What is the Value of Business Networking for Growing and Scaling a Business?

Business networking—the process of building and maintaining relationships with individuals and organisations that can provide resources, information, and support—plays a multifaceted and critical role in the growth and scaling of enterprises.

Drawing on a substantial body of academic literature, this answer synthesises key findings on how networking contributes to business growth, the mechanisms through which value is created, the limitations of networking, and practical implications for entrepreneurs and policymakers.

TLDR; Business networking accelerates enterprise growth through resource variety rather than sheer network size. Academic research demonstrates that accessing just one additional type of resource can increase a firm’s monthly profit by 11%.

Because networking yields diminishing marginal returns, founders must abandon “power networking” in favour of building a strategic network of essential ties. To scale effectively, businesses must balance strong ties for operational stability with bridging ties for innovation, while executing an aggressive, systematic follow-up strategy.

Networking as a Gateway to Critical Resources

The most fundamental role of business networking is that it provides access to resources that are essential for growth but often scarce for small and growing firms.

Semrau and Werner [ 1 ] demonstrated that network relationships serve as conduits for three critical types of start-up resources: financial capital, information and knowledge, and additional business contacts.

Their study of 379 nascent entrepreneurs found that both network size and relationship quality positively influence resource access, though with diminishing marginal returns.

This resource-access function is particularly vital for entrepreneurs operating in resource-constrained environments.

Zou and Storz [ 4 ], studying 200 necessity entrepreneurs in Shanghai, found that two dimensions of network content—resource variety (the number of different resource types accessible through the network) and resource spanning (how widely resources are distributed across contacts)—dramatically explained performance differences.

One additional type of resource variety was associated with an 11% higher monthly profit, while a 10% increase in resource spanning was associated with a 5.5% higher monthly profit.

Notably, for these entrepreneurs, network structure (size and openness) did not significantly affect performance—only the content of the network mattered.

Networking and Marketing Capabilities

Networking contributes directly to marketing activities in small and growing firms.

O’Donnell [ 5 ], through an in-depth qualitative study of seven small firms, found that networking with a variety of actors—including potential and existing customers, suppliers, competitors, business friends, government agencies, and employees.

This contributes to all aspects of small firm marketing, including marketing planning, managing limited resources, keeping existing customers, acquiring new customers, gathering market intelligence, managing pricing, and managing delivery.

Key marketing benefits from networking identified by O’Donnell include:

Word-of-mouth recommendations from existing customers (the most potent promotional tool for small firms)
Information about competitors obtained from customers, suppliers, and competitors themselves
Ideas for new products and processes from customers and competitors
Acquisition of supplier expertise and reputation through supplier relationships
Brokerage functions where network actors connect the firm to new customers and opportunities

Knowledge Utilisation and Firm Performance

Networking facilitates knowledge flows that drive both incremental improvements and radical innovation.

Ju and Wang [ 2 ], in a study of 332 manufacturing firms in China, demonstrated that network ties affect firm performance through exploratory knowledge utilisation (using unrelated/new knowledge) and exploitative knowledge utilisation (using related/familiar knowledge).

Their findings revealed that:

Strong ties (close, frequent interactions with partners) were more associated with exploitative knowledge utilisation
Bridging ties (connections spanning structural holes) were more associated with exploratory knowledge utilisation
Both types of knowledge utilisation fully mediated the relationship between network ties and firm performance—meaning ties alone do not directly boost performance; the key is how firms utilise the knowledge accessed through networks

Importantly, exploratory knowledge utilisation had a “double-edged effect”—it positively contributed to performance growth but also increased performance variability (risk), whereas exploitative utilisation provided stable growth with no significant increase in variability.

Types of Strategic Networks for Growth

Jones, Suoranta, and Rowley [ 7 ], studying 12 software technology SMEs in the UK and US, developed the Strategic Network Marketing Model (SNMM), which identifies six distinct types of networks that firms use to create value and drive growth:

Network Type	Actors Involved	Value Created
Intra-firm networks	Employees across functions	Knowledge integration, speed to market, coordinated innovation
Social networks	Friends, relatives, social acquaintances	Market intelligence, trusted information, word-of-mouth
Customer networks	Current and potential customers	Co-creation, referrals, market feedback, competitive insights
Business networks	Banks, venture capitalists, lawyers, advisers	Resource leverage, strategic partnerships, business capacity
Innovation networks	Universities, industry partners, investors	Radical and incremental innovation, new product development
Marketing & sales networks	Channel partners, resellers, sales teams	Global reach, amplified sales, market access

The SNMM positions intra-firm networks at the centre, as internal knowledge integration is fundamental for leveraging all other network types.

The study found that firms with more developed marketing and sales networks (particularly in the Silicon Valley cluster) achieved faster growth and broader market reach [ 7 ].

Networking and SME Growth

Širec and Bradač [ 3 ], studying 201 Slovenian SMEs, found that networking activities are linked to company growth—though the relationship is complex.

Their factor analysis identified five networking patterns:

Cooperation with educational, research, and supporting institutions (linked to income and asset growth)
Cooperation with final users, suppliers, and agents (linked to income and asset growth)
Membership in associations and cooperation with financial providers
Cooperation with competitors and consultants
Strong non-formal connections (associated with aspirations for employee and sales growth)

The study found that companies with strong non-formal connections aspired to both employee and sales growth, while cooperation with value chain partners (customers, suppliers) enabled better performance without necessarily increasing headcount.

To put this resource-spanning theory into practice, why not join us at an upcoming Kraken Networking event?

Diminishing Returns and the Optimal Network

A critical insight from the literature is that networking yields diminishing marginal returns.

Semrau and Werner [ 1 ] showed that both increasing network size and intensifying relationship quality lead to positive but concave (diminishing) returns in terms of resource access.

This means that after a certain point, adding more contacts or spending more time on relationships yields progressively smaller benefits.

This finding has important practical implications:

Entrepreneurs should focus on developing a “network of essential ties” rather than pursuing unlimited “power networking”
The optimal investment in networking varies by the type of resource sought—access to financial capital requires a larger network and higher relationship quality than access to information and knowledge
Network size and relationship quality are partially substitutable—entrepreneurs can choose which strategy to pursue based on efficiency

Networking for Specific Populations

Women Entrepreneurs

Bogren et al. [ 8 ], studying women entrepreneurs in Sweden and Norway, found that women who were more willing to grow their businesses already had more heterogeneous and supportive networks.

Personal networks were valued more than business networks, but business networks showed a sharp increase in importance from “unwilling” (15.9% supportive) to “extra willing” (35.6% supportive) entrepreneurs.

The study concluded that network diversity and heterogeneity are strongly related to women entrepreneurs’ willingness to grow their businesses.

Immigrant Entrepreneurs

Stephens [ 6 ], studying 28 immigrant entrepreneurs in Ireland, found that business networks provided benefits including improved confidence, key skill development, client acquisition, widened contacts, and access to information.

However, immigrant entrepreneurs faced barriers to accessing formal business networks and often relied on co-ethnic ties initially, gradually expanding to broader professional networks over time.

Early-Stage vs. Established Firms

Kitchen [ 9 ], studying a UK trade show, found that attendees from younger organisations (0–2 years old) followed up with significantly more contacts (10 contacts) compared to more established firms (approximately 1 contact for firms over 20 years).

This aligns with the finding that network intensity is particularly critical for survival and growth in younger firms.

Formal Business Networks and Business Development Services

Suzuki and Igei [ 10 ] provided evidence that even formal, government-facilitated business networks can generate tangible results.

Studying a JICA-supported project in Thailand that established formal networks among Business Development Service (BDS) providers, they found that:

BDS providers in treatment provinces changed their behaviour, becoming more demand-driven (increasing fee-based services by 50.4 additional SMEs)
Providers improved their external outreach activities
SMEs using BDS in treatment provinces had higher likelihood of receiving business contracts from other companies
BDS use improved SMEs’ management practices and increased the likelihood of having certified products and engaging in exports

Practical Implications for Entrepreneurs

Based on the accumulated evidence, several practical recommendations emerge for entrepreneurs seeking to leverage networking for business growth:

Be strategic, not maximalist: Focus on developing a purposeful network of essential contacts rather than accumulating as many contacts as possible [ 1 ].
Prioritise content over structure: The resources available through your network matter more than its size or structural properties, especially for resource-constrained entrepreneurs [4 ].
Diversify network types: Engage with multiple network types—customers, suppliers, competitors, innovation partners, and marketing channels—to access different value-creation opportunities [ 7 ].
Balance strong and weak ties: Strong ties facilitate trust and knowledge exchange, while bridging ties provide access to novel information and opportunities [ 2 ].
Invest enough time—but not too much: Invest sufficient time to secure access to needed resources, but avoid excessive investment when no prospect of significant returns exists [ 1 ].
Cultivate resource spanning: Distribute resource access across multiple contacts to reduce vulnerability and increase strategic flexibility [ 4 ].
Participate in formal networks: Government-facilitated business networks, trade associations, and trade shows can provide structured networking opportunities that reduce search costs and connect entrepreneurs with valuable partners [ 9 ], [ 10 ].

My Conclusion

Business networking plays a vital role in growing and scaling a business by providing access to financial capital, knowledge, market intelligence, customers, innovation partners, and strategic opportunities.

However, the relationship between networking and growth is not linear—it is characterised by diminishing returns and requires strategic calibration.

The entrepreneurs who thrive are those who build networks rich in valuable content, span resources across multiple contacts, utilise accessed knowledge effectively, and balance investments across different types of relationships and networks.

Ultimately, networking is not merely an activity but a strategic capability that, when deployed thoughtfully, can significantly accelerate business growth and scaling.

Understanding the theory of resource spanning is only half the battle; the other half is putting yourself in the room. If you are looking to build a targeted network of essential ties in the region, join us at the next Kraken Networking event to put this strategy into practice.

References

[1] Semrau T, Werner A. How Exactly Do Network Relationships Pay Off? The Effects of Network Size and Relationship Quality on Access to Start–Up Resources. Entrepreneurship Theory and Practice. 2014;38(3):501-525

[2] Ju X, Wang G. How do network ties affect firm performance growth and its variability? The mediating roles of exploratory and exploitative knowledge utilization. Journal of Business Research. 2023;160:113781

[3] Širec K, Bradač B. How does Networking Impact the SMEs Growth. Organizacija. 2009;42(2):59-66

[4] Zou N, Storz C. Why do some entrepreneurs thrive? A network content perspective. Journal of Business Research. 2023;161:113821

[5] O’Donnell A. The Contribution of Networking to Small Firm Marketing. Journal of Small Business Management. 2013;52(1):164-187

[6] Stephens S. Building an entrepreneurial network: the experiences of immigrant entrepreneurs. Journal of Enterprising Communities: People and Places in the Global Economy. 2013;7(3):233-244

[7] Jones R, Suoranta M, Rowley J. Strategic network marketing in technology SMEs. Journal of Marketing Management. 2013;29(5-6):671-697

[8] Bogren M, von Friedrichs Y, Rennemo Ø, Widding Ø. Networking women entrepreneurs: fruitful for business growth? International Journal of Gender and Entrepreneurship. 2013;5(1):60-77

[9] Kitchen E. What is the value of networking? An examination of trade show attendee outcomes. Journal of Convention & Event Tourism. 2017;18(3):191-204

[10] Suzuki A, Igei K. Does efficient provision of business development services yield better results for SMEs?: evidence from a networking project in Thailand. Journal of Development Effectiveness. 2019;11(3):203-229