Companies' formalized relationships: a study of the effectiveness of italian business Network contracts.

Companies’ relationships are becoming a crucial strategy in today’s business, especially for Small and Medium sized enterprises (SMEs) whose competitiveness has been undermined by several multi-sector crises, lack of proper resources and recently by governmental austerity policies. SMEs are looking for effective types of mutual cooperation by leveraging common practices, knowledge and innovation. Although European policy makers are really engaged in fostering SME competitiveness by suggesting inter-organisational strategies, SMEs are still facing a lack of common principles and common forms of contractual coordination. Recently, only a few countries’ regulators developed formal models to enhance collaboration. The sole examples being the Italian law on business network contracts adopted in 2009 (as per Decrees n. 5/2009 and 78/2010), and the German cluster networks. The Italian law on business network contracts points out strategic goals and mutual activities of SMEs that want to build a network. Since its adoption more than 300 formal networks involving more than 1,700 companies have been incorporated. Therefore, given the current Italian crisis, it is timely and important to assess the effectiveness of this formal inter-organisational policy and to address its real outcomes in term of effective SME competitiveness. Specifically, the aim of this study is to address if networking aims (inter-organisational aims), which have been jointly stated and signed on network contracts, have contributed to SME growth and competitiveness in the period 2009-2012. The empirical evidence is based on a sample of companies which, as at April 2012, have been involved in contractual business networks. After in-depth content analysis of the available network contracts we applied statistical multivariate analysis to understand the influence of formalised networking aims and other features on growth and competitiveness outcomes. Specifically, growth and competitiveness outcomes have been accounted as analytical variations of sales and financial ratios compared with industry peers, while the length and intensity of planned networking aims have been related to contracts’ contents and features related to innovation, scale and cost reductions, product integration, sales and marketing coordination, technology integration, and deployment of specific projects. Our preliminary findings suggest that, in the short term, specific networking aims or contract features might hinder business growth and competitiveness. Importantly, the study provides an original contribution to the current management literature by addressing the strategic role played by network formalisation. As no such type of formal practice presently exists in other European countries, the evidence can be useful to other SMEs and, moreover, to international regulators which are trying to find effective measures to overcome the current economic downturn.