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Interorganizational relationships and networks
Journal of Business Research 56 (2003) 691 – 697
Interorganizational relationships and networks: An overview Thomas Rittera,*, Hans Georg Gemu¨ndenb a
Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK-2000 Frederiksberg, Denmark b Technology and Innovation Management Technical University of Berlin, Hardenberg Str. 4-5, D-10623, Berlin, Germany
Abstract Relationships and networks have been analyzed with different theoretical backgrounds and methods, at different levels, and with different results and conclusions. This diversity promotes a better understanding of the antecedents, dynamics, and effects of relationships and networks. However, this diversity also creates problems to compare and integrate results and to develop a general theory based on cumulative evidence. Therefore, we want to offer a framework, which gives some overview and orientation by classifying and describing the different levels of analysis, the different theoretical and managerial perspectives, and the different objects of analysis, which have been used. This could guide the process of bringing together the different pieces of the research jigsaw called research in business-to-business markets. D 2003 Elsevier Science Inc. All rights reserved.
1. Introduction The roots of network thinking can be traced back to the early 20th century and even further (Wilkinson, in preparation). In the early days, however, interorganizational relationships have been treated as exemptions from the ‘‘ideals’’ of hierarchies and markets. Later, in the 1980s, a long discussion had been under way detailing the properties of relationships and trying to place them either between or besides hierarchies and markets (Ha¨gg et al., 1984; Ouchi, 1980; Powell, 1990; Thorelli, 1986). Besides the discussion of where relationships should be placed conceptually, a growing body of literature started to analyze the nature and functions of relationships. This modern understanding of marketing, purchasing, and innovation management (to name the most prominent areas) as interorganizational interaction processes had been pioneered by the work of the Industrial Marketing and Purchasing (IMP) group (see, for example, Ha˚kansson, 1982). The academic discussion as well as a growing importance and acceptance in practice have fueled the number of studies in the area of interactions, relationships, and networks seen in growing numbers of both authors and papers at the annual IMP conference (Gemu¨nden, 1997). Actually, the move from an analysis of individual firms towards the interactions between firms is the basis * Corresponding author. Tel.: +45-3815-2518; fax: +45-3815-2500. E-mail address: [email protected] (T. Ritter).
of much academic and managerial thinking in the 1990s. Since IMP research started, the world has changed in many ways. Outsourcing became a prominent option in many industries, e.g. for automotive and computer services. There is a constant move to decrease value creation inside the firm and, as a consequence, increase the value bought into the firm from suppliers. This has created new relationships not only in numbers but also in content because responsibilities are differently allocated along the value chain. In addition to supply, market entry and research and development (R&D) were increasingly organized as Joint Ventures. As a specific organizational form of ‘‘strategic alliances’’ or in general collaboration, this become popular and again increased the interest in interorganizational research. The term ‘‘virtual organization’’ indicated a tendency towards flexible project-oriented cooperations between firms, enabled by progress in electronic business tools. The virtual organization can be interpreted as a network of relationship between firms, which pool together their resources to achieve ‘‘size effects’’. Smaller firms appear big. On the other side, large multinational firms have been perceived if they were networks of quite independent players, i.e. power structures in polycentric multinationals were more similar to hierarchical networks than to hierarchical organizations. This development was triggered by the idea that too big is inflexible and inefficient.
0148-2963/03/$ – see front matter D 2003 Elsevier Science Inc. All rights reserved. doi:10.1016/S0148-2963(01)00254-5
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The interest in interactions, relationships, and networks developed further when the term ‘‘relationship marketing’’ (Gro¨nross, 1994) was invented. The relationship marketing literature has two main origins, consumer marketing and direct marketing (Ford, 1997). This blurred the meaning of the terms slightly because the concepts and terms now also were used in consumer settings (for a comparison between the network approach and relationships marketing, see Mattsson, 1997). However, the advantage of this development was that even more insights were achieved. a large body of knowledge about interactions, relationships, and networks was developed. The problem with today’s body of relationship and network literature is that it is fragmented and — at least sometimes — different pieces does not seem to fit together. This fragmentation has several reasons: Firstly, research from very different backgrounds addresses the issue of interorganizational relationships. By structuring the different contributions, Araaujo and Easton (1996) found 10 different ‘‘network schools’’. Backgrounds range from social science, organization studies, technology, and innovation management, purchasing, and marketing. Secondly, research in different parts of the world followed different trends using different methods, e.g. where the European community largely looked into understanding interactions in business markets by means of qualitative studies, US researchers focused on relationship management issues using quantitative studies. Comparisons became even harder because the different streams do not always acknowledge each others’ work. As such, some work is, at least partly, overlooked in other parts of the world. Fourthly and related to the foregoing point, there are many different aims and objectives that are addressed in the different studies. Some tried to describe and understand business realities, others tried to prescribe and manage relationships. All these issues add up to a situation in which it is hard to summarize research results or even generalize. Therefore, the objective of this introduction is to develop a framework that enables us to put the different pieces of research into perspective. As such, we will not offer a metaanalysis of research in interorganizational relationships and networks or a review of such research. However, we want to point out in which dimensions research differs and, as such, we offer a platform of understanding different research streams. Such a platform would allow to compare and to contrast research results and, as such, would be of help in developing a general theory about business networks. The paper concludes with an introduction of the contributions in this issue and by pointing out further research questions.
2. Interactions, relationships, and networks Whilst research started by looking at interactions between organizations, it was soon realized that these interactions build up an interorganizational relationship over time. These
relationships have also been called interfirm relations and alliances (especially in the US literature) and have further been building blocks in writings on virtual organizations and outsourcing. Over the years, the following characteristics of an interorganizational relationship have been discovered leading our way to an understanding of industrial markets. There is a long-term orientation in a relationship, i.e. an ongoing interaction between the two actors involved. In the interaction model, individual interactions and exchanges are seen as short-term episodes that contribute through routinization, institutionalization, and adaptation to the development of a relationship, a long-term exchange pattern (Ha˚kansson, 1982). Relationships change over time and, as such, are not static. In terms of development, several stages have been identified (Dwyer et al., 1987; Ford, 1980; Ford and Rosson, 1982). However, these stages are not deterministic in the sense that a relationship will follow the order of the stages or will reach certain stages at all (Ford, 1980). Different relationships can be quite different or, even stronger, some argue that each relationship is unique. Barrier block the development of relationships and, thus, relationships are no self-runners (Walter, 1998). To name one important issue, relationships do not come free of costs. Firms have to invest money, resources and time to make them work. Therefore, access to external partners’ resources should be seen as a lengthy and costly investment process (Mattsson, 1988; Plinke, 1989; Valla, 1986; Williamson, 1979). A relationship has an atmosphere that ‘‘can be described in terms of the power– dependence relationship which exists between the companies, the state of conflict or cooperation and overall closeness or distance of the relationship as well as by the companies’ mutual expectations’’ (Ha˚kansson, 1982). This idea of atmosphere can be found in several other constructs developed to describe relationships: trust (Anderson and Weitz, 1989; Donney and Cannon, 1997; Geyskens et al., 1996; Moorman et al., 1992), commitment (Anderson and Weitz, 1992; Dwyer et al., 1987; Grundlach et al., 1995; Moorman et al., 1992; Young and Denize, 1995), and adaptation (Brennan and Turnbull, 1996; Halle´n et al., 1991). Recently, the notion of relationship quality has developed which combines some of these ideas into one overall construct (Crosby et al., 1990; Kumar et al., 1995; Lagace et al., 1991; Naude and Buttle, 2000). Relationships are mainly maintained for an economic purpose, i.e. they fulfil an economic function (Ha˚kansson and Turnbull, 1982). These functions can be directly related to the individual relationship (direct functions) or might have a purpose in the future of that relationship or in other relationships (indirect functions) (Anderson et al., 1994; Ha˚kansson and Johanson, 1993; Walter et al., in preparation). Over time, the focus of research has moved from the individual relationships towards a wider structure. This was due to the ‘‘discovery’’ of connectedness, which acknowledged the fact that relationships do not exist in
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isolation or independent from each other. ‘‘Two exchange relations are connected to the degree that exchange in one relation is contingent upon exchange (or nonexchange) in the other relation’’ (Cook and Emerson, 1978). ‘‘Generalized connectedness of business relationships implies existence of an aggregate structure, a form of organization we have chosen to qualify as a network’’ (Ha˚kansson and Snehota, 1995). Research on interorganizational networks has revealed the following results. Networks can be described in terms of actors, activities, and resources (Ha˚ kansson and Johanson, 1992). These elements influence each other: Actors perform activities and control resources, activities transform resources and are used by actors to achieve goals, and resources give actors power and enable activities. Networks can also be described in terms of the different bonds between different actors and resources (Mattsson, 1984; Paliwoda and Thomson, 1986). Networks can be seen as self-organizing systems where there is not necessarily a ‘‘leader’’ or ‘‘captain’’. In case such leaders have been identified, these structures have been called ‘‘strategic networks’’ (Jarillo, 1988). However, the majority of cases points out that organizations in networks do both at the same time, managing and being managed (Wilkinson and Young, 1994).
3. Interorganizational levels of analysis In terms of analyzing relationships and networks, we have to distinguish between four levels (Ford and McDowell 1999; Mo¨ller and Halinen 1999). The interaction/the episode: The basis of analysis is a single exchange, an incident, an individual interaction or an episode. Regardless of the label, it is seen and treated as one event in time. Nevertheless, it might be influence by the past and the expected future and, as such, is not necessarily isolated. The dyad/the individual relationship: This is the aggregate of episodes between two actors. The dyad has a history, which is remembered by the actors involved (and others). Again, influences from other relationships might be recognized on this level, but the main focus is on the interaction between two actors over time. The portfolio/similar relationships: The portfolio takes a single firm (often also called the focal firm) as a starting point, which regards a special subset of relationships of the firm in question. It is important to note that this does not include all relationships a firm may have. Rather very similar relationships are taken together. This can take the form of customer relationships or supplier relationships, or several important relationships are in a portfolio (e.g. key accounts). Similarity in this matter can mean different things: similar in their position to the focal firm (e.g. customers), similar in size
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(e.g. large vs. small suppliers), similar in the function fulfilled (e.g. innovation partners). The net/the relationships of an actor: On this level, all relationships of a firm are subject of the analysis, i.e. all suppliers, coproducers, customers, distributors, research institutions, etc. However, some studies also pick some special nets, which effectively are subnets or portfolios of relationships by analyzing, e.g. innovation and knowledge networks. The network/industries and markets as networks: This is the broadest level of analysis. It does not take an individual firm as a starting point but analyzes the whole structure of an industry or a market. The different levels have also been labeled as Micro (dyad), Meso (net), and Macro (markets as networks) (Mattsson, 1997).
4. Management levels of analysis First, we need to make a clear point about the likelihood that one firm can manage, design, or run networks. It is zero because all activities in the networks are dependent on what the other actors do (Ford and Saren, 1996; Ford, 1997). However, firms cope with relationships by not only observing them and reacting to the inevitable evolution but also by proactively anticipating change. At least, actors try to realize their own aims by influencing relationships. However, relationships and networks are the results of activities of human beings, because neither brig of a firm are collaborating with the other party, but human beings do. As such, we have to look at the human dimension in which we can distinguish four levels of actors in the networks (see also Burt, 1980; Ha˚kansson and Johanson, 1992). The individual. On this level, the role and impact of individuals is analyzed. This area has resulted in many role models (e.g., key account manager: Pardo, 1994; relationship promoter: Walter 1999; alliance manager: Callahan and MacKanzie, 1999). A group or team of individuals. As relationships become more complex, we see nowadays that more and more teams are in charge of ‘‘doing something’’ with or within a relationship. Therefore, team approaches have arrived in relationship and network research. (e.g., teams: Helfert and Vith, 1999; Narus and Anderson, 1995; Smith and Barclay, 1993; buying center: Johnston and Bonoma, 1981; Webster and Wind 1972). The organization. On the organizational level, we have again groups of actors acting on behalf of their organization. The difference between the team level is that we draw on a wider pool of people. Conceptually, issues like corporate culture, dispositions, internal communication, and strategy are introduced into the discussion — to name but few. Cluster of organizations. Again, we need to enlarge our view and go outside the organizational boundary. Firms link up with others to compete against other clusters
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(or consortia) of organizations (e.g., collective action: Araujo and Brito, 1998). It is not any longer a battle of organizations against organizations but between networks of organizations. From these different levels of management, interactions, relationships, and networks are influenced, and all levels of management are influenced by these relationships. Again, how much control one actor has over the development of the system or its success is debatable.
is determined by how well the very different pieces fit together. This sets very different preconditions to what the firm wants to achieve. Gemu¨nden et al. (1996) have shown that different nets support different innovation aims.
5. Value created by interactions, relationships, and networks
5.5. The human side
Apart from management and network analysis level, we also need to look at the output of all these management activities on the different levels. Value can be created or destroyed in interactions, relationships, and networks. Again, we can use the dimensions developed above.
5.4. Value creation in networks This takes an even more holistic view of value creation. Here, we leave the level of the firm and analyze whole industries or supply networks.
Obviously, value creation has effects on the different human levels of analysis as well. Individuals such as sales people and purchasers will be judged on the value creation in a single relationship, a team might be judged upon the portfolio of relationships, and firm’s share prices depend on how the net is performing.
5.1. Value creation in a dyad 6. A conceptual framework There are three perspective of the value created in a dyad: Value can be created for both actors involved, which does not necessarily need to be the same value for the two. In addition, the relationship itself can have a value. Based on the discussion of relationship functions, Walter et al. (in preparation) develop a framework of value creating functions exemplified with a buyer –seller relationship from the supplier’s perspective. As a first step, they distinguish between direct and indirect functions. Direct functions create value for the supplier within the given relationship. Three different functions were found empirically: profit, volume, and safeguard. Indirect functions create value for the supplier either in the future in the relationship under question or in other (connected) relationships. Innovation, market, access, and scout functions were found. 5.2. Value creation in a portfolio Given the value of individual relationships, this value creation can be aggregated for a whole set of relationships. The new element of value creation here is the point that — likewise financial portfolio management — different relationships can be used for different purposes. The value of a whole portfolio can be determined by the degree to which the different relationships complement and substitute each other. As such, the value will not be the sum of the relationships’ values but can either be more or less. 5.3. Value creation in nets Whereby relationships to similar type of actors were the level of analysis in a portfolio, the net combines the different portfolios of a firm to its totality. Hereby, value creation
Putting the elements described above together, we can build up the following framework (see Fig. 1): The output is influenced by both the interorganizational and the management level of analysis. This influence is manifold: Firstly, the output measure is influenced by the level of analysis. One would expect that, e.g. at relationship level, relationship output is looked at, whereas on network level, the output of a whole network is considered. In addition, given that different levels of management have different effects on a relationship, one should take this into consideration. In addition, we have seen that what people do (management level) influences what the interorganizational construct is about. In addition, management has an impact on output (i.e. success). We could also assume that management has an interaction effect between what certain types of interorganizational constructs can ‘‘produce’’. With the three areas, we can produce a classic input – process – output model, whereby the input is made on different levels from individuals through to clusters of organizations. The process itself takes part in the network, but, again, on different levels. All this finally produces an output on different levels. This output might be intentionally or not. In this view, we have not included resources. Resources could be seen as input variables but also as output as resources are changed, transformed, exchanged, and developed through interactions between actors. In addition to these ‘‘forward’’ effects, we would also expect some ‘‘backward’’ effects, which we could interpret as ‘‘feedback loops’’ (gray arrows). In case a relationship is successful, people might change their way of management in order to increase the likelihood of being successful in that relationship again or in other relationships. In addition, success (or failure) might change the character-
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Fig. 1. An illustration of different constructs and analytical levels in relationship and network research and their interactions.
istics of any interorganizational level (i.e. success produces more trust).
7. Contributions in this special issue First, we wish to thank all authors who considered this special issue as an outlet for their work. We were overwhelmed by the number of papers that we received in response to our call for contributions. Sadly, we had to reject quite a number of papers in the review process. However, we are grateful to all the authors for their contributions. Our special thanks go to all those who reviewed the papers for us (see Appendix A). We know only too well how hard it is to find time for these kinds of activities. We highly appreciate the support from our colleagues. Without their insightful comments on the manuscripts, we would not have the special issue. We have three papers on the relationship level. Berthon, Pitt, Ewing, and Bakkeland offer an alternative theory for norms and power in marketing relationships. As such, they deal with the substance or the quality of a relationship. Nordberg, Campbell, and Verbeke analyze how relationships can help to acquire technological innovations. Hereby, they widen our understanding of the benefits of relationships. Walter offers ideas on how to manage dyads. He introduces the role model of the relationship promoter and shows empirically how relationship promoters increase adaptation, trust and commitment, and overall supplier involvement in new product development. On the organizational level, Hillebrand and Biemans analyze the relationship between internal and external cooperation. Based on an identification of five different streams of literature, they derive hypotheses on why and how firm characteristics are linked to network activities. Our own contribution takes up the same angle. We based our research on the empirical observation that firms differ remarkably in
their ability to deal with their relationships and networks. This ability is captured in a firm’s network competence. In addition to its impact on innovation success, organizational antecedents are analyzed, linking the ‘‘outside-oriented’’ activities to the inside. In addition, Johnson and Sohi discuss the important issue of learning in relationships. They argue that learning intent, transparency, and receptivity have a positive impact on dissemination and shared interpretation of information, which, in turn, leads to higher effectiveness, efficiency, and commitment. Once again, the success of a relationship is related back to an organizations characteristics. Finally, Dahlstrom and Ingram offer a different perspective to field of interfirm relationships: They take a social network perspective and look at agency relationships. They highlight the importance of social networks in evaluating potential agents as enablers and as constrains. The contributions cover a wide range of the framework that we have proposed in this paper. For us, it is very interesting to see that there are two streams dominating the discussion: innovation and organization. It seems very timely to discuss the innovation benefits relationships and networks can offer and how to realize these. In addition, increased emphasis is placed on the question of how to design organizations so that they can be successful members of networks.
8. Further research questions Even with the contributions in this special issue, we are far away from a general theory in the field of relationships and networks. The following issues await conceptual development and empirical investigation. There are many arguments for the impossibility of managing a network. However, managers do it on a day-today basis. The truth will somehow lay in the middle (as argued above), i.e. firms are only, to a certain extent, able to
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manage their relationships and network. The remainder is determined by other actors’ behavior in the network. But where is the borderline? Can we determine how much a firm can really do in a network? What factors have an influence on this percentage? Even though success stories are more appealing, we need to look at the dark side of relationships and networks. Effects like lock-ins and outlearning have been discussed, but there is still more to discover. Given that networks surround the whole firm, this questions the notion of different functions inside the firm. Is an internal hierarchical organization possible when the surrounding world is a network? Is it successful? What kind of impact can market orientation have on performance when a firm’s network and not a general market determines its success? What impact have new developments in information technology on relationships and networks? There are reasons to believe that IT may strengthen relationships but the opposite has also been observed. Maybe, it is the variation in IT that accounts for these differences, maybe it is the variation in relationships themselves. Linking the new and the networked economy conceptually and empirically remains a big challenge.
Appendix A. List of reviewers
Luis Araujo, Lancaster University, UK Daniel Baier, University of Karlsruhe, Germany Harald Biong, Handelshøyskolen BI, Norway Friedhelm Bliemel, University of Kaiserslautern, Germany Keith Blois, University of Oxford, UK Luc Drapier, EDHEC, France Geoff Easton, Lancaster University, UK Marc Ebers, University of Augsburg, Germany David Ford, University of Bath, UK Thomas Johnsen, Bournemouth University, UK Michael Kleinaltenkamp, Humbold-University Berlin, Germany Prabakar Kothandaraman, Penn State University, USA Stephanos Mouzas, Lancaster University, UK Pete Naude, University of Bath, UK Ed Nijssen, Nijmegen University, The Netherlands Ricky Ryssel, University of Karlsruhe, Germany Christian Schade, Humbold-University Berlin, Germany Albrecht So¨llner, Westfa¨lische Wilhelms-University Mu¨nster, Germany Nik Franke, Ludwig-Maximilians-University Mu¨nchen, Germany Freiling, Jo¨rg, University of Bochum, Germany Pervez Ghauri, University of Gronningen, The Netherlands Bernd Gu¨nter, Heinrich-Heine-University Du¨sseldorf, Germany Ha˚kan Ha˚kansson, Handelshøyskolen BI, Norway Peter Hammann, University of Bochum, Germany Lauritz Hedaa, Copenhagen Business School, Denmark Cornelius Herstadt, Technical University Hamburg-Harburg, Germany Susanne Hertz, Stockholm School of Economics, Sweden
Bernd Swoboda, Saar-University Saarbru¨cken, Germany Jo¨rg Sydow, Free University Berlin, Germany Wolfgang Ulaga, EDHEC, France Thomas Werani, Johannes-Kepler-University Linz, Austria Ian Wilkinson, University of New South Wales Sydney, Australia David Wilson, Penn State University, USA Elisabeth Wilson, Boston College, USA Finn Wynstra, Technical University Eindhoven, The Netherlands Louise Young, University of Technology Sydney, Australia
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Interorganizational relationships and networks: An overview Thomas Rittera,*, Hans Georg Gemu¨ndenb a
Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK-2000 Frederiksberg, Denmark b Technology and Innovation Management Technical University of Berlin, Hardenberg Str. 4-5, D-10623, Berlin, Germany
Abstract Relationships and networks have been analyzed with different theoretical backgrounds and methods, at different levels, and with different results and conclusions. This diversity promotes a better understanding of the antecedents, dynamics, and effects of relationships and networks. However, this diversity also creates problems to compare and integrate results and to develop a general theory based on cumulative evidence. Therefore, we want to offer a framework, which gives some overview and orientation by classifying and describing the different levels of analysis, the different theoretical and managerial perspectives, and the different objects of analysis, which have been used. This could guide the process of bringing together the different pieces of the research jigsaw called research in business-to-business markets. D 2003 Elsevier Science Inc. All rights reserved.
1. Introduction The roots of network thinking can be traced back to the early 20th century and even further (Wilkinson, in preparation). In the early days, however, interorganizational relationships have been treated as exemptions from the ‘‘ideals’’ of hierarchies and markets. Later, in the 1980s, a long discussion had been under way detailing the properties of relationships and trying to place them either between or besides hierarchies and markets (Ha¨gg et al., 1984; Ouchi, 1980; Powell, 1990; Thorelli, 1986). Besides the discussion of where relationships should be placed conceptually, a growing body of literature started to analyze the nature and functions of relationships. This modern understanding of marketing, purchasing, and innovation management (to name the most prominent areas) as interorganizational interaction processes had been pioneered by the work of the Industrial Marketing and Purchasing (IMP) group (see, for example, Ha˚kansson, 1982). The academic discussion as well as a growing importance and acceptance in practice have fueled the number of studies in the area of interactions, relationships, and networks seen in growing numbers of both authors and papers at the annual IMP conference (Gemu¨nden, 1997). Actually, the move from an analysis of individual firms towards the interactions between firms is the basis * Corresponding author. Tel.: +45-3815-2518; fax: +45-3815-2500. E-mail address: [email protected] (T. Ritter).
of much academic and managerial thinking in the 1990s. Since IMP research started, the world has changed in many ways. Outsourcing became a prominent option in many industries, e.g. for automotive and computer services. There is a constant move to decrease value creation inside the firm and, as a consequence, increase the value bought into the firm from suppliers. This has created new relationships not only in numbers but also in content because responsibilities are differently allocated along the value chain. In addition to supply, market entry and research and development (R&D) were increasingly organized as Joint Ventures. As a specific organizational form of ‘‘strategic alliances’’ or in general collaboration, this become popular and again increased the interest in interorganizational research. The term ‘‘virtual organization’’ indicated a tendency towards flexible project-oriented cooperations between firms, enabled by progress in electronic business tools. The virtual organization can be interpreted as a network of relationship between firms, which pool together their resources to achieve ‘‘size effects’’. Smaller firms appear big. On the other side, large multinational firms have been perceived if they were networks of quite independent players, i.e. power structures in polycentric multinationals were more similar to hierarchical networks than to hierarchical organizations. This development was triggered by the idea that too big is inflexible and inefficient.
0148-2963/03/$ – see front matter D 2003 Elsevier Science Inc. All rights reserved. doi:10.1016/S0148-2963(01)00254-5
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The interest in interactions, relationships, and networks developed further when the term ‘‘relationship marketing’’ (Gro¨nross, 1994) was invented. The relationship marketing literature has two main origins, consumer marketing and direct marketing (Ford, 1997). This blurred the meaning of the terms slightly because the concepts and terms now also were used in consumer settings (for a comparison between the network approach and relationships marketing, see Mattsson, 1997). However, the advantage of this development was that even more insights were achieved. a large body of knowledge about interactions, relationships, and networks was developed. The problem with today’s body of relationship and network literature is that it is fragmented and — at least sometimes — different pieces does not seem to fit together. This fragmentation has several reasons: Firstly, research from very different backgrounds addresses the issue of interorganizational relationships. By structuring the different contributions, Araaujo and Easton (1996) found 10 different ‘‘network schools’’. Backgrounds range from social science, organization studies, technology, and innovation management, purchasing, and marketing. Secondly, research in different parts of the world followed different trends using different methods, e.g. where the European community largely looked into understanding interactions in business markets by means of qualitative studies, US researchers focused on relationship management issues using quantitative studies. Comparisons became even harder because the different streams do not always acknowledge each others’ work. As such, some work is, at least partly, overlooked in other parts of the world. Fourthly and related to the foregoing point, there are many different aims and objectives that are addressed in the different studies. Some tried to describe and understand business realities, others tried to prescribe and manage relationships. All these issues add up to a situation in which it is hard to summarize research results or even generalize. Therefore, the objective of this introduction is to develop a framework that enables us to put the different pieces of research into perspective. As such, we will not offer a metaanalysis of research in interorganizational relationships and networks or a review of such research. However, we want to point out in which dimensions research differs and, as such, we offer a platform of understanding different research streams. Such a platform would allow to compare and to contrast research results and, as such, would be of help in developing a general theory about business networks. The paper concludes with an introduction of the contributions in this issue and by pointing out further research questions.
2. Interactions, relationships, and networks Whilst research started by looking at interactions between organizations, it was soon realized that these interactions build up an interorganizational relationship over time. These
relationships have also been called interfirm relations and alliances (especially in the US literature) and have further been building blocks in writings on virtual organizations and outsourcing. Over the years, the following characteristics of an interorganizational relationship have been discovered leading our way to an understanding of industrial markets. There is a long-term orientation in a relationship, i.e. an ongoing interaction between the two actors involved. In the interaction model, individual interactions and exchanges are seen as short-term episodes that contribute through routinization, institutionalization, and adaptation to the development of a relationship, a long-term exchange pattern (Ha˚kansson, 1982). Relationships change over time and, as such, are not static. In terms of development, several stages have been identified (Dwyer et al., 1987; Ford, 1980; Ford and Rosson, 1982). However, these stages are not deterministic in the sense that a relationship will follow the order of the stages or will reach certain stages at all (Ford, 1980). Different relationships can be quite different or, even stronger, some argue that each relationship is unique. Barrier block the development of relationships and, thus, relationships are no self-runners (Walter, 1998). To name one important issue, relationships do not come free of costs. Firms have to invest money, resources and time to make them work. Therefore, access to external partners’ resources should be seen as a lengthy and costly investment process (Mattsson, 1988; Plinke, 1989; Valla, 1986; Williamson, 1979). A relationship has an atmosphere that ‘‘can be described in terms of the power– dependence relationship which exists between the companies, the state of conflict or cooperation and overall closeness or distance of the relationship as well as by the companies’ mutual expectations’’ (Ha˚kansson, 1982). This idea of atmosphere can be found in several other constructs developed to describe relationships: trust (Anderson and Weitz, 1989; Donney and Cannon, 1997; Geyskens et al., 1996; Moorman et al., 1992), commitment (Anderson and Weitz, 1992; Dwyer et al., 1987; Grundlach et al., 1995; Moorman et al., 1992; Young and Denize, 1995), and adaptation (Brennan and Turnbull, 1996; Halle´n et al., 1991). Recently, the notion of relationship quality has developed which combines some of these ideas into one overall construct (Crosby et al., 1990; Kumar et al., 1995; Lagace et al., 1991; Naude and Buttle, 2000). Relationships are mainly maintained for an economic purpose, i.e. they fulfil an economic function (Ha˚kansson and Turnbull, 1982). These functions can be directly related to the individual relationship (direct functions) or might have a purpose in the future of that relationship or in other relationships (indirect functions) (Anderson et al., 1994; Ha˚kansson and Johanson, 1993; Walter et al., in preparation). Over time, the focus of research has moved from the individual relationships towards a wider structure. This was due to the ‘‘discovery’’ of connectedness, which acknowledged the fact that relationships do not exist in
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isolation or independent from each other. ‘‘Two exchange relations are connected to the degree that exchange in one relation is contingent upon exchange (or nonexchange) in the other relation’’ (Cook and Emerson, 1978). ‘‘Generalized connectedness of business relationships implies existence of an aggregate structure, a form of organization we have chosen to qualify as a network’’ (Ha˚kansson and Snehota, 1995). Research on interorganizational networks has revealed the following results. Networks can be described in terms of actors, activities, and resources (Ha˚ kansson and Johanson, 1992). These elements influence each other: Actors perform activities and control resources, activities transform resources and are used by actors to achieve goals, and resources give actors power and enable activities. Networks can also be described in terms of the different bonds between different actors and resources (Mattsson, 1984; Paliwoda and Thomson, 1986). Networks can be seen as self-organizing systems where there is not necessarily a ‘‘leader’’ or ‘‘captain’’. In case such leaders have been identified, these structures have been called ‘‘strategic networks’’ (Jarillo, 1988). However, the majority of cases points out that organizations in networks do both at the same time, managing and being managed (Wilkinson and Young, 1994).
3. Interorganizational levels of analysis In terms of analyzing relationships and networks, we have to distinguish between four levels (Ford and McDowell 1999; Mo¨ller and Halinen 1999). The interaction/the episode: The basis of analysis is a single exchange, an incident, an individual interaction or an episode. Regardless of the label, it is seen and treated as one event in time. Nevertheless, it might be influence by the past and the expected future and, as such, is not necessarily isolated. The dyad/the individual relationship: This is the aggregate of episodes between two actors. The dyad has a history, which is remembered by the actors involved (and others). Again, influences from other relationships might be recognized on this level, but the main focus is on the interaction between two actors over time. The portfolio/similar relationships: The portfolio takes a single firm (often also called the focal firm) as a starting point, which regards a special subset of relationships of the firm in question. It is important to note that this does not include all relationships a firm may have. Rather very similar relationships are taken together. This can take the form of customer relationships or supplier relationships, or several important relationships are in a portfolio (e.g. key accounts). Similarity in this matter can mean different things: similar in their position to the focal firm (e.g. customers), similar in size
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(e.g. large vs. small suppliers), similar in the function fulfilled (e.g. innovation partners). The net/the relationships of an actor: On this level, all relationships of a firm are subject of the analysis, i.e. all suppliers, coproducers, customers, distributors, research institutions, etc. However, some studies also pick some special nets, which effectively are subnets or portfolios of relationships by analyzing, e.g. innovation and knowledge networks. The network/industries and markets as networks: This is the broadest level of analysis. It does not take an individual firm as a starting point but analyzes the whole structure of an industry or a market. The different levels have also been labeled as Micro (dyad), Meso (net), and Macro (markets as networks) (Mattsson, 1997).
4. Management levels of analysis First, we need to make a clear point about the likelihood that one firm can manage, design, or run networks. It is zero because all activities in the networks are dependent on what the other actors do (Ford and Saren, 1996; Ford, 1997). However, firms cope with relationships by not only observing them and reacting to the inevitable evolution but also by proactively anticipating change. At least, actors try to realize their own aims by influencing relationships. However, relationships and networks are the results of activities of human beings, because neither brig of a firm are collaborating with the other party, but human beings do. As such, we have to look at the human dimension in which we can distinguish four levels of actors in the networks (see also Burt, 1980; Ha˚kansson and Johanson, 1992). The individual. On this level, the role and impact of individuals is analyzed. This area has resulted in many role models (e.g., key account manager: Pardo, 1994; relationship promoter: Walter 1999; alliance manager: Callahan and MacKanzie, 1999). A group or team of individuals. As relationships become more complex, we see nowadays that more and more teams are in charge of ‘‘doing something’’ with or within a relationship. Therefore, team approaches have arrived in relationship and network research. (e.g., teams: Helfert and Vith, 1999; Narus and Anderson, 1995; Smith and Barclay, 1993; buying center: Johnston and Bonoma, 1981; Webster and Wind 1972). The organization. On the organizational level, we have again groups of actors acting on behalf of their organization. The difference between the team level is that we draw on a wider pool of people. Conceptually, issues like corporate culture, dispositions, internal communication, and strategy are introduced into the discussion — to name but few. Cluster of organizations. Again, we need to enlarge our view and go outside the organizational boundary. Firms link up with others to compete against other clusters
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(or consortia) of organizations (e.g., collective action: Araujo and Brito, 1998). It is not any longer a battle of organizations against organizations but between networks of organizations. From these different levels of management, interactions, relationships, and networks are influenced, and all levels of management are influenced by these relationships. Again, how much control one actor has over the development of the system or its success is debatable.
is determined by how well the very different pieces fit together. This sets very different preconditions to what the firm wants to achieve. Gemu¨nden et al. (1996) have shown that different nets support different innovation aims.
5. Value created by interactions, relationships, and networks
5.5. The human side
Apart from management and network analysis level, we also need to look at the output of all these management activities on the different levels. Value can be created or destroyed in interactions, relationships, and networks. Again, we can use the dimensions developed above.
5.4. Value creation in networks This takes an even more holistic view of value creation. Here, we leave the level of the firm and analyze whole industries or supply networks.
Obviously, value creation has effects on the different human levels of analysis as well. Individuals such as sales people and purchasers will be judged on the value creation in a single relationship, a team might be judged upon the portfolio of relationships, and firm’s share prices depend on how the net is performing.
5.1. Value creation in a dyad 6. A conceptual framework There are three perspective of the value created in a dyad: Value can be created for both actors involved, which does not necessarily need to be the same value for the two. In addition, the relationship itself can have a value. Based on the discussion of relationship functions, Walter et al. (in preparation) develop a framework of value creating functions exemplified with a buyer –seller relationship from the supplier’s perspective. As a first step, they distinguish between direct and indirect functions. Direct functions create value for the supplier within the given relationship. Three different functions were found empirically: profit, volume, and safeguard. Indirect functions create value for the supplier either in the future in the relationship under question or in other (connected) relationships. Innovation, market, access, and scout functions were found. 5.2. Value creation in a portfolio Given the value of individual relationships, this value creation can be aggregated for a whole set of relationships. The new element of value creation here is the point that — likewise financial portfolio management — different relationships can be used for different purposes. The value of a whole portfolio can be determined by the degree to which the different relationships complement and substitute each other. As such, the value will not be the sum of the relationships’ values but can either be more or less. 5.3. Value creation in nets Whereby relationships to similar type of actors were the level of analysis in a portfolio, the net combines the different portfolios of a firm to its totality. Hereby, value creation
Putting the elements described above together, we can build up the following framework (see Fig. 1): The output is influenced by both the interorganizational and the management level of analysis. This influence is manifold: Firstly, the output measure is influenced by the level of analysis. One would expect that, e.g. at relationship level, relationship output is looked at, whereas on network level, the output of a whole network is considered. In addition, given that different levels of management have different effects on a relationship, one should take this into consideration. In addition, we have seen that what people do (management level) influences what the interorganizational construct is about. In addition, management has an impact on output (i.e. success). We could also assume that management has an interaction effect between what certain types of interorganizational constructs can ‘‘produce’’. With the three areas, we can produce a classic input – process – output model, whereby the input is made on different levels from individuals through to clusters of organizations. The process itself takes part in the network, but, again, on different levels. All this finally produces an output on different levels. This output might be intentionally or not. In this view, we have not included resources. Resources could be seen as input variables but also as output as resources are changed, transformed, exchanged, and developed through interactions between actors. In addition to these ‘‘forward’’ effects, we would also expect some ‘‘backward’’ effects, which we could interpret as ‘‘feedback loops’’ (gray arrows). In case a relationship is successful, people might change their way of management in order to increase the likelihood of being successful in that relationship again or in other relationships. In addition, success (or failure) might change the character-
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Fig. 1. An illustration of different constructs and analytical levels in relationship and network research and their interactions.
istics of any interorganizational level (i.e. success produces more trust).
7. Contributions in this special issue First, we wish to thank all authors who considered this special issue as an outlet for their work. We were overwhelmed by the number of papers that we received in response to our call for contributions. Sadly, we had to reject quite a number of papers in the review process. However, we are grateful to all the authors for their contributions. Our special thanks go to all those who reviewed the papers for us (see Appendix A). We know only too well how hard it is to find time for these kinds of activities. We highly appreciate the support from our colleagues. Without their insightful comments on the manuscripts, we would not have the special issue. We have three papers on the relationship level. Berthon, Pitt, Ewing, and Bakkeland offer an alternative theory for norms and power in marketing relationships. As such, they deal with the substance or the quality of a relationship. Nordberg, Campbell, and Verbeke analyze how relationships can help to acquire technological innovations. Hereby, they widen our understanding of the benefits of relationships. Walter offers ideas on how to manage dyads. He introduces the role model of the relationship promoter and shows empirically how relationship promoters increase adaptation, trust and commitment, and overall supplier involvement in new product development. On the organizational level, Hillebrand and Biemans analyze the relationship between internal and external cooperation. Based on an identification of five different streams of literature, they derive hypotheses on why and how firm characteristics are linked to network activities. Our own contribution takes up the same angle. We based our research on the empirical observation that firms differ remarkably in
their ability to deal with their relationships and networks. This ability is captured in a firm’s network competence. In addition to its impact on innovation success, organizational antecedents are analyzed, linking the ‘‘outside-oriented’’ activities to the inside. In addition, Johnson and Sohi discuss the important issue of learning in relationships. They argue that learning intent, transparency, and receptivity have a positive impact on dissemination and shared interpretation of information, which, in turn, leads to higher effectiveness, efficiency, and commitment. Once again, the success of a relationship is related back to an organizations characteristics. Finally, Dahlstrom and Ingram offer a different perspective to field of interfirm relationships: They take a social network perspective and look at agency relationships. They highlight the importance of social networks in evaluating potential agents as enablers and as constrains. The contributions cover a wide range of the framework that we have proposed in this paper. For us, it is very interesting to see that there are two streams dominating the discussion: innovation and organization. It seems very timely to discuss the innovation benefits relationships and networks can offer and how to realize these. In addition, increased emphasis is placed on the question of how to design organizations so that they can be successful members of networks.
8. Further research questions Even with the contributions in this special issue, we are far away from a general theory in the field of relationships and networks. The following issues await conceptual development and empirical investigation. There are many arguments for the impossibility of managing a network. However, managers do it on a day-today basis. The truth will somehow lay in the middle (as argued above), i.e. firms are only, to a certain extent, able to
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manage their relationships and network. The remainder is determined by other actors’ behavior in the network. But where is the borderline? Can we determine how much a firm can really do in a network? What factors have an influence on this percentage? Even though success stories are more appealing, we need to look at the dark side of relationships and networks. Effects like lock-ins and outlearning have been discussed, but there is still more to discover. Given that networks surround the whole firm, this questions the notion of different functions inside the firm. Is an internal hierarchical organization possible when the surrounding world is a network? Is it successful? What kind of impact can market orientation have on performance when a firm’s network and not a general market determines its success? What impact have new developments in information technology on relationships and networks? There are reasons to believe that IT may strengthen relationships but the opposite has also been observed. Maybe, it is the variation in IT that accounts for these differences, maybe it is the variation in relationships themselves. Linking the new and the networked economy conceptually and empirically remains a big challenge.
Appendix A. List of reviewers
Luis Araujo, Lancaster University, UK Daniel Baier, University of Karlsruhe, Germany Harald Biong, Handelshøyskolen BI, Norway Friedhelm Bliemel, University of Kaiserslautern, Germany Keith Blois, University of Oxford, UK Luc Drapier, EDHEC, France Geoff Easton, Lancaster University, UK Marc Ebers, University of Augsburg, Germany David Ford, University of Bath, UK Thomas Johnsen, Bournemouth University, UK Michael Kleinaltenkamp, Humbold-University Berlin, Germany Prabakar Kothandaraman, Penn State University, USA Stephanos Mouzas, Lancaster University, UK Pete Naude, University of Bath, UK Ed Nijssen, Nijmegen University, The Netherlands Ricky Ryssel, University of Karlsruhe, Germany Christian Schade, Humbold-University Berlin, Germany Albrecht So¨llner, Westfa¨lische Wilhelms-University Mu¨nster, Germany Nik Franke, Ludwig-Maximilians-University Mu¨nchen, Germany Freiling, Jo¨rg, University of Bochum, Germany Pervez Ghauri, University of Gronningen, The Netherlands Bernd Gu¨nter, Heinrich-Heine-University Du¨sseldorf, Germany Ha˚kan Ha˚kansson, Handelshøyskolen BI, Norway Peter Hammann, University of Bochum, Germany Lauritz Hedaa, Copenhagen Business School, Denmark Cornelius Herstadt, Technical University Hamburg-Harburg, Germany Susanne Hertz, Stockholm School of Economics, Sweden
Bernd Swoboda, Saar-University Saarbru¨cken, Germany Jo¨rg Sydow, Free University Berlin, Germany Wolfgang Ulaga, EDHEC, France Thomas Werani, Johannes-Kepler-University Linz, Austria Ian Wilkinson, University of New South Wales Sydney, Australia David Wilson, Penn State University, USA Elisabeth Wilson, Boston College, USA Finn Wynstra, Technical University Eindhoven, The Netherlands Louise Young, University of Technology Sydney, Australia
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