Strategic Networks, Trust and the Competitive Advantage of SMEs

Since their origins, the studies on entrepreneurship and small business management have often focused on either the personality traits of entrepreneurs or the neoclassical view of micro-economics, assuming the individual firm as an exclusive unit of analysis. More specifically, following the mainstream of the discipline, most strategic management scholars have long analyzed the entrepreneur’s behaviour as that of a rational and resourceful individualist, conducting his or her own business according to a stand-alone strategy within a hostile, competitive environment. Starting from the mid-1980s research has highlighted the relevance of social networks and collaborative strategies as tools for contributing to the development and success of firms, particularly SMEs. Joining a strategic network or alliance has been acknowledged as a valuable path for SMEs striving to gain a sustainable competitive advantage within their business environments: lower transaction costs, social capital creation, entering foreign markets and achieving economies of scale have all been reported as positive outcomes of establishing ties with other firms in the markets (Cruickshank and Rolland 2006; Doz and Hamel 1998; Inkpen and Tsang 2005; Jarillo 1988; Nahapiet and Ghoshal 1998; Rosenfeld 1996). Building on this new social network perspective, the entrepreneurship literature has emphasized the importance of networks to small firms, particularly as a means of obtaining resources which would otherwise be unavailable to them (Aldrich and Zimmer 1986; Starr andMacMillan 1990). In particular, research into entrepreneurship in transition economies shows that social capital is an important determinant of resource acquisition and that many of the competitive advantages of transition economies are based on network relationships (Hoskisson et al. 2000; Manev et al. 2005; Manolova et al. 2002). The concept of ‘network’ and ‘networking’ applied to the strategic management of SMEs helps us focus on entrepreneurship as a collective, rather than an individualistic phenomenon (Johannisson 1987, 2000) and permits the addition of some