hypothetically polytechnic in Stuttgart. Theproduction of LCCGs was a

hypothetically it would be possible and useful, especially in the sub-sector of turningmachines (highly concentrated in Stuttgart), to develop lines of machine toolstogether, but this was wishful thinking (Interview BW-F-16): ‘Cooperation with otherfirms is generally difficult, because individualism is very strong in this region'(Interview BW-F-07). In the eyes of many entrepreneurs their firms were not part ofa mutually supported local growth process. Where such interdependences existed,they were seen as unavoidable risk factors. Interviewees preferred to act in-houseand not give information to external engineer bureaus (Interview BW-F-03).Because of this unwillingness to cooperate machine tool firms limited theirlinks to subcontractors, using the links only to reduce production range and increaseproductivity, not to try to qualify a horizontally acting network within the localeconomy. This does not contradict our concept of the networked firm model,because with this we highlight the vertical relations between large firms and SMEs.Subcontractors of SMEs existed as well, but have not been networked with themachine tool firm. Business relations remained bilateral between subcontractors andthe machine tool firm. The flexibility of a network was explicitly denied, whileflexibility potential was seen in the pooling of in-house resources (Interview BW-F-08). Interfirm contacts often remained on a bilateral base, and within these confinesthey were formal, though might become friendly if entrepreneurs knew each other,for example through their studies at the same polytechnic in Stuttgart. Theproduction of LCCGs was a difficult task due to this bilateral character of interfirmcontacts, but we shall see that the increase in competition paradoxically changed thisattitude.Offe (1999) has pointed to the fact that a mix of governance modes is alwaysnecessary to compensate for the disadvantages of any one. In this way associationalgovernance helped to eliminate the weakness of the community mode. For instancethe same entrepreneur who stated that in-house production of collective goods wasthe most efficient strategy to preserve flexibility for the firm, participated in a jointmanagement project, designed for eight SMEs of the region. Here he had learnedabout the disadvantages of the entrepreneur as the exclusive and dominant holder ofknowledge of his product. He had implemented several of the principles which hadbeen discussed, such as internal transparency of the firm and possible strategies forcooperation (Interview BW-F-08). This workshop was organized by the FraunhoferInstitute in Stuttgart, the Landesgewerbeamt, the Arbeitsamt and the local chamber ofcommerce.