Scholarly article on topic 'Knowledge Applications Development at the SMEs Level in a Virtual Business Environment'

Knowledge Applications Development at the SMEs Level in a Virtual Business Environment Academic research paper on "Economics and business"

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Procedia Technology
OECD Field of science
{"Virtual Entreprise" / "Virtual entreprise network" / "Knowledge management" / "Knowledge bases" / "Knowledge applications" / SMEs}

Abstract of research paper on Economics and business, author of scientific article — George Dragoi, Sebastian Marius Rosu, Ionel-Bujorel Pavaloiu, Anca Draghici

Abstract The paper presents the implementation and usage of a Knowledge Management (KM) system for an industrial holding of Small and Medium Enterprises (SMEs). It pursues the application of service oriented architecture to business interaction across collaborative SMEs in virtual enterprise environment. The work analyses the KM system and proposes a KM scenario to support knowledge applications (KApps) development in SMEs. The core components are described and evaluated from a real organization perspective. It is proposed the informational and communication infrastructure and the procedure of partner selection based on KApps in an industrial holding organized by a dynamic alliance of SMEs.

Academic research paper on topic "Knowledge Applications Development at the SMEs Level in a Virtual Business Environment"

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Procedia Technology 9 (2013) 431 -441

CENTERIS 2013 - Conference on ENTERprise Information Systems / HCIST 2013 - International Conference on Health and Social Care Information Systems and Technologies

Knowledge Applications Development at the SMEs Level in a Virtual Business Environment

George Dragoia*, Sebastian Marius Rosub, Ionel-Bujorel Pavaloiua, Anca Draghicic

aUniversity Politehnica of Bucharest, Dept. of Engineering in Foreign Languages, 313 Splaiul Independen}ei, 060042, sector 6,

Bucharest, Romania

bSpecial Telecommunications Service, 323A Splaiul Independent, 060032, sector 6, Bucharest, Romania cUniversity Politehnica of Timi§oara, 14 Remus str., 300191, Timi§oara, Romania.


The paper presents the implementation and usage of a Knowledge Management (KM) system for an industrial holding of Small and Medium Enterprises (SMEs). It pursues the application of service oriented architecture to business interaction across collaborative SMEs in virtual enterprise environment. The work analyses the KM system and proposes a KM scenario to support knowledge applications (KApps) development in SMEs. The core components are described and evaluated from a real organization perspective. It is proposed the informational and communication infrastructure and the procedure of partner selection based on KApps in an industrial holding organized by a dynamic alliance of SMEs.

© 2013 The AuthorsPublishedbyElsevier Ltd.

Selection and/orpeer-reviewunderresponsibility of SCIKA - Association for Promotion and Dissemination of Scientific Knowledge

Keywords: Virtual Entreprise; Virtual entreprise network; Knowledge management; Knowledge bases; Knowledge applications; SMEs.

1. Introduction

The enterprise is the focus of the current research. The issues of ongoing technological interest are

* Corresponding author. Tel.:+40 214029607; fax: +40 214029111. E-mail or

2212-0173 © 2013 The Authors Published by Elsevier Ltd. Selection and/or peer-review under responsibility of SCIKA doi: 10.1016/j.protcy.2013.12.048

- Association for Promotion and Dissemination of Scientific Knowledge

classified as follows: enterprise integration, global production, system components technologies and green production. Essentially, the target is the general idea of revealing the limits of future anticipation based on the most advanced technologies in these days - an open, international enterprise, for the benefit of all who seek to establish universal standards in systematization and organization of technological knowledge. This future enterprise will be available to all, in an ecological approach designed to conserve natural resources and the society itself (Rosu and Dragoi [1]). The modern enterprise is characterized by converting intellectual resources in a service chain integrated into an entity that is useful for the customer. This different approach is based on the importance and role of services in global dynamics. The keyword is the term "intelligence" and the core business strategy is leading towards the intelligence core and the competence of the services. Business management is based on specialized knowledge. Consequently, the nowadays enterprise is the type of entity that generates and coordinates information and, above all, intelligence to meet customer expectation. The main problem of this system is the difficulty of developing and implementing the organization's knowledge base (Rosu and Dragoi [2]). Fortunately, the integrative solutions that emerge and develop continuously provide strong support for the modern type of enterprise production system (Dragoi et al, [3]).

In the past years, the small and medium sized enterprises (SMEs) play an essential role in the European economy as a source of entrepreneurial skills, innovation and job creation. In order to grow and survive, SMEs are forced today to ally with other external small and medium sized organizations in the business process.

The modern production systems of virtual enterprise type become thus the fastest way to develop a new product and to select operational resources of SMEs. Modern business is agile, which means that it possess a rich informational content and has the organizational flexibility to adapt to any process. The competitive advantage is determined by the speed of arrival on the market, customer satisfaction and responsiveness to issues of social and environmental impact. Production and creation of new products are conducted simultaneously. The concept of Virtual Enterprise (VE) is the target orientation of modern industrial production, by the way this tendency is planned and managed (Cruz-Cunha and Varajao, [4]). Virtual enterprise is a temporary alliance of companies which propose the resources and skills sharing in order to respond better and faster to the opportunities arising in the market. This production system fits the best on the structure of a modern industrial group achieved through a coalition of small and medium sized enterprises. This concept is supported by the new technologies and by the globalization phenomenon that begins to dominate the orientation of industrial development, functions and activities related to production being decentralized, distributed on large geographical areas. Virtual enterprise is materialized by selecting market conditions, skills and resources of various small and medium-sized enterprises, grouped in an alliance, in a consortium or in an industry group, focused on delivering a product or service, having the appearance of an integrated business. As a general requirement for the support infrastructure of the virtual enterprise, it can be emphasized that companies must be able to cooperate with each other, changing information, goods and services within a very short time (to the limit, in real time), giving the feeling of an integrated enterprise, even if each component retains its autonomy. A global vision on the industrial market, reflected in the concept of Virtual Enterprise, is supported by new information and communication technologies and leads to what is described as Global Engineering Network (GEN). We get thus the implementation of a knowledge base at the enterprise level as an aid tool for the development and implementation of product or service. One of the main objectives of the industrial group, created by an association of small and medium sized enterprises, is to create an integrated collaborative platform enabling individual members to participate synced or not synced at the development of collaborative projects. Each member brings expertise in his own domain as a part of a great whole. Therefore, each member will be connected to a common database and will be able to understand in detail the components that have to be used and the target of the knowledge that can be delivered to the other members of the network. Distribution of information in the right context requires transforming information

into knowledge, distributing methodically the same direction to different players. In the modern company should be designed, developed and implemented special applications aimed to help the company in creation, acquisition and distribution of both knowledge and information (Putnik and Cruz-Cunha [5], [6], Cruz-Cunha [7]). There were identified and developed two plans in order to systematically pursue this approach - the first plan refers to how information systems provide access to information and knowledge use, and the second one presents the techniques for accumulating knowledge and business expertise necessary to have an innovative presence on the market. This body of applications and systems is performed around a knowledge base that includes internal knowledge structures (research reports, documentation and production procedures etc.), external knowledge, especially about competitors, as well as internal knowledge, named tacit knowledge, which refers to the employees and that is without documentation and unstructured. In this context, in [2] the authors conducted an analysis of individual and group knowledge (Rosu and Dragoi [2]), defining the knowledge management as an strategic focused approach to motivate and facilitate the members of the organization to develop and use their cognitive capacities to capitalize the resources of information, the experience and skills of each of them, subordinated to the global objectives. In the organizational environment, the knowledge is derived from data transformed by those who have the capacity for effective action, by assimilation and integrative understanding, followed by implementation in the given framework.

Traditional applications in the enterprises, mainly related to ERP (Enterprise Resource Planning), DMS (Document Management System) and CRM (Customer Relationship Management), are using massive amounts of data on operation and customers that are unused in data warehouses. To turn that stored data into valuable information, companies are now questing knowledge applications (KApps) (Rosu et al. [8], [9]). The business advantage in having KApps lies in the ability to analyze large amounts of data from any business model, to determine the personalized preferences of all potentially customers, then to rich them with relevant information, wherever they may be. These serve as the driving force for new generation of applications [9], [10] and [11]. Knowledge-driven applications have the potential to expand the use of information by transforming existing huge data collections into revenue-generating asset (Rosu and Dragoi [2]). To take the full advantage for knowledge and information-based business models, there is a need for an integration framework that can tie together the various classes of KApps (Rosu et al. [8], [9]).

The Virtual Enterprise Business Network (VEBN) solution and the knowledge-based system for the partner evaluations and selections presented in this paper was implemented at the Department of Engineering and Foreign Languages and the UPB-PREMINV&CTTM research centers from University „Politehnica" of Bucharest, in a university - SMEs partnership.

2. Virtual Enterprise Business environment for SME's grouped in an industrial holding

The contemporary business environment should be treated as a virtual one which makes transfer of data, information, knowledge, goods and services based on modern infrastructures. These infrastructures are based on information and communication technologies to satisfy the requirements of the new business environment. The modern enterprise is geographically distributed at nationally and internationally scale, being able to create quickly new alliances based on current purpose, in order to respond effectively to customers' explicit and implicit requirements, to adapt to the national and international legislation, with special care to the more restraining chapters regarding the environment protection. Its substantial dimension will make it a player in the globalization of the markets and it will have to assimilate and use in an early stage the new information and communication technologies it encounters there. The production process does not take place anymore as steady process run by a single company in a definite geographic location. Companies feel the need to focus on their core competency and unite into geographically dispersed virtual industry groups, to meet the demands imposed by new product / service on the market. For an organization working as a network, each company is

just a node that adds value to the process, another stage in the manufacturing / delivery chain. Thus come forth the concept of Virtual Enterprise (VE) or the larger one of Virtual Enterprise Business Network (VEBN). The industrial group, correlated with the concept of virtual enterprise, materializes by selecting qualifications and capital from different companies and temporarily synthesizing them into a single functional economic entity, able to take action on the economic opportunities. Cooperation between enterprises involved in a virtual enterprise network is supported by the computers and telecommunication network and other informational technology tools (Dragoi et al. [3]) We are facing thus a virtual industrial group built on the infrastructure provided by the Virtual Private Networks (VPN), the project centered activities being carried out by virtual teams, placed in remote geographic locations. A seamless inter-working amongst heterogeneous network of SME's represents the corner stone for the success of next generation systems with different evolving access technologies (Rosu and Dragoi [1]). For an industrial holding engaged in the global market, the workforce will require high-speed access from remote locations, including their homes. The enterprise network allows an adaptive approach to work - using migration services, employees can access the enterprise network from home using dial-up connections to wired broadband services. It is obtained thus not just a superior productivity, but also a faster response time to the problems that may arise. WiMAX high-speed wireless services presented in this paper is a possible solution for an enterprise geographically dispersed VPNs or for a consortium of many SME's.

A Virtual Enterprise Network (VEN) new solution in the e-platform developed at UPB, in the PREMINV&CTTM Research Centers, based on VPNs solutions is presented in the Figure 1. We propose in this work an e-platform for SME's grouped in an industrial holding augmented with the WiMAX solutions (see Figure 1). This e-platform is ideally suited for distributed coverage applications, such as the operators from the developing countries, rural markets, and potentially cable distributors, with the advanced characteristics required for deploying the next generation broadband multimedia services. The low cost and form factor of the purposed platform make it an ideal product for next generation managed service offerings. Today, VPN solutions can be purchased today from a telecommunications company (see Figure 1) and as an alternative they can create by using existing network infrastructure as the Internet or public switched telephone network, and software through the tunnel crossing. In addition, wireless communications enable all knowledge workers, regardless of their location, to participate in the global information economy and to improve living standards. In this view, enterprise users seek to deploy 4G wireless technologies for expanded in-door coverage in campus-based microcell or picocell applications (Miao [12], Mousa [13] and Ferdiana et al. [14].) Many enterprise networks now require a network upgrade to meet both the emerging bandwidth and mobility requirements, and thus, the WiMAX solution can be deployed by mobile operators to offer managed services to enterprise customers and suppliers. The VEBN represents the alliance of small and medium enterprises that share the resources and know-how to reach the common objectives, based on the technical support offered by the information and communication technologies and the developed software. VE environment starts with the selection of tangible and intangible resources, used in an organization perceived as a functional entity. In terms of duration, the coalition can be made for a limited period, to the extent necessary to reach the common objective, or for a longer duration, aimed to achieve similar objectives on medium or long term. To strengthen this environment, the basic infrastructure has two main modules: the internal unit and the cooperation interface. The autonomous internal module is the unit of a private company, including the complete structure of company information (databases, information system, etc...) and all authorities that take decisions in the internal processes/activities of the company (as the internal planning and control production and the engineering systems). The cooperation module contains all functions for interconnection between companies and network with communication and coordination role and works as an intermediary between the company and the network. The global coordination functions depend on the cooperation and trust level gained or desired in the business. Watching the target of this work, the small and medium enterprises (SMEs), it can be said that not all the companies allied in the consortium will be interested in all the functions offered by the system.

Fig. 1. A VEBN for an industrial holding built on national provider network with mobile access

Therefore, the various functions can be permitted or not in accordance with the set of configuration parameters. Contrasting to the classical executive structure based on lasting relationships between partners and the existence of pre-defined procedures based on direct solutions to given problems, the organizational model is more focused on what can be done to jointly achieve the goal with accent on the cooperative process. With the group focused on a project, the life cycle includes recognition of the occasion, identification of the partners and building the relationships between them, company creation, business operation and closure of the company. At the same time, the industrial group has an organizational structure with adaptive rules, which allows participating organizations to connect or leave the network at any point of time in the project lifetime.

In the modern company it is necessary to be thought, designed and implemented special applications meant to assist the company in the creation, acquisition, distribution of knowledge and information. To present systematically this method, we have identified and developed two plans. The first one concern the way

information systems enable access to the usage of information and knowledge and the second plan refers to technologies for accumulating knowledge and expertise needed by the company to have an innovative presence on the market (Rosu and Dragoi [2], Dragoi et al. [3], Rosu and Dragoi [15]).

In this context, the authors proposed (Rosu and Dragoi [2], Rosu and Dragoi [15]) a methodology on knowledge management in the industrial group in which, outside the four basic conversions of knowledge known in the literature, there were introduced other additional steps to enhance and streamline an organization's knowledge and consequently to improve the business processes in order to achieve an efficient management of the intellectual capital of the organization. Around this methodology there have been developed various KApps which were then integrated into the organization KM system.

3. Case study: The partner evaluation using KApps in SMEs

To thrive, SMEs businesses are often advised to develop relationships with external organizations that have the potential to assist business development, survival, and growth (Street and Cameron, [16]). New business formation activities vary in complexity and formality from day-to-day entrepreneurial or customer prospecting activities to highly structured approaches to new product development, making alliances and venturing (Davis and Sun, [17]). Since the end of the last century, the European Commission has promoted studies on the situation of SMEs with the goal of investigating how small industrial bodies, which are widely distributed in Europe, could reinforce their standing through aggregations, consortia agreements, collaborative networking and so on (Villa and Antonelli, [18]).

A partnership can be defined as a temporary alliance or coalition formed in order to achieve some common goals, created between the various organizations concerned, which may be state organizations, private organizations, NGOs and social partners (Rosu and Dragoi, [15]). Partners should not be analyzed only from a single view (e.g. in terms of price - the price structure analysis and comparison with the competition). It must be obtained an overview to highlight its strengths and weaknesses.

Characterization of potential partners is essential to their choice and this includes the following:

• Characterize partners as producers of goods and services;

• Characterize partners as sellers of goods and services;

• Characterize the conditions under which products and services are offered by partner - price, quality,

methods of payment, terms of association and so on;

• Characterize partner management at the SMEs level.

Classification of a partner as a producer of goods and services, for example, can be made according to several criteria, including: Partner experience on products of interest; Partner's market position; Distribution area, etc. Assessment of activity partners must be guided by a set of criteria that correspond to the goal. In evaluating partners to propose a series of practical criteria validated in the assessment providers. In this category are predominantly criteria that can be easily understood, which are quantifiable and that are of particular importance for the projects development in the enterprise.

The main indicators for general partners are: Turnover, sales volume, sales trends; Creditworthiness, financial strength, profits; Cash flow; Legal organizational form of the partner; Partner's culture; Headquarters and its subsidiaries locations; Productivity, price products; product structure, the proportion of investment in total sales; number of employees, the vocational training section thereof; Timeliness of delivery (the conduct of previous deliveries); Quality of products and / or services and quality system certificate; Expenditures for research and development; Logistics capacity, distribution channels; Payment and delivery conditions; Flexibility, communication, collaboration, etc.

Evaluation of partners must be made under a set of processes. The group can be configured by analysis using the criteria: Objectives cooperation (reducing time of delivery, obtaining zero defects, continuous reduction of costs, increase long-term productivity); Type of collaboration with partners (to develop products

and services, to upgrade / improve products and services, to ensure quality in logistics, in order to participate in tenders for the development of joint projects); Establish Contract length (the minimum conditions for extending the period of grace); Quality, warranty, price; Method of payment; Confidentiality; Lead times and delivery; Patents; etc.

In practice there are a number of assessment methods based on more criterions such as: notes system, the weighted point evaluation method, process with rates, process with indices, determining a profile, a three-dimensional analysis, etc.

An example of a method for partner evaluation using its profile (graphic method) is shown in Table 1.

Table 1. Partner evaluation method by determining their profile

Key variable Associated factor Evaluation steps

2 1 0 -1 -2

1. How flexible is the partner? Partner's reaction to beneficiary requests is: Very Fast Fast Normally With delay It takes a lot

Adapting to beneficiary requirements: No problems With minor problems With problems

Changing the delivery volume based on beneficiary requests takes place: No problems With minor problems With problems

Technological changes according to orders take place: Immediately In short time Within reasonable limits With delay It takes a lot

Cooperation with various partners and beneficiaries are: No problems With minor problems Are difficult

Score 1

2. Ensuring product quality? Product quality is: Exceeds quality requirements Very good Good Fair Under the standard

It works according to the standards: Yes Generally yes No

Quality audits take place: Regular Rare None

Score 2

Score N

Total Score Strengths: Weaknesses:


Total Score Strengths: Weaknesses:


A knowledge-based system for partner evaluation using this method was developed and implemented in VP-Expert and Prolog. In this knowledge based system, the rule of production R1 is applied to the initial base or set of facts SF0 and the result is the base (set) of facts SF1. Starting from SF1 can apply rules R2, R3 or R4, getting SF2, SF3 or SF4, respectively. The set of rules can be represented by a graph (Figure 2a).

Knowledge Base (EVPART.KBS) contains rules (see Figure 2b) on partner evaluation criteria (in terms of timeliness, communication, price level, quality, and so on).

Fig. 2. (a) Change of the set of facts by applying the rules; (b) The EVPART.KBS knowledge base rules

Partner shall make assessments and, depending on their score, receive a grade. In addition to this qualification, the partner strengths and weaknesses are highlighted the (a result of a partner evaluation is shown in Figure 3). Partnership can be developed on several levels (in the sense of complexity) and may consist of simple coordination of partners (for a precise action), or may take the form of cooperation and / or

collaboration. The parties involved in the partnership can bring various resources such as: products and equipments, technologies, access to services, experience in a particular field, etc... - these resources are extremely important especially for SMEs, that miss the power of large enterprises. The particular expertise of the partners can become crucial assets in a project or another, incorporating elements such as professional and efficient use of resources, access to new partners, reorganization activities, etc.

Partnerships encourage the development of newer and effective routes toward goals achievement -partner's plans evolve as a result of the partnership, becoming clearer and their programs are integrated into larger entities. Choosing the relevant criteria is dependent mainly on the type of products covered by the project, on the value wanted by project manager in relation to partners and on their quality.

There should be analyzed the different types of Project Manager - Partner relationships. The basic criteria of the analysis are: the creditworthiness of the company, company culture, quality and flexibility issues, price and geographical proximity. Creditworthiness is important, especially if the research and development process is based on a refinancing procedure, because the development and design of new products requires significant investment. In the context of a long-term collaboration with a supplier, the organization culture has a key position. Communication needed to resolve problems assumes compatibility between organizational cultures, especially regarding business conduct in keeping promises and commitments, the choice of objectives and the conduct chosen to solve issues. A long-term cooperation with partners should be based on a unitary concept of quality in the sense of total quality management in order to maintain the competitiveness of business partners both at entity and at organization level.

Fig. 3. The EVALPART.KBS interrogation and view results in RUNTIME mode for a Wooden Planks Manufacturer located in Buzau Valley, Buzau County

4. Conclusions

This paper proposes the model of the virtual enterprise infrastructure for an industry group to support and integrate the KApps in a KM system. It is investigated the functioning from different perspectives, such as workflows, information exchange and applied standards, flexibility and efficiency to changes and unforeseen events, etc... Unlike the classical organizational structure based on long-term relationships between partners and the existence of preset processes and procedures based on what should be done, the organizational model is focused more on what should be done to achieve a common objective, with a dynamic and flexible cooperative component. Because the alliance is focused on a project, the life cycle includes identifying the opportunity, choosing the partners and developing the relationships between them, business formation, business operation and dissolution of the enterprise. At the same time, the industrial group has an

organizational structure with adaptive rules, which allows participating organizations to join or leave the network at any time instance during the project.


This work was carried out at the UPB, Department of Engineering and Foreign Languages and the PREMINV Research Centre. This work is financed by the Research University Grants ORGVIRT & PROGPROC & ID 1022 from Ministry of Higher Education of Romania and the validation of this solution by a case study in the ORGVIRT & PROGPROC & ID 1022 research projects is to determine the new organization type for integrating the virtual enterprise medium and to outsource shared assets from UPB-PREMINV&CTTM research centers to industrial partners.


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