C-commerce Innovation: Unraveling the Effects of Knowledge Ties on Embedded Network Structure

Relative to other nations, economically significant activity in Australia and New Zealand is skewed toward micro and small business. Issues of scale and access to resources and expertise, suggest issues for Australian and New Zealand SMEs seeking to compete in the era of the global Internet economy. Collaborative, or so-called C-commerce, has arisen as a concept and key enabler for clustering of SMEs to secure resource advantage and to promote global competitiveness. Through the lens of a C-commerce case study in tourism, this paper explores network factors that impinge upon C-commerce innovation in an SME setting. The paper demonstrates the usefulness of Social Network Analysis (SNA) as a method for understanding E-commerce information and knowledge flows between SMEs, and how these factors contribute to C-commerce clustering and innovation outcomes. INTRODUCTION An awareness of the importance of ‘embedded networks’ in understanding innovation emerged from the work of Freeman (1991) and Rogers (1995) in the 1990s. In his study of innovation, Freeman (1991, p.548) had observed that the innovation process was “one of complex network interaction, involving strategic behaviour, knowledge appropriation, technological complementarity and sociological compatibility”. In the mid 1990s, Rogers (1995) built upon Freeman’s work with publication of his “Diffusion of Innovation” (DOI) Theory. Rogers argued that adoption of an innovation is an action facilitated, firstly, by the extent to which the innovation is perceived to generate benefits that outweigh costs (ibid, p.164) and, secondly, as a consequence of the creation of critical mass (ibid, p.157). Critical mass “occurs at the point at which enough individuals have adopted an innovation so that the innovation’s further rate of adoption becomes self-sustaining” (ibid). But according to Rogers, the adoption of an innovation was not wholly determined by considerations of costs versus benefits and the condition of critical mass. Rogers (1995) also viewed the adoption of innovation as partly a social phenomenon, in which “in deciding whether or not to adopt an innovation, individuals depend mainly on the communicated experience of others like themselves” (ibid, p.149). In the 1990s, Freeman’s and Rogers’ ideas were used to analyse innovation behaviour in large corporations and high tech industries. However, the rise of services as an important contributor to GDP in many economies initiated a revolution in innovation theory. This revolution was driven by the rise of so-called Knowledge Intensive Services (KIS) and interest in the transferability of Freeman (1991), Rogers (1995) Granovetter’s (1973) ideas on innovation to organizational contexts and settings outside the formalized arrangements of major corporations. The role of KIS in economic growth and their contribution to economically significant innovation has been extensively researched by Quinn (1992), Reich (1991), Illeris (1996), and Windrum and Tomlinson (1999). Windrum and Tomlinson (ibid, p.3) are particularly concerned with the role of KIS as engines of economic growth: As knowledge has overtaken material inputs as the source of value added, so high tech and highly innovative service sectors have become important to national productivity and competitiveness.