When would networking work as a business development strategy? A trivial case is when clients are irrational in a particular way – they hire the person who is “top of mind” for them or the best networker.
What are some rational reasons why networking might work? If a client considers all service providers equal, then he may pick the “top of mind” provider, draw a name out of a hat, or use any other decision method.
A more likely reason is that networking signals something about the networker that is useful to clients – for example, that the networker has plenty of free time. An irrational aspect of such signaling of availability is that there are more productive ways to signal free capacity, including volunteering and pro bono work. Compared to networking, these generate greater social welfare, improve useful skills, and require less time from the client.
Similarly, networking may demonstrate communication skills, but again, there are more productive ways to show these – the networker could advocate for a good cause or teach for free.
To explain networking as the signaling of some dimension of quality, that dimension should be (a) most observable face to face, (b) sufficiently important to spend time and effort signaling, and (c) not revealed by work output or the results of other productive activities. If an important dimension of quality was best observed in person, then existing clients should be asking for face to face meetings to learn this dimension. If they are not asking, then this dimension is likely learnable by working together, in which case networking should target new clients, not existing ones.
In addition to “vertical differentiation” by quality, there may be “horizontal differentiation” in the sense that provider A is a better fit for client 1, but provider B for client 2. Networking may help clarify what the best match is, but again, this would mostly be relevant for client-provider pairs who have not worked together before. As with quality signaling, networking to find matches only makes sense if it reveals sufficiently precise and important information that is not available through cheaper channels, such as a web search for the service provider’s track record.
The above reasoning also applies to other signaling methods like participating in conferences and panels, publishing academic articles or LinkedIn posts. If people simply liked networking, then they would do it at every opportunity, not just at special networking events. They would hang out with their work contacts as often as possible and look for ways to increase the interaction frequency, such as by moving into the same building, the same floor, and merging their firms.