The double-edged sword of networking: Complementary and substitutive effects of networking capability in China

The competitive dynamics generated by the increasingly connected socioeconomic environment have brought social networking to the forefront. Establishing networks with other firms provides information and resources that reduce uncertainty in highly changeable industries. Previous studies have generally examined customer and technology capabilities but failed to elucidate the role of networking capability. It is therefore important to understand the characteristics of networking capability. Our empirical study, using a sample of 106 Chinese firms, reveals that networking capability can increase performance growth while raising the variability of firm performance. Further, we examine the capability of portfolio strategies to understand the joint effects of networking capability combined with customer- and technology-related capabilities. The results show that networking and technology-related capabilities increase performance growth, while networking capability strengthens the negative effects of technology-related capability on performance variability. In contrast, networking capability attenuates the positive effect of customer-related capability on performance growth, and networking and customer-related capabilities increase performance variability. The findings indicate that networking capability benefits the firm but at the cost of performance variability, while from a configuration perspective, it complements technology-related capability but substitutes for customer-related capability. Thus, networking capability functions as a double-edged sword.