Understanding business networks : evidence from the manufacturing and service sectors in Australia

Following international trends, the Australian government is currently engaged in a policy intervention program designed to encourage small and medium-sized enterprises (SMEs) as a group to undertake certain business activities. The Business Network Program (BNP) focuses on the establishment of "hard" networks. (1) Even though there are similar programs operating in a number of Western countries, there has been limited research and review, both at the empirical and applied levels. This article summarizes the major findings of a recent survey on the attitudes of small and medium-sized manufacturing and service sector enterprise owners concerning their involvement in formal business networks. Although there are many definitions of what constitutes a network, all of them broadly relate to a group of enterprises that have combined their talents and resources. For example, the Australian Manufacturing Council (AMC) defines a "network" as "the coming together of a group of enterprises of whatever size, to use their combined talents and resources to achieve results which would not be possible if the enterprises operated individually" (1990, p. 3). Buttery (1992) further emphasizes that the organizations must also be involved in a long-term relationship. Network opportunities generally arise wherever firms draw on similar sources of information technology, capital equipment, labor supplies and materials, or face similar problems of distribution and marketing. Firms that participate in a network, however, are still separate independent entities which compete freely in the market place. Although networks involve collaboration, they do not necessarily reduce competition between participants. Table 1 Meaning of Business Networks Manufacturing Services Perceived Meaning (percent) (percent) Companies joining together 30 31 Exchange of ideas and resources 10 22 Contacts/inter-business communication 6 19 Positive and beneficial for firms 4 11 Meeting/problem solving 4 4 Cost saving/better performance 1 3 Promotion/marketing - 3 Other 22 23 Don't know 22 11 Method The sample was derived from the manufacturing and service sectors, allowing a comprehensive examination of each and an overall comparison between the two. Using a current internal AGB McNair Group database of over 250,000 companies across Australia, a random sample of 2,500 SMEs(1) in the manufacturing sector was selected, along with a random sample of 3,000 SMEs in the service sector. Interviews were carried out using a Computer Assisted Telephone Interviewing system. A pilot test of the survey instrument was undertaken, based on a random sample of businesses included in the research. Twenty successful interviews were conducted within each industry sector, and appropriate changes were made to ensure the effectiveness of the survey instrument. The final survey was then administered, resulting in 912 successful telephone interviews with the chief executive or the person most concerned with company strategy. See Table 1 for demographics of the sample. Meaning of Business Network Before examining company involvement in business networks, it was first necessary to examine the perception that the selected owner/managers held of these terms. The largest single response from 30 percent of manufacturing companies and 31 percent of all companies interviewed, related to a perception that "networks" are about "companies joining together with a common objective, working together, and co-operating. " The second most common perception was that of networks being for "exchange of and sharing of ideas, knowledge and technology," with 10 percent of manufacturing and 22 percent of service companies reporting this broad statement. …