Networking, trust and embeddedness amongst SMEs in the Aberdeen oil complex

Abstract

Over the last decade or so, networking has become a ‘vogue concept’ in small business research, connecting with wider debates on learning and regional development. Participation in inter-firm networks is seen to provide small firms with access to a broader pool of resources and knowledge, helping them to overcome size-related disadvantages. In particular, the role of such networks as channels for innovation and learning within regions and localities has been emphasized in the context of an apparent shift towards a knowledge-driven economy. In this paper, we provide an empirically-grounded analysis of networking, trust and embeddedness amongst small and medium-sized enterprises (SMEs) in the Aberdeen oil complex. Drawing upon survey and interview data, it is argued that connections to extra-local networks play a crucial role in providing access to wider sources of information and knowledge. At the same time, an Aberdeen location still matters to oil-related firms because of the access it offers to crucial forms of industry-specific information and expertise. In concurring with recent calls for more empirically-grounded research which seeks to ‘test’ theoretical propositions against relevant data, we suggest in conclusion that a combination of firm surveys and face-to-face interviews provides an appropriate way forward.

Keywords:

• networks
• embeddedness
• trust
• learning
• SMEs
• oil industry

Acknowledgements

The Economic and Social Research Council (ESRC) funded the research which this paper is based upon under grant number R000223025. We are grateful to the SME representatives who participated in the study for sharing their time and knowledge. Thanks also to Bengt Johannisson and two anonymous referees for useful comments on the paper.

Notes

1.	The broader research project from which the paper is derived focused on innovation, diversification and networking among this group of firms.
2.	The study adopted an inclusive approach in that firms were included in the sampling frame unless there was definite knowledge that they employed over 500 staff. The telephone survey was subsequently used as a further ‘filter’ with firms employing over 500 staff excluded from the main study.
3.	We estimate that these 192 firms represent approximately 25% of the total SME population; 69 large firms were also contacted, producing an additional 55 partial responses (see note 2).
4.	Firms were grouped into four categories according to their responses to questions on innovation and diversification. The number of firms from each of these groups interviewed was in direct proportion to their distribution across the 192 survey responses. Individual firms within these categories were then selected for interview on the basis of four variables covering key aspects of their operations and networking activities.
5.	In terms of our classification, manufacturing and business services were the two largest sectors amongst both responding firms and the wider population. The majority of firms (71.4%) responding to the survey had less than 50 employees, with 31.8% employing less than 10 staff.
6.	Scottish Enterprise is the main state development agency for lowland Scotland. It is made up of a central core and 12 Local Enterprise Companies (LECs), including Scottish Enterprise Grampian.
7.	The Department of Trade & Industry is a department of the central UK government in Whitehall, although parts of the Oil and Gas Directorate are located in Aberdeen. British Trade International is an associated body, which offers support to firms with export promotion and marketing.
8.	Of the remaining 10 firms that were interviewed, the views of 7 of them towards public agencies can be described as ‘mixed’, while 2 were classified as ‘neutral’, and there was 1 interview in which contacts with agencies were not discussed (reflecting time pressures).
9.	This term is used to refer to SE and Highlands and Islands Enterprise (HIE), the equivalent body covering the Scottish Highlands and Islands.
10.	For example, one export-orientated firm used such publications to identify companies undertaking new drilling operations abroad, allowing them to approach particular companies that are likely to have a demand for their product.
11.	Here, the precise wording of the question is important, with the employment of the phrase ‘mainly occur’ meaning that it does not necessarily follow that firms indicating that informal communication occurred mainly within Aberdeen are not linked to wider communication networks (only that Aberdeen is the more important source). Conversely, firms stating that communication takes place through wider networks may also be involved in locally-orientated forms of communication. The response merely indicates that the latter are relatively less important than the former.
12.	As such, firms with credibility based on performance and reputation will not necessarily be regarded as trustworthy and trustworthy firms may lack credibility.