NEW APPROACH TO COLLABORATION-REGIONAL BUSINESS

NCSB 2004 Conference 13th Nordic Conference on Small Business Research

NEW APPROACH TO COLLABORATION REGIONAL BUSINESS ENABLING NETWORK Vesa Pikka & Päivi Iskanius & Tauno Jokinen & Pekka Kess Department of Industrial Engineering and Management University of Oulu Finland E- mail: [email protected] E- mail: [email protected] E- mail: [email protected] E- mail: [email protected] May 2004

Abstract This paper presents the business enabling network–model and its theoretical base. The basic elements of the model are goal, trust, competence, infrastructure and continuity. The model has been tested in two case networks and the gained results show that the business enabling network model is appropriate frame to analyse regional network. The business enabling network concept is more broaden than the traditio nal business network concepts by stressing the meaning of social networks and taking into account also non-commercial actors. The network definition in this paper is broad; A group of actors that work intentionally together to harness long term business capabilities of the network of participants and change information form the business enabling network. Between the actors there may exist formal economical relations or the relations can be only informal i.e. social relations.


1. Introduction Companies no longer compete alone as autonomous entities, but rather as part of a network (Lambert et al. 1998, Christopher 1998). Naturally one company can be in several networks. Managerial doctrines have emphasized core competencies as a success factor in business. Today companies focus on their core competencies and by networking complement non-core competencies. Especially in the ICT- industry, networking has come a widely accepted strategic way of action. Scale, cost and quality are the paradigms where business is managed (Kolarik 1999, Pine 1993, Suri 1998, Womack & Jones 1996). According to Harrington (2000), the 21st century is bringing rapid innovation, driven by the continuing high-tech boom and expanding global markets from the last decade. Speed and agility are common requirements, not only for the ICT- firms, but also for the traditional industries, like the steel product industry. Collaboration covers besides traditional production, also research and development activities. Business networks, and today eve n more interesting phenomena in research world, social networks, are important factors in the regional development. For example, there is the evidence that historical development as well as the particular structure of the social networks in Silicon Valley have fostered relatively higher growth and development of the region (Castilla 2003). Two main research areas in the network research are business networks (i.e. Easton 1992, Håkansson & Johansson 1992, Vesalainen 1996) and social networks (i.e. Coleman 1988, Davern 1997). Some authors clearly connect these two approaches claiming that social networks are elementary parts of business networks (i.e. Granovetter 1973, Burt 1995), however, this discussion lacks clear conceptualisation as described in Figure 1 using the term Business Enabling Network (BEN).

Business networks

Business enabling network

Social networks

Figure 1. The positioning of business enabling network. This study aims to conceptualise the missing discussion in such a way that new concept to be created clearly combines business objectives and tenets of social network theories. The need of such conceptualisation is strongly supported by the works of Granovetter (1973, 1985, 1992). To create a ground for new discussion such new concept should clearly differentiate from the discussion of social networks and the discussion of business networks. The research problem can be described through two research questions: 1) How the business enabling network can be defined? 2) Is it possible to describe the essence of such business enabling network through a set of manageable assets? As the intention of this study is to create new framework for theoretical discussion the new concepts should be grounded on empirical observations (see Glaser & Straus 1967). Oulu area in Northern Finland has been referred as an example of global high technology hub characterised by strong


social business networks (Hillner 2000). This study analyses the types and structures of the Oulu area ICT social business networks through an empirical work between the years 2000 and 2003. Based on the results the concept of business enabling network and a model describing the assets and asset management of such network are defined. The created concepts are further tested and validated in an other environment. The Steelpolis network in Raahe region (also in Northern Finland) is sufficiently separate and of different type than the Oulu area ICT network providing a appropriate research data for such validation. In this research the network is defined as the group of actors who change information and who have a common interest. This quite broad definition means that the best suitable research method is qualitative. It is obvious that quantitative approach would produce information, which shows for example how network scale and density has developed. These results would not show the cause and effect relations, which are in the background of the phenomena. Also changes in the market would make it difficult to make reliable conclusion of causes that have really had influence to the development of the network. Gummesson (2000) emphasizes that in the research of complicated phenomena – for example strategic changes – quantitative approaches can be predominantly complementary. According to him, in the research of processes best methodologies are qualitative interviews and observations. Qualitative research approach provides more in-depth knowledge of the development of the network and causes which have influence on it. The research data was collected by interviewing actors in the network and organising seminars and workshops where actors have considered the themes that are related to the network. Wide range of public documents that relate to the networks was also studied. Interviewing as a research data collection method is justifiable in this research because it makes possible to gain deep information of the case network. Hirsijärvi and Hurme (2001, 35) give several reasons to the use of interviewing as a research method: it is possible to clarify answers, make more questions and allocate answers to broader context. In this research semi-structured interviews were used and all questions have been same for all informants. During the interviewing more questions have been made in purpose to get more information or clarify some issues. In addition researchers are also involved in the development process of the network. In practise, researchers have worked in the national research programmes, which have aims to develop the networks; ELVA (covering TQM developments in the electronics manufacturing companies) –project founded by Ministry of Labour The National Workplace Development Programme, which was a continuation the ProElectronica (Kess & Pikka 2001) and in the SteelNet (covering collaboration in steel industry network) –project founded by the National Technology Agency of Finland. In this research social relations of a named individual actor are not presented because those relations are considered belong under the privacy protection. Social relations could be interesting and explain some events better, but it is obvious that people are not willing to show up their personal relationships.

2. Related approaches 2.1 Business network approach Networking has been researched in various manners. According to Lehtinen (2001), most salient research levels have been firms’ internal chains, dyadic relationships, external chains and whole networks. In addition, the majority of research on networks has traditionally focused either dyadic relationships or chains embedded within the context of networks. According to Lehtinen (2001), in


Scandinavia the research of industrial networks has been strongly influenced by the IMP group. The IMP research aims to provide better understanding of business markets (buyer-supplier relationships). The networking has developed from occasional subcontracting relations Möller and Halinen (1999) state that the competitive environment fundamental change. We have to look beyond ordinary customer and intricate webs of organisations forming R&D networks, deep supplier coalitions.

to large relation networks. of firms is undergoing a supplier relationships into networks, and competitive

Usually in the definitions of network there are many common parts: actors, bonds, relations, long lasting co-operation, mutual orientation etc. (see Easton 1992, Håkansson & Johasson 1992, Vesalainen 1996). One basic idea in those definitions is that firms that form a network have business relationships together – they have economical transactions. This is however quite narrow view on a network. Firms can form a network without business relationships – in that case social relationships are however needed. Non-contractual network can be formed to provide some common matter – for example to promote project management and quality competence in the local university by funding together research projects. Modelling of networks can be based on verbal, graphical and mathematical model (Lilien & Kotler 1983). Traditionally business networks have been modelled by relationships. Vesalainen (1996) has developed many formal models to firm’s co-operation. All those models don’t include business relations (seller-buyer relation). A good example of this kind of co-operation is a development ring that means that few firms arrange appointments where host firm presents its operation and others will give comments, critic and improvement ideas to the host entrepreneur. Subcontracting is a traditional form of networking. Lehtinen (2001, 35) defines subcont racting as follows: Manufacturing and developing ordered goods; semi-products, components and services whose customised specifications are provided by the prime contractor. Lehtinen (2001) defines that subcontractor is a company or independent organisation that is responsible for offering subcontracting and related functions to other actors of the chain on a long term basis. The key point in this definition is the idea of long-term basis co-operation. This makes the subcontracting one form of networking. Strategic co-operation and partnerships are one kind of subcontracting according to Lehtinen (1992) and Kuitunen et al. (1999). In partnership it is typical that relationships between firms are long lasting and the roles and duties are clear. Information and material flows are also straight. As well the quality etc. standards and routines of order-deliveries are uniform. Competitive bidding takes place only at the case of new purchasing. The strategic alliance is also one form of co-operation, which includes some aspects of networking. The strategic alliance means that two or more firms form an alliance to gain some advantages together. Jarillo (1988) defines strategic alliance as a long-term contract to co-operate with some operations, by which firms are going to improve their competitive position. According to Ali- Yrkkö (2001), alliances can be defined ”horizontal” alliances between competitors, ”diagonal” alliances between companies in different industries and ”vertical” alliances between buyers and suppliers. According to Ali- Yrkkö (2001), one driving force behind alliances is a widely accepted core competence paradigm according to which a company must focus on its core competence and outsource other activities. Outsourcing is possible if there are available suppliers who can offer competitive service. This means then that the network should be able to develop same speed as the leading company or companies.


2.2 The social network approach The fundamental components of a network are nodes and connections (Davern 1997). Sociology has replaced the nodes with actors and the connections with social ties. Davern (1997) presents that the social network is one way to conceptualise social structure. The approach is then relationcentred. According to Davern (1997), social network has four basic components; structural component, the resource component, the normative component and the dynamic component. The structural component is used to describe the configuration of the actors and ties within a network. On the basis of network structure i.e. the arrangement of actors and ties, it is possible to estimate or predict the socio-economic behaviour of network and actors power relative to the others. Resources in social network are something that actors can turn to for he lp in order to achieve their targets. Resources can be ability, knowledge, class, estate etc. Resources can be characteristic to both individual as well as network. Davern (1997) presents an example; a person with several high-status individuals within his or her network has a larger amount of resources than actor with lower-status individuals. Thus resources are a function of the actor’s own resources as well as the resources of all his or her contacts. The normative component of social network contains norms, regulatory rules, and effective sanctions that govern the behavior of actors within a particular network. Coleman (1988) sees these as form of social capital. The normative regulatory rules and sanctions may have an effect on economic transactions. Social capital is one key element when we discuss about social network. But first we take in short a look over human behaviour. According to Coleman (1988), most sociologists see the actor as socialized and action as governed by social norms, rules and obligations. Thus the environment shapes the actor. The fatal flaw in this theory is that the actor has no ”engine of action” as Coleman says. This means that the actor doesn’t have any internal springs of action that give the to the actor a purpose or direction. The economic stream sees the actor as having goals independently arrived at, as acting independently and as wholly self- interested. Coleman (1988) presents that the economic stream flies in the face of empirical reality: persons’ actions are shaped, redirected, constrained by the social context; norms, interpersonal trust, social networks, and social organization are important in the functioning of the economy. Coleman (1988) defines three forms of social capital; firstly obligations, expectations and trustworthiness of structures; secondly information channels; and thirdly norms and effective sanctions. The first form of social capital means that if person A does something for person B and trusts B to reciprocate in the future, this establishes an expectation in A and obligation on the part of B (Coleman 1988). This depends on two elements: trustworthiness of the social environment and the actual extent of obligations held. By information channels information can be acquired is by use of social relations that are maintained for other purposes. So, social relations can constitute a form of social capital that provides information that facilitates action. An effective norm constitutes a powerful form of social capital. A prescriptive norm within a collectivity is the norm that one should forgo self- interest and act in the interests of the collectivity. On the other hand, effective norms can be also harmful; effective norms in the area can reduce innovativeness, not only deviant actions that harm others but also deviant actions that can benefit everyone. According to Hjerppe (Ruuskanen, 2001), capital has three main dimensions: Capital is a reserve, which is usable when needed; Capital is accumulative: it can be built up and it is investible; Capital is erasable, which is taken account for example in theory of accounting by depreciation. Ruuskanen (2001) states that social capital are among others social structure, social institutions and networks, which are usable for an individual at the least up to some level. Those structures create


social order and reduce unsteadiness and indiscriminateness. This can be seen as a resource for an individual. At the same time social structures anyway restrict the actions of an individual. Social capital can be a resource for an actor if the actor reaches for something, which is accepted by the norms of the community and suitable for the institutions. According to Ruuskanen (2001), it can be invested in the social capital. For example the development of ones personal contact network is one form of investment. At the level of community it can be invested to strength or change social institutions. Social capital is also erasable, which can be seen among other in the free rider – problem – free riders will be excluded from the network. Thus the concept of social capital is justified and it offers a possibility to consider the link between social environment and economical action. Social capital is also quite appropriate concept to describe the meaning of social networks.

2.3 Business networks as a social phenomena It is justifiable to consider business networks also as a social phenomena. Granovetter (1985) argues that there is evidence all around us of the extent to which business relations are mixed up with social ones. Furthermore he states that social relations are mainly responsible for the production of trust in economic life. Burt (1992) states that even the competitive arena has a social structure. Also when we compare the structures of business and social networks we can see that they are basically quite similar. What common have the enterprise networks and social networks? Johansson et al. (1995) insists that social relationships have influence to social behaviour and to social networks. Traditionally in the economics it has been thought that the behaviour of an individual person is rational and it is serving self- interests. This conception doesn’t take into account the norms which person has adopted and the institutional limits. The conception of rational beha viour must link together with ones social relationships and social structure. Granovetter (1992, 4) presents three reasons for this: 1. To the pursuit of an individual person’s economical targets links always non-economical motives (status, power, respect). 2. The economical action can’t be separated from the social context that steer and influence in an essential way to the behaviour of an individual person. 3. Economical and other institutions don’t come into existence by themselves but those are always consequence of social action. On the other hand we can keep the idea of the rational behaviour of individual as right if we see that the results of action are individual benefits. However individual benefits are mix of concrete (e.g. money) and unsubstantial (e.g. feelings) benefits. These unsubstantial benefits are difficult or even impossible to measure and research. Also Coleman (1990) states that the behaviour of an individual person can’t be understood without considering relationships between actors. Lehtimäki (1996) has researched a certain social network (and its coordination) that has been formed by key persons’ of one North-American firm. In her research it was noticed that social networks (informal organization) are interrelated to the official organisation. It was also noticed that social network have a significant role in the forming of attitudes and culture. Männistö (2002, 131) has studied in his dissertation the development and activity of a regional innovation system in the Oulu area. He states that regional innovation system has many kind of development intermediate phases between socially based interdependency and technological interdependency. His conclusion is that it is difficult to separate social and technological innovations and their appearance from each other.


3. Constructing the concept of business enabling network The focus business area in the Oulu ICT network is wireless technology that is a main technology base for focal firms (e.g. Nokia) as Figure 2 Error! Reference source not found. shows. The model of ICT cluster in the Oulu region is quite similar as the model of Finnish ICT cluster (see Ali-Yrkkö 2001). The main difference between those two models is public organizations in the Oulu region. These public organizations have been involved with the development of the ICTcluster for more than a decade. For example since 1980s city of Oulu has devoted to the development of technology research, facilities and education. City of Oulu even in 1984 proclaimed itself a technology city (City of Oulu 2003). Also other public organisations have been supporting the knowledge and technology based development. Supporting industries Contract manufacturing Software services R&D services Logistical services

Associated services Technopolis Plc

Related industries Focus business area

Wellness firms Wireless communication technology firms

Other services

Public organisations Council of Oulu Region City of Oulu Province of Oulu

VC finance

The Oulu Region Centre of Expertise

Traditional media

Employment and Economic Development Centre

Education and research services University of Oulu VTT Oulu Polytechnic

POHTO

Figure 2. The ICT cluster in the Oulu region. The number of employees of the ICT cluster in the province of Oulu has growth from the year 1995 to year 2000 from 9 300 to 15 100 employees. And it is expected to grow to 20 800 employees to the year 2012 (Pohjois-Pohjanmaan liitto 2003). By the research interviews and public documents we can form a picture of business enabling network in the Oulu area. The essential finding is that in the Oulu area there is a strong social network among the actors of the ICT-cluster. This tight social network has a significant role when the network is innovating and planning new development activities. The institutionalised operation of business enabling network is expressed in the forms of forums like Mobile Forum, NCEM


Forum, Software Forum etc. (see Technopolis Plc 2003). In the Figure 3 is presented the layers of the business enabling network. The first layer (Business enabling network) includes the network level development and wide collaboration. The second layer (Forum establishment) means the phase when network actors form different kinds of forums in order to develop certain competence areas. The third layer (Strategic collaboration/implementation) includes development/research projects that are strategic for participants. Operative collaboration means so called closed projects where individual organisations do business together. At the end there comes business results that have impact on the first layer business enabling network - business results are feedback of the network operational success.

Business results Operative collaboration / implementation layer Strategic collaboration / implementation layer Forum establishment layer Business enabling network layer

Figure 3. From business enabling network to business results. In the so called ELVA-workshop in June 2001 the participants from different companies, from educational organisations and from other organisations were asked to define the main measurable assets of the business enabling network. As a result of the workshop it was defined the assets of business enabling network that are shown in Figure 4.

5. Continuity 4. Infrastructure 3. Competence 2. Trust 1. Goals Figure 4. Business enabling network assets. There is also theoretical reasons for the assets presented in the Figure 4. Ahola (1995) defines goal as a concept in the following way: “Goals are us ually value based state of will and objectives are detectable and measurable states of affairs in certain moment in the future”. The meaning of goals is to guide planning and decisions in the organisation (see Santalainen et al. 1987, Laukkanen &


Vanhala 1994, Stoner & Freeman 1992, and Lynch 1997). The goal setting for the network is like a strategy process, where individual actors come to jointly accepted opinion about the future state in a certain moment. In the question of enterprise network the expected or predicted business opportunities and economical results will be emphasized. Trust is a basic fact of life and it can be thought of as a functional prerequisite for the possibility of society in that the only alternatives to appropriate trust are “chaos and paralysing fear” (Luhmann 1979, Lewis & Weigert 1985). According to Lewis and Weigert (1985), trust has three dimensions: cognitive, emotional and behavioural. Cognitive process discriminates among persons and institutions that are trustworthy, distrusted and unknown. Basis for cognitive trust is familiarity and previous experiences. The manifestation of trust on the cognitive level is reached when one no longer need or want any further evidence or rational reasons for their confidence in the objects of trust. Lewis and Weigert (1985) states that trust is not only individualistic phenomena but it can also be considered as collective phenomena that is based on assumption that an individual actor presumes that others also trust. The need for trust is obvious in the modern unstable economy where to gain competitive advantage has to have ability to react rapidly. In changing networks there are always actors who are familiar, unknown or something between those. In this kind of systems there are abstract systemic and individual personal level aspects, which means that the generation of networks insist that both basic systemic trust and personal level trust exists (Ruuskanen 1999). Competence is involved with practices and thus it is expressed in the operation (Ranki 1999). Competence can be divided in many ways. Suurnäkki et al. (2000) divides the competence in four categories: technical, productional, process and multicompetence. Core competence is also special competence that appear on the level of the firm and level of the network and it is bound off developed social skills. The target to develop core competence is to improve networks competitive advantage. According to Mäenpää (1997), this development is possible only by developing toward learning orga nisation / network. Pirnes (2002) states that the corner stone of network competence is to combine internal efficiency and external effectiveness. The idea of network competence is to reduce market resistance and to minimize time caps. Reducing market resistance means that firm is able to adjust to current circumstances. Network competence includes also the operational processes of the firm. Those processes should be flexible and the information flow between partners should be rapid – SCM should be visible. Also according to Tekes (2000), in the future the firm must control besides own processes at least in some level also the whole co-operative network from buying the competence to the control of whole supply-chain. Because all this should be able to manage globally the partners who are committed to targets of networks are essential. In addition the compatibility of business processes of network companies has a growing meaning. In the networks management of information, database usability and compatibility are important issues. Also the safety of firm and information has more weight when firms internationalises. In this research the infrastructure is defined as a basic structure that enables the economical action. Traditional community infrastructure (roads, electricity net etc.) has been limited mainly outside of this research scope. The infrastructure of network contains also structures of co-operation and communication channels. Co-operation structures are for example various kinds of development projects and forums. Also the normal business relations belong to this definition. Communication channels are many-sided. These co-operation structures are also communication channels because they enable actors’ incidences and thus create possibilities to communicate. Personal networks are also very important in changing information. Clusters are also one possible way to illustrate the infrastructure of network. Clusters are formed by firms that are centralised to serve large demanding customer group (Porter 1990). In the clusters firms form subcontracting networks, added value producing competencies and marketing channels. In Finland there is for example ICT-cluster


and forest-cluster. The ICT-cluster have created significant knowledge in the side of operators and equipment manufacturers (see Ali-Yrkkö 2001). The continuity of network means continuous renewing of actors and their duties, targets of network and also the infrastructure. The development process of network must be linked together with technological development and market development. Thus the business-enabling network should have an ability to recognise so-called weak signals so that it could produce new competence and facilities that are needed to fare in the future competition situations. The renewal of network is in danger to slow down because the size grows and homogeneity decreases. There are also some social reasons that delay new innovations. According to Granovetter (1973, 1367), actors who have a recognized position in the community are less willing to adopt new radical innovations. Marginal groups whose “threshold” is lower than others then adopt the radical innovations – they are willing to take more risks. The business enabling assets presented above are also manageable. This means that we must define a measurement framework for those assets. Because the many assets are quite abstract, a good measurement tool is maturity model. There is evidence that the different kinds of maturity models are shown to be useful in measuring the development level of an organisation (see Curtis 2001). In the Table 1 is presented a framework for measuring the maturity of business enabling network assets. Table 1. Maturity levels of business enabling network. Level 5 Optimizing 4 Managed 3 Established 2 Existing 1 Initial

Characterisation of the level The network is developed using the measured information. The network has common ways for guidance. Development activities are widely planned and accepted. The network is widely accepted and common investments take place. There is evidence that network exists and appropriate common discussion take place. Network activities are sporadic without common acceptance.

4. The verification of the business enabling network concept The business enabling network concept has been constructed in the ICT network environment. To ensure the relevance of the concept we have tested it in different network environment. The other testing environment is Steelpolis network. Next in this chapter we give a short presentation of Steelpolis network and later in this chapter we compare these two case networks (ICT and Steelpolis) through the business enabling network concept.

4.1 The Steelpolis network


Steelpolis started on the initiative of the Raahe sub-region at the beginning of 2001 as a strategic spearhead project for the Raahe Regional Centre Programme which was being implemented in the sub-region. The aim of operations is to strengthen and expand the metal product industry by furthering research, technology transfer and training in support of corporate competitiveness and development potential. This development will be speeded up by launching various development, research and training projects and by introducing a new operating model, the ‘Production studio’ concept. In addition to funding from industry, the sub-region and the Finnish government, EU structural funds have provided funding for coordination and project implementation. So far, 18 metals sector companies, mainly from the Raahe area, have taken part in these projects. The number of employees of the Steelpolis network is about 5000 and the turnover is about 100 M€ in the year 2002 (Iskanius 2004). The targets of the Steelpolis network are to rise the level of R&D and training activities, to increase the total turnover 30%, to improve the international competitiveness, to create 200 new jobs and half of them by starting new business activity, to make the centre of expertise a part of the regional, national and international innovation network (Raahen seutukunnan kehittämiskeskus 2003). “Our aim is to turn this area into one of three best-known and most highly valued networked production areas in Europe,” says Martti Saarela, the man behind the Steelpolis cooperation project.

4.2 The business enabling network and case networks The business enabling network assets and their reflections to the case networks and the maturity levels of individual asset are presented in the Table 2. This description concerning the ICT network is based on researches tha t are done during the ELVA-project (Pikka et al. 2001, Pikka et al. 2002, Kosonen & Pikka 2002, Kosonen et al. 2002, Halonen et al. 2003, Pikka & Kosonen 2003) and concerning the Steelpolis is based on research done during the SteelNet project (Iskanius 2004).

Trust

Goal

Table 2. The basic assets of business enabling network and the maturity levels. Model

ICT network Oulu

Steelpolis Raahe

• give reason or motive to the action • allocate action and efforts • guide planning and decisions • give a base for the measurement of performance

• first in World level in wireless technology • widely accepted core business areas • Growth agreement (City of Oulu 2003) • Forums (Technopolis Plc 2003)

• one of the three in European level in its core • heavy metal engineering specifically material and joining technologies

Maturity level: 4 Managed • high level of social capital • strong personal relationships • network values: openness, trust, competence, honesty, basic greediness, regional community spirit and co-operation, vision of shared business, innovativeness, communication and commitment Maturity level: 3 Established

Maturity level: 2 Existing • persons know each other, they know the companies’ performance, quality, and competences § possibility to create trust between the companies • SME companies compete with each other § lack of trust Maturity level: 1 Sporadic

• cognitive, emotional and behavioural • reduce complexity quickly, economically and thoroughly • simplifies actions and processes

Continuity

Infrastructure

Competence

NCSB 2004 Conference 13th Nordic Conference on Small Business Research • technical, process and multi competence • internal efficiency • external effectiveness

• community infrastructure • structures of co-operation • communication channels

• continuous renewing of actors and their duties, targets of network and infrastructure • linked together with technological and market development

• wireless technology • co-operation / networking skills • moderate project management competence • need for marketing skills

Maturity level: 4 Managed • good infrastructure • good information channels (formal & informal)

Maturity level: 4 Managed • new business opportunities • developing the testing area • fusions of local SMEs • need for new active actors Maturity level: 4 Managed

• good operational competence in the heavy engineering technologies; specially in material and joining technologies • need for networking skills, project management and marketing skills (but companies realize the need) Maturity level: 2 Existing • deep Steelpolis co-operation • OEM centralized loose network • lack of information channels Maturity level: 2-3 Existing • new business opportunities with the OEM’s outsourcing strategy • beginning co-operation of local independent SMEs • need for “engines” Maturity level: 2 Existing

5. Discussion The networking is still going to extend to new areas from traditional economical transactions. Networking has proven to be a powerful tool to develop not only individual firms but also regions and business areas. This development means that we have to broaden also the definition of network. As a conclusion of above discussion we can define business enabling network as follows: A group of actors that work intentionally together to harness long term business capabilities of the network of participants and change information form the business enabling network. Between the actors there may exist formal economical relations or the relations can be only informal i.e. social relations. The goal of the network is a fundamental issue that guides the decisions that are to be made in network. When we talk about regional business networks the resources are always rather limited. Thus the goal should be clear that limited financial and other resources could be used in the most efficient and effective way. The trust has proven to be an essential element in the efficient network. When the network is trustworthy it gains many benefits; information change is more open and rapid, operations take place rapidly, innovations occur etc. In this model trust as a phenomena also includes norms and values of the network. The competence is also a fundamental asset for successful business. Network offers many possibilities to develop competence especially for SMEs which have usually rather limited resources to development. The competence development is strongly linked together with the goal of the network. The goal should guide the development activities to maximise the benefits at the network level. The infrastructure offers the environment for the business operations. In the business enabling network –model the infrastructure includes besides the traditional community infrastructure also the information channels and supporting industries and other facilities and services. Business enabling network can have a significant role in the development of regional business infrastructure. To have the continuity the network must renew itself. This is a big challenge for networks. As we know the renewal of network is in danger


to slow down because the size grows and homogeneity decreases. There are also some social reasons that delay new innovations (see Granovetter 1973, 1367). Via these assets we can describe the maturity of certain network. As the analyze of the case networks shows (see Table 2) the business enabling network model gives a moderate picture of those networks. The model also rises up the development needs of network. The business enabling network model helps to form a holistic view of network and to define the network development state of art. It also stresses the key points that are crucial for the success of network. The business enabling network –model is adequate for the consideration of regional business networks. The reason for this is that the model stresses the meaning of social networks which are usually quite local. The model have been developed in Oulu region in northern Finland and thus the local culture have certain impact on it. It is obvious that the model have some cultural limitations. On the other hand it may give good start point to study any regional network. This is because the model takes into account also non-economical factors which may be quite important in some areas. The reliability of the data is based on assumption that right persons have been interviewed and the gained information is accurate. In the interviews we have tried to eliminate the influence of researchers but it is obvious that at least some questions reflect the researchers’ preconceptions. However this is acceptable in qualitative research (see Gummesson 1991, Hirsijärvi & Hurme 2001, 23). Also the data gained from large workshops, seminars, and public documents ensure the reliability of the research. In the future there is however needs to research the mechanisms that are useful to develop individual asset of the model i.e. how to develop trust, competence etc. at network level.

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