Inter-firm Networking Propensity in Small and Medium-sized Enterprises (SMEs)

In the past decade, market globalization has not only been a threat for small and medium-sized enterprises (SMEs), but also an opportunity to expand their activities in many countries (Murphy and al., 1991). In fact, some of SMEs are worldwide leaders in their sectors (Simon, 1990; Entreprise, 1995). Moreover, few of these worldwide SME leaders started businesses directly on an international level (Christensen, 1991; Brush, 1992; McDougall and al., 1994). This suggests that these SMEs use many processes to overcome resource and competency constraints, which would otherwise impede the success of a transnational business in the new global environment (Barlett and Ghoshal, 1987; Fombrun and Wally, 1992). Some studies have identified co-operation as one of the most powerful means an SME operating across borders can use to overcome its constraints (Olleros and Macdonald, 1988; McDougall and al., 1994; Scully and Fawcett, 1994). To face the complexity, diversity, dynamism and change characterizing the global market, SMEs need to form strong and sustainable ties with other organizations (Forrest, 1990; Harry, 1990). These ties can be made with big, medium-sized or other small enterprises (Shutt and Whittington, 1987; Lorenzoni and Ornati, 1988; Stevens, 1992; DarrA©on and FaiA§al, 1993; Fernandez and NoA«l, 1994). The balance of power between partners is very important in this kind of inter-firm relationship. SMEs have fewer resources than their partners, and yet their owner-managers prefer autonomy. Then, how do SMEs reconcile the apparent contradictory necessity to cooperate due to resource constraints with their desire for autonomy? What is the ideal quantity of activities that can be devoted to the partnership without threatening the organization itself? The purpose of this paper is to examine propensity of transnational SMEs to subcontract, to outsource (prime contract) or to collaborate on an equivalent basis with other businesses. It is important therefore, to first review the literature related to small business networking. Second, a summary of the methodology and results will follow. Third, propositions will be stated followed by conclusions.