Anwarand Shah

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/328048269
Managerial Networking and Business Model Innovation: Empirical Study of

New Ventures in an Emerging Economy
Article in Journal of Small Business & Entrepreneurship · October 2018

DOI: 10.1080/08276331.2018.1490509
CITATIONS READS
57 912
2 authors:
Muhammad Anwar Syed Zulfiqar Ali Shah

Universität Witten/Herdecke International Islamic University, Islamabad
38 PUBLICATIONS 983 CITATIONS 40 PUBLICATIONS 1,142 CITATIONS
SEE PROFILE SEE PROFILE
Some of the authors of this publication are also working on these related projects:
SMEs Internationalization; CPEC Perspective View project
PhD Thesis View project
All content following this page was uploaded by Muhammad Anwar on 04 February 2021.
The user has requested enhancement of the downloaded file.

Journal of Small Business & Entrepreneurship
ISSN: 0827-6331 (Print) 2169-2610 (Online) Journal homepage: http://www.tandfonline.com/loi/rsbe20
Managerial Networking and Business Model

Innovation: Empirical Study of New Ventures in an
Emerging Economy
Muhammad Anwar & Syed Zulfiqar Ali Shah
To cite this article: Muhammad Anwar & Syed Zulfiqar Ali Shah (2018): Managerial Networking
and Business Model Innovation: Empirical Study of New Ventures in an Emerging Economy,
Journal of Small Business & Entrepreneurship
To link to this article: https://doi.org/10.1080/08276331.2018.1490509
Published online: 03 Oct 2018.
Submit your article to this journal
View Crossmark data
Full Terms & Conditions of access and use can be found at

http://www.tandfonline.com/action/journalInformation?journalCode=rsbe20
Journal of Small Business & Entrepreneurship, 2018
Vol. 0, No. 0, 1–22, http://doi.org/10.1080/08276331.2018.1490509
Managerial networking and business model innovation: Empirical

study of new ventures in an emerging economy
Muhammad Anwar and Syed Zulfiqar Ali Shah
Faculty of Management Sciences, International Islamic University, Islamabad, Pakistan

(Received 17 September 2017; accepted 10 June 2018)
More than 50% of newly established ventures fail in the initial stage across the
globe due to fairly well-known reasons: liability of newness, lack of resources and
smallness. One way to overcome these issues is to build connections with external
bodies that may help in exchange of knowledge and resources. While networking
is a useful ally, it cannot save a venture from failure entirely on its own. New
firms also need an effective business model innovation which is considered a key
factor in the success of Small and Medium Enterprises (SMEs) in the current era.
This article examines the importance of networking in building effective business
model innovation. Data were collected through structured questionnaires using a
sample size of 311 young SMEs operating in the emerging economy, Pakistan.
Hypotheses were tested through Structural Equation Modeling (SEM) in analysis
of a Moment Structures (AMOS).21. The results indicate that financial
networking, business networking and political networking significantly and
positively contribute to business model innovation. Owners and managers of
young medium-sized firms are advised to focus on building relationship with
external partners, financial institutions and government officials to create an
effective business model innovation in order to survive in a turbulent market.
Implications for practice are also discussed in detail.
Keywords: networking; business model innovation; new ventures;
emerging market
Plus de 50% des entreprises nouvellement creees echouent des leur premiere
annee pour des raisons clairement etablies: le handicap d^u a leur jeunesse, le
manque de ressources et le handicap de la taille. Un des moyens pour
surmonter ces difficultes est de construire des partenariats avec d'autres
structures qui apporteraient des ressources et savoirs. Bien que necessaire, le
reseau d'affaires ou networking ne peut a lui seul prevenir une entreprise
d'echouer par son propre chef. Les nouvelles entreprises ont besoin d'un
business modele innovant qui constitue actuellement le facteur cle de succes des
Petites et moyennes entreprises (PME). Le present article examine l'importance
du reseau d'affaires ou networking dans la definition d'un business model
innovant. A partir d'un questionnaire, nous avons mene une etude sur un
echantillon de 311 nouvelles PME du Pakistan exerçant dans le secteur de
l'economie emergeante. En utilisant des modeles structures d'equations dans
AMOS. 21, nous avons teste nos hypotheses. Il en resulte que le partenariat
financier, le partenariat d'affaires et le partenariat politique influencent
significativement et positivement la mise en place d'un modele d'affaires
innovant. Les actionnaires et les gestionnaires des jeunes PME sont conseilles
de construire des relations avec des partenaires exterieurs, des instutions
Corresponding author. Email: m.anwar.ims@gmail.com
ß 2018 Journal of the Canadian Council for Small Business and Entrepreneurship/Conseil de la PME et de l’entrepreneuriat
2 M. Anwar and S. Z. Ali Shah
financieres et des acteurs gouvernementaux afin de creer un modele d'affaires

innovant qui garantisse leur perennite sur un marche instable. Les implications
pratiques sont aussi detaillees dans le present article.
Mots cles: Networking ou reseau d'affaires; business model ou modele
d'affaires innovant; Nouvelles entreprises; marche emergent
Introduction
In the era of globalization and dynamic markets, new ventures face high uncer-
tainty and undergo a tough competition especially in emerging markets because of
the liability of newness, and a lack of vital ingredients for success like resources,
legitimacy, financial capital, R&D, technology, innovation and novel knowledge,
etc. (Breuer and L€ udeke-Freund, 2017; Wang, van Assche, and Turkina 2017).
Due to these issues, many ventures fail to survive long enough. For instance,
Khawaja (2006; CEO of SMEDA) noted that in Pakistan, only 19% of newly
established ventures survive up to 5 years and a mere 4% of the firms survive up
to 25 years after start-up. These figures indicate a high failure rate in the country.
Similarly in China, after commencement of operation, 67% firms fail in the first
year and 85% of firms wind up within 10 years (Parnell, Long, and Lester 2015).
The debacle of failure is rampant in the developed nations too. In USA, out of
700,000 firms that are started every year, only about 10% survive successfully
(Sambasivan, Abdul, and Yusop 2009). To overcome these issues, majority of the
newly established ventures seek external opportunities. In such circumstances, net-
working has emerged as a crucial tool especially for the newly established ventures
operating in less developed markets where formal institutional services are rela-
tively scarce (Hasche and Linton 2018; Su, Xie, and Wang 2015; Tello, Yang, and
Latham 2012). To get due benefits from external resources, firms need a bound-
ary-spanning network with their external partners to build an effective Business
Model (BM) to exploit opportunities and capture value (Zott and Amit 2013). A
recent study conducted by Anwar (2018) in Pakistani manufacturing SMEs speci-
fies that Business Model Innovation (BMI) facilitates SMEs to acquire competi-
tive advantage and superior performance. This study (Anwar 2018) was confined
to only in manufacturing SMEs (new and old firms) where the role of BMI
towards SMEs financial performance via competitive advantage was examined.
But in general terms, the role of networking in BMI has received little attention
from researchers in emerging economies despite its significant benefits to newly
established micro- and medium-sized firms. At the same time, research on the role
of networking in innovation is also scarce. However, it should be noted that
building just a single network is not sufficient to access all necessary resources,
achieve performance excellence and attain competitive positioning in market; ven-
tures must build broad network ties with external partners, other firms, political
circles and industry (Terziovski 2003). This study aims to highlight the importance
of financial networking, business networking and political networking toward
BMI in young SMEs in Pakistan. The empirical analysis of this research focuses
on registered young medium-sized firms because in the emerging market Pakistan,
newly established micro ventures undergo a long process (legitimation) to start
their operation. Moreover, young medium enterprises provide more accurate pic-
ture than newly established micro firms which may survive for too short a period
to provide any meaningful research material.
Journal of Small Business & Entrepreneurship 3
This study contributes to existing literature by examining the role of manager’s

networking in BMI among newly established ventures (e.g. manufacturing, trading
and services) by answering the question ‘Does networking play a significant role
in building an effective BMI’? Social network theory suggests that building ties
with external bodies helps firms to gain useful information, resources and innova-
tive ideas which in turn improve performance (Burt 1992). Furthermore, innov-
ation diffusion theory states that innovation can be enhanced through the
development of different types of networks (Rogers 1983). The findings will
encourage owners and managers of SMEs to give enough attention to financial,
business or political networking to build up an effective BMI and to survive in
the turbulent markets. In addition, the results of this study may help owners and
managers of young medium-sized firms (e.g. manufacturing, trading and service
sectors) to balance their investments in risky projects and give sufficient attention
to building networks with external bodies.
Networking refers to ‘the aptitudes of an entrepreneur/owner/manager to persuade
and interact with others’ (Su, Xie, and Wang 2015). Networking works as a channel
to access financial and non-financial resources which in turn help to modify and
transform the existing assets of firm to generate more useful insights (Zane and
DeCarolis 2016). It helps entrepreneurs to leverage their resources in usable forms
that give sustainable competitive advantage (Li, de Zubielqui, and O’Connor 2015).
Pakistan is located on the best trade route between Europe and Asia. After
agriculture, the next major source of employment are services (including retail
trade) followed by manufacturing. SMEs represent 95% percent of the firms in
these industries which contribute more than 40% to country’s GDP. Young SMEs
in the country rely on building relationship with external partners to find support
and sponsorship. Government of Pakistan has initiated many programs and estab-
lished many institutions to support new and established SMEs. A few programs
related to provision of finance to SMEs are presented in Table 1. For instance,
borrowing rate is very high in Pakistan, particularly for the new startups that are
not able to offer adequate securitization. Informal institutions charge up to 50%
per annum and banks charge up to 20% per annum (Khan 2015). The high inter-
est rate is an obvious source of discouragement to the new ventures. In these
circumstances, financial networking gains a lot of importance for new ventures.
Table 1. Financing programs.
Name of program/institution Year established

SMEDAa 1998
Khushali Bank 2000
Rozgar Micro Finance Bank 2001
Network Micro Finance Bank 2001
SMEs Bank 2002
First Micro Finance Bank 2002
a
Small and Medium Enterprises Development Authority (SMEDA)
established in October 1998 by Government of Pakistan. The major
responsibilities of the authority are to survive and support SMEs.
The core policies and programs were formalized by SMEDA in
2006–2007. There are several programs initiated by SMEDA to
support the startups, newly established and already established firms.
Entrepreneurs in less developed and emerging economies also need to rely on

government networking to access valuable resources and information under
government control. Thus, political networking provides monetary and non-mon-
etary benefits including tax concessions, faster license processing, cheaper land
and reductions in other restrictions which in turn facilitate business structure and
process (Park and Luo 2001). Similarly, entrepreneurs who build networking with
others firms and suppliers have easier access to high quality of raw materials and
services, are able to reduce different costs, create new opportunities and generate
knowledge spillovers (Park and Luo 2001; Turkina 2018).
Literature review suggests that building external networks provides several benefits
to new ventures including timely access to information, innovative ideas, external
knowledge, and customer demands which are necessary for innovation (Pittaway
et al. 2004). Hence, external networking is considered very vital for venture innova-
tive activities and business innovation (Xu, Lin, and Lin 2008; Shaw 1996).
Conceptual background
Networking
Networking can be defined with different dimensions. However, most of the
authors agree on its definition as ‘the relationship of entrepreneurs, businessmen,
owners and managers with financial institutions, other firms, government and
industry’ (Su, Xie, and Wang 2015; Lechner and Dowling 2003). Networking is
considered a core element for survival and growth of newly established ventures
(Lechner and Dowling 2003; Li, de Zubielqui, and O’Connor 2015). For instance,
Lechner and Dowling (2003) developed a four-stage model for Entrepreneurial
Networking Development (Figure 1). Therefore, the researchers rate networking
as the core and first factor that plays a significant role in new ventures. Su, Xie,
and Wang (2015) classified the means of networking as follows.
In this stage, firms touch the boundaries of interactive capability.

Stage Here, either cutting old redundant ties or making new ties become
4 vital for management issue or do verticalization of the networking
(making of first tier and second tier partners) might also take place.
Firms have now already established central networks and seek for
Stage reputation. Technology partnering is used to build technology
3 platform, to enhance complementary assets and to build up
technology status in the markets.
In this stage, ventures become real firms. They generate ample sales.
Stage
Thus, co-optation networking and marketing networking are the
2 principal concerns for management to be established in this stage.
It is the initial stage of development where new venture is unfamiliar

Stage
to industry. Thus, founder’s social networks and building reputation
1 networks in markets are important to get known to others. Hence,
ties help venture to build the early relationship and create future
Figure 1. Lechner and Dowling (2003): four stages of firm’s development.

Financial networking: Building relationship with banks and financial institutions

to access financial resources and loans. Silva et al. (2016) suggested that financial
ties is the link of an entrepreneur with financial institutions that are available in a
country, including banks and venture capitalists, to access finance at lower cost.
Business networking: Building relationship with other businesses, competitors,
industries and suppliers to access valuable information and resources etc. In add-
ition, Chung (2012) defined the business networking as a relationship of a firm
with its customers, supplier and competitors in the industry.
Political networking: Building ties with government and political bodies to
access scarce resources controlled by the government. Chung (2012) suggested
that social ties support entrepreneurs to get the benefits of government policies,
regulations and resources because social ties connect entrepreneurs with political
bodies and government officials.
Business model innovation

The notion of business model innovation (BMI) is several decades old but as yet
no single definition of BMI is finalized (Zott, Amit, and Massa 2011). In the mid-
1990s, only the entrepreneurship and strategy researchers applied the reconstruct
as a holistic description of a firm’s key business processes and how they are
inter-related (Zott, Amit, and Massa 2011). The evaluation of BM studies are
categorized into three streams. First, the BM is used as a basis for enterprise cat-
egorization: in early twenty-first century, as new e-business ventures emerged, the
BM concept was rapidly employed to identify and classify value drivers of e-com-
merce (Zott and Amit, 2010). Second, BM is considered as core factor of firm per-
formance. For instance, firms with successful BM perform better than other firms
(Teece 2010). Third, BM is seen as a potential unit of innovation that was first
discussed by Mitchell and Coles in 2003 (Zott, Amit, and Massa 2011). Thus,
studies have discussed the subject in term of innovation that generates an
extended version called ‘BMI’ (Foss and Saebi 2017).
Today, turbulent markets and competitive environment have challenged the
business enterprises to compete in the markets and to gain competitive advantage
(Breuer and L€ udeke-Freund 2017; Schneider and Spieth 2013). To respond to
these changes, firms use ‘BMI’ which means a firm’s persistent effort and struggle
for changing products, processes, structures and approaches of delivery, consider-
ing all the internal and external factors (Schneider and Spieth 2013). It is neces-
sary for SMEs to have cooperation with external bodies to enhance innovation.
Cooperation innovation may facilitate SMEs operating in emerging economies to
gain resources in less expensive way in order to enhance their innovation perform-
ance (Zeng, Xie, and Tam 2010).
Underpinning theory
The fundamental aspect of this study is a belief that networking is significant for
BMI. Hence, it is essential to demonstrate the significance of networking and
BMI in theoretical prospective.
Social network theory. Wasserman and Faust (1994, p. 20) provided the formal
definitions of social network theory two decades ago as ‘a social network involv-
ing a finite set(s) of actors and their well-defined relation(s)’. Social network the-
ory does not only help to build network with others, but also helps to access new
information quickly (Burt 1992). Brass, Butterfield, and Skaggs (1998) state that
social networks represent the relationship and interaction among actors. Actors
may be firms, individuals or companies who are trying to build relationship with
other social entities. Social network theory discusses the benefits derived from
broad networks with other parties and partners. According to Granovetter (1973)
network relations help to obtain the benefits such as access to new knowledge,
new resources and information that can lead a firm to competitive advantage.
A considerable number of studies have demonstrated that managers’ ties have an
influence on organizations’ innovation and creativity (Wu 2011). The importance of
networking can’t be ignored in firm’s creativity and novel ideas (Burt 2004).
Considering the importance of social network theory in firm’s innovation, prior studies
proceeded to discuss the insights in the additional concept ‘innovation diffusion theory’.
Innovation diffusion theory. Innovation diffusion refers to ‘the practice by which an

innovation can be concocted with, or occurred through, assured networks over time
among the members or group organizations’ (Rogers 1983). Innovation is not lim-
ited to only products or services; it also incorporates an extensive variety of objects.
For instance, it can be an attitude, technology, process, novelty in products and
new knowledge. Managers determine if they want to implement the new technology,
product, or service and/or knowledge. They frequently encounter some distractions
(Rogers 2003). These distractions affect whether users choose to accept or reject the
adoption of an innovation (Cheng 2017). Deliberatively, this study considers the
innovation in the light of ‘innovation diffusion theory’ because this concept has
extensively been discussed in context of social network theory and merged with
BMI by many authors (Cheng 2017; Liu et al. 2017). For instance, Liu et al. (2017)
demonstrate that diffusion of innovation occurs within firms, organizations or indi-
viduals through establishment of network. Managers who aim to adopt innovation
rely on building relationship networking with relatives, external partners and social
support and communication. Moreover, Anwar (2018) says that different types of
innovations are now emerged in a single phenomenon called ‘BMI’. Simultaneously,
a BMI cannot be generated directly; it requires enough internal resources and exter-
nal capabilities to be possessed by young micro and medium-sized enterprises.
Thus, networking here provides advantages to access different types of resources
including financial and non-financial to build an effective BMI. Hence, considering
the essence of both theories, this study believes that networking and BMI fall well
within the themes of both these theories.
Hypothesis development
Financial networking and business model innovation
To make positioning and modification, young firms require tangible and intan-
gible resources such as financial capital, human capital and market knowledge,
etc. However, all the resources are not available in the initial stage, thus new
venture rely on networking to gain the necessary resources (Ensley, Pearson, and
Amason 2002). For instance, RBV theory suggests that ventures in the initial
stage after their start-up have lack of essential resources. It is very difficult for
them to access the essential resources easily unless they build external networking
(Zaefarian, Henneberg, and Naude 2011). Whenever firms cannot acquire all the
expensive resources individually, they rely on financial networking to continue to
innovate (Su, Xie, and Wang 2015). In the early stage, financial networking is
very critical for growth and development of firms operating in emerging markets
(Alakaleek and Cooper 2018). Building financial network facilitates entrepreneurs
to access competencies and resources from financial institutions and banks to cre-
ate values for firms (Uzzi and Gillespie 2002).
In the uncertain markets and highly volatile markets, those ventures have a
superior advantage who have access to internal and external financial capital.
Hence, firms need to build strong financial networking ties (Su, Xie, and Wang
2015; Fonseka, Yang, and Tian 2013). Firms try to build strong financial ties with
financial institutions. For instance, access to external finance provides several ben-
efits to ventures. In addition, through financial ties, ventures can access loans at a
lower affordable interest rate which in turn reduces business and operation costs
and leads to high competitiveness (Silva et al. 2016). Firms persistently improve
BMI in order to gain superior performance but BMI inevitably requires financial
capital. So new venture have a great need for financial networking otherwise they
are likely to perish in the early stage (Fonseka, Yang, and Tian 2013; Ahmad and
Xavier 2012). Therefore:
H1: Financial networking has a significant influence on business model innovation.
Business networking and business model innovation

Ventures with strong networking and diversified geographic structure are in a bet-
ter position to access new ideas and to seize new opportunities swiftly. In add-
ition, networking functions as dynamic capability in order to ease access to
customer’s demand, new technology and knowledge which in turn help to incorp-
orate the dynamic market changes that is being BMI. Relationship with top man-
agers of already established and matured ventures facilitates managers of newly
established ventures to acquire new information, access to resources and new
knowledge (Li, de Zubielqui and O’Connor 2015) that influence firm’s innovation
(Breuer and L€ udeke-Freund 2017).
Firms with rich business networking can acquire the modern technology devel-
oped by their partners and assimilate it with their own present technology system.
So firms with energetic technology can figure up newfangled and innovative prod-
ucts and services that contribute to sustainable competitive advantage over their
competitors (Chen and Wu 2011). Connection with other partners and businesses
firms typically gives the advantage of cost minimization and knowledge trans-
formation in efficient way. Similarly, business networking has significant influence
on innovative products development activities (Gao et al. 2017). Business ties
enhance the relationship between customers and the firm and have positive influ-
ence on product innovation activities (Kofler and Marcher 2017; Wu 2011). Thus,
H2: Business networking has a significant influence on business model innovation.

Political networking and business model innovation

Typically in less developed economies, entrepreneurs give considerable attention
to political ties because government controls valuable resources in these regions
which may be very helpful for the new ventures. Ties with political bodies provide
access to such resources that may have significant role in generating opportunities
and promoting firm’s activities. Hence, managers with successful political ties are
able to secure the valuable resources for development activities and strategic pos-
tures (Li et al. 2008). The contribution of political ties is well-acknowledged espe-
cially in emerging economies in respect to new ventures activities and outcomes
(Kotabe, Jiang, and Murray 2017). Ties with political bodies typically support
ventures growth and help in development opportunity. In addition, such ties facili-
tate ventures to acquire rare resources and access to regulatory information which
in turn provide benefit in development and expansion of business (Hillman,
Zardkoohi, and Bierman 1999). Political ties are crucial for the development of
newly established ventures in emerging economies because government controls
almost all the unique resources. New ventures require the resources for growth
and development, if these resources are not accessed on time, it may cause lethal
harm to their very existence (Justin Tan, and Litsschert 1994). The connection of
top managers plays significant role in the success of young SMEs but social ties
(e.g. network with political bodies) could be used to build an effective BM (Gao
et al. 2017; Wu 2011). Social capital plays a significant role in the development of
BMI especially for operating in emerging markets (Guo, Zhao, and Tang 2013).
Thus, it is beneficial for newly established firms to expand relationship with polit-
ical bodies to build an effective BMI. Therefore, the next hypothesis:
H3: Political networking has a significant influence on business model innovation.
Methodology
Sample and data
To test the hypothesis, this research collected data from registered firms operating
in the emerging economy, Pakistan. In order to gain more fruitful insights, this
study covered newly established medium-sized ventures operating in the three big
cities of Pakistan including Rawalpindi, Islamabad and Peshawar. Registered firms
lists of the respective cities were obtained from Rawalpindi Chamber of Commerce
and Industry (RCCI), Islamabad Chamber of Commerce and Industry (ICCI) and
Sarhad Chamber of Commerce and Industry (KPCCI). RCCI have 5464 registered
firms, ICCI have 3752 registered firms, and KPCCI have 2072 registered firms.
However, as per the study requirement, only those ventures were included in the
survey who had started their operations in the last 10 years, i.e. those considered as
new ventures. A venture is deemed to be a new venture if it has not yet reached the
development stage where it could be called a mature firm. However, it should be
noted that the time in which a new venture goes through phases and becomes a
mature firm has not yet been determined. The maturation time (in which a new ven-
ture is going to attain maturity) depends on resources, industry type and venture
strategy, etc. This definition is in general agreement with the average age of new
ventures suggested in prior literature. In addition, those ventures with less than 250
employees were focused on. This coincides with the definition of SME as per
Pakistani authorities. More specifically, we focused on medium-sized and young
companies rather than small and micro businesses. Data relating to small and micro
businesses is difficult to obtain and generally unreliable. Data were collected
through a self-reported questionnaire because email survey has a low response rate
in this part of the world. Total 600 questionnaires were distributed, 200 in each
city. Owners and senior managers (surrogated by owners) were requested to fill the
questionnaire because of their greater awareness about business activities and
higher responsibility for firm performance (Tajeddini and Mueller 2012). One hun-
dred and three questionnaires from Rawalpindi, 114 from Islamabad, and 123
responses from ventures operating in Peshawar, meeting our criteria, were received
back. However, a few questionnaires missed important information, so these were
excluded from analysis. Hence, total 106 responses from Islamabad, 93 from
Rawalpindi, and 112 responses from Peshawar were included in final analysis with
response rates of 53, 46.5, and 61.5%, respectively. Total usable responses were 311,
with effective response rate 51.8%.
Measurements
Networking: This study relied on the more important networking types that play a
significant role in the development and growth of young SMEs. These network-
ings include FN, BN and PN that are considered crucial for new ventures espe-
cially in emerging economies. To measure networking, nine items (three items for
each networking area) were used as validated by Su, Xie, and Wang (2015) where
firms were asked about their relationship with financial, business and political
bodies over the last three years. To measure FN, a sample item shows ‘Spent
much effort on cultivating connections with financial institutions’, etc. To measure
BN, a sample item indicates ‘Spent much effort on cultivating connections with
buyers’, etc. and to measure PN, a sample items shows ‘Spent much effort on cul-
tivating connections with officials of governments and their agencies’, etc.
Business model innovation: Although there are several dimensions used in prior
studies for measurement of BMI, this study relied on more accepted measures
that covered broad dimensions of innovation adopted from Guo, Zhao, and Tang
(2013) who tested the measures in the emerging economy China. The sample items
indicate ‘Our business model offers new combinations of products, services and
information over the last three years’.
Scale: All the constructs were measured with five-Likert scale ranging from
strongly disagree ¼ 1 to strongly agree ¼ 5.
Profile of the firms

Table 2 shows the details of the respondents who participated in the study.
Surprisingly, our sample is skewed more towards medium enterprises as only 20%
of the firms have less than 100 employees. For instance, there were 10 firms who
had from 20 to 50 employees, 54 firms had from 51 to 100 employees, 58 had 101
to 150 employees, 98 had 151 to 200 employees 91 had from 201 to 250 employ-
ees. In terms of nature of business, 116 firms from manufacturing sectors, 109
from trading and 86 from services sector participated in the study.
Table 2. Profile of the firms.
Description Frequency Percent

Size of firm
1. 20–50 employees 10 3.20
2. 51–100 employees 54 17.4
3. 101–150 employees 58 18.6
4. 151–200 employees 98 31.5
5. 201–250 employees 91 29.3
Total 311 100.0
Industry
1. Manufacturing 116 37.3
2. Trading 109 35.0
3. Services 86 27.7
Total 311 100.0
Data analysis and results

This study performed SEM in AMOS.21 because the results of AMOS are consid-
ered more reliable than simple regression as it separates the measurement errors
of the observe variables while regression provides only the true relationship
between the constructs (Li, de Zubielqui, and O’Connor 2015). In addition,
AMOS provides different validity and reliability tests that lead to reliable insights.
We also performed various robustness tests to confirm the results and significance
of the models. However, there are certain assumptions that should be addressed
before AMOS assessment such as normality and multicollinearity (Hair et al.
2006). This study performed the normality and multicollinearity tests to generate
more valid insights.
Normality
Table 3 shows mean values, standard deviation (SD) and normality of the constructs.
The table indicates that FN has (mean ¼ 2.15, SD ¼ 0.20), BN has (mean ¼ 3.42,
SD ¼ 0.39), PN has (mean ¼ 3.34, SD ¼ 0.34) and BMI has (mean ¼ 2.84, SD ¼ 0.30).
Values about normality indicate that all the constructs have values in the accepted
range ±2 indicate represent that the data is normal (George and Mallery 2010).
Multicollinearity
To check if the variance explained by each of the construct FN, BN and PN in
BMI is unique or overlapping with each other, this study performed variance
inflation factor (VIF) in SPSS. Hair et al. (2010) suggested that the value of VIF
above than 10 indicates multicollinearity problem. In the present study, there is
no multicollinearity problem as all the constructs have values below 3. In add-
ition, Hair et al. (2006) indicated that the tolerance values above 0.10 represent
non-existence of multicollinearity problem; our study also met this criteria. The
results of multicollinearity are shown in Table 3.
Table 3. Mean, SD and normality.
Financial networking Business networking Political networking BMI

Mean 2.147 3.415 3.344 2.844
SD 0.202 0.392 0.338 0.297
Minimum 1.70 2.79 2.68 2.32
Maximum 2.79 4.63 4.03 3.80
Skewness 1.337 0.285 1.002 0.642
Kurtosis 0.590 0.162 0.685 0.861
VIF 1.162 1.078 1.129 –
Tolerance 0.861 0.927 0.886 –
Confirmatory factor analysis

To check the factor structure, validity and reliability of the constructs, confirma-
tory factor analysis (CFA) using maximum likelihood method (MLM) in
AMOS.21 was performed. The first attempt of measurement model did not pro-
vide a good model fit (Figure 2). Thus, modification indices (MI) were checked
Figure 2. Measurement model. Authors' Source.

Table 4. Model fits.
Fitness criteria Measurement model Structural model Acceptable rangea

CMIN 251.070 283.416 –
DF 127 130 –
CMIN/DF 1.977 2.180 1–3
GFI 0.92 0.91 >0.90
AGFI 0.90 0.88 >0.80
CFI 0.96 0.95 >0.95
TLI 0.95 0.94 >0.90
NFI 0.92 0.91 >0.90
RMR 0.011 0.018 <0.09
RMSEA 0.056 0.062 <0.08
P CLOSE 0.157 0.025 >0.05
a
No single rule for model fit. This study followed Hu and Bentler (1999) and Hair et al. (2010) criteria
that are mostly cited and recommended in prior studies.
and found that there were redundancy items between e10 and e16 as well as
between e11 and e14, so covariance were drawn to eliminate the problem. Hence,
the second attempt provided better results. The model fits (Table 4) indicated that
chisq/df has value 1.977 that is < 3, indicating a good model fit (Hu and Bentler
1999; Hair et al. 2010). Goodness of Fit Index (GFI) ¼ 0.91, Adjusted Goodness
of Fit Index (AGFI) ¼ 0.90, Comparative Fit Index (CFI) ¼ 0.96, Trucker–Lewis
Index (TLI) ¼ 0.95 and Normative Fit Index (NFI) ¼ 0.92; all these values are
found in the acceptable range as per recommendation of (Hu and Bentler 1999;
Hair et al. 2010). Root Mean Square Residual (RMR) ¼ 0.011 and Root Mean
Square Error of Approximation (RMSEA) ¼ 0.056; these values are also found in
the acceptable range suggested by (Hu and Bentler 1999; Hair et al. 2010).
All the factors were significantly loaded (p < .001) on their respective constructs
(Table 5) and having standardized factor loading above 0.70 except a few items.
But Hair et al. (2006) suggested that if other items have high factor loadings to
support validity, than items close to 0.70 can be retained. Thus, the model fit cri-
teria were achieved. However, Barclay, Higgins, and Thompson (1995) have sug-
gested ensuring the validity and reliability of the constructs before testing
hypothesis in structural model.
Validity and reliability

Convergent validity and discriminant validity have been checked and are shown in
Table 5.
Convergent validity. It shows the extent to which, and if, the items (retained)
explain sufficient variance in the respective construct than explained by error
terms (Anderson and Gerbing 1988). Convergent validity was calculated by taking
square of standardized factor loading of all the items loaded on the specific con-
structs and then divided by average number of items. The results indicated that all
the constructs have convergent validity above 0.50, thereby showing sufficient
average variance explained (AVE) by the items loaded on the specific constructs
(Hair et al. 2010).
Table 5. Standardized factor loadings, validity and reliability.
Constructs Estimate AVE 冑AVE CR

Financial networking 0.60 0.77 0.81
1. Spent much effort on cultivating connections 0.927
with financial institutions
2. Maintained good relationships with financial 0.801
institutions
3. Devoted substantial resources to maintain good 0.545
relationships with financial institutions
Business networking 0.57 0.75 0.80
with buyers.
with suppliers.
with competitors
Political networking 0.61 0.78 0.82
with officials of governments and their agencies.
2. Maintained good relationships with officials of 0.598
governments and their agencies
3. Devoted substantial resources to maintain good 0.832
relationships with officials of governments and
their agencies
Business model innovation 0.55 0.74 0.92
1. Our business model offers new combinations of 0.642
products, services and information
2. Our business model attracts a lot of new 0.753
customers
3. Our business model attracts a lot of new 0.816
suppliers and partners
4. Our business model bonds participants together 0.709
in novel ways
5. Our business model links participants to 0.899
transactions in novel ways
6. We frequently introduce new ideas and 0.842
innovations into our business model
7. We frequently introduce new operational 0.691
processes, routines, and norms into our BM
8. We are pioneers of the business model 0.649
9. Overall, our business model is novel 0.636
Significant p < .001.
Discriminant validity. Discriminant validity was simply assessed by taking square

root of AVE and the results of discriminant validity are represented in Table 5 as
冑AVE. The results indicate that all the items of the specific constructs are unique
as the value of discriminant validity of each construct is above 0.70 considered as
an acceptable value (Hair et al. 2010). In addition, Hu and Bentler (1999) and
Hair et al. (2010) have suggested that discriminant validity for the specific con-
struct should be above the correlation value of the construct with other construct.
The study met this condition.
Composite reliability. In AMOS, composite reliability has been considered more

advance and reliable than the traditional approach Cronbach’s alpha. It demon-
strates the internal consistency of the items loaded on the specific construct. The
results indicate (Table 5) that all the constructs have composite reliability above
0.70 accepted as per recommendation of Nunnally and Bernstein (1994). Hence,
all the conditions of measurement model were met which allowed for testing
hypothesis in structural model.
Correlation
This study assessed correlation coefficients in SPSS. Although, the correlation
coefficients do not reject or accept the study hypothesis but they do give prior
support to proposed hypothesis. In addition, we also performed Cramer’s V-tests
to check correlation between nature of industry and BMI. The results of the cor-
relation coefficients (Pearson correlation) are presented in Table 6. There is sig-
nificant positive correlation between FN and BMI (r ¼ 0.427, p < .01), significant
positive correlation between BN and BMI (r ¼ 0.522, p < .01) and significant posi-
tive relationship between PN and BMI (r ¼ 0.294, p < .01). The results indicate
that there is no multicollinearity issue as all the correlations values are < 0.80
(Anwar 2018).
Common method bias

Since, data for the study were collected through single source (questionnaire), at
the same time and the same respondent provided all the information about his
firm that may lead to potential common method bias (CMB) and may threaten
the validity of results (Podsakoff and Organ 1986). To check for CMB, Harman’s
one factor test using exploratory factor analysis by extraction method of ‘principle
component analysis’ was performed in SPSS. The results indicated four factors
with having Eigenvalues above 1 of which the first factor explained 36.83% vari-
ance. This revealed that there is no potential problem of CMB as the first factor
does not explain major variance (Podsakoff and Organ 1986; Hair et al. 2010). In
addition, the impact of common latent factor in measurement model has assessed
and ensured that there is no CMB problem in the study.
Structural model
To test the hypothesis and to evaluate the major findings of the study, we per-
formed structural model (Figure 3) in AMOS.21. The model fits (Table 7)
Table 6. Correlation coefficients.
Financial Business Political

Size networking networking networking BMI
Size –
Financial networking 0.288 –
Business networking 0.390 0.246 –
Political networking 0.194 0.321 0.182 –
BMI 0.665 0.427 0.522 0.294 –
Correlation significant at p value .01 (two tailed).
Figure 3. Structural model. Authors' Source.
indicated that chisq/df has value 2.180 that is < 3, an acceptable value recom-
mended by (Hu and Bentler 1999; Hair et al. 2010). GFI ¼ 0.91, AGFI ¼ 0.88,
CFI ¼ 0.95, TLI ¼ 0.94 and NFI ¼ 0.91; all these values indicated acceptable levels
and good model (Hu and Bentler 1999; Hair et al. 2010). RMR ¼ 0.018 and
RMSEA value 0.062 indicate a good model fit (Hu and Bentler 1999; Hair et al.
2010). All the items were significantly loaded on their respective constructs
(p < .001). Hence, structural model was well fitted.
Table 7 shows the main results about the hypotheses. The results indicate that
FN has significant positive impact on BMI (b ¼ 0.426, p < .001) that supports H1
of the study. BN has significant positive impact on BMI (b ¼ 0.275, p < .001) that
supports H2 of the study. PN has significant positive impact on BMI (b ¼ 0.117,
p < .05) supporting H3 of the study. All the proposed hypotheses of the study are
well supported by well-established precedents. R2 indicates that financial network-
ing, business networking and political networking bring 28% variation in BMI. It
can be concluded that networking is an important source of BMI in the newly
established medium-sized ventures.
The relative importance indicates that FN has highest influence on BMI fol-
lowed by BN while PN has the lowest impact on BMI.
Table 7. Hypotheses testing.
Dependent variable Independent variable Estimate SE CR p

BMI <— Financial networking 0.426 0.092 4.626 .000
BMI <— Business networking 0.275 0.047 5.817 .000
BMI <— Political networking 0.117 0.047 2.484 .013
Table 8. Regression analysis.
Unstandardized Standardized
coefficients coefficients
Model B SE b t p
1 (Constant) 2.223 0.042 53.307 .000
Size 0.170 0.011 0.665 15.642 .000
2 (Constant) 0.824 0.157 5.257 .000
Size 0.125 0.011 0.488 11.697 .000
Financial networking 0.284 0.060 0.193 4.698 .000
Business networking 0.204 0.031 0.269 6.520 .000
Political networking 0.077 0.035 0.088 2.210 .028
Robustness tests
To check for robustness, we executed several tests. For instance, we examined
group differences analysis in AMOS to check the role of networking among man-
ufacturing, trading and services industries. Each model for manufacturing, trading
and services firms was created. Finally, each test was compared with manufactur-
ing (test), all the tests with trading and all the tests with services industry. We
found no significant difference among all the cases. Thus, we propose that indus-
try has no significant role in the model.
In addition to Pearson correlation, we checked association between industry
and BMI using Cramer’s V-test in SPSS. The results indicated there is insignifi-
cant association between industry and BMI. However, the association was very
strong as indicated by Cramer’s V (0.86).
Harmon’s one factor test is critical for producing evidence for CMB. Thus, we
checked the influence of common latent factor in the measurement model to check
possibility of CMB. We found significant relationship among all the hypothesized
measurement items and their respective constructs. In addition, the AVE for com-
mon latent factor item calculated as 0.16 which was less than the substantive con-
structs under the study (0.69). Thus, analyzing these results individually and
collectively, we concluded that CMB problem was not found.
To check robustness of the main model, we performed regression analysis in
SPSS, controlling for size of the firms. The results indicated that the factors have
significant influence on BMI and the model was also significant (p < .000). The
regression outputs are presented in Table 8.
Discussion
This study highlights the importance of FN, BN and PN in BMI through empir-
ical evidence collected from medium-sized firms operating in the emerging market
Pakistan. The emerging economy Pakistan has many features in common with
other emerging and developed economies. Hence, the insights of this study can be
literally applied in other economies also. Our findings reveal that FN is the most
significant factor that has significant and greater impact on BMI followed by BN
and PN among newly established medium-sized ventures operating in the emerg-
ing economy. Consistent with prior study, Fonseka, Yang, and Tian (2013) dem-
onstrate that the firms that have access to external finance are able to survive and
get competiveness in emerging market. We argue that firms in emerging econo-

mies have a greater need for external supports due to lack of resources. For
instance, Ahmad and Xavier (2012) suggest that in the initial stage, firms need
finance for different activities; if they lack, finance then firms cannot respond
effectively to the changes in the market. This may prove lethal to new ventures.
This study shows that BN has a significant positive impact on BMI which sup-
ported H2 of the study; in line with prior study, Li, de Zubielqui, and O’Connor
(2015) suggested that networking is very essential for top management of newly
established ventures. Because it facilities them to garner novel information, new
ideas and knowledge which leads to innovation and results in higher performance
for ventures. We propose that building network with other business partners facil-
itates the innovativeness of a firm by giving access to modern technologies.
Networking plays a significant role and positively contributes to innovation activ-
ities and procedures of the firms (Gao et al. 2017).
Our results reveal that PN has a significant impact on BMI and thus supported
H3 of the study. As aforementioned that in emerging economies, governments
have control over resources, hence building strong ties with political bodies is
essential to access the resources for business operation. Hence, political ties in
these markets help to access new knowledge, new zones and advisory support that
are beneficial for innovative ideas and development of newly established firms
[Justin Tan and Litsschert (1994)]. The findings favor Hillman, Zardkoohi, and
Bierman (1999) who scrutinized that ties with government and political bodies
give the advantage of new information, access to rare resources that are required
for newly established ventures and new opportunities that help ventures in innov-
ation approaches and results in positive outcomes.
Overall, the findings of the study support the conclusions derived by Partanen,
Chetty, and Rajala (2014) that innovation can occur through different relation-
ships with suppliers, buyers and other external partners, so these relationships
should be nurtured as they facilitate access to different kinds of resource and new
knowledge necessary for innovation.
Theoretical contribution
The contribution of prior studies in the context of networking and firm performance
cannot be underestimated. However, this study discusses the importance of network-
ing towards the newly emerged concept BMI and contributes to the literature on
networking and BMI. This study acknowledges that while a large number of studies
have discussed the role of networking in firm performance, its role in BMI appears
ignored especially in young medium enterprises. In addition, the role of each net-
work tie in building an effective BMI among young medium enterprises operating in
emerging economies has so far not been adequately explored. Hence, this study
highlights the role of networking as an effective tool for the survival of young
medium-sized ventures and for saving them from failure. While prior literature has
suggested several reasons that may cause harm to, or bring success to, new ventures
this study signifies FN, BN and PN as distinct determinants that have significant
positive influence on BMI. In addition, by examining the model based on empirical
evidence collected from young medium-sized firms, this study strongly supports
social network theory that demonstrates the significance of networking and relation-
ship towards organization outcomes and performance. Similarly, this research
supports innovation diffusion theory which states that innovation can be achieved
through strengthening the ties and networks. Hence, the findings of the study sup-
port both theories by providing insights through empirical evidence. Researchers
and scholars engaged in the same nature of studies may go in depth to explore more
crucial determinants to ensure the survival of young SMEs.
Practical implications
This study not only provides implications for owners and top managers of newly
established SMEs but also gives guidelines for policy makers and in particular
support organizations such as Small and Medium Enterprises Development
Authority. It reveals that owners and managers of young medium-sized firms are
required to establish strong ties with financial intuitions, business partners, suppli-
ers and political bodies to access financial capital, new knowledge and rare resour-
ces which in turn lead to BMI that is necessary for newly established ventures.
For instance, a new venture in the initial phase undergoes many challenges;
networking enables it to access the valuable resources to meet those challenges
effectively. Noteworthy, our results reveals that building ties play a key role in
the success and performance of young medium-sized SMEs in the emerging
economies. Business owners and managers have to build strong connections with
external bodies to make effective BMI. There is adequate evidence that BMI sig-
nificantly positively contributes to performance and outcomes of SMEs operating
in the emerging economy Pakistan (Anwar 2018). Preferably, young medium-sized
ventures have to give considerable attention to FN because these venture faces
shortage of finance that may cause great deal of harm to its sustainability
(Ahmad and Xavier 2012). Moreover, in the initial stage, a firm may face different
accidental shocks in respect of shortage of financial capital, thus financial net-
working enables them respond to the unexpected events and save themselves from
trouble hobbled. However, forming BN helps young medium-sized firms to access
resources easily and learn about new ideas that are significant for BMI. Similarly,
PN also facilitates new medium-sized firm to access rare resources quickly to build
an effective BMI. Considering the location of Pakistan, the insights derived from
this study can be applicable in other regions where new ventures failure rate is
high. We propound that building strong relationship can facilitate the survival of
new ventures in any developing economy as it gives access to valuable resources
that are required for innovative activities of a firm. BMI is essential for successful
operation because many reputed firms fail due to lack of BMI (Teece 2010).
Hence, our findings that access to different resources by building varies ties; FN,
BN and PN can improve BMI have relevance to most developing economies in
the region. In addition, this research suggests that SMEDA and responsible
authorities need to facilitate every new venture including micro and medium-sized
in building of all the three forms of networking as a part of operational policy to
produce an effective BMI and to avoid potential threat of failure.
Limitation and future research

Despite its several strengths and significance, this research has few limitations that
can be addressed in future studies. For instance, the sample size is not large
enough to be a good representative of the all of Pakistan’s newly established

micro sized firms. The sample is heavily biased towards medium-sized firms and
no conclusions can be drawn for the group of small firms with < 50 employees as
only 3% ventures have < 50 employees. More useful results can be generated by
analyzing the model in newly born micro ventures. In the empirical model, we
tested hypothesis using AMOS. However, the disadvantage of AMOS, for
instance, the relationships among latent variables cannot be interpreted as causal
when based on cross-sectional data; it needs to be addressed in future studies.
Further, using a binary code for each tie will articulate results in a better way and
will clarify the extent to which tie makes a contribution to the firm’s BMI. Future
researchers are encouraged to conduct the study in other emerging markets and
conduct a comparative study between emerging and developed markets firms to
gain more fruitful insights. Since, this study examined the direct impact of net-
working on BMI, we strongly recommend that other researchers should test the
mediating role of BMI between networking and firm performance in different
phases of its existence. Similarly, a similar comparative study can be conducted
covering matured and new ventures to get some new insights. Anwar (2018)
argues that theories development about BMI is still rare. More empirical studies
are required to contribute to the theoretical foundation. For example, BMI can be
tested in RBV theory background to explore and enumerate new determinants of
competitive advantage.
Conclusions
Networking has become a major source for new ventures’ success and survival. It
helps firms to access new resources needed for development and growth. This
study examined the impact of networking on BMI. Data were collected through
structure questionnaire using sample size of 311 young medium-sized enterprises
operated in the emerging economy Pakistan. Hypotheses were tested through
structural equation modeling (SEM). The results indicate that all the three forms
of networks; FN, BN and PN have significant impact on BMI. Managers and
owners of newly established medium-sized firms need to strengthen their ties with
financial institutions, business partners and government officials to access valuable
resources and knowledge that lead to innovation which in turn helps to improve
the firm’s performance.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes on Contributors
Muhammad Anwar has done Master of Business Studies from International Islamic
University Islamabad Pakistan. He is working as a Research Associate at Faculty of
Management Science, International Islamic University Islamabad, Pakistan. His research
area includes competitive strategy, international entrepreneurship, business model
innovation and behavioral finance, etc. He has published several papers in this nature.
Syed Zulfiqar Ali Shah is Deputy Dean and Chairman of Higher studies and Research at
Faculty of Management Sciences, International Islamic University Islamabad Pakistan. He
has published more than 50 research papers in the field of corporate finance, firm
performance and efficiency, behavioral finance and corporate entrepreneurship, etc.
ORCID
Muhammad Anwar http://orcid.org/0000-0002-2685-4747
References
Ahmad, Z. S., and S. R. Xavier. 2012. “Entrepreneurial Environments and Growth:
Evidence from Malaysia GEM Data.” Journal of Chinese Entrepreneurship 4 (1): 50–69.
Alakaleek, W., and S. Y. Cooper. 2018. “The Female Entrepreneur’s Financial Networks:
Accessing Finance for the Emergence of Technology-Based Firms in Jordan.” Venture
Capital 20 (2): 121–137.
Anderson, J., and D. Gerbing. 1988. “Structural Modeling in Practice: A Review and
Recommended Two-Step Approach.” Psychological Bulletin 103 (3): 411–423.
Anwar, M. 2018. “Business Model Innovation and SMEs Performance — Does
Competitive Advantage Mediate?” International Journal of Innovation Management
1850057. https://doi.org/10.1142/S1363919618500573
Barclay, D., C. Higgins, and R. Thompson. 1995. “The Partial Least Squares (PLS)
Approach to Causal Modeling: Personal Computer Adoption and Use as an
Illustration.” Technology Studies 2 (2): 285–309.
Brass, D. J., K. D. Butterfield, and B. C. Skaggs. 1998. “Relationships and Unethical
Behavior: A Social Network Perspective.” Academy of Management Review 23 (1):
14–31.
Breuer, H., and F. L€ udeke-Freund. 2017. “Values-Based Network and Business Model
Innovation.” International Journal of Innovation Management 21 (03): 1750028.
Burt, R. S. 1992. Structural Holes: The Social Structure of Competition. Cambridge, MA:
Harvard University Press.
Burt, R. S. 2004. “Structural Holes and Good Ideas.” American Journal of Sociology
110 (2): 349–399.
Chen, X., and J. Wu. 2011. “Do Different Guanxi Types Affect Capability Building
Differently? A Contingency View.” Industrial Marketing Management 40 (4): 581–592.
Cheng, H. H. 2017. “The Antecedents of Creative Article Diffusion on Blogs: Integrating
Innovation Diffusion Theory and Social Network Theory.” Online Information Review
41 (1): 70–84.
Chung, H. F. L. 2012. “Export Market Orientation, Managerial Ties, and Performance.”
International Marketing Review 29 (4): 403–423.
Ensley, M. D., A. W. Pearson, and A. C. Amason. 2002. “Understanding the Dynamics of
New Venture Top Management Teams: Cohesion, Conflict, and New Venture
Performance.” Journal of Business Venturing 17 (4): 365–386.
Fonseka, M. M., X. Yang, and G. L. Tian. 2013. “Does Accessibility to Different Sources
of Financial Capital Affect Competitive Advantage and Sustained Competitive
Advantages? Evidence from a Highly Regulated Chinese Market.” Journal of Applied
Business Research (JABR) 29 (4): 963–982.
Foss, N. J., and T. Saebi. 2017. “Fifteen Years of Research on Business Model Innovation:
How Far Have We Come, and Where Should We Go?” Journal of Management 43 (1):
200–227.
Gao, Y., C. Shu, X. Jiang, S. Gao, and A. L. Page. 2017. “Managerial Ties and Product
Innovation: The Moderating Roles of Macro-and Micro-Institutional Environments.”
Long Range Planning 50 (2): 168–183.
George, D., and P. Mallery. 2010. SPSS for Windows Step by Step: A Simple Study Guide
and Reference (10. Baskı). Boston, MA: Pearson.
Granovetter, M. S. 1973. “The Strength of Weak Ties.” American Journal of Sociology

78 (6): 1360–1380.
Guo, H., J. Zhao, and J. Tang. 2013. “The Role of Top Managers’ Human and Social
Capital in Business Model Innovation.” Chinese Management Studies 7 (3): 447–469.
Hair, J. F., B. Black, B. Babin, and R. E. Anderson. 2006. Multivariate Data Analysis. 6th
ed. Upper Saddle River, NJ: Prentice Hall.
Hair, J. F., Jr., W. C. Black, B. J. Babin, and R. E. Anderson. 2010. Multivariate Data
Analysis: A Global Perspective. Upper Saddle River, NJ: Prentice Hall and Pearson.
Hasche, N., and G. Linton. 2018. “The Value of Failed Relationships for the Development
of a Medtech Start-Up.” Journal of Small Business & Entrepreneurship 30 (1): 97–119.
Hillman, A. J., A. Zardkoohi, and L. Bierman. 1999. “Corporate Political Strategies and
Firm Performance: Indications of Firm-Specific Benefits from Personal Service in the
US Government.” Strategic Management Journal 20 (1): 67–81.
Hu, L. T., and P. M. Bentler. 1999. “Cutoff Criteria for Fit Indexes in Covariance
Structure Analysis: Conventional Criteria versus New Alternatives.” Structural
Equation Modeling: A Multidisciplinary Journal 6 (1): 1–55.
Justin Tan, J., and R. J. Litsschert. 1994. “Environment-Strategy Relationship and Its
Performance Implications: An Empirical Study of the Chinese Electronics Industry.”
Strategic Management Journal 15 (1): 1–20.
Khan, S. 2015. “Impact of Sources of Finance on the Growth of SMEs: Evidence from
Pakistan.” Decision 42 (1): 3–10.
Khawaja, S. 2006. “Unleashing the Growth Potential of SMEs in Pakistan through
Productivity Enhancement.” Pakistan Development Forum-2006. www.smeda.org.pk
Kofler, I., and A. Marcher. 2018. “Inter-Organizational Networks of Small and Medium-
Sized Enterprises (SME) in the Field of Innovation: A Case Study of South Tyrol.”
Journal of Small Business & Entrepreneurship 30: 9–25.
Kotabe, M., C. X. Jiang, and J. Y. Murray. 2017. “Examining the Complementary Effect
of Political Networking Capability with Absorptive Capacity on the Innovative
Performance of Emerging-Market Firms.” Journal of Management 43 (4): 1131–1156.
Lechner, C., and M. Dowling. 2003. “Firm Networks: External Relationships as Sources
for the Growth and Competitiveness of Entrepreneurial Firms.” Entrepreneurship &
Regional Development 15 (1): 1–26.
Li, H., G. C. de Zubielqui, and A. O’Connor. 2015. “Entrepreneurial Networking Capacity
of Cluster Firms: A Social Network Perspective on How Shared Resources Enhance
Firm Performance.” Small Business Economics 45 (3): 523–541.
Li, H., L. Meng, Q. Wang, and L. Zhou. 2008. “Political Connections, Financing and
Firm Performance: Evidence from Chinese Private Firms.” Journal of Development
Economics 87 (2): 283–299.
Liu, W., A. Sidhu, A. M. Beacom, and T. W. Valente. 2017. “Social Network Theory.”
The International Encyclopedia of Media Effects 1–12. Advance online publication.
https://doi.org/10.1002/9781118783764.wbieme0092.
Nunnally, J. C., and I. Bernstein. 1994. Psychometric Theory. 3rd ed. New York, NY:
McGraw-Hill.
Park, S. H., and Y. Luo. 2001. “Guanxi and Organisational Dynamics: Organisational
Networking in Chinese Firms.” Strategic Management Journal 22 (5): 455–477.
Parnell, J. A., Z. Long, and D. Lester. 2015. “Competitive Strategy, Capabilities and
Uncertainty in Small and Medium Sized Enterprises (SMEs) in China and the United
States.” Management Decision 53 (2): 402–431.
Partanen, J., S. K. Chetty, and A. Rajala. 2014. “Innovation Types and Network
Relationships.” Entrepreneurship Theory and Practice 38 (5): 1027–1055.
Pittaway, L., M. Robertson, K. Munir, D. Denyer, and A. Neely. 2004. “Networking and
Innovation: A Systematic Review of the Evidence.” International Journal of
Management Reviews 5–6 (3–4): 137–168.
Podsakoff, P. M., and D. W. Organ. 1986. “Self-Reports in Organizational Research:
Problems and Prospects.” Journal of Management 12 (4): 531–544.
Rogers, E. M. 1983. Diffusion of Innovations. New York, NY: Free Press.
Rogers, E. M. 2003. Diffusion of Innovations. 5th ed. New York, NY: The Free Press.
Sambasivan, M., M. Abdul, and Y. Yusop. 2009. “Impact of Personal Qualities and
Management Skills of Entrepreneurs on Venture Performance in Malaysia:
Opportunity Recognition Skills as a Mediating Factor.” Technovation 29 (11): 798–805.
Schneider, S., and P. Spieth. 2013. “Business Model Innovation: Towards an Integrated
Future Research Agenda.” International Journal of Innovation Management 17 (01):
1340001.
Shaw, B. 1996. “Small Business Enterprising through Technological Innovations Managed
in Networks.” Journal of Small Business & Entrepreneurship 13 (4): 62–74.
Silva, T. C., S. M. Guerra, B. M. Tabak, and R. C. de Castro Miranda. 2016. “Financial
Networks, Bank Efficiency and Risk-Taking.” Journal of Financial Stability 25:
247–257.
Su, Z., E. Xie, and D. Wang. 2015. “Entrepreneurial Orientation, Managerial Networking,
and New Venture Performance in China.” Journal of Small Business Management
53 (1): 228–248.
Tajeddini, K., and S. L. Mueller. 2012. “Corporate Entrepreneurship in Switzerland:
Evidence from a Case Study of Swiss Watch Manufacturers.” International
Entrepreneurship and Management Journal 8 (3): 355–372.
Teece, D. J. 2010. “Business Models, Business Strategy and Innovation.” Long Range
Planning 43 (2–3): 172–194.
Tello, S., Y. Yang, and S. Latham. 2012. “Nascent Entrepreneurs Access and Use of
Network Resources in a Technology Incubator.” Journal of Small Business &
Entrepreneurship 25 (3): 375–397.
Terziovski, M. 2003. “The Relationship between Networking Practices and Business
Excellence: A Study of Small to Medium Enterprises (SMEs).” Measuring Business
Excellence 7 (2): 78–92.
Turkina, E. 2018. “The Importance of Networking to Entrepreneurship: Montreal’s
Artificial Intelligence Cluster and Its Born-Global Firm Element AI.” Journal of Small
Business & Entrepreneurship 30 (1): 1–8.
Uzzi, B., and J. J. Gillespie. 2002. “Knowledge Spillover in Corporate Financing
Networks: Embeddedness and the Firm’s Debt Performance.” Strategic Management
Journal 23 (7): 595–618.
Wang, Y., A. Van Assche, and E. Turkina. 2017. “Antecedents of SME Embeddedness in
Inter-Organizational Networks: Evidence from China’s Aerospace Industry.” Journal of
Small Business & Entrepreneurship 35: 1–23.
Wasserman, S., and K. Faust. 1994. Social Network Analysis: Methods and Applications.
Vol. 8. Cambridge: Cambridge University Press.
Wu, J. 2011. “Asymmetric Roles of Business Ties and Political Ties in Product
Innovation.” Journal of Business Research 64 (11): 1151–1156.
Xu, Z., J. Lin, and D. Lin. 2008. “Networking and Innovation in SMEs: Evidence from
Guangdong Province, China.” Journal of Small Business and Enterprise Development
15 (4): 788–801.
Zaefarian, G., S. C. Henneberg, and P. Naude. 2011. “Resource Acquisition Strategies in
Business Relationships.” Industrial Marketing Management 40 (6): 862–874.
Zane, L. J., and D. M. DeCarolis. 2016. “Social Networks and the Acquisition of
Resources by Technology-Based New Ventures.” Journal of Small Business &
Entrepreneurship 28 (3): 203–221.
Zeng, S. X., X. M. Xie, and C. M. Tam. 2010. “Relationship between Cooperation
Networks and Innovation Performance of SMEs.” Technovation 30 (3): 181–194.
Zott, C., and R. Amit. 2010. “Business Model Design: An Activity System Perspective.”
Long Range Planning 43 (2–3): 216–226.
Zott, C., and R. Amit. 2013. “The Business Model: A Theoretically Anchored Robust
Construct for Strategic Analysis.” Strategic Organization 11 (4): 403–411.
Zott, C., R. Amit, and L. Massa. 2011. “The Business Model: Recent Developments and
Future Research.” Journal of Management 37 (4): 1019–1042.
View publication stats

Anwarand Shah

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Anwarand Shah

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Managerial Networking and Business Model Innovation: Empirical Study of

Article in Journal of Small Business & Entrepreneurship · October 2018

Muhammad Anwar Syed Zulfiqar Ali Shah

SEE PROFILE SEE PROFILE

SMEs Internationalization; CPEC Perspective View project

PhD Thesis View project

The user has requested enhancement of the downloaded file.

ISSN: 0827-6331 (Print) 2169-2610 (Online) Journal homepage: http://www.tandfonline.com/loi/rsbe20

Managerial Networking and Business Model

Muhammad Anwar & Syed Zulfiqar Ali Shah

To link to this article: https://doi.org/10.1080/08276331.2018.1490509

Published online: 03 Oct 2018.

Submit your article to this journal

View Crossmark data

Full Terms & Conditions of access and use can be found at

Managerial networking and business model innovation: Empirical

Faculty of Management Sciences, International Islamic University, Islamabad, Pakistan

Corresponding author. Email: m.anwar.ims@gmail.com

financieres et des acteurs gouvernementaux afin de creer un modele d'affaires

This study contributes to existing literature by examining the role of manager’s

Table 1. Financing programs.

Name of program/institution Year established

Entrepreneurs in less developed and emerging economies also need to rely on

In this stage, firms touch the boundaries of interactive capability.

It is the initial stage of development where new venture is unfamiliar

Figure 1. Lechner and Dowling (2003): four stages of firm’s development.

Financial networking: Building relationship with banks and financial institutions

Business model innovation

Innovation diffusion theory. Innovation diffusion refers to ‘the practice by which an

H1: Financial networking has a significant influence on business model innovation.

Business networking and business model innovation

H2: Business networking has a significant influence on business model innovation.

Political networking and business model innovation

H3: Political networking has a significant influence on business model innovation.

Profile of the firms

Table 2. Profile of the firms.

Description Frequency Percent

Data analysis and results

Table 3. Mean, SD and normality.

Financial networking Business networking Political networking BMI

Confirmatory factor analysis

Figure 2. Measurement model. Authors' Source.

Table 4. Model fits.

Fitness criteria Measurement model Structural model Acceptable rangea

Validity and reliability

Table 5. Standardized factor loadings, validity and reliability.

Constructs Estimate AVE 冑AVE CR

Discriminant validity. Discriminant validity was simply assessed by taking square

Composite reliability. In AMOS, composite reliability has been considered more

Common method bias

Financial Business Political

Figure 3. Structural model. Authors' Source.

Table 7. Hypotheses testing.

Dependent variable Independent variable Estimate SE CR p

Table 8. Regression analysis.

get competiveness in emerging market. We argue that firms in emerging econo-

Limitation and future research

enough to be a good representative of the all of Pakistan’s newly established

Granovetter, M. S. 1973. “The Strength of Weak Ties.” American Journal of Sociology

View publication stats

You might also like