What Is an Economic Network?
An economic network is a combination of individuals, groups, or countries interacting to benefit the community as a whole. The primary goal of the group in an economic network is to strengthen its position in a market.
- An economic network is a combination of individuals, groups, or countries who pool resources and competitive advantages to benefit each other.
- Common types of economic networks are joint ventures between two or more companies or partnerships between corporations.
- The advantages of an economic network are access to a larger labor pool of talent and cost savings.
- The disadvantage of an economic network is that it may result in an imbalance of power between larger members and smaller ones.
Understanding Economic Networks
Economic networks use all available competitive advantages and resources of each member to increase the production and wealth of the entire group. The composition of these networks may vary. In some economic networks, membership may be static (where members do not change), while in others, the network may be dynamic. In these cases, the networks are constantly changing, as members leave or are added. The activities in networks may consist of any number of things including recruitment, surveying, knowledge, and resource sharing.
Economic networks may come in different forms. They may comprise groups of individuals, companies, or nations that share a common goal. Common types of economic networks may come in the form of joint ventures between two or more companies, partnerships between corporations (especially in different nations), or even business groups that form a network with a common link and end goal.
Pros and Cons of Economic Networks
As with any other network, there are certain advantages and disadvantages to being part of an economic network. Some of the benefits include a larger labor pool and savings on costs. When two or more people or groups are sharing resources, they can share talent across the board and their costs can also be driven down.
In addition to this, is the sharing of knowledge, so what one member may lack in knowledge, another member may be able to account for with his expertise. For example, a junior mining company may not be aware of certain local laws or regulations if it undertakes an exploration study in a new geographic area, and therefore, may run into certain problems. However, if it partners up with one or more (larger) companies, or even local ones, it may benefit from their knowledge when it comes to the lay of the land, thus, avoiding any future problems.
But with any network, there are some downsides to being part of a larger group. In some cases, one member's contribution may be larger than others, and there may be a struggle for dominance, leading to an imbalance of power.
Examples of Economic Networks
A chamber of commerce is one example of an economic network. This is a group of businesspeople that promotes and protects the interests of its members. Although the group does not actively take part in creating and enacting laws or regulation, it can be effective by influencing those in power through its lobbying efforts.
Another example of an economic network is the Group of Seven (G-7), comprised of most of the world's largest and most advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Together, these nations represent almost half of the world's gross domestic product (GDP) based on nominal values. As a whole, the group meets for a summit once a year; each member country hosts a summit once every seven years. The annual summits are attended by the heads of government, where they discuss economic policies and initiatives, and any key events that may affect the global economy.