Networking - Gender Differences and The Association With Firm Performance

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Networking: Gender differences and the association with firm performance

John Watson
International Small Business Journal 2012 30: 536 originally published online 14 February 2011
DOI: 10.1177/0266242610384888
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Networking: Gender differences

and the association with firm
performance
International Small Business Journal

30(5) 536558
The Author(s) 2011
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DOI: 10.1177/0266242610384888
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John Watson
The University of Western Australia, Australia
Abstract
This study had two primary objectives. First, to determine whether there are any systematic
networking diffesrences between male and female SME owners. Second, to determine if there is
an association between networking and firm performance, for both male- and female-controlled
SMEs. The results of examining 2,919 male- and 181 female-controlled SMEs (with at least one
employee) over a three-year period suggest little difference in the networks accessed by male and
female SME owners after controlling for education, experience, industry, age and size. The results
also indicate that several formal and informal networks are positively associated with firm survival
but only formal networks appear to be associated with growth. In particular, accessing an external
accountant is associated with survival and growth for both male- and female-controlled SMEs.
Keywords
networking, gender, survival, growth
Introduction
Given an increasing awareness in the broader community of the significant contribution that small
and medium-sized enterprises (SMEs) make to job and wealth creation, examining the antecedent
factors associated with successful SME performance has become an important focus for policymakers and researchers (Low and MacMillan, 1988; Rosa et al., 1996). While previous research
indicates a link between SME success and various owner characteristics (such as education, experience, planning and hours dedicated to the business), only recently have researchers begun to examine the association between the owner-managers personal networks (social capital) and rates of
business formation, survival and growth (Aldrich, 1989; Cromie and Birley, 1992; Donckels and
Lambrecht, 1995; Reese and Aldrich, 1995; De Clercq and Voronov, 2009).
Social capital theory suggests that owners ability to gain access to resources not under their
control cost-effectively through networking can influence the success of their ventures (Zhao and
Aram, 1995). Florin et al. (2003) note that networking provides value to members by allowing
them access to social resources embedded within a network: that is, networking can provide the
Corresponding author:
John Watson, Department of Accounting and Finance, The University of Western Australia, 35 Stirling Highway, Crawley
WA 6009, Australia
Email: John.Watson@uwa.edu.au
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Watson
means by which SME owners can tap into needed resources external to the firm (Jarillo, 1989).
Julien observed that this form of cooperation can facilitate the achievement of economies of scale
in small firms without producing the diseconomies caused by large size (1993: 161). Similarly,
innovation theory suggests that networks (particularly those comprised of many weak ties;
Granovetter, 1973) are important in diffusing innovations and, therefore, SMEs whose owners are
heavily involved in networking should outperform SMEs whose owners make limited (or no) use
of networks (Havnes and Senneseth, 2001). In short, both social capital theory and innovation
theory suggest that networking can potentially lower a firms risk of failure (increase a firms
chances of success).
In addition, it has been suggested there might be significant differences between males and
females in terms of their network use (Hanson and Blake, 2009). For example, Cromie and Birley
(1992) argue that networks are the product of personal drive and historical experiences, and the
social structure and domestic duties of many women might result in female entrepreneurs having
(and therefore using) fewer networks than their male counterparts. Aldrich (1989) noted that these
differences in network use could have a significant impact on the rate at which women (compared
to men) start new ventures and the performance of those ventures.
However, although there has been considerable conjecture about the possible networking differences between men and women, few empirical studies exist that examine the gender differences in
networking and, more importantly, the association between networking and firm performance
(Hanson and Blake, 2009). Following Ibarras (1992) call for further empirical evidence to clarify
how mens and womens networks differ, the extent of these differences and the potential consequences of any such differences, this study sought to identify any systematic networking differences between male and female SME owners and to determine whether there is an association
between networking and firm performance (for both male and female-controlled SMEs).
It is hoped that the findings presented and discussed within this paper will assist SME advisers
and policymakers to understand better the potential differences in the use of networks by male and
female SME owners, and the association between networking and firm performance. This article
begins with a summary of the literature that was central to the development of the models examined in this study. Next, there is a discussion of the models proposed to test for gender differences
in networking, the relationship between networking and firm performance, and a description of
the methodology adopted. The results of the analysis and discussion of those results are given, and
the article concludes with the limitations of the study and suggestions for future research.
Literature review
Coleman (1988) notes that while information is important to decision-making, it is costly to obtain,
hence networks provide a means by which important information can be potentially acquired in a
cost-effective manner. Similarly, Hanson and Blake argue that networking can help SME owners
reduce transaction costs and provide access to resources (2009: 144). Therefore, networking can
enhance an SME owners social capital by providing access to information and [j]ust as physical
capital and human capital facilitate productive activity, social capital does as well (Coleman, 1988:
S101). Seibert et al. (2001) provide a useful summary and discussion of the three conceptualizations
of social capital found in the literature. First, there is the weak tie theory proposed by Granovetter
(1973). Here, the focus is on the strength of social ties and it is argued that networks comprising
strong ties (such as family and friends) are more likely to be a source of redundant information than
would be the case where networks comprise weak ties (such as acquaintances). Second, there is
Burts (1992) notion of structural holes. A structural hole is deemed to exist where two individuals
are not connected in any way. Here the focus is not on the direct ties between SME owners and
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International Small Business Journal 30(5)
individual members of their network, but rather on the relationships between the various members
in an SME owners network. An SME owner whose network comprises many structural holes (that
is, few of the other members of the network are connected) is likely to have more unique and timely
access to information (Seibert et al., 2001: 221). Third, there is social resource theory (Lin et al.,
1981), which focuses on the nature of the resources embedded within a network rather than on the
strength of ties or the existence of structural holes. While weak tie theory and structural hole theory
examine the links between the members of a network, social resource theory is concerned with the
nature of information (i.e. the social resources) held by individual members of the network.
A variety of terms can be found in the network literature to describe the important properties of
personal networks. For example, Munch et al. (1997) refer to network size, contact volume and
composition; Moore (1990) refers to network range, volume of contacts and diversity of alters;
Zhao and Aram (1995) refer to network range and intensity; and Ibarra (1992) refers to network
composition, homophily, tie strength, range, density and the distinction between formal and informal networks. The focus of this study is on the number of networks that SME owners use to access
advice, and the frequency (volume) of their use. In addition, network composition will be examined using Ibarras (1992) classification of networks as either formal or informal, with formal
networks likely to comprise more weak ties and structural holes (and therefore to be more beneficial) than informal networks. Littunen (2000) suggests that formal networks include the likes of
accountants, banks, lawyers and trade associations, while informal networks comprise groups such
as business contacts, family and personal relationships.
Turning to the possible differences between the networks of male and female SME owners,
Cromie and Birley (1992) argue that because the majority of women enter self-employment from
a domestic and/or non-managerial background, it is likely that their personal network contacts will
not be as extensive or well-developed as their male counterparts. As Munch et al. (1997) note,
housework and childrearing are extremely lonely forms of work, and this isolation results in many
women having limited network contacts compared to men. Even where women move directly from
paid employment into self-employment, it is likely that they will have fewer network contacts
because females typically occupy lower level positions within the organizations that they leave,
compared to the typical male (Cromie and Birley, 1992).
Aldrich (1989) argues that past research indicates that female entrepreneurs might not only
have fewer networks than their male counterparts, but are likely to be embedded in different types
of networks. Similarly, Munch et al. (1997) suggest that as a result of their childrearing respon
sibilities, women will typically rearrange their network composition to favour kin (family and
friends) over other forms of network contacts. Consistent with this argument, Orhan (2001) notes
that the first source of advice for male entrepreneurs is usually professional experts (such as
accountants and lawyers), and second is their spouse; whereas the first source of advice for female
entrepreneurs is their spouse, second, their friends, and third, professional experts. Similarly,
Moore (1990) found that women were more likely to include family members in their networks
than men. This suggests that male SME owners are more likely to access formal networks, while
female SME owners are more likely to access informal networks (particularly family and friends).
In summary, it would seem past research suggests that, compared to men, women are likely to
have fewer networks, less time available for networking and networks that favour family and
friends (strong ties with few structural holes) over professional advisers (weak ties with many
structural holes). This gives rise to the first four hypotheses examined in this study.
H1: Female SME owners will have a smaller number of networks than male SME owners.
H2: Female SME owners will make less frequent use of networks than male SME owners.
539
Watson
H3: Female SME owners will make less frequent use of formal networks than male SME owners.
H4: Female SME owners will make more frequent use of informal networks (particularly family and
friends) than male SME owners.
As discussed earlier, social capital theory predicts a positive association between networking and
firm performance, with formal networks (weak ties with more structural holes) likely to have a
greater impact than informal networks (strong ties with fewer structural holes). Support for this
proposition can be found in Renzulli et al. (2000: 538), who report that network heterogeneity
significantly increased the odds of starting a business (see also Burt, 2000: 357 for a detailed
review of the evidence supporting the argument that social capital is a function of brokerage
across structural holes). This gives rise to the last hypothesis examined in this study.
H5: For both female and male-owned SMEs, firm performance is positively associated with networking
with formal networks having a greater impact than informal networks.
Method
Model development
Much of the previous work on networking and firm performance has ignored important intervening
variables. For example, Hoang and Antoncic (2003) indicate that an owners age, experience and
level of education are all related to network use. Similarly, the liability of newness (adolescence)
literature (Bruderl and Schussler, 1990; Stuart and Sorenson, 2003) suggests that networking is
likely to be particularly critical for young (adolescent) firms whose owners have limited experience
in, and knowledge of, the industry in which they are operating. As Brderl and Preisendrfer (1998:
216) note, entrepreneurs endowed with lower stocks of human capital are likely to make more
effort to develop their social resources. Cooper et al. (1989) found that owners or managers of larger
ventures were more likely to access formal networks (such as professional advisers), while the owners or managers of smaller ventures were more likely to access informal sources (such as family and
friends). In terms of firm performance, Lussier and Pfeifer (2001) reported that owner-managers of
successful firms were more educated than those of unsuccessful firms, Robinson and Sexton (1994)
noted that education and experience were positively related to self-employment success, and
Becchetti and Trovato (2002) found that firm growth was significantly affected by the industry, size
and age of the firm. Therefore, in order to assess properly the relationship between networking and
firm performance, it is important to control for such potentially confounding variables. For example
if, compared to older firms, younger firms are more likely to fail (Jovanovic, 1982) and their owners
are also more likely to have fewer networks, including the age of the firm in the analysis allows the
effects of networking on firm performance to be assessed separately from the effects of firm age.
Therefore, in order to test for gender differences in networking (number and frequency), the
following networking model is proposed:
Networking = f(gender, education, experience, industry, age, size)
The dependent variable in this model will take a variety of forms, including the number of networks used
to access advice, frequency of network use, frequency of formal network use, and frequency of informal
network use. Given that the independent variables in this model include a mix of ordinal, nominal and
540
numeric data, categorical regression will be used to test the model. How each of the variables is measured
will be discussed in the following section, which describes the data available for this study.
For a variety of reasons (such as access to information, new innovations and finance) social
capital theory implies that networking should have a significant influence on the success of SMEs
(Chell and Baines, 2000; Greene et al., 2001; Kristiansen et al., 2005; Madill et al., 2004; Renzulli
et al., 2000). The belief that networking is positively associated with firm performance has been
supported by various empirical studies. For example, Florin et al. found that using social networks
could provide a venture with a durable source of competitive advantage (2003: 374), and Brderl
and Preisendrfer (1998) found that network support increased the probability of survival and
growth for new businesses. In terms of professional advisory services, Davidsson and Honig
(2003) found that being a member of a business network (such as Chambers of Commerce, Rotary
Clubs or Lions) had a significant positive effect on firm performance. Duchesneau and Gartner
(1990) found that successful firms were more likely to have used professional advice, and Larsson
et al. (2003) found that a lack of contact with outside expert advisers was an obstacle to the expansion of small businesses. Kent (1994) found that the financial performance of a group of small
pharmacy businesses was positively related to using external management advisory services.
Finally, Zhao and Aram (1995) found that managers of three high-growth firms reported a greater
range and intensity of business networking than managers of three low-growth firms.
Therefore, in order to test the potential association between networking and firm performance,
the following firm performance model is proposed:
Firm performance = f(gender, education, experience, industry, age, size, networking)
Given that the two measures of firm performance used in this study are dichotomous (as discussed
in the following section), logistic regression is used to test this second model. Firm performance
will be examined separately for the male and female-controlled SMEs to specifically examine
gender differences in the possible association between networking and firm performance.
It should be noted that, consistent with most prior empirical studies on networking, this study
focuses on the personal networks of the SME owner rather than the organizational networks of the
business (Brderl and Preisendrfer, 1998). As argued by Bratkovic et al., the personal networks of
SME owners and their organizations networks are almost synonymous since network ties exist at
the interpersonal level (2009: 487).
Data
Low and MacMillan (1988) note that, despite significant resource implications, it is important for
SME researchers to have access to large-scale longitudinal data in order to improve confidence in
research outcomes and as a basis for theoretical model building. This view was echoed by Reese
and Aldrich (1995), specifically in relation to the association between networking and firm per
formance. Therefore, a major strength of this study is its use of a large longitudinal database. The
construction of this database was funded by the Australian federal government and was designed
to provide information on the growth and performance of Australian employing businesses. The
Australian Bureau of Statistics (ABS) Business Register was used as the population frame for
the surveys. All employing businesses in the Australian economy were included in the scope of
the survey, except for businesses in the nature of:
government enterprises;
libraries;
541
Watson

museums;
parks and gardens;
private households;
employing staff;
agriculture, forestry and fishing;
electricity, gas and water supply;
communication services;
government administration and defence;
education; and
health and community services.
The ABS also employed a stratified random sampling framework in which larger businesses
and certain types of businesses (particularly manufacturing concerns) were overrepresented. In all
other respects (such as geographical location) the sample was representative of the population of
Australian SMEs at the time of the surveys.1 Data collection was through self-administered questionnaires distributed by the ABS for the periods 19945, 19956, 19967 and 19978.2 Because
the ABS can legally enforce compliance with its data requests (under the Census and Statistics
Act 1905), response rates were very high (typically in excess of 90%). A non-response normally
meant that the ABS was unable to locate the business proprietor (or the business) and, therefore,
these were treated as business closures. Some questions (such as those relating to items on the
income statement and balance sheet) were repeated in each survey, while other questions (such as
the networking question) were only asked once. For confidentiality reasons, information on all
large businesses was excluded from the dataset made available to researchers and, therefore, the
dataset examined in this study relates to Australian SMEs.
The second ABS survey (19956) contained a question relating to the frequency with which SME
owners had accessed a number of networks during the past year for advice. Specifically, the question
asked respondents to indicate how often (never, between 1 and 3 times or more than 3 times) they
had accessed advice during the past year from each of seven formal network sources (banks, business consultants, external accountants, industry associations, the Small Business Development
Corporation (SBDC) solicitors and the Australian tax office) and three informal sources (family and
friends, local businesses and others in the industry). The question did not ask respondents how often
they accessed each listed source for other networking purposes and, therefore, the data provided
might not be representative of the full extent of networking by SME owners. However, as accessing
advice is one of the major purposes of networking (Hoang and Antoncic, 2003; Kristiansen et al.,
2005), the data should provide a useful indication of how widely networks are used, and allow a
comparison between male and female-controlled SMEs. As this question was asked in the second
survey (19956), the analysis in this article is limited to the data contained in the second, third and
fourth surveys. It seems reasonable to argue that there will always be a lag between a stimulus (in
this case, some form of networking activity) and anticipated benefits (Havnes and Senneseth, 2001);
therefore, to properly assess the benefits of networking, it is necessary to examine performance over
an extended period.
There were 5027 responses to the 19956 survey. On examining the data it was found that 13
businesses had no income (sales or other income), so these were excluded from the analysis on the
assumption that they were not active businesses. As this study is interested in examining the association between networking and firm performance for male and female-controlled SMEs, a further
1914 firms had to be excluded because they did not have a single major decision-maker, or the
gender of that person was not reported. This left 3100 firms (2919 male-controlled and 181 femalecontrolled) that could be examined over the three-year period from 1 July 1995 to 30 June 1998.
542
There are three reasons for the relatively low number of female-controlled SMEs in the dataset. First,
only 18 percent of Australian businesses are run by an individual female or predominantly by females
(Australian Bureau of Statistics, 2001). Second, non-employing businesses were not included in the
database, and this further reduced the proportion of female-controlled firms in the study because a relatively greater percentage of predominantly female-run businesses do not employ staff (i.e. 70% of
predominantly female-run businesses compared to only 59% of predominantly male-run businesses do
not employ staff). Third, there was a sampling bias in favour of large businesses and manufacturing concerns, and these are sectors where females tend to be relatively underrepresented (Marlow et al. 2009).
Measurement of variables
Networking variables. Each of the 10 potential networks (seven formal and three informal) was
treated as a categorical variable: if a particular network had not been used (to access advice) during
the past year it was coded 0; where a network had been used between one and three times during
the past year, it was coded 1; and where a network had been used more than three times, it was
coded 2. Therefore, in terms of the number of network used, an SME owner could score from 0
(if no networks had been used during the past year) to 10 (if all 10 networks had been used). In
terms of the frequency of network use, an SME owner could score from 0 (if no networks had been
used during the past year) to 20 (if all 10 networks had been used more than three times). Similarly,
for formal (informal) networks, the maximum score for the number and frequency of network use
during the past year is 7 (3) and 14 (6) respectively. Given that frequency of network use is a combination of the number of networks used and the frequency of use for each individual network,
most of the analysis and tables that follow will focus on frequency of network use.
Performance variables. Brderl and Preisendrfer (1998) argue that survival is the minimum
criterion for success. However, policymakers are also interested in firm growth, as growing firms
are likely to contribute the most to a countrys economy and job creation. Delmar et al. note there
seems to be an emerging consensus that if only one indicator is to be chosen as a measure of firm
growth, the most preferred measure should be sales (2001: 194). Therefore, in this study firm
performance is measured in terms of both firm survival and sales growth (measured as the percentage increase in total income over the three-year period of this study). Surviving firms are coded 1,
while discontinued firms are coded 0. In terms of growth, this study focuses on those firms in the
top 25 percent (upper quartile, coded 1) for sales growth compared to those in the bottom 25
percent (lower quartile, coded 0). Although it is unusual to discard data, if there is a relationship
between networking and firm performance it will most likely be evident at the extreme ends of the
performance spectrum. That being the case, focusing on those firms in the tails of the performance
distribution (rather than including all firms) is more likely to find such a relationship.3
Control variables. As noted earlier, prior research indicates that potentially significant associations exist between various owner or business characteristics (such as education, experience,
industry, age of business and size of business) and both networking and firm performance, with
these characteristics also likely to vary by gender. Therefore, as far as possible, these variables
need to be controlled in order to understand and assess properly gender differences in networking
and the relationship between networking and firm performance.
In this study, education, industry and age of business were treated as categorical variables with
four categories for education (school, trade, tertiary non-business degree and tertiary business
degree), 11 for industry (mining, manufacturing, construction, wholesale trade, retail trade, accommodation, cafes and restaurants, transport and storage, finance and insurance, property and business services, cultural and recreational services, and personal and other services) and five for age
(less than 2 years, 2 to less than 5 years, 5 to less than 10 years, 10 to less than 20 years, and 20 or
543
Watson
Table 1. Number of Networks used by SME Owners
Number of
Networks
10
9
8
7
6
5
4
3
2
1
0
All SME owners

N = 3100
Male
N = 2919
Female
N = 181
Cum %
Cum %
Cum %
3%
5%
8%
12%
12%
13%
12%
11%
8%
6%
12%
3%
8%
15%
27%
39%
52%
64%
75%
82%
88%
100%
3%
5%
8%
12%
11%
13%
12%
11%
7%
6%
12%
3%
8%
16%
28%
39%
52%
64%
75%
82%
88%
100%
2%
4%
5%
8%
14%
12%
12%
9%
11%
7%
16%
2%
6%
11%
19%
34%
46%
58%
67%
77%
84%
100%
Note: Chi-square test comparing males and females not significant at 5%.
more years old). The owners years of experience and the size of the business (measured in terms
of the number of employees) were treated as continuous variables.
Results
Before examining the results of the networking and performance models developed earlier, some
key descriptive and demographic details are presented in Tables 1, 2, 3 and 4. Table 1 shows the
number of networks used during the past year (to obtain advice) by the male and female SME owners. The results show that most of the SME owners (88% of males and 84% of females) used at least
one network during the past year, with approximately 50% of all SME owners (52% of males and
46% of females) using five or more networks. This finding is consistent with Cooper et al. (1989)
and Robson and Bennett (2000), who reported that entrepreneurs sought information from a variety
of sources. However, the results also indicate no significant differences between the male and
female owners in terms of the number of networks used to access advice. This result is at odds with
H1 (and most of the literature on gender and networking), but supports Cromie and Birleys (1992)
finding that the personal networks of women are just as diverse as those of men. A separate analysis
of the subset of SMEs which had used three or fewer networks also failed to find any gender difference, and the same applied to the subset of SMEs which had used seven or more networks.
Table 2 provides a summary of the frequency with which the male and female SME owners used
a variety of individual formal and informal networks. Contrary to H2, there was no difference in
the overall frequency with which male and female owners used all networks (formal and informal).
This result, although inconsistent with the majority of the literature, again confirms Cromie and
Birleys (1992) finding that women are just as active in their networking relationships as men.
Similarly, Diaz Garcia and Carter (2009) found that male and female business owners devoted a
similar amount of time to networking. As noted by Cromie and Birley (1992), once in business,
women might well recognize the need to have appropriate network contacts and proceed to
develop them vigorously. Alternatively, compared to men, women might have less entrepreneurial
self-efficacy (Wilson et al., 2007) and might feel a stronger need to develop a range of network ties
from which they can access advice. As noted by Wilson et al.:
544
given the complex tasks involved for an individual to locate an opportunity, assemble the resources, set up
a business, and build it into a successful entity, self-efficacy or the belief in ones ability to succeed as an
entrepreneur would seem to be especially important. (2007: 390)
Although there was no difference between males and females in terms of the overall frequency of
their network use, consistent with H3, the male SME owners made significantly more use of formal
networks, particularly with banks, business consultants, industry associations and solicitors.
However, contrary to H4, the female SME owners did not make significantly more use of informal
networks, although they did make significantly more use of family and friends. These findings are
consistent with Robson et al. (2008), who reported that male Scottish business owners were
significantly more likely to seek advice from consultants and Chambers of Commerce, while
female Scottish business owners were significantly more likely to turn to friends and relatives.
Shaw et al. (2008) also reported that female owners were significantly more likely (than male
owners) to identify a family member as their prime network contact.
Interestingly, Table 2 shows the network most often used (for accessing advice) by both male and
female SME owners (with no significant difference between the two groups) is external accountants
(a formal network): 47% of males and 44% of females sought advice from an external accountant
more than three times a year. This finding is consistent with Robson and Bennett (2000) who reported
that, from the private sector, accountants are the most widely used source of advice. The result is also
consistent with Robson et al. (2008), who found that accountants were the most widely used source of
advice for both male and female Scottish business owners (with no significant difference by gender).
Similarly, both male and female SME owners frequently used others in the industry, with 27%
of males and females using this informal network more than three times a year. In summary, unlike
Birley (1985), who found that entrepreneurs relied heavily on informal networks but seldom tapped
Table 2. Frequency of Formal and Informal Network use for Male and Female SME Owners
Networks
Frequency of use (per year)

Nil
Formal
External accountant
Bank
Solicitor
Industry association
Business consultant
Tax office
SBDC
Average formal networks
Informal
Others in the industry
Family and friends
Local businesses
Average informal networks
Average all networks
>3 times
13 times
Male
Female
Male
Female
Male
Female
19%
36%
41%
57%
71%
58%
84%
52%
20%
44%
48%
75%
82%
65%
87%
60%
34%
36%
35%
23%
19%
32%
13%
27%
36%
39%
40%
15%
13%
30%
12%
26%
47%
28%
24%
20%
10%
10%
3%
20%
44%
18% **
12% **
10% **
5% **
6%
1%
13% *
44%
63%
73%
60%
55%
48%
52%
75%
58%
60%
30%
20%
17%
22%
26%
26%
23%
15%
21%
25%
27%
17%
10%
18%
20%
27%
25% **
9%
20%
16%
*, ** Chi-square test significantly different for males and females at 5% and 1% respectively.
545
Watson
into formal networks, the results presented in Table 2 suggest that Australian SME owners (male
and female) make extensive use of both formal and informal networks.
Table 3 provides key demographic details for the male and female owners (education and experience) and their firms (industry, age and size). The results indicate significant gender differences
for all variables. Table 4 provides the same demographic details (plus gender) for surviving and
non-surviving firms and for high and low-growth firms. With the exception of the owners level of
education, all variables are again significantly associated with at least one performance measure
(survival or growth). For example, the owners of firms that discontinued prior to the final year of
the study typically had fewer years of experience than the owners of firms that survived. Similarly,
younger firms were less likely to survive and more likely to be in the high-growth group. The finding that younger firms are both less likely to survive and more likely to grow is consistent with
Jovanovics argument that [f]irms learn about their efficiency as they operate in the industry. The
efficient grow and survive; the inefficient decline and fail (1982: 649). The result is also consistent
with Evans (1987) and Glancey (1998), who found that younger firms grow faster than older firms.
The findings reported in Table 4 highlight the importance of controlling for potentially confounding variables, particularly if as expected a significant relationship also exists between
Table 3. Descriptive Statistics: Gender
Male N = 2919
Education of owner
School
Trade
Non-business degree
Business degree
Experience of owner
Number of years (median)
Industry
Mining
Manufacturing
Construction
Wholesale trade
Retail trade
Accommodation, cafes and restaurants
Transport and storage
Finance and insurance
Property and business services
Cultural and recreational services
Personal and other services
Age of business
Less than 2 years old
2 years to less than 5
20 or more years old
Size of business
Number of employees (median)
**
35%
24%
20%
21%
**
13
**
1%
40%
7%
15%
10%
2%
4%
4%
14%
2%
1%
**
13%
15%
24%
27%
22%
**
10
Female N = 181
49%
14%
27%
10%
8
1%
24%
1%
10%
18%
6%
6%
2%
19%
4%
10%
22%
19%
28%
22%
10%
4
*, ** Significantly different at 5% and 1%, respectively, using the Chi-square test for categorical variables and the MannWhitney U test for continuous variables.
546
Table 4. Descriptive Statistics: Survival and Growth

Variables
Survived
Education of owner
School
Trade
Non-business degree
Business degree
Experience of owner
No. of years (median)
Industry
Mining
Manufacturing
Construction
Wholesale trade
Retail trade
Property and bus services
Personal and other services
Age of business
20 or more years old
Size of business
No. of employees (median)
Gender of owner
Male
Female
Growth
Yes
N = 2653
No
N = 447
High
N = 663
Low
N = 663
85%
88%
85%
85%
15%
12%
15%
15%
51%
51%
48%
49%
49%
49%
52%
51%
*
13
10
12
13
**
80%
86%
87%
89%
85%
77%
88%
78%
86%
79%
84%
20%
14%
13%
11%
15%
23%
12%
22%
14%
21%
16%
**
50%
46%
66%
52%
49%
36%
40%
52%
52%
52%
62%
50%
54%
34%
48%
51%
64%
60%
48%
48%
48%
38%
*
41%
90%
92%
94%
93%
59%
10%
8%
6%
7%
*
67%
51%
51%
49%
43%
33%
49%
49%
51%
57%
11
10
14%
20%
50%
48%
50%
52%
*
13
**
86%
80%
*, ** Significantly different at 5% and 1%, respectively, using the Chi-Square test for categorical variables and the MannWhitney U test for continuous variables.
these variables and an SME owners level of networking. The importance of this issue is highlighted in Table 5, which provides the results of the networking model proposed earlier. Table 5
reports the results where the dependent variable is the overall number of networks used to access
advice, overall frequency of network use, frequency of formal network use and frequency of informal network use. Consistent with the findings reported in Tables 1 and 2, there is no significant
gender difference in terms of number of networks, frequency of use and frequency of informal
network use. With respect to the frequency of formal network use, the significant gender difference
reported in Table 2 disappears when other owner and firm characteristics are controlled.
Apart from the last dependent variable (frequency of informal network use, where the adjusted
R2 is extremely low), the results reported in Table 5 are very consistent, with education, industry,
age and size all being significantly associated with networking. The results suggest a positive
547
Watson
Table 5. Modelling Network Use: Number and Frequency
Model
Standardized Coefficients
B
Number of networks used (H1)

Gender
-0.01
Education
0.06
Experience
-0.03
Industry
-0.09
Age
0.05
Size
0.28
Adj R2
0.10
Frequency of network use (H2)
Gender
-0.01
Education
0.04
Experience
-0.03
Industry
-0.06
Age
0.07
Size
0.33
Adj R2
0.14
Frequency of formal network use (H3)
Gender
-0.03
Education
0.05
Experience
-0.01
Industry
-0.08
Age
0.08
Size
0.39
Adj R2
0.19
Frequency of informal network use (H4)
Gender
0.02
Education
-0.01
Experience
-0.04
Industry
-0.09
Age
0.04
Size
0.07
Adj R2
0.01
SE
d.f.
Sig.
0.02
0.02
0.02
0.02
0.02
0.02
1
3
1
10
4
1
0.51
10.04
2.03
20.51
5.99
196.28
0.47
0.00
0.15
0.00
0.00
0.00
0.02
0.02
0.02
0.02
0.02
0.02
1
3
1
10
4
1
0.28
5.31
1.85
8.45
11.06
289.13
0.60
0.01
0.17
0.00
0.00
0.00
0.02
0.02
0.02
0.02
0.02
0.02
1
3
1
10
4
1
1.89
7.24
0.19
18.56
15.95
419.10
0.17
0.01
0.66
0.00
0.00
0.00
0.02
0.02
0.03
0.02
0.03
0.02
1
3
1
10
4
1
0.72
0.22
2.01
13.34
2.59
7.88
0.40
0.81
0.16
0.00
0.08
0.01
association between the level of education and networking, which is consistent with Shaw et al.
(2008), who noted that individuals with high levels of human capital (such as education) are also
likely to possess high levels of social capital (such as network contacts). Similarly, owners of older
and larger firms appear to be more involved in networking: a finding consistent with Robson et al.,
who report that size of the business is the main variable that explains the use of formal external
advice (2008: 305). With respect to industry, it appears (from further examination of the data, not
reported) that the manufacturing and wholesale trade sectors are associated with higher levels of
networking, while networking is less prevalent in the service sectors. Interestingly, there appears
to be no relationship between experience and networking.
The results for modelling the frequency of network use with each of the individual formal and
informal networks are not presented; however, two notable findings from the individual network
548
analysis are worth noting. First, although not associated with networking at the aggregate level,
experience was found to be negatively associated with frequency of network use for some individual formal and informal networks (business consultants, tax office, SBDC, others in the industry
and local businesses). It seems that as SME owners gain more experience they feel less inclined (i.e.
have less need) to access advice from such groups. Second, and contrary to the findings reported in
Table 2, the results of a separate analysis of the use of family and friends as a source of advice found
no gender difference, but instead it appears that owners of smaller businesses (where women are
typically overrepresented) make greater use of this source of advice. This again highlights the
importance of controlling for potentially confounding variables when looking at gender differences.
Interestingly, Robson et al. (2008) also reported that while women appeared more likely than men
to use family and friends as a source of advice (based on a bivariate analysis), this difference disappeared when owner and firm characteristics were included in a multivariate analysis.
Table 6 presents the results of modelling the relationship between network frequency and firm
survival and growth, incorporating gender and the various control variables from Table 4.
Table 6. Modelling Firm Survival and Growth against Frequency of Network use
Variables in the final models
Survival
Gender
Education
School
Trade
Non-business degree
Experience
Industry
Mining
Manufacturing
Construction
Wholesale trade
Retail trade
Age
Size
Frequency of network use
Constant
Percentage predicted correctly
Survived/discontinued/overall
Low growth/high growth/overall
Nagelkerke R2
Growth
Wald
Sig.
0.00
0.49
0.03
0.19
0.02
0.10
14.67
0.53
0.38
0.01
0.26
0.01
0.44
0.03
1.81
0.00
0.16
483.34
219.28
2.80
0.27
0.91
0.88
100.85
12.36
0.97
0.92
0.87
0.67
0.90
0.76
0.14
0.47
0.54
0.92
0.61
0.94
0.51
0.87
0.18
0.98
0.69
0.00
0.00
0.09
0.60
0.34
0.35
0.00
0.00
42.7
0.36
96
Exp(B)
Wald
1.01
0.11
0.80
0.29
0.45
0.00
0.15
19.42
0.62
2.23
0.05
0.84
1.80
3.37
2.72
0.72
0.80
0.41
16.05
15.81
3.29
4.02
2.25
0.00
5.96
0.09
0.97
1.09
0.98
1.00
1.79
0.76
1.05
1.26
1.04
0.70
1.09
0.51
1.01
0.79
0.05
0.67
0.89
1.24
1.00
1.18
6.14
Sig.
0.74
0.85
0.59
0.50
0.98
0.70
0.04
0.43
0.14
0.82
0.36
0.18
0.07
0.10
0.40
0.37
0.52
0.00
0.00
0.07
0.05
0.13
0.97
0.02
0.76
Exp(B)
1.09
1.09
1.13
1.00
1.00
0.54
0.50
1.12
0.64
0.52
0.32
0.41
0.65
0.65
0.67
2.79
1.43
1.43
1.29
1.00
1.03
0.85
88.4
63.2
0.04
48.3
55.7
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Watson
Table 7. Modelling Firm Survival and Frequency of Individual Network use for Male and Female-controlled
SMEsa
Male-controlled SMEs
Wald
Age
Formal networks
External accountant
Never
13 times
Industry association
Never
13 times
Informal networks
Others in the industry
Never
13 times
Family and friends
Never
13 times
Constant
Survived/discontinued/overall
Chi-square significance
-2 Log likelihood
Nagelkerke R2
Cox and Snell R2
Sig.
434.74
212.94
3.10
0.07
0.69
0.00
0.00
0.08
0.80
0.41
77.07
68.23
2.77
13.27
10.86
1.49
0.00
0.00
0.10
0.00
0.00
0.22
9.48
0.06
5.42
0.01
0.81
0.02
0.00
201.84
96.6
39.4
Female-controlled SMEs
Exp(B)
Wald
Sig.
Exp(B)
0.05
0.66
0.95
1.21
37.84
14.55
0.15
0.48
0.33
0.00
0.00
0.70
0.49
0.56
0.01
0.59
0.44
2.37
0.24
0.76
10.18
9.40
0.78
0.01
0.00
0.38
0.09
0.53
5.52
0.47
2.91
11.24
0.06
0.49
0.09
0.00
0.60
4.87
77.25
0.50
0.74
0.96
1.58
32.25
88.5
0.00
1716
0.36
0.20
94.5
66.7
89.0
0.00
91
0.62
0.39
a
Note that the variables reported in this table are those that were significant, and therefore in the equation as reported
by SPSS using the forward stepwise (conditional) logistic regression method.Variables that were not significant, and
therefore not in the equation, are not reported.
Consistent with H5, the results in Table 6 indicate a significant positive relationship between
frequency of network use and firm survival (and a negative relationship between age of business
and firm survival). Similarly, the results in Table 6 indicate a significant positive relationship
between frequency of network use and firm growth (with younger businesses also more likely to
achieve high growth), although the explanatory power of this model is low. Note that, consistent
with previous studies which have incorporated appropriate controls (see for example, Watson,
2003), there is no relationship between gender and firm performance. In addition, note that when
firms were classified as high or low growth based on whether their growth rate was above or
below the median result (rather than being based on the upper and lower quartiles), the findings
were qualitatively the same as those reported in Table 6; however, the explanatory power of the
model was substantially reduced.
Finally, Tables 7 and 8 present the results of modelling (separately for male and female-controlled
SMEs) the relationship between an owners use of specific formal and informal networks (together
550
with the control variables discussed previously), and both firm survival and growth, respectively.
Given the relatively large number of control variables and networks that could be used to access
advice, the forward stepwise (conditional) logistic regression method was used, adopting the SPSS
default cut-off of 5 percent for variables entering the model and 10 percent for removal. To check
the robustness of the results, the stepwise logistic regressions were run backwards, with no significant differences found. Note that when using stepwise logistic regression, SPSS highlights those
variables that are significant and in the equation. Given space limitations, those variables that are
not significant and, therefore, not in the equation are excluded from the tables and discussion.
Table 7 shows that the only network significantly related to the survival of both male and
female-controlled SMEs is external accountants (a formal network). Firms which had never
accessed advice from an external accountant during the past year were significantly less likely to
survive compared to firms that accessed advice from this source more than three times. Interestingly,
there was no advantage to accessing an external accountant more than three times a year compared
to accessing this source one to three times a year. This finding suggests that there might be some
optimal level of networking with external accountants beyond which no additional benefit is gained
(however, there is no evidence that more frequent contact does any harm). The only other formal
network that showed up in the model was industry associations, although only for male-controlled
SMEs. As was the case with external accountants, it seems that provided male SME owners access
industry associations for advice between one and three times a year, there is no additional benefit
to accessing this network more frequently.
The results with respect to the use of informal networks were also quite interesting, with the
males apparently benefiting from networking with others in the industry and the females from family and friends. However, in this case the results strongly suggest that excessive networking might
be counterproductive. For male- (female-)controlled SMEs it appears that accessing advice from
others in the industry (family and friends) between one and three times a year is significantly more
likely to be associated with firm survival than accessing advice from such networks more frequently (or not at all). This finding suggests that the association between firm survival and accessing informal networks for advice might resemble an inverted U-shaped function (Watson, 2007)
for both male and female-controlled SMEs.
In summary, the final model for predicting survival for male-controlled SMEs incorporates,
along with the age of the business, both formal (external accountants and industry associations)
and informal (others in the industry) networks. Accessing other networks (Australian tax office,
banks, business consultants, family and friends, local businesses, the SBDC and solicitors) does
not add significantly to the explanatory power of the model. Similarly, the final model for predicting survival for female-controlled SMEs incorporates, along with the age of the business, both
formal (external accountants) and informal (family and friends) networks.
Consistent with Granovetters (1973) weak tie theory and Burts (1992) notion of structural
holes (and H5), for both the male and female-controlled SMEs there was a stronger relationship
between survival and formal networks than between survival and informal networks; although
clearly both types of networks were important. This result is contrary to Brderl and Preisendrfers
(1998) finding that strong ties are more important than weak ties in explaining firm survival.
However, the results support the suggestion by Uzzi (1996) that networks consisting of a balance
of both weak and strong ties ultimately might be more valuable than networks focused on only
weak (or only strong) ties.
Table 8 provides the results of undertaking a similar analysis using sales growth (rather than
firm survival) as the dependent variable. In terms of formal networks, male-controlled high-growth
SMEs appeared to gain some advantage from accessing advice from both external accountants and
551
Watson
industry associations. However, the results again indicate with respect to external accountants that
there is an optimum level of networking beyond which no further benefit is gained and, in the case
of industry associations, excessive networking (more than three times a year) might be counterproductive. That is, there is no difference (in terms of firm growth) in accessing advice from an external accountant between one and three times a year and accessing this network more often. However,
accessing advice from an industry association between one and three times a year appears to be
significantly more beneficial than accessing this network more often (or not at all). This suggests
that for high-growth male-controlled SMEs, obtaining advice from both external accountants and
industry associations up to three times a year might be an optimal strategy; any further interaction
with these formal networks is likely to be counterproductive (particularly with respect to networking with industry associations).
Table 8. Modelling firm Growth and Frequency of Individual Network use for Male and Female-controlled
SMEsa
Age
Industry
Mining
Manufacturing
Construction
Wholesale trade
Retail trade
External accountant
Never
13 times
Industry Association
Never
13 times
Constant
High/low/overall
Chi-square significance
-2 Log likelihood
Nagelkerke R2
Male-controlled SMEs
Female-controlled SMEs
Wald
Wald
17.06
15.71
2.92
5.03
1.49
21.65
0.93
2.47
0.00
1.55
2.62
4.03
3.26
1.16
1.22
0.60
6.71
6.36
0.08
6.46
0.09
3.07
0.69
Sig.
0.00
0.00
0.09
0.03
0.22
0.02
0.33
0.12
0.97
0.21
0.11
0.05
0.07
0.28
0.27
0.44
0.04
0.01
0.78
0.04
0.76
0.08
0.41
53.2
63.0
Exp(B)
Sig.
Exp(B)
2.78
1.39
1.49
1.23
0.44
0.42
0.98
0.49
0.39
0.22
0.32
0.52
0.53
0.57
0.64
0.96
8.10
3.02
7.25
0.02
0.08
0.01
0.25
0.24
0.95
1.37
1.62
3.52
0.06
2.00
58.1
0.00
1683
0.06
62.9
71.1
67.1
0.01
92
0.15
Note that the variables reported in this table are those that were significant and, therefore, in the equation as
reported by SPSS using the forward stepwise (conditional) logistic regression method.Variables that were not significant
and, therefore, not in the equation are not reported.
552
For the female-controlled SMEs, the results presented in Table 8 indicate that using an external
accountant for advice more than three times a year is significantly more likely to be associated with
high growth compared to never using this network, or only using this network one to three times a
year. Beyond noting that using an external accountant for advice more than three times a year
appears beneficial, it is not possible (due to data limitations) to indicate what the optimum level of
contact with external accountants might be for high-growth female-controlled SMEs. These results
suggest that while male SME owners make effective use of both external accountants and industry
associations, female SME owners tend to rely more heavily on external accountants (possibly
because of problems associated with accessing industry associations which typically meet after
hours). Interestingly, no informal networks (which typically consist of stronger ties and fewer
structural holes) appear to be related to firm growth for either the male or female-controlled SMEs.
This result is consistent with Bratkovic et al.s (2009) finding that strong ties can negatively affect
firm growth.
In summary, the final model for predicting high-growth male-controlled SMEs incorporates,
along with the age and industry of the business, two formal networks (external accountants and
industry associations) but no informal networks. The final model for predicting high-growth
female-controlled SMEs incorporates only one formal network (external accountants) and no
informal networks. This finding is consistent with Granovetters (1973) weak tie theory and Burts
(1992) notion of structural holes, because both theories suggest that SME owners are likely to
derive more benefit in terms of accessing new products and markets from formal rather than informal networks. The results are also consistent with Brderl and Preisendrfers (1998) finding that
strong ties are more important to firm survival than to firm growth.
Discussion
Several interesting observations arise from the results presented in the previous section. First,
while male and female SME owners appear to use a similar number of networks, male SME owners appear to make more frequent use of formal networks (in particular banks, solicitors, industry
associations and business consultants). However, once appropriate controls are introduced only
one gender difference remains: men appear to make more use of industry associations. Further,
with the exception of the relationship between industry associations and survival, the formal networks used significantly more frequently by male (compared to female) SME owners (banks,
solicitors and business consultants) have no apparent association with firm performance. Therefore,
it would appear that female-controlled SMEs are not disadvantaged by their owners devoting fewer
resources to networking with these groups.
Second, external accountants are the only formal network source significantly related to firm
survival and growth for both male and female-controlled SMEs. Therefore, given limited time for
networking, it would seem that SME owners would be well advised to ensure they maintain regular
contact with an external accountant; this would appear to be particularly relevant for female SME
owners. While this finding is consistent with Potts, who found that successful companies rely
more heavily on accountants information and advice than do unsuccessful companies (1977: 93),
it contrasts with the results of Robson and Bennett (2000) and Cooper et al. (1994). Robson and
Bennett (2000) found no statistically significant relationship between accessing advice from
accountants and any of their measures of firm performance. Similarly, Cooper et al. (1994) found
that the use of professional advisers had no significant effect on firm performance.
Third, with respect to informal networks, there does not appear to be any significant difference
in the overall frequency with which male and female SME owners sought advice from these groups,
although female owners appear to make significantly more use of family and friends. However,
553
Watson
this apparent gender difference with respect to accessing family and friends for advice disappears
when appropriate controls are introduced. Further, while SME owners appear to make frequent use
of a variety of informal networks, none of these networks appear to be related to firm growth, and
only two appear to be related to firm survival (others in the industry for male-controlled SMEs, and
family and friends for female-controlled SMEs). The finding that no informal networks were
related to firm growth (for either the male or female-controlled SMEs) is contrary to Fischer and
Reubers (2003) observation, that owners of high-growth firms see the owners of other highgrowth firms as an invaluable source of relevant and useful advice. However, this finding supports
Nelsons (1989) argument, that owners who want to grow their firms are best advised to make more
frequent use of a limited number of networks where they can access the particular expertise (i.e.
advice) that they require. The finding also supports the argument that weak ties are more important
than strong ties for business growth and development (Granovetter, 1973).
Fourth, there were fewer networks associated with firm growth than was the case for firm survival. This, again, suggests that owners seeking rapid growth for their firms might be best advised
to access more frequent help from a smaller number of networks that have the specific expertise
required (Nelson, 1989; Zhao and Aram, 1995). This result might also help to explain the finding
by Bates that heavy use of social support networks typified the less profitable, more failure-prone
businesses (1994: 671). Therefore, it might be important for SME owners to regularly assess their
networking activities, in order to ensure that they are accessing appropriate networks without
devoting too many resources to networking relative to the benefits they receive. Through a process
of expanding and culling their networks, SME owners can identify those relationships that merit
continued development and future investment (Larson and Starr, 1993: 6).
Fifth, while there are some notable differences between the male and female-controlled SMEs
in terms of the network sources that were significant in the models developed to predict firm
performance, these differences do not appear to impact negatively the performances of femalecontrolled SMEs relative to their male counterparts. Indeed, there was no significant gender
difference in the performances (survival or growth) of the male and female-controlled SMEs in
this study. This result is consistent with a social feminist theory perspective (Fischer et al.,
1993), in that although there might be differences in the networks accessed by male and female
SME owners, both groups appear equally effective in terms of the overall economic benefits that
they derive from their networking activities. Finally, for the relatively few networks that are
significantly related to firm performance, there is some evidence to suggest that excessive networking (more than three times a year) might be counter-productive. This was particularly true
of the association between firm survival and the use of certain informal networks (others in the
industry for male-controlled SMEs and family and friends for female-controlled SMEs).
In summary, although SME owners appear to use a number of different networks, few of
these networks appear to be associated with firm performance (survival or growth). The only
networks to show up as being significantly associated with firm performance are: external
accountants (for firm survival and growth, for both male and female-controlled SMEs); industry
associations (for the survival and growth of male-controlled SMEs); others in the industry
(for the survival of male-controlled SMEs); and family and friends (for the survival of femalecontrolled SMEs).
Conclusion
The key findings from this study indicate that SME owners make extensive use of both formal and
informal networks, with females making more frequent use of family and friends, and males
554
making more frequent use of banks, solicitors, industry associations and business consultants.
However, although the types of networks used by men and women appear to differ, most differences disappear when appropriate controls are included in the analysis.
Further, despite the extensive use made by SME owners (male and female) of formal and informal networks, the majority of these networks with the exception of external accountants, industry
associations, others in the industry and family and friends do not appear to be associated with
firm performance (i.e. survival or growth). Zhao and Aram (1995) note that broad-ranging networks cost more financially, and in terms of the owners time and effort to develop and maintain;
Starr and MacMillan argue that individuals invest their time and energy in social transactions
based on their expectations of future profits and rewards(1990: 80); and Uzzi suggests that an
organizations network position, network structure, and distribution of embedded exchange relationships shape performance such that performance reaches a threshold as embeddedness in a
network increases (1996: 675). Consistent with these comments, and the notion of parsimony,
the results in this study suggest that too many resources devoted to networking might not be helpful
to SME performance. This finding provides support for Lerner et al. (1997) and Bates (1994), who
found that participation in multiple networks was negatively related to firm performance. As noted
by Low and MacMillan: Aspiring entrepreneurs are advised to evaluate and map their current
networks. Doing so is the first step toward building an effective network, an activity that is too
important to be left to chance (1988: 155).
In summary, the results from this study suggest that, given limited time for networking, SME
owners should ensure, at a minimum, that they maintain regular contact with an external accountant. This might be particularly important for female SME owners with family commitments and
limited time available for networking (particularly after hours). The results also suggest that, in
terms of firm survival, accessing advice from a mix of formal and informal networks is likely to be
preferable to only accessing either formal or informal networks. However, this does not apply to
firm growth where only formal networks appear to have a positive impact. Finally, and contrary to
the findings of some prior research, the results suggest that female-controlled SMEs are not failing
to make appropriate use of networks.
Limitations of the study

This study has a number of potential limitations that should be acknowledged. First, the SME owners were asked to indicate, within three categories, how often they accessed advice from a variety
of sources. As this question only relates to accessing advice, it might not provide a true indication
of the total networking involvement by SME owners. Further, the question did not ask respondents
to indicate the nature of their network contact: that is, a simple phone call or a more in-depth meeting. It has been argued that, due to its dynamic and fluid nature, it is difficult to fully appreciate
networking behaviour based simply on a count of the number of contacts made (Chell and Baines,
2000). Second, another potential limitation of the study (as noted in the data section) is the relatively low number of female compared to male-controlled SMEs in the sample. Third, a further
potential limitation relates to the classification of firms as being either female or male-controlled.
Where there was more than one owner of the business, this classification was based on the major
decision-maker. If the major decision-maker was male (or female), the firm was classified as a
male (or female)-controlled firm for the purposes of this study, even though the major decisionmaker might not have been a majority owner. Fourth, this study was conducted at a time when the
use of social media networks (such as Facebook and Twitter) was limited and, therefore, this is an
area that future research could usefully explore.
555
Watson
Finally, it should be noted that it is not possible to conclude causality from a study such as this; all
we can do is draw inferences based on an apparent association between networking and firm performance. For example, it might be that rapidly growing firms have a greater need to consult with external
accountants, rather than regular contact with external accountants necessarily leading to rapid growth.
This limitation is not as critical when firm survival is the dependent variable under consideration.
The reader should be cautioned against interpreting the results of this study as indicating that
networking with those groups not featured in the various models has no benefit. SME owners
might receive other benefits from networking beyond the purely economic benefits that were the
focus of this study. For example, through networking owners might draw more comfort (i.e. reassurance) from their future plans, and might gain the reassurance needed to continue in difficult
times (Birley, 1985). In addition, networks can help SME owners integrate into the social life of a
community (Donckels and Lambrecht, 1995). Further, the benefits from some networking sources
might be firm and/or situation-specific and might not show up in a large-scale study looking at
average outcomes. For example, using management consultants might be of substantial benefit in
a few very specific cases. An analysis of a large data set might mask, or make it difficult to detect,
these benefits. This is an area that future research could investigate further.
From a government policy perspective, it should be noted that while the lack of association
between accessing the SBDC and firm performance could be viewed as disappointing, the SBDCs
main objective is to help with new firm formations rather than to provide assistance to established
firms (which were the focus of this study). This is reflected in Table 2, which shows that the SBDC
was the least used network for the SMEs in this study. Therefore, the results should not be seen as
conflicting with the findings of Chrisman and McMullan (2004), who reported a positive association between survival and an outsider assistance programme.
So, while the results indicate that a variety of formal and informal networks are associated with
SME performance (particularly external accountants and, to a lesser extent, industry associations,
others in the industry and family and friends), they also indicate that SME owners need to monitor
the resources that they devote to networking in order to ensure that the benefits they receive from
networking exceed the costs. That is, the results do not support the widespread involvement of
SME owners in multiple networks. This finding appears to be consistent for male and femalecontrolled SMEs. Finally, it should be noted that the results from this study indicate that women do
not appear to be disadvantaged (relative to men) by potential differences in their networking activities, calling into question the suggestion by Aldrich (1989) that female entrepreneurs should
attempt to break into the Old Boys network whenever possible.
Notes
1. To maintain a representative sample, businesses that ceased operations were replaced with similar
businesses.
2. Copies of the questionnaires can be obtained from the ABS. Also note that the Australian tax year runs
from July 1 to June 30.
3. Note that the findings were not improved by examining firms above and below the median.
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Networking: Gender differences

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The University of Western Australia, Australia

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All SME owners

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Frequency of use (per year)

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Table 4. Descriptive Statistics: Survival and Growth

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Number of networks used (H1)

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Limitations of the study

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