Academic journal article Journal of Small Business Management

Critical Success Factors for Manufacturing Networks as Perceived by Network Coordinators

Academic journal article Journal of Small Business Management

Critical Success Factors for Manufacturing Networks as Perceived by Network Coordinators

Article excerpt

While networking among small and medium-sized manufacturing firms (SMEs) is a growing phenomenon, there has been little empirical study of the factors that lead to the success of these networks. This study identifies the following eight success factors for manufacturing networks of SMEs, which are ranked by perceived degree of importance to the success of the network: (1) participant character,. (2) chief executive officer (CEO) support; (3) confidence; (4) dedication; (5) capabilities; (6) external relationships; (7) intermediary; and (8) information technology. Four success factors were perceived to be significantly more important in joint production and marketing networks compared to joint learning and resource sharing networks: (1) participant character; (2) confidence; (3) external relationships; and (4) information technology.

Introduction

Manufacturing networks, groups of firms that combine forces to achieve competitive advantages that would be difficult to achieve individually, are growing among small manufacturing firms (Selz 1992; Port 1995; Malecki and Tootle 1996; Suarez-Villa 1998). Networking offers material benefits such as increased sales and/or lower costs, psychological benefits (recognition that problems are shared), and developmental benefits such as learning to adapt to changing economic environments (U.S. Net 1995). Coordination among these groups of firms is characterized by informal systems rather than by formal contractual relationships to manage complex products or services in uncertain and competitive environments (Jones, Hersterly, and Borgatti 1997).

There are different forms of collaboration among small and medium-sized enterprises (SMEs) (U.S. Net 1995). For many years businesses joined traditional industry associations such as American Meat Institute and the Woodworking Machinery Industry Association. These associations charged dues, represented the industry's interests to government and regulatory agencies, and provided opportunities for a certain level of joint problem solving by sponsoring conferences and trade shows. However, members' business success did not depend significantly upon the actions of others in the association. Today many manufacturing companies are joining networks in which participation has a much more direct impact on business success. For example, the members of Agile Web, Inc. jointly produce products. Each participant's effort affects the business success of all members (Sherer and Adams 2001). Learning and resource networks, referred to as "soft networks," bring firms together to learn about changes needed to improve competitiveness and to share resources such as training, waste management, or health insurance (Bosworth 1995; U.S. Net 1995). Comarketing and coproduction networks (including supply chain networks) have been referred to as "hard networks" (Bosworth 1995) because they require a higher level of interdependence compared to soft networks and hence have greater risk.

There has been little empirical study on critical success factors in these networks and no comparison of success factors in networks with different objectives. Much of the research on networks has been either on large firm strategic alliances (Human and Provan 1997) or on informal and social networks (Dubini and Aldrich 1991). Based on a review of the predominant success factors identified in the literature as well as case studies of small manufacturing networks, this paper identifies critical factors that are expected to affect SME networks and then ranks these factors in terms of perceived importance. Since the risks differ between hard and soft networks, it is expected that network type moderates the impact of these factors on network success, with greater importance of the critical success factors for hard networks compared to soft networks.

The Growth Of Manufacturing Networks

Large companies have long formed strategic alliances--agreements to share the costs, risks, and benefits associated with new business opportunities--either through formal joint ventures or long-term contracts (Hill and Jones 1995). …

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