SME Performance

SME Performance

Separating Myth from Reality

John Watson

The performance of Small and Medium-sized Enterprises (SMEs) has been a subject of continual interest to both researchers and practitioners. This enlightening book investigates the pitfalls which have affected the assessment of SME performance in much of the past research.

Chapter 9: The Association between Networking and Performance

John Watson

Subjects: business and management, entrepreneurship, economics and finance, international accounting

Extract

INTRODUCTION While there are many factors that can influence the success of a venture and there are various risk reduction strategies that can be employed to increase a firm’s chances of survival (see, for example, Duchesneau and Gartner 1990; Cooper 1993; Cooper et al. 1994; Robson and Bennett 2000; Shepherd, Ettenson and Crouch 2000; Larsson, Hedelin and Garling 2003), only recently have researchers begun to highlight the potential significance to SME performance of an owner-manager’s networking involvement. Coleman (1988) notes that information is important to decision making but is costly to obtain and that networks provide a means by which important information can potentially be acquired in a costeffective manner. Therefore, networking can enhance an SME owner’s social capital (Coleman 1988) because it provides access to information embedded within the networks accessed. Further, Granovetter (1983) argues that individuals whose networks (and, therefore, main source of information) comprise primarily family and friends (strong ties) are likely to have access to less information than individuals whose networks include many acquaintances (weak ties). Presumably for this reason, Fischer and Reuber (2003) suggest that owners of high-growth firms need to develop ties beyond their personal circle of contacts and local communities. Similarly, innovation theory suggests that networks (particularly those comprised of many weak ties) are important in diffusing innovations and, therefore, SMEs whose owners are heavily involved in networking should outperform SMEs whose owners make limited (or no) use of networks (Havnes and Senneseth 2001). In support of the foregoing propositions (and despite Aldrich...

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