The Formation Process of SME Networks

Cooperation concepts can be considered as an opportunity for small and medium-sized enterprises (SMEs) to overcome arising problems due to their size. Although the advantages of cooperations, such as cost sharing, access to new markets and increased flexibility, are well-known and discussed in literature, the realization of the concept remains challenging. Marita Haas claims that social processes are decisive for the success of SME networks and creates a phase concept based on group theory that describes how owners of small enterprises enter into a cooperation. The framework is applied to three network formation cases in Austria, Belgium and Turkey. The author shows that group theory is a useful tool to understand and anticipate processes in networked organizations and indicates that the group formation process must be accomplished before a network will be able to create benefits.


Leseprobe:

1 Introduction (p. 1)

Coming together is a beginning

Keeping together is a progress

Working together is a success

Henry Ford 1863-1947

Henry Ford revolutionized work in the automotive industry by establishing mass production through detailed assembly line planning. He motivated his workers with a concept of high wages so that every employee was able to afford a car produced by the Ford company. Fords ideas – often referred to as "welfare capitalism" – were amplified to a global vision on international cooperation which he examplified through collaboration activities with Agnelli of Fiat in Italy. Based on the above quotation, he was aware of the difficulties of making people and companies work together, which perfectly describes the topic of this dissertation: Cooperation is challenging. The reason behind this is the fact that human beings are involved.

1.1 Objectives and Research Contribution

This work is based on the concept of cooperation between small enterprises and investigates social processes that emerge when people work together in the context of network formation. The background of the work was the participation of the 19-month research project VERITAS (Virtual Enterprises6 for Integrated Industrial Solutions), with the goal of establishing Virtual Industry Clusters (VIC) in Austria, Belgium and Turkey.

VICs correspond to networks of loosely-coupled companies that assure the cooperation preparedness of their members and enable them to form Virtual Organizations (VOs) whenever a joint business opportunity arises (Camarinha-Matos et al., 2004). A VO is described as a "(…) cooperative organization to explore business opportunities that one enterprise itself would not be able to work out." (Sieber/Griese, 1998, p. 213) and regarded as „(…) a temporary network of independent companies – suppliers, customers, and even rivals – linked by information technology to share skills, costs, and access to one another’s markets" (Byrne et al., 1993, p. 36).

In the literature, it is commonly agreed that VOs are able to diminish typical problems of small enterprises. Cooperation is believed to increase flexibility and to enrich the product portfolio of specialized corporations. The author amplifies existing research on networks and VOs by investigating the network formation process from a social perspective. Small enterprises are in the author’s view supposed to be driven by risk-averse business-owners and therefore characterized by the need to establish long-term relationships among cooperation partners. Based on the model of Tuckman (1965) the group formation process is extended and applied to VOs.

1.1.1 Background of the VO Concept for SMEs

Today’s economy is characterized by ongoing globalization, fast changing technologies and a turbulent business environment. These changes affect today’s enterprises’ production processes as well as their internal structures. Especially for small and medium enterprises (SMEs) this is not without problems. SMEs often lack sophisticated know-how or the financial background to respond to new market requirements and therefore need special consideration or even support to defend their market position and to survive.According to the official definition, SMEs occupy a maximum of 250 employees and their turnover does not exceed an annual amount of 50 million Euros.