Impact Of Social Networking In Small Enterprises

Impact Of Social Networking In Small Enterprises Methodology Example

Small and medium-sized enterprises are considered as an integral part of the economy of a country. UK is comprised of 2.7 million firms out of which approximately 99.8% are comprised of less than 250 employees (DTI, 2000). The SMEs comprising of up to 249 employees account for 50% of all economic activity and 56% of private sector jobs. SMEs are regarded as an important source of innovation and this study is focussed to investigate the SMEs of the North-west of England. It is quite interesting to note that the North-west region is uniquely diversified as the region has around three-quarters to four-fifths of its land mass classified as rural and woodland with one that current data indicates is the UK’s leading manufacturing location (NWDA, 2000). The region is rich in history of successful industrial and commercial development. The exhilarating entrepreneurial drive of the region suggests electrifying prospects for SMEs in future. SMEs having long term growth prospects have the greatest potential to strengthen the economy of a country and are also considered as major economic players and a potent source of national, regional and local economic growth (Taylor and Murphy 2004). Systemic activities like technological advancement, innovation and increased level of knowledge tends to engross diverse actors throughout the global financial system. There has been a considerable body of evidence indicating relentless differences in the innovative behaviours of companies located in different countries or regions of the world, signifying that the social or institutional context of the firms within which they function; greatly influence their aptitude to absorb, generate, and apply knowledge (Curran and Blackburn, 2001). Social networking technology is considered as a critical factor in business development and the SMEs with a capacity to demonstrate higher social networking gain competitive advantage. It is very unfortunate that the in many SMEs especially those aspiring to grow, the potential to adopt social networking technology and knowledge exploitation practices is frequently underdeveloped or has been completely disregarded. For the purpose of establishing innovative business techniques and rapid distribution of information the attention has been diverted from traditional business practice to the effectiveness of social networking systems that not only serves the basic need of SMEs but also tends to offer gelling between the business owners, managers and the consumers.


Regarded as one of the major European region, the North-west of England is comprised of approximately seven million people having a population density at 480 persons per sq km which is nearly twice the UK average of 244 (DTI, 2000). At the beginning of the year 2008 there were 454,000 private sector enterprises in the North West of England which makes approximately 9.5 per cent of the UK in total. An increase of 9,000 private sector enterprises has been observed that accounts for approximately 2.1 per cent, since the beginning of year 2007 (NWDA, 2000). In accordance with the figures at the start of year 2008, about 9.3 per cent of the UK total population were employed in the private sector in the North West of England which makes approximately 2,162,000 of the people employed in this region with an increase of 53,000 people making 2.5 per cent of the total since the initiation of the year 2007 (NWDA, 2000). The SMEs of the North-west region employed 1,403,000 people which are equivalent to 64.9 per cent of the total region (NWDA, 2000). Approximately nine percent out of all businesses in the North West of England are in the Transport, Storage and Communications sectors which are six percent higher than the proportion in the UK as a whole. Moreover, approximately nine per cent of all businesses in the North-west region are in the other sectors that include community, social and personal service activities, in comparison with approximately eleven per cent of all businesses in the UK as a whole.


This research aims to enhance the understanding of SMEs acquiring social networking technologies and utilise them as a basis for improved business competitiveness. The theme is based on the SMEs of Northwest of England, illustrating the impacts of social networking implicated in communal, historical and economic contexts of the region (Grandon and Pearson, 2004). With continuously evolving global trends a need has been develop for the transition of business practices in order to achieve a knowledge-based economy by stimulating innovation and improved access to advanced research and development practices and social networking technologies. The proposed paper aims to study the relative impact of social networking technology encompassing the SMEs in the North-west region. The investigation is based on how the innovative use of business networking and advanced e-commerce solutions encourage and support the SMEs of North-west region, to play a leading role in the advancement of a cutting edge trade society (KP Associates, 2000). At the same time the research expounds on addressing the related competitive challenges to SMEs in the North-west region of England, in absorbing and developing new-fangled social networking culture. The study design is fabricated to expound on the impacts pertaining to SMEs benefiting from the exploitation of science and technology in order to develop closer links with new markets and consumers of the North-west region. The theme of the overall exploration is to develop an understanding of how social networking technologies enable SMEs to broaden and deepen their consumer acquaintance and leverage business culture of excellence.


Societies are built around relationships and by introducing the concepts of social networking system within SMEs, a better understanding of business dynamics can be achieved. Social networks are essential not only for explaining the logic of political and institutional arrangements between firms and their environment, but also for understanding the patterns of development of new productive structures and innovative activities (De, 2000). In recent times, the organisations of contemporary business world are embracing blogs and social networking websites not just to gain competitive advantage but to foster innovation and establish a dialogue directly with their customers and relative stakeholders. In the growth of UK economy the SME sector is considered as an engine and a vital component having approximately 3.7 million SMEs which are producing 40% of the UK’s GDP and the picture is equally understood by the UK government (Oftel, 2002). For the purpose of development and stimulation of the SME sector, various policy initiatives have been fabricated and the government has focussed on SMEs in particular recognizing it as a growth opportunity for the technological advancement. Both the former and recent government policies also reflect the same concerns. In order to benchmark the SMEs of UK against international standards numerous targets have been set. Furthermore, it’s interesting to note that the target of 1.5 million SMEs to embrace social networking technologies by 2002 has already been achieved (NWDA, 2000). Conversely, there are few concerns remaining as highlighted in relevant government statistics that in terms of international standards the UK SME sector can be rated as average when it comes to address the level of connectivity. Moreover, regional differences can be observed in SME sector to online access endure and despite the perceived advantages, a very small proportion of SMEs have adopted technological advancements like broadband, reflecting wider issues over roll-out to the UK as a whole; and sadly enough a very small proportion of SMEs trades online. In accordance with a report by (Oftel, 2002) it has been observed that 63% of all UK SMEs are associated with internet connectivity out of which 94% are medium businesses and 60% are small businesses. Furthermore, the survey also constituted that the number of small businesses expecting not to connect to the internet has fallen. In 2001 some 540,000 UK SMEs including micro businesses of less than 10 employees were trading online, which is an increase of 20% from the 2000 figure of 450,000 (Oftel, 2002).


With the passage of time e-connectivity and social networking practices are becoming obligatory for the success of businesses and followed by the observations it can be suggested that the adoption and implementation of the internet connectivity, e-commerce practices and social networking technologies by SMEs offer a great potential for creating new markets, new organisational forms, and new ways of working in the knowledge-driven economy. SMEs are seen as motors of economic growth with their loose organisational structures and often fuzzily defined organisational roles and relationships perceived as fruitful milieus for innovative activities (De, 2000). All social networks have significance for innovative activities and the extent and the nature of overlap between social networks is especially important bearing heavily on the extent to which cooperation can be produced over large sectors of the economy. All business groups are based on social linkages whether it’s cultural similarity, informal link or an everyday contact. The need for social networking arises in situations where economic advantage can be achieved for the group members of a business. To understand the ability of firms to respond to the fast-changing environments of the business world the approach of social networking technologies within regional business development is important which can provide suitable insights into the structure and dynamics of local economies. Although the bulk of the effort in innovation is to be done by the firms themselves, the difference between national and regional patterns of technological development highlights the importance of external economic and non-economic factors that encourage creative interactions between all parts of the society, leading the economy into virtuous circle of technological development (Porter and Stern, 2001).


The social networking technologies encourage entrepreneurship and experimentation and help SMEs compete intensely while at the same time gain knowledge of each other about changing market trends and technologies through informal communications and collaborative practices. UK government encourages SMEs to adopt the social networking technologies with a target of tripling the number of SMEs wired up from around 350,000 at the end of 1997 to over one million by 2002 (DTI, 2000). This constitutes that the UK government perceives SMEs as a medium for entrepreneurial and innovative activities and considers that the adoption of the e-commerce practices and implementation of technological environment SMEs can be fundamentally transformed in terms of business dealings and their relationship with customers, suppliers, competitors and with other organisational members. For SMEs to maintain stability and self-reliance, the practices of secrecy and loyal relations between the firm and their customers, suppliers, and competitors is of exceedingly high substance. Social networking provides a means of efficient business practices with a possibility to respond faster and gather needs of consumer, safely disseminate information and reallocate different types of resources promptly. A socio-technical system formed by the integration of technology within the business organisations which constitutes complex relationships of institutions, artefact and knowledge which tends to interlink the human and the non-human elements.


A community can be more willing to adopt a certain technology when it can offer some beneficial package through which an existing human need can be fulfilled. The social networking technology is capable to offer enhancements to communication that improves networking and also sufficient enough to make needed knowledge resources more readily accessible; and this is what makes it striking for the SME sector. It is also interesting to note that those that have been most successful in fulfilling specific market needs, or niches, also encounter competing technology vendors which can also be the case in any other situation.

A peripheral vision is offered to the providers by the successful community building devices like Facebook, twitter and MySpace and these possess a vital niche within the lives of their consumers and the communities that they tend to form. Astoundingly, the social networks which are the main selling product offered by these community building devices, is mostly formed outside of the e-environment before an electronic communication takes place (Robertson et al., 2007). Interestingly these social networking platforms are not just for the purpose of fun instead they offer a means for advertising potential business practices. The social networking websites were formerly utilised by young however, the technologies that link individuals are no longer limited to the younger age groups and their significance has been realised hence, the models are now designed to serve as an interactive tool which can help diffusion into target markets. In addition to these social websites an alternative niche is provided by a business focussed solution termed as Linkedin that offers the professionals and businessmen from diversified backgrounds with an ability to form business networks and maintain searchable contact information that can be further utilized for trade purposes. These highly successful technologies provide elementary communication and collaboration environments via text and sometimes via audio channels within specified limitations. Much better and enhanced communication and collaborative environments are provided by certain recent innovations as for example, Skype, which is not web based but offers a range of telecommunication devices and by utilizing the IP connectivity it offers call and video conferencing options that can be very useful for swift business activities. All these social networking websites within their own capacities offer a platform for SMEs to further enhance and develop their businesses with an unlimited access and exposure of consumers globally.


E-collaboration as change-orientated device that provides firms a heightened ability to find, use and apply knowledge to either raise competitiveness or improve operational efficiency (Fink, 2007). With the continuously evolving recent market trends the availability of 24/7 portal services has become easier to SMEs of all types. However, the potential and initial market for this type of technology is relatively less within the regional parts as North-west of England as the innovator class of owners or managers or some early adopters of technology might not be readily available in this market. The policies and the infrastructure to deliver support to SMEs are expensive while small business owners themselves appear resolutely unwilling to accept their alleged benefits’ (Curran, 2000). There are certain limitations that keep holding the SME owners to adopt e-commerce practices or social networking technologies. There are hurdles subsisting that tend to limit technology adoption within enterprises, particularly SMEs. For instance, there are many smaller enterprises which find technologies too complex or expensive to install (Lockett and Brown, 2004). Furthermore, computer based technology is less likely to be espoused by those entrepreneurs having reduced knowledge and poor perception about the advanced technologies used in businesses. In addition to this the size and resources also tends to put a drastic impact on the owners perception to adopt such technological advancements which might prove to be expensive or out of budget. For an organization to embrace technological innovations the size and budget of the organization are considered as the key factors. In accordance with another study it has been observed that business size, previously the best indicator of technology adoption, was not significantly related to technological innovations adoption (Goode and Stevens, 2000). It is more likely that larger firms are much more willing to adopt social networking practices as compared to smaller firms as larger firms have a greater need, resources, skills and experience and the ability to survive failures than smaller firms (Levenburg et al., 2006). Conversely, there are many business owners that have embraced the advanced business techniques and modern technologies by recognizing the benefits associated with them. Followed by investigating the positive impacts on the businesses gained by the adopters of the social networking technologies it has been observed that they succeeded to raise profitability of their businesses. Furthermore, enhanced communication practices serve as relative benefit of an organization over the competitor firms in the market place as effectively communicating with customers eventually leads to produce increased revenue streams and build strong relations. The SMEs that tends to adopt the social networking techniques much earlier than their competitors, benefits from the cost reductions due to geographic distances as after integrating the advanced communication technologies an improvement in retrieval and exchange of information that can be achieved much faster. Operational costs may be further reduced via a reduction in travel time to meetings leading to increased worker productivity but also reducing the financial burden associated with the travel to and from meetings. The reduction in cost would result in more efficient operational activity and increased profitability over those firms not engaging with the technology. During the mid-1990s internet services were very basic and few firms used this technology to operate business activity. During 2001, SME adoption of internet services was less than 50%, 7 years later this number has risen to over 90% Oftel (2002). SMEs are considered as slow adopters of the contemporary social networking technologies by the traditional business setup however, insisting demands for technological advancements and fierce competition is driving the overall SME sector to ponder second thoughts over the espousal of newer and better technology.


Research from the European Commission (2002) constitutes that when it comes to introduce technological advancements especially social networking technologies to SMEs, they face certain problems as statistics suggests that the smaller the enterprise the less likely it is to familiarise itself with social networking techniques. This does not necessarily means that by the enlargement of size or by integrating specific SME policies will solve these problems. Reliable, stable and open business environment is what SMEs benefit from and therefore policies encouraging this along with liberalisation of ecommerce practices and the interoperability of internet solutions, and easier access to finance through horizontal policy initiatives are likely to succeed in tandem with SME-specific initiatives (Goode and Stevens, 2000). The competitive or environmental pressure that compels enterprises to adopt social networking technologies tends to result in sustained and improved profitability of an organization. In accordance with another study by (Robertson, Lockett, Brown & Crouchley, 2007) it can be observed that among SMEs that poor perception towards computer based technologies limits adoption as entrepreneurs have limited finance or support to engage with state of the art web based technologies that would enhance communication. When larger companies adopt the social networking technologies it is interesting to note that positive network external effects can be achieved which can also be thought of as word of mouth effects (Frambach & Schillewaert, 2002). The significance of words spread within general public is highly recognized within the business world and SMEs do realise that the adoption of techniques which can broaden the horizon of their trade can be extremely beneficial. Social networking technologies offer the same by providing the business owners with all ingredients to attain better chances of success. As for example the network externality effects were particularly important in the success of fixed line and mobile phone adoption as an additional subscriber leads to an increase in the utility of all existing and future subscribers thereby augmenting the eventual success of the technology (Fildes, 2002).

The existing relationships between the SMEs and the consumer markets also tend to hinder in adoption of the innovative technologies. There is a specific load or pressure within everyday business practice and the knowledge that is required to carry out routine activities through technological means is absent in most of the business environment unwilling to become a part of modern trade practices. The inability to deal with the recent technological environment tends to compromise the credibility with business partners and leaves sensitivity amongst the workforce that the business environment is less dynamic. On the other hand, in some instances there are numerous of consumers without internet capabilities or those who do not feel secure to utilize advance e-business techniques; also see their credibility compromised in terms of other SMEs. Furthermore, industry, market scope, competitive pressure and external technological support are considered to be factors that influence SMEs’ willingness to adopt social networking technologies. The adoption of advanced technologies is greatly influenced and also dependent upon the industry in which the SME operates (Levenburg et al. 2006, Raymond 2001). Processing of information is carried out by the service industry and therefore, much of their functions rely on the information systems. Retail industries are increasingly reliant upon the point-of-sale systems for the transfer of goods. Manufacturing industry rely more on technological systems. It has been observed by a study that the ecommerce practices vary not only across sectors i.e. across Standard Industrial Classification codes but also within constituent sub-sectors (Fallon and Moran, 2000).


For an innovation or technological advancement to integrate within a business it is significant to identify the relative compatibility between them. Compatibility of an innovation with a business is defined as the degree to which an innovation is perceived as consistent with the existing values, past experiences, and needs of potential adopters (Rogers, 2003). In order to gain benefits from a technological system there is need to develop a better understanding and familiarity with it. It has been found that compatibility is an important determinant of adopting the social networking techniques (Premkumar, 2003). The small businesses need to illuminate the compatibility its infrastructure, values and beliefs with all the environmental and functional changes prior to adoption of new technologies. The social networking technologies are the natal component of contemporary business practices and mostly offer positive results but the impacts of integrating new technology within a business can be tricky and hence it becomes imperative to test the relative compatibility of the applied technology in context of the organisational, environmental, operational and functional setting of the business. In addition to test the compatibility it is also essential to check the relative complexity before the implementation of any technology within the business structure. Complexity of a technology can be defined as the obscurity in understanding and utilization of that particular system to be integrated within a business network. The complexity of the technology creates greater uncertainty for successful implementation and therefore increases the risk in the adoption decision (Premkumar, 2003) and hence this factor can be considered to put negative impact in the adoption of technological innovations. It has also been found to be an important determinant of technological innovations adoption in the context of small business (Lertwongsatien and Wongpinunwatana, 2003). The ability to be trailed is yet another significant factor which can be defined as the degree to which an innovation may be followed to be positively related to e-commerce adoption. The advanced innovations and social networking technologies are currently new to the SME market (Kendall et al., 2001) and hence its following is expected to be exceptionally relevant. The social networking technologies and advanced communication systems incorporated within the SME sectors are considered to be advantageous for in both business and consumer perspective. In the context of small business, the degree to which the results of an innovation or technology is observed by others, is another attribute of technological characteristics that is not perceived to be positively related to the adoption of social networking technology. All these factors when studied in context of a particular region i.e., North-west England, tend to play an integral role in identifying the impacts of social networking technologies when applied to the SMEs.


The research methodology incorporates exhaustive literature review, interviews and observations based on studying SMEs in the Northwest of England. The study expounds on observing a radical intent to utilize the development of innovative networking technologies as part of a SME processes however, certain limitations make it difficult for the owner managers (Brock, 2000). The contemporary business practices and market trends has established that by implicitly adopting social networking techniques wider SME transformations can be obtained. To obtain a better picture the study needs to obtain a theoretical understanding of how economic costs and lack of technical knowledge become two of the most important factors that hinder in growth of social networking technologies in small organisations. The research methodology involves observation of theoretical data, data collected through interviews and analysis of market activities, validated research procedures and investigative strategies upon the area under discussion. The method used in this research is to evaluate various technological, organisational, and environmental aspects that facilitate or inhibit adoption or diffusion of social networking technologies and thereby identifying the relative impacts on the SMEs.


The core element of this dissertation is to determine the upshots of implementing social networking technologies within the SMEs and studying in detail how it affected them with a particular emphasis on the SMEs of the North-west region. The objective is to assess the overall business activities and growth pattern of the SMEs to find out the impact of the innovative networking technology and also elicit the views of significant participants of the SME sector. The five main objectives of this study are;

To establish how social networking technologies are acquired, absorbed and utilized within SMEs to gain competitive advantage;

To study the relative impacts of social networking technologies when applied to the SMEs particularly within the North-west of England;

To investigate enablers and constraints that influence social networking in SMEs within a regional context depending on the regional, social and economic factors;

To adopt a methodology, influenced by data collected from the active respondents and theoretical groundings for investigating social networking practices in SMEs;

To utilize a research design incorporating users of social networking technology such as the SMEs owners, managers and administrators, to gather valuable views and comments about the relevant consequences.


The recruitment and designing of sample required the random selection of the study population that is acquired from the 500 SMEs of the North-west region. The additional information about the SMEs was supplemented by the National Statistic website. The sample was designed to develop and benchmark the present scale of adoption of social networking technologies among the allocated sample of SMEs in the Northwest of England. The design of sample was tailored to measure the consequences of adopting e-collaborative technologies within the SMEs in the particular region. A brief semi-structured questionnaire was distributed and the interviews were tape recorded and transcribed verbatim for the assessment of relative impacts of social networking technologies on the SMEs. A back up staff for taking notes in writing and recording was made available to the interviewers, where applicable. The interviews were conducted on the basis of discretion; hence the sample SMEs, market participants and the respondents are kept unidentified.

Initially 500 SMEs from Northwest of England were engaged in the study which operate in a number of sectors that include services sector comprised of media culture and retail, client-based sector that includes bespoke advice and formulaic advice and manufacturing sector encompassing the high-tech and low-tech firms. The firms were further categorized in accordance with their level of maturity i.e. depending on their status of commencement, stability and innovation. At the outset, the interviews were conducted in each firm and the respondents were selected from senior management team. The interviews were based on open-ended questions with in-depth interrogation in which the flexibility was maintained on the focus, follow-ups and probes clarifications to pursue the emerging themes (Alvesson and Sköldberg, 2000). The duration of interviews lasted between one and one-and-a-half hour’s session. The research has been conducted in three phases; each phase is discussed in detail as under:

3.2.1 PHASE I

For understanding the existing research exhaustive literature and systematic reviews were carried out. Review was based on investigating how social networking has been adopted and integrated in small firm and thereby identifying their relative impacts. The exhaustive literature study also examined the association between the use of social networking technology and small firm growth. These reviews helped to identify major themes within previous research and the details contained within the papers highlighted concerns with social issues, absorptive capacity and policy support that enable the transfer and development of social networking technologies within business practices. Gaps include sector bias, lack of research on the situated nature of technologies, factors that mediate the adoption of new systems of organizing, and how relational competence and social skills influence firm growth (Alvesson and Sköldberg, 2000). An in-depth study was carried out of relevant literature present in books, newspapers, articles and renowned academic journals.

3.2.2 PHASE II

The research survey was administered during the period in between February 2010 and March 2010 and the investigation was focussed on SMEs from the north of England, specifically the North-west region. Dunn and Bradstreet database were used for the selection of SMEs via the database to obtain useful data of UK based SMEs. A smaller canvassing team of 5 interviewers were trained to administer the telephonic survey and approximately 500 SMEs were contacted via telephone. The inclusion criteria as set in accordance with the research methodology


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