I think that lacking of capital may not be a constrain,
especially not for some old, successful companies (like in the oil
business). More likely, the constrain is the paradigm and the whole
cultural web of those companies. If it is that what you express with
'hugh knowledge investment', I think that this is very valid.
To stay within your example, it is part of the paradigm of steel mills
that they must be large, to be able to gain the competitive advantage of
economies of scales (like other mass-producers of similar commodities).
However, mini steel mills are not compareable with the classical steel
mills, since it is very likely that they produce specialities, and can
run very successful a profitable niche strategy, while the classical
steel mill must have a broad focus, produces a product with a much
higher commodity character, and suffers from overcapacity, and can only
run a costleadership strategy.
But the more important point is that the belief in 'ecomomies of scale'
is part of the paradigm or shared beliefings, and therefore hard to
change. But the error was not that for the classical steel mill
'ecomomies of scale' are not important (they still are, I think). The
error was that the people who run such a mill could not imagine that
mini-mills could be successful, too. All together it is important to
learn this new knowledge, and change the existing mind-sets.
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OMV AG Raffinerie Schwechat
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