When Collaboration Sparks Entrepreneurship in Small Firms

What is it about?

This study examines how internal knowledge sharing fosters entrepreneurial orientation (EO) in small and medium-sized enterprises (SMEs)—reflecting their willingness to innovate, take risks, and act proactively. It focuses on two aspects of the internal context: structural interdependence (shared tasks and rewards) and relational interdependence (social interaction and trust among coworkers). The model explores how these dynamics promote entrepreneurial behavior through knowledge exchange within the organization. Based on data from Canadian SMEs, the study shows that internal knowledge sharing mediates the link between a firm’s internal structure and its entrepreneurial orientation. SMEs with greater task and reward interdependence, as well as stronger social interaction and trust, share knowledge more actively, which enhances entrepreneurship. Knowledge sharing fully explains the effects of task interdependence and trust, meaning these relationships exist only through knowledge exchange. For managers of small firms, the results underscore the importance of fostering internal collaboration and trust-based communication. Encouraging employees to share expertise and insights across functions can help the organization capitalize on collective creativity and seize new opportunities. In the SME context, where resource constraints often limit formal innovation structures, leveraging internal structural and social ties can serve as an efficient and sustainable way to nurture entrepreneurship.

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Photo by Vitaly Gariev on Unsplash

Photo by Vitaly Gariev on Unsplash

Why is it important?

This study is unique in demonstrating how multiple dimensions of internal interdependence—both structural (tasks and rewards) and relational (interaction and trust)—combine to strengthen entrepreneurship through knowledge sharing. It provides an integrated understanding of how small firms can build innovative capacity by connecting people and ideas internally. Its timeliness lies in its relevance for Canadian SMEs navigating today’s competitive and fast-changing business landscape. By identifying specific organizational practices that enhance entrepreneurial orientation through collaboration, the research offers actionable insights for leaders aiming to promote adaptability, innovation, and long-term growth in smaller firms.