Interfirm alliances in the small business: The role of social networks
BarNir, Anat; Smith, Ken A. Journal of Small Business Management40.3 (Jul 2002): 219-232.

Abstract (summary)
In light of the increasing importance of strategic alliances in shaping competition, this study explored whether the social network of small firm executives can be leveraged to facilitate the establishment of interfirm alliances. Analyses are based on a mail survey of 149 small manufacturing firms in the northeast US. Results indicate that the social networks of senior executives account for 11%-22% of the variance in the degree to which firms engage in alliances, depending on the type of alliance. Results also show that the number of interfirm alliances is positively related to several networking properties (propensity to network, strength of ties, and network prestige). Findings are discussed in the context of network theory, social embeddedness, and the overall implications for management researchers and practitioners.
Full text
In light of the increasing importance of strategic alliances in shaping competition, this study explored whether the social network of small firm executives can be leveraged to facilitate the establishment of interfirm alliances. Analyses are based on a mail survey of 149 small manufacturing firms in the northeast United States. Results indicate that the social networks of senior executives account for 11-22 percent of the variance in the degree to which firms engage in alliances, depending on the type of alliance. Results also show that the number of interfirm alliances is positively related to several networking properties (propensity to network, strength of ties, and network prestige). Findings are discussed in the context of network theory, socialembeddedness, and the overall implications for management researchers and practitioners.
Interfirm alliances are becoming an increasingly pervasive mode of conducting business. More and more firms engage in various forms of cooperative activities with other firms, recognizing the cost savings and the increasing flexibility associated with such arrangements (Ahuja 2000; Dyer and Singh 1998; Kale, Singh, and Perlmutter 2000). A growing body of literature on alliances focuses not only on the benefits to the firm but also on the implications of alliances and cooperation in terms of the competitive structure of markets (for example, see Gomes-Casseres 1996; Gulati, Nohria, and Zaheer 2000), suggesting that the new competitive arena consists of competitive constellations (networks) that are made up of firms linked by series of strategic alliances (Gomes-Casseres 1996).
To the extent that the new way of competing involves constellations of firms, the profitability and success of each firm is contingent on (1) the behavior of all firms that are part of the constellation and (2) the capability of each firm to successfully establish its position in the constellation. Thus, the ability to establish alliances becomes critical for competitive positioning. The benefits of being a partner in an alliance are especially relevant for small firms that have limited resources and limited market presence. Of particular importance for the small firm is being able to ensure that it has plenty of opportunities to partner in and establish cooperative arrangements.
This study focuses on one of the factors that may facilitate the establishment of interfirm alliances: the social networks of the firm's senior executive. Social networks lately have received much attention in management research and have been linked to various aspects of firm behavior and strategy (Larson 1991; Nelson 1989; Ostgaard and Birley 1994). Driving this stream of research is the realization that a manager's social networksconstitute a resource for the firm and that the manager's personal network is often utilized to supportbusiness activities. Because the utility of the social network impacts the opportunities, costs, and activities the firm engages in, it is a potential source of competitive advantage. From a practical perspective, the question of interest is: what are the characteristics of a manager's network that are particularly supportive of creating interfirm alliances?
Background and Hypotheses
Theoretical Framework
Building upon social network theory, this study attempts to explain the relationship between the social networks of senior executives and interfirm cooperation. The study is couched in the theoretical framework ofsocial embeddedness, which argues that economic activity cannot be analyzed without consideration of thesocial context in which it occurs (Granovetter 1985). Granovetter provided three reasons to support his argument for incorporating the social context into the study of economic activities. First, the pursuit of economic activities is confounded with the pursuit of noneconomic activities. Second, economic actors operatein a social context that affects their motives. Finally, all economic institutions are socially construed and are affected by the characteristics and motives of those that construe and run them. It is in this context that the notion of embeddedness is under-stood: Institutions and individuals are affected by social structure, socialrelations, and social ties. They become embedded in the social context, and all activities are, to a degree, affected by it (Granovetter 1985). The social embeddedness framework is central to the major thesis of this study, which is that firm behavior in general, and interfirm cooperation in particular, is affected by the contextin which strategic choices are made. Important elements of this context are the personal and social networksof senior executives.
Interfirm Alliances
Interfirm alliances are arrangements in which two or more independent firms cooperate to perform businessactivities. Such cooperation may include the exchange of goods or information and may relate to technology, products, or resources (Auster 1994). The large body of literature on interorganizational relations has yielded numerous definitions of this construct (see, for example, Astley and Fombrun 1983; Auster 1994; Bresser 1988; Dollinger 1990; Oliver 1990; Schermerhorn 1975). In the present study, we define interfirm alliance as "the presence of deliberate relations between otherwise autonomous organizations for the joint accomplishment of individual operating goals" (Schermerhorn 1975, p. 847).
The advantages of interfirm arrangements include cost sharing, technology transfer, and sharing of information. Additional advantages especially important for the small firm are the improved ability to outmatch a stronger competitor, easier entry into new markets, and access to resources. Because becoming a partner in an alliance is often contingent on what the firm can contribute to the partnership, a major challenge for the small firm is how to make itself attractive as a potential partner. Among the characteristics that make a firm a desirable alliance partner are having financial resources, technological knowhow, market position, reputation, or unique managerial or human resources.
Our focus in this study is on two types of alliances: technology and manufacturing alliances (such as joint ventures, joint manufacturing, or technology transfer agreements), and support alliances (such as sharing of personnel training, marketing, advertising, or distribution). The primary difference between these two types of alliances is reflected by the extent to which the partner firms are invested in and committed to the alliance. Technology/manufacturing alliances usually are intended to capitalize on some future opportunity such as developing new products or utilizing a new technology, and they involve financial investment, long-term formal commitment and some degree of risk. Support alliances usually are meant to lower costs by sharing resources needed for business or administrative activities such as training or advertising, and they often require less equity and formalization.
Social Networks
Social networks in this context are defined as a manager's relations and contacts with others (Burt 1992). Such contacts, to the extent that they provide the means for identifying opportunities or obtaining resources or to the extent that they facilitate the utilization of other resources, are potential sources of competitive advantage. The importance of social networks has been attributed to the fact that they provide resources, access to resources, or emotional support (for example, see Birley 1985; Lin 1982). It has been proposed that the importance of one's social network lies in four factors: information, support, credibility, and governance (Birley, Cromie, and Myers 1990). For example, the scope and diversity of information provided to the executive by network members are a reflection of the characteristics of the network and its members; similarly, the emotional and tangible support is the result of the interaction with acquaintances, friends, and relatives. Additionally, association with network members of high status reflects on the executive's image and credibility. Finally, networking activity leads to the development of a normative context that constitutes a governance mechanism (founded on familiarity and common values), which renders members' behavior more reliable and predictable.
We argue that executives' networks are particularly beneficial to small firms and to businesses with limited resources because the network constitutes a resource-a form of (social) capital-that may compensate for the lack of other resources. Firms with few resources, to the extent that they capitalize on the social capital of the manager, may be able to overcome liabilities associated with their size. The following hypotheses thus are driven by two main questions: (1) Does the social network of the top manager in the small firm facilitate interfirm alliances? and (2) Which characteristics of the network are particularly relevant for interfirm alliances?
The link between Social Networks and Interfirm Alliances
The definition of social networks as "one's relations and contacts with others" is extremely broad and, for practical purposes, needs to be redefined in terms that are easy to conceptualize and examine. In this study, we chose to deal with "ego-- centered" networks (Greve 1995). This conceptualization is consistent with past research on entrepreneurial and small businesses (Birley 1985; Greve 1995; Ibarra 1993; Ostgaard and Birley 1994) and argues that the network of a focal individual (an executive) is determined by the group of persons whom that individual defines as constituting the network of contacts. We focus on four properties of the social network that have been identified as important in the study of executives' networks: the propensity tonetwork, the scope of the network, the strength of ties with network members, and the prestige of networkmembers.
Propensity to Network. Propensity to network reflects an individual's inclination to create and maintain socialcontacts and is often a gauge of the potential resources that he or she has access to. The degree to which one intends to create contacts is a manifestation of a personal tendency to engage in networking and is indicative of the personal motivation to establish relationships, maintain the contacts, and accept norms of behavior that support the relationships. Such personal inclinations are often a reflection of a variety of personality traits such as extroversion, locus of control, or need for affiliation.
Propensity to network is evidenced by participating in social, trade, professional, and other voluntary organizations (Birley 1985; Greve 1995) and is expected to affect interfirm cooperation for two reasons. First, executives' participation in voluntary organizations directly bears on the amount of information available to them such that the more organizations executives participate in, the more information they obtain and the better their access to resources. Second, participation in voluntary organizations leads to the development of a normative context that is based on similar attitudes among participants. To the extent that contacts established through trade or professional organizations are potential partners for cooperation, the similarity inpreferences and values is expected to act as a governance mechanism for interfirm arrangements and to facilitate their development. Thus, our first hypothesis is as follows:
Hypothesis 1: Executives propensity to network is positively associated with the number of interfirm alliancesin which their firms engage.
Scope of Networking Activity. Given that a primary benefit associated with social networks is access to resources and opportunities, the scope of the activity can serve as an estimate for the amount of resources available to the executive. The size of the network and the frequency or duration of the interactions constitute the means for creating and enhancing social capital (Boissevain 1974; Dollinger 1990; Marsden 1990; Ostgaard and Birley 1994), and the scope of networking activity is considered to reflect managerial ability to mobilize assets and utilize financial and other resources (Burt 1992; Greve 1995).
Scope of networking activity traditionally has been measured by the number of people with whom executives discuss business and by the time spent creating and maintaining the contacts (Boissevain 1974; Ostgaard and Birley 1994). Scope of networking is likely to have a positive effect on interfirm cooperation for two reasons. First, networking activity can be a source of information and a means for obtaining resources (Birley 1985; Granovetter 1982), which facilitates contact with potential partners and constitutes a channel for information flow. Second, executives who are known for having large networks of contacts are likely to be highly sought as potential partners, because cooperation with them will facilitate access to their resources for a partner firm. Thus, our second hypothesis is as follows:
Hypothesis 2: The scope of executives' networking is positively associated with the number of interfirm alliances in which their firms engage.
Strength of Ties. Strength of ties refers to the nature of the contacts between the executives and persons intheir network.
Strong ties reflect intense, emotion-laden, and reciprocal relationships that require time and energy to create and maintain. Weak ties reflect loose networks and are best exemplified by the concept of a bridge (Granovetter 1973). The strength of the tie has traditionally been viewed as bearing on the overall amount and content of information associated with the contact: novel and nonredundant information is available through weak ties more than through strong ties (Granovetter 1973). Strong ties, however, are advantageous because they allow for quick flow of information and they provide social support. Further, strong ties are reliable, easily available, and important when dealing with conflicts, crises, and uncertainty (Granovetter 1982; Krackhardt 1992; Nelson 1989).
The relevance of strength of ties to alliance formation could be as a cost reduction mechanism or as a source ofsocial and economic support that moderates the risk associated with cooperation. That is, to the extent that the executive has strong ties with an alliance partner, these ties may act as a governance mechanism, reducing the overall risk associated with cooperation (Gulati 1995; Ring and Van de Ven 1994). Further, strong ties are expected to be positively associated with interfirm cooperation even if a potential partner is not a member of the network. Given that strong ties provide ongoing support and constitute a reliable resource, these ties may increase the executive's actual or perceived ability to deal with the risk associated with the cooperation and to increase the motivation to engage in it. Thus, the third hypothesis is as follows:
Hypothesis 3: The strength of ties in executives' personal networks is positively associated with the number of interfirm alliances in which their firms engage.
Network Prestige. The status of the persons with whom one socializes also constitutes an important resource because it bears on the overall instrumentality of the network (Lin 1982). The prestige and status of the persons in the executive's personal network increase the network's usefulness in terms of its informational and access utility (Burt 1992; Granovetter 1982). Lin (1982) argued that the instrumentality of social capital is associated with the resources that an individual can obtain through the network. Networks whose members have higher status constitute a better source of information and resources are an effective means through which resources are information regarding lucrative partnerships can be obtained. Further, executives with prestigious personal contacts also will be perceived as attractive and credible partners for cooperative activities because prestige serves as a signal that an executive (and his firm) is a "valuable resource" (see D'Aveni 1990; D'Aveni and Kesner 1993). This brings about Hypothesis 4:
Hypothesis 4: The prestige of persons in executives' personal networks is positively associated with the number of interfirm alliances in which their firms engage.
Methods
Sample
This investigation is part ot a larger effort to study competitive behavior in small and mid-sized manufacturing firms. The sample consists of small and mid-size firms located in the northeast United States. The electronic components industry (SIC 367-) and medical instruments and supplies industry (SIC 384-) were chosen. Both industries ranked among the fastest growing industries in the U.S. (U.S. Department of Commerce 1994), provide substantial growth opportunities, and consist of a large number of small firms. The sample was drawn from companies listed in the 1996 New England Manufacturers Directory (Harris 1996a) and the 1996 New York Manufacturers Directory (Harris 1996b). Data were collected using a three-stage mail survey procedure that involved mailing an advance notice/introductory letter to the senior strategic decision-maker in the firm, mailing the survey, and mailing a reminder postcard. A total of 149 usable questionnaires were returned. The three-stage research procedure resulted in a response rate of 10 percent. This response rate is at the low end of the 10-12 percent rate that is typical for mail surveys of senior executives (Hambrick, Geletkanycz, and Fredrickson 1993). No preselection procedure was employed (for example, see Pearce and Zahra 1991), which could account for the response rate obtained.
Three checks for nonresponse bias were conducted. First, respondents were compared to nonrespondents to see whether they differed in terms of basic business characteristics such as number of employees, volume of sales, and age of the firm. No significant differences were observed at the .05 level. Second, since surveys arrived over a period of almost eight weeks and involved the mailing of a reminder postcard, one could argue that late respondents more closely resemble nonrespondents, in which case, if a response bias exists, late respondents would differ from early respondents. Accordingly, respondents were grouped by arrival date and the dependent variables were compared using one-way analysis of variance. No significant differences were observed. Finally, respondents had the option to identify themselves and, to the extent that anonymous respondents more closely resemble nonrespondents, if a response bias exists, anonymous respondents would differ from respondents that disclosed their identity. No statistical differences between anonymous and identified respondents were observed. These analyses, although not direct tests for response bias, raise confidence that response bias is not a critical issue in the present study.
Sample Characteristics. From the sample of usable questionnaires, 68 percent were from firms in the electronic component industry and 32 percent were from firms in the medical instruments and supplies industry. Eighty-six percent of the firms were private, 14 percent were public. Descriptive statistics of participating firms and respondents are presented in Table 1.
Measures
Interfirm Alliances. The interfirm alliances variable was measured by summing the numbers of arrangements that respondents indicated their firms have with other firms. A list was compiled that included the following arrangements: (1) joint ventures; (2) joint research and development or technology exchange agreements; (3) joint manufacturing agreements; (4) licensing of products or technologies; (5) joint marketing or distribution exchange agreements; (6) joint purchasing, sales or advertising agreements; (7) joint personnel training; (8) direct investments; (9) other contractual cooperative arrangements; and (10) other noncontractual cooperative arrangements.1 Items (1) through (4) constitute technology/manufacturing alliances. Items (5) through (7) constitute support alliances.
Social Networks. Propensity to network was measured in a manner consistent with previous research (for example, Greve 1995; Ostgaard and Birley 1994) by counting the number of organizations in which the senior executive was a member or was in contact with a regular basis. Respondents also were asked information about memberships in trade or professional associations; whether they were members of the Chamber of Commerce, of an executive roundtable, of the National Federation of Independent Businesses, of a political action committee, or of a religious organization; whether they were active in the United Way or other community-- oriented groups; and whether they have contact with the Small Business Administration or SmallBusiness Development Center. [Primary sources for the list are Dollinger (1990); Greve (1995); and Ostgaard and Birley (1994).]
Scope of networking activity was measured by asking the respondents to indicate how many people with whom they discuss their business in a typical week (Marsden 1990; Ostgaard and Birley 1994). Strength of ties was measured as the multiplication of the number of years a respondent has known a given contact and the hours per week spent discussing business with that contact (Ostgaard and Birley 1994). Network prestige was measured by asking the respondents to indicate whether the persons closest to them are affiliated with prestigious organizations or functions (D'Aveni and Kesner 1993). Network prestige was calculated as the number of times personal network members were identified as (1) serving on the board of financial institutions; (2) serving on the board of other for-profit organizations; (3) serving as officers or trustees of trade associations; (4) serving as officers or trustees of nonprofit organizations; (5) being senior executives; and (6) holding or having held a high-level position in government or influential lobbyist organizations.
Control Variables. Four control variables were included in this study. First, because the sample was drawn from two different industries, we controlled for possible industry effects. Second, we controlled for two variables at the firm level: age ofa firm (number of years since founding) and size of the firm (number of employees). At the individual level, the control variable was the executive's age (number of years).
A Note on Methodology
In this study, data were collected from a single informant in the organization. Single informants have been used extensively in management research and are considered a reliable source when the informant is senior enough in the firm. A single informant is particularly appropriate in studies such as this one because of the nature of the independent variable-the social network of the executive. However, when using single informants, concerns may emerge regarding common methods variance. We tried to minimize the risk of bias due to single informants in two ways. First, we avoided asking questions that involve attitudes but focused on factual information. Thus respondents, in contemplating the questions, had to think about factual information (that is, specific persons, length of acquaintance, etc.). Second, all questions were phrased such that respondents had to quantify their responses. For example, respondents had to indicate the actual number of each type of alliance the firm has or the specific number of organizations (from a preselected list) in which they are members. Thus, to the extent that personal biases did affect the responses, those biases were minimized due to the fact that the respondents had to anchor their responses in facts and numbers.
Table 1 presents statistics and intercorrelations for variables included inthe analyses.
Results
To analyze the hypotheses, we performed two-block (hierarchical) regression analyses.2 In the first block, only the control variables were entered into the equation: industry, company size, company age, and age of the responding executive. In the second step, all social networkvariables were entered: propensity to network, scope of networking, strength of ties, and network prestige. We assessed the change inR2 (AR) and its significance, and interpreted the effect of individual social networkparameters. Results are presented in Table 2.3 The second column presents results for all cooperative activities. Columns three and four present the results for the two different types of alliances: support alliances and technology/ manufacturing alliances.
Three of the four hypotheses were supported with regard to all alliances. Interfirm alliances were found to be related to the overall propensity of executives to network (supporting H1), to the strength of ties executives have (H3), and to the prestige of the five persons with whom the executive discusses business the most (supporting H4). The role that social network parameters play in facilitating interfirm alliances is highlighted when the network is examined against different types of alliances. Support alliances are positively predicted by the top manager's propensity to network and by the strength of the ties the manager has with people inthe network, and-unexpectedly and contrary to H2-are negatively predicted by the number of persons with whom the executive discusses business. Technology/ manufacturing alliances are predicted by only one of thenetwork properties: the prestige of the persons with whom the manager discusses business.
It is important to note that all three models are significant. Furthermore, the change in explained variance when social network parameters are included is significant, indicating as it does that social networks indeed provide a resource that can be used by managers to facilitate interfirm alliances. Twenty-two percent and 11 percent of variance explained (for support and technology/manufacturing alliances, respectively) by thenetwork of one individual is quite impressive, especially considering the fact that alliance formation is a firm-level activity that is contingent on a large variety of other firm level variables.
Discussion
The questions that drove the present investigation pertained to the relationship between executives' social networks and interfirm alliances in small firms. The significance of these questions lies in the fact that they point to social networks as one factor that can facilitate an increasingly important characteristic of strategic positioning. Overall results indicate that the social network of a single individual in the small firm (the senior executive) explains 11-22 percent of the variance in interfirm cooperation.
These findings are consistent with much of the social embeddedness literature, supporting the notion that thesocial context in which decision-makers operate does explain economic activity. As argued by Granovetter (1985), analysis of economic activities needs to take into account the context in which those activities are embedded. Our findings are consistent with this argument, suggesting the appropriateness of the frameworkin future management research.
Our findings indicate that the overall number of alliances a firm engages in is explained by three networkproperties: propensity to network, strength of ties, and prestige of network members. Propensity to networkreflects executives' inclination to create and maintain interpersonal contacts and was operationalized in terms of participation in trade, professional, or other voluntary organizations. Although the actual effect of the events that take place in the voluntary organizations were not measured, it seems that the contacts created through participation in those organizations are associated with more interfirm cooperation. That is, propensity to network at the personal level appears to affect the scope of networking activity at the firm level. A possible interpretation is that voluntary organizations constitute a form of governance mechanism and that contacts established through them facilitate the development of partnerships that involve trust. Specifically, participationin voluntary organizations not only provides access to contacts but also provides links with persons that share values and interests and that are likely to be bound by the norms that the executive promotes.
It is important to emphasize that the above interpretations appear to point to an assumed causality: Individual-level propensity to networkleads to firm-level cooperation. Under certain situations, however, simultaneous causality is likely because the measures of propensity tonetwork and interfirm cooperation may be mutually reinforcing. On the one hand, the individual inclination to be involved with voluntary organizations leads to more contacts and potential interfirm arrangements. On the other hand, interfirm arrangements result in an increase in interpersonal contacts and are quite likely to lead to the executive's participation in voluntary associations that are part of thesocial network of the new contacts. These findings also raise an interesting question about the antecedents to propensity to network. It is quite possible that personality characteristics such as extroversion, need for achievement, or need for affiliation play an important role inpredicting both propensity to network and interfirm alliances. For example, it is possible that extroverted individuals will be (1) more attracted to positions that require the management of interfirm linkages or (2) preferred and selected to those positions because it will be assumed that they have the social skills to manage such activities. This issue has not been the direct focus of the present investigation but is a promising area for future research.
The number of alliances also was explained by the strength of ties executives have. Strength of ties reflects the intensity and reciprocity that characterize the ties between senior executives and members of their personal network. Our interpretation of the effect of strength of ties was that its primary role is in being a source of social or economic support. Accordingly, it was argued that strong ties constitute a reliable source of ongoing political, financial, and emotional support that is likely to increase the executive's confidence and readiness to take the risks associated with cooperation. Results are consistent with this interpretation. The stronger an executive's ties with the five individuals that constitute her close network, the more likely her firm is to engage in interfirm alliances. Thus, to the extent that cooperation enhances competitive advantage, executives that have strong ties with friends, colleagues, or business professionals appear to have an important advantage that facilitates useful partnerships.
Finally, alliances also were explained by the prestige of network members. It was argued that the information that flows through a high-status network along with the power and credibility associated with it is directly related to the network's instrumentality, utility, and overall wealth (Burt 1992; Lin 1982). Our results can be interpreted in two ways. First, it may be that executives receive more information from high-status individuals, that the information is more accurate or usable, or that the information is perceived as more reliable. In such instances, executives would be more willing to assume the investments and costs associated with alliances. Alternatively, it may be that affiliation with highstatus individuals is reflective of availability of or easy access to resources, which both facilitate establishing interfirm alliances.
Our focus was on two types of alliances: technology/manufacturing alliances, which usually require substantial resources and commitments, and support alliances, which involve sharing of resources and usually require less formalization. Analyses indicate that different network properties are associated with each type of alliance. Technology/manufacturing alliances were explained by one network property-the prestige of networkmembers-suggesting that instrumentality and overall wealth of resources and information that are associated with or available through high-status network members are especially useful for establishing such alliances. It may be that, given the investments and costs that are necessary for establishing and maintaining technology or manufacturing alliances, executives are more willing to assume such commitments when the resources and overall wealth of a highstatus network are available to them.
Support alliances were explained by the executive's propensity to network and the strength of ties. Support alliances involve sharing resources among firms primarily for the purpose of cutting costs. This form of cooperation often entails the sharing of information on firm processes or strategies and, as such, involves a certain degree of risk. To the extent that propensity to network, measured by participation in voluntary organizations, effectively constitutes a form of governance mechanism, contacts established through such organizations will facilitate the development of partnerships that require and involve trust. Similarly, strong ties that executives have with members of their network constitute a reliable source of support, which appears to have a reassuring effect on the executive, resulting in willingness to undertake the risks associated with cooperation.
Finally, scope of networking activity was negatively associated with support alliances, contradicting H2, which was based on the notion that increasing the scope of one's networking activity will also increase opportunities for partnerships. Looking at this result along with effects observed with other network parameters, it could be interpreted to indicate that it is not so much the quantity of the personal contacts that leads to firmlevel cooperation, but rather their quality. For example, meeting people through organizations that promote shared values or having strong ties with network members, both of which reflect the nature of the relationship the executive has, are positively associated with alliances, whereas the parameter that is a reflection of the quantity of contacts is negatively associated with alliances.
The findings from this investigation are interesting in that they point to a consistent theme that suggests some of the conditions under which alliances in small firms are more likely to occur. Identifying opportunities for partnerships is certainly important. But our results imply that it may not be enough. The patterns observed suggest that the content aspects of the network and the nature of the contacts may be more important than its scope. The decision to engage in alliances seems to be primarily a function of executives being assured of support and having confidence in the partners or information related to the cooperative arrangement. The source of the information and the possible governance mechanisms implied, along with availability of reliable resources that may act as a "safety net," are important as well. Thus, insofar as interfirm alliances are concerned, it seems that the significance of the social network is not only in the information that it provides but also in terms of the credibility and support that come along with it. Interfirm alliances may be perceived as risky (particularly for small firms), and this may explain why the particular network properties were significant. These findings are stimulating as they raise many additional questions: Is the role of social networks similar insmall and large firms? To the extent that the role of risk in interfirm alliances emerges as a significant factor, what other mechanisms can facilitate interfirm cooperation? Which other personal and social resources of executives are used to facilitate strategic practices? These questions remain to be addressed in future research.
Footnote
*This study was facilitated by the financial support of the Snyder Center for Innovation Management Research and the Entrepreneurship and Emerging Enterprises Center at the School of Management, Syracuse University.
Footnote
1The primary sources for this list are the works of Hagedoorn and Associates (Hagedoorn 1990, 1993; Hagedoorn and Schakenraad 1994); Dollinger (1990); and McGee, Dowling, and Megginson (1995).
Footnote
2The Durbin-Watson statistic ranged from 2.08 to 2.18 (for the different equations). Regression models were tested for multicollinearity using the Variance Inflation Factor ((VIF) (Graybill and lyer 1994). All VIFs were lower than two, suggesting that multicollinearity was not a concern in interpreting the results. Overall, scatter plots and residual analyses supported the appropriateness of using regressions.
Footnote
3Few outliers were identified. To ensure that results were not biased because of these extreme observations, a separate set of analyses was conducted without them. No substantial differences in the patterns of results were observed, and therefore all observations were included in the reported analyses.
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AuthorAffiliation
by Anat BarNir and Ken A. Smith
AuthorAffiliation
Dr. BarNir is an assistant professor of strategy and entrepreneurship in the Department of Management, College of Business Administration, at the University of North Texas in Denton, Texas. Her current research interests include interfirm cooperation, social capital, and electronic commerce.
AuthorAffiliation
Dr. Smith is an associate professor of strategy and human resources in the School of Management at Syracuse University in New York. His current research interests focus on the dynamics and influence of top management teams.
Copyright International Council for Small Business Jul 2002