A Study of Government-Funded Small Business Networks in Australia

The networks in this study were participants in a federal government-sponsored business networks program and were identified by the funding agency as successful. Here, the term "network" refers to linkages or multi-organizational partnerships that are formalized through involvement in government-funded programs. These programs place limits on each "actor" in the network by virtue of the mandated nature of the program. Three aspects of these networks are of particular importance and are discussed in this article: the emerging network form, governance mechanisms, and the role played by third parties in such networks. Each aspect has ramifications in terms of policies, practices, and research relating to business networks. The Business Networks Program In 1995, AusIndustry, which was part of the Australian Department of Industry, Science, and Tourism, set up a $A38 million [1] demonstration program called the Business Networks Program (BNP). Originally, the BNP's policy stipulated that three businesses were required to form a network and of these, two had to be small businesses. Small businesses were defined as those employing between 15 and 100 persons, depending on the industry sector. This definition was changed in 1997 to define a small to medium-sized enterprise (SME) as a business with less than $50 million in sales and with fewer than 200 employees (AusIndustry 1997). The BNP excluded micro-businesses or those employing only one or two persons (even though many businesses in the program were micro-businesses) because their limited size was likely to diminish the overall achievements of the program, particularly its goals of job creation and increased exporting. The BNP was modeled on the Danish Business Network Program and included the use of network brokers and a three-year pilot program (Nielsen 1993, 1996). The BNP became the largest network program in Australia with over 400 network projects by the end of 1998 and spread across 31 industry sectors (Dean 1996; AusIndustry 1998). Networks were funded to employ accredited and trained network brokers or consultants for the initial three years of the network's operations (AusIndustry 1995). Networks were to become self-funding by 1998, when funding was to cease. Only 2 percent of Australia's small businesses participated in the program, compared to the 10 to 15 percent prescribed by the Danish program (Sinclair 1999). The BNP was administered from Canberra and six state managers were appointed in each state, including the Northern Territory. The state managers' principal duties were to process applications from new or already existing networks and to assist network brokers. The head office in Canberra vetted and approved all applications. The state managers and network brokers created widely divergent practices, and this created tensions with the central bureaucracy in Canberra. In 1996, the newly-elected Conservative Coalition Government reduced the size of the BNP's central office in an overall attempt to reduce the budget deficit. Criticisms of excessive red tape and delays in approving applications and releasing funding contributed to these reductions. However, state manager positions were retained as well as the state-level infrastructure. All three phases of the BNP involved using a network broker. Stage One, or the feasibility stage, involved a maximum allocation of $A1 5,000. Stage Two, or the business planning stage, had a maximum of $A30,000 available to networks. Stage Three, or the implementation stage of the plan, carried a maximum reimbursement of $A60,000. Networks were able to enter at different stages but were reimbursed only for the stage following the one they had entered. Two kinds of network brokers were used to support the program: "host brokers," employed by organizations such as industry associations, as happened in the UK (Chatson 1995a, 1995b) and Norway (Nesheim and Reve 1996), and private consultants. …