Business Growth Network. Cluster Evolution

Network theory is a cross-discipline research field that arised since the 1980's. The arising of network theory has strong practical and theoretical backgrounds. The development of the new-institutional economics and new social economics has greatly changed people's traditional view for the relation between hierarchy and market. Network was also considered as a transactional governance mode besides hierarchy and market to form a new framework of "firm-network-market". Information technology and the trend of globalization have greatly influenced the traditional organization mode for production and operation, and finally drove the formation and fast development of firm networks. Scholars worked in different fields explored and tried to explain the questions such as the form, operation and governance of the network with different aspects. And their achievements were distributed in wide scopes as the strategic alliance, multi-national corporation, industrial clusters, sub-contract and business relationships etc.However, there are still many problems in the network theory to be explored. Existing studies are mainly concentrated on static problems as the competitive advantage that networks brought to firm. While studies deal with dynamic problems as network evolution are rare. In fact, networks are not invariable, but evolve as firms grow. Network with a favorable structure can promote firms to grow rapidly. On the other hand, the continued firm growth will push the network to evolve over time in order to meet the changing demand for network relationships of the firm during its growth. According to the industrial cluster theory, the cooperated local firm networks in clusters can promote firm growth and are considered as the important source of competitive advantage for industrial clusters. Researches on the network evolution of cluster firms will be especially important for us to understand the sustainable cluster firm growth and the development of industrial clusters. Therefore, this paper linked the network evolution with the growth of cluster firms, and tried to answer questions as why to evolve, how evolve and the evolving path. Accordingly, the three questions were analyzed respectively as the driving force, inner mechanism and path of network evolution of cluster firms as firms grow.The research has been developed by the combination use of normative analysis and empirical analysis approaches in this dissertation. The theoretical hypotheses were proposed after literature review. From January to August 2005, 38 managers and employees of 23 enterprises in three industrial clusters of Zhejiang province, thetanning industrial cluster in Haining, small appliances industrial cluster in Cixi and textile industrial cluster in Shaoxing, were interviewed. Based on our interviews and some relative empirical studies in literature, we designed a questionnaire with 52 items. The questionnaire survey was launched for about 500 enterprises in the print industrial cluster in Cangnan, Wenzhou city, the textile industrial cluster in Shaoxing, and the socks industrial cluster in Zhuji. And 296 valid samples are finally gathered. The methods we used in the data analyses process include factor analysis, variance analysis, and regression. Main conclusions we made in this paper are as follows.(1) Cluster analysis shows that the development stages of cluster firms in Zhejiang province at present can be classified into four groups, which are the survival stage, success stage, take-off stage and resource maturity stage. And most enterprises are in the lower phase of survival.(2) Resources demand and strategic intention are major driving forces for network evolution.Network evolution is a result of co-evolution process driven by both internal firm level factors and external environment level factors. But almost all the motivations for a firm to enter a network or form a network can be summarized as the resources demand and strategic intention of the firm. Differences in resources demand and strategic intentions among cluster firms in different growing phases resulted in a changing demand for network relationship by cluster firm, and eventually drive the network to evolve over time. Variance analysis for the four groups on their resource demand and strategic intention show that the strategic aggressiveness increases as firm grows, and the resource demand difference of firms are also significant in different phases. Regression analysis show that the resource demand and strategic intention are related to the characteristics of the firm network, and drive firms to evolve as firm grows.(3) Influences on the re-structuring process of cluster firms' networks reflect the inner mechanism of network evolution.The restructuring process of network is important because the changing network relation demand shows only a direction for evolution, which does not necessarily mean a favorable network will then be inevitably set up. Based on the theoretical analyses, we suggest the restructuring process of a firm's network is influenced by two main factors, which are the firm's network competence and social capital. The former affects the ability of a cluster firm to find partners, develop and manage relations. And the later affects the network opportunities a cluster firm couldeventually get. Our empirical analysis show that network competence and social capital of cluster firms increase when firms grow from lower stage to higher stage. Regression analysis show that network competence and social capital are related to the characteristics of the firm network such as network range, network stability, and therefore influence the network evolution as firm grows.(4) Variations of network range, intensity, stability and location in different grow stages of cluster firms image their evolution path.Empirical analysis show that the characteristics of network change when cluster firms growing from survival stage to resource maturity stage. Network range of cluster firms expands from few types of relationships to a combination of more different types of relationships as firm grows. The variation (more different types) of network relationships increases over time. Network intensities change differently between different industries. Network intensity of firms in textile industry has not show any difference among different stages, while network intensities of firms in manufacturing industry increase as firm grows. Network stabilities also change differently between the two industries. Network stabilities of firms in textile industry decrease and then increase as firm grows, while network stabilities of firms in manufacturing industry increase stably as firm grows. And the locations of the network relationships extend out of the cluster over time, as the number of relations with partners outside the cluster increases.Compare with former studies, the main innovations of the thesis concentrate on the following 3 aspects.(1) Despite the increasing attention paid to firm networks in economic literature, studies on the spatial and temporal variation of networks are still rare. Especially for the problems as the differences of network features among firms in different growing phase, and whey these differences exist. For the firms in industrial clusters, the cooperated network is considered the source of the competitive advantage for the firms and the clusters. Therefore, this paper took firm growth as a background and explored the evolution path of firm network, helped to provide a new angles for researches on cluster firm growth and the development of industrial clusters.(2) Up to now, studies on the mechanism of network evolution are especially limited and mostly focused on the motivations of enter or construct network relationship. This paper analyzed thoroughly the driving force and inner mechanism of network evolution. The former aims to answer the question why evolve, and the later how to evolve. And we statistically testified the validity of the relativehypotheses.(3) Existing literatures on network evolution are mostly theoretical analyses and status descriptions. As for questions like how the characteristics of network change when firms grow are still unclear. This paper described the network with four characteristics. By tracing the changing of these characteristics, we image the path of network evolution as firm grows.