Networking Outcomes

In the network literature, there is empirical evidence that inter-firm and networking ties improve the performance of a focal firm when measured as tangible networking outcomes (Van de Ven 1976; Walker and Ruekert 1987; Walter et al. 2006; Watson 2006). Researchers have argued that network linkages are effective for sourcing and transferring knowledge that will lead to positive networking outcomes, resulting in a competitive advantage and increased business. Networks are also thought to enhance the survival and capabilities of firms by providing opportunities for shared learning, transfer of technical knowledge, legitimacy, and acting as a resource exchange (Nohria and Eccles 1992; Powell 1990). However, research is still limited regarding the influence of network relationships on the performance of firms. Network theory suggests that the ability of owners to gain access to resources not under their control in a cost effective way through networking can influence the success of business ventures (Prahalad and Hamel 1990).

Florin et al (2003) suggest that networking can provide value to members of a network by allowing them access to the social resources embedded within a network. In particular, it is suggested that networking can provide the means by which SME owners can tap into needed resources that are external to the firm (Florin et al. 2003). Julien (1993) observed that this form of networking co-operation can achieve effective economies of scale in small firms, helping them to ‘punch above their weight’ without producing the complexity caused by managing in larger organisations. Therefore using networks and networking can potentially lower a firm's risk of failure and increase its chances of

success (Julien 1993; Watson 2007). Given the significant financial and human costs that inevitably follow a business failure, researchers have long been interested in the factors associated with firm performance (Bonner et al. 2005; Cooper et al. 1994; Leek et al.

2002; McLoughlin and Horan 2000; Rust et al. 2004; Thorngren et al. 2010).

However, earlier research tended to overlook the ways in which firms are relationally embedded within the networks and how this might affect networking outcomes (Watson 2007). While there are many factors that can influence the success of a networking venture, there is growing evidence from researchers that there is a strong connection between the strength of relationships in a network, the degree to which the actors are embedded in a network and the network outcomes (Medlin 2003b; Möller and Hallien 1999; Ritter et al. 2004).

Despite support in the literature for the linkages between networking activity and network outcomes as above, there are researchers who have been unable to find a significant relationship between networking activity and firm performance (Aldrich and Reese 1993;

Cooper et al. 1994). There have been a limited number of studies that have documented a positive association between networking and various aspects of firm performance. For example Donckels and Lambrecht (1995) found that network development was positively associated with firm growth. Similarly, it is noted that entrepreneurs who failed to seek assistance through a network were less successful in acquiring external resources (Hustedde and Pulver 1992). The notion of firm performance in strategic networks was interesting, where firms which captured the impact of social networks on their strategic

development found positive benefits (Gulati et al. 2000). Hung (2002) argued that strategies for achieving differentiation by networking can be based on a wide variety of external social networks of relationships, including political, alumni, family and social links, placing greater reliance on relationship performance in a wider context.

The implications for managers are that firms need to expand their external networks of relationships to secure their survival and growth. There is a growing body of literature highlighting the potential influence of network relationships on a firms’ survival or growth. Watson (2007) for example found a positive relationship between networking, particularly with formal networks and firm survival, and to a lesser extent growth but interestingly not profitability. Watson (2007) further suggest that network intensity is associated with survival and network range is associated with growth. In a separate study Bonner et al (2005) examined the relationship between a firm’s perception of network outcomes and firm performance, concluding that there was a positive relationship which offered an enduring strategic advantage.

In concluding this section, twenty one network and networking concepts identified from the literature have been summarised and collated under four overarching constructs, 1) network atmosphere, 2) network environment, 3) network capability and 4) network characteristics. The constructs presented above are identified as antecedents of networking outcomes and potential indicators of NP. In the following section, a conceptual framework is developed based on the networking concepts described above.

3.3 Conceptual Framework

The objective of this section is to develop a conceptual framework which identifies the constructs most likely to influence the networking outcomes and therefore the preferred approach to conducting this research, facilitating the next stage in this study. The framework is designed to visualise the inter-relationships between network and networking concepts with networking outcomes, in this case the indicators of networking performance. The development of a theoretically based conceptual framework is the first stage in the process of identifying a conceptual model capable of being tested using a quantitative methodology.

However, the review of the literature draws attention to the overlap in the description and conceptualisation of many of the network terms. For example, network atmosphere and network environment share similar descriptions and are frequently interchanged.

Similarly, there is a cross-over in the literature between the networking constructs of network environment and networking capability, with competence and capability frequently used to describe the same networking effect. It was evident that the networking terms would require some refinement if they were to be effective in describing NP. As Ritter et al. (2004, p.181) in a study of networking ability, suggest that the task is to fine-tune the understanding of networking capabilities, to develop good measures for them, and to empirically examine how they contribute to the relationship and network development and the firms performance.

Having considered the influence of the various networking constructs described in the previous section, and taking into consideration the factors linked to networking performance discovered during the pre-survey interviews, a conceptual framework was developed linking a range of networking constructs to proposed independent variables.

The objective is to understand the effect of the network constructs on networking outcomes and to measure NP. The dyadic nature of network relationships where actor perceptions differ, presents a problem for researchers seeking a quantifiable approach relying on simple aggregation to analyse actor constructs. Based on the outline theoretical framework developed in this chapter, the antecedents of networking outcomes are considered to influence NP. Network concepts and outcomes are said exist within a network environment and together influence the nature of the network exchange from a network perspective (Medlin 2003b). Based on the above observations, a conceptual framework is presented in Figure 3.2.

FIGURE 3.2