Industry Peer Networks (IPNs)

Abstract

Purpose This paper aims to examine a type of interorganizational learning called Industry Peer Networks (IPNs), in which a network of non-competing small businesses cooperates to improve their skills and to stay abreast of the industry trends, so that the firms remain competitive in the local and regional markets. The key characteristic of an IPN is the regular gathering of peers in small groups (typically 20 or fewer carefully selected members) in an atmosphere of significant trust, guided by a facilitator, to participate in a series of formal and informal activities through established guidelines, to share knowledge about management and marketing, exchange information about industry trends beyond their core markets, discuss issues related to company performance and provide constructive criticism about peer companies. Design/methodology/approach The qualitative research on the context included visits to 13 peer meetings, three workshops for peer members, seven semi-structured interviews with members and many communications with the founder, chairman, committee chairpersons and several facilitators of peer meetings that spanned across five years. Data collection and analysis followed grounded theory building techniques. Findings The authors identified both cooperative and competitive learning practices that a small business could carry out to grow from a novice to an expert IPN peer member. The cooperative elements such as peer discussions, disclosure of financial data and exposure to various business models allow member firms to learn vicariously through the successes and/or failure of their peers. At the same time, the competitive elements such as service delivery critiques, business performance benchmarking and firm ranking also prompt the members to focus on execution, to emphasize accountability and to strive for status in the network. The IPN in this research has also built network legitimacy over time, and it has sustained a viable administrative entity that has a recognizable form and structure, whose functions are to strategically manage network activities and network growth to attract like-minded new members. Research limitations/implications First, because this research focused on fleshing out the transformative practices engaged by IPN peers, it necessarily neglected other types of network relationships that affect the small businesses, including local competitors, vendors and customers. Second, the small employment size of these firms and the personal nature of network ties in the IPN may provide an especially fertile ground for network learning that might not exist for larger firms. Third, the technology-intensive and quality-sensitive nature of IT firms may make technological trend sensitization and operating efficiency more competitive advantages in this industry than in others. Finally, although participation in IPN is associated with higher level of perceived learning, the relationship between learning and business performance is not yet articulated empirically. Practical implications The study contributes to the understanding of cooperative/competitive transformative practices in the IPN by highlighting the defining features at each transformation stage, from firms being isolated entities which react to market forces to connected peers which proactively drive the markets. IPNs are most effective for business owners who are at their early growth stage, in which they are positioned to grow further. Nevertheless, the authors also present the paradoxical capacity of IPNs to propel firms along trajectories of empowerment or disengagement. Social implications As 78.5 per cent of the US firms are small businesses having fewer than 10 employees, the knowledge of firm and IPN transformation is important for both researchers and advocates of small businesses to understand the roots of success or failure of firms and the IPNs in which they are embedded. Originality/value Earlier research has not explored the network-level effects as part of a full array of outcomes. Instead, research involving IPNs has focused primarily on the motivation and immediate firm-level outcomes of IPNs. Research to this point has also failed to examine IPNs from a developmental perspective, how the firms and the IPN as a network transform over time.