Advertisement

The advantages of formalizing networks: new evidence from Italian SMEs

  • Maurizio Cisi
  • Francesco Devicienti
  • Alessandro Manello
  • Davide Vannoni
Article
  • 43 Downloads

Abstract

Using a large sample of Italian small and medium-sized enterprises (SMEs), we investigate the effect of business cooperation realized through a “network contract” on the economic performance of network members. We find that establishing a formal business network has a positive effect on a firm’s gross margin ratio and exports, but not on profits. The advantages of this type of networking are stronger in the cases of the following: smaller firms; firms operating in traditional markets; firms operating in turbulent markets; firms located in less developed areas; and firms not part of an industrial district. The characteristics of a network (such as its size, geographical dispersion, and the sectorial diversity of its members) also have an impact on firm performance.

Keywords

Formal business network SMEs Economic performance 

JEL codes

D22 L24 L25 M21 L26 

Notes

References

  1. Bennedsen, M., Nielsen, K. M., Perez-Gonzales, F., & Wolfenzon, D. (2007). Inside the family firm: the role of families in succession decision and performance. The Quarterly Journal of Economics, 122(2), 647–691.  https://doi.org/10.1162/qjec.122.2.647.CrossRefGoogle Scholar
  2. Bentivogli, C., Quintiliani, F., Sabbatini, D. (2013). Le reti di imprese. Banca d’Italia–QEF, n. 152. https://www.bancaditalia.it/pubblicazioni/qef/2013-0152/QEF_152.pdf.
  3. Bodnaruk, A., Massa, M., & Simonov, A. (2013). Alliances and corporate governance. Journal of Financial Economics, 107, 671–693.  https://doi.org/10.1016/j.jfineco.2012.09.010.CrossRefGoogle Scholar
  4. Bogliacino, F., & Pianta, M. (2016). The Pavitt taxonomy revisited. Patterns of innovation in manufacturing and services. Economia Politica: Journal of Analytical and Institutional Economics, 33(2), 153–180.  https://doi.org/10.1007/s40888-016-0035-1.CrossRefGoogle Scholar
  5. Brand, M. J., Croonen, E. P. M., & Leenders, R. T. A. J. (2018). Entrepreneurial networking: a blessing or a curse? Differential effects for low, medium and high performing franchisees. Small Business Economics, 50, 783–805.  https://doi.org/10.1007/s11187-017-9895-1.CrossRefGoogle Scholar
  6. Cai, J., & Szeidl, A. (2018). Interfirm relationships and business performance. The Quarterly Journal of Economics, 133(3), 1229–1282.  https://doi.org/10.1093/qje/qjx049.CrossRefGoogle Scholar
  7. Colombo, E., Mangolini, L., Foresti, G. (2014). Il quarto osservatorio IntesaSanpaolo-Mediocredito sulle reti d’impresa. Intesa Sanpaolo - Servizio Studi e Ricerche.Google Scholar
  8. Confindustria. (2016). Reti d’impresa. L’identikit di chi si aggrega. Rome: Centro Studi Confindustria.Google Scholar
  9. Confindustria. (2017). Reti d’impresa. Gli effetti del contratto di rete sulla performance delle imprese. Rome: Centro Studi Confindustria.Google Scholar
  10. Ferrari, C. (2010). The Italian “network contract”: a new tool for the growth of enterprises within the framework of the “Small Business Act”? Brief comments on the Italian Law 9 April 2009, n. 33, art. 3, co. 4-ter. Columbia Journal of European Law Online, 16, 77–83.Google Scholar
  11. Goerzen, A., & Beamish, P. W. (2005). The effect of alliance network diversity on multinational enterprise performance. Strategic Management Journal, 26, 333–354.  https://doi.org/10.1002/smj.447.CrossRefGoogle Scholar
  12. Gulati, R., & Higgins, M. (2003). Which ties matter when? The contingent effects of interorganizational partnerships on IPO success. Strategic Management Journal, 24(2), 127–144.  https://doi.org/10.1002/smj.287.CrossRefGoogle Scholar
  13. Havnes, P., & Senneseth, K. (2001). A panel study of firm growth among SMEs in networks. Small Business Economics, 16, 293–302.  https://doi.org/10.1023/A:1011100510643.CrossRefGoogle Scholar
  14. Hoang, H., & Antoncic, B. (2003). Network-based research in entrepreneurship: a critical review. Journal of Business Venturing, 18(2), 165–187.  https://doi.org/10.1016/S0883-9026(02)00081-2.CrossRefGoogle Scholar
  15. Huggins, R. (2001). Inter-firm network policies and firm performance: evaluating the impact of initiatives in the United Kingdom. Research Policy, 30, 443–458.  https://doi.org/10.1016/S0048-7333(00)00092-5.CrossRefGoogle Scholar
  16. Jack, S. L. (2010). Approaches to studying networks: implications and outcomes. Journal of Business Venturing, 25, 120–137.  https://doi.org/10.1016/j.jbusvent.2008.10.010.CrossRefGoogle Scholar
  17. Koka, B., & Prescott, J. (2008). Designing alliances networks: the influence of network position, environmental change and strategy on performance. Strategic Management Journal, 29, 639–661.  https://doi.org/10.1002/smj.679.CrossRefGoogle Scholar
  18. Lechner, C., Dowling, M., & Welpe, I. (2006). Firm networks and firm development: the role of the relational mix. Journal of Business Venturing, 21, 514–540.  https://doi.org/10.1016/j.jbusvent.2005.02.004.CrossRefGoogle Scholar
  19. Li, H., Corral de Zubielqui, G., & O’Connor, A. (2015). Entrepreneurial networking capacity of cluster firms: a social network perspective on how shared resources enhance firm performance. Small Business Economics, 45, 523–541.  https://doi.org/10.1007/s11187-015-9659-8.CrossRefGoogle Scholar
  20. Lin, F., & Lin, Y. (2016). The effect of network relationship on the performance of SMEs. Journal of Business Research, 69, 1780–1784.  https://doi.org/10.1016/j.jbusres.2015.10.055.CrossRefGoogle Scholar
  21. Mazzola, E., Perrone, G., & Kamuriwo, D. (2016). The interaction between inter-firm and interlocking directorate networks on firm’s new product development outcomes. Journal of Business Research, 69, 672–682.  https://doi.org/10.1016/j.jbusres.2015.08.033.CrossRefGoogle Scholar
  22. Nunes, S., Lopes, R., & Fuller-Love, N. (2017). Networking, innovation and firms’ performance: Portugal as an illustration. Journal of the Knowledge Economy.  https://doi.org/10.1007/s13132-017-0508-7.
  23. OECD (2014) Italy: key issues and policies. In OECD Studies on SMEs and Entrepreneurship. OECD Publishing.  https://doi.org/10.1787/9789264213951-en.
  24. Parida, V., Patel, P., Wincent, J., & Kohtamaki, M. (2016). Network partner diversity, network capabilities and sales growth in small firms. Journal of Business Research, 69(6), 2113–2117.  https://doi.org/10.1016/j.jbusres.2015.12.017.CrossRefGoogle Scholar
  25. Park, Y., Shin, J., & Kim, T. (2010). Firm size, age, industrial networking, and growth: a case of the Korean manufacturing industry. Small Business Economics, 35(2), 153–168.  https://doi.org/10.1007/sl1187-009-9177-7.CrossRefGoogle Scholar
  26. Parker, S. (2008). The economics of formal business network. Journal of Business Venturing, 23, 627–640.  https://doi.org/10.1016/j.jbusvent.2008.01.003.CrossRefGoogle Scholar
  27. Rauch, A., Rosenbusch, N., Unger, J., & Frese, M. (2016). The effectiveness of cohesive and diversified networks: a meta-analysis. Journal of Business Research, 69, 554–568.  https://doi.org/10.1016/j.jbusres.2015.05.011.CrossRefGoogle Scholar
  28. Ritala, P. (2012). Coopetition strategy—when is it successful? Empirical evidence on innovation and market performance. British Journal of Management, 23, 307–324.  https://doi.org/10.1111/j.1467-8551.2011.00741.x.CrossRefGoogle Scholar
  29. Scagnelli, S. D., & Cisi, M. (2015). Companies’ formalized relationships: a study of the effectiveness of Italian business Network contracts. In N. Di Cagno, G. Invernizzi, A. Mechelli, & M. Ugolini (Eds.), Il ruolo dell’azienda nell’economia, Esiste un modello aziendale orientato alla crescita? (pp. 295–307). Bologna: Il Mulino.Google Scholar
  30. Schoonjans, B., Van Cauwenberge, P., & Bauwhede, H. (2013). Formal business networking and SME growth. Small Business Economics, 41, 169–181.  https://doi.org/10.1007/sl1187-011-9408-6.CrossRefGoogle Scholar
  31. Schott, T., & Jensen, K. (2016). Firms’ innovation benefiting from networking and institutional support: a global analysis of national and firm effects. Research Policy, 45, 1233–1246.  https://doi.org/10.1016/j.respol.2016.03.006.CrossRefGoogle Scholar
  32. Stoian, M. C., Rialp, J., & Dimitratos, P. (2017). SME network and international performance: unveiling the significance of foreign market entry mode. Journal of Small Business Management, 55(1), 128–148.  https://doi.org/10.1111/jsbm.12241.CrossRefGoogle Scholar
  33. Tan, J., Zhang, H., & Wang, L. (2015). Network closure or structural hole? The conditioning effects of network-level social capital on innovation performance. Entrepreneurship Theory and Practice, 39(5), 1189–1212.  https://doi.org/10.1111/etap.12102.CrossRefGoogle Scholar
  34. Vanhaverbeke, W., Gilsing, V., Beerkens, B., & Duysters, G. (2009). The role of alliance network redundancy in the creation of core and non-core technologies: a local action approach. Journal of Management Studies, 46, 215–244.  https://doi.org/10.1111/j.1467-6486.2008.00801.x.CrossRefGoogle Scholar
  35. Watson, J. (2011). Networking: gender differences and the association with firm performance. International Small Business Journal, 30(5), 536–558.  https://doi.org/10.1177/0266242610384888.CrossRefGoogle Scholar
  36. Zaheer, A., & Bell, G. (2005). Benefiting from network position: firm capabilities, structural holes, and performance. Strategic Management Journal, 26(9), 809–825.  https://doi.org/10.1002/smj. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of ManagementUniversity of TurinTurinItaly
  2. 2.Department of Economics, Mathematics and StatisticsUniversity of Turin & Collegio Carlo AlbertoTurinItaly
  3. 3.Department of Economics, Mathematics and StatisticsUniversity of Turin & IRCrES-CNRTurinItaly
  4. 4.Department of Economics, Mathematics and StatisticsUniversity of Turin & Collegio Carlo Alberto & IRCrES-CNRTurinItaly

Personalised recommendations