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How business networks help SMEs thrive

Small and medium-sized enterprises (SMEs) are critical to the economy, providing jobs and services. However, these smaller companies often struggle with adopting new digital technologies that can make their operations more efficient and competitive. Digital technology adoption refers to integrating computer-based solutions into business processes, products/services, and business models, such as using the internet for marketing, sales, and customer service.

Digital transformation is particularly challenging for SMEs because they usually have limited financial and human resources. Despite these limitations, the study shows that SMEs can leverage their participation in business networks to overcome these hurdles. Business networks, which include formal organizations like local chambers of commerce and informal groups of business peers, provide valuable knowledge and support.

The aim of the research

The purpose of this study was to understand how SMEs can improve their digital technology adoption through business networks and specific dynamic capabilities. Dynamic capabilities refer to a company's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments. The researchers wanted to identify which capabilities—such as human resources, strategic planning, and marketing—are most effective in helping SMEs adopt digital technologies without disrupting their existing operations.

“One of the biggest challenges we faced was quantifying the impact of different dynamic capabilities across various SMEs. Each business operates differently, and measuring these effects required detailed data and sophisticated analysis,” explained Dr. Jonas Soluk, Affiliated Research Fellow with the House of Innovation.

Key research findings 

• Membership in business networks is positively related to the adoption of non-disruptive digital technologies in SMEs. 
• Marketing capabilities significantly mediate the relationship between business networks and digital technology adoption. 
• Human resources capabilities were found to negatively affect digital technology adoption, indicating a complex interplay of factors.
  What this means for the future

The findings suggest that SMEs can significantly benefit from joining business networks, which provide essential resources and support for adopting digital technologies. However, the study also highlights the need for a nuanced approach, as not all dynamic capabilities equally support technology adoption. For instance, while marketing capabilities are crucial, HR capabilities may present challenges that need to be addressed.

Further research is needed to explore the specific conditions under which different dynamic capabilities contribute to technology adoption. Understanding these nuances can help policymakers and business leaders develop targeted strategies to support SMEs in their digital transformation journeys.

“Our study shows the importance of external support structures, like business networks, in helping small businesses adopt new technologies. This not only benefits the businesses themselves but also has broader economic implications,” Dr. Jonas Soluk noted.

Meet the researchers 

• Jonas Soluk: House of Innovation, Stockholm School of Economics; Entrepreneurship and Innovation Group, WHU - Otto Beisheim School of Management; Department of Economics and Social Sciences, University of Bern 
• Carolin Decker-Lange: Brunel Business School, Brunel University London 
• Andreas Hack: Department of Economics and Social Sciences, University of Bern