What is External Economies

This chapter investigates the effects networks have on the acquisition of external economies. The objectives of this chapter include determining if businesses located in clusters are benefitting from external economies and identifying the extent to which these firms are using their networks in accessing these external economies. Six SME business owners were interviewed. They form part of an automotive manufacturing network based in Port Elizabeth in South Africa. The researchers used content analysis and pattern matching to analyse the data. The findings indicate that the entrepreneurs interviewed were all using their networks to gain external economies. They used networks to gain technology spillovers in the form of information on new trends and processes in the industry and highlighted the fact that the network contacts provided opportunistic information. The study also found that some of the entrepreneurs used their network to source skilled employees from the pooled labour market and obtain specialized services and input.