Using network pictures to study inter-organisational encounters

Scandinavian Journal of Management (2012) 28, 136—148

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Using network pictures to study inter-organisational encounters ¨ berg * Christina O Lund University, Department of Industrial Management and Logistics, Box 118, SE-221 00 Lund, Sweden

KEYWORDS Acquisition; Methodology; Merger; Network; Picture; Sense-making

Summary This paper describes and illustrates how a network picture methodology can create understandings of external parties in mergers and acquisitions (M&As). Recent studies have brought attention to the limited use of qualitative research methods and the overlooked marketing perspective in M&A studies. Network pictures refer to how individual actors in companies perceive their company’s business network. The paper develops a protocol and illustrates its use through a single case study. Network pictures are described in terms of actors, resources and activities on a relational level and on a network level. Using such pictures enables the capturing of how M&As are processed by business partners and how external parties’ activities impact M&A decisions, knowledge which will contribute to the M&A literature. # 2012 Elsevier Ltd. All rights reserved.

Introduction Attention has recently been brought to the limited amount of qualitative studies in management research in general (Gephart, 2004) and to how this has affected research outcomes in the merger and acquisition (M&A) literature in particular (Meglio & Risberg, 2010). Explanations lie in research traditions as well as in the difficulties in actually providing analyses of qualitative research (Gephart, 2004; Suddaby, 2006). Meglio and Risberg (2010) point to the fact that too much emphasis has been placed on finding allembracing explanations for the M&A phenomenon, rather than looking at M&As as being individual, and complex processes, where knowledge is accumulative in a relative sense through multiple approaches. Thus it is suggested that multiplicity rather than streamlining, additively contributes knowledge to the M&A field.

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Parallel to this, a debate on how certain dimensions in merger and acquisition literature remain key foci (Cartwright & Schoenberg, 2006), while others are seldom mentioned, has brought attention to the lack of research on the marketing dimension of M&As (Homburg & Bucerius, 2005; Mazur, 2001). In the research tradition in marketing focusing on business relationships and networks (Axelsson & Easton, 1992; Ford & Ha ˚kansson, 2006; Ha ˚kansson, 1982), voice has been given to the fact that business partners are affected by M&As and should hence also be considered in the M&A literature (Anderson, Havila, & Salmi, 2001). In the same vein of literature, it has also been pointed out that M&As may result from activities among these external parties (Matts¨ berg & Holtstro son, 2000; O ¨m, 2006), implying that managers base their M&A decisions on their understanding of the ¨ berg, Hennesurrounding network and changes therein (O berg, & Mouzas, 2007). Empirical research in the area ¨ berg, 2008 as excepremains limited (see Dahlin, 2007; O tions) and much of the research has focused on pointing to the research gap. This paper brings together aspects of the limited qualitative M&A research (as presented by Meglio & Risberg, 2010)

0956-5221/$ — see front matter # 2012 Elsevier Ltd. All rights reserved. doi:10.1016/j.scaman.2012.02.006

Using network pictures to study inter-organisational encounters along with a consideration of the importance of the marketing dimension of M&As as emphasised by Mazur (2001) and Homburg and Bucerius (2005), and the business partner reciprocal effects of and on M&As (Havila & Salmi, 2000; ¨ berg, 2010) to suggest a methodology for Mattsson, 2000; O capturing business partner effects in M&As. Based on sensemaking of managers (Huff, 1990; Weick, 1995), this paper intends to illustrate an alternative way to research M&As and also point to the influence of, and the impact upon, business partners — and thus in an additive manner contribute to the M&A research literature. The purpose of this paper is to describe and illustrate how a network picture methodology can create understandings of the roles of external parties in M&As. Network pictures refer to individual managers’ mental sense-making of their company’s business environment (Henneberg, Mouzas, & Naude ´, 2006), thus emphasising how the decisions and activities of a company are based ˚kansson & Ford, on perceived network opportunities (Ha 2002), and also creating a link between perceptions and company activities (Mo ¨ller, 2010; Ritter, 1999). It is pointed to how individuals’ network pictures are negotiated, shared and practiced through directives or commitments to guide company activities, and while the pictures are held by individuals, they are results of interaction, and further: if captured as managers’ sense-making, they are expectedly decisive for the strategic decisions made and the activities performed. The network picture idea as methodological approach includes capturing sense-making by means of verbal, textual or visual descriptions of company networks. Sense-making has previous been studied in M&A research but then focused on the M&A parties alone (Vaara, 2003). Studies on agents in M&As (Llewellyn, 2007) similarly underline the individual as the party affecting how the company behaves, but disconnect such behaviours from contextual factors and strategic intentions. In addition to its contribution to the emergent discussion on methodologies for researching inter-organisational encounters (Cartwright, Teerikangas, Rouzies, & Wilson-Evered, 2009; Meglio & Risberg, 2010), the paper adds knowledge to the study of networks. It does so through its overview of present studies on network pictures, developing an analytical protocol, and discussing the consequences of researching inter-organisational encounters such as M&As by means of network pictures. The paper is structured as follows. In the next section, a theoretical overview of networks and network pictures is presented. The use of network pictures as a methodology is discussed, and then based upon the network picture research an analytical protocol is developed, incorporating variables designed to capture the verbal, textual and visual meaning of the network pictures. To illustrate the use of network pictures in studies on mergers and acquisitions, an empirical example is provided. Following from the theory section, the research method for that example is presented along with the results of the empirical study. In the analysis section, the empirical study is analysed by means of the protocol developed in the theory section and network pictures as a research methodology is discussed. The section provides some contributing findings captured through studying M&As and business partners’ effects on M&As by means of network pictures. The paper concludes with a discussion on network pictures in the study of inter-organisational encounters in general and mergers and acquisitions in particular.

137

Theory The network idea The term ‘network’ is used to describe webs of interdependent companies and the relationships among them (Anderson, Ha ˚kansson, & Johanson, 1994). Such interdependence includes how one business relationship may affect other ones, thus emphasising a focus beyond the traditional dyadic business relationship between a supplier and customer (Gummesson, Lehtinen, & Gro ¨nroos, 1997) and thereby forwarding a more holistic view on marketing. The network idea draws on such theoretical constructs as resource dependence (Pfeffer & Salancik, 1978) and social exchange theory (Cook & Emerson, 1978). As such, the functionality of markets is accented, through providing an alternative view to market descriptions as presented in economic theory (Ha ˚kansson, 1982). Rather than buying and selling on an ad-hoc basis, companies form long-term relationships within which they continuously adjust to each other (Halle ´n, Johanson, & Seyed-Mohamed, 1991). The longevity of business relationships, dynamics and the adaptations built into them (Gadde & Mattsson, 1987; Halinen, Salmi, & Havila, 1999; Halle ´n et al., 1991; Huemer, 2004; Smith & Laage-Hellman, 1992), are some of the research subjects arising from taking a ‘network approach’. Network ties between companies are often described as consisting of actor bonds, resource ties and activity links (the ARA-model, Ha ˚kansson & Snehota, 1995), and changes on one of these levels would be expected to spread to and affect other actors, activities, resources or links between them on the dyadic level as well as on the network level (Gadde & Mattsson, 1987; Ha ˚kansson & Snehota, 1989; Havila & Salmi, 2000). Halinen et al. (1999) use the terms ‘confined’ and ‘connected’ change to describe how changes may occur on a business relationship level but also spread to and affect other parties. Relating connected changes to research on mergers and acquisitions implies that this kind of inter-organisational encounter may affect the business relationships and partners of the acquiring or acquired parties. Anderson et al. (2001) use the terms ‘intended’ and ‘unexpected’ effects to indicate that while certain changes in business relationships may be planned by the acquiring or merging parties (such as changes in sales staff following integration decisions; Capron, Dussauge, & Mitchell, 1998; Capron & Hulland, 1999), other unintended changes result from how business partners react to the merger or acquisition: for example deciding not to connect to the acquirer while cross-selling ¨ berg, 2008). While there has been an increased is practiced (O interest in studies on how mergers and acquisitions affect business relationships, the number of studies still remains ¨ berg, 2008), and they tend to focus limited (Dahlin, 2007; O on the resulting outcome in terms of network structures as seen from a bird’s eye perspective (Dahlin, 2007). A second area of network studies of mergers and acquisitions has concerned how mergers and acquisitions result from how ¨ berg & Holtstro business partners behave in the network (O ¨m, 2006), thus implicitly connecting such inter-organisational encounters as mergers and acquisitions to perceptions of network changes. However, the studies on business relationships related to mergers and acquisitions mostly focus on discussing how network relationships may change

138 afterwards, and many are conceptual only — pointing to the lack of research in the field. As stated by Gephart (2004), one key problem with qualitative research is how to analyse the data. Network studies often struggle with issues of causality. The network idea is underpinned by a critical realist mindset (Easton, 1995): networks become simplifications of studied structures and thereby a means to capture, analyse and predict events among business partners. The very concept of networks includes that several companies are involved and ongoing business activities between them mean that they affect one another in a complex pattern of cause and effect (Gadde & Mattsson, 1987); accordingly the contextual embeddedness of companies and activities makes it difficult to actually predict reactions. Much research in the field is merely descriptive (Mo ¨ller, 1994). To improve the understanding of what activities cause companies to merge or acquire, for instance, and what reactions may result, it is important to grasp how managers of firms perceive the network: how they define it, what activities cause reactions, how changes become inscribed into their understanding of the network, and so forth. To enhance the understanding of what actually drives network activities, the concept of network pictures has been introduced (Henneberg et al., 2006). This connects the network idea with research by for instance Weick (1995) to capture sense-making in business relationships and, as set out in this paper, can be used to create understandings of the roles of external parties in mergers and acquisitions.

Network pictures The term ‘network pictures’ refers to how individual actors in companies perceive their company’s network (Henneberg et al., 2006; Kragh & Andersen, 2009; Ramos, 2008) and define it in terms of parties involved. A network picture is built on the understanding that managers cannot grasp entire networks, and thus it also stresses what parts of a network they consider important (Holmen & Pedersen, 2003), and reachable (Henneberg, Naude ´, & Mouzas, 2010). The network picture would include companies with direct ties to the represented company, but also such other companies the manager may perceive to be important yet are not directly connected to the represented company (Pick, 1999). The timely embeddedness symbolised by the history, the present and the future becomes incorporated (Kaplan, 2008; Weick, 1979) into options considered. Network pictures are hence expressions of how individual actors try to make sense of their company’s situation, and build a logic for how to behave (cf. Meindl, Stubbart, & Porac, 1994). The network picture idea is related to research into the area of strategy (Hodgkinson & Johnson, 1994; Jackson & Dutton, 1988; Smirchich & Stubbart, 1985) as well as organisational behaviour literature on cognition (Brown, Stacey, & Nandhakumar, 2008; Daft & Weick, 1984; Huff, 1990; Johnson, Daniels, & Asch, 1998) among which cognitive and casual maps, belief structures and sense-making are just some of the central concepts. Sense-making as a central concept for network pictures suggests an interpretative view of reality (Ellis & Hopkinson, 2010; Palmer & Ponsonby, 2002; Weick, 1995), whereby individual actors’ understandings result from their own frames of reference (Zaltman, Lemasters, & Heffring, 1982) and are transformed into objectified activities by

¨ berg C. O means of interaction (Porac, Thomas, & Baden-Fuller, 1989; Weick, 1979), in turn affecting the sense-making of said individuals. Much research in the field of network pictures remains conceptual and elaborates on ways to model network pictures (Geiger & Finch, 2010; Henneberg et al., 2006; Ramos, 2008), or discusses managerial sense-making and agenda construction in business (Mo ¨ller, 2010). The empirical research has focused on how change is enacted by managers (Abrahamsen, 2009; Kragh & Andersen, 2009), and how ¨ berg et al., 2007). This change affects network pictures (O in turn suggests that network pictures are well suited for researching activities as antecedents for reactions. If relating the network picture concept to the above mentioned studies on M&As, it could be anticipated that a merger or acquisition could be seen as an antecedent causing reactions among business partners (Anderson et al., 2001; Dahlin, 2007; Havila & Salmi, 2000), as well as other parties’ activ¨ berg & ities also being reasons for mergers and acquisitions (O Holtstro ¨m, 2006). Network pictures and networking activities The particularity of network pictures compared to sensemaking in organisational behaviour literature, is the emphasis on networking activities, interactions between parties, and how sense-making and resulting behaviour is shaped in interaction with external parties as well as built on negotiations on an intra-company level (Henneberg et al., 2010; Mouzas, Henneberg, & Naude ´, 2008). While network pictures are held at the level of individual managers, the company can be perceived as the acting unit. In the process of translating individual perception into so called networking activities, individuals will negotiate and use directives, so as to make the company act as they wish. The process of translating individual network pictures into shared ones has been referred to as objectification, or the creation of organisational network pictures. Such processes point to the role of managers as those guiding the organisational network pictures, interactions as affecting individual but also organisational network pictures, and organisational network pictures as negotiated, shared, and implemented by means of directives or commitment. Those processes also include re-evaluation and changes to the initial sense-making. Mo ¨ller (2010) describes how network positions, resources, cognition and culture affect the sense-making which forms the cognitive frames and outcomes and in turn reshapes cognition as well as positions and resources, thus pointing to an ongoing cyclical pattern of impacting forces between managerial sense-making and company activities (cf. Weick, 1995).

Network pictures as a research methodology Network pictures as a concept may be understood as mental descriptions or as actual visualisations of the network. Early conceptualisations of network pictures marked them as the latter: a network picture was a pictorial representation (cf. Arnheim, 1969) of the network as perceived by an individual manager (Henneberg et al., 2006). More recent studies have instead seen network pictures as verbal descriptions of actor, ¨ berg et al., 2007), activity, and resource interactions (O where these are presented by individual managers. In addition, the network picture concept has been used in studies

Using network pictures to study inter-organisational encounters where the researcher forms a network picture based on reconstructed data on interactions (Ford & Redwood, 2005; Geiger & Finch, 2010). In those instances, the main research focus is on inscriptions of network pictures on organisational levels and their resulting networking activities, while less is known about the sense-making affecting those activities. Researchers into network pictures have used various variables and models to capture and present the network picture fundaments. In certain instances, these variables are inductively derived from research aimed at capturing how to measure or portray network pictures (Henneberg et al., 2006; Ramos, 2008). In other cases, the variables are predefined and overlaid empirical data (Andersen & Kragh, 2010; ¨ berg et al., 2007). Henneberg et al. Leek & Mason, 2010; O (2006) explored various types of understandings of networks: after concluding that networks could be understood as spheres, entire worlds, political and reductionistic models, they then analysed these in terms of boundaries, direction, power, time/task, environment, focus, actors and centre/ periphery. Ramos (2008) described network pictures in dimensions of focus, weight, consistency and specificity, and overall view of the surrounding environment. Leek and Mason (2010) investigated network pictures on a dyadic level concentrating on actors and boundaries, focus on activities and resources, positions and centre, and processes and inter¨ berg et al. (2007) mapped actors, activities and action. O resources along with network boundaries, power and centre/ periphery as variables to compare network pictures and resulting networking activities on a cross-case basis. Based on these few studies, it can be concluded that although they overlap it is apparent that there is not one single classification of variables to capture network pictures. However, the various models all seem to suggest that network pictures may be captured by examination of two types of variables: a number of constants (actors, activities, resources, and the like); and measures of intensiveness (centre, power, periphery, weight, focus, and similar). Thus, and in accordance with the purpose of this paper, these two types of variables would be of key importance as the former describes the actors, activities and resources; while the latter refers to how relevant each actor, activity or resource is to a specific decision. This further suggests that there may be a difference between viable options and how various fundaments of the network impact a decision. Those fundaments relevant for a certain decision may only represent a fragment of the (perceived) network. In researching specific events, such as an acquisition decision, only those actors, activities or resources that are considered relevant for that particular decision are included in the network picture analysis (a situational network picture), while a broader view including peripheral actors and so forth would be significant when investigating network pictures as such (Henneberg et al., 2006; Ramos, 2008). Using the often referred to ARA-model (actors, resources, activities, Ha ˚kansson & Snehota, 1995) to capture what network fundaments are considered, it would be relevant to classify these based on their relational impact vis-a `-vis the represented company and the position of indirect actors, resources or activities in the network, so as to depict their intensiveness. Relational impact would in turn include the relative power, weight and focus on a relational level (Ramos, 2008), and network

139 Table 1

Analytical protocol for network pictures.

‘‘Intensiveness’’

Constants Actor

Resource

Activity

Relational level Network level

position the centre/periphery and direction on a network ¨ berg et al., 2007; Ramos, 2008). level (Leek & Mason, 2010; O Relational impact consequently resembles the relationship atmosphere (Gadde, 2004; Ha ˚kansson, 1982; Leek & Mason, 2010) between the represented and the referred to parties, including such dimensions as power-dependence, state of conflict or cooperation, closeness and distance, and mutual expectations of the relationship (Ha ˚kansson, 1982) and thus emphasises the relationship and interaction between the parties. The network position describes how a party is perceived, without it being connected to the represented company, or without it being an acting party in the specific situation. This suggests an analytical protocol for using network pictures as a methodology, describing actors, resources and activities as one dimension, and then on a relational level and network level to capture their individual impacts (intensiveness) as the other, see Table 1. Such a protocol can be used for data collection purposes, and by researchers in analysing collected data.

Method This paper is conceptual, but does provide an illustrative example based on two sequential acquisitions involving the same acquired party. The case being an illustration (Siggelkow, 2007) means that conclusions aim to grasp a broader understanding of how network pictures can be used as a research methodology and what additional aspects of M&As may be captured as a consequence, rather than just being conclusions from the specific case presented. Accordingly, the contribution of this paper is primarily to be seen in its discussion on network pictures as a tool for researching such inter-organisational encounters as mergers and acquisitions, rather than in the empirical illustration provided. The empirical data collection in this paper was based on case study research (Yin, 1994; Dul & Hak, 2008), as in order to capture perceptions of networks it was important to use a data collection method that caught the actors, resources and activities in a network (Halinen & To ¨rnroos, 2005). In using network pictures as a methodology for researching interorganisational encounters it is important to consider how it relates to the choice of data capture. The network picture idea becomes inscribed not only into how and what data are collected, but also into the analysis of it. Studies that have worked with visual descriptions of network pictures (Henneberg et al., 2006; Abrahamsen, 2009) have asked interviewees to draw and then verbally describe their company’s network. Research using textual or verbal descriptions (Ford ¨ berg et al., 2007; Leek & Mason, 2010) & Redwood, 2005; O has relied on documents or traditional interviews (McCracken, 1988; Welch, 2000) as data sources. In the interview situation, questions concerning what drove various decisions, their impact, and so on, would be addressed,

¨ berg C. O

140 either based on asking questions regarding each given actor, activity, resource and their impact or, as in the illustrative example, through practicing an open-ended question technique, while referring to sense-making and cognition, building the network picture on how and what actors, resources and activities are mentioned. This latter approach means building the situational network picture related to each decision based upon textual, verbal and/or visual descriptions. For the particular case presented here, between 2005 and 2007 twenty-two interviews lasting between one and twoand-a-half hours were carried out with actors of the acquiring and acquired parties along with their business parties, and included CEOs and sales, product, IT and financial managers. Each interviewee was asked to give his/her view of the surrounding network, relations to various parties, and connections between other parties, his/her description of each M&A, how it was perceived and what possible reactions followed from the M&As. The interviewees were also asked to draw the business network before and following each M&A. Specific actors, resources or activities were not addressed by the interviewer, but were analysed as outcomes based on mentions by the interviewee. Each interview was transcribed. The analysis procedure was based on the visual and textual descriptions of each interview, which were coded using a first-order coding (Pratt, 2009) aimed at grasping the main content. In a second-order coding, interview transcripts and visual presentations were compared on a cross-interview basis (Pratt, 2009) and were also classified based on the actors, resources and activities mentioned, along with the network position referred to each such item and how it was described in terms of its relation to the represented company. As the network picture idea is built on individual actors’ perceptions (Colville & Pye, 2010) the analysis is not directed at finding a single-explanation, but rather to relate various views to the decision-making mechanisms and activities. This also allows for analysing reactions as well as on an individual manager level connecting activities and reactions to what caused them. As such it also means improving predictions between the causal powers of various activities (Easton, 2004) as well as creating an understanding of the importance of the role of external parties in mergers and acquisitions. However, while network pictures are individual, they are shaped in interactions and create bases for company directives. This means that individual network pictures will share similarities among them. In the case presentation outlined in Table 2, actors with similar views were brought together for illustrative purposes (a separate protocol was first produced per interviewee). In the analysis that preceded the outline, the individual perceptions of networks were compared among the interviewees to understand influencing actors, interaction patterns, and individuals’ explanations to networking activities. Such an analysis pointed to within-company, but also between-company similarities in perceptions of relevant parties, yet also between-company differences in ¨ berg et al., activities based on variances in perspectives (cf. O 2007). The similarities could in turn be explained by closeness among actors, intra-organisational negotiations, inter-organisational commitments in interactions, as well as be referred to as outcomes of previous networking activities (cf. Weick, 1995; Mo ¨ller, 2010).

An illustrative example The example to illustrate how network picture analysis may be used in studies on M&As describes two sequential acquisitions including companies in the IT-sector and targeting the same acquired party. The first acquisition was Momentum’s acquisition of Structurit, the second was BasWare’s acquisition of Structurit (renamed as Momentum Doc). This section briefly summarises these acquisitions with a specific focus on network changes as described by the interviewees: their reasons and consequences. It starts off with a short description of Structurit before the acquisitions. Fig. 1 pictures the different parties connected to the acquisitions as described by the founder of the acquired party.

Structurit before the acquisitions Structurit was founded as a result of a customer initiative. HSB Dalarna, a Swedish co-operative building society turned to the founder of Structurit to find a means to electronically handle supplier invoices. The society was finding it costly to send invoices back and forth between housing cooperatives and its administrative office. The society turned specifically to the founder of Structurit because he was a local IT-provider they already had a business relationship with. At the time, the founder co-owned a store providing hardware and also coowned a company supplying management information systems and whose customers included public housing companies. The founder’s initial idea was to develop a system to handle the distribution of invoices electronically while they would be processed manually at the administrative office. However, after he became aware of a new company, ReadSoft, scanning and reading were included into the system he developed. Structurit was founded in 1997 to sell the system to a wider market, this was largely accomplished through providing it to those public housing companies the founder had connections with through the management information system company, although the electronic invoice system also spread to other HSB associations as HSB aimed to use the same IT-systems on a national level. At this point, electronic invoice processing was not widely known and Structurit did not experience much competition, however this also meant that it was difficult to actually make other customers interested in the system. Additionally, the perception and position of Structurit as a small, local company with restricted financial resources made potential customers wary and less willing to buy the system. For HSB, Structurit’s market position was backed up by other HSB associations and the connection they already had with the company’s principals. For the public housing companies, Sabo, an association for those housing companies, was an important factor in these decisions. However, to expand further, Structurit needed financial backing. During a time of intensive acquisition activities in the IT-sector, the company was approached by several interested buyers. Based on the anticipated integration between companies some were turned down. Eventually, Structurit was approached by Momentum, a local IT-company situated in the same town as Structurit, and already well known to the founder through various personal relationships. The two companies also had an overlapping customer base since Momentum worked on real-estate systems and consequently had several public housing companies as its customers.

Using network pictures to study inter-organisational encounters

Momentum’s acquisition of Structurit In 1999, Structurit was acquired by Momentum. Momentum sought to add products to itself and customers to Structurit. For Structurit, the prospect of greater financial resources Table 2

141 was crucial in accepting the acquisition proposition, as well as the fact that the acquirer was known to Structurit. The existing customers of both Structurit and Momentum initially reacted positively to the acquisition as it was considered a safeguard of Structurit’s continuity. Following the

Case analysis.

Event

Perspective

Foundation of company

HSB Dalarna

Founder of Structurit

Relational level

Network level Relational level

Network level

Potential customers

Relational level

Network level

Momentum’s acquisition of Structurit

Founder of Structurit

Relational level

Network level

Momentum

Customers

Relational level

Network level Relational level

Network level

Actor

Resource

Activity

The founder of Structurit as important for IT-system. HSB representing its local housing cooperatives (HSB the stronger party). Representatives of other HSB associations. HSB as important customer. Representatives of public housing companies as potential customers. Large companies as potential customers. ReadSoft (moving to become a business relationship). For HSB and public housing companies: relationship with founder and among themselves as voucher for Structurit. Sabo. Structurit too small a company for customers beyond existing business relationships.

(Lack of own) ITknowledge.

Invoice processing problem important to solve for own organisation.

No further resources considered. Customer base of coowned company to be explored.

Possibility to use same system in entire HSB. Developing an IT-system.

Customer base to be broadened.

Inclusion of scanning in system. Sell system in wider context important reason for founding the company. Starting using system.

Momentum would allow independence (other acquirers larger and not familiar). Close relationship with Momentum representatives. Risk of other strong parties acquiring the company.

Momentum the stronger party in the acquisition, but on similar terms. Own customers as potential users of Structurit’s system. Customers of Structurit (HSB). Customers the stronger parties, but Structurit growing in strength. No further actors beyond direct relationships considered.

Electronic invoice processing system.

System of electronic invoice processing new to them.

Continuing as previously.

Financial resources as key variable (needed for further growth and development).

Acquisition propositions. Potential for development.

Potential revenue from growth important for continuity and development. Financial and products (own and Structurit’s)

Potential for further development through new customers.

No further resources considered. Existing resources from existing parties (Structurit or Momentum). No further resources considered.

Cross-selling own system to Structurit’s customers. Continuing buying but largely refusing crossbuying.

Cross-selling to existing customers.

No further activities considered.

¨ berg C. O

142 Table 2 (Continued )

Event

Perspective

Financial and organisational problems

Momentum

Customers

BasWare’s acquisition of Momentum Doc

Momentum Doc

Actor

Resource

Activity

Relational level

Focus on own company.

Shrinking financial resources.

Network level

Less focus on external parties. (Competitors increasing in importance). No ability to reach new customers. New financial backers (not defined). Increased distance in relationship. Other IT-parties becoming increasingly interested.

Existing resources from existing parties. Considerations on how to add financial resources.

From expanding to trying to save and divest. Less focus on development. Reorganisation. Search for financial backer.

Relational level Network level Relational level

Network level

BasWare

Relational level

Relational level

Customers of Momentum Doc as interesting targets. Competitors as possible acquirers. Strong vis-a ´-vis Momentum.

Network level

BasWare not known previously.

Relational level

BasWare asserting its ownership. Momentum Doc shrinking within the group. Alternative employers.

Network level

Customers

Product replacement

Momentum Doc

BasWare

Network level Relational level

Network level Customers

Lawyer, existing relationships. Momentum Doc weak party towards these. No previous relation with BasWare. BasWare as increasingly important player. In acquisition, BasWare the stronger party.

Relational level

Network level

Asserting its ownership over Momentum Doc (BasWare the dominating party). Aiming to connect to Momentum Doc’s customers. Actor ties weakening as a result of phasing out of product and staff leaving. Other existing IT-suppliers. Other customers of importance for decision.

No further resources considered. Alternative products.

Possibly revaluating.

Existing systems and customer bases as reason for continuing with the company. Financial resources of BasWare.

Being acquired as option for survival.

Revaluation including external parties’ systems.

Expectations on continuity.

Financial resources providing possibility for expansion. Customer base of Momentum Doc.

Acquisition for further expansion of own business.

Electronic invoice processing as important resource. No further resources considered.

Continue to use on relational level.

(Continuity of) product a key concern.

Staff leaving.

No further resources considered. Own product, Momentum Doc’s product.

New employments.

No further resources considered.

Expanding its product to new customers.

Existing product a key concern. Other systems used by the customer.

Dissolving relationship. Other uses of IT-systems.

Competing systems.

Establishing new relationships with ITproviders.

Competitors’ growth as challenge to meet.

No further activities considered

Realise cost synergies.

Using network pictures to study inter-organisational encounters

a

143

Association

Sabo

Kopparstaden Momentum

Customer relationships

Other HSB associations

HSB Dalarna Customer relationships Initiator

Association

Structurit

Örebrobostäder

ReadSoft Customer to be

Potential acquirer

CellNetwork

Saab

c

b

Xor HSB Data Husar

Fasab

New targets

Association

HSB

Kopparstaden

Association

Customer relationships

Sabo Customer relationships

Sabo

Customer relationships

Momentum

Fakturatjänst

Customer relationships

Momentum

Association

Acquisition

Örebrobostäder

Customer relationships

Fakturatjänst

BasWare Momentum Doc

Association

Momentum Doc

HSB

Kopparstaden

HSB

HSB

Acquisition

Örebrobostäder

Customer to be

Customer relationships

Customer relationships

Scania

Scania Saab Saab

Figure 1 (a) Parties and relationships at the time of the first acquisition. (b) Parties and relationships following Momentum’s acquisition. (c) Parties and relationships following BasWare’s integration.

acquisition, Structurit was renamed Momentum Doc, but largely remained an autonomous business unit within Momentum. Cross-selling of products was practiced, but not to as large an extent as initially intended. In order not to disturb ongoing customer relationships, sales staff remained separate for the companies, while customers also did not see the use of buying the additional products offered. The financial resources provided did however allow Momentum Doc to expand into new market niches. Parallel to this development, the owner of Momentum began to make additional acquisitions, driven by an aspiration to become a major player in the market for real estate systems and aiming to integrate various systems into a single whole. These acquisitions however challenged Momentum financially as well as organisationally. A period of continuous reorganisation of the businesses followed. Customers experienced Momentum as a paralysed organisation that lacked the ability to pursue its regular business. This in turn led to a negative spiral of difficulties in attracting additional customers, increased financial stress and continuous reorganising to come to turns with the difficulties. In 2002, this all came to an end as Momentum was liquidated.

BasWare’s acquisition of Momentum Doc Following the liquidation, customers as well as the lawyer dealing with the liquidation realised that there was a value connected to Momentum Doc as the various parts of Momentum were being split and sold separately, or closed down. Momentum Doc was approached with an acquisition proposition from BasWare. BasWare was a Finnish company that had developed a system of electronic invoice processing, and thus was a competitor to Momentum Doc. Prior to its acquisition of Momentum Doc BasWare had established a small subsidiary in Sweden, but it was still largely unknown to Swedish customers. Its reasons for acquiring Momentum Doc were both related to the risk of a competitor acquiring the company and hence becoming a strong player in the niche of electronic invoice processing, and also related to those customer contracts actually held by Momentum Doc. From Momentum Doc’s perspective the acquisition allowed for the company to continue to exist. From customers’ perspective, the acquisition was considered positive, especially since the past years with Momentum as owner had been turbulent. Customers were also told that Momentum Doc and BasWare

144 would continue as separate companies with their own sales forces and systems. Some time after the acquisition, it turned out that BasWare aimed to replace Momentum Doc’s system with its own. This action caused reaction among Momentum Doc’s sales and development staff and customers. Some of the development staff decided to leave the company as did some of the sales staff who found it difficult to represent a previously competing system. As customers were told about the system replacement, they started to reconsider their choice of supplier for electronic invoice processing. For many customers the BasWare system was considered to be inferior to Momentum Doc’s, although Momentum Doc’s system was about to be outdated. As customers started to look at other alternatives, Momentum Doc lost some twenty percent of its customers. A further twenty percent remained hesitant, while the remaining sixty percent decided to start using BasWare’s system. These decisions were all negatively affected by the number of sales and development staff leaving Momentum Doc. Reasons given by customers for turning to BasWare’s system were that certain staff remained as previously, and that other customers had made similar decisions. This latter was the particular reason for various HSB associations to remain with the combined company, but also other customers considered how other parties remaining with the company vouched for its continuity. Customers that decided to dissolve their relationship with BasWare/Momentum Doc partially based their decision on how other solutions fitted better with their existing IT-systems. One example was Kopparstaden, the public housing company situated in the same town where Structurit originated. It had chosen XOR as its accounting system and now also chose an invoice system from the same supplier. Other public housing companies similarly dissolved their relationships with BasWare/Momentum Doc. Those that decided to remain with BasWare/Momentum Doc saw that the relationship weakened as development of systems became increasingly distanced from the customers and less focus was placed on customisation.

Analysis This section is divided into two parts: one analyses the empirical example, the other discusses the network picture methodology in studies on inter-organisational encounters such as mergers and acquisitions.

Analysis of the case The illustrative example points to several instances of how actors, activities or resources gave rise to new activities and reactions (cf. Havila & Salmi, 2000). It also points to how the awareness of various actors, resources or activities steered which options were considered by a company’s managers (cf. Ford, Gadde, Ha ˚kansson, & Snehota, 2003; Holmen & Pedersen, 2003). The more central (position in the network) and powerful (relative the represented company) the party, the more probable that managers considered it and the actors, resources and activities considered also changed based upon both how the represented company developed and upon previous interaction decisions. The example further indicates how managers would revise their view of the network ¨ berg et al., 2007; Mo (O ¨ller, 2010) once new parties were

¨ berg C. O included. In the following, various actors’ perception of other actors, activities and resources are discussed; only those relevant to a specific decision are incorporated in the description. The various events referred to are summarised in Table 2. (The table includes also other events than the acquisitions, to show how the protocol can be used to study developments and other types of activities.) Starting from the beginning, it becomes apparent how HSB experienced difficulties in the activities carried out among parties in its network of housing cooperatives. HSB therefore approached the founder of Structurit as he was already known to HSB from the ongoing business relationship; because of this, he was the first actor thought of in the network. Because HSB itself had low competences in ITrelated issues, the activities performed between HSB and the founder were largely managed by the founder, and thus he was to play an important role in the development of the intended system. For the founder of Structurit, HSB Dalarna was an important party causing the development of the system. In the relationship between him and HSB, HSB was the more powerful party, however for the specific project of developing the system, the founder was the one influencing the realisation the most. Based on the founder’s other business engagements, other public housing companies were part of the picture as potential customers. ReadSoft was also in the picture, as its cooperation with the founder influenced what activities were included in the system. Through interactions and resource decisions aimed at using the same IT-systems among various HSB associations, Structurit became included in these associations’ network, and through their contacts, in the Structurit founder’s network picture in turn. He however saw that financial resources limited further expansion, and thus the proposals for Structurit’s acquisition introduced alternative owners to the network. The founder decided upon Momentum, a company that was already part of his network picture, based upon expectations of future integration (cf. Weick, 1979; Kaplan, 2008 on the impact of the future). For customers of both Structurit and Momentum, the acquisition merely created a link between the two companies, and while it meant some cross-selling activities, it did not cause any major changes and therefore also no major reactions. Greater financial resources allowed Momentum Doc (previously Structurit) to broaden its network and incorporate new actors, while for these actors, the improved financial strength of the renamed Momentum Doc allowed them to consider doing business with the company. Later though, the turbulence of reorganisation and the financial difficulties of Momentum caused customers to reconsider their view of the company, and made them distance themselves from it. This also meant that there was no capacity to broaden Momentum’s network further. Through its acquisition of the company, BasWare introduced itself as a new player in the network of Momentum Doc and customers, while Momentum Doc itself, along with its customers and competitors, became part of the network pictures of the managers of BasWare. The acquisition activity saw positive reactions among customers, who now saw their relationships with Momentum Doc enabled. The product replacement meant a change of resources provided by Momentum Doc to its customers and this phasing out of

Using network pictures to study inter-organisational encounters the previous product caused reactions among some Momentum Doc staff, who decided to leave the company. Those actors had experienced a change in their network picture that disallowed them from acting as they had previously, and also: their network pictures in terms of desirable activities did not correspond with the ones communicated by the company management. These people leaving and the new product being introduced challenged previous actor and resource ties with customers. Customers decided to search for alternative systems, thus expanding their networks in an active search for options. Decisions also resulted from how other network parties acted to the situation — as in the case of the various HSB associations remaining with BasWare/ Momentum Doc — or were based on those parallel activities among customers such as what resources they used for other purposes, exemplified by Kopparstaden’s decision to dissolve its relationship with BasWare/Momentum Doc. Taken together, the case indicates that the acquisitions of Structurit/Momentum Doc involved a complex web of activities, reactions, repositioning of parties, inclusions of new parties, and so forth, affecting acquisition and integration decisions and their outcomes. Each activity by the acquiring, acquired party or external parties could be analysed in terms of actors, resources and activities considered, as well as the impacting relationship to each variable and what positions they represent (the relational and network levels). In the founder’s decision to start Structurit for instance, HSB Dalarna, the public housing companies and ReadSoft could be considered as direct parties, while other HSB associations were included based on their relationship to HSB Dalarna. HSB Dalarna was considered the party with strongest impact and it also held a strong position in the founder’s network picture. With regards to activities, development activities were mainly pursued by the founder and ReadSoft, while HSB held the role of a customer informing the founder of its needs and wants (von Hippel, 1986; Desouza et al., 2008). As for resources, the early development was marked by a lack of resources, both financially and knowledge related, where ReadSoft came to be an influencing actor for the latter. Table 2 summarises the various events and perspectives from the case study in the dimensions of actors, resources, activities, and their relative importance on a relationship basis and network level of other parties considered (only actors, resources and activities actually considered are included in the table).

Network pictures to study inter-organisational encounters Network pictures hence allow the capturing of activities as embedded, causal links between various activities, and the relative impact of actors and activities on decisions made and their consequences. Related to such inter-organisational encounters as M&As and through allowing the interviewee to elaborate on actors, resources and activities in relation to an M&A, it becomes possible to see how various parties impact one another during and following an M&A. This draws attention to that (i) acquisition decisions are based on perceived options in the network, where more parties than just the acquiring one will impact the acquisition occurrence (cf. Graebner & Eisenhardt, 2004 on the seller perspective); (ii) intended integration (cross-selling and product replacement

145 in the example) may not be realised or may occur to a lesser extent than anticipated as customers also play a part (cf. unexpected change, Anderson et al., 2001) in their reaction to problems at the acquirer, their perception of the other product, dissolved actor links to sales and development staff, etc.; (iii) external parties are influenced in their reactions by other external parties; and (iv) acquisitions are embedded in wider patterns of activities (Schriber, 2008) that influence, and are influenced by, an acquisition. In the present paper, the network picture idea as a data collection and analysis method has been highlighted to point to such causes and reactions of M&As in relation to business partners. Using such pictures thus enables the capturing of how M&As are processed by business partners and how external parties’ activities impact M&A decisions, knowledge which will contribute to the M&A literature. Network pictures being each individual’s perception, yet being so influenced by other actors, allows the capturing of how various actors agree or disagree about activities and their influences. This can be captured through comparing various perspectives related to a given event, and for creating an understanding of the development of an individual actor’s network picture: through comparing actors, resources and activities mentioned related to different events. The study presented linked sense-making to networking activities (Ritter, 1999; Mo ¨ller, 2010), where the sense-making was (partially) aggregated to represent prevailing and disagreeing views of company representatives (whether or not they had committed to the organisational network picture as represented by management directives), and whether or not acquiring, acquired and external parties shared views on matters. Each actor held their own view of the network, however the interaction on both an intra- and inter-organisational level meant that their views converged. In the analysis procedure, protocols were created for each individual interviewee, and later compared on cross-interviewee, cross-company levels. This in turn enabled analyses of how actors formed their network pictures based on the interaction or network inclusion of other parties (Weick, 1995), and also: how network pictures were reshaped as a consequence of networking activities (Mo ¨ller, 2010). Such analyses may be further deepened with a research focus to highlight tensions and contradictions between network pictures on intra- or inter¨ berg, 2010), or organisational levels (cf. Vaara, 2003; O they may, as here, be aggregated to grasp overall patterns of actors, activities, and reactions. Network pictures hence help to capture sense-making and connect it to resulting activities, thus also strengthening the causal claim between various activities, rather than simply describing the changed network structures following an M&A (Anderson et al., 2001; Mo ¨ller, 2010). Causal powers (Easton, 2004) as well as tendencies (Jessop, 2005) become more transparent, yet also apparently more influenced by individual parties’ frame of reference (Mo ¨ller, 2010) and at the same time the complexity of various activities’ interrelations is revealed.

Concluding discussion Meglio and Risberg (2010) have underlined how various research methods and understandings of a phenomenon such

¨ berg C. O

146 as mergers and acquisitions may contribute to a better and broader knowledgebase regarding said phenomenon. This in turn highlights the point that multiple, rather than single research methods build knowledge (Javidan, Pablo, Singh, Hitt, & Jemison, 2004). Although qualitative research remains limited in the area of inter-organisational encounters (Cartwright et al., 2009) its capacity to capture depth and interdependence, adds to and complements the existing knowledgebase and prevailing research methods. In this paper, network pictures are presented as a methodology to create understandings of the role of external parties in mergers and acquisitions. This also brings attention to the limited amount of research on the marketing dimension of M&As (Mazur, 2001; Homburg & Bucerius, 2005) and does so through including various parties’ views on an M&A: how they perceive it and what reactions they have to it. The concept of networks in general is underpinned by the critical realist view on society (Easton, 1995; Jessop, 2005). When looking at the network from the perspective of how various persons within it view their surroundings, influences that are increasingly interpretative surface. Yet, the intention in studying such pictures is not merely to understand the individual mindsets of those observing a company network, but actually create an understanding of the processes that shape such understandings and of their imprint on company activities (Ritter, 1999). Once patterns of sense-making and activities are overlaid, patterns as simplifications are revealed (Easton, 1995; Jessop, 2005), and in the practical research of such a phenomenon as an M&A, findings likely transferable to other situations (Hirschman, 1986; Guba & Lincoln, 1989) emerge. The paper indicates how various parties contribute to the shaping of an M&A, impact its integration and outcome, and through connections to other parties impact their own decisions as well as connecting various activities to each other. Not only acquirers, but also acquired parties, business partners and other network parties (with no direct relationship to the represented company) become parties influencing the M&A. Using network pictures to study interorganisational encounters creates an understanding of the interrelatedness of actors, resources and activities as influences upon decision making and resulting activities. Compared to (the limited number of) other network studies on M&As, network pictures capture causes and effects in terms of sense-making of activities, while previous studies have focused on either M&As as leading to network changes (Anderson et al., 2001), or as result of other parties’ ¨ berg & Holtstro activities (O ¨m, 2006) and as they also largely viewed network changes from a bird’s eye perspective (Dahlin, 2005, 2007) they did not link reasons to activities. This paper suggests a protocol for analysing actors, resources and activities, where these are measured on the impacting level of direct relationships and on the network level as indirect actors, resources or activities. It further describes network pictures as either consisting of all parties considered by the actor, or those particular parties taken into consideration in connection with a specific decision, and thereby contributes to the growing domain of studies utilising network pictures (Abrahamsen, 2009; Colville & Pye, 2010; Ford & Redwood, 2005; ¨ berg Henneberg et al., 2006; Leek & Mason, 2010; O et al., 2007; Ramos, 2008).

Acknowledgements The author would like to thank the Nils-Eric Svensson’s Fund, Riksbankens Jubileumsfond, for financial support. She also gratefully appreciates the comments from two anonymous reviewers and the special issue editors, which helped her to improve the paper further.

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