Organising Effective Local Business Networks and Interfirm Collaboration
Organising Effective Local Business Networks and Interfirm Collaboration for Improved Firm Productivity Performance Dr Selyf Morgan and Professor Nick Clifton CLEC Cardiff Management School
Productivity Our starting point: poor productivity studied at firm level https: //www. welsheconomicchallenge. com/managing-productivity-in-welsh-firms/ A definition: • Productivity is a measure of the efficiency of a person, machine, factory, system, etc. , in converting inputs into useful outputs. • Applicable to all sectors ‘Unless we improve productivity…. we cannot raise living standards’ UK Regional Productivity Differences: An Evidence Review (2020) Industrial Strategy Council
Our Productivity Research • Why productivity is lower in Wales than elsewhere • Understand more micro-elements of the ‘productivity puzzle’ • 74 firms interviewed (2018/19) • Distributed across Wales/Sectors • Mainly Welsh owned; some UK; some multi-national • Mainly not quoted on SE
Areas of Interest and Findings • • the types of objectives firms set for themselves the strategies they use to achieve these objectives the performance measures they utilise to measure success the measurement techniques they employ to quantify their performance the management practices they employ to control outcomes whether they attempt to foster innovation in the company Findings: • • Productivity Measures Strategic Planning Controlling Performance Managing for Change and Innovation
Managing for Change and Innovation: Headline Findings • Means for managing change and promoting innovation: • firms use employee development and training • (mainly) informal staff feedback (ideas)/in job description • investment in technology and management information • External networks are used by many firms to different degrees, but rarely seen as transmitters for new ideas • Few firms are able to fully exploit such sources of information and to act upon them
Managing for Change and Innovation: Different Types of Networks • From the respondents 49 different types of associations/clubs were noted; others declared unspecified associations/networking activity • Sectors: Construction firms quoted the most specified networkinvolvement, followed by Manufacturing and Pharmaceutical • Many were members of government-supported networks including Aerospace Wales; Est. Net; the Welsh Automotive Forum; the Life Science Hub; and Medi. Wales • Cross-sectoral networks included CBI Wales, the Io. D, the FSB, and Chambers of Commerce.
Use of Networks • Continued membership of such bodies and organisations suggest that firms are persuaded of the effectiveness of such activity, • Evidence for this conclusion is variable: • Some firms expressed positive opinions about involvement in networks/trade association • Others are more passive manner: involvement not a source for new ideas or collaboration • Networks were used to different degrees, but rarely seen as transmitters for new ideas • Few firms are able to fully exploit such sources of information and to act upon them – a question of absorptive capacity/motivation/ lack of leadership? • Apparent that networks offer differing levels of support and service
Role/Services of Network Organisation • Some networking organisations focus on representing/promoting sector interests in various fora e. g. government and indirectly via industry standards bodies • Organisations offer access to training; skill development; public financial support; exporting, insurance, and accountancy advice • Some organisations geared to facilitating informal/social networking • Bodies are used for differing purposes but there is no sense, from the research, that they currently form an essential component of the majority of firms’ development
The Benefits of Networks (I) • Can include the use of shared resources, joint working, and mutually supportive exchange of information and expertise • Large firms: internal economies of scale; may operate with departments to manage functions e. g. innovation, marketing, training needs • Small firms lack these resources – staff more likely to be generalists • Small firms: lack of size and bandwidth of expertise has been shown to be a barrier to expansion
Benefits of Networks (II) • Economies of scale: e. g sharing facilities to cut production costs but retain and promote their own branding: Role of trade associations to promote such collaboration is often underexploited or not available • Successful networking activity is likely to be positively related to innovative activities (Huggins, R. and Thompson, P. (2015). ‘Entrepreneurship, innovation and regional growth: a network theory’, Small Business Economics, 45, 103– 128) • An over-reliance on local and informal contacts is associated with lower SME performance (Cooke, P. Clifton, N. and Oleaga, M. (2005) ‘Social capital, firm embeddedness and regional development’, Regional Studies, 39 (8), 1065 -1077) • Realising benefits from network usage are likely to be highly correlated to a firm’s managerial capabilities in coordinating and maintaining them: both in terms of the quality of contacts that are available and also in being able to incorporate the resources they access into the business (Pickernell, D. Packham, G. Jones, P. Miller, C. and Thomas, B. (2011) ‘Graduate entrepreneurs are different: they access more resources? ’, International Journal of Entrepreneurial Behaviour and Research, 17 (2), 183 -202)
Actions (I) • Targeted initiatives to improve the skills of SME owner-managers/ other key staff could have a positive impact at both the level of the individual firm, as well as the wider locality within which they are applied. • By developing leadership and management skills to maximise internal capacity; by collaborating with other SMEs on certain business functions; and by sharing non-confidential knowledge, firms can overcome barriers caused by small size in a relatively costless manner.
Actions (II) • ‘Harder’ skills (planning, finance, etc. ): need to carefully allocate the use of resources increases importance of managerial skills and capabilities of firms looking to innovate whilst maintaining their growth • Entrepreneurs’ ability to set own objectives/priorities is both a blessing and a curse: provides freedom, but also a severe challenge - planning initiated successfully when a minimum level of time and financial resources are dedicated (Mueller, S. Volery, T. and von Siemens, B. (2012) ‘What do entrepreneurs actually do? An observational study of entrepreneurs’ everyday behaviour in start-up and growth stages’, Entrepreneurship Theory and Practice, 36 (5), 995 -1017) • A formal strategic plan is positively associated with the creativity of businesses’ staff: the importance of having a clear vision filters down through the firm to improve the efficiency of both management and staff activities (O’Regan, N. and Ghobadian, A. (2002) ‘Effective strategic planning in small and medium sized firms’, Management Decision, 40 (7), 663 -67127)
Conclusions (I) • Networking and collaborative activities are often performed on a relatively local scale, and although the internet provides a means of extending the spatial reach of networks, they are often dependent on face-to-face and informal contacts. • Firms, left to their own devices, are not necessarily good at searching out potential partners and often fail to realise the benefits of collaboration. • Given that involvement in available networks is variable there appears to be a weakness in the way that a networking and collaborative ethos or culture is being promoted.
Conclusions (II) • Active trade associations to encourage better interaction between local firms needed: examples of good practice are far from broadly replicated • Examples elsewhere: Basque Region in Spain (Mondragon etc); Germany, membership of a Chambers of Commerce compulsory for firms (over three and a half million firms); Denmark and Norway established facilitated network programmes with independent network-brokers • Copied in Australia and Canada - hundreds of networks developed- in Australia initial intervention led to the formation of many additional networks outside the initial (subsidised) programme • In Wales: not well-focussed, nor is there a clear understanding of business support: In the past twenty years, various business support schemes have been introduced, changed, and abandoned - this churn has not helped to instil a sense of continuity of purpose. • Also at the UK level: Over the past decades, UK regional policy has been in constant flux. A tendency to abolish and re-create regional-policy institutions has impaired the build-up of meaningful institutional memory, and hampered attempts to make a dent into UK regional disparities through public intervention. (Haldane. A: Regional Productivity Differences: An Evidence Review (2020))
Thank You
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