July 10, 2012 Emilie Beaud by Emilie Beaud
Product Marketing Manager @HP
in International Trade

""The resources contained in social capital may enable SMEs to overcome numerous barriers to growth.""

The real meaning of business networking

If the concept of networking arouses researchers from the beginning of the 80s, it became of a growing interest in the last decade with the development of online social networks. At the present time, there is not a day where networking and its stakes are not addressed in a newspaper article, a business meeting or during a discussion between friends. It seems no longer possible to approach a professional perspective without addressing in some way the term of networking. The craze around this concept, its contributions and its potential benefits both at the individual level and at the company level is general and constitutes now a leading theme.In that perspective, it is certainly advisable to discuss some of the networking issues. In this article I will raise some assumptions related to the assets deriving from networking and, in particular, the benefits that SMEs can expect from networking activities. These assumptions will help me set the foundation of a short study dedicated to you, readers of TRSM.

 

The case for a better understanding of “networking”

Although the term became popular, networking has not always had good press. Indeed, it has long been considered as a hypocrite and self-interested process for some, superficial activity for others or even Machiavellian moves for the extremes. Nevertheless, if the activities of networking are generally undertaken in the idea to benefit from some advantages, it seems that outcomes are generally expanding mutual advantages rather than one-sided profits. The interpretation of what networking activities are depends certainly on the way of defining networking itself. Too often, networking is viewed as something exclusively related to greeting people, obtain their phone number and exchange some business cards with the secret hope to be able to benefit from it. Such an understanding of the term of networking obviously cannot bear fruits doing business. Considering networking the wrong way will lead networkers to numerous mistakes and will likely prevent them to reach expected results. It is time to advocate for a better understanding of networking. When used in a right way, the thing turns out to be useful for all parties involved. The current imperatives of business imply the consideration of business networking as a special opportunity to share and exchange information and knowledge, to consider various opportunities for possible collaboration and to develop innovative solutions. Networking should be considered as the ability to create a database of strong and reliable relations that can be used in logic of mutual cooperation, because, as stated by Keith Ferrazzi, “the currency of real networking is not greed goal but generosity”.

 

The key concept of social capital

This understanding of networking rings the knell of the time when the contractor led his boat on his own while trying to stay in the course. Facing difficult market conditions and competition increase while he must be able to maintain assets creating value for the company, the contractor must make the effort of openness to collaboration and sharing with other entrepreneurs. It does not seem meaningless to wonder why companies would be winning making such collaborative efforts. For decades, it has been taught that the secret of a successful business was related to the ability to keep to oneself the keys to success. This rule commonly accepted in the business seems to have had its day, at least partly. The concept of social capital, developed within the scientific community, can certainly shed light on this. Metaphorically, it is described as the glue developed during the collaboration between companies that will connect people and enable them to work together, achieving their own objectives and the company’s goals. This glue, which generates an excess of collaboration between individuals and businesses, is called social capital. Social capital consists of a set of resources that companies will share to gain some benefits needed to conduct business. The exact nature of these resources has yet been little studied and no scientific study has clearly identified their composition. Despite this lack of scientific contributions, assumptions can be deducted from literature to date…

 

What can social capital provide?

The resources contained in social capital may enable SMEs to overcome numerous barriers to growth. Indeed, social capital can be considered as the source of information sharing between companies, providing technical and technological knowledge to SMEs, which facilitates technological development and stimulate innovation processes. Social capital may also include other informational resources that provide organizations with a thorough knowledge of their industry and of the competition in their market. Thus, they get a better understanding of their position in their market and are then able to develop and adapt their strategies. These informational resources may allow entrepreneurs to develop their managerial knowledge, leading to better management of the firm. Finally and more broadly, social capital, held by businesses, may allow SMEs to expand their circle of partners and to facilitate agreements and cooperation between companies.

These assumptions of the present literature on social capital in business should be tested in due management research. In the absence of scientific validation, we can still state that networking seems indisputably linked to current business and that continuing to operate in business world by refusing cooperation and openness to other companies may be lethal in an increasingly competitive environment. To quote a previous image, it appears that social capital and its resources allow each captain to take the helm and help him to steer the ship safely into harbor. In any case, while awaiting a scientific validation of the matter, stay on track and keep networking!

 


References

Barnir A. & Smith K. (2002), Interfirm alliances in the small business: the role of social networks, Journal of Small Business Management, VOL. 40, N°3.

Ghoshal S. & Tsai W. (1998), Social capital and value creation : the role of intrafirm network, Academy of Management Journal, Vol. 41, N°3.

Iacobucci D. (1996), Networks in marketing, Sage Publications, Thousand Oaks.

Teten D. & Allen S. (2005), The virtual handshake, opening doors and closing deals online, AMACOM, New-York, 2005

Emilie Beaud

Emilie Beaud

Enthusiastic for business development and innovation, Emilie shares with us her experience of startup’s environment. She exchanges views and provides analyses on marketing and business networking.

Reactions

Leave a Reply