Networking,ResourceAcquisition,andthe PerformanceofSmallandMedium-Sized Enterprises: An Empirical Study ofThreeMajorCitiesinChina BaoshanGe Robert D. Hisrich BaobaoDong Previously, resource-based view (rbv ) research has focused on the characteristicsofresources,payinglessattentiontotherelationshipbe- tweenresourceacquisitionandtheacquisitionmethod.Inaddition,en- trepreneurshipresearch has focused a lot on the firm’s entrepreneurial networktoexplainperformance.Thisnetworkiscriticalnotonlytore- source acquisition but also to overall firm performance. The results of a study of small and medium-sizedfirms in three major Chinese cities supportthesenotions.Theresultsdifferwhendividingthesampleinto twogroups(youngvs.old). Key Words: resourceacquisition,networking,performance,sme s, entrepreneurship jel Classification:m20 ExecutiveSummary Resource-based view (rbv ) research argues that firms with valuable, rare, non-substitutable, and inimitable resources have the potential of achievinguniquecompetitiveadvantages,thuswinningsuperiorperfor- mance(Barney1991 ;1995 ;Wernerfelt1995 ).However,todatenotenough attention hasbeengiventothepositiveeffectsthatastrong,diversenet- workcanhaveonresourceacquisition methodsemployedbyafirmand the firm’s resulting performance. This paper provides insights into our DrBaoshanGeisaProfessorintheCenterforEntrepreneurship, JilinUniversity,China. DrRobertD.HisrichisGarvinProfessorofGlobalEntrepreneurship andDirectoroftheWalkerCenterforGlobal Entrepreneurship, ThunderbirdSchoolofGlobalManagement,usa . DrBaobaoDongisaProfessorintheCenterforEntrepreneurship, JilinUniversity,China. ManagingGlobalTransitions7 (3):221 –239 222 BaoshanGe,RobertD.Hisrich,andBaobaoDong understanding of methods for acquiring the necessary resources, par- ticularlythroughnetworks.Specifically,theresearchfocusesontherela- tionshipbetweenresourcesandperformancebyaddressingthefollowing questions: (1) Do the range and intensity of a firm’s network influence theresourcesacquisition?(2)Dothecapabilityandoutcomeofresource acquisition impact subsequent performance of smalland medium-sized enterprises(sme s)? Thehypothesesarebasedontheoreticalconstructsdevelopedinliter- atureonsocialnetworksandentrepreneurialperformance.Thenetwork isviewedasatoolusefulfortheprocessofresourceacquisitionandpar- ticularly for investigating the change of venture performance based on resourceacquisition.Totestthehypotheses,surveysandinterviewswere conducted with sme s in three major Chinese cities: Changchun, Tian- jin, and Shanghai. The selection criteria for the sme s that became part of our data set included the availability of the founding entrepreneur and/or founding executive for an interview, the age of the firm, and its sector. The resulting data set consists of information from 83 sme sin Changchun,44 inShanghai,and50 inTianjin.Usingdatagatheredfrom these three areas and using different analysis techniques, evidence was provided that resource acquisition influences the development and per- formance of businesses. In addition, the effects that the intensity, range, and closeness of a network have on identifying and acquiring resources wereanalyzed. The empirical results provide evidence that resource acquisition and performance of a firm are positively correlated. Previous research has shown that a social network can benefit a firm’s ability to find new re- sources, which result in high growth and superior performance (Black and Boal 1994 ). Thus, as suggested in prior studies, a network impacts the performance (Young 1998 ; Cromie and Birley 1992 ;W atson2006 ). Furthermore,asfirmsdevelop,thesocialnetworkwillchange,impacting the amount of resources acquired and thus the venture’s performance. Taken in concert, the overall results show that it is preferable for a firm to develop a strong network to acquire the resources needed for growth and performance. The positive correlation between the social network andenterpriseperformanceistakentoanewlevelbyidentifyingthekey rolethatanetworkplaysinacquiringresources. This research also has practical implications, since it gives firms the impetustoenhanceandreinforcerelationships withotherfirmsand or- ganizations.Thesebroadenedandstrengthenednetworksthenassistthe ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 223 firmsinacquiringtangibleandintangibleresourcestoupgradecapabili- ties inall aspects.Inaddition, thegovernment shouldconstructpolicies thatstrengthennetworkingconnectionsamongenterprises. Introduction According to resource-based views (rbv s) of strategy, firms with valu- able,rare,andinimitableresources(includingnon-substitutability)have the potential for achieving superior performance (Barney 1991 ; 1995 ). Resources are inputs into a firm’s production process (Barney 1991 ) that are either knowledge-based or property-based (Miller and Sham- sie 1996 ). Property-based resources typically refer to tangible input re- sources,whereasknowledge-basedresourcesarethewaysinwhichfirms combineandtransformthesetangibleinputs(GalunicandRodan1998 ). Knowledge-based resources may be particularly important for provid- ing sustainable competitive advantage, because they are inherently diffi- cult to imitate, thus facilitating sustainable differentiation (McEvily and Chakravarthy 2002 ). They also play an essential role in the firm’s abil- ity to be entrepreneurial (Galunic and Eisenhardt 1994 ) and to improve performance (McGrath et al. 1996 ). From the standpoint of resource acquisition, the initial resources involve different dimensions including capital (Bygrave 1992 ), human resources (Cooper 1981 ;Dollinger1995 ), andphysicalresources(Dollinger1995 ). In rbv theory, resource acquisition is a crucial point since resources with value, rareness, inimitableness and non-substitutability can cre- ate sustainable competitive advantages and have a great impact on per- formance (Foss 1996 ). Resource acquisition is divided into two dimen- sions: resource acquisition capability and resource acquisition outcome (Zhang,Wong,andSoh2005 ).Resourceacquisitioncapabilityistheabil- itytoacquirebothtangibleandintangibleusefulresourcesthroughfirms or individuals. Resourceacquisition outcome focuseson theusability of theresourcesacquiredandonwhethertheseresourcescanbringcurrent orlong-term competitiveadvantages. rbv research also postulates that both the employees’ personal net- worksandtheorganization’snetworksarethecoreresourcesofthefirms. From the view of transaction cost theory, Jones, Hesterly, and Borgatti (1997 ) think a network will thrive because of the environmental uncer- tainty and intense competition. When uncertainty of product demand, proprietorshipofhumanresources,complexityoftasks,andtransaction frequency among groups increase, the network will reveal more advan- Volume 7 · Number 3 · Fall 2009 224 BaoshanGe,RobertD.Hisrich,andBaobaoDong tagesforthefirmwhencomparedtothecapabilityoftheindividualfirm. In the context of this paper, the network provides a special structure for connectingtotheoutsidetogetusefulinformation,resources,andsocial support that allows the firm to identify and make use of various oppor- tunities. Because of its complexity, researchers divide the network into several dimensions when studying the relationship between the network and other variables. According to Burt (1992 ), and Zhao and Aram (1995 ), the network breaks into two dimensions: the range of the network and the intensity of the network. Range, defined as the degree of diversity containedinanetwork,referstodifferencesamongcontactswithinafo- calactor’snetwork.Inadditiontothedimensionofbreadth(range),en- trepreneurialnetworkscanalsobecharacterizedbyadimensionofdepth (intensity).Intensityreferstotheextentoftheinteractingorganizations’ resources committed to the relationship, in terms of the frequency of contactandamountofresourceexchanged. Manyresearcheshavefocusedontheeffectofthenetworkonresource acquisition (Leung et al. 2006 ; Zhang, Wong, and Soh 2005 ). However, little has been done to test the influence of intensity and range of net- work onresourceacquisition. Inthis study,theconsecutive connections between network and resource acquisition, as well as resource acquisi- tionandventureperformanceareevaluated. TheoryandHypotheses networkandresourcesacquisition The setup of a network needs time and energy, and the network at dif- ferent stages influences resource acquisition of the firm differently. In theinitialstages,theindividualnetworkoftheentrepreneuriscrucialto thedevelopmentofthefirm,althoughthisindividualnetworkisdefined within a restricted range (Aldrich 1989 ). However, in the mature stages, theorganizationalnetworkisessentialforthefirmpreciselyforitsrange andintensity.Thispaperusestherangeandintensityofanetworktoan- alyzeitsimpactonthecapabilityandoutcomeofresourcesacquisition. NetworkingIntensityandResourcesAcquisition Granovetter (1973 ) argues that the network is the combination of time, feeling,familiarity(mutualtrust),andreciprocalservices.Adistinctcor- relationexistsbetweenthelength,mutualfeelings,benefitsofreciprocal services, and closeness of a network to the overall networking intensity. ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 225 Ahuja (2000 ) believes the closer the relationship among members, the faster the speed of sharing resources is, so firms can acquire resources needed to improve the capability and effectiveness of that process. Gu- lati (1995 ) and Uzzi(1996 ) think that the more familiar the contacts are, themoretrustworthythemembersbecome,whichcanreduceunethical behaviors and encourage resource exchange amongst group members. Using networks allows firms to locate valuable resources and improve acquisition capability. Tsai and Ghoshal (1998 ) believe that if the rela- tionshipamongmembersiscloser,groupmemberswillhaveacommon vision, which can facilitate the exchange and combination of resources. Sothefirmsnotonlyreceiverareresourcesbutalsousetheresourcesac- quiredfromothergroupsproperlytoenhanceacquisitioncapabilityand outcomes.Thetwohypothesesare: hypothesis1a Network intensity is positively related to resource ac- quisitioncapability (h1 a). hypothesis1b Network intensity is positively related to resource ac- quisitionoutcome (h1 b). NetworkingRangeandResourcesAcquisition The characteristics and categories of the resources acquired via the net- work rest with the variety of networking members. Since range means thevarietyandnumberofconnections(Burt1982 ;1992 ),thebroaderthe external network is, the easier it is to have access to resources. Then the firm can obtain the resources according to demand (Burt 1992 ), which illustrates strong resource acquisition capability. In addition, the net- work has the benefit of reducing the uncertainty of innovation (Dess and Starr 1992 ), enhancing communication and exchange of resources (Larson 1991 ), and speeding up the transfer of knowledge and technol- ogy. Therefore the network can facilitate the firm’s ability to obtain in- tangibleresourcesquickly.ElfringandHulsink(2003 )positthatthecore strategyofthefirmistogetresourcesneededatthelowestcostandthata socialnetworkplaysanimportantroleincapturingresources.Thatisto say, close and sparse networks can both provide entrepreneurs with re- sources,buttheamountprovidedbytheformerisgreaterthanthatpro- videdbythelatter.Theclosenessandtightnessofanetworkcanstabilize nascentventures. Becauseofthelargerangeofthenetwork, theamount and quality of the resources can be improved, which can enhance and advancetheefficiencyofresourceacquisitiontoobtainsustainablecom- petitiveadvantages.Thetwohypothesesare: Volume 7 · Number 3 · Fall 2009 226 BaoshanGe,RobertD.Hisrich,andBaobaoDong hypothesis1c Networkrangeispositivelyrelatedtoresourceacquisi- tioncapability(h1 c). hypothesis1d Network range is positively related to resource acqui- sitionoutcome (h1 d). resourcesacquisitionandperformance Resources are widely used to explain performance according to rbv (Barney 1996 ; Brush, Greene and Hart 2001 ). These theories can con- tribute to the understanding of the importance of a firm’s internal re- sources and how to acquire resources needed for the improvement of ventureperformance. Some research has studied the relationship between resource acqui- sition and performance, as the amount of needed resources compared with performance. Romanelli (1991 ) thinks that two factors in resource acquisition impact the survival and growth of the firms: resource avail- abilityandorganizationalstrategy.StevensonandLundström(2001 )de- fineentrepreneurshipastheabilitytodiscoveropportunityandorganize resourcesintoaventurethatconsequently createsnewvalueinthemar- ket.Therefore,obtainingthenecessaryresourcesisessentialforthesetup andgrowthofanewventureanditsfutureperformance.Resourceacqui- sitioncapabilityandoutcomehaveanoticeableeffectonventureperfor- mance. Premaratne (2002 ) believes that resource acquisition for a new venture is positively related to the performance and the enhancement of influence under environmental uncertainty. Heirman and Clarysse (2004 ) studied the relationship between resources and the formation of resource advantages. Resources have particular value for new ventures and these differences can affect their performance. Capital and human resources interact to form competitive advantages, which can bring su- perior profit forfirms. In addition, some research has studied the relationship between ac- quisitionstrategiesoftechnicalresourcesandperformance.Forexample, Zahra and Bogner (2000 ) believe that acquiring resources from outside canhaveaneffectonperformance,whileAnnika(2000 )believesthatthe more ways of acquiring technical resources exist, the better the perfor- mancewillbe.Thetwohypothesesare: hypothesis2a Resource acquisition capability is positively related to ventureperformance(h2 a). hypothesis2b Resource acquisition outcome is positively related to ventureperformance(h2 b). ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 227 HypothesesTesting sampleanddatacollection This study focused on small and medium-sized enterprises in the eco- nomiczonesoftheregionallydiversecitiesofChangchun,Shanghai,and Tianjinastheprimaryresearchsources.Thefirmsinthesamplemeetthe followingthreecriteria:first,thefirmsmustbeindependentstart-upsin which the founding entrepreneurs maintain significant control; second, the firms must be operating in high-tech industries and service indus- tries; and third, the firms must be less than eight years old at the time ofstudysothattheentrepreneurs couldrecalltheinitialresourceacqui- sition processes accurately (Wong et al. 1993 ). Since many of the ques- tionnaireitemsinvolvethecircumstancesanddetailsduringthestart-up phase of the firm as well as details of firm strategies, it was necessary that the firms’ executive officers complete the questionnaire themselves (Bowman and Ambrosini 1997 ;Phillips1981 ). Specifically, a respondent had to be either the entrepreneur or a member of the firm’s start-up team, who was privy to the details and circumstances of the firm dur- ing its inception. An important step in the data collection process was gaining direct access to the firm’s original entrepreneur(s) or executive officer(s). This allowed us to conduct personal interviews in addition to thestandardpapersurvey,whichcollectedthebasicinformationregard- ing the firm and its history. The personal interview alsohelped improve thereliabilitylevelofthesurveyanswers. After verifying the role of the entrepreneur or original executive in the firm, thepotential respondent was contacted and solicited tofill out theresearchquestionnaire andtakepartinthetelephone interview. The personal phone interviews were then conducted after the paper surveys had been returned by the respondents. All together 227 firms were sur- veyed with 102 participants from Changchun,49 from Shanghai, and76 from Tianjin. Two months later 187 responses were returned: 90 from Changchun, 47 from Shanghai and 50 from Tianjin. After careful anal- ysis, 177 responses were usable, of which 83 came from Changchun, 44 fromShanghai,and50 fromTianjin. variablesmeasures Given the exploratory nature of this study, construct operationalization andmeasurementwereachievedintwoways:(1)forthosevariablesem- ployed in previous studies, the measures were adopted as long as they could provide acceptablemeasurement quality with only minor modifi- Volume 7 · Number 3 · Fall 2009 228 BaoshanGe,RobertD.Hisrich,andBaobaoDong cations in wording needed to increase their applicability to the Chinese context; (2) for variables that were not used in previous studies, oper- ational measures were developed based on previous conceptual studies and assessed content validity via interviews with five hi-tech entrepre- neurs and three scholars. Our measurement criteria came from the fol- lowingvariables: Networking Intensity.Prior socialnetworkstudies haveemployed sev- eral different measures of the ‘strength of ties’ (Marsden and Campbell 1984 ).Athree-item,evenlyweightedscalebasedonthethreemostwidely used measures was constructed: (1) duration of the relationship, ranked byansweringthequestion‘Howmanyyearshaveyouknowneachother priortothisresourceacquisition?’withx= 1 forlessthanoneyearx= 2 for1–2 years,x= 3 for2–3 years, x= 4 for3–5 yearsandx= 5 forlonger than 5 years; (2) intimacy level, measured by a 5-point Likert scale an- swer to the question ‘To what extent do you agree that you kept a close relationship with each other prior to this resource acquisition?’ (Bian 1997 ), with x = 1 for ‘strongly disagree’ and x = 5 for ‘strongly agree;’ and (3) meeting frequency, measuredbya5-point Likertscaleanswer to the question ‘To what extent do you agree that you met each other ev- ery week prior to this resource acquisition?’ (Bian 1997 ), with x = 1 for ‘strongly disagree’ and x = 5 for ‘strongly agree.’ni1 ,ni2 , andni3 were usedtostandforthethreenetworkingintensity measures. Networking Range. The connecting scope (examples: competitors, consumers, suppliers, universities, government, and agencies) of the firms was used to measure the breadth of the networking range. nr1 , nr2 ,nr3 ,nr4 ,nr5 ,andnr6 wereusedtostandforthesixmeasures. Resource Acquisition Capability. To measure this variable, three ques- tions were used: (1) ‘To what extent do you agree that you can get tan- gibleresourcesfromthenetwork?’ (2)‘Towhatextent doyouagreethat you can get intangible resources from the network?’ and (3)‘T owhat extent do you agree that you can get resources from the network?’ with the responsesranging from ‘stronglydisagree’ (x= 1)to‘stronglyagree’ (x= 5).rac1 ,rac2 ,andrac3 wereusedtostandforthethreemeasures. ResourceAcquisitionOutcome.Threequestionsgaugedthesignificance ofthiscriterion:(1)‘Towhatextentdoyouagreethatyouhaveobtained resourcesfromthenetwork?’(2)‘Towhatextentdoyouagreethatthere- sourcesyouhavegottenfromthenetworkhavebroughtcompetitivead- vantages toyour firm?’ and(3)‘Towhatextent doyouagree thatthere- sources you have gotten from thenetwork areavailable for other firms?’ ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 229 The responses ranged from ‘stronglydisagree’ (x = 1) to ‘stronglyagree’ (x= 5)(Zhang,Wong,andSoh2005 ).rao1 ,rao2 ,andrao3 wereused tostandforthethreevariables. Performance. Gupta and Govindarajian’s (1984 ) multi-item, multi- dimensional performance method was employed in this study. The first performance measure focused on financial results including the follow- ing: (1) profitability (net profit to sales ratio, return on investment); (2) growth (growthrate inrevenue, salesgrowth rate, rate of new employee growth);(3)liquidity(netcashflow);and(4)marketperformance(mar- ket share, rate of new product/service development, developing new markets). Furthermore, two items adapted from Khandwalla (1977 )cre- ated the second measure to gauge their direct and indirect impact on non-financial performance:‘employeejobsatisfactionandcommitment to a firm’s objectives’ and ‘public image and goodwill of a firm.’ To de- velop the third measure based on firm longevity and survival, insights from Jovanovic (1982 ) were used that link firm growth as measured by net profit to survival, which in turn is particularly important to policy makersbecauseofthewidespreadbeliefthatgrowingbusinesseswillcre- ate new jobs. However, Delmar, Davidsson and Gartner’s (2003 ) belief thatthebestindicatoroffirmgrowthcomesfromtherateofsalesgrowth was also considered. Thus, the third measure of firm performance used the rate of growth in total income (sales plus other income). Palepu, Healy, and Bernard(2000 )assertthatacertain levelof returnoninvest- ment should be maintained by firms to ensure their routine operation and shareholder satisfaction. This theory is the basis of the fourth crite- ria for measuring performance: return on investment. The respondents were asked to indicate how important and satisfactory they perceived each item to be on a five-point Likert-type scale, which has also been widely employed in previous studies. Furthermore, in order to comple- ment the subjective measures, the respondent was given the option to provide actual quantitative data related to each performance measure. per1 ,per2 ,per3 ,andper4 wereusedtostandforthefourmeasures. ResultsandDiscussion results In order to test the hypotheses mentioned above, spss13 .0 (Statistical Package for the Social Sciences) and amos 6 .0 (Analysis of Moment Structure)wereusedtoanalyzethedatacollected.Adescriptiveanalysis Volume 7 · Number 3 · Fall 2009 230 BaoshanGe,RobertD.Hisrich,andBaobaoDong table 1 Descriptivestatisticsandcorrelationmatrix Variables 12345 1.Networkintensity 1 2.Networkrange 0 .184 * 1 3.Resourceacquisitioncapability 0 .192 –0 .008 1 4.Resourceacquisitionoutcome 0 .190 –0 .184 ** 0 .150 1 5.Performance 0 .183 * 0 .071 * 0 .259 ** 0 .120 1 Mean 3.422 2 .985 2 .448 3 .541 3 .116 Std.dev. 0 .446 0 .679 0 .346 0 .478 0 .721 notes **Significantatthelevel0 .05 .*Significantat0 .1 level(2-tailed). wascompletedbeforetestingthemodel,andtheresultsaresummarized intable1. The overall response rate to the questionnaires was 82 .4 percent with 187 out of 227 questionnaires returned. After excluding ten incomplete responses (7 from Changchun and 3 from Shanghai), 177 usable ques- tionnaires provided the data for analysis. The reason why the response rate was so high is that the respondents were continuously called and e- mailed to remind them about the questionnaires. The participants were motivated by their interest in the survey results and were eager to coop- erate. The response rate was extremely good. Several two-sample t-tests were performed to investigate sample biases such as non-response bias andrespondentbiaswithnobiasesfound. ReliabilityandValidityAssessment Acoe fficient alpha test examined the internal consistency of the scales of network (0 .729 ), resources acquisition (0 .848 ), and firm performance (0 .795 ). All scales were well above the 0 .7 cut-off, as suggested by Nun- nally(1978 ).Hairetal.(1998 )statethatvalidityistheextenttowhichthe conceptonewishestomeasureisactuallybeingmeasuredbyaparticular scale or index and is concerned with how well the concept is defined by the measure(s). Four strategies for determining a measure’s validity are providedasfollows:(1)facevalidity;(2)contentvalidity,whichrelieson theinternallogicofthemeasure;(3)criterionvalidity;and(4)construct validity,whichislesssubjectiveandmoreempirical.Allthreeconstructs (network, resource acquisition, firm performance) were considered to have both face and content validities. To assess discriminant validity of a network, Brüderl and Preisendörfer (1998 ) used the principal compo- ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 231 table 2 Resultsofreliabilityanalysisandfactorloadings Variables Items Factorloading Cronbach’salpha Network intensity 1.ni1 0 .917 0 .735 2.ni2 0 .727 3.ni3 0 .743 Networkrange 4.nr1 0 .850 0 .720 5.nr2 0 .679 6 .nr3 0 .785 7.nr4 0 .637 8.nr5 0 .581 9 .nr6 0 .649 Resourceacquisitioncapability 10 .rac1 0 .735 0 .783 11.rac2 0 .724 12 .rac3 0 .932 Resourceacquisitionoutcome 13 .rao1 0 .823 0 .777 14 .rao2 0 .707 15 .rao3 0 .920 Performance 16 .per1 0 .833 0 .706 17.per2 0 .642 18 .per3 0 .597 19 .per4 0 .638 nent factor method with varimax rotation to identify how the items of these two scales were loaded. The items were clearly loaded on the two separate constructs as anticipated, indicating that the network had dis- criminant validity. Furthermore, five items of resource acquisition and twelve items of firm performance scale were also analyzed, and all three construct scales were proved to have discriminant validity. Several sam- plebiastestswereconductedthroughtwosamplet-tests,followedbyre- liability tests of inter-items of the scales and validity assessment of con- struct scales (see table 2) prior to testing the proposed hypotheses. Fi- nally, a path analysis was used to construct the relationship among the variables(figure1). The results showed that the Model (network-resource acquisition- performance model) met all the requirements for goodness of fit (see table 3). The results show that hypotheses 1a, 1b, 1c, 1d, 2a, 2baresup- portedwhenallsamplesenter theanalysis. Volume 7 · Number 3 · Fall 2009 232 BaoshanGe,RobertD.Hisrich,andBaobaoDong Networking intensity Networking range Resource acquisition capability Resource acquisition outcome Performance 0 .166 ** 0 .117 ** 0 .279 ** 0 .262 * 0 .391 ** 0 .257 ** figure 1 Pathdiagramforrelationshipsofvariables(n= 177 ,χ 2 =126 .300 ,degrees offreedom=115 ,probabilitylevel=0 .121 ,cfi =0 .979 ,gfi =0 .936 ,rmsea =0 .033 ;**significantatthe0 .01 level(2-tailed),*significantatthe0 .05 level(2-tailed)) table 3 Resultsoffitmeasuresforthemodel Indexes* cmin df cmin /df gfi cfi nfi ifi rmsea Value (n= 177 ) 126 .300 115 1 .10 0 .936 0 .979 0 .981 . 0 .989 0 .033 Value (n= 81 ) 37 .220 16 2 .33 0 .917 0 .943 0 .897 0 .933 0 .072 Value (n= 96 ) 42 .710 23 1 .86 0 .944 0 .959 0 .973 0 .901 0 .054 notes *Thefollowingcutoffcriteriawereused:(1) for‘acceptable’ model fit:rmsea <0 .08 ;gfi >0 .90 ;cfi >0 .90 ;nfi >0 .90 ;ifi >0 .90 ;and(2)for‘good’modelfit:rmsea <0 .06 ;gfi >0 .95 ;cfi >0 .95 ;nfi >0 .95 ;ifi >0 .95 .Thesecriteriaaregenerallyaccepted (HuandBentler1999 ;Kline1998 ). Although the total sample supports the six hypotheses,since network building is a time-dependent dynamic process, firms’ networking con- tacts can change with time, and in different stages the role of the net- work changes (Batjargal 2006 ). In order to account for this, time was measuredbythenumberofyearsthecurrentfirmhadbeenestablished. Two groups were formed, split approximately on the median: (1) Y was less than 3.5 years (n = 81 ) and (2) O was 3.5+years( n = 96 ). Mea- surementloadingswerespecifiedinvariantacrossgroups.Theresultsare showninfigures2 and3 andtable3. Accordingtotheresultsshowninfigures2 and3,fortheyounggroup the network range has no significant relation with resource acquisition capability (β = 0 .043 ,p> 0 .1), and the same with resource acquisition outcome and performance (β = 0 .107 ,p > 0 .1). Therefore, for young groups, h1 c and h2 barenotsupported.Buth1 a, h1 b, h1 d, and h2 a are all supported. For the Old group, the results show that hypotheses 1a, 1b, 1c, 1d, 2a, and 2b are all supported though the relation between ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 233 Networking intensity Networking range Resource acquisition capability Resource acquisition outcome Performance 0 .375 ** 0 .152 ** 0 .043 0 .209 * 0 .131 ** 0 .107 figure 2 Two-groupstructuralmodel:younggroup(n= 81 ,χ 2 =37 .220 ,degrees offreedom=16 ,probabilitylevel=0 .047 ,cfi =0 .943 ,gfi =0 .917 ,rmsea = 0 .072 ;**significantatthe0 .01 level(2-tailed),*significantatthe0 .05 level(2-tailed)) Networking intensity Networking range Resource acquisition capability Resource acquisition outcome Performance 0 .273 * 0 .137 * 0 .341 * 0 .137 * 0 .104 *** 0 .336 ** figure 3 Two-groupstructuralmodel:oldgroup(n= 96 ,χ 2 =42 .700 ,degrees offreedom=23 ,probabilitylevel=0 .148 ,cfi =0 .959 ,gfi =0 .944 ,rmsea =0 .054 ;***significantatthe0 .01 level(2-tailed),**significantatthe0 .05 level(2-tailed),*significantatthe0 .1 level(2-tailed)) networking range and resource acquisition outcome is slightly low (β = 0 .029 ). discussion Hypothesis 1a is supported by the positive relation between network in- tensityandresourceacquisitioncapability.Firmsshouldbuildclosenet- working connections with other groups.Withinthenetwork,afirmcan improve its resource acquisition capability by using close network con- tactsformoreresources.Capability,asauniqueintangibleresource,can gainotherbenefitsforthefirms. Hypothesis 1b is supported by the positive relation between network intensity and resource acquisition outcome. This means the more fre- quent thenetwork connections, thecloser theconnections, andthebet- Volume 7 · Number 3 · Fall 2009 234 BaoshanGe,RobertD.Hisrich,andBaobaoDong tertherelationships,themoreresourcesthefirmscanget,andthebetter theoutcomes. Intheanalysis,Hypothesis1cissupportedbythepositiverelationship between network range and resource acquisition capability for both the total groupandtheOldgroup.ButfortheYounggroup,thishypothesis is not supported, which means that firms younger than three and a half years old have a hard time forming trust alliances within the dynamic andcomplexmarket(Guthrie1998 ),andforthesenewfirms,theylacka good, established reputation, so other firms are probably not willing to take a chance on them, which results in low capability. But when a firm has broader contacts, it can more easily identify and acquire resources needed. Conversely, if the firm has few contacts, which are loosely con- nected, it will be hard to identify and obtain special resources that de- velopandincreaseafirm’scompetitiveadvantage. Hypothesis 1d is supported by the positive relation between network rangeandresourceacquisitionoutcome.Thebroaderthenetworkis,the moreresourcesthefirmcancomeintocontactwith,andthemoreeasily thefirmcanacquirenecessaryresources.Theoutcomeofacquisition,to anextent,iscontingentonthenetworkingrange. Hypotheses2aand2baresupportedintermsofapositiverelationship between resourceacquisition capability and firm performance as well as between resource acquisition outcome and firm performance according tothetotalgroupandOldgroupsamples,respectively.ButfortheYoung group, there is no significant relationship between resource acquisition outcomeandfirmperformance.Thismeansthatforfirmsyoungerthan three and a half years, when they acquire the necessary resources, lack a special capability to integrate these resources to form competitive ad- vantage and enhance performance. The Old group, however, can eas- ily allocate the resources acquired because of their market experience (WangandBao2007 ),whichcanbringthembetterperformance.Sothe firmswithstrongcapabilityandbetteracquisitionoutcomeswillgetkey resources. After combining, matching, and integrating the acquired re- sources, the firm will own sustainable competitive advantages, and con- sequently will bring in higher profitability (Brush and Chaganti 1998 ; Brush,GreeneandHart2001 ). Afteranalyzingthehypothesesitisapparentthatfirmsshouldstreng- then the building of their networks and also develop and extend the in- tensity, range, and closeness of contacts. Only by following this method can firms acquire crucial resources, increase resource acquisition capa- ManagingGlobalTransitions Networking,ResourceAcquisition,andthePerformance 235 bility,andimproveresourceacquisitionoutcome,whichcansuccessfully contributetotheperformance. ConclusionandImplication This paper empirically studies the relationships among network range and intensity, resource acquisition, and firm performance and analyzes the six hypotheses theoretically. Survey data from three Chinese cities were used to test the hypotheses. The results show that all hypotheses are supported in empirical investigation. Namely: a network influences resource acquisition, which in turn has a definitive impact on the firm’s performance. Theoretically, this paper studied the relationship between a network and a firm’s resource acquisition capability and outcome and tested the positive connection. The analysis was then taken a step further to study the relationship between resource acquisition capability and outcome and firm performance, based on the previous literature. Previous stud- ies only focused on the relationship between resource acquisition and performance and the strategies of resource acquisition. However, these studies seldom illuminate the relationship from the standpoint of capa- bilityandoutcome. In practice, this paper provides useful and valuable suggestions for small and medium-sized enterprises and the government. Firms should enhance and reinforce their relationship with other firms and organiza- tions, in order to acquire tangible and intangible resources to upgrade capabilities in all aspects.As for government, policies shouldbeenacted tosupportthisnetworkcreationprocess. Acknowledgments The authors would like to thank the National Natural Science Founda- tion of China for financially supporting this research. The paper is sup- ported by two important programs of China (Grants No.nsfc -70672025 andnsfc -70732005 ). References Ahuja,G.2000 .Collaborationnetwork,structuralholes,andinnovation: Alongitudinalstudy.AdministrativeScienceQuarterly45 (3):425 –55 . Aldrich, H. 1989 . Networking among women entrepreneurs. In Women- owned businesses,ed.O.Hagan,C.Rivchun,andD.Sexton,103 –32 . New York: Praeger. Volume 7 · Number 3 · Fall 2009 236 BaoshanGe,RobertD.Hisrich,andBaobaoDong Barney, J. B. 1991 . Firm resources and sustained competitive advantage. 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