The growth paths of small business in a competitive global economy : the network perspective in the context of the clothing manufacturing industry in Durban.

Abstract

One of the most enigmatic phenomena to explain in social and business sciences is the functioning and economic growth of organisations and national economies. This is testified by the several theoretical frameworks, which, with varying degrees of success, attempt to unravel the growth puzzle. This dissertation focuses on the network theory, with particular reference to small business growth in the contemporary competitive global economy. The primary focus is the isolation thesis which maintains that although small business growth is constrained by a number of factors, isolation rather than size is the key problem and that the answer lies in networking and clustering. Hypothesising that fraternal network is the most significant type of network for small business growth, the dissertation investigates the structural properties of networks in relation to the performance of the small clothing manufacturing enterprises (SCMEs) in the Durban Metropolitan Area (DMA). Combining qualitative and quantitative research approaches, descriptive network data and hermeneutic analyses, the dissertation argues that the growth and development of small business may be understood by the framework of relationships between the scopes of fraternal and factor networks, the medium of communication and the human factor. The dissertation empirically confirms the isolation thesis and the widely documented view that networks have positive impact on business performance although they could also be detrimental. The study finds that although clustering may be necessary it is certainly not a sufficient condition for inter-firm co-operation and joint action to a level that promotes individual firm performance and collective efficiency. The study argues that the widely documented poor performance of the clothing industry in the Durban Metropolis is, to a large extent, due to inadequate network relationships. The observed minimal network relationships among the sampled firms is largely the result of human factor decay manifesting as mistrust, selfishness, dishonesty, greed etc. Conceding that human factor decay is largely a consequence of the process of modernisation or the transition from Germeinschaft (Community) to Gesellschaft (Association), the dissertation maintains that human factor decay among the sampled SCMEs is exacerbated by the apartheid system, which undermined social and economic relationships. Of the three types of networks identified in the literature - factor, fraternal and communication networks - the study confirms the latter as the most significant to SCMEs in Durban. The study also confirms the view that the use of electronic networks or new information and communication technologies (ICTs) contributes significantly to economic performance. Although reverse causality is a possibility, the dissertation concludes that small firms are likely to be better off through increased electronic connectivity, as compared to face-to-face (FTF) interactions. By this finding and conclusion the study, on one hand, fails to confirm the hypothesis that fraternal networks are the most significant types of networks among the SCMEs in Durban. On the other hand, it confirms Castells' theory of a universal trend of social change towards a network society, a global informational economy and a culture of 'real virtuality'. The impact of ICTs use on the effectiveness and efficiency of networks, however, depends on the scope of networks but more importantly, on the human factor (HF) i.e., appropriate human personality traits, e.g., information management skills and knowledge, trust, honesty, reciprocity, loyalty and creativity. In the concluding chapter, the dissertation explores the policy implications of the findings and offers recommendations that could inform trade and industrial policy for small business growth and development through the network perspective.