Networking within the public sector: How the effect of networking and competitive advantages ...

99 Pages·2016·1.03 MB·English

by  Johannes Rydström

Bachelor Thesis
Networking within the public sector
How the effect of networking and competitive advantages facilitate growth

Authors: Sandra Janson 940725
Victor Halvardsson 910103
Supervisor: Peter Ceasar
Examiner: Dr. Pejvak Oghazi
Date: 27.05.2016
Program: International Sales and Marketing
Level: Bachelor
Course code: 2FE22E
Abstract

The purpose of the study was to describe how networking can provide competitive advantage
to facilitate growth when offering consultancy services toward the public sector. The majority
of companies are looking to expand their business due to different reasons. With todays
intense competiton on the market it is becoming increasingly important to outperform
competitors in order to maintain the current customerbase aswell as it is to gain new
businesses. Companies that work toward the public sector have special laws, directives and
regulations that have to be taken into account when conducting business. Involvement with
networks is based on different reasons, it can be due to gaining new customers, contacts and
knowledge to name a few.

The authors have performed a qualitative case study with a focus on two companies. The
empirical findings is based on information collected through interviews with these companies
and through a quanitative self-completion questionnaire with a sample group of 16
repondents. By analysing the empirical information the authors have concluded that
networking activities are important in order to prosper growth. However, there is a lack of
networking strategies among the two companies of focus which constraint the firms to get
the most out of the networks.

Keywords

Networking, Cometitive advantage, Resources, Social capital, Growth, Consultancy
services, Public sector, Public procurement.

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Acknowledgements

Firstly, we want to send our gratefulness and sincere thank you to our contact persons at
Company A and Company B. We are grateful that you helped us to conduct this study, it
would not have been possible to do this work without your participation.

Secondly, we want to send our gratitude and sincere thanks to all 16 respondents of the
questionnaire. Your response helped us moving forward with our thesis.

Thirdly, we wish to send our greatest appreciation and a sincere thank you to our supervisor,
Peter Caesar and our examiner Dr. Pejvak Oghzai. We are grateful for the help, inspiration
and guidance that you have given us throughout this whole project.

Lastly, we also want to thank Sten Janson and Catharina Halvardsson for your expertise and
support in receiving feedback and letting us pre-test our interview and questionnaire with
you.

Ljungby, May, 2016
Sandra Janson and Victor Halvardsson.

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Table of Contents
1 Business Growth _____________________________________________________ 6
1.1 Preknowledge ____________________________________________________ 7
1.1.1 Business service _______________________________________________ 7
1.1.2 Consultant industry ____________________________________________ 7
1.1.3 Public sector and procurement ___________________________________ 8
1.1.4 Networking __________________________________________________ 8
1.2 Problem Discussion ______________________________________________ 10
1.3 Purpose ________________________________________________________ 11
1.4 Research Questions ______________________________________________ 11
2 Theoretical framework / Literature Review ______________________________ 12
2.1 Ansoff’s Growth Matrix ___________________________________________ 12
2.2 Competitive Advantage ___________________________________________ 13
2.3 Networking _____________________________________________________ 15
2.4 Resources ______________________________________________________ 16
2.4.1 Resource Based View (RBV) ____________________________________ 16
2.4.2 Social Capital Theory _________________________________________ 17
2.5 Public sector ____________________________________________________ 18
3 Methodology ________________________________________________________ 20
3.1 Research Approach _______________________________________________ 20
3.1.1 Deductive approach ___________________________________________ 20
3.1.2 Qualitative approach __________________________________________ 20
3.2 Research Design _________________________________________________ 21
3.3 Data Sources ____________________________________________________ 22
3.4 Research Strategy ________________________________________________ 22
3.5 Data Collection Method ___________________________________________ 23
3.5.1 Qualitative Data Collection Method ______________________________ 23
3.5.2 Quantitative Data Collection Method _____________________________ 24
3.6 Data Collection Instruments ________________________________________ 25
3.6.1 Operationalization ____________________________________________ 27
3.6.2 Interview Guide ______________________________________________ 28
3.6.3 Pretesting of interview guide ____________________________________ 29
3.6.4 Self-Completion Questionnaire __________________________________ 29
3.6.5 Pretesting of self-completion questionnaire ________________________ 30
3.7 Data Analysis Method ____________________________________________ 30
3.8 Sample Selection ________________________________________________ 31
3.8.1 Case Study Companies ________________________________________ 31
3.8.2 Snowball sampling ____________________________________________ 32
3.9 Quality Criteria __________________________________________________ 32
3.9.1 External Validity _____________________________________________ 33
3.9.2 Face Validity ________________________________________________ 33
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3.9.3 Reliability __________________________________________________ 34
3.10 Ethical Consideration ____________________________________________ 34
4 Empirical findings ___________________________________________________ 36
4.1 Goals for growth _________________________________________________ 36
4.1.1 Company A _________________________________________________ 36
4.1.2 Company B _________________________________________________ 37
4.2 Market position and internal communication ___________________________ 37
4.2.1 Company A _________________________________________________ 37
4.2.2 Company B _________________________________________________ 39
4.3 Networking involvement and activities _______________________________ 39
4.3.1 Company A _________________________________________________ 39
4.3.2 Company B _________________________________________________ 41
4.4 Resources within the organization ___________________________________ 42
4.4.1 Company A _________________________________________________ 42
4.4.2 Company B _________________________________________________ 42
4.5 Networking within the public sector – purchasers perspective _____________ 43
4.5.1 Constraints of networking within the public sector ___________________ 43
4.5.2 Involvement and contribution of networking ________________________ 45
4.5.3 Development of public sector and procurement _____________________ 46
5 Analysis ____________________________________________________________ 49
5.1 Firm growth and future goals _______________________________________ 49
5.2 Market position and internal perspective ______________________________ 50
5.3 Networking involvement __________________________________________ 51
5.4 Managing internal and external resources _____________________________ 52
5.5 Networking within the public sector, purchasers perspective ______________ 53
5.5.1 Constraints of networking within the public sector ___________________ 53
5.5.2 Involvement and contribution of networking ________________________ 54
5.5.3 Development of public sector and procurement _____________________ 55
6 Conclusion _________________________________________________________ 57
6.1 Theoretical Implications ___________________________________________ 59
6.2 Managerial Implications ___________________________________________ 59
6.3 Limitations _____________________________________________________ 60
6.4 Future Research _________________________________________________ 60
7 List of References____________________________________________________ 62
8 Appendices __________________________________________________________ I
Appendix A - Definition of SMEs _________________________________________ I
Appendix B – Interview questions _______________________________________ II
Appendix C – Self-Completion Questionnaire _____________________________ III
Appendix D – Interview with Company A ________________________________ IV
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Appendix E – Interview with Company B _______________________________ VIII
Appendix F – Self-compleation questionnaire 1-16 ________________________ XIV

List of Tables
Table 1. Operationalization for Interview Guide ___________________________ 27
Table 2. Operationalization for Self-Completion Questionnaire ______________ 28
Table 3. Interview Guide ______________________________________________ 28
Table 4. Likert scale questions, part I of self-completion questionnaire ________ 29
Table 5. Case study companies _________________________________________ 31

List of Figures
Figure 1. Ansoff’s Growth Matrix ________________________________________ 12
Figure 2. Porter's Five Forces __________________________________________ 14
Figure 3. Constraints with networkin in the public sector ____________________ 43
Figure 4. Importance of networks _______________________________________ 45
Figure 5. Network involvement _________________________________________ 45
Figure 6. Development of networking within the public sector _______________ 46
Figure 7. Development of using consultancy services within the public sector __ 47
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1 Business Growth
This chapter will introduce the reader to the topic of business growth, also present preknowledge that is a good
tool in order to be familiar with when reading the thesis. The chapter starts with presenting business services,
continue on to the consultancy industry, then moving to the public sector and procurement, and finally, an
introduction of networking.

Businesses1 are established due to both societal- and firm perspectives. Businesses are one
essential and important way for the government to collect money through, for example
taxation. This money will provide an important portion of the amount that the government
can allocate and for this reason the society, in turn has an interest in businesses and their
growth2. A study by Tillväxtverket (2016) (The Swedish Agency for Economic and Regional
Growth) found that in 2014, 68% of the small and medium sized companies (SMEs) wanted
to achieve growth in revenue, staff or both. The reason why a person chose to start a firm
can change on an individual basis, however, the idea of starting a firm is to achieve profits.
The majority of firms have goals in order to prosper and to build value, this can be achieved
through expansion and profitability. Expansion and profitability are a measure of value
creation.

Anderson et al. (2010) state that growth has been recognized as a complex process.
“Moreover, research has emphasized that small businesses are part of complex networks of
economic actors, and are dependent on the existence of other entities” (Lewin & Regine
1999, in Wiklund et al. 2009, p. 353). There are different paths of how a business chose to
approach growth and what a firm needs to consider in order to expand. The attitude of a
manager in small firms have been found to help contribute to growth in sales, staff or both
(Weber et al., 2015; Kirkwood. 2009; Hansen & Hamilton, 2011; Mazzarol et al., 2009). Most
businesses start off as small and aims to expand or achieve profitability. According to
Kirkwood (2009) small firms can be found in having problems with gaining access to
resources. Which is a difference from larger firms that have resources more available than
the small firms. Newbert (2008) explains that access to rare or valuable resources can be a
source of competitive advantage.

1 Throughout this thesis, the terms ”business”, “company”, “organization” and ”firm” are used interchangably
2 Throughout this thesis, the terms “growth” and “expansion” are used interchangably
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To achieve growth, it is necessary that a firm has access to resources (Hessels & Parker,
2013). Having European Commission (A 2016) state that 99% of the companies in the EU
are belonging to the SME category. Statistics from Ekonomi Fakta (A 2016) shows that
99.4% of businesses located in Sweden have between one and 49 employees which means
that they are, according to European Commission (ibid), considered as micro- or small
businesses (See Appendix A). Based on those data it could be suggested that the majority of
small firms have problems with accessing the resources and knowledge needed.

1.1 Preknowledge
1.1.1 Business service
Services are a crucial part of the business world, the European Commission (D 2016) states
that over 70% of EU employment and Gross Domestic Product (GDP) comes from the
service sector. Ekonomifakta (B 2016) found that 62.6% of all companies in Sweden are
working in the service sector. Technical services, for example, engineering, architecture and
IT, legal services, employment services and facility management are all services which are
counted as business services (C European Commission, 2016); consultancy activities are a
type of professional services (Gummesson, 1979), which is a category within business
services. Considering the European competitiveness, business services are of great
significance since these are essential when it comes to manufacturing and other service
sectors (C European Commission, 2016). The market of business service has high potential
for growth in the EU and are an important role when it comes to the European economy
(ibid).

1.1.2 Consultant industry
Consultancy services are offered within the service sector, this type of service seem to have
a stable growth curve. According to Consultancy.uk (2015) the Swedish consultancy market
has grown with 5.5% from 2014 until 2015; and is forcasted to continue growing. The value
of the Swedish consulting market was just under €800 million and by that it is the largest
consultancy market of the Nordic countries (ibid). For external consultants the public sector,
retail and financial services has been the key sectors of clients from the industry perspective
(ibid).

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1.1.3 Public sector and procurement
Public procurement is an important factor that is contributing to the societal economy.
Public procurement is functioning with a purpose for contributing to sustainable
development and to establish valuable competition on the market (A Konkurrensverket,
2016); which is the base for how the The Swedish Public Procurement Act (Lagen om
Offentlig Upphandling in Swedish, from now on called LOU) is built.

Opportunities
Public procurement is the term used for the process of when public authorities are going to
purchase products or services (B European Commission, 2016). European Union (EU) have
established some ground laws which all countries within EU are obligated to follow when
operating public procurement (ibid). These laws are functioning in order to “create a level
playing field for all businesses across Europe” (ibid).

In addition to the laws all countries can establish national laws as well, however, the EU law
must be respected (B European Commission, 2016). The idea of the laws is to be able to
create a transparent, fair and open competition in public procurement across the whole
market of EU; the outcome are generated business opportunities, driving the economic
growth and to create more jobs (ibid). EU’s tools for public procurement are: improved
governance, procedure simplification and increased usage of electronic tools. These are
important tools when it comes to fight fraud and corruption as well (ibid).

Limitations
LOU is the document where the laws and regulations are described (B Konkurrensverket,
2016). The laws in LOU are based on the EU directive of public procurement, and also
include some national regulations (ibid). In Chapter 1, Article 9 the five fundamental
principles are mentioned: non-discrimination, equal treatment, transparency, proportionality
and mutual recognition. “Contracting authorities shall treat suppliers in an equal and non-
discriminatory manner and shall conduct procurements in a transparent manner.
Furthermore, the principles of mutual recognition and proportionality shall be observed in
connection with procurements” (SFS 2007:1091, p.6).

1.1.4 Networking
“A business network is an arena in which interdependent actors relate to each other in unique
ways and a business network accommodates a wide diversity of practice and structure within
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and between actors” (Ford & Mouzas, 2013, p. 440). Networking is an activity where two or
more parties share information, knowledge and resources, the idea is that all parties should
gain something from the network. The level of formality within different networks can vary
greatly depending on size, actors and industry. Neergaard (2005) claim that networking plays
an important role when it comes to growing a business.

Nahapiet and Ghoshal (1998) argue that relationships can be seen as a resource where a
company can gain organizational advantages. As mentioned in chapter 1 (Business growth),
resources are needed in order to achieve growth. Martinez and Aldrich (2011) presented that
theorists of networking literature have argued that networking will increase the chance of
resource sharing and transfer. Considering that small firms have a limited access to resources,
networking is a strategy that can be applied in order for small firms to overcome that barrier.
Premaratne (2001) argues that businesses are dependent on resources from others, and these
resources cannot be controlled by themselves.

When businesses wants to change or develop their interaction process or structure of a
relationship, to develop growth or to institute change, networking is said to be a beneficial
strategy to undertake (Anderson, Dodd & Jack, 2010; Ford & Mouzas, 2013). Waluszewski
(2006) state that the majority of interpretations of network emphasize on that interaction
and relationships are the most important characteristics in today's businesses. As widely
known, any relationship requires that the parties involved have trust in each other;
networking has the possibility to lead parties to a higher level of trust. Trust becomes more
important when it comes to the purchasing of services. When purchasing a product the buyer
has the possibility to inspect the product in advance of the actual purchase, which is not
possible to do with a service.

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