A business network refers to a complex, enduring, and interdependent webs of business relationships among market and non-market actors that allow firms to co-create value in their business environment. Firms influence their markets by managing and signalling their network positions, facilitating entry of new actors, or removing other actors, for instance, through disintermediation, which means elimitating the middleman.
When some actors within a business network have joint strategic intents and work together to achieve certain objectives, then the network is called a strategic business net. These objectives, which are strategic and operational, are adopted by business networks based on their role in the market.
Definition
Several descriptions of business networks stipulate different types of characteristics:
A business network is a form of inter-firm cooperation that allows companies, located in different regions or countries, to collaborate on a basis of common development objectives expressed in a cooperation agreement. The companies decide to join their strengths, share information and create synergies to become more innovative and competitive in domestic and international markets, while keeping their autonomy, not creating a separate legal entity. This cooperation model is suitable for any kind of business activity or sector. A business network is greater than the sum of the individual businesses. It incorporates suppliers, customers, third-party developers, distributors, and others. These third parties generally have a strong reason to support the network and remain active in it. A business network is generic and includes both smart and not-so-smart business networks. A smart business network is defined as a group of participating companies (nodes) that are linked together by one or many communication networks (links). The companies have compatible goals and interact in innovative ways. A smart business network is perceived by each company as increasing its own value and is sustainable as a network over time. A business network is owned by the business enterprise, where the scope of the network is to support the informational and operational requirements of the business, such as marketing, sales, accounting, and manufacturing departments.
Study
In the late 20th century, the study of business networks emerged in the field of industrial markets. Researchers analyzed the transactions and communications beneath the visible flows of products, inquiries, sales visits and negotiations, and beyond the visible growth and prosperity of some companies and the failure of others.
Snehota and Hakansson (1995) explain: For more than twenty years, we have analyzed business networks for answers to the many questions about industrial markets. Unlike consumer markets, industrial markets are not generally known to the public, nor to many management scholars. We have been surprised by the complexity of industrial markets and at the same time by the apparent smoothness of their working. Gradually, we have acquired respect for their importance and complexity and learned how they work.
Another study on business networks was carried out by Ecorys between 2013 and 2014. This study was specific to EU-level business networks and was financed by the European Commission. The main objective of the study was to investigate and highlight the new forms of inter-firm collaboration and to propose possible measures to support and coordinate them in Europe where and if appropriate. This study included the objectives and categorization of business networks.
Objectives
Business networks have two types of objectives — strategic and operational — that are adopted depending on the role of the business network in the market.
Strategic objectives
Strategic objectives are focused on long term activities, such as:
Innovation
Internationalization
Foreign matchmaking
Operational objectives
Operational objectives are diverse and include:
Provision of legal and financial services
Collaboration in regional, national, and international projects
Increased buying power through joint purchasing
Optimization of HR-marketing for recruitment of highly specialized talent
Provision of intellectual property protection
Categorization
Business networks can be divided into two main categories: business associations and company aggregations.