Networking, marketing activities, and firm performance: a survey of Thai construction firms.

AuthorBoonchoo, Pattana
  1. INTRODUCTION

    Networking plays an important role in business, particularly in emerging markets where the level of environmental uncertainties is relatively high (Luo, 2003). A firm's ability to engage in relevant and useful networking activities, such as participation in trade, social and professional organizations, as well as the exchange of information with different stakeholders in the industry, can be a source of competitive advantage that will boost performance. However, the effect of networking activities on firm performance is not straightforward. While networking can exert direct influence on firm performance, it can also affect firm performance indirectly through a wide array of business strategies, such as marketing, human resources, etc. The existing literature primarily examines the relationship between networking and firm performance in the context of developed countries (e.g., the United States, European countries, and Canada), and inconclusive results have been found (see for example Bonner et al., 2005; Babakus et al., 2006; Kandemir et al., 2006; Lechner et al., 2006).

    To date, empirical studies that seek to investigate the effect of networking on firm performance through marketing strategies are still scant. Therefore, it is a main goal of this paper to address this gap in order to broaden the boundary of research on the networking activities of firms. More specifically, this paper seeks to scrutinize the interrelationships among networking, marketing activities, and firm performance, providing more empirical evidence on this line of research. The research question we seek to answer is whether firms with a high level of engagement in networking activities will exhibit better performance than those with a low level of engagement in such activities. We also substantiate the indirect effect of networking by enquiring into the linkages between networking activities, changes in marketing activities, and firm performance. To control for the homogeneity of firms, this study uses a single-industry sample, specifically the Thai construction industry.

    The paper is structured as follows. The next section reviews literature on network relationship and firm performance, while the data collection and methodology are described in the subsequent section. Section 5 presents and discusses our empirical results. The paper concludes with limitations and suggestions for future research in the final section.

  2. LITERATURE REVIEW

    Networking is one of the key elements of business in its effect on organizational growth and performance (Lee and Tsang, 2001). Conceptually, networking includes all activities carried out by network actors, how network relationships are created, maintained, and managed, and all of the exchanges between network actors such as information, money, and friendship (Conway and Jones, 2006). Improvement in marketing effectiveness can be achieved through the use of networks. Networking has been found to provide firms with the necessary and reliable information that helps them understand and cope with environmental uncertainty (Gilmore et al., 2006; Shaw, 1999), and make effective marketing decisions (Hill and Wright, 2000). More specifically, networking activities can help firms to create new, situation-specific ways of coping with turbulent environments (Eisenhardt and Martin, 2000; Miles and Darroch, 2006), and to acquire, retain, and create value for customers (Bjerke and Hultman, 2002; Eisenhardt and Martin, 2000; Morris et al., 2002). Networking also offers firms a way to access critical resources, both tangible (e.g., financial) and intangible (e.g., knowledge) (Tsang, 2006). With networks, firms can mobilize and leverage the resources embedded throughout the network and take advantage of resources developed in connected relationships (Bjerke and Hultman, 2002; Kandemir et al., 2006). Empirical evidence indicates that networking has played an important role in business, especially in emerging markets. Birley (1985) and Ostgaard and Birley (1994) found that firms' survival depends substantially on the strength of the relationships in their networks and on the capability of their networks to provide necessary support and resources.

    Extant literature, however, has provided inconclusive findings when exploring the relationships between firm performance and networking. On one hand, the results of the US data are rather consistent. That is, all studies observed a positive relationship between networking and firm performance. Bonner et al. (2005), for instance, found that strategic networking is positively correlated with firm performance as measured by sales growth, market share, market development, and product development. Likewise, Kandemir et al. (2006) found that alliance orientation is positively associated with the alliance network performance and market performance of firms. In addition, Sorenson et al. (2008) found a positive relationship between collaborative network orientation and firm performance (i.e., profitability, overall performance, profit growth, and market share). Nevertheless, Sawyerr et al. (2003) found both a positive relationship and no relationship between network activities and firm performance (i.e., net income after taxes, sales growth, and ROA).

    On the other hand, studies on the other side of the Atlantic have revealed mixed results in relation to the relationship between the firm performance and networking of European firms. While Babakus et al. (2006) found a positive relationship between domestic and foreign networking and export performance of manufacturing SMEs in the Nordic region, Ostgaard and Birley (1996) found that networking has both positive and negative relationships with growth in the sales and profitability of owner-managed companies in England. Studying venture capital financed firms in Europe, Lechner et al. (2006) found that networking has both positive and negative effects on firm performance as measured by time-to-break-even and sales.

    Studies using data from other regions have also reported inconclusive results. Studying ethnic entrepreneurs in Canada, Kariv et al. (2009) found that transnational networking is positively associated with firm performance as...

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