The management of network relationships

The management of network relationships is inherently difficult. Knowledge of how to
collaborate accumulates over time through experience, reflection, and interpretation.
Striking the right balance involves managing informal and formal agreements, while
at the same time establishing trust.
Firms need to learn network competencies, for example:
¦ Whether agreements need contracts or can be based on good faith
¦ If friendship or reputation plays a role in the identification of partners
¦ Milestones or interventions needed to ensure a project stays on course
Unfortunately many firms do not appreciate the need for network management skills.
One study of owner-managers of printing electronic firms in the UK, for example,
revealed that the need to manage networks was widely ignored. Although there
was plenty of contact in the sector between small and large firms there was a lack
of active management of these relationships.
In particular:
¦ Contact tended to be one-off and intermittent
¦ There was a lack of long-term relationships
¦ Contacts tended to be haphazard rather than via strong local networks
¦ Firms put little effort into promoting and maintaining them networks
¦ Networking was conducted via a few key employees within the firm. When these
employees left or were absent then the firm’s links with the network was broken
Worryingly the owner-managers did not see the value in networks and only 20% saw
any value in introductory services. This is a problem because the general evidence
supports the view that networks are more effective at leading to innovation where
they are both long-term and relatively stable. Fortunately firms can develop network
capability. It is also clear than some networks are intrinsically more dynamic than others.12
The research has a number of important implications for business practitioners.
It confirms that networks play a crucial role in innovation through: access to external
knowledge; risk sharing; access to new markets and technologies; accelerated time
to market; and pooling complementary skills.
The findings also suggest that a particular type of networks, i-works, have greater
innovation potential.
i-works display the following characteristics:
¦ Highly diverse: network partners from a wide variety of disciplines and
backgrounds who encourage exchange about ideas across systems
¦ Third party gatekeepers: science partners, such as universities, but also consultants
and trade associations, provide access to expertise and act as neutral knowledge
brokers across the network
¦ Financial leverage: access to investors via business angels, venture capital firms
and corporate venturing which spreads the risk of innovation and provides
market intelligence
¦ Proactively managed: participants regard the network as a valuable asset and
actively manage it to reap the innovation benefits
Companies should therefore:
¦ Proactively manage their networks and networking activities
¦ Actively seek out and participate in i-works
¦ Collaborate with third parties such as trade associations, consultants and science
partners who can act as neutral network brokers
¦ Recognise that venture finance networks offer more than just funding
The first step, however, is for senior managers in the UK to realise that networking is
a critical capability for their organisations – and should be managed as such. Companies
need to manage knowledge spillover, but they also need to recognise that no company
is an island. The failure to develop networking capability is a self-limiting strategy.
The failure
to develop
capability is a
strategy. Implications for policymakers and researchers
The AIM research also has a number of important implications for policymakers
and researchers. In particular, policy makers should consider a range of measures
to stimulate the formation of i-works, including:
¦ Establishing centres for collaboration in priority areas
¦ Fostering the diversity of partners, e.g. actively promoting local SME networking,
pump priming funding for foreign research collaboration
¦ Establishing more network intermediaries in universities and colleges
¦ Strengthening the role of business angel networks on a local (sub-regional) level
¦ Encouraging syndicated investments to improve the quality and the quantity
of investment in entrepreneurial fir