Small-firm networks and strategies for consolidation: evidence from the Brazilian context.
| Autor | Wegner, Douglas |
| Cargo | Texto en ingles - Ensayo |
1 Introduction
Despite academic progress in understanding the reasons which lead firms into establishing interorganizational networks and achievable benefits through such a strategy (Borgatti & Foster, 2003; Brass, Galaskiewicz, Greve, & Tsai, 2004), there is still a limited number of studies addressing the network as a unit of analysis (Brass, 2007; Provan, Fish, & Sydow, 2007; Zaheer, Gozubuyuk, & Milanov, 2010). Analyzing the whole network is important to understand the network's development, governance and how collective outcomes are reached. Provan, Fish and Sydow (2007) propose a redirection in the focus of analysis on the structures and processes of the whole network rather than on the firms that compose it.
An interorganizational network is a collaborative agreement amongst firms which identify common goals and work in partnership to share knowledge and improve competitiveness (Dean, Holmes, & Smith, 1997). Collaboration tends to be more important and even crucial for the survival of smaller firms due to their lack of resources and legitimacy (Moreira, 2013). Despite a broad typology of network models (e.g. Grandori & Soda, 1995; Todeva, 2006), the networks we focus on throughout this paper consist of cooperative relationships among small firms, called small-firm networks-SFN (Jarillo, 1988). They are formally established, governed and goal-oriented (Kilduff & Tsai, 2003). Relationships among SFN members are primarily non-hierarchical, and participants often have substantial operating autonomy and may ask to leave the network once it is perceived as most convenient. Through cooperation, the firm may obtain benefits such as access to services, risk sharing, legitimacy and status (Podolny & Page, 1998; Lotia & Hardy, 2008), access to new knowledge (Dagnino, Levanti, Mina, & Picone, 2015), learning (Powell 1990; Knight & Pye, 2005) and social capital development (Inkpen & Tsang, 2005). Knowledge exchange among network members minimizes uncertainty and the risk of opportunistic behaviors (Pereira, Brito, & Mariotto, 2013).
Considering that SFNs focus on widening competiveness of its members and seeking market consolidation, this study aimed to analyze the strategies adopted by SFNs to reach consolidation. From a theoretical point of view, the study is justified due to a lack of research addressing the dynamics of collaboration or looking into the strategies that lead to SFNs consolidation, as pointed out by Doz (1996), Oelsnitz and Tiberius (2007) and Tiberius (2008). From a managerial perspective, this study is justified because it describes the strategies SFNs may adopt to reach consolidation. To accomplish such goal, interviews with 28 SFNs members from southern Brazil were recorded and case studies involving three consolidated SFNs were analyzed.
The paper is organized as follows: the first section presents a discussion on the dynamics of SFN development and the factors that may contribute to its consolidation. The methodological procedures are presented in the second section, followed by the empirical study in the third section. The results of this study are described in the fourth section, in addition to research implications. The last section comprises final remarks and directions for future studies.
2 The development of Small-Firm Networks
Although SFNs are usually described as static entities, they are characterized by their various stages of initiation and development (Ceglie & Dini, 1999; Child, 2001; Oelsnitz & Tiberius, 2007; Tiberius, 2008), as structures of dynamic nature which undergo modifications over time. SFNs face dynamic evolution because members may change their goals during their participation, leading to internal adjustments or the rupture of previously established relationships (Ebers & Grandori, 1999).
A scarce number of authors have analyzed the dynamics of cooperation. Some follow the logic of a product life cycle with stages of initiation, development and decline (Dwyer, Schurr & Oh, 1987; D'Aunno & Zuckerman, 1987). Others establish analogies comparing the life cycle stages as if they were a personal relationship (Ahlstrom-Soderling, 2003; Zineldin, 2002). Thus, each author uses different names and adds new stages to their models. Ring and Van de Ven's (1994) model stands out with a proposal considering the cyclical character in the evolution of interorganizational relationships. There is also a lack of empirical studies exemplifying how the life cycle model applies to interorganizational relationships. Ahlstrom-Soderling (2003) is the only one who has applied the model in a case study of a business network in the furniture segment. Due to the lack of models that analyze the pattern of the development of SFNs, Wegner, Alievi and Begnis (2015) proposed a model which specifically considers the characteristics of this interorganizational network model.
2.1 Developmental stages of SFNs
Based on existing studies for the analysis of interorganizational network dynamics (Ring & Van deVen, 1994; D'aunno & Zuckerman, 1987), and taking into consideration the fact that existing models lie on strategic alliances or partnerships, Wegner et al. (2015) proposed a life cycle model for SFNs. The model describes six stages that characterize the dynamics of SFNs development. Network conception takes place in the first stage. Entrepreneurs meet to gain understanding of the logic of cooperation and discuss any possibilities of joint actions. Great levels of participation and commitment are perceived in this stage, although there is little exchange of strategic information due to a low level of interpersonal trust. The second stage consists of the network's birth and formalization. A board of directors is elected and management support teams are established. The primary collective goals and the network's strategic planning are prepared. The process of defining goals and strategic planning may not only contribute for the desertion of entrepreneurs generating a natural selection, but also for an improvement in the level of trust among the remaining network members.
At the development stage, an SFN has its management structure set and governance rules improved. Opportunities to exchange information and experience stimulate strong social interaction. The SFN already has a strategic alignment and offers a service portfolio that generates benefits for members. However, efforts to accomplish goals may lead the network to critical crossroads demanding new efforts for consolidation or lead to a process of decline. In the stages of consolidation and maturity, an SFN reaches the highest level in the life cycle. The SFN puts in place a professional management structure and hires managers to carry out activities. Governance tends to move towards a network administrative organization (NAO). The service portfolio offered by the SFN to the members is wide and qualified.
However, a lack of adjustments and improvements in the network structure, process and governance may lead it to decline, another SFN life cycle stage. Entrepreneurs focus on individual actions as their priorities instead of collective goals and actions. A break in trust among entrepreneurs and network managers may occur. Conflicts rule over and some participants leave the network at this stage. Unless the SFN performs the necessary changes and improvements, it becomes impossible to revert the decline and the SFN will end up at the dissolution stage. In this stage there is no longer a structured management or even services provided by the network. Governance rules are not followed and participation and engagement among entrepreneurs is almost inexistent.
The model also indicates a period of restructuring which was previously pointed by Ahlstrom-Soderling (2003). Restructuring is not a stage in the life cycle, but an adjustment for SFNs to remain in existence along time. Even consolidated SFNs must go through transformations to avoid decline and dissolution. According to Ahlstrom-Soderling (2003), a justification for that lies on changes in resources, information and partner's expectations, whose interests are always focused on getting more advantages out of the network.
2.2 SFNs consolidation drivers
The authors who propose theoretical models for an analysis of the dynamics of interorganizational networks (Dwyer et ah, 1987; D'Aunno and Zuckerman, 1987; Ahlstrom-Soderling, 2003; Zineldin, 2002) also suggest factors that may be used to analyze the network life cycle. The quality of interpersonal relationships and participants' level of motivation are considered key factors to support cooperation (Spekman, Forbes, Isabella & Macavoy, 1998; Ring and Van de Ven, 1994; Zineldin, 2002). Adopting standards and rules for cooperation (Dwyer et ah, 1987) and placing collective interests above individual ones (Dwyer et al., 1987) are also cited. Another key factor for developing cooperation is the need to make strategic and cultural adjustments amongst participants (Dwyer et ah, 1987). The model proposed by Wegner et al. (2015) presents six factors for analysis divided into two categories: i) network organization and management; ii) relationships and exchanges between members. Such factors may influence network development and therefore should be considered in developing strategies for network consolidation. These factors are discussed in the following two sections.
2.2.1 Network's organization and management
One critical factor of interorganizational cooperation relies on the definition of the network governance. It refers to the design of the structure and mechanisms of SFNs internal coordination (Provan & Kenis, 2007; Albers, 2005; Theurl, 2005). Governance rules aim to balance conflicting interests between entrepreneurs to ensure the SFN's long term viability, especially when members have diverging interests and information asymmetry (Theurl, 2005). The typology proposed by Provan and Kenis (2007) suggests three distinct modes of network...
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