The Effects of Network Relationships on SME Growth: Evidence from New Zealand

Abstract

This thesis aims to explore how SMEs use network relationships to support SME growth. Drawing on the network perspective, this thesis investigates different network relationships – innovation networks, finance networks and distribution network relationships, to understand their relationships with SME growth. The use of both quantitative methods (Study 1 and Study 2), and qualitative methods (Study 3) provides interesting and nuanced insights to the relationships. The findings are presented as three inter-linked studies. The first study focuses on whether domestic and international innovation networks are complementary or act as substitutes in developing exploitation and exploration innovation activities, as well as ambidexterity. The substitution findings extend earlier research on SME ambidexterity, suggesting that duplicating effort to develop domestic and international networks weakens efforts to achieve ambidexterity. The contribution suggests that taking a balanced approach to ambidexterity can alleviate the resource conflict and tension. The second study assesses whether internal and external equity funding, and debt, have a relationship with different international growth outcomes for SMEs. The study uses Rugman’s (2001) concept of regional growth to determine that for young and middle-aged SMEs internal and external equity funding works together to support growth beyond the home region. Debt funding only makes an appearance once the SME reaches maturity, in line with earlier research which suggests that firms return to lower risk forms of funding once they reach maturity (Berger & Udell, 1998). The third study focuses on the role of trust and how it can influence the pathways followed to exit key foreign market relationships. The study finds that as the SMEs resources like knowledge and networks develop, performance gaps can emerge highlighting limitations to the network partnership, potentially leading to SME network relationship exit. Together the studies contribute to the overall development of the SME growth literature, adding to the growing calls for insight into how SME network relationships evolve over time. This thesis offers practical recommendations for SMEs on strategies for sustaining SME growth potential through network relationships. Finally, the limitations of the research are explained, and important future research themes presented.