Abstract
This paper investigates the role of trust and control in networks of small and medium-sized enterprises (SMEs), with a focus on both their direct and interaction effects on value creation. To delve into the interplay between trust and control, we unpack control mechanisms into three different forms: output, process, and social control. Our hypotheses are tested on a sample of 58 Italian SME networks based on formal agreements. Results show that the competitiveness and sustainability of inter-firm networks require trust-based relationships among entrepreneurs. Additionally, the adoption of output control mechanisms reinforces the positive link between trust and value creation, whereas a substitution effect exists between trust and process control and, with limited significance, between trust and social control.
Highlights
Over time, a vast body of literature has been produced on strategic networks and on the importance of inter-organizational cooperation for firm competitiveness, in the context of small and medium-sized enterprises (SMEs) [1,2,3,4]
The objective of this paper is to address the following questions: Do the level of trust among entrepreneurs and the presence of control mechanisms foster network value creation? How do trust and control mechanisms interact in making the collaboration sustainable and enhance member firms’ competitiveness? To delve deeper into the relationship between trust and control in terms of complementarity or substitutability, we unpack the mechanisms of control into three different forms: output control, process control, and social control [26]
Our research on value creation in inter-firm networks focused on three different objectives: analyzing the performance effects of trust-based relationships among partners within strategic networks; studying the distinct effects of output, process, and social control mechanisms on value creation; and exploring the complementarity vs. substitutability relationship between trust and control in influencing value creation
Summary
A vast body of literature has been produced on strategic networks and on the importance of inter-organizational cooperation for firm competitiveness, in the context of small and medium-sized enterprises (SMEs) [1,2,3,4]. Strategic networks are typically considered an effective way to overcome the constraints often associated with the small size. Research has highlighted a variety of benefits deriving from network relationships in terms of lowering transaction costs, increasing social capital, achieving economies of scale, and fostering internationalization [7,8,9,10]. More recent research has widened the concept of value creation in network contexts and underscored that networks may contribute from multiple aspects to a firm’s sustainable competitiveness.
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