Chapter 9: Networks in International Business
9.1 INTRODUCTION Entrepreneurship is widely recognized as a key factor in economic growth (Leibenstein, 1968). Historical studies of commercialization and industrialization suggest that the speed of ‘take-off’ is higher when entrepreneurs in related lines of activity work well together (Grassby, 1995). In the aggregate, entrepreneurs may work better as a co-operative network than as a collection of competitive individualists. Unfortunately, attempts to develop the idea of an ‘entrepreneurial network’ encounter the difﬁculty that both ‘entrepreneur’ and ‘network’ are somewhat nebulous concepts. Using economic theory, however, it is possible to deﬁne them in a more rigorous manner. This chapter elucidates the concept of an entrepreneurial network, distinguishes different levels of entrepreneurial network, and shows how these different levels have interacted historically to promote growth in the international economy. The chapter is in three main parts. The ﬁrst part analyses the concept of a network. The second discusses entrepreneurship, while the ﬁnal part examines different types of entrepreneurial network, and considers the factors that inﬂuence their structure and their location. 9.2 AN ECONOMIC APPROACH TO NETWORKS Until recently, economists assumed that competitive markets could handle information in a costless manner, failing to recognize that, whatever kind of institution is involved, information-processing incurs substantial costs. Moreover, to explain why people compete so readily, economists assumed that material greed was the dominant human motive. Recent research has sought to remedy these weaknesses (Casson, 1995). Information costs have been incorporated into decision-making using the theory of teams (Carter, 1995), and ethical constraints...
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