Building the legitimacy of business networks through certification: The development of differentiated relationships.

In this paper we analyze how legitimacy allows us to develop differentiated relationships in business networks. Our central argument is that the building of legitimacy in business networks through certification needs the development of what we call differentiated relationships, based on the use of governance mechanisms. Mainly theoretical, our communication develops the argument through a critical review of literature. We use the organizational legitimacy (Elsbach, 1994) and institutional theories (DiMaggio and Powell, 1983) approach to explain how business networks can adopt and manage legitimacy. We exploit also the economic theory (Brousseau and Raynaud, 2006) and social theory of agency (Westphal and Zajac, 1998) to explain the adoption of specific governance mechanisms (Provan and Kenis, 2007) that legitimate business networks. We apply our question to a specific third party certification market: the fair trade market. We show that to build legitimacy in business networks it is necessary to use and manage governance mechanisms in the best way. These actions lead to establish differentiated relationships in business networks between all of the partners involving third party certifiers.relationships; Legitimacy; networks; certification;

Bank Credit and Business Networks

We construct the topology of business networks across the population of firms in an emerging economy, Pakistan, and estimate the value that membership in large yet diffuse networks brings in terms of access to bank credit and improving financial viability. We link two firms if they have a common director. The resulting topology includes a "giant network" that is order of magnitudes larger than the second largest network. While it displays "small world" properties and comprises 5 percent of all firms, it accesses two-thirds of all bank credit. We estimate the value of joining this giant network by exploiting "incidental" entry and exit of firms over time. Membership increases total external financing by 16.6 percent, reduces the propensity to enter financial distress by 9.5 percent, and better insures firms against industry and location shocks. Firms that join improve financial access by borrowing more from new lenders, particularly those already lending to their (new) giant-network neighbors. Network benefits also depend critically on where a firm connects to in the network and on the firm's pre-existing strength.

Skilled Migration and Business Networks

The role of migrants’ networks in promoting cross border investments has been stressed in the literature, possibly making migration and FDI complements rather than substitutes in the long run. In this paper, we estimate the magnitude of such business network externalities in dynamic empirical models of FDI-funded capital accumulation. We use original data on capital and migration stocks rather than flows. Regarding migrants, we distinquish the total and the skilled diasporas abroad. In both cross-sectional and panel frameworks, we find evidence of strong network externalities, mainly associated to the skilled diaspora. These network externalities are stronger for countries exhibiting intermediate corruption index.FD1, Migration, Brain Drain, Network, Diaspo

Migrant Business Networks and FDI

This paper studies the effects of migration on the bilateral FDI of four European countries, Germany, Italy, France and the U.K. It is based on four distinct datasets with time spans going from 1990 to 2004. It focuses on the impact on FDI of skilled and less-skilled immigrants and on the networks’ ties with the less developed countries. Results are that the effects of skilled immigrants are positive and robust for both inward and outward FDI, and that networks linked to the developing countries mostly have stronger effects on the outward FDI than those related to the developed economies.Migrant Business Networks, Skills, FDI

Composition of small and large firms? business networks in transition economies

Recent research has theorized on the composition of firms' business networks but has not empirically examined business networks in transition economies may vary for different firms. In this study, using firm level data from twenty six transition economies collected by the World Bank and the EBRD in 1999-2000, we conduct a set of logistic regression models to investigate the composition of small and large firms' business networks. The results show that, in contrast to smaller firms, larger firms are more likely to have formal business relationships, and relationships with national and foreign financial institutions, government, and foreign firms. In addition, in a subgroup analysis of seven transition economies we show that the composition of the firms' business networks varies substantially across countries but that the government is still a dominant client. Furthermore, we found a large variation on firms' reliance on informal ties and the extent to which firms exchange with foreign firms.business relationships, multi-country, transition economies, institutional environment

The balanced scorecard logic in the management control and reporting of small business company networks: a case study

The purpose of this paper is to assess and integrate the application of the balance scorecard (BSC) logic into business networks identifying functions and use that such performance measuring tool may undertake for SME’s collaborative development. Thus, the paper analyses a successful case study regarding an Italian network of small companies, evaluating how the multidimensional perspective of BSC can support strategic and operational network management as well as communication of financial and extra financial performance to stakeholders. The study consists of a qualitative method, proposing the application of BSC model for business networks from international literature. Several meetings and interviews as well as triangulation with primary and secondary documents have been conducted. The case study allows to recognize how BSC network logic can play a fundamental role on defining network mission, supporting management control as well as measuring and reporting the intangible assets formation along the network development lifecycle. This is the first time application of a BSC integrated framework for business networks composed of SMEs. The case study demonstrates operational value of BSC for SME’s collaborative development and success

Business networks SMEs and inter-firm collaboration: a review of the research literature with implications for policy

This literature review, which was commissioned by the UK's Small Business Service is concerned with business networks, and their importance for the small business community. Business networks are sometimes defined as comprising only inter-firm relationships (e.g. those that exist between component supplier and a manufacturer). However, it soon becomes apparent that a broader perspective is required, if research findings are to contribute meaningful insights for policy and practice. We have therefore incorporated research evidence on personal networks, notably those associated with entrepreneurship, and on links between firms and supporting institutions, such as trade associations, government agencies and universities

Business Networks and inward FDI Policy

I outline the effect of business networks on trade, FDI and wel- fare in a two-country, two-firm duopoly. The network effect, following Greaney (2002), is modelled as a marginal cost disadvantage facing a firm from Foreign in selling to Home. Unlike traditional trade costs, this cost cannot be avoided by investing in Home. My main addition is a Nash game between governments in which they subsidise the fixed costs of inward FDI. While the network effect is shown to lead to favourable outcomes for the Home firm, I show that once government subsidies to the fixed costs of FDI are included and welfare functions analysed, the network effect leads to asymmetric outcomes unfavourable to Home. This result can help inform the debate on countries' (in particular Japan's) international trade and investment relations.Foreign Direct Investment, Network effects, Government Subsi- dies

Skilled emigration, business networks and foreign direct investment

In a global context foreign direct investment (FDI) and migration substitute one another in the matching process between workers and firms. However, as labor flows can lead to the formation of business networks, migration can actually facilitate FDI in the long-run. We first present a stylized model for a small open economy illustrating these offsetting effects. We then use U.S. data on bilateral labor inflows and capital outflows to measure the extent of contemporaneous substitutability and dynamic complementarity between migration and FDI. We find that brain drain and FDI inflows are negatively correlated contemporaneously but that skilled migration is associated with future increases in FDI inflows. We also find suggestive evidence of substitutability between current migration and FDI for migrants with secondary education, and of complementarity between past migration and FDI for unskilled migrants

Discovering the dynamics of smart business networks

Earlier research discussed the necessary evolution from smart business networks, as based on process need satisfaction and governance, into business genetics [1] based on strategic bonds or decay and opportunistic complementarities. This paper will describe an approach and diffusion algorithms whereby to discover the dynamics of emergent smart business network structures and their performance in view of collaboration patterns over time. Some real life early analyses of dynamics are discussed based on cases and date from the high tech sector. Lessons learnt from such cases are also given on overall smart network dynamics with respect to local interaction strategies, as modelled like in business genetics by individual partner profiles, goals and constraints. It shows the weakness of static “business operating systems”, as well as the possibly destabilizing clustering effects amongst nodes linked to filtering, evaluation and own preferences.smart business networks; business genetics; network performance; SBN; dynamics