Networking Boosts Corporate Growth

eBusiness statistics

Helsinki, 28 January, 2005 — Networking Boosts Corporate Growth

Corporate networking boosts growth in turnover and the number of personnel states Statistics Finland. Network operations are more vigorous than the business activities of companies working on their own resources, because the basic preconditions for the operations and demand are already in existence.

Corporate networking boosts growth in turnover and the number of personnel states Statistics Finland. Network operations are more vigorous than the business activities of companies working on their own resources, because the basic preconditions for the operations and demand are already in existence.

Companies use networking mainly with the aim of expanding their business operations. Networks offer flexibility, more comprehensive service packages and the innovative spirit. The biggest benefits in networking are associated with faster growth. The depth of networking also makes an impact; the greater the degree of networking by a company, the faster it grows.

Information about the extent and effects of networking appear in a report entitled Yritysten liiketoimintasuhteet (Companies' business relationships) published in September by Statistics Finland and the Confederation of Finnish Industries (EK). A questionnaire was sent to almost 2,700 companies, a third of which replied.

Partnership on the Increase

Most Finnish companies have stable inter-company business relationships: 86 per cent in industry, 79 per cent in services and 75 per cent in construction. The biggest proportion of the relationships is related to companies' core business activities, and the smallest to research and product development.

Cooperation in networked business operations is usually extensive and stable. Partnership agreements have increased the most, by a long way. Correspondingly, the relative proportion of annual agreements and non-recurring agreements is on the decline.

Today 40 per cent of the agreements in industry are partnership agreements, compared with only 18 per cent ten years ago. The proportion of partnership agreements in services is 40 per cent.

The research figures show that networking in Finland at least is more general than, for example, in Sweden and Denmark, with 73 per cent of Finnish companies having permanent opportunities for cooperation compared with 57 per cent in Sweden and 20 per cent in Denmark.

Effect on Profitability Unclear

Although a network promotes growth, the effect on profitability is unclear. According to the report, this may result from networked companies growing more quickly than companies that are not networked or weakly networked, and rapid growth weakens the relative profitability.

"Rapid growth seems to take place at the expense of profitability. Organizational problems with networks slow down the realization of benefits," says Pekka Tsupari, a leading advisor at EK.

The research workers were also caused a headache by the phenomenon of networked subcontractors seeming to grow more slowly than those operating outside networks. Further surveys should look into whether networking slows down the ability and scope to react to changes in the environment.

More information
pekka.tsupari@ek.fi