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For rural businesses, networks work, UNL research shows

Nebraska

Small town businesses face difficult challenges, but those that join forces may have a better chance of success, University of Nebraska-Lincoln research has found.

Nancy Miller, a professor in textiles, clothing and design, has spent the last decade, beginning at Iowa State University and now at UNL, researching how rural business networks can help communities thrive by tapping into their economic development strengths.

"As rural communities decline, local leaders find that the traditional 'smokestack chasing' strategy holds little promise," she wrote in a report about her research. "Most successful are strategies that build upon local assets and focus resources and energy on supporting retention and expansion of existing businesses and creation of new businesses."

Miller's research, which included interviews with more than 1,100 members of 29 networks, focused on two kinds of business networks--those that are community-based such as chambers of commerce and those organized for specific types of businesses that cover a wider, sometimes even multi-state region.

Most of the networks Miller and her colleagues studied had been around for some years--11 for more than 50 years. Sizes of the networks varied from fewer than 25 members to more than 2,000.

Miller began her work in 1997 by focusing on a network of small store owners. Other networks she's studied comprise nut growers, bed and breakfasts, chiropractors, home-based businesses and dry cleaners. In 2005, five new networks were formed involving women apparel store owners, organic crop growers, small community economic developers, Hispanic entrepreneurs, and small market farmers. Funding to study the networks' development was provided by the National Science Foundation.

Convincing small business owners to work together can be difficult, the Institute of Agriculture and Natural Resources researcher said. Many have a "go it alone mentality" and "don't want to be dictated to."

But the benefits of formal networking are significant, Miller said. Participants in business networks reported these benefits as the most important:

--influence over favorable legislation;

--enhanced market knowledge;

--improved marketing;

--improved management skills;

--and greater access to technology.

Networking is not only good for business, but good for communities, Miller said. Research suggests that businesses that belong to formal networks are more successful, have denser local supply chains, and are more likely than non-networked businesses to engage in community betterment initiatives such as building bike trails and sponsoring community festivals.

Miller found that the most successful business networks are well-organized, with a set of bylaws and a leadership structure. They communicate frequently, perhaps through a newsletter, and they continue to recruit new members.

The apparel-store network Miller studied had a rule that members had to be at least one hour's drive away from each other. Members of that group sometimes place orders together to take advantage of volume discounts, splitting the merchandise. Members also share advertising and marketing ideas as well as discuss financial ratios.

Successful business networks "have to go through their own development of trust," Miller said.

Once they learn that trust, though, the benefits of networking are obvious to many business people.

"After you get hooked, you can't leave it," said Diane Knobbe, owner of StylePlus in West Point, part of the apparel-store network. "I think what's good for one of us probably is good for all of us."

Miller and others, including Diane Vigna of UNL Extension, have put their findings into practice by helping businesses start new networks and by creating some educational materials for business owners. She's also gotten UNL students involved, through the UCARE program, in her work. For example, some have helped businesses with new ideas for store layout and design.

Miller is continuing her research of rural business networking with a $450,000 grant from USDA's National Research Initiative. Recent changes in rural heartland towns offer the promise of economic vitality and population growth. The changes are the increase in Latino population and business ownership, and the growth of women-owned businesses. Among the questions she's exploring: Can networking help Latino-run businesses be more successful in attracting a larger customer base?

Miller's work also is funded by the USDA's Fund for Rural America.

The Institute of Agriculture and Natural Resources includes UNL Extension, the Agricultural Research Division and the College of Agricultural Sciences and Natural Resources. A 2007 study by an independent organization found IANR annually returns at least $15 in benefits to Nebraskans for every dollar of state support, making it a primary engine for economic and social sustainability (atworkfornebraska.unl.edu).

1/5/09
6 Star Midwest Ag\5-B

Date: 12/29/08



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