Network capability and entrepreneurship : refinement of a scale and test of a framework

• Principal Topic Small firms are widely recognized as being in need of managing social and professional networks with other actors and are therefore no longer considered as individual and self-fulfilling units that do not require other actors to be competitive. Rather the individual firm can be seen as an ''organizer'' that interacts with other actors in order to be able to carry out a strategy and build competitive advantage that is far beyond the limitations of the single firm. All collaborating partners can focus on their core activities and by interlinking these, competitive advantage can occur. Having a capability to know about and tap into other firm's resources seems to be a valuable asset in the harsh competitive landscape of today's business environment. Unfortunately, although prior research much emphasizes the value of such a network capability, there are not much scales or approaches integrating such scales in models of small firm entrepreneurship and performance. As a response, our study develops and tests an operationalization of network capability, and examines the significance of this concept in order to understand small firm performance and entrepreneurial behavior. Based on scholars such as Walter et al. (2006) we define network capability as the firm's ability to develop and use inter-firm relationships which includes the following components: a) the firm's coordination activities between collaborating firms, b) the firm's relational skills due to their ability of inter-personal exchange, c) partner knowledge, i.e. possessing organized and structured information about their collaborating firms and competitors, and, d) the firm's internal communication to attain organizational learning within partnerships. However, we also add a dynamic aspect, that is, network capabilities in locating and building up new relations rather than merely sustaining old ones. For small firms in today's dynamic business environment, such a capability may be very valuable for both pursuing entrepreneurship and ultimately performing well. Consequently, we also see and research the relevance of e) skills in locating and building up new relations with future partners, as a potential part of network capability. In this study we will therefore investigate whether network capability has any effect on small firm outcomes in terms of entrepreneurial behavior and firm performance. Methodology/Key Propositions We use two independent samples of small firms (less than 50 employees) in Sweden to be able to reach our aim. The samples are selected based on their relevance for the study at hand. The first survey is a stratified sample of small IT-related firms, which represent businesses that is operating under fairly turbulent conditions. The other survey is a random sample of firms that started their business 2003, representing firms that are fairly young. We believe that both these conditions (turbulence and newness) constitute cases where networking is important and are worthy candidates in a study of network capability. Both surveys are currently being undertaken and the analysis in this abstract is based on 294 cases. Another 100 cases is expected before our data collection is closed. The response rate will be around 20 %. A preliminary non-response analysis shows little difference between respondents and non-respondents. The operationalization of network capability is based on the research of Walter et al. (2006). Three items measure each of the four dimensions (coordination activities, relationship skills, partner knowledge and internal communication). We have added the component network building and measure it by three items. Our scale has been pretested and refined by being put to test to both scholars and practitioners before sending the surveys. Entrepreneurial orientation (EO) is measured based on the scale developed by Lumpkin and Dess (2001), where we consider the ''classics'' innovativeness, proactiveness, and risk taking. Consistent with prior small firm research, we used a perceived measurement of firm performance. The statistical analysis is based upon various forms of factor analysis (exploratory and confirmatory) and regression analysis. Results and Implications The analysis shows that network capability has good measurement properties. Each of the five dimensions form a factor with only minor crossloadings between factors (using oblique rotation). Cronbach's alpha is between 0.70 and 0.85 and correlations between the five factors vary between 0.2 and 0.4 which indicates that these five aspects form an overall scale for network capability. In support of accuracy, a confirmatory factor analysis also report acceptable model fit measures. When performing regressions with firm performance and entrepreneurial orientation as dependent variables (and controlling for size and environmental conditions), we get interesting results. For the turbulent sample, the two coordination dimensions are significant (together with EO) when looking at performance, while internal coordination and building capability is significant to explain EO. For the other sample consisting of young firms, relationship skills are the only significant dimension (together with EO) when looking at performance, while only the building capability is significant to for EO. Our results suggest a valid measurement of network capability and that network capability seems to be important to understand entrepreneurial behavior and small firm performance. Aspects of network capability explain significant parts of EO and moreover help to explain firm performance over ad beyond what EO does. It is especially interesting to note that the most influential aspect of network capability when it comes to explain EO is the aspect we developed for this study. The capability to find and build a new relation thus seems vital to use in future studies on a firm's network capability and its associations to entrepreneurship and performance.

Ämnesord

TEKNIK OCH TEKNOLOGIER  -- Annan teknik -- Övrig annan teknik (hsv//swe)

ENGINEERING AND TECHNOLOGY  -- Other Engineering and Technologies -- Other Engineering and Technologies not elsewhere specified (hsv//eng)

Nyckelord

Entreprenörskap och innovation

Entrepreneurship and Innovation

Centre - The Faste Laboratory

Centrumbildning - Fastelaboratoriet

Publikations- och innehållstyp

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