Category: Interpreting Rurality

Rural Business Association   by Gary Bosworth and Robert Newbery (University of Plymouth)

Business-to-business cooperation is seen to be vital to knowledge transfer, the discovery and exploitation of ideas, and higher levels of innovation. The literature on industrial networks and business clusters is replete with evidence of how differential access to physical, human and social resources provides greater local, regional, and/or national productivity. Business networks may be informally or formally constituted, but regardless of the hierarchy of the literal association, the lubricant for all these networks is the social ties connecting businesses.

In a rural area, lower population densities and the often greater distances between individuals and businesses, would be expected to constrain the ability of firms to form, maintain and develop these social ties.  From this perspective they are disadvantaged. On the other hand, the stronger social mechanism associated with rural communities – classically articulated by Tonnies and more recently by Putnam – should act as a foundation for building and consolidating social ties. These barriers and boosts to rural social tie formation may cancel each other out to some extent, but they also give a distinct rural character to these connectivities between businesses.  

The rural may not feature heavily in literature on industrial networks and innovation clusters but Murdoch’s observation states, “Conditions in the global economy (such as rapid technological change) are now seen to place a premium on innovation and learning and this is thought to be conducted most expeditiously within associations of many small firms deeply embedded in local societies and cultures”  (2000, pp414-415).

The strength of social capital in rural areas sees business owners using informal approaches to recruitment, building cooperative relationships with nearby businesses and recognising the reputational gains from supporting community initiatives. However, bonding social capital can also be a hindrance for businesses. Examples from our research show that the risks associated with a negative reputation among a tightly knit community can play a major role in decision making. A village shopkeeper could not advertise for a job vacancy for fear of losing the loyalty of any unsuccessful applicants (and their immediate friends), another business owner was conscious that a planning application to extend a property would create divisions among the local population and a third experienced difficulties when trying to formalise employment and accounting procedures.  In each case the reaction, or anticipated reaction, of people embedded within the local community played a significant role.  The fact that there are fewer businesses in rural areas, and that many of them are recognisable as part of the built environment that connotes that identity of a settlement, conveys a sense of partial ownership onto the community and with that comes a sense of responsibility upon the business owner. 

Looking at formalised networks, Lockett et al (2012) suggest that the process of formalising these associations may kill-off the formation and development of social ties too.  There is evidence that in rural areas, the relational gains sought from formal membership of a business organisation may change over time (Newbery et al Ongoing). In the short-term a member is likely to seek instrumental benefits, such as finding new customers and advertising their presence to the wider community. Over time, the relevance of these wain and members find social benefits of use. Long-term members are however to become “habitual members” unlikely to seek or perceive any kind of benefit, often expressing organisational dissatisfaction but nevertheless reluctant to leave. These habitual members may however be vital in maintaining the association over time, being the only firms likely to maintain membership during times when there is no distinct benefit or purpose. The organisation is able to react rapidly when a burning issue develops, such as the development of out-of-town shopping / foot and mouth, etc.

If rural business Associations rely on purposive joining by businesses looking to extract value, the low densities would be a serious restraint on their sustainability.  The fact that there are fewer local connections means that both community-based ties and “habitual” membership of formal associations provides the infrastructure that would otherwise be lacking.  This infrastructure itself adds value to the rural business, even where it is not called upon for an immediate result.

Theorising about how rural businesses use their networks of associations leads to the conclusion that the source of advice is often connected to the level of risk attached to the decision.  Where high risks are involved, such as starting a business, strong ties are employed offering the highest level of trust.  Rural business owners, especially those with a community service role, are also facing considerable risk when taking decisions that will effect their local reputation, so recruitment and local supplier relationships are also heavily dependent on strong ties.  The risk associated with recruitment for a small firm, especially a family firm, is extenuated for higher level positions which led to firms relying on strong ties from considerably further afield rather than chancing a less familiar alternative.

By contrast, where the risk undertaken is lower, such as opportunities for new business growth, weaker ties are most valuable.  The sourcing of new opportunities or information is less frequent among tight knit groups because of the openness and shared values that exist.  Here, trust is less important because the new idea can be tested, mitigating the level of risk being faced.  For rural economies, accessing these weaker ties is often more difficult, especially among indigenous populations, so this may explain the prevalence of low growth enterprises.  This is not to say that the businesses are “suffering” because many are content in the knowledge that their position is relatively secure, due to the strong-tie associations conferring confidence that the status quo can continue.  However, it may restrict growth across the wider rural economy.

A further observation is that there is a high level of latent association and redundant ties that could be better employed to aid business sustainability or development.   With the sparser character of rural areas leading many firms to join and remain members of associations out of habit, it seems that this social infrastructure could be better employed to stimulate knowledge exchange and business collaborations.  Similarly, the value of more casual social relations is often under-used as business owners “don’t like to talk shop” when they are away from their workplace.  With growing numbers and a growing diversity of rural businesses, the ability for engagement in a balance of traditionally strong rural networks and fruitful, weaker-tie associations will be explored further through this ongoing work.

An associated abstract has been submitted for a proposed forthcoming volume entitled “Co-operation in rural, peripheral areas of Europe: challenges and solutions” to be edited by Edward Kasabov and Alex Warlow.