Small Businesses Need Strong Mediators: Mitigating the Disadvantages of Peripheral Localization Through Alliance Formation

This paper investigates how small entrepreneurial firms in two peripheral regions developed by entering the oil and gas industry. The paper draws on previous studies related to the establishment of strategic alliances and emerging clusters and contributes to these research streams by examining the disadvantages of peripheral localization and small firm size. We use a longitudinal case study based on primary data consisting of 54 in-depth interviews conducted between 2007 and 2012 to illustrate that when large-scale oil and gas projects enter a peripheral region, oil companies can moderate local firms' disadvantages related to peripheral localization by actively facilitating relationships with established national firms. By facilitating such relationships and maintaining an active moderating role, strategic alliances and emerging cluster structures can arise. A cross-case analysis illustrates that the oil company had a decisive role in one of the two cases in two dimensions: its role as intermediary between local firms and national firms and its role in fostering the development of an emerging cluster structure by stimulating the establishment of new firms through the oil and gas project. In the second case, the oil company was unable to facilitate regional development.