Dynamic capability in a small global factory

• The study brings the concept of global factory to the context of small and medium-sized firms – which has not been done earlier.
• The study adds to our understanding of global factory by addressing the dynamic capabilities in this context.
• The study identifies three levels of dynamics in a small global factory: managerial characteristics, managerial capabilities and organizational capabilities. Although all three are needed for successful orchestration of a small global factory, their management differs considerably.
• The study suggests how to foster and develop the needed capabilities among entrepreneurs and managers.

In order to balance their local and global operations optimally, SMEs are moving toward a ‘global factory’ type of organizational form, meaning a differentiated network of activities held together through the control of key assets and flows of knowledge, and coordinated by a focal firm. Managing such a network requires a specific dynamic capability comprising, according to our study, cognitive, managerial, and organizational capabilities. Cognitive capabilities – cultural awareness, entrepreneurial orientation, and a global mindset – are the basis for a global factory because they are the source for opportunity recognition and exploitation, and are therefore crucial. The focal firm's organizational flexibility and absorptive capacity, as well as managerial capabilities in the areas of interface competence and analytical capability, are needed in the steering of a small global factory, the success of which depends on the nurturing of these assets.