Network competence in Finnish SMEs: implications for growth

Abstract

Purpose–The purpose of this paper is to examine how network competence is related to the growthof domestic and international SMEs originating from the Nordic region. Business networks have beenfound to drive internationalization of SMEs in the Nordic context, but the impact of network-relatedorganizational competencies on them has not been considered.Design/methodology/approach–The authors apply regression analysis on a sample of 298Finnish SMEs across five industry sectors, gathered via an online survey in 2008, and with the datahaving been updated for its financial indicators up to 2010.Findings–The authors find that cross-relational network competence is a significant predictor ofgrowth in internationally operating SMEs. This result is robust across measures among the firms.In comparison, the network competence of domestically operating SMEs is not related to their growth,and relationship-specific competence does not influence growth.Research limitations/implications–The study does not account for longitudinal aspect ofcompetence development. Growth is measured by the growth in sales and assets, and there are otherways to measure organizational growth. A single-country context also extends some restrictions on thegeneralizability of the results, although they could be expected to hold across small, open economiessimilar to Finland and the Nordic area.Practical implications–The results imply that the strategic aims of SMEs determine their need fornetwork competence, those SMEs seeking internationalization and growth through geographicexpansion come to benefit from developing certain types of network competence.Social implications–Policy implications arise where governments in Finland and in the Nordic areamay aid SMEs’internationalization efforts by enabling the growth-seeking firms with increasedresources for competence development.Originality/value–This is the first study to examine how the organizational competencies todevelop and manage business networks, in particular dyadic and network-level competencies, come todetermine realized growth outcomes in domestic and international SMEs. It contributes to the theory ofSME internationalization and international entrepreneurship from the business network point of view,while providing further knowledge on internationalization of SMEs originating from the Nordic area.