Abstract
This paper proposes taxonomy to classify small business operating in networks. This taxonomy is based on linking element or actor between the network and the market. Four types of links are identified: a) a fund provider; b) an outsourcer; c) a cooperative; and d) a stellar organization. The stellar organization, an informal network arrangement based on common objectives of participating members, that appeared in Northern Italy in seventies is described in terms of relevant characteristics. These can be positive or negative. Positive features of the stellar organization include high specialization and multiple mother (or star) companies, resulting in lower unit costs of production and high flexibility in satisfying demand. Negative features includes higher transaction cost diseconomies due to the required multiple negotiations. However, the paper shows that even the high transaction costs can be overcome by systematic gains due to negotiations, a system that is more efficient than the authoritarian command typical of large organizations. The paper also points out the branding weakness of the stellar organization to compete in a global economy.