THE ROLE OF NTREPRENEURIAL NETWORKS ON BUSINESS DEVELOPMENT

 

THE ROLE OF NTREPRENEURIAL NETWORKS ON BUSINESS DEVELOPMENT

 

 Introduction

ØThe role of networks in fostering (promoting) business performance and economic growth.

Ø Networks are deemed to have the potential to address challenges related to Smallness, Newness and Isolation of the enterprises.

 

Ø“… to manage a business well is to manage its future;  to manage its future is to manage information; and to manage information is to network…” (Barker, 2000).

 

ØHow do we define networks? There are many definitions, Including the views that:

 

i.             Networks are organisational relationships: In its simplest form, the term network is used to refer to two or more organisations involved in long-term relationships (Thorelli, 1986).

 

ii.           Networks are social and economic relationships: a framework of individuals and organisations, which form the stage upon which entrepreneurial performance is played (Wickham, 1998).

 

iii.           Networks are ties: networking is an activity, which is differentiated from normal business behaviour in terms of the nature of relationships – strong ties, weak ties, and one-off events (Birley and Muzyka, 1997).

 

iv.          Networks as linkages and means for flexible specialisation: institutional arrangements, which facilitate flexible specialisation among firms operating together in a given geographical environment (Piore & Sabel, 1984).

 

v.            In general terms, therefore: Accordingly, networking activities are those social and economic processes through which individuals and organisations develop long-term relationships with particular sets of stakeholders for the purpose of accessing support and facilitating exchange.

 

 Why be concerned about entrepreneurial networks? (The rationale for networking)

 

Ø Relationships are vital in all spheres of life, here are a few facts about the importance of social relationships:

 

i.             People with strong social support networks enjoy better physical and mental health than those without such networks. Not only people with good support networks less likely to become ill, but when they do, they recover faster.

ii.           People with large personal networks tend to live longer than those with small networks.

 

iii.          Personal happiness and satisfaction depend in large part on the quality of relationships with other people.

iv.          Building good working relationships is the main cause of success for managers who take charge of a new situation

 

v.            Close relationships with customers save money. It costs three to five times as much to get a new customer as it does to keep an existing one!

 

vi.          Strong partnerships with suppliers yield lower costs and higher quality products and services

 

vii.         Business effectiveness, in general, depends more on “human-related activities”, such as building relationships, interpersonal skills, and communication, than on technical skills and abilities

viii.       Managers with large personal networks get higher-paying positions than managers with small networks

 

ix.          Managers with larger, well-diversified networks get promoted faster and at younger ages compared with their peers with underdeveloped networks

 

x.            Professionals who find jobs through personal contacts (instead of classified advertisements or other impersonal means) find better, more satisfying jobs that they stay with longer

 

xi.          Relationships are  fundamental human need

 

xii.        Repeated interactions encourage cooperation, trust, & ties

 

xiii.       Networks make the world small

 

xiv.       It supports accumulation, and deployment (use/consumption)of  physical and soft resources, which entrepreneurs cannot do without (Aldrich and Zimmer, 1986)

 

 

 Implications on Tanzanian (small and medium enterprises) SME’s actors and entrepreneurs

Networks are instrumental towards overcoming SMEs’ challenges of Smallness, Newness and Isolation:

 

ØThey influence resources

 

ØThey influence information

 

ØThey enhance capacities and capabilities

 

Building intelligence networks

 

	Inside	Outside
	•         Superiors	•         Customers
Personal	•         Peers	•         Suppliers
	•         Subordinates	•         Investors
	•         Team members	•         Union leaders
	•         Directors	•         Government officials
	•         Work units	•         Organizations of:
	•         Teams	•         Clients
Group	•         Departments	•         Suppliers
	•         Divisions	•         Investors
	•         Subsidiaries	•         Communities
	•         Offices	•         Etc

 

 

 Pillars Of Effective Networking

·         Mutual understanding:

 

ØStrive to have a clear understanding of what you intend to achieve from your networking initiatives.

ØStrive to understand the expectations of the other parties you interact with:

          - internal

          - external 

 

·         Mutual benefits

 

-          Both parties win in an authentic (true/real) relationship.

-          Each part takes the other’s welfare into account

-          There is shared exchange of:

ØTask-related benefits

ØRelationship-related benefits

ØInspiration-related benefits

 

·         Relationship contract

 

ØThink of a relationship as an implicit (unspoken) contract,  unwritten agreement, wherein reciprocity (joint/shared) prevails (success)

 

-A psychological/interpersonal contract

 

- “… a tacit, but agreed upon, set of mutual expectations concerning performance, roles, trust, and influence.”

 

 Revision questions

1.   Define entrepreneurship networks.

2.    Name three pillars of networks.

3.   For any business of your choice, discuss how can good networks promote the business.

4.   The limited growth of business in Tanzania is at times associated with the lack of supportive networks. Discuss.

5.   Describe any four benefits of effective networking for a Business Manager

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