Bridging and bonding forms of social capital in a regional strategic network

Industrial Marketing Management 40 (2011) 994–1003

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Industrial Marketing Management

Bridging and bonding forms of social capital in a regional strategic network☆ Jens Eklinder-Frick a, Lars-Torsten Eriksson b, Lars Hallén c,⁎ a b c

Gävle University, SE-80176 Gävle, Sweden, and Mälardalen University, Box 883, SE-72123 Västerås, Sweden Gävle University, SE-80176 Gävle, Sweden Mälardalen University, Box 883, SE-72123 Västerås, Sweden

a r t i c l e

i n f o

Article history: Received 30 November 2010 Received in revised form 11 April 2011 Accepted 1 June 2011 Available online 23 July 2011 Keywords: Social capital Bridging Bonding Regional strategic networks Dependence-oriented culture

a b s t r a c t Research on networks emphasizes the importance of bonds between actors. Social reciprocity strengthens network bonds, which is assumed to have positive effects on business relationships between firms. However, the importance of weak ties is also stressed in network research. An important policy issue is therefore if more attention should be devoted to the creation of bridges to other social groups and loosening bonds between network actors. The difficulty in doing so is described and analyzed in this article focusing on a regional strategic network, which is viewed in three network perspectives. Interview data were collected from all participating managers in a regional strategic network in 2004 and 2010. The findings shed light upon the paradox of using a regional strategic network to counteract over-embeddedness and freeing the involved actors from existing network lock-ins instead of further strengthening such social institutions. © 2011 Elsevier Inc. All rights reserved.

1. Introduction Research on networks emphasizes the importance of bonds between actors. Social reciprocity strengthens network bonds, and in regional strategic networks (also called cluster initiatives) this is assumed to have positive effects on business relationships between member firms. However, the importance of weak ties is also stressed in network research. An important policy issue is therefore if more attention should be devoted to the creation of bridges to other social groups and loosening bonds between network actors, i.e., focusing on bridging forms of social capital as contrasted to bonding forms. Social capital represents the relational resources attainable by actors through social relationships (Adler & Kwon, 2002; Bourdieu & Wacquant, 1992; Coleman, 1990; Putnam, 1995). It is regularly assumed that the effect generated by businesses cooperating in a network significantly depends on the strength of the social resources of the group and the social capital in society (Houghton, Smith, & Hood, 2009; Shan, Walker, & Kogut, 1994). Negative effects of social capital resulting from over-embeddedness in the network are also discussed in research since long (Grabher, 1993; Granovetter, 1985; Uzzi, 1997), but other researchers in the field (Alguezaui & Filieri, 2010; Molina-Morales & Martínez-Fernández, 2009; Osborne, Baum, ☆ Jens Eklinder-Frick has a Licentiate degree in industrial management and organization from Mälardalen University (Västerås, Sweden) and is employed at Gävle University (Sweden). Lars-Torsten Eriksson is professor of business administration and entrepreneurship at Gävle University. Lars Hallén is professor of business administration and industrial marketing at Mälardalen University. ⁎ Corresponding author. Tel.: + 46 21 101517. E-mail addresses: [email protected] (J. Eklinder-Frick), [email protected] (L.-T. Eriksson), [email protected] (L. Hallén). 0019-8501/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2011.06.040

& Ziersch, 2009) point out that there is a lack of research that empirically explores the negative effects of social capital. Through the case study in this article we explore effects of over-embeddedness and relate this to the concept dependence-oriented culture. Our purpose is to describe bonding and bridging forms of social capital in the empirical setting of a regional strategic network (cluster initiative). We analyze this using three network perspectives to shed light on the relation between bridging and bonding activities in a regional strategic network and social capital in a context characterized by a dependence-oriented culture. We rely on network theory and empirical data from a network of small industrial companies in Sweden. 2. The theoretical perspective Håkansson, Ford, Gadde, Snehota, and Waluszewski (2009:236) claim that “network is one word with many meanings”. To bring about some order into these various interpretations Cova, Prévot, and Spencer (2010) specify five different perspectives that typify the use of the concept: territory, industry, alliance, community, and kinship. Three of these perspectives are of particular relevance in our case. The industry perspective reflects the ambitions of the cluster initiative. The territory and community perspectives characterize dominant features in the context of the regional strategy, as the initiative was formally restricted to a specific region and as it operated in a strong community culture. The conceptualization of these perspectives is summarized in Table 1. Our empirical case is a designed inter-company cooperation project that was formed with a vision of achieving regional growth

J. Eklinder-Frick et al. / Industrial Marketing Management 40 (2011) 994–1003 Table 1 Three perspectives on networks. Adapted from Cova et al. (2010), p. 885. Perspectives

Industry

Type of members

Companies Local (suppliers/buyers/competitors) companies and localized institutions Business relations, mainly Essentially vertical horizontal

Nature of links or ties Nature of flows

Economic. Goods and services

Network organization

Supply chain. Formal. Structured. Mechanistic. Industry focused.

Network Industry focused. configuration Efficiency and optimization Network purpose and (individual and collective) outcomes

Territory

Informational, affective, political, technological Spans from totally spontaneous and informal to explicit design by political actors Regional, sectorial Regional growth (collective) and competitive advantage (individual)

Community Individuals

Reciprocal, intense, solidarity Social, affective

Emergent, informal, stable, sense of responsibility,

Cultural. “Weness” Individual and collective identity building

by bringing together firms operating in the region. The territory perspective as described by Cova et al. (2010) emphasizes aspects such as local companies and institutions, influence from political actors and regional growth purposes and development of competitive advantages. All these aspects were highly relevant in this case. However, as Koschatzky and Kroll (2007:7) claim, the design of a regional innovation and network policy “requires a combination of regional intelligence” and “the ability to understand the local socioeconomic context”. This is represented by the community perspective which focuses on individual and collective identity building, social and affective flows, and emergent and stable networks. The socioeconomic context is often explicated by the concept social capital (Adler & Kwon 2002; Molina-Morales & Martínez-Fernández, 2009). To understand the social capital in a region is therefore of importance in designing and implementing inter-company cooperation. Thus, the concept of social capital derives from a logic coherent with the community perspective of the network concept (Cova et al., 2010) since social capital builds upon the flow of social and affective values that build an individual and collective identity (Adler & Kwon, 2002; Bourdieu & Wacquant, 1992; Coleman, 1990; Putnam, 1995). The industry perspective focuses on mainly vertical business relationships involving the exchange of goods and services within a structured supply chain. This network perspective can be seen as implicit in the design of the regional strategic network. In other words, the ambition was to create an industry-based network from the territorial and community-based network structures that already existed.

have grown and developed over time without central control, whereas strategic networks are designed entities created by some initiators or founders. The case reported in the present paper is a regional strategic network according to this taxonomy (Fig. 1). We define a regional strategic network as a collaborative project between companies in a region operating with the support of public agencies or other organizations in order to stimulate regional business development (Hallén & Johanson, 2009, p. 22). In the territory perspective of the network concept the geographical proximity between the companies is a given condition (Cova et al., 2010) but this is not the only dimension that generates spatial relationships to support innovation (Cantù, 2010). Technological proximity (Greunz, 2003), cognitive proximity (Wuyts, Colombo, Dutta, & Nooteboom, 2005) and social proximity (Bradshaw, 2001) also have an impact upon the formation of innovative networks, making proximity more than a geographical feature (Cantù, 2010). The technological proximity refers to shared technological experience and knowledge and is based on the value of the technological exchanges made as well as the potential value of future exchanges (Cantù, 2010). The social form of proximity implies that interactions and relationships are influenced by cultural proximity, which refers to the dominating culture of a region and the organizational culture among the involved actors. A broad perspective in creating innovative networks must according to Cantù (2010) be taken, transcending the prior focus upon geographical closeness as the main variable. Faerman, McCaffey, and Van Slyke (2001) highlight the element of choosing the number and variety of involved actors as one of the strategically important issues facing a management group within a strategic network. They bring forward the notion that fruitful collaboration is more easily achieved if the member group is homogeneous and if there are personal ties between the actors. Large and heterogeneous groups may on the other hand facilitate cooperation by creating opportunities for business and information exchange. Saxton (1997) argues that a certain degree of similarity may smoothen interaction but that too much similarity would not bring anything novel to the relationship. Dhanaraj and Parkhe (2006) claim that a strategic network that aims at spurring innovation should involve complementary actors when it comes to market leadership, resources, reputation and prior ties. The actors will thus have different strengths and be able to play different roles in the collaborative process. Complementary resources allow for vertical collaboration among the involved actors as each member makes its particular contribution to a common achievement, for example a product. 2.2. The community perspective on the network Much of the current interest within network studies seems to be devoted to the effects of network processes on innovation (Edquist & McKelvey, 2000; Romer, 1986). Geographical proximity between companies within a regional strategic network does not singlehandedly

2.1. The territory perspective on the network Cova et al. (2010) characterize networks from a territory perspective of networks as spanning from totally spontaneous formation to explicitly designed cooperation undertaken by political actors. In a taxonomy of inter-company cooperation (Hallén & Johanson, 2009), a distinction is made between emerging and designed (or “engineered”) cooperation. Clusters are seen as emerging spatial networks of firms in related lines of business that

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Fig. 1. Four types of cooperative patterns between business firms. Hallén and Johanson (2009), p. 14. (Authors' translation.).

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create a platform for innovation. Other aspects of proximity must be put into focus such as the cultural proximity between the involved actors (Cantù, 2010). An aspect of this is the role of social capital (Putnam, 1993) and the cooperation between SMEs (Piore & Sabel, 1985) which is in focus in the present paper. Trustworthiness is an important part of an actor's social resources and relates directly to an actor's ability to create strategic networks (Coleman, 1990). Houghton et al. (2009) claim that there is a direct link between a firm's social resources, the firm's involvement in external networks and the firm's strategic complexity. If a firm is involved in a lot of external networks the firm gets access to much social capital, with elevated possibilities for strategic development as a consequence. Shan et al. (1994) also make a clear connection between the number of collaborative relationships a firm develops and its innovation output. Research on social capital has mostly focused on its positive effects. Molina-Morales and Martínez-Fernández (2009) claim that there is a lack of empirical research exploring the negative effects of social capital. Other researchers concur and postulate that the same ties that filter information and serve as knowledge resources can serve as lockins that isolate the organization from the outside world (Gargiulo & Benassi, 2000; Grabher, 1993; Parra-Requena, Molina-Morales, & García-Villaverde, 2009; Uzzi, 1996). Nardone, Sisto, and Lopolipo (2010) claim that “negative bonding social capital can hinder the achievement of a policy goal by coalescing opponents into an effective coalition”, thereby “oppressing some members of a community from connecting with other communities and organizations”. Molina-Morales and Martínez-Fernández (2009) call the effect of hindering bonds and ties “over-embeddedness” and conclude that the curve that relates to the connection between richness in social capital and innovation is an inverted U-shape. Some degree of social capital in the form of information networks within clusters promotes innovation, but when the information network becomes too dense innovation is hindered. Coleman (1990) characterizes a network that is fully connected by a huge quantity of social capital as “closed” and therefore immune towards opportunistic behavior. On the other hand, Coleman identifies “closed” networks as somewhat rigid and therefore less innovative than “open” networks. Granovetter (1983) claims that socially dense and cohesive networks do not provide the most favorable environment for genuine innovation and active social connections. This function is performed through “weak ties” i.e. temporary or intermittent connections through which unexpected significant information flows are channeled. Granovetter (1983) uses the term “bridging” to denote how weak ties can create bridges between an actor's social context and that of another actor, which contributes to broadening the actor's frame of reference. Granovetter's (1983) term is developed by Putnam (2000) who claims that social capital may have two different effects upon human interaction: bridging and bonding. Bonding represents strong connections within homogeneous groups that often exclude interaction outside the group. Bridging, on the other hand, entails interaction between different social groups, and more loose bonds between actors. Hoyman and Faricy (2008) claim that strong bonds between members of homogeneous groups may hinder innovation since these bonds make the members complacent and isolated from impressions outside of their small circle of social interaction. These strong bonds therefore generate conformity. According to Hoyman and Faricy this is a strong obstacle for innovation. Florida (2002) connects the “bridging” form of social capital with what he calls the creative class and connects innovation to loose bonds between different social groups which contributes to an open society. Burt's (1992) notion of “structural holes” focuses on the dangers of consistent norms fostered by cohesive networks and thereby raises a similar argument as Granovetter's weak ties (1983). Burt (1992) claims that the diversity of information and the subsequent brokerage

opportunities created by structural holes in networks are supported by access to social capital. The acknowledgement of structural holes in networks enables actors to act as information brokers in combining the information from separate networks. The combination of the information stemming from separate networks increases the potential for innovation. 2.3. The industry perspective on the network According to the markets-as-networks perspective, companies are considered to operate in a business network of suppliers of goods and services, competitors, resellers, suppliers of complementary services (e.g., after sales services or financial services), customers and their customers, institutional actors and others. A salient feature of the business network is its connectedness in terms of direct or indirect links between firms. Various theoretical approaches focusing on different network aspects include actor relationships (Hägg & Johanson, 1982), the actor-resource-activities model (Håkansson, 1987), distance to the market place (Krugman & Venables, 1996), and spatial closeness between firms (Porter, 1990). The industry perspective focuses on network features such as business relations between companies, mainly vertical relations between suppliers and customers. Such vertical collaboration may entail different aspects of the supply side of the individual company. Often rather few suppliers constitute a company's supply base and consequently play an important role in that company's business (Axelsson, Rozemeijer, & Wynstra, 2005). Each supplier relationship therefore has its own history that influences the other supplier relationships and business relations within the individual actor's network. The interconnectedness and interdependency of the different relationships that constitute a supplier network is embedded in a significant number of other supplier relationships in terms of shared resources and interconnected activities. Due to these interconnections a company's individual supply chains are characterized as relatively stable and generate both value and constraints (Ford, Gadde, Håkansson, & Snehota, 2003; Håkansson & Snehota, 1995). Tunisini and Bocconcelli (2009) call these relatively stable supply chains “history networks” to emphasize the importance of their emergence over time. They also claim that these history networks can either be a constraint or a value for the individual company. Consequently they define these supply networks as either a “history network as a burden” or a “history network as a tool” and thereby specify if a single company's previous network connections might help or constrain the company in developing its network. 3. The regional strategic network of Firsam The municipality of Söderhamn (26 000 inhabitants) is situated on the Swedish coast of the Baltic Sea 260 km north of Stockholm. Söderhamn can be described as a traditional industrial community once founded around an important armorer's workshop and gradually developed around the forestry business (Hammar & Svensson, 2000). In 1945 a military air force base was set up in town in succession to previous military installations. At the same time the industrial production expanded in a new direction as the telecom manufacturer Ericsson started a plant in town in 1947. Both the air force base and the Ericsson plant were closed at the turn of the millennium—the Ericsson plant just a year after it was bought by Emerson. These closures reduced employment in the municipality with more than 10%. One of the projects undertaken to compensate for the downsizing included actors from the public, private and academic sectors (“triple helix” cooperation) as this had become a preferred approach for regional actors wanting to stimulate the development of regional industry (Lind, 2002). Together with the previous management at Emerson, officials of the municipality developed a cluster initiative

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together with researchers at the regional university. In 2004 these three actor groups formed the regional strategic network Firsam (Företag i regional samverkan—Firms in regional collaboration) of the triple helix type supported by the EU Regional Development Fund. The project idea was to bring to market the combined competence and capacity of the companies joining the Firsam network. The ultimate mission was to find a product idea to develop and produce jointly. Each company should be responsible for a step in the value chain. This demanded joint efforts in searching for new products, product development, marketing and financing. On Firsam's web site the mission was described by the catchwords “from idea to the final customer in one chain”. The links in the chain were specified as illustrated in Fig. 2. The designated scope of the mission was thus very ambitious. The aim was to develop Firsam into a permanent organization which in the long term would create business relationships equally important for the region as Emerson (Ericsson) and the military air force base had been. 4. Methodology and data collection Case study research is a well established methodology in industrial marketing and network research (Visconti, 2009) and plays an “important role in theory development within industrial marketing and the industrial networks paradigm” (Wagner, Lukasse, & Mahlendorf, 2009:6). As stated by Borghini, Carù, and Cova (2009) the principal objective of case study research is “a deep understanding of the actors, interactions, sentiments, and behaviors occurring for a specific process through time”. This statement together with Yin's (2003) statement that a case study is appropriate when the research question is formulated as “how” or “why” rather than “how many”, “how much” “where”, or “how often” provides arguments for using a case study approach. The emphasis normally is on qualitative data, although both quantitative and qualitative data are usually used as different sources of information (Yin, 1993). We started the research project through participant observations made during the initial phase of the network project, which lasted for approximately half a year in 2004. We also conducted in-depth interviews with all the involved companies during the first three months. Hence, the participating managers of all the 15 companies included in the Firsam network were interviewed in separate

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meetings, lasting 60–140 min. Very broad and open questions were formulated in order to let the respondents reflect over the network. The content of the interviews focused on getting an adequate picture of the respondent's company, on giving the respondent a chance to express his or her intent in joining Firsam, and portraying the expectations that he or she had on the Firsam project. The respondents' prior experience of network projects was also discussed in order to get a picture of the respondents' general attitude towards networking. We met with the same managers for in-depth interviews in 2010 to follow up the development of the Firsam project as well as the managers' personal development tied to the Firsam venture. After all the interviews were carried out and transcribed we started to sort the qualitative data by using open coding influenced by Strauss and Corbin (1998). This approach gives an opportunity to be open in the coding of the data, as opposed to a more structured approach with preliminary codes decided upon a priori. We specifically searched for information that shed light on bonding and bridging activities or attitudes. The concepts used to structure data are therefore empirically derived and then sorted into categories based on a prior existing theoretical framework. This method follows the inductive perspective often used in case study research (Bryman & Bell, 2007). Some quantitative data were also collected through a questionnaire that was filled out by the same respondents. This was also done both in 2004 and in 2010. The questionnaire dealt with issues regarding the respondents' current contacts with the companies included in the Firsam project. The questionnaires were filled out by the respondents themselves in the presence of the interviewer and collected at once. In the questionnaire the respondents were asked to assess how often their own company worked together with the other member companies of the budding strategic network by using a scale from 1 (not at all) to 5 (very often). The member companies were identified through aided recall as a list of company names was presented to the respondents. The assessments made by the respondents resulting in the quantitative data should be interpreted as a subjective grading by the respondent and not a factual account of how often these companies are in contact. Besides the collection of primary qualitative and quantitative data, secondary data were collected and included in the analysis. The secondary data consist mainly of protocols, newspaper articles and web based material. These data predominantly serve to portray the strategic and managerial development of the Firsam project and the context of the member companies. Researchers (Degenne & Forsé, 1994; Freeman, 1996; Wasserman & Faust, 1994) often suggest that modern social network analysis began with the publication in Moreno's (1934) pioneering book on sociometry. Moreno developed a sociometric instrument now commonly used in social network research involving the measuring of network modularity (Freeman, 1996). In measuring the percentage of modularity the formation of cliques or separate groups within a network becomes visible (Moreno, 1934). The modularity percentage indicates how dense a sub-network is in comparison to the surrounding network and thereby indicates the density of tie formation in network structures (Bickel & Chen, 2009). We use this sociometric instrument in measuring the density of cliques within the studied network. This enables us to shed further light upon the development of social capital within the focal network structure. 5. Analysis 5.1. The strategic network in 2004

Fig. 2. “From idea to the final customer in one chain”. Firsam Verkstadscentrum Söderhamn, 2008 (authors' translation).

Figs. 3 and 4, which are based on information from the questionnaires to representatives of the member companies of the Firsam strategic network in 2004 and 2010, show the member companies at these two points in time. They depict the intensity and

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Fig. 3. The Firsam network in 2004.

direction of relationships between them. The properties of the relationships were self-assessed by the respondents on both occasions according to the five-point scale mentioned above. The member companies were identified through aided recall as a list of company names was presented to the respondents. In the diagrams, arrows represent the relations between the companies where the dashed lines represent a relationship grade of 4 (“working together rather often”) between the companies and solid lines represent a relationship where the relationship has been graded with grade 5 (“very often”). The solid lines therefore indicate very frequent contacts between the actors. Some of the interviewed companies often mentioned a connection to the company Ericsson. These companies which mostly operated in the electronics and telecom industry are indicated here as EC 1–EC 8. Other companies mostly performing various manufacturing tasks in the mechanical industry (here designated as MC 1–MC 5), made similar reference to Verkstadscentrum, another strategic network that was established previously in the region and functioned as a basis for the relationships that the companies in the Firsam network had had prior to the launch of the new network project. The EC companies either consisted of staff formerly employed by these companies or did the bulk of their business with the Ericsson (Emerson) company. The know-how of these companies focused on electronics. They either produced or designed electronic products with a focus on the telecom market. The purpose of Verkstadscentrum was to make joint purchases of materials for production and to work closely with the industrial program at the local high school in offering trainee positions. The companies mentioning connections to Verkstadscentrum all had their primary business or know-how in manufacturing and engineering. It can be seen both in Figs. 3 and 4 that the Firsam network was derived from two previous constellations, i.e. companies connected to the EC group or to the MC group. There are no companies that have

more arrows connecting them to a company representing the other of the two groups than that company has to companies representing its own group. The intended bringing together of two prior existing groups fits in well with Burt's notion of using the brokerage opportunities created by structural holes to create innovation. The inclusion of heterogeneous companies in order to facilitate vertical collaboration thereby seems to have created opportunities for two networks to share information. Merging two social contexts in this manner contributed to information exchange by bridging weak ties and thereby to the creation of bridging forms of social capital. The difference between the subgroups EC and MC was noticed by the respondents and expressed in the interviews conducted in 2004. A respondent from the EC group claimed: There is a difference in culture; you express different things in a different manner depending on the line of business you are in. This highlighted that bringing together the two subgroups initiated by Firsam might not work out that smoothly. The companies associated with MC also felt a friction between the subgroups. Some respondents from this group felt that the Firsam project had a focus on the electronics business from the outset since the project leader had a background within this business. Another respondent reported the following: Firsam was influenced by the project leader, and he came from the electronics side of things. In that field of business it seemed that we in the manufacturing industry and subcontracting manufacturing business did not have anything to gain. Here the significant difference between the subgroups is described as between one group consisting of companies within the electronics field and another group of manufacturing companies, a notion

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Fig. 4. The Firsam network in 2010.

indicating that the groups did not share a technological proximity. The respondents interpreted the friction between the groups as something negative, and this seems to correlate well with the assumption that bonding social capital might force the subgroups into opposite coalitions. An unwillingness to create relationships outside of the social context provided by the two subgroups serves as a telling sign of the influence the prevailing bonding social capital had on the Firsam project. One of the initial thoughts behind the Firsam project was to create a regional strategic network that worked on the basis of “from idea to the final customer in one chain” (Fig. 2). A respondent representing the network management group expressed this vision: I thought the general idea was great: to gather these different companies in order to do different elements in the production process and then finally deliver parts of a final product or a complete product to customers and other companies. This way of thinking corresponds to vertical collaboration and entails the process where the companies undertake different activities that build upon each other towards a final product. The intent in selecting companies that were complementary instead of similar was described by a respondent representing the Firsam management group as follows: I am still skeptical towards the practice of assembling networks by always including very similar companies. It creates likemindedness. According to Jarillo (1988) an entrepreneur should choose the companies that he wishes to include in his strategic network carefully, and choose companies that can “relate to each other”. If the companies also share technological proximity a better breeding

ground for trust can be developed (Cantù, 2010). The management group of Firsam preferred a diverse network rather than a homogeneous one. This had effects on the subsequent building of trust among the companies in the Firsam strategic network, but the possibility on creating brokerage opportunities also seems at least implicitly to have guided the management group of Firsam. A representative from the management group described the reasoning behind the implementation of vertical collaboration within the Firsam project in this way: We tried to get them to change their opinion about themselves or their identity, so to speak. He continued his reasoning by adding: We are subcontractors, we manufacture. If the customer wants a 10 by 10 centimeters piece of steel with four holes in it, that is what we do. Thereby he referred to the manufacturing companies' identity in his previous statement. The identity change that he was looking for was described by reasoning such as: What happens when you take a little more responsibility for the product, and you venture a little further in product development? Will the customer change supplier then? This quote signifies that the member of the network management group had identified an attitude among the manufacturing companies that he did not consider productive. The member of the network management group described that one of the goals of the Firsam project was to change this identity. This implied giving the network management group the position of an educator among the included companies. Vertical collaboration between the members was

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expected to affect the managers in the manufacturing companies. The effect that the management group wanted to impose would be to make the manufacturing companies less passive in the relationship towards their customers. This passivity in the collaborative stance towards their customers can be attributed to the influence of bonding social capital. Exposing the companies to other social contexts might contribute to the identity change that the management group was referring to. 5.2. The strategic network in 2010 From the initial interviews conducted in 2004 it can be concluded that the actors' incentives for joining the Firsam network can be described as threefold: spurring joint product innovation projects, creating joint tenders to attract large orders from customers, and developing learning relationships between the companies included in the network. In the interviews conducted in 2010 the actors expressed that only the last objective was truly fulfilled. A comparison between the Firsam network in 2004 and in 2010 shows that the network had become somewhat denser in 2010. In Fig. 4, the network in 2010, there is an average of 5.2 arrows depicted per company, compared with the average of 3.1 arrows depicted in Fig. 3, which represents the network in 2004. There is also an increase in the number of relationships between the companies included in the EC group and the MC group. In 2010 there were 17 arrows connecting companies stemming from these separate groups, while in 2004 there were only 10 such arrows. The number of mutual relationships between these two groups rose from 2 in 2004 to 3 in 2010. Still, there is only one company (EC 6) with more arrows connecting it to a company representing the other one of the two subgroups than that company has to companies representing its own group. In other words, the two subgroups had still not integrated into one cohesive network. In order to fulfill the goal of vertical collaboration where the vision of “from idea to the final customer in one chain” becomes realized, the manufacturing companies had to be brought together with the electronic companies. The goal set for Firsam implied that the manufacturing companies (MC) should undertake the “design for manufacturability/design for automated assembly” and “manufacturing of all parts” in the activity chain that had been created as a vision of intended collaboration (Fig. 1). However, the network remained divided into its two original parts. This is illustrated in Table 2, where the modularity percentage of the two groups has been calculated using the quantitative data collected in the survey. The expected percentage indicated in the model represents the likelihood that an actor would choose to establish a connection with a representative from a group if the connections were chosen completely at random within the Firsam network as a whole. This figure is then put into relation with the percentage of connections that is established and observed between the different groups in the network. If the observed percentage overrides the expected percentage this amount indicates the modularity percentage which in turn indicates to what extent the two groups are exclusive from one another (Bickel & Chen, 2009; Moreno, 1934). It can be concluded from the figures that the two cliques within the Firsam network started out as two separate entities and that they failed to integrate and form a cohesive network in 2010. Ties connecting the Table 2 Group modularity in the Firsam network in 2004 and in 2010. 2004

Expected percentage Observed percentage Modularity percentage

2010

EC group

MC group

EC group

MC group

53 75 22

33 78.5 45.5

50 70.4 20.4

35.7 66.7 31

two cliques have in other words failed to emerge, thereby keeping the Firsam regional strategic network from becoming a cohesive network. The qualitative data from the interviews undertaken in 2010 provide the same impression, as the majority of the respondents did not believe that the two groups had been integrated into a cohesive network. A respondent voiced the opinion that the companies in the Firsam network were too diverse, although some of the companies probably would be able to form interesting collaborative projects. He said: There were two different groups of companies from the outset […]. Then they merged everything and put it all in a mixer in order to pick up some interesting bits that afterwards emerged from the mess. That made it difficult. All the interviewed respondents said that the amount of business generated by the Firsam project had been less than expected. This is illustrated by the following quotes: If you look at the business side of Firsam, how much business Firsam generated and the jobs that actually got created, then it could have been handled better. In fact, it did not amount to much. No orders were generated; that must be said. I had a lot of expectations in finding business. Unfortunately, it did not turn out that way. A member of the network management group claimed: You must dig a bit deeper and brush away some dust to really see the benefit of these projects that we worked on and how we got them to see the whole production chain. Thus, he expressed his conviction that increased awareness of the entirety of the product chain was an important part of the effect that the Firsam project had had on the involved companies. He continued: There were not that many products that came from the project, but I think that the result consisted in the fact that we managed to change the companies' attitude. They finally realized that networking and cooperation is important. They also realized that it is possible to achieve collaboration in Söderhamn. This indicates that the realization that networking might take place also in their own town was an important realization in itself as it reflects a belief that networking in Söderhamn might be particularly difficult to realize or even to imagine. One of the respondents described the attitudes of companies in Söderhamn as follows: Ogle at your neighbor and think “damn it, he took that order” instead of thinking “alright, now he got that order; OK, something will probably spill over onto me, I can help him with some of it”. This attitude can be interpreted in terms of the connection that Molina-Morales and Martínez-Fernández (2009) make between overembeddedness and the tendency to refrain from making new connections with actors outside one's own social context. There seems to have been a climate where strategic networking like the project undertaken by Firsam was difficult to achieve. Another respondent made a similar remark regarding the impact of the local social culture upon the Firsam project. He stated: Of course, it seems that we have some kind of dependenceoriented culture here. I think it is a lot harder to get things working in places like ours, with people with such a frame of

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mind. I am positive that this culture got something to do with it. An added comment by the respondent indicated that the dependence-oriented culture was still alive but that Firsam had worked as an antidote: I think that Firsam has helped in neutralizing this culture, but it is still very influential. Although the respondents claimed that the official and quantifiable goals of Firsam were not met, they meant that Firsam was a successful venture. The reasons behind the assumed success of the Firsam project were hard for the respondents to articulate. A “new frame of mind” or a “developed way of thinking” were wordings used by a member of the network management group when trying to express the success of Firsam. The respondents representing the companies seemed at least implicitly to agree with this member of the network management group. A respondent representing a Firsam company described the learning which Firsam had provided to the member companies as follows: They learnt what it means to work in networks, to work together and to make allowance for each other. Everybody realized that it is not as easy as just putting profit margins on top of everything. Another respondent put it like this: We learned how to cooperate. We had to cooperate with other companies in various matters. A respondent expressed a similar view, and compared Firsam to other designed networks that he had taken part in: If you were to have these programs in Verkstadscentrum, then the welders would have met with the welders, the engineers would have met the engineers and the managers would have met the managers. By not doing so I think that we learned a lot more from each other […]. It really opened up our eyes to new things. These quotes indicate a commonly held view among the respondents that Firsam had provided the companies within the project with an opportunity to practice the art of coming to terms with other companies and to develop trust between themselves and other organizations. This describes Firsam as an important learning experience, even if the business generated might have been meager. The latter quote indicates that the diversity of the involved actors within the Firsam project added to learning. Several respondents explicitly made reference to the dependenceoriented culture in Söderhamn. This indicates that bonding social capital negatively influenced the merger of the two groups into a cohesive network. However, the respondents also expressed that Firsam helped in neutralizing this culture, and they also gave accounts of the emergence of a more collaborative culture within the project. The exposure to a social context outside the companies' regular spheres of interaction was described as something positive and something that contributed to learning. Thus, the Firsam project seems to have reduced the influence of bonding social capital upon the stance to collaboration of the member companies. 6. Discussion When using regional strategic networks as a tool for regional growth the emphasis is often put on creating a cohesive network where the participating actors are bound together through trust and reciprocity thereby bringing the regional actors more closely together as an embedded coalition. However, strengthening already existing

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coalitions might not create an innovative business climate (Saxton, 1997). To the contrary, such investments might create what MolinaMorales and Martínez-Fernández (2009) call over-embeddedness of the included actors. Lock-ins that isolate the members of the strategic network from the outside world might be created (Gargiulo and Benassi, 2000; Grabher, 1993; Parra-Requena et al., 2009; Uzzi, 1997). According to Florida (2002) lock-ins make the members of the coalition complacent and isolated from impressions outside their small circle of social interaction, which may hinder innovation and the formation of weak ties. Further strengthening the bonding social capital in the region might therefore be an unwanted consequence of supporting the development of already existing social structures. The cultural proximity within the regional strategic network of Firsam was derived from a shared socio-economic context. The social capital in small industrial towns like Söderhamn is often characterized as a “dependence-oriented culture” and this socio-economic milieu characterizes the region of Söderhamn. Forsberg (1997:59) defines dependence-oriented culture as “the filter or lens that redefines and adapts the general economic and social structures to the local context”. Thus, dependence-oriented culture is seen as a product of the economic and social structures that define certain regions or towns (Lindberg, 2002:37). According to Hammar and Svensson (2000) the dependence-oriented culture developed out of the relation in previous centuries between the dominant local employer, often a factory owner and member of the nobility, and the workers at the mill. The employer and proprietor guaranteed employment in exchange for the workers' loyalty. This loyalty entailed the expectation that commercial activity outside the one undertaken or controlled by the dominant employer was undesirable. Therefore, entrepreneurship was often considered as a betrayal of this loyalty and frowned upon in the local social context. The dependence-oriented culture was based upon a few very strong connections, both internally within the local society and externally through customer contacts. The major employer used to manage these connections and most people trusted the collective represented by organizations such as the trade unions and political parties in providing secure employment (Hammar & Svensson, 2000). The dependence-oriented culture is based on deeply embedded values and behavioral norms (Lindberg, 2002). In this respect it resembles what Kenyon, Wood, and Parsons (2008) call inherited culture. Kenyon et al. (2008:283) claim that “inherited culture is learned from elders, who are close to the heart of the community” and is a “slow moving beast”. Behavioral norms constituted by inherited culture are hard to change and so is the dependence-oriented culture. Dependence-oriented culture bears a strong resemblance to bonding social capital. The expectation that loyalty towards a dominant employer would make all other commercial activity undesirable as well as strong faith in collective action only can be seen as examples of such hindering social ties that characterize overembeddedness. Dependence-oriented culture therefore poses a hindering effect in the individual actor's development of weak ties outside existing network structures and exemplifies a negative effect of the bonding form of social capital. In the case of the Firsam network the governmentally funded network management group chose to include a somewhat diverse set of companies, which included companies with know-how in advanced electronics design as well as companies dealing with subcontracting, manufacturing and welding. However, this inclusion of companies from different lines of business made it harder for the involved parties to encompass shared norms for information sharing since their experience in building lengthy relationships was varied. The two cliques did not share a common technological proximity which seemed to keep them apart. The process of building trust between the included actors in the strategic network was therefore described as difficult by both the included companies and the network management.

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The shared cultural proximity constituted by the dependenceoriented culture hampered the merger of the two existing cliques of companies. The dependence-oriented culture relies on few and very strong connections, both internally within the local society and externally through customer contacts. This makes the formation of new network connections opposed to the logic of the dependenceoriented culture and subsequently kept the regional strategic network from forming a cohesive network. This serves as an explanation to why the two subgroups of EC and MC were not integrated. No joint business ventures were undertaken and it is likely that this was due to the network management group's strategy in choosing a heterogeneous set of companies in order to create the prerequisites for vertical collaboration. In the interviews undertaken in 2004 the involved companies showed a somewhat passive attitude with regard to their customer relationships. From the interviews undertaken in 2010 we sense a realization among the companies that such an attitude does not support business development. The collaboration with other companies in the product chain brought together by the Firsam project exposed the companies to new aspects of their business. Furthermore, some Firsam companies had different views upon their customer relationships. This seems to have made the managers of the less collaborative companies re-evaluate their attitudes. Broadening the companies' network to include collaboration outside of their old social context created a platform for the development of bridging forms of social capital. 7. Conclusion The network of Firsam fits well into three of the theoretical perspectives of Cova et al. (2010)—territory, community and industry. Firsam can be described as a strategic, regional network marked by a dependence-oriented culture in need of industrial cooperation. Being a designed network, Firsam operated as a sub-network encompassing parts of the market networks where its members conducted their business. This meant that it had to balance the network conditions seen from an industry perspective according to the ambitions of the regional strategic network with the conditions formed by the territorial delimitation and the inherited culture as seen from the community perspective. The main objective of the Firsam project was put as creating new job opportunities in the municipality of Söderhamn by attracting new companies to settle in the region and by creating opportunities for joint tenders between the involved parties. Even if some job opportunities were created this objective was described by the involved parties as unfulfilled. Still, the Firsam project was described as positive by the respondents. According to the respondents the Firsam project spurred a learning process within the involved companies that taught the actors to value networking activities as an important part of business development. This was considered as an improvement of the business climate of Söderhamn, which had been described as less than nurturing to similar activities. In the case of Firsam it seems that the regional socio-economic milieu made existing network structures rigid and stable. The cultural proximity within the strategic network was characterized by the bonding form of social capital which hinders novel network connections and weak ties from being formed. Strong regional connections that hinder the development of new supply chains is a telling example of an instance where the “history network as a burden” (Tunisini & Bocconcelli, 2009) principle becomes realized. Rigid network structures might hamper innovative regional development since closed network structures can create over-embeddedness and organizational lock-ins. Considering the value of weak ties (Granovetter, 1983), and the conditions for innovation and entrepreneurial activity along structural holes (Burt, 1992), to further reinforce such network structures might therefore

be considered counterproductive since these networks might be a burden for the individual member company in its development of weak ties. The Firsam case is an example of a regional strategic network in which the network management focused on facilitating bridging connections between previously unconnected actors in a region dominated by the bonding form of social capital. The management therefore preferred not to support existing network structures which resulted in a loosening of the bonding form of social capital among the involved actors. This resulted in a lack of technological proximity within the network, something that hindered the creation of trust. On the other hand, it loosened up the rigid connections that seemed to work as a burden on the member companies' history networks. Thus, we believe that the Firsam project in fact helped neutralizing the effects of bonding social capital upon the companies within the regional strategic network. The network management intentionally chose to include a heterogeneous gathering of companies in the strategic network, to facilitate vertical collaboration influenced by the catch phrase “from idea to the final customer in one chain” (see Fig. 2). This created what a representative of the management group called a “new frame of mind” and a “developed way of thinking” among the involved companies. The value in having regional strategic networks knowingly expose the participants to influences and actors outside their existing social context is illustrated by the Firsam case. The cultural proximity between the member companies within the Firsam network is gainfully described by the concept of dependenceoriented culture. It is evident from the empirical findings that an awareness of this socio-economic culture played a prominent role in the design and implementation of the strategic network. Concepts such as social capital and a collective identity stemming from the community perspective of network research (Cova et al., 2010) thereby had an influence on the regional business development aspect prominent in the territory perspective on networks. To consider all these dimensions in future research on the development of regional strategic networks can provide a better understanding of the possibilities for creating a network based on the industry network perspective, since the ability to understand the local socio-economic context plays a crucial role in the design of such network ventures. References Adler, P., & Kwon, S. -W. (2002). Social capital—Prospect for a new concept. Academy of Management Review, 27(1), 17–40. Alguezaui, S., & Filieri, R. (2010). Investigating the role of social capital in innovation— Sparse versus dense network. Journal of Knowledge Management, 14(6), 891–909. Axelsson, B., Rozemeijer, F., & Wynstra, F. (2005). Developing sourcing capabilities. Chichester: Wiley. Bickel, P., & Chen, A. (2009). A nonparametic view of network models and Newman– Girvan and other modularities. Proceedings of the National Academy of Sciences of the United States of America, 106(50), 21068–21073. Borghini, S., Carù, A., & Cova, B. (2009). Representing B to B reality in case study research—Challenges and new opportunities. Industrial Marketing Management, 39(1), 16–24. Bourdieu, P., & Wacquant, L. J. D. (1992). An invitation to reflexive sociology. Chicago: University of Chicago Press. Bradshaw, M. (2001). Multiple proximities—Culture and geography in the transport logistics of newsprint manufactured in Australia. Environment and Planning, 33(10), 1717–1739. Bryman, A., & Bell, E. (2007). Business research methods (2nd ed.). Oxford: Oxford University Press. Burt, R. (1992). The social structure of competition. Cambridge, Mass: Harvard University Press. Cantù, C. (2010). Exploring the role of spatial relationships to transform knowledge in a business idea—Beyond geographic proximity. Industrial Marketing Management, 39, 887–897. Coleman, J. (1990). Foundation of social theory. Cambridge Mass: Harvard University Press. Cova, B., Prévot, F., & Spencer, R. (2010). Navigating between dyads and networks. Industrial Marketing Management, 39, 879–886. Degenne, A., & Forsé, M. (1994). Social research. Paris: Armand Colin Publications. Dhanaraj, C., & Parkhe, A. (2006). Orchestrating innovation networks. Academy of Management Review, 31(3), 659–669. Edquist, C., & McKelvey, M. (Eds.). (2000). Systems of innovation: Growth, competitiveness and employment. Cheltenham: Edward Elgar.

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