The Impact of Business Networking on SME Performance: Development of a Conceptual Framework.

Author(s)

Harshana PS , Prof.Dr. Ali Khatibi , Dr. Mohd Shukri Ab Yajid ,

Download Full PDF Pages: 40-53 | Views: 323 | Downloads: 90 | DOI: 10.5281/zenodo.3458778

Volume 4 - February 2015 (02)

Abstract

This research attempts to create a conceptual framework that explores the impact of Business networking towards Sri Lankan Small and Medium Enterprises (SME) performance and the continuity and success of SMEs. Business networking has been gaining grounds as an influencing factor for business success in the recent years. The growth of technology has increased the avenues available for Business networking in many folds, compared to what was available a decade ago. Many empirical studies have conducted to understand and model the way how Small and Medium Enterprises (SMEs) function and perform. However, relatively limited research has been conducted on understanding the impact of business networks on SME performance throughout the world despite most of the economies recognizing SMEs as the driving force in respective economies. In the Sri Lankan context, the available literature is minimal. Sri Lankan SMEs, on the other hand differ from the rest of the world in terms of cultural values, ethics, standard operating procedures etc. This paper, therefore, attempts to develop a conceptual framework upon which further elaboration of the said relationship can be investigated. The proposed conceptual framework pay attention to certain ‘personal attributes’ of the entrepreneur that influences business networking and ‘business justification’ for the entrepreneur to consider engaging in business networking. Featured variable in the conceptual framework are Trust, Self-Efficacy, Tolerance of Ambiguity, Competition, Necessity, Reciprocity, Stability, Legitimacy and Efficiency.

Keywords

Business Network, SME success, Sri Lanka, SME Performance. 

References

  1. Ahlström-Söderling, R. (2003). SME Strategic Business Networks seen as Learning Organizations, Journal of Small Business and Enterprise Development, 10: 444-454.
  2. Ammenberg, J., Börjesson, B. & Hjelm, O. (1999). Joint EMS and Group Certification: A CostEffective Route for SMEs to Achieve ISO 1400. Greener Management International, Vol. 28, pp. 23- 31.
  3. Andrews, K. (1971). The Concept of Corporate Strategy. Irwin, Homewood, IL.
  4. Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, Vol 17, pp. 99-120.
  5. Bentler, P. M. & Chou, C. P. (1987). Practical Issues in Structural Modeling. Sociological Methods and Research, Vol. 16, pp. 78-117.
  6. Bentler, P. M. (1990a). Comparative fit indexes in structural models. Psychological Bulletin, Vol. 107, pp. 238-246.
  7. Bentler, P. M. (1990b). Fit indexes, Lagrange Multipliers, constraint changes and incomplete data in structural models. Multivariate Behavioral Research, Vol. 25, pp. 163-172.
  8. Biggero, L. (2001). Self-organizing processes in building entrepreneurial networks: a theoretical and empirical investigation, Human Systems Management, Vol. 20, pp. 209-222.
  9. Blau, P. M. (1964). Exchange and power in social life. New York: Wiley.
  10. Bollen, K. A. (1989). Structural equations with latent variables. New York: Wiley.
  11. Borch, O. J. & Arthur, M. B. (1995). Strategic Networks among Small Firms: Implications for Strategy Research Methodology, Journal of Management Studies, Vol. 32, pp. 419-441.
  12. Bosworth, B. & Rosenfeld, S. (1992). Significant others: Exploring the potential of manufacturing networks. Chapel Hill, NC: Regional Technology Strategies.
  13. Bradach, J. L. & Eccles, R. G. (1989). Markets versus hierarchies: From ideal types to Business Performance through Innovation Programmes. Small Business Economics, Vol. 13, pp. 219-234.
  14. Burrel, G. & Morgan, G. (1979). Sociological Paradigms and Organizational Analysis: Elements of the Sociology of Corporate Life. Aldershot: Gower.
  15. Buvik, A. and Reve, T. (2002), “Inter-firm governance and structural power in industrial relationships: the moderating effect of bargaining power on the contractual safeguarding of specific assets”, Scandinavian Journal of Management, Vol. 18, pp. 261-84.
  16. Carroll, G. & Hannan, M. (2000). The Demography of corporations and industries. Princeton, NJ: Princeton University Press.
  17. Castells, M. (1996), The Rise of the Network Society: The Information Age: Economy, Society and Culture, Volume I, Blackwell Publishers, Cambridge, MA.
  18. Chaston, I. (1995). Danish Technological Institute SME sector networking model: implementing broker competencies, Journal of European Industrial Training, Vol. 19, pp. 10-17.
  19. Chell, E. & Baines, S. (2000). Networking, entrepreneurship and microbusiness behavior, Entrepreneurship & Regional Development, Vol. 12, pp. 195-206.
  20. Chung, S., Singh, H., & Lee, K. (2000). Complementarity, status similarity and social capital as drivers of alliance formation. Strategic Management Journal, Vol. 21, pp. 1–22.
  21. Covin, J. G. & Slevin, D. P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship: Theory and Practice, Vol. 16, pp. 7-25.
  22. Das, T. K. & Teng, B. (2002). Alliance Constellations: A Social Exchange Perspective. Academy of Management Review, Vol. 27, pp. 445-456.
  23. Dean, J., Holmes, S. & Smith, S. (1997). Understanding business networks: evidence from the manufacturing and service sectors in Australia. Journal of Small Business Management, Vol. 35, pp. 78-84.
  24. Denzin, N. & Lincoln, Y. S. (2000). Introduction: The discipline and practice of qualitative research. In N. K. Denzin & Y. S. Lincoln (Eds.) Handbook of qualitative research: 1-28, Thousand Oaks, CA: Sage.
  25. Dermer, J. (1973). Cognitive Characteristics and Perceived Impact of Information. Accounting Review, July.
  26. Diez, M. A. (2001). The Evaluation of Regional Innovation and Cluster Policies: Towards a Participatory Approach. European Planning Studies, Vol. 9, pp. 907-923.
  27. Dubin, R. (1978). Theory development. New York: Free press.
  28. Ebers, M. and Jarillo, J.C. (1998), “The construction, forms, and consequences of industry networks”, International Studies of Management and Organization, Vol. 27 No. 4, pp. 3-21.
  29. Eisenhardt, K.M. (1989), “Building theories from case study research”, Academy of Management Review, Vol. 14 No. 4, pp. 532-50.
  30. Florén, H. & Tell, J. (2004). The emergent prerequisites of managerial learning in small firm networks. The Leadership and Organization Journal. Vol. 25, pp. 292-307. 68
  31. Ford, D., Gadde, L-E., Ha°kansson, H., Lundgren, A., Snehota, I., Turnbull, P. and Wilson, D. (1998), Managing Business Relationships, John Wiley & Sons, Hoboken, NJ.
  32. Fornell, C. (1987). A Second Generation of Multivariate Analysis: Classification of Methods and Implications for Marketing Research. In: Review of Marketing. (Ed) Houston, M. J (Chicago), American Marketing Association, pp. 407-450.
  33. Forstro¨m, B., Kautonen, M. and Toivonen, J. (1997), Innovatiivisten pk-verkostojen menestystekija¨ t, Teknologiakatsaus 55/97, Tekes, Helsinki (research report published by the Finnish Technology Agency, in Finnish).
  34. Forza, C. (2002), “Survey research in operations management: a process-based perspective”, International Journal of Operations & Production Management, Vol. 22 No. 2, pp. 152-94.
  35. Franke, U. F. (1999). The virtual web as a new entrepreneurial approach to network organizations. Entrepreneurial & Regional Development, Vol. 11, pp. 203-229.
  36. Fuellhart, K. G. & Glasmeier, A. K. (2003). Acquisition, assessment and use of business information by small- and medium-sized businesses: a demand perspective. Entrepreneurship & Regional Development, Vol. 15, pp. 229-252.
  37. Gephart, R. (2004). Qualitative Research and the Academy of Management Journal. Academy of Management Journal, Vol. 47, pp. 454-462.
  38. HaÊkansson, H. and Johanson, J. (1987), ``Formal and informal cooperation strategies in international industrial networks'', in Contractor, F.J. and Lorange, P. (Eds), Cooperative Strategies in International Business, Lexington Books, MA, pp. 369-79.
  39. Hammarkvist, K.-O., HaÊkansson, H. and Mattsson, L.-G. (1982), MarknadsfoÈring foÈr konkurrenskraft (Marketing for Competitiveness), Liber, MalmoÈ. Harrigan, K.R. (1985), ``An application for clustering for strategic group analysis'', Strategic Management Journal, Vol. 6, pp. 55-73.
  40. Hoang, A. and Antoncic, B. (2003), “Networkbased research in entrepreneurship: a critical review”, Journal of Business Venturing, Vol. 18, pp. 165-87.
  41. Holmlund, M. and Kock, S. (1995), ``Buyer perceived service quality in industrial networks'', Industrial Marketing Management, Vol. 24, pp. 109-21.
  42. Human, S.E. and Provan, K.G. (1997), “An emerging theory of structure and outcomes in smallfirm strategic manufacturing networks”, Academy of Management Journal, Vol. 40, pp. 368-403.
  43. Human, S.E. and Provan, K.G. (2000), “Legitimacy building in the evolution of small-firm multilateral networks: a comparative study of success and demise”, Administrative Science Quarterly, Vol. 45, pp. 1-33.
  44. Hunt, M.S. (1972), ``Competition in the major home appliance industry, 1960-1970'', unpublished doctoral dissertation, Harvard University, Boston.
  45. Ireland, R.D., Hitt, M.A., Camp, S.M. and Sexton, D.L. (2001), “Integrating entrepreneurship and strategic management actions to create firm wealth”, Academy of Management Executive, Vol. 15, pp. 49-63.
  46. Jarillo, J. (1988), “On strategic networks”, Strategic Management Journal, Vol. 9, pp. 31-44.
  47. Jarillo, J.C. (1993), Strategic Networks: Creating the Borderless Organization, Butterworth Heinemann, Oxford.
  48. Kanter, R.M. (1994), ``Collaborative advantage: the art of alliances'', Harvard Business Review, JulyAugust, pp. 96-108.
  49. Koh, J. and Venkataraman, N. (1991), “Joint venture formation and stock market reactions: an assessment in the information technology sector”, Academy of Management Journal, Vol. 34, pp. 869- 92.
  50. Kwoka, E.J. (1979), ``The effect of market share distribution on industry performance'', Review of Economics and Statistics, February, pp. 101-9.
  51. Kwoka, E.J. and Ravenscraft, D.J. (1986), ``Cooperation v. rivalry: price-cost margins by line of business'', Economica, August, pp. 351-63.
  52. Lumpkin, G.T. and Dess, G.G. (1996), “Clarifying the entrepreneurial orientation construct and linking it to performance”, Academy of Management Review, Vol. 21, pp. 135-72.
  53. Madhok, A. (1995), “Opportunism and trust in joint venture relationships: an exploratory study and a model”, Scandinavian Journal of Management, Vol. 11, pp. 57-74.
  54. Mattsson, L.-G. and Lundgren, A. (1992), ``En Paradox? Konkurrens i industriella naÈtverk (A Paradox? Competition in Business Networks)'', MTC Kontakt, Nr 22, aÊrgaÊng 8 1992/93.
  55. Mayer, R.C., Davis, J.H. and Schoorman, F.D. (1995), “An integrative model of organizational trust”, Academy of Management Review, Vol. 20, pp. 709-34.
  56. Miller, D. and Friesen, P. (1982), “Innovation in conservative and entrepreneurial firms: two models of strategic momentum”, Strategic Management Journal, Vol. 3, pp. 1-25.
  57. Miller, D. and Friesen, P.H. (1984), Organizations: A Quantum View, Prentice-Hall, New York, NY.
  58. Moore, J.F. (1996), The Death of Competition ± Leadership & Strategy in the Age of Business Ecosystems, John Wiley & Sons, Chichester.
  59. Morgan, R.M. and Hunt, S.D. (1994), ``The commitment ± trust theory of relationship marketing'', Journal of Marketing, Vol. 58, pp. 20- 38.
  60. Nilsson, K. and Nilsson, P. (1992), “Sma˚fo¨retag i flerpartssamverkan” (“Small companies in multiparty cooperation”), doctoral thesis, Umea˚ University, Umea˚.
  61. Penrose, E. (1959), The theory of the Growth of the Firm, John Wiley, New York, NY.
  62. Porac, J.F., Thomas, H. and Baden-Fuller, C. (1989), ``Competitive groups as cognitive communities: the case of Scottish knitwear manufacturers'', Journal of Management Studies, Vol. 26 No. 4, July, pp. 397-410.
  63. Porter, M.E. (1979), ``The structure within industries and companies' performance'', Review of Economics and Statistics, May, pp. 214-27.
  64. Ring, P.S. and Van de Ven, A. (1992), ``Structuring cooperative relationships between organizations'', Strategic Management Journal, Vol. 13, pp. 483-98.
  65. Schumpeter, J.A. (1940), Capitalism, Socialism, and Democracy, Harper, New York, NY.
  66. Sivadas, E. and Dwyer, F.R. (2000), “An examination of organizational factors influencing new product success in internal and alliance-based processes”, Journal of Marketing, Vol. 64, pp. 31- 49.
  67. Spekman, R.E., Forbes, T.M. III, Isabella, L.A. and MacAvoy, T.C. (1998), “Alliance management: a view from the past and a look to the future”, Journal of Management Studies, Vol. 35, pp. 747-72.
  68. Steward, F. and Conway, S. (2000), “Building networks for innovation diffusion in Europe: learning from the SPRINT Programme”, Enterprise and Innovation Management Studies, Vol. 1, pp. 281-301.
  69. Thomas, H. and Venkatraman, N. (1988), ``Research on strategic groups: progress and prognosis'', Journal of Management Studies, November, pp. 537-55.
  70. Turnbull, P., Ford, D. and Cunningham, M. (1996), ``Interaction, relationships and networks in business markets: an evolving perspective'', Journal of Business & Industrial Marketing, Vol. 11 No. 3/4, pp. 44-62.
  71. Van de Ven, A.H. and Ferry, D.I. (1980), Measuring and Assessing Organizations, John Wiley & Sons, New York, NY.
  72. Varama¨ki, E. and Vesalainen, J. (2003), “Modelling different types of multilateral cooperation between SMEs”, Entrepreneurship & Regional Development, Vol. 15, pp. 27-47.
  73. Wiklund, J. (1998), “Small firm growth and performance: entrepreneurship and beyond”, Jo¨nkoping International Business School, Jo¨nkoping.
  74. Wiklund, J. (1999), “The sustainability of the entrepreneurial orientation-performance relationship”, Entrepreneurship: Theory & Practice, Vol. 23, pp. 37-48.
  75. Zaheer, A. and Venkatraman, N. (1995), “Relational governance as an interorganizational strategy: an empirical test of the role of trust in economic exchanges”, Strategic Management Journal, Vol. 19, pp. 373-92.
  76. Zahra, S.A. (1991), “Predictors and financial outcomes of corporate entrepreneurship: an exploratory study”, Journal of Business Venturing, Vol. 6, pp. 259-85.
  77. Zahra, S.A. (1993a), “Environment, corporate entrepreneurship and financial performance: a taxonomic approach”, Journal of Business Venturing, Vol. 8, pp. 319-40.
  78. Zahra, S.A. (1993b), “A conceptual model of entrepreneurship as firm behavior: a critique and extension”, Entrepreneurship: Theory & Practice, Vol. 17, pp. 5-21.
  79. Zahra, S.A. and Covin, J.G. (1995), “Contextual influences on the corporate entrepreneurshipperformance relationship: a longitudinal analysis”, Journal of Business Venturing, Vol. 10, pp. 43-58.
  80. Zahra, S.A., Nielsen, A.P. and Bogner, W.C. (1999), “Corporate entrepreneurship, knowledge and competence development”, Entrepreneurship: Theory & Practice, Vol. 23, pp. 169-89.

Cite this Article: