Market Revenue and the Scope and Scale of SME Networks in Europe's Vulnerable Regions

‘For some, networks have ontological status, being associated with the embeddedness of social life in general and the necessary embeddedness of firms in their industries and regions in particular. For others less certain about ontology, networks are vital ingredients in firm-specific competitive strategies and long-term growth prospects. In this paper we approach the issue with reference to firm-specific competitive strategies, reporting the results of a large-scale pan-European survey of small and medium-sized enterprises' (SMEs) network-related responses to changing market conditions. Distinguishing between different types of production network (supply and distribution) operating at various geographical scales (regional, national, EU, and global), it is shown that the scope and scale of firm networks are strategic issues. All things being equal, firms adopt advanced technologies in response to changing market conditions, enabling their networks to change in scope and geographical scale. We also show that the significance of local as opposed to national and EU networks is changing with less ‘localism’ and wider geographical scope becoming increasingly important. Using probit models for different types of networks, we identify and distinguish between predictive variables driving network formation, including the type of SME ownership. Implications are drawn for the theoretical status of networks in industrial organisation and their significance for European economic development.