Small Firms and the External Context: Embeddedness Versus Dependency

This chapter offers an analysis of the relationship between small firms and the external context, focusing on labour regulation. It argues that small firms operate against the backdrop of complex institutional networks, formed of different types of actors, which contribute to creating collective goods to complement small firms’ inadequate resources. Furthermore, it gives evidence that small firms make differential use of external resources, influenced by their characteristics and strategies. The authors conclude that “embeddedness” in an institutional network does not necessarily imply “dependency” on the context, and vice versa. A “disembedding” effect, though, is associated with an emerging pattern of regulation, consisting in the outsourcing of administrative and managerial tasks to professionals and consultants, which involves a shift from “institutional” to “personal” relationships.