A Panel Study of Firm Growth among SMEs in Networks

An underlying assumption in SME literature, as well as among policymakers, is that networks are good per se especially for SMEs. Through accessing and utilising external resources in the network, the SME can overcome some of the assumed disadvantages of limited size. Thus networking is assumed to enhance small firm performance and thereby small firm growth. This article investigates this assumption. Analysis of panel data ascertains that a substantial number of SMEs are actively networking and that the level of networking has been maintained over a five-year period. In spite of this there is no evidence of associated short-term benefits such as growth in employment or growth in total sales resulting from the networking activities. The analyses suggest, however, that networking is associated with high growth in the geographic extension of markets, which suggests that networking sustains long-term objectives of the firms.