Mid Sweden University

Regardless of firm size, governance structure, and ownership form, all firms depend on competencies, i.e., skills, knowledge, and qualifications, as a vital resource for business prosperity. However, previous research has shown that access to crucial competencies varies depending on the context in which the firm operates. It has previously been suggested that firms operating in rural contexts are substantial contributors to local and national economy, although these firms are generally small and have limited access to crucial resources that enable business prosperity. Simultaneously, in recent decades, the rural context has proved to offer limited competencies that match the competence needs of the firms operating in this context because individuals with specialised competencies have extensively ‘emigrated’ from rural areas to seek more advantageous job opportunities and access to crucial infrastructure in urban areas. This has left rural areas with low population density and, as a result, downshifted infrastructure. Most of these small firms operating in the rural context have a family ownership structure, which is associated with specific familiness traits in their governance. These familiness traits produce an even narrower selection of competencies than other firms have. Small, family-owned firms operating in rural contexts thus have limited access to matching competencies due to the extensive rural competence scarcity, and simultaneously, they ‘block’ the few potential competencies available by preserving familiness and long-term firm heritage. This downward rural spiral creates challenges for rural family firms and affects the competence management strategies they apply to navigate this situation.

The purpose of this dissertation is to deepen the understanding of challenges and strategies in rural family SMEs’ (small and medium-sized enterprises) competence management and examine how industry affiliation, location, competence diversity, and business disruptions affect these firms’ challenges and strategies. Three research questions guided the empirical studies of this dissertation: RQ1) How do industry affiliation and location affect the prerequisites and strategies for competence management in rural family SMEs? RQ2) In which ways and why does familiness affect competence diversity in rural family SMEs in terms of finding, attracting, and retaining competencies? RQ3) Which competence management strategies do rural family SMEs apply to enhance entrepreneurial endurance during business disruptions and why?

Three studies were conducted that applied both qualitative and quantitative as well as a mixed-methods approach. Two industries were investigated in different geographical areas: the manufacturing industry and the tourism industry in southern and northern Sweden. The resource-based view (RBV) was used to understand how rural family SMEs find, attract, and retain competencies, while socio-emotional wealth theory (SEW) was applied to delve deeper into the how values, norms, and behaviours of the family SME-owners guide the management of competencies. SEW theory was also applied to understand how familiness traits affect the strategies of rural family SMEs. Previous studies have not thoroughly outlined this allocation of competencies in rural family SMEs, nor has the perspective of how familiness affects competence management strategies in rural family SMEs been investigated. These two perspectives can deepen the understanding of which competence management challenges rural family SMEs face and how they develop their strategies.

This dissertation finds that rural family SMEs use short-term competence management strategies rather than long-term prospects to navigate rural competence scarcity; this finding contradicts previous research indicating that family firms act with a long-term perspective. Rural competence scarcity, in combination with unique familiness traits, pushes rural family SMEs towards short-term strategies rather than long-term prospects to fill their immediate competence needs. The rural location is proved to affect the competence management extensively, as rural family SMEs find that they cannot compete with the salaries offered in urban areas. The two industries examined here use strategies with some similarities to manage their competencies by prioritising family members in positions within the firm and by recruiting individuals from their closest networks. While the manufacturing industry, for instance, uses coopetition as a competence management strategy, the tourism industry uses seasonal staff. This study further reveals that rural family SMEs use network coopetition as an advantageous competence management strategy to navigate business disruptions, such as crises. There is an extensive need for rural family SMEs to exchange knowledge when competencies are scarce during business disruptions, which makes them seek competitors for collaboration. The use of the network coopetition strategy enhances robustness for rural family SMEs, which helps them endure business disruptions better than other firms. The small size of their firms makes network coopetition a successful competence strategy to use during business disruptions. An important contribution is that familiness causes reluctance towards competence diversity – such as bringing competencies from outside into the network – in rural family SMEs, and thus, they have a rather ambiguous attitude towards bringing diverse competencies into their firms. As previous research has established that competence diversity enhances business performance and growth, rural family SMEs' ambiguous attitude towards it sheds light on a rather ‘closed’ working environment that does not properly use potentially available external competencies at hand, despite the need to do so.

An important theoretical implication is that, complementing prior research, the findings of this dissertation show that rural family SMEs do not solely rely on internal resources, as RBV suggests, to make ends meet, but also on external resources. Another implication is that the few competencies available in rural areas must be better matched with the competence needs of the family SMEs operating there. The findings suggest that more attention must focus on addressing the extensive difficulties that rural family SMEs face in meeting their competence needs due to rural competence scarcity. Sufficient, functioning infrastructure is a crucial aspect that could prevent rural competencies from being lost. Starting educational programmes that nurture necessary competencies in rural areas to match competence needs could also increase the attractiveness of working and living in those areas.