Conflicts and value co-creation in project networks

Industrial Marketing Management 40 (2011) 1377–1385

Contents lists available at ScienceDirect

Industrial Marketing Management

Conflicts and value co-creation in project networks Cristina Mele ⁎ Business Economics Department, University of Naples “Federico”, Via Cinthia Monte S. Angelo, 80126 Napoli, Italy

a r t i c l e

i n f o

Article history: Received 23 June 2007 Received in revised form 25 February 2011 Accepted 3 June 2011 Available online 16 July 2011 Keywords: Conflicts Relationship Network Value co-creation Project

a b s t r a c t The present study aims to (i) extend knowledge of the nature of conflicts and of their influence on value cocreation in project networks and (ii) contribute to the management of conflicts to enable value co-creation. This work is based on an action research methodology conducted during a five-year case study of a firm operating in the Information and Communication (IT) industry. Three dimensions of conflicts are identified: (i) types, (ii) timing and (iii) effects. An understanding of these dimensions facilitates the management of conflicts. Two levels of intervention are isolated: (i) the strategic level and (ii) the operational level. The paper offers a new understanding of conflicts that should precede their management, which is crucial to enabling project network value. © 2011 Elsevier Inc. All rights reserved.

1. Introduction A project is seen as “a complex transaction concerning a package of products, services and work designed specially to realize in a certain period of time a specific asset for a client” . This transactional perspective of a project has been challenged by a network-centred view (Cova & Salle, 2007; Lee-Kelley & Sankey, 2008; Söderlund, 2004), where project networks are understood as “structures of exchange relationships among business actors—firms as well as individuals—structures which emerge, evolve and dissolve over time in a continuous and interactive process” (Halinen & Törnroos, 1998, p. 189). By recognising project networks as “dynamic sets of project-based inter-organisational and interpersonal relationships” (Manning, 2005, p. 410), the primary concern for scholars and practitioners is becoming value creation rather than product creation (Artto & Wilström, 2005; Skaates, Tikkanen, & Lindblom, 2002). The task of the provider is not to create value for the customer; rather, the provider seeks to co-create value with the customer. It has been suggested that value creation in project networks does not proceed from bilateral interactions but instead proceeds from multilevel activities (individual, team and organisational) within multilateral relationships among all actors of a network (Cova & Salle, 2008; Lusch, Vargo, & Tanniru, 2010; Ritter & Gemünden, 2003). This perspective is still in its infancy. In analysing the network aspect of projects (e.g., the building of relationships between actors and the pooling of resources: Söderlund, 2004, p. 660), most studies have focused on the positive aspects of relationships, such as trust, commitment and collaboration, and their role in value creation (Gummesson, 2002), but relatively few have ⁎ Tel.: + 39 081 675070. E-mail address: [email protected]. 0019-8501/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2011.06.033

addressed the implications and management of potential threats, conflict and stress, which can weaken relationships (Vaaland & Håkansson, 2003) and prompt their dissolution (Holmlund-Rytkönen & Strandvik, 2005; Vaaland & Purchase, 2005). Although many studies have examined value and conflicts in isolation, little research on the links between these constructs exists. There has been a failure to develop a coherent framework of the theoretical and practical implications of these links in project research. The present study aims to (i) extend knowledge of the nature of conflicts and of their influence on value co-creation in project networks and (ii) contribute to the management of conflicts to enable value co-creation in project networks. Through case study and action research methodologies (Ballantyne, 2004; Gummesson, 2003), this study analyses conflicts within the project networks of a firm operating in the information technology industry. The focus here is on the interpersonal networks within project networks across several companies. The paper contends that understanding conflicts is necessary to their management, which is crucial to enabling project network value. The remainder of the paper is arranged as follows. First, a sketch of the theoretical basis surrounding the concepts of value, conflicts and relationships is presented. Next, the methodology and the findings are presented. The paper concludes with a discussion of the findings, managerial implications and suggestions for further research. 2. Theoretical basis 2.1. Value and relationships In response to a call for broadening the scope of research on projects, some scholars have looked beyond the mainstream literature

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on project management to draw on insights that emerge from understanding ‘projects as business’ (Artto & Wilström, 2005; Blomquist & Wilson, 2007; Winter & Szczepanek, 2008). This approach suggests that the business literature, rather than the project literature, provides the most useful insights for understanding value creation. The value-creation process is a key theme in network management entailing an analysis of the interconnectedness of relationships and the interdependence that exists among parties (Halinen & Törnroos, 1998; Ritter, 2000). Value is created through interaction (Lindgreen & Wynstra, 2005; Normann & Ramirez, 1994; Ulaga, 2001) and is the result of a trade-off between benefits and sacrifices. Several levels of analysis (such as analysis of the individual, the firm and the network) have been identified (Möller & Halinen, 1999; Ritter & Gemünden, 2003). In the emerging service-dominant (S-D) logic (Vargo & Lusch, 2008), the focus is on the interactions among suppliers, customers and network partners as they co-create value through their collaborations. In the process of ‘value co-creation’, parties integrate resources and combine their capabilities to generate that which is of value for them (Lusch, Vargo, & O'Brien, 2007; 2010; Lusch et al., 2010). In a similar vein, Cova and Salle (2008, p. 272) emphasised the role played by the networks of relationships, pointing out that “cocreation is carried out, in a many-to-many approach between a supplier and his network in interaction with a customer and his network”. A recent work by Gummesson and Mele (2010) stressed multiparty interaction in the co-creation of value. Framed within a relational context, the study specifically addresses interaction and its role in the co-creation of value through resource integration. In this view, resource integration can be generalised to actor-to-actor (A2A) interactions through which the actors link their resources in the mutual creation value (Gummesson & Mele, 2010; Vargo & Lusch, 2011). 2.2. Conflicts and relationships The literature on relationship marketing and the network approach has stressed the positive aspects of relationships (trust, commitment and collaboration) in creating value and in enhancing organisational performance. In contrast, fewer articles have analysed the relationship of conflicts and value creation. Vaaland and Håkansson (2003) explored inter-organisational conflicts in complex projects, emphasising governance mechanisms, but they did not address value creation specifically. Nordin (2006) investigated both inter-organisational and intra-organisational conflicts, pointing out that the perspectives of several stakeholders should be included when implementing a service alliance. Still, his study did not analyse the link between conflicts and value. Other articles have provided interesting insights, but their weakness lies in the fact that they see conflict in negative terms— perceiving it as an unavoidable consequence of two firms striving to maximise their returns from a business relationship (HolmlundRytkönen & Strandvik, 2005; Vaaland & Purchase, 2005). There is also a large body of managerial literature on conflict (Duarte & Davies, 2003; Janssen, et al., 1999). However, this literature has tended to focus on outcome maximisation for individuals, rather than attempting to analyse the phenomenon in a relational context, although Wall and Callister (1995) did acknowledge the importance of such an approach. The term ‘conflict’ comes from the Latin word conflictus (meaning ‘clash’). Thus, it represents a clash between divergent perspectives, interests, objectives, or behaviours. Conflicts are usually perceived as inherently negative; for example, Wall and Callister (1995, p. 517) defined conflict as “a process in which one party perceives that interests are being opposed or negatively affected by another party”.

However, a clash of opinions is not necessarily negative per se; some forms of conflict can be useful because they foster creativity and debate (Amason, 1996; Vaaland & Håkansson, 2003). Whether conflicts are perceived as ‘positive’ or ‘negative’ depends upon the outcome. The concept of a ‘win–win’ scenario is useful in this regard (Gummesson, 2002). ‘Positive’ conflicts can be understood as those in which the outcome produces agreement in the form of a ‘win–win’ situation for disputants, enabling value co-creation; in contrast, in the case of a ‘win–lose’ outcome, conflicts can be understood as being ‘negative’ as their destructive effects can threaten both performance and value co-creation. The present study adopts this understanding of ‘positive’ and ‘negative’ conflicts: it depends upon the outcome of the conflict. This, in turn, depends upon how conflict resolution is managed. Apart from the use of such qualifications as ‘positive’ and ‘negative’, other categorisations of conflicts have been suggested. Amason (1996) distinguished between ‘cognitive conflicts’ and ‘affective conflicts’. This author (1996, p. 127) described cognitive conflicts in positive terms as “functional” because they are “generally task oriented and focused on judgmental differences about how best to achieve common objectives”; in contrast, affective conflicts were pejoratively described (1996, p. 129) as “dysfunctional” because they tended to be “emotional and focused on personal incompatibility or disputes”. Jehn and Mannix (2001) also distinguished among various types of conflict when they contended that conflicts could be further classified as either relationship conflicts, task conflicts, or process conflicts. According to these authors (2001, p. 238), relationship conflicts are “the awareness of interpersonal incompatibilities, including affective components such as feeling tension and friction”. The same authors (2001, p. 238) described task conflicts as “the awareness of differences in viewpoints and opinions pertaining to a group task”. Finally, process conflicts were said to refer to “an awareness of controversies about aspects of how task accomplishment will proceed” (2001, p. 239). The last type of conflicts is thus concerned with the delegation of responsibility and the allocation of resources— that is, who should do what and how. Peterson and Behfar (2003) argued that task conflicts encourage better decision-making because they promote greater cognitive understanding of the issue being discussed. In contrast, relationship conflicts, which involve a perception of personal animosities and incompatibilities, were said to have a negative influence on intragroup trust and group performance. It is thus apparent that several authors have a rather pejorative view of ‘relationship conflicts’. However, the present study contends that this view is inadequate. A relationship consists of an interaction and interdependence in which the participants invariably affect one other, either directly or indirectly (Deutsch & Coleman, 2000). If the parties involved were entirely independent, without interaction, no conflicts would indeed arise; however, it is also true to say that no relationship would exist either. It is therefore inadequate to characterise ‘relationship conflicts’ as being inherently affective; rather, relationship conflicts are a multifaceted phenomenon that should not be understood as merely one type of conflicts among others. Indeed, the present study contends that ‘relationship conflicts’, properly understood, are the core category for understanding the more generic phenomenon of conflicts and conflict resolution. 3. Methodology 3.1. Action research This work is based on a five-year case study of a firm operating in the IT industry. The action research methodology adopted in this study was qualitative and interpretative (Bradbury & Reason, 2009;

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Gummesson, 2003), with the aim of identifying concepts and categories about conflict management and value co-creation in project networks. The research team consisted of a project manager of the investigated firm and an academic researcher. According to Perry and Gummesson (2004, pp. 313–14), action research involves “… a group of people who use spiralling cycles of activities that involve planning, acting, observing and reflecting upon what has happened… to try to improve workgroup process of action; that help to solve complex, practical problems … the action researcher is both an actor and a researcher … a facilitator or an interventionist in a change process”. Through action research, the aim is to develop an iterative process of action and learning (Bradbury & Reason, 2009), facilitated by the relationships formed between the people involved (Ballantyne, 2004). In the present case, this action research methodology involved (i) placing the researcher in the network context; (ii) exploring the phenomenon from a grounded perspective (that is, allowing the reality to emerge); and (iii) intervening in the context. 3.2. Case and research sites The case study concerned a leading global IT firm that sells integrated and customised solutions to information and communication technology (ICT) problems. The case offered good access to the firm's network of relationships, thus providing an opportunity for close and in-depth analysis of the role of conflicts in the process of value co-creation (Siggelkow, 2007). Four networks associated with four projects were analysed in the present study. Each network consisted of (i) actors from the IT firm; (ii) actors from the customer firm; (iii) the suppliers of the IT firm; and (iv) the suppliers of the customers. Table 1 highlights the projects studied.

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implications with “a greater explanatory power” (Halinen & Törnroos, 2005, p. 1288). The investigation of the four project networks ceased when a certain level of theoretical saturation was reached (Glaser & Strauss, 1967); that is, no new materials emerged by continuing to interview participants. In the first project, the problem of conflicts and their influence on value co-creation arose. In the second and third projects, the focus widened to include not only value co-creation but also relationships, networks and their interconnections. The aim was to generate enough in-depth materials that could illuminate the patterns, concepts and categories of the investigated phenomena (Gummesson, 2002) and activate learning processes (Flyvbjerg, 2006). In the last two projects, conflicts were coded with respect to various dimensions to develop a theoretical framework and to define the managerial actions that were implemented. Research credibility and reliability were enhanced by the techniques used for data collection and analysis (Denzin & Lincoln, 1998). Validity was enhanced in accordance with the suggestions of Maxwell (2005) and Flyvbjerg (2006). 3.4. Data collection and analysis The unit of analysis for each project was the interaction between individuals at both the intra- and inter-organisational levels. The researcher, who was situated in the context being studied (Flyvbjerg, 2006), made direct observations and conducted interviews with the network members, especially with people who were involved in episodes of conflicts (critical events). The project manager made separate observations of relationships and episodes of conflicts. A meeting between the researcher and the project manager was held every month to discuss each other's notes and reports. Specific attention was paid to reducing, structuring and de-contextualising the data. This process facilitated (i) in-depth understanding of the phenomena and codification into concepts, categories and models (thus addressing the first research aim) and (ii) identification of actions (in terms of conflict management) to be implemented during the project's life cycle (thus addressing the second research aim).

3.3. Research design 3.5. Analytical framework for the study Over a period of five years, the four project networks were analysed according to a ‘micronet embeddedness’ perspective proposed by Halinen and Törnroos (1998). Indeed, this study was influenced by their suggestions regarding the use of case methodology to study networks. The problem of network boundaries was addressed by analysing the interactions between people directly involved in the project. The complexity of network embeddedness was taken into account by analysing the individual and team interactions. The author could then highlight patterns associated with the influence of conflicts on the value co-creation process. To provide a longitudinal perspective, the entire life cycle of each project was investigated. Although this was a single case, the fact that four networks (multisites study) were analysed provided a richer research context (Maxwell, 2005). The aim was to explore a complex phenomenon in real life (Flyvbjerg, 2006) and to develop theoretical and managerial

Notwithstanding the distinctive discontinuity and complexity of each separate project (Mandjak & Veres, 1998), the four projects had the same project manager, who, together with the researcher, developed an overall framework for managing projects and networks. The analytical framework was a tool for collecting action research data and for arriving at theoretical conclusions about conflicts and conflict management. It acted as a guide for the study and is thus presented here before the findings. Table 2 shows the main elements of this framework. All projects were posited as interpersonal networks within a project network of several companies that included suppliers, customers and other stakeholders in a process of value co-creation (Brady et al., 2005; Cova & Salle, 2008). This basic contention—that a network exists to enable value co-creation—assumes that a common aim existed and that it is provided by a value proposition that

Table 1 The projects analysed. Project

Content

Time

Companies

People

Economic value

Project P1 Project P2

Time management with a large postal company Development and implementation of a payroll information system within a banking group Upgrade of systems, applications, and products for human resources (SAP HR) with a large postal company Outsourcing of an airport's information system

January 2001–December 2001 October 2002–July 2004

4 5

Twenty Eighty

€0.8 million €2.5 million

August 2004–December 2004

4

Fifteen

€0.5 million

January 2005–June 2007

5

Seventy

€1.3 million

Project P3 Project P4

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Table 2 A framework for managing projects. 1. A project was seen as a process of value co-creation; 2. a shared network vision with a common aim was required to foster value co-creation; 3. value co-creation was held to be the result of the expertise and competencies of all people involved; 4. teamwork and team relationships were accepted as key elements in the co-creation of value in the network; 5. the value that is co-created was held to be a project network value; and 6. conflicts in relationships were recognised as being potential barriers to the creation of project network value, and it was therefore necessary to co-manage conflicts to enable value co-creation.

underlies both the network and the project. This common aim of value co-creation in turn determines the activities of different people in the project network according to their competencies. Teamwork was fostered in a dynamic fashion. Teams were not preestablished in terms of numbers and tasks; rather, they were determined according to the task to be performed and the competencies required. The idea was “one big group for one network”, with many-to-many interactions and relationships (Gummesson, 2006). This procedure enhanced interactions among team members (Wilkinson & Young, 2002), fostered learning and creativity and exploited and communicated available knowledge (Sense, 2007). In general, it enhanced the role of relationships in co-creating value for all participants, thus making the network stronger. The role of individuals in the value co-creation process was empowered. Individuals were recognised as being the ultimate arbiters of value. As Normann and Ramirez (1994, p. 101) have pointed out, “it is only when individuals act that they have an impact on value creation”, even if the effectiveness of a person is very much dependent on the networks, teams and management structures that support him or her. Thus, it is apparent that the value co-creation process in the networks studied here did not involve only dyads but all actors in the network in accordance with a ‘win–win’ perspective (Gummesson, 2002). The interactions at an interpersonal level create value at the company-level network. In the present study, the expression project network value is used to describe the entire value created at the project network level. A significant potential barrier to the co-creation of network value is the existence of conflicts within relationships; these needed to be appropriately managed. 4. Findings The findings for this research are presented in two parts. The first group of findings refer to an understanding of conflicts and focus on the following identified dimensions of conflicts: (i) type, (ii) timing and (iii) effects. Knowledge of these dimensions supports the second

group of findings, which refer to the development of a framework to manage conflicts. In presenting the findings, some quotations and examples have been drawn from the reports to illustrate key issues or situations. The following codes were used to indicate particular individuals: ITm1, 2, … (IT firm members); Cm1, 2, … (customer firm members); CSum1, 2, … (customer's supplier members); and ITSum1, 2, … (IT firm's supplier members). 4.1. Understanding conflicts 4.1.1. Understanding types of conflicts ‘Conflicts’ can be understood as frictional events during the interaction process that influences the pattern of a relationship. As such, five types of conflicts were identified in the present study. Each type of conflicts is explained using an example, as shown in Table 3. The typology presented in this study differs from that suggested by Jehn and Mannix (2001) in that the typology proposed sub-divides the category of ‘process conflicts’ into ‘process-related conflicts’ and ‘role-related conflicts’. The rationale for this subdivision is rooted in the difference between conflicts regarding procedural aspects of work (how to do something) and conflicts regarding roles and responsibilities (who should do something and with which responsibility). It should also be noted that the term ‘affective conflicts’ does not necessarily have a negative connotation in the present study. In most studies, the term has had a pejorative connotation (linked to personal incompatibility), whereas the present study contends that conflicts, regardless of the type, are neither negative nor positive in themselves; how they become one or the other depends on how they are managed. This is illustrated by the following example: In P1, ITm7 to team leader (TL): I have some difficulties working on this task with ITm10. He tends to impose his view. TL (calling ITm10): I want to organise a meeting with both of you.

Table 3 Types of conflicts. Type

Explanation

Task-related conflicts Differences in opinions regarding a group task

Process-related conflicts Role-related conflicts

Affective conflicts Values-related conflicts

Example

In Project 4 (P4), the following dialogue occurred between two IT members: ITm5: To do this task, we could implement already existing software. ITm10: No, I think we have to write new software. ITm5: Why do you think so? We will waste too much time. ITm10: Maybe, but we could do some things that the old software does not do. [The debate continued.] Controversies about how tasks In P2, to develop new software, an ITSum wanted to use the ‘water fall’ model, which consisted of a linear should proceed to accomplishment process. In contrast, a Cm wanted to use a ‘spiral cycle’ model. The two members had a long and heated clash about this difference of opinion. Differences about the degree and type In P4, at the beginning of the project, there were three teams with three leaders. During the execution of responsibility that various people phase, the leader of one team took control of the other two teams, contending that the quality of the first think they should have team was linked to the quality of the others. The other two team leaders complained to project management about what had happened. Emotional arguments based on In P1, ITm8 went to project manager and said, “I am sorry, but I do not wish to work with ITm12. I do not like interpersonal compatibility him and I do not have a good working relationship with him”. Controversies caused by different In P2, the customer firm was a large banking group that had been formed through acquisitions and mergers systems of values over time. As a result, a variety of work cultures and value systems existed within the group, and employees tended to work with people who had come from the same company.

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At the meeting, the following exchange took place: TL to ITm10: Please explain to me why you decided to develop the task in this way. ITm10: I talked with ITm7, and we decided … ITm7: (interrupting) No, you decided! ITm10: No, I proposed, and you did not indicate any opposition! The debate continued. At the end of meeting, the team leader summed up the discussion as follows: TL: OK. It is apparent that there was a misunderstanding. You have to clarify this point. Please take some time to talk about this! The last category mentioned, values-related conflicts, refers to conflicts arising from different value systems (e.g. personal, cultural and social values: see Wade-Benzoni et al., 2002; Kwantes & Kaushal, 2006), which are the basis for the interactive development of a homogeneous group (Stampacchia, 2001). Values-based conflicts are the most profound conflicts, but their proper management can nonetheless prepare the way for developing a shared value system among a network's actors. Such shared value systems are ultimately needed for the co-creation of network value. This is illustrated in the following example: In P4, there were 24 companies supplying software to a customer firm. In transferring software to new machines, the IT company chose to involve the customer's partners. This required a substantial amount of time, consulting with these companies to understand their needs and to communicate the IT company's requirements. Although difficulties emerged in the interactions among the variety of business cultures, the decision was ultimately a good one, as it involved the customer's network and did not entail the modification of the customer's existing relationships with its software suppliers. 4.1.2. Understanding timing of conflicts The types of conflicts varied with respect to a project's life cycle. Table 4 highlights the most common conflicts in each phase. Before the signing of a contract, effective interactions among people were grounded in an understanding of the various customers' and stakeholders' needs. Constructive dialogues enabled problems to be overcome and facilitated the presentation of an offer containing commercial and technical solutions to a customer's problems. This is illustrated in the following example from a P4 meeting: ITm8: I think we have to offer a business continuity solution. ITm2: No. It's better to offer a disaster recovery. ITm3: What are the customer's needs? Have you talked with the customer's people? ITm12: Their needs are not clear to us and are not even clear to them. I think we should speak with Cm1, Cm5, and Cm8 to get a better understanding of the problem and define our proposal. ITm2: Yes. It's a good idea to involve the customer and to increase their commitment.

Table 4 Most common conflicts according project's life cycle. Phases

Most common types of conflicts

Initiating

Role-related conflicts Values-related conflicts Role-related conflicts Values-related conflicts Task-related conflicts Task-related conflicts Process-related conflicts Affective conflicts Role-related conflicts Affective conflicts

Planning

Execution

Closing

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At the start of a project and in the context of forming a positive vision, strengths converged to produce constructive conflicts, which are coded as a common aim that enabled the interest of the group to emerge. However, extreme competition among individuals sometimes produced destructive situations and therefore negative conflicts. As the project developed, more conflicts emerged regarding the roles and responsibilities of various people in the project network. Most people were inclined to affirm power positions. In addition, conflicts on values sometimes emerged, especially between people from different firms. In the execution phase, a few negative conflicts regarding tasks and processes did emerge. People who knew each other well demonstrated greater informality in their interactions and tended to manage conflicts and solve problems by themselves. In contrast, more recent relationships tended to be more formal, and there was a need to develop trust and to understand the shared vision of the network before the relationships became effective in creating value. At the end of a project, conflicts increased as new individualistic positions arose to safeguard personal achievements. These caused role conflicts and escalated affective conflicts (in the negative sense). It was apparent that particular difficulties arose at the end of projects due to a will on the part of some to continue the projects. 4.1.3. Understanding effects of conflicts Conflicts produced varying effects, which could be characterised as either ‘positive’ or ‘negative’ depending on whether they had a constructive or a destructive result on the management of the situation. These effects tended to escalate as they proceeded from individuals to dyadic relationships, teams and finally networks. Table 5 illustrates the escalation of these effects. In the present study, constructive conflicts were apparent when the team's members were aware that a disagreement was a natural element of relational dynamics and that it could actually contribute to the achievement of common objectives by enhancing their cognitive understanding of issues and allowing different perspectives to emerge. In turn, these developments also fostered dialogue and the sharing of creative knowledge. Moreover, through such constructive conflicts, beliefs and values could be shared, building mutual trust, strengthening relationships, and generating so-called ‘relational capital,’ which ultimately increased a network's capacity to be value-creating. The following example illustrates such positive effects: ITm1: I do not understand what are you saying. Please explain this to me. Table 5 Effects of conflicts. Positive effects/ constructive process

Negative effects/ destructive process

Individual

Better understanding Knowledge

Dyadic Relationship

Trust Commitment Relational capital Exchange of resource Stronger Shared believes Shared values Better socialisation Shared mental model Knowledge and Creativity

Bad feeling Alteration of behaviour Worse work performance Distrust Lack of commitment Resource consuming Breaking Escalation Alteration of quality Hostile communication Negative climate Animosities Problem on knowledge creation Weaker Block of value co-creation Destruction of value

Team

The project network

Stronger More value co-creation

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After the explanation had been provided: ITm1: OK, I now have a different point of view, and your proposal seems to be interesting. Maybe we can talk more this evening after work. Call ITm6 and Cm3; they also have interesting ideas about this procedure. For a few days, a debate developed and involved other people and the PM. The result was a new effective procedure that satisfied all of the people involved. In contrast, it was apparent in the present study that destructive conflict diminished work performance. Such destructive conflicts were characterised by hostile communication and inappropriately competitive behaviour, with selfish interests being promoted at the expense of the group's shared interests. Negative effects included distrust, lack of commitment and diminution of quality. People perceived only the sacrifices of a relationship, not the benefits. Such a worsening of interpersonal relationships had a negative influence on productivity, efficiency and effectiveness as people assumed defensive attitudes that restricted the expression of their ideas. These destructive conflicts wasted resources and diminished the generation of value. This is illustrated in the following example of a negative conflict: In P1, after a heated clash, Cm3 did not speak or interact with Cm2. This also limited communication with ITm6, who was a member of the same team. A climate of distrust and a lack of commitment were established. Some problems arose due to delays and inefficiencies. Moreover, the members of the team began to talk with others about the negative situation. Some people who were not directly involved began to waste time and resources by sending e-mails and speaking with each other about the event. This situation continued until the PM intervened by separating the people involved and forming new teams. Two meetings were organised to reduce the tensions and analyse what had happened. The present study found that negative conflicts could reflect an episode between individuals or within a team but that they could also be a combination of events. Once people were not able to manage an episode of tension, this escalated into a situation more structured with psychological and behavioural aspects. Such conflicts were not confined to a specific issue at a given time in a specific place. Inevitably, they were recognised by people other than those immediately involved, and if this conflict was not managed appropriately, it widened to involve other relationships in the network. In these circumstances, the whole process of value co-creation was threatened, and a tremendous waste of resources was evident. 4.2. Management of conflicts in the analysed case study Knowledge of the types, timing and effects of conflicts is a preliminary step in the management of those conflicts because different circumstances require different levels and methods of intervention. To facilitate the value co-creation process, specific managerial interventions had to be identified and implemented. Levels of intervention were developed (i) at the strategic level and (ii) at the operational level. The strategic level was important to establishing the cultural orientation of a project network to frame it as a value co-creation process. It involved the management of higher-order conflicts (such as affective and valuesrelated conflicts) and, in part, role-related conflicts. Strategic interventions were applied from the beginning of projects until the establishment of a project network. In contrast, operational interventions established specific methods to solve disputes (such as task-related and process-related conflicts) and role-related controversies. They were applied as projects progressed to enable effective value co-creation among the participants. The proposed model that evolved from the present study is illustrated in Fig. 1.

An effective strategy of conflict management was developed that proactively managed conflicts and their effects while taking into account the structure of the networks involved; conflicts could not be effectively managed in a dyadic fashion that ignored the multilateral nature of the relationships of all of the actors in a network. The key element of the strategy was simply management by consensus. This involved the active cooperation of all team members and not merely simple agreement. If any decision was to be implemented effectively, people needed to be committed to that decision; thus, it was consensus that facilitated the necessary commitment and trust and strengthened the relevant relationships. Consensus was an enabler of value co-creation. This is illustrated in the following example: In P2, the PM had an idea to foster consensus and a ‘network culture’. He put all the teams together in the same room to encourage them to work as a single group until they had found a good solution for all of them. In this context, constructive debate was fostered in an open climate (like a ‘ba’ in the view of Nonaka & Konno, 1998), with the project manager acting as a guide. Although it was important to encourage consensus as a means of mobilising all actors' capabilities and leveraging the intangible aspects of value creation in networks, consensus alone was insufficient. A shared sense of direction was also required. The guiding principle here was a commitment to enabling customer value as a means of maximising network value. A commitment to enabling customer value acted as a bond, fostered motivation and joint achievement, and helped to overcome obstacles. Evidence of the IT firm's commitment to customer value was its inclusion in Gartner's ‘Magic Quadrant’ for outsourcing excellence in Western Europe (in 2006). The success associated with this prestigious acknowledgment meant that the IT firm, for the first time, was positioned as a peer among its competitors. The award was a direct result of an interview conducted by Gartner with the CEO of the IT firm's corporate customer (P4). According to Gartner (2006), the corporate customer commended the IT firm for its excellent level of service, its capability to manage strategic services, for being highly complex and innovative, and for its ability to manage a composite network. Within such a general strategy of conflict management, specific methods were utilised. These were based on a ‘relationship view’, in which people were encouraged in most instances to co-manage conflicts. This perspective differed from most proposals for conflict resolution in the extant literature, which tend to emphasise mediation, negotiation, and the involvement of third parties. The aim here was to utilise the project network's relationships to transform a destructive course (a ‘win–lose’ scenario) into a constructive course (a ‘win–win’ scenario). This ‘relationship view’ encouraged all participants of the following: 1) to perceive conflicts of interests as mutual problems to be solved by collaborative efforts; 2) to recognise the legitimacy of each other's interests and the need to search for solutions that are responsive to the needs of all; and 3) to focus on using network relationships and involve other people to solve conflicts. Consequently, two main methods were employed to co-manage conflicts: (i) empowering (giving power) the relationship and (ii) widening (making wider) the relationship. The first method utilised the capabilities of individuals and teams to identify problems and solutions. The people or teams involved in conflicts were therefore given power to manage them without external help to enhance value. To do so, the participants applied problem-defining and problem-solving processes to identify, analyse, and solve problematic situations in a positive manner. In P4, the PM said to ITm3 and Cm8: What's the matter? I asked you to solve this problem yesterday, and you did not do it.

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Levels

Timing

Strategic Type Conflicts Effect

Management Operational

Key elements Consensus & Shared direction

Principle and methods Commitment

Comanaging

Empowering & Widening relationships

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Aims Customer value & Project network value Value for disputants & Project network value

Fig. 1. A model of conflict management.

Cm8: We have different opinions about the procedure to use. PM: Did you apply our process? ITm3: Yes, but we did not succeed. Cm8: Perhaps we could develop a change in the program. PM: OK, you work together and come to me with a joint solution. If the first method was unsuccessful, the team leader could intervene with the second method mentioned earlier—widening the relationship. This involved the team leader placing himself (or another person) inside the relationship to reassess the strength of the relationship between the people who were experiencing conflict. The suggested procedure was that direct communication between the disputants was to cease (at least for a while), while other forms of indirect communication were established. In effect, the dyad relationship became a triad. Widening the relationship in this way allowed other perspectives to emerge through constructive dialogue. In P3, the PM said to ITm9: I have called you because we have a problem. ITm2 and ITm4 have a disagreement about the implementation of the SAP procedure. They are not able to work together, but we need both of them to perform these tasks. I need you to intervene and speak with them separately. Create bonds between them. Try to understand the real origin of the clash. In this case, rather than dealing only with the relationship between ITm2 and ITm4, two new relationships were activated (ITm9–ITm2 and ITm9–ITm4) in an attempt to restore the original connection. Whichever of the two methods was employed, the disputants had to perceive that they received value from the resolution, thus preserving project network value. Briefly, the aim was to achieve a resolution of conflicts in a manner that promoted personal development, self-awareness and learning in order to optimise long-term value within the project's network.

5. Discussion, implications and further research 5.1. Discussion Conflicts among participants in a project network are a common and complex phenomenon. Although there is a significant body of research on conflicts from a managerial perspective, most studies have focused on outcome maximisation and personal utility; studies on project networks have rarely considered the links between conflicts and value. This study has addressed this gap by analysing conflicts and value in project networks. Through action research, the focus has been on interpersonal networks within project networks of several companies. This study provides 1) an extension of knowledge regarding the nature of conflicts and their influence on value co-creation in project networks and 2) a contribution to the management of conflicts to enable value co-creation in project networks. The empirical findings provide contents that respond to the research aims. The first group of findings (‘understanding conflicts’)

address the first aim, emphasising three dimensions of conflicts (types, timing and effect). This study has identified the types and timing of conflicts. Five types of conflicts were identified within a core category of ‘relationship conflicts’: (i) task-related conflicts; (ii) process-related conflicts; (iii) role-related conflicts; (iv) affective conflicts; and (v) values-related conflicts. This categorisation, which differs from those proposed in the literature by other authors (Amason, 1996; Jehn & Mannix, 2001; Vaaland & Håkansson, 2003; Nordin, 2006), offers a wider perspective on the nature of conflicts. The occurrence of these five types of conflicts varies according to a project's life cycle, as the empirical analysis has shown. The study has made relevant contributions to our understanding of the effects of conflicts on value co-creation. In this regard, the study has also contributed to the debate on ‘positive’ and ‘negative’ conflicts in terms of the constructive or destructive management of critical events. The constructive resolution of conflicts has a positive effect on trust and understanding and strengthens relationships, increasing a network's capability for value co-creation. In contrast, the destructive resolution of conflicts worsens interpersonal relationships. The presence of unresolved conflicts can be a significant obstacle to the successful development of a project because it diminishes trust, commitment, and cooperation; conversely, it encourages distrust, indifference, and inappropriately competitive values. In this scenario, the process of value co-creation can be inhibited. This emphasis on the destructive effect on the generation of value, which is not often discussed in the literature, is one of the most important contributions of the present study. In most negative conflicts, people perceive only the sacrifices entailed in the relationship and not the benefits; thus, the ‘value equation’, as developed by Ravald and Grönroos (1996), cannot be applied. As noted earlier, an understanding of the three dimensions of conflicts was needed for the management of the conflicts. The second group of findings (‘management of conflicts’) addresses the second research aim. In this regard, the study has made a relevant contribution, contending that value co-creation can be fostered by managing conflicts through the relationships inherent in a project network. The study has also increased our understanding of the interconnectedness of conflicts. If conflicts are not managed constructively, they can widen to involve other relationships. This finding is consistent with Ritter (2000), who noted that relationships are interconnected to other relations and have impacts on them, and it is consistent with Halinen and Törnroos (1998), who stressed social embeddedness in terms of individuals acting on behalf of organisation and for themselves. Thus, it is apparent that B2B conflicts cannot be managed in isolation. An effective strategy for conflict management is required. Such a strategy should take into account the structure of the network while also seeking consensus and the common goal of customer value. Within such a general strategy of conflict management, two more specific methods of conflict resolution have been suggested: (i) empowering (giving power) the relationship and (ii) widening (making wider) the relationship. Whichever method is employed, conflict management should not attempt to maximise outcomes for disputants. Rather, it should

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address the relationship itself. The real outcome is not the settlement (this is only a short-term view that encourages enforced agreements); rather, it should be the satisfaction of all participants and the preservation of value creation. This approach strengthens network relationships and leads to greater commitments, more effective learning processes and more co-created value.

5.2. Managerial implications Certain specific implications for managers arise from this study. The study has shown that conflicts are a multifaceted phenomenon in project networks. Moreover, managers should recognise that when seeking to develop a project as a value co-creation process, they can themselves be a barrier to success. The analytical framework developed in this study could be of help in managing projects. Embedded in a project's details, a manager should see that project as a process of value co-creation, which emerges from the competencies of all involved. In this view, managers should be fostering interpersonal and team relationships as key steps in the achievement of project network value, which is the entire value created at the level of the project network. Managers should have two interlinked priorities about understanding and managing conflicts. First, managers should understand the various dimensions of conflicts (types, timing, and effects); knowledge of these dimensions facilitates opportune interventions and actions that can produce efficient and effective solutions and enable value co-creation. Secondly, to manage conflicts effectively, managers should operate at both the strategic and operational levels, taking into account the networks involved. Key elements of the strategy should be seeking a consensus and establishing a common goal of customer value. At the strategic level, to create a relational environment, managers should pay special attention to the development of a common system of values and norms in the workplace, with an emphasis on trust, respect, collaboration and a commitment to ‘win–win’ solutions. At the operational level, managers should use appropriate methods for conflict resolution such as (i) empowering (giving power) the relationship and (ii) widening (making wider) the relationship. To support these methods, managers should design appropriate procedures and routines to minimise disagreements about goals, tasks, and resources. They should foster listening and dialogue to resolve conflicts in a manner that promotes personal development, selfawareness and learning in order to optimise long-term value within a project's network.

5.3. Limitations and suggestion for further research Because this paper is based on the analysis of a single case, contextual factors that would limit its generalisability should be carefully considered. However, the fact that this single case study considered four research sites increases the relevance of its findings to other contexts and enhances the validity of its general conclusions. Moreover, action research was a powerful research strategy for developing conceptual categories, such as the development of ‘relationships conflicts’ as a core category, which involves additional types of conflicts, and for developing managerially relevant frameworks, which could have usefulness for both business and project business research. The findings in the present study suggest a need for future research that develops a systematic understanding of conflicts in project networks to enable value co-creation. In particular, there is a need for further research that focuses on the cooperative elements of conflict resolution (in contrast to the prevailing view of conflicts as a competitive struggle).

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