Investigating the Effectiveness of Social and Business Networks on the Performance of Small to Medium Firms in International Markets Considering the Mediating Role of Market Knowledge

One of the most important ways for small to medium companies to succeed is to expand their business into the global markets. Given the current economic situation of the country and the lack of sufficient incentives to invest in large industries by the private sector, and given the specific characteristics of small to medium firms such as greater agility and flexibility in the face of macroeconomic fluctuations, there is a need to pay more attention to these firms and examine their performance in international markets. While the expansion of international sanctions in recent years against Iran, has posed many challenges to the development of Iranian companies in international markets. There are not enough studies in the literature on the complexity and tension of network relations and their impact on the performance of exporting companies in international markets; hence, the present study aims to examine a conceptual model based on the theory of internationalization from a network perspective and by studying small to medium exporting companies in Tehran, Iran. The study of the relationship between SME networks and the performance of SMEs in international markets is mediated by the role of market knowledge. The main question of this study is that to what extent do business and social networks influence the performance of companies in international markets?

This survey study is applied in nature and is correlational and descriptive in terms of purpose and data collection. The statistical population of this research consists of small to medium export companies in Tehran, where 134 managers and business experts were selected based on available sampling method. Data were collection using a researcher-made questionnaire whose content validity and convergent validity were confirmed by experts and through statistical methods. The reliability of the questionnaire was assessed through Cronbach alpha coefficient. The research hypotheses were evaluated using structural equation modeling on SPSS and Smart PLS software.

All of the hypotheses in the study were confirmed and the findings indicate that business and social networks have a positive impact on the performance of companies in international markets through the mediating role of market knowledge.

SMEs need to expand their interactions with formal business networks to gain insights into foreign markets. Accordingly, companies that interact more with formal business associations and partners as well as their peers are more likely to be exposed to environmental conditions, challenges and the opportunities available in international markets to acquire the necessary information and knowledge and thus to perform better in those markets. Managers of small to medium companies should pay particular attention to the creation and participation in social networks in order to gain the information and knowledge they need about foreign markets. Since social networks highlight implicit and informal relationships, it is important to pay special attention to informal relationships between business executives and experts to obtain the information and knowledge needed in foreign markets. Companies that have been able to gain the knowledge they need in foreign markets are able to perform better in international markets, increase the awareness of foreign companies about their products, and also retain their customers in international markets. The present study showed that establishing and interacting within business and social networks can provide the necessary backgrounds for improving the performance of Iranian exporting companies in international markets by providing the required knowledge for network members. Therefore, executives and experts in export companies are advised to interact with partners, industry-like companies, third parties and business associations, as well as to establish informal relationships with social networking members to create opportunities to acquire the knowledge needed in international markets and improve company performance in these markets. Social networks can directly lead to gaining market knowledge and indirectly improve the performance of companies in international markets. So, there is a need for SME managers to establish networks and engage with social network members to gain market knowledge and consequently, it is necessary to improve the performance of the company in the transnational markets.