We can draw some preliminary conclusions based upon our qualitative and quantitative findings. Scholars have suggested that evaluation of inter-firm arrangements among SMEs should incorporate process criteria for network effectiveness such as organizational learning rather than traditional economic or performance criteria (Baird, Lyles, & Reger, 1993). We found a strong conceptual fit with Lyle’s concept of organization learning through inter-firm relations which defines learning as "both action outcomes and changes in the state of knowledge" of network participants (Lyles, 1988: 302). Our findings indicate that network firms achieved both action outcomes such as new resource exchanges from network participation, as well as changes in their state of knowledge with respect to their own capabilities and their organization field.

First, our findings indicate that network member firms increased resource exchanges with other similar firms though network participation even though the networks operated in a fragmented industry without benefit of historical inter-firm infrastructures. Thus, purposive networks can enhance resource exchanges for SME member firms.

Second, the major finding of our research suggests that network participation provides an opportunity for SMEs to learn about their own capabilities in ways not available through market arrangements. That is, conventional wisdom would expect that firms would learn what they can and can not do well through interactions with customers or by losing to competitors in competitive market bidding. While these are useful ways to learn organizational capabilities, they are also difficult ways, since the typical learning occurs due to losing an account or bid. The traditional cautions regarding network arrangements, such as organizations losing their competitive edge due to a buffering effect of network membership, do not appear to hold up in SME networks. Instead, SME members appear to go through a process of enhanced learning about themselves relative to others through cooperative activities rather than through being "beaten up" through competitive activities. Network exchanges (e.g., friendship, information) appear to provide a more advantageous context for learning about your own organizational capabilities than market exchanges. Thus, the conventional wisdom that firms, especially SMEs, may lose more than they gain through inter-firm relationships is not confirmed in our study. In addition, our findings suggest that network participation expands SMEs awareness of their organization field. Not only did network participation appear to increase network members’ view of competitors as resources, but, at least in H-net, members appeared to become more aware of which firms were actual competitors. Thus, previous scholars’ assumptions that awareness precedes inter-firm relationships may depend upon the context of those relationships (i.e., large versus small firms).

Finally, our findings suggest that organizational learning through network participation is increased when those inter-firm linkages are among competitors rather than among buyers and suppliers. Overall, H-net respondents indicated a greater self-awareness and a greater increase in organization field awareness through their network experience than did V-net respondents. We would expect that organizations that have inherent reasons for cooperating, such as buyers and suppliers, would not perceive reasons for additional cooperative activity after joining the network. In addition, these vertically linked firms could essentially recreate their pre-network linkages after joining the network. In contrast, horizontally linked firms, such as H-net, would have few historical exchange patterns to replicate with one another and consequently would have more complex ties to create and coordinate once they joined the network. Horizontally linked network firms would have more opportunity to learn from each other since they have no pre-existing ties to duplicate in the network. In sum, our findings suggest that networks of horizontally linked firms provide members with greater opportunities to learn about themselves and their organization field than networks of vertically linked firms. Consequently, network practitioners should not ignore these more challenging and potentially risky networks, given the greater potential for positive process criteria of network effectiveness (i.e., organization learning).

While our research findings are limited to the cases we explored in the study (i.e., two networks) we believe our systematic triangulated procedures throughout the project strengthen our preliminary conclusions and ability to generalize to other SME networks. Overall, our preliminary conclusions indicate that small- and medium-sized firms can and do exchange critical resources to "stay small but act big" through manufacturing network participation. We can also conclude that SMEs differ in the extent they achieve organizational learning from network participation, depending upon the direction of the network linkages involved. Our study suggests several avenues for future researchers to build upon such as further exploration of SME network resource exchanges among a large sample of networks and from complete, rather than samples of network firms. In addition, longitudinal studies can uncover how resource exchanges change throughout differing stages in network development.

Previous Page | Main Menu | Next Page



1997 Babson College All Rights Reserved
Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

To sign-up for the Center for Entrepreneurial Studies' publication lists,
please register with the
Entrepreneurship WebTeam.