The research hypotheses circle around the notion of strong and weak ties. Various statements hypothesising the factors determining the strength of inter-firm linkages shall be tested during the empirical work.
Hypothesis 1: the benefits of strong & weak inter-firm ties. The primary benefit of creating and maintaining strong inter-firm ties is that they provide the necessary social “embeddedness”; promote cooperation and facilitate the
exchange of various tangible and intangible resources. The maintenance of strong ties creates a culture of relational governance based on social attachments, trust, and norms. On the other hand, the primary benefit of weak ties is that they provide flexibility in company operations and firms can avoid a lock-in situation when adverse market conditions necessitate a re-structuring of the company strategy and organization (re-engineering). This hypothesis is based on the classical sociological publications of social embeddedness, social capital and network theory as applied for the inter-firm domain.17
Hypothesis 2: When managing the portfolio of inter-firm relations in a particular company, the finite resources must be assigned to alternative, competing ties. The portfolio of ties of a particular company with other firms (ego-network) is composed of stronger and weaker linkages. Over time certain ties will strengthen, while others will weaken. Managerial interventions may have a significant role in keeping up or phasing out certain inter-firm relations, e.g.
subcontracting ties or innovation oriented strategic alliances. In absence of such interventions inter-firm ties have a tendency of spontaneous weakening which is called “churning”. The strengthening of some ties may affect the weakening of other ties, e.g. because the weakening of a strong tie is what frees the manager to access new, weak ties by assigning resources to these relations. Networks consisting of a mix of strong and weak ties have the greatest adaptive capacity.
The source of this hypothesis is organisational theory, with special respect to the formal study of inter-firm networks. 18
Hypothesis 3: Network dynamics depends on the type and range of resource(s) being exchanged between co-operating firms and on the momentum of inter-firm relations. The type of resource being exchanged between co-operating firms, (in other words the “agenda” of the inter-firm linkage) is defined by the fact whether on this linkage people, products, services, capital and / or knowledge are exchanged. The wider is the scope of resources exchanged, i.e. the scope of co-operation within inter-firm linkages, the easier is the further deepening of the co-operation by including new flows of exchange between the participating companies. This hypothesis was taken from certain findings of economic research on innovative clusters.19
Hypothesis 4. Uncertain market conditions have a tendency to de-stabilise inter-firm network structure. A major motivation of inter-firm co-operation in entrepreneurial networks is to reduce insecurity and risk resulting from demand fluctuation, technological uncertainty and regulatory instability. The volatility of demand and of technological uncertainty generates a volatility of network structure. In sectors where technological uncertainty is higher, the life span of
inter-firm ties is shorter, i.e. existing ties are being regularly replaced by new ones. Analogously, in epochs of higher volatility of demand, the life span of inter-firm ties is shorter. The source of this hypothesis is organisational theory, with special respect to the formal study of inter-firm networks. 20
Hypothesis 5: If a company has invested certain resources into creating and maintaining its inter-firm linkages, and these investments cannot be easily re-allocated, then the stability of the network increases but its flexibility decreases.
Planning and investment are necessary pre-conditions of developing inter-firm ties. Resources which can be re-allocated only at a high cost are called investments “with high asset specificity”. Such investments can easily result in a “lock-in situation”: in this case the company lacks the necessary flexibility to re-structure its tie portfolio. If the resource invested previously into inter-firm relations cannot be easily re-allocated to other purposes then stronger, rather than weaker ties characterize the network. The source of this hypothesis is identical with the source of the previous hypothesis.
Hypothesis 6. Higher transparency of inter-firm linkages enables the management to easier re-structure the portfolio of inter-firm ties. In other words, if it is difficult to measure the costs and benefits of inter-firm ties, this contributes to the prevalence of stronger, rather than weaker ties. The source of this hypothesis is identical with the above cited paper.
Hypothesis 7. Networks built on the exchange and diffusion transparent, easily accessible knowledge tend to be weaker than networks facilitating the exchange of sophisticated, elite, highly professionalised information. This hypothesis refers only to inter-firm ties where the major resource exchanged is knowledge (e.g. in innovation based clusters). The hypothesis is as follows: The transfer of tacit, complex, confidential knowledge requires strong social ties. On the other hand, weak ties are sufficient to the transfer of explicit, open knowledge which is easily accessible to a wide range of stakeholders (e.g. competitors). This hypothesis is based on historical observation and on the above cited paper.
Hypothesis 8. In times of crisis it can be disadvantageous to be a member of a cluster. Inter-firm networking and clustering helps firms to stay competitive in global competition under normal market conditions. However, this rule has the limits in terms of validity. In times of crisis the strengthened global competition weakens the benefits of being in a cluster, because existing strong ties cannot be flexibly replaced by other new inter-firm linkages. (Lock-in situation). The tendency underlying this hypothesis has been observed in various clusters.21
Hypothesis 9: Equity-based, knowledge-based networks and networks based on subcontracting linkages are stronger and more sustainable than networks
based on the exchange of business services. A major characteristic of networks is the nature of the resources exchanged between members. Inter-firm linkages can serve to exchange people, products, capital, services, and / or knowledge in the framework of the particular co-operation. The hypothesis goes as follows:
Networks that facilitate the inter-firm flow of products, capital and knowledge are more sustainable than other networks in which only business services are exchanged. This hypothesis may help to explain why a few Hungarian clusters are sustainable and why most of them have a temporary character.