This study deals with small wood processing firms (each of them having between zero to six employees) in the rural district of Ljusdal in the administrative province of Gävleborg, Swe-den. Wood processing firms are industries considered by many to develop more slowly than most other industries.

The principal aim of the study was to create a better understanding of the conditions small wood processing firms have to deal with. A second aim was to evaluate their growth poten-tial. Nine different firms were visited and also depicted. Among the firms three were mainly dealing with saw milling, two were manufacturers of timbered houses, one was manufacturer of windows, one was manufacturer of stairs, one was supplier of wood components, and one was combined wood manufacturer. A theoretical model was chosen for the analysis of the firms. The firms were grouped according to their ability to establish relations, to create repu-tation, to introduce new ways of thinking, and to benefit from strategic assets. In addition the willingness of the manufacturers to increase their firms was included in the analysis.

It was shown that the owners of the firms more easily create relations with suppliers and cus-tomers than with other manufacturers. Thus collaboration with other manufacturers hardly exists. The customers often recommend the products to each other, indicating the importance of a good reputation. Some of the manufacturers also disclosed new ways of thinking, but without being technical innovators. Access to strategic assets, such as low capital costs, may explain the relative success of some of the firms. Another possible strategic asset is subsidies from the Government, however not much utilized among the firms. Instead, the subsidies seem to induce jealously counteracting incentives to collaboration. Most of the manufacturers are not interested in increasing the firms by ordinary employing. Another way of increasing regional employment is firm startups, but that is limited because of lack of entrepreneurial spirit in the region.

Accordingly, a question to be further examined is whether the subsidies from the Government to individual firms aiming to induce growth through further employing may be limited to gen-erate counterproductive effect. A further issue is the general conditions for the entrepreneurs in the region. Showing up as one of the conclusions of the study, these type of problems are preferably examined by carrying out individual case studies instead of searching for general and comprehensive models to understand the small firms. The results may than be used to communicate the prerequisites of the small firms with other firm owners, with people in trade and industry, with persons doing research and also with students.