president, was unyielding towards any agreement that could 13 the tariff level in france was in the region of 30% until 1958, while it was at 13% in the frg, 24% in belgium, and 45% in italy (loubet 1995). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 entail a reduction in italian production, thus affecting the production of the r-4 planned for 1962 (loubet 1995). following petrilli’s insistence, giuseppe lauraghi, the new alfa romeo ceo, halted the manufacture of both the r-4 and r-8. according to him, it was difficult to defend the production of models that directly competed with fiat cars. when the manufacture of the r-4 was finally ready, the italian government passed a new tax that especially affected foreign cars. the new tax was so biased that its result was that while the fiat 500 and 600 paid on average 30,000 italian liras per unit, the r-4 was forced to pay 62,000 liras. the new tax had an immediate effect: the 63,000 cars sold by renault in 1963 dropped to 13,000 a year later (loubet 1995). even though the commercialization of the dauphine worked well, renault was unable to create common synergies with the italian dealers. in addition, in billancourt they thought that the milanese acted more so on the basis of italian national interests (always remaining loyal to fiat over renault’s claims for greater openness) than in favour of business interests. when the italian-made r-4 was finally launched in 1964, renault mounted an offensive to take over alfa romeo’s commercial network in italy. however, renault failed resoundingly. the majority of the italian dealers stuck with alfa romeo (loubet 2000). within a few months, renault left the italian market, where it had been obtaining remarkable results (see table 1). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 table 1. renault’s car production in southern europe during the golden age renault’s car production outside france italy spain portugal units share (%) ranking units share (%) ranking units share (%) ranking 1960 117,000 21,100 18 2/13 9,900 8.5 4/13 ------/13 1965 153,900 ------/20 47,300 30.7 1/20 2,210 1.4 10/20 1970 336,607 ------/25 98,754 29.3 1/25 5,328 1.6 11/25 source: own elaboration by using loubet (2000, 220). renault’s strategy to enter a new country without having control over the operation proved unsuccessful. as would happen in brazil a few years later, renault was removed from a market where it was achieving very positive results. for this reason, dreyfus reshaped its international strategy, recognizing that a direct investment was better than a joint venture: <<l’implantation directe est préférable aux services d’un importateur[…] c’est certainement une voie plus difficile au début parce qu’elle demande des investisements très importants, mais nous l’estimons à plus long terme plus rentable car encore une fois, l’implantation internationale doit être une oeuvre continue et menée dans une perspective à long terme>>. (loubet 1995, 463) spain constitutes a clear example of this change of direction. renault in spain fabricación de automóviles s.a. (fasa) was established in 1951 in the city of valladolid. the company held the production licences for the renault 4cv. the driving force behind the project was the then lieutenant colonel manuel jiménez-alfaro, who was ultimately named general manager of the company. even though lefaucheux had displayed open hostility towards francoism, the possibility to operate in a closed market with low levels of motorization together with the threat to call volkswagen if the negotiations failed finally broke his reticence. renault’s conditions were twofold: it would not invest a single peseta and http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 saear would be the only dealer (sánchez, 2004). once an agreement had been reached with the french, jiménez-alfaro needed to gain the necessary administrative permission. to overcome this hurdle, he offered nicolás franco, the dictator’s brother, the chairmanship of the future company. influence peddling (a highly regarded activity in spain) was his main skill and administrative authorization was quickly obtained (fernández-de-sevilla, 2010a). the production of the renault 4cv began in october 1953, with a volume of ten vehicles per day. banco ibérico (owned by the fierro family) purchased 10 per cent of the share capital in 1954. a year later, banco santander became the principal shareholder of fasa. in the wake of this shift, nicolás franco and manuel jiménez-alfaro agreed to step back. eduardo ruiz de huidobro, the strongman of banco santander in valladolid, assumed control of fasa. however, fasa’s production stagnated in the region of 8,000 cars per year. eventually, banco santander sold its stake to banco ibérico in 1961. it was under the control of the fierro family that fasa began mass production. not only did the production capacity rise sharply, but a process was also initiated to vertically integrate production. in time, fasa took over the direct manufacture of engines, gearboxes, and bodywork (fernández-de-sevilla 2010b). banco ibérico’s sole control of fasa came to an end in 1965. at that time, fasa’s annual production of renault cars bordered on 50,000 units. as a result, the firm had become the primary centre of renault car production outside france (table 1). however, the fierro family’s bank did not have the capabilities needed to take on the development of the company alone. during the course of the second half of 1964, negotiations resulted in the takeover of saear by fasa. at the same time, renault acquired a majority stake in fasa, which was http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 transformed into fasa-renault, and the fierros became minority shareholders. at that time, renault was in the middle of the years defined by loubet (2001) as les trente glorieuses of the french car industry. this scenario permitted renault to sustain the expansion of its spanish subsidiary. the french reshaped the board of directors by appointing a new general manager and a new vice president, reorganizing their new subsidiary along functional lines, and appointing new directors for the most important departments. likewise, the french also took control of the general coordination by establishing a committee that met weekly to analyse the company from a three-pronged perspective: technical, administrative, and financial. in addition, renault provided the resources that permitted fasa’s industrial development. 14 in 1968, a second assembly plant was built in valladolid (beginning activity in 1972) and the engine factory, gearbox factory, and foundry were modernized by installing three transfert lines, the jewel in renault’s crown. from then on, fasa-renault became a net exporter of engines and gearboxes (fernández-de-sevilla 2010b). the growth in the production capacity could only be sustained if the sales network was able to sell the increasing production. marketing and distribution capabilities were crucial in a sector marked by steadily increasing supply and a demand that had lost its impetus since the mid1960s. the experience of renault’s sales department provided the basis for the strategy in spain. as in france, this strategy turned on the diversification of models and the expansion of points of sale. both range and network bore fruit. although competition increased notably in the mid-1960s (citroën reached an annual output of 10,000 cars in 1965, barreiros started the simca 1000’s production in 1966, and authi began production of the mini morris in 1967 14 fasa’s share capital multiplied by seven between 1965 and 1974, reaching close to 3 billion pesetas by the end of the period (fernández-de-sevilla 2014a). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 (fernández-de-sevilla 2014b)), renault car registrations also increased notably from 1967, surpassing 100,000 units in 1972. the subsidiary could only consider exporting under the protection of renault. otherwise, its production levels would not allow it to finance any international commercial expansion. spanish exports did not begin to make headway until 1971, when renault took the decision to buy fifty units a day of the r-4 for the french market. since then, renault has decided the final destination of fasa’s exports (fernández-de-sevilla, 2014a). renault in southern europe from the stagflation crisis to the long recession renault’s international strategy despite the outbreak of the stagflation crisis, renault was able to expand its international business during the 1970s thanks to its success in france. renault increased its global production from 1.4 million cars in 1973 to 2.0 million cars in 1980. however, a crisis erupted in the early 1980s because of the ruinous acquisition of amc. in 1981, bernard hanon replaced bernard vernier-palliez as president of the company. his desire was to achieve the production of 2.5 million cars in 1985. however, the amount of losses in 1984 left renault in dire straits. the main reason was the acquisition of the american motor corporation (amc), which became a resounding failure. by spending 150 million dollars on the acquisition of 27.8 per cent of amc shares, renault was again trying to gain a presence in the american market. its target was to manufacture r-9 and r-11 models, renamed alliance and encore respectively. according to renault’s estimations, the expectation was to sell 150,000 units of both models in 1983 and 300,000 in 1985. however, as explained by loubet (2000), the acquisition became a complete fiasco. 15 15 finally, renault sold amc, which was acquired by chrysler (loubet 2000, 310). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 bernard hanon was forced to resign in 1985. 16 george besse was hanon’s replacement. his aims were threefold: 1) to find the break-even point in the region of 1.2 million cars per year; 2) to reduce the size of the workforce without negotiating with the unions; and 3) to move the company’s debt to its main shareholder, the french state. besse could not witness the results of his strategy since a small far left group killed him in 1987. his replacement, raymond lévy, continued with his strategy. renault recovered profits as early as 1986. three years later, the production levels of 1983 were restored. after failing again in its american adventure, renault reshaped its international strategy by channelling its efforts towards europe. since 1987, the european factories located in belgium, france, portugal, and slovenia had been integrated under the same industrial system centred on a strong division of work in which each model was produced in only two factories and in which each factory only produced one model. both eu pressure and the desire to forge an alliance with volvo persuaded lévy to privatize part of renault’s share capital, which became renault s.a. however, in 1995 the french state still owned 53 per cent of the company (freyssenet 1998). louis schwitzer replaced lévy in 1992. his duty was to foster the alliance with volvo. however, this alliance was never forged and both companies abandoned it definitively two years later, thus spoiling renault’s international strategy. with its position in europe stabilized at around 10 per cent of the eec market, renault acquired its turkish subsidiary. in latin america, renault sold its subsidiaries in colombia, venezuela, and chile. on the other hand, the company invested in brazil through a partnership with the state of paraná, building an assembly plant with a capacity for producing 120,000 cars per year in curitiba. 16 hanon’s main legacy was twofold: the preliminary study of the r-19, a vehicle that relaunched renault in 1988, and the design of the espace (freyssenet 1998, 382–383). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 renault in portugal in the 1950s, the automotive industry located in portugal basically consisted of the assembly of imported ckd kits, without any significant incorporation of domestic content. the industry did not develop in the 1960s either, mostly because the assembly law passed in 1961 was in favour of the commercial interests of the existing importers (sousa and diogo 2012). commercial vehicle importation was banned in 1963, and this ban was extended to passenger cars a year later. however, the domestic content requirement for locally assembled vehicles was a mere 15 per cent. 17 extensive diversification was the main consequence, preventing any company from achieving a competitive size. 18 just when the domestic market was protected, banco ibérico decided to use its close relationship with portugal (nicolás franco himself was the ambassador in lisbon) to establish an assembly plant there. basilio freire-caeiro da mata, a portuguese member of banco ibérico’s board, had been negotiating the establishment of a fasa subsidiary since 1962. at the same time, an agreement with renault to obtain its licences was also negotiated. industrias lusitanas renault (ilr) was established in 1963 with a share capital of 8 million escudos. its major shareholder was fasa (75% of the shares), followed to saear (20%), and renault (5%). 19 the factory was set up in guarda, a town located 40 km from vilar formoso, the point of entry of spanish goods to portugal by railway. 20 in 1964, a thousand cars were produced, and this figure doubled the following year. 21 17 the domestic content requirement increased to 25% in 1969 (sousa and diogo 2012). 18 in 1964, 17 companies represented more than 40 foreign brands; six of them were subsidiaries of mnes (ford, gm, fiat, renault, citroën, and bmc) while the rest assembled under the licence of foreign firms. 19 fasa, actas del consejo (council minutes), 23/06/1963. 20 fasa, actas de la junta (board minutes), 11/12/1962. 21 fasa, actas de la junta (board minutes), 14/05/1965. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 despite the continuous growth of its annual production, ilr never crossed over to the region of mass production. the 6,000 cars manufactured by ilr in 1973 show that the company had experienced a low degree of development. the renault market share remained stable at around 7 per cent 22 , revealing that the development of the car industry in portugal was too limited. ilr profits increased from 1.4 million escudos in 1967 to 6.4 million in 1971. however, they plummeted to close to zero a year later. the bulk of the profits were invested in factory enlargement and in the acquisition of new equipment. with a workforce of 150 people, the daily production capacity was 23 cars in 1969. ilr ranked fourth among portuguese assemblers, maintaining this position four years later. 23 these figures offer a clear image of both the portuguese subsidiary and the car industry in portugal. after the carnation revolution (april 1974), which put an end to the dictatorship, the portuguese economy fell into the same negative cycle as the other western economies. however, the portuguese crisis was worsened by the country’s political instability. therefore, two thirds of assembly firms went bankrupt. in 1976, the portuguese government launched an international call to modernize the car industry. in 1980, it was announced that opel, auto europa (volkswagen group), and renault were the companies selected to remain in the country 24 . a few months earlier, fasa had transferred control of the portuguese subsidiary to renault. 25 in doing so, renault revealed its desire to reshape the iberian scenario. at the end of the 1970s, renault was worried because both ford and gm had opened industrial subsidiaries in spain to serve as export platforms for low-to-medium range cars to 22 fasa-renault, actas de la junta (board minutes), 16/12/1966 and 12/04/1973. 23 fasa-renault, actas del consejo (council minutes), 20/05/1969 and 26/11/1973. 24 both auto europa and opel began activity in 1983. while opel closed its factory in 2006, auto europa redirected its activity. 25 fasa received 34 million pesetas for its portuguese subsidiary (fasa-renault, actas del consejo (council minutes), 20/04/1979). http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 europe. thus, renault considered its portuguese subsidiary to be strategic. its plan was to have a production level of around 80,000 vehicles per year together with the construction of two new factories: a foundry and a gearbox factory. however, this plan was interrupted when renault sold amc in 1986, since the car planned to be produced was the jeep, an amc model. soon afterwards, renault sold the assembly plant (it was acquired by gm), with only the gearbox factory remaining, which was established in aveiro in 1981. in doing this, renault was appointing spain as its main base in southern europe. as table 2 shows, ilr never played a key role in the international structure of renault, with its growth being cut short just when it was starting to take off. table 2. renault’s car production in southern europe during the stagflation crisis renault’s car production outside france spain portugal units share (%) ranking units share (%) ranking 1975 559,257 196,908 35.2 1/23 8,685 1.6 10/23 1980 806,438 343,678 42.6 1/27 13,398 1.6 9/27 1985 702,406 224,915 32.0 1/18 37,230 5.3 5/18 source: own elaboration by using loubet (2000, 220) renault in spain in late 1972, the spanish government passed two decrees, known as the ford decrees, with the goal of reshaping the country’s car industry. the rationale behind this turnabout was the need to raise the competitiveness of existing manufacturers in order to increase their exports and stimulate their specialization within the international strategy of large-scale enterprises. however, the primary aim was to enable ford to set up in spain. the shift in the development http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 model was accompanied by a new set of industrial policies, such as a reduction in both the level of the domestic content required and the tariff level. as a result, competition increased in the domestic market due to the entry of ford, which initiated its activity in 1976, and opel, which began production in 1983 (catalan 2010). soon after the promulgation of the ford decrees, the outbreak of the so-called stagflation crisis took place. this economic crisis, which affected europe’s economies from 1974, hit spain particularly hard (rojo 1994; catalan 1999). in 1977, the state of the spanish economy was even gloomier than in the preceding three years. the economic programme applied to reduce inflation took shape in the so-called moncloa pacts in the autumn of 1977, which basically consisted of an adjustment policy aimed at curbing inflation in exchange for political and economic reforms. specifically, they featured a policy of monetary tightening, together with the containment of growth in real wages and public spending (trullen 1993). the application of these containment measures succeeded in curbing inflation, although the downside of the austerity policies was a severe contraction in the annual rate of economic growth, which plummeted to below 1.5 per cent until 1986 and even sank below zero in 1981. an immediate consequence of stagflation was a collapse in investment. this translated into a sharp fall in labour force participation and the emergence of high unemployment rates, which exceeded 10 per cent from 1980 (carreras and tafunell 2004). the negative evolution of internal demand particularly affected durable consumer goods like vehicles. between 1977 and 1980, the domestic market amassed a negative differential of 85,000 cars, falling back to the levels of 1975. during those years, fasa-renault entered into serious turmoil. the renault subsidiary experienced losses for the first time in 1974 and went on to record losses for two more years http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 because of serious industrial disputes. an initial consequence was the suspension of its development programme, which was aimed primarily at increasing the company’s production capacity through the construction of a third assembly plant. by channelling labour disputes since mid-1976, fasa-renault could restart its industrial programmes at the end of the year. with its third plant in palencia entering into operation, fasa-renault soon became the leading firm in the sector. the increase in production, which rose from a little over 200,000 cars in 1976 to nearly 350,000 in 1980, took place in the worst years of the economic crisis. this development was possible because of the excellent performance of domestic and export sales, which stood at roughly 100,000 units in 1980. in the first half of the 1980s, and despite the economic crisis and the rise of ford and opel, fasa-renault was able to maintain an output of over 300,000 units until 1984, when it shrank by roughly 75,000 vehicles. the main setback to the interests of fasa-renault, however, came because of the crisis that hit renault in the first half of the 1980s (freyssenet 1998; loubet 2000). while the figures in table 2 suggest a loss of weight in the international structure of the renault group, the fall was solely due to the increase in production carried out in the amc plant in kenosha (wisconsin), which was to cease shortly after 1985. the failure of the us operation once again bolstered fasa-renault as the primary and most successful foreign operation of all those undertaken by renault. once renault recovered from its crisis, fasa also recovered its export levels, confirming spain as the main production centre outside france. after twelve years of severe economic instability, fasa was producing 100,000 cars more than the belgian plant, and its output was six times the output of argentinean and turkish factories. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 the spanish car market entered a virtuous cycle during spain’s integration into the eu from 1986 to 1989. the international crisis of 1990–1992 echoed softly in spain due to the stimulus effects of the olympic games in barcelona and the international exposition in seville. renault reacted by decreasing prices and increasing advertisement expenses. the clio was launched in 1991 as the best remedy to fight against stagnation. however, the olympic euphoria was followed by a severe hangover that lasted until 1994. the successive devaluations of the peseta permitted fasa-renault to gain competitiveness within the renault group, increasing its exports substantially (see graph 1). fasa received the production of a third of all units of the twingo (450 units per day, while the french factory in flins manufactured 850 units per day) and its gearbox factory was in charge of the production of all gearboxes for that model. for its part, the engine factory manufactured around 80 per cent of r-19 engines, which had to be delivered on time to the french factory of douai. graph 1. cars produced by fasa-renault (in units) source: renault histoire (2011) however, in order to defend its role as the main international industrial centre of renault, fasa was forced to become more competitive. the competitiveness of the spanish 100000 150000 200000 250000 300000 350000 400000 450000 500000 550000 600000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 export total http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 subsidiary was positively affected by the sustained depreciation of the peseta during the 1990s. however, fasa also had to implement a tough programme to reduce the size of its workforce. with a staff of around 20,000 workers, the redundant workforce was estimated at around 7,000 workers. the plan to achieve this reduction was developed entirely in spain. they created a voluntary redundancy plan for people aged 58 and above, which allowed them to cut their workforce by 1,200 people annually from 1993 to 1998, and the loss of purchasing power was covered by the company. this programme permitted the correct planning of the company’s organization by the end of the process. 26 the positive impact of the plan was so great that the fasa director of human resources was appointed director of human resources for the renault group. once the programme finished, the spanish factories’ competitiveness was at the top of the renault group. as a result, exportation permitted the company’s output to rise again after being stagnated for some years (see graph 1). during the 1990s, the spanish subsidiary achieved its competitive advantage due to specialization and staff cutbacks. competitiveness was also achieved through the sustained depreciation of the peseta’s parity. however, since the adoption of the euro, stagnation in the production assigned to spain can be perceived, affecting the role played by the spanish factories in the renault group. as jordi catalan (2013) explains, the adoption of the euro coincided with the erosion of spanish competitiveness in the automotive industry. significant depreciation was a recurrent means by which policy helped to maintain competitive advantage during the stagflation crisis and, especially, in the 1990–1995 crisis. however, the euro 26 the main element in fasa’s reorganization was the closure of the original factory, which was compensated for by doubling the capacity of the second assembly plant and by establishing a new and modern painting workshop. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 removed this option, limiting the competitiveness of the spanish factories within the international structure of the renault group. some conclusions before wwii, renault’s international strategy was focused on the creation of commercial subsidiaries. after wwii, and especially when pierre dreyfus was appointed head of the enterprise, renault intensified its international efforts, pointing to foreign production as a key part of its strategy. however, the company’s operation was determined by its financial constrictions and it was forced to hold a minority position in its international affairs. renault decided to increase its control over fasa once it had been ousted from italy and brazil, both interesting markets where it was experiencing remarkable success. renault thus developed the industrial, commercial, and managerial capabilities of its spanish subsidiary. since then, fasa has been the main industrial foreign centre of the renault group. when in the mid-1980s fasa’s position was threatened by the new role of the portuguese subsidiary, fasa was able to increase the competitiveness of its factories by reinforcing its position. at the end of the 1980s, once the portuguese factory was closed, the spanish subsidiary was confirmed as the main centre of renault in southern europe. in the 1990s, the spanish subsidiary gained competitiveness by applying a specific set of corporate policies fully designed in its offices. in addition, fasa reinforced its competitive advantage not only through specialization and staff cutbacks, but also through the sustained depreciations of the peseta. however, since the adoption of the euro, stagnation in the production assigned to spain can be perceived, affecting the role played by the spanish factories within the renault group. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 by analysing the origins and evolution of renault subsidiaries in southern europe, this article reveals that the development path of the subsidiaries was not only decided in the headquarters of the mne, but also through the subsidiaries’ own development of their organizational capabilities. the italian failure may be related to the fact that renault implanted itself without having any previous commercial structure, lacking prior knowledge of both the domestic environment and the right professionals to work in it. on the other hand, the spanish renault subsidiary is a clear example of a subsidiary that was able to develop its own organizational capabilities as described by chandler (1992), teece and pisano (1994), dosi (1995), and nelson and winter (2002). this research also validates the analysis of malnight (1996), taggart (1997), birkinshaw (1997), and birkinshaw, young and hood (2005), who argue that mne subsidiaries have their own strategies and make effective use of their far-flung networks. in addition, the spanish managers showed their ability to interact with the local environment, which could be considered as an example of crony capitalism. therefore, the results are also in line with the studies that highlight the key role played by links between the subsidiary and its local business environment (enright 2000; frost 2001; and nell and andersson 2012). finally, the portuguese case represents the other side of the story. established in the early 1960s, by the 1980s it was clear that the portuguese subsidiary had not been able to develop its own organizational capabilities. despite the fact that renault wanted to transform the portuguese subsidiary into a major productive centre in southern europe, the subsidiary’s own inability to develop any kind of competitive advantage resulted in its failure. http://revistes.ub.edu/index.php/jesb volume 2, number 1, xx-xx, july-december 2016 doi.org/10.1344/jesb2016.2.j015 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 references bardou, jean-pierre. 1977. la revolution automobile. paris: albin michele. bartlett, christopher a., and sumantra ghoshal. 1986. 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committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 rugman, alan m. 1980. “internalization as a general theory of foreign direct investment: a reappraisal of the literatura.” weltwirtschaftliches archiv 116 (2): 365-379. sánchez, esther. 2004. “la implantación industrial de renault en españa: los orígenes de fasarenault, 1950-1970.” revista de historia económica 23 (1): 147-175. sociedad anónima española de automóviles renault frérés (saearf), actas de la junta, 19101951. sousa, maria l., and maria p. diogo. 2012. “giving with one hand and taiking away with the other: the automobile assembly industry in portugal (1960-1988).” revista de historia industrial 48: 155-181. taggart, james h. 1997. “autonomy and procedural justice: a framework for evaluating subsidiary strategy.” journal of international business studies 28 (1): 51-76. teece, david j., and gary pisano. 1994. “the dynamic capabilities of firms: an introduction.” industrial and corporate change 3: 537–556. trullen, joan. 1993. fundamentos económicos de la transición política española. madrid: centro de publicaciones del ministerio de trabajo y seguridad social. wilkins, mira. 1977. “modern european economic history and the multinationals.” journal of european economic history 6 (3): 575-595. wilkins, mira. 1998. “multinational enterprises and economic change.” australian economic history review 38 (02): 103-134. wilkins, mira. 2015. “the history of multinationals: a 2015 view.” business history review 89 (3): 405-414. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 desiderio juan garcía-almeida josé luis ballesteros-rodríguez university of las palmas de gran canaria (spain) analysis of knowledge tacitness in the transfer of food and beverage practices: evidence from new chain hotels abstract knowledge is a valuable resource that can provide a firm competitive advantages. food and beverage practices require the existence of knowledge to effectively perform the activities in this key department for many hotels. when hotel firms grow by integrating new hotels in the organizational structure, managers usually want to transfer the knowledge underlying the key practices. however, the transfer is affected by the level of knowledge tacitness, since this characteristic is considered to render the transfer more difficult. with data from 93 new chain hotels where f&b knowledge has been transferred, the results shed some light about the tacitness of f&b knowledge and its transfer. thus, customer service knowledge is the knowledge with the lowest degree of tacitness, and food planning, production and preparation is the most tacit. the most frequent mechanism to transfer the knowledge on food planning, production and preparation and the knowledge on management and control of purchases and consumption is the use of staff from the headquarters or other chain hotels in long-term assignments; the preferred method for f&b customer service is training courses, lectures and seminars. moreover, the tacitness of knowledge about f&b customer service negatively affects the knowledge transfer process in several success dimensions. keywords: knowledge tacitness; knowledge transfer corresponding author: e-mail: dj.garcia@ulpgc.es received 05 january 2017 accepted 28 april 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 introduction in the last decades knowledge has been considered a key resource to enhance and sustain competitiveness. there is increasing recognition that an effective management of knowledge is essential for firm success (holste and fields 2010). the relationship between knowledge and sustainable competitive advantages is highlighted in the literature (e.g., lubit 2001). in tourism, cooper (2006) states that the sector has been slow in adopting the knowledge management approach, partly due to the lack of connection between research and the industry. tacitness is one of the most studied knowledge dimensions in management research. according to lubit (2001), tacit knowledge often allows a group to perform at a higher level than that which their explicit knowledge does. the existing literature provides sufficient evidence to support the relevance of tacit knowledge (venkitachalam and busch 2012). the role of both explicit and tacit knowledge has been addressed in management studies regarding decisionmaking, knowledge creation and innovation, information systems, and knowledge transfer among other processes. the literature on hospitality management has not reflected the relevance that knowledge tacitness has had in the general management field. though abdullah, ingram and welsh (2009, 119) stated that tacit knowledge has “a place in the theory and practice of hospitality management”, the studies which address the tacit dimension of knowledge as a central aspect regarding hospitality management have been scarce. nevertheless, some areas in hospitality activities are prone to be considered rich in tacit knowledge, and hence be subject to the effects this characteristic can cause. the food and beverage department is one of those areas, since many practices in this domain are usually associated with information that is difficult to express, formalize, or share. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 chuang, jackson and jiang (2016) defend that knowledge must flow and be embedded in the firm in order to create value. since hospitality chains are oriented to growth and operational standardization is a common strategy for these firms, knowledge transfer to new hotels is a frequent process. haldin-herrgard (2000) indicate that one of the main concerns for organizations managing their knowledge resources is the diffusion of knowledge within the organization. in that sense, and due to the economic and strategic relevance that food and beverage activities have, the knowledge in that area is usually mobilized to new settings. abdullah, ingram and welsh (2009) empirically document several concerns in ethnic restaurants regarding the transfer of tacit knowledge. based on the problems that knowledge transfer entails (e.g., szulanski 1996), the study of the mobilization of food and beverage knowledge practices becomes an interesting topic. in the tourism field, zhang et al. (2015) address the relevance of understanding the mechanism to capture and transfer tacit knowledge as a major challenge in the tourism field. moreover, as rhou and koh (2014) highlight the key relevance of acquiring sustainable competitive advantage in the restaurant context through the firm’s collective, tacit knowledge during international expansion, additional research on the characteristics and effect of tacit knowledge in the growth process of restaurants and hotels with food and beverage departments can contribute to the academic development of the field. this study aims to shed light on the tacitness of food and beverage knowledge to be transferred to new hotels when chains grow. thus, the specific goals of this work are: to describe the level of tacitness of the food and beverage knowledge, to describe the mechanisms employed to transfer it, and to analyze the influence of the level of tacitness on the transfer success. this last goal will be presented in terms of a research hypothesis in the theoretical section of this work along with the discussion of tacit knowledge in transfer processes and the presentation of the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 transfer mechanisms. after that section the method for the empirical approach is addressed. next, the results are presented. the last section of the work deals with the main conclusions. theoretical framework based on their literature review, eisenhardt and santos (2001) highlight a strong divergence in the meaning of knowledge addressed in theoretical and empirical works. thus, the literature has developed theoretical approaches towards interesting elements to understand the concept of knowledge. nevertheless, empirical studies, particularly those included in the strategy field, take an approach in which knowledge is seen as a resource. the resource-based view defends that valuable and rare resources are the basis to create competitive advantages (e.g., barney 1991). grant (2002) observes that despite the deep philosophical questions raised about the nature of knowledge, some of the most important perspectives on the knowledge-based vision of the firm have emerged considering very basic features of this resource. in the task of addressing the concept of knowledge a traditional way to define it is by contraposition to data and information. although the boundaries between these concepts vary depending on the author (e.g., fahey and prusak 1998; alavi and leidner 2001; kettinger and li 2010), the approach to the concept of knowledge in this paper begins trying to clarify these differences. given the difficulty of providing definitions in these areas, in order to distinguish between data, information and knowledge using external approaches or a user perspective is interesting (bhatt 2001), since differences are a question of degree. according to bhatt (2001), data differ from information in their organization, while information is distinguished from knowledge based on their interpretation. thus, the data are a discrete set of objective realities and facts while information is an organized data set (davenport and prusak 1998; bhatt 2001). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 in general, the approach to knowledge from this perspective implies embedding important meaning to make decisions and actions (fahey and prusak 1998). in the business context, therefore, knowledge goes beyond data and information. many different contributions have aimed to conceptualize this organizational reality: from 'recipe' that specifies how to perform activities (kogut and zander 1993) or justified true belief (nonaka and takeuchi 1995), to the understanding, awareness or familiarity gained through study, research, observation or experience over time (bollinger and smith 2001). a relevant discussion line in these contributions is the epistemological treatment of the nature of knowledge. nonaka and takeuchi (1995) decisively contributed to analyze the concept of knowledge from that perspective, and other authors have further developed it in the organizational field (e.g., spender 1996; tsoukas 1996; oguz and sengün 2011). in order to provide clarity to the concept, different orientations that underlie the approach of definitions can be presented. so, alavi and leidner (2001) identify five perspectives in the literature to address knowledge: as state or fact of knowing, as object, as process, as a condition of access to information, and as a capability. knowledge assets may reside in the “individual, group, organization, book or machine” (wilkins, van wegen and de hoog 1997, 62). law (2014) complements that view by indicating that in organizations knowledge resides in individuals, team memories, organizational routines, documentation and databases. in this line, carlucci (2012, 73) underlines that several kinds of knowledge assets can exist in an organization such as, for example, “employee’s motivation, brand, image, database, routine and practices, relationships among colleagues, and so on”. knowledge is characterized in that its value is determined by the utilities that it can provide to solve problems, help in completing tasks, etc. according to leonard and sensiper (1998, 113) and in order to propose a working http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 definition, knowledge can be regarded as “information that is relevant, applicable, and at least partially based on experience”. this view of knowledge integrates elements of contextual information, articulated experience, values and expert points of view (davenport and prusak 1998). therefore, knowledge allows for facing reality by reducing uncertainty (uit beijerse 1999) while providing it with meaning. venkitachalam and busch (2012, 358) indicate that the major element of organizational knowledge is the contribution of its staff, since “individuals are not silos of knowledge, rather their connectivity to other staff constitutes a considerable component of organizational know-how”. a branch within the knowledge-based view of the firm has conducted taxonomic approaches to knowledge, trying to extract implications of the types presented (e.g., spender 1996; tsoukas 1996). the typology of greatest impact and recognition in the field is the one that distinguishes between explicit and tacit knowledge (polanyi 1966; nonaka and takeuchi 1995; tsoukas 1996; ranucci and souder 2015), though oguz and sengün (2011) defend that the term tacit knowing should be preferred to tacit knowledge. explicit knowledge includes knowledge that can be transmitted through a systematic language (nonaka and takeuchi 1995). matsuo (2015) states that most declarative knowledge is explicit. this kind of knowledge is characterized by the fact of not being subject to a too specific context in order to be meaningful. this feature enables the transfer of knowledge without major problems when removed from the original context of their creation or use (zack 1999). the ease of transfer of such knowledge between sender and recipient is a crucial element in its definition, since it outlines that both entities (source and recipient) may possess this knowledge http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 through transmission by codes or symbols (kogut and zander 1992). nevertheless, such ease of replication often cannot be contained within firms (ranucci and souder 2015). tacit knowledge, in turn, is related to the kind of knowledge that can hardly be formalized or expressed. thus, tacit knowledge is the implicit accumulation of skills and knowledge through experience (reed and defillippi 1990), internalized by understanding and practice (oliva 2014). the key elements in this idea are embedded in the expression 'we know more than we can tell' (polanyi 1966; teece 1998). matsuo (2015) indicates that some parts of procedural knowledge are tacit. for okumus (2013), tacit knowledge is generally informal, intuitive, and based on personal experiences. derived from those statements, that knowledge cannot be expressed with words easily, and hence it is difficult to code. the reason for this is that tacit knowledge arises and accumulates through the interaction between the person and the situation. that makes tacit knowledge specific to the context in which it was created. holste and fields (2010) support those ideas when they indicate that tacit knowledge is highly personal and difficult to reduce to writing. for nonaka and takeuchi (1995) the concept of tacit knowledge includes mental schemes, beliefs and perspectives, which the human being uses to perceive and define the environment, and abilities, skills or know-how to perform specific tasks. tacit knowledge is obtained by internal individual processes like experience, reflection, internalization or individual talents (haldin-herrgard 2000). the degree to which knowledge is considered explicit or tacit is directly related to the extent that it can be taught and codified (kogut and zander 1995; ranft 1997). okumus (2013) affirms that at the expertise and capability levels, there is much more tacit knowledge than explicit knowledge. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 holste and fields (2010) review the descriptions and characteristics of explicit and tacit knowledge in the literature. at this point it is interesting to mention that tsoukas (1996) underlines that tacit knowledge can be really expressed linguistically if we focus on it, and vice versa: explicit knowledge is always based on a tacit component. it is therefore not appropriate to separate both concepts dichotomously, establishing two oversimplified discrete types. instead, knowledge in an organization can be seen in a continuum where the extremes are purely tacit and explicit elements, respectively (leonard and sensiper 1998; oliva 2014). as it has been shown above, the concepts of explicit and tacit knowledge are linked to knowledge transferability. the transfer of tacit/explicit knowledge has been often addressed in the literature on management, although empirical studies on this issue have a much lower quantitative relevance. grant (1996a) notes that transferability is a key characteristic for the development and sustainability of competitive advantages. regarding knowledge, the author notes that the ability to transfer it is a critical issue in business management. grant (1996b) points out that precisely the barriers to the transfer and replication of knowledge bestow it strategic importance. these competitive dynamics in the restaurant industry are reflected in rhou and koh’s discussion (2014) when these authors indicate that higher level of tacit knowledge and greater opportunities to establish a sustainable competitive advantage entail less emphasis on pricing competition and accrues higher profit margins. for a tourism organization, it is vital to consider knowledge as a resource (cooper 2006) that can be of paramount importance for its performance and long-term survival. more specifically, crook, ketchen and snow (2003) highlight the relevance of the knowledge possessed by a firm in the hospitality industry, because it can yield a competitive advantage and become a http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 paramount aspect of human resource management due to the importance of direct contact between employees and customers in the industry. the transfer of knowledge and technology has been considered a desired strategy in the organizational growth, whether in size or profits (kogut and zander 1992), since the transfer of capabilities can be seen as a primary mode of expansion (hedlund 1994). understanding and using knowledge developed and tested inside the organization allow for facing an expansion process with the aim of appropriating new rents in new markets by exploiting the possessed knowledge and becoming a possible source of competitive advantage. oliva (2014) explains that the ability to take advantage of teams that have already experienced the same situations and implemented solutions makes it possible to reduce the level of resources to be adopted, reduce the time for completing the project, enhance the levels of quality and allow the company to satisfy customers. so, technology transfer lies at the heart of the issue of the firm growth, domestically and internationally (kogut and zander 1993), because, as nelson and winter (1982) suggest, the replication of assets and capabilities is related to the growth and profitability of a firm. according to chuang, jackson and jiang (2016) knowledge must flow through and be embedded in the organization in order to create value. in the tourism industry many firms grow globally by using strategies based on the transfer of knowledge resources. knowledge transfer processes in this sector have not received much attention in the scientific literature (hallin and marnburg 2008; shaw and williams 2009; advimiotis, 2016). hallin and marnburg (2008) present the first review of empirical studies on knowledge management in the hospitality field; shaw and williams (2009) review research on knowledge transfer in the context of innovations; and avdimiotis (2016) analyses the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 relationship between tacit knowledge acquisition/transfer and behaviors originating in a working environment where task assignments fit employees’ personal characteristics. according to zhao and olsen (1997), multinational firms seek to provide a consistent bundle of goods and services to their customers and generally attempt to transplant a domestic definition of that bundle to other countries in order to serve the client in overseas destinations. this can be one of the reasons why ramón (2002) empirically observes that spanish hotel chains are mostly characterized by a certain ethnocentrism in their international growth. in addition, evans, campbell and stonehouse (2003) describe this situation when they address one of the key challenges for an international hotel chain which must provide the same quality standards throughout the world but with staff coming from different cultural and language backgrounds, when the service is provided in very different locations, and in buildings that are not owned by the company. it is generally recognized the difficulty associated with the transfer of tacit knowledge. zander (1991) notes that the tacit dimension of knowledge has a strong influence on the transfer smoothness. knowledge tacitness along with its complexity and specificity originate causal ambiguity (reed and defillippi 1990), generating an ambiguous relationship between actions and outcomes. thus, when trying to replicate the use of knowledge, an irreducible uncertainty can be present which hinders the possibility to clearly observe how features of the new context influence the results of the attempted replication (lippman and rumelt 1982). therefore, the content of a tacit skill implies that the content of the original cannot be passed to a useful and adequate symbolical format, and there exists ambiguity about what that content really is (winter and szulanski 2002). this idea is reflected in the concept of “sticky knowledge” introduced by von hippel (1994) and attempts to show the difficulty linked to the transfer of certain http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 knowledge-based resources. in the restaurant context, rhou and koh (2014) refer to this idea when they indicate that offering more complicated products and customized services entails higher costs to transfer knowledge than those required of quick-service restaurants. in order to obtain tacit knowledge the main mechanisms are individual and shared experience (nelson and winter 1982) and learning by doing (ranft 1997). in the context of transfer to other individuals, polanyi (1962) points out that the person who has got the knowledge cannot be fully capable of encoding and teach others the knowledge s/he possesses. in the same vein, winter (1987) argues that tacit knowledge cannot be specified and communicate regardless of their possessor, because this type of knowledge can only be disclosed in its use (grant 1996a). for crane and bontis (2014) tacit knowledge is acquired unconsciously and automatically, but capable of influencing action (action-oriented). those ideas can give rise to the view that the implementation of tacit knowledge assets is key to learn from other individuals and show how the transfer of such knowledge is slow, costly and uncertain (teece 1981; grant 1996a). as winter and szulanski (2002) indicate, the degree of transferability of tacit skills to new contexts is probably affected by the way it is taught, but not easily. apart from the theoretical support, several empirical analyses show the highest level of difficulty associated with internal transfers of this type of knowledge from different conceptualizations and perspectives (e.g., szulanski 1996; zander and kogut 1995; bresman, birkinshaw and nobel 1999; szulanski, ringov and jensen 2016). with some of the ideas discussed in the preceding paragraph another aspect gains relevance in the analysis of successful internal knowledge transfer: the mechanisms used to effectively transfer that knowledge in organizations. some authors address different ways to transfer knowledge internally in their work. for subramaniam and venkatraman (2001) and pedersen, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 petersen and sharma (2003), an interesting approach to such transfer mechanisms lies in the theoretical framework provided by the concept of information richness (daft and lengel 1984, 1986). arrow (1969) notes that several communication mechanisms differ in their capacity to transfer information along with their costs. daft and lengel (1986) analyze the existing forces in organizations that influence information processing, and they address uncertainty, defined as the absence of information, and equivocality as complementary forces in information processing. the concept of equivocality is related to ambiguity and to the existence of varied and conflicting interpretations about an organizational situation. to reduce equivocality, daft and lengel (1986) discuss the possibility of using structural mechanisms that enable debate, clarification and more than the mere presentation of data, which they identified with the need for processing rich information. according to daft and lengel (1984), information richness is defined as the ability of information to change understanding within a time interval. thus information richness is related to the learning ability that provides an act of communication (daft and lengel 1986). the communication which overcomes different perspectives or clarifies ambiguous issues to change understanding is considered rich in that sense. conversely, the communication with a low degree of richness cannot overcome different reference frameworks or it requires a long period of time to enable understanding. however, this view contrasts with brookes’ suggestion (2014) that partner-specific variables may be considered more relevant than knowledge-specific aspects to determine knowledge conduits, although the empirical findings for that suggestion were obtained in an inter-organizational setting. in the tourism field, zhang et al. (2015) state that understanding the mechanism to capture and transfer tacit knowledge still remains a major challenge. the conceptual framework provided http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 by information richness allows for systematizing the various mechanisms of knowledge transfer. daft and lengel (1986) provide a list of five mechanisms based on their capacity to process rich information, and they are the following ones from low to high: digital documents; impersonal written documents; personalized documents such as letters or memoranda; telephone calls; and face-to-face contact. lord (1997) applies these mechanisms in the context of knowledge transfer, extending the logic of the concept of information richness on this topic. the author extends the previous classification and lists the following mechanisms to transfer knowledge: written memoranda; detailed reports or studies; emails; telephone conversations between two people; “teleconference” sessions; face-to-face meetings or conferences; temporary assignments of staff from knowledge source units; temporary assignments of staff from knowledge recipient units; and permanent staff transfers from knowledge source units. in the same vein, pedersen, petersen and sharma (2003) propose a continuum of mechanisms that is the basis for addressing the various ways in which knowledge can be transferred in an international context. at one end of this continuum manuals, development of databases, written instructions and drawings/diagrams would be found; these mechanisms require little individual interaction. at the other end, pedersen, petersen and sharma (2003) list the mechanisms based on face-to-face relationships, informal interaction and teamwork. for inter-organizational knowledge transfers in a franchise network, gorovaia and windsperger (2010) distinguish mechanisms with a relatively high degree of information richness (training, conferences, meetings, telephone conversations, visits of the outlets) and mechanisms with a relatively low degree of information richness (fax, intranet and internet, and other electronic transfer mechanisms). meanwhile, gupta and govindarajan (2000) show how the existence and richness of transmission channels are positively and significantly related to the transfer of http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 knowledge from the headquarters of an organization towards its subsidiaries. this relationship is supported with formal mechanisms such as liaison personnel and temporary and permanent teams or with vertical socialization mechanisms such as having staff in the unit who has previously worked in the headquarters or having a mentor there. due to all this discussion, the transfer of tacit food and beverage knowledge to new settings can encounter several barriers and hinder a successful, smooth transfer. that is the basis for setting the research hypothesis of this work: h1: the tacitness of knowledge in the f&b area is negatively related to knowledge transfer success when hotel firms grow. method the data for this study were collected by using a survey. the population was set to include all the new hotels integrated by spanish hotel chains in a two-year period where a significant internal transfer of knowledge from the headquarters or other organizational units had taken place. a senior manager in the chain was contacted in order to verify the existence of this transfer. the concept of hotel chain was defined as an organization which operates three or more hotels or motels (ingram 1996). since franchising can be treated as a quasi-market transaction (erramilli, agarwal and dev 2002) franchises were not included in the population since it would be problematic to analyze the knowledge transfer in this context as an internal one. three hundred fifty-nine new hotels matched the above criteria. abdullah, ingram and welsh (2009) confirm that tacit knowledge is difficult to put down in restaurant settings and to quantify with rigorous statistical analysis. to gather valuable data a sound research approach for this analysis was carefully designed. the questionnaire was developed after a literature review and questions for the variables of interest were formulated http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 with a seven-point likert scale, ranging from one to seven (total disagreement – total agreement, or lowest value – highest value). for szulanski (1996), the concept of practice refers to the routine use of knowledge which often has got a tacit component whether in individual skills or in group collaborative agreements. kostova (1999) defines an organizational practice as certain ways to implement organizational functions that have evolved along time under the influence of history, interests, and actions within an organization and that have been institutionalized in it. according to this author, the practices that organizations develop and institutionalize vary widely. thus, practices can have a limited or wide scope, referring to specific tasks in a functional area or more complex tasks respectively. in order to identify the main practices in food and beverage (f&b), two rounds of contacts with ten hospitality experts were organized. in the first round, practices were identified, and in the second one agreement with the wording proposal of three practices identified in the first round was submitted to assessment. experts agreed on these three practices: (1) food planning, production and preparation; (2) customer service (in restaurant, cafeteria, bar...); and (3) purchase and cost management and control. the level of tacitness of these three knowledge domains was measured with three items which integrated the scales used by bresman et al. (1999) and subramanian and venkatraman (2001). those contacts with experts were also used to identify the main transfer mechanisms used in the industry, and they were presented in the questionnaire based on their degree of information richness (daft and lengel 1986; lord 1997). following the aim of this work, knowledge transfer success was measured with four dependent variables: time to transfer the knowledge, cost of the transfer, recipients’ satisfaction with the transfer (pinto and mantel 1990; szulanski 1996), and similarity of the knowledge characteristics between the f&b department in the new hotel and the corporate template, http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 following the theoretical approach taken by winter and szulanski (2002). the questionnaire was prepared in spanish and english and reviewed by three university professors and by a professional translator. for each of the hotels included in the population the first general manager was identified and contacted for his/her participation in the survey as the key informant. the final version of the questionnaire was sent by email or fax. ninety-three valid questionnaires were able to be used for this study. the average number of rooms in the 93 hotels included in this final sample is 209. the average total number of employees for those hotels is 84, and the average number of f&b employees descends to 36. the main segment for most hotels is leisure/vacation (57%), while the remaining 43% primarily target the business traveller. though most hotels are in spain (71%), in the sample there are hotels in europe, america and asia. half of the hotels analyzed in this study are owned by the hotel chain, though some others are leased or linked with management contracts. regarding the key informants, almost 80% were general managers of the hotel. the rest of the individuals who provided the data for this study were deputy general managers (5%), corporate managers (4%) or other managers in the hotel. most of them were male (81%) and their tenure in the hotel firm was lower than 5 years (54%). with regard to their age, around 58% were between 30 and 45 years old. results table 1 shows the tacitness degree of the three knowledge assets considered in this work. the hardest practice to learn by reading a manual is the one related to kitchen activities and food preparation. the knowledge underlying this practice is also the most difficult one in the f&b http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 department to embed in a manual. nevertheless, the corporate knowledge assets associated with a higher level of complexity to be taught are the ones related to purchases management and consumption control. from a global perspective, and based on the mean of the three tacitness items, customer service knowledge is the knowledge asset with the lowest degree of tacitness. on the other hand, food planning, production and preparation are deemed to be the least explicit knowledge asset out of the three domains considered. table 1. descriptive values of tacitness for the each f&b practice variables f&b practice item food planning, production and preparation customer service (in restaurant, cafeteria, bar...) management and control of purchases and consumption educating the new employees to operate in this practice using the chain standards is very slow and complicated 3.55 3.35 3.71 formulating and understanding this practice in written documents is very difficult 3.43 3.18 3.23 new employees can learn how to perform this practice by studying a manual with difficulty 3.73 3.63 3.53 mean 3.57 3.40 3.49 another interesting aspect is to observe the knowledge transfer mechanisms that hotel firms have used to transmit the f&b knowledge. table 2 displays the main mechanism employed for each knowledge practice in all the hotels of the sample. starting with the food planning, production and preparation, the most frequent way to transfer it is with the employment of personnel from the headquarters or other chain hotels in long-term assignments, followed by the use of training activities and corporate personnel or staff from other hotels/units of the chain moved temporarily to the hotel in short stays. in the same line, and considering the main mechanism used in the knowledge transfer, long-term staff from other organizational units seems to be the most frequent way used in the industry to transfer the knowledge on http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 management and control of purchases and consumption. for the knowledge assets in this category, the employment of training activities and procedures manuals are also quantitatively remarkable as the main method used. as for f&b customer service, the preferred method is training courses, lectures and seminars. table 2. main knowledge transfer mechanisms for each f&b practice variables f&b practice item food planning, production and preparation customer service (in restaurant, cafeteria, bar...) management and control of purchases and consumption procedures manual 12 16 17 personalized written documents (letters, reports, memos, emails) or audiovisual material 10 5 9 phone conversations or other similar mechanism (videoconference) allowing contact with corporate experts or from other chain hotels/units 0 0 4 training courses, conferences or seminars 18 25 17 corporate personnel or from other hotels/units of the chain moved temporarily to the hotel (for less than one month) 15 14 13 personnel from this hotel moved temporarily to other hotels/units of the chain 12 13 7 corporate personnel or from other hotels/units of the chain moved to the hotel for more than a month or permanently 20 15 21 in order to test the research hypothesis of the study, regression analyses were conducted. but firstly, exploratory factor analyses were conducted to reduce the dimensionality of the scales of knowledge tacitness for the three food and beverage practices. tables 3, 4 and 5 show the results of those exploratory factor analyses. for each practice, only one factor was extracted, and they explained between 74% and 79% of the variance in their corresponding scale. kaiser-meyerolkin measures of sampling adequacy and bartlett’s tests of sphericity were computed and results were satisfactory. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 table 3. exploratory factor analysis for tacitness of food planning, production and preparation variables factor item factor load educating the new employees to operate in this practice using the chain standards is very slow and complicated 0.780 formulating and understanding this practice in written documents is very difficult 0.778 new employees can learn how to perform this practice by studying a manual with difficulty 0.704 cronbach’s alpha 0.819 percentage of variance explained (%) 75.42 eigenvalue 2.263 kaiser-meyer-olkin measure of sampling adequacy bartlett’s test of sphericity 0.717 107.564 (0.000) table 4. exploratory factor analysis for tacitness of customer service (in restaurant, cafeteria, bar...) variables factor item factor load educating the new employees to operate in this practice using the chain standards is very slow and complicated 0.780 formulating and understanding this practice in written documents is very difficult 0.804 new employees can learn how to perform this practice by studying a manual with difficulty 0.644 cronbach’s alpha 0.784 percentage of variance explained (%) 74.27 eigenvalue 2.228 kaiser-meyer-olkin measure of sampling adequacy bartlett’s test of sphericity 0.690 106.933 (0.000) table 5. exploratory factor analysis for tacitness of management and control of purchases and consumption variables factor item factor load educating the new employees to operate in this practice using the chain standards is very slow and complicated 0.794 formulating and understanding this practice in written documents is very difficult 0.790 new employees can learn how to perform this practice by studying a manual with difficulty 0.768 cronbach’s alpha 0.855 percentage of variance explained (%) 78.38 eigenvalue for factor 1 2.351 kaiser-meyer-olkin measure of sampling adequacy bartlett’s test of sphericity 0.736 124.951 (0.000) http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 bivariate correlations of the variables to be included in the regression analyses were also computed (see table 6). the first four variables refer to the four variables linked to dimensions of knowledge transfer success. each of these variables was used in a regression model as a dependent variable (see below). variables 5, 6 and 7 are the factors extracted in the exploratory factor analyses conducted on the scales of knowledge tacitness. the remaining four variables are control variables: (1) the fact that the new hotel was in spain or abroad (dichotomous variable); (2) the number of employees in the f& b department; (3) the fact that the hotel chain was the owner of the new hotel or not (dichotomous variable); and (4) the fact that the main segment of the hotel was leisure customers or not (dichotomous variable). table 6. correlation matrix for variables in the four models variables 1 2 3 4 5 6 7 8 9 10 11 1. similar characteristics to the source f&b 1 2. reduced time to transfer knowledge 0.50*** 1 3. [inverted] cost to transfer knowledge 0.01 0.33*** 1 4. recipients’ satisfaction with the knowledge transfer 0.39*** .0.60*** 0.09 1 5. tacitness of food production knowledge -0.13 -0.35*** -0.16 -0.17 1 6. tacitness of food and beverage service knowledge -0.20* -0.40*** -0.12 -0.28*** 0.9*** 1 7. tacitness of purchase and consumption knowledge -0.17 -0.22** -0.02 -0.09 0.77*** 0.73*** 1 8. hotel abroad -0.16 -0.19* -0.12 -0.18* 0.12 0.15 0.15 1 9. number of employees in f&b 0.02 -0.18* -0.15 -0.23** 0.13 0.21 0.00 0.35*** 1 10. own property 0.06 0.10 0.13 -0.16 -0.08 -0.09 -0.07 0.08 0.20* 1 11. leisure hotel 0.06 0.04 0.00 0.09 -0.13 -0.05 -0.19* -0.11 0.39*** 0.08 1 * p<0.10. ** p<0.05, *** p<0.01 the dependent variable of the first regression model (see table 7) is the similarity of the knowledge characteristics between the f&b department in the new hotel and the corporate template. consequently it refers to the adjustment of the performance in the new unit with the operational and quality standards of similar units in the chain. it seems the only significant http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 variable in this regression model is the tacitness of customer service knowledge, but with a low level of significance. table 7. multiple regression results with standardized estimates for model 1 variables similar characteristics to the source f&b beta coefficient (t signif.) tacitness of food production knowledge 0.333 (0.198) tacitness of food and beverage service knowl. -0.436 (0.082)* tacitness of purchase and consumption knowl. -0.036 (0.833) hotel abroad -0.185 (0.130) number of employees in f&b 0.099 (0.467) own property 0.047 (0.671) leisure hotel 0.059 (0.633) r2 0.094 adjusted r2 0.015 f 1.190 (0.318) * p<0.10. ** p<0.05, *** p<0.01 the second regression model (see table 8) addresses the required time to work with the source knowledge in the new setting. the dependent variable is expressed in terms of how short the time to work with the corporate standard is. the tacitness of customer service knowledge is significant again, and it also affects the success dimension in a negative way. table 8. multiple regression results with standardized estimates for model 2 variables reduced time to transfer knowledge beta coefficient (t signif.) tacitness of food production knowledge -0.053 (0.827) tacitness of food and beverage service knowl. -0.400 (0.089)* tacitness of purchase and consumption knowl. 0.142 (0.380) hotel abroad -0.084 (0.459) number of employees in f&b -0.114 (0.371) own property 0.131 (0.207) leisure hotel 0.064 (0.584) r2 0.204 adjusted r2 0.135 f 2.936 (0.009)*** * p<0.10. ** p<0.05, *** p<0.01 http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 the third regression model deals with the economic dimension of knowledge transfer success (see table 9). due to interpretation easiness, the dependent variable was inversely computed, so that a higher value of this variable means a lower cost for the firm. even adopting a flexible significance limit of the p value lower than 10%, no variable in the regression model exerts a significant influence on the dependent variable. table 9. multiple regression results with standardized estimates for model 3 variables [inverted] cost to transfer knowledge beta coefficient (t signif.) tacitness of food production knowledge -0.400 (0.122) tacitness of food and beverage service knowl. 0.108 (0.664) tacitness of purchase and consumption knowl. 0.217 (0.209) hotel abroad -0.069 (0.568) number of employees in f&b -0.128 (0.346) own property 0.160 (0.147) leisure hotel 0.002 (0.986) r2 0.099 adjusted r2 0.020 f 1.257 (0.282) * p<0.10. ** p<0.05, *** p<0.01 table 10 displays the main results of the regression analysis on the recipients’ satisfaction with the transferred knowledge. though the f value has a low level of significance, this last dimension of knowledge transfer success seems to be significantly influenced by two variables: the tacitness of food and beverage service knowledge, and the fact that the main hotel segment is the vacation tourist. the first variable negatively affects the independent variable and the second one has a positive relationship with it. the global results of these four regression models confirm the research hypothesis of this work (h1) but only partially. knowledge tacitness in the food and beverage area negatively affects knowledge transfer success. but this relationship is not evident for all the categories of knowledge assets and neither for all success dimensions. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 table 10. multiple regression results with standardized estimates for model 4 variables recipients’ satisfaction with the knowledge transfer beta coefficient (t signif.) tacitness of food production knowledge 0.322 (0.184) tacitness of food and beverage service knowl. -0.663 (0.005)*** tacitness of purchase and consumption knowl. 0.187 (0.250) hotel abroad -0.025 (0.823) number of employees in f&b -0.194 (0.129) own property -0.127 (0.220) leisure hotel 0.237 (0.044)** r2 0.204 adjusted r2 0.135 f 2.932 (0.090)* * p<0.10. ** p<0.05, *** p<0.01 conclusion this work has attempted to analyze the tacitness of food and beverage knowledge in the context of organizational growth. many hotel firms regard the food and beverage area as key to generate rents, and they commit many resources to create competitive advantages from that domain. when these firms grow they want to replicate their formula in new settings, and consequently transfer the f&b practices to the new units. the underlying knowledge of the practices in full service restaurants is often tacit. the academic literature emphasizes the relevance of tacit knowledge, especially to transfer it internally, since it is more difficult to be imitated by competitors. however, that advantage becomes a problem due to the difficulties associated to the intra-organizational mobilization. the empirical approach of this work allows for stating some ideas about that tacitness and its role in knowledge transfer. food and beverage knowledge can be grouped in three categories or practices: food planning, production and preparation; customer service (in restaurant, cafeteria, bar...); and purchase and cost management and control. the practice associated with a higher level of tacitness is the one about the food planning, production and preparation. on the other hand, the knowledge about customer service in f&b areas is the most explicit one. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 regarding the main mechanisms to transfer the f&b knowledge when hotel chains grow, the more tacit the knowledge, the richest the mechanism used to mobilize the knowledge. thus, the most frequent transfer mechanism for the kitchen and the purchase and consumption knowledge is the employment of staff from the headquarters or other chain hotels in long-term assignments, which is considered a very rich transfer mechanism. on the other hand, the most frequent transfer mechanism for the customer service knowledge is training courses, lectures and seminars. this mechanism is associated with a medium level of information richness, and lower than the one linked to staff mobilization from the headquarters and other hotels. with regard to the influence of knowledge tacitness on knowledge transfer in context of growth, customer service tacitness seems to exert a negative, significant impact on several dimensions of transfer success. this negative influence results in dissimilarities with the knowledge source, a longer time to achieve a satisfactory transfer, and lower recipient satisfaction with the new knowledge. unexpectedly, the level of tacitness of food production knowledge and purchase and consumption knowledge do not exert a significant influence on knowledge success, even though these practices are characterized by higher levels of tacitness on average. a potential explanation for this is the use of richer transfer mechanisms that reduce and cancel the negative impact of these highly tacit practices (e.g., gorovaia and windsperger 2010). this is in line with the standard assumption in the industry that food production and purchase and consumption management are difficult to transfer, since this would propel the use of those rich mechanisms. however, customer service is not seen as a highly tacit practice and hence cheaper transfer mechanisms with lower information richness are used. this argument is strongly reinforced in subramaniam and venkatraman’s work (2001), where these authors empirically corroborate that the existence of adjustment between the acquired tacit knowledge and the use http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 of rich communication media strengthens the capability of new product development in a transnational context. based on these findings, some recommendations can be extracted for managers in charge of the expansion process. the first one is that the expansion process should be planned, as emergent decisions can result in the wrong choice of transfer mechanisms in the expansion process. another implication of this work is that managers should evaluate the characteristics of the knowledge to be transferred to new units. thus, for f&b practices associated with a high level of tacitness, expansion managers should organize the transfer process by using rich transfer mechanisms such as expatriates and transferred staff. the use of manuals and written documents, so widespread in the sector, tends to increase the failure likelihood in these growth processes, at least in the f&b field. employing transfer mechanisms with a low possibility of discussion and resolution of problems that appear in daily operations can result in lower levels of recipients’ satisfaction, and that in turn can affect the quality of the service in the long run. some limitations must be stated regarding the validity of the findings. the use of a questionnaire for the study can limit the quality of the collected data, since respondents cannot comment on a wide array of aspects which can characterize the practices object of study in this work. moreover, the generalization of the findings can only be done based on the geographical approach of this study, that is, the growth of spanish hotel chains. finally, the relatively low number of hotels in the sample must be also stated. references abdullah, faurouk, arthur ingram, and rita welsh. 2009. “managers’ perceptions of tacit knowledge in edimburgh’s indian restaurants.” international journal of contemporary hospitality management 21 (1): 118-127. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 54-83, january-june 2018 doi:10.1344/jesb2018.1.j037 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb 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spillover and sustainability in destination development.” journal of sustainable tourism 23 (7): 1029-1048. zhao, jin l., and michael d. olsen. 1997. “the antecedent factors influencing entry mode choices of multinational lodging firms.” international journal of hospitality management 16 (1): 79-98. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 sylvia rohlfer cunef, madrid (spain) employee involvement and participation in smes: a synthesis of extant research abstract it is widely acknowledged that small and medium-sized enterprises (smes) cannot afford underutilize their workforce and owner/managers encourage ways to involve employees. in this article, we focus on what is known about formal employee involvement and participation (eip) practice in smes. based on a systematic, “aggregative” literature review (briner and denyer 2012; gough et al. 2012) we identify key research on eip in smes that is embedded in practice and provides utility for practitioners and policy makers. the findings not only allow us to comment briefly on the evolution of eip research in smes, but to identify methodically what is known and not known about eip practice in smes. we go therefore beyond the limited review provide by sameer and őzbilgin (2014) and identify with a higher level of confidence three key directions for future academic research. keywords: human resource management; small and medium-sized firms; systematic literature review introduction research evidence has accumulated over the past 25 years, primarily for large firms that employees and organizational culture represent the unique competitive advantage in an economy that has become increasingly service and knowledge based (katzenbach 2000 ; corresponding author: e-mail: srohlfer@cunef.edu received 09 nov 2016 accepted 26 sept 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 schwartz 2010; ulrich and ulrich 2010). other sources of competitive advantage (e.g. access to capital, design of products, consulting advice) can be bought or copied. thus, human resource management (hrm) practices and a changed role for the human resource (hr) department emerge as important success factors for large firms. one might argue that employees and firm culture are even more important to the success of small and medium-sized enterprises (smes). smes do not have the capacity and slack to retain employee and practices that do not contribute to performance, cannot afford to underutilize their workforce, and must rely on staff for learning, innovation and creativity (castrogiovanni 2011). key elements in this discussion are the individuals that comprise the organization and the ways to involve these employee resources. while it is widely acknowledged that in smes hr practices do not rise to the level of functionality and formalization found in large firms, research has found that small firms do employ a mix of hr practices (hayton 2004; barrett and mayson 2007). for this article, we particularly focus on the practice of employee involvement and participation (eip) in smes. there is growing evidence in the general literature that eip is broadly necessary and beneficial for organizational longevity and success. a glut of literature considers its relationship with organizational performance, climate and commitment (richardson et al. 2010; peccei at al. 2010; pyman et al. 2010), job satisfaction and industrial citizenship (antcliff and saundry 2009; pyman et al. 2006), psychological contract (guest 1998) and high-performance work systems (bryson et al. 2007; wood and fenton o´creevy 2005). despite its importance to firms’ success and longevity, sameer and őzbilgin (2014) not only observe that research on eip in smes is largely absent in academic studies but they also underline that eip research must be contextualized more clearly to the sme setting. they point http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 to the myriad of formal and mainly direct eip mechanisms, the prevalence of more informal employee relations and the union absence in smes that taken together stimulate distinct dynamics in eip practice compared to large organisations (sameer and őzbilgin 2014). in fact, sameer and őzbilgin build a case to explain why (more) eip research in smes is not only stimulating and vital, but also fills gaps in knowledge. however, their approach is not guided by explicitly stated inclusion and exclusion criteria and may involve cherry picking of eip research to support their point as they “present a general overview on important contemporary debates in the employee voice and locate it in industrial relations and human resource management literatures” (sameer and őzbilgin 2014, 411). sameer and őzbilgin (2014) do not claim to use explicit rigorous methods and there is the risk that articles are selectively chosen from what is available. their overview falls short of providing an in-depth, comprehensive and balanced account of extant eip research based on a descriptive and thematic analysis. by contrast, reviewing the available literature systematically and making the review method explicit and transparent allows us to draw conclusions with higher levels of certainty, consistency and assurance about what is known and not known about eip in smes (tranfield, denyer, and smart 2003; briner and denyer 2012). moreover, recent research based on qualitative case study research confirms the interplay between formal and informal practices (cox et al. 2009; della torre and solari 2013; marchington and suter 2013; townsend et al. 2012). the evidence points to the important role played by informal eip mechanisms with formal and informal eip practice complementing each other. while academics call for more research to identify how formal and informal practices interplay with each other (cox et al. 2009; marchington 2015), the importance of formal eip should not be underestimated. the empirical research clearly demonstrates that http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 formal eip techniques tend not to be fully substituted by informal practices (townsend et al. 2012; marchington and suter 2013). informality may not survive as a sustainable mechanism for employee participation in the absence of formal structures, especially if certain external or internal factors, such as market conditions or senior management philosophies change (cox et al. 2009; wilkinson et al. 2004) or might reach its limits and formal mechanisms are sought to ensure all employees are reached (marchington and suter 2013). against this background this article pursues the following objectives: through the means of a systematic, “aggregative” literature review (gough et al. 2012) we identify key research on formal eip in smes that is embedded in practice and provides utility for practitioners and policy makers. apart from mapping the eip research based on a statistical analysis that allows us to comment briefly on the evolution of eip research in smes, we carry out a thematic analysis of articles to identify more accurately what is known and not known about eip practice in smes (briner and denyer 2012). the findings are valuable to help academics framing subsequent empirical enquiries into eip practice. conceptual boundaries and method our aim is to evaluate of what has been found to date in empirical research on eip in smes and to create an agenda to fill some empirical holes in extant research. first, we considered studies that were concerned with smes, i.e. enterprises that per the widely accepted definition by the european commission employ fewer than 250 persons, apart from turnover or balance sheet total. for our study the employment size variable is decisive as it sets the scene for eip practice at workplace level. in addition, we only consider research that focus on stand-alone independent firms i.e. that are not part of a larger conglomerate. owner/managers in these firms have a more unfettered choice which practices to choose since they are unconstraint through http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 centrally advocated and/or requested management policies and practices. more importantly, owner/managers implement eip practices that fit the resources of the sme context while branches of larger businesses may rely on central company resources to make eip work. given our focus, we considered only studies concerned with formal eip. as commented earlier, classifications may present problems in smes where day-to-day interactions between employee and management tend to encourage an informal dimension to participation (cox et al. 2009; moore and read 2006). moreover, the meanings and forms eip can take vary considerably depending on the discipline (wilkinson et al. 2010). eip practice usually encompasses a range of mechanisms used to involve the workforce whether undertaken directly with employees in a formal setting or indirectly through their representatives via formal ongoing bodies such as jccs or works councils (marchington 2015). for the literature review we adopt a pragmatic approach. while it is well established that there are important differences in the formal structures for eip at the workplace across europe (fulton 2013), we consider formal eip encompassing the practices commonly identified by researchers in the field (eurofound 2015; marchington and wilkinson 2005; wilkinson, dundon, and grugulis 2007). these include (a) direct communication –regular workforce meetings; regular team briefings; e-mail/intranet; management chain, notice board, newsletters-; (b) upward problem-solving – suggestion schemes, attitude surveys-; (c) representative participation –joint consultative committee, unions-; and (d) financial participation – performance-related pay, profit-related pay and share schemes. since our primary aim is to evaluate the prevalence of eip in smes at present and to create an agenda to fill the empirical holes in current research, our systematic review aims at an aggregative review that requires a encompassing, unbiased data set of empirical studies (gough http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 et al. 2012). we therefore searched in six reference databases: (1) ebsco´s business source complete, (2) proquest’s abi-inform – complete (business), (3) web of science; (4) jstor and (5) emerald insight and (6) springer link, which were chosen from amongst others as the databases focusing explicitly on articles pertaining to the areas such as economics, business, management and sociology. consistent with our conceptual framework on direct and representative formal eip the search terms used were “employee involvement”, “employee participation”, “employee representation”, “employee voice” and “employee influence”. in parallel, the search was duplicated by substituting “employee” with “worker”. these terms were crossed with the search terms “sme*” and “small and medium sized firm*”. due to considerable variation in the terminology used to map the sme terrain, we also included the terms “small firm*”, “small organi*”, “small enterprise*”and “small business*” (nolan and garavan 2015). the review was limited to scholarly, peer-reviewed journal articles, both practitioner and academics oriented. empirical studies (either qualitative or quantitative methods) as well as conceptual papers published in english were included. each database was interrogated by the search terms mentioned above on june 15th and 16th 2016. titles and abstracts were searched with search date and numbers returned recorded. see table 1 for a more detailed description of the search boundaries and the inclusion and exclusion criteria. the total number of potentially relevant studies retrieved using search strings alone was 166, which yielded in 86 articles having removed duplications across the six databases. these were exported to excel to create a common database, where the abstracts were further reviewed against the inclusion and exclusion criterion in an iterative process. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 table 1. search boundaries of the systematic literature review and the criteria for the selection of the articles source: author search boundaries databases ebsco, abi-inform, web of science, jstor, emerald, springer time period covered no time restrictions type of publications peer-reviewed articles, academic or practitioner oriented language english eip concept “employee involvement”, “employee participation”, “employee representation”, “employee voice”, “employee influence” worker involvement”, "worker participation”, "worker representation”, “worker voice” and “worker influence” smes “sme*”, “small and medium sized firm*”, “small firm*”, “small organi*”, “small enterprise*”, “small business*” selection of articles inclusion criteria all private sector firms examine eip across different sectors all smes examine eip across different types of smes at all stages of development quantitative and qualitative empirical studies capture all empirical evidence theoretical papers examine the working assumptions, conceptual underpinnings to be used in the field exclusion criteria public sector firm or ngo operating under different corporate governance principles being a business unit of an mncs or having an affiliation to, or ownership by, another organization not being a stand-alone, independent establishment and therefore being under the headquarters’ influence on business unit policies and practices concerning communication between management and employees no interaction between management and workforce with the focus on influencing working issues or decision within the firm http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 after having checked whether the inclusion criteria were correctly applied, we then applied the exclusion criteria that each article fell within the conceptual boundaries established. a total of 60 articles were deemed relevant following this process. at this stage a thorough review of the full article was conducted by the author and a research colleague and the articles classified into one of five categories (macpherson and holt 2007): primary, secondary, peripheral, conceptual and not relevant per the criteria in table 3. it is important to note that the paper categorization at this stage was not a stand-alone judgment of the study´s quality but of its fit with the review criteria, i.e. empirical research on eip practice in smes. judgements were made particularly on whether there was an indication that the article included theories and findings that were directly related to eip which contribute to policy and practice. those articles that were highly relevant in the majority of criteria were judged as primary data, those with a majority of medium relevance in the criteria were categorized as being of secondary relevance, etc. articles that concentrated on one specific eip practice, such as h&s representatives (walters 1998a, b; 2004; frick and walters 1998), collective representation in smes (haynes et al. 2006; moore and read 2006; helfen and schuessler 2009) or employee suggestion schemes (andries and czarnitzki 2014) could still be of primary relevance as long as they reviewed explicitly the extant theory on the specific eip practice(s) under investigation and the findings had a clear utility for eip practice and policy. articles that crossed several themes associated with eip, e.g. eip practices being a part of lean management practices, total quality management (tqm) or as an element within high performance work systems (hpws) were more likely to be considered as not being of primary relevance due to the primary focus on theories/concepts related to tqm, lean management, hpws or general management in hrm rather than eip http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 specifically. there were 28 articles categorized as being of primary relevance, seven as being of secondary relevance, 24 of peripheral relevance, none as irrelevant and one conceptual paper. the full text of the 28 studies initially categorized as primary were then analysed using an excel spreadsheet to code and identify themes to form the basis of this review. this spreadsheet can be provided by the author on request. table 2. relevance assessment criteria and the categorization of articles relevance assessment criteria aspect of study 0= absent 1: low 2: medium 3: high theoretical contribution and insight insufficient information to assess this criterion weak development of theoretical insights and limited awareness of prevailing literature basic development of theory and use of concepts gathered from existing literature good use of theory, including the novel and provocative development of concepts embeddedness in practice insufficient information to assess this criterion hard to use the concepts and ideas in eip application findings have potential utility for business and policy makers the utility for practitioners and policy makers is clear methodology and methods data supporting arguments insufficient information to assess this criterion incomplete data and not related to theory coupled to weak research design data broadly related to the arguments, and conveyed through a clear research design and method data strongly supports arguments. robust research design and good use of methods relevance of three areas: findings, theories; methods insufficient information to assess this criterion only tangentially relevant; provocative but linked to an established line of thought broadly relevant perhaps in one of the areas, or applied in different disciplinary fields integration of findings, methods and theoretical constructs contribution insufficient information to assess this criterion insignificant contribution; it is not clear the advances it makes although using other´s ideas, builds upon the existing theory further develops existing knowledge, expanding issues source: macpherson and holt, 2007, adapted by author http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 table 3. categorization of articles categorization criteria criteria guidance primary majority "3" studies that indicate a high level of coherence and contribution were considered directly related to the study criteria secondary majority "2" information on only theory or findings and/or the relevance to policy and practice was ambiguous peripheral majority "1" theories and concepts that were tangential or not clearly linked to eip in smes and/or findings were unrelated to policy and practice not relevant majority "0" theories and concepts that were not linked to eip in smes or findings were unrelated to policy and practice source: author literature review: findings scholarly interest in eip in smes took off in the late 90s as seen in the steady contributions to eip in smes research published in peer-reviewed, academic journals. following the academic journal guide 2015 (cabs 2015) one article appeared in a one rated journal and seven articles were published in two rated journals, which are general seen as publishing original research of acceptable standards with many excellent practitioner-oriented articles published there. another 12 articles appeared in three rated journals and six articles in four rated journals. both journal categories publish original and well executed research. two journals were not included in the journal guide 2015 (figure 1). the quality of journals is related to the method applied (figure 1). quantitative and mixed method studies dominate the work published in the higher quality rated journals indicating a preference for quantitative work. this shift towards quantitative orientation in eip research in smes is supported by a few other factors pushing in this direction, including the rising opinion http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 among researchers that the main journals in their field favour quantitative pieces (whitfield and strauss 2000). nevertheless, the review shows that at present room remains for genuine qualitative research to be published in quality rated journals. policy makers and managers have always used a wide range of sources of evidence in making decisions about policy and the organization of the business. however, they are coming under increasing pressure to adopt systematic, thorough and seemingly objective evidence to address complicated questions about the nature and significance of the problem, the nature of proposed actions and their differential impact, cost-effectiveness, acceptability etc. qualitative research is primarily exploratory research to gain an understanding of a phenomenon or to dive deeper into the problem, since the sample size is typically small. hence the researchers’ ability to generalization from the findings remains often limited. policy makers and practitioners rather require access to research that emphasize objective measurements and the greater relevance of statistical, mathematical or numerical analysis of data leading to demand for more quantitative or mixed studies. this tendency is reflected in our review since the articles identified are classified according to the contributions´ embeddedness in practice and its utility for practitioners and policy-makers. figure 1. distribution of articles by method and journal rating source: author 0 1 2 3 4 5 6 7 mixed quant qual mixed quant qual mixed quant qual mixed quant qual mixed quant qual 1 2 3 4 not rated http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 eip research in smes is published in a wide variety of subject areas that are identified by the abs academic journal guide 2015 (figure 2). journals in “hrm and employment studies” tend to cluster most research on eip in smes (n=19) and only a small part of research is published in “entrepreneurship and small business management” (n=3). this tendency may not only indicate the relative nascence of research focusing on hrm issues in smes, a fertile ground for research that has been overlooked (katz et al. 2000; moore and read 2006). positioning an eip paper for submission to a general sme management journal also requires a different approach. rather than leading with an emphasis on filling a gap in the hrm literature, it is important to identify the shortcomings in existing management debates and research that looks at social relations, on which recourse to an sme context helps shed new light. an approach which eip researchers appear to have hardly pursued and if so then only more recently (dietz et al. 2006; uhlaner et al. 2013 and andries and czarnitzki 2014). however, it hinders the dissemination of quality research into broader management circles which could fertilize and support eip research given its demonstrated relevance for management decision-making and organizational performance and the multidisciplinary nature of eip research (wilkinson et al. 2014). figure 2. journals according to areas according to the abs ajr 2015 source: author 0 2 4 6 8 10 12 14 16 18 20 economics, econometrics and statistics entrepreneurship and small business management hrm and employment studies international business and area studies operations and technology management social sciences not categorized according to the abs ajr 2015 http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 focusing on the setup of the research framework the large majority of studies adopts a single country focus (n=24). moreover, anglo-saxon countries (n=16), in particular the uk (n=11) as well as european countries (n=13), with a dominance of germany and the eu as a region (n=3 each), are the principal foci in extant research. one study does not even allow the reader identifying the specific country setting in which the empirical data was collected (allen et al. 2013). hence eip research in smes is dominated by empirical knowledge generated in anglosaxon and western european countries. it reveals that the middle east, africa, latin america and asia constitute severely understudied and underrepresented geographies in research. hence eip research conducted outside western europe and anglo-saxon countries does not sufficiently inform theory making in eip research in smes and demarks knowledge and imagination of eip practices to those geographies studied (őzbilgin 2004), the lack of multinational studies (n=3 in our sample) even across western european countries implies a difficulty of formulating overarching conceptual frameworks, theoretical models in eip. the former is lamentable since blasi et al. (2003), walters (2004) and gilman and raby (2013) show in their empirical studies that idiosyncrasies attached to specific national, often institutional, context engender and influence eip practice in smes. the latter point is a supporting factor that eip in smes remains an under-theorized and under-researched area (gilman et al. 2015). while the literature on eip finds its roots in several disciplines and therefore gaining insights from complementary and competing approaches towards eip (wilkinson et al. 2014), our analysis shows that eip research in smes lacks this attribute. following the categorization by wilkinson, and colleagues (2014) the large majority of studies are rooted in the hrm/hpws literature (n=22). while this is not surprising given the dominant journal category of “hrm http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 and employment studies” in which articles are published, it brings to light that extant sme research on eip lacks “the potential for greater theoretical specificity within the wide range of perspectives that shape understanding and can help identify conceptual overlap” between different theoretical strands (wilkinson et al. 2014, 9). a related point arises with respect to the meaning of eip (dundon et al. 2004). a large majority of studies (n=22) captures eip in an sme context as contribution to management decisionmaking (dundon et al. 2004, 1152). here eip research is informed by the underlying assumption that eip helps employees gaining input to improve work organization and efficiency more generally, particularly through management initiatives such as upward problem-solving practices or by eliciting workforce engagement, leading to “high levels of energy that are invested in work” (hallberg and schaufeli 2006, 119; wilkinson et al. 2013). already strauss (2006, 778) denoted, facilitating eip “provides a win-win solution to a central organizational problem – how to satisfy workers´ needs while simultaneously achieving organizational objectives”. however, theory and practice can diverge (harley et al. 2005) and eip research requires a more critical approach in analysis by interrogating the multiple views by stakeholders. while nine studies in our analysis base their findings on management responses only, i.e. those who adapt, interpreted and implement legislation and corporate initiatives, an equal part of enquiries solicits either the employee perspectives (n=1), collects information on eip from multiple stakeholders (n=3) or interrogates management and employees alike (n=5) and therefore provides differing views on how eip is perceived. a further four studies did not provide information on their unit of analysis. following the categorisation by marchington and wilkinson (2005) we also observe that research on eip covers the whole range of eip techniques (figure 3). taking downward http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 communication and upward problem-solving together, direct eip (n=18) is equally investigated as is representative participation (n=17) followed by financial participation (n=12). three studies focus on eip in general without breaking it down further into specific techniques and two studies use other concepts to operationalize eip in their enquiry. these findings are interesting given the observed trend in the general literature towards direct individual voice mechanisms rather than participative representation (brewster et al. 2007). furthermore, of the categorized research, 12 studies focus on a single eip technique in specific country contexts only, providing limited insight into the comparative differences and their wider integration and synergies between eip techniques. figure 3. different types of eip source: author with respect to external influences and internal dynamics for eip practice, all studies contextualize their findings to the sme context. while 12 studies refer to the sme context in general, in eight articles explicit sme size groups are identified. nine studies in total include a comparison amongst differently sized companies, mainly including a comparison between smes and large organizations rather than between differently sized smes. the fact that there 0 2 4 6 8 10 12 14 16 18 not specified other direct eip downward communication upward problem solving representative participation financial participation http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 is very little research that differentiates between different sme size groups calls attention since a few researchers (uhlander et al. 2013; della torre and solari 2013; moore and read 2006; cox et al. 2009; bayo-morines and larraza-kintana 2009) show that variations in eip within smes of different size exist. uhlander and colleagues (2013, 605) accentuate “that even among smes, there is major difference between the management of the very small (<10 employees) and even moderately small (i.e. between 50 and 100 employees) firms, a difference that has not been adequately addressed in the literature.” to test whether authors contextualize beyond the mere size variable we compared their research findings on influential factors for eip practice with the open systems hrm framework for smes developed by harney and dundon (2006). their framework to analyse hrm in smes conceptualises a complex interplay of external structural factors and internal dynamics. in fact, all researchers acknowledged that research which considers smes in isolation is ultimately misleading (barrett and rainnie 2002; cassell et al. 2002). most researchers (n= 20) contextualizes according to a mix of external influences and internal dynamics, given that small firms have less control over their environment than larger organizations. the remaining studies (n=8) refer to internal dynamics only. among the most prominent factors that influence eip practice in smes are trade union presence or absence (n=17), management style and ideology (n=15), legislation (n=13), employee characteristics, industry sector and product/market structure (n=9 each). moreover, many studies (n=18) identified a range of additional factors that were found relevant. among the most frequently used additional factors to influence eip were the presence of the hr specialist/unit (n=3), firm age (n=4), nature of social relations (n=3) and firm´s competitive strategy (n=3). extant research therefore underlines the importance of context for employers’ choices of eip regimes (marchington 2007) but also the http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 challenges for the employer and employee side to assess and develop a fitting eip framework for the greatest organizational impact and employee good. finally, except for two studies, the large majority of studies were based on cross-sectional data (n=26). hence changes over time in eip practice, long term effects of eip practices nor the varying impact of factors over time are hardly assessed. discussion and conclusion in a nutshell, the systematic review on the eip literature in smes not only demonstrates the key patterns of eip research in smes with respect to its methodology and thematic content. it also sets out the background against which future empirical enquiry can be conducted and we perceive the following three research lines to be particularly fruitful. first, to enrich the conceptual underpinning of eip research, we see the need to adopt a multiple country focus drawing on management and employee data. such research framework allows the identification and analysis of idiosyncrasies and commonalities that drive formal eip and that steam from different national, institutional contexts. as gilman and raby (2013, 385) observe for hpws including eip practices, “attention must be placed not solely at the organizational level but also at the institutional level”. confirming this observation, our review systematically identified the range of factors beyond the boundaries of the firm that moderate firm eip practice in smes, extending the open systems hrm framework for smes by harney and dundon (2006). however, at present we do not know about the overarching relevance of these factors across different national contexts and their complex factor interactions within national boundaries, which has been cited as theoretically weak in much of the extant literature on smes (barret and rainnie 2002, 416; harney and dundon 2006). http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 such comparative analysis of external factors and internal influences driving eip in smes would be valuable for practitioners as well. it is accepted that the behaviour of organisations cannot just be considered as a response to economic downturns and market pressure but also to their embeddedness in wider social and institutional environments that require differentiated management responses, particularly when organizing an sme internationally. management practices, including eip, reflect the rules, norms and structures prevalent in their societal setting, as shown by the cross-country study by gilman and raby (2013). considering institutional factors in more detail, our review of the literature has shown that research repeatedly points to the influence of employment law. of more recent significance is here the european information and consultation of employees 2004 regulation that came in effect in 2008 for smes. for the first time, employees across europe in smes above the 50employee threshold have the legal right to be informed and consulted on a range of business and employment matters, should they wish (wilkinson et al. 2007). however, its impact in specific countries is ambiguous (for the uk: wilkinson et al. 2007; cox et al. 2009) and may exercises little pressure on management for conformity (for germany: helfen and schuessler 2009). it means that there remains leeway for smes to cope with institutional pressure and managers have certain choice in the adoption of the eip practices. most empirical studies usually show a myriad of eip techniques in smes (wilkinson et al. 2013) which are shaped by external and internal contingencies (gilman and raby 2013; gilman et al. 2015; wilkinson et al. 2007; dietz et al. 2006) but practitioners are often left alone to identify the commonalities among these contingencies that drive eip practice and influence its outcomes. given that causalities cannot be attributed in a linear fashion within such a complex system of social and institutional environments, the emphasis on operationalising the context for eip should not be http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 on prediction but rather understanding what is contextually significant and unique and the reason for it (brewster 1999; truss 2002). this would allow a more informed management choice on eip practice implementation to fit a given business contexts. combining such research with a size sensitive research framework within the sme group could also encourage a better fit with the management literature configuring management theory further to differing sme national and organizational contexts. secondly, longitudinal research that examines how eip practices in smes have changed over time is of merit for the conceptual development in eip. this is of interest in current times, as in 2008 the most serious crisis to hit the global economy since the great depression began in the us and spread rapidly to europe. hence a pre, after and during crisis examination would help understand how an economic downturn has affected organizations and, ideally, the eip prospects for workers in different institutional contexts. it might be that new forms of eip emerged or vanished during different periods, sometimes replacing and at other times coexisting with prior forms of participation. such interrogation could lead to a more thorough evaluation of the antecedence and drivers of eip practice in smes to explain further why eip is different to large organization. while research exists in this respect to large organisations, such systematic investigation is missing at present, even though mcmahon underlined earlier on that “[…] while the internal and external factors identified are identical to those affecting large firms, given smes´ proximity to the external environment, it is ´the way in which these factors impact on small firms that makes the situation for small firms different from that of large firms.” (mcmahon 1995, 199; original emphasis, cited by harney and dundon 2006). finally, eip research in smes focuses to equal parts on participation and involvement, which is surprising given the present managerial rhetoric and smes being commonly classified as http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 non-union firms. however, collective participation is a broad term and more detailed case study evidence is needed to see whether this indicates a shift towards more managerially-driven forms (brewster 2007). while extant research investigates employees´ attitudes towards eip or trade unions, skills levels, ethnicity and income levels, further case study research should also try to identify common responses to eip practices by groups of employees that share specific characteristics. to conclude, this article makes an important contribution to the existing literature on eip in smes by providing a transparent and objective assessment of extant eip research. while the descriptive and thematic analysis has shown the evolution and state-of-art in eip research, further advances can be made to improve the field further and eventually help positioning an eip article for submission to a general sme management journal with the benefit to reach broader audiences. cross-country, longitudinal studies of eip including qualitative studies that incorporate a differentiation according to size within the sme group are seen as particularly promising to overcome existing limitations and to advance the field in this respect. acknowledgements this project has received funding from the european union´s horizon 2020 research and innovation programme under the marie sklodowska-curie grant agreement no 734447. also, i am grateful to my collaborating research colleagues (carlos salvador muñoz and alesia slocum) for their comments. http://revistes.ub.edu/index.php/jesb volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 references allen, mathew r., jeff ericksen, and christopher j. collins. 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(2013). „disentangling the effects of organizational capabilities, innovation and firm size on sme sales growth.” small business economics 41 (3): 581–607. ulrich, dave, and wendy ulrich. 2010. the why of work. new york: mcgraw hill. http://revistes.ub.edu/index.php/jesb http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.321.7149&rep=rep1&type=pdf volume 3, number 1, 112-136, january-june 2018 doi:10.1344/jesb2018.1.j039 doi.org/10.1344/jesb201x.x.j0xx online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 walters, david. 1998a. “employee representation on health and safety in small enterprises.” employee relations 20 (2): 164-179. walters, david. 1998b. “employee representation and health and safety.” employee relations 20 (2): 180-195. walters, david. 2004. “worker representation and health and safety in small enterprises in europe.” industrial relations journal 25(2): 169-186. whitfield, keith, and george strauss. 2000. “methods matter: changes in industrial relations research and their implications.” british journal of industrial relations 38 (1): 141-51. wilkinson, adrian, tony dundon, and irina grugulis. 2007. “information but not consultation: exploring employee involvement in smes.” international journal of human resource management 18 (7): 1279-1297. wilkinson, adrian, tony dundon, and mick marchington. 2013. “employee involvement and voice.” in managing human resources, edited by stephen bach, and martin edwards, 268–88. oxford: blackwell. wilkinson, adrian, tony dundon, jimmy donaghey, and richard b. freeman. 2014. “employee voice: charting new terrain.” in handbook of research on employee voice, edited by adrian wilkinson, jimmy donaghey, tony dundon, and richard b. freeman, 3-16. northampton: edward elgar. wilkinson, adrian, paul j. gollan, mick marchington, and david lewin. 2010. “conceptualizing employee participation in organizations.” in oxford handbook of participation in organizations, edited by paul j. gollan, david lewin, mick marchington, and adrian wilkinson. oxford: oup. wilkinson, adrian, mick marchington, and paul ackers. 2004. “changing patterns of employee voice.” journal of industrial relations 46 (3): 298-322. wood, steven, and mark p. fenton o´creevy. 2005. “direct involvement, representation and employee voice in uk multinationals in europe.” european journal of industrial relations 11 (1): 27-50. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 180 alejandro campos sánchez university of guadalajara (mexico) personal values as predictors of entrepreneurial intentions of university students abstract considering entrepreneurship as a set of actions performed by a subject, and behavior one of the main predictors of actions, this work presents a study based on the theory of human values, that aims to analyze the influence of personal values on entrepreneurial intention of university students; understanding as well the personal values as cognitive characteristics that explain the attitudes of a subject towards entrepreneurship, the hypotheses of this work establish a positive relation between values associated to individualism and the entrepreneurial intention as well as a negative relation between values associated to collectivism and the entrepreneurial intention of university students. for this, a sample of 488 undergraduate students from the university of guadalajara in mexico is used and statistical analysis is performed through the spss software. using a quantitative methodology, an exploratory factorial analysis and a linear regression model are performed to calculate the predictive capacity of the different types of personal values on the entrepreneurial intention of students at the university previously mentioned. personal values associated to individualism prove to be highly related to entrepreneurial intentions while those related to collectivism show low or null effect. some exceptions are discussed and lead to future lines of research regarding different types of entrepreneurship. keywords: entrepreneurial intention; personal values; university students; collectivism; individualism corresponding author: ea.campos@cucea.udg.mx received april 17, 2020 accepted march 11, 2021 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:a.campos@cucea.udg.mx http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 181 1. introduction abundant research has been conducted in recent years regarding the phenomenon of entrepreneurship. the variety of scopes and issues related to this topic, cover from the macroeconomic and economic development of regions around the world (clemmens and heinemann 2006; quadrini, 2009; parker 2018), all the way to the very particular studies regarding the process of business creation or even more specific, the entrepreneur as a subject itself (mckenna 1996; hebert and link 2006; mukherjee 2016) in this sense, this research aims to evaluate the influence of personal values on the entrepreneurial intention of university students, analyzing a sample of 488 students at the scholl of business of the university of guadalajara, using statistical techniques with a correlational scope. analyzing the personal characteristics of university students related to entrepreneurial intentions and identifying which of these characteristics have better explanation capacities on entrepreneurial attitudes, allows educational policy and decision makers to understand in a deeper way how new generations perceive entrepreneurship as a path to the future or even an option to join as a professional career. in order to adequately understand what this research is intended to evaluate, this work starts presenting a literature review of the main theories and concepts related to entrepreneurship and the entrepreneurial subject, entrepreneurial intention, personal values, the relationship between values, attitudes and behavior, among others. this literature review is done for two purposes; first, to know the state of the art of the topic of personal values and the influence on entrepreneurial intention at the present time and to discard any possibility of duplicating the http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 182 study on the phenomenon in this particular context; second, to give theoretical support and literature base to the statement of the hypotheses. according to this, the objective of this research is to evaluate the role of personal values as determinants of the entrepreneurial intention in university students. likewise, it is intended to test whether the various classifications of personal values, may positively or negatively influence the entrepreneurial intention of the university students who were chosen as a sample; finally, the results of this experiment will be compared with results of similar experiments in different contexts. this article provides a theoretical framework about the elements of the study such as entrepreneurial intention, personal values analyzed within the field of entrepreneurship, the classification of personal values according to the individualism-collectivism criteria and the entrepreneurial attitude. another section explains the methodology followed to conduct the study followed by the analysis of results. finally, a discussion and conclusions section is presented. 2. theoretical framework 2.1. entrepreneurial intention the phenomenon of entrepreneurship can emerge from different scenarios: two of the most mentioned in literature are, on one hand, the scenario where the subject recognizes an opportunity and finds the best conditions to start a project, and on the other hand, the scenario where the need pushes the individual to start a business as soon as possible. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 183 the factors associated with the opportunity recognition are represented by the environment, such as universities, government and other actors that promote entrepreneurship, while the factors related to the need are represented by situations that are not favorable for people such job dissatisfaction or unemployment (mueller and thomas 2001). however, some of these factors occur in situations that are external to a person, so identifying and exploiting business opportunities depends directly on the cognitive aspects of the entrepreneur, aspects that are mainly explained by skills and motivations, that means, there could be an entire ecosystem of entrepreneurship well defined to facilitate the entrepreneurial processes, however, the decision of an individual to undertake or not depends directly on the subject. given this panorama, the generation of knowledge about the cognitive aspect of the entrepreneur has been incorporated into the field of study of entrepreneurship, in order to obtain a much deeper understanding about the phenomenon of entrepreneurship, which has been called entrepreneurial intention (ei). soria, zuñiga, and ruiz (2016) define ei as the self-recognition of the security that an individual can present in creating a business; it is also shown as the best predictor of certain behavior in the future, which are determined by the desires, motivations, and viability of exploiting a market opportunity (romero and milone 2016). the models that explain ei are a key factor in the action of starting or not starting a business, since it encompasses cognitive processes, such as intentions that act as sources of balance among other external factors, for example, social, cultural variables, demographic, among others (chattopadhyay and ghosh 2008). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 184 the development of an ei depends on the integration of personal and contextual guide and explain behavior of people. contextual factors are the subjective norm, the perception of opportunities and the limitation of resources. both contribute significantly to the construction of an ei. it is for this reason that ei models demonstrate a person's ability to understand and realize the process of generation of new businesses (bird 1988; krueger, reily and carsrud 2000). among the great variety of personal characteristics that may explain the entrepreneurial intention of an individual, personal values have gained importance in the last decade (jaén, moriano and liñán 2013; campos 2018; kruse et al. 2019; hueso and liñan 2020) and this has to do with the recognition of the fundamental role of personal values in the prediction of attitudes and hence of behavior. 2.2. personal values in the field of entrepreneurship entrepreneurship is a phenomenon that has increased in importance for researchers of the last couple of decades. after several years of research in this field, scientific texts still present difficulties in defining some basic terms such as entrepreneur and entrepreneurship (gartner 1988; bygrave and hofer 1992; rosa and bowes 1993). entrepreneurship cannot be considered as an isolated action, on the contrary, it must be seen as a process that involves different scenarios, which are not merely economic in nature but emanate from the social context that shapes and shapes business results (anderson and jack 2002). thus, the entrepreneurial process is carried out by people, and the study of those people who carry out this type of activity is as important as the study of the entrepreneurial process http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 185 itself; it is not possible to understand the entrepreneurial process without observing and understanding the people who carry it out. various aspects of the personal characteristics that define the entrepreneur have been studied in academic texts; characteristics such as skills, talent, and knowledge that influence the possible success or failure of new entrepreneurship projects (brandstätter 2011; hormiga, campos and valls 2011; širec and močnik 2012; ahmadkhani et al. 2013; xie 2014), but also, personal characteristics such as personal values have been appearing more and more in recent literature. personal values are recognized as some of the most important cognitive characteristics of humans due to their prevalence over time. it is well accepted in the scientific community that personal values are difficult to change easily in a short time lapse, in other words, they maintain relatively stable overtime (dolan, garcia and richley 2006, 28) in the field of entrepreneurship, personal values have often been mentioned as a secondary cognitive aspects explaining certain factors. personal values, related to entrepreneurship started to appear in the 1970’s, when hornaday and aboud (1971) identified personal values such as achievement, independence and leadership, as characteristics more visible in successful entrepreneurs that in other subjects. different authors have mentioned similar personal values as a part of a set of motivational factors driving entrepreneurship in high-tech industry, they reported no significant difference between personal characteristics of high-tech entrepreneurs and any other entrepreneur. however, it is not until the decade of the 1990s that personal values appeared as the main independent variable explaining some factor related to the entrepreneurial behavior, attitude, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 186 intention, or even some other variable embedded in the entrepreneurial process. (fagenson 1993; morris, avila and allen 1993; hussin 1997; lipset 2000) in the last two decades, the research relating personal values and entrepreneurship has raised as an important field of study. during these two last decades, personal values finally became a worth-to-explore topic in the field of business creation. from 2000 to the date, we found several works analyzing how these characteristics explain different aspects of the entrepreneurial process. and this time is also where we start to find scientific work on the role of personal values in entrepreneurial attitudes, motivations or intentions (brice 2004; liñan,2008; liñan and chen 2009; zhao, seibert and limpkin 2010; fayolle, liñan and moriano 2014; liñan, moriano and jaén 2016; campos 2018). 2.3. individualism vs collectivism in entrepreneurship in academic business research, the topic of personal values has generally been related to work. some studies have tried to demonstrate the relationship between personal values and, for example, the feelings of satisfaction or motivation at work. despite this, there is little research regarding the role played by personal values of entrepreneurs in the entire process of creation and the reach for survival of a new company (amit et al. 2001). holland and shepherd (2013) make important contributions to this stream of literature by exploring how an entrepreneur's personal values influence the way in which he decides to persist in his decision to seize an opportunity. using schwartz's (1992) theory of values, these authors investigate individual differences in how values influence persistent business decisions and find that personal values help explain the variation in emphasis individuals place in their different decision criteria. the authors capture entrepreneurial decisions in real-time and http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 187 examine how individual and contextual differences are related to variations in decision making, concluding that entrepreneur persistence in decision making can be attributed to differences in their values. on the other hand, tomczyk, lee and winslow (2013) proved that the performance of high growth companies is related to the values of the entrepreneur. these authors studied entrepreneurs highly successful and demonstrated the impact of caring for other values on company performance. a highly studied relationship is one that exists between individualist-collectivist values and the tendency to be an entrepreneur. some personal values respond to individual interests while others respond to collective interests (ros and grad 1991). the latter, it is argued, “implies [n] the subordination of personal interests to the objectives of the largest working group, an emphasis on exchange, cooperation and harmony, a concern for the well-being of the group and hostility towards external members” (morris and davis 1994, 598). thus, it is postulated that the values that serve individual interests are the antithesis of those that serve the collective interest (schwartz 1992). in table 1, the values in this study are classified according to the different categories of the analyzed values. these values are those that are related in more aspects with the entrepreneurial belief. the first four values are those located in the group of values that are largely associated with the beliefs of the entrepreneur. on the contrary, security is the most contrary value to the beliefs related to the entrepreneur. finally, universalism and benevolence are those values related to new management paradigms, such as collaborative management, and are chosen to understand whether or not entrepreneurial attitudes are related. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 188 table 1. classification of values related to entrepreneurial attitude type of motivation description of the indicator type of reason (schwartz and bohenke 2004) type of orientation (gouvieia 2003) self-direction independence in decision-making. setting own goals and ways of behaving. do what it takes to develop and spread your own ideas openness to change individualism (personal) power leadership and recognition of other team members. self-enhancement individualism (personal) achievement (economic) achievement of economic goals and desire to improve the current economic situation self-enhancement individualism (personal) stimulation inspired by challenges, satisfied by working as a team to the limit of abilities and working at all times with enthusiasm openness to change individualism (personal) hedonism pleasure and sense of gratification for oneself self-enhancement individualism (personal) security carry out daily activities in a safe environment, free from any type of threat. conservation central universalism a concern for the economic and political situation of the community, a commitment to the common good. selftranscendence collectivism (social) benevolence maintain good relationships with those who care and are in frequent contact. selftranscendence collectivism (social) conformity restraint of actions, inclinations and impulses likely to harm others and violate social norms conservation collectivism (social) tradition respect, commitment and acceptance of customs, culture and ideas or religion provide, conservation collectivism (social) source: own elaboration with data from gouveia (2003); schwartz and bohenke (1992); ros and grad (1991). following this insights, the hypotheses proposed for this work are presents next: http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 189 h1.personal values associated to individualism are positively related to entrepreneurial intention h1a. personal value self-direction influence positively the entrepreneurial intention of university students h1b. personal value power influence positively the entrepreneurial intention of university students h1c. personal value achievement influence positively the entrepreneurial intention of university students h1d. personal value hedonism influence positively the entrepreneurial intention of university students h1e. personal value stimulation influence positively the entrepreneurial intention of university students h2.personal values associated to collectivism are negatively elated to entrepreneurial intention h2a. personal value security influence negatively the entrepreneurial intention of university students h2b personal value universalism influence negatively the entrepreneurial intention of university students h2c. personal value tradition influence negatively the entrepreneurial intention of university students http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 190 h2d. personal value benevolence influence negatively the entrepreneurial intention of university students h2e. personal value conformity influence negatively the entrepreneurial intention of university students 3. methodology as previously established, the main objective of this work is to analyze the influence that the presence of certain personal values of students at the school of business (cucea) at the university of guadalajara has on their intention to undertake; a quantitative methodology with the correlational scope is used to know the causal relation between the variables established in the hypotheses. to obtain data, a likert scale questionnaire was designed, with two main components that present, on the one hand, scenarios associated with the meaning and presence of certain personal values in students according to the classification and definition of the types of values proposed by schwartz and boehnke (2004) and, on the other hand, the entrepreneurial intention scale designed by liñan and chen (2009). the instrument consists of 40 items on a likert scale from 1 to 7 where 1 corresponds to a level of "totally disagree" and 7 corresponds to the level of "totally agree" with the scenarios proposed. the instrument was applied to 488 students of the different degrees from cucea of the university of guadalajara during the month of july 2019. this university center attends a total of 17,980 undergraduate students. all of them attend majors related to economic and management sciences such as accounting, management, human resources, marketing, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 191 international business, finance, economy. the sample was chosen randomly, with the necessary awareness that there were no duplicate responses by the same student. once the data was obtained, the database was captured and prepared in a spreadsheet and later converted into a data-sheet in the spss statistical software. subsequently, exploratory factor analysis was performed and the reliability indexes of the scales obtained in the reduction of dimensions were calculated; as well as a linear regression model to establish the predictive capabilities of the independent variables (personal values) on the dependent variable (entrepreneurial intention). finally, a discussion of the results is carried out and conclusions are established. 4. analysis of results factor analysis is performed, which reflects a kmo sample adequacy indicator of .855 which is considered to be at a significant level. in the same factor analysis, the explained variance table was obtained, where it turns out that the data collected explains up to 63 percent of the phenomenon. (see table 2). the rotating components matrix of this same factor analysis shows the grouping of variables into factors corresponding to the different factors that make up the instrument. the grouping agrees with the theoretical foundation, that is, the variables grouped in the different factors according to the matrix of rotated components correspond to the meanings of each of the types of vàlues according to the literature (see table 2). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 192 table 2. factorial analysis (rotated component matrix) component 1 2 3 4 5 6 7 8 9 10 selfdirection1 .659 selfdirection2 .583 selfdirection3 .717 selfdirection4 .663 universal1 .580 universal2 .650 universal3 .814 universal4 .747 tradition1 .485 tradition2 .581 tradition3 .579 tradition4 .704 tradition5 .488 stimulation1 .481 stimulation2 .598 stimulation3 .816 hedonism1 .637 hedonism2 .654 power1 .773 power2 .767 power3 .734 power4 .643 power5 .581 security1 .793 security2 .768 security3 .415 conformity1 .618 conformity2 .587 benevolence1 .713 benevolence2 .777 benevolence3 .754 benevolence4 .726 achievement1 .862 achievement2 .849 achievement3 .655 extraction method: principal component analysis. rotation method: varimax normalization with kaiser. to. the rotation has converged within 10 iterations. source: own elaboration. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 193 once the composition of the factors was obtained, the reliability analysis was carried out using cronbach's alpha, which is why the results shown in table 3 were obtained: table 3. cronbach alfa for scales obtained dimension reduction of personal values name number of items % variance cronbach's alpha self-direction 4 9.28 .695 universalism 4 8.72 .722 tradition 5 7.01 .760 stimulation 3 6.72 .574 hedonism 2 6.60 .506 power 5 6.25 .791 security 3 5.59 .714 compliance 2 4.79 .684 benevolence 4 4.47 .814 achievement 3 3.53 .775 total 35 62.96 kmo .855 significance .000 source: own elaboration. as observed in table 3, it is found that eight out of the ten scales of the factors obtained present acceptable reliability indices. it is recognized that in two factors, stimulation and hedonism, the reliability indicators do not reach an optimal level, however, previous works have found the same limitation (campos 2018; gorgievsky, ascalon and stephan 2011; schwartz et al. 2001) correlation matrix for the components extracted is presented next in table 4. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 194 table 4. correlation matrix source: own elaboration. as seen in table 4, all correlations prove to be in the normal range below .5, except from the correlation between the values tradition and benevolence. in order to vanish any possibility of multicollinearity that might be affecting the significance of these factors in the final model, two actions were taken. first, the principal components analysis was reviewed, to identify possible share loads among the components tradition and benevolence, finding no issue on this. second, linear regressions benevolence power selfdirection universalism achievement stimulation tradition security hedonism conformity benevolence corr 1 .383** .503** .321** .273** .440** .547** .355** .379** .195** sig .000 .000 .000 .000 .000 .000 .000 .000 .000 n 481 474 480 476 479 480 479 478 473 476 power corr .383** 1 .344** .200** .283** .422** .315** .204** .121** .149** sig .000 .000 .000 .000 .000 .000 .000 .009 .001 n 474 475 474 470 472 474 473 471 468 471 selfdirection corr .503** .344** 1 .393** .263** .394** .384** .226** .236** .121** sig .000 .000 .000 .000 .000 .000 .000 .000 .008 n 480 474 488 482 479 481 484 482 478 480 universalism corr .321** .200** .393** 1 .225** .343** 268** .111* .177** .051 sig .000 .000 .000 .000 .000 .000 .015 .000 .269 n 476 470 482 483 475 477 479 477 473 476 achievement corr .273** .283** .263** .225** 1 .363** .133** .057 .186** -.007 sig .000 .000 .000 .000 .000 .004 .214 .000 .871 n 479 472 479 475 480 479 477 476 471 474 stimulation corr .440** .422** .394** .343** .363** 1 .329** .124** .229** .021 sig .000 .000 .000 .000 .000 .000 .007 .000 .651 n 480 474 481 477 479 482 477 479 473 476 tradition corr .547** .315** .384** 268** .133** .329** 1 .410** .343** .314** sig .000 .000 .000 .000 .004 .000 .000 .000 .000 n 479 473 484 479 477 477 485 481 477 479 security corr .355** .204** .226** .111* .057 .124** .410** 1 .264** .323** sig .000 .000 .000 .015 .214 .007 .000 .000 .000 n 478 471 482 477 476 479 481 483 475 477 hedonism corr .379** .121** .236** .177** .186** .229** .343** .264** 1 .306** sig .000 .009 .000 .000 .000 .000 .000 .000 .000 n 473 468 478 473 471 473 477 475 479 473 conformity corr .195** .149** .121** .051 -.007 .021 .314** 479 .306** 1 sig .000 .001 .008 .269 .871 .651 .000 .323** .000 n 476 471 480 476 474 476 479 .000 473 481 ** correlation at 0.01 level of significance * correlation at 0.05 level of significance http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 195 were conducted individually between these factors and de dependent variable; the results confirmed that there are no statistical significance of benevolence and tradition over the entrepreneurial intention that may affect the final model results. once the factors were obtained through the reduction of dimensions and the results of the reliability analysis were calculated, the same treatment was carried out for the variables of entrepreneurial intention, the results of this factor analysis are presented below in table 5. table 5. matrix of components component matrix intencemp1 .880 intencemp2 .910 intencemp3 .945 intencemp4 .938 intencemp5 .925 kmo = .857 significance = .000 cronbach’s alfa = .954 % of variance = 84.6% source: own elaboration. through the statistical treatment of the data obtained through the surveys for the factor entrepreneurial intention, the following results are obtained: the factor analysis yields a kmo sample adequacy indicator of .857, which is considered a significant level (see table 5). in the same factor analysis, the explained variance table was obtained, resulting in the data collected explaining up to 84.6 percent of the phenomenon (see table 5). the rotated components matrix of this same factor analysis shows the grouping of the five variables in a single factor corresponding to the entrepreneurial intention. the grouping is consistent with the theory since the extraction of components includes all the items included in the instrument to address the factor. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 196 subsequently, the cronbach's alpha was calculated to determine the reliability of the scale and an indicator of .954 was found for the five elements that make up the factor, which is shown in table 5. once the factor analysis and measurement of reliability of the scales, a linear regression model was performed to determine the explicative capacity of each of the independent variables (personal values) on the dependent variable of the model (entrepreneurial intention) and the results are shown in tables 6 and 7. table 6. linear regression model summary summary model r r squared r squared corrected typ. from an estimate 1 .786to .618 .610 .63122928 a. predictor variables: (constant), conformity, benevolence, stimulation, safety, self-direction, power, achievement, hedonism, tradition, universalism sig .000 source: own elaboration. table 7. coefficients and significance model typed coefficients t sig. beta 1 (constant) entrepreneurial intention benevolence .038 1,292 .197 power .108 3,66 .000 universalism .160 5,371 .000 tradition -.003 -.091 .927 self-direction .084 2850 .005 achievement .749 25288 .000 security .005 .176 .860 stimulation .008 .258 797 hedonism .078 2,64 .009 conformity -. 076 -2539 .011 source: own elaboration. in the results of the linear regression model, it is first seen that the model significant in general, presenting an index of sig .000 and offers an explicative capacity of .610 in the corrected r http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 197 squared. this indicates that, in general, the proposed model of the subject's personal values, these explain up to 61% of the entrepreneurial intention factor. when evaluating in detail the indicators of each factor in the model, it is found that there are four factors whose significance level, greater than .050 does not allow the results to be interpreted in a reliable way and these are: benevolence, tradition, safety, and stimulation. while the rest of the factors present reliable levels of significance to analyze their beta loads. below is the model with the results obtained: figure 1. model. effect of personal values on entrepreneurial intention source: own elaboration. once the linear regressions model has been carried out, the research equation is presented next: r2 .610 entrepreneurial intention = .108 power + .160 universalism + .084 self-direction + .749 achievement + .078 hedonism .076 conformity http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 198 5. discussion and conclusions this research aims to evaluate which are the personal values that generate the greatest impact on the entrepreneurial intention of university students from cucea at the university of guadalajara, mexico. according to the most traditional theory of the personal characteristics of entrepreneurs, individual-oriented attitudes and personal characteristics have proven being positively associated with the entrepreneurial behavior (tiessen 1997; fitzsimmons and douglas 2005; baluku, bantu and otto 2018). findings in this work demonstrate that those personal values associated to individual interests explain in a positive sense the intention to undertake of university students. all personal values categorized within the individualistic dimension of self-enhancement present a positive and significant effect on the entrepreneurial intention and this is perfectly lined-up with the literature, so hypotheses 1b, 1c and 1d are accepted. about personal values grouped within the individualistic dimension of openness to change, we identify that only self-direction shows a positive effect so hypothesis 1a is accepted, while stimulation resulted not significant so hypothesis 1e cannot be concluded. this result contrasts with different experiments in other countries where stimulation is commonly a strong predictor of entrepreneurial behavior or intention (campos 2018; liñan, moriano and jaén 2016). regarding the set of collectivist values we have some interesting results for some of them. for those personal values within the dimension of conservation, we find that security and tradition show no significance so hypotheses 2a and 2c cannot be concluded. however, the value conformity results significant and having a negative impact on the entrepreneurial intention, so hypothesis 2e is accepted, this means that respect for others and the possibility of hurt someone else are important issues to consider for students when think about becoming entrepreneurs. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 199 this is congruent with some part of the literature that present similar results (zeffane 2014) and partially congruent with some other findings where this value result not even significant for entrepreneurial intentions (alsaad 2018). analyzing personal values associated to the collectivist dimension of self-transcendence we identify that the value benevolence result not significant for the model so hypotheses 2d is non conclusive. in the meantime, the value universalism proves to be significant and positively related to entrepreneurial intentions of university students; hypothesis 2b is rejected. this is an interesting result due to the few literature supporting the idea of collectivism associated to entrepreneurial behavior. previous work conducted by alsaad (2018) or the same author of this research in different countries demonstrate that universalism relates negatively to the entrepreneurial intention or at least resulted not significant. in this sense, we assume that universalism, being a personal value strongly related to culture, may present different results across countries. it is also understood that the relatively recent appearance of social entrepreneurship also motivates students to visualize entrepreneurial projects with implications to the values associated to universalism. in this research, universalism resulted to be the personal value with the second highest impact on the entrepreneurial intentions, only behind the value achievement. in this sense, we conclude as well that university students at the university of guadalajara, have the personality to become either traditional or social entrepreneurs. (see table 8) table 8. personal values and their influence on entrepreneurial intention personal value definition category impact theory contrast hypotheses achievement achievement of economic goals and individualism/selfenhancement .749 in accordance with: (jhonson 1a accepted http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 200 personal value definition category impact theory contrast hypotheses desire to improve the current economic situation 1990; de pillis 1998) power leadership and recognition of other team members individualism/selfenhancement .108 in accordance with: (martinelli 2004; zimmerman 2014) 1b accepted self-direction independence in decisionmaking. setting own goals and ways of behaving. do what it takes to develop and spread your own ideas individualism/ openess to change .084 in accordance with: (noseleit 2010; liñan, moriano and jaén 2016) 1c accepted hedonism pleasure and sense of gratification for oneself individualism/selfenhancement .078 in accordance with: (halis, ozsabuncuoglu and ozsagir 2007) not in accordance with: (alsaad 2018; campos 2018) 1d accepted stimulation inspired by challenges, satisfied by working as a team to the limit of abilities and working at all times with enthusiasm individualism/ openess to change not significant 1e not conclusive http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 201 personal value definition category impact theory contrast hypotheses universalism a concern for the economic and political situation of the community, a commitment to the common good collectivism/selftranscendence .160 in accordance with: (zeffane 2014) not in accordance with: (alsaad 2018; campos 2018) 2b rejected conformity restraint of actions, inclinations and impulses likely to harm others and violate social norms collectivism/ conservation -.076 in accordance with: (zeffane 2014) not in accordance with: (alsaad 2018) 2e accepted security carry out daily activities in a safe environment, free from any type of threat. collectivism/ conservation not significant 2a not conclusive tradition respect, commitment and acceptance of customs, culture and ideas or religion provide, collectivism/ conservation not significant 2c not conclusive benevolence maintain good relationships with those who care and are in frequent contact. collectivism/selftranscendence not significant 2d not conclusive source: own elaboration with data from gouveia (2003); schwartz (1992); ros and grad (1991). although entrepreneurship is a phenomenon that has become popular in recent times for research, there are still lots of research to do in order to fully understand the factors involved in the process. this work includes a model that explains, through the classification of personal http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 202 values, which of these influences a student's intention to start a business. this research is expected to contribute to scientific knowledge related to entrepreneurship as a social phenomenon. this research constitutes a contribution to the few work carried out on entrepreneurship, particularly entrepreneurial intention and personal values. it is recommended that this model is used by other higher education institutions as a tool to understand the orientation of the entrepreneurial attitude of students. analyzing the personal values of students, an institution can design educational policy oriented to promote the type of entrepreneurship that fits the most the beliefs of the community. both traditional (commercial) entrepreneurship or social entrepreneurship are important drivers of economic and regional development (hidalgo, rialp and urbano 2020). analysis of personal values related to entrepreneurship my give a glance in the orientation of entrepreneurial education in higher education institutions. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 180-208, july-december 2021 doi.org/10.1344/jesb2021.1.j096 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 203 references ahmad ahmadkhani, leyla heydari, m. heydari, and gholamreza panahandeh. 2013. “investigating the personal characteristics of entrepreneurs.” management science letters 3(11): 2717-724. doi: 10.5267/j.msl.2013.10.007. alsaad, abdallah. 2018. “the individualistic view of culture and the nascent entrepreneurship: an examination of schwartz’s 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of management and information systems 18(4): 291-98. 10.19030/ijmis.v18i4.8834. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.19030/ijmis.v18i4.8834 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 248 mauricio matus-lópez universidad pablo de olavide (spain) paloma fernández universitat de barcelona (spain) https://orcid.org/0000-0002-5273-823x https://orcid.org/0000-0001-5295-9465 transformations in latin american healthcare: a retrospective analysis of hospital beds, medical doctors, and nurses from 1960 to 2022 abstract latin america's healthcare systems evolved nonlinearly, influenced by diverse models, historical events, and political regimes. limited knowledge exists despite national-level efforts, indicating a need for long-term statistics to assess the effects of reforms and understand healthcare changes in the region. the article contributes to the actor network theory (ant) claim for better understanding of complex networks through a description of its main long term comparable components with a long term quantitative series for 20 latin american countries, spanning from 1960 to 2020, on the number of hospital beds, physicians, and nurses (per capita) and healthcare expenditure (in us dollars per capita). the primary goal of this study is to showcase and describe the historical trends and patterns of these variables in the region. the results remain in purpose in this article in a descriptive level, d ue to the lack of reliable long term series that require in our view to disseminate the data so a broader scientific community may use them to obtain more contextualized interpretations in the different countries involved. the article, nevertheless, shows that there is a very convincing demonstration of the existence of an ove rall improvement in all the indicators considered and for most latin american countries. they are leaders in most of the analyses and most of the time, cuba, argent ina, and uruguay. they are accompanied, depending on the indicator and the period, by costa rica and panama. on the contrary, there are setbacks in venezuela and minor progress or stagnation in most central american countries. keywords: healthcare, latin america, xx century, xxi century, hospital beds, nurses, physicians, expenditure transformaciones en la atención sanitaria en américa latina: un análisis retrospectivo de camas de hospital, médicos y enfermeras de 1960 a 2022 resumen los sistemas de salud de américa latina evolucionaron de manera no lineal, influenciados por diversos modelos, eventos históricos y regímenes políticos. existe un conocimiento limitado a pesar de los esfuerzos a nivel nacional, lo que indica la necesidad de estadísticas a largo plazo para evaluar los efectos de las reformas y comprender los cambios en el cuidado sanitarios en la región. el artículo contribuye al reclamo de la teoría del actor-red (ant) para una mejor comprensión de las redes complejas a través de una descripción de sus principales componentes comparables a largo plazo con una serie cuantitativa a largo plazo para 20 países de américa latina, que abarca desde 1960 hasta 2020, sobre el número de camas de hospital, médicos y enfermeras (per cápita) y gastos de atención médica (en dólares estadounidenses per cápita). el objetivo principal de este estudio es mostrar y describir las tendencias y patrones históricos de estas variables en la región. los resultados se mantie nen en el propósito de este artículo a nivel descriptivo, debido a la falta de series confiables a largo plazo que requieren, a nuestro juicio, difundir los datos para que una comunidad científica más amplia pueda utilizarlos para obtener interpretaciones más contextualizadas en los diferentes países involucrados. el artículo, sin embargo, muestra que existe una demostración muy fehaciente de la existencia de una mejora general en todos los indicadores considerados y para la mayoría de los países latinoamericanos. son líderes en la mayoría de los análisis y la mayor parte del tiempo, cuba, argentina y uruguay; les acompañan, según el indicador y el período, costa rica y panamá. por el contrario, hay retrocesos en venezuela y avances menores o estancamiento en la mayoría de los países centroamericanos. palabras clave: sanidad, américa latina, siglo xx, siglo xxi, camas hospitalarias, enfermeras, médicos, gasto transformació de l'assistència sanitària llatinoamericana: una anàlisi retrospectiva de llits hospitalaris, metges i infermeres de 1960 a 2022 resum els sistemes sanitaris d'amèrica llatina han evolucionat de manera no lineal, influenciats per diversos models, esdeveniments històrics i règims polítics. en tenim un coneixement limitat malgrat els esforços a nivell nacional, cosa que indica la necessitat d'estadístiques a llarg termini per avaluar els efectes de les reformes i entendre els canvis sanitaris a la regió. l'article contribueix a la reivindicació de la teoria de la xarxa d'actors (ant) per a una millor comprensió de les xarxes complexes mitjançant una descripció dels seus principals components comparables a llarg termini amb una sèrie quantitativa a llarg termini per a 20 països llatinoamericans, que abasta des del 1960 fins al 2020, sobre el nombre de llits d'hospital, metges i infermeres (per capita) i despesa sanitària (en dòlars dels eua per capita). l'objectiu principal d'aquest estudi és mostrar i descriure les tendències i patrons històrics d'aquestes variables a la regió. els resultats es mantenen en l'objectiu d'aquest article a nivell descriptiu, a causa de la manca de sèries fiables a llarg termini que requereixin al nostre punt de vista difondre les dades perquè una comunitat científica més àmplia les pugui utilitzar per obtenir interpretacions més contextualitzades als diferents països implicats. l'article, tanmateix, mostra que hi ha una demostració molt convincent de l'existència d'una millora global en tots els indicadors considerats i per a la majoria de països llatinoamericans. són líders en la majoria de les anàlisis i la majoria de les vegades, cuba, argentina i uruguai. els acompanyen, segons l'indicador i el període, costa rica i panamà. al contrari, hi ha retrocessos a veneçuela i progressos o estancaments menors a la majoria de països centreamericans. paraules clau: sanitat, amèrica llatina, segle xx, segle xxi, llits hospitalaris, infermeres, metges, despesa corresponding author: e-mail: mmatlop@upo.es received 24 april 2023 accepted 30 may 2023 this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://orcid.org/0000-0002-5273-823x https://orcid.org/0000-0001-5295-9465 mailto:mmatlop@upo.es http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 249 1. introduction the history of healthcare systems and institutions in advanced economies has been examined by a diversity of analytical perspectives in a variety of scientific disciplines (vilar-rodríguez and pons 2018; donzé and fernández pérez 2022). the history of medicine, first of all, with research on the development of human health treatment and the evolution of medical education and professions, such as medical doctors and other sanitarian experts. pioneering studies in this field include the works of osler (1921), castiglioni (1941), and rosen (1958), while more recent contributions include lane's (2001) research and carney's (2023) book. a second approach in the literature is from the field of contemporary history and the history of science, within which a significant stream of research has been describing since the 1980s and 1990s the creation and development of influential western healthcare models, particularly the national health service in the united kingdom, medicaid and medicare in the united states, and national health insurance in germany (moran 1999; webster 1998; walzer and numbers 1983; pauly, kissick and roper 1989). there is also an abundant literature specialized in the history of hospitals within the fields of organization, public health, and business history. often this literature incorporates elements from the fields of history, health studies, management, organization studies, and economics (vilar-rodríguez and pons 2018; donzé and fernández pérez 2019 and 2022). most of the works analyze the long-term evolution of hospitals in a specific country or region, focusing on their organization and characteristics as business enterprises (granshaw and porter 1999; risse 1999; fernández-perez 2021; vilar and pons 2018). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 250 the fourth, institutional cross-national approach, englobe works with comparison analysis, often through classification schemes. one the most representative author in this field was roemer (1991), who described and classified all the world’s healthcare systems, from the soviet union to the united states in the 1990s. recently, sun (2020) and johnson, stokskopf, and shi (2018) have incorporated some latin american cases into their international summaries of healthcare systems. production of knowledge in not developed countries is less abundant. the literature gap between advanced economies and the rest of the world is confirmed by de carvalho, schmid and fischer (2021), who, after reviewing more than 40 international healthcare classifications, conclude that most of them are not relevant in relation to the global south. the scientific production in latin american countries (lac) is scarce. except for roemer’s work (1991), none of the studies using any of the above-described four perspectives examines widely the way in which healthcare systems are and were organized and financed in the region in the long term. however, there are related works that build a basis of analysis in lac. from a history of medicine approach, cueto (1996) and cueto and palmer (2015) studied the history of medicine in the region, from indigenous medicine to the global health issues of the 20th century. another approach is that of mesa-lago (2008, 2009), who proposed a social protection classification that jointly considered healthcare and pension coverage. he classified countries according to the moment in history in which pension/health systems were created (categories of pioneers, intermediate and latecomers), but the economic and institutional organization and the evolution of the different models in time were not discussed. with a regional perspective, it is possible to mention the book by matus-lópez and cid (2020), which analyzed the literature on the sources http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 251 of funding and fiscal space for healthcare systems in the region and the monographic of matuslopez (2023), that make a brief historical review of the mayor national reforms of healthcare systems in countries in lac. at a country level, studies are numerous. the effort made by the journal revista de salud pública de méxico to describe how the models around year 2010 operate in chile (becerrilmontekio, reyes and annik 2011), uruguay (aran and laca 2011), ecuador (lucio, villacrés and henríquez 2011) and costa rica (sáenz et al. 2011) should be underlined. other interesting national analyses include those by illanes (2010) and molina (2010) on chile, veronelli and veronelli (2004) on argentina, and botey (2020) on costa rica. this article aims to study data about hospitals, hospital beds, and human capital in hospitals in latin america between the 1960s and the 2020s, with a long term comparative approach that is, mainly, descriptive. description is at this stage extremely necessary to have a dynamic, evolutionary perspective of health infrastructure and human capital in the hospital systems of any continent. particularly in latin america. there are abundant series for leading oecd countries about hospitals, hospital beds, or sanitary staff, that allows international comparisons and in-depth approaches using national and international statistics (fernández pérez 2021). however, there are not abundant comparable series for central and south american countries (not to speak of asia, or africa) with a very long term perspective due to the lack of comparable statistical criteria regarding definitions and methodologies. the lack of descriptive data has an obvious scientific implication: the invisibility of a process of creation and development of heterogenous and complex hospital and health care systems, and ignorance about structural dynamic change or inertias. without comparable international long term data the whole latin america region is used as a homogeneous concept, hiding the advances, the lack of advance, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 252 the losses, and the real needs. descriptive data is a need in science, required prior to any diagnosis or design of global strategies of improvement. for this reason, this article applies key insights of the actor-network theory (ant), used in sociology, health sciences, and urban studies, among other scientific disciplines (latour 2005). particularly, the methodological call of the ant for the utility of the description of actors and networks in the understanding of complex realities and organizations, to elaborate data with which to present reliable long term indicators of the evolution of latin american health systems since the 1960s until our century. the ant approach, despite limitations, helps understand complex realities and organisations, in which there are similar actors whose different numbers and trainings produce different combinations and impacts in the health care networks in which they are, which result in different roles, relations and outcomes. in this theory inanimate objects and technologies (like hospitals, or hospital beds) have the role of actors that play a role in the network, and in the performance of the other actors in the network. the application of this theory to the understanding of healthcare systems has been demonstrated (cresswell, worth and sheikh 2010). this article combines the relevance to description of main actors and networks from the ant methodological approach, that involves knowing, by describing, complex realities and organizations to what we believe is one of the most complete first long term descriptions of relevant protagonists involved the complex health care systems of latin america in the last six decades: the number of hospitals and hospital beds per capita, as well as the number of physicians and auxiliary medical staff. this study presents quantitative information of human and physical capital for all the region for 70 years. in fact, we construct series of hospital beds, physician, and nurses, from 1960 to 2020, for 17 latin american countries. additionally, we construct a series of health national http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 253 expenditure for the same period. original data for the 17 lac of the four series, in the period 1960-2020, are presented in annex 1. 2. methodology 2.1 sources the information was extracted from official reports and cross-country databases. official reports were available in digital format in the institutional repository for information sharing (iris) of pan american health organization (paho). they were summary of four-year reports on health conditions in the americas (paho 1962, 1966, 1970, 1974, 1978, 1982, 1986, 1990, 1994, 1998, 2002a), annual reports of basic indicators (paho 2002b, 2007, 2008, 2010, 2013), health in south america (paho 2012) and core indicators (paho 2016). databases were open data portal of the pan american health organization (plisa) (paho 2023), core indicator database provided directly by paho (paho 2022), data portal of national health workforce accounts of the world health organization (nhwa) (who 2022), and the global health expenditure database of the world health organization (ghed) (who 2023). methodological notes for year, series and countries are described in annex 2. raw data is available in excel format at https://zenodo.org/record/7985339 2.2 definitions of the series serie 1. hospital beds per 1,000 inhabitants. general and specialty hospital beds, public and private sector, divided by the total population (in thousand). however, depending on the year and the country, complete information is provided or only referred to public or government hospitals. see methodological notes. serie 2. physicians per 10,000 inhabitants. physician in hospitals and primary care centres, public and private, divided by the total population (in ten thousand). however, depending on http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 254 the year and the country, some reports listed only those working in ministries of health or the government. see methodological notes. serie 3. nurses per 10,000 inhabitants. nurses in hospitals and primary care centres or health services, public and private, divided by the total population (in ten thousand). depending on the year and the country, some reports listed only those working in ministries of health or in the government. in paho (1962), the information is based on the classifications of graduated nurses provided by the countries (but sometimes it includes nursing assistants). in the report of paho (1966, 2002b, 2007, 2013), it is not explicit what was included as nurses. in the database who (2022) it refers to professional nurses, but sometimes countries only provide nurses personnel not further defined. see details in methodological notes in annex 2. serie 4. government spending on health, per capita. health expenditures, in national currency and us dollars, divided by the total population. for 1960-72, the items included differ considerably owing to the nature of the programs and services provided. expenditure statistics should be considered with great caution. most countries in the region fund their public health systems through fragmented financial structures, primarily relying on pay-roll taxes. however, this crucial information is often excluded from paho reports, particularly those predating the year 2000. since 2000 the source is the same (paho 2023) and the figures refers to resources from government schemes and compulsory contributory health care financing schemes. the values are presented in constant us dollars of 2020, according to consumer price index retroactive series of us census bureau (2023). 2.3 selection criteria about sources. in periods where two or more reports coincide, the source that had been used prevailed. the switch to another source was made when the new source had more information http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 255 (more countries) than the current source. additionally, the missing data in the main source were completed with specific reports. detail of the source of each data and series is presented in methodological notes (see annex 2). years. it corresponds to those provided in the quadrennial paho reports between 1960 and 1982 and the annual reports until 1996. since 2000, efforts have been made to select five-year periods. 2.4 method to conduct the analysis, we computed descriptive statistics. for comparative analysis, regional averages were calculated with respect to the united states of america standard. additionally, we carried out a case/country graphical evolution of each series from 1960 to 2020 (see annex 3) and a comparative graphical analysis for the year 1964, 1980, 2000 and 2020. the year 1964 was chosen as the starting point for the comparative analysis due to the higher data quality reported in that year compared to 1960. to supplement the comparative graphical analysis, a cluster analysis was conducted for the year 1964, 1980, 2000, and 2020. cluster analysis classified different countries into similar groups (clusters), based on endowments of doctors, nurses, and hospital beds (per inhabitant), and health expenditure (us dollar constant 2020, per capita). a hierarchical model was carried and euclidian distance method was used. the number of clusters to be formed was specified in advance, corresponding to upper, middle, and lower values. spss version 23.0 was used for it. four adjustments were made to the original data for the cluster analyses. first, bed rates were expressed to 10 thousand inhabitants (such as doctors and nurses). second, square root transformations were applied (logarithmic transformation for expenditure). third, haiti was http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 256 excluded due to outlawyer values. fourth, the missing values were completed with the averages between the previous and subsequent years. 3. results 3.1 hospital beds (per 1,000 ihnabitant). the evolution of the number of beds in the region exhibits a declining trend, which is a longterm phenomenon observed globally. nevertheless, the difference in the region is that the initial number of beds was lower compared to that of wealthy countries. for instance, in 1960, the number of hospital beds per 1,000 population was three times higher in the united states than the average in la. although this ratio decreased to 1.8 times by 2000, it has remained relatively constant in the past decade (graph 1). graph 1. hospital beds per 1,000 inhabitants. united states of america and average of lac (20 countries). 1960-2020 source: paho (1964/2023), who (2022, 2023). the number of beds per 1,000 inhabitants has decreased in all countries, with more pronounced reductions observed in some countries. for example, from 1960 to 2020, costa rica http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 257 experienced a reduction from 5.1 to 1.1 beds per 1,000 inhabitants, while argentina saw a decrease from 6.4 to 3.2 beds and chile from 5.0 to 2.0 beds per 1,000 inhabitants (see annex 3). graph 2. hospital beds per 1,000 inhabitants. ranking of countries based on value (higher to lower value) and classification according to cluster analysis. year 1964, 1974, 1984, 2000 and 2020. latin america source: paho (1964/2023), who (2022, 2023). cluster 1 uruguay, argentina, cuba cluster 2 costa rica, chile cluster 3 other (n=14) standard deviation / average: 0.47 cluster 1 cuba, argentina, uruguay cluster 2 brasil, panama, chile, costa rica, venezuela cluster 3 other (n=11) standard deviation / average: 0.63 cluster 1 cuba, uruguay, argentina cluster 2 brasil, chile cluster 3 other (n=14) standard deviation / average: 0.67 cluster 1 cuba cluster 2 argentina cluster 3 other (n=17) standard deviation / average: 0.58 average: 1.6 standard deviation: 0.9 average: 3.1 standard deviation: 1.5 average: 2.5 standard deviation: 1.6 average:1.9 standard deviation: 1.3 0 1 2 3 4 5 6 7 1964 0 1 2 3 4 5 6 7 1984 0 1 2 3 4 5 6 7 2000 0 1 2 3 4 5 6 7 2020 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 258 in the longitudinal analysis, cuba, argentina, and uruguay consistently recorded the highest values throughout the period, with brazil, chile, and panama following closely behind in most years. however, costa rica, which ranked fourth in 1964, experienced a faster decline than the other countries and dropped to 12th place by 2020. similarly, venezuela fell from seventh place to 16th place over the same period (graph 2). in the long run, the differences between countries have been narrowing. this is due to the decreasing trend of the values in a series that is always positive by definition, i.e., the reduction in the number of beds per 1,000 inhabitants from an average of 2.9 in 1960 to 1.6 in 2020, which brought the values of all countries closer together. consequently, the standard deviation, absolute deviation, and deviation from the average decreased from that year. as a result, the cluster analysis of three categories described a cluster that grouped more countries over time (cluster 3), with 11 countries in 1984 and 17 countries in 2020. on the contrary, there seems to be some narrowing of the differences between 1960 and 1984. however, given the caution of the sources regarding the values of the first years, it is important to be cautious in the conclusions. 3.2 physicians (per 10,000 inhabitants) the trend in the number of physicians per 10,000 inhabitants in the region has been increasing over time. although the gap with the united states has been narrowing throughout the period, it has been narrowing at a faster rate in the last decade. in 1960, the number of physicians per 10,000 inhabitants was almost three times higher in the united states than the average in latin america. by 2000, this ratio had fallen to 1.7 times, and in 2020, it was 1.1 times higher in the united states than the latin american average (graph 3). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 259 graph 3. hospital beds per 1,000 inhabitants. ranking of countries based on value (higher to lower value) and classification according to cluster analysis. year 1964, 1974, 1984, 2000 and 2020. latin america source: paho (1964/2023), who (2022, 2023). increases in the number of physicians per 10,000 inhabitants have occurred in all countries, with greater increases observed in countries that had higher initial levels of medical resources. from 1960 to 2020, the indicator increased from 9.7 to 74.5 in cuba, from 11.4 to 53.2 in uruguay, and from 13 to 40.6 in argentina. the exception is el salvador, which increased from 18 in 1960 to 28.7 in 2020. none of the countries experienced a decrease in the value of this indicator, although increases of less than 10 points were observed in bolivia, peru, honduras, and haiti (see annex 3). in the longitudinal analysis, similarly to the number of beds, cuba, argentina, and uruguay consistently recorded the highest values throughout the period. however, in the following group, the ranking changes depending on the time period examined, as the differences between the remaining countries are relatively small. notably, venezuela stood out, as it was among the http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 260 five countries with the highest values until the year 2000, but dropped to 11th place in the last two decades (graph 4). graph 4. physicians per 10,000 inhabitants. ranking of countries based on value (higher to lower value) and classification according to cluster analysis. year 1964, 1974, 1984, 2000 and 2020. latin america source: paho (1964/2023), who (2022, 2023). cluster 1 argentina, uruguay cluster 2 cuba to brazil (n=14) cluster 3 ecuador, bolivia, guatemala el salvador, honduras ecuador to honduras standard deviation: 3.4 standard deviation / average: 0.63 cluster 1 argentina cluster 2 uruguay, cuba, méxico, venezuela cluster 3 other (n=14) standard deviation / average: 0.59 cluster 1 cuba cluster 2 uruguay, argentina cluster 3 other (n=16) standard deviation / average: 0.79 cluster 1 cuba cluster 2 uruguay, argentina cluster 3 other (n=16) standard deviation / average: 0.77 standard deviation: 18.6 average: 10.4 standard deviation: 6.1 average: 16.4 standard deviation: 13.0 average: 24.1 0 15 30 45 60 75 90 1964 0 15 30 45 60 75 90 1984 0 15 30 45 60 75 90 2000 0 15 30 45 60 75 90 2020 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 261 over the long term, the number of physicians per 10,000 inhabitants in cuba, and to a lesser extent in uruguay and argentina, has consistently exceeded those of other countries in the region. the average value increased from 5.3 in 1960 to 24.1 in year 2020, but surpassed 40 in the aforementioned three countries. consequently, the standard deviation in absolute terms has increased over the period. as a result, when applying a cluster analysis with three categories, the model identified a third cluster that included an increasing number of countries (cluster 2 in 1964 and cluster three en the other years). in 1964, this cluster comprised 14 countries, while in 2020, it encompassed 16 countries. 3.3 nurses (per 10,000 inhabitants) the number of nurses in the latin american region reveals a trend of growth, although at a slower pace than that of physicians. however, the region's gap with the united states widened for most of the period studied. in year 1960, the number of nurses per 10,000 inhabitants was almost 14 times higher in the united states than the latin american average. by 2000, this ratio had increased to 17 times. while there was a narrowing of the gap in the 1990s due to an increase in the latin american average, the trend reversed at the end of the decade. since then, the number of nurses has increased at a greater rate in latin america than in the united states, leading to a decrease in the ratio to 7.3 times in 2020. (graph 5). the number of nurses per 10,000 inhabitants underwent a significant increase between 1964 and 1984, doubling during this period. subsequently, between 1984 and 2000, the rate of growth slowed, with the increase primarily attributable to the rise in endowment in cuba that had commenced during the 1990s. excluding cuba, the average number of nurses per 10,000 inhabitants in the region would have been only 5.5 in 2000. more recently, other countries have followed this trend, resulting in an average of 17.7 nurses per 10,000 inhabitants. notably, http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 262 argentina increased from 5.9 to 37.2, chile from 2.4 to 35.3, and costa rica from 11.7 to 35.2, indicating significant progress in enhancing nurse-to-population ratios across these countries (see annex 3). graph 5. nurses per 10,000 inhabitants. united states of america and average of lac (20 countries). 1960-2020 source: paho (1964/2023), who (2022, 2023). in the longitudinal analysis, there are notable differences with the other indicators. while cuba is the only country that consistently remains in the top three throughout the period, panama, argentina, and costa rica also exhibit high endowments. the cases of peru and venezuela in 1984 and mexico in 2000 are striking, with comparatively high values. over the past twenty years, the number of nurses per inhabitant has exhibited a behavior similar to that of doctors, with cuba, argentina, and costa rica continuing to occupy the top four positions, and chile now joining them in the third position. conversely, mexico has experienced a relative loss of position, falling from second place in 2000 to sixth in 2020, and uruguay has fallen from fourth to ninth in the same period (graph 6). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 263 graph 6. nurses per 10,000 inhabitants. ranking of countries based on value (higher to lower value) and classification according to cluster analysis. year 1964 to 2000. latin america source: paho (1964/2023), who (2022, 2023). as a result, when performing a three-category cluster analysis, the model described a third cluster that grouped almost all countries throughout the period (between 14 and 16 countries). cuba stands out as the country that distances itself the most from this main group, due to its high endowment of nurses, especially since the year 2000. the other countries that distance cluster 1 argentina cluster 2 panama, cuba, costa rica cluster 3 other (n=15) average: 2.6 standard deviation: 2.5 standard deviation / average: 0.99 cluster 1 cuba cluster 2 panama, perú cluster 3 other (n=16) average: 8.9 standard deviation: 5.5 standard deviation / average: 1.09 cluster 1 cuba cluster 2 costa rica, mexico, panama uruguay, venezuela cluster 3 other (n=13) average: 5.7 standard deviation: 15.9 standard deviation / average: 1.78 cluster 1 cuba cluster 2 argentina, chile, costa rica cluster 3 other (n=15) standard deviation / average: 0.99 average: 17.7 standard deviation: 17.6 0 10 20 30 40 50 60 70 80 1964 0 10 20 30 40 50 60 70 80 1984 0 10 20 30 40 50 60 70 80 2000 0 10 20 30 40 50 60 70 80 2020 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 264 themselves from this main group are panama between 1964 and 2000, and costa rica in most years. in 2020, argentina, chile, and costa rica are approaching cuba's standard. the rest of the countries remain below values of 20 nurses per 10,000 inhabitants. 3.4 expenditure per capita (us dollars) it is important to exercise caution when interpreting health expenditure statistics (see methodology), as values prior to 2000 are often influenced by varying criteria used by individual countries and may not account for the fragmentation of national health systems or private expenditure. despite this, certain trends can be observed in the description of the series. per capita spending on health in latin america experienced two periods of growth: the first occurred between 1980 and 1990, during which spending increased from $54 to $192 per capita (a 3.5-fold increase), and the second took place between 2000 and 2020, during which spending increased from $170 to $386 per capita (a 2.2-fold increase) (graph 7). nevertheless, these values remain relatively low, with the 2020 per capita spending in latin america amounting to less than 1% of that in the united states. the average health expenditure per capita in the region increased significantly between 2000 and 2020. in constant terms, it rose from an average of $3,022 to $9,919 per capita, representing a 3.3-fold increase during this period. seventeen out of the twenty countries in the region experienced an increase in this indicator, with ecuador recording the largest variation of 12 times. cuba, bolivia, and peru increased their per capita spending on health by over 3 times compared to 2000, while paraguay, dominican republic, costa rica, and chile also saw significant increases ranging from 1.9 to 2.6 times. in contrast, venezuela experienced the greatest fall of -74.3%, followed by argentina (-1.2%) and haiti (-3.3%) (see annex 3). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 265 graph 7. expenditure per capita (us dollars, constant year 2020). average of lac (20 countries). 1960-2020. serie paho 1960-1990 and serie who (2023) 2000-2020 source: paho (1964/2023), who (2022, 2023). as a result of the cluster analysis using three categories, the model identified two clusters with a similar number of countries each year (between 8 and 9 countries). in 2000, argentina and uruguay were distinguished as two countries with higher spending that were separated from the rest. in 2020, three countries were identified as having higher spending and were separated from the rest of the countries (graph 8). http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 266 graph 8. expenditure per capita (us dollars, constant year 2020). ranking of countries based on value (higher to lower value) and classification according to cluster analysis. year 2000 and 2020. latin america source: paho (1964/2023), who (2022, 2023). 4. conclusions according to the actor network theory, any understanding of a complex reality or organization must start with a description of its components: inanimate and human actors, and networks. there are very few long term descriptions of the most relevant actors in the evolution of health care systems in latin america since mid 20th century: hospitals (centers of resources and services), hospital beds (the most relevant and basic physical unit required to attend patients in any health care center poor or rich), and sanitary staff (mainly physicians and auxiliary staff). the reconstruction of historical series from international organizations whose data came from national organizations, since 1960, done for the first time for this article, for all the latin american region, enables us to draw conclusions on three overarching questions: the cluster 1 argentina, uruguay cluster 2 panamá to dominican rep. (n=9) cluster 3 peru to ecuador (n=8) average: 3,032 standard deviation: 151.0 standard deviation / average: 0.89 cluster 1 cuba to argentina (n=8) cluster 2 colombia to bolivia (n=8) cluster 3 nicaragua, honduras, venezuela average: 9,919 standard deviation: 324,1 standard deviation / average: 0.84 0 200 400 600 800 1000 1200 2000 0 200 400 600 800 1000 1200 2020 http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 267 endowment of hospital beds and human endowments; the different evolution in the endowment of nurses and physicians in the various countries; the increase in health care spending • first, the evolution of endowments in hospital beds has been decreasing, while human endowments, i.e. doctors and nurses, have been increasing. this decline in hospital bed numbers is not unique to latin america; other countries have witnessed a similar trend, which can be attributed to national policies, patient demand and profile, medical technologies, and care models (oecd 2023; ewbank, thompson and mckenna 2017). however, the latin american region started this process with low endowments, with only argentina and costa rica exceeding 5 beds per 10 thousand inhabitants in 1960, while 12 out of the 20 countries failed to reach 3 beds per 10 thousand inhabitants. this is particularly significant considering the criticism that hospital bed shortages faced during the covid-19 pandemic in 2020-2022 (sen-crowe et al. 2021; bloom, foroutanjazi and chatterjee 2020; neville 2020). the series of the united states and latin america converge towards the end of the period. also, the number of doctors and nurses per 10,000 inhabitants has increased throughout the period, with particularly noteworthy increases between 1984 and 1996, and after 2015. • secondly, there are two differences in the behavior of the doctors and nurses series. firstly, the countries with the highest number of doctors per population are the same ones that have the highest number of hospital beds at any given time, including cuba, uruguay, and argentina. conversely, the series of nurses is heavily influenced by the high endowment of cuba, particularly since 1984. only in the last two decades, there has been a significant increase in the number of nurses in some countries, namely http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 268 argentina, chile, and costa rica. secondly, while the number of doctors in lac is approaching the us standard, the number of nurses is diverging. • thirdly, it is noteworthy that health spending has significantly increased over the past two decades. however, caution must be exercised as there may be a lack of information on some previous funding sources, and this bias is more pronounced in older series. as matus-lopez (2023) has demonstrated, financing schemes in the region have varied over time and are characterized by fragmentation. only in the last century has there been greater consistency in the data. the analysis for the period of 2000-2020 aligns with other studies that indicate an effort to increase public expenditure in health (matuslopez and cid 2020). consequently, at the end of the period, cuba, uruguay, chile, panama and costa rica exceeded $600 per capita, while argentina came very close to this threshold. by contrast, no country had reached this level of spending twenty years ago. an overview of the reconstructed historical series reveals a group of leading countries, including cuba, argentina, and uruguay, that consistently perform well across most indicators and periods. these countries are often accompanied by costa rica and panama. interestingly, three of these countries are also considered pioneers in the mesa-lago classification (2009). conversely, venezuela experiences significant setbacks, and most central american countries show minor progress or stagnation, with the exception of costa rica. this study's data aims to provide to a variety of researchers a valuable new quantitative complement to the qualitative historical analysis of the region's health systems and help test hypotheses about their development. the value of this information lies in its broad temporal http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 269 and geographical scope. however, it is important to note the limitations of the study, above all that the sources used in this study may have omissions, particularly in the first years and especially in financing. therefore, the article calls for further research to collect national historical statistics and describe the financial structure of health systems in the twentieth and twenty-first centuries to strengthen and complement this database. acknowledgements we extend our sincere acknowledgments to andrea gerger, specialist of health information systems for health department at pan american health organization, for his indispensable assistance in providing the essential information required for this study. additionally, we express our gratitude to jaime lópez guauque, who provided essential technical assistance in compiling and organizing initial data under the supervision of paloma fernández pérez at universitat de barcelona with funds of an icrea academia grant (2013-2018). references aran, daniel, and hernán laca. 2011. “sistema de salud de uruguay.” salud pública de méxico 53:265274 becerril-montekio, victor, juan de dios reyes, and manuel 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m. 1991. national health systems of the world. volume one. the countries. new york: oxford university press. rosen, george. 1958. a history of public health. new york: md publications. sáenz, maría, mónica acosta, jorine muiser, and juan luis bermúdez. 2011. “sistema de salud de costa rica.” salud pública de méxico 53:156-167. sen-crowe, brendon, mason sutherland, marc mckenney, and adel elkbuli, a. 2021. “a closer look into global hospital beds capacity and resource shortages during the covid-19 pandemic.” the journal of surgical research 260:56–63. doi:https://doi.org/10.1016/j.jss.2020.11.062. sun, xiaoming. 2020. world health systems. new jersey: wiley. us census bureau. 2023. annual average consumer price index retroactive series r-cpi-u-rs. all items. 1947 to 2021. last modified september 12, 2022. available at: https://www.census.gov/topics/income-poverty/income/guidance/current-vs-constantdollars.html. veronelli, juan carlos, and magalí veronelli. 2004. los orígenes institucionales de la salud pública en la argentina. vol. 1 and vol. 2. buenos aires: ops/oms. http://revistes.ub.edu/index.php/jesb https://iris.paho.org/handle/10665.2/28327 https://www3.paho.org/hq/dmdocuments/2013/basic-indicator-2013-en.pdf https://iris.paho.org/handle/10665.2/31289 https://opendata.paho.org/en/core-indicators/core-indicators-dashboard#definitions https://opendata.paho.org/en/core-indicators/core-indicators-dashboard#definitions https://doi.org/10.1016/j.jss.2020.11.062 https://www.census.gov/topics/income-poverty/income/guidance/current-vs-constant-dollars.html https://www.census.gov/topics/income-poverty/income/guidance/current-vs-constant-dollars.html volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 274 vilar, margarita. and jeronia pons. 2018. un siglo de hospitales. entre lo público y lo privado 18861986. financiación, gestión y construcción del sistema hospitalario español. madrid: marcial pons historia. walzer, judith, and ronald numbers. 1983. sickness and health in america. madison; university of wisconsin press. webster, charles. 1998. the national health service: a political history. oxford: oxford university press. who, world health organization. 2022. national health workforce accounts data portal. accessed november 10, 2022. available at: https://apps.who.int/nhwaportal/. who, world health organization. 2023. global health expenditure database. accessed april 20, 2023. available at: https://apps.who.int/nha/database/select/indicators/en. this is an open access article distributed under the terms of the creative commons attribution-non-commercialno derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://apps.who.int/nhwaportal/ https://apps.who.int/nha/database/select/indicators/en http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 275 annex 1. original data. hospital beds per 1,000 population by country. latin america. 1960-2020 country 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 var 64/15 argentina 6,4 6,0 6,3 5,7 5,4 5,4 5,4 4,4 3,3 4,1 4,1 4,7 5,0 3,2 -3,2 bolivia (plur. state of) 1,8 2,1 2,2 2,0 1,8 1,8 1,8 1,3 1,7 0,8 1,1 1,1 1,2 1,4 -0,4 brazil 3,4 3,4 3,8 3,8 3,8 3,8 3,6 3,5 3,1 2,9 2,6 2,3 2,4 2,4 -1,0 chile 5,0 4,3 4,4 3,7 3,6 3,6 2,9 3,2 2,7 2,7 2,3 2,1 2,1 2,0 -3,0 colombia 3,2 2,7 2,4 2,0 2,9 1,7 1,8 1,4 1,5 1,6 1,2 1,5 1,7 1,7 -1,5 costa rica 5,1 4,5 3,8 3,9 3,8 3,1 2,9 2,2 1,9 1,6 1,3 1,2 1,1 1,1 -4,0 cuba 2,3 5,5 4,8 4,2 4,2 4,0 6,1 6,0 5,1 5,0 4,9 5,3 4,0 4,2 1,9 dominican rep. 2,7 2,7 2,8 2,8 2,8 2,0 1,2 1,9 1,5 2,0 2,0 1,7 1,5 1,4 -1,3 ecuador 2,1 1,9 2,4 2,1 2,1 2,0 1,9 1,6 1,6 1,5 1,7 1,6 1,5 1,3 -0,8 el salvador 2,0 2,3 2,2 2,1 1,8 1,8 1,3 1,6 1,7 0,8 0,7 1,1 1,0 1,1 -0,9 guatemala 2,8 2,6 2,5 2,4 2,0 1,6 1,6 1,6 1,0 0,5 0,7 0,6 0,6 0,4 -2,4 haiti 0,7 0,7 0,7 0,7 0,7 0,8 1,0 0,8 0,7 0,8 0,8 0,7 0,7 0,7 0,0 honduras 2,0 2,0 1,7 1,7 1,7 1,3 0,9 1,1 1,1 1,2 1,0 0,7 0,6 0,7 -1,3 mexico 1,4 2,2 2,0 1,2 1,2 0,9 0,8 0,8 1,2 1,1 1,0 1,5 1,0 1,0 -0,4 nicaragua 1,8 2,3 2,3 2,5 2,2 1,6 1,6 1,2 1,6 1,0 0,9 0,9 0,9 0,9 -0,9 panama 3,8 3,2 3,3 3,2 3,2 3,9 3,6 2,7 2,2 2,1 2,2 2,2 2,1 1,9 -1,9 paraguay 0,8 2,2 2,0 1,5 1,5 1,5 1,4 1,2 1,3 0,7 1,3 1,3 0,8 1,0 0,2 peru 2,2 2,5 2,4 2,0 2,0 1,9 1,7 1,5 1,5 1,8 1,2 1,5 1,6 1,6 -0,6 uruguay 3,9 6,4 6,4 3,0 5,7 5,2 5,0 4,4 4,4 4,4 2,9 2,5 2,5 2,5 -1,4 venezuela rbd 3,6 3,3 3,2 2,1 2,9 2,7 2,7 2,6 1,5 2,0 0,9 0,9 0,7 1,0 -2,6 united states of america 9,1 9,4 8,3 7,2 7,1 6,2 5,7 4,6 4,0 3,5 3,2 2,9 2,7 2,7 -6,7 n. obs. 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 average all 2,9 3,1 3,1 2,6 2,8 2,5 2,5 2,3 2,0 1,9 1,7 1,8 1,7 1,6 -1,3 average full data (n=17) 2,8 3,2 3,1 2,6 2,8 2,5 2,5 2,3 2,1 1,9 1,7 1,7 1,6 1,6 -1,2 index usa=100 31,3 33,3 37,0 36,5 38,9 40,8 43,2 48,9 51,4 55,4 54,5 61,1 60,8 57,7 max 6,4 6,4 6,4 5,7 5,7 5,4 6,1 6,0 5,1 5,0 4,9 5,3 5,0 4,2 1,9 min 0,7 0,7 0,7 0,7 0,7 0,8 0,8 0,8 0,7 0,5 0,7 0,6 0,6 0,4 -4,0 range / average 2,0 1,8 1,9 1,9 1,8 1,8 2,2 2,3 2,2 2,3 2,4 2,7 2,6 2,4 -4,7 raw data is available in excel format at https://zenodo.org/record/7985339. http://revistes.ub.edu/index.php/jesb https://zenodo.org/record/7985339 volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 276 physicians per 10,000 population by country. latin america. 1960-2020 country 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 var 64/15 argentina 13,0 14,9 18,9 20,9 21,7 26,7 27,0 26,8 26,8 32,5 31,9 39,4 39,9 40,6 27,6 bolivia (plur. state of) 1,9 2,9 3,6 4,1 4,7 4,7 7,2 4,5 13,0 12,0 3,3 4,4 15,9 9,5 7,6 brazil 4,0 4,0 4,4 5,2 6,1 8,7 9,3 13,6 12,7 13,7 16,1 18,5 18,8 23,1 19,1 chile 6,2 5,8 5,5 5,4 4,5 5,2 8,0 11,0 11,0 8,9 9,8 14,3 21,5 28,4 22,2 colombia 4,3 4,4 4,5 4,6 4,8 5,1 8,4 10,9 11,6 12,5 14,2 16,5 19,7 23,3 19,0 costa rica 3,9 4,7 5,4 7,0 6,6 6,6 10,1 12,6 14,1 13,1 20,4 23,1 27,3 33,0 29,1 cuba 9,7 8,9 8,7 8,5 8,9 14,8 19,1 43,3 53,0 59,3 62,7 68,2 77,7 84,2 74,5 dominican rep. 1,5 6,2 5,0 5,2 5,4 5,4 6,2 14,9 21,6 18,5 11,0 15,3 21,2 14,5 13,0 ecuador 3,4 3,3 3,6 3,4 4,7 4,7 11,5 14,2 17,0 14,5 15,0 21,1 20,7 23,2 19,8 el salvador 1,8 2,2 2,3 2,5 2,7 2,9 3,4 8,4 10,7 12,4 17,1 18,8 15,7 28,7 26,9 guatemala 2,1 2,5 2,2 2,3 2,2 1,2 4,7 7,8 9,3 8,8 9,7 9,0 2,8 12,4 10,3 haiti 0,0 0,7 0,7 0,8 0,9 1,2 1,6 0,8 0,8 2,4 1,4 2,3 2,3 2,3 honduras 2,1 1,6 2,7 2,9 3,4 3,2 6,6 7,0 8,3 5,6 3,6 3,0 6,0 5,0 2,9 mexico 5,8 5,2 5,4 6,9 8,0 8,0 16,4 17,0 18,6 16,3 17,7 20,0 23,3 24,3 18,5 nicaragua 3,5 4,2 5,1 7,0 6,3 3,6 6,9 4,4 8,6 6,2 5,0 7,3 9,3 16,7 13,2 panama 3,8 5,3 5,1 7,0 7,9 8,5 10,4 16,4 16,7 12,3 13,5 14,1 15,8 16,3 12,5 paraguay 5,3 6,0 6,2 4,1 4,6 5,7 7,3 6,5 11,0 11,5 11,5 12,8 15,8 10,5 5,2 peru 4,7 4,7 5,1 5,5 5,6 6,8 9,5 10,6 9,3 11,4 10,0 9,5 13,1 13,7 9,0 uruguay 11,3 11,4 9,6 10,9 11,0 18,8 19,3 36,8 37,0 37,2 37,2 39,5 39,6 53,2 41,9 venezuela rbd 7,0 7,8 8,9 10,3 11,5 11,4 14,3 16,2 23,6 19,5 20,0 12,3 17,6 19,2 12,2 united states of america 13,4 15,4 15,3 15,5 16,3 16,7 21,4 24,5 27,9 27,9 26,0 26,0 26,0 25,9 10,6 n. obs. 20 20 20 20 20 20 20 20 20 20 19 20 20 20 20 average all 4,8 5,3 5,6 6,2 6,6 7,7 10,4 14,2 16,7 16,4 17,3 18,4 21,2 24,1 19,3 average full data (n=17) 5,3 5,5 6,0 6,7 7,0 8,3 11,4 15,3 17,8 17,7 18,3 20,3 23,0 27,4 22,1 index usa=100 35,6 34,6 36,9 40,2 40,3 45,9 48,4 57,9 60,0 58,9 66,7 70,8 81,5 93,1 max 13,0 14,9 18,9 20,9 21,7 26,7 27,0 43,3 53,0 59,3 62,7 68,2 77,7 84,2 74,5 min 0,0 0,7 0,7 0,8 0,9 1,2 1,6 0,8 0,8 2,4 3,3 1,4 2,3 2,3 2,3 range / average 2,7 2,7 3,2 3,2 3,2 3,3 2,5 3,0 3,1 3,5 3,4 3,6 3,6 3,4 3,7 raw data is available in excel format at https://zenodo.org/record/7985339. http://revistes.ub.edu/index.php/jesb https://zenodo.org/record/7985339 volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 277 nurses per 10,000 population by country. latin america. 1960-2020 país 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 var 64/15 argentina 5,2 10,4 5,7 6,1 5,9 7,2 4,7 5,4 7,7 5,9 2,2 3,80 25,82 37,20 32,0 bolivia (plur. state of) 0,7 1,1 1,3 1,6 1,6 1,7 1,9 2,5 6,9 1,6 3,2 2,40 3,92 5,70 5,0 brazil 0,6 0,8 1 0,9 0,8 1,9 2,0 3,7 4,1 4,5 5,4 7,10 21,18 19,24 18,6 chile 2,1 2 2,5 2,3 2,6 3,2 2,8 4,2 4,7 2,4 4,3 15,30 20,66 35,32 33,2 colombia 0,7 0,7 1 1,2 1,4 1,1 3,5 4,6 4,8 5,7 6,1 9,20 10,80 13,91 13,2 costa rica 4,5 4,3 5,7 4,6 5,6 5,5 5,2 9,5 10,9 11,7 15,3 19,10 26,58 35,21 30,7 cuba 4,5 5,1 5,4 5,5 10,1 14,3 26,5 68,0 67,8 74,9 83,6 91,70 79,40 75,20 70,7 dominican rep. 1,4 0,4 0,5 0,7 0,7 0,9 0,9 1,8 3,0 3,0 3,9 3,30 3,48 3,93 2,5 ecuador 0,5 0,7 0,9 1 1,7 2,6 3,1 5,0 7,0 4,6 5,8 7,90 11,74 12,42 11,9 el salvador 1,3 2,4 2,4 2,6 2,9 3,8 3,4 4,9 3,5 6,3 8,1 17,20 7,82 8,08 6,8 guatemala 1,6 1,1 1,4 1,4 1,4 1,1 3,0 3,2 2,7 3,2 3,6 5,00 0,24 1,17 -0,4 haiti 0,7 0,9 0,8 1,1 1,5 1,9 1,0 1,1 1,1 3,50 honduras 0,5 0,8 1,3 1,1 1,3 1,5 2,6 2,5 2,6 3,2 4,00 1,23 1,13 0,6 mexico 1,3 2 2 2,1 4,6 5,4 4,6 9,2 8,7 11,6 13,8 25,40 16,36 16,90 15,6 nicaragua 1,8 2,1 2,3 2,4 2,4 3,7 4,3 5,6 9,2 3,3 1,4 11,80 7,31 7,70 5,9 panama 4,6 6,5 7,3 7 6,9 11 10,4 10,5 14,4 10,8 11,5 12,80 14,02 16,28 11,7 paraguay 0,5 0,7 1,3 1,2 1,7 1,7 2,2 3,0 2,4 1,2 2,8 14,90 14,60 11,70 11,2 peru 3,1 3,1 3,5 4,6 4,6 7,8 8,7 11,5 6,7 9,0 10,90 8,52 10,54 10,5 uruguay 1,5 1,8 2,7 3,4 3,4 3,4 5,0 5,5 7,0 9,1 8,7 15,30 18,90 13,47 12,0 venezuela rbd 3,2 4,3 5,7 7,3 7,4 6,9 5,3 7,4 6,4 7,9 8,0 8,0 12,14 8,9 united states of america 28,0 29,6 33,1 36,3 44,9 50,1 83,0 87,8 97,2 97,2 78,5 85,0 111,4 96,6 81,8 n. obs. 18 20 20 20 20 20 20 20 20 20 17 19 20 19 19 average all 2,0 2,6 2,7 2,8 3,4 4,2 5,1 8,3 9,3 5,7 11,1 15,0 15,2 17,7 15,8 average with full data (n=16) 2,1 2,7 2,7 2,7 3,4 4,4 5,3 9,2 10,5 5,7 11,8 16,9 17,2 20,6 18,6 desv/avrg 0,80 0,99 0,76 0,76 0,77 0,85 1,09 1,72 1,52 0,76 1,72 1,30 1,12 0,99 index usa=100 7,2 8,6 8,2 7,8 7,6 8,3 6,1 9,5 9,6 5,9 14,1 17,7 13,6 18,4 max 5,2 10,4 7,3 7,3 10,1 14,3 26,5 68,0 67,8 19,1 83,6 91,7 79,4 75,2 70,7 min 0,5 0,4 0,5 0,7 0,7 0,9 0,9 1,0 1,1 1,1 1,4 2,4 0,2 1,1 -0,4 range / average 2,3 3,9 2,5 2,3 2,8 3,2 5,1 8,1 7,2 3,1 7,4 6,0 5,2 4,2 4,5 raw data is available in excel format at https://zenodo.org/record/7985339 http://revistes.ub.edu/index.php/jesb https://zenodo.org/record/7985339 volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 278 health expenditure by country. us dollars, constant 2021. latin america. 1960-2020 país 1960 1972 1980 1990 2000 2010 2020 var 20/60 argentina 56,32 34,13 649,52 581,61 687,88 574,77 bolivia (plur. state of) 8,90 12,93 32,81 75,12 38,83 73,53 180,93 19,3 brazil 14,42 7,38 71,65 248,10 194,93 478,77 314,17 20,8 chile 62,05 122,74 81,22 299,53 286,76 611,49 832,71 12,4 colombia 18,94 17,92 25,01 158,34 154,87 402,46 375,23 18,8 costa rica 64,27 23,47 87,46 300,11 246,56 569,06 722,40 10,2 cuba 57,76 228,53 657,80 1.079,75 17,7 dominican rep. 34,05 53,93 76,30 62,41 70,42 170,44 232,81 5,8 ecuador 5,27 38,06 151,40 21,85 156,54 282,28 el salvador 24,47 38,69 101,70 119,96 178,81 234,59 guatemala 22,20 67,39 57,59 44,91 70,82 107,41 haiti 8,44 4,33 8,10 16,95 9,92 11,96 9,59 0,1 honduras 15,26 18,98 46,31 84,75 51,88 91,73 92,80 5,1 mexico 21,94 14,65 24,47 165,27 219,33 322,20 284,89 12,0 nicaragua 23,39 60,59 118,74 51,82 39,41 72,17 104,93 3,5 panama 74,40 92,61 100,35 332,27 294,76 470,14 740,22 8,9 paraguay 5,60 33,90 19,07 94,77 60,57 119,51 220,41 38,4 peru 30,14 68,47 32,87 79,55 66,75 149,07 267,45 7,9 uruguay 277,81 88,50 77,05 304,54 434,44 737,41 1.014,61 2,7 venezuela rbd 152,48 238,15 96,90 424,35 243,24 422,10 62,59 -0,6 united states of america 228,64 827,27 3.080,69 5.322,16 3.032,86 4.539,03 9.919,44 42,4 n. obs. 16 19 19 19 20 20 20 16 average all 54,4 50,9 56,7 192,5 170,5 322,7 386,7 11,4 average with full data (n=16) 54,4 57,2 59,9 179,9 165,1 335,0 408,5 13,5 index usa=100 23,8 6,2 1,8 3,6 5,6 7,1 3,9 max 277,8 238,2 118,7 649,5 581,6 737,4 1079,7 38,4 min 5,6 4,3 8,1 17,0 9,9 12,0 9,6 -0,6 range / average 5,0 4,6 2,0 3,3 3,4 2,2 2,8 3,4 raw data is available in excel format at https://zenodo.org/record/7985339 http://revistes.ub.edu/index.php/jesb https://zenodo.org/record/7985339 volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 279 annex 2. methodological notes sources by series 1. the rate of hospital beds was extracted from paho (1962, p.82) for 1960, paho (1998, p. 281) for 1964 to 1996 (1972 not included), paho (1972, p. 225) for 1972, paho (2002b, column 49) for 2002, paho (2007, column 49) for 2005, paho (2013, column 41) for 2010, paho (2022) for 2015 and 2020. the missing information was extracted from paho (2002a, p. 375) for honduras in 1996, paho (2008, column 41) for panama and peru in 2005, paho (2022) for haiti in 2010. 2. the rate of physician was extracted from paho (1962, p. 66) for 1960, paho (1966, p. 125) for 1964, paho (1970, p. 178) for 1968, paho (1974, p. 230) for 1972, paho (1978, p. 326) for 1976, paho (1982, p. 365) for 1979, paho (1986, p. 170) for 1984, paho (1994, p. 453) for 1990, paho (1998, p. 301) for 1996, who (2022) since 2000 to 2020, and paho (2023) for haiti in 2015. the missing information was extracted from paho vol ii. (1990, p. 228) for mexico (own calculation) in 1986, paho (2002b, column 46) for nicaragua in 2000, paho (2007, column 46) for brazil, guatemala, and peru in 2005, paho (2012, p. 72) for venezuela in 2010, paho (2016, column 74) for dominican rep. and paraguay in 2015 (circa 2014), 3. the rate of nursing personnel was extracted from paho (1962, p. 98) for 1960, paho (1966, p. 129) for 1964, paho (1970, p. 178) for 1968, paho (1974, p. 230) for 1972, paho (1978, p. 326) for 1976, paho (1982, p. 365) for 1979, paho (1986, p. 175) for 1984, paho (1994, p. 453) for 1990, paho (2002b, column 47) for 2000 with who (2022) for cuba and costa rica, paho (2007, column 46) for 2005, paho (2013, column 39) for 2010, who (2022) since 2015 to 2020 with http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 280 paho (2010, column 39) for argentina and venezuela for 2010, paho (2016, column 75) for colombia, haiti, venezuela, uruguay, paraguay, and united states of america for 2015 and paho (2023) for argentina and bolivia for 2020. 4. government spending on health, per capita was extracted from paho (1962, p. 69) for 1960, paho (1974) for 1970, paho (1986, p. 210) for 1980, paho (1994, p. 401) for 1990, and who (2023) for 2000, 2010 and 2020. series are not directly comparable. for 1960 it refers to expenditure on health (“gastos para salud”), for 1970 it refers to total government expenditures and expenditures devoted to health (“gastos totales del gobierno y gastos dedicados a salud”), and for 1980 it refers to central government expenditure (“gasto del gobierno central”) and excludes social security data, for 1990 it refers to national health expenditure (“gasto nacional en salud”). the paho source explain that the items included differ considerably owing to the nature of the programs and services provided. since 2000 public health expenditure refers to government schemes and compulsory health insurance. government health care financing schemes are determined by law or by the government of each country. a separate budget is set for the programme, and a government unit has an overall responsibility for it. compulsory health insurance involves a financing arrangement to ensure access to health care for specific population groups through mandatory participation and eligibility based on the payment of health insurance contributions by or on behalf of the individuals concerned. country, year of the data (in parenthesis) and annotations argentina: (1968) nurses for 1969, (1970) expenditure of the ministry of health for 1969, (1972) beds for 1971, (1976) physician, nurses, for 1973, (1996) physician for 1992, nursing http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 281 auxiliaries for 1994, (2000) physician for 2001, (2005) beds for 2000, physician for 2004, (2010) physician for 2013, nurses for 2008, (2015) nurses for 2016. bolivia: (1960) physician only government, expenditure public health and social insurance “previsión social”, (1968) nurses for 1969, (1970) expenditure for 1972, (1972) beds for 1970, (1976) physician and nurses, for 1974, (1979) physician and nurses, for1974, (1996) physician for 1997, (2000) beds for 2001, physician for 2001, (2005) beds for 2006, physician for 2007. brazil: (1960) physician for 1959, hospitals and health services only, (1960) graduated midwives included in nurses, (1964) nurses for 1963, (1968) nurses for 1966, (1970) expenditure for 1972, (1972) beds for 1971, physician for 1969, nurses for 1970, (institutional and public health services only), (1976) nurses in government only, physician and nurses for 1972, (1979) physician and nurses, for 1980, (2000) beds and physician for 1999, (2005) beds for 2002, (2010) physician for 2011, (2020) nurses for 2019. chile: (1964) nurses for 1963, (1970) expenditure for 1972, (1972) beds for 1970, physician and nurses for 1973, (1996) physician for 1994, (2000) physician for 2002. colombia: (1960) midwives not available., (1964) nurses for 1965, (1968) nurses for 1967, (1970) expenditure for 1972, (1976) physician and nurses for 1972, (1979) physician and nurses for 1977, (1996) physician for 1997, (2000) beds for 2001, (2005) beds for 2004, (2015) nurses for 2014, (2020) nurses for 2019. costa rica: (1960) nursing government only, midwives included in nurses, (1964) nurses for 1965, (1968) nurses for 1969, (1970) expenditure for 1969, (1972) physician and nurses for 1973, (1976) physician and nurses for 1975, (1979) physician and nurses, for 1975, (1996) http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 282 physician for 1997, (2000) beds for 1999, nurses personnel not further defined, (2005) beds and physician for 2006. cuba: (1960) beds do not include those administered by universities, municipalities, and other autonomous institutions, (1964) nurses for 1965, (1972) physician for 1968, nurses for 1970, (1976) physician and nurses for 1974, (1979) physician and nurses for 1978, (1996) physician for 1997, (2000) beds for 2001, nurses personnel not further defined. dominican rep.: (1960) beds, government hospitals only, physician and nurses government only, (1964) nurses for 1965, (1968) nurses for 1967, (1976) physician and nurses for 1973, (1979) physician and nurses for 1973, (1996) physician for 1997, (2000) beds for 1999, (2005) physician for 2008, (2010) physician for 2011, (2015) physician circa 2014, (2020) nurses for 2019. ecuador: (1960) physician for 1958, (1964) nurses for 1965, (1968) nurses for 1969, (1970) expenditure for 1972, (1972) beds for 1971, physician and nurses for 1970, (1976) physician and nurses, for 1973, (1979) physician and nurses for 1973, (1996) physician for 1997, (2005) beds and physician for 2003, (2020) physician for 2019, nurses for 2018. el salvador: (1960) beds government hospitals only. it does not include 500 beds of social security, military, and private hospitals. nursing ministry of health only, (1964) nurses for 1965, (1972) beds for 1971, (1996) physician for 1997, (1970) expenditure for 1971, (2000) physician for 1999, (2010) physician for 2008, (2000) beds for 2001, (2020) nurses for 2018. united states of america: (1960) expenditure for 1958-59, (1964) nurses for 1962, (1968) nurses for 1967, (1970) expenditure for 1971-72, (1972) physician and nurses for 1971, (1976) physician and nurses for 1975, (2015) nurses professionally active for 2014. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 283 guatemala: (1960) physician 1958, (1964) nurses for 1965, (1968) nurses for 1969, (1970) expenditure for 1972, (1972) beds, physician and nurses for 1971, (1976) physician and nurses for 1971, (1979) physician and nurses, for 1976, (1996) physician for 1997, (2005) physician from paho 2008, (2000) beds for 2001, physician for 1999, nurses data was modified from original 18.4 to average inter-years (2010) beds public sector and physician for 2009. haiti: (1960) beds of “other hospitals” not included. physician for 1957, (government only), (1960) expenditure for 1959, (1964) nurses for 1963. nurses, government only, (1968) nurses for 1967, (1970) expenditure for 1972, (1996) physician for 1992, (2000) beds for 1998, (2005) beds for 2000, (2010) beds for 2013, physician for 2011, (2015) beds for 2013, nurses for 2014, (2020) beds for 2018, beds original data 7,0 was modified by 0.7. honduras: (1960) beds, does not include tuberculosis and leprosy hospitals, physician 1957, (1964) nurses for 1965, (1972) nurses for 1973, (1996) physician for 1997, (2000) beds for 2001, (2005) beds for 2002, (2010) beds public sector, (2020) nurses for 2018. méxico: (1960) expenditure public health and social insurance “previsión social”, (1964) nurses for 1965, (1968) nurses for 1967, (1970) expenditure estimation, (1972) beds for 1971, physician and nurses for 1970, (1976) physician and nurses for 1974, (1979) physician and nurses for 1974, (1984) physician for 1986, (1996) physician for 1990, (2005) beds for 2004, (2020) nurses for 2019. nicaragua: (1960) beds without one mental hospital, expenditure for 1960-61, (1964) nurses for 1965, (1968) nurses for 1969, (1976) physician and nurses for 1975, (1996) physician for 1997, (2000) beds for 2001, (2010) beds public sector. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 284 panama: (1964) nurses for 1965, (1968) nurses for 1969, (1970) expenditure for 1972, (1976) physician and nurses without zona del canal, (1979) physician and nurses for 1978, (1996) physician for 1995, (2000) physician for 1999, (2010) beds public sector, (2020) nurses for 2019. paraguay: (1960) beds, government hospitals only, physician 1958, (1964) nurses for 1965, (1996) physician for 1997, (2000) physician for 2002, (2005) beds for 2006, physician for 2002, (2010) physician for 2012, (2015) physician, circa 2014, (2020) nurses for 2018. peru: (1960) graduate nurses not separately specified. expenditure public health and social insurance “previsión social”, (1964) nurses for 1965, (1968) nurses for 1969, (1976) physician and nurses for 1972, (1996) physician for 1997, (2000) beds for 1996, physician for 1999, (2005) beds public sector only, (2010) physician for 2009, (2020) nurses for 2018. uruguay: (1960) beds, government hospitals only, physician for 1958, (1968) nurses for 1967, (1972) beds, physician and nurses for 1971, (1976) physician and nurses for 1972, (2000) beds for 1996, physician for 2002, (2005) beds, public sector for 2006, physician for 2002, (2010) physician for 2008, (2015) nurses for 2014, (2020) nurses for 2019. venezuela bol. rep.: (1960) expenditure for 1960-61, (1964) nurses for 1963, (1968) nurses for 1969, (1972) nurses public sector only, (1979) physician and nurses for 1977, (1996) physician for 1997, (2000) beds for 1999, physician for 2001, (2005) beds, public sector only for 2003, (2010) beds public sector only, nurses for 2008, (2015) nurses public sector only for 2014, (2020) nurses for 2018. http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 285 annex 3. graphical analysis hospital beds per 1,000 population by country. latin america. 1960-2020 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 argentina 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 bolivia (plurinational state of) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 brazil 0.0 1.0 2.0 3.0 4.0 5.0 6.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 chile 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 colombia 0.0 1.0 2.0 3.0 4.0 5.0 6.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 costa rica 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 cuba 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 dominican rep. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 ecuador 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 el salvador 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 guatemala 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 haiti 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 honduras 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 mexico 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 nicaragua 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 panama 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 paraguay 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 peru 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 uruguay 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1960 1964 1967 1972 1974 1978 1984 1991 1996 2000 2005 2010 2015 2020 venezuela rbd http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 286 physicians per 10,000 population by country. latin america. 1960-2020 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 argentina 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 bolivia (plur. state of) 0.0 5.0 10.0 15.0 20.0 25.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 brazil 0.0 5.0 10.0 15.0 20.0 25.0 30.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 chile 0.0 5.0 10.0 15.0 20.0 25.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 colombia 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 costa rica 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 cuba 0.0 5.0 10.0 15.0 20.0 25.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 dominican rep. 0.0 5.0 10.0 15.0 20.0 25.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 ecuador 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 el salvador 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 guatemala 0.0 0.5 1.0 1.5 2.0 2.5 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 haiti 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 honduras 0.0 5.0 10.0 15.0 20.0 25.0 30.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 mexico 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 nicaragua 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 panama 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 paraguay 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 peru 0.0 10.0 20.0 30.0 40.0 50.0 60.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 uruguay 0.0 5.0 10.0 15.0 20.0 25.0 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 venezuela rbd http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 287 nurses per 10,000 population by country. latin america. 1960-2020 0 5 10 15 20 25 30 35 40 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 argentina 0 1 2 3 4 5 6 7 8 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 bolivia (plurinational state of) 0 5 10 15 20 25 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 brazil 0 5 10 15 20 25 30 35 40 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 chile 0 2 4 6 8 10 12 14 16 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 colombia 0 5 10 15 20 25 30 35 40 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 costa rica 0 10 20 30 40 50 60 70 80 90 100 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 cuba 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 dominican rep. 0 2 4 6 8 10 12 14 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 ecuador 0 2 4 6 8 10 12 14 16 18 20 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 el salvador 0 1 2 3 4 5 6 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 guatemala 0 0.5 1 1.5 2 2.5 3 3.5 4 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 haiti 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 honduras 0 5 10 15 20 25 30 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 mexico 0 2 4 6 8 10 12 14 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 nicaragua 0 2 4 6 8 10 12 14 16 18 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 panama 0 2 4 6 8 10 12 14 16 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 paraguay 0 2 4 6 8 10 12 14 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 peru 0 2 4 6 8 10 12 14 16 18 20 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 uruguay 0 2 4 6 8 10 12 14 1960 1964 1968 1972 1976 1979 1984 1990 1996 2000 2005 2010 2015 2020 venezuela rbd http://revistes.ub.edu/index.php/jesb volume 8, number 2, 248-288, july-december 2023 https://doi.org/ 10.1344/jesb2023.8.2.42709 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 288 health expenditure by country. us dollars, constant 2021. latin america. 1960-2020 http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 ruvislei gonzález sáeza universidad de la habana (cuba) the chinese project “ one belt one road ” toward latin america and the caribbean. economic-financial implications abstract in september 2013, the president of the people's republic of china, xi jinping presented in kazakhstan the idea of the great project belt and road initiative (bri). two years later beijing made official the megaproject with the institutionalization of six corridors and its two slopes, the economic belt of the silk road and the maritime silk road of the 21st century. in its initial projection the connection of asia with europe, crossing the middle east and involving africa was proposed. however, starting in 2016, the extension to latin america and the caribbean is being projected, through the development of a series of economic-financial projects. the article uses primary and secondary sources, and a narrative style, to argue that bri is more than an infrastructure and economic initiative. the major objective of the study is to determine and highlight the relevance of economic-financial dimensions, without downplaying the obvious political implications. keywords: belt and road initiative; china; geostrategy; latin america and caribbean; integration corresponding author: e-mail: vietcuba@gmail.com received 23 january 2019 accepted 8 may 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 introduction the rise of china as a global power has been an event of greatest geostrategic value in recent years. though, indeed, one of the most important processes that has contributed to this chinese emergence has been the belt and road initiative (bri). since xi jinping became president and secretary general of the communist party of china, he began to express the bri proposal presented for the first time in kazakhstan and later in indonesia in 2013. in 2015, china officially recognized bri as the most important initiative taken in the framework of the reform and opening process. beijing devotes great resources to the development and expansion of bri with the support of the participating countries on the basis of a win-win relationship. the new silk road as it is also known consists of two parts, one with the name of the silk road economic belt and another called the 21st century maritime silk road. the project that aims to revive the ancient silk road may seem like an economic initiative; however, this article argues that it is much more than that. sometimes bri is compared with the marshall plan, but is very different. the changes in the situation of the participant country in bri related to the national interests of china, do not imply the end of the participation in projects of this initiative. in contrast, in the marshall plan, the program administrator could terminate the program when, following a change in the situation of the participating country, it was not in accordance with the national interests of the united states. while bri does not impose conditions on members related to the stability of the chinese economy, the marshall plan emphasized that it would not endanger the economic stability of the us. in bri, china does not establish aid periods, but in the marshall plan, the us established an aid period between april 1948 and june 1952. the biggest difference is that, while the us plan sought to http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 rebuild after a great war, the chinese initiative aims to prevent a war through the inclusion in a development project (gonzález 2019). bri from 2015 to 2019 increased the participation of countries and territories not only in asia, the middle east and europe as planned, but also included nations from africa, latin america and the caribbean (iiss 2018). the initiative has focused on specific objectives: to improve coordination policies across the asian continent, to promote trade liberalization, to develop financial integration and regional connectivity and to promote the cultural exchange. bri started with six official corridors: china-mongolia-russia economic corridor, new eurasian land bridge, china-central asia-middle east economic corridor, china-pakistan economic corridor (cecp), china economic corridor bangladesh-myanmar-india and economic corridor china-indochina peninsula (hong 2016). new corridors were developed although it hasn´t been officially defined: the arctic route, the interconnected route through sub-saharan africa and the maritime belt to latin america and the caribbean. until mid-april 2019 a total of 124 countries (map 1) and 29 international organizations have signed bri cooperation documents with china (jiechi 2019). the bri is now just six years old and already encompasses countries that account for half the world’s economic activity. bri now forms the world’s largest trade and investment area. at the same time, bri is one of the main plans of chinese statecraft under xi, alongside the made in china 2025 economic development strategy. with bri, china has further expanded sectors accepting foreign investment to create a business environment of high international standards. it has opened 12 pilot free trade zones for global business and experimented with free trade ports to attract investment from participating countries of the belt and road initiative. in fact, china's average tariffs have dropped from 15.3% when it joined the world trade organization to 7.5% today. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 map 1. bri members around the world source: own elaboration from hktdc (2019) the relevance of the belt and road initiative in recent years according to the leading group for promoting the belt and road initiative (2019) from 2013 to 2018 china's direct investment in bri countries surpassed 90 billion dollars, realizing a turnover of 400 billion dollars in foreign contracted projects in these countries. in 2018 chinese businesses made a total of 15.6 billion dollars in non-financial direct investment in bri countries, growing by 8.9% year on year and accounting for 13% of china's total non-financial foreign direct investments during the same period. the turnover of foreign contracted projects in bri countries reached 89.3 billion dollars, or 53% of the total turnover of foreign contracted projects in the same period. bri is the top project of china in recent times for the dimensions that it has from the geopolitical, economic and financial point of view. in political terms, it will allow a greater role http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 in global affairs and economically be indispensable for the growth of other export-oriented economies and the need for financing, but in turn for their companies to gain space in the world market against the competition of other large of recognized prestige. bri responds to the logic of development more focused on the change of the chinese model towards internal consumption, with the intention of continuing to diversify its routes and commercial partners, especially in the current context of tensions with the united states. in turn, it promotes new consumer markets for products that do not find a place in the saturated domestic market. at the same time, it guarantees the supply of energy and raw materials, essential for the economic and social stability of the country. finally, it amplifies its logistic structure and builds a trade network around china. regarding conflictive issues, china hopes to create more stability in the less developed and / or conflictive regions along the route (xinjiang, tibet, afghanistan, pakistan, myanmar), and to consolidate a secure transport network that will allow to continue trading with the european union (eu), final destination and most important commercial partner for china. the route has specific objectives, especially to boost the chinese economy, based on the need to change the model that is not supplemented by internal consumption yet, as well as contributing to its rise as a global power. this is a decisive project and capable of metabolizing other mechanisms for its support, such as the cases of the eurasian economic union (eaeu), the shanghai cooperation organization (sco) and the association of southeast asian nations (asean), among others (isdp 2016). with the celebration of the xix congress of the chinese communist party in october 2017, bri acquired greater official and priority. in that same year, africa and latin america and the caribbean began to gain interest in bri. that interest promoted and statement by xi jinping http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 113 for these regions to join the great initiative. particularly in latin america and the caribbean, with the request of panama in december 2017. latin america and the caribbean in the bealt and road initiative until 2015, latin america and the caribbean concentrated chinese foreign direct investments in the natural resources sector, as indicated in the articles of casanova, quer and dalla costa published in this special issue. criticism towards beijing is linked above all to this issue, due to the deepening of the regional dependence on exports of natural resources. certainly, in this sense, the governments of the latin american and caribbean region have not considered a change in their productive models that are less dependent on natural resources and do advance in other sectors of strategic interest. it is not in this sense to blame china entirely. from 2015, there has been a change of beijing policy towards the region. china had been working in a substantial framework known as the 1+3+6 mechanism. this consists in a plan for china-latin america and the caribbean cooperation for the period 2015-2019, three driving forces integrated by trade, investment and financial cooperation. in addition, all supported by six key points: energy and resources, infrastructure, agriculture, manufacturing, scientific-technical innovation and information technology (china-celac 2015). in this strategy, beijing proposes the region to go towards a relationship process based on winning both parties and not focusing only on natural resources. undoubtedly this would contribute to the diversification of the sectors to invest and also to the participation of other chinese companies in the area. at the same time, china's policy towards latin america and the caribbean proposed to actively explore the new modality of cooperation in productive capacity, which was defined as "3x3". http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 this consists of jointly building the three bridges, that is, logistics, electric power and information technology, materializing the virtuous interaction between companies, society and government, as well as broadening the three financing channels such as funds, credits and insurance". china advances with this strategy from 2015 in latin america and the caribbean in sectors such as: telecommunications, electronic components, banking, transport, renewable energy, automotive, pharmaceutical, textile and construction (china-celac 2015). the participation of chinese companies in the great project: global impacts the belt and road initiative proposes multiple sectors of cooperation that focus primarily on investment and the construction of an infrastructure network that interconnects its members and thus enables the progress of all its projects. for this, beijing is focusing on increasing direct investment and infrastructure construction in asia, europe, africa and latin america and the caribbean, especially in bridges, highways, ports and high-speed trains, although the latter do not always represent a type of optimal investment. the role and efficiency of chinese companies in achieving the aforementioned purposes is key. the exponential growth experienced by large chinese groups in recent years, especially construction of infrastructure, has caused a significant change in the global business map. in this order, the big chinese state corporations have taken the top positions in the construction ranking thanks to the advance of the domestic economy in the current 21st century. its progress contributes to the strategy of bri but also conditions a higher level of competition in various sectors compared to traditionally leading companies in europe, the united states and japan. in the construction sector, among the ten largest contractors in the world in the 2017 ranking, seven are chinese companies. china state construction engineering corp. ltd occupies first http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 115 place in the ranking, it also held that position in 2016, including billing and projects to mention some examples of evaluation in the ranking (enr 2017). other companies such as china railway group ltd. (crg), china railway construction corp. ltd., china communications construction group ltd., among others, are more relevant at worldwide. although one of the largest projects undertaken by china was to unite asia with europe by railway, some issues that affect the development of rail transport between china and europe still need to be resolved, such as the great congestion in some routes and different track widths. less than 10 years ago, the idea of a railway connection between china and the european union was unthinkable. however, in 2016, more than 500,000 tons of goods have been sent by rail from different parts of the asian country to a growing number of european destinations. in general, chinese contractors prefer to partner with large, well-known international players to benefit from their credibility and reputation. this situation needs the leading role of large companies in the sector, but on the other hand, some are already wondering if maritime operators should be concerned. in other words, if the freight traffic increases by land, this will have an impact on the maritime transport system. however, china foresees in the maritime belt of the 21st century the development of ports and an interconnected road with a system of maritime cargo transport. given the divided opinions, it is stated that no private company has shown interest in continuing the expansion. in the particular case of the maersk shipping company with headquarter in copenhagen, denmark, he pointed out that although trains can reduce the future growth of maritime transport, they should not affect the existence of the business itself. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 the connections of china with europe and latin america in the bri framework according to parra (2017), "the connection with the heart of europe is made through the new eurasian land bridge on a 10 000km route that connects china with europe through russia. the project includes the construction of three major railway projects that bring the markets of the westernmost chinese provinces closer to the main hub cities in europe. (…) spain participates since december 2014 as ends of the freight train known as yixinou, linking madrid with the chinese city of yiwu, zhejiang province, on a journey that covers 13503 km in 21 days (...) ". it is proposed that the process of modernization of the main connections between china and europe implies a capacity of three million teus, similar to that provided by maritime transport. also, the national railway operator of kazakhstan, ktz, will have a capacity of 1.7 million containers per year between europe and china for 2020. work is being carried out on the rail connection by china and its companies in order to reduce the transit time of the merchandise and reduce the risk of damage in conflictive areas, whether it is impacted by pirates in the indian ocean or clashes on maritime routes in conflicts. one of the problems that chinese companies must face is the homologation of track gauges, taking into account that in russia, kazakhstan, kyrgyzstan, tajikistan, uzbekistan and turkmenistan, containers must be unloaded and loaded again due to the differences in the road widths of the different countries. in this sense, this implies a greater delay and affectation in which one must work. bri's progress towards latin america and the caribbean also implies the need for greater interconnection. it is no coincidence that some projects have already been proposed, some of them paralyzed, as in the case of the interoceanic canal of nicaragua or the interoceanic http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 railway brazil-peru-bolivia or others for the construction of railway infrastructure in central america or in the argentina-chile corridor. the progress of infrastructure projects in the region will be of great importance for interconnection, but in turn, the growing presence of chinese companies in the region represents a major challenge for major european construction competitors. currently, spanish companies such as acciona, ferrovial, ohl, sacyr and acs, among others, build railways, airports, office buildings, hotels, shopping centers, hospitals, highways, electricity networks (laguens 2018). the penetration of chinese companies within the framework of bri to this area could take place either by complementing these spanish companies due to the need for infrastructure in the region, or by competing against them. an example of the cooperation is the agreement signed between spain and bolivia in august 2018, with the visit of spanish president, pedro sánchez, for the development of the peru-bolivia binational railway as part of the interoceanic railway project. companies previously mentioned as china communications construction group, power construction and others such as china state construction engineering corp and china railway group limited are gaining more opportunities to participate in global projects (obras 2019). this is due to the financial support of the chinese government that allows them greater competition against their european rivals. china is proposing an interconnected network that links the atlantic with the pacific in south america, but at the same time, projects are emerging that come from central america from costa rica to panama with access to the canal. all this implies a level of relationship between countries in the region that belong to bri and china, which will not only favor greater interconnections, but also greater trade. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 according to (núñez 2018), before the need to build regional infrastructure and the crisis generated by the odebrecht company related to corruption in different countries, there were opportunities for chinese companies in the construction sector. those projects linked to odebrecht aim to distance themselves and therefore seek business with other internationally renowned ones. chinese acquisitions and investments in latin america the development of the privatization processes of the governments of argentina and brazil in the period 2016-2018 has contributed to the increase of the acquisitions of companies in these countries by china. at the end of 2016, there were 2,058 companies from various sectors of source chinese capital in the area, almost double in relation to 2012 (1,088 companies). the total works contracts of these companies amounted to 14.5 billion dollars in 2017. in 2016, the value of the works contracts signed by chinese companies in latin america reached 19.1 billion dollars, raising the accumulated value to 145 billion dollars (china-celac forum 2018). another sector that is expanding with the advance of bri is the port activity. in that sense it occurs in ports and channels such as panama, sri lanka, pakistan, greece, among others. particularly in the latter country, china signed a lease agreement for the largest greek port pireo. in this activity, renowned companies such as the state china ocean shipping company (cosco), moves forward in the objectives of the chinese initiative. china has committed to invest at least 350 million euros over the next ten years in the port, in addition to the 200 million euros already invested in the two container terminals operated by cosco under a 35-year http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 concession. the logistics centers at the port terminals facilitate the distribution of chinese products, such as huawei and zte, and their entry to the rest of europe. although cosco has not proposed it directly, and some experts express the opportunities of china's future positioning in the caribbean, it can successfully break into the caribbean cruises sector by acquiring cruise ships and reconditioning them to the "chinese style", in a first stage; and building new ships equipped with the most modern technologies. for this venture, the chinese company could take advantage of several tourist destinations for their natural, historical and heritage values in countries such as bahamas, cuba, jamaica, trinidad and tobago, antigua and barbuda, dominica, dominican republic, as well as other island destinations (perelló 2018). in the telecommunications sector, huawei has stood out as one of the most successful chinese private companies. in fact, it is a leading global provider of information and communications technology (ict) solutions. the ict company’s solutions, products and services are used in 170 countries and areas, and serve more than a third of the world's population. with 180,000 employees, 36 joint innovation centers and 15 research centers, it has become a global company and one of the pioneers in 5g technology (huawei 2018). in the third quarter of 2018, huawei together with the other chinese company xiaomi helped the growth of global smartphone sales. globally, 1.4% more devices were marketed to end users, up to 389 million units. smartphone sales are falling for many manufacturers. huawei, on the other hand, grew 43% in the third quarter of 2018, and remains as the first brand in china and in third place in europe. the distance between samsung and huawei continues to narrow more and more in various markets worldwide, especially because of huawei's brand and http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 distribution investments in emerging markets in africa, asia and the middle east. (del río 2018). one of the pillars of the chinese economy that has to be mentioned is the banking sector. it should be noted that progress in the bri strategy implies financial resources and for this china cannot count on the existing international financial institutions such as the international monetary fund (imf), the world bank (wb) and the asian development bank (adb) under the aegis of the united states. in this sense, it began to develop its own institutions such as the asian investment and infrastructure bank (aiib), development bank of the brics. in 2015 bri became official and in the same year the chinese government also inaugurated the aiib. china's tactic has been to create new institutions that strengthen its international position, leaving aside the role it has in the imf. in the same way, it does not have a preponderant role in the adb, where it has a 5% stake. the aiib began with a subscribed capital of 50 billion dollars and an authorized capital of 100 billion dollars. this institution started operations in january 2016 and has grown to 97 approved members worldwide. seven prospective members are from latin america: argentina, bolivia, brazil, chile, ecuador, peru, uruguay and venezuela (aiib 2019). together with the silk road fund and the new development bank, aiib will fund and finance new regional infrastructure projects including, but not exclusively, those covered in bri, specifically in energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, and urban development and logistics. china concentrates the four largest banks by volume of assets in the world, according to the list drawn up by forbes. the fact that the asian economy has accumulated more than a decade http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 growing at high rates and possessing the largest international reserves explains the exponential increase of its financial sector. in the ranking of large banks, industrial & commercial bank of china heads the classification by volume of assets, with 3.62 trillion dollars in portfolio and is ranked in fourth position for profits generated, with 134.8 billion dollars. in second place is the china construction bank corp., with a total of 2.94 billion dollars in assets and 13,629 domestic subsidiaries, to which are added its subsidiaries in new york, seoul, singapore, tokyo, sydney or barcelona. in third and fourth places are also the agricultural bank of china, with a volume of 2.82 billion dollars in assets and the bank of china, the oldest in the country (1912), whose volume of assets reaches 2.63 trillion dollars. the fifth place was occupied by an english bank hsbc and the sixth by the american jp morgan (economic digital news 2017). bri's progress towards latin america and the caribbean: impact of the economicfinancial dimensions. the progress of bri towards the latin america and the caribbean region occurred with the incorporation of panama to the economic belt of the silk road of the 21st century. the central american nation has been one of the last to break ties with taiwan and officially recognize the popular republic of china. on the same day of the establishment of diplomatic relations, one of the big private companies, china landbrige group, began the construction of the mega-port panama colón container port that will have docks for the super post-panamax ships. the expansion of the canal will allow the servicing of large vessels, known as "neo-panamax" and "super post-panamax". its construction, which is in charge of the chinese group landbridge, will mean an investment of the order of 1,100 million dollars and will provide this port terminal with a handling capacity of up to 2.5 million teu (unit of measure equivalent to http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 a container 20 feet long, that is, 6.09 meters long). china is currently the second user of the panama canal and the main supplier of the colon free zone, the main distribution center of the american continent. in december 2017, panama and china signed, during the panama president's historic visit to china, a memorandum of understanding (mou) for the participation of the central american nation in bri (rodríguez 2017). in the same month, both nations signed other agreements within bri. one of those was the panama chiriqui railway project, in which the company that will carry it out will be china railway design. this is in feasibility study and is expected to be built in 2022 with an estimated investment plan of 5.5 billion of dollars. the chinese government signed two documents for the financing of the feasibility study of the railway project. the first was endorsed by the chinese minister of commerce and the chancellor in charge of panama, the second was an exchange of notes with which china will offer scholarships, seminars and other projects. this railway system will travel almost the entire national territory with a distance of 450 km in two and a half hours. although in may 2019 was the presidential elections, the current panama’s president intends to leave reserved the right to the land, the route defined in addition to the feasibility study and a preliminary draft so that the next government can tender it (chinaenamericalatina 2018). trinidad and tobago was the second country in the area to join to bri. bolivia followed in june 2018 and from august of the same year, guyana, uruguay, antigua and barbuda, venezuela, costa rica, dominica, granada, suriname, chile, and dominican republic. cuba joined in november 2018 with the visit of cuban president miguel díaz-canel. subsequently, ecuador, argentina, barbados, jamaica and peru were incorporated (yidai yilu website 2019). http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 of the total of the latin american and caribbean member of the bri, 13 are countries in the greater caribbean area. china bases bri's progress towards lac based on three geopolitical objectives, in the author's opinion: to become a relevant actor through its economic-financial capabilities, to expand its foreign relations, and to balance american power in the region with a view to creating a multipolar international order. the fact that 13 countries joined bri within the greater caribbean, is relevant for the development of china's upcoming strategies in the space of the extensions of new bri corridors. the investments in the caribbean are moderate, but it’s has a great impact on local economies. as previously mentioned, the caribbean along with central america is especially important for china due to the presence of the chinese province of taiwan. of 17 nations in the world that has diplomatic relations with taiwan, three are located in central america (guatemala, honduras and nicaragua), while five are from the caribbean (belize, haiti, saint kitts and nevis, saint vincent and the grenadines and saint lucia). the dominican republic and el salvador broke relations in 2018 with taipei to establish them with beijing; it could be expected in the future that something similar could happen with haiti or other country of the area. undoubtedly the asian island has favored these nations with assistance especially linked to the issues of climate change and investments. the attention given by the asian giant has been important for the development of some caribbean islands such as the bahamas with the construction of several tourist resorts, which includes five different hotels along with other facilities and the national stadium at a cost of around 3.5 billion of dollars. on the other hand, it has contributed to the construction of http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 infrastructures such as the conference center and a theater in barbados, while in antigua and barbuda a new airport terminal to give some examples (perelló 2018). according to (garcía 2018), the growing chinese influence in latin america and the caribbean (lac) can be interpreted as a result of mistakes made by usa in the region, as well as the growing questioning of us hegemony in what they themselves have considered their 'back yard'. some of the consequences are the exponential growth of chinese investments and trade with lac; the diplomatic recognition of costa rica (2007), panama (2017) and el salvador (2018) to china in counterpoint to taiwan; the decision of venezuela to put the price of its oil in chinese yuan instead of dollars and the association with china for the exploitation of the orinoco belt creating the bi-national company sinovesa; the interoceanic canal project in nicaragua; and the fact that seven latin american countries joined the asian infrastructure investment bank to build roads, railways, ports and tunnels, among others. other agreements that condition the participation of chinese companies are those developed in brazil, uruguay and bolivia, these last two members of bri. in the case of brazil, the westeast integration railway project was completed, which will cross the city of ilheus in the state of bahia, to figueiropolis in the state of tocantins. the development of this work was by another of the large infrastructure companies of china the crg, together with valec engenharia, construções e ferrovias s.a. the beginning of this was in october 2010 and it was planned to conclude in june 2018 with an investment of 550 million dollars. this railway consisted in the construction of seven railway stretches between the cities ilheus and barreiras, with the intention of taking the soybean from the center of west to the port of bahia, which is vital for the supply of this product to china, especially in of the commercial tensions unleashed http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 with the united states in 2018. the project has had several difficulties, among them such as the delay in the execution period or cost overruns, among others (chinaenamericalatina 2018). in the process of greater interrelation between china and latin america and the caribbean, the financial issue has also been key. it is currently the main source of financing for the region having outperformed all other lenders together. in turn, several latin american nations have signed currency exchange agreements with the popular bank of china (central bank) for an amount equivalent to around 49.2 billion dollars. the agreements have been made with the purpose of strengthening reserve positions and promoting bilateral trade. argentina established an exchange agreement for an amount of 11 billion dollars, brazil for 30 billion dollars, chile for 8 billion dollars and suriname for 160 million dollars (forum china-celac 2018). at the same time, china has authorized two yuan compensation banks in argentina and chile. however, the only country in the western hemisphere to implement the yuan exchange with china has been brazil. chinese banks have established more than ten branches in the region. the industrial and commercial bank established offices in argentina, brazil, colombia, peru and mexico; while the bank of china in brazil, colombia and panama. in the case of the construction bank, it has a presence in brazil and chile; in as much the bank of development in brazil and venezuela. these agreements were aimed at facilitating investment and trade in yuan, but were also established to improve financial conditions through the use of these loans as a measure of relief in the face of a weakening of foreign exchange reserves, a particular situation in argentina (cepal 2018). the yuan is an increasingly important currency as a reserve asset. in 2017, it was the sixth worldwide and it is expected that in the short term it will displace the canadian dollar. however, http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 the yuan is far from approaching the us dollar and the euro, while it must still exceed the pound sterling and the japanese yen. since 2016, the chinese currency is part of the currencies that form the special drawing rights of the imf and, therefore, can be used as one of the currencies to grant loans. already more than 60 nations and regions exist that have the yuan as part of their international reserves, and have included it in the portfolio of sovereign funds. some authors reflect that some countries participants at bri conditions fall into the so-called external debt trap. in this sense, ríos (2018) note that their credits increase the foreign debt and their landings aggravate trade deficits. the spiral may result in the need to request new credits to get out of the debt crisis that china can address by establishing in-kind payments of various types and introducing the yuan on a larger scale. (…) china's "easy money" model offers new opportunities and provides more options than previously available, but it also has its risks for china, including non-payment and the mobilization of its competitors. however, it is important to note, that the increase in debt is a consequence of the strategy of the governments of the participants countries, those who have the greatest responsibility for indebtedness. faced with the criticisms, china raises the quest for alternatives to counteract this situation. conclusions the belt and road initiative, at the same time that advances the internal economic development of china and contributes to the progress of the countries involved, also conditions a more active role of the chinese big companies. the global business environment has become more competitive and aggressive in the sense that the companies of the asian giant have a great financial backing. on the other hand, it will be very difficult for european and other regional companies to compete alone. however, in view of the growing need for cooperation, it can carry out joint projects with chinese companies. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 bri is the largest project undertaken in the current century with extra continental dimensions which represents opportunities for companies in china, but also in the united states, europe and japan. the necessity of infrastructure construction only in asia exceeds the capabilities of the asian giant and therefore needs the cooperation and complementation of other major economies. other regions, such as africa and latin america and the caribbean, also demand high resources to be able to undertake such major projects within the framework of bri. the growing participation of chinese companies in various strategic sectors such as construction of infrastructure, technology, banking, energy, among others, raises concerns in the main powers that may be displaced and seek alternatives. the chinese development dynamic itself has allowed an accelerated development of its companies with greater financial capabilities and to undertake large projects outside of china. the internationalization of the great belt and road project focuses on a new development model with a more cooperative participation of the entities that participate in it. however, there are concerns about the successful development of some of its projects with quality, with the established environmental requirements, as well as the successful conclusion in conflictive areas. bri's advancement towards latin america and the caribbean is not only beneficial for china, but to for the region in general, that requires infrastructure and insertion in the most advanced trends of the new industrial revolution 4.0. china is interested in investing with high technology in lac in electricity, telecommunication and infrastructure in general, but the region needs a strategy with china. the bilateral projects are goods, but is necessary the connectivity and the cooperation. in this sense, the integration is very important and more the willpower of the latin-american governments to change the current economic models. a latin american and caribbean strategy towards china within the framework of bri, can contribute http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 to a greater regional interconnection. at the same time, facilitate the trade and investment, not only of the member states, but also of china and the united states itself. according to (molina 2010) adam smith argued that each country should specialize in the production and export of those goods for which it would have absolute advantages. this meant that each country had to specialize in the production of those products for which, absolutely, the largest economy of labor expenses was obtained. the british economist david ricardo of the nineteenth century, explained that foreign trade based on comparative advantages can, under certain circumstances, to be a way to economize effectively on living expenses and dead labor on a national scale. the chinese initiative raises the emergence of a new theory, regardless of the traditional way of existing foreign trade. the bri does not promote the productive specialization of each country, or the interrelation through the comparative advantages of david ricardo. this promotes the shared and interconnected development not only of infrastructures that allow boosting the commerce, but with the support of the technological advance sharing the absolute advantages of some of the parties united to the common interest of all the parts. the chinese project can motivate the criticism of generating dependency, but with a correct strategy of the participating countries and china, can open the way to a theory of shared advantages in the 21st century. notes ahead of research team of the asia pacific area and member of the scientific council of the research center for international policy (cipi) in cuba. he is an associate professor at the faculty of economics of the university of havana (uh). he is a member of the national group of the insertion of cuba in the belt and road initiative of the ministry of foreign trade and investment of cuba. his research interests include several topics of international economic relations, with a special focus on the chinese and vietnamese contexts. he has published in world economy journal, international economy magazine and other journals of latin america and the caribbean and asia. http://revistes.ub.edu/index.php/jesb volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 references aiib. 2019. aiib approves membership of côte d’ivoire, guinea, tunisia, and uruguay. available in: https://www.aiib.org/en/news-events/news/2019/20190422_001.html. cepal. 2017. united stateslatin america and the caribbean trade developments 2016-2017. available in: http://www.cepal.org. cepal. 2018. “explorando nuevos espacios de cooperación entre américa latina y el caribe y china. segunda reunión ministerial del foro de la comunidad de estados latinoamericanos y caribeños (celac) y china.” comisión económica de las naciones unidas para américa latina y el caribe. http://www.cepal.org. china-celac. 2015. plan de cooperación china-celac 2015-2019. http://politica-china.org/wpcontent/plugins/download-attachments/includes/download.php?id=807. chinaenamericalatina. 2018a. ferrovía de integración oeste-este fiol. http://www.chinaenamericalatina.info/es/2018/09/20/ferrovia-de-integracion-oeste-este-fiol/. chinaenamericalatina. 2018b. ferroviario panamá chiriquí. inversiones chinas en américa latina. http://www.chinaenamericalatina.inf/es/2018/09/20/ferroviario-panama-chiriqui/. del río, laura. 2018. “las firmas chinas sostienen el negocio del smartphone.” computing, december 3. http://www.computing.es/mercado-ti/informes/1109058046401/firmas-chinas-sostienennegocio-del-smartphone.1.html. enr.2017. “engineering news record 2017 top global contractors 1-100.” htpp://www.enr.com/toplists/2017-top-250-global-contractors-1 fórum china-celac 2018. “ii fórum china-comunidad de estados latinoamericanos y caribeños (celac).” http://www.chinacelacforum.org/esp/ltdt_2/t1527540.htm. economic digital news. 2017. “los cuatro bancos más grandes del mundo son chinos.” dirigentes digital, july 19. https://dirigentesdigital.com/hemeroteca/los_cuatro_bancos_mas_grandes_del_mundo_son_chi nos-lrdd52827 garcía fernández, anibal. 2018. “china en américa latina, según estados unidos.” celag, debates económicos. https://www.celag.org/china-america-latina-segun-eeuu/. gonzález saez, ruvislei. 2019. “ii foro mundial de la iniciativa de la franja y la ruta.” saeeg. http://saeeg.org/index.php/2019/05/20/ii-foro-mundial-de-la-iniciativa-de-cooperacion-de-lafranja-la-ruta-dando-forma-futuro-compartido-mas-brillante/. iiss.2018. “china’s belt and road initiative in latin america and the caribbean.” iiss. vol. 4. https://www.iiss.org/publications/strategic-comments/2018/chinas-bri-in-latin-america. http://revistes.ub.edu/index.php/jesb http://www.cepal.org/ http://politica-china.org/wp-content/plugins/download-attachments/includes/download.php?id=807 http://politica-china.org/wp-content/plugins/download-attachments/includes/download.php?id=807 http://www.chinaenamericalatina.info/es/2018/09/20/ferrovia-de-integracion-oeste-este-fiol/ http://www.chinacelacforum.org/esp/ltdt_2/t1527540.htm https://www.celag.org/china-america-latina-segun-eeuu/ http://saeeg.org/index.php/2019/05/20/ii-foro-mundial-de-la-iniciativa-de-cooperacion-de-la-franja-la-ruta-dando-forma-futuro-compartido-mas-brillante/ http://saeeg.org/index.php/2019/05/20/ii-foro-mundial-de-la-iniciativa-de-cooperacion-de-la-franja-la-ruta-dando-forma-futuro-compartido-mas-brillante/ https://www.iiss.org/publications/strategic-comments/2018/chinas-bri-in-latin-america volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 isdp. 2016. the belt & road initiative 一 带 一 路. http://isdp.eu/content/uploads/2016/10/2016-thebelt-and-road-initiative.pdf. hong, zhao. 2016. china´s one belt one road: an overwiew of the debate. iseas yusof ishak institute. isbn 978-981-47-6236-6 http://bookshop.iseas.edu.sg huawei. 2018. corporate information. https://www.huawei.com/es/about-huawei/corporateinformation/milestone. jiechi, yang. 2019. “the belt and road initiative and preparations for the second belt and road forum for international cooperation.”april 01. https://eng.yidaiyilu.gov.cn/qwyw/rdxw/84390.htm. laguens, josé l. 2018. “siete empresas constructoras españolas entre las 100 primeras del sector a nivel global.” octubre 02. http://www.elempresario.com/noticias/economia/2018/10/02/siete_empresas_constructoras_esp anolas_entre_las_100_primeras_del_sector_nivel_global_111464_1098-html. leading group for promoting the belt and road initiative. 2019. “the belt and road initiative progress, contributions and prospects.” first edition . belt and road portal. isbn 978-7-119-11973-1. https://eng.yidaiyilu.gov.cn/zchj/qwfb/86739.htm. molina molina, e. 2010. la defensa del capitalismo en el pensamiento económico occidental: breve ensayo crítico. la habana: editorial félix varela. núñez, leticia. 2018. “la competencia china amenaza el liderazgo de las constructoras españolas en latinoamérica.” alnavio, february 23. https://alnavio.com/noticia/12951/economia/lacompetencia-china-amenaza-el-liderazgo-de-las-constructoras-espanolas-en-latinoamerica.html obras. 2019. “china es el emperador de la construcción a nivel mundial.” https://obrasweb.mx/construccion/2019/04/09/china-es-el-emperador-de-la-construccion-anivel-mundial. parra pérez, águeda. 2017. “bri: las 5 claves de la mayor iniciativa de infraestructura mundial liderada por china.” documento de opinión no. 113/2017. instituto español de estudios estratégicos (ieee). madrid, españa. http://www.ieee.es perelló cabrera, j.l. 2018. “china y cuba: la nueva ruta de la seda.” excelencias news cuba. december 01. https://www.excelenciascuba.com/es/noticia/china-y-cuba-la-nueva-ruta-de-la-seda. la habana, cuba. ríos xulio. 2018. “dinero fácil y trampa de deuda.” observatorio de la política china. september 10. http://politica-china.org/areas/politica-exterior/dinero-facil-y-trampa-de-deuda. http://revistes.ub.edu/index.php/jesb http://isdp.eu/content/uploads/2016/10/2016-the-belt-and-road-initiative.pdf http://isdp.eu/content/uploads/2016/10/2016-the-belt-and-road-initiative.pdf https://eng.yidaiyilu.gov.cn/qwyw/rdxw/84390.htm https://eng.yidaiyilu.gov.cn/zchj/qwfb/86739.htm https://alnavio.com/noticia/12951/economia/la-competencia-china-amenaza-el-liderazgo-de-las-constructoras-espanolas-en-latinoamerica.html https://alnavio.com/noticia/12951/economia/la-competencia-china-amenaza-el-liderazgo-de-las-constructoras-espanolas-en-latinoamerica.html http://www.ieee.es/ http://politica-china.org/areas/politica-exterior/dinero-facil-y-trampa-de-deuda volume 4, number 2, 108-131, july-december 2019 doi.org/10.1344/jesb2019.2.j062 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 rodríguez, mirta. 2017. “los 19 acuerdos que firmaron china y panamá.” la estrella de panamá. november 17. http://laestrella.com.pa/economia/19-acuerdos-entre-china-panama/24033943. yidai yilu website. 2019. “information about the belt and road initiative.” http://eng.yidaiyilu.gov.cn. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 josé luis solleiro rebolledo institute of applied sciences and technology, unam (mexico) moisés braulio garcía martínez autonomous university of san luis potosí, ucbts (mexico) rosario castañón ibarra institute of applied sciences and technology, unam (mexico) laura elena martínez salvador institute of social research, unam (mexico) smart specialization for building up a regional innovation agenda: the case of san luis potosí, mexico abstract the state of san luis potosí (slp) is divided into four regions: “altiplano, centro, huasteca and media”. a large socioeconomic inequality is perceived among the regions, this is especially observed when comparing centro with the other regions, mainly because centro region shows greater economic dynamism and has a great amount of companies, educational institutions and research centers, which contributes to lower its socioeconomic lag. in order to reduce the social inequality and the economic development gap of slp, a project for the construction of innovation agendas with a regional focus was formulated applying ris3 methodology. therefore, this article has as its main objective, to present and analyze the results of this project, through the identification of regional economic potential and their areas of smart specialization, as well as international technological trends in those areas. as an important component, a governance mechanism was organized in the four regions used to build consensus and legitimate the ris3 process. in the framework of triplehelix participatory workshops, a portfolio of priority innovation projects was defined. this article offers an analysis of favorable factors and obstacles faced during the process; a series of recommendations for the promotion of regional innovation agendas (ria) plus brief conclusions. keywords: regional innovation system; smart specialization; innovation; mexico. corresponding author: e-mail: laura.martinez@sociales.unam.mx received 25 oct. 2019 accepted 14 dec 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 introduction innovation is considered an important driver for regional competitiveness and development. in this sense, regional approaches to promote innovation, take increasing relevance; hence, methodologies have been created leading to the definition of region-based strategies and institutional frameworks, to enhance the effects of agglomeration as the basis for technological learning and interactive innovation (dutrenit 2009). within this framework, new approaches to defining innovation policies have appeared. that is the case of research and innovation strategies for smart specialization (ris3), a methodology created to identify the innovation potential of specific regions, in order to optimize investments and effects of innovation. in mexico, ris3 methodology was implemented for the first time in 2014. the national council for science and technology (conacyt) was the promoter of the elaboration of state innovation agendas (sia) for its 32 states. in these agendas, seen as instruments of innovation policy, the states’ strategic sectors with the greatest potential were identified, and a portfolio of research, development and innovation projects was defined; these projects were considered because of their high ‘multiplier effect’. in the case of san luis potosí (slp), the state agenda focused on four economic sectors -food, automotive, renewable energy and logisticsall closely related to the productive vocations of the capital city, but not necessarily for the other regions, which could sharpen existing disparities, that will be described later. due to this situation, in 2018, the state government of slp highlighted the need to conducting studies of technological capabilities in its four regions, in order to develop http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 innovation agendas using the ris3 methodology. the authors of this study participated in 2019 as coordinators for the preparation of the four regional agendas. therefore, this study aims to analyze the process of planning and creating the agendas, recognizing the role of the main actors, the governance mechanisms, and favorable factors and obstacles of this process. based on this analysis, conclusions and recommendations are presented to improve the building of innovation agendas (ria) in developing regions. this article is divided into five sections. in the first one, the review of the literature on the ris3 approach is presented and it is used as a basis for the identification of innovation opportunities in the regions, in order to design policies and instruments for innovation. the second section provides details on the methodology for applying the ris3 approach, in the construction of rias, as well as on the type of analysis that has been carried out based on the authors' experience while directing this process. the third section is devoted to the analysis of the application of the ris3 methodology in the four regions of slp. this is based on the identification of regional economic vocations and their areas of smart specialization, as well as on the recognition of the potential effects of global technological trends. a fourth section describes the process of developing the agendas, and the governance frame used for this. the main challenges to managing this project are described and analyzed as well. finally, in a fifth section, a series of conclusions and recommendations for the promotion of rias are made. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 regional innovation systems and smart specialization national innovation systems (nis) are created by the interaction of agents (companies, universities, research centers and technological institutes, supporting organizations for business activities, financial system and decision-makers), who act within institutional frameworks and policies. these nis become conductive environments for the accumulation of knowledge and the collaboration between agents within regions (lundvall 1992). likewise, territorial models have been defined as regional innovation systems (ris) (cooke 1998), in order to include innovation microsystems at different scales (rózga and solleiro 2017), and also taking into account that in the regions underlies the potential to build competitive capabilities through innovation. several authors consider that a main challenge of the innovation system framework is to understand the specific challenges and potential of regions and how specific policy initiatives could foster the learning and innovation processes and induce a local development process that is dynamic and sustainable. (cassiolato et al. 2013; cooke et al. 1997; barca et al. 2012). innovation for competitiveness in regions can be obtained through the efficient direction of resources in areas of specialization and through priority projects embodied in a regional innovation agenda (ria) that relates to those public policy instruments that allow coordination and interaction of regional actors in a collective endeavor that goes beyond a triple helix approach (höglund and linton 2017), with the addition of a fourth dimension (including society, civil associations, end users or consumers) transforming the triple into a quadruple helix analytical instrument. the ria is created based on the identification and selection of priority areas and the definition of strategies to articulate the agents of the regional innovation system; this with the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 aim of promoting investment in sectors that can have a high impact in the economy of the region. these regions, as territorial divisions, have historical, political, geographical, and even cultural characteristics that unify them. in order to promote innovation in the regions and investment in a rational and efficient way, approaches such as research and innovation strategies for smart specialization (ris3) were developed by the european union in 2013. this methodology has a series of principles under which “each region must select a limited number of areas of activity, or knowledge, in which the region can be truly competitive in the context of an increasingly globalized economy” (del castilli and paton 2013, 17). in europe, the ris3 platform is designed to help in the capacity-building activities of the regions, which are essential for upgrading their institutional quality and capabilities and building their innovation agendas. the ris3 methodology favors the design of public policies and a better orientation of innovation investment, hinged on the productive vocations of the regions. this methodology is based on the definition of the following items (foray et al. 2012): 1. analysis of the regional context and the potential for innovation: at this point, a characterization of the region and analysis of the territory assets are carried out. 2. governance is understood as different coordination mechanisms in which actors, located normally outside of governmental sphere, can influence the regional decision making process to improve regional development. 3. development of a collective vision for the future of the region: this step implies the development of a shared vision of economic development as the main driver of strategic projects. this vision should be realistic and bold enough to align different socioeconomic actors. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 4. identification of priorities: at this point, an identification of priority sectors with potential for specialization, growth or diversification is carried out as the base for building a portfolio of innovation projects. 5. definition of coherent mixed policies and building up of an innovation agenda. 6. integration of evaluation and monitoring mechanisms. in terms of governance, analysis of experience in european regions show that not all institutional and governance arrangements are necessarily fixed and one of the advantages of the ris3 agenda may be precisely the fact that the process opens opportunities to adapt institutional and governance arrangements for better policy alignment were explicitly acknowledged (kroll 2015). indeed, any outcome-oriented reshaping of local and regional governance in response to the ris3 consultation and public participation processes may prove to be a genuine long run benefit of such approaches (kroll 2015). although there is a great discussion about the elements that define governance (abas 2019; graham et al., 2003; perry and may 2007), there is also consensus that sound governance structures in regional innovation system must be created, putting emphasis on institutional arrangements to designing, supporting and implementing innovation policies (flanagan et al. 2011; morisson and doussineau 2019). such governance structure enhances the inclusion of actors that do not participate regularly in the decision-making process, thus generating participatory spaces for knowledge exchange, advocacy and social change. in latin america, besides mexico, there are some experiences in applying ris3. barroeta et al. (2017) analyzed different experiences and made following swot analysis. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 table 1. swot analysis of regional specialization in latin-america strengths opportunities national development policies focused on innovation exist. several countries are facilitating regional specialization (pilot, demonstration effect). extensive knowledge of the european ris3 strategies among the persona responsible for innovation policy. significant number of companies and capacities in sectors related to creative industries and the icts existence of national research systems specialization sectors have been identified at a national or regional level traditional industries with reconversion potential towards new sectors new policies for the decentralization of resources and their applicability of the ris for all of the regional and local development policies existences of large companies as a tractor effect of global value chains with potential local impact weaknesses threats highly centralized systems limited financial resources oriented to support related action little interaction between universities, research centers and companies limited evaluation systems and indicators applied on a regional scale persistent technology gaps and limited business innovation little inter-regional cooperation in technology lack of technological centers operating at a latina american scale the weakness of the tax system and the global crisis reduce the incentives to execute innovation strategies conformism with specialization applied exclusively to extractive and agricultural sectors high territorial concentration of resources and capacities (e.g. metropolitan zones and/or logistic corridors) the weakening of the new regional integration processes source: barroeta et al. (2017, 30) the main difficulties for ris3 implementation identified by barroeta et al. (2017) lie in the articulation of innovation policies with other relevant policies as well as the governance of the process. another important limitation relates to the incomplete implementation of innovation agendas due to lack of continuity in policies and programs derived from changes in central governments that concentrate most of the resources for science, technology and innovation. these non-eu-ris3 experiences reflect an inadequate institutional capacity for fostering innovation as well as a low level of regional funding as well as financial autonomy; a limited influence of the regional authorities in the design and implementation of national public policies and a weak governance structure that does not include an adequate private actor’s representation (goméz and dos santos 2017). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 methodology the authors of this research have coordinated the creation of the ria in the regions of slp; this is why the methodological approach used is based on action research, a process of evaluation that enables learning by doing, as researchers and practitioners work alongside one another. this analytical framework establishes that researchers of the phenomenon are not set aside from the phenomenon itself; this is achieved through diagnosing the problem, proposing new approaches, suggesting hypotheses and evaluating the changes resulting from the intervention (checkland 1999; lewin 1958). the essence of action research is that the researcher does not become an outsider and brings together a range of multiphase stakeholders to inclusively share knowledge to find solutions to social problems while considering the local context (morchain et al. 2019). according to lewin (1958) there are three most important characteristics of modern action research which are: participatory nature, democratic impulse and simultaneous contribution to knowledge in the social sciences. considering this framework, the authors of this research have actively participated in the process of building up the ria, following guidelines of the soft systems methodology developed by checkland and seeking to articulate a continuous learning process to address a situation in which there is a high social, political and human component. this distinguishes soft system from other methodologies that deal with hard problems, with a more quantitative orientation. using this approach of complex systems, it is possible to take advantage of its characteristics for the interpretation and analysis of innovation ecosystem of specific regions, just as it has been developed by several http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 evolutionary economists to explain the dynamics of productive systems (silverberg, dosi, and orsenigo 1988; foster 1993 and 2005; safarzynska and van den bergh 2010). despite the usefulness that action-research tool might represent, it is important to stablish that some subjectivity could be faced during the systematization and analysis of any experience. to reduce the risk of that subjectivity, authors of this paper have implemented frequent discussions with stakeholders in the region as well as reporting to the main user of the study, putting emphasis on verifying judgements and assessments with relevant actors of the policymaking process. with this practice, action-research generates a spiral of knowledge and feedback. the creation of regional agendas began with the identification of relevant actors in the four regions of slp, this, in order to recognize the innovation ecosystem and its potential, and to be able to integrate an advisory council in each region, which is a critical element of the governance required for the process to be legitimate and to continuously count on public support once the definition of the agenda is finished. in previous years (conacyt 2015), it was confirmed that the best way to go on the creation of ria was to build up a governance proposal that incorporates representatives of industry, academia and government as well as some opinion leaders. the integration of the advisory councils of each region 1 was settled in coordination with slp’s council of science and technology authorities (copocyt for its 1 it was suggested that the councils should have the following functions: a) support to establish relationships with various stakeholders of the strategic sectors for the development of the state and the region. b) feedback on the diagnosis of the socioeconomic situation of the regions and the findings reached in the project in terms of project identification, existing innovation capabilities, selection of priority sectors and specialization niches. c) support through their experience and expert judgment for the elaboration of policy and strategy recommendations for the research and technological development projects identified in the strategic sectors. d) guidance on the best modality to present the results so that they are accepted by the decision-makers in the relevant institutions of the state and the country. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 acronym in spanish), trying to maintain a balance between the members of above-mentioned sectors in each region. at the same time, in order to have enough information to recognize regional productive vocations and viable opportunities for innovation, a diagnostic document was made considering sociodemographic, economic, and scientific-technological and innovation capabilities of each of the four regions of the state. for this purpose, the following actions were carried out:  an analysis of the economic variables to identify the strategic economic activities in each region.  an analysis of the relevant public policies and instruments used for the development of research and innovation activities in the state.  a characterization of the scientific and technological capacities in the regions through an analysis of firms, higher education institutions, research centers and other organizations of the innovation ecosystem. these documents were central to identify specialization areas for each region; these papers were discussed and approved by copocyt and the advisory council, in order to decide on the smart specialization areas to be considered in each region. once the strategic sectors of the regions were identified, an analysis of technological trends was carried out to identify future scenarios with potential impact on these sectors. these technological trends were studied based on scientific literature and patents. the information generated (socio-economic studies, determination of smart specialization profiles, map of actors in the innovation ecosystem, determination of priority sectors, and analysis of technological trends) was shared with many different persons who http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 were invited to participate in consultation workshops to elaborate the regional agendas. this field work was integrated by the following activities:  for each of the strategic sectors identified, in each of the four regions, a consultation workshop was organized convening members of the academic, business and government sectors.  visits to innovative firms and research institutions related to priority sectors, to get their views on relevant projects to improve sector’s performance as well as their willingness to participate in those projects.  interviews with opinion leaders from relevant industries, state and municipal government authorities, focused on knowing their vision on development priorities, innovation potential and the main obstacles to regional development. in consultation workshops, a synthesis of regional documents and technological trends were presented and used as information base, to conduct discussions aimed at identifying and prioritizing innovations needed to solve sector’s problems and to meet market opportunities. the result was the definition of a catalog of r&d and innovation projects for the priority sectors of each region. this catalog was presented to the authorities, as well as to members of each regional advisory council in order to validate it. feedback was positive and some adjustments and details for improving the catalog were recommended. to integrate the regional agendas, for each project was prepared a document, which included objectives, justification, implementation and funding strategy. additionally, a road map was drawn up to indicate the steps to follow to execute the project, highlighting the recommendation of participants (firms and institutions), sources of funding and other http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 resources for project implementation, and the monitoring and evaluation mechanisms required for copocyt, as the coordinator of this initiative. regional innovation and smart specialization agendas in the state of slp san luis potosi is a state located at the center of mexico and is considered a very important logistic node given its potential to connect the region (by highways, rails or secondary roads) with large cities such as monterrey and border metropolis like brownsville, mcallen and laredo. slp is connected to west states such as veracruz and tampico; and is very close to mexico city (mejía et al. 2019). the state of slp is divided into four regions (altiplano, centro, huasteca and media) (iil, 2016) and contributes with 2.1% to the national gross domestic product (inegi 2018). the state’s manufacturing exports (especially of transport equipment, machinery and electronics equipment, plastics, rubber, and food products) have placed it as the 11th exporter in the country (proméxico 2017). in 2018, slp had a population of more than 2.8 million people (2.3 percent of the total population of mexico). in recent years, slp has shown economic growth mostly driven by the interest of multinational companies in the automotive sector to locate their factories in the state; this has created a sophisticated supply chain. in addition, some other consolidated activities are found in the center region such as auto parts manufacturing, agriculture and livestock production, logistics, tourism and mining. however, among regions there is a great economic and social inequality, which is quite evident when comparing center with other regions, since center region shows greater economic dynamism and a much larger presence of firms, educational institutions and research centers (mejia et al. 2019). so, to reduce social inequality and the economic http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 development gap between slps regions, an initiative was created to build up the already mentioned regional innovation agendas, by following the ris3 approach described in the previous section. analysis of the regional context in slp this section presents some economic, social, educational and technological aspects of the four regions in slp; in table 1 a list of the most representatives institutes in slp regions is presented, this information is relevant in order to analyze the strengths and weaknesses found in each region considering their economic sectors. centro region (center region) the center region in slp has 11 municipalities; the state capital is located there and is characterized for having the highest contribution to the state’s gdp, as well as for being the most densely populated region. it is also the most important economic node, due to the presence of national and international companies, the concentration of universities and research centers, several firms and multiple support organizations (mejia et al. 2019). in this region, the automotive, food, manufacturing equipment, electronic and mining industry have boosted job creation (government of san luis potosi 2012). another sector that has had a considerable growth due to business and recreational activities development, is tourism. in this region, the presence of innovative key actors is vast, the region has more than 80 educational institutions; 10 research centers; more than fifty thousand firms; medical, logistic and automotive clusters; 15 industrial areas, 25 government offices, federal and state councils, 7 chambers of commerce and various civil associations (mejia et al. 2019, 105). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 altiplano region this region has 15 municipalities and is considered as a strategic point for communication between the state capital and the northern states of the country. in this region, the mining and auto parts industry are important, but also the agri-food and textile industries. protected agriculture has been showing a significant growth, both in hectares and in production units. livestock activity is also important since its production of goat and sheep is high (siap 2018). in this region, the presence of innovative key actors is limited since in the academic sphere there are only 10 educational institutions (college education) and only one research center. this region has approximately eight thousand firms, one industrial zone, 17 government entities (that may participate in technological development and innovation) and 5 chambers of commerce and associations (mejia et al. 2019, 152). huasteca region the huasteca region has 20 municipalities and is considered a region with a predominantly agricultural and agro industrial productive vocation, especially since it has significant production of sugar, citrus, tomato and peppers; on the other hand, livestock activity in the region is also important. environmental conditions in huasteca are characterized for being mostly tropical, rainy and having constant rainfall and extensive bodies of water. this has created eco-tourism activities in the zone that have grown in importance. the area known as the ‘huasteca potosina’ is part of the sierra madre oriental, an orography condition that has hindered economic integration and communications with the other regions. in this region there are 20 colleges, approximately 14,000 companies and two industrial zones (located in ciudad valles and ébano). in this region there are 6 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 chambers of commerce and associations, as well as 26 government entities related to the promotion of industrial, economic and innovation development (mejia et al. 2019, 277). media region (middle region) finally, the middle region, like the huasteca, has a productive vocation due to the food industry, as well as the agricultural sector by producing seasonal orange, green chili pepper, tomato and cattle. in this region there are some food producing and packing companies, and protected agriculture is just entering into practice. on the other hand, tourism is an activity of great importance for the region, although it faces a pollution problem that has to do with uncontrolled exploitation of recreational spaces. non-metallic mining is another activity of importance for the region, although most mining producers are small companies integrated to the construction value chain as suppliers of raw materials. in this region, actors of innovation are scarce since it has only 4 higher education institutions and less than eight thousand firms, most of them from the food industry; 25 government entities are involved in economic development, science, technology and innovation activities (mejia et al. 2019, 204). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 table 2. most representative higher education and research institutions in slp regions center regional main economic activitiy higher education center and research centers industrial groups and firms  automotive industry  food industry  basic metal industries  manufacture of accessories, electrical appliances and electrical power generation equipment  universidad autónoma de san luis potosí (uaslp)  colegio de postgraduados  el colegio de san luis, ac*  instituto potosino de investigación científica y tecnológica, ac  centro de tecnología avanzada (advanced technology center) iberdrola; becton dickinson; caterpillar l´oreal; 3m méxico; a schulman bimbo; bmw canel’s; cementos moctezuma; cemex; continental; cummins; daimler; draexlmaier; general electric; general motors; hyundai; herdez; mabe maxion wheels de méxico; mexichem; robert bosch; toyota altiplano  automotive industry  food industry manufacture of textile products  universidad intercultural de san luis potosí.  coordinación académica región altiplano (uaslp)  instituto tecnológico de matehuala  universidad de matehuala grupo industrial yazaki grupo industrial k&s mexicana barcel las sevillanas productos medellín sa de cv minera hochschild sa de cv minera para adelante sa de cv first majestic sa de cv minera los lagartos minera azteca sa de cv industrial minera méxico mineras golondrinas altiplano gold silver sa de cv media  food industry  beverage and tobacco industry  metal products manufacturing  manufacture of products based on  nonmetallic minerals  agricultural sector  instituto tecnológico superior de rioverde  unidad académica multidisciplinaria zona media (uaslp)  universidad intercultural de san luis potosí citrofrut sa de cv agrizom, sc de rl de cv centro de producción santa rita, sa de cv. huasteca  food industry  retail trade  wholesale trade  farming  escuela normal de la huasteca potosina  instituto de ciencias y estudios superiores de san luis potosí  instituto politécnico y de estudios superiores de los valles de oxitipa  instituto superior interestatal de las huastecas  instituto tecnológico de ciudad valles  instituto tecnológico superior de ébano  instituto tecnológico superior de tamazunchale  universidad tamazunchale  universidad tangamanga  unidad académica multidisciplinaria zona huasteca grupo gusi fabricaciones y montajes industriales jro granja acuícola integral laguna del mante la lajilla granja acuícola integral piasa ingenio plan de san luis sociedad de productores de vainilla tlilixochitl note: a.c for its acronym in spanish (civil non-profit organization) source: mejia et al. 2019 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 priority sectors by region in the construction of the ria in slp the priority sectors chosen (agrifood, automotive, chemical, logistics, mining, tourism) for the construction of the ria, were discussed and selected in collaboration with government authorities, using socioeconomic information on the regions. also, they were agreed upon with the regional advisory councils based on studies on regional vocations and the vision that the government portrayed in the state development plan. this was critical to start the ris3 process, however it is important to highlight that the generic description of a sector does not reveal the real productive vocation of the regions. for that reason, interaction with the advisory councils proved to be essential to provide additional qualitative information to determine the specialization areas based on the balance of strengths and weaknesses (table 3) of the regions. this analysis was the basis to define the innovation projects during the workshops. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 table 3. strengths and weaknesses of the ria priority sectors in the slp regions center region center strengths agri foods automotive logistics mining chemical tourism large concentration of specialized production complexes in the food industry (candy, dairy products) main center of food transformation. sector dominated by tier 1 and tier 2 companies that have highly standardized processes for high quality. recent use of robotic equipment and use of sensible equipment active and functioning automotive cluster. strong foreign direct investment in the sector. an increment in logistics operations due to the arrival of international companies in the region, especially in the automotive sector. increase in the operations of the international airport of slp. the nuevo laredomonterrey-saltillo slp highway is considered the most active road of the national rail network. this region is the one with the highest extraction of fluorite in the country (villa de zaragoza has more than 90% of the national total production). presence of research centers with an impact on the mining sector. high concentration of multinational productive complexes with specialization in the cosmetic industry and personal hygiene products. great tourism services, good hotel facilities for congresses and conventions, good venues, good communication, technology and telecommunications coverage. slp is a city considered 'cultural heritage of humanity' and has tourist routes mobile applications to promote state events (promoted by the ministry of tourism of the state). trained providers of hotel services. weakness es low supply of specialized technical services for the food industry low number of innovations low level of process digitalization. smes without certification low knowledge and use of technologies to increase the competitiveness and efficiency of the sector (internet of things, big data, data mining, data analytics). international airport with exceeded capacity and low levels of competitiveness. road congestion on main avenues and vehicular passages. the mining activity has bad public image because it is considered one of the activities with the greatest environmental i mpact. lack of investment in science, technology and innovation (sti) mining activities low capacity for human resources training disarticulated chemical industry. deficient capacities for the usage of new ingredients and the creation of new formulations with added value and greater market value. absence of infrastructure to perform tests of new formulations and products. insufficient waste control systems from the chemical industry. absence of articulation between touris m agencies among regions. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 altiplano region altipla no strengths agro foods automotive logistics mining tourism protected agriculture and greenhouses infrastructure installed. high livestock of sheep and goats. small processing companies (dairy, mezcal) institutional capacities (colleges, research centers) the altiplano region has the second highest number of firms in the automotive sector. large concentration of metalworking companies with potential for integration into the automotive sector. growth in the installation of plants in the automotive sector. potential of highway and rail communications with the north of the country and with the usa. connection with the main trade centers in the north of the country high attraction of foreign direct investment in exploration and extraction projects. mining tradition and community interest for jobs generated by this industry. large activity in extraction of metallic minerals. 8 tourist routes including the 'mezcal route' and the 'desert route'. the region has an specialized tourism agency weaknesses adverse agronomic conditions. high costs per square feet of water pump. low financing level for producers to transit to protected agriculture and greenhouses. high level of staff turnover. insufficient supply of infrastructure for protecte d agriculture and greenhouses activities. high raw material costs. low linkage academia industry for strengthening the livestock sector high staff turnover and low retention of trained personnel. low knowledge and use of technologies to increase the competitiveness and efficiency of the sector (industry 4.0, advanced manufacturing). messy urban and industrial growth that has resulted in insufficient road and rail infrastructure. lack of logistics capabilities and platforms. low use of technologies linked to industry 4.0 (sensors, information systems, autonomous vehicles, automated warehouses, intelligent guides with radiofrequency). the income resulting from extraction activities is not retained in the region. the region does not have companies focused on the maintenance of equipment and tools used in mining. mining companies of medium and small size lack preventive or corrective maintenance systems. the mining activity does not have a good public image because it is considered one of the most polluting activities. insufficient capacity building cti. insufficient road and communications infrastructure. tourism concentrated only in zones called "anchors" like real de catorce. low diffusion of the tourist attractions of the region. low use of information and communication technologies (ict) for tourism services. san luis-matehuala highway is considered one of the most dangerous in the state. lack of qualified human resources for tourism. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 huasteca region huaste ca strengths agro foods tourism state government initiatives to boost the diversification of crops with greater market value. existence of agribusiness companies important citrus production state strategic programs that promote the production of market value crops such as vanilla. region with the highest production of brown sugar at the national level, municipalities of xilitla and tamasopo named 'pueblos mágicos', which constitutes an intangible asset for tourism. presence of trained tour operators. adventure tourism activities. tamuín local airport started operations in august 2019. weakness es low level of technification in agro production and poor quality, hygiene and safety systems. large losses due to postharvest handling deficiencies. inadequate water resource management. insufficient road and communications infrastructure. hotel services are deficient under use of icts. lack of connection between tourism operators. tourist facilities with low hygiene conditions. pollution of water bodies due to poor tourism practices low training of qualified human resources media region media agro foods mining tourism strengths protected agriculture and greenhouses in rise orange harvest is done seasonally so this favors the price. great cattle production technical assistance programs for producers small mining companies are integrated into the production chain of the construction industry. abundant resources with exploitation potential religious centers that attract pilgrims great amount of natural resources for tourism weakness es insufficient supply of workforce for agricultural activities lack of support for innovative activities greater emphasis “in channel” breeding of live cattle, leaving out the one that adds more value. low productivity of cattle due to stallions with poor genetic load low level of association among farmers in the region. insufficient linking of the sti system the mining sector is made up of small companies and producers with limited capacities, especially regarding the analysis, inspection and sampling of minerals. lack of qualified technical services insufficient trained human resources insufficient roads and communications infrastructure. low level usage of hotel infrastructure food services without quality certifications. low use of icts for the tourism sector. seasonality of visits (high and low seasons very marked). pollution of water bodies source: the authors. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 as a result of the analysis of global technology trends, a series of technological boosters and technological platforms were identified to have a good picture on the drivers of technical change in the priority sectors (table 4). table 4. main technological boosters and technology platforms in the priority sectors technological boosters technology platforms agrifood integration of agrifood value chain differentiation of products for various consumer segments safety and traceability reduction of environmental impact and circular economy biotechnology nanotechnology icts logistics smart materials for packaging automotive regulation in safety, energy efficiency and environmental care. digitization of the industry change in mobility pattern. reduced energy consumption advanced materials. automation process. connectivity, internet of things and artificial intelligence. sensors and nanotechnology. logistics intermodality sustainability. intelligent transport and storage systems product quality assurance time and cost reduction security smart packaging data science and big data, sensorial technologies, iot, artificial intelligence transportation systems smart vehicles geolocation and communication systems mining operational safety environmental sustainability productivity and efficiency in extraction ultra-deep mining social responsibility automation automation, iot and artificial intelligence. geophysical data modeling high precision remote sensing mobile robotic meta data analysis environmental engineering communication chemical automatization emission control and energy management facility security replacement of raw materials with biological inputs search for value-added products biotechnology nanotechnology materials science process engineering sensors, automation, iot and artificial intelligence tourism economy and human development. value chain integration community and small business articulation environmental sustainability leisure management intensive use of icts digitization of services applications for mobile devices augmented reality consumer science and customer service software and multimedia development communication source: author’s elaboration. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 considering these elements for discussions among actors of the regional innovation ecosystems invited to participate in the workshops to build the ria, the following areas of innovation were defined as priorities (table 5). table 5. topics of innovation for priority sectors in the four regions altiplano centro media huasteca agrifood incorporation of technologies to increase the productivity of the livestock sector (goats and sheep) protected, semi-protected agriculture and greenhouses for vegetables and strawberries specialized technical services to support agro industrial smes biotechnology applied to horticultural crops technical assistance for bovine breeding protected, semiprotected agriculture and greenhouses for vegetables and strawberries integration of technologies for emerging crops (avocado and mango) improvement of productivity, quality and safety in the vanilla chain improvement of productivity, quality and safety in the sugarcane chain (brown sugar). reduction and use of agricultural waste automotive management skills development in suppliers of the automotive sector training, advice and technical support in manufacturing 4.0 digitalization of processes and implementation of cyber-physical systems. application of data science (big data, data mining and data analytics) to this industry development of soft skills in human capital * chemical * infrastructure to support innovation processes of smes in the cosmetic, soap and personal hygiene products industry. designing and construction of a pilot plant to offer services that support innovation activities in * http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 altiplano centro media huasteca smes logistics training of human resources for the logistic sector national logistic node super network of logistic services san luis potosí 2035 urban and logistic development master plan. slp airport railway station interior custom in slp training of human resources for the logistic sector * mining equipment and machinery renovation and repair center strategic communication and social responsibility plan * laboratory of analytical services for mining smes * tourism use of icts to promote cultural tourism incorporation of good practices in the presentation of tourist services strengthening and promotion of medical tourism. use of icts to promote the tourism sector good environmental and social responsible practices use of icts to promote tourism use of icts to promote tourism training for tourism service providers note: * the relevance of these sectors in the regions is low, so projects were not considered. source: the authors. during the investigation, priority cross-cutting areas emerged in the four regions and they have motivated the definition of four horizontal lines for innovation projects: social innovation, information and communication technologies (ict), water management and sustainable energy management. analysis of the ria construction process table 6 summarizes activities and challenges in the different stages of this project. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 table 6. considerations for each stage of the research and innovation strategies for smart specialization (ris3), methodology applied to the ria of slp, mexico stage what was done? challenges faced analysis of the regional context and the potential for innovation through the review of quantitative indicators on economic, social, educational, scientific, and technological and innovation aspects, the behavior of the economic sectors and the productive vocations of the regions were defined. interviews were conducted with key actors in the priority sectors identified in the state development plan. these interviews helped to identify areas of specialization based on specific programs of government agencies or business groups. documentation of the current situation of the four regions from the sti perspective. the absence of 'regional' information generated delays in the integration and analysis of the data, since official sources offer information only at the state or municipal level. the data around the innovation activities of universities, r&d centers or companies was not available. sometimes the 'ideal' actor was not available, so the information came from other actors with less knowledge of the sector. it was common to find that the representatives of the different sectors do not have clarity about concepts associated with sti and, therefore, they do not know the sector environment. the definition of priority areas was usually contaminated by subjective preferences or conflicts of interest from the actors governance mechanisms a state technical committee (stc) was formed, headed by copocyt, as well as regional advisory councils. these councils were constituted from companies, chambers, academia and government representatives. directories were prepared and done sector by sector and by region where companies, cluster leaders, higher education centers, research centers, experts, representatives of public government institutions (such as municipal presidents) and civil society actors (such as business associations or chambers of commerce) were considered. interviews, industry visits and consensusabsence of working groups in the regions that would take internal responsibility for the construction of ria. limited participation of faculty of institutions belonging to the working group because they did not assume the project as theirs. low level of attendance in some workshops that were mainly due to three elements: 1. low credibility of the institutions, due to the poor results and expectations generated by the participants in other planning exercises. 2. some actors are unaware of the importance of promoting this kind of projects and their vision does not go beyond seeking financial support for their own projects. 3. the process of convening the workshops (invitation and followup of attendance) was carried out only through electronic http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 stage what was done? challenges faced building workshops were carried out with key actors in the regions. specialized events were attended in which contact with relevant actors was privileged. validation meetings were held with members of the stc and with the regional advisory councils. communications, which led to confusion about the objective and importance of the workshops. it is worth mentioning that there is a small participation of actors considered from civil society. most of the participating actors were firms (46 percent), and members of regional public institutions as well as research centers and universities (23 percent respectively) attended in the same proportion. vision of the future of the region through alignment with national or state development plans the initial guidelines of the project were aligned to the state development plan (2015-2021) as well as to the sectorial program for economic development (2016-2021). agreement was reached with the regional advisory councils on the areas of specialization coordination with copocyt to boost the common vision was essential currently, méxico is going through a process of political change that has generated uncertainty around new national policies of sti. there is little institutional credibility political differences and manifestation of conflicts of interests in the workshops little familiarity of some ecosystem actors with technological trends and future challenges lack of a shared vision of 'region' that limits the systemic approach. identification of priority sectors, technological trends and innovation projects for the regions studies of technological trends were used to familiarize participants in the workshops with the most relevant changes and innovations that may be presented in the next ten years on each sector. workshops for each area of specialization of the different regions were carried out. little knowledge of the actors about the concept of innovation and technological trends. defense of traditional positions against technological changes. participating key actors, brought their own work agendas, so they sought to align innovation projects to their particular interests or those of their industry. when this happened, other actors without so much bargaining power, limited their own participation, so that in the consensus exercises, specific groups’ opinion prevailed. representatives of academic groups interpreted this exercise as an opportunity to obtain resources for research projects that do not impact the areas of specialization some workshop participants maintained a passive attitude, mainly due to lack of knowledge. in some areas of specialization there was indifference of industry representatives http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 stage what was done? challenges faced definition of list of projects, road maps and action plans. considering all the information from the previous stages, a list of innovation projects was built for the areas of intelligent specialization, which resulted in a portfolio of innovation projects with a multiplier positive effect in the regions. project documents that include the strategy to execute them were developed as well. presentation and validation of the project portfolio and the execution strategy by the stc and the regional advisory councils. difficulty in translating the needs of the sectors and the problems of the regions into innovation projects, since the causes of these problems are not of technological nature. low participation of actors from the regions in the elaboration of the projects. uncertainty about funding sources and mechanisms for projects due to the lack of definition regarding conacyt programs and other federal agencies that provide support for innovation. difficulty in identifying project’s leaders, especially in those areas in which actor’s industry had indifference to these exercises integration of monitoring and evaluation mechanisms. design of an execution plan and creation of public policy recommendations, in order to establish incentives for project implementation. dissemination of regional agendas. definition of indicators and monitoring procedures. obtaining the commitment of the different areas of the state government for the execution of the agendas. insufficient budgets for execution. the agendas will be widely disseminated; if they are not translated into concrete actions, the actors (especially the industry) will have a very negative reaction to this type of innovation plans. copocyt shall carry out the monitoring of the execution in accordance with the proposed indicators, based on its own regional councils of science and technology (corecyt). source: the authors. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 one of the greatest challenges facing the application of ris3 concerns regions with very limited innovation-related assets. in the case of slp, some regions contain no research institutes and yet have only a very limited capacity for developing an innovation system, constrained by institutional and governance issues as well as by technological issues. for that reason, it is essential to consider that innovation policy orientation and the policy instruments have to be different to adapt them to diverse contexts, exactly as smart specialization argues, and the use of indicators for ex ante policy design, policy experimentation and better ex post evaluation are essential (veugeleurs 2015). in the case of the four regions of slp, the challenges of the application of ris3 for the construction of ria are those of a regional innovation system with an institutional framework that is concentrated in the centro region. the other three regions lack institutional capabilities (both at the public sector as well as among the private actors) and this presents a great challenge to conduct discussions with representatives of priority sectors that are not used to manage science and technology concepts and information. ris actors have also a poor perception of policies and available capabilities to foster long term innovation projects. analysis of the application of ris3 for the definition of ria in slp the process of creating the ria a critical element for the elaboration of rias has been to follow a logical sequence in accordance with the methodological approach of ris3. it has been very helpful that the state development plan of slp proposes a set of priority areas of development in the regions, which is a good starting point. however, the application of this approach in a country like mexico, with very heterogeneous regions is complex for several reasons. the first of these, is the low availability of socioeconomic information in the regions. the state of slp has made a http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 remarkable effort to have reliable statistical information, but this is added at the state level. this forced the working group to generate and, in some cases, estimate regional data, causing delays in the process and the challenge of sharing this information with the participants in the workshops, in order to counteract another difficulty that lies in the unequal level of knowledge that representatives of the sectors have. the latter is very relevant because, in order for the consultation spaces to be implemented successfully, it is necessary that the participants have sufficient and precise information on the socioeconomic conditions and technological trends in their sector. in this case, the coordinating team had to carry out the basic studies and disseminate them, although due to the pressure of time, it was not possible to verify that the participants in the workshops had adequately understood the content of the reports. with no doubt, that is an aspect to improve. the translation of the proposals emanating from the workshops into concrete innovation projects is not a simple matter. we must point out that the participants presented a general idea that needs to be worked out in such a way that clear objectives, technical and economic justification, expected results, strategy, possible executors, the necessary budget and the way to finance the project. therefore, it is necessary to have a work team who has experience in the building of innovation proposals as well as a guide to have a homogeneous structure in the portfolio. for this purpose, it was agreed to develop a template that follows the mexican standard of technological projects. the conduction of the workshops is critical to generate useful results, especially taking into account that it is usual that some people seek to lead the discussions towards their particular agenda. therefore, meetings should be coordinated by facilitators with experience and knowledge about the process of consensus building. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 ria governance governance refers to a new arrangement of authority and power where actors make decisions and generate policies that are binding as noted by hanf and jansen (1998). accordingly, to this, the construction of the ria requires the planning of spaces for representatives to participate (companies, knowledge generating institutions, government and society). therefore, the constitution of regional advisory councils has been a basic component to involve such representatives. the project coordinating group was responsible for identifying opinion leaders belonging to the cited sectors and convening them, taking advantage of the fact that ria creation started at the highest level of the state government. thus, in the four regions, representative groups with a high level of influence were integrated, although they do not always have mastery of innovation issues. during the process, copocyt structured additional regional sti councils, the so-called corecyt. at the beginning, there was some confusion and overlap between the activities of the regional advisory councils and the corecyts, especially considering that there were several members common to both figures. that is why we sought to coordinate the actions with both groups and this proved to be an adequate decision for the continuity and monitoring of ria activities, since the corecyt has an institutional structure that does not depend on this project. the federal government would have an important role in the governance of the project, hence conacyt is its co-sponsor. however, the change of government in december 2018 caused an element of uncertainty, since the new conacyt’s authorities have questioned the project and the process, which has limited their participation as a policy-generating body in the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 matter. this, without a doubt, is an important gap that imposes the need to negotiate with conacyt in order to reach a commitment to the implementation of rias, since it is the organization that manages the largest budget to finance sti projects. working group for the elaboration of ria the working group has been coordinated by an academic person from the most important public university in slp, whom has had an excellent network of relationships in the regions and in most of the priority sectors. likewise, the leadership of a university with presence and recognition throughout the state can be considered as an important asset for the project, as it provides credibility and convening power. in the group of collaborators there have been specialists with experience in other ris3 exercises, which allowed the process to be carried out more expeditiously, although not without the difficulties mentioned. two other universities joined the group, but their participation was rather small. this has been a limitation since such a complex project with activities distributed over a large and diverse territory requires competent and committed human resources. this proves the need to have a better structure of the working team to achieve greater efficiency. moreover, collaboration with specialists from the regions is an element that should be strengthened in order to enhance the process of analyzing specific socioeconomic contexts with sound qualitative information that is essential for the definition of areas of smart specialization and priority projects. the coordination of the work of this group with copocyt has been fundamental to achieve synergy and to generate the message that the process of elaboration of the ria relates to the decision-making bodies regarding sti. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 final considerations it is important to note that when working with heterogeneous and disarticulated innovation systems such as the ones of the slp regions, the challenges around building consensus are substantial. that is why emphasis is placed on the formation of a solid governance framework and fieldwork as fundamental elements. the interviews, with companies and key stakeholders, and discussion workshops are key to understanding the potential and needs of the regions, as well as the expectations of stakeholders. for this, timely planning and convening of actors is essential. it has been clear that a public relations strategy has to be designed to increase the convening power and the organization required to have key agents involved in the workshops and governance meetings. having the support of an institution with leadership in the region, such as copocyt, improves and simultaneously strengthens the commitment of the actors with the process and ria. the key actors, who are also opinion leaders, become a very effective catalyst for the different stages of the project. therefore, this selection deserves special attention. in this project, such actors emerged from different institutional areas, as some are in municipal governments, others in companies, consulting firms or industrial chambers. executing the ria will pose another major problem: financing. due to the instability and uncertainty in the institutional framework dedicated to supporting sti, there is a need to raise awareness among the different actors on the rias and on searching alternative sources of funds for the execution of the project portfolio. we agree with mccann and ortega (2016) that ris3 is not a one-off process, necessary simply to respond to ex ante conditionalities, but rather an ongoing process of governance and policymaking upgrading. it is therefore that slp’s authorities must institutional framework http://revistes.ub.edu/index.php/jesb volume 5, number 1, 81-115, january-june 2020 doi.org/10.1344/jesb2020.1.j069 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 that is concentrated in the centro region. the other three regions lack institutional capabilities (both at the public sector as well as among the private actors) and this presents a great challenge to conduct discussions with representatives of priority sectors that are not used to manage science and technology concepts and information. considering this agendas require careful monitoring and stability in the governance structure; this could be achieved if the regional science and technology councils are strengthened. this ris3 study has had the benefit of giving stakeholders a good information base to understand some aspects of innovation that can be fundamental for local development. involving public and civil society actors as well as private-sector actors has been a very important milestone to increase collective learning on the state and potential of the regions to foster an innovation-based 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"evolutionary models in economics: a survey of methods and building blocks." journal of evolutionary economics 20 (3): 329-373. silverberg, gerald, giovanni dosi, and luigi orsenigo. 1988. “innovation, diversity and diffusion: a self-organization model.” economic journal 98 (393): 1032-1054. sistema de información agroalimentario y pesquero, siap. 2018. “atlas agroalimentario 2012-2018.” last modified august 17, 2019. https://nube.siap.gob.mx/gobmx_publicaciones_siap/pag/2018/atlas-agroalimentriao2018. veugeleurs, reinhilde. 2015. do we have the right kind of diversity in innovation policies among eu member states?. vienna:wwwforeurope. https://www.econstor.eu/bitstream/10419/125763/1/wwwforeurope_wps_no108_ms 228.pdf this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 cristian paúl naranjo navas universidad nacional de chimborazo (ecuador) central bank of ecuador, 1927: among dictatorship, revolution and crisis abstract on july 9 th , 1925, a coup d’état overthrew the ecuadorian government of the president gonzalo s. córdova. the military junta chose the new president, dr. isidro ayora, who founded the central bank of ecuador in 1927. the majority of historians emphasize the patriotic spirit of the military forces in order to eliminate the influence of private banks. nonetheless, there is a less popular view of the process known as the julian revolution, which understands the coup d’état, and the foundation of the central bank of ecuador, as the result of struggles between bankers due to controversies around currency emissions. the arguments behind the julian revolution were based on some economic facts. even though real gdp did not decrease in any year from 1913 to 1927, there was a generalized perception of a critical economy due to the constant fluctuation in prices, the increasing of fiscal deficit, and the reduction of revenues from the trade balance. this article proposes two hypotheses: first, the economic crisis was not an isolated case in latin america, on the contrary, it was part of a regional trend; second, the economic crisis only affected the urban areas, which account for less than half of the total population. keywords: central bank of ecuador; julian revolution; dictatorship corresponding author: e-mail:cnaranjo@unach.edu.ec received 18 october 2016 accepted 13 january 2017 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 introduction on july 9 th , 1925, a coup d’état overthrew the ecuadorian government of the president gonzalo s. córdova, which was replaced by a supreme military junta. after a year, the supreme military junta chose the new president, dr. isidro ayora, who ruled until 1931 and who founded the central bank of ecuador, after the recommendation of the kemmerer mission. the central bank of ecuador was the key point around which a new financial structure was established. the main objective of this new financial structure was the fiscal stability using one specific tool: the golden standard. some historians have analyzed profoundly this event in the ecuadorian history, known as the revolución juliana 1 , through two perspectives. the first, the patriotic spirit of the military forces that was needed to close a period in which private banks had the control of the political power and, in turn, returned the power to the people. this perspective emphasizes the economic critical situation in ecuador as the causes of a political and social instability. the second, a less popular view, which understands the coup d’état, and the foundation of the central bank of ecuador, as the result of the struggles between bankers due to the controversies around currency emissions. this point of view underlines the strong influence of luis napoleón dillon, a private banker from quito, in the military forces that organized the coup d’état. this paper has three main objectives. first, to review the arguments behind the two main readings of the revolución juliana, are they complementary or are they opposed to each other? was ecuador living an economic crisis that justified the arguments behind the revolution? was ecuadorian economy an isolated case or was part of a trend in the region? 1 the revolución juliana comes from the month in which the coup d’état took place. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 second, to build a historical context to understand the coup d’état, the creation of the central bank of ecuador and the influence of the kemmerer mission in the construction of the new financial system. third, to build a comprehensive economic background of the country, using the main macroeconomic statistics available from 1913 to 1927. reconstructing the historical versions of the revolución juliana on july 9 th , 1925, a coup d’état finished the ecuadorian president gonzalo s. córdova, who had been elected the previous year. president córdova was replaced by a military league that was formed in october of 1924, “when a reduced group of young officials, in the heat of the conversations around the adversities in ecuador, and the need to do something serious, decided, finally, to confabulate to save the country” (paz y miño cepeda 2002, 15). according to paz y miño (2002, 13), the revolution had a patriotic idealism that drove the officials to finish the presidential period of córdova: “in ecuador, the military coup d’état of the 9 th of july, 1925, known as the revolución juliana, came to happen because of the collapse of the liberal state.” the military league would organize a supreme military junta, which, in turn, would establish a provisional government junta that should govern the nation through a group of people of provable honorability. there were two provisional government juntas: the first operated from july 20 th , 1925 to january 9 th , 1926; the second did from january 10 th , 1926 to march 31 st , 1926. on april 1 st , 1926, isidro ayora cueva was chosen as the president of the republic of ecuador, his term lasted until august 24 th , 1931, when he was resigned. dr. isidro ayora cueva founded the central bank of ecuador after the recommendations of edwin w. kemmerer who headed the kemmerer mission. the central bank of ecuador was the key http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 point around which a new financial structure was established, having as the main objectives to achieve the fiscal stability and the bank system modernization. historians, who, in majority, share a common point of view, have analyzed the revolución juliana under the scope of a patriotic spirit inside the military forces. this patriotism was needed to close a period when private banks had the control of the political power. this point of view is built around the idea that the military forces wanted to return the power to the people. nonetheless, there is a less popular view of this event, the one that understands the coup d’état, and the foundation of the central bank of ecuador, as the result of struggles between bankers due to controversies around currency emissions. the first point of view, the most popular one, underlines some kind of patriotic efforts of the military forces that tried to change the liberal state instated since 1895, the hegemony of the banks from guayaquil (the main costal city), and the discrimination of the workers. the military forces were concerned about the economic situation installed in ecuador produced by the main banks: banco del ecuador, banco comercial y agrícola, banco del pichincha, banco del azuay, banco de descuento, compañía de crédito agrícola e industrial. the ideas of the revolution were “born on october 25 th , 1924, when a small group of young officers in the heat of the talks on the misfortunes of ecuador and the need to do something serious, finally decided to conspiring to save the country” (paz y miño cepeda 2002, 15). in may 1925, the president, gonzalo córdova, who was in guayaquil to get treated of some medical problems, received a telegram from his minister of interior, jaramillo alvarado, who stated, “[…] real data provides the convincing fact that in may the revolution will explode[...] you are the referee and the head responsible for this moment in history. save the country, mr. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 president, from a civil war” (el día 1925, 26 th of july). on the 9 th of july 1925, a small group of military, the majority were young officials, overthrew the government. pérez ramírez (2014) provides a tribute to the young official who made the decision of saving the country: they “decided to do something for the homeland imbued with patriotic ideals” (2014, 13). pérez stands out the biographies of eight of the young officials, the only ones who singed the foundation of the military league: agustín patiño donoso, virgilio guerrero espinosa, josé morán estrada, carlos abarca montesinos, josé antonio guerrero hidalgo, luis a. rodríguez sandoval, samuel jarrín polanco, manuel martín ycaza valverde. paz y miño (2002, 12) affirms that the young officials had their internal motivations which underlined the need to ensure a professional career, a better welfare system, with improvements in remuneration, courses and scholarships. on the 10th of july, 1925, one day after the coup d’état, the main newspaper of guayaquil, published that “[…] the army of the republic, convinced that the sacred interests of the country could not continue under the mercy of a regime, that was in absolute divorce with the national will, made the right decision to topple the government” (el telégrafo 1925, 10 th of july) of gonzalo s. córdova, elected in 1924. the revolution had a banker within their supporters: luis napoleón dillon. before the coup d’état, dillon “tried to get followers inside the army to take out of the cordova´s government” (pérez ramírez 2014, 46). dillon was a businessman from quito who founded a bank called sociedad de crédito internacional in 1922, whose main purpose was to issue currency in the highlands. dillon was convinced that the coastal financial power established in guayaquil was dominating the country, “dillon became the leading and most visible http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 northern highland critic of the coast” (rodríguez 1994, 48). dillon was part of the first provisional government junta 2 , and worked as minister of finance until january 1926. during the second provisional government junta, dillon was a member of the first board of the central bank of ecuador. the participation of dillon in the revolución juliana, his decisions as minister of finance, his participation in the provisional government junta, and his presence in the first board of the central bank of ecuador, write a less common known version of the revolution: dillon becomes the cornerstone of the controversy in this part of the paper. his support to the revolution may not have been in favor of the patriotic spirit that flowed in the air of the young military officials, his participation in the revolution may have had other intentions, which will be explained with the second point of view of the revolución juliana. the second point of view about the revolución juliana is less known, and probably less accepted by the historians in ecuador. this perspective emphasizes the personal intentions of dillon during his participation in the revolution. guillermo arosemena (2002) believes that the revolution was financed and supported by a private banker, luis napoleon dillon. according to the narrative of arosemena, dillon was a well-educated person, who was obsessed by the rivalry between the coast (guayaquil) and highlands (quito). dillon was the manager of a local bank in quito, sociedad de crédito internacional. this credit society was used to fund dillon’s textile company called fábrica de tejidos de la sociedad de crédito internacional. in fact, when reviewing the researches of the historians that support the first point of view, there is no mention of its function as a national credit 2 the members of the first provisional junta were: luis napoleón dillon, josé rafael bustamante, francisco j. boloña, francisco arízaga luque, pedro pablo garaicoa, modesto larrea jijón, and general francisco gómez de la torre. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 institution, the only thing said about it is that: “the sociedad de crédito internacional, in 1921, as a credit institution from quito, became the banking institution that helped to established the electric municipal power plant in quito” (pérez ramírez 2014, 198). before 1925, private banks had the authorization of issuing currency because there was no public institution that could monopolize the monetary emissions. some banks from guayaquil became very powerful for three reasons: the governmental needs for loans to cover the fiscal deficits; the ability of issuing currency; and, the commercial movement of the city, the biggest companies, by 1900, had their headquaters in guayaquil, with a capital between 1 and 5 million sucres, while in quito, the most important was of only 200,000. the companies from guayaquil were 10 times larger than in the capital. it could not be otherwise because 95% of exports came from the coastal provinces and about 90% of the total bank deposits. the difference in living standards between quito and guayaquil was abysmal in favor of the latter causing resentment among citizens in quito (arosemena 2002, 18) the issuing of currency produced an inflationary trend, which was directly related to the behavior of private banks. the price index, compiled by linda alexander rodríguez (1992, 207) shows, from 1921 to 1925, an annual averaged inflation of 24%. nonetheless, arosemena (2002) points out that, contrary to the opinion that the coastal private banks manipulated the government through the covering of its fiscal needs, “they were victims of the ecuadorian system and abuse of the power of governments. in the past century, banks from quito, as banco union and banco de quito, also made the same mistake of addressing the needs of the state budget, they broke a few years from being founded” (arosemena 2002, 104). by 1924, luis napoleón dillon was the president of the chamber of commerce in quito, and he was the manager of sociedad de crédito internaciona. he accused the private banks from http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 guayaquil as the institutions responsible for the critical economic situation of the nation, and made constant public speeches asking for changes. when the military junta took control of the government, in july 9 th , they immediately created the junta of government with seven people who would manage the new government. the members of the junta of government were: luis napoleón dillon, general gómez de la torre, general moisés oliva, josé rafael bustamante, francisco arízaga luque, and, from the coast, francisco boloña y pedro pablo garaicoa. rodríguez (1994, 47) shares the view that dillon not only had the northern highland’s antipathy toward the coast, “but his hostility was also fueled by the belief that his financial and political ambitions had been thwarted by guayaquil bankers, particularly urvina jado.” rodríguez explains that dillon founded the sociedad de crédito internacional to issue currency in the highlands, yet, the government blocked his intentions. urvina jado, president of the coastal banco comercial y agrícola had informed the minister of finance, alfonso larrea, of dillon’s intentions. the government prohibited the circulation of currency from sociedad de crédito internacional. rodríguez (1994) pointed out that urvina jado behaved in the same way with a bank from guayaquil, banco de descuento, when its managers tried to circulate bills. urvina protested to the minister larrea who immediately prohibited the bank to circulate new bills. in both instances. linda rodríguez considers that urvina jado acted to protect the nation’s currency. president córdova offered dillon another portfolio, which was rejected; dillon believed that “he deserved to be minister of finance since he was the manager of la internacional, the country’s largest textile factory, and because he was one of the most influential members of the highland business community” (rodríguez 1994, 48). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 why did the government listen so attentively to urvina jado? rodríguez (1994) thinks that the reason was because the government owed much money to the banco comercial y agrícola. in this sense, the idea that flowed in the environment of the highlanders that the coastal bankers had the control of the government and, therefore, the political power, strengthened around the most influential people in quito: businessmen, military officials, politicians, and some tabloids. la antorcha (1924) and el abanderado (1924), newspapers from quito, published a series of articles that tried to prove, with the use of evidence that never was published, that banco comercial y agrícola was forcing the government to sell the galapagos islands. the situation infuriated the young military officials that finally decided to overthrow the government of president córdova. victor emilio estrada, cited by arosemena (2002), in a public letter, in 1934, provided of new information to understand the revolución juliana. when he was the head of treasury, he found documents pointing the fact that dillon had wanted to circulate currency issued by his sociedad de crédito internacional. when mr. urbina, the president of banco comercial y agrícola, “knew this inflationary project he informed the government, which prevented mr. dillon to circulate currency […] from the moment dillon realized that mr. urbina and banco comercial y agrícola opposed these emissions […] he became a sworn enemy of banco comercial y agrícola and its manager, and quickly prepared the revolution which trashed the bank and led its manager to the tomb” (arosemena 2002, 132). estrada’s statement places the revolution under a controversial scope: the young officials were encouraged and financed by a banker who tried to get vengeance for the limitations he found when he tried to issue currency from his own bank. the revolution was not the http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 “product of inflation or devaluation of the sucre, but of vengeance from the person who wanted to circulate fake currency and got prohibited” (arosemena 2002, 102). the researchers that see some value in this point of view consider that the difference between the two perspectives of the revolution comes from a regional fact: the majority of historians are from the highlands (rodríguez 1992). in the same path of thought, it seems clear that the main objective of the revolution was to move the economic and political power to quito, and, in order to establish the headquarters of this renowned power, the central bank of ecuador was founded. the military and people who supported the revolution were “determined to end the financial power of the coastal elite, leaders from the highlands tried to establish the central bank in quito and destroy the banco comercial y agrícola, the largest and most prominent bank in guayaquil” (rodríguez 1992, 156). the first junta of government formed commissions to investigate the behavior of some banks, the main one, banco comercial y agrícola. the results were presented to the new minister of finances, luis n. dillon, on the 22 nd of august 1925, in a report that “came to the conclusion that the bank had illegally circulated currency” (rodríguez 1992, 157). this conclusion was based on questionable interpretations of what meant to have a legal reserve to back up the emission of currency. shortly after, dillon recommended the closure of the bank, after imposing a fine of 2,237,093.33 sucres. as the bank had offices in many cities of the country, dillon also recommended the replacement of banco comercial y agrícola with the foundation of the central bank of ecuador. the stories behind the revolución juliana and behind the foundation of the central bank of ecuador build some new insights that help to see a clearer picture of this event. to be able to read this event through the first point of view, the hegelian reading of history (hegel 2001), http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 in which contradictory forces create a new path to understand history, is helpful: the critical economic situation, the regional belief that the coast manipulated the government decisions, and the idealism of the military forces crashed into one result, the creation of the central bank of ecuador. to understand the second point of view, it is necessary to frame the reading inside the foucauldian understanding of how power writes history, “foucault is an antihistorical historian, one who, in writing history, threatens every canon of the craft” (poster 1982, 116). this foucauldian framework is helpful to see that this way of telling the story behind the foundation of the central bank of ecuador threatens the traditional understanding of history in ecuador because the new elements, that were not told before, break the core vision and the common agreement of how to see the revolución juliana. this reading proposes a new conclusion: the foundation of the central bank of ecuador was a product of a regional dispute on the economic and political power of the country, with the help of some military officers, the power was founded, or re founded, in quito. to be able to propose a comprehensive understanding of the events, some facts have to be taken into account: first: the military officials that organized the coup d’état were young which shows a common idealism to feel entitled of the transformation of the nation. second: there is no doubt that there was the idea of a regional conflict between the coast and the highlands, which was reinforced when the banks from the coast influenced the governmental decisions. third: the most influential civilian in the revolution was luis napoleón dillon, this fact is clear to accept considering that dillon was elected to be part of the first provisional http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 government junta, as a minister of finance, and, after that, he was part of the first board of the central bank of ecuador. fourth: banco comercial y agrícola was closed, and its reserves were used to fund the caja central de emisión y amortización that became, after a few months, the central bank of ecuador. these facts build a more complete reading of the revolución juliana. the banks from the coast had an enormous influence in the decisions of the government; this fact reinforced the regional dispute of power between the coast and the highlands. the young military officers probably had genuine motives that put them into the position to believe that they were in charge of turning around the economic situation of the nation. the role of the military officers was largely inflated by the most influential civilian in the highlands, luis napoleón dillon, whose motives had not only a “patriotic” feeling but, mainly, a revenge feeling which caused his involvement in the revolution, his participation in the first junta of government and in the first board of the central bank of ecuador. there is no certainty that dillon financed the revolution, but this idea would fit the story with no contradiction. dillon represents the regional struggles between the coast and the highlands, the combination of his influence and the military intervention produced a remarkable output: the political and economic power returned to quito, this was acquired by closing the most influential bank from guayaquil and by founding the central bank of ecuador in quito. nonetheless, there are still some arguments that have not yet been valued: the economic arguments used to justify the revolution. the “critical economic situation” that ecuador was living before the revolution is supported by a simple fact, the increasing cost of living. after presenting the influence of the kemmerer mission in the region, the economic arguments that http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 justify the abrupt closing of the presidency of córdova will be analyzed in the following epigraphs. the united states influence and the kemmerer mission in latin america after 1919, the period of the postwar brought two important changes to the latin american region: first, the increasing u.s. influence through foreign investment; second, the return to the gold standard. during the years that preceded the foundation of the central banks in latin america, after the great war, united states stretched its influence by increasing the investment, a hand to development that the region could not deny to hold. the increasing american influence in commerce and politics was the result of the european weakness and destruction caused in the great war. from 1913 to 1929, united states pushed away the british presence in the hemisphere, in 1913 britain had estimated $532 million invested in the five andean republics, while the united states had a mere $72 million. sixteen years later, england’s investment had increased by only 14 percent, while those of the united states had risenaccording to enthusiasmby over 1200 percent (drake 1995, 11) in the latin-american countries, the american foreign investment went from an averaged 87 million per country in 1919 to 154.3 million of current dollars (naranjo 2016). in the same study, we affirmed that, in the andean countries, the american investment moved from the agricultural sector, during the xix century, to the oil sector, during the first decades of the xx century: “in venezuela, the investment in the oil sector reached a 5 per 100 of annual growing… the investment in the oil sector was important for the venezuelan exports development during the twenties, as well as for the peruvian and colombian” (naranjo 2016, 82). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 in argentina the agriculture was the main focus of the external investment, the agricultural and livestock production index went from 29, in 1900, to 117 in 1929. in other countries, such as panama, guatemala and cuba, the general electric had the control of the electricity production. finally, the investment in railroads was top in mexico and ecuador: in the case of mexico, the proximity between united states and the coal and iron ore regions in mexico helped enhance these investments; in the case of ecuador, the political decisions of the presidents gabriel garcía moreno and general eloy alfaro enhanced the american investment in railways. the investment came to the country also as credits, “in the 1920s, there was a boom of foreign private loans from the united states. sellers managed to put loans to unwary governments” (thorp 1992, 53), encouraging them to borrow beyond their possibilities. figure 1 shows the american investment in some countries in latin america. from 1919 to 1929, the amount invested raises considerably in all countries, except in colombia and peru. the most impressive case was argentina, where the american investment grew from 0.3 to 28.1 million-dollars/per capita. the american influence in the region increased through the multiplications of investors that reach the needing countries, these investors were dressed with the image of american banks: in 1926, there were 61 branches of us banks in latin america (phelps 1927). table 1 shows the commercial relationship between the united states and the countries of latin america: from 1913 to 1927, the relationship of commerce dependence remained high with central american, while it increased with south america. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 figure 1. american foreign investment/per capita in latin america, 1919, 1924, 1929. millions of current dollars source: author’s creation. data for u.s. foreign investment and population come from moxlad 2016 0.3 0.5 28.1 0 5 10 15 20 25 30 1918 1920 1922 1924 1926 1928 1930 argentina 0.1 0.2 5.7 0 1 2 3 4 5 6 1918 1920 1922 1924 1926 1928 1930 brazil 11.5 14.9 29.0 0 5 10 15 20 25 30 35 1918 1920 1922 1924 1926 1928 1930 bolivia 81.9 82.4 97.9 80 85 90 95 100 1918 1920 1922 1924 1926 1928 1930 chile 48.1 47.6 16.1 0 10 20 30 40 50 60 1918 1920 1922 1924 1926 1928 1930 colombia 4.9 4.5 6.0 0 1 2 3 4 5 6 7 1918 1920 1922 1924 1926 1928 1930 ecuador 8.3 9.9 12.2 0 2 4 6 8 10 12 14 1918 1920 1922 1924 1926 1928 1930 paraguay 24.4 28.6 23.2 0 5 10 15 20 25 30 35 1918 1920 1922 1924 1926 1928 1930 peru http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 table 1. commerce between the united states and latin america, percentage of the total latin american commerce, 1913, 1918, 1927 1913 1918 1927 south america imports from the u.s. 16.2 25.9 26.8 exports to the u.s. 16.8 34.8 25.2 mexico, central america, caribe imports from the u.s. 53.2 75.0 62.9 exports to the u.s. 71.3 73.4 58.4 source: thorp 1992, 53 the return to the gold standard came along with the creation of central banks in the region. this was the product of the influence of the kemmerer mission. edwin walter kemmerer was born in scranton, pennsylvania, the 29 th june 1875. his father, lorenzo dow kemmerer, had a german ancestry. e.w. kemmerer attended wesleyan in middletown, connecticut; after obtaining his bachelor, he was accepted for graduate studies on economics at cornell university. in 1903, kemmerer obtained a ph.d. in economics and finances; in the same year, he started working as financial advisor to the us-philippines commission. kemmerer helped to establish certain type of measures to support the gold standard in the philippines. after this, kemmerer helped, playing a small role, setting up the federal reserve system. before becoming the “money doctor”, e. w. kemmerer worked at princeton university teaching money and banking, and international finance. during his time at princeton, his career developed greatly, his main contribution was the book “modern currency reforms” published in 1916, where he cultivated the idea that “adopting a gold standard was the wisest course of action for a nation enjoyed well night universal respect” (kemmerer 1993, 22). many nations around the world agree with kemmerer statements, in fact, by 1930, more than http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 40 nations had returned to the gold standard, a system that would prevent the causes of inflation. in 1917, kemmerer worked as advisor in mexico helping to solve the central-banking problems, and in 1919 in guatemala. in 1918, his book, “the abc of the federal reserve system” (kemmerer 1922) was published, and through it, his fame as an expert on central banks and federal reserves was spread around many countries. after visiting mexico and guatemala, kemmerer was hired as financial advisor in colombia, chile, ecuador, bolivia and peru, “during his teaching career, edwin kemmerer, a professor of economics at princeton, was called upon to advise the governments of fourteen nations on their monetary standards and policies of fiscal reform and modernization” (kemmerer 1993, 9). the advice and policies of the kemmerer mission had similar patterns in each country they visited. the common elements in all the countries were: the creation of central banks, superintendence of banks, general comptroller; and the proposal of a series of laws by which the government would settle the gold standard as public monetary policy. these changes in the region did not come out of domestic matters; “it is unlikely that one country’s local problems explain its creation of a central bank when all its neighbors were establishing exactly the same institution at precisely the same time” (drake 1995, 2). the creation of central banks came along with the creation of some public institutions that will structure the functioning of the gold standard. from 1919 to 1930, these structural changes occurred in the countries mentioned above. table 2 displays the works of the kemmerer mission in a chronological order: http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 table 2. founded institution and approved laws: the results of the kemmerer mission in latin america country founded institutions approved laws guatemala (1919)  banco central de guatemala  ley monetaria de la república de guatemala colombia (1923)  banco de la república de colombia 3  contraloría general de la república de colombia  ley del banco de la república  ley sobre establecimientos bancarios  ley de timbre (it reorganized the operation of customs and established the collection of national revenues)  ley de impuesto sobre la renta  ley de contraloría (transformed the former court of accounts into the comptroller general of the republic).  ley sobre fuerza restrictiva del presupuesto (it limited the powers of the parliament to organize public expenditure and left this initiative in the hands of the executive branch).  ley que fijó el número y nomenclaturas de los ministerios.  ley sobre títulos negociables chile (1925)  banco central de chile  superintendencia de bancos  contraloría general de la república de chile  ley del banco central de chile  ley general de bancos  ley monetaria  ley orgánica de presupuesto  ley de la contraloría general de la república ecuador (1926)  banco central del ecuador  superintendencia de bancos del ecuador  contraloría general de la república del ecuador  ley orgánica del banco central del ecuador  ley orgánica de bancos  ley orgánica del banco hipotecario  ley de impuestos internos.  ley de monedas  ley sobre los contratos de prenda agrícola  ley de aduanas bolivia (1928)  banco central de bolivia  superintendencia de bancos  contraloría general de la república de bolivia  ley de reorganización del banco de la nación boliviana  ley general de bancos.  ley monetaria peru (1930)  banco central de reserva del perú.  superintendencia de banca del perú  ley del banco central de reserva del perú  ley de bancos del perú  ley monetaria source: gozzi and tappatá 2010, 2. 3 according to santos molano (2005) the congress resolved, by a law of 1922, to create the bank of the republic and to empower the government to bring a mission of foreign technicians. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 the first central banks in latin america were designed for three objectives: first, to preserve the monetary stability; second, to preserve the stability of the banks; finally, to limit the public financing (jácome 2015). the main tool that these objectives had was the emission of a currency under the gold standard system: in theory, this would produce low inflation rates because it limits the money supply. by 1926, “the gold standard was already established in twelve republics from central and south america” (thorp 1992, 65). the kemmerer mission represented the ideals of the u.s. federal reserve on how a country should manage its finances and what monetary instruments were necessary to use in order to obtain a balanced budget while controlling the inflation rates. these ideals were spread in the region through the kemmerer mission; through the economic branches that were being multiplied in the banking system; and also through different u.s. industries and investments, the more important were: railroads, mining, and electricity. the creation of the central bank of ecuador, and the establishment of the gold standard, as the main monetary policy, was not an isolated policy, quite the opposite, was part of a regional trend that was to be broken when the great depression hit the region. 4 the kemmerer mission and the central bank of ecuador in 1925, the economy of the nation was critical, some bankers from guayaquil urged president córdova to invite edwin kemmerer to advice the government in the foundation of a central bank and the stabilization of the fiscal structure, private “bankers thought that the services of a distinguished foreign expert were so vital that they offered to pay the cost of an 4 when the great depression started, the latin american republics decided to leave the gold standard. this happened in different years: argentina, uruguay and brazil in 1929; venezuela in 1930; mexico, chile and bolivia in 1931; colombia, nicaragua, costa rica, peru and ecuador in 1932. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 advisory mission if the government had no money” (rodríguez 1992, 158). the president córdova invited kemmerer before his government was overthrown. before the arrival of the mission, luis napoleón dillon opposed the advice of a foreigner, this position was accepted by the military junta. dillon advised the military junta to fund the central bank of ecuador using the reserves of the private banks that emitted currency. the payment to the private banks for their reserves in gold would have been less than half of the value. this proposal was detained because of the public tension from the coast: the pressure was so strong against these intentions that the military junta felt obliged to replace the government. on april 1 st 1926, the military junta chose the minister of social welfare, dr. isidro ayora, as the president of the republic. in his first decree, dr. ayora declared himself as the supreme commander of the nation, his appointment was well received by the public: “dr. ayora has proved that the time in charge of the ministry, and chairman of the municipal council of quito, are the pearls that adorned his personality” (coral 1995, 125). the new president ordered the closure of several banks and imprisoned the managers arguing that they did not obey the order of collecting the illegal checks in circulation. the new government appointed humberto albornoz as the new minister of finances. albornoz had the intention of reopening the banco comercial y agrícola to give tranquility to the markets that were anxious because of rumors on other banks being closed. president ayora rejected albornoz intentions; the most prominent bank from guayaquil was never reopened. in june 1926, the government froze the metallic reserves of the banks that emitted currency, and founded the caja central de emisión y amortización. this institution represented a transition stage to the creation of the central bank. the reserves in gold from these banks http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 were transferred to the new institution paying less than half of its value in the market: dillon’s advice was followed at last. in total, the reserves transferred to caja central de emisión y amortización amounted 10,604,314.75 sucres (table 3), 35 percent came from banco comercial y agrícola. table 3. gold reserves transferred to caja central de emisión y amortización, in sucres, 1926 bank headquarters year of foundation quantity in gold percentage of the total (%) banco del ecuador guayaquil 1868 2,572,883.70 24.00 banco comercial y agrícola guayaquil 1894 3,716,174.05 35.00 banco del pichincha quito 1906 2,901,507.00 27.00 banco del azuay cuenca 1913 737,750.00 0.07 banco de descuento guayaquil 1920 330,000.00 0.03 compañía de crédito agrícola e industrial quito 1908 346,000.00 0.03 total 10,604,314.75 100 source: author’s creation based on the executive decree n. 476, 1926. the government of the president ayora emitted an executive decree regarding the reserves of the banco comercial y agrícola that were to be transferred to the caja central de emisión y amortizacón. in the executive decree, published in the official gazette on the 9 th of november 1926, the government settles the amount and the way to pay the bank for its reserves, it is written that “the government may order that any dividends paid continue to be on deposits until the purchase by agreement or the immediate withdrawal of circulation of paper money according to the amounts paid, all paper money will be incinerated.” this procedure was alike with all the banks whose reserves were transferred. in total, few more than 24 million sucres were incinerated from 1927 to 1929. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 table 4. incinerated currency from private banks´ emission, in sucres, 1927-1929 comercial y agrícola ecuador pichincha azuay descuento cía. de crédito caja central total 13,534,000 3,283,655 3,038,400 518,300 389,000 305,200 3,066,000 24,134,555 source: banco central de ecuador 1929, 26. the 18 th of october 1926, edwin kemmerer in his mission arrived to ecuador invited by the new president of the republic, dr. isidro ayora. kemmerer was a well recognized in the united states and in several latin american countries. 5 in the case of ecuador, the reforms were going to be similar as in other countries, nonetheless, there is no evidence that could suggest that kemmerer was in favor of closing and transferring the reserves of some private banks for the creation of the central bank of ecuador. moreover, there is no evidence that could suggest that kemmerer advised the ecuadorian government on the way the central bank had to be founded. that procedure seems to be a local political decision. once the kemmerer mission arrived in ecuador, his fame had spread widely; national newspapers published his speeches in ecuador, latin america, and the united states. the ecuadorian press published constantly the benefits and results of the mission in other countries of the region, it is evident the advantages that came along the creation of the central bank in chile, previously authorized by prof. dr. kemmerer. the general conditions of chile when the central bank was created were nothing favorable because the country had just emerged from a period of two years of revolutionary governments and was going through a period of a real crisis. (el comercio, 1927) during its time in ecuador, the kemmerer mission arrived to some conclusions on the fiscal structure: 5 for more information on each country: guatemala (molina calderon 2007); colombia (santos molano 2005); chile (carrasco 2009); ecuador (drake 1995); bolivia (administration of studies and standards 2007); and peru (basadre grohmann 2010) http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 first, small incomes derived from direct taxes, seven percent from the total income. second, great uncertainty on the amount of incomes derived from customs. third, limitations and failures in tax collection. thus, the mission proposed not to increase the number of taxes but to develop a more appropriate tax collection procedure. this was going to be achieved through changes made in the ley orgánica de hacienda (treasury law). the changes in the tax collection procedure increased the government income in almost 40 percent from 1926 to 1928, passing from 44 to 61 million of current sucres, the biggest increases came from customs and income taxes (almeida 1994, 67). another important contribution from the mission was the proposal of a law that would rearrange the banking system in the country. the banking had few regulations that control the behavior of the banks, which emitted currency, but there was a whole in the legislation for the rest of the banking. the new law, called ley general de bancos, was proposed to fix the lack of regulation and guide the loans. this law proposed the division of the banking in three: savings; commercial; and mortgage. moreover, this law would establish the obligation of adopting strict accounting procedures and the publishing of the finances of the banks. it regulated the proceeding of branch offices, international banks and the duration of the banks bestowal (registro oficial no. 432, 1927). the economic policies of kemmerer mission were based on two pillars: the adoption of the gold standard and the creation of a central bank. the main purpose of the economic policies of the kemmerer mission was the monetary and fiscal stability. for that purpose, dr. kemmerer and his team proposed the creation of three institutions and the adoption of seven legal bodies. the central bank of ecuador had four main objectives: emission and conversion http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 of currency; stabilization of international exchange; regularization of discount rates; to help banks in times of emergency (almeida 1994, 84). the bank was managed by a board of eight people, the first members were: neptalí bonifaz, federico malo, dr. clemente ponce, luis alberto carbo, enrique cueva, luis napoleón dillon, luis adriano dillon, and agustin rendón. kemmerer left the country in march 1927; in the same month, the government promulgated the executive decree to establish of the gold standard. to begin the monetary system under the gold standard, the government decided to settle the exchange rate at five sucres for each u.s. dollar. moreover, the gold standard, founded in ecuador, required a gold reserve of 50 percent of the total deposits and currency in circulation; these reserves could be “in the central bank facilities or in recognized banks in new york or london” (morillo 1996, 37). after kemmerer’s departure, the caja central de emisión y amortización became the central bank of ecuador on 10 th of august 1927. the central bank of ecuador started with a legal reserve of 27,084,667 sucres, which promptly increased to 42,891,098 sucres by the 31 st of december 1927 (table 5). the increase of 7,787,756 sucres came from the excessive purchases over sales orders from abroad; the increase of 18,675 in coins of gold came through the convertibility of banknotes to gold; moreover, the central bank of ecuador bought from the government 1,600,000 dollars to a given exchange rate of five sucres per dollar. from the total amount of reserves in gold, 10,604,314.75, value in sucres, came from the private banks whose reserves were transferred to caja central de emisión y amortización, that represents around 37 percent of total amount in reserves by the 10 th of august 1927. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 table 5. central bank legal reserve, 1927 legal reserve sucres on the 10 th of august, 1927 27,084,667 increase in foreign exchange 7,787,756 increase in gold 18,675 purchase of 1,600,000 dollars 8,000,000 reserves by the 31 st of december, 1927 42,891,098 source: carbo 1978, 150. the ecuadorian case is very similar to others assisted by the kemmerer mission in latin america, nonetheless, there is a very important difference: kemmerer never advised the government to close private banks or to use their reserves to open the central bank of ecuador. the decisions around the creation of the caja central de emisión y amortización, which was a transitory institution installed until the opening of the central bank, was taken within a local environment of dispute between the coast and the highlands: politicians had one specific purpose, to restore the political and economic power in quito. the foundation of the central bank of ecuador in 1927, apart from the foundation of institutions of banking and public spending control, is considered the breakpoint to modernization. this structuring of the fiscal system of ecuador remains to this day. at its opening, the main function of the central bank was to preserve the gold standard through the use of two tools, the discount rate and the exchange rate: raising the discount rate if the money supply increased, and decreasing the discount rate if the money supply decreased; on the other hand, if the exchange rate increased, this would mean an excess of money supply, which would force the central bank to sell money orders abroad, and doing the opposite if the exchange rate decreased. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 public finances and the economic situation in 1927, luis napoleón dillon published a critic chapter about the economic ecuadorian situation in a book called the economic and financial crisis of ecuador, which was republished by the coordinating ministry of economic policy of ecuador in 2013. this publication tried to create a scholastic background that would present the ecuadorian economic crisis before the revolution. most of the book is a recollection of notes written in the newspaper el día with the name “cases and things mr. kemmerer ought to know, a brief history of an eleven-year tyranny.” the title of this note had a clear argument: ecuador was living a tyranny before the revolution, and therefore, some kind of intervention was needed. the main purpose of this section is to evaluate whether there was an economic critical situation. the main arguments revised come from dillon´s book published in 1925 and re edited in 2013, estrada (1922) and riofrío (1926), having in mind the advantages of our times. the clearest advantage is the economic historical statistics for latin america, which these authors did not have during their lifetime. therefore, the intention of this part of the paper is not to criticize or support such arguments, but to see if there is real evidence around the idea, in the public opinion, that ecuador was living a critical economic situation before the revolution. moreover, it is needed to present data that these authors did not refer to, in order to have a more comprehensive context of the years before the creation of the central bank of ecuador. before analyzing the most important arguments, it is necessary to understand the historical context: the liberal revolution in ecuador started in 1895 when general eloy alfaro overthrew the government and was declared commander in chief. a few years later, some rights were proclaimed with the new constitution of 1897, such as the abolition of the death http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 154 penalty, freedom of worship, the citizenship for every person living in ecuador, marriage and divorce as a civil matter, and the rejection of the influence of the catholic church in this civil matters. alfaro was murdered in 1912. from 1913 until 1926, was a known period because, the ‘bankocracy’ subordinated the people to the affluent and small group of shareholders who handled the few existing banks and that, given the dearth of the state by the crisis in the cocoa exports, they provided funds to governments and obviously they passed the bill asserting its influence on all decisions. (lara 2012, 439) the plutocratic period (1913-1925) was accused of creating a political context in which the influence of private bankers was excessive in the public decision-making. bankers were accused of benefitting from this influence through public debt: private banks were the main source to finance the central government. in this sense, dillon’s first arguments contained statements that condemned the fiscal behavior of the governments during the first decades of the twenty-century making a clear reference to the government internal debt. public debt the main arguments develop the idea that there was an uncontrollable internal public debt. the data presented by dillon (2013), plus additional data on government expenditures, government incomes, and the public debt to banks from other sources, have been used to see a comprehensive panorama of this statements. from 1913, as shown in table 6 and figure 2, the ratio of the internal public debt (ipd) over government expenditures (ge) was always high; nonetheless, it increases substantially during the twenties, with the highest pick in 1921, registering a radio of 1.3:1. during the twenties, the internal public debt exceeded the total amount of public expenditures, which in turn shows a constant fiscal deficit. when looking closely at the numbers, it is clear that the internal public debt was high and that it increased during the twenties, and even double the amount of previous years, nonetheless, http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 155 this increment did not come from the public debt to banks. in fact, the ratio of public debt to banks (pdb) over the internal public debt (ipd) decreases from 0.66:1 in 1919 to 0.46:1 in 1924. the increment of the internal debt did not come from the private banking system. moreover, it is ironic to see that the pdb/ipd increases when the military took over the government. the increment of internal public debt resulted from the great war, a period in which ecuador was obliged to acquire debt to finance the military expenditures (rodríguez 1994). table 6. internal public debt, government expenditures and incomes, 1914-1927, millions of current sucres year internal public debt, ipd government expenditures, ge government incomes, gi public debt to banks (pdb) / ipd ipd / ge 1913 14.2 22 20 0.57 0.65 1914 15.2 23 16 0.65 0.66 1915 17.1 21 21 0.65 0.82 1916 18.6 18 18 0.64 1.04 1917 18.8 18 19 0.66 1.05 1918 20.7 17 18 0.59 1.22 1919 22.6 14 18 0.66 1.62 1920 25.6 23 15 0.60 1.12 1921 28.5 22 21 0.61 1.30 1922 32.5 27 25 0.63 1.21 1923 36 29 25 0.48 1.24 1924 39.8 35 31 0.46 1.14 1925 49.3 44 39 0.67 1.12 1926 42.4 44 65 0.72 0.96 1927 19.8 70 62 0.28 http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 figure 2. pdb / ipd; ipd / ge, 1913-1925, millions of current sucres source: author’s creation. for 1914-1925, data of internal public debt comes from dillon 2013, 66; for 1913, ipd comes from rodríguez 1992, 143. data for government expenditures and incomes come from moxlad 2016. data for public debt to banks comes from rodríguez 1992, 143. it is easy to imagine and accept the statements that portray private banks as having a major influence over governmental decisions because of the high public debt that was owed to them. nevertheless, after the revolución juliana, after the closure of many private banks, and after the foundation of the central bank of ecuador, the percentage of public debt to private banks increased year after year, 79.6 percent in 1931, 91.6 percent in 1934 (rodríguez 1992, 143). the fiscal relation to banks did not change in time. external trade and government incomes the main productive sectors were related to three agricultural products: cocoa, coffee and ivory nuts. cocoa exports represented 60 percent of total exports. local families from the coast were dedicated to exploit the wild cocoa, “[…] a small group of some 20 families emerged, controlling more than 70 percent of the productive lands[…] aspiazu (57 0.57 0.65 0.65 0.64 0.66 0.59 0.66 0.6 0.61 0.63 0.48 0.46 0.67 0.72 0.65 0.66 0.82 1.04 1.05 1.22 1.62 1.12 1.3 1.21 1.24 1.14 1.12 0.96 0.28 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 pdb/ipd ipd / ge http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 properties), puga (16 properties), seminary (39 properties), caamaño (23 properties), morin (28 properties), duran-ballén (la clementina), burgos (23 properties), mandinyá (8 properties) and sotomayor (4 properties)” (paz y miño cepeda 2011, 54). more than 44 percent of government revenues came from customs, becoming the main source of public finances. this percentage fluctuated during the twenties, registering some high and low picks because of the crisis in the production of cocoa, the main product for exportation. as seen in table 7 and figure 3, exports grew continuously during the twenties while the ratio of cocoa/total exports reduced uninterruptedly. the importance of cocoa exportations was decreasing because of two main reasons. first, the plagues that cocoa plantation suffered, there were two major diseases that attacked cocoa plantations, the first is known as witches' broom, and the second known as monilia fungus, both caused the tree to quickly dry in seven-ten days. second, the first world war affected the commercial relations between ecuador and the european market. there were some plans to recover the plantations, which worked partially; however, cocoa exports never recovered the production and the level of exports (60 percent of total exports) registered during the first decade of the twenty-century. while the ratio of cocoa/total exports was decreasing, other products, among which the main one was oil, were replacing cocoa. oil exports represented less than five percent of total exports during the first decade of the twenty-century, however, its importance increased rapidly during the second decade, registering 19.6 percent of total exports in 1930 (naranjo 2016, 76). another export product that increased its importance was coffee. coffee exports represented 1.8 percent of total products in 1920, whereas in 1926 it represented 18.1 percent of total exports (rodríguez 1992, 214). http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 158 table 7. trade balance in ecuador, millions of current sucres years total exports exports index total imports imports index balance cocoa exports cocoa/ total exports 1913 32.4 100.0 18.1 100.0 14.3 20.5 0.63 1914 26.8 82.7 17.2 95.0 9.5 20.7 0.77 1915 26.5 81.8 17.3 95.6 9.2 19.9 0.75 1916 36.1 111.4 19.1 105.5 16.9 26.2 0.73 1917 32.8 101.2 20.9 115.5 11.9 21.9 0.67 1918 27.1 83.6 16.6 91.7 10.4 17.1 0.63 1919 42.7 131.8 24.0 132.6 18.7 29.4 0.69 1920 48.8 150.6 43.4 239.8 5.3 35.5 0.73 1921 32.7 100.9 23.4 129.3 9.2 20.3 0.62 1922 44.7 138.0 33.5 185.1 11.1 30.2 0.68 1923 36.8 113.6 36.8 203.3 0.02 18.8 0.51 1924 59.2 182.7 52.0 287.3 7.2 30.2 0.51 1925 69.6 214.8 55.2 305.0 14.4 33.9 0.49 1926 60.2 185.8 47.0 259.7 13.2 26.4 0.44 1927 74.8 230.9 57.0 314.9 17.7 36.9 0.49 source: author’s creation. data for exports and imports come from banco central del ecuador 1940, 17. data for cocoa exportations come from rodriguez 1992, 223. the trade balance of ecuador fluctuated (table 7), from 1913 to 1927, dramatically, drawing constantly high and low peaks. in millions of sucres, the high peaks are visible in 1916 (16.9), 1919 (18.7), and 1927 (17.7), while the low peaks occurred in 1920 (5.3), and 1923 (0.02). in us dollars, the fluctuation of the trade balance is similar to the one registered in sucres. nonetheless, the apparent recovery of the trade in sucres in 1927 does not have the same impact in us dollars: from 1926 to 1927, in millions of sucres, the balance trade moved from 13.2 to 17.7, while, in million us dollars, it moved from 2.5 to 3.5, this data shows that, even http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 159 though in nominal prices, the trade improved in one year, the exchange rate diminished the significance of the improvement. these fluctuations in the trade balance are related to the fact that ecuadorian main product of exportation, cocoa, reduced its production because of the attack of diseases in the plantations. furthermore, from 1913 to 1927, in million us dollars, the trade balance reduced in almost half, from 6.6 to 3.5: a real catastrophe for external trade. figure 3. exports index, cocoa export/ total exports, ecuador, 1923/1927 source: author’s creation. data for exports and imports come from banco central del ecuador 1940, 17. data for cocoa exportations come from rodriguez 1992, 223. secondary axis for cocoa/ total exports. money supply, inflation, and exchange rates around the idea of crisis, another argument used was the inorganic currency supply. before the creation of the central bank of ecuador (1927), the emission of currency was in the hands of private banks, which decided the emission of currency given their own judgment, “the money supply increased from 18 to 38 million” (dillon 2013, 97), even though dillon does 100.0 82.7 81.8 111.4 101.2 83.6 131.8 150.6 100.9 138.0 113.6 182.7 214.8 185.8 230.9 0.63 0.77 0.75 0.73 0.67 0.63 0.69 0.73 0.62 0.68 0.51 0.51 0.49 0.44 0.49 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 0.0 50.0 100.0 150.0 200.0 250.0 300.0 1912 1914 1916 1918 1920 1922 1924 1926 1928 index exports cocoa/ total exports http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 160 not mention any time period, it might be from 1917 to 1927. this statement involves the increment of the inflation and, therefore, the decreasing of the purchasing power. as shown in table 8, money supply increased from 1922 to 1925 in 76 percent (current prices), which would raise the inflation rates. the great war left the region with a major devaluation of local currencies (table 10) that obliged governments to increase the monetary supply. the case of ecuador is not separated from the region, yet, its devaluation and inflation was higher than the average of the region. it is important to notice that until 1919 the exchange rate of the region fluctuated with no major changes, but, after world war i, devaluation was a common symptom. the restriction of the monetary supply in ecuador in 1922 was a policy to try to control the inflation rates that were raising because of the devaluation of the currency. table 8. money supply, ecuador, 1920-1927 year gold currency deposits money supply constant prices money supply current prices 1920 9,324,322.00 22,455,896.00 13,711,835.00 36,167,731.00 36,167,731.00 1922 8,346,240.90 16,671,484.40 13,697,009.30 30,368,493.70 34,738,519.94 1923 7,688,158.60 24,328,490.20 14,420,577.00 38,749,067.30 48,482,833.01 1925 6,669,754.50 25,412,894.00 15,801,331.40 41,214,225.50 60,609,640.02 1927 22,525,412.70 11,193,707.20 34,125,950,2 58,573,780.92 source: author’s creation. data for money supply in constant prices comes from: marchán 2013, 285. the index price published by marchán (2013) has been used to transform the data into current prices. money supply is the sum of currency in circulation and deposits. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 161 table 9. price index, ecuador and latin america, 1913-1927 year ecuador colombia venezuela peru latin america 1913 100 100 100 100 100 1914 100 67 100 100 92 1915 130 67 105 100 101 1916 170 67 114 100 113 1917 204 67 130 133 133 1918 238 67 135 133 143 1919 214 133 157 167 168 1920 192 133 178 167 168 1921 194 100 135 167 149 1922 215 100 124 167 151 1923 208 100 124 167 150 1924 242 133 130 167 168 1925 245 167 135 167 178 1926 309 167 141 167 196 1927 300 167 135 167 192 figure 4. price index, ecuador and latin america, 1913-1927 source: author’s creation. data for ecuador comes from drake 1984, 220; for the rest of countries, moxlad 2016. data for latin america base year is 1970=100; the base has been changed to 1913. logarithmic trend lines. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 162 table 10. exchange rate, ecuador and latin america, 1913-1927 (lcu/us $) year ecuador brazil bolivia chile peru venezuela latin america 1913 2.09 3 3 2 5 3.02 1914 2.11 3 3 7 2 5 3.69 1915 2.15 4 3 6 2 5 3.69 1916 2.23 4 3 4 2 5 3.37 1917 2.48 4 3 4 2 5 3.41 1918 2.57 4 2 3 2 4 2.93 1919 2.14 4 3 4 2 5 3.36 1920 2.25 4 3 5 2 6 3.71 1921 3.46 8 4 8 3 6 5.41 1922 4.27 8 4 8 3 5 5.38 1923 4.79 10 3 8 2 5 5.47 1924 5.03 9 3 9 2 5 5.51 1925 4.32 8 3 9 2 5 5.22 1926 5.12 7 3 8 3 5 5.19 1927 5.01 8 3 8 3 5 5.34 figure 5. exchange rate, ecuador and latin america, 1913-1927, 1913=100 source: author’s creation. data for ecuador comes from dirección nacional de estadística 1944, 373; for latin america, moxlad 2016. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 163 the argument on the increasing cost of living is supported by the statistics presented in this section. the inflation rates of ecuador show a general tendency to escalate until 1926, with two picks, in 1918 and 1926. this phenomenon is the product of the devaluation of the currency and the increment of money supply that came from private banking, responsible of the emission of currency. ecuador is not a single case in the region, on the contrary, the region shows a similar pattern: an escalating inflation and currency devaluation. gross domestic product regarding the evolution of the gross domestic product, from 1914 to 1927, there is a constant increase of an annual average of 3.9 percent, which is the media of the region for the same period. there is no year with a negative growth. latin america shows a decreasing gdp in 1914 due to the beginning of the great war, “in a very short time the entire banking and credit system and the organization of money markets were suspended, which in latin america caused an acute liquidity crisis and financial panic in 1913-1914” (bethell 1991, 5354). the falling of great britain as the international hegemon gave space for united states to become the first commercial partner in latin america. from 1914, united states was the destiny of more than 40 percent of the total exports of the region. there was also an increasing foreign investment in strategic sectors as: mining in mexico, railways in ecuador, copper in peru, bananas in colombia and sugar in cuba, “private investment of the united states abroad increased from 3500 million in 1915 to 6400 million in 1919” (lewis 1938, 449). after the great war, the u.s. established a strong presence in the region through foreign investments and commerce. this increasing influence came along with the idea of a reduced http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 164 role of the government and free market. bethell (1991) affirms that the foreign investment in the region increased, from 1919 to 1928 in around 30 percent, which shows that the american presence, and its model of growing, was spread in most part of latin america. the economic growth of the region was based on the exports until 1929, when the great depression collapsed the model and gave birth to a period of protectionism and industrialization. table 11. gross domestic product, 1970=100, in millions of local currencies years argentina brazil ecuador venezuela peru colombia uruguay latin america 1913 14048 11689 2402 1416 18912 8239 142250 28422.3 1914 12587 11434 2507 1229 18797 8552 118517 24803.3 1915 12657 11946 2621 1259 20417 8947 112383 24318.6 1916 12292 12295 2714 1179 22533 9408 116217 25234.0 1917 11294 13145 2808 1367 23365 9794 128193 27138.0 1918 13373 12878 2908 1349 23505 10338 135861 28601.7 1919 13865 14577 3040 1252 24286 11197 153496 31673.3 1920 14877 16015 3177 1493 24529 11962 133852 29415.0 1921 15256 16349 3291 1543 25544 12651 140826 30780.0 1922 16464 17476 3407 1576 27745 13507 161054 34461.3 1923 18290 18479 3526 1806 29656 14369 169561 36526.7 1924 19709 18467 3650 2077 32449 15186 185809 39621.0 1925 19625 18541 3779 2666 33307 16005 178543 38923.7 1926 20566 18938 3900 3203 36689 17533 194900 42247.0 1927 22027 20313 4104 3569 37337 19112 222941 47057.6 source: moxlad 2016. figures are estimated with rate of growth of gdp $ppp 1990 from bértola and ocampo 2010. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 165 figure 6. real gdp, latin america, 1913-1927, 1913=100 source: moxlad 2016. figures are estimated with rate of growth of gdp $ppp 1990 from bértola and ocampo 2010. the case of ecuador represents the mean of the region, the constant increase of the gross domestic product shows that the economy was growing in a slow pace, with no substantial benefits. the evolution of gdp can be used to affirm that there was no contraction in the economy: ecuadorian economy is not an outlier in the region, on the contrary, it represents the economic development of the region. even though there was a real crisis in the governmental finances, and there was an increasing cost of living, the economy of ecuador was growing at the same pace of the region. on the other hand, the local economic problems presented in the inflation rates were not present in the majority of the population because one third of the population lived in rural areas and the majority of this section lived in a barter system (naranjo 2016), the economic problems were present in the urban cities. the crisis was felt mainly in the urban centers of quito and guayaquil, which represented the two poles of development. guayaquil was the center of the 50.0 70.0 90.0 110.0 130.0 150.0 170.0 190.0 210.0 230.0 250.0 1912 1914 1916 1918 1920 1922 1924 1926 argentina brazil ecuador venezuela peru colombia uruguay http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 166 main exporting companies, which commercialized cocoa, coffee, and ivory nuts; while quito was the center of the textile industries, whose production was consumed internally. notes on social conflicts in ecuador the sectors that felt the increasing cost of living, influenced by russian revolution, organized strikes in the main cities, especially in guayaquil and quito. luna tamayo (2013), citing albornoz (1969), records some of the most important conflicts. as shown in table 12, the majority of the conflicts were registered in quito and guayaquil, most of the strikes were generated because of wages increase. luna tamayo (2013, 37) argues that there is an increasing tendency of workers’ strikes, the majority of these strikes pursued some objectives: “[…] salary increase, employment, labor stability and better working conditions.” the most important event occurred on the 15 th of november 1922, when workers organized themselves and decreed in guayaquil the first major general strike. workers in guayaquil could not remain in peace, after the city lived a week without street lighting, due to cuts in the electric power, and without food supplies, thousands of workers began to march through the streets demanding immediate solutions to their problems and the high cost of living, paralyzing completely the commercial, industrial, social and economic activity of guayaquil (avilés pino 2016) the 15 th of november, hundreds of workers walked through the main streets of the city to gathered at plaza del centenario. after some fiery harangues, many protesters attacked the police, others tried to rob the warehouses located on the main street of the city, the av. 9 de octubre. after some hours of violence, with the help of the military, the police could regain the control of the city with a heavy toll of deaths. avilés pino (2016) states that the general strike in guayaquil had been interpreted by some leftist authors as the cornerstone of the social claims of the twenties. avilés pino considers http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 167 that these writers, such as joaquín gallegos lara (1946) and óscar enfrén reyes (1949), created myths around the events on the 15 th of november 1922. the most famous myth tells the story that the corpses of the workers were thrown to the guayas river to disappear any evidence of the massacre. the social claims, evident in the strikes of the twenties, gave birth to the revolución juliana. table 12. workers strikes and social claims 1914 -1929 year type of workers place motive/actions 1914 railway workers bahía de caráqueschone payment of wages 1916 workers sugar mill valdez rising of wages and decreasing of working hours 1916 cocoa workers guayaquil rising of wages 1916 wagon and urban car drivers guayaquil rising of salaries and compliance of working hours 1916 railway workers durán 1918 barbers guayaquil rising of wages 1918 tailors quito rising of wages 1919 typographers quito rising of wages 1919 miners portovelo rising of wages 1919 tailors riobamba rising of salaries 1919 pharmacy employees guayaquil rising of salaries 1921 native indigenous guano, paquicahuan y cubijíes resistance to territorial taxes 1922 general strike of workers guayaquil rising of salaries, labor stability, against the critical economic conditions 1923 hacienda leyto baños indigenous uprising 1923 workers of the cigar factory la corona guayaquil rising of salaries 1924 rubber tappers amazon region forty rubber tappers died at the hands of shuar warriors 1924 native indigenous sicalpa indigenous uprising http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 168 year type of workers place motive/actions 1924 shuar warriors amazon region shuar warriors attack the camp of salesian missionaries 1924 communards illinsichi communards are faced with the army 1924 sawmill workers esmeraldas 100 workers were fired 1924 operators of the cotton industry ambato rising of salaries 1924 police officers quito insurgency of officers from esmeraldas in police headquarters 1928 native indigenous san josé de minas indigenous uprising 1928 native indigenous cebadas and flores indigenous uprising 1928 native indigenous tisaleo armed uprising of 3,000 indigenous 1929 bank employees guayaquil reject retirement tax 1929 native indigenous colta six thousand indigenous take control of the haciendas source: authors creation. data come from: luna 2013, 36-37, 42-43; avilés pino 2016. these examples show that the main economic concern in urban cities were the rise of salaries. this was a real economic issue, as shown previously. nonetheless, as it was mentioned, the economic problems were not present in the majority of the population, which lived in rural areas and lived under their own conditions: country people were consumers of products that were harvested by themselves. final remarks this article started with some enquiries, the first one regarding the arguments behind the two main readings of the revolución juliana: are they complementary or are they opposed to each other? the two readings of this event raise a broader debate about how some historical events in ecuador have been written: is it possible to settle a line that divides the writers’ political ideologies with the actual facts? how much of what has been written has to be doubted or expanded? http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 169 having in consideration that the first reading of the revolution juliana emphasizes the patriotic feelings of the military officers, while the second reading emphasizes the personal motivation of luis napoleón dillon, it can be affirmed that both readings are complementary. in fact, this article proposes a short version that joins both perspectives: the young military officers had genuine motives as they were young and idealist, but it is also difficult to deny the personal motivation of dillon, which were intertwined with some regional antagonism between the coast and the highlands. the second question refers to the arguments that affirm that ecuador was living within a critical economic situation. on the one hand, from 1913 to 1927, the ecuadorian economy grew at a rate of 3.9 percent. on the other hand, the inflation in ecuador was the highest in the region: the constant increasing of the cost of living was enough to create a social environment of a critical economic situation. furthermore, the public finances were unbalanced due to public debt, which increased constantly during the twenties. nonetheless, this increase did not come from the public debt to banks, but it was the result of the great war, a period in which ecuador was obliged to acquire debt to finance the military expenditures. was ecuador living within a critical economic situation? the fluctuation in prices had diminished the purchasing power in urban areas, which, in turn, created an increasing social perception of a critical economic situation. this perception was more notorious in the industries related to the exports of cocoa: the plantation diseases affected greatly the production of cocoa, which represented 60 percent of total exports. however, the economic crisis was not an important element in rural areas, where people lived in a barter system. people in rural areas represented one third of the total population. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 170 was ecuadorian economy an isolated case or was part of a trend in the region? ecuador was not an isolated case in latin america, in fact, the region was going through the same issues: increasing public expenditure due to the effects of the great war; increasing cost of living; increasing american investment; and, a slow economic growth reflected in the evolution of the gdp. finally, it could be argued that the kemmerer mission was an essential tool to spread the influence of the united states in latin america. however, the mission did not visit countries to impose policies or the foundation of institutions, rather the mission visited each country after the invitation of the local government. in this sense, it is important to consider that e.w. kemmerer never advised the ecuadorian government to close private banks or to use their reserves to open the central bank of ecuador. this decision was taken by local politicians, and it happened before the mission’s arrival. references albornoz, osvaldo. 1969. del crimen de el ejido a la revolución del 9 de julio de 1925. guayaquil: editorial claridad. administración del sr. dr. dn. isidro ayora, p. p. 1926. transacción gobierno banco comercial y agrícola. (n. 179), year i. quito, ecuador. november 9. almeida, rebeca. 1994. kemmerer en el ecuador. quito, ecuador: flacso, sede ecuador. arosemena, guillermo. 2002. la revolución juliana: evento ignominioso en la historia de guayaquil. guayaquil, ecuador: archivos históricos del guayas. avilés pino, efrén. 2016. "enciclopedia del ecuador." revolución del 15 de noviembre de 1922. 2016. accessed january 05, 2017. http://www.enciclopediadelecuador.com/historia-delecuador/revolucion-del-15-de-noviembre-de-1922/. ayora, isidro. 1926. "contrato transacción banco comercial y agrícola." executive decree. n. 25. quito, may 3. banco central de ecuador. 1929. "boletín mensual." no. 26. quito, november. banco central del ecuador. 1940. "boletín mensual." year xiii, 50-151. quito, january-february. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 171 basadre grohmann, jorge. 2010. “la misión kemmerer y su importancia para el banco central.” revista moneda 132: 5-23. bértola, luis, and josé antonio ocampo. 2010. desarrollo, vaivenes y desigualdad: una historia económica de américa latina desde la independencia. madrid: segib bethell, luis. 1991. historia de américa latina. américa latina: economía y sociedad, c. 1870-1930. barcelona, españa: editorial crítica. brian news service. 1942. edwin w. kemmerer. washington: library of congress prints and photographs division. carbo, luis alberto. 1978. historia monetaria y cambiaria del ecuador. quito: banco central del ecuador. coral, hector. 1995. isidro ayora. quito: abrapalabra. carrasco, camilo. 2009. banco central de chile 1925-1964, una historia institucional (vol. 14). santiago, chile: banco central de chile. decreto ejecutivo. 1926. "executive decree n. 476." vol. tomo 2. quito, october 20. dillon, luis napoleón. 2013. la crisis económico financiera del ecuador. re-edition of original publication of 1925. quito: ministerio coordinador de la política económica. dirección nacional de estadística. 1944. ecuador en cifras 1938-1942. quito, ecuador: imprenta del ministerio de hacienda. drake, paul. 1984. "la misión kemmerer en el ecuador: revolución y regionalismo." revista del banco central del ecuador vii, 9, may. drake, paul. 1995. kemmerer en los andes: la misión kemmerer, 1923-1933. quito, ecuador: banco central del ecuador. efrén reyes, oscar. 1949. breve historia general del ecuador. quito: tall. gráf. nacionales. el abanderado. 1924. year 01, no. 04. december. el comercio. 1927. “el banco central de chile”. quito, february 4. el día. 1925. "para la transformación política: el ministro de gobierno comunicó oportunamente al sr. dr. córdova los peligros de la situación." quito, july 26. el telégrafo. 1925. "el ejército a la nación." guayaquil, july 11. estrada, victor emilio. 1922. ensayo sobre la balanza económica del ecuador. guayaquil: tipografía de julio t. foyain. gallegos lara, joaquín. 1946. las cruces sobre el agua. guayaquil. gozzi, eugenia, and ricardo tappatá. 2010. "primera iniciativa de reforma financiera profunda en américa latina la misión kemmerer." fitproper. accessed january 6, 2017. http://www.fitproper.com/documentos/propios/mision_kemmerer.pdf http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 172 hegel, georg wilhelm friedrich. 2001. the philosophy of history. ontario: batoche books. jácome, luis i. 2015. “central banking in latin america: from the gold standard to the golden years.” international monetary fund-imf working paper 15-60, march. kemmerer, edwin. 1922. the abc of the federal reserve system. londrés, ecuador: oxford university press. kemmerer, donald. 1993. princeton's "money doctor": professor e.w. kemmerer and the gold standard. edited by princeton university library. vol. lv. 1 vols. princeton: princeton university library. la antorcha. 1924. year 01, no. 01. november. lara, jorge salvador. 2012. breve historia contemporánea del ecuador. méxico, d.f.: fondo de cultura económica. lewis, cleona. 1938. america's stake in international investmen. washington: brookings institution, institute of economics. luna tamayo, milton. 2013. "regiones, clases y enfrentamientos sociales en los 20." in crisis y cambios de la economía ecuatoriana en los años 20, by carlos marchán, 233-257. quito: ministerio coordinador de la política económica. marchán, carlos. 2013. crisis y cambios de la economía ecuatoriana en los años veinte. quito, ecuador: ministerio coordinador de la política económica. molina calderón, josé. 2007. guatemala: un siglo de seis lustros de banca, bancos y banqueros (1877-2007). ciudad de guatemala, guatemala: kan sasana printer. morillo batlle, jaime. 1996. economía monetaria del ecuador. quito, ecuador: imprenta mariscal. moxlad. 2016. base de datos de historia económica de américa latina montevideo-oxford. http://moxlad-staging.herokuapp.com/home/es# naranjo, cristian. 2016. “la gran depresión en ecuador, 1927-1937. salarios y precios.” phd diss., universidad autónoma de barcelona. paz y miño cepeda, juan. 2002. la revolución juliana nación, ejército y bancocracia. quito: abya yala. paz y miño cepeda, juan. 2011. "la época cacaotera en ecuador." in el ferrocarril de alfaro. el sueño de la integración, by sonia fernández rueda, 51-61. quito: tehis-corporación editora nacional. pazmiño, b., and ignacio, c. 1929. “empleados del banco central del ecuador, quito.” archivo histórico del guayas. quito: ministerio de cultura y patrimonio. pérez ramírez, gustavo. 2014. la revolución juliana y sus jóvenes líderes olvidados. quito: academia nacional de historia. http://revistes.ub.edu/index.php/jesb volume 2, number 1, 128-173, january-june 2017 doi: 10.1344/jesb2017.1.j025 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 173 phelps, clyde w. 1927. the foreign expansion of american banks. new york: ronald press co. poster, mark. 1982. "foucault and history." social research (modern masters) 49, 1: 116-142. registro oficial n. 432. 1927. year ii. quito, ecuador. september 8. riofrío, eduardo. 1926. el problema monetario y el problema fiscal en el ecuador. quito: anales de la universidad central. rodriguez, linda. 1992. las finanzas en el ecuador. quito: banco central del ecuador. rodríguez, linda. 1994. rank and privilege. the military and society in latin america. oxford: sr books. santos molano, enrique. 2005. la misión kemmerer. revista credencial historia 184. thorp, rosemary. 1992. "américa latina y la economía internacional desde la primera guerra mundial hasta la depresión mundial." in américa latina economía y sociedad: 1870-1930, by leslie bethell, 50-71. barcelona: editorial crítica. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 cintia russo universidad nacional de quilmes, universidad de buenos aires (argentina) patricia gutti universidad nacional de quilmes (argentina) study cases of two small medium size enterprises (smes) in the southern metropolitan region of buenos aires1 abstract the main purpose of the paper is to understand which specific strategies argentinian small mediumsized enterprises (smes) adopted during the second half of the 20th century to adapt to and confront economic cycles, and how the learning process allowed them to endure over time. to do so, we focus on the learning paths of two metallurgy firms established in the quilmes district, south of the buenos aires metropolitan region: sinpar (1931), and gora (1958), which have accumulated experience and recognition at the local level, for more than sixty years. by studying those companies, we aim to a twofold result. the first is to show that the strategies of the smes in the manufacturing sector are based on internal capabilities of meeting demand and responding to the domestic economy. the second one associates the long-term endurance of companies with a strong family management structure over more than one generation. based on those results, we will argue that the smes lasted over time because their founders and successors developed the ability to adapt and of learning how to respond to and take advantage of the uncertainty, restrictions and opportunities of the argentinian economy. keywords: small businesses; smes; family management; metallurgical industry; technological capabilities. corresponding author: e-mail: patricia.gutti@gmail.com received 15 october 2019 accepted 25 march 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. 1 we would like to appreciate the valuable comments we received from phd. araceli almaraz while preparing this paper. http://revistes.ub.edu/index.php/jesb mailto:patricia.gutti@gmail.com http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 introduction in argentina’s history of industrialization, small and medium-sized enterprises (smes) have had, and still have, a significant place in the productive structure (barbero and donato 2009; russo 2011). they exercise a positive synergy, creating employment, disseminating and contributing to the training of the workforce, and have a distributive socioeconomic effect in terms of both income and productive capabilities.2 however, smes in argentina—and especially in latin america, as a result of their high structural regional heterogeneity—have also a low level of performance in terms of productivity, weak or no participation in exports and limited technological capabilities (kulfas 2008; ferraro and stumpo 2010; cepal 2015). thus, the main objective of this article is to understand the learning processes of smes in argentina, that is, which specific strategies they adopted in the course of the second half of 20th century to adapt to and confront the economic cycles so as to endure in the long run. we will focus on the trajectory of two companies established in the quilmes district, south of the buenos aires metropolitan region (rmba): sinpar s.a., founded in 1931 and gora hnos., founded in 1958. both smes3 are small enterprises in the metallurgical industry and are more than sixty years old and have accumulated experience and recognition at the local level. they are also nuclear family businesses whose partners belong to the same family, a feature through which their trajectories show continuities (almaraz and ramírez 2018). they are outstanding cases of the local industrial structure representing family-run companies. they have incorporated technology into their production processes and learned to dominate 2 in 2017 there were 609.000 companies with at least one employee registered as dependent worker. 99.5% were smes that accumulated 48.5% of formal private employment (datos argentina 2020; oede 2020). 3 we consider here the criterion of the number of employees as defined by the secretariat of entrepreneurs and smes of the ministry of production of the argentine republic (companies with up to 235 employees are considered small industries, resolution 215/2018). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 82 market niches through specialization. these elements partly explain how they have overcome many critical periods in the history of the argentine economy. based on the existing literature on the topic, we would like to show how the performance of these enterprises in the long term is related to the business ability to adapt to the national and international context, as well as to transformations in the current techno-productive paradigm (fernández pérez and lluch, 2016; lluch and fernández pérez, 2019). our working methodology combines the historical perspective with organizational analysis, allowing the reconstruction of the trajectory of the smes. in this sense, we will analyse different aspects, such as business behaviour, organization, structure and management processes, and technological capabilities, as well as the training of human resources, through the history of these enterprises. the present paper is divided in five parts. the first part is related to methodology and how mixed methods can help to study learning, behaviour and business trajectories. the second part establishes the periodization of the enterprises’ trajectories. the third section analyses technological capabilities as one of the factors that explain their performance in the long run. the fourth section presents the analysis of the results obtained in this paper, with emphasis on similarities and differences among research topics. in the last part, we offer some conclusions in terms of learning process, family business, and adaptive models in smes in latin america. i. strategy of methodology the current research is carried out following a mixed type methodology based on the multiple case method and the biographical method. those will be the main tools we use to reconstruct the trajectory and business strategies, both explicit and implicit (jones et al. 2011). on the one http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 83 hand, the research followed the design of the “holistic multiple case study” type (yin 2014). this model allows us greater validity by contrasting the results because it implies a deep analysis of the whole individual cases. on the other hand, the biographical method enables a global grasp of the phenomenon studied (“comprehensive research”), by incorporating the point of view of the social actors through semi-structured interviews (desmarais 2009). thus, the story of the interviewees —the businessmen in this case— provides the basis for this work. one may observe that, in the process of producing meaning, the oral narrative swings between singularity and universality, subjectivity and objectivity, implication and distancing. hence, the biographical method articulates micro and macro explanations. this reduction of scale in the observation —provided by the case studies and the biographical method— makes it possible to focus on aspects that appear not only on a macro scale, but also in the analytical unit. the attributes of the companies studied are common to other cases and, to some extent, can be generalized to the argentine industrialization process. hence, the privileged sources of the present paper are semi-structured interviews and complementary documents.4 being aware of the potential and limitations of the oral source we not only contrast it with other sources, but also with the history of companies that would share similar characteristics.5 in the two analysed cases, the periodization follows three criteria. firstly, the productivetechnological criteria—that is, what they produce and under what conditions, identifying some significant milestone in the long-term construction of technological capabilities. secondly, the commercial criteria—that is, how under what conditions they enter the market and market their products. and thirdly, the organizational criteria, which concerns the 4 we consult publications of the association of metallurgical industrialists of the argentine republic. 5 the cases of gora and sinpar are inserted in a research project on the industrial history of the quilmes district, south of the rmba. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 84 condition of family-business —that is, who founded the business, what kind of management it has, when following generations join the business. the smes were intentionally selected because of their family structure, their centralized business management and their size of no more than sixty stable employees. also they were both created before the 1970’s, their founders and successors combine formal and informal knowledge, including important technical knowledge, their customers were usually large companies with much bargaining power and, finally, the two companies followed a tendency to expand their production mix in response to recurring crises. since the last quarter of the 20th century, the argentine economy has taken steps forwards and backwards. along this road, uncertainty has determined the companies’ operations. to endure in the long term, smes must internalize uncertainty by developing the capabilities necessary to adapt to macro and micro economic conditions. although globally this may be a general feature of business strategies, in the case of argentina it has become a defining feature. hence, our hypothesis is that the strategies that smes adopt in different contexts depend on the possibilities they have for the develop of innovative capabilities. in what follows we will analyse the specific form this adaptive behaviour acquires in the chosen study cases. in this sense, we would like to address the following questions: how do smes innovate and how do they last in the long term? why do they adopt certain strategies in each time period? when do they invest, how do they finance these investments and what conditions them? what have the learning paths been that allowed them to expand and define their entrepreneurial culture? and finally, what variables determined or influenced the ability to adapt to changing macroeconomic conditions? http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 85 ii. the trajectory of the companies based on the productive-technological, commercial and organizational criteria, we establish four stages to facilitate the comparison of the business’s trajectories. these are based on the testimonies collected in the field and give an initial contrast between the two selected smes. both have a family origin and, throughout their trajectories, they remained in this group of family businesses even though in one of the cases there were two changes of ownership. with more than sixty years of dedication to the metallurgical industry, these are small companies with a simple management structure, run by family members who currently represent the second and third generation of descendants. in the following sections these two case studies will be presented in depth. ii.a. the sinpar case sinpar s.a. is a metallurgical company dedicated to the production of circular saw blades, industrial blades and other cutting and machining tools. however, the manual saw blade is its base product and was the first product manufactured by the company during its start-up phase. different family groups have managed sinpar. alberto kurz started a metallurgical workshop at the back of his family home in 1931. the name “sinpar” was acquired in 1932. since then, and until today, the facilities are located at the centre of the quilmes district, in the southern metropolitan region of buenos aires. (1) the first stage of this sme runs between 1932 and 1971. from the beginning, the firm produced manual saws for cutting metals but also a wider range of products of the same sort. all the production machines used at that time were self-manufactured and the company was not modernized until the end of the 20th century. the sales catalogue of this first period http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 86 included, alongside with the manual saw, also circular saws, tools for lathes, bands and industrial blades. this rapid diversification allows us to confirm that, in a favourable economic context, some smes such as sinpar have accelerated their growth since the beginning of their trajectories. at the end of the 1930’s, sinpar had a general-partnership-based structure that lasted until 1952 when it became a limited liability company. alberto kurz directed the business with the strict criteria of austerity and reinvestment of profits, which explains the entrepreneurial trajectory in these years. this first stage ended in 1971 when the founder of the company died. four decades of a management style concluded with a consolidated brand in the market for special cutting tools. (2) the second stage of sinpar runs between 1971 and 1992 and is characterized by a more erratic process of business management. in the absence of heirs, the accountant carlos de marchi took over the management of the enterprise for a brief period until 1974, when pedro wedekindt, a friend of kurz, became the temporary new director. soon after, his son carlos wedekindt became the director of sinpar for more than nearly two decades. these first adjustments in the ownership and management of the firm undoubtedly affected its productivity. in these years there were many changes in the business strategy, the most outstanding is the importation of saws in the 1980’s and 1990’s. in order to remain in the market, many argentine smes had to adopt this behaviour in a context of macroeconomic policy open to importations. it is important to highlight the fact that the productive stagnation of sinpar during these years was the consequence of disinvestment and machinery obsolescence. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 87 (3) the third stage extended between 1992 and 2005 and is defined by another change in the ownership of the company. manfredo arheit bought sinpar in a context marked by the two quasi-hyperinflationary experiences of 1989 and 1990 and the implementation of orthodox economic reforms. these policies had two outstanding aspects: one monetary-fiscal and the other structural. the monetary-fiscal reforms may be summarized in the “currency convertibility law”, which lasted between 1991 and 2001. the structural aspect of the orthodox reforms was the opening to the foreign market, the privatization of state-owned companies and the deregulation of the markets. in this context, manfredo arheit initiated a difficult restructuring of the company. it should be noted that mr. arheit knew sinpar because he had been production manager between 1971 and 1974 —the year in which he resigned to start his own company under the name of herramar. the purchase of sinpar allowed manfredo arheit to integrate the family businesses into the new logic of the herramar/sinpar industrial group.6 the acquisition of sinpar by arheit signified the beginning of the third stage for the company. a modernization process characterized the years between 1992 and 2005, with investment in machinery, participation in international exhibitions and the obtaining of iso certifications. manfredo arheit bought the company with his own resources and financed the equipping and the new infrastructure with credit. the profile of the new sinpar owner contrasts with the previous two owners. manfredo arheit obtained a degree in mechanical engineering at the karlsruhe institute of technology, and participated actively, for almost thirty years, in the business chamber of the sector —the association of metallurgical 6 herramar produces special tools for metal work: lathe blades, drilling systems and precision tools. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 88 industries of the argentine republic. in addition to this position of business representation, he has been a member of different committees.7 during the convertibility period, the business strategy was not modified. arheit continued the import and became the representative of the boehlerit, fette and lmt brands. the relationship between imports and domestic production, in these years was 75% to 25%, respectively. with the end of the convertibility plan, arheit strengthened the relationship with foreign suppliers, allowing him to cope with the economic and social crisis of 2001, apparently without too much trouble. during this period the company began a moderate growth process that lasted until the next stage. (4) in the fourth stage, which runs from 2005 to the present, arheit invested in the expansion of the installed capacity. at this stage, the owner incorporated computer tools and implemented a quality management system, which allowed the company to obtain the iso 9001 certification standard by the year 2000. he also developed a technical training program aimed at the staff. this process corresponded to a stage of modernization and certification, which would later be reflected in a new corporate image. the indicated changes led sinpar to become a sme with high capacity for manufacturing all types of metal cutting saws. its production is 100% directed to the domestic market, with coverage of 70% of the national consumption.8 this is an indicator of the repositioning ability of arheit, as well as his use of external supplier’s networks during the convertibility period. despite this, the biggest problem for arheit was the shortage of qualified human resources. 7 for twelve years, manfredo arheit was a member of the adimra committee and served as president between 2009 and 2013. 8 he absorbed the company augustín duris s.a., producer of large circular saws and some assets of the company juan korth s.a., producer of manual closures for machines, which had stopped operating in 1995. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 89 thus, smes face limitations not only resulting from organizational capabilities and entrepreneurship, but also those of a structural nature (external restriction, access to financing, concentrated markets, production scale problems, shortage of technical human resources, etc.). in the case of the other sme, gora, this is a growing limitation. with the purpose of overcoming this difficulty, sinpar has focused on the training of qualified personnel. based on the german dual model, the firm promotes the degree of “technician in machining” and “technician in industrial administration” together with the argentine-german chamber of industry and commerce. the current organizational structure of sinpar is still a family-based nuclear type: manfredo arheit is the main shareholder and chairs the board of directors, his wife is the second shareholder and has the position of vice president, and their oldest son is the deputy director. the management of the company is related to the role of the second generation since 2005. the modernization fell on cristina and rodolfo arheit —manfredo’s children— both industrial engineers graduated from the technological institute of buenos aires (itba). they are in charge of the marketing area, and of the operation and administration area, respectively. hence, the incorporation of marketing strategies is related to the new generation of the arheit family. the last generation to have joined the company has a more dynamic vision of the commercial promotion as they consider it a central aspect to improve the positioning of the company. as part of this dynamic, since 2005 they have promoted the design and production of their own machinery. in summary, in the first four decades of sinpar the management structure was that of a family business with mediocre growth. when the founder died, there was no successful transition since he had no heirs. so, how did this small business last? it lasted, in the first http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 90 place, because of the professional skills and knowledge of the new owner, who in 1992 regained the direction of the company. secondly, manfredo arheit was an experienced engineer and an entrepreneur in the metallurgical industry. when acquired by manfredo arheit, sinpar took another turn and based its performance on the professional skills and knowledge of the new owner, who recovered the company’s track in 1992. the dynamism of sinpar equates with the needs of the nuclear family group that acquired it. the business group is composed of two generations of the arheit family at the head of two small companies within the same industrial branch, both more than sixty years old. the management of the arheit family guaranteed the recovery and growth of sinpar, relying on investment and modernization, as well as being specialized in the technical, commercialization and marketing areas. this process also has the imprint of the second generation of the family. ii.b. the gora case founded in 1958 by an entrepreneur, the son of ukrainian immigrants, gora is an sme that belongs to the metallurgical industry and is dedicated to the development of products and services for industrial filtration. the pioneer of the company, alejandro gora, graduated from a technical high school, worked in the 1950’s as a metalworker while also repairing refrigerator compressors in his spare time. drawing on this training experience, he established a workshop at the back of his house, with only one lathe. four years later, in 1962, alejandro went into business with his brother rodolfo, and established a de facto business association. as a nuclear family-type partnership, the history of the company and the gora family were closely interwoven. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 91 (1) gora’s first stage began in 1958 and extended until the end of the 1970’s, in the context of the second import-substitution industrialization (isi). during these years, the company developed a dynamic link to the synthetic yarn multinational company, ducilo.9 this customer-supplier relationship opened the possibility for gora to grow, learn and specialize in the manufacturing of industrial filters, oriented, at this stage, towards the textile sector. ducilo demanded from gora spare parts and filters that could not be easily imported. the family workshop was dedicated to manufacturing different types of cast parts and mesh filters on an old lathe. the challenge for gora was to manufacture specific parts with simple machinery. the customer-supplier relationship between ducilo and gora is an example of a productive configuration processes in which the customer belongs to a multinational corporation that unites management, contracting and commercial functions (vázquez barquero 1997). within this trading scheme, smes located near the larger company are the basis of the local productive structure but are left out of the decision-making. for its part, the large company disseminates a productive dynamic to promote technical knowledge, technological abilities and innovation, which are spread around the dependent productive units, both horizontally and vertically (veltz 2005). at the end of the 1960’s, the second family generation joined the business —the founder’s nephew— and changes in the structure of the firm were introduced. during the 1970’s, organizational transformations were deepened and the operational capacity was significantly expanded the acquisition of lots adjacent to the house-workshop. thus concluded, at the end of the 1970’s, the first stage of gora’s trajectory. 9 ducilo productora de rayón s.a, a subsidiary of the multinational company du pont de nemours, settled in the quilmes party in 1936, and in the 1970’s developed into one of the largest companies in the southern rmba. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 92 (2) in a different national scenario of commercial opening and changes in business rules, gora began a second stage in 1977, which ended in 1990. in 1977, gora participated for the first time in the argentine exhibition of machine tools, organised by argentine industry association.10 from that point on, gora would expand its costumer portfolio and venture into other industries, thereby beginning to move away from the sales model to a unified company. to that end, they would articulate a twofold strategy. on the one hand, they take part —for over twenty years— in the annual meetings of the argentine exhibition of machine tools, which allowed them to enter into the supply chains of different industrial sectors, enabling a greater opening to the domestic market. on the other hand, they participated in international fairs specialized in the manufacture of industrial filtration in italy and germany. for gora these international scenarios become one of the principal ways to get to know and learn about, copy and buy new technologies. in this second stage the integration of the founder’s children marked the generational turn in gora’s trajectory. simultaneously, the company defined its specialization in filtration engineering. in 1981 the firm began to take part as gora public limited company [gora s.a.] in large hydroelectric projects as contractors and as direct suppliers to state companies such as gas del estado (the state gas company) and ypf (the state oil company). at the 1984 argentine exhibition of machine tools, imitating what they have observed in other international fairs, gora presented a brochure of new products: air filters, compressed air filters, liquid filters, hydraulics filters, and even filters that had not yet been manufactured but for which they had the capacity. for this brochure they made very careful use of paper and 10 the first argentine exhibition of machine tools was organized in 1964 by the argentine association of manufacturers of machine tools. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 93 graphic design, which was unusual in the marketing of this category of industrial suppliers. the brochure attracted new customers who demanded the products and services it displayed.11 marketing showed results in the short term: in the second half of the 1980’s, the customer base and the profit were expanded, while dependence on ducilo decreased. during this stage, gora also began to develop a domestic scheme of distributors and commercial representatives in argentina’s main industrial centres: córdoba, rosario, neuquén, mendoza and bahía blanca. this link is decisive for the company because the manufacture of industrial filters requires specificities that the supplier must learn. to support this marketing and distribution network, gora’s managers had to offer training courses and carry out regular visits to customers and potential buyers. until the 1990’s, this network accounted for 20% of gora’s turnover, and although the percentage has now dropped to 7%, it is still relevant. (3) the third stage of gora began in 1990 and extended until 2006. this period was characterized by the weight that the petrochemical and gas sector acquired in the turnover of gora. the positioning of the gora brand in industrial filters in these years is remarkable. as suppliers of state companies, gora benefited from the privatizations of the 1990’s. it is pertinent to stress that the manufacture of filters depends on qualified manpower, which demands continuous training of human resources, this becoming a basic need for the company. the incorporation of younger workers trained in technical schools in gora's the area of influence provided the skills needed by the firm during this period. from the early 2000’s, the firm implemented its own quality system that facilitated the international 11 during the 1980’s, the factory facilities were still unattractive —“just a few sheds”— and the brochures. on the contrary, they offered a very modern image (interview to eduardo fernández, may 20, 2018). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 94 certifications of management system standards. these conditions allowed them to compete for and win international tenders. however, in the last decade an important restriction in qualified human resources can be observed.12 given the conditions of the labour market, the company implemented a policy to train young people at their own plant, signing an internship agreement with the industrial school in quilmes. this policy of training human resources became a very efficient way of renewing the workforce. in the 1990’s, gora definitively dethatched itself from ducilo, and consolidated its position in the domestic filtration markets by supplying the oil, gas, petrochemical, food and beverage industries. this process forced the company to develop new organizational strategies. one of them was outsourcing, due to restrictions in their own installed capacity. another strategy was the increase in imported inputs and finished products. from the 1980’s, and even more often in the 1990’s, gora started importing filters when producing them was not justified, or they acted as representatives of an international brand. these decisions were taken on the basis of the economic situation, due to the market opening or an unfavourable currency exchange rate. under these circumstances, the company could not compete with the imported products. the mix between domestic manufacture and importations stabilized in the early 2000’s at 70% and 30%, respectively. 13 (4) the fourth phase of gora’s trajectory extends from 2006 to the present and is characterized by the assumption of leadership in the domestic industrial filtration market — definitely oriented towards the petrochemical and gas sector, which is consolidated as one of 12 the shortage of qualified operators is due to the deterioration of the technical secondary schools that until the mid-1980’s fulfilled the role of training skilled labour force. in the 1990’s, its decline was exacerbated, and many technical schools closed as a result of deliberate educational policies. 13 according the interview to eduardo fernández, may 20, 2018. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 95 the main business units.14 this leadership was possible due to increased productivity and organizational restructuring. the need to grow and extend, anticipated in the previous stage, forced gora to build a new plant and expand its productivity. this allowed them to avoid outsourcing, which had the risk of transferring technology to and encouraging the emergence of new competitors. in turn, these years coincided with the incorporation of members of the third generation of the family, that is, the grandsons of the founder. the characteristics of filter production prevent us from identifying a “star product” that would define gora’s positioning in the market. this is in part because the buyers themselves define the characteristics of the product. however, the three lines of production in which gora has a presence are: (i) liquid filters; (ii) filters for compressed air and gas treatment; (iii) and ambient air filters. for each one of these lines there are twenty to twenty-five companies in argentina that compete as suppliers. overall, eighty-three companies registered in the country offer industrial filters.15 they are mostly smes, although it should be noted that some of them are only importers, that is, they act as representatives of multinationals. in relation to domestic and foreign suppliers gora has a long-term strategy respecting conditions, delivery times and payments despite the recurring crises that affect the argentine economy. although it has not been and is not yet a privileged destination for its filters, the foreign market occupies a place in this strategy. since the 1990’s, they have exported to neighbouring countries and from 2000 on they have increased sales to other countries in 14 in 2005, pablo gora became one of the founding partners of the argentine chamber of suppliers of the petroenergy industry and he is still part of the board of directors. 15 yellow pages. http://www.paginasamarillas.com.ar/b/filtros-industriales/p-4/ accessed may 7, 2018. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 96 south america. the economic recession of 1998-2001, the implementation of the convertibility programme, and the resulting depression of domestic consumption offered a favourable context that encouraged gora to intensify exports and thus compensated for the fall in domestic demand. by the years 2005-2006, the foreign market came to represent 18% of total turnover.16 as for financing, one of the main characteristics of a family businesses founded with almost no initial capital —and in this sense gora is an example— is that profits tend to be reinvested in its own growth. another strength of gora is its flexibility and resilience to context changes and determination to maintain the growth path. indeed, during times of crises, investment with their own resources increases —a policy that arises during the interviews as an explicit aspect of the business strategy. its offensive nature does not respond, they argue, to economic cycles. in times of crisis, the production and growth of the company is prioritized, so they invest in infrastructure, technology and human resources and develop new markets. while competitors are reducing their production and withdrawing from the market, gora deploys an offensive strategy that prepares them to meet the demand for the recovery phase of the cycle. in summary, gora is an sme that has not exceeded a hundred employees. the organization has been based on family management over three generations and its members have achieved the specialization and positioning of the brand in the filter markets after becoming independent from the first buying company that was their single customer for over three decades. gora’s organization has become increasingly complex. from being a family 16 in the 2000’s, through tecpetrol of the techint group, gora took part in large oil projects in bolivia and peru. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 97 workshop, it later became a limited company that operates with the following board of directors: alejandro gora —founder and president—; pablo —son and manager of the commercial section—; patricia gora —daughter and administrative manager—; eduardo fernández —nephew and technical manager. the endurance of gora —according to family dynamics and the testimonies of its current managers— seems to be guaranteed by patricia gora’s family branch. the members of the second and third generation have defined a family-based business culture with an adaptive behaviour to domestic economic uncertainty. adaptive strategies have been based on what can be called the “culture of effort”, which is typical among immigrant families. and the investment strategy has responded to the initial “productive vocation”. however, the single customer-supplier relationship delayed the process of change. the second generation of the family aimed to locate itself in networks of suppliers of entrepreneurs, negotiate contracts so as to ensure recognition. the current business management can be decisive in the future of gora due to the changes made in the second and third stages. the different generations of the gora family have defended the strategy of keeping a niche market based on a productive investment policy. in this sense, the productive vocation of the original enterprise is preserved and it is the identity of the family business. finally, it should be noticed that not all smes with structures adaptable to changes succeed —and survival is even lower among those smes inserted in industrial chains. but the ability to respond is perhaps one of the most important assets of gora and explains why they have lasted over time. the values of the company have passed from generation to generation, allowing the original small home workshop to become a thriving family business. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 98 iii. technological capabilities: keys in the entrepreneurial trajectories of gora and sinpar in the second part of the paper we analysed the main stages of the argentine smes gora and sinpar without detailing the technological capabilities that influenced the trajectory of the family business. according to almaraz, the continuity of the families and the endurance of the companies are interdependent processes (almaraz 2019). however, it is important to understand how the companies built technological capabilities and incorporated technological changes. hence, this section addresses the technological capabilities of different developing processes, linked to the organization of the two smes studied. as will be seen, each company has had a greater or lesser predominance of technical capabilities, which were relevant for the endurance of the businesses. during the early stages, both companies privileged the absorption of external technological capabilities, while in advanced stages they focused on innovation, seeking to develop new knowledge and to incorporate new technologies. this is because capabilities are not a constant factor, but rather reflect the learning process of owners and workers. altogether, this implies the accumulation of capabilities along an active trajectory and, as long as companies and their owners experience different levels of development, they also acquire different capabilities (narula 2004; giuliani and bell 2005; bell 2007).17 the accumulation of technological capabilities is also the result of investments made by entrepreneurs in response to external and internal stimuli. hence, we must recognize the importance of interaction with other economic agents, private and public, local and foreign 17 there are some exceptions, as those of technology-based companies or those based on knowledge (martin and moodysson 2013). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 99 (lall 1992). therefore, in order to analyse technological capabilities it is necessary to identify specific factors of the company and others of the environment (such as the incentive system, institutional structure and endowment of resources, among others). almaraz considers that in a start-up phase, internal and external factors influence the entrepreneurs —where the former correspond to the organizational, administrative and business management—, and the latter correspond to the institutional, technological and socio-cultural dimensions (almaraz 2019). in sum, it can be argued that the learning path of companies is based on the building and accumulation of technological capabilities. the main learning paths may be distinguished as follows: (a) learning by doing —through the process of organizing production (arrow 1962) —; (b) learning by using —through the marketing process (rosenberg 1982) —; (c) learning by interacting —through the interaction between producers and users—; and (d) learning to learn —through the ability of employees and managers to learn, as developed from the evolutionary and systemic perspective (lundvall and borrás 1998). the different forms of knowledge in the productive structure may be reduced to two learning modes, which synthesize the transition companies undergo between innovative processes: (1) the dui mode —learning by doing, using and interacting— and (2) the sti mode —sciencetechnology-innovation— (jensen et al. 2007). the dui mode is based on the learning-doing and using-interacting experiences, while the sti mode is based on innovation related to science and technology —that is, creating new knowledge by using scientific knowledge through r&d (research and development)—, and by interacting with research institutions. therefore, technological capabilities reflect the ability of the business members to absorb, use, adapt, improve and create new technologies (lall 1992; bell and pavitt 1993). http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 100 what we are interested in discussing in the two selected study cases is whether the learning processes were enhanced, if this happened through formal or informal means and, in addition, if that knowledge allowed them to increase their competencies —that is, increase development capabilities, improve products and processes, implement organizational changes and develop new ways of relating to other market agents. from this perspective, both the technology incorporation phase and the building of the companies' own technologies are reflected in the strengthening of specific assets of the companies. the absorption of available technology is a critical component in the business capabilities —especially in the early stages of participation in the market— and implies a process of identification and assimilation of knowledge, which will later be exploited to create new knowledge. although this knowledge is initially part of the external environment, it will become valuable for commercial use (cohen and levinthal 1989). these capabilities depend on initial knowledge within the company as well as the unique dependency path. the absorption capacity in this case is considered an intangible asset that is difficult to measure, because there is rarely a unique relationship between the actions taken to increase these absorption capabilities and a given result (gutti 2008). however, it is possible to think of both organizational changes and market positioning as expressions of those processes. the development of new or improved products or services is part of the innovative capacity —obtained thanks to the agents' developed skills to combine existing factors, internal and external, to the organization (lundvall 1992; edquist 1997; freeman and soete 1997). iv. building technological capabilities in gora and sinpar the trajectories of gora and sinpar may be interpreted from the perspectives of different development models of technological capabilities. each company has differentiated decisive http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 101 conditions and experiences that require greater knowledge of their particular learning and technological evolutionary contexts. in this sense, belonging to the same productive sector is not conclusive. hence, it is necessary to discuss the development of the smes’ capabilities to see what allowed them to remain in one or several markets, and what allowed them to become benchmarks of the metallurgical industry or simply followers in the supply sector. based on the results achieved by our research, what emerges as a premise is that explicit and implicit business strategies are conditioned by macroeconomics and by the learning paths privileged during their trajectories. table 1. from the workshop to the factory, the case of two argentinian smes. sinpar and gora. period: 1932 – 1977 company technological capacities absorption capacity innovation capacity learning mode sinpar 1932-1971 prior technical knowledge (tools and machines) local adaptation of the company’s flagship product: saw blade, manual use. learning by doing wholesale supplier marketing: creation of the brand sinpar learning by using gora 1958-1977 prior technical knowledge (tools) local adaptation of different products learning by doing supplier of large companies specialized in industrial filters for textile sector learning by using source: prepared by the authors on the basis of the cases studied. the start-up stage of every company begins with a series of strategic assets. founders of manufacturing organizations start with simple industries, using artisan tools and machines, implementing their tacit knowledge. the prior technical training of the founders is the basic condition of this process but the absorption of new knowledge becomes vital to make the first cycle of the start-up feasible. thus, it is important to take into account the entrepreneurial agents and knowledge agents (almaraz 2019). in terms of the organization, the start-up stage http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 102 can be characterized in a good number of cases as “from the workshop to the factory”. as shown in table 1, both gora and sinpar had a professional training and accumulated knowledge that allowed them to start their own workshops and become suppliers of differentiated products. this led them to experience significant growth and, in gora’s case, also under the protection of a large company. the technological capabilities of this stage are rooted in learning processes through practice and use (see table 1). (2) the second stage, between the 1970’s and the beginning of the 1990’s, is characterized by specialization and positioning in vacant niche markets, mainly in the domestic market. ideas for new products are obtained from the incorporation of technology through investment in machinery and equipment (especially from italy and germany), and from the participation in international fairs. thus, learning is emphasized by practice, use and also by the willingness of employees and managers to learn (see table 2). in terms of the organization, this period can be characterized as “from factory installation to specialization”. table 2. from factory installation to specialization, the case of two argentinian smes. sinpar and gora. period: 1971-1992 company technological capacities absorption capacity innovation capacity learning mode sinpar 1971-1992 continuity of productive activity without investment management: asset valuation in the financial market productive stagnation gora 1977-1990 -participation in the emaqh -investment in machinery -codifying specific knowledge: registration and digitization of plans -management: computerization -outsourcing with technology transfer. learning by doing learning to learn source: prepared by the authors on the basis of cases studied. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 103 during much of this phase, argentina’s macroeconomic context was adverse for the manufacturing sector and favourable to financial speculation. the productive restructuring of the 1980’s led to the shutdown of many factories and companies. while gora —which had just incorporated the second family generation— deepened specialization, invests in infrastructure and machinery and modernizes its organization, sinpar changed owners and, although it continued to produce saws, it did not sustain productive investment and turned to the financial management of its assets. (3) argentina’s macroeconomics of the 1990’s was marked by economic stability and orthodox reforms, but it ended with an economic and institutional crisis. the way out of the 2001 crisis was anchored in the recovery of the domestic market and in policies favourable to the industrial sector. therefore, the third stage (1990-2006) includes differentiated context conditions. during this period, the strategies of the companies were oriented to intensifying specialization, investing in knowledge and absorbing external technology. a novelty with respect to previous stages was the incorporation of qualified human resources and the relationship with technical institutions. furthermore, product innovations (of their own design and manufacture) and process certifications were milestones for positioning in the domestic market and even in some cases enabled them to export, especially to other latin american markets (in particular in gora’s case). access to international markets and combining local production with importations were some of the factors that helped companies face the strong recession in the domestic market towards the end of the 1990’s as the convertibility plan ended (especially between 1998 and 2002). in this context, the companies accumulated technological capabilities in learning http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 104 processes such as practice, interaction with customers and by “learning to learn” (see table 3). table 3. the stage of specialization. the case of two argentinian smes: sinpar and gora. period: 1990-2006 company technological capacities absorption capacity innovation capacity learning mode sinpar 1992-2005 -codifying knowledge -production reorganization, (records and procedure manuals) process: certifications learning by doing -investment in machinery -participation in the emaqh 1996 representation of foreign products gora 1990-2006 engineering-intensive human resources -differentiated products -outsourcing with technology transfer. learning by doing -exports (through third parties) -expansion of productive capacity -specialization in filters for the petrochemical and gas industry. -process: certifications learning by interacting source: prepared by the authors on the basis of cases studied. (4) finally, in the last stage, from 2006 onwards, the business strategy is oriented towards services, marketing and corporate image. these changes are associated with the arrival, or the effective involvement in decision-making, of the following generations of the families. this mainly has to do with the fact that unlike the founders —who were engineers or technicians— the new generations involved in the decision-making during this period have studies in business and marketing schools and management experience. this change of perspective, combined with a market demand based on the specialization achieved in previous stages, seem to be the factors driving the company’s activities, which now offers mainly services. accordingly, companies are oriented to the integration of production, either by incorporating design and after-sales services or by developing new http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 105 products or supplies complementary to the original products. moreover, a modernization of the companies’ image is imposed, renewing the brands established more than sixty years before. table 4. services, marketing and corporate image. the case of two argentinian smes: sinpar and gora. period: 2006 onwards company technological capacities absorption capacity innovation capacity learning mode sinpar 2006/2018 process redesign process: certifications learning by interacting -participation in business chambers -marketing: corporate image -product: 1st design and own manufactured machine learning to learn gora 2006/2018 investment in machinery marketing: technological filtering services learning by interacting -human resources -engineering-intensive custom made product learning to learn source: prepared by the authors on the basis of case studies as these companies become modernized, they also advance in certification processes related to safety and environmental management; these certifications play a prominent role in attracting new customers or markets. during this period, technological capabilities are accumulated through learning processes in the interaction with customers and suppliers and by “learning to learn” (see table 4). v. analysis of results for the study of two argentinian smes the first results of the research show that the strategies of smes in the manufacturing sector are based on their capabilities for developing adaptative behaviour to respond to macroeconomic conditions. in turn, the long-term endurance of companies is based on the strong family management of the successive generations that gives continuity to these http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 106 processes. in our two study cases the founders and successors took advantage of the opportunities and identified internal and external restrictions, and this allowed them both to last over time despite their different trajectories. we can identify, then, a series of similarities and differences through the strategies adopted in relation to the sector, the customers, the family organization and the vision of the firm in the long run: -specialization. the product differentiation and the specialization in market niches determines the absence —or low presence— of competitors in the domestic market, with imported products often being the main competitors. -flexibility. although the family may impose limits on or obstacles to the company management, the cases studied share an agile organizational structure for decision-making. in this sense, the centralization in decision-making makes them flexible and adaptable to the unstable nature of argentina’s macroeconomics. we highlight, in this sense, the way in which companies adapt their strategies to the economic policies anticipating the recessive impacts they many times produce in the medium term. the example of the importation of final goods is representative of this strategy. the mix of imported and domestic production remains then at 30% / 70%, respectively. this proportion can be reversed in periods of external opening and exchange rate flotation, when entrepreneurs increase the importation of final goods to incorporate into their offer to the local market. likewise, we must emphasize that the flexibility related to the ability to adapt to changes of these companies is linked to the development of an innovative behaviour. this behaviour is observed throughout the company trajectory which combinates internal learning mechanisms, http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 107 such as continuous training in the factory, and external mechanisms, among which participation in fairs and congresses so as to absorb technical knowledge is privileged. furthermore, the incorporation of the following generations with new capabilities focused on improving the competitiveness of companies determines the organizational structures in the long-term. -counter-cyclical strategies. during periods of crisis, companies identify opportunities and deploy offensive strategies, which means that they invest in the contraction cycle phase — when competitors are withdrawing from the market and reducing their production— so that in the recovery phase, they are prepared to meet the demand. another possible strategy involves putting together and offering a mix of products (local and imported) that changes according to macroeconomic conditions. linkages with suppliers (locals and foreign). long-term relationships with suppliers (especially foreigners) combined with trust and credibility are a fundamental advantage for negotiating and solving problems in the payment chains. in political terms, participation in business union life (sector associations and chambers of commerce) allows the consolidation of a wide social and productive network. human resources. technical knowledge —especially the tacit one— is the strategic asset for a company. human resource training is a challenge for companies. the companies studied have developed close links with the secondary technical schools of the quilmes district and have established training centres within the company. in general, management and business skills are incorporated when the new generations join the family business. this example shows the importance of establishing mechanisms for the transmission of knowledge and http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 108 management, especially for smes. both gora and sinpar have successfully overcome these limitations by incorporating the following generations naturally in positions and functions that replace and complement the role of the founders. furthermore, in both cases studied, the importance of management for the growth of the company has been verified, particularly learning by directing, in the early stages of the companies. the characteristics and strategies implemented by the business owners were key to their growth. financing. the companies usually have difficulties accessing financing due to lack of specific government policies in a context of financial valuation with high interest rates. that is the reason why they privilege their own resources to finance investments and take credit only in very specific cases. commercialization. the domestic market is the privileged destination of production. export is a marginal activity. in this sense, from a more general perspective, it can be stated that argentine smes do not have an outstanding export performance and therefore their presence in global value chains is very low. indeed, in the cases studied here it can be verified that a process of building technological capabilities allows them to consolidate in the domestic market but gives them little or no projections in the international market. we must then consider the limitations that companies have to compete beyond the domestic market. this question opens up to a broader debate, which points to future research into the nature of these restrictions —micro and macroeconomic context, economic policy, institutional. ownership, enterprise organizational structure and strategy. it should be emphasized that in both case studies the second and third generation guarantees not only family management http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 109 continuity, but also has a synergistic influence on the modernization of business strategies and structures. technological capabilities. the growth path of the companies was based on learning processes. in the early stages of their trajectories, practice and use is mainly explained in terms of the learning process. in this regard, progress is achieved by consolidating production and specialization. then, interaction and learning to learn become more relevant in the learning processes. thus, the trajectory of both studied cases seems to correspond to the dui mode, learning by doing, using and interacting (jensen et al. 2007). the learning by doing mode is verified in each stage of the companies and even in the management capacity of the founders. the criteria of austerity and re-investment of profits adopted by the owners at the beginnings of the companies and then during periods of crisis, were one of the key factors that explain the entrepreneurial trajectory of these companies. at the same time, it can also be noticed that the absorption capabilities of external technology —although they maintain their importance throughout the entire trajectory of these companies— are fundamental at the beginning, when the manufactured products were adapted from others already existing. in addition, even though innovation capabilities are also present throughout the companies’ histories, they acquire greater prominence and complexity as the companies become leaders of a particular product or market. thus, in the early stages, innovation has a local scope and in the last stages, companies seek to innovate according to international standards. in the last stage, the generational replacement —with a strong entrepreneurial profile— seems to explain the modernization process characterized by flexible management, product innovations, design http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 110 and manufacture of their own. a final element to highlight is linked to an underlying aspect of the story of the different generations. it refers to the imprint of those immigrant grandparents as referents of a “culture of effort”. this inherited migratory experience is very present in the story of the founders of the companies and persists in the second and third generation. we leave this topic as an interesting feature to study in future research. the incidence of immigration waves (in the early 20th century and between the two world wars) in the argentinian industrialization process, is a problematic extensively studied by business economic history but exceeds the purpose of this paper. conclusions the history of smes in argentina is not straightforward. as we have seen, the two cases studied —located in the quilmes district in the south metropolitan region of buenos aires— have not experienced the same performance despite the fact that both have a family imprint and underwent growth and specialization processes. each company responded with different strategies to the particular challenges of complex scenarios in which there were periods of great economic instability. the results obtained in this paper provide evidence to identify the learning path of some argentine smes that managed to endure in the long term. a central feature of this path is the specialization of production based on the domestic market. in turn, this behaviour is complemented by a high capacity to adapt not only to changes in the local macroeconomic policies but also to the evolution of manufacturing processes worldwide. in this regard, the management skills and the formal and informal education of the owners proved to be a key feature for these adaptation processes over the business trajectory. the re-investment of http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 111 profits is a counter-cyclical strategy that allows these companies to face the contraction and expansion phases of the economic cycle but, at the same, time limits their growth in the long run. the training of human resources is another feature to be noticed. on the one hand, the training is a continuous process within the factory and within specific training institutions. on the other hand, the new generation have the incentive to achieve the higher education levels. the sum of these features determines the dui model (learning by doing, using and interacting) as the learning path of these companies. in this sense, the accumulation of technological capabilities is a result of the learning processes that takes place in the factory rather than in the research and development laboratories. the capacity to absorb external technology, from participating in fairs, congresses and business trips, is one of the most important mechanisms for the acquisition of knowledge and innovations. finally, the study of individual cases allows us to identify these learning paths which constitute a starting point for further analysis. in this regard, the challenges of the present investigation and the directions it should take in the future are organized on two axes. on the one hand, to build a theory, we propose to deepen the study of each company and incorporate new cases to add evidence. on the other hand, the cases analysed seem to respond to a typical industrialization model of manufacturing production in the 20th century. therefore, if these companies could be compared with others which emerged in the 1980’s, within the framework of a new model of production, it could provide a substantial difference for the research. http://revistes.ub.edu/index.php/jesb volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 112 references almaraz, araceli and luis alfonso ramírez. 2018. familias empresarias en méxico. sucesión generacional y continuidad en el siglo xx. méxico: el colegio de la frontera norte. second edition. almaraz, araceli. 2019. “origins of entrepreneurship: the other faces of the rhombus.” in the history of entrepreneurship in mexico: contextualizing theory, theorizing context edited by araceli almaraz and oscar montiel, 37-66. bingley: emerald. arrow, kenneth. 1962. “the economic implications of learning by doing.” the review of economic studies 29(3): 155-173. barbero, maría inés and vicente donato, comp. 2009. contra viento y marea. historia de pequeñas y medianas empresas argentinas. buenos 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innovation systems context: consequences for economic and employment growth.” druid, working paper 04-02. observatorio de empleo y dinámica empresarial (oede). 2020. “estadísticas e indicadores regionales, ministerio de trabajo, empleo y seguridad social.” accessed march 4, 2020: http://www.trabajo.gob.ar/estadisticas/oede/estadisticasregionales.asp. http://revistes.ub.edu/index.php/jesb http://www.revistacts.net/files/tesis_gutti.pdf https://doi.org/10.1016/j.respol.2007.01.006 https://www.aehe.es/wp-content/uploads/2019/01/dt-aehe-1902.pdf https://www.aehe.es/wp-content/uploads/2019/01/dt-aehe-1902.pdf http://www.trabajo.gob.ar/estadisticas/oede/estadisticasregionales.asp volume 5, number 2, 80-114, july-december 2020 10.1344/jesb2020.2.j077 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 114 resolución 215/2018. ministerio de la producción de la república argentina, boletín oficial 33.884. buenos aires, argentina accessed april 3, 2020: http://servicios.infoleg.gob.ar/infoleginternet/vernorma.do?id=311198 rosenberg, nathan. 1982. inside the black box: technology and economics. cambridge: cambridge university press. russo, cintia. 2011, “fábrica y territorio: un caso al sur de la región metropolitana de buenos aires.” investigaciones de historia económica. 7(3): 369-380. veltz pierre. 2005. mondialisation, villes et territoires. paris: puf. yin, robert. 2014. case study research. design and methods. thousand oaks, usa: sage. interviews gora alejandro gora, founder & chairman of the board (april 11th, 2018). eduardo fernández, technical director (may 20th, 2018). pablo gora, commercial director (march 15th, 2018). patricia gora, administration director (may 20th, 2018). nicolás marques, area for administration, financing and commercialization (may 20th, 2018). sinpar manfredo arheit, owner & chairman of the board (april 14th, 2018). cristina arheit, marketing manager (april 14th, 2019). roberto pertoczi, former marketing manager, retired (may 15th, 2018). this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://servicios.infoleg.gob.ar/infoleginternet/vernorma.do?id=311198 http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 42 norma silvana lanciotti universidad nacional de rosario / conicet (argentina) revisiting british investment in latin america: the river plate trust group, 1879–1963 abstract the article analyses the performance and profitability of the firms controlled by the river plate trust group in argentina and uruguay from 1879 to 1960 to challenges the notion that british investments in the southern cone involved greater default or insolvency risks because of nationalism, expropriations, and over-taxation. also known as morris or morrison group, river plate trust became the most important british business group in the region during the first global period, as it controlled a number of public utilities, mortgage and financial firms. our case shows that the decline of british investment in mortgage and financial activities did not mark the end of this business cycle after wwi; rather, it signalled a change in the direction of capital flows. capital outflows from host economies to great britain—via dividends—continued over the interwar period, with only a brief interruption between 1931 and 1934. the business cycle of british firms entered a new phase, characterized by stagnant british investments and increasing capital returns from argentina and uruguay to great britain. moreover, british public utility firms continued to invest in the river plate until the 1940s, because profits from the region supported the distribution of high dividends to shareholders. keywords: british business groups; river plate trust; financial firms; mortgage companies; public utilities; foreign investment; argentina; uruguay corresponding author: e-mail: nlanciot@unr.edu.ar received june 5, 2020 accepted december 3, 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:nlanciot@unr.edu.ar http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 43 introduction in the first global economy, british investment greatly expanded to european and american peripheries. argentina—more than any other latin american country—attracted significant foreign capital inflows to infrastructure, commercial and financial services associated with wool, and meat and crop exports. in 1913, long-term private foreign investment represented half the value of fixed capital stock in argentina; great britain led private foreign investments with 59 per cent of overall foreign investment and 62 per cent of all foreign companies in the country (un-cepal 1959). the boom of british investment in latin america, particularly in argentina, from 1870 to 1914, has been well analysed. research shows that following world war i (wwi), european capital ceased to flow into the country and american investment began. from the british perspective, this booming cycle ended when the british economy started to decline as a result of macroeconomic, technological, and institutional factors (jones 2000; jones and wale 1998; miller 1998; hannah 2009; coopey and lyth 2009). according to platt (1977), british capital withdrew from the region because of rising economic nationalism in latin american countries that threatened british companies.1 charles jones (1980), in his study of the morrison/river plate trust group, argues that paradoxically, it is british investment in argentina that may have fuelled local political leaders’ nationalism and prompted the end of the former liberal, cosmopolitan consensus of oligarchs. 1 platt’s thesis was endorsed by charles jones, among others. see jones, jones, and greenhill (1977), and jones (1997). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 44 from the host economy’s perspective, recent long-term historical studies of foreign companies have downplayed the decline of the british presence in argentina during world war i and extended the life cycles of british companies to the post-world war ii (wwii) period (lanciotti and lluch 2010, 2015; lluch and lanciotti 2012). even in the 1920s, when american capital inflow grew at a higher rate than its british counterpart, the latter's share of total foreign direct investment (fdi) remained higher until the railway nationalization in 1947. therefore, british firms played a dominant role in argentina before railways and utility companies were sold to the argentine state. by taking a business history approach, this study reviews the periodization of foreign investment cycles in argentina. our main hypothesis is that the analysis of foreign investment cycles should include both british capital exports to the river plate area and their returns via earning transfers from host economies to great britain. accordingly, we analyse investment and indebtedness cycles, paying particular attention to the capital return phase, to determine the size of earning transfers from argentina to great britain during the interwar period. the river plate trust, also known as the morris or morrison group, became the most important british business group in the region during the first global period. it controlled multiple public utility, mortgage, and financial firms in argentina and uruguay.2 according to geoffrey jones (2000), business groups can be organized according to three different forms: unitary, network with a core company, and loose network. the river plate trust group adopted the network 2 river plate trust is currently known as the morris-morrison group, a name given by charles jones. however, we consider that the name morris-morrison underlines the managerial role of john morris and the position of charles morrison as a major shareholder in the first phases of the life cycle of this group. because this business group continued operating in the river plate region for several decades after morris and morrison passed away, we think the name river plate trust is more adequate to define the lifelong interests of this business group in the region. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 45 form, consisting of a parent company, the river plate trust, loan and agency company (rptla), surrounded by a cluster of free-standing companies linked by equity, debt, interlocking directorates, management and—sometimes—by agency agreements. in addition to having individual boards in london, the companies relied on local managers located at their respective offices in buenos aires, rosario, and montevideo.3 using river & mercantile trust ltd. (rmtr) records (university college, london), we analyse the distribution of investments, capital invested, incomes, profits, and losses of the parent company, rptla, and its affiliates: mortgage company of the river plate (mcrp), the river plate and general investment trust (rp & git); consolidated waterworks co. of rosario; the rosario drainage co.; and the montevideo waterworks company ltd. (mww). the first section of this article analyses the investment, profitability, and economic performance patterns of the river plate trust group’s mortgage and financial companies.4 the second section focuses on the evolution of public utility companies controlled by the group and the economic strategies they pursued after the 1930 crisis. we find the decline of british investment in mortgage and financial activities did not mark the end of this business cycle; rather, it signalled a change in the direction of capital flows. after wwi, though the inflow of british capital into financial and mortgage activities had ceased, 3 “free-standing” companies specifically are created to operate in host economies but with a (small) headquarters in their home countries. these companies were concentrated on transport infrastructure, utilities, primary sector investments, and urban development (wilkins 1988; casson 1994). charles jones (1997) instead, proposes to analyse the forms of british investment in latin america in the first global period as mercantile investment groups (migs) and autonomous overseas companies (aocs). for an analysis of business groups in argentina, see barbero (2015). 4 for earlier studies that measure british firms’ profitability until wwi, see davis and huttenback (1982) and edelstein (1976). for the profitability of british firms in latin america, see rippy (1948, 1953, 1959). for the performance and profitability of british banks and merchant houses over the entire period, see jones (2000). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 46 capital outflows from latin america to great britain—via dividends—continued over the interwar period, with only a brief interruption between 1931 and 1934. the business cycle of british firms entered a new phase, characterized by stagnant british investments and increasing capital returns from argentina and uruguay to great britain. however, public utility firms continued to invest in the river plate until the 1940s, because profits from the region supported the distribution of high dividends to shareholders.5 the performance of the public utility firms controlled by river plate trust contrasted with that of british railways and tramway companies, the profitability of which declined steadily after the crisis in 1930 as a consequence of currency devaluation and increased competition from automotive transport. argentina’s decision to abandon the gold standard and devalue its currency had a negative impact on public utility companies. however, service monopoly conditions and sustained revenue growth, driven by a rising urban population and economic development throughout the period (cf. five-year period following the crisis in 1930), offset the drop of earnings in pounds. our case study shows that investments in mortgage, finance, and utilities proved complementary for the business group that controlled all the companies. companies’ profitability curves peaked at different times during the investment cycle: whereas financial and mortgage firms ranked highest in profits before wwi, urban utilities reached their highest profitability after the war. 5 for british investors, the river plate area included the argentine provinces of buenos aires, santa fe, entre ríos, and córdoba, as well as montevideo, uruguay’s capital city. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 47 our evidence also shows that firms controlled by the group secured sustained profitability with low risk, thereby ensuring a long life for the river plate trust’s operations until the mid-1940s. this finding challenges two notions, namely, that (1) british investments abroad proved more profitable than home investments but involved greater default or insolvency risks (edelstein 1976), and (2) british investment in latin america was hazardous because of nationalism, expropriations, and over-taxation (rippy 1959, jones 1997).6 after 80 years of business in the region, the parent company rptla was reorganized to create the river and mercantile trust limited, but the agency in buenos aires continued to manage the remaining small british firms until the mid-1970s. the group’s corporate success, in terms of profitability and survival, calls for a review of classic theses on great britain’s waning operations in this region. british investment in the river plate financial and mortgage operations garnered a large share of british investment in latin america during the first global economy. in the early 1900s, british investment was reoriented from the united states and britain toward canada and argentina—the london market's two new favourites at the dawn of wwi. falling demand for foreign capital in the united states, as well as australia’s financial crisis in 1893, constrained new issuances aimed at these countries, 6 according to the analysis of par value as a basis for calculating “approximate rate of returns therefrom” rippy concluded that latin america was a risky region for british investment (rippy 1959). rippy’s calculations are based on data published by the stock exchange year book, the stock exchange official intelligence, and the south american journal, which ‘does not describe fully and clearly the basis of its estimates’ (rippy 1948, 63). moreover, his sample excluded mortgage and loan companies, core british businesses that we analyse in this article (rippy 1953, 113). finally, his remarks refer to latin american as a whole, so they do not explain the differences between countries or regions. following rippy’s and platt’s thesis, charles jones (1997) argues that ‘adverse political circumstances coupled with sectoral distributions’ explained the low survival rate of anglolatin american migs and aocs. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 48 at the same time that government securities and corporate shares in argentine railway companies gained increasing popularity in the london stock exchange (platt 1985). in 1913, new british investments overseas had begun to recede, except in canada and argentina, which ranked third and fourth among countries receiving fdi. the united states and russia still topped the list of countries with the largest fdi stock, but investment flows shifted more toward canada and argentina. the advent of wwi prompted capital repatriation, and british government securities became the predominant investment instrument in british firms' portfolios in the river plate, thus starting the downward trend of british investment in argentina. however, in 1938, argentina was still the fourth largest fdi recipient (wilkins 2004). the size of british direct and portfolio investments in latin america has been debated extensively in british studies. using records of boards of companies listed at london’s stock exchange, irving stone (1968, 1977) noted that by 1913, british investments in latin america amounted to £1,177,462,000, with a 46 per cent share in direct investments and 54 per cent share in portfolio investments. a little over half the stock consisted of railway company shares; the remainder was divided into utility, financial, mining, industrial, and shipping companies. argentina topped the list of latin american countries receiving british investment, garnering £479,800,000, with £184,593,000 in government securities and £219,235,000 in railway stocks (slightly more than half of great britain’s total investment in latin american railways). in argentina, british direct investment exceeded portfolio investments, accounting for 54 per cent of great britain’s total investments in 1913 (stone 1977). in uruguay, british investments (about £58,400,000) went to banking, railways and water services from 1890 (barrán and nahum 1968). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 49 according to dunning (1970), 40 per cent of british portfolio investment was in railway stocks and 30 per cent was in national and local government securities. ratios of direct-to-portfolio investment were revised in the 1980s, when fdi was redefined as an investment involving corporate management control. previous calculations had classified investments that were channelled via free-standing companies as portfolio investments, even though they actually represented direct investments (corley 1994; wilkins 1988). platt (1985) also downplayed overestimated investment portfolio rates, claiming that, by 1914, half the railway shares in the united states and india already had been sold to local investors. goetzmann and ukhov (2005) note that british capital invested in argentina in securities and shares amounted to £319,565,000. even considering these differences in calculations, by 1913, portfolio investments accounted at least for 40 per cent of overall british investments in argentina. british companies’ board members repeatedly emphasised argentina’s attractiveness to foreign investors during shareholder meetings, describing the country as a growing economy based on rich, fertile grasslands with a rising demand for credit that could not be met by local capitals. argentina’s allure also lay in its ability to diversify its exports in response to european demand, its political stability, and, especially, its financial stability, following the reintroduction of the peso's convertibility to gold in 1899 (lewis 1987). argentina exported a broader range of commodities than other latin american economies, creating profitable investment opportunities for services and activities directly or indirectly associated with export-related processes (transportation, communications, marketing, finances). european investors also favoured argentina and uruguay for political reasons. starting in the 1880s, both became politically stable countries, with governments that openly promoted the arrival of foreign capital via indebtedness and direct investment. these conditions marked a http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 50 contrast with other latin american countries during the first global economy. chile and peru— traditional destinations for british investments—were at war from 1879 to 1883, and mexico was renegotiating its sovereign debt in the 1880s. shortly thereafter, conflicts between the government and peasant farmers, followed by workers’ mobilization and repression, led to the mexican revolution in 1910, turning mexico into an unviable destination for investors (marichal 1984; lanciotti and lluch 2010). it should be noted that neither argentina nor uruguay passed any laws related to foreign investment until the end of wwii. the restriction on dividend remittances for a short period of time after the crisis in 1930 was a temporary measure to lower the payment balance deficit rather than a policy meant to curtail foreign investment. thus, as soon as the economies were back on track, this restriction was lifted. controls on profit remittances imposed by the argentine president perón’s administration in 1947 were also intended to limit the reduction of exchange reserves. although the peronist government (1946–1955) proclaimed it would promote economic nationalism, foreign investors in argentina did not suffer the discrimination that confronted investors in other developing countries (kelly 1952; lanciotti and lluch 2015; miller 2013).7 consequently, european capital flowed into the river plate under the umbrella of financial companies listed at the london stock exchange from 1899 to 1929. at the time, the most important british trust in the region was the rptla. the investment strategies developed by the rptla resulted in the creation of a business group, river plate trust, a conglomerate of 7 for example, exchange controls were in force only for a brief period and did not end in regulations as in india (kapoor and saxena 1979). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 51 free-standing companies controlled by a trading and financial parent company by means of contracts and interlocking practices. the investment strategies and the organizational structure of river plate trust were similar to those employed by british groups operating in other asian and latin american countries. british groups doing business in argentina, chile, peru, and brazil invested in financial, railway, and utility operations, complementing their investments with the exploitation of region-specific natural resources. advantages drawn from the ownership of intangible assets proved a strong incentive to internalize activities in specific regions, and the groups’ hierarchical yet open structures enabled british capital to reach recently developed areas (jones and wale 1998; miller 1998; greenhill 1995) organization types were similar across all regions; their key advantage was access to local knowledge drawn from long track records in business. differences among regions hinged on regional advantages and resources, as well as the possibility—or lack thereof—of initiating vertical integration processes based on the development of original operations or resource exploitation. in this regard, casson (1994) has argued that the key to analysing free-standing companies lies in the different nature of the competitive advantages in property-related industries. the concentration of free-standing companies in investments associated with ownership of specific assets abroad—for example, transport infrastructure, utilities, mining, plantations, or oil reservoirs—may be attributed the need for these industries to assess local factors during deployment stages according to qualified business judgment. specific knowledge of locations http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 52 and relationships with local officials became a competitive advantage that british free-standing companies exploited. river plate trust’s financial and mortgage companies river plate trust emerged from the reorganization of the failed mercantile bank of the river plate venture. 8 the rptla was created in 1881 to purchase the assets and take on the liabilities of the mercantile bank of the river plate, lend money via mortgage loans in argentina and uruguay, and provide financial management services to companies and individuals in the river plate area. the managing board included highly prominent members who contributed greatly to the firm's expansion. the agency brought together major shareholders of railway companies, members of parliament, former consuls and london stockbrokers, british investors and businesspeople living in argentina and uruguay, and liquidators and shareholders of the failed mercantile bank. the chair was john morris, senior partner in ashurst, morris, crisp and co., which acted as rptla’s lawyers. morris had vast experience in the financial management of british companies and specialized in both turnaround schemes for companies in distress and securities management of british railway companies located in the united states and canada during the mid-19th century.9 presided over by morris, the managing board of river plate trust was reorganized in 1883, and the former shareholders of the mercantile bank were replaced by professionals and businesspeople with broad business experience in the river plate. thus, in 1883, the board was 8 river and mercantile trust records (rmtr). the river plate trust, loan & agency, memorandum of association, july 30, 1881. on the failure of the mercantile bank of river plate, see jones (1980, 2018). 9 on the role of john morris in river plate trust, see slinn (1997) and lanciotti (2011). for biographical data on morris, see jones (2004). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 53 integrated by william wilson, shareholder of mww; edward ashworth, a major shareholder of the mercantile bank (along with charles morrison, also director of the buenos aires great southern railway); e.m. underdown, a lawyer with great knowledge of english and spanish legislation who managed several companies in spain; and john taylor, ex-director of the mercantile bank (directory of directors, 1880). soon after, charles gunther, director of two meat companies in argentina, and a. fitz hugh were appointed as members of the board. to represent the interests of past shareholders of the mercantile bank, the ex-secretary john duncan and frederick isaac also became directors. by 1885, the new organizational structure included three levels, specializing in the legal, managerial, and financial activities of the firm, including specific tasks such as attraction of new capital, promotion of business, and the construction of a reputation in the city of london. at the top was the managing board presided over by morris. a second circle included the liquidators of the former mercantile bank, who became majority shareholders of rptla: sidney buxton, c. wood, alexander henderson and leon isaac. a third circle was led by the trustees john fair and frank parish (chair of the buenos aires great southern railway and director of the two most important railways in argentina, the central argentine railway and the railway of buenos aires and rosario); their trajectory in anglo-argentinean business would sustain the reliability of rptla as an agent of british companies in the river plate.10 under the leadership of a managerial board with extensive connections in london’s financial scene and investments in the river plate, rptla created new financial and mortgage 10 rmtr. the river plate trust, loan & agency, ‘report of the fourth ordinary general meeting, 1885.’ http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 54 companies.11 morris's plan to attract fresh capital from european markets proved successful and led to the creation of two new firms that took advantage of river plate trust's ownership advantages in mortgage and financial businesses in argentina and uruguay. the call raised more capital than the company could take in such a short time, and as a result, in 1888, the mortgage company of the river plate (mcrp) and the river plate & general investment trust (rp & git) were created. the mcrp was created to tap into the growing mortgage business developed by rptla in argentina and uruguay. it could lend and receive cash on deposit, develop real estate, buy—as a principal or agent—part of all of other companies' businesses, and sell other companies' shares and bonds; eventually, it became a mortgage and financial firm like its parent company.12 thus rptla acted as an mcrp agent. john morris, edward ashworth, j. h. duncan, a. fitz hugh, charles j. gunther, and william wilson served on both boards.13 the business life cycle of mcrp lasted over half a century, until it was reorganized as the moorside trust ltd. in 1946.14 the firm was created in the midst of the real estate boom to use the capital surplus earned in london with highly profitable investments (mcrp, annual report, 1888, 1889). property prices rose quickly until 1889, when they began to decline. the 1890 financial crisis affected mortgage businesses only temporarily. by 1891, property values 11 for an analysis of london’s financial community, see cassis (1985). 12 rmtr. agreement between the mortgage company of the river plate and the river plate trust, loan and agency; mortgage company of the river plate, memorandum and articles. 13 rmcr, “agreement between the mortgage”; mortgage company of the river plate, memorandum and articles. 14 rmtr. the moorside trust, “memorandum of association”. for portfolio composition in the 1950s, see the moorside trust, annual report 1961. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 55 had fallen by 40 per cent and then continued to fall. in 1892, profits fell by half compared with figures in 1890, and mortgage payments went into arrears. the financial crisis hampered the firm’s business, forcing it to stop all lending operations for the next few years. however, mcrp and rptla consolidated their market position, displacing many local players that lost their properties and went out of business. in the 1890s, the directors of both companies (thomas farrell, william wilson, and john morris) travelled several times to argentina to assess the situation and help companies navigate the crisis (mcrp, proceedings, january, 1892). they were confident about the future and highlighted the argentine economy’s flexibility and resilience. in 1897, mortgage loans resumed, and the companies began to liquidate foreclosed properties. one year later, profits exceeded the 1890 results, fuelling a boom that would extend until wwi. with favourable expectations, mcrp underwent a capital increase in 1898. both companies greatly increased their mortgage loans, which became their core business from 1900 to 1915 (table 1). great britain’s involvement in wwi and the dropping demand for mortgages in the river plate region brought about a change in rptla’s and mcrp's investment portfolios. at first, the acquisition of british government securities was intended to contribute to financing war expenses; however, in the absence of better investment opportunities, this strategy was consolidated in the 1920s. in 1918 and 1919, the mortgage business remained nearly stationary, and the companies acquired low-priced securities. this shift caused dissent among shareholders, who, failing to understand the increase in the share of investments in british government securities, typically asked: ”whereas you get only between 3 per cent, and 4 per cent, over here, after income tax is deducted, in the argentine you get nearly double that?“ the managing board confirmed that it was more profitable to invest money http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 56 in argentina, but there was no demand for short-term loans because competition with belgian and french mortgage companies had increased, and the company chose to prioritize safe investment over issuing mortgages in a saturated market (rptla, proceedings, march 1918, 12-15). table 1. river plate trust companies’ asset breakdown, the mortgage company of river plate and the river plate trust, loan & agency, 1883–1957 year assets mcrp (£) assets rptla (£) gold loans on first mortgages of free hold properties general investments gold loans on first mortgages of free hold properties general investments 1883 137,788 1886 385,508 91,264 1888 200,897 952,656 357,743 1890 804,370 28,745 1,208,378 462,065 1892 665,599 48,143 1,150,184 407,116 1897 864,425 64,436 1,349,449 281,874 1900 1,004,148 102,153 1,353,829 307,145 1904 1,000,802 132,484 1,443,548 350,158 1908 1,397,717 132,624 2,273,272 256,893 1912 1,487,587 195,481 4,047,024 474,573 1916 1,273,823 470,105 3,948,881 456,195 1918 850,122 763,812 2,565,697 2,226,743 1920 871,672 860,634 2,493,287 2,618,406 1924 752,670 1,027,096 2,205,709 3,038,856 1929 694,327 1,160,303 2,030,380 3,657,172 1939 343,748 1,415,351 927,965 4,521,065 1942 291,526 1,441,689 796,629 4,692,219 1946 292,485 1,496,901 1,071,703 4,672,843 1949 146,159 1,469,601 601,443 4,410,546 1954 433,816 5,008,844 1957 373,104 5,059,254 source: the mortgage co. of river plate, annual reports, 1888-1949. the river plate trust, loan & agency, annual reports, 1882–1957. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 57 both managers and shareholders proved right. the performance of mortgage investments in argentina, even in the unfavourable circumstances of wwi, produced more than a 10 per cent return on capital, and companies never stopped distributing dividends on ordinary stock. companies consistently paid high dividends on their ordinary shares (cf. in the 1930s) and increased their net profits and profitability during the first global period (figures 1, 3). return on equity (roe) curves also maintained high rates between 1898 and 1929 (figure 2).15 mortgage and financial businesses continued to enjoy high profitability rates after wwi; nevertheless, rptla and mcrp refocused their investments on financial assets in other regions, as shown by the increased share of ”general investments” in both companies’ assets starting in 1918 (table 1). from 1933 on, the profitability of mortgage loans began to drop below 10 per cent (figure 2). james anderson, chairman of rptla, explained the situation as follows: ”intensive competition had sprung up, which led to reduced rates of interest, but what made us hesitate to push again our business in argentina was a change in the currency laws which affected gold contracts and deprived us of the feeling of security that we formerly had that we could depend on having our money back in gold or its equivalent” (the river plate trust, loan & agency, proceedings, march 1934, 6-7). mortgage lending continued to decrease during the 1930s until the end of the decade, when it accounted for only 18 per cent of total assets. the investment cycle in the mortgage market had come to an end, and there were no positive expectations about the future. by the end of the cycle, investments were reoriented toward the home country. in 1948, 77 per cent of mcrp’s 15 these firms’ profitability remained among the top-ranking until the 1930s. for a comparison with large european firm’s financial profitability, see cassis (1997). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 58 investments were in great britain, and only 7.7 per cent remained in the region; 74 per cent of rptla's investments went to great britain, and 12 per cent remained in argentina and uruguay. in addition to the mcrp, the rp & git was established in 1888 to channel investments in securities, debentures, and government bonds;16 the trust featured shareholders of the four major british railways operating in the region. in addition to acquiring stock in other group companies, the rp & git acquired debentures and shares in railway companies in latin america, spain, and the united states, as well as gas, water supply, sanitation, and telephone companies in latin america and securities and government bonds. despite its apparent diversification however, 86 per cent of its total investment portfolio was located in the river plate and, even more remarkably, almost 60 per cent of the funds it invested in argentina and uruguay went to loans granted to businesspeople and landowners in argentina’s pampas area (rmtr agreement between the river plate; the river plate and general investment trust, proceedings, 1891, p. 1-2). the 1890 crisis did not affect the rp & git; on the contrary, the firm ventured into new business opportunities, such as the purchase of low-priced securities (the river plate & general investment trust; proceedings, february, 1892). as morris had advised, investments grew steadily in the 1890s, and the company seized opportunities to purchase securities at depreciated values (table 2). 16 two of its five trustees, john morris and james anderson, were rptla directors. the other members included edward thornton, former british ambassador in buenos aires and asunción (paraguay), h. doughty browne, shareholder and head of the buenos aires northern railway, and robert ryrie, a businessman based in london. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 59 table 2. the river plate & general investment trust –capital, debentures, reserves and assets, 1888–1961 year capital in £s 4% debenture stock reserve fund assets in £s preferred stock deferred stock investments 1888 208,059 1890 250,000 250,000 11,633 514,681 1894 250,000 250,000 12,830 524,364 1898 250,000 250,000 20,920 536,865 1902 250,000 250,000 14,000 552,781 1904 250,000 250,000 32,500 541,365 1910 250,000 250,000 250,000 106,000 910,389 1914 250,000 250,000 250,000 150,000 966,449 1918 250,000 250,000 250,000 172,000 965,303 1920 275,000 275,000 250,000 130,000 986,095 1922 275,000 275,000 250,000 38,390 1,065,226 1928 275,000 275,000 250,000 89,000 1,256,767 1930 275,000 275,000 250,000 100,000 1,363,588 1932 275,000 275,000 250,000 110,000 1,312,526 1934 275,000 275,000 250,000 112,500 1,344,882 1938 275,000 275,000 250,000 122,500 1,447,084 1942 275,000 275,000 250,000 139,000 1,344,984 1945 275,000 275,000 250,000 153,000 1,218,608 1947 275,000 275,000 250,000 165,000 1,221,001 1950 275,000 275,000 250,000 192,500 1,260,782 1955 275,000 550,000 250,000 200,000 1,318,905 1958 275,000 605,000 450,000 254,000 1,599,180 1961 275,000 605,000 450,000 375,564 1,721,639 source: the river plate & general investment trust, annual reports, 1888-1961. promoted as a safe business, rp & git offered capital that was composed equally of deferred and preferred shares. the main appeal of deferred shares is that they tend to provide higher profits while maintaining a stable market value, such that they have less potential for capital gains but carry no risks resulting from sharp drops in the value of securities and ordinary stocks. preferred shares also offer greater safety to shareholders in terms of dividends, and they take precedence in dividend distributions. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 60 from 1896 on, rp & git began to buy shares and debentures of electricity holdings in argentina. purchases increased notably beginning in 1900, and in 1907, debentures were issued to raise additional capital. net income also rose rapidly and reached top value in 1913 (rmtr. the river plate & general investment trust, minutes book). the outbreak of wwi temporarily disrupted the firm's business. after the war, an upward trend strengthened. in 1918, trustees recommended capitalizing a portion of gains accumulated in reserves.17 in the 1920s, investments increased as money repaid from mortgage loans was used to buy british government securities. the boom cycle for the river plate & general investment trust began then and lasted until 1930 (table 2). after a slowdown as a result of the 1930 crisis and wwii, a second thriving period started in the 1950s, and the company earned returns even higher than those of the 1920s. however, part of the group’s investment portfolio had been moved from south america to great britain (the river plate & general investment trust, annual report, 1950). a report in 1945 mentioned that it was still a difficult time to invest in argentina; returns on capital and interest rates had fallen, and, despite increasing dividends, the company claimed: ”we have had repayments and conversions to lower rates of interest in the case of first class debenture stocks, which had previously shown us a good return of the money invested” (the river plate & general investment trust, minutes of ordinary general meeting, february 24th, 1947). this pessimistic scenario was compounded by a negative expectation of a drop in revenues as the result of nationalizations, the effects of coal shortages, and ”fewer opportunities of remunerative employment of surplus funds [that] cannot but have serious repercussions on 17 following the advice, the company created an additional capital reserve fund of £106610 in 1922. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 61 investment trust companies such as ours” (the river plate & general investment trust, minutes of ordinary general meeting, february 24th, 1947). the nationalization of railway, gas, water supply, and sanitation companies further reduced the trust company's interests in argentina (lanciotti 2015). by 1947, investments in south america accounted for only 17 per cent of total investments (the river plate & general investment trust co, annual report, 1950). the sales of british railways, rosario’s waterworks, and drainage companies to the argentine state, as well as the sale of mww to the uruguayan state, reduced rp & git’s holdings in south america, marking the absolute decline of british businesses in the river plate region. by 1958, the trust no longer had any investments in south america. however, it continued operating as the agent of other british firms in the region until the 1970s. when rptla was reorganized as the river & mercantile trust ltd., both companies ended their relationship and started operating as independent trusts (rmtr. the river plate trust, loan & agency, legal documents. reorganization, 1958). our analysis of dividends on deferred shares distributed by rp & git reveals they were always higher than those paid by other trust companies but lower than dividends paid by mcrp and rptla until the 1920s (figure 1). the dividends distributed by the three companies show dispersion during the business cycle in argentina and remarkable convergence starting in the 1950s. both rptla and mcrp distributed very high dividends (always above 10 per cent during the entire cycle), and rp & git began to pay dividends of 10 per cent or more during the return phase of the business cycle. our analysis also indicates that holders of mcrp and rptla ordinary stock had already recovered their investments by 1902. by the second postwar period, rptla shareholders received a nine-fold return on their initial investment, and mcrp shareholders’ returns amounted to six times their original investment. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 62 figure 1: dividends paid by the river plate trust, loan & agency, mortgage company of the river plate and the river plate & general investment trust, 1882-1960 source: the river plate trust, loan & agency, annual reports, 1882-1957; mortgage co. of river plate, annual reports, 1888-1949; the river plate & general investment trust, annual reports, 18881961. the roe also shows high profitability ratios, with peaks during the speculative periods (1880s and 1900s) (figure 2). it did not start to drop until 1930, and this decrease mainly was a result of exchange rate losses and decreased mortgage operations. a comparative analysis of net profits reveals the parent company’s earnings exceeded the net profits of other group’s companies by several times (figure 3). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 63 figure 2. return on equity (roe)** of the river plate trust, loan & agency, mortgage company of the river plate and the river plate & general investment trust, 1882–1961 source: the river plate trust, loan & agency, annual reports, 1882-1957; mortgage co. of river plate, annual reports, 1888-1949; the river plate & general investment trust, annual reports, 18881961 ** net profits/share capital *100. we consider net profits before tax. equity and profits are book values, denominated in pounds sterling. investments made by mcrp and rp & git show concentrated portfolios of stocks representing assets in the river plate until wwi. in the 1920s, those portfolios began to diversify with the addition of government securities and, later, shares from british industrial companies. however, during their second boom, firms again featured highly concentrated portfolios: 87 per cent of their investments focused on british industrial companies’ assets. thus, in expansion cycles, the portfolios grew more concentrated. this strategy indicates that—as noted in a study of british firms in asia (jones and wale 1998)—british groups typically invested in one country and a single industry. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 64 figure 3. net profits of the river plate trust, loan & agency, mortgage company of the river plate and the river plate & general investment trust, 1882–1961 (in £) source: the river plate trust, loan & agency, annual reports, 1883-1957; mortgage co. of river plate, annual reports, 1888-1949; the river plate & general investment trust, annual reports, 18881961. in general terms, the river plate trust’s financial and mortgage companies performed better than average: the roes of these companies reached the same level as those of borneo co., the most profitable british trading company in colonies such as malaysia. except during financial crises and world wars, their profitability exceeded 10 per cent, with peaks of about 20 per cent. both rptla and mcrp showed higher profitability rates than the 12 per cent secured by leading british banks in the region, such as the london & river plate bank and he london & brazilian bank. the roes of river plate trust’s firms proved even higher than those of the most successful banks in other regions, such as the hong kong & shanghai banking http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 65 corporation over the entire period. only in the late 1940s did profit ratios begin to draw closer (jones 2000, 1999). the river plate trust’s case shows that net profits and return rates of british financial and mortgage firms in the river plate increased remarkably starting in the mid-1890s, peaking in 1910 and from 1925 to 1929. a long-term analysis undermines evidence for the declining trend for rates of return after wwi reported by studies of periods up to 1913 (davis and huttenback 1982; edelstein 1976). figures 1–3 show that the great depression, followed by currency devaluations, impaired the performance of financial and mortgage firms in the region. the report of proceedings at the general meeting of shareholders in 1934 expressed concern for the new exchange rate, which had affected gold agreements, and for the profit-remittance restrictions enforced by argentina’s government, which forced companies to reinvest their earnings in the host economy. investment transfers back to great britain over the preceding decade reveal that investment opportunities in businesses in which rptla enjoyed competitive advantages had reached their limit in argentina and uruguay. the remarkable recovery of profits, profitability, and dividends from financial and mortgage companies during the second post-war period no longer accounted for the performance of assets in the river plate; it came from great britain, where investments had returned (rmtr. the river plate trust, loan & agency, proceedings, march 26, 1934). the companies of the river plate trust showed a moderate-to-low leverage ratio and high reserve-to-equity ratios. that is, these companies were low-risk, highly profitable businesses during 1885 to 1930, and they experienced a moderate increase in risk and moderate http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 66 profitability during 1932 to 1947. in all cases, return on investment far exceeded the capital invested during the business cycle in latin america, the gibbs and balfour groups displayed similar features, with their differences stemming from the dissimilarities between peru’s market and those of chile, argentina, and uruguay. because of the type of investments required for mining in peru and the position of peru’s economy, attracting capital proved to be harder for peru than chile or argentina; it drove groups to lean toward portfolio rather than direct investments (miller 1998). still, the issues that arose after the 1930s were the same for all groups operating in latin america. river plate trust’s public utility companies in argentina and uruguay the river plate trust group controlled three public utility companies in the region: consolidated water works co. of rosario and rosario drainage co., in rosario, as well as the montevideo waterworks company, in montevideo. the mww was the first company owned by the river plate trust group. in 1879, the company took over a concession to build and manage the running water system in montevideo; it was transferred to uruguay’s state in 1948. the mww’s early success soon drew london shareholders’ attention. in just a few years, it had secured satisfactory financial profitability, driving group investments into other utility concessions in the river plate. montevideo’s water system concession, as well as subsequent agreements forged by the firm with uruguay’s government, proved very beneficial for the company (finch 2014). for the first 12 years, the government guaranteed tax waivers, state subsidies for construction works, and exclusive arrangements. moreover, the rate per cubic meter of water, set in gold-convertible http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 67 pesos, was very high— double the rate established in other cities (lanciotti and regalsky 2014). even when the exclusivity clause expired, the distance separating the city from supply sources demanded costly investments that hindered the arrival of new competitors, as mww officials pointed out to their shareholders (the montevideo waterworks co., annual report, 1890; proceedings, 1895). figure 4. the montevideo waterworks: return on equity (roe) and return on assets (roa), 1880–1947*** source: mww, annual reports, 1880-1947 *** roe (return on equity): financial profitability = net profits/share capital *100. roa (return on assets): economic profitability = net profits/assets *100. those initial advantages, against a backdrop of swift population growth by immigration, brought increasing earnings that stemmed from economies of scale in montevideo’s water http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 68 network, boosting the firm’s capitalization.18 company assets continued to rise even after 1930. as a result of high tariffs and entry barriers, mww became the most highly capitalized and profitable utility owned by the river plate trust group (figures 4 and 5). both mww’s financial and economic profitability rates exceeded european firms’ average profitability throughout this period. its roe rose above 15 per cent from 1927 to 1936 and dropped below 10 per cent only in 1938, as the result of devaluation caused by a new exchangerate scheme. it then rose again until the waterworks system was nationalized.19 the economic performance of mww proved even more compelling: its return on assets (roa) was the highest in the group, exceeding 5 per cent throughout its operating period and peaking at 11 per cent in 1925. even during the 1930s and until the end of its concession, mww accomplished satisfactory profitability. the firm maintained high earnings when exchange rate losses increased after the crisis in 1930.20 these indicators provide an explanation for the increased capital investments in mww throughout its existence, until it was sold to uruguay’s government in 1947 (figure 5). in 1950, the uruguayan state took over the system, after transferring its total assets for an accounting value of £3,320,000 (rmtr. the montevideo waterworks co., final report of liquidation, 1953). 18 montevideo’s population grew from 215,000 in 1889 to over 655,000 in 1930. during the 1930s, the urban population continued to grow to nearly 750,000 (nahum 2007). 19 a new “managed exchange rate” scheme was enforced on december 4, 1937 to replace the official exchange rate in place since 1931. this new scheme established a spread between foreign currencies bought and sold in the local market, under the supervision of banco de la república oriental del uruguay (bertino, bertoni and garcía repetto 2004). the exchange rate control scheme had been instituted in argentina in 1931. 20 mww’s roe stood at par with the highest roes of other european firms (cassis 1997). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 69 figure 5. assets of the montevideo waterworks co., consolidated waterworks of rosario (rosario ww) and rosario drainage co., 1879–19476 (in 000’s £) source: mww, annual reports, 1880-1947, consolidated water works co. of rosario, annual reports, 1896-1946; rosario drainage co., annual reports, 1899-1946. although the consolidated water works company of rosario did not perform as resoundingly as mww, its economic and financial profitability proved very satisfactory throughout this period, except during war years. once the consolidated water works company of rosario was reorganized in 1896, its performance proved outstanding. however, the rosario drainage co. was unable to put its network in operation, undergoing several conflicts with the local government. because the optimal operation of the water works system depended on its integration with the home sewage system, the delay in bringing that system to effective operation, coupled with the breach in a time-is-of-the-essence clause, negatively affected the performance of the water company. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 70 however, in 1901, continuation of drainage works and a system expansion began to ensure significant profitability. thus, investments in facilities were resumed, and a new purifying plant was installed. water consumption doubled from 1905 to 1912, and both companies increased their revenues as a result of rising household connections and property values in a period of economic and population growth. at that time, the board proposed extending the network. as in montevideo, the companies’ operating period coincided with remarkable population growth in the port city of rosario in argentina’s main export region.21 during wwi, recession drove a drop in the number of services. consolidated water works' profits began to fall in 1915 (see figure 6). increased fuel costs as a result of imported coal substitution by firewood in 1915 and 1916 also had a negative impact on income. the rosario drainage co. remained unaffected though, because of its lack of dependence on imported fuel. despite difficulties in accessing materials to finish the works, particularly imported cement from great britain and the united states, the firm's net profits increased during wwi as the result of a more household connections resulting from system expansion. by 1919, the situation had returned to normal. wood supply and access to ferric aluminium (used to purify water) were resolved; fuel and input prices were falling. operating costs diminished and profits increased. the rosario drainage co. took out temporary loans and reinvested earnings. investing in system expansion proved to be the right decision, because it expanded the benefits of economies of scale. this situation was recognized by the company’s 21 rosario’s population grew from 50,914 in 1887 to 468,000 in 1947, when companies were sold to the government. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 71 chair in 1923, when he reported to shareholders that revenues would grow along with rentals in rosario. figure 6. consolidated water works of rosario’s and the rosario drainage company’s net profits, 1896-1944 source: consolidated water works co. of rosario, annual reports, 1896-1946; rosario drainage co., annual reports, 1899-1946 several shareholders raised objections to raising additional capital; they preferred short-term, higher dividends to investing in company growth and services. chair james anderson explained that the investment in ”the new areas will yield enough income to pay a satisfactory interest on the capital cost, and also to provide for redemption to the capital” (consolidate waterworks company of rosario, annual reports (1925), 7). he also clarified that issuing debentures would not create a problem for the company, because there were still 30 years left before the concession agreement expired. anderson's explanation encouraged shareholders to issue new http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 72 shares, but the issue was rejected by the board in favour of issuing debentures,22 complemented in 1927 by new equity shares. in 1931, the crisis struck utilities hard, and additional users did not offset falling rental prices. argentina’s currency devaluation increased exchange rate losses, and restrictions on foreign exchange remittances prevented dividend distribution. both companies’ net incomes dropped. however, even during the most difficult years, earnings did not fall below the mid-1920s level (figure 6). profitability (roe) fell slightly more, down to pre-war levels (figure 7). against this backdrop, companies restricted investments, increased their reserves, reduced dividend distribution, and issued no additional equity.23 these decisions implied a shift in the river plate trust group's corporate policy, as a result of a change in the region’s business outlook. the rptla's managers believed that investment opportunities in operations in which the group enjoyed some advantages had reached their limit in argentina and uruguay (lanciotti 2011). in contrast with the case of mww, board members at rosario’s companies heeded the local government’s increasing criticism of foreign utilities. because concession contracts had set fees in gold pesos, the service became more expensive in local currency, leading consumers to default on their payments and the company to cut off services. the local government stepped in on behalf of consumers, enforcing a 20% discount on fees. as a result, g. harnett harrison, director at consolidated water works co. of rosario, travelled urgently to argentina to press 22 shares involve property rights. if the interests on dividend payments are low, it is more convenient to fund new investments by issuing dividends. 23 the introduction of the income tax as of january 1934 did not decisively impact on company profits, because it included 5 to 7 per cent of annual profits, about half britain's income tax. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 73 for the suspension of this executive order. agustín p. justo, argentina’s president at the time, intervened, and the fee discount was removed (compañía consolidada de aguas corrientes 1935). figure 7. consolidated water works of rosario’s and the rosario drainage company’s return on equity (roe), 1896–1944 source: consolidated water works co. of rosario, annual reports, 1896-1946; rosario drainage co., annual reports, 1899-1946. the rosario drainage company’s fixed assets decreased between 1929 and 1938 but then rose from 1939 on, whereas its capital increased very little. consolidated water works' assets and capital remained stagnant between 1929 and 1946 (figure 5). the system expanded between 1900 and 1930, but service expansion grew at a slower rate after 1930. as the number of users grew faster than the network, the system worked more intensely. in turn, in 1935, consolidated water works co. began to install home water meters, which helped reduce overall water consumption while increasing the number of users. this innovation led to a steady annual water http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 74 consumption rate between 1936 and 1940, despite a larger number of connections, which boosted the firm’s profits after 1936. in 1941, consolidated water works reorganized common and preferred shares in a single stock to divest itself of its business. although exchange-rate losses peaked in 1942, the firm reported record profits that exceeded the 1930 mark. operating costs soared in 1943 as a result of fuel shortages and municipal restrictions on rate increases, compounded by wage increases and the introduction of social security and pensions in 1945. the use of fuel oil enabled a cost-based economy that was insufficient to offset wage increases with frozen rates and a 100 per cent income tax hike in 1946. at the same time, to meet its obligations, the company started selling some of its portfolio investments, which was a sound decision in a context of increasing prices and decreasing profits. urban utilities’ economic growth after the crisis in 1930 differs from the path followed by tramway and railway companies, the profitability of which peaked at the beginning of their operations but started to decline in the 1920s and 1930s, respectively. the downfall of tramway companies began during wwi, when operating costs soared as a result of coal shortages. in the 1920s, their profits did not return to pre-war levels, and the crisis in 1930 worsened their financial distress just as tensions between the companies and local society heightened, featuring successive strikes and users’ persistent complaints about poor service (garcía heras 1994, rosenthal 1995). british railways’ incomes instead rose in 1923, driven by increased fees and traffic rekindling. after that point, most companies, with the exception of the central argentine railway co., invested in railway expansion and electrification. in 1930 however, gross revenues fell as a http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 75 result of the economic slowdown; currency depreciation, the introduction of exchange rate controls, and restrictions on foreign exchange remittances also curbed british firms’ profitability and increased their indebtedness. these restrictions affected other foreign firms, but private railroad companies had to face rising competition from automotive transport in the 1930s (salerno 2007; lewis 2007). british companies’ strategies to navigate the crisis failed to revert this trend. their demands that the argentine government release foreign exchange and pass a law to regulate automotive transport did not succeed. by 1933, argentine politicians and british railways directors and financial officials proposed the idea of nationalizing railroads (lópez 2016). furthermore, strained trade relations between great britain and argentina, as well as the accumulation of negative trade balances in pounds during wwii strengthened the thrust to nationalize railroad companies. major british companies’ board members wanted to sell off their companies to the government—a stance supported by the british government, which had decided to include the issue in its negotiations with argentina with regard to blocked balances in pounds. after several negotiation rounds, in february 1947 argentina agreed to purchase railway and non-railway assets in the country belonging to british companies for £ 150 million. assets effectively were turned over a year later (lópez 2016).24 unlike the situation of british railway companies, the financial profitability of water companies in rosario and montevideo largely exceeded other european firms’ profitability levels in the 1930s and 1940s. this difference may be attributed to the conditions granted to utilities, the 24 on the stance adopted by major railway companies’ board members in london and the diplomatic conflicts during the war, see kelly (1952). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 76 contracts of which guaranteed exclusive service supply, with fees set at gold-convertible prices at a time of significant economic and population growth in montevideo and rosario. utility companies that had invested heavily in fixed assets benefited from economies of scale as a result of service expansion. thus, mww and the rosario drainage co. continued to invest even after 1930. due to the growing political risk of investments in europe, investments in the southern cone proved not only profitable but safe. however, after 70 years, great britain’s investment and indebtedness cycle in the region was coming to an end. despite the satisfactory performance of utility companies controlled by the river plate trust, group officials anticipated the end of this business cycle in the region. after a long booming phase, they expected a decline, just as similar businesses in other latitudes had undergone. in 1949, rptla’s president, walter woodbine parish, referred to sanitation companies’ nationalizations in argentina and uruguay in the following terms: these nationalisation programmes have in a good many instances deprived us of first class investments which were yielding us well, and it is difficult as things are today to replace them maintaining security and income. i would mention as a particular example of nationalisation, the montevideo waterworks, with which we have been closely associated for many years, and in which we have a substantial holding. we have been receiving an income at the rate of over 10 per cent per annum on a book cost of 36000 pounds (rmtr. the river plate trust, loan and agency. notes for chairman speech at annual general meeting to be held on monday, february 28th, 1949, minute book nº 6 1939-1949). parish believed the sale of sanitation companies to argentina’s and uruguay’s governments marked the end of great britain’s investment cycle in latin america: our investments in south america have decreased from 16.89 per cent in 1947 to 10.07 per cent in the year under review, and it seems probable that our stake in the latin http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 77 american countries will be reduced to a very small figure in the near future. i mention this as in looking back i find it was as recently as 1944 the percentage was over 31 (rmtr. the river plate trust, loan and agency. notes for chairman speech, february 28th,1949). final remarks we start by noting the long lifecycle of river plate trust’s british firms. these companies operated in the country for 70 years. their long track records challenge the thesis about the end of british fdi’s cycle after wwi. instead, the trajectory of the river plate trust confirms that great britain’s investment cycle ended at the same time that anglo-argentine commerce and trade declined in the mid-1940s. the companies affiliated with river plate trust continued to operate and produce consistent profits throughout the period. both profitability ratios and dividend distributions showed steady, successful performances in all cases; however, the distinction between contributions from mortgage and financial firms and from public utilities companies should be noted. mortgage and financial firms, the operations of which would largely amount to british portfolio investments, showed a gradual investment refocus from argentina and uruguay to their home country, starting in wwi. investments in the river plate region, which accounted for 83 per cent of rptla’s overall investments, dropped to 47 per cent by 1923, 27 per cent by 1932, and 11 per cent by 1946. similarly, rp & git reduced its assets in the region to 31 per cent of its total by 1938 and to 17 per cent by 1947. these reductions reflected the displacement of mortgages as these firms’ core businesses. by the end of wwi, investments by rptla and mcrp were refocused to financial assets in other http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 78 regions, as shown by the increased share of “other investments” in both companies’ assets, which drew away from mortgage loans since 1918. the mcrp was the first company to reorganize itself to operate in another region; by 1949, only 6 per cent of its investments were located in the river plate. in contrast, because rp & git’s investment portfolio consisted largely of securities from firms operating in this region, it maintained its investments until the 1940s, when major british firms were sold to argentina’s government. these firms’ gradual withdrawal—particularly from mortgage operations—was driven by managers’ assessments of the outlook for ending a business cycle that initially had been driven by the speedy growth of a ‘new economy’ in the periphery. a maturing argentine economy and the emergence of loan mechanisms other than mortgage market offerings curtailed the growth of these operations. the withdrawal was not abrupt or forced; rather, it pursued an investment strategy that already had been proven in other latitudes by the group’s early managers. the mortgage business had not ceased to be profitable, as james anderson, rptla’s chair, correctly observed. the changing conditions that drove initial investments were the key reason for investment portfolio reorientation; the earnings produced by the group’s mortgage and financial firms rose during the 1920s, and their roes also remained high. thus, the decision to refocus investments on financial assets in other regions did not come as a result of decreasing profitability or an unfavourable policy for british companies. profitability did not fall until the 1930s, and the fall was caused by exchange rate losses resulting from argentina’s departure from the gold system and the peso devaluation. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 79 in the 1940s, the rising trend returned. nonetheless, we cannot associate earnings of the mortgage and financial firms of the river plate trust group during this decade with argentine businesses: only 11 per cent of their investments were located in the river plate by 1946. the shift in the earnings trend of river plate trust’s mortgage and financial firms in the 1940s marked a new expansion cycle associated with transactions involving securities in britain’s stock market. in contrast, like other british fdi, the utility companies controlled by the group maintained their assets in argentina. in the 1920s, mww, consolidated water works, and rosario drainage co. continued to invest in the host economy until the facilities were sold to the governments of argentina and uruguay in 1947; mww’s capital raising and fixed assets continued to grow in the 1930s to expand montevideo’s water system and leverage economies of scale. this strategy proved successful for the company, driving higher earnings and dividends in the 1930s. in rosario’s sanitation companies, capital raising was interrupted by the crisis in 1930, but fixed assets increased slightly in the 1930s. rosario water work’s financial and economic profitability remained high throughout this period. as for the rosario drainage co., construction deficiencies and clashes with local authorities caused a significant delay in system development, which hindered acceptable profitability until the 1920s. however, the company subsequently produced high earnings (though not as high as rosario water works) and adequate profitability. in both cases, lower profitability in the first half of the 1930s compared with the previous decade’s roe and roa resulted from exchange rate losses. even so, rosario water works secured very high roe and roa levels, and the rosario drainage co. also quickly recovered lost ground. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 80 the contrast between these firms’ performances and those of tramway and railroad companies, especially after 1930, highlights that, though the former continued to operate with no competition and with gold-convertible fees in a setting characterized by growing urban service demand, the latter faced decreasing demand as they competed with road transport. furthermore, group companies’ profitability proved higher than the average profitability of european firms during this period and resembled leading british banks’ profitability in other regions. when we analyse how business operations evolved across the group’s companies, the complementarity of both investment types becomes clear. profitability curves rose at different business cycle phases, with financial and mortgage firms becoming more profitable first and utility companies taking the lead after the 1930 crisis. the diversification of investments in a single region helps explain the long life cycle of river plate trust’s firms. the management and organizational capabilities of the group guaranteed sound investment performance and a steady distribution of company dividends. our analysis also clearly shows that the profit return phase lasted far longer than the capital inflow phase and that the capital initially invested in all companies was recovered before wwi. moreover, it shows that capital returns far exceeded capital inflows, confirming that the british investment cycle spanned an investment and indebtedness period that lasted 70 years in this region. profits and survival confirm the corporate success of river plate trust in argentina and uruguay. our long-term analysis establishes that the decline of british investments in the region was not the result of managerial shortcomings in groups and companies; quite the contrary, for a long time, group officials successfully maintained competitive advantages they acquired as a result http://revistes.ub.edu/index.php/jesb volume 6, number 2, 42-86, july-december 2021 doi.org/10.1344/ jesb2021.1.j092 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 81 of their specific knowledge, reputation, and long-term relationships between home and host economies. neither was this decline caused by nationalist policies or foreign capital-averse measures; sanitation companies were sold to the argentine and uruguayan governments in mutually agreed-upon transactions based on company assets’ accounting value. furthermore, according to group officials themselves, the nationalizations that deprived them of the high returns produced by their investments marked the end of a business cycle in this region. we make two final, additional points. first, the foreign investment cycle does not come to an end when multinational companies refocus their investments; it ends when companies leave the region. from the standpoint of host economies, when the initial capital inflow phase is followed by an earning outflow phase, outflow volumes substantially exceed investments in even the least successful cases. second, to determine british firms’ life cycles during the first global economy, it is necessary to look at the track records of investment groups that manage business strategies. thus, our study demonstrates the different stages of the investment and indebtedness cycle led 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86 association of the river plate trust loan & agency company limited.” rmtr. the river plate & general investment trust, minutes book. rmtr. 1953.. the montevideo waterworks co. final report of liquidation. rmtr. 1939-1949. the river plate, trust, loan & agency, notes for chairman speech at annual general meeting to be held on monday 28th, february 1949. minute book nº 6. rosario drainage co. 1899-1946. annual reports. the montevideo waterworks company. 1880-1947. annual reports.. the montevideo waterworks company. 1890-1925. report of proceedings. the moorside trust. 1961. annual report. the river plate & general investment trust co. 1888-1961. annual reports. the river plate & general investment trust. february 1892. minutes of proceedings at the fifth ordinary general meeting of shareholders. london. the river plate & general investment trust co. february 24th, 1947. minute ordinary general meeting. the river plate trust, loan & agency. 1883-1957. annual reports. the river plate, trust, loan & agency. march 1918. report of proceedings at the thirty-seventh ordinary general meeting of shareholders. the river plate, trust, loan & agency. 1889. report of proceedings at the ordinary eighth meeting of shareholders. the river plate trust, loan & agency. march 26th, 1934. report of proceedings at the fifty-third ordinary general meeting. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 1 ángel calvo universitat de barcelona (spain) internet access standards: dissemination of the integrated services digital network in spain, 1984-2005 abstract this article aims to narrate the birth and evolution of the integrated services digital network (isdn) in spain with an essentially descriptive methodology, from an interdisciplinary perspective and from varied sources. the study aims to investigate the forms of the transition from a conceptual or engineering phase to the market in a standard of internet access and, at the same time, in the different patterns of technological innovation and the factors that motivate them. it tries to verify if the own nature of the techniques, the degree of diffusion of the previous technologies, the technological level -digitalization and the structure of market of the telecommunications — continued existence of the monopoly of the historical operator national telephone company of spain — had a significant impact on the inequality of penetration with respect to other countries. the research authorizes to conclude that a very heterogeneous combination of factors caused that leading countries in the diffusion of a technology did not achieve that leading role in the diffusion of other technologies. keywords: integrated services digital network; telecommunication networks; internet access technologies; national telephone company of spain corresponding author: e-mail: angel.calvo@ub.edu received august 8, 2019 accepted november 4, 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb mailto:angel.calvo@ub.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 2 introduction the role of information and communication technologies (icts) in economic growth has been the subject of sharp debate in the decades of the 1980s and 1990s, a feature highly exemplified by the so-called productivity paradox in the pioneering studies of roach (1987) and solow (1987), this second being the author of the aphorism "we see computers everywhere but in the productivity statistics". the controversy soon reached its ignition point with david's contribution (1990, 355-361), characterized by a profound historical perspective. this polemic debate has continued in the new millennium as outstanding scholars (audretsch and welfens, 2013) have pointed out. while mckinsey (2001), gave contradictory evidence, robert j. gordon (2003), showed that the acceleration in us output growth was due exclusively to cyclical factors and increased productivity growth in the computer sector. contrary to that perspective, jorgenson and others (2002) argued that icts had positive spillover effects on productivity in other sectors. the relevance of icts, as general purpose technologies, seems to call for a special attention to network utilities, i.e. resources that are essential ingredients for the success of a modern economy (bottini, coelho and kao 2012; stewart 2010). in the history of technology, networks have received specific attention from the key works of the discipline and, more specifically, since the exceptional work on networks of power by thomas p. hugues (1983), who laid the foundations for the study of technology embodied in large systems — hence the meaning of "large technical systems", lts — and unveiled the mysteries of what until then was considered a black box. this systemic conception, elaborated by hughes with a more sociological approach, was also cultivated by melvin kranzberg (1986, http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 3 544-560) by equating technological systems with technological packages, since they were integrated by diverse components conformed by economic and sociocultural patterns. within the large technical systems (lts) stream, isdn, as an instrument of integration of separate communication networks, was present in the discussion on the generalization of the hughes´ approach to even more advanced stages in the expansion, scale improvement or merger of lts (mayntz and hughes 1988, 15). close to the field of economic history, the systemic approach was also previously explored by nathan rosenberg (1982) from the evolutionary economics of technological innovation, which is shaped by science, industry and economics. unlike hughes, who focuses on power grids, rosenberg studies aspects of innovation in telecommunications. specifically, he pointed out as one of the systemic features of the integrated services digital network (isdn) — in spanish, red digital de servicios integrados (rdsi) — its ability to maintain compatibility throughout the system, along with the introduction of flexibility for each user a flexible information highway. however, in the opinion of the first users, isdn did not provide any new services that could be handled by traditional systems1. isdn is a critical component of an effective business infrastructure for integrating business functions such as manufacturing, marketing, intelligence, and research and development (kuo y lin 1992, 165-178). overall, the main contributions to isdn made from a historical perspective come from the field of the general history of telecommunications and from 1 isdn was called “the proverbial egg (the network) for a future chicken (new applications)” (rosenberg 1982, 209). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 4 economic policy, reflected, inter alia, by studies published in telecommunications policy (fuchs 1992, 635-645; glen 1982; gregg 1992, 425-439, and keiko 1995, 531-544). in spain, the few contributions to the history of isdn come primarily from general studies on telecommunications, articles in specialized journals and some isolated work on the internet (grupo de tecnologías de la información y las comunicaciones 2017; linares 1989, 95-96; miguel de vicente 1989, 86-87, and monedero y post 1990, 28-33). there is, therefore, ample space for new contributions. in its interdisciplinary approach, this article aims to study networks in their multiple components of material inputs, institutional environment and economic context. it consists of three main sections. the first explores isdn as an internet access technology and its expansion, while the second describes the deployment of this technology in spain. the last deals with a technological innovation: the digital subscriber line. the arguments and conclusions are based on a wide variety of sources, which, in turn, include primary sources from large national or international institutions —unesco, european commission, telecommunications market commission, congress of deputies and sénat de la france—, and those from companies — telefonica—, as well as those from the newspaper library and other documents of various origins. isdn, an internet access technology in recent years, we are witnessing the final phase of the deployment of a technology that has marked one of the internet access routes with its own seal, whose growth in its various uses is usually attributed to technological advances and privatization. isdn and the internet could be further integrated and communication capabilities enhanced by extending the role of including http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 5 in isdn switching centres certain packet-switching functions and enhancements that enabled narrowband isdn (n-isdn) to support moving video besides voice and data communications (barfield, heiduk and welfens 2003, 9). internet communication protocols (https) are being imposed on the telephone networks that have prevailed until now, as evidenced by the migration to the oftp2 protocol, successor to oftp1, which operated over the integrated services digital network (isdn) line. some telephone operators have decided to cancel their isdn services, migrating their infrastructures and services to communications over transmission control protocol over internet protocol (tcp/ip) technology in successive years.2 networks are the channel through which information transmitted between several points flows. according to their varied typology, the main ones are the telephone network, the cable network, the mobile network and the satellite television broadcasting networks. the first network distinguishes between the traditional switched network and isdn.3 the basic and primary accesses to the isdn belong to the set of infrastructures of the distribution network that allow the information to be brought to the customer from the last switching element and constitute, in short, the means necessary to provide the service. these include the access loop to the basic telephone network; ports for access to data networks; base stations on mobile service networks; transmitting and retransmitting stations for broadcasting audiovisual services; access to cable networks, irrespective of the mode and collective and individual satellite dishes (cmt 1998, 6). the basic and primary accesses to the isdn belong to the set of infrastructures of the distribution network that allow the information to be brought 2 swisscom was ahead in 2017 and would be followed by deutsche telekom (2018), orange (2020) or bt (2025): edicom, 7 november 2017. as deutsche telekom itself pointed out, the tcp/ip reference model describes the structure and interaction of network protocols in the internet protocol family. 3 the qualitative supremacy of the digital over the analogue transmission stems from the limitation of the volume of raw digital data allowed by compression techniques (joyandet, hedgehog and türk 1996/1997). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 6 to the customer from the last switching element and constitute, in short, the means necessary to provide the service. these include the access loop to the basic telephone network; ports for access to data networks; base stations on mobile service networks; transmitting and retransmitting stations for broadcasting audiovisual services; access to cable networks, irrespective of the mode and collective and individual satellite dishes (cmt 1998, 6). the isdn technology used a twisted copper cable infrastructure and as a digital prerequisite for a flexible and rational transport network, as well as for the control, supervision and management of the entire telecommunications network and its services (ekelund and samuelsson 1988, 122). it was widely promoted by the communications industry as a universal global transport solution during the 1970s and 1980s (littman 2002, 1). the advantages of the isdn resided in the higher quality, speed and flexibility (rosenberg 1982, 209), as well as in the integration of all services in a single network — voice, text, image and data. it allowed access through a single connector and the transmission of all kinds of information thanks to the digitization of signals (dorros 1981, 16-19).4 its origins date back to 1984, when the international telephone and telegraph consultative committee (ccitt in its english acronym) produced its red book of recommendations on system capabilities, functions and interfaces. after four years, a blue book with new orientations replaced this authentic bible was (fischman and jorstad 1990, b-17).5 4 according to the international communications union (itu), isdn was essentially characterised by its ability to enable a wide range of voice and non-voice applications on the same network. the provision of a range of services through the use of a limited set of connection types and multi-purpose user-network interface configurations was a key element for the integration of services in an isdn (itu 1993, 1). 5 cerni (1982, 69-84). ccitt recommendation g.705 (october 1984) suggested further development of isdn and an increase in its network functions and features. it defined isdn as a public end-to-end digital telecommunication network with signalling, switching and transport capabilities supporting a wide range of services with integrated user interfaces. itu-t recommendation i.120, as revised by itu-t study group xviii http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 7 the introduction of isdn exemplifies the transition from a conceptual or engineering phase to a market phase (thachenkary 1993, 921-932). in terms of deployment, first came the narrowband isdn in its dual typology of basic base interface of two channels of 56-64 kilobits per second (kbps) and a signaling channel of 16 kbps and, in its second aspect, primary base interface (information gatekeepers inc., 1994, 109). the trend towards adoption of this technology was unanimous but the modalities and pace of extension around the world varied, due to the diversity in institutional settings and degree of development.6 isdn was envisaged to enjoy a deployment similar to that of telephone networks, which had evolved in two distinct stages and were embarking on a third. the first stage was fully analogue (integrated analogue network, ian), the second (integrated digital network, ion) began to evolve with the introduction of digital transmission and switching, while the third stage (integrated services digital network, isdn) was to cover end-to-end digital connectivity (glen 1982). isdn went through an implementation period, first in the transmission systems and then throughout the telecommunications network, before reaching full maturity and definition between the late 1970s and early 1980s. this coincided with a remarkable evolution of public policies in the telecommunications sector and the dismemberment and reorganization of the american telephone and telegraph (at&t), one of the largest companies in the world. manufacturers were enthusiastic about isdn because it incorporated attractive features that (1988-1993), was approved by the world telecommunication standardization conference (wtsc) in march 1993. with the reform of itu, ccitt ceased to exist in february 1993 and was replaced the following mo nth by the telecommunication standardization sector, as a permanent body of itu (itu-t) (itu 1993, 1). 6 keiser and strange (1985), for example, point out that tracing the evolution of isdn in the usa requires alluding to the framework of organisation and politics, and its effect on motivations. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 8 stimulated the commercialization of isdn switching products. between 1988 and 1996, the number of countries with an isdn commercial service increased twentyfold, from two to forty. to start with the most technologically advanced country, in the united states, in 1986, the first isdn features were introduced and two years later, the first commercial services were offered (ronayne 1997, 170).7 the adoption rate and extension of the isdn were weak due to structural and other obstacles of various kinds, including inconsistent implementation standards, lack of government support, non-competitive tariffs, and a market strategy with some positive aspects, as will be seen, but considered inefficient by some. (browne 1985; gregg 1992, 425-439; lai and reeh 1995, 131-140).8 the restricted scope of isdn applications to isdn telephone features and data transfer as well as voice-communications capabilities severely hampered the diffusion of isdn service in organizations (lai, guynes and bordoloi 1993, 8). relating to one of the the major issues of ict investment, although isdn technology enabled to reduce the total costs in communications, it was hard to generalize about the savings because of the 7 at&t, probably the champion in the isdn race, implemented its integrated digital network as a nodal architecture. in other words, it treated it as a collection of special-purpose, independent networks ending in at&t switching nodes where the only truly integrated thing was the link between the client and the network (network world, june 29, 1987, 37). the company that's helping local telephone companies turn the promise of isdn into real-world solutions" (network world, 6, june 25-26, 1989, 53). at&t and northern telecom, owners of the dms-supernode and the 5ess digital exchange, respectively, illustrate two different positions on the extension of isdn. in its commitment to technology, the former based its strategy on defending the capabilities and quality of its products, while the latter advocated the market with aggressive marketing. att claimed that its 5ess was an avant-garde product, which had allowed users to develop their own services and whose sustained processing was more powerful than northern telecom's dms-100 (isdn newsletter, 3, august 8, 1987). 8 a specialized media pointed out the hypercompetitive policy and its fragmented communications infrastructure as possible causes of incompatibility with the implementation of isdn (network world, 3, 22, 1986, 33). the copper lines of the regional bocs in the usa between 1988 and 1995 only increased by 77,971 miles (6.87%). at the beginning of 1996, isdn lines installed by regional operators, not including those of two companies, stood at 379,135 (information gatekeepers inc. 1994, 142 and 116). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 9 variation in three areas: private and public implementation, types of hardware and applications used and tariffs charged (bushaus and travis 1990, 12-15).9 if we take a distant geographical and cultural reference, japan conceived isdn as the backbone of its communications for the next century (kaplan 1984, 50-52) and embarked on a modality of its own without conforming to international standards. nippon telegraph and telephone corp., which served 90% of japan's national telecommunications, developed its information network system (ins) in the late 1970s. like isdn, ins integrated analogue networks for telephony, fax, telex and other services into a unified digital network (network world, february 16, 1987, 32). in this asian country, there was a gradual extension — osaka and tokyo, first and other areas later — as well as an incidence of the price factor. analysts based the forecasts of isdn growth in japan and its conversion into an indispensable medium for commercial activities in the 1990s on the positive correlation between number of useful applications, number of subscribers and cost reduction (ono 1990; the japan times, july 1, 1999 and february 9, 2000; inoue 1992, 54-57). the main obstacles were exposure of high investments to uncertain returns demanded by the privatised telecommunications industry, low interconnection and high equipment prices, as well as competition from other technologies, media and services (staal, grassmuck and hatta 1995, 531-544). the strategy followed has been considered unfortunate because when isdn was about to take off with force it began to be displaced by dsl technology (shibata 2006, 73). 9 cost savings in data communications should not be restricted only to the direct costs paid for the lines. savings derived from flexibility, bandwidth, services, speed, and convenience of the networks should be also considered (lai, guynes and bordoloi 1993, 9). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 10 in closing this brief overview of the world situation, it is worth stressing that isdn was particularly attractive to less developed networks where existing investment in plant and equipment was not threatened. this was the case in china, where the initial interest in isdn for applications was intense and varied. the asian giant accessed the internet intermittently since mid-1989 and permanently five years later (ronayne 1997, 170; information gatekeepers inc. 1994, 32). to focus on the area closest to the geographic space article, as in japan, the european community understood the isdn as the backbone of telecommunications — or the telecommunications highway — for the 1992 single market. member states agreed to implement this backbone access with harmonized european standards in line with ccitt recommendations (fischman and jorstad 1990, b-17).10 if we consider any particular country, the post office took the arrival of the isdn as a means of draining more revenue from the existing network by boosting services available over this network and achieving savings by absorbing other networks such as telex within the isdn (ronayne 1997, 174; fuchs 1992, 635-645). in short, isdn was an important expression of the changing nature of traditional telephone networks. meeting the communication requirements of a modern economy that went far beyond the simple universal voice operator, it offered the opportunity to send not only voice, but also data and even moving images over telephone lines. 10 according to david and steinmueller (1994, 217-241), the demand and supply for standards under regulated monopoly and the transition to deregulation and competition created a balance between the traditional objective of achieving positive externalities from interconnection and the alternative of improing the supply of services that could put at risk universal connectivity. this compensation affected the use of data communication networks in the us and europe. in addition, conflicting interest issues complicated the european approach to "harmonisation" of standards in the case of telecommunications. in conclusion, the nature of the standards and standard-setting process could have significantly affected the incentives for private research and development. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 11 isdn was particularly suited to the communication needs of small and medium-sized enterprises (bangemann report 1994). figure 1. the common plan for the deployment of isdn in europe (1993, thousands of accesses) source: prepared from eu commission (1985, 116). many countries developed the first isdn services using their own short-term definitions in the absence of standards. not a few companies did the same. in parallel, the european conference of postal and telecommunications administrations (cept) coordinated a unified approach to a pan-european isdn through the definition of a memorandum of understanding (mou) that required the provision of a first stage of international isdn capable of supporting a limited range of services and the use of standards to establish the compatibility of certified terminal equipment in any cept country.11 11 memorandum of understanding on the implementation of european isdn service by 1992, london, april 6, 1989. example of national definitions: vnx series in france and 1tr6 in germany (burd 1997, pp. 25-26). for http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 12 table 1. the common plan for the deployment of isdn in europe total accesses, 1993 (thousands) costs (million ecu) international digital circuits required belgium 140 168 180 germany 1,250 1,500 1,660 denmark 125 150 160 france 1,100 1,320 1,460 united kingdom 1,000 1,200 1,330 greece 170 204 220 italy 825 990 1,100 ireland 30 36 40 luxembourg 7 8 9 holland 280 336 370 spain 40 48 51 source: prepared from eu commission (1985, 116). according to the common plan for the deployment of isdn in europe, 5% of the available lines were to have such access by 1993. but in the ec this technology was stranded between the attempt to liberalise the hitherto closed and fragmented european telecommunications markets and the twin objectives of fostering a strong and independent european industry and a paneuropean network. the commission's expectations were dashed by a reality of delay in the deployment of isdn (fuchs 1992, 635-645). in practice, the commission aimed at continuing concerted efforts in three areas: access to commercial services, full compatibility of these services and availability of low-cost terminals and improving the competitive position of european industry. graph 1 business purposes and in order to stick to multinationals, hewlett-packard marketed a set of products for isdn networks supporting bandwidth of up to 768 kbps and wide area network (wan) solutions capable of connecting remote sites and workstations to enterprise networks under an isdn architecture. one of the main advantages of hp's isdn architecture was its scalability or the possibility of adding bri isdn links to hp workstations or servers, to allow simultaneous transmission at a speed of up to 384 kbps, a figure that can be doubled by compression (computerworld, june 3, 1994). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 13 and table 1 detail 1993 total access figures (thousands) and their cost, as well as the international digital circuits required. in comparative terms, europe and the united states had many similarities with respect to the development of physical infrastructure in the implementation of isdn but differed greatly in the commercialization of it. europe based its action on a supply-oriented approach, focusing on the provision of basic services, i.e., listening services and some basic teleservices. this was due to the specific european situation in which the development of compatible services at european level was a priority. in the united states, the marketing strategy focused on the development of applications that could be carried out through isdn.12 the task of identifying applications and proposals was entrusted to a north american isdn users' forum (niuf), which then established implementation agreements.13 the absence of such a specific instance in europe was replaced by dg xiii of the european commission, which, in its capacity as responsible for icts, proposed to support the creation of a similar forum. the european isdn user forum (eiuf) was founded towards the end of 1990 as an open forum for existing and potential european isdn users to define their requirements and promote pan-european isdn (information gatekeepers inc. 1996, 86). 12 commission of the european communities (1990, 21-22). it has been pointed out that, originally, isdn was presented as a new telecommunication network that eventually had to replace the old telephone network (fuchs 1992, 635-645). the role played by individual users in promoting isdn should not be overlooked. as the new york times (october 17, 1993) reported, isdn users tended to become technology evangelists, preaching their excellence. the publisher of infoworld, a newspaper in the computer industry, connected his office computer network via a telephone line to isdn, which allowed him to work at home. "i'm bathing in bandwidth", he exclaimed, at a price of $27 a month. 13 in its first five years, niuf managed to get 141 active applications accepted for application profile development. these were completed for 14 applications; 15 implementation agreements and 8 compliance tests were also concluded (lennon 1993, 633-635). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 14 as a next step, the european commission planned to address the issue to existing user organisations, cooperate with etsi and seek support at political level in the european parliament (ungerer, berben and scott 1991, 157). implementation agreements were developed and approved by industry and user representatives in order to accelerate the development of isdn capabilities, promote the interoperability of isdn communications equipment and provide universal implementation from multiple providers (north american isdn users' forum).14 isdn's commercial launch forecasts (with payment of a published tariff) presented a gradual deployment profile: they envisaged a start in january 1991 and a completion in january 1994. with the exception of greece, the remaining eu-12 countries would offer services from the beginning of 1994. the united kingdom, denmark and belgium were expected to form the fastest platoon, reaching full geographical coverage from the outset. ireland and portugal would follow, with 80 % of initial geographical coverage, and the rest would be incorporated more slowly.15 going to the facts, shortly before the end of the 1980s, the european commission saw significant progress, which it justified in the commitment of public network operators in all member states of the community to implement a pan-european isdn. france went ahead at the end of 1987 with a commercial isdn, which could be accessed throughout the country in 1990 using the basic tariff and the primary charge. germany launched one year after a commercial isdn in eight major cities. belgium started a first phase of isdn in mid-1989 with 14 north american isdn users' forum agreements on integrated services digital network, nist special publication 500-195, department of commerce, national institute of standards and technology. 15 in germany, basic access lines or bri (basic rate interface) were expected to be multiplied by seven and primary access lines or pri (primary rate interface) by 2.65 (isdn newsletter, 7, 2, may-june 1993, 1). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 15 commercial offers in eight cities. denmark established a pilot isdn service during the same year and made available to users the basic charge and the primary charge (commission of the european communities 1990, 9-10).16 two great powers — germany and france — represented the european advance in the deployment of isdn, with some modifications with respect to the plans. at the beginning of 1991, they had 51.14% and 34.09% of basic accesses out of a total of 14,665. belgium, denmark, the uk and the netherlands followed with 800, 700, 500 and 100, respectively. the uk was the leader in primary accesses (1,700), ahead of germany and france (640 and 500 primary accesses, respectively) and at a huge distance from belgium (25) (commission of the european communities 1990, 9-10).17 ten years after the first european regulations, isdn services were available in europe, japan and the usa, albeit on a limited basis and with a standards adjustment process still incomplete (fischman and jorstad 1990, b-17; igic 1994, 2).18 16 in france, the isdn took the name réseau numérique à intégration de services, which the press described as "réseau à tout faire" (le monde, november 17, 1987); was inaugurated at the end of 1987 in a locality in the brittany region with 300 subscribers according to a gradual extension programme over the next two years to be continued in the paris and la défense areas, with a thousand connections, and in four large cities (lille, lyon, marseille and rennes); by the end of 1989, numeris was available in seven regions of france, including paris (réponse à la question écrite 33,706 de m. bachelet pierre, rassemblement pour la république alpesmaritimes, ministère interrogé p.t.t., 7/12/1987, 25/4/1988, 1,781). 17 in 1990, the isdn offer was to be generalized to the whole country according to one of the fastest programs in the world. the isdn benefited from attractive prices (300 francs excluding tax per month) and a capable and motivated sales organisation (réponse à la question écrite 33,706 de m. bachelet pierre, rassemblement pour la république alpes-maritimes, ministère interrogé p.t.t., 7/12/1987, 25/4/1988, 1,781). isdn was qualified in italy as “ferrari” for information highways (la repubblica, february 19, 1996). 18 date of december 22, 1986 carries the recommendation 86/659/eec “the coordinated introduction of the integrated services digital network (isdn) in the member states of the european community”, official journal, l 382, december 31, 1986, 0036 – 0041. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 16 translated the gradualism into figures, between 1990-1992 the sales of user equipment multiplied comfortably by eight, high growth that concentrated mainly on pbx equipment with primary access (pri: primary rate interface for voice and data). this range went from $115 million in 1990 to $980 million two years later, a figure that represented almost half of total isdn unit sales (igic 1994, 2). in 1993, the inaugural event to promote the eurie'93 pan-european isdn by the twenty-two major telecommunications operators from seventeen countries took place. it was a fully compatible, narrow-band global trans-european digital communication network, the standardisation of which was developed by the multilateral body etsi. it offered compatible end-to-end international digital continuity services such as video telephony, video conferencing, group 4 fax terminals, multimedia terminal connection, dedicated line back-up, local area network interconnection or high-speed data transmission, enabling the creation of a genuine single market for terminals, applications and services. as the official organiser of eurie'93 in spain, telefónica joined the event by connecting one of its demonstration centres to the new trans-european digital network. a multi-videoconference bridge for the graphic arts sector allowed a demonstration of a publication and the interactive edition of its cover (telefónica, libros de actas del consejo de administración laca, december 22, 1993). in 1996, europe occupied leading positions in the extension of isdn across the globe, with 65 % of the world total. the usa and asia, with 19 % and 15 % respectively, were at a considerable distance (information gatekeepers inc 1996, 7-8). the deployment of isdn in spain http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 17 the strategies that the different countries followed for the introduction of isdn varied considerably from one to the other (liebscher 1990). in spain, isdn, as the middle ground between basic telephone lines and broadband networks, called to cover the whole territory, was understood as a necessity, an option without alternative (linares 1989, 95; computerworld, december 8, 1995). according to forecasts of the european competent agencies, spain would reach coverage of between 21 and 40% at the outset, 60% by mid-1994 and 80% by 1 january 1996 (igic 1991, 29; isdn user magazine, july-august 4, 1990, 7). the action anticipated the effective governmental guidelines, which were later included in the national telecommunications plan (1991-2002), undoubtedly a consequence of the law on the regulation of telecommunications, the first regulatory framework in the entire history of the sector in that country.19 the monopoly operator compañía telefónica nacional de españa (ctne) and the equipment manufacturer standard eléctrica acted cooperatively and agreed to establish an isdn field test based on system 12, which would integrate the analogue telephone service with digital voice teletext, facsimile group 3 and personal computers. it was to include circuit switching for incoming and outgoing local calls as well as packet switching for local calls. beginning in madrid during 1985, an early offering of advanced telephone and data services, aimed at closed customer groups, was to be made through ibercom and small digital exchanges. the final step was integration into isdn through its primary network. ctne and standard eléctrica considered extending these initial tests to other services and the connection to the spanish iberpac packet switching network. in parallel, some studies attempted to 19 act 31/1987, of december 19, 1987, 37,409-37,419. telefónica's plans distanced themselves from the eec's recommendations on rds1, which involved installing 400,000 isdn lines in spain before 1993: la vanguardia, december 6, 1987. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 18 determine the optimal strategy for the introduction of isdn in the spanish network (eu commission 1985, 10-11; plan nacional de telecomunicaciones 1992).20 even so, the start of isdn operation in spain was somewhat delayed and required fertilizing the land.21 it was necessary to develop subscriber network projects and incorporate various elements to facilitate the transition from the existing multiple network to the serial network. the comprehensive business communications service (in spanish, servicio integral de comunicaciones de empresa, sice) was a significant step forward in its effort to digitize the office's own communications, integrating these functions with data transmission and enabling the constitution of urban or interurban networks for private or closed use (telefónica 1984 and 1985; ericson 1993).22 to this purpose were used the first terminal centres of the ibercom network based on the md110 digital switchboard of the manufacturer intelsa once they passed the test phase prior to the opening of the service. concrete experiences and study of the strategies of introduction, as well as of interworking with the iberpac network and of future evolution allowed advances in the isdn of narrow and wide bands. the design of the common channel signalling network provided the essential infrastructure not only for the establishment 20 the government regulations recognized the isdn pilot experience with the availability of network terminations of two types — basic access (2b+d) and primary access (30b+d) — capable of supporting multiple services (plan nacional de telecomunicaciones 1992, 42). field trials in italy relied on the cooperative efforts of sit and face, while in belgium the protagonists were the state administration of telegraphs and telephones (rtt) and the belgian subsidiary of the multinational it&t bell telephone co. (haerens et al. 1985, 89-97). the order of 11 january 1996 instructing telefónica to establish an information access service over the public switched telephone network and isdn (boletín oficial del estado, 24, january 27, 1996, 2.635-2.638) was repealed the following year. 21 for the more purely technical aspects in the spanish case, see purse and post (1990, 28-33). 22 in 1989, a pilot service was planned for companies with an impact on residential areas through the establishment of four centres in madrid equally divided between the axe system and the 1,240 system with modules connected to the ibercom access network (mrai). ibercom was described as a pseudo digital network of services integrated by the right-wing opposition, while the ruling party claimed its successes (journal of the congress of deputies, february 12, 1991, 86, 4248 and 4.251). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 19 of the future isdn but also for cable television.23 laboratory experiences with isdn models of the 1240 and axe systems were a must24 as well as the signing of two protocols to set up as many networks in europe, i.e., the isdn in 1991 and a broadband network on an experimental basis. it meant the incorporation into the european strategy of the coordinated introduction of isdn and the creation of an interconnection support for 'application pilots' arising from the race programme (86/659/eec: council recommendation of 22 december 1986 on the coordinated introduction of the isdn in the european community, com 1986, 205)25. the isdn required a powerful digital infrastructure and a definition of the specific solutions to which the access networks should be subjected in order to facilitate the digital connection wherever the demand for new services arose. this was the direction of the development and modernisation projects for the entire interurban transit structure of the telephone network up to 23 work was also started on race, the eec's broadband network. according to engineer j. de miguel, soul of the md110 at intelsa, this company, which could boast of its own research centre since 1986, with an investment of 212 million pesetas and some 120 telecommunications engineers recruited primarily from the spanish university, was planning to deliver several pilot plants in 1989 and the first commercial ones two years later. the isdn development carried out by intelsa and ericsson was based on the digital switching systems md 110 (annex 1) for private networks and axe10 for public exchanges. the axe pilot exchanges included the two types of 2b+d access for standard isdn terminals and 30b+d for md110 connections within the ibercom network (miguel de vicente 1989, 86). the banks, in a commitment to modernisation, agreed to switch to the x-25 system despite having equipment that could be used with the iberpac network, an attitude opposed to the resistance of not a few users to use the x-25 equipment, the network of the future, due to the desire to use their equipment with iberpac (telefónica, 1986). over time, telecommunication operators attempted to enter cable television and leisure companies with the intention of combining their own resources in telecommunication technology with those of the former (ericsson 1993, 12). 24 acquisition by 40.53 million pesetas of an experimental model isdn 1240 (itt), the most suitable for isdn experiences as an advance to the application to the ctne network and with the possibility of laboratory experience, the first in spain (telefónica 1983). based on the development of terminals and adapters for isdn and the millimeter-wave radio link, the first activities in the field of broadband isdn were planned and started within the project broadband subscriber system for optical distribution (in spanish sabado, for sistema de abonado de banda ancha por distribución óptica), with a view both to the future optical subscriber loop and to local switching and distribution (telefónica 1987, 24). 25 telefónica, minutes of the executive committee, april 12, 1989; see also linares (1991). for an overview of community telecommunications policy, see alabau and guijarro (2011, 44-45). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 20 its total digitalisation, for action on the international network and for the deployment of digital infrastructure — 'digital rings' — in the country's large metropolitan areas (telefónica 1985, 20). after the implementation of specialized solutions, telefónica planned to begin the deployment of isdn in 1988, with the offer mainly oriented to companies, lack of an integration of equipment, networks and information. it understood it as a solution to the obstacles between non-compatible special networks, between different protocols and different connection boxes for terminals. as for the pace of deployment, the monopoly operator planned to meet the objectives set by the eu one year in advance.26 deployment of isdn on the core network started in 1991.27 in the following two years, telefónica experimented successively with the system in the pre-commercial phase and presented it to the telecommunications and electronics industry as a whole, as well as to end users.28 in the initial market launch phase, isdn was aimed at professionals and a selective number of companies with the potential to make profitable and improve information-intensive activities, irrespective of their size. there would be two types of subscribers: basic access line, the digital equivalent of a telephone line, and primary access line, which offered multiple connections to the isdn functionality switching exchange through a single line. according to a gradual 26 it presented it as “a single network and a single line that supports all types of communication” (telefónica, 1986, 18). 27 the foreseen connections covered between 20 and 30 large spanish companies and the investments for the following biennium in about 1,000 million pesetas, a figure to which had to be added part of the 31,500 billion necessaries for the implementation at national level of the isdn (telefónica 1992, 11). 28 the list included equipment suppliers and companies specialising in applications (el país, june 29, 1993). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 21 deployment, in 1993, it would be extended to the main business areas of eleven cities and two provinces of the cantabrian sea, followed by nine more business areas the following year and coverage for the whole territory in 1995, when the supply capacity would be 48,544 basic accesses and 3,096 primary accesses. in 1996, this service could be accessed by towns with a population of more than 20,000 inhabitants and, after two years, could be enjoyed by all towns with a population of more than 10,000 inhabitants. to the capacity of connection within the country was added the external one since the isdn would allow to communicate with eleven countries, eight of them european, and with the usa via at&t, list that would be extended without excessive delay. the most common isdn applications in the country were the interconnection of local networks, switchboards and videoconferencing, over and above voice or fax services. this profile contrasted with that of the whole of europe, where voice and data transmission predominated with more than 3/4 of the total use (computerworld, december 8, 1995).29 telefónica developed a new corporate isdn network, a specialised part with specific isdn functionalities, which combined and encompassed installations from the former uno network, specialised in data transmission (computerworld, october 1, 1993). the operator planned to implement the isdn corporate network in 1,200 and 2,400 branches of two banking entities — 29 in 1994, ericsson's spanish subsidiary introduced the md 110 switchboard after receiving the acceptance certificate from the directorate general of telecommunications, which enabled it to be sold in the market or through the ibercom network. the md 110 accessed the isdn through the european primary access standard (30 b+d), with a digital connection at 2 mb/s and signalling via a standard d channel (computerworld, november 4, 1994). according to telefónica's forecasts, during the three-year period 1994-1996, isdn coverage should increase from more than 70 districts to 188 and 366 respectively. also, the number of localities that should have isdn facilities should increase from 98 to 276 and 624 (computerworld, july 1, 1994). some news on forecasts spoke of coverage for the nuclei of more than 5,000 in 1997. in 1995, spain had some 14,000 digital telepho ne lines. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 22 caja madrid and banesto, respectively. shortly thereafter, the vitalicio group and the banco central hispanoamericano were added to the list of candidates with voice, data and image services at 34 mb. banesto and the latter bank benefited from the advantages of red uno — dataand the optical fibre of the fotón plan, as well as from the fruits of an agreement to develop multimedia applications with value-added services available to their customers.30 later, several entities — the madrid architects' association, the spanish engineering institute, the official telecommunications engineers' association, the spanish federation of book chambers and national organization of the spanish blind — joined the isdn services clientele, and in this case the internet (telefónica, minutes of the board of directors, december 20, 1995). in a single year — 1994 — telefónica invested 6,488 million pesetas in isdn infrastructure, while the estimated figure for 1995 was 9,309 million pesetas and the total forecast for 1999 was 23,083 million pesetas. however, the diffusion of its isdn network continued to encounter various obstacles, the main of which was considered from the offer the great ignorance that companies had of isdn and the services inherent to this communications system, an issue that we have noted for the whole world.31 the strong investments required put stress on the finances 30 deployment in spain: madrid, barcelona, valencia, vizcaya, zaragoza, alicante, asturias, cadiz, castellón, la coruña, málaga, las palmas and santa cruz de tenerife (canary islands); international deployment: germany, belgium, denmark, finland, france, united kingdom, sweden and holland — and in the far east — australia, japan and singapore. forecasts: telefónica, minutes of the board of directors, september 29, 1993); red uno in banesto with 2,411 virtual circuits and in caja de cataluña (telefónica, minutes of the executive committee, march 20, 1991 and june 26, 1991); isdn in banco bilbao vizcaya, 2,670 centres of the banco central hispanoamericano and the more than 600 offices of the vitalicio group (telefónica, minutes of the board of directors, march 23 and october 26, 1994, january 25, 1995). isdn tariffs in april boletín oficial del estado: 45,000 pesetas per registration for basic access line and 8,000 pesetas monthly fee, 1,254,652 pesetas per registration for primary access line and 146,583 monthly fee (telefónica, minutes of the board of directors, july 28, 1993). 31 telefónica, convinced of the great growth potential of isdn, recognised the lack of a dynamiser to pull the market (telefónica, minutes of the board of directors, july 1, 1994). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 23 of the spanish operator by demanding the amortization of the existing networks, one aspect to which little is mentioned.32 figure 2. isdn channels/100 inhabitants in the world, 2000-2004 source: elaborated from eito (2002). spain lagged far behind in the dissemination of isdn throughout europe. its per capita penetration figures differed not only from those of the leading country but also from the average for western europe (graph 2). it was so obvious that the country was left behind the rest of the surrounding countries that the sad reality of backwardness broke into the congress of deputies.33 evidently, the deployment of this type of network by the different countries 32 an explicit reference to the enormous financial and amortization problems of the existing plant presented by the implementation of the new transport networks in aic análisis e investigaciones culturales, 6, january 1981, 68). 33 the right-wing parliamentary opposition, which contrasted the "lights" in europe with the gloomy picture in spain, estimated a delay of at least four years and blamed the socialist government and the lack of liberalisation: diario de sesiones del congreso de los diputados, february 1991 12, 86, p. 4,222. the italian government planned advances towards isdn that included successively the provision of 64 kbit/s digital connectivity in 1986 and the activation of a pilot isdn service after two years (mossotto 1986, 413-420). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 24 depended on the degree of digitalisation achieved in the telephone service in each of them. in spain, digitisation reached 5.7% of the urban lines installed and 18.5% of the links installed in transit centres in 1987. forecasts for the digitalisation of transmission and switching affected some thirty main cities in 1988 and all the provinces by 1990 (network world, 4, 26, june 29, 1987, 30; eu commission 1985, 10-11).34 deployment, in turn, was subject to government priorities and available resources. between 1987 and 1992, the degree of digitization increased from 5.7; 24.4 and 18.5% in urban, international and transit switching, respectively, to 36.4; 67.5 and 78.6. in 1997, network digitalisation reached 80.7% (telefónica, 1992, 11 and 1997, 10).35 another major factor were tariffs. by 1996, the highest prices per basic access connection were in ireland and the uk, while five countries — italy, denmark, the netherlands, norway and sweden — held intermediate positions. spain was among the highest of the intermediate countries. if we are talking about primary access, spain was the second country with the highest tariffs, behind belgium. in terms of monthly subscriptions, spain ranked third among the most expensive countries in europe in terms of basic access and second behind portugal in terms of primary access (ronayne 1997, 230).36 34 a simple exercise for the case of italy expresses that parallelism, although not absolutely narrow, since towards the end of the decade, the expansion of the isdn was more intense than the degree of digitalization (oecd 2001, 390). 35 spain had a degree of digitisation comparable to italy in transmission, far from the leading group — uk, denmark and the netherlands — and slightly higher in interurban communications; it ranked last in local communications (iwens 1986, 37). 36 in 1999, isdn bri tariffs ranked from lowest to highest gave germany first place, followed by two asian countries — singapore and malaysia — and three european countries — italy, finland and france. the list continued with japan, south africa, usa, belgium, ireland, united kingdom and austria (isdn user newsletter, 13, 6, november-december 1991). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 25 figure 3. isdn channels/100 inhabitants in the world, 2000-2004 source: prepared from telefónica, annual report(s). on the other hand, the deployment of the isdn found support in agreements between the operator telefónica and associations of interested companies, a topic to which specialists have devoted little attention. in this facet, an agreement was signed with the unión tabaquera de servicios to carry out a campaign to promote isdn, fax and private mailbox among the smes in the tobacconist network. the same applies to the agreement with caja madrid, hewlett packard española, instituto de empresa and microsoft españa to promote a consortium to promote isdn, video conference and frame-relay between managers of smes trained in business management programs. telefónica was to provide 25 million pesetas in 1997, in addition to the necessary technology (telefónica, 1997). in the year 1997, spain had 5 lines per thousand inhabitants, a figure that was only above greece and ireland (unesco 2000, 286). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 26 in imitation of some operators who, as mentioned above, attempted to find their own solutions, between 1995 and 1999 telefónica marketed the infovía service, the commercial name for access to information through the public switched network and integrated services digital network. the brand included a modem, a browser and a tariff for internet access from any point. it was also complemented with its own internet access service, called teleline, the germ of terra, a very unlucky website portal (abc, july 3, 2017).37 after a first extension, as the end date of the further extension of the infovía service approached — december 1, 1998 — the lack of adaptation of telefónica's network and internet access providers to ensure the transition to the new internet access provision regime offered by telefónica became apparent. this situation led to the further extension of the end of the infovía service until 17 january 1999 and its potential coexistence with any new services that might arise. in this last stage, solutions appeared that represented an important advance and promotion of the service, among them those of telefónica (infovia plus) and its competitors, as well as those approved by the government on the basis of technologies of the adsl type. the announced imminent disappearance of infovía caused the number of isdn lines to fall (graph 3), at the same time as the business model changed considerably. operators were forced to establish a fairly widespread network if they wanted to offer the subscriber a metropolitan tariff price for access.38 37 order of 11 january 1996 of the ministry of public works, transport and the environment issued the appropriate instructions to telefónica de españa, sociedad anónima. infovía, a kind of "closed internet", had a metropolitan call cost (comisión del mercado de las telecomunicaciones 1998, 139); grupo de tecnologías de la información y las comunicaciones 2017, 112). 38 data transmission operators wishing to transport user calls to the service provided by internet access providers had to activate a series of telephone numbers which subscribers could call to access the internet (comisión del mercado de las telecomunicaciones 1998). infovía plus, successor to the first infovía, was the majority access provider among users with 477,513 subscribers, as opposed to 136,796 from various providers with their own http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 27 telefónica developed telecommunication networks and infrastructures for institutions, professionals and companies. these include the aragonese institutional communications network (in spanish, raci), at the time considered the most important information highway in spain. in 1995, the isdn provided telefónica with access to the build net network, created by one of its subsidiaries and the architects' association of madrid and specialised in multimedia and interactive telecommunications services for the construction sector (telefónica 1995, 3).39 there is nothing better than using the actors involved in the deployment of access to the network to make an emergency assessment. in the opinion of one of the most outstanding, in spain the sector sinned of unpredictability and excess of security and confidence by continuing to bet on traditional methods, very standardised, with long development cycles and alien to the external environment (linares 2018, 113). on the other hand, the extension of the service to the entire spanish geography did not prevent the diversity and quality of the offer of services that could be received in each autonomous community and province (comisión del mercado de las telecomunicaciones 1998, 109). the challenge of the european single market sealed the strategy of equipment manufacturers and solution providers. adapting to open markets and being competitive became an immediate nodes, 91,191 from retevisión's retenet, 10,020 from british telecom's interpista (1998) and 296 from cable (comisión del mercado de las telecomunicaciones 1998, 109). 39 raci used technologies — synchronous digital hierarchy (sdh) and asynchronous transfer mode (atm) — that allowed the digital connection of the buildings, services and dependencies of the autonomous administration in aragon and the university of zaragoza. the government of aragon approved a framework agreement for the councils, associations and town councils to be incorporated into all the services offered by raci (aragon today, november 4, 1997). raci served the government of aragon and the regions of that autonomous community to sign an agreement-framework of collaboration for the exchange of services and applications of administrative management: boletín oficial de aragón [official gazette of aragon], 16, february 10, 2003). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 28 goal. universal standards, via generalization of user equipment in different environments and countries, would avoid de facto barriers and open up markets in other countries to industry (adanero 1989, 85).40 in the central triennium of the 1990s, equipment manufacturers and solution providers fought for the most substantial market share. the mechanism consisted of getting their products approved by the competent government body, the directorate general of telecommunications. seventeen companies competed for this equipment market — adapters, switchboards, processors, multiplexers, terminals, call concentrators, interfaces, and telephone equipment with interface — in those years. the bulk of these companies were composed of european multinationals — philips, alcatel, matra communication, ericsson or siemens — and north american — at&t, northern telecom and hewlett-packard — which placed in the spanish market the products manufactured mostly by their headquarters. at the same time, the multinationals strengthened their presence through their subsidiaries — alcatel standard eléctrica spain at the time — so that only exceptionally equipment or solutions were manufactured in spain by indigenous companies, namely amper and the iberian society of electrical transmissions (annex 1).41 40 for the implications of demand and supply for standards, see the previously cited work of david and steinmueller (1994, 217-241). 41 amper was mainly active in the field of terminals (adanero 1989, 85). ericsson conceived of "evolutionary and not revolutionary" isdn planning for md110, although he recognized that md110 was designed with isdn in mind from the beginning and that it changed information internally at 64 kbps speeds, making the switch an "isdn-ready" platform (information gatekeepers inc. 1994, 55). in 1989, ericsson set a three-phase strategy to migrate md110 to full isdn compatibility. phase i consisted of field trials, which eventually took place in the united states, australia and europe. phase ii of the strategy consisted of the general launch of the bri and pri interfaces, as well as the commercial launch by 1990. phase iii included compatibility with additional standard isdn products and services as they evolved (ericsson, annual report, 1988, 38; igic 1994, 55). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 29 a final note should be made about the end of the 1990s. at that time, companies were focusing on maximum customer loyalty — customer service centres, traffic and discount packages and comprehensive service —, new forms of market attention customer segmentation, multichannel strategy supported by global solutions — own 022 channel for smes, third channels contracted with companies — and new figures such as the 'approved consultant'. on the other hand, the offer of new services grew, especially with ip technology, among which the virtual private network stands out, in pilot phase, new modalities of ibercom, centrex, isdn, network intelligence and broadband (telefónica, minutes of the board of directors, october 29, 1997). technological innovation: the digital subscriber line the development of the isdn network is shown in graph 4, which displays the rise of the isdn and its subsequent decline dragged by the dsl (digital subscriber line) in its different variants. well it is true, dragged but not buried because, as some thought, the traditional advantages of the isdn — prices, applications and availability —, together with other planned ones — a third isdn channel, known as the d channel, with potential for always active data connectionallowed to predict the survival of this technology, so that it could mean "it's still doing nicely" (financial times, november 24, 1999). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 30 figure 4. telephone lines of access in the oecd by technologies source: elaborated from oecd (2007, 115). in 2000, the most important reasons for not having an isdn line in the eu were, in that order, lack of or insufficient knowledge of this technology in the provision of services (55.8%) and not being indispensable at home (26.7%). not having the necessary equipment was a minor reason (6.4%) as curiously was the price (13.6%) (european commission 2001, 185). during the 1990s, dsl and cable network technologies, wired or not, prevailed over isdn in modest home offices and small businesses. in addition, multi-service as well as highperformance, high-capacity broadband solutions based on atm (asynchronous transfer mode) technology overshadowed isdn (littman, 2002, 1). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 31 figure 5. dsl penetration across europe, 2002-2004 (%) source: autorité de régulation des télécommunications 2004, 94. the spread of dsl technology across europe occurred unevenly, as had happened with isdn.42 as graph 5 shows, in 2004, the leading group was made up of three countries in central and northern europe — denmark, belgium and the netherlands — with rates above 20% population coverage. it was followed by the bulk of countries with rates above the average for the eu-15 — france, italy, finland and sweden — or equal sweden. backward countries were portugal, luxembourg, ireland and greece (autorité de régulation des télécommunications 2004, 94; oecd 2008, 34). notwithstanding the similarities, compared to the deployment of isdn, there are some notable differences. undoubtedly, the main one refers to the substitution in european leadership, then embodied in two great powers — germany and france — by a trio of smaller countries — denmark, belgium and the netherlands. this uneven diffusion of dsl technology 42 users' preferences for high-speed access were due, in this order, to constant connection, speed and greater performance for games and leisure (isdn user newsletter, 14, 3, may-june 2000, 1). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 32 was due to a multiplicity of economic, social, cultural and institutional factors ranging from prices to regulation.43 spain was in the group with rates below the european average, to which two major european powers — germany and the united kingdom — belonged (autorité de régulation des télécommunications 2004, 94). this disparity in the intensity of dissemination by country corresponded to the same trend within spain. according to data from telefónica and the ine register, in 2003 the autonomous communities presented a marked contrast in their penetration. catalonia led the list of autonomous communities with 5,884 adsl lines per 100,000 inhabitants, closely followed by madrid (5,802) and the balearic islands (5,729). above the spanish average (3,844) but further away from the leading group were four communities — canary islands (4,902), melilla (4,956), ceuta (4,841) and aragón (3,369). according to some manufacturers, in 1999, isdn made a strong comeback. the internet boom gave operators wings to invest in greater capacity in the existing copper network. ericsson's products made it possible to increase bandwidth at the desired speed, first with isdn and then with adsl (ericsson 1999, 29). conclusion this article explores an episode related to telecommunications networks from a historical perspective and with an interdisciplinary approach. the study has briefly presented the 43 the access price is a differentiating factor expressly recognized, for example, by zolait (2013) in a case study. it seems appropriate to point out the potential influence of the dsl forum in different countries, as a non-profit association that aims to create guidelines for the development and deployment of dsl network systems (architecture & transport working group 2006). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 33 characteristics of the isdn/isdn and the lines of evolution at world level, and then focuses on the spanish case, from which it has drawn its differential characteristics. at the time of the conclusions, the first concerns general questions about the history of the technique, as indicated in the objectives of this study. the introduction of the isdn illustrates a concrete modality in the transition from a conceptual or engineering phase to a market phase in an internet access standard. according to the adopted theoretical framework, this process follows a long and intricate path, bringing together institutions of various levels, scientists, regulators, industry and business. it is clear that the approach and strategies followed by different countries for the introduction of isdn varied significantly from country to country. the competent spanish bodies understood isdn as the middle ground between basic telephone lines and broadband networks, called to cover the whole territory, as an indisputable need. in spain, the introduction of isdn anticipated the effective governmental guidelines, subsequently included in the national telecommunications plan, a possible consequence of the first regulatory framework for the sector established in spain.44 this country was placed in the avant-garde in the diffusion of isdn in europe. the work highlights the actions of the various actors involved. above all, it reveals spain's delay in the start of isdn operation and its poor position among european countries in the dissemination of this technology. among the reasons are the degree of digitalisation achieved in the telephone service, the priorities of the governments and the available resources as well 44 law 31/1987, december 18, de ordenación de las telecomunicaciones, boletín oficial del estado, 303, december 19, 1987, 37,409-37,419. http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 34 as the high tariffs. secondly, it points to the adoption by the then monopoly operator ctne of its own solutions independent of standards (infovía), a behaviour similar to that followed by some countries and operators. finally, it underlines the cooperative work carried out in the beginning of isdn implementation by the monopolistic operator ctne and the equipment manufacturer standard eléctrica. this collaboration was repeated in the actual stage of deployment between the ctne and various companies or organizations. to end with a touch of current affairs, spain displays today a diversity of factors in the dissemination of innovation. according to data from the spanish national statistics institute, the internet access of the main dwellings via fibre-optic connection — the most advanced form — is closely correlated with factors such as the size of the municipalities and the income level of the households. annex 1. acceptance of equipment by the spanish directorate general of telecommunications equipment brand model manufacturer date isdn basic access terminal adapter (net-3) hewlett-packard hp isdn bri hewlett-packard france, france 1994 private branch exchange with basic isdn access (net-3) philips sopho-s10 sopho-s15 sopho-s25 sopho-s35 philips b.c.s. small switching, uk 1994 computer adapter with basic isdn access (net-3) telefónica tarjeta s-pc alcatel standard eléctrica, spain 1994 switchboard ericsson md110 intelsa 1994 communications processor interface x.25 (net-2), nano pad sfa data communication s inc. nano turbo sfa data communications, usa 1994 digital switchboard with basic access to isdn (net-3) northern telecom meridian-1 northern telecom, ireland 1994 private switchboard with primary access to isdn (net-5) ericsson model md110/wallmounted ericsson, sweden 1995 http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 35 equipment brand model manufacturer date private switchboard with primary access to isdn (net-5) ericsson md-110/90 ericsson, sweden 1995 multiplexer with basic isdn access (net-3) ascom timeplex time/lan access router ascom timeplex ltd., uk 1995 pc adapter with basic isdn access (net-3) picturetel escab picturetel corporation, usa 1995 private switchboard with basic isdn access telenorma integral-331 telenorma, gmbh germany 1995 adapter for basic isdn access (net-3) avm avm-isdncontroller-a1 avm aud markt. und computersys, gmbh, germany 1995 private switchboard with primary access to isdn (net-5) hicom-392 siemens siemens, a.g. germany 1995 private switchboard with primary access to isdn ericsson businessphone -250 ericsson, austria 1996 private switchboard with primary access to isdn at&t definity g3i at&t, usa 1996 specific isdn terminal matra matracom 420(mc-420 matra communication, france 1996 concentrator with isdn primary access wyatts reuter company dk-200 ab electronic assemblies, uk 1996 isdn primary access interface coral pri-30 tadiran electronics industries, inc., israel 1996 specific isdn terminal matra matracom 420(mc-420) matra communication, france 1996 isdn telephone equipment with analogue interface interisa int-245 interisa electrónica, spain 1996 digital telephone equipment with basic isdn access telefónica irisdn amper telemática, spain 1997 isdn terminal adapter kit (basic access) e y p telecomunicación miniorion sociedad ibérica de transmisiones eléctricas, spain 1997 source: prepared from boletín oficial del estado of spain/ boe(s). http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 36 acknowledgements a preliminary version of this article has been published as “las tecnologías de acceso a internet en españa: nacimiento y evolución de la red digital de servicios integrados, 1984-2005.” actes d'història de la ciència i de la tècnica, vol. 11, 1, 2018, 69-93. this researcher acknowledges support from the centre d'estudis 'antoni de capmany' d'economia i història econòmica (universitat de barcelona). summary of acronyms used adsl: asymmetrical digital subscriber line cept: european conference of postal and telecommunications administrations dsl: digital subscriber line https: hypertext transfer protocol isdn: integrated services digital network pri: primary rate interface rdsi: red digital de servicios integrados servicio integral de comunicaciones de empresa (sice) tcp/ip: transmission control protocol over internet protocol primary sources comisión del mercado de las telecomunicaciones congreso de los diputados sénat de la france telefónica, libros de actas del consejo de administración newspaper and periodicals bit computerworld financial times isdn newsletter http://revistes.ub.edu/index.php/jesb volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb 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https://doi.org/10.1109/glocom.1990.116695 https://doi.org/10.1109/jsac.1986.1146336 https://doi.org/10.1109/tencon.1990.152734 volume 6, number 2, 1-41, july-december 2021 doi.org/10.1344/jesb2021.1.j091 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 41 roach, stephen s. 1987. america's technology dilemma: a profile of the information economy. new york: morgan stanley. ronayne, john. 1997. integrated services digital network: from concept to application. london-new york: crc press. rosenberg, nathan. 1982. inside the black box. technology and economics. cambridge: cambridge university press. shibata, tsutomu, editor. 2006. japan, moving toward a more advanced knowledge economy, 1: assessment and lessons. washington: world bank publications. solow, robert m. 1987. “we’d better watch out.” new york times book review (july 12): 36. staal, peter van der, volker grassmuck, and keiko hatta. 1995 “isdn in japan: 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terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb https://doi.org/10.1016/0308-5961(95)00030-a http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 116 natalia petelski darío milesi vladimiro verre instituto de industria, universidad nacional de general sarmiento (argentina) strategies of innovation and appropriation. sectoral analysis of argentine manufacturing firms abstract following the evolutionary and neoshumpeterian theoretical framework, this research studies how the appropriation strategy of firms is formed in different industrial sector and what factors explain the use of the mechanisms that firms use to protect their innovations. the analysis is based on evidence from argentine manufacturing firms surveyed by the national survey of employment dynamics and innovation (endei) for 2010-2012. the results of the statistical analysis allow to identify three clusters at the sectoral level with differentiated characteristics in terms of their innovation activities and business conformation. the cluster of high innovative activity shows a greater incidence of the use of secrecy and patents, while the cluster of low innovative activity presents a greater use of complementary assets and first mover. the econometric analysis (probit models) shows different effects of the factors considered (type of effort and innovative results, capabilities, linkages, structural factors) on the mechanism used, showing that the appropriation strategy is an emerging of innovation process and differs according to the sectoral cluster considered. the type of innovative effort affects only the appropriation strategy of the high and low innovative activity clusters; while the structural factors of firms explain only the appropriation strategy of sectors of high and medium innovative activity. keywords: innovation; appropriation; strategy corresponding author: e-mail: npetelski@campus.ungs.edu.ar received 23 oct 2019 accepted 19 dec 2019 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 117 1. introduction innovation and knowledge are increasingly relevant to explain the economic performance of firms. however, innovation becomes a central competitive element only when the innovator can appropriate its value and associated extraordinary rent. in the face of the threat of possible imitators, he displays what is known in the literature as an appropriation strategy, that is, the use of different legal and strategic mechanisms to protect the market of his innovative product and/or avoid or delay imitation in order to capitalize the benefits derived from its innovation. from the evolutionary and neoschumpeterian view (dosi 1982; pavitt 1984; winter 1984; dosi et al. 1994; freeman 1994; johnson and lundvall 1994; malerba and orsenigo 1997), it is argued that different sectors show different technological opportunities for innovation and different appropriability conditions, being the capabilities of the firms that operate in these sectors and their strategies who determine who take advantage of such opportunities and benefit from innovation. literature little discusses the relationship between innovation/appropriation and the real impact that the perception of appropriation has on the possible efforts of innovators, and there is a certain consensus that private efforts to innovate are made when expectations about private appropriation of benefits from innovation are positive. most of the appropriation literature are, on the contrary, oriented to the analysis of the mechanisms and strategies that firms use to protect their innovations once they are introduced into the market (teece 1986; levin et al. 1987; harabi 1995; cohen et al. 2000; arundel 2001; galende del canto 2006; gonzález-álvarez and nieto-antolín 2007; among others). in this context, the purpose of the paper is to analyze how industrial firms define their appropriation strategy based on the general hypothesis that the appropriation strategy is an http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 118 emerging decision of the innovation process, and as such, sectoral cluster to which the firm belongs also affects. thus, based on a theoretical model that links the characteristics of the innovation process and the different appropriation mechanisms used by the firm, it is sought to identify the factors that explain their choice and whether there are sectoral regularities in the conformation of the appropriation strategy of firms. the research is based on empirical evidence of argentine manufacturing firms surveyed by the national survey of employment dynamics and innovation (hereinafter endei) for the period 2010-2012. a quantitative methodology is followed. first, a cluster analysis is carried out to classify the industrial sectors according to their innovative activity. through the statistical analysis of the available information, the innovative activity and appropriation strategy of the sectoral clusters are characterized. then, probit models are estimated to identify the factors that explain the probability of using the different mechanisms for each of the sectoral clusters and to evaluate how the factors that characterize the innovation process and the structural characteristics of the firms influence the sectoral appropriation strategy. the document is organized as follows. section 1 covers the theoretical discussion on appropriability and innovation and introduces the conceptual framework. section 2 presents the data and the results of the cluster analysis. section 3 presents the statistical analysis of the innovation and appropriation strategy of the sectoral clusters. section 4 sets out the methodology for the analysis of the determinants of the sectoral appropriation strategy. section 5 presents the results of the probit models. finally, section 6 summarizes the main conclusions. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 119 2. conceptual framework from the evolutionary and neoschumpeterian view (dosi 1982; pavitt 1984; winter 1984; dosi et al. 1994; freeman 1994; johnson and lundvall 1994; malerba and orsenigo 1997) technological change is determined by the specific opportunities derived from each technological paradigm (dosi 1982) and their interaction with economic, institutional, organizational, social and political factors. innovation is conceived as a dynamic and social process, which arises from the interaction and synergies between different types of actors that accumulate capabilities and knowledge through learning processes specific to the agents that own them. in this context, the capabilities of firms and their strategies define who takes advantage of such opportunities and benefits from innovation. the innovative activity is aimed at differentiating the firm's products and positioning them in the market, to obtain an extraordinary benefit (quasi-rent) based on the privileged position derived from its innovation. however, if the knowledge incorporated into new products and processes can be imitated at a relatively low cost, the remaining benefits may not be sufficient to justify the innovative effort. in this sense, the appropriation literature points out the importance of generating conditions that favor a greater private appropriability, in order to stimulate investment in r&d, justifying regulation through intellectual property rights (ipr) as a necessary condition to invest in innovation. this line of thinking is based on arrow's (1962) approach about the existence of market failures, caused by uncertainty about the results of innovative efforts and about the private appropriation of the benefits of innovation, which lead to a lower investment in innovation by comparison with the socially desirable. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 120 however, the theoretical discussion about the real impact that the perception of appropriation has on innovative efforts is not completely resolved. other authors assign a lower role to appropriability as an incentive for technological innovation and argue that innovation efforts depend more on the capabilities and strategies of the firms than on the conditions of appropriation of the results of such efforts (geroski 1995; klevorick et al. 1995; veugelers and cassiman 1999). in the same direction, dosi et al. (2006) argue that minimum conditions of appropriability are necessary to encourage innovation, but after companies reach a certain minimum threshold in their perception of appropriation, further strengthening of these conditions does not determine a significant increase in investment in r&d or in innovation rates. these define the position that supports this work, since as we have pointed out, it based on the general hypothesis that the appropriation strategy is an emerging decision of the innovation process. in milesi et al. (2014), the authors point out a certain contradiction in arrow's approach, since on the one hand, a regulatory mechanism is proposed arguing that the innovation process is intrinsically uncertain and, on the other, an ipr scheme is suggested that ensures the appropriation of an innovation that the potential innovator, by the same argument, has not any certainty of obtaining. parallel to this theoretical debate a more empirical literature has mostly focused on identifying the mechanisms used by firms to protect and appropriate the benefits of innovation once it has been obtained (teece 1986; levin et al. 1987; harabi 1995; cohen et al. 2000; arundel 2001; galende del canto 2006; gonzález-álvarez and nieto-antolín 2007; among others). the main mechanisms of appropriation can be classified into two broad categories: on the one hand the legal ones, which include the patent (or license, when the owner of the patent yields the right of its exploitation), the utility models and the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 121 industrial/design models; and on the other hand the strategic ones, especially complementary assets, industrial secret and first mover. the patent is a legal provision by which the inventor of a new device or process is assigned an exclusive (temporary) right over the production or use of it (griliches 1990). the literature notes that the information that firms must disclose when publishing the patent (disclosure) allows competitors to legally innovate "around" that patent, this risk of copying is greater in process innovation (levin et al. 1987; cohen et al. 2000; blind et al. 2006). the utility model is a right granted to a new form obtained in a known object that implies a better use in its function. the industrial/design model is rights granted to protect the original and ornamental features that derive from the design activity. this mechanism does not protect the functionalities of the products. the complementary assets is a concept introduced by teece (1986) to highlight its importance as a strategic appropriation mechanism, emphasizing the fact that their possession or not determines the distribution of the benefits of innovation and market power. teece identifies both productive assets (competitive manufacturing, scale, quality, etc.) and commercial assets (distribution channels, marketing, after-sales services and complementary technologies). the industrial secret is the adoption of means or systems to preserve confidentiality and restrict access to relevant technological information (cep 2006). the literature finds that this mechanism is more effective to protect process than product innovations, given the risk of imitation through reverse engineering (harabi 1995; arundel 2001; fernández sánchez 2004). the first mover is the strategy of introducing a product/service to the market before the competitor, in order to obtain a temporary advantage (temporary monopoly) that allows the innovative firm to appropriate the benefits of its innovation. in relation to this strategy, it is necessary to differentiate between those firms that launch an innovation that materializes a new concept of http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 122 those firms that are moving based on successive incremental innovations, the latter being the way in which this mechanism is mostly used in developing countries (levin et al. 1987; lieberman and montgomery 1988; fernández sánchez 2004; galende del canto 2006; gonzález-álvarez and nieto-antolín 2007)1. given the diverse characteristics and spaces of effectiveness of the different appropriation mechanisms, firms usually use them simultaneously and in a complementary way (hurmelinna-laukkanen and puumalainen 2007; laursen and salter 2005) forming what is known in the literature as “strategy of appropriation” (cohen et al. 2000). the literature finds that the use and effectiveness of appropriation mechanisms vary according to the industrial sector (mansfield 1986; levin et al. 1987; arundel and kabla 1998; brouwer and kleinknecht 1999; cohen et al. 2000; neuhäusler 2012; hurmelinna-laukkanen et al. 2016; paula and da silva 2019). several empirical studies that analyze the use of appropriation mechanisms, mostly oriented to the study of patents, also point out differences according to the size of firms (levin et al. 1987; arundel and kabla 1998; brouwer and kleinknecht 1999; cohen et al. 2000; combe and pfister 2000; arundel 2001; sattler 2003; chabchoub and niosi 2005; blind et al. 2006; hanel 2006; byma and leiponen 2007; leiponen and byma 2009; neuhäusler 2012; holgersson 2013; milesi et al. 2013; paula and da silva 2019; among others); ownership of the capital of the firm (arundel 2001; cincera 2005; hu and jefferson 2005; lópez and orlicki 2007; lópez 2009; neuhäusler 2012); the exporting condition of the firm (arundel and kabla 1998; hurmelinna-laukkanen et al. 2016); public financing for r&d (cincera 2005); r&d cooperation (brouwer and kleinknecht 1999; 1 for a more detailed description of each appropriation mechanism, see milesi et al. (2017). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 123 arundel 2001; leiponen and byma 2009; milesi et al. 2017), although without reaching conclusive results on the impact of such factors. the sectoral consideration pointed out by the evolutionary and neoschumpeterian view and by the empirical works of use of mechanisms constitutes a central dimension of analysis in the present investigation. therefore, in section 2 below, a classification of the industrial sectors is carried out using the technique of cluster analysis; in order to characterize and compare the innovation and appropriation strategies of firms according of their sectoral clusters of belonging. the others characteristics of the firms mentioned by the empirical studies of appropriation (size, ownership of the capital, the exporting condition, public financing for r&d and r&d cooperation) are taken into consideration in section 4.2 to define the set of indicators used for the econometric analysis. 3. data the research is based on data collected by the national survey of employment dynamics and innovation (endei) carried out by the ministry of science, technology and productive innovation (mincyt) and the ministry of labor, employment and social security (mteyss) of argentina. the endei has a national scope, covers all industrial sectors, is representative of firms with 10 or more employees and provides information regarding the 2010-2012 period. the endei base is composed of 3691 companies and reports firm's economic activity at two digits according to the international standard industrial classification of all economic activities (isic rev. 3). the technique of cluster analysis is applied to classify sectors acording to their innovative activity, in order to study the characteristics of each of these groups and identify if there are http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 124 sectoral regularities in the conformation of the appropriation strategy of firms. the grouping of industrial sectors is based on three types of technological indicators. first, the firm's decision to invest or not in different types of innovation activities, calculated by the percentage of firms in the industrial sector that invest in each type of innovation activities (internal r&d, external r&d, industrial design and engineering, machinery and equipment, hardware and software, training, technology transfer, consulting). second, the intensity of such investments in relation to current income, calculated by the average for each industrial sector of the participation of the firm's expenditure in different types of innovation activities in relation to its current income. finally, the structure or composition of investments in innovation, in order to capture how firms distribute their total investment in innovation activities (sectoral average proportion of each type of investment). the cluster analysis uses the k-means method (k=3), suitable for quantitative variables, calculating the measure of distance or similarity between cases by means of the euclidean distance without standardization (since all variables are measured as percentage and are thus on a 0-1 scale). table 1 below shows the sector grouping that the cluster analysis yields. it can be seen that the cluster 1 groups the most knowledge intensive industrial sectors such as chemistry, medical instruments, oil production and various types of machinery and equipment. on the other hand, more capital-intensive sectors such as automotive and transportation equipment, metal fabrications, non-metallic minerals and rubber and plastic products are grouped in cluster 2. finally cluster 3 groups those branches of mass consumption, more intensive in labor and natural resources, such as food and beverages, textile products, apparel, leather, wood, furniture, paper and publishing. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 125 table 1. classification of sectors according to the cluster analysis innovative activity cluster1 cluster2 cluster3 sectors* firms sectors* firms sectors* firms 24 = chemical products 317 25 = rubber and plastics products 192 15 = food products and beverages 734 29= machinery and equipment 402 26 = other nonmetallic mineral products 130 17 = textile products 198 30 = office, accounting and computing machinery 135 27 = basic metals 129 18 = wearing apparel 146 33= medical instruments 79 28 = other metal products 228 19 = leather 135 99 = rest (oil; other machinery and electrical equipment; tobacco) 86 34 = motor vehicles, trailers and semitrailers 171 20 = wood 131 35 = other transport equipment 74 21 = paper 135 22 = publishing 136 36 = forniture; manufacturing industry n.e.c. 133 total firms 1,019 924 1,748 note: *isic rev. 3 two digits source: own elaboration table 2 characterizes each sectoral cluster according to five dimensions. on the one hand, it can be observed that all clusters are similar in terms of size (mostly smes) and age (majority of older firms). on the other hand, the clusters are different in terms of ownership of capital and market orientation. cluster 1 shows the highest percentages of multinationals, http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 126 corporations and exporters while, opposite to it, cluster 3 shows the lowest proportion in all three dimensions. somewhere in between is cluster 2 with percentuals similar to the whole data base average. table 2. characterization of sectoral clusters firms cluster 1 (%) cluster 2 (%) cluster 3 (%) total (%) smes* 80.0 78.7 80.0 79.7 age** 23.3 23.2 29.7 26.3 multinational 14.2 9.5 6.1 9.2 corporations 16.2 11.7 10.4 12.3 exporter 56.5 38.3 28.8 38.9 note: * less than 100 employees; ** 10 or less years old source: endei 2010-2012. 4. innovation strategy and appropriation of sectoral clusters in order to characterize and compare the innovation strategy of the sectoral clusters identified in the previous section, table 3 shows for each cluster, the average percentage of firms in each industrial sector that invest in different types of innovation activities. it is observed that cluster 1 forms the group of high innovative activity, showing an average of 76.6% of firms that invest in innovation. the percentage is higher also considering the different allocation. although the acquisition of machinery and equipment is the main use of the innovation investment (62.8%), the greatest relative difference among clusters occurs in internal r&d, with 58% of the firms of cluster 1 spending on that innovation activity, against 40.7% of cluster 2 and 30% of cluster 3. cluster 2, meanwhile, shows intermediate values in the percentage of firms that invest in innovation, about 67.6% on average, showing a percentage http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 127 closer to cluster 1 in the case of industrial design and closer to cluster 3 considering the expense in technology transfer. finally, cluster 3 is considered of low innovative activity, with almost 59% of the firms that invest in innovation activities on average, strongly prevailing the machinery and equipment allocation (52.7%). table 3. percentage of firms that invest in different types of innovation activities type of innovation investment cluster total firms (%) cluster high (%) cluster medium (%) cluster low (%) total innovation activities 76.6 67.6 58.9 66.0 internal r&d 58.0 40.7 29.8 40.3 external r&d 26.1 18.8 13.3 18.2 industrial design 51.3 43.7 24.5 36.7 machinery & equipment 62.8 59.5 52.7 57.2 hardware & software 45.9 39.7 33.3 38.4 training 48.2 41.2 32.4 39.0 technology transfer 16.5 8.9 7.9 10.5 consultancy 41.2 35.0 26.3 32.6 source: own elaboration based on endei 2010-2012. considering the average intensity of the innovation investment, measured as the expense in different types of innovation activities in relation to the current income of the firm, table 4 shows that in aggregate terms there is not difference between the three clusters, which allocate approximately 3.3% of their current income to investment in innovation. the main difference is observed in the allocation of it. although in all cases the greatest effort in innovation is oriented to the acquisition of machinery and equipment, the sectors of cluster 1 show a greater http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 128 relative intensity in r&d (0.95%), mainly internal but also external, and industrial design and engineering (0.4%), highlighting the complementarity between the acquisition of incorporated technology and the generation of knowledge; while in the case of cluster 2 and 3, the intensity in machinery and equipment (2.7%) strongly predominates over the other allocations. table 4. intensity of investment in different types of innovation activities type of innovation investment cluster total firms cluster high cluster medium cluster low innov.act /current-income 0.0331 0.0345 0.0334 0.0336 i+d total/current-income 0.0095 0.0045 0.0029 0.0051 int.r&d/current-income 0.0087 0.0036 0.0024 0.0045 ext.r&d/current-income 0.0017 0.0013 0.0008 0.0012 ind.design/current-income 0.0040 0.0036 0.0013 0.0026 mach & equipment/current-income 0.0177 0.0268 0.0268 0.0243 hard & soft/current-income 0.0012 0.0011 0.0009 0.0010 tech.transfer/current-income 0.0019 0.0004 0.0004 0.0008 training/current-income 0.0007 0.0006 0.0004 0.0005 consultancy/current-income 0.0017 0.0013 0.0010 0.0012 source: own elaboration based on endei 2010-2012. this last result is also reflected when considering the composition of the distribution of total innovation expenditures as table 5 shows. the sectors that form the cluster 1 show a more homogeneous distribution of innovation spending, allocating 41.7 % to machinery and equipment, 23.4% to internal r&d and almost 12% to industrial design. on the contrary, in those sectors of medium and low innovative activity, the acquisition of machinery and equipment predominates, by allocating 56.5% and 66.5% respectively of their total innovation http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 129 investment to that use. however, although to a lesser extent, the cluster 2 of medium innovative activity is closer to the high cluster when considering r&d activities (internal and external) and industrial design. table 5. distribution of total innovation expenditure in their different allocations type of innovation investment cluster total firms cluster high cluster medium cluster low int.r&d/innov.act 0.234 0.134 0.089 0.140 ext.r&d/innov.act 0.040 0.031 0.026 0.031 ind.design/innov.act 0.119 0.097 0.039 0.076 mach & equipment/innov.act 0.417 0.565 0.665 0.571 hard & soft/innov.act 0.065 0.073 0.083 0.076 tech.transfer/innov.act 0.023 0.012 0.010 0.014 training/innov.act 0.030 0.020 0.023 0.024 consultancy/innov.act 0.072 0.066 0.064 0.067 source: own elaboration based on endei 2010-2012. considering the obtaining of product and/or process innovations, table 6 below shows that 71.2% of the firms in cluster 1 have innovated in the analyzed period, while the percentage of innovative firms reach 62.1% considering the sectors of cluster 2 and 54.4% in the case of cluster 3. taking into account the type of innovation, the data indicate that although in the three clusters it is majority the number of firms that obtain simultaneously product and process innovations, the incidence of firms that innovate only in process increases as we mover from cluster 1 to cluster 2, and from the latter to cluster 3, highlighting that in sectors of less innovative activity, although product innovations predominate, it becomes more important the process innovations. the cluster of high innovative activity also shows a greater http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 130 participation of firms that obtained commercialization (23.3%) and organizational (26.8%) innovations, the latter being superior in the three sectoral clusters. table 6. percentage of innovative firms by type of innovation firms cluster cluster 1 high (%) cluster 2 medium (%) cluster 3 low (%) innovative* 71.2 62.1 54.4 only product** 19.3 15.2 13.4 only process** 10.6 11.1 12.5 product&process** 70.1 73.7 74.1 organizational * 26.8 24.5 20.5 commercialization * 23.3 17.1 18.8 note: (*) % calculated on total firms of the cluster. (**) % calculated on the total of innovative firms in product and/or process of the cluster. source: own elaboration based on endei 2010-2012. in summary, the analysis of the innovation strategy shows that, although in aggregate terms the argentine manufacturing firms analyzed have invested approximately 3.3% of their current income in innovation activities between 2010-2012, the sectors identified as high innovative activity are characterized not only by a greater number of firms that carry out innovations activities of all types, but also they have distributed the funds more homogeneously by combining the acquisition of machinery with investment in r&d. on the contrary, in those sectors of medium and low innovative activity the acquisition of machinery and equipment predominates strongly. this translates into a higher proportion of innovative firms in the case of cluster 1 (71.2% versus 54.4% observed in cluster 3); and although more than 70% of the innovative firms in each of the clusters obtained simultaneous product and http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 131 process innovations, the incidence of process innovations is greater in the cluster of medium and low innovative activity, which mainly include intensive capital and mass consumption sectors, respectively. considering the appropriation strategy of innovative firms in product and/or process, the vast majority of argentine manufacturing firms have use at least one appropriation mechanism to protect their innovations in the 2010-2012 period (87.1% of cluster 1; 84.4% of cluster 2 and 83.4% of cluster 3). figure 1. number of appropriation mechanisms used by sectoral cluster (% cluster firms) source: own elaboration based on endei 2010-2012. figure 1 shows the percentage of firms of each sectoral cluster that uses different amounts of appropriation mechanisms to configure its appropriation strategy. it is observed that cluster 1 seems to show greater diversification in the use of appropriation mechanisms, since the number of firms that simultaneously use three mechanisms (18.1%) predominates, being also 18,1%16,5% 19,1% 0% 5% 10% 15% 20% 25% 1 2 3 4 5 6 7 8 9 10 11 12 number of mechanisms used cluster 1 cluster 2 cluster 3 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 132 considerable the number of firms that use between six and seven (8.8% and 6.7% of the firms in cluster 1 respectively). cluster 2 of mediam innovative activity is mostly identified with the use of a single appropriation mechanism (16.5%) and almost half of the firms that form this sectoral cluster rely on only three mechanisms. finally, cluster 3 shows a conformation similar to that observed by cluster 2, although it mostly relies on two mechanisms (19.1%). figure 2 shows that the appropriation strategy of argentine manufacturing firms relies mainly on the use of their complementary assets (productive and commercial), since more than 80% of the firms that form each of sectoral clusters have protected the innovations of the analysed period through this mechanism. considering the instruments included in this type of mechanism, it is more widely used the active communication with customers (reaching 69.1% of the firms in cluster 1 and 62.1% of cluster 3) and the production scale (between 43% and 47% according to the cluster). the comparison among clusters highlights the greater relative use of the production scale and distribution networks in the case of the low innovative activity cluster, as expected taking into account the sectors that form it. another difference among clusters is manifested in the use of secrecy, which in the analysis includes not only technological secrecy, as generally is considered by the literature, but also its use in relation to the firm's human resources (confidentiality contracts). the secrecy is more used in firms with high innovative activity (46.6%), which incidence is well above that observed for the sectors that form the cluster of low innovative activity (29.5%) and practically doubling the incidence of use of this mechanism in the case of medium innovative activity sectors (21.1%). for the rest of the mechanisms analyzed, the incidence of use is reduced as one passes to clusters of less innovative activity, with the only exception of the utility model, which is http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 133 higher in the case of cluster 2. this would indicate a correlation between the level of innovative activity and the use of mechanisms to protect innovations. figure 2. type of appropriation mechanisms used by sectoral cluster (% cluster firms) source: own elaboration based on endei 2010-2012. finally, it is interesting to analyze which cluster shows a greater relative use of each mechanism. figure 3 below groups the different complementary assets (productive and commercial) and considers only the patents among the legal assets for being the instrument of greatest use within this group. the data clearly differentiate the appropriation strategy of the cluster of high and low innovative activity; since considering the total number of firms that use patents and secrecy, the sectors that form the high innovative activity cluster predominate (44% and 43.9% respectively), while on the contrary, considering the total number of firms 0% 20% 40% 60% 80% 100% utility model industrial design/model patents secrecy production scale supplies access customer contract trademark distribution networks customers communication complementary assets first mover cluster 1 cluster 2 cluster 3 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 134 that use complementary assets and first mover, most of them belong to sectors included in the cluster of low innovative activity (41.8% and 39.7% respectively). figure 3. use of appropriation mechanisms according to sectoral cluster source: own elaboration based on endei 2010-2012. in this way, the appropriation strategy analysis shows that complementary assets are the most widely used appropriation mechanism in the case of the analyzed industrial manufacturing firms, regardless of their industrial sector. within this type of mechanism, active communication with customers (customer loyalty) becomes more relevant, with greater incidence in cluster 1, and the production scale, mostly in cluster 2 and 3. the cluster of high innovative activity is characterized for combining a greater number of mechanisms to configure its appropriation strategy, also showing a greater incidence of use of secrecy; while it forms the cluster with the greatest presence within the total firms that patent. on the contrary, the cluster of low innovative activity is majority when considering the total firms that use the complementary assets and first mover. 32,4% 29,5% 41,8% 39,7% 23,6% 26,7% 25,3% 25,1% 44,0% 43,9% 32,9% 35,2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% patents secrecy complementary assets first mover cluster 1 cluster 2 cluster 3 http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 135 5. methodology for the analysis of the determinants of the sectoral appropriation strategy 5.1. model specification in order to study what factors impact to the conformation of the sectoral appropriation strategy, probit models (or the alternative, logit models) can be proposed to explain the probability of use of each mechanism, which are estimated for firms belonging to the sectors that form each cluster. the model specification is as follows: 1 with probability 𝑝, 0 with probability 1 − 𝑝 𝑝𝑖 ≡ 𝑃𝑟[𝑦𝑖 = 1 | 𝑥 ] = 𝐹(𝑥𝑖 ′ 𝛽) where f (∙) is a cumulative distribution function in order to ensure that 0 ≤ 𝑝 ≤ 1, being in the case of the probit models estimated in the present investigation the cumulative distribution function of the standardized normal (greene 2003). 5.2. indicators table 7 summarizes the indicators used for the econometric analysis. the explained variables are binary, and take value 1 if the firm has used the mechanism considered to protect its product and/or process innovations for the 2010-12 period. among the legal mechanisms only patents are analyzed, given that the small percentage of utilization of industrial design/model and utility models does not allow the econometric estimation. the patent variable (pat), considers both the firms that have patented and those that have patents in process during the period. among the strategic mechanisms, secrecy (sec) takes into account both the use of technological secrecy and refered to human resources, as previously mentioned. y = http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 136 complementary assets (ass) include productive and commercial mechanisms. finally, first mover or to reach the market first (mov) mechanism is analyzed. among the explanatory variables, the model includes variables that reflect the innovative behavior of the firm in terms of investments (type of innovation expenditure) and results (type of innovative result), following what was stated in the initial discussion about the emerging nature of the appropriation strategy, which is defined based on the path of the innovation process itself. the paper distinguishes among three types of innovation activities that firms can carry out: the generation of technology, which contemplates the cases in which firm invested in r&d and/or industrial design and engineering (binary variable rde); the acquisition of incorporated technology, which capture the investment in machinery and equipment, hardware and software (inctec); and the acquisition of disembodied technology, which takes into account technology transfer, training and consulting (distec). the results of the innovative process are measured from binary variables that indicate whether the firm has achieved product (prod), process (proc), organizational (organ) or commercialization (com) innovations during the analyzed period. the potential capacity of firms to innovate is approximated through a continuous variable (prof) that measures the proportion of engineers and professionals in the total employees of the firm, seeking to capture the accumulated technological skills. a binary variable is also incorporated to indicate whether the firm has a department or formal r&d area (rddep). the links with other agents to innovate and the use of external sources of knowledge are also considered in the model. it is distinguished, on the one hand, if the firm is linked to other firms (linkf) to jointly carry out innovation activities (r&d, technological exchange, testing and research trials, development or improvement of products/processes, industrial http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 137 design and engineering); and on the other hand, if the firm is linked to these innovation activities with universities (public and/or private) and public institutions of science and technology (s&t) (linku). the firm's access to public financing for innovation, through innovation oriented support programs or human resources training (pubs) is also considered. table 7. indicators indicators description variable pat use of patents binary sec use of secrecy binary ass use of complementary assets binary mov use of first mover binary rde investment in r&d and/or industrial design and engineering binary inctec investment in machinery and equipment, hardware and software binary distec investment in technology transfer, training and consulting binary prof proportion of engineers and professionals in the total employees continuous (0/1) linkf link to other firms binary linku link with universities and public institutions of s&t binary pubs firm benefited with public support to innovation binary rddep firm with formal r&d area or department binary prod innovation of product binary proc innovation of process binary org innovation organizational binary com innovation of commercialization binary size logarithm of total number of employees continua age young company: 10 years or less of age binary mnc firm with foreign capital participation binary group firm belonging to an economic group of companies binary x exporting firm binary sectoral dummies dummies indicating the industrial sector (d1 to d18) binary source: own elaboration based on endei 2010-2012. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 138 finally, among the structural characteristics of the firms, it is considered the firm size by a continuous variable (size) that measures the number of employees (in logarithmic scale); the age by a binary variable (age) that takes value 1 to indicate a young company (10 years or less); the ownership of capital by a binary variable (mnc) that indicates that the firm is multinational; the belonging to a group of companies controlled by a holding (binary variable group); and the market orientation by a binary variable that indicates that the firm is an exporter (x). the industrial sector to which the firm belongs is controlled by a dummy variable (according to isic rev. 3 two digits). 6. results of the econometric analysis for the econometric analysis, the sample of firms is divided according to their sectoral cluster, estimating the probit models for each mechanism at the firm level within each cluster. table 8 shows the results for the industrial sectors that form the cluster 1 of high innovative activity (chemical and medical instruments, the production of oil and various types of machinery and equipment), table 9 for cluster 2 of medium innovative activity (automotive and transport equipment, metal fabrications, non-metallic minerals and rubber and plastic products) and table 10 for cluster 3 of low innovative activity (food and beverages, textile products, apparel, leather, wood, furniture, paper and publishing). the results are analyzed by a double direction. on the one hand, comparing between clusters (vertical analysis) to identify sectoral specificities in the factors that explain the use of each particular mechanism (summarized in tables 11 to 14). on the other hand, as a synthesis of these results and to highlight the sectoral differences, comparing the results within each cluster, in order to identify the differentiated impact of the innovative process and structural factors in the use of the different mechanisms (horizontal analysis). http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 139 table 8. probit models: cluster 1 explanatory variables (x) patents secrecy comp. assets first mover f=pr(pat=1) f=pr(sec=1) f=pr(ass=1) f=pr(mov=1) df/dx (a) df/dx (a) df/dx (a) df/dx (a) rde 0.0532 0.0992 0.0439 0.1584 ** inctec 0.0376 0.0723 -0.0468 -0.1465 ** distec 0.0064 0.0977 * 0.0406 0.0772 prof 0.1519 0.4585 *** 0.0784 0.1515 linkf -0.0120 -0.0322 0.0249 -0.0076 linku 0.0674 ** 0.1943 *** 0.0389 0.0383 pubs -0.0036 -0.1315 0.0035 0.0224 rddep 0.0428 0.1217 ** 0.0105 0.1480 *** prod 0.0338 0.2261 *** 0.2658 *** 0.1929 *** proc -0.0680 * -0.0093 0.0883 ** -0.0389 org 0.0235 0.0138 0.0605 ** 0.0579 com 0.0585 * 0.0691 0.0847 *** 0.0314 size 0.0489 *** 0.0064 0.0305 * 0.0043 age 0.0006 -0.0399 0.0192 -0.0796 * mnc -0.0165 0.0594 0.0163 -0.0022 group -0.0445 0.0241 -0.0334 -0.0664 x 0.0126 0.0285 -0.0044 -0.0068 sectoral dummies included included included included observations 697 697 697 697 pseudo r2 0.1105 0.1457 0.1489 0.0771 chi2 70.42 (0,00) 140.39 (0,00) 94.89 (0,00) 70.50 (0,00) log likelihood -283.34798 -411.47548 -271.11605 -421.92472 prediction 83.79% 69.44% 82.93% 68.15% (a) marginal effect, ***significant at 1%; **significant at 5%; *significant at 10% http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 140 table 9. probit models: cluster 2 explanatory variables (x) patents secrecy comp. assets first mover f=pr(pat=1) f=pr(sec=1) f=pr(ass=1) f=pr(mov=1) df/dx (a) df/dx (a) df/dx (a) df/dx (a) rde 0.0282 0.0892 0.0462 0.0228 inctec 0.0411 -0.1449 -0.0638 -0.0385 distec -0.0414 -0.0718 0.0438 -0.0245 prof 0.2860 ** 0.1562 -0.6642 *** 0.0275 linkf -0.0063 0.0413 -0.01189 0.0072 linku 0.03769 0.1725 *** 0.0697 * 0.03452 pubs -0.0436 -0.0098 0.0579 0.0576 rddep 0.1305 *** 0.0884 0.1092 ** 0.0973 prod 0.0570 0.1572 ** 0.2165 *** 0.1297 * proc -0.0323 0.1724 *** 0.0987 * -0.0555 org 0.0140 0.0727 -0.0594 0.1330 *** com 0.0222 -0.0375 0.0883 ** 0.0353 size 0.0181 0.0050 -0.0177 0.0076 age -0.0319 0.0272 0.0096 0.0351 mnc -0.0348 0.0033 0.0904 -0.0418 group 0.0895 * 0.0471 -0.0946 0.0718 x 0.0486 * 0.0949 ** 0.0408 * 0.0894 ** sectoral dummies incluidas incluidas incluidas incluidas observations 552 552 552 552 pseudo r2 0.2117 0.0925 0.1137 0.0830 chi2 85.54 (0,00) 66.84 (0,00) 61.07 (0,00) 58.29 (0,00) log likelihood -159.2925 -327.99694 -238.03395 -322.20969 prediction 89.49% 68.66% 81.34% 67.75% (a) marginal effect, ***significant at 1%; **significant at 5%; *significant at 10% http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 141 table 10. probit models: cluster 3 explanatory variables (x) patents secrecy comp. assets first mover f=pr(pat=1) f=pr(sec=1) f=pr(ass=1) f=pr(mov=1) df/dx (a) df/dx (a) df/dx (a) df/dx (a) rde 0.0301 0.1244 *** 0.0556 * 0.0557 inctec 0.0099 -0.0137 0.0426 0.0416 distec 0.0159 0.0580 0.0852 *** 0.0079 prof 0.1497 * 0.1704 0.1829 -0.0150 linkf -0.0172 0.0243 0.0224 0.0623 * linku 0.0156 0.0900 *** 0.0354 0.0447 pubs -0.0141 -0.0669 0.0546 0.1147 rddep 0.0736 *** 0.1069 ** 0.0254 0.1382 *** prod 0.0348 0.1722 *** 0.1575 *** 0.2866 *** proc 0.0029 0.0232 -0.0247 0.0381 org -0.0065 0.0519 * 0.0003 0.0454 com 0.0686 *** 0.0459 0.1225 *** 0.0851 ** size 0.0082 0.0190 -0.0047 0.0091 age 0.0241 0.0032 0.0458 0.0654 * mnc 0.0198 0.0947 -0.0081 0.0143 group 0.0019 -0.0499 0.0060 0.1328 ** x 0.0209 0.0418 0.0038 -0.0041 sectoral dummies incluidas incluidas incluidas incluidas observations 904 904 904 904 pseudo r2 0.1259 0.1501 0.1131 0.1316 chi2 71.54 (0,00) 148.86 (0,00) 100.52 (0,00) 147.66 (0,00) log likelihood -248.31461 -421.47527 -393.94525 -487.23654 prediction 90.60% 77.1% 81.08% 71.79% (a) marginal effect, ***significant at 1%; **significant at 5%; *significant at 10% considering the patents, it is observed that the realization of efforts in innovation does not affect its probability of use in any of the sectoral clusters. in the case of medium and low innovative activity cluster its use is associated with the capabilities of the firms and formal http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 142 research; since a 10% increase in the proportion of qualified employment raises the probability of use of patents by 28.6% in the sectors of cluster 2 and 15% in the case of cluster 3; while having a department or formal r&d area increases the probability by 13.1% and 7.4% respectively. on the contrary, in the case of industrial sectors with high innovative activity, the probability of using patents is higher in those firms that have linked with universities and public research centers to innovate (6.7%). for these sector there is a significant negative incidence of obtaining process innovations (-6.8%), indicating as mentioned in the literature (harabi 1995; arundel 2001; fernández sánchez 2004) that this mechanism is less used to protect this type of innovations. there is a greater probability of use patents in the case of firms that obtained innovations of commercialization belonging to sectors that form the cluster 1 (5.9%) and cluster 3 (6.7%). table 11. probit models: patents patents cluster 1 high cluster 2 medium cluster 3 low rde inctec distec prof + + linkf linku + pubs rddep + + prod proc org com + + size + age mnc group + x + http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 143 the structural factors are not significant to explain the patenting in the sectors of low innovative activity. on the contrary, it is observed a greater probability of use of patents in the case of larger firms that belong to sectors of high innovative activity (4.9%), and in those firms that be owned by an economic group of companies (9%) and are exporters (4.9%) in sectors of medium innovative activity. analyzing the determinants of secrecy, the results show that the probability of use this mechanism increases in cases in which firms are linked to universities and public s&t centers and to protect product innovations, since a positive incidence of these factors is observed in all clusters. in contrast to the patents, the cluster of high innovative activity shows a greater probability of using secrecy in those firms with higher capacities (45.9%), which have an r&d department (12.2%), and invest in technology transfer, training and consulting (9.8%). the greatest use of secrecy to protect process innovations indicated by the literature (levin et al. 1987; harabi 1995; arundel 2001; fernández sánchez 2004) is observed only for medium innovative activity cluster (17.2%), while in the low innovative activity cluster are important the organizational innovations (5.2%). structural factors do not affect the probability of using secrecy, as they are not significant for any clusters, with the only exception of the medium innovative activity sectors for which being an exporting firm increase the probability of using secrecy by 9.5 %. this would indicate that the use of secrecy is extensive among argentine firms belonging to all industrial sectors and regardless of their size, age and ownership of capital. on the contrary, the characteristics of the innovation process explain the intersectoral differences in the use of secrecy as mechanism of appropriation. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 144 table 12. probit models: secrecy secrecy cluster 1 high cluster 2 medium cluster 3 low rde + inctec distec + prof + linkf linku + + + pubs rddep + + prod + + + proc + org + com size age mnc group x + considering the complementary assets, it is observed that its use is more probable in those firms that combine the obtaining of different types of innovations, mainly of product (with an incidence of between 15.8% and 26.6% depending on the cluster) and commercialization (between 12.3% and 8.8%); but also in the case of cluster 1, process (8.8%) and organizational (6.1%), and in the cluster 2 process (9.9%) innovations. this reflects the diverse nature of the instruments included in this category, which includes both productive and commercial factors from which firms designs their appropriation strategy. the efforts in innovation are only significant in the case of the low innovative activity cluster, showing that investment in knowledge generation raises the probability of using this mechanism by 5.6% and the investment in disembodied technology does so by 8.5%. on the contrary, for the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 145 sectors of high and medium innovative activity, investment in innovation does not affect the use of this mechanism. particularly for this last group, the links with public s&t centers and universities (7%) and to have a formal r&d department (10.9%) inside on the probability to use complementary assets, while a negative incidence is observed in the proportion of engineers and professionals in total employment (-66.42%, although significant only at 1%). this one highlights the result previously discussed when analyzing patenting, indicating that in sectors of medium innovative activity the greater capacities of firms affect the use of that legal mechanism. the structural factors do not appear to be a differentiating factor in the use of this mechanism among the different sectoral clusters, since only in the case of the cluster of high innovative activity it is observed a greater probability of using complementary assets in larger firms (3.1%), explaining the majority and generalized use of this mechanism by argentine manufacturing firms. table 13. probit models: complementary assets complementary assets cluster 1 high cluster 2 medium cluster 3 low rde + inctec distec + prof linkf linku + pubs rddep + prod + + + proc + + org + com + + + size + age mnc group x http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 146 finally, the analysis of the factors that affect the use of first mover mechanism also identify differentiating effects between clusters. for high innovative activity sectors, investment in r&d and engineering (15.8%) is relevant, preferably if it is carried out by a department or formal area of r&d (14.8%), and the investment in incorporated technology have a negative incidence (-14.7%). these results reinforce the importance of allocating the investment to the generation of knowledge to explain the use of first mover mechanism. on the contrary, for the low innovative activity cluster, the innovation efforts are not significant, and the combination of product (28.7%) and commercialization (8.5%) innovations has a positive impact on firms that have a formal r&d department (13.9%) and have linked with other firms to innovate (6.2%). table 14. probit models: first mover first mover cluster 1 high cluster 2 medium cluster 3 low rde + inctec distec prof linkf + linku pubs rddep + + prod + + + proc org + com + size age + mnc group + x + http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 147 structural factors allow to differentiate among clusters too. the use of first mover is more likely among firms with greater age within the cluster of high innovative activity (significant marginal effect of -8% of the age variable); and it is higher among young firms (6.5%) and firms belonging to an economic group of companies (13.3%) within the sectors of low innovative activity. on the contrary, the cluster of medium innovative activity shows a greater probability of using first mover among exporter firms (9%), which complement their product innovations (13%) with organizational innovations (13.3%). summarizing the analysis of the sectoral specificity in the factors that explain the use of each particular mechanism (table 11 to 14), the differentiated impact of the factors that characterize the innovative process and the structural characteristic of firms on the use of mechanisms according to the cluster (horizontal interpretation) is analyzed below. the results of the analysis show that the type of innovative effort affects only the appropriation strategy of the high and low innovative activity cluster, indicating a difference between both extreme groups of firms. in the first group, investment in knowledge generation raises the probability of using the mechanism of first mover, while on the contrary in the case of low innovative activity cluster it mainly affects the use of secrecy and, to a lesser extent, complementary assets. the capabilities of the firms and having a formal r&d department also shows a difference in the appropriation strategy according to the cluster. for sectors of high innovative activity, these factors are significant to explain the use of secrecy, while for sectors of medium and low innovative activity these are the factors that explain the patenting. the links with public s&t centers and universities to innovate seem to rely on trust among the parties, since for the three sectoral clusters they explain the use of secrecy; although in the case of high innovative activity sectors, more intensive in knowledge, they also explain the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 148 use of patents, while for medium innovative activity cluster they affect the use of complementary assets. the links with other firms, on the other hand, has shown to be relevant only in the case of sectors with low innovative activity and to explain the use of first mover. this result, added to the fact that belonging to an economic group of companies has also been significant for this cluster, reinforces the idea that in low innovative activity sectors the use of first mover occurs in cases in which the firms link with other companies (of the same economic group or not) to innovate. innovation oriented public policies do not affect the appropriation strategy of argentine manufacturing firms of any sectoral cluster. a general result observed for all clusters is that product innovations are protected by strategic mechanisms of the three analyzed types. process innovations show a negative effect to explain the use of patents in the case of high innovative activity cluster, indicating the preference of no patent this type of innovations, on the contrary, they do not affect the appropriation strategy of the low cluster innovative activity as are not significant for any mechanism. the innovation of commercialization alternatively explain the different mechanisms according to the considered cluster, although in any case they are significant to explain the use of secrecy. meanwhile, the organizational innovations reinforce the effect of other types of innovations by raising the probability of using the complementary assets in the case of cluster 1, the first mover in cluster 2 and the secrecy in sectors of cluster 3. finally, the structural factors explain the appropriation strategy of high and medium innovative activity sectors and allow to differentiate the use of mechanisms between both groups. while for the industrial sectors of cluster 1 the size (to explain the use of patents and complementary assets) and the age (to explain first mover) are relevant; in the sectors of medium innovative activity, to be an exporter firm (to explain patents, secrecy and first http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 149 mover) and to belong to an economic group of companies (to explain patents) are relevant. on the contrary, there is no statistical significance of structural factors in low innovative activity sectors, with the only exception of first mover which use is more likely in the case of firms belonging to an economic group of companies and younger. the ownership of capital does not influence the appropriation strategy of argentine manufacturing firms of any sectoral cluster. these results, although limited to the case of the analyzed argentine manufacturing firms, highlight the way in which the firms configure their appropriation strategy based on the characteristics of their innovation strategy and according to their industrial sector. 7. conclusions in an increasingly challenging competitive context for manufacturing firms, in which innovation and knowledge are determinants of the economic performance and market position of firms, it is relevant to study the strategies they develop to protect their innovations and appropriate their extraordinary rent associated. the firms configure their appropriation strategy based on the use of various mechanisms (legal and strategic) aimed at avoiding/delaying imitation or to maintain their market position. this research studies the determinants of such strategies at sectoral level, taking the case of the argentine manufacturing firms (endei 2010-2012) through a cluster analysis to group the industrial sectors (isic rev.3 two digits) into those of high, medium and low innovative activity and the estimation of probit models. the analysis of the innovation strategy shows that on average the argentine manufacturing firms analyzed have invested approximately 3.3% of their current income in innovation activities between 2010-2012. however, when considering the sectoral cluster firms belong http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 150 to, it is found that the so-called cluster of high innovative activity, which groups the most knowledge-intensive and, in general, greater productivity industrial sectors (chemical and medical instruments, oil production and various types of machinery and equipment) is characterized not only by a greater number of firms that carry out innovation activities of all types (76.6%), but also they distribute the funds more homogeneously by combining the acquisition of machinery with r&d investment. on the contrary, in the medium innovative activity cluster, which includes intensive capital industrial sectors (automotive and transport equipment, metal fabrications, non-metallic minerals and rubber and plastic products); and in the low innovative activity cluster, which includes the industrial sectors of mass consumption and intensive labor and natural resources (food and beverages, textiles, clothing, leather, wood, furniture, paper and publishing), the acquisition of machinery and equipment predominate. this results in a higher incidence of innovative firms in the case of cluster 1 (71.2% versus 54.4% observed in cluster 3), and although in all cases the obtaining of simultaneous product and process innovations predominates, the incidence of process innovations is greater in the cluster of medium and low innovative activity. the appropriation strategy analysis shows that argentine manufacturing firms belonging to the three sectoral clusters mostly use complementary assets to protect their innovations, and among them, active communication with customers and production scale are the instruments more utilized. the high innovative activity cluster is characterized by combining a greater number of mechanisms to configure its appropriation strategy; also showing a greater incidence in the use of secrecy, while it forms the cluster with the greatest presence within the total firms that patent. on the contrary, the cluster of low innovative activity is majority when considering the set of firms that use first mover and complementary assets; and within the http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 151 latter, the comparison among clusters highlights the greater relative use of production scale and distribution networks. the econometric analysis of the determinants of the appropriation strategy of firms shows that it must be analyzed in the general framework of its innovation strategy, since the characteristics of such process affect the use of mechanisms that firms use to protect their innovations from potential competitors and to appropriate the rent associated with them. in this context, there are differences in the innovation and appropriation strategy according to the sectoral cluster considered, in some cases more marked than in others, but which allow to identify certain regularities in the appropriation strategy at sectoral level. for the industrial sectors of high innovative activity, the allocation of the innovation investment is relevant to differentiate the appropriation mechanism used, finding that the investment in r&d affects first mover (mainly in firms with greater age) while the investment in disembodied technology explains a greater use of secrecy. in these sectors, the characteristics of the innovation process (capabilities, links with public s&t centers, formal r&d department) mainly explain the use of secrecy, while on the contrary, the type of innovative result affects the use of complementary assets. the patenting, which is observed with greater intensity in this sectoral cluster, is more likely in firms that link with public s&t centers and larger. in the industrial sectors of medium innovative activity, it is found that innovation efforts do not explain the appropriation strategy. the patenting is more likely in firms with higher capabilities and who have a formal r&d department. the links with public s&t centers and universities increases the probability of using secrecy and complementary assets, while the type of innovative result that complements product innovations allows to distinguish between http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 152 first mover (organizational) and complementary assets (commercialization), being process innovations also relevant for this last mechanism. in these sectors, unlike what is observed for the other sectoral clusters, the exporting condition of the firms becomes relevant for the appropriation strategy. finally, in the industrial sectors of low innovative activity, the appropriation strategy is mainly explained by the characteristics of the innovation process, since the structural factors (age and the belonging to an economic group of companies) only affect first mover. in this group of sectors, the use of secrecy is more likely in firms that invest in r&d, have a formal department to carry out such activities, are link with universities and public s&t centers and complement product innovations with organizational ones. on the contrary, the probability of using complementary assets is greater when combining investment in r&d with the acquisition of disembodied technology, and complementing product innovations with commercialization ones. the patenting in this sectoral cluster is more likely in firms with higher capabilities and who carry out formal r&d activities. the links with firms, which are only significant for the industrial sectors that form this cluster, only affect the use of first mover. based on these results, the importance of the characteristics assumed by the innovation process and the consideration of the sectoral dimension for the study of the appropriation strategy of firms emerges as a general conclusion, since it is configured as an emerging of the innovation process. the evidence of the case of argentine manufacturing firms shows that although in aggregate terms firms declare similar intensity in innovation expenditure, when considering the sectorial cluster to which they belong differences are observed regarding the allocation of the investment, the proportion of innovative firms and the type of innovation http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 153 obtained. in the same way, although complementary assets are the mechanism most used by argentine firms, the consideration of the sectoral cluster allows differentiating the way in which firms combine the use of different mechanisms based on different innovation strategies. in this sense, although limited to the case of the argentine manufacturing firms, these results provide evidence that challenges the widespread view in the literature about the role of appropriation as an incentive to innovation, and they emphasize that the way in which firms configure their strategy of innovation referred to efforts, capacities, the use of external sources of knowledge and cooperation with diverse agents, the way in which they carry out innovation activities and the type of results obtained, could be relevant to explain the conformation of their appropriation strategy. an additional challenge and future line of research is the study of the effectiveness of the appropriation strategy to protect innovations, in order to evaluate the impact that different appropriation strategies have in the medium and long term on the economic performance of firms (e.g., future r&d projects, manufacturing competitiveness and productivity, positioning in the global context). references arrow, kenneth. 1962. “economic welfare and the allocation of resources for invention.” in the rate and direction of inventive activity, edited by r. nelson. princeton: princeton university press. arundel, anthony. 2001. “the relative effectiveness of patents and secrecy for appropriation.” research policy 30:611-624. arundel, anthony, and isabelle kabla. 1998. “what percentage of innovations are patented? empirical estimates for european firms.” research policy 27 (2): 127-141. byma, justin, and aija leiponen. 2007. “can’t block, must run: small firms and appropriability.” working paper series 1-07, the mario einaudi center for international studies, january. http://revistes.ub.edu/index.php/jesb 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"protecting their intellectual assets: appropriability conditions and why u.s. manufacturing firms patent (or not)." nber working paper series, working paper 7552. combe, emmanuel, and etienne pfister. 2000. “patents against imitators: an empirical investigation on french data.” cahiers de la mse. dosi, giovanni. 1982. "technological paradigms and technological trajectories: a suggested interpretation of the determinants and directions of technical change." research policy 11 (3): 147-62. dosi, giovanni, luigi marengo, and corrado pasquali. 2006. “how much should society fuel the greed of innovators? on the relations between appropriability, opportunities and rates of innovation.” research policy 35:1110-1121. dosi, giovanni, christopher freeman, and silvia fabiani. 1994. 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"appropriating the returns from industrial research and development." brookings papers on economic activity 3:783-831. lieberman, marvin b., and david b. montgomery. 1988. “first-mover advantages.” strategic management journal 9 (s1): 41-58. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 156 lópez, andrés. 2009. “innovation and appropriability: empirical evidence and research agenda.” in the economics of intellectual property. suggestions for further research in developing countries and countries with economies in transition, edited by world intellectual property organization, january 2009. lópez, andrés, and eugenia orlicki. 2007. “innovación y mecanismos de apropiabilidad en el sector privado en américa latina.” in proyecto ompi-cepal sistemas de propiedad intelectual y gestión tecnológica en economías abiertas: una visión estratégica para américa latina y el caribe. cenit, 30 de agosto de 2007. malerba, franco, and luigi orsenigo. 1997. “technological regimes and sectoral patterns of innovative activities.” industrial and corporate change 6 (1): 83-117. mansfield, edwin. 1986. “patents and innovation: an empirical study.” management science 32 (2): 173-181. milesi, darío, natalia petelski, and vladimiro verre. 2017. “innovación y uso de patentes en la industria manufacturera argentina.” in la encuesta nacional de dinámica de empleo (endei) como herramienta de análisis. la innovación y el empleo en la industria manufacturera argentina, edited by cepal, n., a. m. de ciencia, et al. (2017), 231-254. lc/ts.2017/102. milesi, darío, vladimiro verre, and natalia petelski. 2017. “science-industry r & d cooperation effects on firm’s appropriation strategy: the case of argentine biopharma.” european journal of innovation management 20 (3): 372-391. milesi, darío, natalia petelski, and vladimiro verre. 2014. "apropiación privada de los resultados de innovación." in tópicos de la teoría evolucionista neoshumpeteriana de la innovación y el cambio tecnológico, edited by yoguel, g. robert, v., and barletta, f., 357-376. universidad nacional de general sarmiento, los polvorines, argentina. milesi, darío, natalia petelski, and vladimiro verre. 2013."innovation and choice of appropriation mechanisms: evidence from argentine microdata." technovation 33 (2-3): 78-87. neuhäusler, peter. 2012. “the use of patents and informal appropriation mechanisms—differences between sectors and among companies.” technovation 32 (12): 681-693. paula, fábio de oliveira, and jorge f. da silva. 2019. “the role of the appropriability mechanisms for the innovative success of portuguese small and medium enterprises.” international journal of innovation management 23 (04): 1-23. pavitt, keith. 1984. “sectoral patterns of technical change: towards a taxonomy and a theory.” research policy 13 (6): 343-374. sattler, henrik. 2003. “appropriability of product innovations: an empirical analysis for germany.” research papers on marketing and retailing 003, university of hamburg. http://revistes.ub.edu/index.php/jesb volume 5, number 1, 116-157, january-june 2020 doi.org/10.1344/jesb2020.1.j070 online issn: 2385-7137 cope committee on publication ethics http://revistes.ub.edu/index.php/jesb creative commons license 4.0 157 teece, david j. 1986. “profiting from technological innovation: implications for integration, collaboration, licensing and public policy.” research policy 15 (6): 285-305. veugelers, reinhilde, and bruno cassiman. 1999. “make and buy in innovation strategies: evidence from belgian manufacturing firms.” research policy 28 (1): 63-80. winter, sidney g. 1984. "schumpeterian competition in alternative technological regimes." journal of economic behavior & organization 5 (3-4): 287-320. this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. http://revistes.ub.edu/index.php/jesb http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 182 paloma fernández pérez universitat de barcelona (spain) how to evaluate the capacity of hospital systems in a very long term international comparative perspective? hospital beds per inhabitant in catalonia 1900s-2010s abstract this article proposes that the number of hospital beds available in a territory can be used as a comparative tool to gain a perspective on the very long term evolution of the historical capacity of hospital systems worldwide. the article presents: 1) the issues stemming from a lack of sources and comparative data available internationally before 1960; 2) data for the early 20th century for barcelona and other cities of the world,; 3) data on hospital beds for various countries since the 1960s, with attention to data for catalonia,; 4) data for the number of hospital beds per 1000 inhabitants for the past few decades in catalonia, and a comparison with other autonomous communities and countries. the sources are the league of nations, yearbooks for barcelona, the national statistics institute of spain (instituto nacional de estadística, ine), idescat, the world health organization (who) and the oecd. the article provides research data that confirm that the beginning of the modern increase in the number of hospital beds per capita in catalonia started as the rest of the western world in the first third of the 20th century. such growth was maintained throughout the 20th century up until the 1980s. after the 1980s, in barcelona as in the rest of the world, there was a process of reducing hospital beds per capita. this has therefore created the possibility of hospital services being overwhelmed very quickly in the instance of a widespread health emergency. keywords: hospital beds per capita; well being; healthcare; catalonia; hospitals corresponding author: e-mail: palomafernandez@ub.edu received 30 june 2020 accepted 13 august 2020 this is an open access article distributed under the terms of the creative commons attribution-non-commercial-no derivatives license (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-comercial re-use and distribution, provided the original work is properly cited, and is not altered or transformed in any way. mailto:palomafernandez@ub.edu http://creativecommons.org/licenses/by-nc-nd/4.0/ volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 183 1. introduction health expenses have risen very rapidly in the 20th century, most notably in the last 50 years. according to the organization for european cooperation and development (oecd) and the world health organization (who) health statistics, such expenses amounted to an estimated 1 per cent of global gdp in 1900, 4-6 per cent in 1970, and 10 per cent in 2017. of the overall health expenditure, according to the same sources, it is very likely that in recent decades at least 50 per cent are hospital related expenses. these very rough figures suggest that the 20th century and the first decades of the 21st century have witnessed the construction of national health systems all over the world in which hospitals have had a central role. the exact point in time when hospital expenditure began to increase, around a century ago, is not very clear, due to the lack of reliable aggregated data on both national and international levels prior to the creation of the world health organization (who) post world war ii. some economic historians have been able to produce some estimated figures about social expenditure from national accounts before the 1940s, however in these documents education and health expenditure was quite often combined, which made it difficult to identify what was purely hospital expenditure (donzé and fernández pérez 2019; espuelas 2013). the correlation between health expenditure and general improvement in the health of a nation is an extremely complex process, which varies according to specific national and local contexts. in the period between the late 1880s and early 1930s the most commonly accepted factor that contributed to general health improvement worldwide was improved sanitary conditions in the provision of drinking water and sewage disposal, as well as improvements in nutrition.the enormous relevance of water and food quality, however, does not account for the change that volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 184 also started to take place in the improvement of hospital infrastructures, and access to hospital services, particularly in the largest cities of the world (fernández pérez 2021). the history of medicine, the history of science and technology, and more recently economic and business history have provided a wealth of empirical evidence about the process of reform, or brand new construction of very large hospitals in the centre and in the outskirts of big metropolises. hospital account books, or the history of health insurance, provide excellent data to analyse this parallel process of improvement in hospitals and health insurance in a few areas of the world for some countries like england, germany, switzerland, the united states or japan (stevens 1989, fernández pérez 2021, donzé 2007, 2017 and 2019; pons and vilar 2019). the main issue is that, for most of the world, the data available is not ample enough or of good enough quality to make a balanced evaluation of what happened outside europe and in the united states before world war ii. there is limited, fragmented data, which only becomes less and less available for earlier periods and for developing countries. despite this lack of information, the number of beds per hospital often appears in documents. on its own it does not indicate in depth what a hospital system looks like, and how it evolves, because it is more often the quality of the staff and the pharmaceutical and clinical resources that are important. however, as this information on equipment and resources does not usually appear continuously over time for the history of hospitals in many countries, an alternative to obtain an approximate idea of the evolution of a hospital system can be constructed with a series of data on beds per hospital, which usually appear in all countries for long historical periods. a hospital bed requires care from qualified personnel, and medicines, and equipment for diagnostic tests so the more hospital beds, the more staff and resources are used for each bed, and in this way they can be volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 185 used as an indicator to reflect the evolution of hospital resources over a very long period of time in a given country or region. since the late 1880s there are official statistics on the number of hospitals and number of patients attended in hospitals available for many cities and countries in developed and developing economies. from the 1860s, originally only in very few countries such as in england, and gradually in more countries from the 1900s onwards, there is an increasing number of official statistics about the number of hospital beds available at a local, national, and international level, which therefore allows for comparison. the number of hospital beds available are not, and this is important to highlight, the best indicator to study the evolution of hospital expenditure or general health improvements in the last century. looking at the number of hospital beds alone does not provide information about what changes, if any, took place inside a hospital in productivity or efficiency, investments made, specialised staff and equipment available,and if there were any changes in the general organisation and management of the hospital. why, then, can it be useful to spend time and effort to analyse international statistics about the numbers of hospital beds available per capita since the early 1900s? firstly, as mentioned previously, the number of hospital beds per capita in a given region or country is one of the few indicators that there is evidence available for the period prior to world war ii. there is little else to go on as more detailed health expenditure data over the years only really became available after the creation of the who. furthermore, any increase in the number of hospital beds requires a parallel increase in part, or completely, of the other economic factors associated with hospital expenditure: labour, capital and technology. each new hospital bed in a health centre requires more, or better organised, specialised human resources (doctors, nurses, and other healthcare and administrative staff), volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 186 more medicines, more intensive use of existing or new healthcare equipment. consequently, more, or better organised, labour and technology requires more financial resources (or more efficiently employed). if a given country does not have centralised and well coordinated health care centres, it still may have alternative ways to coordinate different types of health centres. if coordination exists, then efficiency may be achieved, and movements of patients from one centre to another be done thus relieving one centre that can occasionally suffer from a sudden arrival of a huge number of acute patients (as can happen with large scale transport accidents, or fires, that can cause the emergency system of a large hospital to be overwhelmed in a matter of minutes). however, a sophisticated network of healthcare establishments that are well equipped, organised, and interconnected in a sustained way, has been a historical rarity. what has more often taken place in history, everywhere in the world, is a poor distribution of total numbers of healthcare centres in each territory, and bad or inefficient connection between them, and a trend (with clear exceptions in a few countries like germany or japan) towards a concentration of healthcare products and services in only a few large hospitals serving hundreds of thousands of potential patients. a concentration of hundreds of thousands of potential patients in a few large hospitals might be a relatively efficient option, if: a) the population served is small, b) if there are good financial resources to maintain the high fixed expenditure of large hospitals, and c) if there are no epidemics or pandemics. however, such a concentration may be very inefficient if the population increases beyond available financial resources to pay correspondingly for an increased amount of specialised healthcare staff, medicines, and healthcare equipment. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 187 from a very long term historical perspective, the number of patients a hospital can serve may be relatively estimated if we are able to find out the number of hospital beds per inhabitant and how that number may have increased or decreased over a long period of time, and are able to compare it with this evolution in different territories, in order to evaluate the relative availability of healthcare resources in a dynamic, flexible way. it is for these reasons that identifying good sources from which to study the number of hospital beds available are important, to compare and evaluate if a healthcare system is improving, or declining, the healthcare services supplied to the population when conditions change. there are many disciplines which have published research about the history of hospitals, from the history of medicine, the history of science and technology, the economics of health, public health administration, history, and economic and business history. there are also national and international organisations which have tried to provide reports and data, like the league of nations in the late 1920s, healthcare conferences and the pan american health organisation between the 1880s and world war ii, private philanthropic foundations with health units like the rockefeller foundation also before the 1920s, and the world health organization and regional and national agencies of public health after world war ii (donzé and fernández pérez 2019; fernández pérez 2021). there is, however, the issue of finding appropriate sources or methodologies in order to make international comparisons with homogenous indicators and variables throughout the last century. a century ago, there was a huge diversity in the control of key variables which could allow us to see when, where, and how far, the process of growth and the concentration of healthcare services in large hospitals that dominate the landscape of global healthcare today, took place. it is very difficult to know for sure, especially before the 1980s, if the process of volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 188 growth of hospitals and hospital services in a given city or country was similar, or distinctly different, to other cities or countries. the fragmentation of data for the thousands of hospitals, cities, and healthcare systems is enormous, and makes it very difficult to establish appropriate analysis through comparison. in order to start filling this gap, this article aims to provide a starting point for the long term comparative study of hospital beds, using the case study approach for the city of barcelona in an international context. the goal is to try to establish, even if in a fragmentary way, a long term view about stages of development in the evolution of hospitals (fernández pérez 2021). the article first contextualizes the relevance of studying hospital centrism and the indicator of the number of hospital beds, and then presents and analyses the data. 2. well being, economic growth and the relevance of hospital expenditure in the 20th century. general well being is an accepted measure of the progress of social and economic development in the world, which takes the increase or decrease in life expectancy as a comparable international indicator (prados de la escosura 2003). there is a common popular belief, shared by many policymakers, according to which countries with higher percentages of expenditure on health over gdp should automatically have, and give rise to, a higher level of general well being to the population. the figure below, drawn with official data from national sources gathered by the world health organization (who), reveal that this common belief often does not correspond to reality. on the right side of the graph, which includes european countries, there are a group of countries with a higher expenditure on health in 2014, that are precisely the group of countries in the sample with a lower life expectancy at birth for both sexes. on the left volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 189 side of the graph, there are countries with less private expenditure on health where life expectancy at birth is much better and higher. there are two lessons to be taken from this data. firstly, that private expenditure on health is not a direct drive towards a higher level of national wellbeing (measured by life expectancy), and therefore public expenditure on health (which dominates in the group of countries on the left hand side) seems to be a better engine for improved life expectancy in the sample. secondly, there is an intermediate group of countries that include most southern european countries where there is considerably less expenditure on health over gdp than in northern european countries where wellbeing levels (again measured by levels of life expectancy at birth) are excellent. economic investment, public (as in nordic countries where it is very high) or private (as in eastern european countries where it is very high) alone, seems to be not enough to understand why southern european countries perform so well in terms of well being and life expectancy levels. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 190 figure 1. life expectancy at birth (years) both sexes, and private households’ out-of-pocket expenditure (world health organization/who estimates) as % of health expenditure, 2014 source: who 2017. latest available data on table. with technical assistance of jaime lópez guauque. the organisation for european cooperation and development has provided data about healthcare spending since 1960, which presents one of the first long term indicators that show evolution and change. between 1960 and 2011 the total cumulative average growth rate of total spending, public and private, on healthcare as a percentage of gdp, increased in the countries of the sample of the table below. the country where the total increase was the highest was spain, where the growth rate is almost double the average cumulative growth rate of europe, and the united kingdom, over the last five decades. albania armenia austria azerbaijan belarus belgium bos & herz bulgaria croatia cyprus czechia denmark estonia finland france georgia germany greece hungary iceland ireland israel italy kazakhstankyrgyzstan latvia lithuania luxembourg malta montenegro netherlands norway poland portugal r. moldova romania russian fed. ; 70 serbia slovakia slovenia spain; 83,4 sweden switzerland mkd* turkey turkmenistan ukraine uk uzbekistan who eur reg r² = 0.4206 68 70 72 74 76 78 80 82 84 86 0 10 20 30 40 50 60 70 li fe e x p e ct a n cy ( y e a rs ) private healthcare expenditure (%) volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 191 table 1. evolution in healthcare spending in a sample of oecd countries, 1960–2011 (cumulative average growth rate of total spending public and private on healthcare as a percentage of gdp at market prices) 1960-2011 1970-2011 1980-2011 1990-2011 2000-2011 usa 2.47 2.25 2.21 1.71 2.36 uk 1.74 1.81 1.68 2.33 2.72 france 2.21 1.88 1.64 1.55 1.27 europe 1.91 1.65 1.08 1.45 1.51 japan 2.31 1.92 1.32 2.43 2.15 spain 3.64 2.41 1.83 1.72 2.35 germany* – 1.56 0.96 1.48 0.76 sweden* – 0.82 0.21 0.70 1.35 italy – – – 0.85 1.39 source: compiled by the author, with assistance of jaime lópez guauque, from efpia 2014 (oecd 2013) the figure below shows that there seems to be a direct connection between the increase in healthcare expenses since 1960, and the increase in life expectancy at birth. however, the graph below clearly displays something else extremely important: the largest increase in life expectancy took place before 1960, during the first half of the 20th century. and taking into account the fall in life expectancy during the civil war (1936-1939), the graph shows that the process of improvement in wellbeing, measured by the improvement in life expectancy at birth, started in the 1920s, and continued steadily, with the exception of the civil war, until the first decade of the 21st century. the 1920s were a crucial decade of improvement in wellbeing (life expectancy) in spain. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 192 figure 2. life expectancy at birth in spain, 1908–2014 source: instituto nacional de estadística, ine. the figures below show how the 1920s were, also, the crucial decade of improvement and radical take-off in life expectancy in the city of barcelona 30 40 50 60 70 80 90 female male total volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 193 figure 3. life expectancy in spain and the city of barcelona, 1900/1908–1984 source: see table 2. 30 40 50 60 70 80 90 spain total male female 29 39 49 59 69 79 89 barcelona total male female volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 194 table 2. growth rates in life expectancy in spain, and in barcelona, 1908-1984 spain barcelona year total male female year total male female 1908-1909 41.19 40.19 42.21 1900-1901 31.6 29.8 33.4 1910-1914 42.04 41.05 43.07 1904-1907 34.6 32.6 36.0 1915-1919 39.75 38.89 40.66 1909-1912 36.6 34.5 38.7 1920-1924 43.41 42.17 44.69 1915-1916 37.4 35.9 39.0 1925-1929 48.31 46.77 49.89 1920-1921 38.2 38.6 43.1 1930-1934 50.75 48.98 52.56 1924-1927 45.7 46.6 51.9 1935-1939 49.11 45.26 53.31 1929-1932 48.8 49.7 54.7 1940-1944 51.8 48.46 55.28 1940-1941 56.1 54.2 61.9 1945-1949 59.36 56.59 62.09 1944-1947 63.0 59.2 66.2 1950-1954 64.16 61.8 66.4 1949-1952 65.6 62.2 68.5 1955-1959 67.52 65.11 69.81 1954-1957 70.0 67.2 73.8 1960-1964 69.75 67.15 72.24 1959-1962 71.6 68.9 75.1 1965-1969 71.25 68.47 73.92 1964-1967 72.1 69.0 74.9 1970-1974 72.53 69.65 75.3 1969-1972 72.2 68.9 75.1 1975-1979 74.21 71.16 77.15 1974-1975 73.1 69.5 77.1 1980-1984 76.01 72.84 79.09 1980-1981 76.5 73.0 79.4 source: spain: human mortality database 2016. barcelona: ajuntament de barcelona, departament d’estadística 2016. with technical assistance of jaime lópez guauque. 3. hospital beds per capita since the 1880s 3.1. the relevance of hospital beds as an international indicator of the evolution of well being what happened in the 1920s? qualitatively speaking historians have analysed the close links between improvement in life expectancy at birth with prior improvements in diet and in the sanitary conditions in the provision of drinking water used by the urban population. however, which long term comparable quantitative indicators are available to detect major patterns of change besides the demographic ones in this process? are there any indicators for improvement in healthcare systems in the world, however small, that could be analysed and used for comparison since the 1880s and first third of the 20th century until recent times? this article volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 195 argues that there is one that, despite limitations in availability of data, in comparability, and in its implications due to the diversity of contextual factors, exists in most countries of the world in the last century or more: the number of hospital beds in a given region or country, in relation to the number of inhabitants. since medieval and early modern times large hospitals and city hall councils, in most of the world, kept regular records of the number of hospitals that received public subsidies, and often (though not consistently up until the 19th century) of the number of hospital beds available in those hospitals. hospitals were, in early modern europe, and in many central and south american countries during colonial times, very modest establishments or houses where basic services to poor sick people could be supplied with the aid of charitable donations from religious groups and public authorities or institutions (fernández pérez 2021). since the mid 19th century, in close connection with the beginning of massive migrations to cities from the countryside, and between countries and continents, cities grew and the pressure on those small hospitals increased. for safety reasons, mainly, but also because of the increase in the number of graduates in medicine and pharmacy in the western world, and radical innovations in microbiology and medical equipment and products, many cities increased the number and the size of their hospital services (fernández pérez 2021). in industry or trade an increase in the number of employees, financial assets or sales of a business are traditional indicators used by economic and business historians in order to analyse historical increases in size of a given business organisation. however, hospital archives in madrid, barcelona, bilbao, new york, london, berlin and paris, reveal that when hospitals increased their services in the 19th century up until the 1930s there were no significant changes in financial resources for these hospitals, or employment levels: public authorities either volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 196 expanded existing hospitals or built brand new hospital buildings. until after the 1930s, the only indicator that has had a very marked increase since the 1880s with the expanded or new large hospitals in the world, was the number of hospital beds. online research on the history of hospitals in colonial latin america, early modern europe, preindustrial east asian countries, or africa, has revealed that before the 19th century the vast majority of hospitals had less than 200 beds each, and the poorer the area the closer to a figure of less than 100 beds per hospital, as was the case in south america even in the early 1920s (martin and mayo 1922). only in eastern europe, particularly in russia, or in some large arab cities such as cairo, foreign observers revealed that there were hospitals with more than 1,000 beds per hospital in the early 1930s (fernández pérez 2021). between the 1880s and the 1930s, when life expectancy radically increased in the world, and in spain or barcelona more particularly as seen in the figures and tables above, there was a parallel process of an increase in large hospitals (that can be compared across countries with the consequent increase in hospital beds) that took place and has been relatively unexplored by economic historians, despite the fact that this increase in hospital beds ran in parallel with a marked improvement of general wellbeing (in terms of life expectancy) during those decades. after the 1980s, in many countries as demonstrated later in the article, there was a consistent reduction in the number of hospitals in the world, and in the number of hospital beds. in 1861 in england and wales, there were 65,000 hospital beds in 904 hospitals; 263,103 hospital beds in 1938; 455,138 in 1959; 363,395 in 1980; and 255,094 in 1990, with a continuous decline up until 2018-2019, where there were only 140,960 overall.1 1 data for 2018-2019 from the kings fund 2020. for previous years in england and wales, armstrong 1998. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 197 3.2. hospital beds, 1880s-1930s: barcelona in an international context relatively reliable statistics about healthcare establishments, public and private, at a local and national level, increased in western countries after the 1860s and particularly in the 1880s. these statistics detail the number of healthcare centres in each country and the number of patients attended in such centres. statistics such as these for the 1880s and the first decade of the 20th century did not often provide data about hospital beds with which researchers could easily figure out the number of hospital beds per inhabitant, but they did publish data about the number of inpatients and outpatients per hospital, a variable that hospital historians have used to see the growth in size and scope of modern hospitals in many oecd countries (fernández pérez 2017;donzé and fernández pérez 2019; fernández pérez 2021). in spain the reseña geográfica y estadística de españa published very little data at a provincial level in 1888, and since 1913 the anuario estadístico de españa provided aggregated data for the various types of healthcare establishments (profit and not for profit, public and private). at the municipal level, statistic yearbooks published data for individual healthcare establishments that received municipal subsidies and support, usually very large hospitals and specialised healthcare centres like maternity hospitals and hospitals for poor children. these sources provide data for large healthcare establishments at the provincial, municipal, and national level. in barcelona there is data available in the anuario estadístico de la ciudad de barcelona for the years 1902-1920 (which is also available after 1987 under the same name but with exclusively online records), and in the estadística municipal for the years 1927 to 1986, with changes in the quantity and quality of data provided. both sources have been made available through digitalisation of their content, which is downloadable with open access through the volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 198 website of the barcelona city hall. governments at the national and municipal level provided such data for many countries in western europe, latin america, and asia (ayuntamiento de barcelona website; fernández pérez 2021). what do these sources indicate about the evolution of the number of patients and hospital beds available in the largest healthcare establishments that were supported by public subsidies (either totally or in part)? in barcelona in 1902, the largest public and private hospitals that received some financial support from the local city hall gave assistance to around 60,000 inpatients, which represented around 10% of the total population of the city that year. the figure went up to 20% in the year 1920 as shown below, which can be seen as a sign of the increased demand for health services from large hospitals in the city. in 1920 one out of five people in the city of barcelona used hospital services. this was a revolution, when compared to the 19th century and earlier. this demonstrates that the hospital was at the centre of healthcare assistance, in a very early period. the municipal source provides data for the following hospitals in 1902: the hospital de nois pobres (for poor children) with 45,255 inpatients (a figure that could be a error in the source that still needs further confirmation), the hospital de la santa cruz with 7,050 inpatients, the hospital militar with 4,836; various casas de socorro with 5,452; the hospital nuestra señora del sagrado corazón de jesús 644, the higiene especial del gobierno civil 169, and the hospital homeópata del niño dios, 75. a new hospital was added in 1906, the hospital clínico de la facultad de medicina de barcelona, where there were 3,132 inpatients in 1919; 4,799 in 1915; and 5,545 in 1920. the hospital de la santa cruz maintained an average of 6,000 inpatients every year in the first decades of the 20th century, as did the aggregated number of casas de socorro of the city; the hospital militar had an average of 4,000 inpatients annually; volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 199 and the sagrado corazón de jesús an average of 640 inpatients per year, according to the anuario estadístico de la ciudad de barcelona. according to the same source, at least half of the inpatients attended in santa creu and clínic hospitals came from the neighboring provinces of aragón and the valencian region.2 the number of large establishments for health assistance with partial or total public financial support remained rather stable in the 1910s and 1920s in barcelona. however, the number of patients went up, as well as the percentage that these patients represented of the total population of the city. the number of patients went from 10% of the total population of barcelona in 1902 to 20% in the year 1920, most likely as a result of the effect of the 1918-1919 pandemic of spanish flu, as shown in the table below with data from the anuario estadístico de españa. the percentage of the population of the city who attended the healthcare centres shown in the source went down to 11% a decade later in 1930, which suggests that, with the exception of the years of pandemic of the 1918-1919, the average percentage of patients attended in hospitals in the city with public subsidies, was around 10% of the total number of city inhabitants. 2 the name of hospitals changed throughout their history, before the 1930s in their own documents the name appears in some years in catalan but mostly in spanish. after the 1930s, mostly in spanish. after the 1980s, mostly in catalan. the text respects the name as it was used in the documents in every period of their history volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 200 table 3. patients in health care centers of the city of barcelona in the first third of the 20th century (number of patients) 1920 1930 hospitals (5 hospitals) 12,864 18,981 asilos/hospicios 4,794 4,941 casas expósitos 1,757 1,574 casas maternidad prov. 505 565 casas socorro (4 top) (“consulta general”) 126,302 93,316 total patients, barcelona centers of the source (a) 146,222 119,377 total population bcn city (b) 710,335 1,005,565 % a/b 20.6% 11.8% % patients in hospitals/patients in all centers of the source in bcn city 8.8% 15% source: own elaboration with data from ministerio de instrucción pubíca y bellas artes, dirección general de estadística 1922, ministerio de trabajo, comercio e industria, dirección general de estadística 1922, presidencia del consejo de ministros, dirección general del instituto geográfico, catastral y de estadística 1932a and 1932b. the table above indicates a second interesting fact that happened in the first decades of the 20th century: the increase in the percentage of total patients who used a hospital for health care assistance as an option, from the various health care establishments of the city: 8% in 1920, and double up to 15% in 1930, a sign of the relative decline of traditional establishments like casas de socorro in the provision of assistance. this was a process that was most likely a result of new regulations of the mancomunitat de catalunya, an administrative institution which was created that had partial responsibility for public health in catalonia, and whose policy included reducing the number of primary health care centres like thecasas de socorro in the city and reinforcing a select few larger clinics and hospitals to help improve the administrative capacity of supervision of health care centres in the city (sabaté 2015). a similar process of concentration and reform of health care centres took place not just in barcelona but in most of the largest cities of the spanish provinces in these years, as observed in the table below: volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 201 table 4. concentration of sick people/patients in hospitals in the largest cities/provincial capitals of spain in the first third of the 20th century city/provincial capital 1920 1930 madrid 22,982 25,405 barcelona 12,864 18,981 seville 8,508 10,631 bilbao 8,251 8,708 valencia 5,171 6,618 córdoba 4,220 5,505 zaragoza 3,393 5,470 pamplona 3,022 2,004 valladolid 2,450 2,331 burgos 466 446 spain 132,272 166,813 source: own elaboration with data from ministerio de instrucción pubíca y bellas artes, dirección general de estadística 1922, ministerio de trabajo, comercio e industria, dirección general de estadística 1922, presidencia del consejo de ministros, dirección general del instituto geográfico, catastral y de estadística 1932a and 1932b. note: the numbers are sick people that were inpatients the first day of the year plus inpatients registered during the year. the table shows that barcelona was the city that experienced the fastest rate of growth. the figures do not include patients from hospitals which did not supply data to the source, only information from hospitals that responded to requests to provide data. in madrid 16 hospitals responded to the source, in most other provincial capitals it was only between 1 to 3 hospitals that responded and supplied data. the total number for spain has been elaborated by the author taking into account the inpatients of the hospitals that supplied data to the source from all provincial capitals included in the source. most of the population did not use hospitals, or healthcare establishments, despite this process of growth of hospitals in the first third of the 20th century. more often it was doctors who received visits from patients at their home practice or that were called directly to the patients' homes. an indicator of the increase in healthcare assistance in these years, therefore, is to see not just the number of healthcare centres and patients in them, but also the number of new doctors in a city. the table below shows that, in the city of barcelona, the number of registered doctors in the colegio de médicos of barcelona increased to six times the original number in a time span of three decades: from 383 in 1895 to 2,000 registered doctors in 1928. in only 10 years, between 1895 and 1907, the number of doctors increased almost threefold, from 383 to volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 202 928 médicos colegiados. in comparison with the number of médicos colegiados registered in spain in the same period of time, the numbers are fairly similar, thus indicating that the case of the city of barcelona is a good example of a national trend that took place across the country in that period. table 5. doctors, hospitals and social health expenditure 1895-1928 in spain year registered doctors of barcelona (comb) registered doctors of spain1 (oecd) number of new hospitals built in spain social health spending (in current million pesetas) 1895 383 2,908 229 18,70 1907 928 7,046 18,92 1928 2,000 15,186 317 78,54 source: own elaboration with data from: for 1920s ministerio de sanidad y seguridad social/instituto nacional de salud madrid 1977). the health social expenditure data was taken from espuelas 2015. registered doctors from the official medical association of barcelona comb (col·legi oficial metges de barcelona), oecd, and the ine. note: the total number of doctors licensed in spain for the years 1895, 1907, 1928, corresponds to a proxy which was calculated using the series for the city of barcelona and its trend. it was found that for the years for which data are available for spanish and barcelona-based members, there is a very similar trend over time, and taking this into account, this trend has been used to estimate the spanish total (for the years for which there was no data for spain) from the number of barcelona-based universities . in spain, the number of healthcare establishments doubled in the period: 1529 in 1915, from 755 in 1844, with some 66,000 beds at the beginning of the century and some 7,769 responsible municipal doctors (fernández pérez 2018). the new hospitals built in spain increased in number, though relatively slowly compared to other countries: from 229 in 1895, 317 in 1928, to 563 in 1945. in the united states this number went from 178 establishments (public and above all private) with 50,000 beds in 1873 to 4,359 establishments with more than 420,000 beds in 1909. the proliferation of hospitals and clinics for commercial purposes in the cities ran in parallel with an increase in employees in the health sector. by the first third of the 20th century, germany and japan had already both had outstandingly dense networks of health centres and healthcare staff per inhabitant in their territories. this trend has continued up until volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 203 present times, as according to the who these countries are still among the top countries with the highest numbers of hospital beds per inhabitant in the world. so how did barcelona’s hospitals and hospital beds available per inhabitant compare with those of other territories of the world in this period? health authorities started to elaborate statistics that could be used as a comparative measure between countries in the first decades of the 20th century. in soviet russia, a hierarchically organised system of healthcare that linked factories, homes, primary assistance healthcare centres (local gps), general hospitals, and specialised hospitals, was established in the late 1920s for the admiration of north american and british health authorities who visited russian hospitals to learn about modern efficient methods of healthcare organisation (newsholme and kingsbury 1934). reports from these western authorities led to the publication of some figures about the hospital system in soviet russia in the late 1920s and early 1930s: in 1927-1928 there were 154,685 hospital beds in total in the seven soviet union republics in existence in the years the report was made; 207,502 in 1931; and 244,375 in 1932. these figures are not far off those mentioned previously for the number of hospital beds available in england per inhabitant for 1938. moreover, medical doctors increased in those years in soviet russia from 1,289 doctors in 1927-1928 to 3,846 in 1932 (newsholme and kingsbury 1934 244-246, and fernández pérez 2021). these numbers were, nevertheless, far lower than in spain, where there were about five times that amount of doctors than in soviet russia. clearly, in russia the speed in the increase in hospital beds was faster than the increase in specialised healthcare staff, whereas in other countries like spain with regions like catalonia with an old tradition of medical education since at least the 18th century, the speed in the increase in the number of doctors was more relevant than a sudden increase in the number of hospital beds available. indeed, the transformation of big and magnificent palaces volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 204 of the russian aristocracy into healthcare establishments in soviet russia was directly responsible for the sudden increase in the capacity to multiply hospital beds right after their civil war in the early 1920s (newsholme and kingsbury 1934 fernández pérez 2021). the league of nations published statistics about hospital beds per 1,000 inhabitants in different countries in 1929: 3.6 in france, 5.0 in germany, 2.97 in the united states, 9.6 in mexico, 3.8 in panama. for spain some scholars have indicated that in 1940 right after the civil war, there would have been around 4.0 beds per 1,000 inhabitants (fernández pérez 2021). in japan from around the 1880s onwards there was a very different process compared to western countries, or soviet russia, with a decline of public hospitals, and a fast increase in the number of small private clinics where most healthcare beds and doctors concentrated assistance in a fragmented, dispersed way to patients. in 1883, there were 632 hospitals in japan, of which about 43.2% were private hospitals and around half public hospitals. the wave of privatisation by the japanese government in the 1880s led to a decline in public hospitals, and a relative increase in the number of private hospitals and clinics. private hospitals represented 95% of all hospitals in 1926, many of them small; the total number of hospital beds multiplied by three from 36,856 in 1913 to 101,883 in 1940, and most of them were concentrated in cities, owned and managed by doctors (donzé, 2017, and 2019). these figures were around half the total number of hospital beds in the late 1930s in soviet russia, or in england. on a local level, barcelona provides a good example of the process of increase of hospital beds and patients in continental western europe in this period sustained totally or in part with public funds. the number of hospital beds of the private hospital de la santa creu and sant pau of volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 205 barcelona was similar to the number of hospital beds of other large hospitals in spain: the public hospital general de madrid had 1,200 in 1929, and hospital de la santa creu of barcelona 1,256 in 1901 and 1,000 in 1930. these figures were possibly exceptional in comparison to the rest of country, as they were almost double the number of beds compared with other large hospitals in spain such as the public hospital civil of bilbao (with 600 hospital beds in 1908), and the hospital clínico of barcelona (with 400) in the first decades before the civil war.3 if we compare these figures with other large hospitals in large cities of the world, like hong kong, the number of hospital beds per hospital was similar to the medium sized hospitals of spain, close to the the number in the hospital civil of bilbao or the hospital clinic of barcelona, with around 480 hospital beds in tung wah hospital and in the queen mary hospital of hong kong in 1938 (fernández pérez 2021; chang-yeung 2018, 239).4 in south america, only maybe the hospital san vicente paul and hospital barrios laco of santiago de chile (with between 900 to 1,000 beds respectively) the us army controlled ancon hospital in panama (800 beds in 1921) and dos de mayo hospital in lima in peru (700 hospital beds in 1921) could be compared to hospital de la santa cruz y san pablo and hospital general de madrid. most large hospitals in the capital cities and large cities in south america in the 1920s had far fewer hospital beds far from hospital beds of santa cruz y san pablo or hospital general de madrid: in sao paulo there were around 400, and a similar number again in buenos aires. most hospitals in lima had below 200 beds, whereas in bolivia and ecuador the figures were 3 figures for madrid and barcelona in fernández pérez and sabaté 2019 and archivo histórico hospital sant pau i santa creu; for bilbao pedro pérez castroviejo 2002; all of them analyzed in fernández pérez 2021. for clínic antonio morales pérez 1908. about the clínic also corbella 2006. 4chang-yeung from hong kong administrative reports, medical annual reports. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 206 in general very low compared to their south american neighbours (martin and mayo 1922, 233-265; fernández pérez 2021). 3.3. the expansion of hospital beds in the world, 1940s-1970s wars of the late 1930s and early 1940s in the world increased the demand for healthcare assistance, but depleted financial resources available to provide care: specialised healthcare staff went to war, abandoning hospitals, and many died, were exiled, or became imprisoned; the immediate demands that war put on countries prioritised investments in weapons and not in medicines; innovation had to substitute for the scarcity or high price of medicines and hospital equipment. established and often mobile healthcare assistance had to be provided far from large cities near the battle front, and large hospitals piled up the sick and wounded patients who were cared for by voluntary medical staff, many of them medical students still in their final years of study, as revealed by famous catalan surgeon moisés broggi, and the two grifols brothers who learnt about blood banks in the battlefront of spain during the civil war and with their father (further explained in the article in this special issue by fernández and sans) who created laboratorios grifols s.a. in 1940 (hervás 2004; fernández pérez 2017; fernández pérez 2019). in the late 1940s and in the 1950s and 1960s, public welfare and public investment in healthcare accelerated the previous path that was moving towards an increase in large hospitals in big cities where patients, and resources, were concentrated. these hospitals were centralised in order to achieve economies of scale in the acquisition and concentration of specialised staff and equipment. health insurance companies also expanded the access the public had to health services (vilar and pons 2016). oecd countries regulated the coexistence of public and private institutions and organisations in the construction of welfare systems, and isi policies in emerging economies started vast programs in cooperation with international organisations to volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 207 reduce mortality rates and increase life expectancy with a variety of healthcare establishments in rural and urban centres of developing countries. the table below puts together available information about hospital beds per 1,000 inhabitants for a sample of countries in a few benchmark years between 1929 and 1980. the starting year shows how countries with strong state intervention and investment in healthcare in the late 19th century and first decades of the 20th century, like germany, had the highest amounts of hospital beds per inhabitant in 1929. the figures for germany were very high compared to available figures for other developed countries in that year, like france, and compared to most emerging economies of america until the late 1970s. according to the source, in 1980, the number of hospital beds per capita in most of latin america was lower than in germany in 1929, with the exception of argentina and uruguay. secondly, the table shows how from 1929 until 1960, or 1970 depending on the country, most of the countries in the sample increased their numbers of hospital beds substantially. the peak in most of them was in 1970, as by 1980 many countries reduced or maintained numbers of hospital beds per 1,000 inhabitants. table 6. hospital beds per 1.000 inhabitants in the world, 1929-1980 1929 1960 1970 1980 europe france 3.6 germany 5.0 italy 8.9 10.5 9.6 spain 4.0* 4.6 5.3 america argentina 6.4 5.7 5.4 bolivia 1.8 2.0 1.8 brazi 3.4 3.8 3.8 canada 10.6 9.8 8.9 colombia 3.2 2 1.7 costa rica 5.1 3.9 3.5 cuba 2.3 4.2 4.0 chile 5.0 3.7 3.6 ecuador 2.1 2.1 2.1 volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 208 1929 1960 1970 1980 el salvador 2.2 2.1 1.8 guatemala 2.8 2.4 2.0 haití 0.7 0.7 0.8 honduras 2.0 1.7 1.3 mexico 9.6 1.4 1.2 1.2 nicaragua 1.8 2.5 2.2 panama 3.8 3.2 3.9 paraguay 0.8 1.5 1.5 peru 2.2 2.0 2.0 dominican republic 2.7 2.8 2.8 uruguay 3.9 5.7 5.7 usa 3.0 9.2 7.9 6.0 venezuela 3.6 3.0 3.4 source: league of nations 1932, oecd.stat. 2017.; who 2020; paho various years. data downloaded with technical assistance by j. lopez guauque (data for 1970 published in 1972 report; paho data for 1980 corresponds to 1978) *the figure for spain in 1929 in fact is data corresponding to 1940. in spain there are studies on the statistical sources for research on the history of the hospital system in spain in the 20th century (carreras and tafunell 2005), and research projects which have produced recent publications with new descriptions about the regulation, the policies, and the diversity of stakeholders in the business of private and public health insurance, that slowly contributed to a modern construction of a public hospital system in spain after the civil war (vilar and pons 2016 and 2019). according to these studies, there are published censuses of healthcare establishments in spain in 1949, 1957, and 1964, published in the anuario estadístico de españa edited by the instituto nacional de estadistica. since 1971, the ine has been publishing the “estadística de establecimientos sanitarios en régimen de internado” (eesri), annually, and since 1997 the series of “indicadores hospitalarios” (carreras and tafunell 2005, 110-111). in the early 1980s the creation of the autonomous communities in spain led to a transfer of healthcare policies and supervision to the new regional governments. between the 1940s and the early 1980s the state increased its share of investment and regulation of healthcare establishments in spain, but in some regions like catalonia, private healthcare volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 209 establishments that existed before the civil war remained very much dominant, as the other articles by barceló, vilar and pons and bohigas indicate in this special issue. the approval of the seguro obligatorio de enfermedad in 1942 was an ambitious attempt to override private control of healthcare establishments and regulations in spain. however, it was poor in resources and early results were not promising: 353 healthcare establishments under public control existed in 1944, and despite a lot of propaganda in 1953 only 9 new large healthcare residences had been built (26 more were in construction that year). the number of hospital beds designated for the 9 new large healthcare residences in service were: 812 beds in the barcelona francisco franco healthcare residence, 702 in the bilbao residence, and all the others had between 60 and 450 beds each, most of them having around half the number compared to the barcelona and bilbao residences (vilar and pons 2016). far from the 1,200 hospital beds that the hospital general de madrid and hospital sant pau of barcelona had had in 1930, before the civil war, sant pau was financed mostly with private donations. in 1963 the private sector was still very significant in spain: there were 538 public civil hospitals, 1,040 private civil hospitals, and 55 public military hospitals. public civil hospitals had in total 47,548 beds, and private civil hospitals 52,063 beds (vilar and pons 2016 36). this means that the average number of hospital beds in 1963 per public civil hospital was around 100, and in private civil hospitals around 50 beds per hospital, on average. the reality was that there were less than 10 top public hospitals with more than 500 beds per establishment, in the most important cities of the country (madrid, barcelona, bilbao, seville, valencia), whereas the rest of new hospitals in the provincial capitals and other cities of the country were had very low numbers of hospital beds. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 210 the hospitals in the territory, in the 1950s and 1960s, were dominated by many small hospitals with below 50 beds on average. there was, subsequently, an increase in the concentration of patients in a few large hospitals in the region, ”large” being defined as a hospital with 500 beds or more. ”large”, by international comparison, was rather small in spain at the time. the largest hospitals in the world had on average 1,000 beds per hospital. spain had in 1968 an index of hospital beds per 1,000 inhabitants of 4.34, a huge difference when compared to sweden and ireland (with 14.28); east germany, northern ireland and luxembourg (which all had average of around 12.5); austria, france, iceland, west germany, finland and italy (11.10); russia (9.3); denmark and norway (9.09); england and wales and belgium (8.3); poland, hungary, the netherlands (7.69), portugal (5.8); greece (5.5) (oecd 2017 and 2019; who 2020; vilar and pons 2016, 37-38; fernández pérez 2021). in the city of barcelona in 1963, the number of hospital beds of the 4 largest hospitals were: 932 in hospital sant pau and santa creu; 904 in clínic hospital; 758 in residencia francisco franco; and 612 in quinta de salud la alianza. (vilar and pons 2016, 37). these numbers were similar to the number of hospital beds of large hospitals in sao paulo, buenos aires, santiago de chile, but also in london, paris, berlin, or new york city and tokyo (fernández pérez 2021). the city, as was the case in other western european cities like milan, paris, berlin, london, had healthcare beds concentrated in a few large hospitals, some publicly owned and some privately owned, and in many very small clinics (mostly privately owned) where a variety of specialised chronic and acute health assistance was provided (comelles et al. 2017, and barceló et al. in this special issue). this process was possible with the increased number of private and public health insurance systems distributed across the developed world, between volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 211 the 1940s and the late 1970s, as echoed by the process of hospital and healthcare system development in barcelona, as shown in the other articles published in this special issue. 3.4. the decline in hospital beds, 1980s-2020. 3.4.1. a process of reduction in the number of hospital beds per capita since the 1980s in 1976 there were 14 “medical cities” in spain (ciudades sanitarias being the original spanish name), including 49 healthcare establishments, 88 healthcare residences, and a total of 41,582 beds. an average of 303 beds per healthcare centre, attended by 47,251 doctors of the national health service or seguridad social (81.6 per cent of the total number of medical doctors in the country). in 1981, there were 1,054 hospital establishments public and private with 193,895 beds (61% private establishments and 32% private hospital beds), an average of 193 beds per healthcare centre (conde 2001, 251-256). measured by the average bed per healthcare establishment, the transition to democracy period in spain between 1976 and 1981 were years of cuts which led to reductions in services, in line with the years of economic crisis caused by the new regime. between 1972 and 1995, the number of healthcare establishments in spain decreased from 1,287 in 1972 to 799 in 1997. the number of hospital beds from 177,385 in 1972 to 166,276 in 1997. the number of hospital beds per 1,000 inhabitants declined in a sustained downward trend: 5,3 beds per hospital on average in 1972; 5,13 in 1981; 4,56 in 1985; 4,26 in 1990; 3,94 in 1997 (conde 2001, 262-265). some experts believe that in this period, one of the most important effects this period had led to the closure (“cierre o desafectación”) of many healthcare establishments where elderly patients received care —a trend that led to the decentralisation and privatisation of this service and to the reduction of transparency and homogeneity in volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 212 regulations about the type of healthcare services that elderly people subsequently received in the new private residences that would substitute the public ones that disappeared in these years (conde 2001, 261-265)—. on the positive side, the financial resources used to provide universal access to public healthcare allowed that, by 1991, the percentage of spanish population with healthcare coverage was 98%. it was not a sustainable process in the long run, though. every citizen had access to all kinds of services in the public healthcare sector almost for free, with an increase of 42.6% of healthcare personnel hired in the public hospitals between 1972 and 1995. this enormous wave of patients to be sustained in public centres revealed the two major flaws in the system: the fact that the system was not financially sustainable and that there was an insufficient number of hospital beds to account for the rise in patients. this was already a visible issue in the 1970s and only worsened throughout the 1980s and 1990s. the various crises that have impacted the spanish economy since the 1980s also affected the financial sustainability of universal health access. from the 1980s onwards there was less public funding available to have licenced medical personnel in nursing homes for elderly people. over the years, guidelines for acceptable minimal medical support in nursing homes were watered down, a fact that became tragically apparent during the covid 19 pandemic of 2020. it was in these years of sharp reduction in the number of beds per healthcare establishment, and reduction of healthcare establishments for elderly people under that were public control, that the spanish government initiated the transfer of insalud competences to the autonomous community of catalonia, in 1981. in 1983 the institut català de la salut was created, and in 1990 the new law of healthcare organisation of catalonia (llei d´ordenació sanitaria de catalunya) started new regulations, well described in the article by lluis bohigas in this same special issue. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 213 in catalonia during the majority of this period, 50% of the total number of healthcare establishments were not owned by the public system but by private institutions and organisations (conde 2001,260-265). the table below, with official data taken from the catalan institute of statistics website, shows how 30% of the total number of hospitals in spain disappeared between 1981 and 1997, whereas in catalonia the numbers remained relatively stable. the number of beds per hospital remained relatively stable during this period but in terms of hospital beds per 1,000 inhabitants, the table shows that in fact the big cut in beds per inhabitant that spain suffered between 1981 and 1995 was not as dramatic in the case of catalonia that, throughout the same period of economic crisis in the health sector, remained on average better endowed than spain in terms of beds per person. table 7. hospitals, beds per hospital, and hospital beds per 1,000 inhabitants in average in spain, and catalonia, 1981-1997 hospitals spain hospitals catalonia hosp beds per 1,000 spain hosp beds per 1,000 catalonia 1981 1,054 193 5,1 5,2 1985 913 175 4,5 4,8 1990 820 177 4,2 5,0 1995 782 176 3,9 4,9 1997 799 180 4,1 5,2 source: own elaboration with data from idescat website (population at 1rst of january). in the first decade of the 21rst century, catalonia, despite economic and political difficulties and issues with healthcare policy, as described in the other articles of this special issue, maintained a fairly stable number of hospital beds per inhabitant. the case of the barcelonès area5 is particularly outstanding in this regard. it has always remained above the catalan average the number of beds available per person, and well above the spanish average of beds 5 barcelonès area is a comarca —an administrative division of the generalitat de catalunya like a county— whose capital is barcelona and also groups the municipalities of badalona, l'hospitalet de llobregat, sant adrià de besòs and santa coloma de gramenet, which have a total of 2,278,437 inhabitants (data of 2019). volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 214 per person between 2000 and 2018, as shown in the table below elaborated by the author of this article, also with idescat data: table 8. hospital beds per 1,000 inhabitants in spain, catalonia, and the barcelonès area, 2000-2018 hosp. beds per 1,000 inhabitants in spain (public hospitals) hosp. beds per 1,000 inhabitants in catalonia hosp. beds per 1,000 inhabitants in barcelonès 2000 2,7 5,1 6,4 2005 2,6 4,8 6,2 2010 2,7 4,7 6,2 2015 2,6 4,8 6,5 2018 2,6 4,7 6,2 source: own elaboration with data retrieved from idescat website. hospital beds per 1000 inhabitants. how did catalonia and barcelona compare with other territories outside spain in these years? the table below shows hospital beds per 1,000 inhabitants for a sample of countries. firstly, spain compares closely with the evolution of the united states and italy, a group of countries where there have been very significant cuts in hospital beds per 1,000 inhabitants since the late 1980s. catalonia´s evolution since the 1980s would resemble rather the numbers and patterns of evolution of cuba and argentina, and the barcelonès area would seem to be close to patterns shown in hospital beds per 1,000 people in france. table 9. hospital beds per 1,000 inhabitants in the world, 1980-2017 1980 1990 2000 2013 2017 europe france 7.9 6.4 5.9 germany 9.1 8.2 8.2 italy 9.6 7.2 4.7 3.4 3.1 spain 5.3 4.2 3.6 2.9 2.9 united kingdom 4.1 2.7 2.5 asia and oceania japan 14.6 13.4 13.0 china 4.2 india 0.6 russian federation 8.1 australia 3.7 volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 215 1980 1990 2000 2013 2017 america argentina 5.4 5.0 bolivia 1.8 1.1 brazil 3.8 2.2 canada 8.9 2.7 colombia 1.7 1.5 costa rica 3.5 1.2 cuba 4.0 5.2 chile 3.6 2.2 ecuador 2.1 1.5 el salvador 1.8 guatemala 2.0 0.6 haiti 0.8 0.7 honduras 1.3 0.7 mexico 1.2 0.5 nicaragua 2.2 0.9 panama 2.3 paraguay 1.5 1.3 peru 2 1.6 dominican republic 2.8 1.6 uruguay 5.7 2.8 usa 6.0 4.9 3.5 2.9 2.8 venezuela 3.4 0.8 source: 1960 to 2000 oecd.stat. for 2013 who 2020 (japan for 2013 in fact is data for 2012). for 2017 oecd 2019 (data in 2017 for us in fact is year 2016). for 1960 to 1980 years information for american countries retrieved from paho various years(data downloaded with technical assistance by j. lopez guauque (data for 1970 published in 1972 report; paho data for 1980 corresponds to 1978). 3.4.2. the situation in 2018, right before the covid pandemic: hospital beds below the level in 1929 in barcelona, spain, and the rest of the world with respect to the countries in the table above and in table 11 below, and the numbers of hospital beds per 1,000 inhabitants with the numbers for each autonomous community of spain in 2018, it is apparent that the numbers for the different autonomous communities of spain are currently very close to the number of beds per capita in italy, the united states, and the united kingdom, canada, and latin american countries like chile and uruguay. that is to say, most spanish autonomous communities are in worse condition in terms of healthcare volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 216 infrastructure, as revealed by the proxy of hospital beds per person, than neighbouring territories such as germany, france, japan, and emerging economies like russia or cuba. of course hospital beds per person, alone, are not an indicator that can serve to evaluate the complexities of health care systems, as there are issues surrounding technology available, specialised healthcare staff, and special financing and regulations that are crucial for a real understanding of this sector. however, using hospital beds and hospital beds per person as a very long term variable measure to observe the evolution throughout a century of different health care systems, the figures provided in this article can contribute to identifying patterns, stages of growth and decline, and which countries and territories seem to do better and when than others. as hospital beds have a limit in the number of patients and healthcare staff attending them, any improvement in hospital assistance may be revealed, potentially, by increases in the numbers of hospital beds per person in a given territory. the current situation in spain, as revealed by the latest available data for 2018, shows an unequal distribution of hospital infrastructures by regions or autonomous communities: andalusia has one third of all hospitals in catalonia, and around half the hospital beds per 1,000 inhabitants catalonia has. the comparisons between catalonia and madrid are also striking, showing clearly the effect of cuts made in the public hospital system in madrid that have taken place over the last decades in parallel with an increase in the privatisation of their hospital infrastructure and services. the public system in catalonia has double the number of hospital beds per 1,000 inhabitants than madrid, and almost 5 times more public hospitals than madrid. almost one third of all public hospitals in spain are in catalonia. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 217 table 10. hospitals and hospital beds per 1,000 inhabitants of the spanish national health service/sns, by autonomous community, 2018 hospitals hospital beds per 1,000 inhabitants 468 2,4 andalucía 50 1,7 aragón 20 3,2 principado de asturias 12 2,9 illes balears 11 1,9 canarias 15 2,1 cantabria 5 2,4 castilla y león 16 2,7 castilla-la mancha 20 2,2 cataluña 158 3,5 comunitat valenciana 39 2,0 extremadura 12 3,1 galicia 19 2,8 comunidad de madrid 37 1,9 región de murcia 15 2,3 comunidad foral de navarra 6 2,3 país vasco-euskadi 25 2,6 la rioja 6 3,0 ceuta y melilla 2 2,0 source: ministerio de sanidad del gobierno de españa 2018. final remarks from the table above one could easily conclude that the catalonian public hospital system seems to be stronger than that of other spanish autonomous communities. however, this must be examined on a closer level, in terms of each individual hospital or healthcare centre. this article aims to demonstrate that a very long term comparative approach is far more helpful to understand general trends than a static analysis taken over a short period. catalonia may have more hospital beds per 1,000 inhabitants than other regions in the country, which is a good indicator of the capacity to resist possible big shocks to the system, such as the devastating covid 19 pandemic. this article has indicated how in fact catalonia, since the transition to democracy, has consistently been reducing the number of hospitals and hospital beds per inhabitant, and that today there is a huge inequality between the excellent ratio of hospital beds volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 218 per inhabitant in the barcelonès area (around 6 per person) and the extremely poor ratio of hospital beds per inhabitant in the rural comarcas (areas or small counties) of catalonia (around 4). the inequality is clear, between autonomous communities, and between very dense and large urban metropolises and the rest of the territory. the inequality has also increased, if we compare territories of the world like germany, or japan, or communist countries of eastern europe, in which there are far better ratios of hospital beds per inhabitant than in spain, catalonia, or barcelona. table 11. hospitals and hospital beds in a sample of countries, 1930-2018 year country hospital beds per 1,000 inhabitants 1929/1930 union of soviet socialist republics ussr (1931) 2.9 mexico 9.6 germany 5.0 france 3.6 spain (1940) 4.0 panama 3.8 usa 2.97 1960 united kingdom 10.6 germany 10.5 usa 9.1 japan 9 italy 8.8 argentina 6.3 cuba 4.3 1970 japan 12.5 germany 11.3 italy 10.6 united kingdom 9.6 usa 7.88 argentina 5.5 spain 4.6 cuba 4.6 mexico 1.2 1990 japan (1993) 15 germany 10.3 italy 7.9 volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 219 year country hospital beds per 1,000 inhabitants united kingdom 5.9 cuba 5.4 usa 4.86 mexico 2.0 argentina 4.5 spain 4.2 2017 japan (2012) 13.4 germany 8.3 cuba 5.2 spain 2.9 united kingdom (2013) 2.8 usa 2.77 italy 3.1 source: for 1929/1930 league of nations 1932, newsholme and kingsbury 1934:244-246 for russia. 1970, 1990 and 2017: oecd statistics 2020; who statistics 2020; and world bank. 2020. the inequality is incredibly clear, if the pattern of evolution of hospital beds is analysed in the largest hospitals of catalonia and barcelona in the last century: in santa creu and sant pau today there are half the number of hospital beds in service that these hospitals had in 1929; the clínic hospital has also reduced hospital beds from the average number of 1,000 that the hospital had in the late 1930s to the estimated 800 beds today in the first half of the 21st century. hospital beds alone, as this article insists, cannot be the sole factor to be analysed when trying to make sense of what has happened in the history of hospital infrastructures and services in a territory. there are financial, regulatory issues, problems with technology, specialised staff, professionalisation, management and organisation, and agency problems between owners and managers and community interests. there are many factors that intervene historically in the good service of a hospital to their community. however, among these there are not many stable indicators that allow for a clear study of the very long term dynamic evolution of the hospital system and that allow for comparison over centuries. the number of hospital beds available, volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 220 and this number when compared to the number of inhabitants in the territory per capita, is one of such indicators that researchers can elaborate, and use, for comparing territories, and for comparisons of different hospital systems over long periods of time. comparisons over a century or more help to elaborate conclusions that go beyond short-term political criticisms. comparisons over a very long tem period of time helps make structural trends visible. this article shows that there are structural long term trends that have to do with structural options taken by a society over generations. during the first third of the 20th century, many large cities of the world improved and strengthened the network of hospitals and hospital beds, with a significant pattern of increase before world war ii, that is visible as we have seen in barcelona. this improvement coincided with a general improvement in well being in western territories of the world, as revealed by a sustained trend of mortality reduction and a trend towards an increase in life expectancy. new modern hospitals may have played a relatively neglected role in this process that still needs to be fully researched. between the 1940s and the 1970s public and private initiatives expanded the endowment of hospital infrastructure in large cities. in many developed countries these three decades witnessed the peak in the number of hospital beds per inhabitant, though in many emerging countries there was a relative stagnation in the number of hospital beds per inhabitant (despite the increase in the total number of hospitals) because of the impressive demographic growth of those years and the insufficient public funding to create stable hospital systems to attend the new masses of patients in need of healthcare. volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 221 after the 1980s, emerging economies maintained their stagnation or declined their health infrastructure measured by hospital beds per inhabitant, as in the developed world, a sign of the path of sustained contraction in the investment per capita in health infrastructures and medical staff per inhabitant particularly from public administrations, in a context of a strong economic crisis. this included catalonia, and barcelona (barceló and comelles 2016 and 2017). between the 1980s and the early 21st century, there was a clear reduction in hospital beds per inhabitant, except in germany, japan, and countries with strong systems inherited from past communist times in the health sector. catalonia and barcelona, as most of the world, saw a reduction in the number of hospital beds per inhabitant, though less than the reduction that took place in other spanish autonomous communities. today, the largest hospitals in barcelona have, relatively speaking, good ratios of hospital beds per inhabitant compared to neighbouring european regions in france, or the netherlands, or the united kingdom. however, catalonia and barcelona in particular have clearly lost their agility and ability to react quickly in the context of the recent covid 19 pandemic. hospital beds, despite the limitations in fully revealing details of health care infrastructure and staff, are as we defend in this article a useful proxy to evaluate very long term trends. health care assistance, despite all the innovation and all the tecnologies, are very labour intensive, there are limits in the number of patients that a bed or a medical staff can attend. an increase in the number of patients usually requires an increase in number of beds and medical staff especially in acute intensive care. therefore, the trends shown by the evolution of hospital beds per inhabitant in a territory, this article defends, reveal despite all the limitations how between the 1920s and the 1970s there has been a clear increase, followed by a sustained contraction in hospital beds per inhabitant after the 1980s. international comparisons in the long term, also, do show how some territories volume 6, number 1, 182-226, january-june 2021 doi.org/10.1344/jesb2021.1.j087 222 have sustained with effort better endowments of hospital beds than others, a sign of the long term interest of their societies and governments in well being, not shown in most territories of the world. acknowledgements this work acknowledges support from the public research project collective entrepreneurship, innovation and internationalization of the spanish services industry (1900-2017) (pgc2018093971-b-i00), funded by the ministerio de ciencia, innovación y universidades (mcu), agencia estatal de investigación (aei) and european regional development fund (erdf). references armstrong, david.1998. “decline of the hospital: reconstructing institutional dangers.” sociology of health and illness 20(4): 445-457. ajuntament de barcelona, institut d’estadística i política social. 1923. anuari estadístic de la ciutat de barcelona . tomo xvii-anys 1918-1919-1920. barcelona: establiment editorial albert martín. http://hdl.handle.net/11703/97077. ajuntament 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