Creating Value with Regional Communities of SMEs

This article provides a conceptual argument that the knowledge management (KM) approach of communities of practice (CoPs), and their virtual equivalents (VCoPs), can create value for clusters of regional small and medium enterprises (SMEs). The article firstly shows that value creation in regional clusters occurs by encouraging collective learning and reciprocal knowledge exchange. The article then shows that CoPs, and VCoPs in particular, have been the most successful value creation mechanism in large organisations. We argue that VCoPs hold considerable potential for value creation in regional clusters of SMEs by promoting innovation, more effective knowledge sharing, and recognising the value of VCoPs as capital. The strategic integration of SMEs in regional clusters is analogous to large organisations’ global operations. In this environment VCoPs combine industry-specific knowledge with firm specific knowledge and emerge as a new source of social capital.