Deep Knowledge of B2B Relationships Within and Across Borders 9781781908594, 9781781908587

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DEEP KNOWLEDGE OF B2B RELATIONSHIPS WITHIN AND ACROSS BORDERS

ADVANCES IN BUSINESS MARKETING & PURCHASING Series Editor: Arch G. Woodside Recent Volumes: Volume 7:

Advances in Business Marketing and Purchasing

Volume 8:

Training Exercises for Improving Sensemaking Skills

Volume 9:

Getting Better at Sensemaking

Volume 10:

Designing Winning Products

Volume 11:

Essays by Distinguished Marketing Scholars of the Society for Marketing Advances

Volume 12:

Evaluating Marketing Actions and Outcomes

Volume 13:

Managing Product Innovation

Volume 14:

Creating and Managing Superior Customer Value

Volume 15:

Business-To-Business Brand Management: Theory, Research And Executive Case Study Exercises

Volume 16:

Organizational Culture, Business-to-Business Relationships, and Interfirm Networks

Volume 17:

Interfirm Networks: Theory, Strategy and Behavior

Volume 18:

Business-to-Business Marketing Management: Strategies, Cases, and Solutions

Volume 19:

Reflections and Advances in Honor of Dan Nimer

ADVANCES IN BUSINESS MARKETING & PURCHASING VOLUME 20

DEEP KNOWLEDGE OF B2B RELATIONSHIPS WITHIN AND ACROSS BORDERS EDITED BY

ARCH G. WOODSIDE Boston College, MA, USA

ROGER BAXTER Auckland University of Technology, New Zealand

United Kingdom – North America – Japan India – Malaysia – China

Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2013 Copyright r 2013 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78190-858-7 ISSN: 1069-0964 (Series)

ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004. Certificate Number 1985 ISO 14001

CONTENTS LIST OF CONTRIBUTORS

vii

PREFACE

ix

THE IMPACT OF NATIONAL CULTURE ON WESTERN INDUSTRIAL BUYER-SELLER RELATIONAL PROCESS MODELS Anna Kaunonen

1

DEVELOPING GUANXI RELATIONS Anna Kaunonen

51

THE DEVELOPMENT OF INDUSTRIAL BUYERSELLER RELATIONS IN A CHINESE CONTEXT Anna Kaunonen

93

ADAPTATION IN BUSINESS CONTEXTS: WORKING TRIADIC RELATIONSHIPS Anne-Maria Holma

119

HOW DO MANAGERS SEE IT? CAPTURING PRACTITIONER THEORIES VIA NETWORK PICTURES Carla Ramos and David Ford

293

v

LIST OF CONTRIBUTORS David Ford

Euromed, Ecole de Management, Marseilles, France

Anne-Maria Holma

University of Vaasa, Vaasa, Finland

Anna Kaunonen

Tampere University of Technology, Tampere, Finland

Carla Ramos

Manchester Business School, The University of Manchester, Manchester, UK; Insper Institute of Education and Research, Sa˜o Paulo, SP, Brazil

vii

PREFACE Relationships of individuals and groups among three-plus firms represent the cornerstone concept in business-to-business (B2B) contexts. The threeplus firms include manufacturer–supplier to manufacturer–customer to distributor–customer, and facilitators (e.g., transportation and management consulting firms). The common thread of the five chapters in this volume is that making sense and achieving deep knowledge of three-plus B2B relationships are necessary antecedents for achieving high operating effectiveness, high (on-time) efficiency, and sustaining profits for each firm in these relationships. As the titles of the five chapters imply, reading the volume provides deep insights into the specifics of how high performing threeplus B2B relationships influences these three major objectives of the firm:  the impact of national culture on Western industrial buyer-seller relational process models  developing Guanxi relations  the development of industrial buyer-seller relations in a Chinese context  adaptation in business contexts: working Triadic relationships  how do managers see it? capturing practitioner theories via network pictures If you want to learn about how executives interact and how they get things done (and overcome interfirm obstacles) within three-plus firm relationships, this volume is especially meets these objectives. This preface offers a quick scan of a few of several valuable lessons that each chapter offers.

THE IMPACT OF NATIONAL CULTURE ON WESTERN INDUSTRIAL BUYER-SELLER RELATIONAL PROCESS MODELS In the first chapter, Anna Kaunonen compares the dynamics in states of relationships between industrial marketers and buyers. She develops a

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PREFACE

five-stage classification for industrial buyer-seller relationships: pre-relationship stage, attraction stage, formation stage, expansion stage, and ending stage. The pre-relationship stage is such that the buyer and seller do not yet interact with each other, but they may be aware of the existence of the other. During the attraction stage, either the buyer or the seller contacts the prospective business partner in order to begin discussions on possible collaboration, sales, or purchase. The relational actors establish the operation of the relationships during the formation stage. The customs developed during the formation stage become the standard during the expansion stage. During the ending stage, termination is begun by one or both actors. A key lesson learned from Kaunonen’s treatise: an industrial buyer-seller relationship may face a quiet period during which either the buyer or the seller has no need to conduct business with the other. Even so, this does not mean that the relationship has ended, but instead the firm representatives may meet, for example, at trade fairs and attend each other’s events. However, a significant amount of resources are not allocated to the relationship during that period, that is, the state is not one of growth. The actors remain attracted to each other and the relationship has not institutionalized, because of which the state cannot be the decline state or the constant or static state, respectively. Neither is the relationship facing problems, that is, the state is not a troubled one. The state cannot only be an end state as the parties remain committed to the relationship and see a future for the relationship.

DEVELOPING GUANXI RELATIONS In the second chapter, Anna Kaunonen describes the development of guanxi in the context of Chinese–Finnish relationship dyanmics. This study is valuable in in particular because of its descriptions of guanxi at both the individual and organizational level, that is, relationships between organizations and the representatives of these companies. Key lessons Kaunonen covers in the second chapter include the following perspective. Westerners who aim to develop relations with Chinese counterparties need to take into consideration three paradoxes. First, both advantages and disadvantages in developing strong interpersonal ties exist, that is to say, one might gain better access to information and guanxi members, but simultaneously one faces constraints for the future regarding, for example, one’s resources. Second, no clear set of rules exists, which one should follow when trying to develop intercultural and interpersonal relations with the

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Preface

Chinese. Some firm representatives want to follow traditional guanxi-based rules, while others might want to follow a Western or a hybrid form of rules. Contextual factors, such as network members, the network formation, and resource access, guide the interactions. One needs to be ready to adapt one’s behavior and mindset based on the changing situation. Third, the closer the relationship between the parties, the less innovative and more complicated the relationship is.

THE DEVELOPMENT OF INDUSTRIAL BUYER-SELLER RELATIONS IN A CHINESE CONTEXT In the third chapter, Anna Kaunonen raises and answers the question, how do industrial buyer-seller relationships develop in a Chinese context? The third chapter provides great depth in learning the intricacies in executing guanxi acts within Chinese relationships. While unique some parallels do exist between East and West in such relationship building and maintenance acts. Kaunonen suggests the following take-aways from the four cases. Although thestudy has centers on China and guanxi, similar business thinking exists in, for example, Japan, Korea, and India. Such practices as gift giving and entertaining that are important for cultivating and maintaining guanxi are common in several other nations and business cultures as well as the notion of reciprocity. Networking is also important in the West and several Europeans and Northern Americans commonly use the concept of the ‘‘old boys’’ network. However, the operation of social relations, or guanxi, is unique to China because similar relational forms are nonexistent in the West. In addition, the role of guanxi in everyday life is special to the Chinese context. Guanxi is a science and art in which the actors carefully design their practices and processes.

ADAPTATION IN BUSINESS CONTEXTS: WORKING TRIADIC RELATIONSHIPS In the fourth chapter, Anne-Maria Holma provides a comprehensive framework to analyze adaptation dynamics in triadic B2B relationship settings. Researchers may make more detailed analysis with the help of her

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PREFACE

framework by studying the subprocesses, for example, (1) the progression of adaptation with its different phases, (2) the adaptation chains, and (3) the adaptation outcomes. From an in-depth interpretative stance Holma proposes and confirms that the course an adaptation process takes is itself at least as important as its outcomes. The ups and downs and specifically the setbacks along the way were on the minds of the informants all the way through the process. For example, the actors’ perceptions that they were treated unfairly, or that they were not listened to, gained more attention than the fact that the process ended up positively, and the adaptations were beneficial. The process itself may be a reason for deterioration of a relationship, even though the final outcomes of adaptation may be profitable and mutually agreed. Thus, the importance of involving all the firms, communicating and sharing information cannot be emphasized too much.

HOW DO MANAGERS SEE IT? CAPTURING PRACTITIONER THEORIES VIA NETWORK PICTURES In the final chapter, Carla Ramos and David Ford have two objectives: to explore how practitioners actually perceive their business surroundings (i.e., what do practitioner theories look like) and to assess the extent of overlapping between academic theories and practitioner theories. To achieve these objectives, the Ramos and Ford use a dimensional network pictures model to analyze the network pictures of 49 top-level managers across seventeen companies from two very distinct contexts or networks: a product-based network and a project-based network. The study is breathtaking is providing emic and etic interpretations of the dynamics of actors and firms in B2B relationships. Several of the findings in this study may surprise. For example, Ramos and Ford conclude that most individuals do not appear to be able or interested in stepping back and looking at the network to take into account their own as well as the perspective of other actors. Individuals are so embedded in their own reality and perceptions that they are not able to consider that other actors may see things (including their company) differently than they do, and by so doing, they may be missing out on opportunities or incurring unnecessary risks. For example, although networks do not have an objective center, in these analyses individuals

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usually perceive themselves as being the center of everything. By not considering that other actors probably think differently, individuals’ perceived objective center is one that may not actually exist or may take a different shape for the surrounding actors. This conclusion is one of several important lessons appearing in the fifth chapter.

CONCLUSION Acquiring deep knowledge of B2B network relationships requires ‘‘direct research’’ (Mintzberg, 1979) whereby the researcher spends time extensively in the field – in real-life, natural contexts where these relationships form, grow, and die. Direct research includes ‘‘being there’’ – that is, the research moves into the context of the action in several instances of days, weeks, and months. Cross-sectional surveys ignore this methodological principal. The studies in Volume 20 do not. Not relying solely on the verbal reports to the researcher that participants express is one of the key contributions of the studies in Volume 20. All the etic interpretations in the five chapters rely on multiple sources including interviews of executives in both pivotal and peripheral firms in the relationships – and direct observations of interactions in these relationships. Given the inherent problems with ‘‘telling more we can know’’ (Nisbett & Wilson, 1977) and less that we are aware unconsciously (Bargh & Chartrand, 1999) as well as questions on the metric meaning of Likert sevenpoint scaled responses, and issues relating to ‘‘self-generated validity’’ when answering a string of survey questions (Feldman & Lynch, 1988), the studies avoid the use of closed-end survey questions. Self-generated validity refers to the influence of expressing beliefs and/or emotions in answering questions early in a survey on answering the questions that follow. The studies in Volume 20 support the valuable contributions of case study research (CSR) in generalizing to theory as well as to management practice. The editors of the volume very much appreciate the hard work and insightful contributions by the authors. The reader is invited to apply similar research methods and other CSR methods (see Woodside, 2013) in their studies for submission to future volumes in this series. Arch G. Woodside Roger Baxter Editors

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REFERENCES Bargh, J. A., & Chartrand, T. L. (1999). The unbearable automaticity of being. American Psychologist, 54, 462–479. Feldman, J. M., & Lynch, J. G. (1988). Self-generated validity and other effects of measurement on belief, attitude, intention, and behavior. Journal of Applied Psychology, 73, 421–435. Mintzberg, H. (1979). An emerging strategy of direct research. Administrative Science Quarterly, 24, 582–589. Nisbett, R. E., & Wilson, T. D. (1977). Telling more than we can know: Verbal reports on mental processes. Psychological Review, 81, 231–259. Woodside, A. G. (2013). Moving beyond multiple regression analysis to algorithms. Journal of Business Research, 66, 463–472.

THE IMPACT OF NATIONAL CULTURE ON WESTERN INDUSTRIAL BUYER-SELLER RELATIONAL PROCESS MODELS Anna Kaunonen ABSTRACT Three types of industrial buyer-seller relational process models are available: joining theory, stage theory, and state theory. However, historically, these models have developed based on the knowledge and cultural context of the Western world. Several researchers note that national culture may have an impact on international industrial buyerseller relationships. Including culture in the models is highly important, especially as the business environment is increasingly more global and different countries have different business cultures. The goal of this paper is to define the most suitable industrial buyer-seller relational process models for describing relationships in various contexts. The paper includes a through literature review and a single case study in order to reach this objective. A new state theory model evolved during the research. It consists of two beginning states: searching and starting; four purely middles states: constant/static, decline, growth, and troubled; and a purely end state: termination. The state of dormant/inert is both a middle

Deep Knowledge of B2B Relationships within and across Borders Advances in Business Marketing & Purchasing, Volume 20, 1–49 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-0964(2013)0000020004

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ANNA KAUNONEN

state and an end state, that is, when the relational actors are not in contact does not mean that the relationship has ended, but instead, for example, new legislation may have been implemented, which requires the actors to evaluate their relationship and its future. A relationship goes through the two beginning states in the order mentioned above, but after that, any state may occur. Keywords: National culture; industrial buyer-seller relationship; relationship development; Western world

INTRODUCTION This paper is the first of three that report a two-year-long case study based research on industrial buyer-seller relationships and their development across different cultural contexts. The first paper discusses relational development in a Western context, the second that in a Chinese context. The third paper combines these two views.

Background to the Research Several academics discuss the development of relationships (Arora, 2008) but not at the international level (Jones & McCleary, 2004). Petison and Johri (2008) note that the current academic views on the stages of relationship development generally base on the buyer-seller relationships within the developed markets. Actually, the development of relationship marketing as a domain builds on the basis on Western economics, psychology, and management theories (Flambard-Ruaud, 2005). However, members from different national cultures may understand relationships and relationship management in various ways (Flambard-Ruaud, 2005) as the basis for developing relationships and the relative significance of relationship-related attributes differ across national cultures (Buttery & Wong, 1999; Chua, Morris & Ingram, 2009; Dunning & Kim, 2007). For example, the Chinese believe that transactions follow a relationship (Ambler, 1994; Luo, 2007; Park & Luo, 2001; Vanhonacker, 2004) and that a contract is only the start of real negotiations with the focus of negotiations being the discussion of relations instead of actual contracts (Strutton & Pelton, 1997). On the other hand, Westerners view relationships developing through

The Impact of Culture on Western Industrial Relations

3

completed transactions (Ambler, 1994; Luo, 2007; Park & Luo, 2001) or more precisely through contracts or deals (Vanhonacker, 2004). The different viewpoints on relationships are still a novel research area (Flambard-Ruaud, 2005). However, this difference implicitly influences the different frameworks, models, and theories from the different backgrounds (Gao, Ballantyne, & Knight, 2010). Fletcher (2004), Fletcher and Fang (2006), and Ha, Karande, and Singhapakdi (2004) state that research on both culture and relations relies on developed countries. Additionally, few research studies regarding the cultural-specific factors affecting relationship marketing are available (Bianchi, 2006), including the studies by the IMP Group (Fang & Kriz, 2000; Hyder, 2008), even though culture is significant in relationships (e.g., Fletcher, 2004; Fletcher & Fang, 2006; Hewett, Money, & Sharma, 2006; Nes, Solberg & Silkoset, 2007) and in business in general (e.g., Hofstede & Hofstede, 2005). However, utilizing a Western relationship marketing model is questionable in, for example, the Asian context (Wang, 2007). National culture is a key environmental characteristic causing systematic differences in buyer-seller behavior. National culture acts as the foundation for generating beliefs and behavioral standards which affect the interaction manner of individuals (Dash, Bruning & Guin, 2007; Harris & Dibben, 1999). According to Bhagat, Devitt, and Devitt (2010), managerial theories should be grounded in the various national contexts, that is, cultures. Pressey and Selassie (2002), however, find that national culture does not matter in industrial buyer-seller relationships. Their definition of the impact of national culture is limited as they do not consider that national culture affects or determines the national business environments (Pressey & Selassie, 2002). Jia and Rutherford (2010), conversely, noted that in industrial relationships between Western buyers and Chinese sellers cultural differences are potential sources of relational risk. The purpose of this paper is to review the different relational process models and to evaluate the most suitable one to be used, when the players are from different cultures. The chosen model is then evaluated over a single case: an industrial buyer-seller relationship between a Sino-British customer and a Finnish seller.

Research Method This paper begins with a thorough literature review of industrial buyer-seller relational models. In the case of industrial buyer-seller relational models,

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the research uses the search term ‘‘industrial buyer-seller relationship development’’ for both the Google Scholar search engine and the EBSCOHost database, which was directly linked to Springer Link and Emerald Insight databases, resulting in over 14,000 journal articles, conference papers, and books. From these 14,000 items, first of all, a title check took place. If the title was such that the item possibly discussed industrial buyer-seller relationships and especially their development, a keyword and abstract check occurred. If the item still classified as an item on industrial buyerseller relational process models, an assessment of the introduction and conclusions and a browse of the figures and tables took place. Finally, the researcher read the whole item, if she considered the item to fulfill the criteria and got through this process. In addition, a check of the bibliographies in these search results occurred and the same process took place. Based on the titles and abstracts of the search results, 48 accessible items fulfill all the criteria. The paper is an inductive case study. The study allows the case to tell its own story without it being in the terms of the current theoretical models or accepted concepts, based on the action-analytical research strategy (Kasanen, Lukka, & Siitonen, 1991; Neilimo & Na¨si, 1980; Olkkonen, 1994). Even though inductive case research builds somewhat on grounded theory (Gummesson, 2003), when conducting the interviews, the researcher did not completely discard the knowledge gained during the literature review. The method is such that consulting theory and field data collection occurs simultaneously (Olkkonen, 1994). Structure of the Paper The rest of the paper consists of three additional parts: a literature review, a single case study, and conclusions.

APPROACHES FOR MODELING THE INDUSTRIAL BUYER-SELLER RELATIONAL PROCESS Categorizations of the different industrial buyer-seller relationship process models are scarce. Batonda and Perry (2003a) identify three types of approaches for studying the development of industrial buyer-seller relationships: (1) joining theory, (2) stages theory, and (3) states theory. (2a) Lifecycle models and (2b) growth-stage models are the two different forms of

The Impact of Culture on Western Industrial Relations

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(2) stages theory. Growth-stage models include models analogous to dating (Batonda & Perry, 2003a; Rao & Perry, 2002). Below more in-depth discussion of these different industrial buyer-seller relational process models as well as a comparison of the different stages, or states, of the models takes place. In addition, a discussion of the methods use and the influence that culture has in the models occurs.

Joining Theory Joining theory is possible based on the work of Thorelli (1986). According to Batonda and Perry (2003a), the position a new member takes when entering an interfirm network determines how well a relationship and the whole network of which the relationship is part will function. The initial position of the new member also affects the direction in which the relationship and the network in which the relationship exists will proceed. Members in a network may reposition themselves and exit the network and, hence, terminate the relationship shared with an industrial buyer or seller. The initial position, however, determines how the new member may reposition itself within the network and, thus, develop relationships. Repositioning as a process is similar to entering networks (Batonda & Perry, 2003a). None of the industrial buyer-seller relational process models identified during the literature review belongs to joining theory. Batonda and Perry (2003a) state that an empirical test of this theory does not yet exist. As they note, joining theory is not an appropriate theory for analyzing the development of industrial buyer-seller relationships (Batonda & Perry, 2003a).

Stages Theory According to stages theory, industrial buyer-seller relationships develop, grow, or process in a sequential manner over a long time. Two forms of stages theory, (1) life-cycle models and (2) growth-stage models, exist (Batonda & Perry, 2003a). Below, the discussion elaborates on these two types of models. This study compares the models with a five-stage classification for industrial buyer-seller relationships, which Baker and Hart (2008) suggest: pre-relationship stage, attraction stage, formation stage, expansion stage, and ending stage. The pre-relationship stage is such that the buyer and seller

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do not yet interact with each other, but they may be aware of the existence of the other. During the attraction stage, either the buyer or the seller contacts the prospective business partner in order to begin discussions on possible collaboration, sales, or purchase. The relational actors establish the operation of the relationships during the formation stage. The customs developed during the formation stage become the standard during the expansion stage. During the ending stage, the relationship one or both of the actors terminate the relationship (Baker & Hart, 2008). Several researchers, for example, the ‘‘Finnish School of Termination’’ (cf. Alajoutsija¨rvi, Mo¨ller, & Ta¨htinen, 2000; Halinen & Ta¨htinen, 2002; Ta¨htinen, 2001, 2002; Ta¨htinen & Halinen, 2002; and Ta¨htinen & HalinenKaila, 1997), by Hadjikhani (1996), Hirschman (1970), and Geersbro and Ritter (2009, 2010) and Ritter and Geersbro (2010), examine the ending of relationships. The ‘‘Finnish School of Termination’’ views that relationships end ‘‘beautifully,’’ that is, exiting a relationship through different stages with as little harm done to the other as possible. At this point, although the relationship basically ends, the two parties will continue to acknowledge each other. Hadjikhani (1996) views ending a relationship as a natural part of project management. However, his view is almost identical to relationships going to the dormant or inert state. Hirschman (1970) treats relationship ending as the customer exiting the relationship due to a decline, for example, in product or service quality. Geersbro and Ritter (2009, 2010) and Ritter and Geersbro (2010), on the other hand, discuss ending a relationship deliberately because the relationship is not financially beneficial to the seller, that is to say, the relationship is a burden for one or both of the actors (Ha˚kansson & Snehota, 1998). None of these studies discuss any situation in which the other actor would cease existing and, hence, the actors will remain aware of the other until the situation changes due to competition. Life-Cycle Models Life-cycle models base on the Darwinist view of evolution. They usually do not truly discuss the development of industrial buyer-seller relationships but instead deal with interorganizational issues like product development and process innovations (Utterback & Abernathy, 1975) or industry-related matters, for example, industry change (Easton, Burrell, Rothschild, & Shearman, 1993; Porter, 1980). The researcher identified two life-cycle models during the literature review (see Table 1). Ellram (1991) builds her model on a conceptual model (see Table 1). In addition, she bases her model on interviews with 18 representatives of

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The Impact of Culture on Western Industrial Relations

Table 1.

Identified Life-Cycle Models.

Author(s)

Ellram, 1991

Wackman, Salmon, & Salmon, 1986

Method

Case study

Questionnaire

Model

1. 2. 3. 4. 5.

Pre-Relationship Attraction Formation Expansion Ending

Role of National Culture

Pre-partnering Decisions Development Commitment Integration Business/Performance Dissolution –

Pre-Relationship Development Maintenance Termination –

the purchasing departments of 8 large manufacturers: 6 firms based in the United States, 1 firm based in Japan, and 1 firm based in France. Wackman et al. (1986) base their model on a questionnaire sent to 300 representatives of the advertising sector and a Milwaukee study (they do not elaborate on this study). Altogether 182 representatives from the buying side answered the questionnaire. Therefore, both studies are one-sided, that is to say, they do not consider the view of both the buyer and the seller, which is a limitation of both of these models. Even though Ellram (1991) does not include pre-partnering decisions in her model, she notes that several requirements exist for companies before they can interact within a relationship. Companies may even need a total philosophical change (Ellram, 1991). Wackman et al. (1986) believe a relationship begins before a formal contract or agreement. The stage concentrates on learning about the prospective business partner (Wackman et al., 1986) or becoming familiar with this potential partner (Ellram, 1991). The other partner must become attractive to the potential business partner in order for the relationship to exist (Wackman et al., 1986). Hence, the parties judge whether a relationship is possible (Ellram, 1991). To determine this, representatives from several different organizational levels are in contact with each other. Often this is face to face interaction. The actors discuss what kind of expectations they have in order for a relationship to come about (Ellram, 1991). According to Ellram (1991), this is the stage when the first orders take place. However, Wackman et al. (1986) view that the buyer places its first order only after the relational actors are acquainted with each other, that is, in the developing stage.

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During the commitment stage of Ellram’s (1991) model, the relations improve and the dependency between the partners increases. Even though this is a high-energy time (Wackman et al., 1986), fewer face to face contacts between the parties take place as the parties use other methods of communication and become more acquainted with each other and acknowledge each other’s customs and habits (Ellram, 1991). The parties discuss more substantive issues within the relationship (Ellram, 1991; Wackman et al., 1986). The actors need to maintain the relationship in order for the relationship to be successful in the long term (Ellram, 1991; Wackman et al., 1986). The relationship deepens (Wackman et al., 1986) as the actors gain more mutual advantage and they trust each other more (Ellram, 1991). The relationship is full of routines (Ellram, 1991). This tends to be the most productive stage of the relationship (Wackman et al., 1986). According to Ellram (1991), the relationship may end for either businessor performance-related reasons. Wackman et al. (1986) call the different relationship ending possibilities voluntary and involuntary, respectively. If the reason is business related, or voluntary, then the relational actors dissolute the relationship in more collaborative terms and both partners aim to minimize the mutual losses. If the relationship terminates for performance reasons, or involuntarily, the other actor tries to leave the relationship as quickly as possible with as little harm done to itself. Generally, however, both the buyer and seller face considerable upheaval when this occurs (Ellram, 1991; Wackman et al., 1986). Neither Ellram (1991) nor Wackman et al. (1986) consider the impact that national culture may have on the development of relationships. This is surprising in the case of Ellram (1991) as the case companies she studies are from different countries. All the authors were based in the United States at the time they submitted the journal articles, which may have influenced their view of the world. Growth-Stage Models. The majority of industrial buyer-seller relational process models are growth-stage models (see Table 2). From the 48 journal articles, conference papers, and books suggesting different industrial buyerseller relational process models, 39 present a growth-stage model. Growth-stage models or process models are sequential in nature (Batonda & Perry, 2003a). Palmer and Bejou (1994) prove this feature of growth-stage models, which justifies their use. However, several authors (e.g., Rao & Perry, 2002) claim that these models are lacking in the sense that industrial buyer-seller relationships in reality do not follow the growth-stage models

Exploration

Awareness

Pre-Contact

Alliance Environment Initial Conditions Awareness

Initial Contact Phase

C

C

C/Q

C

C

M C

NA

Borys and Jemison (1989) Chang and Lin (2008) Claycomb and Frankwick (2010) Conway and Swift (2000) Das and Teng (2002)

Ford (1980) Ford et al. (1998) Ford, Gadde, Ha˚kansson, and Snehota (2003)

Q

Formation

S

Arin˜o and de la Torre (1998)

Doz (1996) Dwyer, Schurr, and Oh (1987) Edvinsson (1985)

Defining Purpose

C

Pre-Relationship Stage

Early Stage Exploratory Stage

Development Stage Developing Stage

Trial Order and Delivery Phase

Reevaluation Expansion

Operation

Development

Expansion

Operation

Setting Boundaries

Execution-Learning

3. Formation

Model

Customer Maintenance and Repeat/Customer Development Phase Long-Term Stage Stable Stage

Revised Conditions Commitment

Mature Relationship

Commitment

Maintenance

Reevaluation-(a) ReadjustmentRevised Conditions or New Equilibrium; (b) Unilateral Reaction Value Creation

Relationship Development Phase Development

4. Expansion

Identified Growth-Stage Models.

Negotiating and Test Phase

Alliance Conditions; Formation Learning About Exploration

Initial Interaction

Negotiation and CommitmentInitial conditions

Initiation

Negotiation Phase

Andersen and Kumar (2006)

Pre-Relationship Phase

S

2. Attraction

Andersen (2001)

1. Pre-Relationship

Method

Author(s)

Table 2.

Final Stage

Failure/Success Dissolution

Outcome

Dissolution

Hybrid Stability

Forced/Voluntary Termination þ Reestablishment Dissolution

Termination Phase

5. Ending

Relationship itself seen as applied cultural encounters Cultural distance –

– –

–

Psychic distance

–

–

–

Cultural distance?

–

–

Role of National Culture

Exploration Stranger (Exploration) Conditions to Build

Relationship Initialization Stage Negotiations Uncommitted

Interest Initial Stage

NA Q

C

Q

C

M

M S

NA

M

C

C

C

M

Iyer (2002)

Jap and Anderson (2007) Jia and Rutherford (2010) Larson (1992)

Lehtinen (1986) Liljegren (1988)

Millman and Wilson (1995)

Ng (2008, 2009)

Pett and Dibrell (2001)

Polonsky, Beldona, and Schuppisser (2003)

Ring and Van de Ven (1994) White (2000)

Exploration Phase

Pre-relationship Stage

Pre-KAM Stage

Preconditions for Exchange

Awareness and Partner Selection

Exploration Stage

Early Stage

Early-KAM Stage

Joining Phase Establishment Phase

Exploration

Injection-Rejection Stage Purchase Purchasing Process

Interest Stage

C

Frazier, Spekman, and O’Neal (1988) Gro¨nroos (1980) Gro¨nroos (1982)

Initiation Process

NA

2. Attraction

Frazier (1983)

1. Pre-Relationship

Method

Author(s)

Developing

Relationship Stabilization Stage Commitments, Executions

Actualized Phase

Recurrent Contracts Stage

Development Stage

Mid-KAM Stage

Structuring Phase, Development Phase

Acquaintance (expansion)

Build-Up

Expansion

Repeat Purchase Consumption Process

Implementation Stage

Implementation Process

3. Formation

Model

Table 2. (Continued )

Mature

Operational Relationship Stage Assessments

Relational Contracts Stage

Partnership-KAM Stage, Synergistic-KAM Stage Long-term Stage

Intensive Phase Maintenance Phase

Integration and Control

Partner (Commitment)

Commitment to Relationship Maturity

Review Stage

Review Process

4. Expansion

Declining

Dissolutions

Inactive/ Deactualized Phase

Outcome Stage

Final Stage

Termination Phase Clashing Phase, Termination Phase Uncoupling KAM

Decline

Perceived Service Quality

Outcomes

5. Ending

–

–

–

Culture matters

–

–

– –

–

Environmental factor

–

Environmental factor

– –

Characteristics of macroenvironment –

Role of National Culture

C

M

Wilson, and Mummalaneni (1986)

Yorke (1990)

Ignorance

Partner Search and Selection Need Complementarity

Interest

Defining Purpose

Initiation

Setting Relationship Boundaries Interactions (Exchanges)

Involvement

Creating Relationship Value

Relationship Maintenance Outcomes, Satisfaction, Investments, Commitment Integration –

–

–

M

Doherty and Alexander (2004) Guillet de Monthoux (1975)

C

Zineldin (2002)

Recognition, Search, Evaluation

Discovery Phase (Romance)

Selection and Courtship

Romance

First Meeting

Development Phase or Basic Relationship Phase (Engagement)

Getting Engaged

Affair

Partnership

The Proposal

Setting Up Housekeeping, Learning to Collaborate Commitment Phase (Marriage)

Marriage

The Breach of Promise

Loyalty Phase (Ongoing Strategic Business Relationship or Old-Married)

Divorce - New Romance, New Affair, New Marriage Changing Within

Marriage and Honeymoon

–

Culture matters

–

–

Culture matters

The models drawing on the dating relationship are separated by the dashed line; the abbreviations for the method: C–Conceptual, M–Multiple case study, NA–Not available, O–Observation, Q–Questionnaire, and S–Single case study.

M

Kanter (1994)

NA

M, O

Borch (1994)

----------------------------------------------------------------------------------------------------------------------------------------------------------------------

C

Wilson (1995)

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ANNA KAUNONEN

and their sequential forms, that is to say, growth-stage models consist of irreversible stages (Batonda & Perry, 2003a). Nevertheless, several of the growth-stage models (e.g., those of Arin˜o & de la Torre, 1998; Dwyer et al., 1987; Ford, 1980) consider this and state that the stages are not in a continuous sequence, but instead relationship may jump over stages and go back to previous stages, that is to say, the relationship development process is iterative in nature. No distinct hurdle causes the movement along the various stages (Claycomb & Frankwick, 2010). Different kinds of relationships are the basis for growth-stages models. For example, Andersen (2001), Edvinsson (1985), Gro¨nroos (1980, 1982), Lehtinen (1986), and Yorke (1990) illustrate relationships between service providers and clients. Arin˜o and de la Torre (1998), Borys and Jemison (1989), Das and Teng (2002), and Doz (1996), to name a few, describe the relationship development as that of two actors aiming to establish a strategic alliance. Doherty and Alexander (2004), on the other hand, portray a relationship between a franchiser and franchisee while Larson (1992) discusses the special features of the relationship between an entrepreneur and its business partner. Millman and Wilson (1995) specialize in relationships between suppliers and their most important customers, that is, key accounts. Some growth-stage models (Borch, 1994; Doherty & Alexander, 2004; Guillet de Monthoux, 1975; Kanter, 1994; Zineldin, 2002) draw on the dating relationship between humans. In Table 2, a dashed line separates these. The discussion is also separate. Methods for Modeling Industrial Buyer-Seller Relationship Growth-Stage Models Of the industrial buyer-seller relationship growth-stage models in Table 2, 16 are purely conceptual models basing either on previous industrial buyerseller process models (Andersen & Kumar, 2006; Chang & Lin, 2008; Claycomb & Frankwick, 2010; Das & Teng, 2002; Iyer, 2002; Pett & Dibrell, 2001; Polonsky et al. 2003; Wilson, 1995) or on previous theories in various fields. Borys and Jemison (1989) base their model on organizational theories, Conway and Swift (2000) on psychic distance, Dwyer et al. (1987) on modern contract law and exchange theories, and Frazier et al. (1988) on transaction cost economics, political economics, and resource-dependence frameworks. Jia and Rutherford (2010) combine previous industrial buyerseller relational process models with the life cycle of leadership maturity model, while Ring and Van de Ven (1994) base their model on economics. Wilson and Mummalaneni (1986), on the other hand, draw from social psychology and marketing theories. Theories from social psychology,

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sociology, relationship management, and marketing influence the dating analogous model of Zineldin (2002). A somewhat smaller number of authors (13 models) conduct case studies. Andersen (2001) studies a single seller, a Danish bank; Arin˜o and de la Torre (1998) a failed international joint venture (JV) between two multinationals; and Liljegren (1988) a relationship between two Swedish daughter companies, one being a seller and the other a buyer in the relationship. Doz (1996), on the other hand, studies two projects in each of three case relationships, all of which are between organizations from different nations. Lehtinen (1986) examines three Finnish service providers, that is, sellers. Ng (2008, 2009), in both of his works, bases his model on several regional buyerseller relationships. The first one studies 10 relationships in Taiwan (Ng, 2008) and the second 12 from Australia (Ng, 2009). White (2000) examines only the view of buyers in her case study of 14 British retail-related respondents. Yorke (1990) also studies both sides of the relationship in the service industry. The sample consists of altogether 32 relationships (Yorke, 1990). In addition, Larson (1992) conducts a multiple case study, but she uses ethnographical methods to study the seven alliances, that is, her sample. The alliances are between entrepreneurs and their partners (Larson, 1992). Borch (1994) uses the interviews of five fresh fish exporters (20 interviews in total), as well as the observations of a development fund of which the interviewees are members. However, the research is one-sided, focusing only on the seller-side (Borch, 1994). The research of Doherty and Alexander (2004) is similar in the sense that they study six UK sellers, that is, fashion retailers. Kanter (1994), on the other hand, studies both sides of the relationship in her sample of 37 companies and their partners in 11 nations. Three of the growth-stage models base on quantitative work, that is, questionnaires. The model by Ford (1980), which Ford et al. (1998) and Ford et al. (2003) update bases on the work of the International/Industrial Marketing and Purchasing (IMP) Group. The research studies industrial buyer-seller relationships between actors in Britain, France, Germany, Italy, and Sweden. Both marketing and purchasing personnel filled out the questionnaire (Cunningham, 1980). As Cunningham (1980) mentions, the convenience of the sample makes the statistical reliability questionable. Gro¨nroos (1982) further develops his model from 1979 to 1980 by asking seminar participants (executives) to fill out a questionnaire. Gro¨nroos (1982) personally gave the seminar in which he introduced his model. Based on the seminar and the reality of the executives, they evaluated the model fit (Gro¨nroos, 1982). Hence, the results may be somewhat biased and lack the view of both sides of the buyer-seller relationship interface.

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Jap and Anderson (2007) sent a questionnaire to resellers of an agricultural chemical manufacturer, making this study a one-sided one. They claim, however, that this should not affect their results (Jap & Anderson, 2007). The sellers are from different nations, which Jap and Anderson (2007) did not consider during the analysis of the results and the model development. Some of the authors do not clearly state the basis for their model. Edvinsson (1985) further develops the model of Gro¨nroos (1982) and claims to use a multiple case study. However, he does not elaborate on these case studies. Frazier (1983) also claims to use a multiple case study to strengthen his model, which conceptually bases on theories about exchange relationships of marketing literature and related behavioral science disciplines. The examples that he provide from the multiple case study include companies acting in the automobile, medical supply and equipment, and industrial supply channel industries (Frazier, 1983). Gro¨nroos (1980) does not discuss the background of his model. Apparently, the basis is in service marketing and management theories (Gro¨nroos, 1980). Millman and Wilson (1995) do not mention the method they use to develop their model. As in the case of Gro¨nroos (1980), one can only guess that the model bases on previous industrial buyer-seller relational process models (Millman & Wilson, 1995). However, Gro¨nroos (1980) also provides examples from reality. Guillet de Monthoux (1975) states that his work bases on empirical findings, but the article does not reveal the research method. The First Stage: Pre-Relationship In the pre-relationship stage, either the buyer or the seller or both become aware of each other (Andersen, 2001; Iyer, 2002) and show interest in the other (Gro¨nroos, 1980, 1982). Usually the seller acknowledges the existence of the buyer first (Andersen, 2001). Either party may scan the market to identify a prospective business partner (Conway & Swift, 2000). Either actor may identify potential business partners inside or outside of a firm (Ng, 2008, 2009) through, for example, advertisements, brochures, direct mail, or public relations activities (Gro¨nroos, 1982). In the key account management literature, the view of this process, however, is different. The seller elects the key accounts from its existing customer base, that is to say, the buyers and sellers have been conducting business for some time. (Millman & Wilson, 1995) Often the searcher identifies several feasible partners (Claycomb & Frankwick, 2010; Dwyer et al., 1987; Edvinsson, 1985), but the party needs to select the most attractive one (Dwyer et al., 1987; Edvinsson, 1985), as well as choose the person in the organization who should contact this prospective partner (Edvinsson, 1985).

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The buyer or the seller always has a need for which the actor seeks a new partner (Frazier, 1983). Some episode in a current industrial buyer-seller relationship, the (poor) performance of a current seller, the efforts of a new seller, a strategic decision within the firm or a policy decision by the government, or other reasons may motivate the evaluation of a new potential business partner. The previous relationships the actor has had, uncertainty about the prospective relationship, and the distance between the buyer and seller affect the search for a new business partner (Ford, 1980). According to Frazier et al. (1988), however, this stage ends when either of the partners identifies the need to find a new partner. They see the actual search process as part of the next stage (Frazier et al., 1988). The business partners need to evaluate the benefits and the costs that might arise from the potential relationship. These include what the business actor can learn from the prospective partner, what kinds of offerings the seller has, and what the costs are of developing the new relationship, namely, the size of the investment in financial terms and in time (Ford et al., 1998, 2003; Frazier, 1983; Frazier et al., 1988). The offering (e.g., capabilities) of the feasible business partner should meet the needs that the searching organization has identified (Iyer, 2002; Ng, 2008, 2009). The business actor also needs to trust the potential partner (Ford et al., 1998, 2003). A relationship, however, does not yet exist between the two actors as they have not interacted (Conway & Swift, 2000) and are not yet committed to each other (Ford, 1980). Polonsky et al. (2003) view the pre-relationship stage to consist of two different stages: (1) potential relationship stage and (2) relationship discovery stage. In the potential relationship stage, the parties are either unaware of each other or are beginning to acknowledge the existence of a prospective business partner. The actors are not in contact with each other at this stage. During the relationship discovery stage, the buyer and seller are not yet in contact with each other, but they do evaluate the other’s characteristics for developing a relationship (Polonsky et al., 2003). Although Das and Teng (2002) do not identify a pre-relationship stage, they claim that the alliance environment, that is, the characteristics of the firms, industry, and institutions near the business partners, affects the further development of the relationship. Doz (1996) identifies several more initial conditions that will affect the development of the relationship in the future: the task that the partners think the relationship should perform, the routines of the partners, how parties conduct the interaction between the interfaces, and the expectations that the actors have regarding the potential relationship and each other. According to Larson (1992), the most important factors, however, are the personal reputations of the firm

16

ANNA KAUNONEN

representatives, prior relationships the firms have had, and the image of the firms. In the models analogous to the dating pattern, Borch (1994) claims that the pre-relationship stage is actually the first meeting while Doherty and Alexander (2004) view the stage to be the one in which an actor recognizes a need for a partner and begins the search for one. During this search process, the actor evaluates its different possibilities. However, they divide this pre-relationship stage into three different stages (Doherty & Alexander, 2004). The pre-relationship stage is critical for the future success of the relationship as the actor chooses the potential relational partner (Iyer, 2002; Wilson, 1995). For the actor to complete this task in a successful manner the actor must allocate sufficient resources (Iyer, 2002). If representatives from each organization already know each other, the relationship has a better possibility of developing in the long term (Wilson, 1995). If the relational actors also invest in learning about the external environment of the possible partner and adapt their actions accordingly (in the future), the relationship should be successful in the long term (Iyer, 2002). Although a majority of the growth-stage models neglect the pre-relationship stage as such, often the attraction stage includes the predecessory stage. However, some models simply do not consider the need for companies to first of all acknowledge a need and motivation to begin interacting with a possible partner. They might just assume the background for the occurrence of relationship development is obvious or discard background as insignificant. Relationships, however, do not develop if both partners are not willing to participate in one. Hence, a relationship will reach the next stage only if the actors are satisfied with the completion of the previous stage. However, the stages may overlap somewhat, that is to say, the transition of the stages is not always clear. The Second Stage: Attraction Dwyer et al. (1987) divide the second stage into five subprocesses basing on the social behavior theory of Scanzoni (1979): attraction, communication and bargaining, development and exercise, norm development, and expectation development. The attraction stage is one in which, based on the information gained during the pre-relationship stage, at least one of the parties views the other as a truly prospective partner (Dwyer et al., 1987). The marketing the seller conducts during the whole attraction stage is heavily personal selling (Gro¨nroos, 1982). The communication and bargaining begins when either the buyer or the seller contacts the other

The Impact of Culture on Western Industrial Relations

17

(Conway & Swift, 2000; Ng, 2008, 2009). The actor may contact the other directly or indirectly (Polonsky et al., 2003). This leads to a process of negotiations during which the actors evaluate whether or not to begin developing a relationship with the other (Dwyer et al., 1987), that is to say, this process is a search and trial one during which the parties establish a common ground (Iyer, 2002). During the negotiations, the buyer and seller make promises to each other regarding various issues, for example, the specifications of the offering that the seller produces for the buyer to purchase (Chang & Lin, 2008), that is, the parties negotiate the contract terms and offering specifications (Claycomb & Frankwick, 2010). Either party may need to use persuasion skills during the negotiations (Andersen, 2001; Ford et al., 1998, 2003; Millman & Wilson, 1995) as the parties may be anxious about the performance of the other (Andersen & Kumar, 2006; Ford et al., 1998, 2003), especially, if the reputation of the possible relational actor is weak (Claycomb & Frankwick, 2010). Hence, the building of trust between the prospective partners needs to begin as early as possible (Andersen & Kumar, 2006). The parties should state their wants, issues, inputs, and priorities during this stage in order to guarantee a firm base for the future (Dwyer et al., 1987; Millman & Wilson, 1995; Pett & Dibrell, 2001). The communication needs to be bilateral (Dwyer et al., 1987). The negotiations usually end with either an agreement about the first order or the actors concluding that they do not fit each other (Ford, 1980; Ford et al., 1998, 2003). However, even if the buyer orders the seller’s offering, the business partners are not yet committed to each other (Ford, 1980; Ford et al., 1998, 2003), but instead the actors still consider other prospective partners (Claycomb & Frankwick, 2010) as the parties remain somewhat strangers to each other (Jia & Rutherford, 2010). According to Lehtinen (1986), in the case of services, the buyer is using the auxiliary services at this stage and, hence, is getting acquainted with the core service and the core service provider. Development and exercise is the subprocess in which the parties discuss power and justice (Dwyer et al., 1987). This subprocess overlaps somewhat with the bargaining process (Dwyer et al., 1987), as bargaining, to some degree, is also a game of power (e.g., Hofstede, Jonker, & Verwaart, 2009). Based on the way in which the prospective business partner acts during the negotiation process, the other party gains a picture of how this partner will also act in the future, leading to the development of norms (Dwyer et al., 1987). However, this does not mean that the actors cannot change their ways of interaction in the future (Dwyer et al., 1987) as

18

ANNA KAUNONEN

the parties have not established any routines (Ford, 1980; Ford et al., 1998, 2003). The expectations that the buyer and seller have of the relationship and of each other concern the likely level of unity, and the degree of problems and possible conflicts of interest which may arise (Dwyer et al., 1987). During this stage, the parties seriously doubt each other (Ford et al., 1998, 2003) and, thus, the parties need to show goal compatibility and integrity and perform well (Claycomb & Frankwick, 2010). Ring and Van de Ven (1994) view the expectations to be joint prospects of the motivations, possible investments, and perceived business uncertainties instead of individual expectations as Dwyer et al. (1987) have seen this. During the attraction stage, the parties define the purpose of the potential relationship (Borys & Jemison, 1989; Wilson, 1995) and the actors initially commit to the relationship (Arin˜o & de la Torre, 1998). Allocating resources for the good of developing a relationship shows commitment. Therefore, the parties establish the foundations of the relationship and its future (Chang & Lin, 2008). This stage, like the other initial relational process stages, is one which determines the success or failure of the relationship in the future (Conway & Swift, 2000; Larson, 1992). If the relationship has an insufficient base, the relationship probably will not flourish. Thus, the actors must invest a significant amount of work and resources during this stage in order to guarantee a successful long-term relationship, if that is the goal. The actors need to know each other and acknowledge the habits of the other party in order to interact efficiently and effectively in the future (Ford, 1980; Ford et al., 1998, 2003). The learning occurring in this stage may be either behavioral non-learning or cognitive learning (Doz, 1996). The actors learn more about the characteristics of each other instead of how they carry out the actual tasks and processes (Doz, 1996; Iyer, 2002). Most learning probably occurs during this stage (Ford et al., 1998, 2003). This stage ends when the business partners have learned enough about each other that their interaction becomes somewhat habitual (Polonsky et al., 2003). The relationship between the individuals participating in the interactions is at least at the business friendship level (Wilson, 1995). From the models analogous to the dating process, Guillet de Monthoux (1975) sees the attraction stage to include evaluating the possible business partner. Several different organizational levels participate in the evaluation (Guillet de Monthoux, 1975). Kanter (1994) views the initial meeting as the beginning of the relationship between a buyer and seller. The two companies are attracted to each other. The parties evaluate the other’s attractiveness

The Impact of Culture on Western Industrial Relations

19

based on three issues: the capabilities of the firm itself, the chemistry that the two firms share, and the compatibility of the two firms. The compatibility needs to exist at the legacy, philosophy, and desire level (Kanter, 1994). Sometimes the motivation for beginning a relationship may be the opportunity cost of not participating in the potential relationship (Guillet de Monthoux, 1975; Kanter, 1994). According to Zineldin (2002), the attraction stage is one in which two parties interested in conducting business with each other come together. During this stage, the actors learn about each other and especially about the needs and wants of the potential business partner. The seller develops or the buyer and seller co-jointly develop an offering during negotiations. The parties need to act according to the expectations of the other for the relationship to deepen (Zineldin, 2002). Even though Das and Teng (2002) state that alliance conditions exist at each stage of the relationship and differ during the relational stages, the actors determine the future of the alliance conditions during this stage. The buyer and seller need to evaluate the collective strengths they have; the potential conflicts which may arise during the relationship; and the interdependencies of the relationship that exist and which the parties desire. Arin˜o and de la Torre (1998) name the alliance conditions of this stage initial conditions. According to Pett and Dibrell (2001), both external factors, such as national culture, government regulations, environmental conditions, industry-specific issues, and internal factors, that is, organizational issues, affect the attraction stage and, therefore, the whole relationship and its development. The level at which the relationship forms differs in the models. In some growth-stage models (e.g., Andersen, 2001; Andersen & Kumar, 2006), the relationship already exists during this stage while in others (e.g., Larson, 1992, Zineldin, 2002), the attraction stage is that in which only the parties hold the negotiations and the actual formation of the relationship is left to the next stage. Some (e.g., Borys & Jemison, 1989; Wilson, 1995) even say this stage covers only the beginning of the process before the negotiations and learning begin. They see the actual negotiations, that is, discussing the boundaries of the relationship, occurring in the next developmental stage, that is, the formation stage (e.g., Borys & Jemison, 1989; Wilson, 1995). The Third Stage: Formation During the formation stage, the parties conduct all the issues agreed upon during the initial negotiations (Das & Teng, 2002). For some (e.g., Arin˜o & de la Torre, 1998; Edvinsson, 1985) this means the trial order and delivery, that is, one transaction. While to others, several transactions may take place

20

ANNA KAUNONEN

during the formation stage (e.g., Claycomb & Frankwick, 2010; Das & Teng, 2002) or negotiating long-term contracts and, hence, electing one relational party over another (Claycomb & Frankwick, 2010). A relationship still does not exist, but one or several transactions take place (Pett & Dibrell, 2001), even if the parties are more dependent on each other (Jia & Rutherford, 2010). Generally after the negotiations the parties sign a contract stating the negotiation results (Ford, 1980; Ford et al., 1998, 2003; Ring and Van de Ven, 1994). The contract may be a legal or a psychological one (Ring and Van de Ven, 1994). The formation stage may also take place when the seller’s deliveries are continuous, the volume of purchases has increased, or when new requirements or when the parties discuss a new project (Ford et al., 1998, 2003). The process and task learning also begins (Arin˜o & de la Torre, 1998; Doz, 1996). Due to the knowledge gained in the two previous stages, the barriers between the two relational actors should be lower (Iyer, 2002). Often, especially in the case of service providence, the customer receives training (Edvinsson, 1985; Ford, 1980). During the formation stage, the parties contact the other buyers or sellers with whom the prospective business partner has relations in order to better understand the character of the potential business partner (Chang & Lin, 2008). In addition, the actors use the positive experiences and information gathered during the previous stage to enhance trust and commitment in the relationship (Conway & Swift, 2000). During the formation stage, the partners still have some doubt about each other and accordingly, try to discover whether the other party has a hidden agenda for developing the relationship. In order to complete this task, the actors also learn more about the goals and skills the other has. Since one or more transactions occur, the parties also understand the environment in which the relationship occurs. During the formation stage, the buyer and seller might need to adjust their customs and offerings in order to satisfy the other better and, therefore, ensure a fruitful relationship (Doz, 1996; Ford, 1980). The most important issue regarding possible adjustments is that the actors are willing to adapt to the new circumstances. Informal adaptations, especially, show one party that the other is committed to the relationship and to cultivating the relationship further (Ford et al., 1998, 2003). Communication is the most significant issue in this stage (Pett & Dibrell, 2001). The interaction manners may be extreme. The organizations of the two actors need to be flexible in order to allow borderless communication (Edvinsson, 1985). The business partners try to influence each other by expressing their beliefs and showing their commitment through their behavior (Frazier, 1983).

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According to Dwyer et al. (1987), the five subprocesses discussed in the previous stage, namely, attraction, communication and bargaining, development and exercise of power, norm development, and expectation development, are also present in this stage, especially, if the parties make adjustments. The risk of developing a long-term relationship increases as the business partners become more dependent on each other (Dwyer et al., 1987). Hence, the business partners show their commitment to the relationship by investing resources in the relationship (Ford et al., 1998, 2003). Even though the parties make investments in the relationship, the relationship usually allows for cost savings. However, if one party dominates the other, that is, the exercise of power is not as the parties expect, the relationship often terminates (Frazier et al., 1988). During the formation stage, the relationship between the two parties may grow, reform, or even terminate (Das & Teng, 2002; Ford, 1980) depending on the level of benefits, mutual dependence, and trust between the two actors (Claycomb & Frankwick, 2010). According to Polonsky et al. (2003), the relationship may also become inactive or deactualize, that is, the relationship does not need to be continuously active, but instead periods during which the relationship is on hold can occur. Usually during the formation stage, the knowledge that the buyer has of the seller and vice versa develops to such a level that the business partners are better equipped to judge the potential that a prospective relationship has. The parties understand how the other partner functions and can evaluate whether or not this way is suitable for them and their ideology (Ford, 1980). According to Zineldin (2002), whose model is analogous to dating, the formation stage is the engagement phase. The partners have come to an initial agreement, that is, the engagement, regarding the offering being provided and purchased. Positivity in this stage is significant for the relationship to develop into a marriage, that is, a loyal relationship. The next stage will occur only if the actors are satisfied with each other (Zineldin, 2002). The Fourth Stage: Expansion The expansion stage occurs when the actors have reached a certain level of stability. Stability needs to exist in the learning, investment, and commitment processes (Ford et al., 1998, 2003). The companies have acknowledged that they may mutually gain from the relationship (Pett & Dibrell, 2001). Therefore, the firms are integrated operationally, strategically, and through social relations (Larson, 1992), that is, they trade continuously (Ng, 2008, 2009). The level of commitment (Jia & Rutherford,

22

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2010), mutual dependence, and trust (Claycomb & Frankwick, 2010; Jia & Rutherford, 2010) between the buyer and the seller is high. The parties should be so satisfied with the other that the switching costs are extremely high for both and, therefore, relationship termination is virtually impossible. This could, however, imply that one or both of the parties are making or have made very severe sacrifices (Claycomb & Frankwick, 2010). During the expansion stage, both actors need to show their commitment to the relationship and to each other (Andersen, 2001; Claycomb & Frankwick, 2010). The actors can show their commitment, for example, by visiting the other (Andersen, 2001) or by explicitly or implicitly showing a willingness to sacrifice for the longevity of the relationship (Claycomb & Frankwick, 2010). Hence, more personal relationships develop (Claycomb & Frankwick, 2010; Andersen & Kumar, 2006) and the actors maintain the trust and commitment to the other and the relationship (Conway & Swift, 2000). The relationship may become so personal that it personifies in individual firm representatives (Ford, 1980). Commitment and trust, overall, are the most important factors in the relationship at this point (Conway & Swift, 2000), with trust having the most significant role (Pett & Dibrell, 2001). Dwyer et al. (1987) consider commitment at this stage to mean the belief that the partners have regarding the continuity of the relationship, that is, the parties consistently need to invest in the relationship over a long time. Because both business partners commit more, they are more willing to take bigger risks for the relationship to be successful (Andersen & Kumar, 2006), for example, by sharing more confidential information (Millman & Wilson, 1995). The risk-taking and the whole relationship often lead to an improved competitive advantage for either one or both of the actors, usually in a way that could not be gained alone (Borys & Jemison, 1989). Some value that is superior to functioning alone and through transactions must always exist (Wilson, 1995). The business partners aim to enhance the competitive advantage even further (Chang & Lin, 2008). This competitive advantage may come in the form of technology, market access, or information (Wilson, 1995). According to Dwyer et al. (1987), the risktaking includes committing to only one buyer or seller, instead of using other possibilities. However, the seller needs to balance this act as the seller should never be too committed to one buyer (Ford, 1980) and vice versa. The actors may need to make more adjustments both to the contributions each party makes to the relationship and to the distribution methods (Arin˜o & de la Torre, 1998). The actors make these possible adjustments based on the previous efficiency, equity, and quality of the relationship

The Impact of Culture on Western Industrial Relations

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(Arin˜o & de la Torre, 1998; Ring and Van de Ven, 1994), that is, the attractiveness, trust, and expertise of the personnel (Frazier, 1983). The parties evaluate these attributes against the previous performance of the firm and against the performance of other firms and relationships (Frazier et al., 1988). The partners continue to learn about each other when evaluating and adapting new practices (Arin˜o & de la Torre, 1998; Iyer, 2002). Often, the relationship institutionalizes, that is, the buyer and seller share common goals and practices (Ford, 1980; Ford et al., 1998, 2003; Iyer, 2002) and conflict resolution manners (Ng, 2008, 2009). This, however, may also have a negative effect as the business partners may stop improving these practices and, hence, may lose their competitive advantage (Ford, 1980; Ford et al., 1998, 2003). During the expansion stage, the parties should not try to overly influence each other but should respect each other and the habits and customs each has (Chang & Lin, 2008). However, for this to be possible, the actors need to be familiar with one another (Borys & Jemison, 1989) and to be mutually important (Ford, 1980), that is to say, power asymmetry must not exist. Otherwise, the relationship will usually end (Borys & Jemison, 1989). The level of commitment at this stage influences the outcome of the next stage. If the actor is heavily committed to the relationship, the relationship will generally end in success. However, if either the buyer or the seller or both are not that committed to the relationship, the relationship often fails. The lack of commitment to the relationship may be a result of lowered expectations and/or heightened suspicions of the actions of the business partner or of the other party in general (Doz, 1996). The relationship has several other strains. The transaction costs may increase, the barriers to conduct business with another player may lower, and/or personal or organizational needs may change. However, several benefits of doing business with an established partner exist (Dwyer et al., 1987). The actors know the customs and the efficiency of the other actor and the roles and goals (Ford, 1980). According to Edvinsson (1985), this is the stage during which the business partner should exploit the other as much as possible before the relationship ends. The expansion stage is the marriage phase of a relationship. The buyer and seller commit to each other for the long term. The business partners share mutual trust and respect and are satisfied with the performance of the other. Thus, the relationship is strong, close, and interactive. Together the parties are able to create value, that is, synergy effects. Marketers need to maintain at least a satisfying level of offering quality and performance (Zineldin, 2002). The top management has to ensure that they achieve

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the goals they aim to gain through this marriage by committing the lower organizational levels to the relationship. The relational actors need to consider money, often also an issue in marriages, within the industrial buyer-seller relationships. A lack of resources may cause the relationship to end. As in marriages, the actors need to establish routines in the industrial buyer-seller relationships (Kanter, 1994). Opposed to Larson’s (1992) three forms of integration, Kanter (1994) suggests five: strategic integration, tactical integration, operational integration, interpersonal integration, and cultural integration. This means that the companies need to work together at all organizational levels in order for personal relationships within the industrial buyer-seller relationship to develop. For personal relationships to develop, the representatives of the organizations need to be culturally sensitive. This integration may affect the firms in such a way that they need to change internally (Kanter, 1994). The Fifth Stage: Ending Several of the stage-growth models (e.g., Ford et al., 1998, 2003) end at the expansion stage and do not consider the ending state of the relationship. Many of the models (e.g., Andersen, 2001; Chang & Lin, 2008; Conway & Swift, 2000; White, 2000) identify a special ending state but do not elaborate on the state. In the ending stage, the value created bases on the mutual behavior and trust that exist between the two actors. If a sufficient amount of mutual interest in maintaining a relationship does not exist and the relational costs are too high, the relationship may terminate (Ng, 2008, 2009). Therefore, the relationship may end in a failure or a success (Doz, 1996). According to Doz (1996), a relationship is a failure when the relationship ends, and successful when the relationship continues. Millman and Wilson (1995), also, suggest two possible ends to a relationship: uncoupling may occur or the relationship may become more synergistic. During uncoupling, the relationship ends. In contrast, a more synergistic relationship is more than a relationship; it is a joint value-creating entity instead of two separate organizations (Millman & Wilson, 1995). Some models (e.g., Andersen & Kumar, 2006; Arin˜o & de la Torre, 1998; Dwyer et al., 1987) consider the ending state as only the termination of the relationship. Hence, they always see the ending of a relationship as a possible failure. Although the relationship may terminate during any stage of the relationship, if the relationship terminates after the expansion stage, the ending is a cause for more severe emotional reactions. The actors feel more

The Impact of Culture on Western Industrial Relations

25

hurt if the other does this intentionally (Andersen & Kumar, 2006; Dwyer et al., 1987). The dissatisfaction of one of the business partners often drives the termination. The parties may be displeased with the performance of the other, they may find the relationship unequal in power or benefits, or a conflict may arise (Frazier, 1983). Other views exist, too. For example, Ford (1980) sees the ending state as one in which the relationship is truly institutionalized. The actions are industry-specific. Often, however, the other players within the industry view these actions as illegal. Borys and Jemison (1989), on the other hand, see the ending state as one of stability. The actors may gain relational stability through shared norms and values, industry-specific or economy-specific practices, and/or contracts. Each of these forms, however, has its disadvantages. Shared norms and values are difficult to establish, practices do not generate sufficient barriers to entry, and contracts are difficult to agree upon in uncertain conditions (Borys & Jemison, 1989). Das and Teng (2002) suggest four possible outcomes of a relationship: (1) stabilization, (2) reformation, (3) decline, and (4) termination. (1) A stable relationship is a mature one, that is to say, the relationship fits the environment in which the relationship exists and continually adapts to the environment. (2) Reformation occurs when the parties need to adjust the relationship. (3) The interactions of a relationship may diminish and, hence, the relationship may decline. (4) The relationship terminates when one or both of the parties decide to end the relationship. The ending state may also be a combination of these four outcomes. If the relationship reforms or terminates, the relationship has not failed. Instead, the buyer and seller may need to come to this end due to the existing conditions, for example, governmental regulations (Das & Teng, 2002). During the relationship, several outcomes may result. The relationship may have developed a competitive advantage, the relationship may end as a failure, or a residual outcome, that is to say, an unexpected positive or negative outcome, may arise (Pett & Dibrell, 2001). According to Polonsky et al. (2003), a relationship does not end, but instead the relationship may become inactive or deactualize. The buyer and seller do not need to be in continual contact, but instead discontinuities within the relationship may develop (Kaunonen & Uusitalo, 2009). The inactive business partners still acknowledge what the other does even if they do not interact with each other. For example, even though the parties do not purchase and deliver each other offerings, the buyer may still need to purchase auxiliary services related to the offering of the seller (Lehtinen, 1986). Hence, the relationship continues to exist inactively.

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Several of the models (e.g., Ford, 1980) do not consider that the ending state is the absolute end of the relationship but that the relationship may return to a previous stage and continue again from the previous stage. Andersen and Kumar (2006) name this stage separately as the reestablishment stage. They claim that the actors may reinstate a relationship when they are not as hurt as they were just after the relationship terminated (Andersen & Kumar, 2006). The dating analogous models consider the relationship to end sadly, that is, in a divorce, or to continue happily, that is, married ‘‘until death do them part.’’ Guillet de Monthoux (1975) sees the relationship ending in a possible divorce. The divorce, however, does not need to be final, but instead might be a bump in the road, which may lead to a happier time, that is, the rekindling of the romance. On the other hand, the new romance may also occur with a new partner and, hence, a new relationship may develop (Guillet de Monthoux, 1975). Borch (1994) sees the relationship ending in the honeymoon and marriage following that. Zineldin (2002), on the other hand, terms the ending stage old-married. The actors are extremely loyal to each other. Even though the couple is married, they should still maintain some of their own characteristics, that is to say, they should still differentiate from each other and the other players in the market. Neither should be too dependent on the other and, thus, both should still maintain a portfolio of customers and suppliers. In marriages, the couple feels more connected to each other during certain time periods and drifts apart during others. The same phenomenon occurs in industrial buyer-seller relationships. The business partners interact, purchase, and deliver more to each other during certain time intervals. During others, the parties are more inactive (Zineldin, 2002). Conversely, Kanter (1994), views this stage as one full of changes. In order for a marriage to endure, the actors need to adjust to the shifting environment and the needs and wants of the other. The organizations need to know each other well enough to be able to make the necessary changes (Kanter, 1994). The Impact of National Culture in the Models Very few of the models in Table 2 consider the impact of national culture even when the data gathering takes place in several countries (e.g., Jap & Anderson, 2007). Some models (e.g., Borys & Jemison, 1989; Heide, 1994; Millman & Wilson, 1995; Wilson, 1995; Zineldin, 2002) consider organizational culture. On the other hand, Yorke (1990) inspects the offering-specific culture, that is, service-related culture, and Borch (1994) the industry-specific

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27

culture of entrepreneurial strategic alliances. Below, a brief discussion of those models which consider national culture takes places. Conway and Swift (2000), Ford (1980), Ford et al. (1998, 2003), and Iyer (2002) are the ones, who mainly discuss the impact which culture has on industrial buyer-seller relationships and their development. Conway and Swift (2000) view the impact that psychic distance has while Ford (1980) and Ford et al. (1998, 2003) consider cultural distance. Iyer (2002), on the other hand, discusses the environment in which the relationship occurs and the differences between the two relational actors due to, for example, national culture. Psychic distance and cultural distance are somewhat separate phenomena (Prime, Obadia, & Vida, 2009; Sousa & Bradley, 2006). Psychic distance and cultural distance tend to refer to the seller’s perception of the origin of the buyer, while country-of-origin illustrates the buyer’s view of the origin of the seller (Josiassen & Fletcher, 2010). This difference is not part of the scope of this study. However, this difference shows an interesting aspect about the previous perspective of the industrial buyer-seller relational process models. Therefore, a need for models incorporating national culture and both sides of the relationship exists. Previously, the use of psychic distance and cultural distance was interchangeable (Prime et al., 2009; Sousa & Bradley, 2006). However, instead of being identical, cultural distance is part of psychic distance (Brewer, 2007; Prime et al., 2009; Sousa & Bradley, 2006). The difference is that psychic distance exists at the individual level while cultural distance is at the national level (Sousa & Bradley, 2006). Several definitions for cultural distance exist (Prime et al., 2009; Sousa & Bradley, 2006), including one by Harvey and Griffith (2002) who see cultural distance as the difference between the norms and values of two societies. Lee, Jeong, Lee, and Sung (2008) view the distance as rising from differences in languages, business practices, marketing infrastructure, and legal/political systems. Cultural distance is greater the more ‘‘different’’ the other culture is (Conway & Swift, 2000). According to the CAGE Distance Framework, cultural distance consists of four attributes: language, ethnicity, religion, and social norms (Ghemawat, 2001). On the other hand, according to Ford (1980), cultural distance is one of five different forms of distance, the other four being geographical distance, social distance, technological distance, and time distance. Cultural distance is the differences between the norms, values, and operational methods between two firms due to the separate national characteristics of their respective countries of origin (Ford, 1980).

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However, Shenkar (2001) criticizes the operationalization of this term. He claims that distance as a term implies symmetry because usually the measurement of cultural distance is at one point in time, which conveys stability. Cultural distance is directly proportional to the risk regarding investment, entry mode, and performance (Shenkar, 2001). As a measurement, culture distance assumes all the critique that Hofstede (1980) faces, that is to say, the measurement assumes that all organizations from one culture are similar and the culture within a nation is constant. In addition, the measurement as such is not up to date (Hofstede, 1980). Neither Conway and Swift (2000) nor Ford (1980), however, use the term as a measurement as such, but instead use distance as an explanatory factor. Shenkar, Luo, and Yeheskel (2008) suggest that instead of using the term distance, one should use friction in order to overcome the problems related to distance as a term. According to Conway and Swift (2000), the psychic distance between the two actors is at a medium level during the pre-relationship stage. The buyer and seller do not yet know each other and, hence, they have culturally related stereotypes of each other. The business partners need to be open and culturally empathetic, that is to say, the parties need to build a positive picture of each other in order to develop a successful long-term relationship. The actors need to plan the communication that will occur in the subsequent stages in such a way that the actors interact with the potential partner in a culturally aware and empathetic way (Conway & Swift, 2000). Ford (1980) considers cultural distance to be great at this stage if the actors are from different nations. According to Iyer (2002), the barrier due to cultural differences is the largest during this stage. In order to reduce this, the relational actor(s) should try to learn about the other’s external environment, including national culture. For example, companies could use crosscultural training during this stage (Iyer, 2002). The level of psychic distance decreases to medium during the formation stage. The actors are now closer to each other through mutual understanding and empathy (Conway & Swift, 2000). As the social distance lessens, the actors may also lower the cultural distance through more frequent social exchanges. The main way for a seller to reduce the cultural distance at this point is to establish an office in some form in the country of the buyer. Employment of locals should also help to decrease the cultural distance (Ford, 1980). The knowledge gained during the previous stage helps to ensure that the relationship will successfully evolve through this stage. However, during this stage the relational actors should focus on learning as much as possible about the corporate culture of the other. Hence, the

Role of National Culture

End State(s)

Culture matters

Culture matters

Termination

Starting Development Maintenance

Starting Development Maintenance

Middle State(s)

Termination Dominant (and Reactivation)

Searching

Searching

Beginning State(s)

Model

Method

Batonda and Perry (2003b) Multiple case study

Batonda and Perry (2003a) Multiple case study

Author(s)

Culture distance

Inert

Static

–

Termination Phase

Constant Phase

Decline Phase

Growing Troubled

Single case study

Halinen (1994)

Pre-Relationship Phase Initial Phase Growth Phase Troubled Phase

New

Ford and Rosson (1982) Multiple case study

Table 3. Identified States Models.

–

Strategic Fit Operational Misfit Operational Fit Strategic Misfit Dormancy Exit

Negotiations

Niederkofler (1991) Multiple case study

–

Inert Terminated

Static

Growing Troubled

New

Rosson (1986) Multiple case study

The Impact of Culture on Western Industrial Relations 29

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knowledge one has of the national culture of the other acts as a building block for the success of the relationship (Iyer, 2002). Psychic distance comes to the lowest levels when the relationships are mature (Conway & Swift, 2000). The buyer and seller are familiar with each other (Conway & Swift, 2000; Iyer, 2002). The level of cultural distance also is at a minimum (Ford, 1980) as the actors have learned about each other and the external environment in which the other functions (Iyer, 2002). Hence, the barriers related to external environments between the two actors should be lower (Iyer, 2002). However, Ambler (1994) claims that understanding the distances between the culture, language, and geography of two actors is not of assistance when trying to understand the other’s way of thinking. Arin˜o and de la Torre (1998) do not consider the influence culture has on the development of industrial buyer-seller relationships, but they claim that cultural distance may have an impact. They see that cultural distance may impact organizational culture and the moral of business people and, hence, also the development of relationships (Arin˜o & de la Torre, 1998), as seen also by Iyer (2002). Edvinsson (1985) also sees culture in a similar way to Iyer (2002). He claims that the relationship itself consists of applied cultural encounters. In order for a relationship to work and the parties to build trust, they need to harmonize several crucial cultural-related factors (Edvinsson, 1985). The view of Jia and Rutherford (2010) is similar to that of Edvinsson (1985) and Iyer (2002) as they consider cultural adaptation to be an important part of the buyer-seller interfaces during the relational process (Jia & Rutherford, 2010). If the firm representatives succeed in cultural adaptation, that is to say, in understanding, adjusting, and learning of the relational partner’s culture, a hybrid cultural interface (HCI) or a mutually beneficial fusion of cultures of the buyer and the seller at the interface will come to exist (Jia & Rutherford, 2010). Frazier (1983) mentions that the features of a macroenvironment influence the development of industrial buyer-seller relationships. One of these features is culture. However, Frazier (1983) does not specifically mention this. On the other hand, Borch (1994) does suggest that national culture might have an impact on the ‘‘forced’’ alliances. With regard to the dating analogous models, the model of Kanter (1994) seriously considers the impact of national culture. She compares the business cultures of China, Europe, and the United States and gives examples of what needs companies must consider at the various stages when developing relationships in the abovementioned areas (Kanter, 1994).

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States Theory According to states theory, industrial buyer-seller relationships develop through unpredictable states (Batonda & Perry, 2003a; Palmer, 2007). The development path is also capricious (Batonda & Perry, 2003a; Palmer, 2007), that is to say, the only definite issue is that a beginning state and an ending state exist (Ford & Rosson, 1982). The development itself, hence, is very complex (Palmer, 2007). This study uses the classification of Rosson (1986) to categorize the different states of the theories: (1) beginning state(s), (2) middle state(s), and (3) end state(s). Table 3 also contains information about the method and the manner in which the models consider culture. Methods for Modeling Industrial Buyer-Seller Relationship State Models All of the states models listed in Table 3 use case studies to justify their structure. Batonda and Perry (2003a, 2003b) first synthesize six growthstage models into a states model and then test and adjust their model basing on case studies conducted in Australian–Chinese networks. Ford and Rosson (1982) also use a growth-stage model, that of Ford (1980), to develop a states model. In addition, they refer to an organizational theorist Marrett (1971). They gather data from Canadian firms (N=21) that export goods to Britain through an overseas distributor (Ford & Rosson, 1982). However, Ford and Rosson (1982) and Rosson (1986) use the state model more as a tool to further study the nature of relationships between manufacturers and their overseas distributors. Halinen (1994) also uses the model proposed by Ford and Rosson (1982) as a basis for studying a single advertising agency–client relationship functioning in Finland. As seen in Table 3, Halinen (1994) modifies the initial model. Niederkofler (1991) illustrates a states model based on six case relationships between entrepreneurs and larger companies. The case firms work together through strategic alliances (Niederkofler, 1991). The Beginning States According to Batonda and Perry (2003a, 2003b), the initial beginning state is that of searching. During this substate, the actors identify a need and purpose for interacting within a relationship. In order to participate in a relationship, the buyer or seller needs to find a prospective partner. The actor may find the potential business partner from intra or interorganizational sources. When selecting an eligible partner, the partner needs to check the competence of the other. The actor needs to make a cost analysis of the

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competence of the potential business partner against its needs in order to choose the most suitable firm. The actor also considers the social and economic attributes of the prospective firm (Batonda & Perry, 2003b). The second substate of the beginning state is that of starting. During this state, one of the parties makes the initial contact. The actor gives the purpose of contact and the firm attempts to attract the potential partner by communicating the opportunity at hand. Developing rapport and testing the fit of the personalities and the compatibility of the companies in general begin a relationship between the representatives of the parties. The objectives of the two separate firms should correspond (Batonda & Perry, 2003a). Ford and Rosson (1982) and Niederkofler (1991) view the beginning state differently. They consider the beginning stage the stage of negotiations and contract signing. Hence, the actors are not yet familiar with one another and each other’s practices and habits (Ford & Rosson, 1982; Niederkofler, 1991). Halinen (1994), even though based on Ford and Rosson (1982), modifies their model to include two beginning substates: the pre-relationship phase and the initial phase. These substates are similar to those of Batonda and Perry (2003a, 2003b). During the pre-relationship phase, no business exchanges occur, but some communication between the buyer and seller might take place. The parties build the foundation for general trust and attraction during this phase as the firms become aware of each other. The main issues impacting this phase are the marketing strategy and organization of the firm, the previous and current relationships with competitors, and the key personnel and their contacts (Halinen, 1994). According to Halinen (1994), both firms make the initial contacts and complete the first assignments during the initial phase. The actors hold negotiations, in which the communication might be intensive. During the negotiations, the parties build the relational infrastructure and define the interfirm roles. The buyer makes its first orders and the seller its first assignments only if the potential partner is attractive enough. At least a low level of trust needs to exist between the actors. The parties may already be attitudinally committed to the other actor and the relationship (Halinen, 1994). The Middle States Batonda and Perry (2003a, 2003b) identify two substates: the development state and the maintenance state. During the development state, the representatives of the buyer and seller try, at least to some degree, to develop a personal relationship and mutual trust through socialization.

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Even though Halinen (1994) claims that the companies define the interfirm roles during the beginning state, Batonda and Perry (2003a) see this occurring only during the middle state. During this substate, the actors also outline the activities, responsibilities, and relationships. The business partners need to agree on what to prioritize. The discussion itself formalizes as communication occurs regularly. Although the parties complete the trial order during this substate, the companies only slightly commit to each other and the business idea (Batonda & Perry, 2003a). During the maintenance state, the actors allocate more resources in order to develop and uphold the relationship. After the trial orders and deliveries, the firms may need to make adjustments. The socialization continues as the firm representatives test personalities. The trading activities at this point are continuous (Batonda & Perry, 2003a). Ford and Rosson (1982) note three middle states: the growing state, the static state, and the troubled state. Relationships in the growing state are commonly relatively new or established ones (Ford & Rosson, 1982). As the name of this implies, the relationship develops positively during this state (Ford & Rosson, 1982), meaning more business exchanges occur (Halinen, 1994). For the sales to grow, the actors need to communicate continually. Also, the level of coordination is high. As the buyer and seller learn more about each other and each other’s customs, they have to adapt to these in order for the relationship to succeed. As the representatives of the business partners are more actively communicating, their personal relationships strengthen. The result of the increased collaboration is that norms develop, trust deepens, and commitment strengthens, both attitudinally and behaviorally. The uncertainty of the continuity of the relationship also decreases to a low level (Halinen, 1994). During the static state (Ford & Rosson, 1982), or constant phase (Halinen, 1994), the relationship continues to be stable. The amount of orders and deliveries is somewhat constant over a period of years (Ford & Rosson, 1982; Halinen, 1994). Even though the actors generally are unwilling to allocate more resources to the relationship (Ford & Rosson, 1982) because they are not attracted to each other, the representatives of the companies have established personal relationships (Halinen, 1994). The organizations are well aware of their interfirm role within the relationship and the shared norms. The level of trust and commitment, as well as the uncertainty of the continuity of the relationship, is low (Halinen, 1994). Uncertainty is present during the troubled state (Ford & Rosson, 1982; Halinen, 1994). Even though, for example, the business environment is in turmoil, the sales may increase (Ford & Rosson, 1982). Often, however, they

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suddenly decline. The interaction between the parties also initially decreases but may increase later. The personal relationships also weaken as the representatives are not completely sure about their role in the relationship. The attraction between the partners may also become lower due to diminished interaction. This may lead to decreased levels of trust and attitudinal commitment (Halinen, 1994). Halinen (1994) includes a fourth substate: the declining state. Everything, that is to say, the amount of purchases and deliveries and, hence, the level of interaction, attraction, trust, and commitment, decreases. The uncertainty of the future of the relationship is high (Halinen, 1994). Niederkofler (1991) define the middle states of a relationship very differently. He identifies four different states: strategic fit and misfit and operational fit and misfit. Strategic fit exists when the organizations find each other compatible for a relationship, that is to say, the competence and resources of the other fit one’s need. When parties are strategically fit, they share common objectives for the relationship and motivation to participate in developing a relationship. Top management evaluates strategic fitness. Strategic misfit is the opposite of strategic fit, that is to say, actors do not share common interests or goals. In order for the buyer and seller to become strategically fit, they need to negotiate and position themselves differently (Niederkofler, 1991). Operational fit is a situation in which the ways and means used within a relationship are beneficial and suitable for both of the business partners. The middle managers who participate in the relationship establish operational fit. Both companies may need to adjust their own practices to fit the other, that is to say, in order to move from the state of operational misfit to operational fit. If the firms are not willing to make these adaptations, they either cannot sustain a relationship or a disappointing or frustrating version of the relationships will develop. In these cases, the organizations often become dependent on each other and, hence, strategically misfit (Niederkofler, 1991). The End States Two possibilities for the end state of a relationship exist. The relationship may either terminate or continue in a dormant state. According to Niederkofler (1991), if the parties are strategically misfit and are not ready to adjust themselves, they may exit the relationship. The reason behind a sudden exit may be a critical event, for example, the merger of either of the actors with another firm (Halinen, 1994). During the termination, the actors need to evaluate the costs and benefits of continuing a relationship. The

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companies may terminate the relationship through a mutual arrangement or through either a soft landing approach or a hard mercenary approach (Batonda & Perry, 2003a). The other possible state is that of dormancy, or inertia. A change in business or project completion or failure to meet an individual requirement may cause a relationship to become dormant. The firms, however, may reactivate the relationship later on if they resume business activity or new business opportunities arise (Batonda & Perry 2003a). The Impact of National Culture in the Models Batonda and Perry (2003a) note in detail the impact national culture may have on the development of industrial buyer-seller relationships when comparing the business culture of Australians and overseas Chinese. Especially differences in the searching state exist when overseas Chinese often use their own contact pools for finding new business partners. Often overseas Chinese also use introducers when initially contacting a prospective firm. Overseas Chinese also see creating a personal relationship as more important than Australians do. The manner in which an overseas Chinese terminates a relationship is always through the soft approach in order not to lose ‘‘face’’ (Batonda & Perry 2003a). Batonda and Perry (2003b) further study the impact culture may have in the development of industrial buyer-seller relationships. The study discusses which of the five national culture value dimensions of Hofstede (1980, 1991) affects the relational development states. A result of the study is that culturally sensitive Australians adjust their behavior according to the business culture of overseas Chinese while this does not occur on the part of overseas Chinese (Batonda & Perry, 2003b). As such, the results do not directly discuss the impact national culture has on the relational development. Ford and Rosson (1982) and Rosson (1986) note that cultural distance might impact relational development. However, they do not consider cultural distance when analyzing their data, since in their opinion, Britain and Canada are similar cultures (Ford & Rosson, 1982; Rosson, 1986).

The Most Suitable Industrial Buyer-Seller Relational Process Theory for Different Cultural Contexts Regardless of the theory each model follows, some commonalities among these models exist (Wagner, 2011). First of all, a direction characterizes all

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of these models (Wagner, 2011), that is to say, the development taking place in the models follows a timeline. Second, the models share strength of growth (Wagner, 2011), that is, the relationship matures, declines, or remains unchanging, if the relationship does not become inert. The majority of the industrial buyer-seller relational process models are conceptual or based on case studies. Only a few of the models consider the impact national culture may have on the relational development. Ford (1980) considers the impact of cultural distance while Conway and Swift (2000) illustrate the effect psychic distance has and Iyer (2002) the influence of the external environment. Overall the findings support that of Petison and Johri (2008), who claim that the industrial buyer-seller relational process models base on the West. This study does not utilize models basing on joining theory as the verifications are still lacking (Batonda & Perry, 2003a). In addition, based on the literature review no models follow joining theory. The study does not use life-cycle models of stage theory as they focus more on interorganizational issues than on relational matters. Even though growth-stage models are the most common industrial buyer-seller relational process model, this study also rejects them since state theory models are the best fit for the Chinese context (Batonda & Perry, 2003a) and they tend to be more iterative in nature (Batonda & Perry, 2003a; Rao & Perry, 2002). However, some

Beginning States

Middle States

End States

Constant / Static

Searching

Decline

Dormant / Inert

Starting

Growth

Termination

Troubled

Fig. 1.

The State Theory Model for Illustrating the Development Paths of the Case Relationships.

The Impact of Culture on Western Industrial Relations

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Table 4. The Different Tasks and Features Related to Each Relational State (based on Batonda & Perry, 2003a, 2003b; Ford & Rosson, 1982; Halinen, 1994; Niederkofler, 1991; Rosson, 1986). State Beginning

Middle

Substate

Tasks and Features

Searching

 Identification of need and purpose for a transaction or a relationship  Finding potential relational actors and selecting one or more to contact based on cost analysis

Starting

 Initial contact between relational actors, that is, both parties become at least aware of each other at this point  Attempting to attract potential relational partner through communication  Building foundation for general trust  Rapport development and testing suitability of personalities and strategies

Constant/Static

      

Decline

 Purchase and delivery levels decrease  Levels of interaction, attraction, trust, and commitment decline  High uncertainty of relational future

Growth

 Development of personal relationships  Socialization and strengthening of mutual trust  Formalized discussion through frequent/constant communication  More orders and deliveries  High level of coordination for which norms develop, trust deepens, and commitment strengthens  Learning about relational actor  Low uncertainty of development of the relationship

Troubled

 High uncertainty of the future of the relationship  Level of sales may increase, remain constant, or decrease  Level of interaction varies  Depth of personal relationships varies  Attractiveness may decrease, remain constant, or grow  Level of trust and attitudinal commitment varies

Allocation of resources at constant level Continuous orders and deliveries Socialization and personalization of relationship Clear relational roles Shared norms Low levels of trust and commitment Low uncertainty of the continuity of the relationship

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Table 4. (Continued ) State End

Substate

Tasks and Features

Dormant/Inert

 The relationship is put on hold and may be rejuvenated later on  Due to a change in business or project completion or failure to meet an individual requirement

Termination

 Companies strategically misfit  One or both parties exit a relationship voluntarily or involuntary as a mutual arrangement or based on a soft landing approach or a hard mercenary approach  A cost-benefit analysis of relationship conducted

claim this is also a feature in several growth-stage models (e.g., Arin˜o & de la Torre, 1998; Dwyer et al., 1987; Ford, 1980). Both growth-stage theory and state theory include models which claim to consider national culture (e.g., Batonda & Perry, 2003a, 2003b; Conway & Swift, 2000; Ford, 1980; Ford & Rosson, 1982; Iyer, 2002). However, the operationalization of national culture in these models is somewhat limited and mainly based on the concepts of cultural distance and psychic distance. For example, Shenkar (2001) criticizes the use of these terms. This study does not use these concepts as such, but instead the special context the relationships are in determines the base of the impact guanxi has on the case relationships. Hence, since the state theory models note the impact of national culture, but are not empirically affiliated to cultural or psychic distance, these models are suitable for this study. In addition, Yen and Barnes (2011) in their study on the Taiwanese market note that a model following state theory is the best fit for the Chinese market. This study uses an aggregate model of state theory which combines all the six models identified during the literature review to illustrate the development of the case relationship. This model is presented in Fig. 1. The tasks and features related to each substate appear in Table 4. The relationship does not have to go through all the states of Fig. 1 and Table 4, but instead the relationship may go directly from a beginning state to an end state without passing through any middle states. The order in which the relationship goes through the states is relationship-specific and the relationship may visit the same state at different points in time. In addition, all the tasks and features for the relationship, as in Table 4, do not have to take place. They are merely possible ones. The tasks generally are not in

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The Impact of Culture on Western Industrial Relations

chronological order but instead may take place at different points in time or simultaneously during the relational process.

APPLYING THEORY INTO PRACTICE: CASE RELATIONSHIP DRAGON Case Relationship Dragon is between a Sino-British JV buyer and a Finnish seller. Currently, the British parent firm in the JV is a minor shareholder. According to the North American Industry Classification System (NAICS; U.S. Census Bureau, 2010), both companies belong to Division D: Manufacturing (OSHA, 2010). Case Relationship Dragon began with the searching state, when the seller noted the existence of the buyer (see Fig. 2). Being a JV between a Chinese firm and a prestigious British firm made the buyer more attractive. Developing a relationship with the buyer became a must for the seller, especially because the JV was the firm with the most potential in the Chinese market and in particular, the higher end of the market. As the JV had an international firm as the other parent, the seller had an easier time contacting the JV since language and cultural barriers were lower.

Beginning States

Middle States Constant / Static

Searching

End States

7.

Decline 3.

Dormant / Inert

1. Starting

2.

Growth

Termination 4.

5.

6. Troubled

Fig. 2.

The States in the Development of Case Relationship Dragon.

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During the starting stage, see Fig. 2, the seller contacted and tried to attract the buyer. The seller being an internationally known player helped the relationship to begin even though at that point in China the Internet did not exist at the current extent, and information about international actors was difficult to come by. A similar situation existed for the international players trying to find information about the local companies and the market in general. However, as the buyer was a JV, information about international actors was easier to obtain. The buyer made the first order in 1996, when the buyer ordered one third of a certain kind of machinery from the seller. The relationship continued to grow and the actors become closer. The buyer visited the seller in Finland. The parties held several meetings in which, for example, the seller presented demos. During 1998 and 1999, the level of trust between the actors increased, especially as the seller’s products at the buyer’s premises worked well. During 2000–2002, a quiet period occurred within the relationship, that is to say, the firm representatives did not meet often, only occasionally at trade fairs. Other divisions of the companies continued to interact, however. Even though the relationship was in a dormant or inert state, the two were not dissatisfied with each other. During that time the buyer was not planning to purchase more machinery and, hence, did not feel the need to be in frequent contact. However, the relationship between the two continued to exist. The relationship continued to grow after the quiet period. The buyer made its second order in which the buyer purchased six sevenths of needed machinery from the seller. The interaction between the two became closer between 2002 and 2005. Before the buyer placed its third order with the seller in the period 2006– 2007, the relationship experienced a troubled period. The relationship almost terminated at this point. However, the managers of the companies felt that they should try to find a common understanding as they did not want to end the relationship. Hence, the representatives of the companies worked hard to maintain the existing relationship. In the end, the actors found a compromise regarding the contents of a new order and the buyer purchased all the machinery from the seller. After the buyer made the order, the relationship, however, remained in a somewhat troubled state as the buyer was experiencing problems building its plant. Therefore, the seller needed to be extremely flexible. Because the buyer was a ‘‘must’’ in the Chinese market, the seller provided this level of flexibility. After the companies overcome the challenges, the relationship between the two began growing again as the trust level between the two had increased during the troubled period when the parties proved willing to

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work together and showed their commitment to the relationship. In 2008, the buyer ordered machinery for its fourth plant in China. Three quarters of the machinery came from the seller. Since 2009, the relationship has been in a constant state, in which the firms hold ‘‘normal business meetings.’’ This means that the business partners meet about bimonthly, usually over dinner. The future of the relationship is questionable and depends on the strategy the buyer takes, that is to say, will the buyer continue to concentrate on the higher end of the market or branch into the lower end of the market, in which case the buyer will probably not purchase machinery from the seller.

CONCLUSIONS The Western academic literature introduces several industrial buyer-seller relational process models (e.g., Arora, 2008). Batonda and Perry (2003a) classify industrial buyer-seller relational process models into three categories: (1) joining theory, (2) stages theory, and (3) states theory. (1) Joining theory bases on the initial work of Thorelli (1986), but the usage of the joining theory to illustrate the relational development process is scarce. Empirical tests for joining theory do not yet exist (Batonda & Perry, 2003a). Batonda and Perry (2003a) further divide (2) stages theory into two classes: (2a) life-cycle models and (2b) growth-stage models. (2a) Life-cycle models base on the idea that relationships develop through stages in which the relationships may improve or deteriorate. Often these models consider the evolution of a focal firm instead of the cultivation of the relationship of a dyad (Batonda & Perry 2003a). (2b) Growth-stage models are the most common type of relational process models. They view the relationship developing through more or less five stages: (1) the pre-relationship stage, (2) the attraction stage, (3) the formation stage, (4) the expansion stage, and (5) the ending stage (Baker & Hart, 2008). Palmer and Bejou (1994) prove the validity of these models, but some authors (e.g., Rao & Perry, 2002) criticize the models due to the lack of empirical relevance. Some models (e.g., Ford, 1980) take this into account and claim that the stage model is not as straightforward as thought, but instead the stages may occur in a different, capricious path. (3) States theory takes the capricious nature of industrial buyer-seller relational process into consideration by suggesting that relationships go through various states (Batonda & Perry, 2003a; Palmer, 2007): the beginning state or states, the middle state or states, and the end state or

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states (Rosson, 1986). The development of relations is highly complex as they go through the different states (Palmer, 2007). This paper used models based on state theory to depict the processes of the case relationships as state theory models are the most suitable for relationships between players from different cultural contexts (Batonda & Perry, 2003a). The current state theory models were somewhat modified: The dormant or inert state, which previous models only consider as an end state, is also a middle state (see Fig. 3). The relationship may face a quiet period during which either the buyer or the seller has no need to conduct business with the other. Even so, this does not mean that the relationship has ended, but instead the firm representatives may meet, for example, at trade fairs and attend each other’s events. However, a significant amount of resources are not allocated to the relationship during that period, that is, the state is not one of growth. The actors remain attracted to each other and the relationship has not institutionalized, because of which the state cannot be the decline state or the constant or static state, respectively. Neither is the relationship facing problems, that is, the state is not a troubled one. The state cannot only be an end state as the parties remain committed to the relationship and see a future for the relationship.

Beginning States

Middle States

End States

Constant / Static

Searching

Decline

1. Starting

Dormant / Inert

2.

Growth

Termination

Troubled

Fig. 3.

The Proposed State Theory Model for Relationship Development.

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All relationships go through the two beginning states, before it can enter either a middle and/or end state, as in Fig. 3. The future of the relationship after the beginning states is open. A relationship can go through one or more of the middle and end states. It may also return to one of the previous states.

ACKNOWLEDGMENTS The study builds from Kaunonen’s (2010) doctoral dissertation. The author expresses appreciation for her doctoral dissertation supervisor Olavi Uusitalo for all his efforts during the research process. The author thanks the Department of Industrial Management at the Tampere University of Technology, the Doctoral Program in Industrial Engineering and Management, the Finnish Cultural Foundation, and the Foundation for Economic Education for funding her research.

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DEVELOPING GUANXI RELATIONS Anna Kaunonen ABSTRACT Research regarding the development of guanxi, especially outside China, is scarce. A through literature review conducted as part of this research found only five different models and from these three were from Hong Kong. The guanxi development model, which includes the most variables, that is, the membership type, network level, and tie type of the relational actors. A single case relationship between a Hongkongese industrial customer and a Finnish industrial supplier tests the theoretical model. It is suitable for the setting and is tested in three further case relationships for Chinese industrial customers and Finnish industrial sellers. Keywords: China; Guanxi; industrial buyer-seller relationship; relationship development

INTRODUCTION Background to Research Research regarding China discusses relationship management and negotiations in a limited manner, for which significant gaps still exist in the research that require filling (Ho, & Lee, 2007). Lack of knowledge about the Deep Knowledge of B2B Relationships within and across Borders Advances in Business Marketing & Purchasing, Volume 20, 51–91 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-0964(2013)0000020005

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development of gua¯nxı´ ( ) (Kaunonen, Polsa, & Fan, 2010; Yen & Barnes, 2011) is an example of the significant research gaps. Guanxi is a special relationship form related to China. Guanxi may refer to either social networks governed by emotion-based favors or webs of businesspeople transferring information, opportunities, or resources among each other (Huang, Baek, & Min, 2010). In the Anglophone academic and business literature, guanxi has several spellings. Examples include forms written with pin-yin, with Chinese characters, with a capital G, or in italics. This study includes Mandarin Chinese concepts using the Chinese character and with pin-yin. Afterwards, the term appears only in English without capitals or italics. The literature review provides an in-depth discussion of guanxi. Recent Chinese history may be the reason for the lack of research on the development of guanxi. While Chairman Mao Zedong ( ) governed China, the nation had a supply-driven economy and, hence, marketing did not play a significant role. After Deng Xiaoping ( ) opened the Chinese market with the introduction of socialist market-oriented thinking in 1978, the importance of marketing grew (Ambler, Styles, & Xiucun, 1999). Western managerial theories have also begun to influence the Chinese business culture (Ambler et al., 1999) as China is now more open to foreign concepts, cultures, lifestyles, and technologies (Faure & Fang, 2008). Foreign investments in China, globalization, and the Internet have all increased the exposure to these foreign issues (Faure & Fang, 2008). However, the Chinese market is still quite traditional in the sense that this market depends on relations (Ambler et al., 1999).

Research Methodology This paper begins with a thorough literature review of guanxi and its development models. The research uses the search term ‘‘guanxi’’ for both the Google Scholar search engine and the EBSCOHost database, which was directly linked to Springer Link and Emerald Insight databases. From the results, first of all, a title check took place. If the title was such that the item possibly discussed guanxi and especially their development, a keyword and abstract check occurred. If the item still classified as an item on guanxi, an assessment of the introduction and conclusions and a browse of the figures and tables took place. Finally, the researcher read the whole item, if she considered the item to fulfill the criteria and got through this process. In addition, a check of the bibliographies in these search results occurred and

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the same process took place. Based on the titles and abstracts of the search results, 96 accessible items fulfill all the criteria. The paper is an inductive case study. The study allows the case to tell its own story without it being in the terms of the current theoretical models or accepted concepts, based on the action-analytical research strategy (Kasanen, Lukka, & Siitonen, 1991; Neilimo & Na¨si, 1980; Olkkonen, 1994). Even though inductive case research builds somewhat on grounded theory (Gummesson, 2003), when conducting the interviews, the researcher did not completely discard the knowledge gained during the literature review. The method is such that consulting theory and field data collection occurs simultaneously (Olkkonen, 1994). The paper illustrates the development of guanxi. Chen and Chen (2004) suggest two possibilities for studying the development of guanxi: by conducting a longitudinal study or by requesting the interviewees to recall critical events which have occurred during the guanxi development process. This paper asks for the interviewees to recall the development of the industrial buyer-seller relationship they shared with either a Chinese buyer or a Finnish seller (i.e., the relationships are studied from both sides). Prior research examines guanxi generally only at the individual level even though implications also exist at the organizational and societal level (Fan, 2002). This paper aims to discuss guanxi at both the individual and organizational level, that is, relationships between organizations and the representatives of these companies.

Structure of the Paper This study begins with a thorough literature review of guanxi development models. Guanxi as a research term resulted in 96 accessible items in Google Scholar and other databases. The third section of the paper is an illustration of a case relationship. The guanxi development model from the second section acts as an illustrating tool. Conclusions are at the end.

CONTEXTUAL SETTING: CHINA AND GUANXI Guanxi as a Special Feature of the Chinese Business Culture No English word depicting guanxi as a concept to the fullest exists (Ambler, 1994; Chen & Layton, 2003; Michailova & Worm, 2003) as guanxi is a

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complex umbrella concept (Chen & Layton, 2003). Hence, English uses the Chinese term (So & Walker, 2006). This leads Westerners functioning in China to misunderstand the concept and, as a result, to problems on the business front (Hutchings & Murray, 2002a, 2002b). The Concise English-Chinese Chinese-English Dictionary translates guanxi as (I) (1) relation; relationship, (2) ties; connections, (3) bearing, (4) [indicating cause or condition], (II) to concern; to affect; to involve (Manser, 2004). However, according to Chang and Lii (2005), guanxi is not as simple a concept as the English ‘‘relationship.’’ Instead, guanxi is a way to demonstrate one’s position within the social network structure and the role related to that position and a way to provide security and trust (Hammond & Glenn, 2004). The manner in which the current academic literature operationalizes guanxi differs. First of all, the basis on which individuals cultivate guanxi affects the nature of guanxi and, hence, also its characteristics. The basis of the intention of the interaction in which guanxi is present is a way to classify guanxi. Second, the level of analysis affects how the literature treats guanxi. Some authors view guanxi as a dyadic concept while others as a network concept. Third, the view of guanxi is only a substitute for the weak legal system of China or a form of friendship (Chen & Chen, 2004). Academic literature, however, agrees on two issues: (1) all guanxi ties are highly personal and particularistic (Chen & Chen, 2004; Wang, 2007) and (2) the cultivation of guanxi begins after an actor or the actors recognize a guanxi base (Chen & Chen, 2004). These guanxi bases are unique in the Chinese context (Chen & Chen, 2004). Chung (2005) claims that the usage of the concept guanxi is too simplistic in academic literature. Guanxi comprises of two characters. Gua¯n ( ) has several meanings: (I) (1) to shut; to close, (2) to turn off, (3) to lock up, (4) to close down, (5) to concern; to involve; (II) (1) to pass; to check, (2) barrier; critical juncture, (3) customs house (Manser, 2004). Guan has both a positive and negative meaning, that is, inside a group, one can be ‘‘one of us,’’ but outsiders of the group might not recognize the existence of the individual (Ambler, 1994; Luo, 2007). This duality (positivity and negativity) appears also during discussions of guanxi (Ambler, 1994; Ambler et al., 1999; Gold, Guthrie, & Wank, 2002; Lee, Pae, & Wong, 2001). Some view guanxi as a backward or old-fashioned way to conduct business (Ambler, 1994; Ambler et al., 1999). Some even go as far as claiming that guanxi is only corruptive actions (Ambler, 1994; Ambler et al., 1999; Dunfee & Warren, 2001; Hsu, 2005; Lovett, Simmons, & Kali, 1999) or that this is the Western point of view on guanxi (Chan, Cheng, & Szeto, 2002; Lovett et al., 1999). However, this is

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not the case, as generally the Chinese view guanxi as an acceptable practice (Chan et al., 2002; Hsu, 2005). They distinguish between ‘‘establishing good business relations’’ ( (gaˇohaˇo sha¯ngye` gua¯nxı´ )) and utilizing social relations in order to take care of economic and political procedures ( (ka`o gua¯nxı´ xue´ ba`n shoˇuxu`)) (Guthrie, 1998). These economic and political procedures include favor seeking, or qı nyoˇu gua¯nxı´ ( ), and rent seeking, or qua´nlı` gua¯nxı´ ( ), respectively (Su & Littlefield, 2001) or extended family ties and particular instrumental ties (Jacobs, Belschak, & Krug, 2004). This is to say that the Chinese balance the negative connotations of guanxi, for example, corruption, with positive ones, such as warm emotions and social connectedness (Hsu, 2005). A suggestion is that those who claim that guanxi as corruptive action do not have a similar level of connections (Warren, Dunfee, & Li, 2004) or do not understand the cultural norm related to reciprocity in Chinese society (Su, Mitchell, & Sirgy, 2007). That is, the two separate ethical codes of conduct: the code of brotherhood or yı` ( ) and the code of reciprocity or ba`o ( ) (Su et al., 2007). Based on Confucian teachings, one should help others with no strings attached, voluntarily, and without special demands (Su et al., 2007). The difference between guanxi and corruption is that guanxi aims to strengthen a relation while corruption is only illegal behavior (Lovett et al., 1999; Luo & Chen, 1997; Vanhonacker, 2004; Verhezen, 2008), that is, one transaction (Verhezen, 2008). Westerners, however, often have a problem distinguishing between these two actions (Lovett et al., 1999; Pearce & Robinson, 2000; Su & Littlefield, 2001) and, hence, may overemphasize the gift-giving and wining-and-dining components of guanxi (Luo & Chen, 1997; Pearce & Robinson, 2000, Tsang, 1998). Another reason that some consider guanxi as corruption is that guanxi is stronger when one of the parties has negative information about the other (Michailova & Worm, 2003). Guanxi, however, may become a trap that is difficult to escape from if one owes favors to the ‘‘wrong’’ people (Ambler, 1994). Guanxi is also seen as a trap, for example, when a salesperson completes a task for the buying personnel. In this situation, guanxi may be corruptive behavior and/or the buying personnel will need to reciprocate the favor (Lee & Dawes, 2005). When the network is very strong, the members may request more demanding favors (Michailova & Worm, 2003; Tsang, 1998). This may also create a trap. Due to the costs related to the reciprocal actions, guanxi may also be expensive (Park & Luo, 2001), especially as the value of investments to the relationship increases over time (Standifird, 2006). In addition, guanxi can cause personal moral conflicts (Provis, 2008) and lead

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to an ethical dilemma (Su & Littlefield, 2001). In order to avoid being trapped, firms need to manage guanxi like any other of their resources (Vanhonacker, 2004). Reciprocity is present in other ways, too. Individuals within a guanxi network or gua¯nxı´ waˇng ( ) are required to give face, or mia`nzi ( ), to each other (Buckley, Clegg, & Tan, 2006). This also helps to strengthen a business relationship (Buckley et al., 2006) even though actors attribute the credit for the act to the individual instead of the organization (Chen & Chen, 2009). Through reciprocity, guanxi parties accept the obligation of returning favors at an unspecified time (Luo, 2007; Pearce & Robinson, 2000). The network, being based on trust and reciprocity, is flexible and able to quickly respond to changes (Buttery & Wong, 1999; Michailova & Worm, 2003), which is especially important in a legally turbulent environment (Michailova & Worm, 2003). Face, or mianzi, though existing in other cultures as well, differs in the case of China (Hutchings & Murray, 2002a, 2002b) as Chinese grant more importance to face (Davies, Leung, Luk, & Wong, 2003). Face is an intangible form of social status and is even a currency (Park & Luo, 2001), that is to say, face is quantifiable (Luo, 2007). One’s position in the network and one’s material possessions affect guanxi (Park & Luo, 2001). So, when the size and quality of the connections in one’s network increase, one’s reputation and face also improve (Luo, 2007; Standifird, 2006). One should try to give face as much as possible and avoid making anyone else lose face since causing the loss of face also brings loss of face to oneself (Hutchings & Murray, 2002a, 2002b). Traditionally, Chinese compare losing face to physically losing a body part, for example, an eye, a nose, or a mouth (Park & Luo, 2001; Luo, 2007). Losing face during a transaction means an unsuccessful transaction or relationship, that is, a terminated one (Hutchings & Murray, 2002a, 2002b; Standifird & Marshall, 2000). To avoid losing face, buyers need to purchase offerings from the sellers within their guanxi network (Luo & Chen, 1997) and to follow the guanxi rules related to reciprocity and equity (Bickenbach & Liu, 2010). Another form of face also exists, that of liaˇn ( ). Chinese relate this form of face to one’s moral or ethical conduct while mianzi relates to one’s performance and, thus, the amount of resources one has (Hwang, 1997– 1998). In other words, lian differentiates individuals at the philosophical level while mianzi differentiates individuals from others within a society by referring to one’s credibility, honesty, income, network, occupation, power, and/or reputation (Park & Luo, 2001). This study means mianzi, when referring to face.

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Guan, as such, is transferable: If A has guan with B and B with C, then B may introduce A to C or vice versa. Otherwise, the contact might be impossible (Ambler, 1994). The transfer does not occur rapidly, but actor B evaluates whether bringing parties A and C together is beneficial (Standifird & Marshall, 2000). Transferability is fortunate for newcomers, as otherwise they would face severe difficulties when conducting business (Pearce & Robinson, 2000). Guanxi partners are a resource (Park & Luo, 2001). Guanxi referrals help to identify prospective business partners. Often guanxi parties establish new guanxi relationships through these introductions (Chan, 2008). Westerners may use these mediators when beginning to do business in China (Pearce & Robinson, 2000; Su & Littlefield, 2001), especially, if the goal is to establish helper guanxi (Su & Littlefield, 2001). If guanxi is not initiated through mediators, often a blood relationship or particular ties and personal feelings between the two individuals exist, that is to say, the two individuals may belong to the same family or share their birthplaces, schools, or former employees (Chang & Lii, 2005; Chen & Chen, 2009). However, prospective guanxi parties will only cultivate new relationships if both of the parties are amenable (Chang & Lii, 2005). The transferability is the beauty of guanxi (Fan, 2002), that is to say, by knowing one person, one actually knows a whole network (Fan, 2002; Hutchings & Weir, 2006). The reciprocity and transferability are at such a degree that an individual does not even need to meet or be in contact with another individual to whom one fulfills a favor if this favor requester is a contact of someone within one’s own network (Michailova & Worm, 2003; Nojonen, 2007). Due to the hierarchical nature of xı´ ( ), guanxi partners may bank favors and repay them when the time is right if indeed the time ever is. Hence, guanxi acts as a sort of insurance: one might not want to use guanxi, but one has guanxi just in case a situation arises in which one needs guanxi (Ambler, 1994; Michailova & Worm, 2003). Due to this hierarchy, Chinese highly respect the status of persons (Ambler, 1994). The respect shown to status affects the manner in which the actors use guanxi and how the actor operates (Ambler, 1994): The one with the higher rank may choose whether or not to develop a relationship with an individual with a lower rank (Ambler, 1994; Chow & Ng, 2004). Often those individuals with an especially high rank are very cautious when selecting guanxi partners as they may be suspicious about the favors requested from them in the future (Chow & Ng, 2004), especially as, in general, guanxi tends to favor the weaker partner (Dunning & Kim, 2007; Fock & Woo, 1998; Luo, 2007; Michailova & Worm, 2003). However, superiors tend to socialize with their

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subordinates in order to transfer silent knowledge and show their loyalty toward the subordinates (Pearce & Robinson, 2000). Ranks are also important regarding interorganizational guanxi. If the companies are too different in rank, interorganizational guanxi more commonly leads to a failure (Nojonen, 2007). The significance of one’s position is part of the Confucian heritage (Ambler, 1994). Although different forms of Confucianism have arisen, the principles of this ideology have remained (Wong, 2007). Confucianism bases on four building blocks related to (1) harmony, (2) hierarchy, (3) the building of moral potential, and (4) kinship (Buttery & Wong, 1999). The eight principles related to moral behavior are: (1) harmony or he´ ( ), (2) justice or yı` ( ), (3) kindness or re´n ( ), (4) love or a`i ( ), (5) loyalty or zho¯ng ( ), (6) peace or ping ( ), (7) respect or xia`o ( ), and (8) trust or xı` n ( ) (Luo, 2007). Hence, Confucionists believe that everything exists in a certain structure and individuals should know their position within this hierarchy and act accordingly (Ambler, 1994; Dunning & Kim, 2007; Wong, 2007; Yeung & Tung, 1996). Knowing one’s place and acting accordingly enhances harmony (Lee & Dawes, 2005; Wong, 2007; Yeung & Tung, 1996). Therefore, the Chinese often follow the moral conducts of lıˇ ( ) instead of legalism or faˇ ( ). Laws apply to only to those who are very low on the moral strata. They are also the only ones who use them (Luo, 2007). To ensure harmony within a relationship, the parties try to lower the chance of losing face. This means that when the buyer is not able to pay for its purchases, the seller gives credit (Luo & Chen, 1997; Pearce & Robinson, 2000). Due to the cultural value of seeking harmony, Chinese organizations are often hierarchical and vertical organizations in which the top management generally has the decisive power (Hutchings & Weir, 2006). This has led to a cultural system regarding relationships named the SPACE diagram (Buttery & Wong, 1999). The SPACE diagram illustrates the context in which relationships exist in China. The Chinese tend to build systems (S) based on relationships, meaning they rely more on their guanxi than on transactions of goods and services. The personality (P) of the Chinese often consists of features of selfcontrol, obedience, and the valuing of order and harmony in relationships (Buttery & Wong, 1999). The respect of harmony implies that the whole Chinese culture bases on cooperation instead of competition (Go´mez Arias, 1998). The Chinese are willing to adapt (A) based on the situation. Chinese, however, often limit this flexibility to the boundaries of their guanxi networks and to the trust that exists within these networks. The Chinese are used to living in an environment which may change (C) rapidly and, thus,

Developing Guanxi Relations

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result in tension and conflicts in the economic system. This ever-changing environment has taught the Chinese to guard their own personal interests and not to rely on the political systems. Hence, some Chinese are entrepreneurs (E) (Buttery & Wong, 1999). Chinese also highly value entrepreneurship due to the cultural emphasis on the patriarchal family, that is to say, a family may be self-sufficient and the family members will not need to work with/for strangers (Hsu, 2005). This entrepreneurial spirit is also a reason for the growth of the Chinese economy since the death of Mao Zedong (Fang, Zhao, & Worm, 2008; Hsu, 2005). Wong and Tam (2000), on the other hand, view the SPACE diagram as an approach to the dynamics of guanxi. They divide the different dimensions among individuals, the society, or the state (Wong & Tam, 2000). As in the Buttery and Wong (1999) diagram, S stands for system at the state level, that is to say, China has a poor legal system of property rights, which does not protect individual economic assets (Wong & Tam, 2000). P does not stand for personality as in the Buttery and Wong (1999) model but for personal economic capital (Wong & Tam, 2000). In China, attaining more material possessions is difficult (Wong & Tam, 2000). A in this context relates to assets (Wong & Tam, 2000) instead of adaptation (Buttery & Wong, 1999). Assets are symbolic capital saved in the form of guanxi (Wong & Tam, 2000). Instead of signifying change (Buttery & Wong, 1999), C stands for connections, that is to say, the Chinese trust their personal connections to ensure the distribution of resources efficiently, on time, and in a manner which is beneficial to both the buyer and the seller (Wong & Tam, 2000). Personal economic capital, asset, and connection are social level dimensions which underlie defensiveness (Wong & Tam, 2000). E does not imply entrepreneurship (Buttery & Wong, 1999) but empathy at the personal level (Wong & Tam, 2000). Empathy is the result of insiders’ bonding and the reciprocity present within guanxi, which allows a more flexible and adaptive network and rapid reaction within and between different guanxi networks (Wong & Tam, 2000). Not only does Confucianism but also Taoism and especially, the principles of yin and yang affect the Chinese business culture. The longevity, coordination, and people orientation of yin balance the eagerness, aggressiveness, and outcome orientation of yang, especially, when aiming to build trust. If a balance does not exist, either party may end the relationship due to the destruction of trust (Buckley et al., 2006). Related to the principle of yin and yang, are the concepts of heart and mind management. Mind management refers to acting more on one’s reasoning rather than on one’s feelings. When individuals are associated with

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each other and bond, they are more committed to each other (Buttery & Wong, 1999). Mind management is based on gaining a win-win situation of profits and resolving conflicts. The relationships are more transaction-based and less emphasis is put on social ties. In a sense, the Chinese calculate the commitment (Wong, Leung, Hung, & Ngai, 2007). Heart management, on the other hand, bases more on one’s feelings. In China, first feeling somewhat defensive toward an outsider is natural. In order to become more acquainted, one needs to understand the other’s standing, that is to say, one needs to feel empathy toward the outsider. This is often related to giving face to the other, that is to say, one acknowledges the status and moral reputation of the other. Performing favors and/or giving gifts, or re´nqı´ ng ( ), helps to break down this defensiveness (Buttery & Wong, 1999). Chua, Morris, and Ingram (2009) suggest that the constructs of guanxi should mirror those of familial collectivism. Buttery and Wong (1999) have defined four key constructs of guanxi: adaptation, dependence, favor, and trust. The adaptation occurs in both directions, that is to say, the buyer needs to adapt to the seller and vice versa (Geddie, DeFranco, & Geddie, 2005). Individuals are dependent on each other in several ways; they require both instrumental resources and socioemotional support from the other. In order for overall trust to develop between the two individuals, affect- and cognition-based dependence need to exist. Transactions between the two can occur only when a relationship is present, that is to say, economic dependence follows affect-based trust. As more transactions take place, the actors may more efficiently judge the competence and reliability of the other. In the end, the better connected one is to the guanxi partner’s professional network, the higher the level of and the judgment of one’s reliability and competence (Chua et al., 2009). Several Chinese terms are also related to guanxi. These are presented in Table 1. Foreigners need to acknowledge guanxi-related concepts during business activities. Understanding the meaning of these terms allows foreigners to establish stronger connections with the Chinese counter parties (Buckley et al., 2006). In Table 1, yı` compensates for the downfalls of the Chinese legal system. Ambler (1994) claims that guanxi and the commercial legal system are counterparts of each other: the stronger the guanxi, the weaker the need for the commercial legal system and vice versa. Hence, as the commercial legal system has been weak, Chinese have judged the trust in and need for contracts unnecessary since the transactions have been based on guanxi, that is, trust between two individuals within a relationship (Ambler, 1994) as guanxi is based on the concept of face (see Table 1) (Chow & Ng,

Guanxi family

Guanxi network

Gua¯nxı´ waˇng

(1) report back, (2) repay; requite; reciprocate, (3) retaliate; pay sb. in his own coin Help; give (or lend) a hand; do a favor (I) sincere; honest, (II) really; indeed (1) law, (2) method; way

Gua¯nxı´ hu`

( )

Simplified Chinese

(1) feelings; emotion; sentiment; (2) affection; love

)

Translation

Gaˇnqı´ ng

Faˇ

Che´ng

Ba¯ngma´ng

(Huı´ )ba`o

Pı nyı n (

Concept

Law, applied to only those low on the moral strata, who have forsaken the ethics of right relationships One of the two constructs of qı´ ng ( ) signifying affection, that is, the degree of emotional understanding and connection, the sharing of both positive and negative feelings, the sense of loyalty and solidarity, and the willingness to take care of each other in all situations, that is, a measure of the emotional commitment of the guanxi parties to each other Interorganizational guanxi; specially connected individuals, firms, or government departments, used when discussing business concerns that maintain extensive guanxi with one another and give each other preferential treatment regardless of market rationality A complex web of obligations beyond the conceptual, providing real and material benefits; are subnets (groups) collected with a sum of cells (units) constructed by threads (individuals) with knots (guanxi)

One of the two constructs of xı` n ( ) signifying sincerity

Favor-giving

Reciprocity

Meaning

Table 1. Concepts Related to Guanxi (as mentioned by Ambler, 1994; Ambler et al., 1999; Buckley et al., 2006; Chen & Chen, 2004; Chow & Ng, 2004; Chua et al., 2009; Dunning & Kim, 2007; Fan, 2002; Guthrie, 1998; Hammond & Glenn, 2004; Hwang, 1997–1998; Kriz, 2009; Lee & Dawes, 2005; Leung, Lai, Chan, & Wong, 2005; Lu, 2007; Luo, 2007; Luo & Chen, 1997; Manser, 2004; Park & Luo, 2001; Pearce & Robinson, 2000; Seligman, 1999; Su & Littlefield, 2001; Tsang, 1998; Verhezen, 2008; Wah, 2010; Wang, 2007; Wong, 2007; Wong & Leung, 2001; Zhu, & Zhang, 2007).

Developing Guanxi Relations 61

Corruptive form of guanxi

To establish guanxi

Friendship; friendly relations; acquaintanceship

Wine and meat relationships Trustworthiness

To pull guanxi

(1) ceremony; rite, (2) courtesy; etiquette; manners, (3) gift; present

Straighten out guanxi

Face Gift; present

Ho`ume´n gua¯nxı´

Jia`nlı` gua¯nxı´

Jia¯oqing

Jiuˇ ro`u gua¯nxı´ Keˇxı` n

La¯ gua¯nxı´

Lıˇ

Lıˇ shun gua¯nxı´

Liaˇn Lıˇ wu`

Simplified Chinese

Study of guanxi, guanxiology

)

Translation

Gua¯nxı´ xue´

Pı nyı n (

Concept

Meaning

To put guanxi back into its proper order, usually after a difficult or awkward time period Face related to one’s moral or ethical conduct Gift; wu` ( ) without lıˇ ( ) is merely an object, a bribe; lıˇ ( ) provides the reciprocal nature and makes the object a gift

The practice and technique of using and manipulating guanxi for specific ends Back-door deals; guanxi related to bureaucratic corruption, that is, nepotism, patronage, and faction To develop a relationship based on reciprocal respect, friendship, effort, and continued contribution; should be used instead of la¯ gua¯nxı´ ( ) One of the two constructs of qı´ ng ( ) signifying obligation, that is, the sense of obligation and indebtedness resulting from social and economic transactions in order to satisfy the pragmatic needs of work and life Guanxi based on socializing, especially in the form of banquets The degree of the trustworthiness of an actor; identifiable from one’s social reputation, educational background, previous examples of trustworthiness or opportunism, and solidarity To initiate and establish a connection, to get on the good side of someone who is powerful and store social capital with the powerful one; sometimes interpreted as using dishonest means (bribery, doing favors, or using power to influence in a dishonest way) 1. A Confucian concept illustrating correct interpersonal relationships which provide security and stability 2. The religious and social standards of proper personal conduct and the right ordering of relationships between people in social institutions that is necessary to maintain a moral order in society

Table 1. (Continued )

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(1) feelings; affections; sentiment, (2) favor; kindness; (3) situation; condition Family-related affection

Qı´ ng

(1) trustworthiness; credit, (2) credit (I) (1) justice; righteousness, (2) human relationship, (3) meaning; significance, (II) adopted; adoptive

Xı` nyo`ng

Yı`

(I) (1) letter, (2) message; information, (3) trust; confidence, (II) to believe; to trust

Xı` n(re`n)

Te`qua´n

Re´nqı´ ng

Re´n

(I) benevolent, (II) (1) benevolence, (2) kernel (1) human feelings; sympathy; sensibilities, (2) favor; (3) human relationship Privilege; prerogative

(1) outer part; outside, (2) reputation; face; self-respect

Mia`nzi

Qı nqı´ ng

(1) human relationships, esp. as conceived by feudal ethics, (2) logic; order, (3) peer; match

Lu´n

A Confucian concept expressing (a) human relationships, especially the Five Cardinal Relationships (wuˇlu´n ( )) between: (1) ruler-subject, (2) father-son, (3) husband-wife, (4) elder brother-younger brother, (5) friend-friend; (b) social order; and (c) moral principles concerning interactive behaviors of relational actors May be seen as dignity, prestige, or reputation. Saving it may be used as a shortcut with which to develop guanxi within one’s current network and to widen one’s network. One of the two construct of guanxi quality signifying feeling, that is, how well a given guanxi satisfies the mutual affective and instrumental needs of the parties The most intimate form of gaˇnqı´ ng ( ); affection for loved ones, which exists only between direct family members Humanism and benevolence, love and affection, kindness and compassion; in practice, to love all men without discrimination Human debt to acquaintances, that is, reciprocal favor, special treatment of an individual. All group members are required to perform favors to help those in need and all favors need to be repaid Privilege of officials, which is hated by the common citizens as it signifies monopolized interests drawing upon public property One of the two constructs of guanxi quality signifying the trust or trustworthiness of the other guanxi party, which is not present in Western relations. Can also be defined as the heart-and-mind confidence and belief that the other person will perform, in a positive manner, what is expected of the person, regardless of whether that expectation is stated or implied A measurement of a person’s business ethical integrity; close to the Western ‘‘trust’’ A concept signifying trust, sincerity, commitment to mutual assistance, and justice. It partly allows guanxi to compensate for the downfalls of the Chinese legal system

Developing Guanxi Relations 63

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2004). Guanxi has acted not only as a substitute for the commercial legal system but also as an alternative manner to generate personal wealth and to ensure one’s security under the Communist system (Buttery & Wong, 1999). Trust or xı` nyo`ng ( ) is important in guanxi: one needs to trust the other in order for a relationship to properly exist (Hutchings & Murray, 2002a, 2002b), that is to say, the existence of trust is a condition for guanxi (Luo & Chen, 1997). Westerners typically find trusting Chinese difficult. However, when one does finally trust a Chinese, the Chinese is very loyal (Hutchings & Murray, 2002a, 2002b). Chinese may find trusting foreigners difficult since they will always remain strangers, or outsiders. Therefore, Westerners should take the first step and show their commitment when developing a relationship (Su & Littlefield, 2001). Another form of trust also exists: xı` nre`n ( ). Xinren is the expectancy that another will perform the tasks promised or expected. Usually in order for xinren to exist within a relationship, the relational actors need to have already bonded and should not be outsiders, or strangers. The reciprocity related to guanxi helps the development of xinren within a relationship. Xinren is a significant factor in both social and business relationships. However, xinren is rarely present in business relationships. Hence, companies tend to rely more on money than on words (Kriz, 2009). Chow and Ng (2004) classify guanxi as either close guanxi or distant guanxi. Close guanxi exists between two individuals who feel particularly close to each other while individuals with distant guanxi do not feel close to each other as such. Being close to someone often implies sharing more private information in a more open manner and asking for help in crisis (Chow & Ng, 2004). The decision to accept someone as an insider instead of an outsider depends on who has initiated the set-up of the guanxi network. The initiator is also more willing to offer relational acknowledgment to individuals with a lower rank (Chang & Lii, 2005). Being colleagues or relatives does not automatically mean that the individuals share close guanxi, but actually, the opposite is true, that is to say, colleagues and relatives often share distant guanxi. However, in crisis, family members are often those consulted. Instead, being of the same age often implies sharing close guanxi (Chow & Ng, 2004). As a term, guanxi applies more at the individual level (Ambler, 1994; Davies, Leung, Luk, & Wong, 1995; Dunning & Kim, 2007; Luo & Chen, 1997; Michailova & Worm, 2003; Seligman, 1999; So & Walker, 2006; Tsang, 1998; Warren et al., 2004; Yeung & Tung, 1996). However, some claim that guanxi also exists between organizations (Ambler, 1994; Michailova & Worm, 2003; Tsang, 1998) and even nations (Ambler, 1994). Others

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(Fan, 2002; Seligman, 1999) are not certain about the transferability of guanxi from an individual to an organization, especially as the Chinese often view the firm representative as the firm itself (Lee & Dawes, 2005), because of which salespeople need to try to transfer the trust in them to trust in the organization (Lee & Dawes, 2005; Standifird, 2006). According to Cheng, Hsieh, & Ouyang (2010), guanxi transfers from an individual to the organization through a four-step process. (1) Germinate, that is to say, hire an individual based on one’s family or personal background. (2) Nurture, that is to say, allow the firm representative to use resources to maintain or strengthen the guanxi connection. (3) Transplant and Convert, that is, inject more firm representatives within the guanxi relationship through introductions (Cheng et al., 2010). And (4) Expand or Weaken (Cheng et al., 2010), that is to say, allocate a sufficient amount of resources to the firm representatives in order to maintain the connection (Cheng et al., 2010; Standifird, 2006). Even though guanxi might not exist at different levels, different forms of guanxi at the individual level exist (Fan, 2002). Fan (2002) identifies three different typologies of guanxi: family guanxi, helper guanxi, and business guanxi. Family guanxi bases on Confucianism while helper and business guanxi base on the current Chinese socioeconomic systems. Hence, the future of family guanxi is more secure than that of helper and business guanxi as the latter two relate more to exchanging favors, particularly for business guanxi in the business world. Therefore, business guanxi bases on personal interests and driving those interests, for example, acquiring scarce resources or getting special treatment otherwise. As a result, business guanxi is generally begun through intermediaries. The base for helper guanxi is more social, for example, belonging to the same soccer club, and for family guanxi one’s blood relations. Actors always see their business partners as outsiders and family members as insiders. ‘‘Helpers’’ fall somewhere in between, that is to say, they can either be insiders or outsiders (Fan, 2002). With interactions with strangers, that is, in business guanxi, the Chinese are motivated only by self-interest and, thus, they feel little motivation to help strangers (Hsu, 2005). However, they try to avoid conflicts and, hence, act in quite an exclusionary fashion with strangers (Hutchings & Weir, 2006; Michailova & Worm, 2003) even though business guanxi is quite utilitarian in nature (Su, & Littlefield, 2001). While nepotism is the drawback of family guanxi, corruption is that of business guanxi. Both ‘‘helpers’’ and business partners may be overwhelmed by the favors requested from them. Generally, however, family and helper guanxi are both healthy forms of

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guanxi, that is to say, they are moral or even desirable and harmless to outsiders (Fan, 2002). However, business guanxi is essential for gaining new information, ideas, and market opportunities (Hammond & Glenn, 2004). Su and Littlefield (2001) define two separate streams of helper guanxi: relative, or qı nqi gua¯nxı´ ( ) and friend or pe´ngyou gua¯nxı´ ( ). Actors use relative guanxi with individuals belonging to the kin or clan of the focal person and friend guanxi when they belong to the kith or friend category. Relative guanxi centers more on obligation while friend guanxi is more about reciprocity as people have the choice of choosing one’s friends but not one’s relatives (Su & Littlefield, 2001). Fan (2002) further divides business guanxi into business-to-business (B2B) guanxi and business-to-government (B2G) guanxi. Chen and Chen (2004) call this latter type political guanxi. Even though the names of these guanxi types are B2B and B2G guanxi, they still exist at the individual level (Fan, 2002). Three different circles: (1) the innermost circle of insiders, (2) the intermediate circle of associates, and (3) the outermost circle of outsiders depict the three different guanxi types (Gao, Ballantyne, & Knight, 2010). This view of the guanxi types is related to the three different types of ties of Hwang (1987): expressive, mixed, and instrumental (Gao et al., 2010). (1) Insiders are part of the innermost circle (Gao et al., 2010). These are individuals with whom one shares expressive ties, that is to say, these are usually family members or one’s closest friends (Gao et al., 2010) or family guanxi (Fan, 2002). These members allocate resources based on one’s needs. Westerners may see these as guanxi exchanges (Gao et al., 2010). (2) The ties in the intermediate circle are both expressive and instrumental ones. The relationship exists between associates (Bond & Hwang, 1986; Wong, 1998a), who allocate resources based on renqing, that is to say, the relationship occurs based on an emotional response to particular actors within the circle (Gao et al., 2010). From a Chinese viewpoint, the relationships in this circle base on helper guanxi (Fan, 2002) while from the Western perspective, they are Sino-Western ones (Gao et al., 2010). (3) The outermost circle consists of outsiders, who share purely instrumental ties. The members allocate resources among themselves through rationality and reasonableness (Gao et al., 2010). The Chinese consider this business guanxi (Fan, 2002), the type of relationship that they would expect Western industrial buyer-seller relations to be (Gao et al., 2010).

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According to Hwang (1997–1998), two types of relationships exist: vertical and horizontal. Vertical relationships, following Confucian tradition, are always those between in-group members. On the other hand, two types of horizontal relationships exist: horizontal in-group and horizontal out-group relationships. Horizontal in-group relations consist of expressive ties while horizontal out-group relationships are those of instrumental ties. Vertical relations follow the Five Cardinal Relationships (wuˇlu´n ( )), that is, the Confucian concept of superior–subordinate relations (see Table 1). Hence, the subordinate needs to follow the superior’s guidance or commands at least publicly but may defy the superior in private. Horizontal in-group relations are the most important type of relations in the West but not in the East. Giving face is an important feature in horizontal in-group relations. The relational actors are at a more equal status level and can consider each other ‘‘friends.’’ Horizontal out-group relations, on the other hand, are relationships between two individuals who are not friends or family members but instead acquaintances. Conflicts between these two actors may take place (Hwang, 1997–1998). Lin and Si (2010), on the other hand, divide the Chinese social capital or guanxi into two types based on the strength. (1) Relationships of dense strong ties within a local cluster are based on shared clan norms. The communication is rapid but lacks innovativeness. The individuals within the clusters are equal. The members of the cluster value collectivism, familism, and high trust. The transaction costs are low and consist of maintaining guanxi as part of everyday living (Lin & Si, 2010). Therefore, this is somewhat similar to family guanxi (Fan, 2002). (2) The second social capital type exists beyond the local cluster. The ties are weak and sparse. The communication between the parties lacks set rules, because of which information sharing within a cluster takes time. This may also slow down the innovation process. As the individuals live within different regions (in China), inequality exists due to the heterogeneity of, for example, the legislation and level of technological sophistication. The trust between the parties is also low. Cooperation is lacking due to the mentioned barriers (Lin & Si, 2010). The difference in the relational closeness of the guanxi types is similar to tie strength in network research (Chen, Chen, & Xin, 2004). Buckley et al. (2006) find that foreign companies need to develop guanxi with their local employees through trust, with local partners through a shared mindset, and with the central and local governments in order to secure governmental support and, hence, to ensure a favorable operating environment. That is, in order for the officials to grant necessary rights and resources (e.g., real

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estate) and to consider legislation in a favorable manner for the firm (Bickenbach & Liu, 2010). The foreign enterprise needs to be long term oriented when developing these relationships (Buckley et al., 2006). In the end, Chinese, however, place the most emphasis on interpersonal loyalty (Dunning & Kim, 2007). The treatment of the different levels of guanxi varies. If guanxi exists between two organizations, then guanxi is kept secret, that is to say, guanxi occurs ‘‘behind closed doors’’ or ‘‘through the backdoor.’’ This secrecy may be due to the illegitimate nature of the exchange. However, if guanxi exists between two individuals, the actors complete favors publicly as this enhances the social capital of the favor doer (Chen & Chen, 2009). In addition to the different forms of guanxi at an individual level, classifications for the different levels of guanxi at the organizational level exist. Su et al. (2007) classify forms of guanxi into three levels. (1) The core level consists of those firm representatives who cater to the demands of the major external guanxi relations. Major external guanxi stakeholders include boards of directors, shareholders, customers, and the community. Core guanxi relationships, therefore, are between the key decision-makers within and outside of the focal firm. (2) Major guanxi stakeholders affect the key decision-makers by providing resources or by otherwise affecting the organizational activities. (3) Peripheral guanxi stakeholders are those whose actions may affect the long-term survival of a firm. This effect may, however, not be immediate. This classification helps one to understand which guanxi parties have the resources one needs the most. To ensure this, Westerners should draw guanxi maps (Su et al., 2007). Westerners should update these maps at least annually as the job mobility rate in China is very high (Tsang, 1998). However, even though (Western) companies might conduct these practices, guanxi is difficult to manage (Nojonen, 2007). Guanxi is an important part of the relationship between two actors in China, but guanxi is not sufficient (Ambler, 1994; Tsang, 1998; Yeung & Tung, 1996). The seller’s product needs to satisfy the customer’s needs and the price should be (nearly) right (Ambler, 1994; Luo, 2007), that is to say, the seller needs to consider the traditional Western marketing mix (Fock & Woo, 1998). However, guanxi recognizes that the lifetime value of a welltreated customer and the customer’s positive opinion are often significantly more beneficial than any single transaction (Ambler, 1994; Luo, 2007). Customers who are not satisfied with the offering are likely to switch their suppliers (Wong & Oswald, 2000). Companies should try to cultivate the personal guanxi of the organization’s representatives into a competitive advantage, that is, they should

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develop this guanxi into a non-imitable, nontransferable, rare, and valuable resource (Gu, Hung, & Tse, 2008; Tsang, 1998). However, the companies tend to be less strict when doing cost-benefit analyses when guanxi exists with the potential business partner (Chen & Chen, 2009). Foreigners should allocate a significant amount of resources to creating and developing guanxi (Buckley et al., 2006). Guanxi is a competitive advantage (Buckley et al., 2006), and as a result, the Chinese may not want to elaborate on the subject (Ambler, 1994). However, China is a huge country with various sub-business cultures (Buckley et al., 2006; Walters & Samiee, 2003). The cultural diversity has even widened in the recent past due to the demographic, economic, institutional, and social changes occurring in Chinese society (Chen & Chen, 2009). Hence, when deciding how many resources to allocate in the guanxi development process, one needs to consider the importance guanxi plays in a particular region, that is to say, one should apply the ‘‘when in Rome’’ principle (Chan et al., 2002). In the areas where the Confucian relational values have been losing their importance, the significance of guanxi has also been declining (Chen & Chen, 2009). These areas are mainly those in which the presence and, thus, the influence of Western companies is at a higher level, that is to say, Western firms have brought some non-Chinese business practices with them (Dunfee & Warren, 2001; Park & Luo, 2001; Sin et al., 2005). In these more marketized areas of China, the locals better formalize and more efficiently maintain the institutions for exchanges (Gu et al., 2008) while in the nonopen areas, competition is at a lower level and the companies within these areas tend to operate more with the government to overcome the potential disadvantages of competition (Park & Luo, 2001). Even though the business environment is somewhat more westernized, some Chinese are still somewhat ethnocentric and consider the business culture outside China to be identical to that in China. Hence, often Chinese view Western guanxi partners as windows to the West, that is, the Chinese expect Westerners to help them in the West as they would help other guanxi partners in China (Seligman, 1999). Gift giving is a guanxi-related issue to which companies should allocate resources. Westerners, however, may view this cultural trait as bribery even though locals consider gift-giving a totally acceptable and necessary practice in order to cultivate mutual trust and longevity within a relationship (Chan et al., 2002; Xin & Pearce, 1996). By sharing gifts, one expresses one’s feelings, especially affection, to another. Thus, the Chinese value gifts according to the degree of affection that they show (Lo & Otis, 2003). Gift giving and bribing are different issues and they have a different set of

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vocabulary. Chinese usually give gifts during Chinese festivities while they can provide bribes at any point. Gifts are given in public while bribing is an under the table or backdoor procedure. To ensure that gift giving does not develop to corruptive behavior, Western companies, especially, should alternate the positions of the representatives within the organization and share responsibilities among several representatives, especially in the sourcing/purchasing department, between different organizational levels, and by educating the representatives (Millington, Eberhardt, & Wilkinson, 2005). Managerial time is another resource which companies greatly need when conducting business in China. Business relationships in China are never impersonal. In order to develop and maintain guanxi, one needs to be more involved in the personal and social lives of the (prospective) guanxi partners (Chen & Chen, 2004; Walters & Samiee, 2003). One has to determine the benefits and costs related to maintaining guanxi. Benefits include quality assurance, product diversification, referral networks and more business opportunities, and minimized risk of trustworthiness due to loss of face. As a result of having guanxi, the actors may regulate the prices, the activities may be more cost effective, and companies may receive (insider) information earlier (Chan, 2008). This information often concerns market trends and business opportunities, as well as government policies (Davies et al., 1995). One should, however, note that these benefits are tactical and temporary but not strategic. Also, in many cases, if gains to an individual from using guanxi exist, a loss to society occurs. Actually, several Chinese deem this type of guanxi generally immoral and illegal and, hence, they do not practice ‘‘bad guanxi’’ (Fan, 2002). Guanxi is not always beneficial, as abovementioned. Guanxi may create favor traps (Ambler, 1994) and require a significant amount of resources for actors to maintain guanxi (Buckley et al., 2006). In addition, guanxi results in high or even over-dependency between the relational actors (Chan, 2008; Gu et al., 2008; Standifird & Marshall, 2000), which, if the network fails, may result in a domino effect (Gu et al., 2008). Guanxi may also overburden corporate obligations and cause collective biases (Gu et al., 2008). Often when firms base their business operations on guanxi, they are less innovative, take less risk, and are not as proactive as they could be (Chen & Layton, 2003; Standifird & Marshall, 2000) and, hence, may lose business opportunities (Standifird & Marshall, 2000). Guanxi can be harmful to the whole society as a buyer may purchase more environmentally hazardous offerings due to the connection between the buyer and the seller (Warren et al., 2004).

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If, however, a firm representative finds becoming involved in a guanxi relationship a beneficial action, the companies should develop relations with a key player of influence within one’s industry. The firms should identify both the business and personal interests of these key players or their representatives and find a way to communicate directly with the key player. This can be done, for example, through agents or other mediators. Companies need to gain business referrals in order to have enough face. Sharing highly valued information, generally on business opportunities, or acting as a mediator between two companies searching prospective business partners aids the initiation of guanxi relationships (Chan, 2008). A guanxi network will be most successful when all the members participating in the network are equally committed to the network and are willing to develop and cultivate the network according to the consensus view. The relationships within the network should be similar to those with old friends or favorable partners in order for the members to trust each other enough to allow open communication. Often these business relationships are a result of previous relationships in which information sharing was open and occurred at a frequent pace and the actors shared a mutual understanding of the goal and nature of the relationship (Chang & Lii, 2005). Usually, guanxi is most beneficial for foreign companies when they are entering new relationships. The relationship develops faster if one is introduced to the other party. Guanxi also helps during negotiations and when setting up one’s operations. After the initial stage of the relationship, the importance of guanxi tends to lower (Fan, 2002). Leung and Wong (2001) categorize foreign businesspeople into three groups: (1) preservers, (2) bravers, and (3) wisers. (1) Preservers see guanxi as flattery and spend only limited time to look for business opportunities through their connections. They purposely remain distant from their Chinese counterparts. The preserver will, thus, remain an outsider to the Chinese. (2) Bravers put effort in developing a guanxi network and eagerly look for business opportunities from the network. They tend to be overpromisers, because of which the guanxi partner may doubt their personal integrity. In the long-term, bravers also tend to remain outsiders. (3) Wisers initiate business dynamics, facilitate business transactions, and establish protective mechanisms around themselves. Their guanxi partners view them to have personal integrity and stable characters. Chinese may allow wisers to become part of their closer networks (Leung & Wong, 2001).

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The Development of Guanxi Little literature on the development of guanxi exists. However, businesspeople should consider each transaction with a Chinese as an interaction deepening the relationship between the buyer and the seller (Hsu, 2005). The illustration of five models regarding the development of guanxi follows. Leung, Wong, and Tam (1995) are the first to try to implement a Western relationship building process theory (the Buyer and Seller Interaction Model of the IMP Group (cf. Ha˚kansson, 1982)) with distinct Chinese cultural factors. They use both quantitative methods (i.e., a questionnaire) and qualitative methods (i.e., focus group) (Leung et al., 1995). Their sample bases in Hong Kong (Leung et al., 1995), which may affect the results as guanxi may be perceived differently in Hong Kong than in mainland China due, for example, to the British presence (Smart & Smart, 2006). The Mainland Chinese still consider the Hongkongese to be virtual foreigners, due to which the relations between the two do not have much significance (Trimarchi, Liesch, & Tamaschke, 2010). Leung et al. (1995) consider the development of guanxi to be a fourstage process with eight subprocesses: (i) availability, (ii) association, (iii) acceptance, (iv) affective, (v) affordable, (vi) affirmative, (vii) assurance, and (viii) adoptation. They view the four stages through psychological concepts: (1) associate, (2) new friend, (3) partner, and (4) old friend (Leung et al., 1995). While in the associate stage of guanxi, both actors are testing the other’s intention. First of all, the prospective guanxi partner needs to be available (Leung et al., 1995). Searching for an available partner is time consuming (Leung et al., 1995; Yi & Ellis, 2000). Not only does an actor need to find a partner, but the actor also needs to identify the right source or gatekeeper (Wong & Chan, 1999). Negotiations during this stage usually require bargaining (Wong & Chan, 1999) and the conduct is in private to ensure that neither loses face (Lin, 2001). Second, one needs to build up a connection with the potential partner (Leung et al., 1995). Through this connection or association, the actors test the willingness of the other (Leung et al., 1995), that is, an experiment takes place (Wong & Chan, 1999). If the parties are not willing to participate in the relationship, continuing the process is not fruitful (Leung et al., 1995; Wong & Chan, 1999). The parties need to communicate their expectations for guanxi and acknowledge the strengths and weaknesses of the other and, thus, judge whether a relationship with the prospective partner would be fruitful. This is a critical stage within guanxi development (Wong & Chan, 1999).

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If both partners are willing, the relationship between the two should develop into an affective one (Leung et al., 1995). The partners should be able to help the other to overcome their weaknesses (Wong & Chan, 1999). This stage may end here or the companies may determine the affordability of the relationship. One should not try to develop guanxi when one does not have the resources to cultivate guanxi in the long term. If any negative feedback arises, the relationship could also end (Leung et al., 1995; Wong & Chan, 1999). The new friend stage of guanxi development is a similar process (Leung et al., 1995). The difference is that a new friend is an insider from the beginning (Leung et al., 1995; Wong & Chan, 1999), and therefore, information sharing is more open and one can accept a discounted price for one’s offering, that is to say, one is more willing to compromise and perhaps even to give up one’s self-interests to gain mutual benefits (Wong & Chan, 1999). An associate may also develop into a new friend during the cultivation process. If the situation is not such, but, however, the firms still cultivate guanxi, the guanxi partner remains as an outsider and becomes a partner. The guanxi parties, however, limit the information sharing at this point (Leung et al., 1995). While developing guanxi from the associate stage to the partner stage, the actors remain outsiders and, hence, the trust level between the two might not be sufficient to allow the other party to exit the trial state. If the parties cultivate guanxi more, both of them are assured that the relation should continue and, therefore, try to converge with each other, that is to say, the actors work closely together, but the actors still remain somewhat distant (Wong & Chan, 1999). If the relationship develops further from the new friend stage to the old friend stage, the parties should initially discuss the direction in which they can enhance the relationship (Leung et al., 1995). The level of trust between the two actors is high (Wong & Chan, 1999). The parties need to be committed to the relationship and show assurance of this to the other (Leung et al., 1995; Wong & Chan, 1999). Assurance in a relationship may even be more important than trust as this shows that the other is not (too) opportunistic (Standifird & Marshall, 2000). Finally, through adaptation, the actors confirm the existence of very good guanxi. At this point, the actors continue to discuss the direction of the development of the relationship (Leung et al., 1995). Buttery and Wong (1999) also view the development of guanxi as occurring through a two-by-two-matrix. They base their model on interviews (Buttery & Wong, 1999), but they do not elaborate more on the method,

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which is always questionable. Hence, one cannot know whether Buttery and Wong (1999) develop the model based on the Hongkongese view of guanxi, which may differ from that of the Mainland Chinese (Smart & Smart, 2006). They differentiate between an outsider and an insider (Smart & Smart, 2006). Insiders are those with whom one is willing to resolve conflicts and, on a more general level, work together (Chang & Lii, 2005). Buttery and Wong (1999) use similar psychological terms to illustrate the developmental stages of guanxi as Leung et al. (1995). Buttery and Wong (1999), however, replace the terms associate and partner with fencer and fiance´, respectively. The term fencer refers to a sword fencer, that is to say, an individual who aims to expose the other’s strengths and vulnerable areas (Buttery & Wong, 1999). The companies use this time period to judge whether or not the other is a suitable business partner (Buttery & Wong, 1999; Wong & Leung, 2001). The analogy with the fiance´ refers to individuals who are more acquainted with each other, that is, they are already willing to get married. The friendship between the parties (at least, when not discussing arranged marriages) is already quite strong and sufficient trust exists to sign a contract with each other. The trust level is higher and the parties aim to help each other. However, as the partners are not married and are not officially part of the family, they view each other as outsiders (Buttery & Wong, 1999). Chinese like to conduct business with their friends. A friend is an individual the other can trust and, hence, discuss business with. However, when the friendship is new, the parties still need to prove themselves to each other. When one has proven one’s loyalty and trustworthiness, one may become an old friend. With an old friend, one can confide and the need for legal contracts does not truly exist anymore as one’s word is sufficient. An old friend is just a phone call away (Buttery & Wong, 1999). Wong and Chan (1999) combine the two previously presented guanxi development models. In order to develop their model, they use a qualitative approach. Their sample consists of Hongkongese buyers and sellers (Wong & Chan, 1999). As mentioned earlier in the discussion of the first guanxi development model, Mainland Chinese and Hongkongese (may) view guanxi differently (Smart & Smart, 2006). This model especially considers the relationship between a buyer and seller (Wong & Chan, 1999). Wong and Chan (1999) see the guanxi development between a buyer and a seller through three characteristics: friendship type (F), interaction type (B), and behavior type (T). The friendship types are from the Buttery and Wong (1999) model and the development of guanxi follows the models of Leung et al. (1995) and Buttery and Wong (1999). The interaction may be

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bewaring, benefiting, belonging, or beloved while the behavior may be testing, trial, teaming, or trusting (Wong & Chan, 1999). The buyer and seller are independent of each other at the fencer stage. In the fiance´ and favorable party stages, the buyer and seller are somewhat dependent on each other, but still are also independent. In the friend stage, the buyer and seller are as in a yin and yang state, that is to say, they both have their own identities even though they are a harmonious team (Wong & Chan, 1999). Chen and Chen (2004) suggest a second type of model for developing guanxi based on reasoning, that is, a conceptual-analytical approach (Kasanen et al., 1991; Neilimo & Na¨si, 1980; Olkkonen, 1994). They identify three stages through which guanxi develop: (1) initiating, (2) building, and (3) using (Chen & Chen, 2004). Building and using guanxi are different issues (Hutchings & Murray, 2002a, 2002b). Before one can initiate guanxi, a party should define the aim of the relationship. Acting according to one’s strategy regarding networking instead of merely functioning case by case is important. The objective should be more long term in nature. In order to initiate guanxi, the actor needs to scout for a prospective party and suitable relational base (Vanhonacker, 2004). Usually before a firm initiates guanxi, the parties are not acquainted with each other (Chen & Chen, 2004), that is to say, the guanxi process to begin between members who do not know each other is possible (Fan, 2002). However, for a firm to initiate guanxi, the potential guanxi parties need to find a common base (Chen & Chen, 2004; Luo, 2007; Standifird, 2006). This guanxi base may consist of common social identities or a common third party, or guanxi may be future oriented (see Table 1) (Chen & Chen, 2004). Fan (2002) classifies guanxi bases differently into three categories. (1) Relationships by birth or blood are those between family or kinships or in-laws. These relationships are mainly from the father’s side of the family. (2) Relationships may also base on nature (Fan, 2002). Relational actors may share the same locality, that is to say that they are neighbors (Fan, 2002) or from the same town (xiaˇoto´ngxia¯ng ( )) or province (da`to´ngxia¯ng ( )) (Fan, 2002; Luo, 2007; Wong, 2007). Being classmates, fellow alumnus, or co-workers also can act as a base for a relationship. Hierarchy does not matter in this case, but instead relationships may also exist between teachers and students or superiors or subordinates. Sometimes, being in the same professions is sufficient for a relationship to take place. (3) Relationships may also be acquired through acquaintances, intermediaries, friends, or sworn brotherhood (Fan, 2002).

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The guanxi base type may be given, that is, one cannot affect who belongs to one’s family, except through marriage if the marriage is not an arranged one. However, actors may affect the second two types, which are based more on social identity. Although even if the companies do not find a common social identity ground, they may begin the guanxi process. In this situation, however, cultivating guanxi will take longer and may be more difficult (Fan, 2002). However, if the two actors have ‘‘chemistry’’ and behave as old friends, that is, they are familiar at first sight (yı jia`n ru´ gu`, ), the guanxi between the two will develop fast (Tsang, 1998). In order for this to occur, the actors do not need to share common values (Fock & Woo, 1998). During the guanxi building process, two parties generally find some guanxi base, that is to say, they at least become acquaintances if not even friends (Fan, 2002). Before the prospective guanxi partners may set up the guanxi bases, one of the parties needs to signal the interest of establishing guanxi with the other (Vanhonacker, 2004). The two actors need to be familiar with each other (Chen & Chen, 2004; Lee et al., 2001). Getting acquainted with the prospective party is often done in public, for example, at a banquet or other broader social event (Vanhonacker, 2004). If the actors do not find a common social identity base, they usually cannot build guanxi. In general, this stage is important for the future of guanxi. If the parties find a guanxi base and they both are willing to participate in the relationship, the parties need to be prepared to share (confidential) information as is common with old friends. However, one needs to acknowledge the risk related to sharing (private) information with people whom one does not truly know are trustworthy (Chen & Chen, 2004). One should also note that due to the lack of loyalty and the openness of network architecture, Chinese parties may try to establish guanxi with two different parties in such a way that a conflict arises. Thus, one needs to be careful when choosing one’s prospective guanxi partner (Vanhonacker, 2004). Reciprocity is important at this stage of guanxi development (Vanhonacker, 2004) because the relationship truly begins when one completes a favor to the other and, therefore, the other is indebted (Standifird, 2006; Standifird & Marshall, 2000). The manner in which to request a favor should be subtle and packaged, that is, the actor should only hint at the true objective of the favor (Vanhonacker, 2004). Westerners should not try to begin their relationship with the Chinese through rent-seeking activities but instead should try to inch themselves closer to the insider circles (Su & Littlefield, 2001). During the negotiations, the focus is more on the long-term goals instead of specific current aims. In China, gathering information about the other

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party takes longer compared to the West and, hence, judging the other’s trustworthiness also takes longer. Westerners should not be impatient during the negotiations, but instead they should show their willingness to allocate resources, including that of one’s own time, to the relation and to cultivate the relationship (Pearce & Robinson, 2000). Likewise, one should not condemn the different manner in which Chinese may hold negotiations. Many Westerners judge their Chinese counterpartner’s to be using ‘‘tricks,’’ that is, using false information to benefit oneself, as Chinese consider this practice perfectly acceptable and part of negotiations or the ‘‘game’’ (Trimarchi et al., 2010), In order to develop active or strong guanxi, sharing only a guanxi base is not sufficient, but instead the actors need to trigger guanxi in other ways, that is, the actors need to interact with each other, build trust and credibility and work over time to maintain the relationship (Dunfee & Warren, 2001; Fan, 2002). Hence, maintaining guanxi requires time, money, and effort (Pearce & Robinson, 2000; Tsang, 1998). The activities needed in order to cultivate guanxi take place in the building and using stages of guanxi (Chen & Chen, 2004). Westerners may try to develop guanxi with their Chinese counterparts by allocating a Key Account Manager to the Chinese client, finding regional sales offices close to the customer, and/or utilizing agents situated close to the buyer (Luo & Chen, 1997). When two individuals are better acquainted with each other, they may conduct several transactions, which may be either expressive or instrumental in nature. However, transactions may not be of only one type but may be hybrids, that is, a social event may simultaneously also be business related. The transactional type depends on its means. Participating in transactions allows the relational actors to move from being an outsider to being an insider (Chen & Chen, 2004). However, even though a relationship between two actors exists due to transactions, they might not cultivate guanxi (Fan, 2002). A relationship, however, is a requirement for guanxi to exist (Go´mez Arias, 1998). For the transactions to occur successfully, the relational actors need to follow guanxi related rules (Chen & Chen, 2004; Hammond & Glenn, 2004; Pearce & Robinson, 2000; Vanhonacker, 2004), that is, widely shared practices, which are rooted in the Chinese culture (Hammond & Glenn, 2004). One of the most pervasive rules is that of reciprocity, meaning that the guanxi actors try to establish a positive long-term cycle of favor exchanges (Chen & Chen, 2004; Wang, 2007; Wong et al., 2007). The favors exist in several different forms, ranging from dealing with major life events, such as accidents, birth, death, and unemployment; to loaning money;

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mediating conflicts; and receiving favorable job assignments (Chen & Chen, 2004). Thus, the favors may be either tangible, for example, gifts, jobs, or houses; or intangible, for example, advice, information, or counseling (Fan, 2002). Chinese do not exchange only tangible goods (Su & Littlefield, 2001; Warren et al., 2004) but also intangibles (Warren et al., 2004), for example, power for goods (Su & Littlefield, 2001). Overall, two forms of favor giving in China exist. Xueˇ zho¯ng so`ng ta`n ( ) is an idiom literally meaning ‘‘to send coal during snow.’’ Figuratively, however, this form of favor giving means to provide help when one most needs help, that is, offering timely help. The Chinese appreciate this form of favors more as this favor giving truly shows one’s feelings toward the other, that is to say, whether or not one is willing to help. Jıˇ n sha`ng tia¯n hua¯ ( ) or ‘‘to add flowers to the brocade’’ means to make something more perfect than it already is. This type of favor is easy to provide at a low cost and might not be beneficial to the receiver (Su & Littlefield, 2001). The actors may request favors even though they would not necessarily need to. However, actors should request both types of favors in order to allow the relationship to develop instead of asking for favors only when one is in trouble (Vanhonacker, 2004). The favors requested in business guanxi do not always need to be organization-related but instead may also be personal, for example, enhancing one’s reputation and social status (Go´mez Arias, 1998; Seligman, 1999). The willingness to develop a long-term relationship, that is, one does not ask for a too valuable favor, influences the favors one dares to request (Hsu, 2005). However, the favors the actors reciprocate need to be of great value to the receiver (Chen & Chen, 2004; Chow & Ng, 2004). The value of the favor should be higher than the previous favor so that one of the actors is always in debt to the other (Chen & Chen, 2004; Chow & Ng, 2004; Go´mez Arias, 1998; Lin, 2001; Yeung & Tung, 1996). That is, completing the favor should require more time and effort (Chow & Ng, 2004) and the guanxi equity should never equal zero (Fan, 2002) but instead roughly zero (Seligman, 1999). Sometimes, the parties might even think that they are both simultaneously in debt to the other (Lin, 2001). If the actors handle the reciprocity in a different manner, that is, if the favor is of less or similar value, the parties may conclude that the other has finalized guanxi, that is, guanxi has ended (Chen & Chen, 2004; Hsu, 2005; Yeung & Tung, 1996), which is considered highly offensive (Hsu, 2005). Otherwise, guanxi always exists even though guanxi may be in latent states (Fan, 2002; Fock & Woo, 1998). The expectative nature of the relationship allows guanxi to exist also in the latent states (Vanhonacker, 2004).

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Guanxi differs from a transaction in two ways: (1) Guanxi may initially be a transaction between two individuals which widens up to include the network(s) of one or both of the transactional parties. (2) Guanxi may occur at any point in time, that is to say, when one of the parties requests a favor. The value of the favor is unknown beforehand. Hence, the guanxi process is highly uncertain (Fan, 2002). To develop guanxi with the Chinese, Westerners should, first of all, try to communicate more closely in order to truly understand the Chinese partner’s expectations (Lee et al., 2001). Face to face interaction is important, not only with the prospective partner’s representatives, including the top management, but also with government officials (Standifird & Marshall, 2000). Westerners also need to show their own commitment to the relationship and try to restrain their opportunistic behavior (Lee et al., 2001; Standifird & Marshall, 2000) by, for example, building assembly operations, establishing a subsidiary, and/or sourcing Chinese supplies (Standifird & Marshall, 2000). Westerners should try to establish a common ground with the Chinese in many ways, including sharing interests, values, experiences, and mutual understanding (Lee et al., 2001). During the guanxi building stage, the actors improve the guanxi quality. Guanxi quality illustrates the state of a relationship at a certain point in time. This judgment is subjective and all the actors within the relationship or network can judge the quality. Guanxi quality is the psychological distance between oneself, that is, the focal actor and the guanxi partner. Guanxi quality consists of two constructs: trust ( (xı` n)) and feeling ( (qı´ ng)). The higher the trust between two parties, the better the quality of their guanxi. An individual is trustworthy if he or she is capable, credible, honest, reliable, and sincere. Even though trust is a construct of both ability and sincerity, trust is primarily about sincerity since ability is more situation-specific and sincerity individual-specific. When comparing these Chinese concepts with Western ones, the ability-based trust is similar to trust in ability and sincerity-based trust to trust in benevolence (Chen & Chen, 2004). Feeling, on the other hand, consists of affection and obligation (see Table 1 for more specific definitions). When one is able to gain both affection and obligation, the parties are closer to each other (Chen & Chen, 2004). Affect, actually, is the most important factor of guanxi and in China; individuals use the terms guanxi and affect interchangeably (Lee & Dawes, 2005). Guanxi improves not only the relationship quality but also the overall business performance (Lee et al., 2001). Guanxi allows for the variable costs of a transaction to be at a minimum level (Schramm & Taube, 2003).

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The final stage of guanxi development is that of using guanxi (Chen & Chen, 2004). The utilization of guanxi depends on the institutional, organizational, and strategic environments in which a firm operates. The intensity of guanxi depends on the institutional and organizational features of both actors (Park & Luo, 2001). At this stage, the actors continue to request for and grant favors (Chen & Chen, 2004; Yeung & Tung, 1996). In order to maintain guanxi, one needs to keep the relationship going by, for example, sending greetings, visiting each other, and gift-giving (Lee & Dawes, 2005). The repetitiveness allows trust to build up between the two actors (Luo, 2007). When one faces a problem, one evaluates which guanxi partner(s) to contact and request help from (Chen & Chen, 2004). The guanxi partners should see guanxi as a long-term commitment from which mutual benefits arise. The benefits should be based not only on material but also on intangible items, such as power and information. At this point, delivering what one promises and not cheating is extremely important (Yeung & Tung, 1996). One also uses guanxi when trying to gain access to new buyers or suppliers, to maintain relationships with current buyers and suppliers, to facilitate daily operations, or to avoid governmental investigations (Dunfee & Warren, 2001). When the actor uses guanxi, the actor needs to reevaluate and adjust this guanxi periodically (Chen & Chen, 2004). Developing guanxi with the guanxi partner is not enough, but one needs to cultivate guanxi also with business associations from which one can, for example, gain information or scarce resources, which can benefit both guanxi parties (Luo, 2007). Based on reasoning, Kaunonen et al. (2010), on the other hand, develop a three-by-three matrix reflecting the different types of guanxi and the processes by which one can move from one stage to another. The framework is an initial attempt to combine the development of guanxi and that of the industrial buyer-seller relationships, that is, the growth-stage models. They classify the different types of guanxi based on (1) the network type: primary, secondary, or tertiary; (2) the membership type: insider, associate, or outsider; and (3) the tie type: emotional, mixed, or instrumental (Kaunonen et al., 2010). The first dimension expresses the type of relationship network. The primary network consists of the family or the ‘‘romantic other’’ (Joy, 2001), that is, relationships determined by birth or blood (Fan, 2002). One’s friends, colleagues, and relatives are part of the secondary network (Kaunonen et al., 2010). In terms of the guanxi base, these would be relationships by nature or an acquired relationship (Fan, 2002). The members in one’s tertiary network are total strangers to that

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individual (Kaunonen et al., 2010). These are relationships that the actor acquires (Fan, 2002). The second dimension, the membership type, classifies a firm or an individual as an insider, an associate, or an outsider (Bond & Hwang, 1986; Wong, 1998a). The guanxi parties may unconsciously or consciously favor insiders through, for example, small gifts, dinners, and favors. Insiders also are more willing to share information with each other or to sacrifice some benefits in order to conduct business with the relational actor (Wong & Chan, 1999). The level of openness and, therefore, information sharing increases the closer the individual or firm is to the other (Wong, 1998b). In order for a foreign businessperson to move from the position of an outsider closer to that of an insider, Leung, Heung, and Wong (2008) suggest that one show personal integrity and harmony, position oneself as a wiser, and try to use renqing (e.g., favors) in order to generate ganqing (i.e., affection) and thereby attain the position of a friend. When a buyer develops a strong sense of ganqing toward the seller through, for example, a higher level of social interaction, assistance or favors, and gift giving, a strong guanxi between the two exists. Favors and gifts also increase renqing and, hence, guanxi. However, one should not be arrogant when granting favors or gifts. For guanxi to develop at all, xinren needs to exist. However, once xinren is present in a relationship, the actors do not need to further develop xinren (Yen, Barnes, & Wang, 2011). The third dimension, the types of ties, focuses on the extent of the affective or emotional engagement in the relationship (Hwang, 1987), or ganqing (Wang, 2007). The emotional depth of relationships differs. Relationships may be based on very emotional bonds, with completely instrumental bonds on the other end of the continuum. More deeply expressive relationships are less calculative and the exchanges occurring between the relational actors do not necessarily need to be mutually favorable. The relational parties are willing to sacrifice for the relationship through, for example, costly transactions and to provide free service without expecting a payback. However, when the relationship is based on extremely instrumental ties, one constantly conducts cost-benefit analyses. The relational actors expect the exchanges to be equal in the long term (Kaunonen et al., 2010). The most intimate relationships are those between family members. These are also known as qingging (Wang, 2007). Commonly, Westerners begin their guanxi development path as strangers, that is, outsiders, with instrumental ties to their Chinese counterparts in the tertiary network of the Chinese. Then Westerners begin to build their guanxi network. They may complete this alone or through agents or mediators. The

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Westerners or Western companies need to show their attractiveness to the Chinese partner. If successful, the ties become mixed, and the Westerners move into the secondary network of the Chinese. The Chinese, however, still consider the Westerners outsiders. If a relationship forms with the Chinese, the Westerners may become associates. Two opportunities exist if the relationship further expands: (1) the Westerners may either become insiders, that is to say, have a similar status to relatives, close friends, or classmates or (2) the locals may take Westerners into the primary network and become similar to one’s fiance´ (or the fiance´ in fact, if one is considering personal relations) (Kaunonen et al., 2010). Zhuang, Xi, and Tsang (2010) suggest that Western companies try to focus on developing emotional ties in order to guarantee a more successful relationship in the long term. The Most Suitable Guanxi Development Model for Intra-Cultural Relational Development All of the five guanxi development models more or less follow (growth-) stage theory with a straightforward development sequence, but in the Chinese context, a state theory model is more suitable (Batonda & Perry, 2003). This study uses the model of Kaunonen et al. (2010) as the basis for the discussion of the guanxi process as Kaunonen et al. (2010) consider membership, network, and ties. The models of Leung et al. (1995), Buttery and Wong (1999), and Wong and Chan (1999) base on the Hongkongese view of guanxi, which differs somewhat from the mainland Chinese view of guanxi due to the fact that the Western business culture, especially that of Britain, has affected the Hongkongese one, (Smart & Smart, 2006). The models of Chen and Chen (2004) and Kaunonen et al. (2010) are conceptual ones. The model of Chen and Chen (2004) is quite simplistic and does not consider all the aspects that take place in the development of the relationship. The model of Kaunonen et al. (2010) is more complex and aims at explaining more issues taking place in the relationship. Hence, the study uses the underlying matrix of Kaunonen et al. (2010), see Fig. 1.

APPLYING THEORY INTO PRACTICE: CASE RELATIONSHIP RED BIRD Case Relationship Red Bird is between a Hongkongese buyer and a former Asian-Finnish joint venture (JV) seller. According to NAICS (U.S. Census

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Primary

Strangers who know an insider or associate in the primary network

Fig. 1.

Strangers who know an associate in a secondary network

Strangers who build up guanxi alone or via intermediaries

Strangers

Instrumental

Tertiary

Relatives, Close friends, Classmates, Fellow alumni, People from the same region

Ties

“Romantic Other”

Outsider

Mixed

Core family, Near relatives

Secondary

Membership Associate

Emotional

Network

Insider

The Model to Discuss the Development of Guanxi in the Case Relationships.

Bureau, 2010), both companies belong to Division D: Manufacturing (OSHA, 2010). The chronology of the relationship shows its development over the years by decade. General thoughts on the relationship and guanxi are at the end. During the Searching State of the Relationship, the buyer and seller remained strangers to each other because neither actor knew the other personally (see Fig. 2). After the seller contacted the buyer, that is to say, the relationship was in the Starting State, the ties of the relationship changed to both instrumental and emotional. The Growth State in the relationship lasted for a long time. During this period, the parties became more acquainted with each other and their different practices. This was a time during which the communication between the parties became very open and the trust level very high. Hence, the parties were associates at this point. Currently, as Case Relationship Red Bird is in the Constant State, the actors consider each other the ‘‘romantic other’’ or even marriage partners, that is to say, part of the core family. Group CEO, Buyer Red Bird, compared the relationship to dating and marriage; in close relationships, actors cannot be in contact only once or twice a year, but instead when

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Insider

Relatives, Close friends, Classmates, Fellow alumni, People from the same region

Strangers who know an insider or associate in the primary network

Strangers who build up guanxi alone or via intermediaries

Growth

Primary Tertiary

Searching

Instrumental

Strangers who know an associate in a secondary network

Starting

Strangers

Fig. 2.

Ties

Secondary

Constant

Mixed

Network

Outsider

“Romantic Other” Emotional

Core family, Near relatives

The Development of Guanxi between Buyer Red Bird and Seller Red Bird.

dating, the relational actors meet often as should be the case with close business relationships, also. The relationship between Buyer Red Bird and Seller Red Bird has institutionalized with each being part of the other’s primary network. The personal relationships between the top management teams of the two companies are those of two close friends, that is to say, the first quadrant on the second row. The individuals remain in contact even though they have retired and they continue to share personal information. For example, the firm representatives are in contact when new grandchildren are born.

CONCLUSIONS Guanxi is a significant part of Chinese society. Confucianism affects guanxi through moral behavior, social modes, and social basis. Guanxi, itself, influences social-political life and business-economic activities and, hence, the Chinese society and economy (Luo, 2007). Guanxi consists of six traits. First of all, guanxi is utilitarian, that is to say, personal interests purposefully drive guanxi. Second, guanxi is

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reciprocal: one’s reputation depends on how well one completes reciprocal obligations. Third, guanxi is transferable: actors often use referrals in order to gain access to a third party. Fourth, guanxi exists between individuals. Penultimately, guanxi has a long-term nature, that is to say, one should maintain one’s guanxi with another actor in the long term. Finally, guanxi is intangible: one does not need hard copies of contracts as one may trust the other due to the fear of losing face (Dunning & Kim, 2007). The future of guanxi is controversial. When viewed from the institutional perspective, that is to say, from the perspective that the institutions and legislations are becoming stronger in China due to the market-oriented reforms, guanxi is diminishing. On the other hand, from a cultural point of view, guanxi is remaining an essential aspect of life in China (Bickenbach & Liu, 2010). When discussing the diminishing influence of guanxi in China due to institutional changes, one needs to be careful not to hint that Chinese business practices are old-fashioned. Neither should one be ethnocentric and consider that a single ‘‘best’’ or ‘‘superior’’ way of doing business, that is, that of the West exists (Wilson & Brennan, 2010). Five different models portray the development of guanxi. First of all, an actor needs to initiate guanxi by finding a common ground, that is, a guanxi base. When the potential guanxi parties find mutual understanding, they may further develop guanxi through reciprocal actions, that is, illustrating one’s trust in the other and showing willingness to participate within the relationship. The parties need to maintain guanxi by continuing to give gifts and by helping the other in both personal and business matters. Westerners who aim to develop relations with Chinese counterparties need to take into consideration three paradoxes. (1) Both advantages and disadvantages in developing strong interpersonal ties exist, that is to say, one might gain better access to information and guanxi members, but simultaneously one faces constraints for the future regarding, for example, one’s resources. (2) No clear set of rules exists, which one should follow when trying to develop intercultural and interpersonal relations with the Chinese (Gao et al., 2010). Some firm representatives want to follow traditional guanxi-based rules, while others might want to follow a Western or a hybrid form of rules (Gao et al., 2010; Trimarchi et al., 2010). Contextual factors, such as network members, the network formation, and resource access, guide the interactions. One needs to be ready to adapt one’s behavior and mindset based on the changing situation. (3) The closer the relationship between the parties, the less innovative and more complicated the relationship is. However, if the relational actors remain outsiders in each

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other’s networks, the less flexible and more rigid the actors are in the local market. The most difficult position is that of associates because this requires balancing one’s obligations toward the insiders and the outsiders (Gao et al., 2010). Five different models for developing guanxi exist based on the literature review. The paper chose the model of Kaunonen et al. (2010) as the most suitable as the model considers not only the process but also the membership type, network level, and tie type of the relational actors. Three of the five models base on the Hongkongese view of guanxi while this study focused more on the mainland Chinese view on guanxi.

ACKNOWLEDGMENTS The study builds from Kaunonen’s (2010) doctoral dissertation. The author expresses appreciation for her doctoral dissertation supervisor Olavi Uusitalo for all his efforts during the research process. The author thanks the Department of Industrial Management at the Tampere University of Technology, the Doctoral Program in Industrial Engineering and Management, the Finnish Cultural Foundation, and the Foundation for Economic Education for funding her research.

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THE DEVELOPMENT OF INDUSTRIAL BUYER-SELLER RELATIONS IN A CHINESE CONTEXT Anna Kaunonen ABSTRACT The industrial buyer-seller relational process models from the Eastern and Western worlds have not been combined. The Western world has dominated the development of the models, while there exist only a very limited amount of guanxi development models from the East. This paper is exploratory in nature, focusing on combining the development of these two worlds into one intercultural model. Four case relationships verify the proposed model. This paper focuses on only one cultural context outside of the West, that is to say, China. In order to justify the model to be completely an intercultural one, research in other cultural contexts is necessary. Keywords: China; guanxi; industrial buyer-seller relationship; relationship development

Deep Knowledge of B2B Relationships within and across Borders Advances in Business Marketing & Purchasing, Volume 20, 93–118 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-0964(2013)0000020006

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INTRODUCTION Background Information The way in which relationships are seen in the East and the West differ. For example, relationship building in China tends to follow the rules of guanxi, meaning that the relationship building is informal and Chinese build relationships for the long term at a personal level. In the West, on the other hand, relationships tend to develop for a short term and in a more formal manner at the corporate level based on the interplay of competition and cooperation (Jia & Rutherford, 2010). In Asia, companies should rely more on the relationship marketing strategy and, hence, aim at developing long-term industrial buyer-seller relationships (e.g., Abramson & Ai, 1997; Backman & Butler, 2007; Boos, Boos, & Sieren, 2003; Hammond & Glenn, 2004) even if the Chinese are moving to a more short-term perspective (Faure & Fang, 2008), at least during negotiations (Trimarchi, Liesch, & Tamaschke, 2010). Ha˚kansson and Snehota (1998) actually suggest that the tendency toward relationships will be universally true. The benefits of this strategy are that the supplier’s understanding of the buyer and the buyer’s needs, as well as the supplier’s ability to conduct more efficient marketing activities, improves due to closer relationships. The buyer may also make its purchasing activities more efficient because of a closer relationship with its supplier(s) (Andersson, Forsgren, & Holm, 2002). However, Westerners have conducted the majority of relationship marketing research (Wong & Chan, 1999), which is somewhat ironic as relationships and networks were the dominant transactional governance manner in China long before relationship marketing and network research gained popularity in the West (Davies, Leung, Luk, & Wong, 1995). In order for firms to consider the cultural factors of their (prospective) business partners, they should employ representatives who are empathetic and world-minded instead of ethnocentric. The representatives also need to be able to read cultural-specific body language. In addition, they should be able to deal with stress, develop and interact in personal relationships, and use culturally appropriate communication style (Bush, Rose, Gilbert, & Ingram, 2001). The lack of cultural sensitivity may seriously jeopardize one’s relationships (Schultz, Evans, & Good, 1999). According to Huang, Rayner, and Zhuang (2003), research on intercultural competence in the Chinese business context, especially while developing industrial buyer-seller relationships, is still lacking.

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Research Methodology The main research question is: How do industrial buyer-seller relationships develop in a Chinese context? The Chinese context mentioned in the main research question is the location and the cultural, institutional, and social context within which the case relationships operate (Li & Tsui, 2000). The Chinese context includes mainland China, Hong Kong, and Taiwan (Li & Tsui, 2002). This research focuses more on guanxi as a significant cultural and social institution in China as this kind of cultural variable may play a larger role than any process variable (Leung, Wong, & Tam, 1995). This study focuses only on the Chinese context and, hence, is exploratory in nature. This research is an initial attempt to understand whether differences in the cultivation of industrial buyer-seller relationships in different cultural contexts exist. In order to study this, the research concentrates on four case relationships (see Table 1). The case relationships are still ongoing, thus Table 1 does not list the time of the last contact. All the case actors were in contact with each other during January–February 2010, when the interviews of the firm representatives of the case relationships took place. The business culture in China is relatively different from the Western business culture, on which the previous industrial buyer-seller relational process models base. Acknowledging and understanding the differences between the East and the West allows the analysis of the impact the context may have on the relationships and their cultivation. Generally guanxi, briefly translated as relationships in China, considers individuals while industrial buyer-seller relational process models consider organizations. Therefore,

Table 1. Case Relationship

The Case Relationships.

Buyer

Dragon Red Bird

Former Sino-British joint venture Hongkongese

Turtle White Tiger

Chinese distributor Chinese subsidiary of an originally U.S.-based parent

Seller

Finnish Former Asian-Finnish joint venture Finnish Finnish

First Contact

1996 1999 2001 2002 (regarding China)

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when comparing these two concepts and the models related to them, maintaining fact care is important. Business researchers should focus on guanxi and guanxi-related systems as Western businesspeople are increasingly encountering non-Western business systems and need to adapt to them in order to operate in these environments. In the future, the Western business system may also change to one more similar to the guanxi system, because of which understanding the current guanxi system is important (Lovett, Simmons, & Kali, 1999). This research combines Eastern and Western business practices. Luo (2007) suggests that businesspeople should better understand guanxi. Academics should consider all the existing paradigms and theories and implement them in the Chinese context (Luo, 2007). The paper is exploratory multiple case research (Gummesson, 1993) focusing on the development of four Chinese industrial buyers and four Finnish sellers. (1) Case Relationship Dragon focuses on a former joint venture (JV) between a Chinese firm and a British firm with a Finnish seller. (2) Case Relationship Red Bird involves a Hongkongese buyer and a former JV between a Finnish firm and an Asian firm. (3) Case Relationship Turtle is between a Chinese distributor (buyer) and a Finnish seller. (4) The final case relationship – that of White Tiger – is one between a subsidiary of an originally U.S.-based firm and a Finnish seller. The paper is an inductive case study. The study allows the case to tell its own story without it being in the terms of the current theoretical models or accepted concepts, based on the action-analytical research strategy (Kasanen, Lukka, & Siitonen, 1991; Neilimo & Na¨si, 1980; Olkkonen, 1994). Even though inductive case research builds somewhat on grounded theory (Gummesson, 2003), when conducting the interviews, the researcher did not completely discard the knowledge gained during the literature review. The method is such that consulting theory and field data collection occurs simultaneously (Olkkonen, 1994).

The Structure of the Paper The paper begins with analyzing the differences between Eastern and Western relationships. This section ends with combining Eastern guanxi development models and Western industrial buyer-seller relational process models introduced in Kaunonen (2013a, 2013b), respectively. Four case relationships verify the theoretical model. Conclusions are at the end.

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EASTERN AND WESTERN RELATIONSHIPS AND CURRENT RELATIONAL PROCESS MODELS The Difference between Eastern and Western Relationships Easterners and Westerners may understand relationships differently. Chinese relations, or guanxi, differ from Western relational exchanges. In China’s collectivist culture, family and kinship ties are important social resources. Guanxi, as such, is a special Chinese form of relational exchange which Chinese institutions or actually the lack of formal institutions has influenced (Gu, Hung, & Tse, 2008). The major difference between guanxi exchanges and Western relational exchanges is the philosophy and its assumptions behind the individuals participating in the exchange (Lovett et al., 1999). While the Chinese follow Taoism (Ambler, 1994), for example, the principle of yin and yang, which is a continuum between differences (Faure & Fang, 2008), Aristotelian (linear) logic informs Western thought (Ambler, 1994). For example, as Westerners tend to be straightforward with their wants and needs, the Chinese tend to suggest issues. This, however, is somewhat changing due to the more westernized business cultures on the coast and to the fact that the businesspeople may be more frank (Faure & Fang, 2008). For example, in Shanghai, the Chinese tend to be business savvy, bottom-line oriented, detail-focused, confident, arrogant, materialistic, more tactical compared to people from other parts of China, more willing to westernize, and obsessed with getting forward in their careers. Hence, a larger number of younger people are in higher positions (Tung, Worm, & Fang, 2007). The difference between the Chinese and Western ways of thinking is visible, for example, in the written languages (Chen, 1999). While the Chinese use characters, Westerners use the Latin alphabet. This difference still seems to be the main driving force in the different ways of thinking between the Chinese and Westerners (Faure & Fang, 2008). When Westerners are conducting business with Chinese, they should consider the yin and yang principle. This is especially important during conflicts when two behavioral options are available: one can either pull or push the door. Pulling the door refers to yin movements, which are receptive and yielding; while pushing the door to direct and active responses, that is, yang movements. Hence, when one’s partner pushes the door, one can decide to either pull or push the door, that is, to complement or resist the other (Strutton & Pelton, 1997). One should select the movement which is

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culturally more suitable for the situation and is more beneficial for the long term (Strutton & Pelton, 1997), that is to say, one needs to carefully choose one’s fights. Learning how to handle both situations is important for Western managers when functioning in China, as one should balance one’s yin and yang (movements) (Strutton & Pelton, 1997). Westerners may view the way in which guanxi is practiced to be unethical as they may feel that Chinese violate the Western principles of ‘‘fairness’’ and ‘‘equal opportunity’’ (Lovett et al., 1999). In addition, Westerners view issues having clear alternatives while for Chinese, issues may be more blurred, that is, ‘‘both and’’ instead of ‘‘either or’’ (Ambler, 1994), in accordance to the yin and yang principle (Faure & Fang, 2008). Some consider a corruptive form of guanxi to exist (Fan, 2002; Luo, 2008). This is ‘‘bad guanxi’’ as opposed to the ‘‘good guanxi’’ of favor exchanging and of close friendly relationships (Fan, 2002). Some consider guanxi to be the enabler of corruption in China (Fan, 2002; Luo, 2008). Even though the exchanged items differ, guanxi bases on exchanging favors for the long term. Conversely, corruptive actors usually bribe the other, that is, money usually changes hands, at one point in time or during a short period of time (Luo, 2007). However, in 2007 Luo (2007) believed that as China was demoralizing, the separation between guanxi and corruption would widen. A year later, though, Luo (2008) found that the situation might not be that clear, but instead, the separation of guanxi and corruption would depend on the type of guanxi. The guanxi between family members is more moral and legal while the same is not true for that between strangers (Luo, 2008). Although two types of guanxi exist, this study does not discuss the corruptive form in depth, but instead only elaborates on ‘‘good guanxi’’ as the Finnish case sellers need to obey Finnish laws, which are strict about not practicing corruptive actions. This is not to say that Finnish firms would not conduct illegal activities, but at least the Finnish firms admitting to illegal activities during interviews is unlikely. Hammond and Glenn (2004) note that guanxi and the Western social network theory have three similarities in common. First, the role of information is important in both guanxi and social network theory (Hammond & Glenn, 2004). The level of information which two actors share distinguishes insiders (strong ties) from outsiders (weak ties) (Hammond & Glenn, 2004), which may be a reason for Westerners to try to develop close relations in China (Gao, Ballantyne, & Knight, 2010). Second, the two parties need to build trust. However, trust as a concept differs in the East and the West. Third, randomness and order are at the core of both paradigms. Both suggest that order and chaos are relative terms. However, guanxi is more about

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certainty and trust while social network theory allows for chaos. For example, in societies based on guanxi, divorces are rare. In contrast, in the West the divorce rate has increased as social condemn of divorces is lower (Hammond & Glenn, 2004). Several differences between these two points of view also exist. First of all, guanxi bases on collectivism, while individualism influences the Western personal networking more. Even though networks are important in both societies, Easterners consider networks of even vital significance. Networking in China is extremely common while in the West, exchanges are more discrete in nature. Chinese, to some degree, are more private and, as a result, the exchanges usually occur at the workplace. In contrast, Westerners like to socialize outside the workplace (Michailova & Worm, 2003). The exchange in the East is both social and business in nature. In the West, however, one tends to keep business exchanges as business and not to mix in friendship (Pearce & Robinson, 2000). Being a feature of a collectivistic society, guanxi usually consists of at least a triad while Westerners network at a dyad level and, therefore, the exchange itself is more direct compared to Chinese, who often utilize mediators. In the end, the relationships between the Chinese are more personal. Westerners, on the other hand, view their own networks as nonpersonal (Michailova & Worm, 2003). In order for a relationship between a Chinese and a Westerner to function well, the firm representatives need to be culturally sensitive, that is to say, to consider the different cultural norms and rules and to overcome any possible conflicts that arise as a result of the differences in business cultures (Gao et al., 2010). Other factors also affect the performance of Western (and other foreign) companies in China (Quer, Claver, & Rienda, 2010). The Western firm needs to adopt a strategy that is between a defensive and a proactive one (Quer et al., 2010; Strutton & Pelton, 1997). The level of cooperation between the buyer and the seller, and the cultural adaptation of, for example, the contract affect one’s performance. Any experience of China that one gains tends to improve one’s knowledge and understanding of the Chinese ways of doing business and, accordingly one’s performance thereby increasing the amount and depth of one’s guanxi-based relations. The choice of location, as well as the duration of the relationship with a Chinese business partner, may affect one’s performance. The offering, of course, affects the performance of the foreigner as well as the ability to cater to the local needs and wants with the offering. One needs to understand the local culture in order to be able to solve arising problems in the correct manner. One needs also to find a resource supplier who commits and is able to produce what one needs (Quer et al., 2010).

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Combining Western Industrial Buyer-Seller Relational Process Models and Eastern Guanxi Development Models Kaunonen (2013a) introduces three different types of Western industrial buyer-seller relational process models: joining theory, stage theory, and state theory. From these models, the Kaunonen (2013a) claims that state theory is the most suitable to be used in intercultural contexts, and especially in a Chinese context. During a thorough literature review of guanxi and its development models, Kaunonen (2013b) found five different guanxi development models. From these Kaunonen (2013b) chose a model by Kaunonen, Polsa, and Fan (2010) as the most suitable as it considers more issues: the membership type, network level, and tie type of the relational actors, affecting the complex guanxi relationships than the other four models. However, all of the guanxi development models use the Western stage theory. Hence, in order to combine the two models, the intercultural relational process development models need to make some adjustments to the chosen guanxi development model (see Fig. 1).

Outsider

Primary Secondary

Relatives, Close friends, Classmates, Fellow alumni, People from the same region

Strangers who know an insider or associate in the primary network

Strangers who build up guanxi alone or via intermediaries

Strangers who know an associate in a secondary network

Strangers

Instrumental

Tertiary

“Romantic Other”

Ties

Core family, Near relatives

Mixed

Fig. 1.

Membership Associate

Emotional

Network

Insider

The Model to Discuss the Development of Guanxi in the Case Relationships.

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VERIFYING THE INTERCULTURAL RELATIONAL PROCESS MODEL THROUGH CASE RELATIONSHIPS Introduction to the Case Relationships The case relationships exist between four buyers and four sellers, all of which are present in the Chinese market. All of the companies belong to Division D: Manufacturing (OSHA, 2010) of the North American Industry Classification System (U.S. Census Bureau, 2010). (1) Case Relationship Dragon is between a Sino-British JV buyer and a Finnish seller. Currently, the British parent firm in the JV is a minor shareholder. The buyer built its first plant in China in 1996, for which the seller supplied one third of a certain kind of machinery. Several other divisions of the companies also interact. The relationship has had its up and downs. The future of the relationship looks quite fruitful in at least the higher end of the market. (2) Case Relationship Red Bird is between a Hongkongese buyer and a Finnish seller. The companies began their relationship in 1999 through small cooperation. At that point, the Finnish firm was still a minor shareholder of a JV with an Asian firm. However, a year later, the seller acquired the major shareholder’s part of the JV. The relationship between the two has been one of learning and sharing information about how to conduct business in mainland China. Along the way small issues have arisen, but the actors have overcome all of these problems. The future of the relationship looks positive. (3) Case Relationship Turtle is between a Chinese distributor as the buyer and a Finnish seller. The Director of the Chinese distributor is a former salesperson for the seller. He left the seller’s organization in 2006 and joined the distributor in 2007. Hence, the Director of the distributor was the one who was first introduced to the seller. The relationship between the two has been truly bumpy and the future looks somewhat uncertain. (4) Case Relationship White Tiger is between a Chinese subsidiary of an originally U.S.-based parent as the buyer and a Finnish seller. The relationship between the two is international with the buyer having the seller’s products at each of its production facilities. As a result, not only the representatives of the companies located in China but also the representatives from the headquarters and the different plants are in

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contact. The relationship at the Chinese location is at a somewhat critical stage as its future to some extent will be determined soon. All of the sellers act in the higher end of the market and try to create demand for their products through the quality, consistency, and technology services available. The environmental issues and their increasing importance in China through, for example, regulations should increase the sellers’ customer market potentials and potentially also its market share.

The Development of the Case Relationships The ways in which the case relationships began differ. The seller initiated two of the four relationships while the Director of Buyer Turtle became acquainted with Seller Turtle before contacting the firm and joining the organization and Buyer White Tiger requested information about Seller White Tiger’s activity in China as the parties had already conducted business globally. The reasons for which the sellers contacted the prospective business partners also differ to some extent. Seller Dragon considered Buyer Dragon a must relationship, which to some degree made the market the buyer’s (Alajoutsija¨rvi, 1996; Campbell, 1985). Seller Red Bird thought Buyer Red Bird was strategically a good choice with which to partner as both could learn about the mainland Chinese market, that is to say, through a domesticated market, the companies aimed at working together in order to understand the mainland market (Campbell, 1985). This allowed a relationship to begin and move into a more cooperative direction, especially as both parties were willing to work together to learn about the mainland market (Alajoutsija¨rvi, 1996). In Case Relationship Red Bird, one reason for the companies to interact, as Ford, Ha˚kansson, and Johanson (1986) suggest that one must always exist, is the mutual learning and the gainable benefits. Both Buyer Dragon and Buyer Red Bird, however, were more westernized companies as the British business culture had influenced them. Buyer Dragon, being a JV, had a British firm as the other parent and Buyer Red Bird was based in Hong Kong, which at that time was still under British rule. This made contacting the companies easier as both were more internationally experienced and the language barrier between the companies was lower, that is to say, the representatives of both companies spoke English. Both of the companies were also big players which the industry

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members knew to be honorable, that is, to have integrity (Leung, Heung, & Wong, 2008), and to respect the higher end of the product range. Both Buyer Dragon and Buyer Red Bird are tomorrow’s customers, that is, strategic resources (Campbell & Cunningham, 1983), for Seller Dragon and Seller Red Bird, respectively, with which they needed to develop relations in the Chinese market in order to succeed in the future. All of the Finnish sellers provide higher-end products, for which they need to find buyers who value more sophisticated offerings. This is one reason for the case buyers to interact with the case sellers, as Ford et al. (1986) suggest. When the two sellers contacted the two potential buyers, neither of the buyers was acquainted with the sellers, that is, they were strangers and, hence, belonged to the tertiary network (Kaunonen et al., 2010) and were outsiders (Bond & Hwang, 1986; Wong, 1998) even though both of the sellers were internationally known companies. During this time, Chinese companies had difficulties finding information about foreign companies. However, the internationality of the companies could have helped the companies to choose to interact with each other (Ford et al., 1986). Currently, information gathering about foreign companies is easier due to the Internet. The information that the sellers had of the buyers was also quite limited. When the Director of Buyer Turtle took Seller Turtle’s leaflet at a trade fair, his knowledge of the firm was also limited. He used his guanxi network to find out more information about the firm. He also utilized this network to get the opportunity to join the seller’s organization as his friend was working for the firm. When the seller asked the salesman to leave the seller’s organization, the Director joined the distributor. Since the representatives of the companies were acquainted with each other, the Seller asked the distributor to outrun its organization by establishing a distribution network. In this way, initially the seller contacted the buyer in order to conduct business together. In a sense, the seller needed the buyer in order to develop a distribution network. On the other hand, the buyer needed to conduct business with the seller in order to use the competitive advantage that the seller had, that is to say, the expertise in the seller’s offerings. Hence, in a way the situation is a domesticated market in which the buyer tries to help the seller differentiate its products and the companies cooperate to ensure that the business in China will grow, a win-win situation for both (Campbell, 1985). As both parties are ready to invest in the relationship, the relationship between the actors is highly cooperative (Alajoutsija¨rvi, 1996). Since the parties were already acquainted with each other, they are associates (Bond & Hwang, 1986; Wong, 1998) and Buyer Turtle was

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already somewhat emotionally attached to Seller Turtle and, therefore, the organizations are ‘‘friends’’ (Kaunonen et al., 2010). Buyer White Tiger, on the other hand, was already acquainted with Seller White Tiger, that is to say, being part of each other’s secondary network and to some degree emotionally attached to each other (Kaunonen et al., 2010). Buyer White Tiger was the seller’s special customer of today globally, that is to say, the companies were used to working with each other on the projects of a certain area, but the buyer was not tomorrow’s customer in China (Campbell & Cunningham, 1983), as the buyer did not have sufficient information about the activities of the seller in China. The past positive experiences in the relationship allowed the relationship to be cooperative (Alajoutsija¨rvi, 1996). Hence, the buyer contacted the seller related to the Chinese operations about a possible purchase of machinery for the buyer’s new plant in China. Buyer White Tiger’s making the first contact ensures that the relationship is cooperative (Alajoutsija¨rvi, 1996). As the parties were already acquainted with each other, the different divisions knew whom to contact. Familiarity is a reason for interaction to occur in this case (Ford et al., 1986). The Chinese subsidiaries, however, did not interact, but instead the headquarters of the companies were in contact. This situation is a domesticated market in the sense that the companies are used to cooperating at a global level (Campbell, 1985). After the actors contacted their prospective business parties, the actors needed to attract these potential partners in order for the parties to invest their scarce resources in cultivating the particular relationship (Ha˚kansson & Snehota, 1998). Often, even though information was rarely available before the Internet was widely available, being an internationally known and appreciated player helped to attract the local player, that is to say, the companies almost automatically were famous of their integrity in their dealings (Leung et al., 2008). International companies tend to produce better quality products in a more consistent manner (i.e., the characteristic of supply performance capability (Cunningham & Homse, 1986)), which the potential Chinese-based buyers value and which affects their choice of potential interaction partners (Ford et al., 1986). However, being an international player is not sufficient, but one also needs to have local presence, preferably through at least one plant. This shows that the foreign enterprise is serious about the market and is not just in China to milk the local customers. Hence, the seller can assure the buyer that the buyer will easily receive help in the future, that is to say, the buyer may purchase technology services locally. Through their investments, foreigners show their position as wisers (Leung & Wong, 2001; Leung et al., 2008).

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After the parties get better acquainted with each other and they hold negotiations, the buyer can make its first orders. The manner in which the seller completes the first order is crucial, as this may determine the cooperativeness within the relationship (Alajoutsija¨rvi, 1996). According to Buyer Red Bird, the first order tells more about the seller than the negotiation round can. During the first order, the parties learn about the practices of the other, for example, of mutuality (Ford et al., 1986) and how well they treat their customers and follow the contract, that is to say, the integrity of the firm (Leung et al., 2008). In order to guarantee future interaction (Ford et al., 1986), the relational partner needs to take care of the other at least at the level that the other expects if competition exists. After the actors have completed their first orders, they continue to develop their relationships. Due to the performance of the first order, the trust level between the parties has improved and the communication has opened. In order for the relationships to develop in the future, the companies need to maintain them, that is, the firms need to preserve the harmony within the relationships (Leung et al., 2008). To cultivate the relationships, the companies meet at least biannually. Negotiations determine the frequency of business meetings for Case Relationship Dragon and Case Relationship White Tiger. When the partners discuss projects and quotations, the firm representatives meet more often. In addition, they may hold demos. Inviting the buyers’ representatives to Finland to show the premises and headquarters is a display of trust and commitment to the relationship. Hence, Seller Dragon, Seller Red Bird, and Seller White Tiger have invited their respective buyers to Finland. During the visits to Finland, the sellers have also provided training. This shows that these sellers are ready to develop the relationship further and ensure that the buyers become today’s special or regular customers (Campbell & Cunningham, 1983), so that the revenue that the buyers bring will increase. With regard to Case Relationship Red Bird, the representatives of the companies at the operational level meet daily, that is to say, the frequency of interpersonal contacts is extremely high (Cunningham & Homse, 1986). The top management boards, however, meet at least biannually. According to the recipients, the best way for developing the relationship is to meet over events that are both business and social by nature, that is to say, over dinner. Golf is also somewhat gaining in popularity in mainland China, but events that are common in Europe do not yet work in China. Inviting buyers to events that show the importance of China globally, for example, the Olympics of 2008 in Beijing and the first Formula 1 race in Shanghai in 2004, are also a good way to show both the significance that the buyer has

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for the seller and the respect that the seller has for the culture of China and how the nation has modernized. The manner in which the relational actors treat each other may also affect the future of the relationship and serve as a reason to continue interacting (Ford et al., 1986) since the interaction the actor performs demonstrates the integrity of the actor (Leung et al., 2008). The parties within a relationship do not have to be continually active with each other, that is to say, the frequency of interpersonal contacts does not always need to be high (Cunningham & Homse, 1986). Sometimes quieter periods occur. For example, in Case Relationship Dragon such a period occurred from 2000 to 2002. During this time, these two particular divisions of the firms were not active although other divisions from the firms were actively in contact. This is a somewhat positive situation as this means that at least nothing bad is happening in the relationship and that the machinery is functioning well, that is to say, that the actors maintained the harmony in the relationship (Leung et al., 2008). However, as the relationship is not in an active stage, the buyer does not necessarily receive all the necessary support that the buyer could gain if the parties were actively involved. The seller, on the other hand, might not hear all the possible needs of the buyer early enough, that is to say, the seller’s competitor could win a project over the seller. At this point, the buyer is somewhat tending toward becoming a yesterday’s customer, that is to say, their sales volume is quite small and they receive little or no services. The seller continues to cater to the needs to the buyer, but the seller may do so unenthusiastically (Campbell & Cunningham, 1983). This, however, is not in the case of Seller Dragon, who still valued Buyer Dragon even though little business was taking place, that is to say, although activities within the relationships did not occur, both parties maintained their integrity, belief in the relationship and its continuation, and their positions (Leung et al., 2008).

THE DEVELOPMENT OF INDUSTRIAL BUYER-SELLER RELATIONSHIPS IN A CHINESE CONTEXT A General View on the Development of the Case Relationships All the development paths of the case relationships begin with the Searching State, see Table 2, in which one of the actors recognized a prospective business partner and sought more information about the potential partner

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Table 2. An Overview of the Relational Processes of the Case Relationships. Case Relationship State Beginning Middle

End

Substate Searching Starting Constant/Static Decline Growth Troubled Dormant/Inert Termination

Dragon 1. 2. 8. 3. 6. 4.

5.

7.

Red Bird

Turtle

White Dragon

1. 2. 4.

1. 2.

1. 2.

3.

3. 4.

3.

through secondary sources. The next state is that of Starting, in which either the buyer or the seller, more often the latter, contacts the other and tries to attract the prospective partner in order for a relationship to initiate. The parties often place their first orders or deliveries during this beginning state. Even though all of the relationships go through both of these states, they should be separate as the tasks the actors complete during the two states are very different. In addition, the level of interaction varies. In the Searching State, the actors are not yet in contact and one might not even know about the other, as was true in the cases of Buyer Dragon and Buyer Red Bird. In the Starting State, on the other hand, the parties are already interacting as they make an initial contact. Therefore, both actors at this point are aware of the existence of the other. The contacted party usually gathers information about the prospective business partner in this state from intraorganizational or inter-organizational sources. In the cases of Seller Dragon and Seller Red Bird, the cultural and language barriers between the contacted party and the initiator were lower compared to typical Chinese actors. This follows the internationalization model of Johanson and Vahlne (1977), that is, when one is expanding abroad, one tends to go to markets which are more familiar and have a lower psychic distance. The same is true when targeting customers in foreign markets, that is, actors have an easier time contacting companies with which one has a lower psychic distance. In China, these companies also tend to be those that appreciate the higher end of the product range as all of the case companies function in this part of the market.

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After the Beginning States, all of the case relationships evolved into the Growth State of the relationship. This is a natural progression as the other Middle State options would be somewhat troublesome to develop into. In the Constant or Static State of the relationship, the relationship is already institutionalized and the parties are well acquainted with each other. The level of trust tends to be very high and communication extremely open. The actors should develop the relationship well and the relationships should be close so that the actors can weather any negative effects in the relationship, such as those resulting from a decline in the number of orders. Outsiders may have forced the relationship, if the relationship should evolve directly to the Troubled State. On the other hand, the relationship could terminate directly if the parties do not have an external reason to stay within the relationship. During the Growth State, the parties get better acquainted with each other and with the offerings the seller has for the buyer. During this state, the firm representatives meet each other. The frequency of the meetings, however, is usually lower than that during the Starting State as the actors do not necessarily negotiate anymore and the seller may have already delivered the first order. The seller may also provide technology services during this state. As the actors know more about each other, the level of trust may increase and communication may open up. Actors must fulfill all the items in the initial contract and to be consistent from that point onwards. The local companies tend to be inconsistent and because of this, foreign companies have a competitive advantage with their practices and quality. The way in which the relationship develops from the Growth State onwards varies. Case Relationship White Tiger has remained in this State. If the relationship develops, the relationship may, for example, evolve to the Constant or Static State as Case Relationship Red Bird did. As the other sellers provide investment products and technology services, establishing a Constant or Static State is more difficult due to the nature of the sales process. The buyers do not tend to purchase machinery at a monthly rate but instead at a much slower pace. In between, the buyers may, however, purchase technology services. The relationship may possibly only develop into the Constant or Static State if the actors sign annual agreements concerning spare parts or maintenance work or if the buyer frequently purchases these technology services. In China, however, this is still not a very probable relational state as the local customers have not yet understood the importance of maintaining their machinery in good condition. In addition, many local companies tend to arrange their own maintenance work as in the case of Buyer White Tiger, which has not purchased

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technology services during the past year because the firm is trying to train its employees to complete these tasks. On the other hand, the relationship could also decline, that is to say, the interest that the two have in the relationship decreases and, hence, also the level of orders. None of the case relationships evolved in this way. The fourth Middle State option is that in which the relationship is in turmoil. Case Relationship Dragon experienced challenges before the actors finalized the third order. The parties had problems finding a compromise which was beneficial for both, that is to say, one in which the price and the contents of the order were satisfactory for the buyer and the seller. The situation was so bad that the relationship almost ended. However, as both of the parties wanted to overcome this, the relationship evolved from the Trouble State. Case Relationship Turtle is currently in the Troubled State as the parties are experiencing a strategic misfit, that is to say, the actors want different things from the relationship. The relationship has been experiencing difficulties for some time already as the buyer does not seem to trust the seller and in the seller’s opinion, the buyer is not investing enough in the relationship. In order to overcome these problems, the representatives of the companies need to discuss the troubles and find a way to overcome them in a manner which satisfies both. The previous state theory models consider the Dormant or Inert State as an end state of the relationship. However, this might not be so. For example, Case Relationship Dragon entered a quiet period soon after the seller made the initial contact because the buyer did not need to purchase any machinery for some years. This, however, did not mean that the parties were ending their relationship, but instead they just did not require each other’s services during that time. The firm representatives met during this state at fairs and the seller hosted events to which the seller invited its VIP customers, including Buyer Dragon. Hence, the Dormant or Inert State of the relationship is both a Middle State and an End State. None of the relationships are currently terminating even though severe problems have occurred. If a relationship ended, the parties would still continue to acknowledge each other and the activities of the other. Is the only reason for which a relationship could terminate completely the bankruptcy of one or both of the parties? Based on the case relationships, the research proposes a modified version of the state theory models (see Fig. 2). The time and the arrow sizes illustrated in the model are only indicative and do not illustrate the actual time each state or transition takes. In this case successful means that the relationship is ongoing and is not related to success related to financial issues.

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Middle States

End States

Constant / Static

Searching

Decline

1. Starting

Dormant / Inert

2.

Growth

Termination

Troubled

Fig. 2.

The Proposed State Theory Model for Relationship Development.

Even though the state theory model based on the case relationships in Fig. 2 is similar to those from the Western context, differences also exist. The time duration for the beginning states in the Chinese context may be longer compared to those for relationships between only Western or westernized companies. This is visible when comparing the durations of the initial states of Case Relationship White Tiger and a relationship between a truly Chinese buyer and Seller White Tiger. The path for the industrial buyer-seller relationship in Fig. 16 holds only for those relationships that have successfully proceeded forward from the Beginning States. The relationships may at any time also evolve to either End State, without developing through the second Beginning State or Middle States.

A General View on the Development of Guanxi The ways in which the case relationships developed differ (see Table 3). Case Relationship Dragon and Case Relationship Red Bird are more similar in

Relatives, close friends, classmates, fellow alumni, people from the same region ‘‘Romantic other’’ Core family, near relatives

Strangers who know an associate in a secondary network Strangers who build up guanxi alone or via intermediaries Strangers who know an insider or associate in the primary network

Strangers

Guanxi type

2. Starting (cont.) 3. Growth 4. Dormant/Inert 5. Growth 6. Troubled 7. Growth 8. Constant/Static

1. Searching 2. Starting

Dragon

3. Growth (cont.) 4. Constant/Static

2. Starting (cont.) 3. Growth

1. Searching 2. Starting

Red Bird

Turtle

1. Searching 2. Starting 3. Growth 4. Troubled

Case Relationship

Table 3. An Overview of the Development of Guanxi of the Case Relationships.

1. Searching 2. Starting 3. Growth

White Dragon

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that the relationships began in the bottom-right quadrant, when the actors were strangers to each other and they need to gather information about the prospective relational partner. At this point, only one of the actors had acknowledged the other. After Seller Dragon and Seller Red Bird had contacted and attracted their respective buyers and the buyers made their first order, the relationships evolved to the middle-left quadrant. At this point, the tie was a little more personal than before as the representatives of the companies knew each other better due to negotiations and other meetings, that is, the two had been in contact more often. When the relationship evolved to the first middle state, that is, that of Growth, the parties were no longer outsiders, but instead became associates. This means that the buyers might be ordering more and the actors communicated more openly. The trust level had also increased and the ties remained mixed but were more personal than before. As for Case Relationship Turtle and Case Relationship White Tiger, they began their evolvement in the matrix in this quadrant. In both of the case relationships, the buyer and seller knew each other beforehand. Director, Buyer Turtle, was a former salesperson of Seller Turtle while Buyer White Tiger had machinery of Seller White Tiger at its other plants outside China. These two relationships, however, have not evolved since the initial stature. A relationship may develop in any way from the middle quadrant. In Case Relationship Dragon, the evolvement occurred horizontally while in Case Relationship Red Bird, the development happened vertically. The state during with the move differs for the two. For Case Relationship Dragon, the relationship evolved during the Troubled State, while for Case Relationship Red Bird, the development took place during the Growth State. Hence, a relationship may develop during any of the states. A general model based on the case relationships is in Fig. 3, in which the arrow from the lowest right quadrant to the highest left quadrant illustrates time. The personal relationships occurring between the representatives of the case companies follow that of the general case relationship. This, of course, does not necessarily need to be the case, but instead the relationship between the firm representatives may be closer or more distant than those of the organizational relationships. Generally, however, for the organizations to have good relations, the firm representatives also need to share a working relationship since they may be in daily contact. According to Group CEO, Buyer Red Bird, the firm representatives need to click and have chemistry in order for the organizational relationship to strengthen.

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The Development of Industrial Buyer-Seller Relations in a Chinese Context Membership Associate “Romantic Other”

Outsider

Secondary

Strangers who build up guanxi alone or via intermediaries

Growth

Strangers who know an associate in a secondary network

Searching

Instrumental

Tertiary

Strangers

Ties

Strangers who know an insider or associate in the primary network

Starting

Relatives, Close friends, Classmates, Fellow alumni, People from the same region

Mixed

Network

Primary

Emotional

Insider Core family, Near relatives

Time

Fig. 3.

A General Model for the Development of Guanxi in a Successful Industrial Buyer-Seller Relationship.

CONCLUSIONS Implications Based on the state theory model and the guanxi development model, the study built a comprehensive framework for the development of industrial buyer-seller relationships in a Chinese context. This is Fig. 3. According to the model, all relationships begin in a similar manner. That is, from the two beginning states, the Searching State and the Starting State, the process evolves to the first middle state of Growth. If the actors are not acquainted with each other beforehand, they are first outsiders to each other and during the Growth State evolve to associates. Initially, the parties are in the other’s tertiary network and move to the secondary network during the Starting State. In addition, the ties become more personal and are not only instrumental. If the parties already share a relationship due to a previous history, the starting point for the relationship is that of an associate in the secondary network with mixed ties. From this point onwards, the relationship may develop in any manner if the relationship has not yet evolved to one of

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the end states. Development is not limited to only the Growth State. For example, the trust level may improve during the Troubled State as both parties need to be more flexible with each other and work together in order to overcome the difficulties of this period. As a result, the parties may consider each other in a closer membership or network level. The process by which relationships develop is similar in the West and the East. However, the time duration of the states may differ. Usually in the East, actors require a longer time to attract the prospective business partner while in the West actors can attract the other more straightforwardly. Although companies need to cultivate relationships with government officials and customs officers, these individuals do not play a very significant role in the particular industrial buyer-seller relationships. Instead, they may affect the smoothness with which the buyer and seller conduct their business in China. This may affect the length of the states, but otherwise, these officials do not need to be present in the developed framework. The importance of these relationships increases with organizational size.

Implications and Avenues for Future Research Although this study has centered on China and guanxi, similar business thinking exists in, for example, Japan, Korea, and India (Ambler, 1994; Gu et al., 2008). Such practices as gift giving and entertaining, which are important for cultivating and maintaining guanxi, are common in several other nations and business cultures (Dunfee & Warren, 2001) as well as the notion of reciprocity (Park & Luo, 2001). Networking is also important in the West and several Europeans and Northern Americans commonly use the concept of the ‘‘old boys’’ network (Gu et al., 2008). In the end, however, the operation of social relations, or guanxi, is unique to China (Gu et al., 2008; Luo, 2007; Tsang, 1998) because of which similar relational forms are nonexistent in the West (Bhagat, Devitt, & Devitt, 2010). In addition, the role of guanxi in everyday life is special to the Chinese context (Luo, 2007; Standifird & Marshall, 2000; Tsang, 1998). Guanxi is a science, in which the actors carefully design their practices and processes (Luo, 2007). In order to justify the generalizability of the framework developed in this study, the framework should be studied in different cultural environments and between companies from different national cultures. Hence, the suitability of the model based on the development of guanxi at a more global level could be considered.

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Limitations The study is based on data from four case relationships between a Chinabased buyer and a Finnish seller with presence in the Chinese market. Hence, the relationships are somewhat westernized already due to the initial conditions. To study a purely Chinese relationship, one should use local companies as references. This study focuses on the higher end of the market, as foreign industrial companies tend to serve this end of the market. Hence, the buyers are also more westernized than a common Chinese firm. The level of westernization is increased for the case buyers as the majority of the companies are based in Hong Kong and Greater Shanghai, which are more westernized than most areas in China. Formerly, the industrial buyer-seller relational process models have based on the West. This study focuses on only one cultural context instead of several. Hence, the generalizability of the results is questionable on a more international level.

ACKNOWLEDGMENTS The study builds from Kaunonen’s (2010) doctoral dissertation. The author expresses appreciation for her doctoral dissertation supervisor Olavi Uusitalo for all his efforts during the research process. The author thanks the Department of Industrial Management at the Tampere University of Technology, the Doctoral Program in Industrial Engineering and Management, the Finnish Cultural Foundation, and the Foundation for Economic Education for funding her research.

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ADAPTATION IN BUSINESS CONTEXTS: WORKING TRIADIC RELATIONSHIPS Anne-Maria Holma ABSTRACT This study provides a comprehensive framework of adaptation in triadic business relationship settings in the service sector. The framework is based on the industrial network approach (see, e.g., Axelsson & Easton, 1992; Ha˚kansson & Snehota, 1995a). The study describes how adaptations initiate, how they progress, and what the outcomes of these adaptations are. Furthermore, the framework takes into account how adaptations spread in triadic relationship settings. The empirical context is corporate travel management, which is a chain of activities where an industrial enterprise, and its preferred travel agency and service supplier partners combine their resources. The scientific philosophy, on which the knowledge creation is based, is realist ontology. Epistemologically, the study relies on constructionist processes and interpretation. Case studies with in-depth interviews are the main source of data. Keywords: Adaptation; triadic business relationship settings; business services; corporate travel

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INTRODUCTION This study is about adaptation in triadic relationship settings in the service context (this report uses ‘‘triadic relationship setting’’ and ‘‘triad’’ interchangeably). The study examines how actors (firms) in triadic relationship settings adapt toward each other. Theoretically, the research is within the field of relationship marketing. The paper has five main sections. This first section introduces to the topic of the study and discusses its purpose. Thereafter, the second section discusses the theoretical background and the analysis framework. The third section explains the research design and methodology. The fourth section presents the case study findings, and finally, the fifth section concludes the report, discusses its reliability, and suggests avenues for further research.

Adaptation To sell someone a standard item at a standard price, using standard sales procedures, delivering and invoicing according to standard terms and conditions, and then to claim that you have a relationship with them is either sophistry or self-deception. (Brennan & Turnbull, 1996, p. 30)

Adaptation is an important concept in many fields of science. Adaptation has a long history in biology, where adaptation concerns the way living organisms tackle environmental stress and pressure. Furthermore, cultural ecologists study the effects that human groups have on their environment, and the ways they adapt to environmental contexts. The concept of adaptation relates closely to exchange, and an exchange process can be regarded as an adaptation process (Newcomb, Turner, & Converse, 1965). Exchange is a fundamental concept in interpersonal relationships, in social psychology, sociology and anthropology (e.g., Homans, 1958; Thibaut & Kelley, 1959). Exchanges in social relationships are interaction processes, where the interaction is any observable behavior between two individuals, and when we have a reason to believe that these individuals are responding to each other. When individuals continue to interact for a longer period, they adapt to each other. Such adaptations apply also to business relationships, where adaptations are elements in the social exchange process (Halle´n, Johansson, & Seyed-Mohamed, 1991). In the business context, both organization theory and marketing theory discuss adaptation. Organization theory notices two main aspects of adaptation: First, the organization-environment interface, which is addressed as

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the contingency theory (Fiedler, 1964). The second aspect refers to the behavioral theory, which concerns the history dependent features of adaptations, and their role in organizational change (Cyert & March, 1963). In marketing, a central constituent in Alderson’s (1965) functionalist theory of marketing is adaptation that balances organized behavior systems and their environments. International marketing focuses on adapting local marketing programs to international standardization (e.g., Halle´n et al., 1991), and the impact of different cultures in international business relationships (e.g., Fang, 2001). The strategic marketing management is often regarded as a process of adaptation by an individual firm to changes in the broad marketing environment, to the competitors, and to the consumers’ requirements (Aaker, 2001; Chakravarthy, 1982). Besides responding to the dynamic business environment, firms respond to changes in the core relationships by making adaptations (Canning & Brennan, 2004; Canning & Hanmer-Lloyd, 2002). Thus, adaptation is a critical feature in the dynamics of business relationships (Halle´n et al., 1991; Schurr, 2007). Most business relationships include some kind of match between functions of at least two companies (Halle´n et al., 1991). According to Ha˚kansson and Snehota (1995a), adaptations occur when firms adjust their actors, resources, and activities (ARA) to those of the counterparts. Adaptations are generally relationship specific (Canning & Brennan, 2004), and firms cannot transfer adaptations as such to other relationships. Adaptations may occur in the initial phases of a relationship to bring about ‘‘fit’’ between organizations. Adaptations continue for the duration of a relationship as understanding and expectations change (Canning & Brennan, 2004; Dwyer, Schurr, & Oh, 1987; Ford, 1980; Halle´n et al., 1991). Adaptations change both the relationship itself and the focal network of other actors in which the relationship is embedded (Ha˚kansson & Snehota, 1995b). This research limits the focal network to concern a triadic relationship setting. In this kind of setting, an actor may change, the relationship may end, or the triad may transform into becoming a dyad (Havila, 1996). Fig. 1 illustrates the different levels of adaptation in business markets. The current research focuses on the innermost rectangle, on adaptation at the triad level. Adaptations occur in the dyadic relationships A-B, B-C, and A-C, which are interconnected, either directly or indirectly. Adaptations between two actors entail two intertwined processes, that is, intrafirm adaptation and interfirm adaptation. Intrafirm adaptations occur in individual organizations, and interfirm adaptations occur in the interactions between the organizations (Brennan & Canning, 2002; Brennan & Turnbull, 1999).

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Macronet level adaptation Primary network level adaptation

C

Fig. 1.

B A-

C -A

Triad level adaptation A

intrafirm + Interfirm adaptation C-B

B

Levels of Adaptation in Business Markets.

Adaptations occur also at the primary network level and the macronet level. Primary network level adaptation concerns industry specific adaptation. Macronet level adaptation entails business level and market level adaptation, that is, general strategies, a firm’s market sensing, target marketing and positioning capabilities in macrolevel segments. Separating these levels is important. However, the impact of the levels on one another is also essential (Canning & Brennan, 2004). The Triadic Relationship Setting By the third, I mean the medium or connecting bond between the absolute first and last. The beginning is first, the end second, the middle third. The end is second, the means third. The thread of life is a third; the fate that snips it, its second. (Peirce, 1931, in Beucham, 1998)

Peirce (1839–1914), one of the fathers of semiotics, insisted that any relationship between two entities, for example, persons, ideas, or natural forces, could not be understood in simple dyadic terms. Relationships between two entities always require a third element, the framework or structure of meanings, truths, laws, assumptions, and expectations within which the relationship occurs (Beaucham, 1998). A triadic relationship setting is a widely researched group formation in sociology, where a triad is seen as a group of three individuals that are directly connected to each other in order to, for example, carry out an assignment together

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(e.g., Simmel, in Wolff, 1950). In business research, triad is a relatively new concept. In the business network context, researchers generally consider a triad to consist of relationships between three firms, which are connected to each other by a third actor, either directly or indirectly (cf. Havila, Johanson, & Thilenius, 2004; Khurana, 2002; Madhavan, Gnyawali & He, 2004). In this study, the concept of ‘‘triadic relationship setting’’ refers to three firms that may have both direct and indirect connections. Thus, the triadic relationship setting consists of three independent actors (firms) that are connected to each other, either directly or indirectly, for the purpose of doing business. In the empirical study, the business these actors are doing together is arranging the industrial enterprise’s business travel, and the activities and processes business travel purchase includes. Simmel (1858–1918) is a microsociologist who played an important role in small-group research development. His central tenet is that everything interacts in some way with everything else. He also distinguishes some main differences in interactions in dyads, in triads, and in larger groups. First, a dyad relies on direct reciprocity. A dyad differs from all other types of relationships because each of the two participants meets only one another and not a collectivity. In a triad, members normally have a chance to interact directly with each other. Larger groups, conversely, have a greater diversity of relationships that can form in them (Caplow, 1956). Furthermore, when a group exceeds a relatively limited size, interaction requires formal arrangements (Coser, 1977). Second, in a triad, the third actor may have different roles. She/he may keep the triad together by softening the conflicts between the other two. The third actor may also act as a tertius gaudens (the third who rejoices), seeking to turn to his own advantage a disagreement between the other two. Furthermore, through a strategy of divide et impera (divide and rule), he/she may intentionally create conflicts between the other two in order to attain a dominant position or other gains (Simmel, in Wolff, 1950). Third, triads are less stable than dyads (Caplow, 1956). As Simmel (1969, pp. 60–61) states, ‘‘A dyad depends on each of its two elements alone – in its death though not in its life: for its life it needs both, but for its death, only one.’’ The triad may continue its existence, even if one actor leaves and a new one enter the relationship. Larger groups, in their turn, tend to be more stable because of the greater diversity of relationships that can form in them (ibid.). Fourth, one common rule which has been widely observed, and which makes the triad less stable than other relationship settings, is that in any

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group of three, the actors tend to form coalitions and segregate into a dyad, and an isolated actor. Generally, the members of triads may differ in strength, and a stronger member can control a weaker member. Furthermore, the actors seek control over the others, and prefer to have control over two others, rather than over just one. The strength of a coalition is equal to the strength of its two members (Caplow, 1968; Simmel in Wolff, 1950). In business research, only a few studies have an explicitly triadic approach. But even though a triad is the unit of analysis, the studies usually apply a dyadic perspective (e.g., Havila, 1996; Havila et al., 2004; Trimarchi, 2001). Furthermore, what the researchers mean by a triadic approach remains often somewhat unclear. In the current study, a triadic approach denotes investigating each of the three dyads in a triad, in the context of the other two connected dyads, and from both ends. Havila et al. (2004) raised the question of whether researchers should extent, in some situations, the dyadic approach to international business relationships to a triadic approach (see also Phillips, Liu, & Costello, 1998). In many fields of business, a triad forms an essential setting for conducting business, and a third actor plays an important role as an intermediary between two actors. For instance, in relationships between a manufacturer and a distributor (e.g., Anderson & Narus, 1990; Rosenbro¨ijer, 1998), a manufacturer and an industrial client (e.g., Ha˚kansson & Snehota, 1995b), in a ‘‘service triangle’’ where customers, service organizations, and individual service providers are identified as the components of the service delivery process (e.g., Gutek, Groth, & Bennett, 2002), in third party logistics (e.g., Bask, 1999), and in between international corporations, and their clients (e.g., Havila, 1996). According to Simmel (in Wolff, 1950, p. 141), the triadic relationship setting is a structure completely different from the dyad, but not explicitly distinguished from groups of four or more. Therefore, studying triadic relationship settings may increase our understanding of relationships that are interconnected and that form a network of relationships. Ritter (2000, p. 319) argues that analyzing triads is sufficient to address the issue of interconnectedness between relationships. This view is correct because we can deconstruct a network into triads for analytic purposes, and researchers can measure network effects by using only a triad. Triad as an analytical tool may help us, for example, to understand the dynamics of power, loyalty, and commitment in service relationships (Andersson Cederholm & Gyimo´thy, 2005). Madhavan et al. (2004) argue that a triadic approach is especially relevant in relationships where an intermediary is involved, and all the three actors have direct connections with each other.

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The Importance of Adaptation in Business Travel Management As the second most controllable cost in a company after wages, accounting for 15 per cent of a company’s revenues, the spotlight is firmly fixed on this complex area [business travel]. (Upton, 2005)

Business travel management is ‘‘The corporate function of managing the business travel activities of an organization’s employees’’ (Douglas, 2008). (For this study I consider the following terms to be interchangeable: ‘‘corporate travel management,’’ ‘‘business travel management,’’ and ‘‘travel management’’). Business travel management is a service that should support the customer’s individual employees to complete their primary tasks (cf. Fitzsimmons & Noh, 1998). From the corporate buyer’s perspective, travel management is an important support function. Industry reports emphasize effective travel management programs that help to save travel costs. For example, travel budgets could be 25% higher without the efforts of a travel management department (Runzheimer International, 2000). Furthermore, a survey by American Express claims that US companies are losing $500m a year through failing to manage their hotel programs properly (Slaughter, 2009). For the business travel agency and for most service suppliers, business travel is the core business area. (The study uses ‘‘business travel agency,’’ ‘‘travel agency,’’ and ‘‘agency’’ interchangeably.) Firms evaluate suppliers and contracted services based on competitive bidding. However, the relationships require continuous interaction over time (cf. Axelsson & Wynstra, 2000; Wynstra, Axelsson, & van der Valk, 2006). Corporate travel management and its three core actors, the buyer organization, which in the current study is an international industrial enterprise, its business travel agency, and service supplier partners, form business triads and are the empirical settings of the study. The focus of their cooperation is the industrial enterprise’s business travel management. Managing corporate business travel is originally the responsibility of the corporate travel management function. However, the function cannot be successful without the support of all other firms involved in the process. The process relies on the interactive relationships between the core actors (Douglas & Lubbe, 2006). Business services typically need a higher degree of cooperation and more extensive interaction (Gro¨nroos, 2000; Gummesson, 1991), and thus more adapting than goods. In business travel management, an important requirement for the supplier and the travel agency is the ability to offer total solutions and geographical coverage, and to adapt them to the specific

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situation of the buyer organization. For the buyer organization, the critical ability is to interpret, translate and communicate the demands of internal users, as well as the ability to implement and leverage these services within the own organization (cf. Wynstra et al., 2006). Business travel represents a service that organizations purchase, but the users are the individual employees (cf. Gummesson, 1977; Ojasalo, 2007). In many business-tobusiness (B2B) services, an intermediary simplifies the network of suppliers, and the assortment of services by representing multiple suppliers and multiple services. When no single supplier can be expected to meet the full range of customer needs, then an intermediary service will be more desirable (Sarkar, Buttles, & Steinfield, 1995). In corporate travel management, the great challenge is aligning potentially conflicting goals of the various actors taking part in the process. Generally, the management of the company wants to keep expenses low. The travel agency wants to be guaranteed a firm stream of business, and the supplier wants a high yield for its services. Thus, every adaptation may not be beneficial for all the involved actors. Ultimately, the actors in corporate travel all strive to reach one common outcome: a successful corporate travel management program that will satisfy all the actors taking part in the process (Douglas & Lubbe, 2006). The Purpose of the Study Prior studies on adaptation concern manufacturing industry. Furthermore, the studies have a dyadic perspective. These are the two major gaps this study aims to fill. In addition, this study gives a comprehensive picture of an adaptation process by creating an analytical framework of adaptation in triadic relationship settings. Prior research on adaptation proves that most business relationships are based on a process of matching between the operations of two companies (e.g., Brennan, Turnbull, & Wilson, 2003; Canning & Brennan, 2004; Canning & Hanmer-Lloyd, 2001b, 2002; Schmidt, Tyler, & Brennan, 2007). However, the dyadic perspective on adaptation is insufficient when the relationship involves more than two actors. When a dyadic perspective is applied, important aspects of the relationships are neglected. First, the dyadic perspective ignores the network effects of adaptation. Adaptation research does not take into account that adaptive behavior may also be a response to different parties in the network, and that adaptation can involve several parties. Relationships interconnect, and a given relationship does not only affect itself and the two actors involved, but a given relationship may

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also have an effect on other relationships in a network (Walter & Ritter, 2003). Second, the different interaction patterns in triadic relationship settings differ if compared with dyads or larger groups. The fact that three actors interact complicates adapting. Third, coalition formation is general in triadic relationship settings (Caplow, 1956; Coser, 1977), which affects the adaptive behavior. In the service sector, the buyers and service suppliers develop services and service processes in cooperation (see, e.g., Gro¨nroos, 2000). Therefore, research on adaptation in the context of ‘‘pure’’ service industries is important (Brennan et al., 2003). The primarily service based studies by Halinen (1994) and Schmidt et al. (2007) discuss adaptation to some extent. However, the former study is not focusing on adaptation, and the latter study does not separate features of adaptations in services from those of goods. As Brennan et al. (2003, p. 1660) state: ‘‘There is a great deal still to be learned about adaptations in ‘pure’ service industries. The classification scheme appropriate to a manufacturing industry is likely to need amendment for a service industry. Whether this will be relatively cosmetic (‘service’ and ‘service delivery process’ for ‘product’ and ‘production process’) or more substantial is a matter for future research.’’ Prior research does not offer an all-inclusive picture of adaptation. Researchers find, for example, that adaptive behavior varies between relationship stages (e.g., Halle´n et al., 1991). Research on relationship development (cf. Halle´n et al., 1991; Ha˚kansson, 1982; Johanson & Mattsson, 1987) notices that the adaptation process is closely intertwined with the exchange process and coordination process. Brennan and Canning (2002), Brennan and Turnbull (1999), and Canning and Hanmer-Lloyd (2001b, 2002) pay attention to the decision-making levels in the adaptation process. Brennan and Canning (2004) and Canning and Hanmer-Lloyd (2001b, 2002) take a managerial point of view and modeled the process of adaptation with the focus on environmental adaptation. Specific adaptation by one firm toward another in the context of long term buyer-seller relationships is an everyday practicality, and clearly of importance to the understanding of business marketing (Schmidt et al., 2007). Therefore, a comprehensive framework is necessary which helps to investigate adaptations in the connection of everyday interaction processes. Attention should also be paid to how adaptations initiate, how the process advances and spreads to incorporate the entire relationship setting, and what are the outcomes of adaptations. The empirical setting of the current study is unique, consisting of the actual seller, buyer and intermediary counterparts in specific relationships.

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This specific setting allows research on each of the three dyadic relationships in the context of the other two, and from both ends, providing multiple perspectives on specific adaptations. Prior research sees the importance of gathering data from the actual counterparts of the relationships, that is, actors that are connected to each other at the time when the research is carried out. Data should be gathered from both ends of the relationship and from more than one respondent in each organization. This enables the consequent observation both within and between the partner firms (Brennan et al., 2003). As Brennan et al. (2003) notice, respondents tend to emphasize adaptation made by their own organization, and underestimate adaptation made by the counterpart. However, in most adaptation studies, their data presented does not link to specific adaptation between the parties. The study of Brennan and Turnbull (1999) links particular adaptations, but the study draws on the experience of only one party in detailing these. The studies of Brennan and Canning (2002) and Canning and Hanmer-Lloyd (2002) take a dyadic approach and examine the shared experience of both the supplier and customer companies in relation to specific adaptations. In order to fill the gaps, this study builds a comprehensive framework of adaptation in triadic business relationship settings in the service sector. The framework describes how adaptations initiate, how they progress, and what the outcomes of these adaptations are. Furthermore, the framework takes into account how adaptations spread in triadic relationship settings, that is how adaptations reach all three actors of the triadic relationship setting. Adaptation is not an event but a process (cf. Pettigrew, 1990; Van de Ven, 1992). Therefore, adaptation research requires a processual research approach. Both the time dimension and the multiplicity of actors taking part in the process are involved in the framework. The framework concentrates on the content, the context, and the process (see Pettigrew, 1990) of adaptation. These three constructs form the key understanding by giving answers to the questions of why adaptations occur, how they occur, and what are the outcomes. The study here creates the framework by seeking answers to the following sub-questions: 1. Nature of how do adaptations initiate in a triadic business relationship setting? (context) 2. How do adaptations spread over time in a triadic business relationship setting? (process) 3. How do adaptations change the structure of a triadic business relationship setting and its relationships? (content)

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ADAPTATION IN TRIADIC RELATIONSHIP SETTINGS Two schools of thought in the field of marketing influence this study: the interaction and network approach (INA) (see, e.g., Axelsson & Easton, 1992; Ha˚kansson & Snehota, 1995a), and the service marketing and management (SMM) approach by the Nordic School (see, e.g., Gro¨nroos, 1995). The INA and the SMM share the same concern for market relationships. The research background of the SMM is on the marketing of services (e.g., Gro¨nroos, 1979; Gummesson, 1977). The Nordic School emphasizes the process nature of the services, where buying and consuming services are integrated processes that cannot be separated (Gro¨nroos, 2007). The origins of the INA are in the empirical studies of supplier–buyer dyads in industrial markets, industrialization, and distribution channels (Easton & Araujo, 1994). The Nordic School noticed that marketing of services needed a different approach than what was typical in marketing of products. Likewise, the IMP-Group found that B2B marketing differs from consumer marketing (Mattsson, 1997). Fig. 2 illustrates the theoretical positioning of the current study (the business travel management ellipse), and the two approaches. The figure also aims to point up the INA’s and the SMM’s distance from the traditional marketing theories, which is mainly due to the emphasis on long-term relationships and relational interactions. The empirical context, business travel management, is a B2B service, where the core relationships form a small

Consumer marketing

Traditional marketing mix Service marketing and management

Business travel management

B2B marketing

Services

Fig. 2.

Interaction and network approach

Business Networks Manufacturing industry

Theoretical Positioning of the Research.

Goods

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network, which is a part of a larger network. The ellipse illustrating the SMM is closer to the consumer market section, because the SMM is more specialized in consumer markets, and concentrates on less complicated relationships, both regarding the substance and the functions (Holmlund & To¨rnroos, 1997; Mo¨ller & Halinen, 2000). The SMM also treats the embedded nature of the individual relationships to a limited extent in (Mattsson, 1997).

Business Relationships in Networks This section associates the triadic relationship setting to its wider network context, and gives basic understanding of the connections between the core actors. A business network is a set of connecting business relationships in which interfirm exchange is contingent upon exchange in other relationship (see, e.g., Anderson, Ha˚kansson, & Johansson, 1994). Relationships are connected to a network context through direct and indirect relationships, and thereby embedded in the network of other relationships. Single relationships exist both in themselves and through their connections to other relationships (Anderson et al., 1994; Ha˚kansson & Snehota, 2006). Granovetter (1992) distinguishes between relational and structural embeddedness. The structural aspect is especially relevant, because ‘‘treating a dyad as if it existed separately from its context may lead to the problem of ‘‘‘dyadic atomization’’’ (Granovetter, 1992, p. 33), a type of reductionism. However, we cannot explain a successful exchange without considering both the relational and structural dimensions. According to Nahapiet and Ghoshal (1998, p. 244), relational embeddedness contains the, ‘‘personal relationships people have developed with each other through a history of interactions.’’ Structural embeddedness, in turn, implies, ‘‘impersonal configuration of linkages between people or units.’’ Thus, structural embeddedness describes the ‘‘impersonal’’ nature of embeddedness, meanwhile relational embeddedness includes interpersonal trust and trustworthiness, overlapping identities, and feelings of closeness or interpersonal solidity (Nahapiet & Ghoshal, 1998; see also Moran, 2005). A basic model in the INA approach is the network model where business networks develop in a continuous process among companies embedded in a network. Business relationships consist of three elements and connections between them: ARA. Actor bonds, activity links and resource ties bind companies together. When business firms cooperate for a longer period, the need for adaptations in ARA is apparent (Ha˚kansson & Snehota, 1995a).

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Relationships develop when firms create activity links, resource ties and actor bonds between each other. Actor bonds reflect the interaction and adaptation processes between the companies (Ha˚kansson & Snehota, 1995a). They imply, for example, structural, financial, and social bonds. Actor bonds may also be economic, technological, geographical, time, knowledge, cultural, ideological, and psychological. Structural bonds (e.g., Dwyer et al., 1987; Morgan & Hunt, 1994) involve value adding problem solutions, which are not dependent on an individual service agent. Thus, they are especially relevant in the B2B context (Berry Leonard, 2000). Structural bonds emerge when organizations adapt to each other in economic or technical ways, for example, in product or process adaptations (Perry, Cavaye, & Coote, 2002; Sigala, 2007). The travel management process implies technology investments and creates structural and financial bonds. Social bonds are investments in time and energy between the individual employees. They imply ‘‘y positive interpersonal relationship and collaborative practices between the partners, although these can range from formal, organizational contacts through to informal, personal ones’’ (Sigala, 2007, p. 339, see also Perry et al., 2002). In B2B service context, social bonds are important, because customers evaluate the quality of the service based on human interaction between the individual actors. Financial bonds relate to negotiated purchasing volumes and investments, for example, in technology. They may also imply loyalty programs, which are common in the travel industry. Bonds may also be economic, legal, technological, geographical, time, knowledge, cultural, ideological, and psychological (Storbacka, Strandvik, & Gro¨nroos, 1994). Resource ties connect different resources, such as technological, material and knowledge resources of companies. Relationship development requires incremental investments of resources, which may take the form of several adaptations in the product and process areas (Ford & Ha˚kansson, 2006; Ha˚kansson, 1982). Travel management relies on resource allocation and technology integration between its core actors. Every activity is a link in a chain of activities. Activity links include, for example, technical and administrative links between cooperating firms. The activities may relate to production, or to exchange, or they may be financial or legal activities. Some activities may be basically technical, and the others social. Some of them are mainly mental, while others are primarily physical (Ha˚kansson & Johanson, 1993). The travel management process represents a chain of activities in the current case study. (I will describe travel management process in detail in the empirical part of the study.)

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The Network in Corporate Travel Management The industrial network researchers have introduced the concept of the triad (e.g., Havila, 1996; Laage-Hellman, 1989). Fig. 3 aims to illustrate in a simplified way one of the core triads of the current study, and the wider business network in which the triad is embedded. The triangle in the middle illustrates the focal triadic relationship setting and its three actors: the travel agency, service supplier, and the industrial enterprise. The double-headed arrows denote connections the actors have with each other. The focal actors have connections also with a number of other firms, for example, technology providers, credit card companies, and competitors. Furthermore, the travel agency and industrial enterprise are connected to several suppliers, and the supplier to several other travel agencies. The elliptical line enclosing the actors shows the imaginary boundary between the business travel industry and the wider network. The arrows pointing outside the core industry denote that the relationships exist also outside the travel industry, and to the fact that networks exist without limits (cf. Halinen & To¨rnroos, 2005). The travel management process looks different depending on whose perspective we apply, the buying developments in order to justify organization’s perspective, or the business traveler’s perspective. In the following, I will first address the organization’s perspective, and consequently the traveler’s. The focus is on the actors taking part in the process. The buyer may represent public or private sector, or an association. The key actors and decision makers in the buyer organization may be many: senior management, travel manager, travelers, and secretaries (Davidson & Beulah,

TA

= travel agency

SS

= service supplier

IE

= industrial enterprise = the focal triad = connection

= boundary between travel industry and the wider network

Agents

Other suppliers

Suppliers’ suppliers Other suppliers

Technology providers

TA

SS

Focal relationships

Credit card companies

IE Customer’s customers

Other suppliers

Competitors

Fig. 3.

Triadic Relationships Setting Embedded in the Wider Business Network.

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2003). Business travel agencies bring together corporate buyers and suppliers by delivering travel related services (Davidson & Beulah, 2003). Some of them also package their own services for sale. The business travel agency may handle the practical travel arrangement in several different ways, for example, through ‘‘an implant,’’ which is the agency’s satellite branch based directly on the corporate buyer organization’s premises. The agency may also serve through ‘‘an outplant’’ which is a main area office where dedicated staff are assigned to particular accounts. Other solutions may be a main branch where a pool of staff handles a range of different accounts. The agency may also implement an online booking service for the buyer organization (Davidson & Beulah, 2003). Furthermore, the buyer may choose to use the agency’s call center for travel bookings. Service suppliers provide, for example, transport, accommodation and catering, data solutions, charge cards, and a number of ancillary services. Corporate buyers may interact either directly with the service provides, or through travel agencies. Traditionally, an agency acts as an assembler of the various service suppliers (Davidson & Beulah, 2003). From the individual business traveler’s point of view, the different actors join the process at different times of the business trip. The employer may dedicate a person to book travel, for example, an assistant, who in turn makes the booking via a business travel agency. Some services are available through an in-company travel department, or via the internet. The travelers also access the ‘‘transit zone’’ with airline companies and other means of transport, and the ‘‘destination zone,’’ including, accommodation, catering, meeting and working facilities (Davidson & Beulah, 2003). Whichever perspective a researcher takes, the travel management process is an activity chain, where the firms adapt their resources and activities. Information exchange is fundamental to adaptation because the actors need knowledge of each other’s resources and activities. For example, the cooperating actors have to know the buyer organization’s travel patterns and destinations. Beyond this basic information, communication builds and coordinates relational norms through the exchange of personal, privileged, confidential, and relationship specific information (Cunningham & Homse, 1986; Ford, Gadde, Ha˚kansson, & Snehota, 2003; Ha˚kansson, 1982). Communication and information exchange is the ‘‘groundwork of relationships’’ (Andersen, 2001). Adaptation, in turn, usually leads to a growth in information exchange (Canning & Hanmer-Lloyd, 2002), and more intense contact patterns between the firms (Seyed-Mohamed & Wilson, 1989). The firms exchange information on market and technological costs of adaptation (Walter & Ritter, 2003).

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Triadic Business Relationship Settings The aim of this section is to give a comprehensive picture of the structural context of the study, the triadic relationship setting, and the connections between its actors. Direct and Indirect Connections in Triadic Relationship Settings A group of three actors is the smallest conceivable unit of analysis in which we can study connections between relationships (cf. Easton & Henriques in Havila, 1996; Ritter, 2000). This research focuses on a triadic relationship setting that exists at the firm level, and consisting of three independent actors (firms) that are connected to each other, either directly or indirectly, for the purpose of doing business. Thus, the same relationship setting may face situations where the three actors are directly connected and situations where they are indirectly connected to each other. In other words, two actors may cope with a situation without the immediate help of the third actor. However, sometimes all the three actors work together. In the business context, this may concern, for example, contract negotiations. The buyer may agree with the supplier to buy services via an intermediary. Both the buyer and the supplier, or one of them, discusses independently the terms of service delivery with the intermediary. However, sometimes a meeting where all three are present may be simpler to arrange, so as to discuss the terms on the spot. In a triad with indirect connections, each of the three actors may function as an intermediary between the other two (Havila, 1996, p. 26). This perspective reflects, ‘‘In addition to the direct relationship between actors A and B, there is a relationship between them that is derived from their common relationship to actor C’’ (Granovetter, 1973, p. 1363). Consequently, the relationship between actors A and C, and the relationship between actors C and B, have an impact on the relationship between actors A and B. A triad with direct connections functions as one relationship where social interaction is one entity (cf. Havila, 1996). Then, an increase in social interaction between, for example, between an intermediary and customer cause a decrease in social interaction between supplier and customer, and vice versa (Havila et al., 2004). Social psychologists discuss triads at an individual level, and define them as groups where ‘‘three individuals are observed to interact on successive occasions. These three come together repeatedly or communicate often, conversing, exchanging products, and so on’’ (Thibaut & Kelley, 1959, p. 191). The connections may also differ in strength. Granovetter (1973, p. 1363) argues that triads are common if

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the relationships between actors A and B, and A and C are strong relationships. Then we can expect also either a strong or a weak connection between the actors B and C. Whether the connections between the actors are direct or indirect, strong or weak, a researcher may investigate a triadic relationship setting from two perspectives. The focus may be on the actors, or on the relationships and their connections. In business network studies, connectedness is often the focus of interest (Holmen & Pedersen, 2000). The focus is usually not on the triad as a phenomenon, but on the specific connections between the three parties or the relationships in the channel or in the network. This approach treats the triad as a specific type of triad, as a serial triad, or as a system (Anderson et al., 1994; Havila, 1996). In the current study, the focus is on the triads as a phenomenon and on the connections between its actors. Research on Triads Havila et al. (2004) raise a question as to whether the researchers should, in some situations, extend the dyadic approach to international business relationships to a triadic approach (see also Phillips-Carson, Carson, Knouse, & Roe, 1997). Also Madhavan et al. (2004) argue that a triadic approach is especially applicable in cases where an intermediary is involved, and where all three actors have direct connection with each other. A triadic approach is specifically relevant in situations where the social interaction pattern indicates that the business relationship has the form of a triad (Havila et al., 2004). However, studies of triads with indirect connections can also apply a triadic approach. For example, structural hole studies where actor A connects B and to C, but B and C do not link directly to each other (Burt, 1992) are about triads. Prior research with three actors usually study separate dyads (e.g., Gutek et al., 2002; Phillips-Carson et al., 1997), and only few business studies with three actors have an explicitly triadic approach (e.g., Havila, 1996; Havila et al., 2004; Trimarchi, 2001). In the study here, a triadic approach denotes investigating dyadic relationships embedded in a triad, from all three firms’ perspectives, and in the context of each other. The approach provides an entirely new perspective to triadic relationships, and to adaptation research. This approach covers both direct and indirect connections between the actors, and reveals how actors are connected, and how the connections change in strength due to adaptations. Research on triads has its roots in sociology. For example, in the connection with social exchange networks, Thibaut and Kelley (1959), Cook and Emerson (1984), and Yamagishi, Gillmore and Cook (1988)

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have studied exchange relationships between three parties. Furthermore, distribution and marketing channel literature (Stern & El-Ansary, 1992), and export channel literature (Cateora, 1990) discuss connections between parties or relationships. Traditional marketing theory pays attention to intermediaries, and sees them as organizations that support exchanges between producers and consumers. Table 1 lists examples of relationships where the third actor often plays an important role between the other two, directly or indirectly, for example (1) between a buyer and a seller (Havila et al., 2004), (2, 3) between a manufacturer and an end user or an industrial client (Anderson & Narus, 1990; Ha˚kansson & Snehota, 1995b; Rosenbro¨ijer, 1998), (4) between different nationalities and cultures (Fang, 2001; Trimarchi, 2001), and (5) between a supplier and end user (Padro & Salle, 1994; Salo, Ta¨htinen & Ulkuniemi, 2008). (6) Also in organizations with internal centralized functions, a unit or

Table 1.

Examples of Studies with Three Actors.

Example of a Triadic Business Relationship (1) Buyer–seller–intermediary. (2) Manufacturer–distributor–end customer. (3) Manufacturer–distributor–industrial client. (4) Relationships between different nationalities and cultures. (5) Supplier–distributor–end user. Supplier–customer–end user. (6) Business organization–internal centralized function–end user. (7) ‘‘Service triangle.’’ (8) Third party logistics. (9) International corporation–sales subsidiary/agent– client. (10) Supply chain and logistics. (11) Employee–trade union–employer. (12) CEO candidates–executive search firms–firms searching CEO. (13) Buyer–reference, word-of-mouth, experience, expectations, perceptions–seller.

Researcher(s) Havila et al. (2004) Anderson and Narus (1990); Rosenbro¨ijer (1998) Ha˚kansson and Snehota (1995b) Fang (2001); Trimarchi (2001) Padro and Salle (1994) Salo et al. (2008) Andersson Cederholm and Gyimo´thy (2005) Phillips Carson et al. (1997); Gutek et al. (2002) Bask (1999); Larson and Gammelgaard (2001) Havila and Sandstro¨m (1993); Havila (1996) Phillips et al. (1998); Choi and Wu (2009) Phillips-Carson, Carson, Bierkenmeier, & Toma (2006) Khurana (2002) Salminen (2001)

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an individual actor may have an important role between the end user and the service or product supplier (Andersson Cederholm & Gyimo´thy, 2005). (7) In the service triangle (Gutek et al., 2002; Phillips-Carson et al., 1997), which is a triad of a customer, service organization, and individual service provider, these three actors are the components of the service delivery process. Furthermore, three actors are involved (8) in third party logistics (Bask, 1999; Larson & Gammelgaard, 2001), (9) in relationships between international corporation, sales subsidiary or agent, and their clients (Havila, 1996; Havila & Sandstro¨m, 1993), (10) in supply chain and logistics (Choi & Wu, 2009; Phillips et al., 1998), and (11) in relationships between employee, trade union, and employer (Madhavan et al., 2004; Phillips-Carson et al., 2006). Khurana (2002) examine (12) the intervention of an executive search firm in CEO employment. Furthermore, (13) references, word-of-mouth, experience, expectations, and perceptions may also, implicitly or explicitly influence a dyadic relationship (Salminen, 2001). Different Types of Triads The triadic relationship setting between supplier, buyer, and an intermediary can function like a series of two dyads (serial triad), or like a group (unitary triad). In both cases, all three parties interact on successive occasions, and meet each other face-to-face between certain intervals. The difference is the strength of the relationship between the supplier and the customer (Havila, 1993, 1996). In a serial triad, one dyadic exchange precedes another, and the first one has an impact on the second one. The focus is then on the whole, and the specific connections between the parts of the whole. We can also assume a boundary between the parts. Assuming the boundary allows us to say which parties belong, and which parties do not belong to the system (Havila, 1996). A serial triad represents the traditional distribution arrangement. The position of the intermediating actor is defined in relation to the other two actors. The position also involves specific tasks, which are performed in a predetermined order (cf. Havila, 1996). A unitary triad is like a group, which is a central research object in social psychology and sociology (e.g., Homans, 1951; Thibaut & Kelley, 1959). In a unitary triad, every actor interacts with every other actor to more or less the same extent, and each of the three parties functions as an intermediating actor between the other two. The relationship between A and C and the one between B and C influence the relationship between A and C (Homans, 1951, p. 248). The boundaries of the group may be more or less clear. In small groups, a specific feature is the ability of the actors to distinguish the other actors of the group. The group behaves as one unit and cooperates to

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reach common goals (Thibaut & Kelley, 1959), as the example by Homans (1951, p. 135) illustrates: Two men reward each other, and thus cooperate with each other, when each provides the other with a service that he could not do for himself at all or could not do at such low cost. Sometimes the services the two men provide are similar, as when both put their weight into moving a rock neither could move alone. But often the services are different, which means that each man becomes a specialist as far as their cooperation is concerned.

In business relationships, this leads to differentiation of the tasks in different areas within the group. The position of the intermediating actor is unique in the way that this actor may perform the special tasks (Havila, 1996). However, unlike in a serial triad, the tasks, or their order in time is not predetermined. Furthermore, the positions in a group are defined in relation to the whole. In bridge triads (see, e.g., Stern & El-Ansary, 1992) the sellers and the buyers are not involved directly with each other, and the exchange tends to be rather dyadic in nature. The intermediary may have connections with a supplier whom the buyer would like to deal with, but to whom the buyer has no direct connection. The relationship between the buyer and the supplier may be ‘‘inadequate or inappropriate.’’ In the bridge triads, the intermediary may bind the network actors together, or the intermediary may provide a barrier for regulating a buyer’s or seller’s participation in the network (Smith & Laage-Hellman, 1992). Triadic Relationship Settings in Business Travel Management Firms may establish business relationships for the time being, or for a predetermined period. Caplow (1968, pp. 5–7) distinguishes between three types of business triads: Terminal, continuous and episodic business triads. Adaptations are most obvious in continuous triads, where the actors are related to each other for the time being, for example, for the period agreed in the contract. Adaptations occur then in order to develop the relationship on a long-term basis. However, adaptations are probable also in episodic triads. According to Ta¨htinen (2001), an episodic triad dissolves when the time period is over, and adaptations may take place in order to facilitate the cooperation during the certain period. Actors of a terminal triad do not cooperate voluntarily, they prefer operating independently. In terminal triads, the actors are conscious of the fact that their relationship has continuity, not only in the

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past, but also in the future. The circumstances may not allow them to end the relationship. The element of continuity is not solely related to the actors’ wishes for the future, but also the fact that the present interactions affect future interactions (Caplow, 1968; Ta¨htinen, 2001). Adaptations in a terminal triad aim to cope with the current situation. The triads I investigate in this study bear a resemblance to continuous triads, because contracts are negotiated for a certain period. However, when examining a business triad and its relationships, we have to become aware of the fact that the nature of the triad can change over the course of time. A relationship that started as episodic in nature may change into a continuous one, if the intended purpose of the relationship changes (Ta¨htinen, 2001). In business travel management, the triadic relationship setting of a buyer organization, service supplier, and business travel agency represents a traditional way to manage corporate travel (see Fig. 4). A corporate buyer organization may also choose to arrange business travel directly with the service suppliers without a business travel agency, and use, for example, a payment card company to provide reporting of travel costs. The triad may be a unitary triad, which functions as a group, or a serial triad with dyadic functions, depending on the role of the business travel agency (cf. Havila, 1996). Travel management may remind of a bridge triad, where a business travel agency acts as a distributor. The corporate buyer may then have no direct contact with the service suppliers. Instead, the business travel agency manages the suppliers for the buyer organization. Fig. 4 illustrates direct and indirect connections between the supplier and buyer. The Role of Intermediaries In sociological triads, the third actor may have different roles. The third actor may play the role of intermediary in respect of the other two, helping, through his own neutrality, to inhibit the dissolution of the group. The

Business travel agency

Buyer organisation Buyer organisation

Business travel agency

Service supplier

Fig. 4.

Travel Management Triads.

Service supplier

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mediating actor may also act as a tertius gaudens (the third who rejoices), seeking to turn to his own advantage a disagreement between the other two. Furthermore, through a strategy of divide et impera (divide and rule), the mediating actor may intentionally create conflicts between the other two in order to attain a dominant position or other gains (Caplow, 1968; Simmel in Wolff, 1950). In business context, intermediates traditionally pull together the needs of buyers and sellers by gathering together several sellers and several buyers with the same needs. Furthermore, the needs may be similar, but not identical (cf. economies of scale and scope). When relying on an intermediary, the sellers’ needs may concern, for example, marketing, service delivery, supply chain management, and risk assumption functions. The buyers’ needs may have to do with advice, assortment, customization, price, time and place effectiveness, and post sales services (Anderson & Anderson, 2002). In business triads, the intermediaries can expand the range of potential trading partners through their contacts. The two actors on both sides of the exchange prefer to gain information through intermediaries that they know. The role of the intermediary can be critical in bringing two parties together by emphasizing their shared interests and the potential for a mutually beneficial transaction (cf. Simmel in Wolff, 1950). The Trusted Third Parties. Trust gains a lot of attention in adaptation research (see, e.g., Canning & Hanmer-Lloyd, 2001a; Halle´n et al., 1991; Jeffries & Reed, 2000; Mukherji & Francis, 2008; Walter & Ritter, 2003). However, the studies treat trust generally as a dyadic concept, even though a third party’s judgment may formulate the assumptions of the counterpart’s trustworthiness. For example, ‘‘Company A may perceive the performance of supplier B as poor, since supplier B does not deliver the necessary material and components on time. Furthermore, customer C may perceive the performance of supplier B as deficient, since company A blames the supplier for its inaccurate deliveries that cause unreliable deliveries to customer C. Supplier B may judge the trust toward company A as troublesome, since the orders of materials and components are unreliable, which cause ups and downs in supplier B’s manufacturing processes’’ (Svensson, 2004, p. 167). Morrison and Firmstone (2000) refer to the ‘‘trusted third parties’’ in the management of risk by trust. Trust can increase considerably when the individual or organization has the right to appeal to a third party to ensure the enforcement of a performance or an offer. The third party may level out the fear of possible nonperformance or misunderstanding. Economic

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trust will exist when, for example, continuous interactions that lack social interaction, develop in a relationship where an intermediary deals with a buyer using open terms rather than relying on a contract for payment. Such activities reduce the potential for costs in transactions, and raise the degree of economic trust between interacting parties (Trimarchi, 2001). In the service context, Parasuraman, Zeithaml, and Berry (1985) introduced trust as a critical success factor in service relationships. When establishing the determinants of service quality, they suggested that customers should be able to trust their service providers, and feel safe in the dealings with them. As services are intangible, the customer will have to trust that the service provider can perform the service well before she chooses the service for the first time. Coulter and Coulter (2003) suggest that customer’s knowledge of, or familiarity with the service industry in question affects the variables on trust, and conclude that customer knowledge, or familiarity, is an important mediator of the effects of both ‘‘performancerelated’’ (e.g., competence) and ‘‘personality-related’’ (e.g., empathy) characteristics on trust. The performance-related characteristics have a greater effect on trust when customers are familiar with a particular service industry, and the personality-related characteristics have a greater effect on trust when customers are unfamiliar with a particular service industry. In business settings, intermediary may mediate trust at three levels; interpersonal, intraorganizational, and interorganizational trust (Basu, 1986). This study concerns adaptation between organizations, but it is the individuals that interact with each other, and individuals as members of organizations have trust (or mistrust), rather than the organizations. Thus, both interpersonal and interorganizational levels of trust are relevant in this study. They are related but separate concepts, and they play different roles in relationship performance (Zaheer, McEvily, & Perrone, 1998). When examining trust in interorganizational relationships, we have to investigate both levels of trust simultaneously. The outcomes of trust may be different when we consider the boundary-spanning individual separately from the rest of the organization. Likewise, interorganizational research examining trust solely at the individual level may be missing important institutionalized effects of interorganizational trust (Zaheer et al., 1998). Interorganizational trust is definable as, ‘‘the firm’s belief that another company will perform actions that result in positive outcomes for the firm, as well as not take unexpected actions that would result in negative outcomes for the firm’’ (Anderson & Narus, 1990, p. 45). Interpersonal trust in the organizational context is ‘‘trust placed by the individual boundary spanner in her individual opposite member’’ (Zaheer et al., 1998, p. 140).

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Interpersonal trust may be either cognitive-based, or affect based. Cognitive based trust reflects technical competency, and is based on predictability, past behavior, dependability, and fairness. Affect-based trust is rooted in emotional attachment and care and concern for the other party’s welfare (Jeffries & Reed, 2000). Jeffries and Reed (2000) argue that organizational trust remains purely cognitive in nature. However, personal relationships have the potential to apply powerful influences on organizational buying behavior and relationship management (Bennett & Gabriel, 2001; Blois, 1997, p. 379). Furthermore, strong and trusting personal relationships can solve problems and difficulties that arise during the service process. Services are generally customized and people-intensive, and some level of trust is necessary for an exchange to occur. Thus, services enhance long-term relationships (Halinen, 1996; Liljander & Strandvik, 1995). Prior research shows varying results of the sequence and the importance of interorganizational trust and interpersonal trust. Ring and Van de Ven (1994) argue that high interorganizational trust and low interpersonal trust can coexist in the same relationship if boundary-spanning individuals come and go, whereas the institutionalized structure and processes accompanying interorganizational trust are more stable and enduring. Morrison and Firmstone (2000) make a distinction between personal trust and abstract trust. Abstract trust is trust in social systems, including organizational trust. Abstract trust operates across time and space, enabling trust to endure without personal relationships. The partners demonstrate their trustworthiness by committing themselves to the exchange relationship, and one important way of showing commitment is to adapt to the counterpart (Blankenburg Holm, Eriksson, & Johanson, 1999). Morgan and Hunt (1994, p. 23) define relationship commitment as, ‘‘an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it.’’ The committed party believes that the relationship is worth working on to make sure that the cooperation endures indefinitely. Empirical findings show that trust and commitment are significantly positively related, such that the greater level of trust, the greater level of commitment (e.g., Anderson & Narus, 1990; Morgan & Hunt, 1994; Nielson, 1998). The social exchange process (Blau, 1964) entails a causal circularity between commitment and trust. Holmlund (1997), as well, notes that the order between trust and commitment is not obvious. She argues that these two may be both as prerequisites for, as well as consequences of each other. The party that is least committed to a relationship is likely to control the relationship negatively by hindering its development, and the party that is

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most committed enhances the positive development of a relationship (Ha˚kansson & Ford, 2002). However, in business triads with an intermediary, trust rather than commitment may the outcome of the atmosphere of the relationships. The fact that an intermediary exists in the relationship is an act of commitment (Havila et al., 2004). Disintermediation and Re-Intermediation As e-commerce spreads, new business models replace the old ones. The internet can change dramatically the balance of power among clients, distributors, manufacturers and service providers (Leek, Turnbull, & Naude, 2003). Some actors may experience an increase in their power and profitability, and others may experience the reverse, or even find that the other actors bypass them. In general, the power has shifted from the seller to the buyer (Chircu & Kauffman, 1999; Morris & Morris, 2002; Po¨ltz, 2000). Tapscott (1996, p. 195) argues that intermediaries ‘‘need to move up the food chain to find new ways to create value to customers.’’ Traditional intermediaries must either adjust or face elimination according to the intermediation–disintermediation–re-intermediation cycle (Chircu & Kauffman, 1999; Morris & Morris, 2002). In this cycle, intermediation occurs when a firm begins as an intermediary between buyer and seller, and the relationship involves three actors. Disintermediation begins when the buyer and the seller eliminate an established intermediary, and the relationships return to a dyadic relationship. Re-intermediation takes place when a once disintermediated actor is able to reestablish its role as an intermediary (Be´dard, 2002; Lu, Deng & Wang, 2007; Sarkar et al., 1995; Sen & King, 2003). At the beginning of the internet revolution, electronic commerce brought the idea of disintermediation to many suppliers. Instead of going through traditional distribution channels, which have some type of intermediary (such as a distributor, wholesaler, broker, or agent) suppliers may now deal with every customer directly, for example, via the internet. One important factor is a decrease in the cost of serving customers directly (Lu et al., 2007; Malone, Grant, Turbak, Brobst, & Cohen, 1987; Sen & King, 2003). Electronic commerce was a way of cutting costs or increasing profits. Suppliers supposed that the internet would dis-intermediate intermediaries, and force them out of business by giving the suppliers the opportunity to sell directly to users (Anderson & Anderson, 2002; Sarkar et al., 1995). However, many suppliers faced problems such as the high cost of handling to distribute small orders, dealing with massive amounts of customer service issues, and the time spent on dealing with retailers and

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other partners. Suppliers did not consider that they had to spend massive resources to accommodate pre sales and post sales questions of individual consumers. Before disintermediation, those distributors acted as salespeople for the producers. After disintermediation, somebody had to handle those customers. Furthermore, suppliers did not consider that selling online has high costs, for example, developing a web site, maintaining the information and marketing expenses to draw online customers. Many suppliers did not consider the fact that being the only source of their products or services for online consumers is similar to having only one store in a city selling a particular brand. Many thousands or even millions of web distributors are pushing their own products and spending money to draw customers to their web sites (Anderson & Anderson, 2002; Sarkar et al., 1995). In re-intermediation, a traditional industry actor has incentives to develop e-commerce capabilities and start competing in electronic markets as well. Important features for the re-intermediating actor are the technological innovation and the assets the intermediary has in a traditional market, and its ability to reconfigure them in the e-commerce enabled marketplace (Chircu & Kauffman, 1999). New network-based intermediaries are called ‘‘cybermediaries.’’ Cybermediaries serve as a link between the suppliers and internet users (Lu et al., 2007; Morris & Morris, 2002; Sarkar et al., 1995). However, Chircu and Kauffman (1999) argue that traditional intermediaries have a better opportunity to reintermediate in the long-run, and even strengthen their position in the market as new intermediaries. Furthermore, the power of intermediaries, which often originates from their current direct relationship to end customers, may force suppliers to abandon efforts to fully bypass intermediaries for fear of causing retaliation (Sarkar et al., 1995). Sarkar et al. (1995) use economic, social and institutional logic to oppose the notion that e-commerce will lead to the disappearance of intermediaries. In a situation where transaction costs of the interactions between intermediary and customer, and between intermediary and supplier are lower than costs of direct interaction between supplier and client, an intermediary is necessary. In the opposite case, the customer deals directly with the supplier. However, transaction costs include not only monetary cost, but also everything needed to complete a transaction. The supply becomes more complex and fragmented, which creates opportunities for new types of problem solvers (Anderson & Anderson, 2002). Malone et al. (1987) argue that the impact of information technology (IT) on relationships between suppliers and buyers lowers transaction costs and supports arms-length

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relationships between the actors. Clemons, Reddi, & Row (1993) and Hart and Estrin (1991) show contradictory results regarding the outcome of IT use. The explanation for these conflicting results is that different types of IT applications support different types of relationships (Gallivan & Depledge, 2003). Bunduchi (2005) provides a review of studies conducted in IT and electronic markets and their impact on business relationships. Most of these studies apply the transaction cost economic (TCE) framework (Williamson, 1975, 1985), where the unit of analysis is the transaction, while in social exchange theory the unit of analysis is the relationship. Thus, the TCE fails to account for social exchanges such as trust and power. The travel industry is a forerunner in the field of IT, and one of the most interesting sectors in terms of the possibilities offered by the internet (Ancar, 2003). In the business travel industry, online travel created gradually new business models that changed the relationships between the key actors. Airlines have started to exploit various channels to sell flight tickets directly through their ticketing offices, call centres, their own website portals and to corporate clients directly. The indirect channels are the traditional business travel agencies, online travel agents, tour operators and consolidators. Global distribution systems (GDSs) represent indirect channels, which support a single point of access for reserving airline seats, and other travel related services. Buyers traditionally book hotels directly. The internet offers a direct channel also to airlines, and they encourage business travelers to buy tickets directly. However, to estimate the total cost of a booking, buyers need to take into account the average time spent on making a booking through each channel. People spent different amounts of time to make the same travel arrangements, depending on the nature of the trip, skills of the people, and the efficiency of the source. According to a survey by The Association of Corporate Travel Executives (in Alamdari & Mason, 2005), when the booking time is given a monetary value (50–75 USD/hour, 500 USD/ticket), the most cost-efficient booking channel is an internet travel agency, followed by a conventional business travel agency.

The Concept of Adaptation The aim of this section is to identify concepts, theories, and models to define what adaptation in the triadic relationship settings is. Even though adaptation is a well recognized concept specifically in the interaction and network literature, no single accepted definition of what adaptation denotes

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is available. As Brennan et al. (2003, p. 1638) note: ‘‘The unqualified use of the term adaptations in the marketing literature is problematic, since it would not be unreasonable to define marketing itself as the process of adapting an organization to meet the needs of the customer.’’ The researchers use dyadic concepts, such as ‘‘interfirm adaptation,’’ ‘‘dyadic adaptation,’’ and ‘‘buyer-seller adaptation.’’ This turns the attention to adaptations in a particular buyer-seller relationship instead of adaptations in a macronetwork. Brennan and Turnbull (1996, p. 182) offered one of the first definitions of interfirm adaptation. This definition refers to adaptation as a behavioral modification: Buyer-seller adaptations are defined as behavioral modifications made by one company, at the individual, group, or corporate level, to meet the specific needs of another organization. (Brennan & Turnbull, 1996)

Canning (1999, p. 35) provides a more elaborated definition that specifies the needs as ‘‘new’’ needs. Furthermore, instead of meeting the needs of ‘‘another organization’’, actors adapt to meet up the needs of the ‘‘specific relationship.’’ Canning also adds the reciprocity (‘‘one or both parties’’) to her definition: ‘‘modifications at the individual, group or corporate level which are carried out by one or both parties in an exchange relationship in order to suit new needs or conditions, and which are designed initially for that specific relationship’’ (Canning, 1999, p. 35). For example, Canning and Hanmer-Lloyd (2002), Brennan and Canning (2002), and Canning and Brennan (2004) have used Canning’s definition in later studies. The definition by Brennan et al. (2003, p. 1639) adds organizational modifications to the definition, and leaves out the reciprocity: ‘‘Dyadic adaptations are defined as behavioral or organizational modifications at the individual, group or corporate level, carried out by one organization, which are designed to meet the specific needs of one other organization.’’ Hagberg-Andersson (2007, p. 33) expresses the reason for adaptations. She sees adaptations as offensive or defensive actions. Furthermore, her contribution to the earlier definitions is that of the notion of an adaptation to meet the needs of one’s own organization: Adaptations should be regarded as offensive or defensive modifications, carried out by one or two parties to meet the needs of one’s own or another individual or organization. (Hagberg-Andersson, 2007, p. 33)

However, the definitions lack the impression of the content of adaptations, of which a number of researches give examples (e.g., Cannon,

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Achrol, & Grundlach, 2000; Ha˚kansson, 1982). For example, the early IMP research (Ha˚kansson, 1982) describes adaptation with the following example: ‘‘Another important aspect of the relationship is the adaptations which one or other party may make in either the elements exchanged or the process of exchange. Examples of this are adaptation in product, in financial arrangements, in information routines, or social relations’’ (Ha˚kansson, 1982, p. 18). Cannon et al. (2000), in their turn, refer to inventory practices, product redesign and co marketing programs as the objects of adaptation. Several researchers mention adaptations in human interaction, information exchange and learning (cf. Brennan & Turnbull, 1999; Brennan et al., 2003; Schmidt et al., 2007). Marketing research discusses a number of concepts closely related to interfirm adaptation (see Table 2). Many of these concepts share the notion of (1) ‘‘investment,’’ or ‘‘input’’ that are relationship specific, and that firms cannot easily transfer to another relationship. Like interfirm adaptations, these investments and inputs are not marketable, or at least their value in other transactions is less than in the particular use for which they were indented (Ford, 1980). For example, Wilson and Mummalaneni (1986) use the concept of (2) irretrievable investments for investments that have no or less value in another relationship. Sometimes researchers use transaction-specific investment (3) as a synonym to adaptation. However, in transactions cost analysis (Williamson, 1975, 1985) the unit of analysis is transaction, a transfer of services or goods between organizations including make-or-buy decisions, meanwhile in adaptation the unit of analysis is the relationship. From a TCE’s perspective, adaptations create nonmarket assets, which render the adapting firm exposed to opportunistic behavior by its counterpart (Brennan & Turnbull, 1996). (4) Easton and Araujo (1994) propose the concept of relationship investment, which required in exchange relationships, and which are the sources of the returns over time. Easton and Araujo offer a hierarchy of four relationship investment categories: minimal investment, relationship specific investment, relationship development investment, and secondary investment. (5) Minimal investment is the minimum investment required to do business (cf. Williamson’s transaction-specific investment). Minimal investment is a unilateral investment in assets that are committed to a limited choice of business opportunities. (6) Relationship specific investment concerns, for example, adaptation of products and production processes, delivery procedures, and social codes to those of the counterpart’s. In (7) relationship development investment, both parties invest in the development of the

(13) Relationship specific asset

(12) Commitment input

(11) Pledge

(10) Flexibility/adaptability

(9) Integration

(7) Relationship development investment (8) Secondary investment

(5) Minimal investment (6) Relationship specific investment

(2) Irretrievable investment (3) Transaction specific investment (4) Relationship investment

(1) Investment

Concept

Both parties invest in the development of the relationship resources in order for the relationship itself to create new resources. One or both actors use the resources created within the relationship to develop new business opportunities. Closer adaptation, facilitating co-ordination of activities and processes that are more efficient. Capability to adapt to future changes. Short-term responses to sudden and unanticipated customer needs. Actions undertaken by channel members that demonstrate good faith and bind the channel members in the relationship. The credibility and proportionality of resources inputs committed to the relationship. Physical or human assets that are dedicated to a particular relationship and cannot easily be redeployed.

Grundlach, Achrol, and Mentzer (1995) Heide (1994)

Jahre and Fabbe-Costes (2005); Cannon and Homburg (2001) Anderson and Weitz (1992)

Jahre and Fabbe-Costes (2005)

Easton and Araujo (1994)

Investment required in exchange relationships and the sources of the returns over time. The minimum investment required to do business. Adaptation of products and production processes, delivery procedures, and social codes.

Researchers Johanson and Mattsson (1987); Easton and Araujo (1994); Halle´n et al. (1991); Halinen (1994) Wilson and Mummalaneni (1986) Williamson (1985)

Definition

A Summary of the Selected Concepts Related to Adaptation.

Processes through which resources are committed in order to create, build, or acquire other resources which can be used in the future. The firm purposefully adapts or changes its resources in order to make the relationship more beneficial. Investments that have no or less value in another relationship. Transfer of services or goods between organizations.

Table 2.

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relationship resources in order for the relationship itself to create new resources. Relationship development investments are more difficult to measure, but they are also more likely to be valuable. Firms use the relationship as a resource to create other resources, to produce adaptations, to find new ways of doing things, and to access third parties (Easton & Araujo, 1994). The concept of adaptation of the current study includes relationship investment and its three categories. The fourth type of relationship investment, (8) secondary investment, takes place when one or both actors use the resources created within the relationship to develop new business opportunities. Secondary investments are not necessarily relationship specific. Furthermore, secondary investments may, or may not affect the relationships, which indirectly encourages their emergence (Easton & Araujo, 1994, p. 79). In the current research, I regard adaptation as ‘‘triadic specific’’ adaptation which is designed to develop relationships in the specific triadic business relationship setting. Halinen (1994, p. 226) divides adaptation into two further dimensions, namely investing and adapting. She defines adapting as an activity where the firm adapts itself to the requirements of the other party or to the demands of the contextual setting and eventual changes in it. Thus, she sees adapting as a passive activity, implying the idea that the firm abides by the current state of affairs, and that the firm probably misses some business opportunities. Investing is an activity where the firm purposefully adapts or changes its resources in order to make the relationship more beneficial (ibid.). In the IMP-research, investment means an act in which resources are committed to the future of a relationship beyond what is routinely expected. Such investments may be, for example, the purchase of dedicated machinery, and the locating of a staff member on customer premises. Services are developed in cooperation, and suppliers can exactly define what is beyond usual routines. Furthermore, according to the IMP-approach, investments imply also adaptations (McLoughlin & Horan, 2000), and investment usually refers to a purposeful activity. (9) Brennan and Turnbull (1999) describe integration as closer adaptation, which facilitates coordination of activities and processes that are more efficient, and which implies large-scale adaptations (10) Flexibility and adaptability refer to the capacity to adapt to face future changes (Jahre & Fabbe-Costes, 2005). Supplier flexibility is the degree to which the supplier is willing to make changes to accommodate the customer’s changing needs. This refers typically to short-term responses to sudden and unanticipated customer needs (Cannon & Homburg, 2001).

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(11) Pledge (Anderson & Weitz, 1992) is a channel relationship concept. Pledge refers to actions that the channel members undertake in order to show good faith and to bind the partners in the relationship. (12) Commitment input (Grundlach et al., 1995) refers to the credibility and proportionality of resource inputs committed to the relationship. Heide (1994) discusses (13) relationship specific physical or human assets that are dedicated to a particular relationship and that firms cannot easily redeploy. In summary, most of the concepts presented above share the notion of relationships specificity, referring to something that is not as such transferable to other relationships. However, the definitions of adaptation and the concepts related to adaptation are too narrow to describe the diversity of the phenomenon on which this research is focusing. For example, investment is a purposeful activity, excluding thus adaptation as a socialization process or as an evolutionary process (cf. Brennan & Turnbull, 1999). Integration (Jahre & Fabbe-Costes, 2005) may be an outcome of adaptation. Flexibility refers to short-term action, whereas adaptation implies both short time and long-time response (Cannon & Homburg, 2001; Jahre & Fabbe-Costes, 2005). Thus, the content of adaptation is wider than in the definitions above. Furthermore, adaptations are not always profitable for all actors involved in the relationship (Anderson & Weitz, 1992; Easton & Araujo, 1994; Halinen, 1994). Research on Interfirm Adaptation The early IMP studies introduced the concept of adaptation (see, e.g., Ford, 1980; Ha˚kansson, 1982), and the concept is still actual among IMP-minded researchers. The interaction model by the IMP group (Ha˚kansson, 1982) regards adaptation as an important aspect of the relationship. Table 3 presents a selection of research focusing particularly on interfirm adaptation. (1) Halle´n et al. (1991) conducted the seminal research focusing particularly on interfirm adaptation. In a quantitative study in the manufacturing industry, Halle´n et al. tested propositions based on the social exchange theory and resource dependence theory, and find that adaptations are associated with the power balance in the relationship, mutual adaptation leads to trust building, product complexity may cause the customer’s dependence on the supplier, andthe customer’s importance may lead to supplier’s dependence on the customer. Furthermore, Halle´n et al. found a systematic relationship between the extent of adaptive behavior within a relationship and the development stage of the relationship. The study draws on an extensive international IMPproject, and focuses on buyers’ perspective on adaptation.

(8) Brennan and Canning (2002)

(5) Ahmad and Buttle (2001) (6) Canning and Hanmer-Lloyd (2001b) (7) Canning and Hanmer-Lloyd (2002)

(3) Jeffries and Reed (2000) (4) Cannon et al. (2000)

(2) Brennan and Turnbull (1999)

(1) Halle´n et al. (1991)

Researcher(s)

Major Findings

Provides the intrafirm and interfirm adaptations process model, and the combination of the two. Motivations for adaptations. The adaptations are primarily for the benefit of the customer, and initiated by them. The behavior and experience of managers involved in the interfirm process can hinder or facilitate effort to realize the adaptations (trustworthiness).

Contracts and social norms are effective in enhancing supplier performance individually and in combination. Customer retention primarily occurs by bonding customer at financial, social and structural level. The need to understand adaptation as a process: the events, activities and stages. Gives guidelines for managing the process of environmental adaptation. The process of adaptation; coordinated effort between information exchange, negotiation, commitment, and execution phases. Managerial behavior, managers’ experience, and credibility affect the progression.

Empirical Context Perspective

Relational contracting. Contract managers. A variety of branches. Buyers. Chemical industry. Buyers. Telecom, plastics, cable, label supplier. Suppliers and customers. Telecom, plastics, cable, label supplier. Customers and suppliers. Specific adaptations. Automotive, telecom, IT. Buyers and sellers (specific adaptations).

Automotive, telecommunication. Suppliers.

Manufacturing sector. Buyers.

A Selection of Research Focused on Interfirm Adaptation.

Adaptations are associated with the power balance in the relationship. The actor with weaker power would have to adapt to the stronger actor. Product complexity leads to customer dependence; mutual adaptation is a consequence of trust building. Differences in scale and formality of the adaptation. Adaptations tend to increase levels of trust and commitment. Adaptive behavior is influenced by the power balance, but does not alone explain it. Too much trust is as bad as too little.

Table 3.

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(13) Schmidt et al. (2007)

(10) Walter and Ritter (2003) (11) Canning and Brennan (2004) (12) Hagberg-Andersson (2007)

(9) Brennan et al. (2003)

Researcher(s)

Classification system. Mutual adaptation is a component of the trust-building process, and unilateral adaptation a response to the power relationship. Supply firms adapt more for more powerful customers, and customers who offer reciprocal adaptation. Adaptation is a major driver for direct value creation. Commitment is an important driver for indirect functions. Adaptation of the way in which a firm organizes resources in order to achieve its goals is a central feature of strategy content and processes. Mutual dependence between the buyer and the supplier/unequal degree of dependence Differences in adaptation within intentionally created networks and evolutionary networks. It is not usual to calculate explicitly the costs and benefits of adaptation decisions. Managers often neglect and under-value the role of intangible adaptations. Adaptations are not used for explicit relationship building purposes.

Major Findings

Table 3. (Continued )

Mechanical engineering. Suppliers. IT and telecom. Sellers and buyers. Manufacturing industry. Suppliers. Partly buyers. Transport engineering, printing and pharmaceutical industries. Buyers and sellers.

Automotive, telecommunication. 1st phase: Buyers and sellers. 2nd phase: Sellers.

Empirical Context Perspective

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(2) Brennan and Turnbull (1999) draw conclusions about the forces that drive adaptive behavior in buyer–supplier relationships, and reflect on the meaning of these findings for managers responsible for business relationship management. Brennan and Turnbull categorize adaptations according to their scale and formality, and discover the connection between adaptation and trust, concluding that adaptations tend to increase levels of trust and commitment in the relationships. Brennan and Turnbull agree with Halle´n et al. (1991) about the importance of power of the relationships, but they state that power alone does not explain adaptive behavior. Brennan and Turnbull prove that supplier’s managerial orientation affects supplier adaptation, and that relationship marketing orientation enhances adaptive behavior. Brennan and Turnbull found positive association between relationship age and adaptations. They gathered qualitative data both from buyers and from suppliers in the automotive and telecommunication industry, but the analysis concentrates only on the suppliers’ perspective. (3) Trust is a central concept also in the study of Jeffries and Reed (2000). The focus is on relational contracting, and how trust affects the quality of solutions to problems of adaptation in relational contracting. The conclusion is that too much trust is as bad as too little trust. Solutions are furthest from optimal when both organizational and interpersonal trusts are high, or when both of them are low. The research takes the contract managers’ perspective. (4) Cannon et al. (2000) focus on contracting and governance. They studied the moderating influence of adaptations on relationship performance in connection with contractual agreements and relational norms. The major conclusion is that contracts and social norms are effective in enhancing supplier performance individually and in combination. Furthermore, the use of multiple sourcing enhances the performance of a supplier in conditions of low uncertainty and low adaptation. However, this is not the case when uncertainty is high and adaptation remarkable. The study is quantitative, and applies the buyers’ perspective. (5) Ahmad and Buttle (2001) examine adaptation as a means of retaining business customers, and preventing the relationships to fade away. According to their findings, customer retention succeeded primarily with the help of bonding customers at the financial, social and structural level. The research is a case study, and the researchers gathered the data through open-ended interviews from both sides of the relationships in the chemical industry. However, as the study concerns retaining business customers, the implications concern the buyer.

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(6) Canning and Hanmer-Lloyd (2001b) provide an additional research on trust and adaptation. This study details the results and managerial implications from four case studies, which examine how firms manage the environmental adaptation process in B2B relationships. Canning and Hanmer-Lloyed model the process as a series of repeated sequence of information exchange, negotiation, commitment and execution phases. The research has a dyadic perspective. (7) Based on this same data, Canning and Hanmer-Lloyd (2002) present a further study of modeling the process of adaptation. The focus of this study is on the adaptations intended to improve environmental performance and how the environmental adaptations are introduced into existing suppliercustomer relationships. Furthermore, the study gives guidelines for managing the process. Canning and Hanmer-Lloyed pay attention both to interfirm and intrafirm processes, their sequence of events, activities and stages, and prove that managerial behavior, managers’ experience, and credibility affect the progression of the adaptation process. The study takes a dyadic approach and examines the shared experience of both the supplier and customer companies in relation to specific adaptation. (8) Brennan and Canning (2002) went on with the research on the process of adaptation. The aim of their research was to present a comprehensive model of the adaptation process in the interfirm relationships from the managers’ point of view, and to describe the behavior enacted by firms from the point when the managers first considered a given adaptation to the point when the change (adaptation) is actually realized. Brennan and Canning describe the activities the adaptation process entails between and within firms, and list motivations for adaptation. Adaptations are not linked to the stages of the relationship life cycle (cf. Brennan et al., 2003). Brennan and Canning discovered that the customers primarily initiate adaptations and benefit of them. Brennan and Canning also noticed that the willingness to cooperate with the third party encourages the progression of the process. Furthermore, trustworthiness in the behavior and the experience of managers involved can hinder or facilitate efforts to realize the adaptations. The research is a case study consisting of two phases. The first phase investigates the process of adaptation enacted between firms, and the shared experience of both supplier and customer companies associated with specific adaptations. The second phase considers adaptation within an individual supplier or customer companies. The focus is on intrafirm adaptation behavior linked to specific adaptations. (9) The research by Brennan et al. (2003) provides a classification of adaptations. The classification system is a single system, which does not differentiate

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customer adaptation from supplier adaptation. This study confirms the earlier research (e.g., Brennan & Turnbull, 1999; Halle´n et al., 1991) of the central role of power: mutual adaptation is a component of the trust-building process, and unilateral adaptation is a response to power relationship. In addition, supply firms adapt more for powerful customers, and customers who offer reciprocal adaptation. Customers adapt more for suppliers that adapt for them, and suppliers that have an active relationship development policy. The study also discovered a number of factors that predispose partners in a buyer-supplier relationship toward adaptation behavior. Unlike Brennan and Turnbull (1999) and Brennan et al. (2003) did not find a positive association between relationship age and adaptations. Brennan et al. applied a qualitative study, to explore the managerial understanding of dyadic adaptation in order to refine the definition and improve the categorization of the concept. The research investigates the causal factors underlying the dyadic adaptations, and obtains rich descriptions of particular adaptations in dyadic relationships. Brennan et al. used also quantitative data to test the classification scheme of adaptation. The research takes into account both the buyers’ and sellers’ perceptions. (10) Walter and Ritter (2003) focus on the drivers for value creation in business relationships, more specifically the influence of adaptations, trust and commitment on value-creating functions of customer relationships. Walter and Ritter discovered that adaptation is a major driver for direct value creation, meaning that suppliers could get fast returns on their adaptation investments. Commitment is a very important driver for indirect functions, because only committed customers are willing to contribute by means of input innovations, information on their market and future developments, and access to third parties. This research draws on a quantitative study, and concentrates on the suppliers’ perspective. (11) Canning and Brennan (2004) research strategy and adaptation both in the terms of content and process at different levels: suppliercustomer relationship level, marketing level, and business strategy level. The aim was to develop a more integrative understanding of the characteristics and significance of adaptation. Adaptation of the way in which a firm organizes resources in order to achieve its goals is a central feature of strategy content and processes at all three levels. The research uses data from supplier-customer relationships in the IT and telecommunication industries. (12) Hagberg-Andersson (2007) contributes interfirm adaptation research by a doctoral dissertation with five essays. The major findings imply a mutual dependence between the buyer and the supplier, the unequal degree

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of dependence, and the suppliers’ dependency on the buyer. HagbergAndersson also noticed that the focal buyer perceives that the suppliers adapt more, and draws conclusions about the motives and outcomes of the adaptive behavior. She concludes that in a created network, the readiness for adaptation was not as evident as in evolutionary networks. These studies contain both qualitative and quantitative data. Hagberg-Andersson applies mainly the supplier’s, and only partly the buyer’s perspective. (13) The study of Schmidt et al. (2007) focuses on the types, scope, and reasons for adaptation. The study also pays attention to the costs and benefits, concluding that firms do not usually calculate explicitly the costs and benefits of adaptation decisions. Furthermore, managers often neglect and under-value the role of intangible adaptations, and direct their focus on altering the product, production process, or logistics function. The majority of the adaptations Schmidt et al. discovered are tacit or ad hoc rather than tactical or strategic, and they are not used for explicit relationship building purposes. Schmidt et al. conducted the research primarily in the service industry. The study takes into accountant both buyers’ and sellers’ perspectives. The study includes services, but does not separate adaptations made in the service context from those in the manufacturing context. In summary, most of the adaptation research in the organizational context concerns manufacturing industry. The study of Schmidt et al. (2007) is mainly service based, but does not distinguish between adaptations in the service industry from those in the manufacturing industry. Canning and Hanmer-Lloyd (2001b, 2002), Brennan and Canning (2002), Canning and Brennan (2004) and Schmidt et al. (2007) take into consideration both buyers’ and sellers’ perspectives. Only Canning and Hanmer-Lloyd (2002) and Brennan and Canning (2002) study specific adaptations within specific relationships. Furthermore, the prior studies neglect the impact of adaptations on the wider network and on the third actor. The prior studies do not either pay attention to the contextual setting and timing of adaptations (cf. Halinen, 1994). The focus is on the behavior itself, and not on its outcomes. Additionally, the process of adaptation is studied (Brennan & Canning, 2002; Canning & Hanmer-Lloyd, 2001b, 2002), but no research offers a comprehensive picture of adaptations in everyday interaction processes. Defining Adaptation in a Triadic Relationship Setting This study uses the term, ‘‘adaptation,’’ instead of ‘‘interfirm adaptation’’ to emphasize that adaptation is not bound to a dyadic relationship, or to a buyer-seller relationship, but may include several actors. I take the connectedness of the relationships into account, and I regard adaptation

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as triadic specific adaptation, which may not be transferable as such to other relationships outside the triad. The content of adaptation includes adaptations in actor bonds, resource ties and activity links (Ha˚kansson & Snehota, 1995a), because these are the elements that bind the firms together. Additionally, firms carry out adaptations also proactively in order to improve the relationships, or to discover more effective ways to cooperate. Reactive adaptation is an answer to changing conditions. An additional feature in adaptation is the contextual setting and timing (cf. Halinen, 1994). Due to continuous changes in the business environment, ‘‘a well adapted resource at time t may be unsuitable at time t+, and its adaptability with regard to the new context will be questioned’’ (Jahre & Fabbe-Costes, 2005, p. 153). These considerations inform the following definition: Adaptations are proactive or reactive adjustments in actor bonds, resource ties, and activity links in triadic relationship settings that take into account the contextual setting and changes in it. Adaptations are designed initially for specific business relationships in a triadic setting, and they are not transferable as such to other relationships. In sum, this study suggests that adaptations occur in relationships between individuals and between organizations (Brennan & Turnbull, 1996; Brennan et al., 2003; Canning, 1999). Firms make adaptations (Schmidt et al., 2007) as a result of an impulse that functions as a trigger. In proactive adaptation, the impulse is in the future, and in reactive adaptation, the impulse is in the present time. Diverse adaptations lead to processes with different phases (Brennan & Canning, 2002; Canning & Hanmer-Lloyd, 2001b, 2002) with diverse scales and formality (Brennan & Turnbull, 1999) and different degrees of reciprocity (Brennan et al., 2003). In a triad, the fact that the relationship setting includes more than two parties increases the complexity, and the probability that changes will take place (cf. Havila, 1996). Change may occur in terms of outcome factors. Adaptation may lead to change, which affects the specific parties or the process as such (Mo¨ller & Wilson, 1995, p. 32). The remaining sections of the theory chapter will address these issues in the form of the three research questions regarding initiating adaptation, adaptation process, and adaptation outcomes.

Initiating Adaptation The aim of this section is to find concepts that will help in analyzing adaptation initiation in a triadic relationship setting. The focus is on the

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context of adaptation, and on the first research question: Nature of how do adaptations initiate in a triadic business relationship setting? Impulses that function as triggers to adaptation may relate to the focal actors (firms: TA, SS, IE), the dyadic relationship (TA-SS, TA-IE, IE-SS), the primary business network, and the macronetwork as illustrated in the Fig. 5, with an example from the business travel industry. Impulse types may be endogenous or exogenous. Endogenous impulses arise (1) from the firms (TA, SS, IE), or (2) from the dyads (TA-SS, TA-IE, IE-SS) in the triadic relationship settings. Exogenous impulses have their origins (3) in the primary business network (the industry specific network), or (4) in the macroenvironment (the other industries, and society as a whole (cf. Anderson et al., 1994, p. 4; Ha˚kansson & Snehota, 1995b, p. 271). In Fig. 5, the primary network is inside the dotted elliptical line, and the micronetwork outside this line. The triadic relationship setting as such does not provide impulses for adaptation. The firms mediate the impulses to the dyads and to the network.

TA

= travel agency

SS

= service supplier

IE

= industrial enterprise

Agents

= the focal triad Other suppliers

= connection = boundary between travel industry and the wider network

1 Impulses related to actors (TA,SS,IE)

2 Impulses related to dyads (TA-SS,TA-IE,SS-IE)

Fig. 5.

Suppliers’ suppliers Other suppliers

Technology providers

TA

SS

Focal relationships

Credit card companies

IE

Customer’s customers

Other suppliers

Competitors

3 Impulses related to primary business network (inside the dotted ellipse)

The Four Impulse Sources.

4 Impulses related to micronetwork (outside the dotted ellipse)

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Impulses Related to the Firms Change within a firm in the triadic relationship setting, and in its resources and activities, generally leads to adjustments within the two remaining actors in order to make a fit between the three of them. Impulses for adaptation may originate from organizational structures of the firms. Mergers, acquisitions, and partner switching usually require adaptations (Halinen, Salmi, & Havila, 1999; O¨berg & Holtstro¨m, 2006), as well as internationalization, new market entry and new subsidiaries (Elo & To¨rma¨nen, 2003). Bankruptcy is an impulse requiring adaptations from all the counterparts (Havila & Salmi, 2000). All the entrepreneurial and strategic actions belong to this category, implying changes in business, marketing and purchasing strategies. Furthermore, impulses may concern operational changes, for example, managerial or financial management. Changes in personnel function as an important impulse for adaptations (Elo & To¨rma¨nen, 2003; Halinen et al., 1999; Mainela, 2002). Social bonds and the tacit knowledge may have created certain routines that the employees will adapt to fit the new circumstances. Changes in top management may also act as an adaptation impulse. Impulses Related to the Dyadic Relationships Changes in dyadic relationships, in their actor bonds, activity links and resource ties are generally an impulse for the third actor to make adaptations. Firms must continually evaluate their resources allocated to counterparts, because the value of the existing client may change over time (Gadde, 1993). As firms develop relationships with a specific counterpart, they may have to diminish their involvement in other relationships (cf. Gadde, 1993, p. 54), for example, relationships with the third actors. Conversely, closer involvement with one of the actors may lead to closer involvement also with the third one, or vice versa. Furthermore, the desire to achieve cost reductions stimulates adaptations (Ford, 1980). These impulses may imply, for example, changes in the contracts between the partners, price increases or changes in delivery arrangements (Ta¨htinen, 2001). Furthermore, the impulse originating from a dyad may imply human and technological resources. A missing contact person in one of the organizations may affect the triadic relationship setting as a whole. Establishing new contacts in a dyad may also require additional contact persons within the third actor. Havila et al. (2004) notice that business triad functions as one business relationship where social interaction is one entity, and an increase in the social interaction between intermediary and customer

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cause a decrease in social interaction between supplier and customer, and vice versa. Impulses Related to the Primary Business Network Halinen (1994, p. 226) takes into account the contextual setting of the relationships by stating that by adapting the firm adapts itself not only to the requirements of the other party but also to the demands of the contextual setting and eventual changes in these settings. Thus, adaptation impulses may relate to the primary business network to which the relationships belong. Impulses may derive from changes in the position of the actors within their primary network. Important actors may disappear and new actors enter the network (Ta¨htinen, 2001). For example, Halinen (1997) reports that a rapid international expansion of the company and various conflicting interests during the process functioned as an impulse for the development of the advertising agency relationship. The travel industry undergoes structural changes due to the development of booking and video conferencing technology. Furthermore, the airline industry is facing increasing competition due to deregulations. The primary business environment is competitive, and competition acts as an impulse for adaptation. Competition may concern, for example, the emergency of low cost airlines, or tightening competition with the existing actors. Impulses Related to the Macronetwork Impulses related to the macroenvironment may be in technological, economic, political, and social conditions of companies, or they may relate to demographic changes, or changes in industrial structures. The many links with other actors in the business network mediate these impulses to the focal relationships (cf. Elo & To¨rma¨nen, 2003; Halinen et al., 1999). Economic recession is an impulse behind a variety of adaptations that has far-reaching effects on business networks where actors are dependent on each other through activity links and resource ties. Furthermore, companies are facing competition, and uncertain market conditions in the macroenvironment (Brennan & Canning, 2002; Halinen et al., 1999; Zineldin, 2002). Economic reform and membership in the European Union (Mainela, 2002; Salmi, 1995) are examples of impulses originating from the macronetwork. The business travel industry is well known for its sensitivity to economic fluctuations, fuel price, world politics, wars, natural disasters, and health epidemics (Bender & Stephenson, 1998; Caamano, 2008; Davidson, 1998; Franke, 2004). EU legislations and environmental concerns are impulses for adaptations in the airline industry. The elimination of international trade

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barriers has resulted in a global marketplace, making business travel one of the most important profit and growth sectors of the tourism industry (Davidson & Beulah, 2003). How Impulses Mediate to the Triadic Relationship Setting A triadic relationship setting is less stable than a dyad or a larger group (Caplow, 1956). When aforementioned changes occur, the actors have to adapt their activities and resources (cf. Anderson et al., 1994; Halinen, 1997). The firms, the dyads, the primary network, and the macronetwork mediate impulses to the triads. Impulses from the macronetwork may affect the triadic relationship setting directly, or through the primary business network, as is illustrated in Fig. 6. For example, technology development may affect the triadic relationship setting directly by threatening the intermediary’s existence. Economic fluctuation and uncertain market conditions occur in the macronetwork, and mediate to the triads through the primary network. The primary network and dyads may also have a connection. For example, a new self-booking system developed in a dyad, may enhance general development in the primary network, and thereby give an impulse back to the dyad. As the number of arrows in Fig. 6 illustrates, impulses from firms, dyadic relationships, primary network, and macronetwork may be extremely interdependent. In practice, they may be overlapping. Andersson (1996) emphasizes that changes, for example, in physical flows of distribution, or in the social aspect of the interactions, are inseparably interwoven with other political, social, economic and technological change processes. Changes in

Dyads

Actors

Adaptations in triads

Primary network

Macro network

Fig. 6.

The Interconnectedness of the Impulses.

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economic conditions transform into, or at least combine with endogenous change through the network (Halinen et al., 1999). Impulses may also be overlapping in the sense that two similar impulses have an effect on one another, for example, if a supplier has closed a contract with a client just before another supplier gets into contact with the same client (Hedaa & To¨rnroos, 1997). Impulses may also be a part of a series of events that gradually create pressure on one or all the actors to make major adaptations (Halinen et al., 1999; Ta¨htinen, 2001). Impulses may also appear frequently or infrequently. For example, a phone-exchange may have busy lines, or online connections may be out of function, which may cause difficulties for customers to get into contact with the supplier. An infrequent impulse may be replacement of an important boundary spanner, for example, a new salesperson replaces the old one (Hedaa & To¨rnroos, 1997). An impulse has a relational connection to the past, present and future modes of temporality. An event taking place at present is temporally connected to antecedent events. Relationships have been historically developed through trust and commitment, and they are loaded by future expectations about business gains as an outcome. The actors may interpret impulses differently, and ambiguous situations lack clarity or consistency in reality, causality or intentionality. An impulse may also be so complicated that no single actor can have a total and correct picture of either the actors involved or the final outcome (Hedaa & To¨rnroos, 1997).

Adaptation Process The aim of this section is to find concepts and create classifications that will enable the analysis of how adaptations progress and spread in triadic relationship settings, thus, the focus is on the second research question: How do adaptations spread over time in a triadic business relationship setting? Content of Adaptation To be able to follow the adaptation process, we have to know what is adapted. Ha˚kansson (1982) provided the first taxonomy of the contents of adaptation. The taxonomy consists of product specification, product design, manufacturing processes, planning, delivery procedures, stockholding, administrative procedures, and financial procedures. Brennan et al. (2003) added to this classification the provision of unusually detailed or sensitive information and changing organization structure. Other classifications are more general, including products, processes, and procedures (Cannon &

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Perreault, 1999). Different studies denote that one classification system is sufficient to categorize supplier’s and customer’s adaptation (see, e.g., Brennan et al., 2003; Schmidt et al., 2007). Thus, the study here applies one classification: the division into actor, resource and activity adaptations (see Table 4). Actor Adaptations. Adaptations in organizational structures of the firms (Brennan et al., 2003; Schmidt et al., 2007) may be site-specific investments where an agency may have to follow an important client abroad in order to serve the client’s international needs better. Furthermore, adaptations in the actors’ roles are important, and specifically in the service sector (Halinen, 1997). Relationships are built between boundary spanning individuals on both sides of the exchange. These individuals are most aware of the needs of the other party, and the firms have to empower the boundary spanners to build the relationship. Empowering these individuals may require adaptation in organizational structures to facilitate an increased role for boundary spanning personnel in the central decision-making process (Knoppen & Christiaanse, 2007; Tyler, Stanley, & Brady, 2006). Resource Adaptations. Resource adaptation implies technical, behavioral and knowledge dimensions. The technical dimension implies explicit and visible relationship features. The behavioral dimension embraces the more implicit and invisible relationship attributes related to the interactions between the actors (Knoppen & Christiaanse, 2007). The knowledge dimension deals with information exchange and learning, which are essential elements in adaptation (cf. Brennan & Turnbull, 1999; Brennan et al., 2003; Schmidt et al., 2007). Adaptations are often connected with people in day-to-day operations. Individual adaptation, for example, learning by doing is a significant form of adaptation (Halinen, 1997). Adaptations in human resources imply generally personnel, additional interfirm contacts, and physical investments, which may take the appearance of a common relationship history including established patterns of behavior, common values, and good knowledge of the partner firm (Halinen, 1997). Schmidt et al. (2007) discovered ‘‘secondary adaptations’’ of personnel and human resources that occurred only after a firm has already made other adaptations, including logistics and products/production. Activity Adaptations. Prior research mentions regularly adaptations in products and production processes, specifically customization of products where the supplier produces according to the customer’s specific demands.

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Table 4.

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A Synthesis of the Contents of Customer–Supplier Adaptation in Prior Research.

Content Adaptations in actors Site-specific investment Organizational structures Interfirm roles and positions Adaptations in resources Information exchange Technology Learning and building knowledge Attitudes Personnel Additional interorganizational contact Adaptations in activities Product, product design, product specification, product features, planning

Packaging forms Production processes Production scheduling Manufacturing process Investment in manufacturing equipment Delivery procedures Stocks, stockholding and delivery

Inventory and distribution Marketing Assignment processes Administrative procedures Financial procedures, contractual terms and conditions Capital equipment and tools Payment terms

Researchers

Halinen (1994) Brennan et al. (2003); Schmidt et al. (2007) Halinen (1994) Brennan et al. (2003); Brennan and Turnbull (1999); Holmlund and Kock (1995); Schmidt et al. (2007) Halinen (1994) Cannon et al. (2000); Schmidt et al. (2007) Brennan and Turnbull (1999); Halinen (1994) Turnbull and Valla (1986); Halle´n et al. (1991); Brennan et al. (2003); Ha˚kansson (1982); Cannon et al. (2000); Hagberg-Andersson (2007); Schmidt et al. (2007); McLoughlin and Horan (2000) Jahre and Fabbe-Costes (2005) Halle´n et al. (1991); Holmlund and Kock (1995); Brennan et al. (2003); Schmidt et al. (2007) Brennan et al. (2003); Schmidt et al. (2007) Ha˚kansson (1982); Turnbull and Valla (1986); Hagberg-Andersson (2007) Brennan and Turnbull (1999) Ha˚kansson (1982); Turnbull and Valla (1986); Brennan et al. (2003) Brennan et al. (2003); Ha˚kansson (1982); Turnbull and Valla (1986); Halle´n et al. (1991); Schmidt et al. (2007) Turnbull and Valla (1986) Cannon et al. (2000); Holmlund and Kock (1995) Cannon et al. (2000) Halinen (1994) Ha˚kansson (1982); Holmlund and Kock (1995) Brennan et al. (2003); Schmidt et al. (2007) Cannon et al. (2000); Turnbull and Valla (1986); Halinen (1994); Holmlund and Kock (1995)

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Activity adaptation may imply product specification and design, the different dimensions of the product, materials, qualities, and other aspects of a product (e.g., Brennan et al., 2003; Cannon et al., 2000; Hagberg-Andersson, 2007; Ha˚kansson, 1982; Halle´n et al., 1991; Schmidt et al., 2007; Turnbull & Valla, 1986). The supplier may also adapt production processes by purchasing new equipment, using just-in-time logistic systems, applying planning procedures, like, for example, stock level, and adopting various routines to meet the demands of a specific customer. Respectively, the customer may adapt products, processes, and procedures to the capabilities of a specific supplier (e.g., Brennan & Turnbull, 1999; Brennan et al., 2003; Hagberg-Andersson, 2007; Ha˚kansson, 1982; Halle´n et al., 1991; Holmlund & Kock, 1995; Schmidt et al., 2007; Turnbull & Valla, 1986). As prior adaptation research mainly concerns manufacturing industry, the examples above do not relate to services. Halinen’s (1997) research concerns services, even though adaptation is not its focus. She states that physical investments are likely to be small-scale or even nonexistent in service relationships compared to investments in production technology often required in the manufacturing industry. An example from advertising services shows that resources used in adaptations are typically intangible rather than physical or economic, with direct cost implications for the organization concerned. Furthermore, the execution of assignment processes requires adaptations, for example, because of changes in time schedules, personnel, intragroup networks of the companies, and in market conditions. In professional services, the importance of adaptations in cooperating firms’ and their employees’ roles and positions is noteworthy (ibid.). As firms develop services and service processes in cooperation, adaptations concern activity chains within each of the three firms. The Nature of Adaptations Adaptations may possess different characters in a triadic relationship setting, regarding the scale and formality, and the reciprocity of adaptations. The scale and formality denotes the balance of how much the actors perceive they give to the relationship in terms of adaptations, and reciprocity describes their mutuality and voluntariness. Scale and Formality. Adaptations occur in organizations (intrafirm or internal adaptations) and in interactions between them (interfirm adaptations, or dyadic adaptations). Adaptation process generally starts with intrafirm adaptations. These internal processes may vary in scale and

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formality, depending on how much a firm gives to the relationship in terms of adaptations. I will evaluate the scale and formality of adaptations in proportion to the involvement and influence of different managerial levels and departments taking part in the adaptation process (cf. Brennan & Turnbull, 1999). Interfirm and intrafirm adaptations are intertwined and accumulated processes. Interfirm adaptations enhance intrafirm adaptations, and vice versa (Brennan & Turnbull, 1996). Although this research focuses on adaptations between organizations, we need to understand intrafirm adaptations. Brennan and Turnbull (1996, 1999) distinguish four different intrafirm adaptation processes with different scales and formality: investment process, political decision-making process, socialization process, and evolutionary process. Political and investment processes are formal and planned adaptations, whereas socialization and evolutionary processes imply informal and unplanned adaptations (ibid.). Adaptation as an investment process includes large scale strategic adaptations, which are usually carefully planned and involve physical assets. Investment processes are formal decision making processes, usually at a top management level. This kind of process involves a wide range of departments for purposes of data gathering and analysis, for example, marketing, purchasing, engineering, quality, production, operations, finance, and legal affairs. The employees identify alternatives and create a scheme of estimations and calculations, which leads to a decision of whether or not to implement a specific adaptation (Brennan & Turnbull, 1996). Adaptation as a political process involves tactical adaptations that are relatively minor, but the firms plan and organize them. Senior level or functional management level typically makes the adaptations. Adaptations involve limited number of departments, depending on the area to which the decision belongs (Brennan & Turnbull, 1996). The socialization process is the process of learning how to interact with the business partners. Socialization process refers to minor unplanned ad hoc adaptations at different decision-making levels, most generally at the operating manager level in a large company. In a small company, the given adaptation may be more important than in a large one. The adaptations involve normally only the department actually implementing the adaptation (Brennan & Turnbull, 1999) and they strengthen the social bonds between the employees. Evolution is a commonly used metaphor of major unplanned and informal adaptation processes, which may imply tacit adaptations emerging as the accumulation of small changes creating large-scale adaptation (Brennan & Turnbull, 1999). An evolutionary process involves

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multiply undefined departments. Most of the change that occurs in an industrial network is evolutionary in nature (Halinen et al., 1999; Havila & Salmi, 2000; Ha˚kansson & Snehota, 1995b). Intrafirm adaptations may not have the same importance for all the actors, and the scale of adaptation is not comparable between two organizations, and even less in a triadic relationship setting. Buyer organizations have different requirements regarding distribution solutions. Some buyer organizations may prefer advanced and costly distribution arrangements to improve their performance in other respects. These arrangements usually require adaptations, which are possible to implement in long-term relationships. Others prefer less advanced and less costly solutions, relying on transactional exchange. Thus, the important characteristics of a distribution relationship are the level of involvement in the relationship, and the complexity of the distribution solution applied (Ford et al., 2003). Ford et al. (2003, p. 128) suggest four combinations of relationships with different levels of involvement and distribution complexity. First, the distribution solution is complex, but not adapted to the specific problems of the buyer organization. Instead, the users themselves are willing to adapt their own systems to fit with the solutions of the suppliers, because the cost of doing so is less than the perceived benefits. The services are advanced and costly, but they pay off through improvements in the client’s internal operations. For example, the internet provides cost-efficient solutions with certain benefits for travel industry. Second, the distribution arrangements are complex, and require remarkable adaptations. For the relationship to be successful, both sides of a relationship need substantial coordination of activities and communication, and extensive investments and adaptations. This increases the level of involvement in the relationships. An example is the travel management process, which is a complex distribution arrangement where the buyer organizations, suppliers and travel agencies integrate resources. Third, low-cost distribution arrangement is appropriate for users that do not gain any advantage from a more advanced distribution solution, or an arrangement that is adapted to their specific situation. The organizations are not interested in high involvement, because they would be too costly. Instead, the buyers appreciate the benefits of a simple and standardized solution, which provides opportunities to switch suppliers without difficulties. In business travel markets, internet travel agencies and low-cost carriers provide possibilities for simple distribution without adaptations. The relationship will continue as long as the distribution is adequate to the buyer organization’s needs.

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Fourth, even though distribution arrangements feature low complexity, the seller adapts to the buyer organization’s specific requirements, and the relationship becomes a high-involvement relationship. For example, a supplier may provide a self-booking tool to the buyer. Even though the distribution itself is simple, the data integration may require major adaptations. The buyer organization usually reduces the number of suppliers and increases the responsibilities of the remaining ones. Either the buying organization, distributor, or service supplier makes adaptations, and the client is likely to stay in this relationship rather than start shopping around (Ford et al., 2003). Reciprocity of Adaptations. In social psychology, reciprocity refers to responding to a positive act with another positive act, or acting in response to a negative act with a negative one. In evolutionary biology, reciprocity refers to mechanisms whereby the evolution of cooperative or altruistic behavior may be favored by the likelihood of future mutual interactions. In this study, I regard reciprocity as the mutuality and voluntariness of adaptations. Prior research discusses unilateral and reciprocal (mutual) adaptation. In unilateral adaptation, the firm implements a specific modification for an exchange partner without any mutual modification by that partner. Unilateral adaptation is a response to asymmetric resource dependence (Brennan et al., 2003; Halle´n et al., 1991; Hetrz, 1994). In a dyad, reciprocal adaptation concerns both actors adapting reciprocally to each other. Havila (1993) argues that the extent of reciprocal adaptation relates to the number of alternatives to do business with. Gadde and Ha˚kansson (2001) conclude that adaptations are in direct proportion to the differences that exist between the counterparts. Furthermore, the mutuality of the adaptation and framing decision are seldom symmetrical (Grabher, 1993, p. 11). Due to lack of research on adaptation between three actors, we are missing words to describe all nuances of adaptation. Therefore, I use the term ‘‘threefold adaptation’’ to describe adaptation where all three actors adapt to each other to benefit common goals. (Threefold means being three times as great or as many, http://mw1.merriam-webster.com/, accessed on July 19, 2009.) Thus, in a triad, a firm can adapt unilaterally toward one or two actors, or there may be reciprocal adaptations in dyads, or adaptations may be threefold. The power and dependence, and the roles, and the role expectations in a triad may have an impact on how, and who initiates adaptations, and whether they are reciprocal and voluntary. Power plays an important role in adaptation (Brennan & Turnbull, 1999; Halle´n et al., 1991), both as a causal factor, and as an antecedent to

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adaptation. In B2B relationships, the concept of power has received contrasting treatment; meanwhile researchers generally view concepts such as trust, commitment, cooperation and mutuality as positive relational factors (Hingley, 2005a, 2005b). Researchers also claim that power imbalance negates cooperation (Doney & Cannon, 1997) or hinders sustainable relationships (Gummesson, 1999). However, a contradictory view comes from several researchers (e.g., Blois, 1997; Svensson, 2001). The market model regards power as a kind of market imperfection, whereas the network model views power as a necessary ingredient in exploiting activity interdependencies (Ha˚kansson & Johanson, 1993, p. 48). Building lasting, meaningful and workable relationships where power imbalance and power dependence are present is relevant, for example, in supply chain relationships (Hingley, 2005b). Balance of power is quite an unrealistic state in dyadic relationships, and even more unrealistic in triads, because ‘‘there is one, and only one, kind of social situation in which the power of opposing groups is completely balanced. The numbers of each ‘side’ are equal, their social organization is identical, and their resources are as nearly the same as possible’’ (Bierstedt, 1950, p. 738). A triad is never stable with a perfect balance between all the three dyads (Gutek et al., 2002; Phillips-Carson et al., 1997). In buyer–intermediary– supplier relations, the intermediary may even be excluded (Havila & Sandstro¨m, 1993). However, the development of a relationship is never unilateral, even in the situation where one of the parties is overwhelmingly powerful or committed. None of the actors has an absolute control over the relationship, as the power relationships may change over time (Andersson Cederholm & Gyimo´thy, 2005; Holmlund & To¨rnroos, 1997; Ha˚kansson & Ford, 2002, p. 135). The nature of adaptations depends on power distribution, the use of power, and the history and relational norms of the relationships. The more powerful actor may, for some reason, hold back using its power. Furthermore, the perceptions of power are likely to be unclear in the early stages of a relationship, and they can change over time (Ha˚kansson, 1982; Smith & Laage-Hellman, 1992; Wilkinson, 1996). A power holder’s perception of its own power determines the use of power. The more a firm perceives to have power, the more the firm will use the power (Wilkinson, 1996). The social exchange theory regards power as reciprocal to dependency. According to Cook and Emerson (1978, p. 101), ‘‘If two persons are unequally dependent on one another for valued outcomes, the less dependent person has a power advantage over the other, and the relation is said to be power imbalanced.’’ Power imbalance may lead to an imbalance in exchange

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with the more dependent person giving more than receiving. The resourcedependence theory generalizes the power model to the organizational level in. The main argument of the theory is that organizations use relationships in order to gain access to resources that are essential to their existence, and that they do not possess themselves. This makes organizations interdependent, and reduces an organization’s control over its own actions (Pfeffer, 1982). The tendency to divide into coalition of two actors against one is a significant feature of the triad (Caplow, 1959). Two actors may force adaptations to the third actor based on the following assumptions The members of the triadic relationship setting may differ in strength and a stronger member can control a weaker member. The actors seek control over the others, and prefer control over two other to control over one. The strength of a coalition is equal to the strength of its two members. Interdependence facilitates cooperation in triadic business relationships (Holma, Bjo¨rk, & Virtanen, 2009). Successful relationship development requires that the actors have significant and ‘‘roughly the same dependence upon the relationship’’ (Anderson & Narus, 1990, p. 101). A balanced situation would be a harmonious state, where the actors feel like being in a situation where they fit together without stress (Heider, 1958). In terms of balance theory, the attraction among the three actors persuades a number of unit relations, such as similarity of goals, similar expectations of quality, and desire to maintain future contact (Phillips-Carson et al., 1997). A motivational theory of attitude change applies to cases where individuals see all three relationships of a triad as interdependent and relevant to each other. Each of the two relationships between each dyad can consist of positive or negative attitudes (e.g., likes/dislikes, approves/disapproves). Balanced relationships would remain as they are until new influences come along and upset the balance; meanwhile relationships that are not in balance are continuously being forced toward change (Eiser, 1986; Newcomb et al., 1965) and adaptations. Besides power and dependence, the roles of the actors, and the expectations they have toward each other may have an impact on the nature of adaptations. In a triad, the role of each of the three actors is related to the other two actors, and they have expectations regarding each other’s adaptive behavior. Roles shape in interaction processes as a result of the parties’ perceptions of their roles, and their expectations and intentions concerning the roles. Furthermore, the actors’ actual behavior both bases on their roles, and shapes their roles (Halinen, 1997, p. 223). Roles are the key mechanisms for creating a network organization design (Grandori & Soda, 1995).

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The intermediary has usually a general role between the buyer and the seller (Alderson, 1957; Stern & El-Ansary, 1992). Thus, the buyer and seller generally expect the intermediary to adapt to them both, and the buyer expects the supplier to adapt. Therefore, buyer organizations sough after the majority of the adaptations, and the adaptations primarily benefit the buyers, also when the suppliers introduce the adaptations (Brennan et al., 2003). However, Havila (1993) argues that in situations with a direct connection between the supplier and the customer, the role of the intermediary is not solely that of a mediating agent. In triadic business relationships, the intermediary’s role is defined rather from its role performance than from its position between the two other actors. In a triad, each actor has expectations toward the other actors, which may, or may not coincide with each other, and with the role of which they have expectations (ibid.). Depending on the power distribution and dependency, and on the roles and role expectations, adaptations may be unilateral, mutual, or threefold. Power distribution and the roles may also have an impact on the voluntariness of adaptations. Adaptations are coerced when the less powerful actor (or actors) has to adapt to the stronger actor (Halle´n et al., 1991). An example of a coerced adaptation may be if the buyer takes advantage of its power to enforce adaptation (Brennan & Turnbull, 1999). In a triad, adaptation may be coerced by a coalition of two actors against one (cf. Caplow, 1959). Coercive bases of power may decrease the level of cooperation and increase the level of tension and conflict in a relationship (Jonsson & Zineldin, 2003), which may complicate adaptations. The more powerful actor may also restrain using its power. The power may be noncoercive, and adaptations are voluntary. Noncoercive basis of power may increase the value of the relationship through team support and common interest. Voluntary adaptations may also promote collective goals (Jonsson & Zineldin, 2003). In situations where high involvement might lead to enhanced performance, the actors must use power in a constructive way, for example, as a means to establish shared norms and expectations (Gadde, 2004). Adaptations may be voluntary because they offer new possibilities to develop relationships. They may promote and facilitate the partners to reach the goals of their cooperation, or their individual objectives. Adaptations may occur, for example, in order to facilitate buyer-seller collaboration (Halinen, 1994). Adaptations are useful to make better use of the resources tied to the relationships, and to reduce the costs of doing business (Brennan & Canning, 2002). .

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Progression of Adaptations The progression of adaptation clarifies how adaptations occur. I will describe the progression with the help of the phases of adaptation, and the ways of how adaptations spread in a triadic relationship setting. One way of seeing relationship development, is to investigate the development process as two separate, but very closely related processes: exchange processes and adaptation processes (Halle´n et al., 1991; Ha˚kansson, 1982). The relationship begins with exchange processes (see Fig. 7), where single exchanges are important parts of a process in which the actors progressively build up mutual trust in each other, and test how well they fit together (Dwyer et al., 1987; Eiriz & Wilson, 2006; Ha˚kansson, 1982; Halle´n et al., 1991). These exchange processes, where two or more individuals are responding to each other in relatively continuing ways, are also adaptation processes (Halle´n et al., 1991; Johanson & Mattsson, 1987). Johanson and Mattsson (1987) argue that the more extensive the exchange process between the firms, the stronger will be the reasons to make adaptations. An intensive business service exchange, for example, exchange of services for money, requires much social exchange, and encourages adaptation. In a dynamic setting, exchange and adaptation are difficult to separate from one another. Adaptations emerge from normal interaction patterns between firms and the process of adaptation may be difficult to distinguish from established interaction behavior (Halle´n et al., 1991; Johanson & Mattson, 1987).

Coordination process Adaptation process

Adaptation process Exchange process

Formal adaptation

Fig. 7.

Exchange process

Informal adaptation

Formal and Informal Adaptations.

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If the interaction leads to some business, coordination of the activities becomes important. Halinen (1994) adds the coordination dimension between exchange process and adaptation (see Fig. 7). Adaptations are then planned, and they may take the form of an investment process, or a political process (Brennan & Turnbull, 1996). In coordination processes, firms harmonize their actions in order to achieve the expected benefits before the actual adaptation process. An intensive business service exchange with much social exchange requires generally extensive coordination efforts (Halinen, 1994). In the coordination process, the actors agree on the nature of the adaptation, and the contribution of the actors to facilitate the adaptation (Canning & Hanmer-Lloyd, 2002). This coordination, to a large extent, defines the nature of the relationship (Ford et al., 2003; Halle´n, et al., 1991; Johanson & Mattsson, 1987, p. 38). Coordination implies costs for both parties, and limits their freedom to coordinate with others (Ford et al., 2003). For example, when distribution arrangements have other characteristics than traditional channels (e.g., a network), the activity interdependence increases, and requires more activity coordination (Gadde, 2004). In a dyad, the actors may have reciprocal exchange with each other. A triad may need more coordination simply because a three party relationship involves three actors. Gadde (2004, p. 171) argues that the relationship atmosphere in distribution context has become more cooperative in the control dimension than earlier in the regime of traditional channels. Adaptation Phases. The advancement of an adaptation process in dyadic relationships is a coordinated effort between information exchange, negotiation, commitment, and execution phases (Brennan & Canning, 2002; Canning & Hanmer-Lloyd, 2002). (1) Information exchange involving interpersonal contacts with negotiations to plan, and to agree upon the adaptations occurs before actual adaptations. One or both of the parties identify an adaptation that is of potential benefit, and establish mutual interest in the adaptation. Interactions, for example, meetings and phone calls, will occur between the partners to establish the salience of the proposed adaptation. The account managers on the supplier’s side, and purchasing managers on the buyer’s side will be primarily involved in these interactions (Brennan & Canning, 2002). (2) The negotiation phase involves familiarization with the proposed adaptation amongst other interested parties. After obtaining the interest and support of the key actors, the next steps imply developing common understanding on the precise nature of the problem and the agreement

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on the adaptations (Brennan & Canning, 2002). In the (3) communication phase, the actors identify resources available to each other. Interpersonal contacts involve bargaining and negotiating the adaptations and the activities to be carried out. Finally (4) execution phase is a commitment to act, which leads to the investment of resources, and a formal or informal agreement for commitment (Brennan & Canning, 2002). In summary, this process describes adaptation in a dyadic relationship. In a triad, the process is probably more complicated and requires more coordination. The process model also assumes planned adaptations. The phases of unplanned adaptation are difficult to trace due to their evolving nature. Furthermore, the model does not explain how adaptations spread on to incorporate all three actors. The Spread of Adaptation in Triadic Relationship Settings The processes in this discussion provide no tools to analyze the spread of adaptation in triadic relationship settings. Therefore, consider the spread of adaptation as the fifth adaptation phase after the information exchange, negotiation, communication and execution phases. The spread of adaptation describes the ways of how adaptations extend to incorporate the entire triadic relationship setting. Adaptation relates to change, and a triadic relationship setting is a small network. Therefore, concepts related to research on change in business networks (Halinen et al., 1999; Havila & Salmi, 2000) are appropriate also in adaptation study. In network change studies, particular emphasis is paid to the impact a change in a dyad may have on other connected relationships. These studies suggest that part of a change always remains within a business-relationship dyad, while some part of a change may also affect other relationships and actors in the network. The former change mechanism is called confined change and the latter one connected change. Confined change implies a seemingly stable situation in a network. Confined change remains within a dyad without affecting the other actors in the network. This kind of change may be, for example, change in the number of persons involved, or the deepening or weakening of trust in the relationship. However, the concept of connected change is more relevant in the current study. Connected change in a network is ‘‘a change in one relationship that is received and acted upon by other actors in the network’’ (Halinen et al., 1999, p. 782). Halinen et al. (1999) emphasize the importance of dyadic relationships both as receivers and as transmitters of change. Actors are able to reproduce, adapt, absorb or transmit the change to other relationships (Easton & Lundgren, 1992). Adaptations may extend from one

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actor to the other actors or from one dyadic relationship to the other connected relationships. In a triadic relationship setting, this may occur in three different ways, which I have labeled as connected, derived, and agreed adaptations. Any one of the three actors in the business triad may initiate connected adaptation. This may occur in three different ways as Fig. 8 illustrates. First, the initiator is actor B, requiring adaptations from actors A and C. Actor A is responding, and actor C is adapting to actors A and B. Second, actor B is the initiator, and actors A and C adapt in cooperation. Third, actor B is the initiator, and actors A and C react in turn. The arrows describe the direction to which the adaptations spread. Derived adaptation refers to a process where one of the dyads initiates adaptation. The third actor responds, which denotes direct connections between the actors, as Fig. 9 illustrates. The arrows describe the direction of the spread of adaptations. The third way is agreed adaptation, as Fig. 10 illustrates. The three actors plan and implement agreed adaptations in cooperation. Adaptation Outcomes The aim of this section is to conceptualize the adaptation outcomes. Thus, the focus is on the third research question: How do adaptations change the structure of a triadic business relationship setting, and the nature of its relationships?

The study includes evaluating adaptation outcomes at three different levels: outcomes for individual actors (actor outcomes), outcomes for the dyads (dyad outcomes), and outcomes for the triadic relationship settings (triad outcomes). Actor Outcomes Adaptation outcomes occur at the actor level (for the firm), because each of the firms has, besides a common goal for their cooperation, their own goals

Actor A

Actor B

Actor A

Actor A

Actor C

Actor B

Fig. 8.

Actor C

Connected Adaptation.

Actor B

Actor C

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Actor A

Actor B

Fig. 9.

Actor C

Derived Adaptation.

Actor A

Actor B

Fig. 10.

Actor C

Agreed Adaptation.

for profitability. They have also different roles in the triad, and their goals may be conflicting. An adaptation that is favorable to one actor may be disadvantageous for its counterpart. Adaptation occurs in the three elements of the ARA model: in ARA. Adaptations may have positive or negative impact on the individual actors. Positive outcomes may help the firm to reach its goals, and negative outcomes may restrain it. Sometimes, positive and negative outcomes are the opposite poles of the same adaptation. A remarkable positive adaptation outcome has consequences for the longterm competitiveness of the firm. Adaptation may appear as a major driver for the supplier’s direct value creation, meaning that suppliers may get fast returns on their adaptation investments (Walter & Ritter, 2003). Successful adaptation improves the firms’ economic efficiency by enhancing savings in time and money, and thus contributes to its survival and development (Hagberg-Anderson, 2007; Halle´n et al., 1991; McLoughlin & Horan, 2000). For example, a customer may force a supplier to introduce quality management, which in turn leads to better competitiveness in other customer relationships. Thus, adaptation may be a source of innovation in process development (Ha˚kansson, 1982). From the supplier’s perspective, given the better fit between a supplier’s offering and the client’s needs, the supplier may expect that the client will purchase higher volumes from that specific supplier.

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Furthermore, as the supplier has expressed willingness through adaptations, the customer might feel obliged to buy from the supplier also in hard times (Brennan & Turnbull, 1999; Canning & Brennan, 2004; Ha˚kansson, 1982). Adaptation may evolve into regular business practices with all customers, which may subsequently lower the costs of a relationship specific adaptation. For example, in the 1970s, some suppliers developed electronic data interchange (EDI) as a relationship-specific adaptation for particular customers. In due course, sellers offered these procedures to many customers. The procedures became more standardized, which lowered the cost to implement them (Cannon & Homburg, 2001). Adaptation usually leads to an expanse in information exchange (Canning & Hanmer-Lloyd, 2002) and more intense contact patterns between the firms (Seyed-Mohamed & Wilson, 1989) enhancing interorganizational learning. Mutual knowledge, which is knowledge the parties have about each other and upon which they communicate with each other is important. Mutual knowledge may refer to resources, strategies, needs, and capabilities of the parties and their relationships with the other firms. Mutual knowledge is knowledge that is based on personal experience, and takes time to develop (Cannon et al., 2000; Johanson & Mattsson, 1987). A demonstrated willingness to make adaptations sends important signals to partners about the commitment and trust (McLoughlin & Horan, 2000). Adaptations strengthen the relationships and make them more manageable, and more active, because disagreements have to be handled within the framework of the relationships, and the actors have to learn conflictresolution methods (Brennan & Turnbull, 1999; Canning & Brennan, 2004; Ha˚kansson, 1982). As a result of adaptation, discrepancies emerging in the course of the exchange relationships are resolved within the relationship rather than by reorganizing relationships (Grabher, 1993). Sometimes adaptation may become more of a dysfunction than a positive adaptation over time (Brennan & Turnbull, 1999; Canning & Brennan, 2004; Halle´n et al., 1991; Ha˚kansson, 1982). Furthermore, a firm may need to limit adaptation, for example, in order to prevent one’s own identity. Adaptations may over a period of time lead to the emergence of a process of institutionalization in the relationship, and certain activities and processes become routine. The firms carry out activities without thinking the need for them. Institutionalization may lead to lack of innovation, because of the routine activities and processes. Furthermore, the business partners may become doubtful of the cooperating actor’s objectivity. Clients in long-term relationships may also come too close to each other so that their thoughts are too similar, and have thus less value to add (Pillai & Sharma, 2003).

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Buying organizations may bargain away the premium prices and a supplier must charge for adapted services and products. Fundamentally, the costs of adaptation may shift to suppliers. At a more general level, buyers may compensate suppliers through long-term commitments and promises of higher sales volume, an arrangement that typically involves lower prices over time (Cannon & Homburg, 2001). Adaptations increase interdependency, which may also be a burden to one or all the cooperating firms. The buyer faces difficulties in using alternative sources, because of switching costs (Erbismann, Kock, & Strandvik, 1998). Interdependency may lead to an asymmetrical relationship. Dyad Outcomes A specific adaptation may have an impact on the dyad’s development. I am treating the concept of development as a neutral concept, which refers to the development of interfirm relationships and their ups and downs, not only to the progressive development (cf. Halinen, 1994; Ta¨htinen, 2002). Actor bonds, activity links and resource ties between the actors may strengthen or weaken, and the ways in which the activities and activity chains are performed, and the way the resources are allocated may change. Dyads are the receivers and transmitters of change in a business network (Halinen et al., 1999). Thus, changes in the triads cannot be analyzed without taking into consideration what happens in the dyads. Adaptations occur in interactions, and we can compare them to interaction episodes as defined by Schurr (2007). Interaction episodes are engines of change, or motors that engage the energy of a relationship. Interaction episodes can be generative or degenerative; they may have a positive or negative impact on the relationship development. Adaptations may lead to generative development when actor bonds, resource ties, and activity links between two actors become stronger, denoting, for example, increased cooperation, increased trust, more mutual benefits, and mutual understanding (cf. Schurr, 2007). Degenerative development takes place when actor bonds, resource ties, and activity links become weaker, meaning decreasing cooperation, decreasing trust, decreasing understanding and joint benefits. The INA approach, and in the service and relationship management approach emphasize the importance of close or even intimate relationships (Ford, 1980; Nielson, 1998). Ha˚kansson (1982) refers to the fundamental role of closeness in the relationships’ overall atmosphere as one of the main features of the relationship. Measures of closeness associate often either

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directly or indirectly with trust and commitment (Morgan & Hunt, 1994; Nielson, 1998). Dyad outcomes may not be merely generative or degenerative. Despite changes in actor bonds, resource ties and activity links between the firms, the relationship may remain unchanged. Due to unsuccessful adaptation, an interfirm relationship may also end, or dissolute, when the actor bonds, resource ties and activity links cease to exist at the organizational level (see Table 5). (Halinen and Ta¨htinen (2002) suggest that different terms should be used when referring to different kinds of endings. They propose ending to be a general term, and dissolution a naturally ending relationship.) However, prior research provides a ‘‘relationship energy’’ that remains, specifically in the social bonds that the individuals have created, and which stays even though the organizational bonds would break. Havila and Wilkinson (2002) propose that the relationship energy cannot be destroyed; the energy can transform and transfer to other relationships, where the energy manifests itself in different ways. Relationship energy provides opportunities for the same relationship to be reactivated at a later time, and helps or hinders the configuration and maintenance of other relationships as this energy moves with people to other organizations and contexts (ibid.). Triad Outcomes Based on its dyadic relationships, we can analyze a triad as one entity. However, defining triad outcomes as generative or degenerative would be too simplistic. Generative development in the triad would mean stronger actor bonds, resource ties, and activity links between all the three actors, leading to increased cooperation, increased trust, more mutual benefits, and mutual understanding (cf. Schurr, 2007) in all the three dyads. However, a triad is less stable than a dyad, and the balance of power is very unlike to be equal between all three actors. Even though adaptation outcomes in one of the dyads may be generative, the development in the third dyad may be Table 5.

Dyad Outcomes.

Generative Dyad Outcomes

Degenerative Dyad Outcomes

Ending

Unchanged

Stronger actor bonds, resource ties and activity links.

Weaker actor bonds, resource ties and activity links.

Actor bonds, resource ties and activity links end at the organizational level.

No change in actor bonds, resource ties and activity links.

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degenerative. Therefore, I will relate the triad outcomes to changes in the nature of the dyad’s relationships. Madhavan, Koka, and Prescott (1998) use the concepts of structurereinforcing and structure-loosening change when investigating how the structure of interfirm relationship networks changes over time and in response to specific industry events. When applying these concepts, structurereinforcing adaptation outcomes denote development toward a more cooperative triad, implying (1) change from a bridge triad to a serial triad, (2) change from a bridge triad a unitary triad, or (3) change from a serial triad to a unitary triad. Furthermore, a unitary triad may also change from a ‘‘less unitary triad’’ to a ‘‘more unitary triad’’ (Havila, 1996). Structure-loosening outcomes denote the opposite: the actors may become less cooperative. Thus, structure-loosening outcomes may imply (1) change from a unitary triad to a bridge triad, (2) change from a serial triad to a bridge triad, or (3) change from a unitary triad to a serial triad. To end a triadic relationship setting is not as straightforward as to end a dyadic relationship. In a dyad, when one of the actors leaves, the dyad ceases to exist. A triadic relationship constellation provides more variations (Havila, 1996). First, even though one of the parties leaves the triad, the relationship may continue to function as a dyad if two of the actors continue their cooperation. For the actor that leaves the triad, the change may be radical. In service delivery, the intermediary has usually a general role in linking consumption and production of the service. Consequently, if the link is not needed any more, the two remaining participants are naturally the customer and the supplier. Second, if a new actor replaces one of the actors (or two of them), the relationship turns to a new triad. The triad is still a triad, but with new activity links, resource ties and actor bonds. Third, the triad may cease to exist, by dissoluting naturally, or by ending due to an unexpected event (cf. Giller & Matear, 2001; Havila, 1996). Each of the parties may continue to function independently. Just like in dyads, the relationship energy may remain within the actors (Havila & Wilkinson, 2002). In fact, relationship energy is even more expected, because more actors are involved in the triads. Table 6 summarizes the triad outcomes. Structural change in a network is typically an evolutionary process. The focus is often on change through gradual and incremental steps as network actors interact and adapt to one another (cf. Halinen et al., 1999; Havila & Salmi, 2000; Ha˚kansson & Snehota, 1995b). Ha˚kansson and Henders (1995, p. 147) argue that a total revolution in terms of network change in all actors,

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Table 6. Structure Reinforcing

Structure Loosening

More cooperative – from bridge to serial triad – from bridge to unitary triad – from serial to unitary triad – from a less unitary to a more unitary triad

Less cooperative – from unitary to bridge triad – from serial to bridge triad – from unitary to serial triad

Triad Outcomes. New Triad

An actor is changed

Dyad

Ending

An actor is Triad ends at eliminated organizational level

activities and resources can never take place. Any revolution will only directly involve a few of the dimensions of the network (ibid.). The punctuated equilibrium model offers a lens through which theorists can make discoveries about how organizations, managers, work groups, and industries both develop over time and react to changes in their environment (Gersick, 1991). For example, Salmi (1995), Halinen et al. (1999), and Havila and Salmi (2000) have used this model in business network dynamics studies. The developers of the model, Tushman and Romanelli (1985), argue that organizations progress through convergent periods, which are punctuated (interrupted) by reorientations. Gersick (1991, p. 10) proposes three main components for the punctuated equilibrium paradigm: deep structure, equilibrium periods, and revolutionary periods. Deep structure refers to the fundamental structures, which are the basic construction of the network. Fundamental structures concern the choices the actors have made regarding to whom they are connected and with whom they cooperate (Gersick, 1991), including the actor bonds, resource ties and activity links the actors have built between each other over time (Halinen et al., 1999). Gersick (1991, p. 16) compares the deep structure to the design of the playing field and the rules of the game. During the periods of stability (equilibrium), the basic activity patterns remain the same, and only incremental changes may occur. If the deep structure describes the playing field and the rules, then the equilibrium periods are a game in the play (Gersick, 1991). In the network context, the actor bonds, resource ties and activity links between the different actors are

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stable, but their nature may change. The network approach emphasizes the combination of change and the overall stability of the relationships. For example, relationships are often built with similar companies to those in the firm’s current relationship portfolio. Furthermore, change may imply new ways of working with existing business partners (Ritter & Ford, 2004). Inertia leads to stability in the relationships, and refers to the tendency to maintain the deep structure of the network. As long as the deep structure is unbroken, the structure generates a strong inertia, first to prevent the system from generating alternatives outside its own boundaries, then to pull back to the line any deviations that occur. Inertia manifests the various interdependencies between companies, which keep the actors together, allowing only incremental change and adjustments to occur (Gersick, 1991). Further barriers to radical change in human systems are cognition, motivation, and obligation. The cognitive frameworks and the thoroughness shape human awareness, and phenomena, ‘‘that will not fit in the box are often not seen at all’’ (Kuhn, 1970, p. 24). The motivational barriers to change imply uncertainty and the fear of failure that go together with the anticipation of terminating a life structure and trying to define a new one (Levinson, Darrow, & Klein, 1978). Even if a system overcomes its own cognitive and motivational barriers against realizing a need for change, the networks of interdependent resource relationships and value commitments often prevent the ability to change, referring to obligation (Tushman & Romanelli, 1985, p. 177). However, discontinuities and revolutionary change can also happen in business networks. The need to understand change processes is critical today, when the economic, technological, social and political environment constantly faces alterations (Zineldin, 2000). The punctuated equilibrium model suggests longer periods of stability, and unexpected and revolutionary periods (Gersick, 1991, p. 20), which force the deep structures of actor bonds, resource ties, and activity links to alter fundamentally. According to Gersick (1991, p. 33), critical events should be seen as impulses that set the stage for radical change (see also Havila & Salmi, 2000). This might lead to dissolution of the relationships, or the emergency of new actors in the network. Revolutionary periods usually involve uncertainty and discomfort for the individual actors in the network (Halinen et al., 1999). Returning to Gersick’s (1991) playing field metaphor, the difference between the incremental change and revolutionary change is like the difference between changing the game of basketball by moving the hoops higher (incremental change) or by taking the hoops away (radical change).

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The first kind of a change leaves the game’s deep structure unbroken, and the second takes the structure apart (ibid.).

A New Framework to Analyze Adaptations in Triadic Relationship Settings This section integrates the theoretical discussion of adaptation initiation, the process of adaptation, and its outcomes to an analysis framework, which is visualized in the Table 7. In line with the systematic combining approach, the framework is a result of matching the theoretical world and the empirical world. (cf. Dubois & Gadde, 2002, p. 554) Impulse sources and impulse types are the tools to analyze adaptation initiation. Impulse sources depict from where the adaptation impulses emerge; the actors (firms), the three dyadic relationships they build, the primary network, which is the industry in which the triad belongs to, and the macronetwork. The macronetwork is the overall network in which the industry specific network is embedded. Impulse types are either endogenous or exogenous. The individual actors, and the dyads represent endogenous impulses, and the primary network and the macronetwork represent exogenous impulses. Adaptation process describes how adaptations progress and spread to cover the entire triadic relationship setting. The content of adaptation denotes what is adapted, referring to the actors, and their resources and activities. The nature of the process indicates the characteristic of adaptations: the scale and formality of adaptations, and their reciprocity and voluntariness. The scale of adaptation refers to the key actors’ involvement in the process, and the number of organizational units participating in them (Brennan & Turnbull, 1999). Investment and evolutionary processes are large-scale processes involving a great number of actors in the organization. Political and socialization processes are of minor scale. The reciprocity describes whether adaptations are unilateral, mutual, or ‘‘threefold,’’ and if they are coerced or voluntary. In unilateral adaptation, the firm implements a specific modification for an exchange partner without any mutual modification by that partner. Mutual adaptation is reciprocal adaptation between two actors. In threefold adaptation all the three actors implement adaptations toward each other to benefit the common goals. One actor or a coalition of two may force adaptations. Voluntary adaptations occur without coercion. Adaptation process progresses in information exchange, negotiation, communication, and execution phases. A fifth phase describes how adaptations spread to concern the entire triadic relationship

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Table 7. A Framework to Analyze Adaptation in Triadic Business Relationship Settings. Initiating How adaptations initiate in a triadic business relationship setting?

Process How do adaptations spread over time in a triadic business relationship setting?

Outcomes How do adaptations change the structure of a triadic business relationship setting and the nature of its relationships?

Impulse types – Endogenous – Exogenous

Content of adaptations – Actor – Resource – Activity

Actor outcomes – Positive – Negative

Impulse sources – Actor – Dyad – Primary network – Macronetwork

Nature of adaptations Reciprocity – Unilateral – Mutual – Threefold – Coerced – Voluntary Scale of adaptations – Investment – Political – Socialization – Evolutionary

Dyad outcomes – Generative – Degenerative – Ending – Unaltered Triad outcomes – Structure-reinforcing – Structure- loosening – Dyad – New triad – Ending

Progression Phases – Information exchange – Negotiation – Communication – Execution Spread – Connected – Derived – Agreed

setting. The spread may occur in three different ways. One of the actors initiates connected adaptation, a dyad initiates derived adaptation, and all the three actors in cooperation initiate agreed adaptation. Adaptation outcomes imply three different levels: Actor outcomes may be positive or negative. Dyad outcomes may be generative, meaning stronger actor bonds, resource ties, and activity links between two actors, or degenerative, denoting weaker actor bonds, resource ties, and activity links.

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The relationship may also end, or remain unaltered. Triad outcomes may be structure-reinforcing indicating a more cooperative triad, or structureloosening, referring to a less cooperative triad. A triad may also change to a dyad, when one of the actors leaves the triad. A triad may change to a new triad when a new actor replaces the old one. Furthermore, a triad may end, when the actor bonds, activity links and resource end at the organizational level. The study uses this conceptualization and the framework to analyze adaptations in triadic business relationship settings in the corporate travel management. However, before the analysis, the following exposition explains the research design and method.

RESEARCH DESIGN AND METHOD This study relies on subjectivist epistemology, where the knower and the subject create understandings. The study includes the use of the interpretive approach which springs from constructivism, where the reality is socially constructed, contextual, and the individual realities are holistic, more than the sum of their parts (Hudson & Ozanne, 1988). The study applies case studies and in-depth interviews to understand reality. The informants’ perceptions provide a window to a reality. Thus, the knowledge creation relies on constructionist processes and interpretation (cf. Healy & Perry, 2000, p. 120). By adding variance, or detail, the interpretive process becomes more complex, and the researcher will achieve a ‘‘thick description’’ (Easton, 1995, p. 444; Geertz, 1973; Hudson & Ozanne, 1988). According to Bleicher (1990, p. 29), ‘‘interpretation is an activity the aim of which consists in arriving at Understanding.’’ Interpretive methods are characterized by efforts to understand the complexity of the business world by adding meaning to strategies, actions and events, and being thus especially suitable for B2B research (Black, 2006; Gummesson, 2003). Easton (1995) sees constructivist approach problematic for industrial network research, because these approaches treat industrial networks as social phenomena, even though they are also economic and technological in nature. He argues that concentrating on the social aspect may result in a one-dimensional description. However, the individuals in the networks coordinate activities with other individuals, and provide the basis for network behavior. However, actors cannot work within industrial networks

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without resources. Resources bring with them the technical and economic aspects that have an impact on the actors’ behavior (Easton, 1995).

Case Study Method The choice of method is dependent upon the research problem, the research design, and the purpose of the research (Ghauri, Gro¨nhaug, & Kristianslund, 2002). The IMP Group recommends case-based research when the aim is to understand the process by which specific relationships develop over time (Dubois & Gadde, 2002; Halinen & To¨rnroos, 2005; Ha˚kansson, 1982). This study is exploratory in nature, and the case study method helps to determine the best research design and data collection method as the problem is not clearly defined. The goal of the study is analytical generalization, expanding and generalizing theories, rather than statistical generalization or case comparison (cf. Yin, 2003). Because of context specificity and historical background, each relationship is unique and therefore difficult to compare with other relationships (Halinen & To¨rnroos, 2005, p. 1288). The low statistical representativeness is replaced with depth and comprehensiveness. The case study method is suitable when dealing with complicated organizational phenomena, such as adaptation (Easton, 1995, p. 483). A case study is useful when little is known about the phenomenon, or the current perspective seems inadequate (Eisenhardt, 1989, p. 528; Ghauri & Gro¨nhaug, 2002), as in the current study, which is an adaptation study in a new context and with a new perspective. Preunderstanding Gummesson (2000) argues that academic researchers give inadequate thought to the importance of preunderstanding that helps to understand the research setting and all its nuances. The study knowledges insights and experience of the object as she/he approaches it, thus being unable to start with a neutral mind (Bleicher, 1990). Lack of preunderstanding will cause the researcher to spend considerable time gathering basic information. Before the research process started, I had an extensive preunderstanding of the business travel industry and the specific relationship setting due to extensive working and executive training experience in the industry. Systematic Combining Perry (1998, p. 789) argues that ‘‘pure induction might prevent the researcher from benefiting from the existent theory, just as pure deduction

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might prevent the development of new and useful theory.’’ This research is characterized by systematic combining (Dubois & Gadde, 2002), which is based on the logic of abductive research. Systematic combining is a combination of deduction and induction, but gets closer to an inductive than deductive approach. Systematic combining is similar to grounded theory (Glaser & Strauss, 1967), where the researcher systematically generates theory from data. However, the evolving framework is typical to the systematic combining approach (Dubois & Gadde, 2002). The main characteristic of systematic combining is ‘‘a continuous movement between an empirical world and model world’’ (Dubois & Gadde, 2002, p. 554). While in the grounded theory has no theoretical framework, in systematic combining the theoretical framework, empirical fieldwork, and case analysis advance simultaneously (Turnbull, 2002). Systematic combining is more open-ended than, for example, the case study approach by Yin (2003). The researcher knows neither the phenomenon nor its context prior to starting the research. The context and boundaries of the phenomenon construct progressively as theory interacts with method and empirical observations. Thus, the research object, and its boundaries and context are emergent and unfolding outcomes of the research process (Dubois & Araujo, 2004). Processual Approach The processual perspective addresses the question of how change occurs, its nature, sequence, and order of events and activities that unfold over time (cf. Dawson, 1997; Halinen, 1996). The other alternatives would have been the input-output models, which have their focus on the antecedents and consequences of development, or models using change perspective. They concentrate on the development process in terms of the change in the number of specific variables over time, for example, the changes in exchange volumes. The input-output models usually only allow us to see if a change has happened, not how change happened (Halinen, 1996). The basic idea of processual research is that organizations may be researched as a continuing system with a past, a present and a future. Adaptation is a dynamic phenomenon, which is time and context specific. In accordance with the interactive view, the actions of a single company are based on, ‘‘its interpretation of the previous actions of specific others and on its anticipation of the possible reactions and re-reactions of those specific others in the future’’ (Ford & Ha˚kansson, 2006, p. 4). The contextual setting and the timing of the adaptation are important, because of the continuous changes as well in the organizational and

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relational conditions (Jahre & Fabbe-Costes, 2005), and a successful adaptation in the present moment may not be relevant at other times, or in other contexts (Halinen, 1994). For example, Ford (1980) used the processual perspective. He analyzed relationship development by considering the following variables: experience, uncertainty, distance, commitment, and adaptation. In the service sector, Halinen (1994) conducted a longitudinal study in the professional services. The study of Dwyer et al. (1987) applies also a processual perspective, and describes relationship development as a process of deepening dependence. Van de Ven and Poole (1995) provide a typology of four generic but distinct developmental theories: life cycle, teleology, evolution, and dialectic theories. These four theories may be classified along two dimensions; the unit of change, and the mode of change. The unit of change portrays whether the process focuses (1) on the development of a single organizational entity, or (2) on interactions between two or more entities. Life-cycle and teleological theories represent the former view, and evolutionary and dialectical theories stand for the latter one (Weick & Quinn, 1999). The mode of change depicts whether (1) the sequence of change events is predetermined by deterministic laws and produce first-order change, or (2) whether the sequence is constructed, and emerges as the process unfolds, generating novel second-order change. The life-cycle and evolutionary theories represent the former mode and the dialectical and teleological theories the latter mode (Weick & Quinn, 1999). Life cycle and evolutionary theories are the most often used theories in buyer-seller relationship research. In practical research, several process theories are typically applied simultaneously to establish understanding for the process in focus (Halinen, 1996). Halinen (2007), lecture advices using a combination of two of these theories. Brennan and Canning (2002) suggest that a teleology process would be the most suitable for the development of a model of adaptation, because teleology bases on the assumption that the developing entity is purposeful and adaptive. The theories of change that best can explain how adaptations unfold in relationships are evolutionary and dialectical theory. The unit of change is constructed and emergent, and implies more than two entities. If we see the company as a collection of heterogeneous individuals, dialectical theory serves as a motor of change. Evolutionary models apply the processual meaning of development, and aim at capturing the content of the relationship in dynamic concepts (Halinen & To¨rnroos, 1995). Dialectical theory explains stability and change by the relative balance of power between opposing forces (Das & Teng, 2000, p. 84; Van de Ven, 1992), and predicts

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the collision of coexisting but contradictory social forces that produce a new social order (de Rond & Bouchikhi, 2004). Some contradictions are generated within the organization, which are growing out of the divisions, control structures, and other separation points in the organization. Contradictions may also appear in wider society, from where they are enforced upon the organization (Benson, 1977). Opposing forces can consist of tensions endogenous and exogenous to the relationship, they are interdependent and mutually negating, and inherent in all social relationships. Tensions occur when the forces are out of balance. The specific issues addressed and activities performed depend on timing and context. Relationships survive by managing the dominant force at the given point of time. Change is a function of adaptation to these opposing forces, and requires constant adaptation in relationships (Bantham, Celuch, & Kasouf, 2003; Johnston, Robinson, & Hausman, 2006; Montgomery, 1998). For example, Johnston et al. (2006) apply the dialectical view to relationship development, and use the extended marriage metaphor, which highlights the complex juggling act that accompanies maintenance of network relationships. The extended marriage metaphor includes the constancy of change, changes in the actors as they leave and enter the network, changes in the power held by a firm, changes in culture, and many other changes that require evolution and restructuring of relationships and key processes. Furthermore, individuals in the firms may change their relative positions. According to the dialectic view, firms may simultaneously occupy several potentially conflicting roles across specific dyads within the network. Consequently, firms must adapt to different ways of interacting with each firm in the network (Johnston et al., 2006). The emphasis of evolutionary approaches is on the environment as a trigger of change, preserving only those entities that best fit its evolving nature. The evolutionary approaches consider change deterministic and subject to minor influences by individuals. These approaches have a generative mechanism of competitive selection and resource scarcity (Weick & Quinn, 1999). Evolution theories have several variations, for example, punctuated equilibrium, Darwinian, and Lamarckian evolution models. Evolutionary models apply the processual meaning of development and try to capture the content of the relationship in dynamic concepts: to the past, present, and future (Halinen & To¨rnroos, 1995) with no absolute time dimension. Evolutionary models view relationship development in relation to the processes occurring in relationships and the events in the context of relationships, not only in relation to the passage of time (Halinen, 1996).

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The Research Setting The business travel industry offers the topical context for this research. The core triads consist of an industrial enterprise, and its business travel agency, and service supplier partners, who are during the investigated period actively related to each other through business, social and technological exchange (cf. Halinen & To¨rnroos, 2005, p. 1288). Generally, the researcher faces difficulties when collecting data from the actual counterparts of a specific relationship because of the opaque nature of the business relationships (e.g., Trimarchi & Tamaschke, 2004, p. 341). Ha˚kansson (1982) notices that trying to collect data from actual counterparts might lead to resistance from firms, because doing so may interfere with their business with each other. The dyadic relationships in triads develop at different speeds for different motivations, needs and strategic reasons (cf. Keyton, 2000). The actors of the triad may also change, as happened during my research process when a new one replaced one of the actors. Therefore, I treat the firms as a ‘‘public phenomenon,’’ not as a ‘‘private role,’’ meaning that a role exists together with a position (Linton, 1936; Merton, 1957). If the firm leaves the position, the role remains, and another firm can learn to perform the role (cf. Havila, 1993). The triads embed in an industry that is highly network bounded. Drawing the boundary round the focal triadic relationship setting narrows the scope, but allows a deeper analysis (Halinen & To¨rnroos, 2005). From a network perspective, when a researcher chooses a small unit, she or he loses the connectedness, which is essential in business networks. A large single network causes difficulties in access (Easton, 1995; Halinen & To¨rnroos, 2005). Focusing on something ‘‘small’’ in its wider context is a theoretically relevant and empirically helpful way of drawing a boundary around the case and developing the analysis (Dubois & Araujo, 2004, p. 218). The empirical case study is about how the actors in the triadic relationship settings adapt toward each other. Here the industrial enterprise is a starting point when selecting the triads. This was a natural choice, because the service the relationships are established for is the industrial enterprise’s business travel management process, and the industrial enterprise that chooses the partners with whom to cooperate.

Units of Analysis and the Research Perspective Several researchers argue that the unit of analysis is equivalent with the case (e.g., Miles & Huberman, 1994; Patton, 1990; Yin, 2003). However, for

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example, Gru¨nbaum (2007) pays attention to the conceptual separation of the case from the unit of analysis. The unit of analysis constitutes the microlevel, and the case constitutes something that is closely and logically connected with the unit of analysis. The unit of analysis must in any research always be identified, as this process will strengthen the purpose of the study (Gru¨nbaum, 2007, p. 88). The current study applies the embedded single case design (cf. Gru¨nbaum, 2007, p. 87; Perry, 2001, p. 307), where I examine several units of analysis in one case. In other words, the research setting includes six triadic relationships, in which 11 dyadic relationships are embedded. These dyadic relationships are directly connected to the industrial enterprise’s travel management process. In Fig. 11, the numbers 1–11 denote the dyadic relationships. The two business travel agencies are participants in the triadic relationship settings at different points of time, thus I do not include their competitive relationship in the analysis. Furthermore, because I investigate the travel management process from the industrial enterprise’s perspective, I exclude the relationships between the three service suppliers from the analysis. The study applies a triadic approach by investigating each of the three dyadic relationships of a business triad in the context of the other two dyads to which the dyad is connected, and from both ends. The micronet approach that Halinen and To¨rnroos (1998) suggest inspires this approach. However, the triadic perspective limits the examination ‘‘inside the triad.’’ The perspective is similar to ‘‘a net within a network perspective’’ Industrial enterprise

1 Former travel agency

Industrial enterprise

2 3

Industrial enterprise

4

Airline A

Former travel agency

Industrial enterprise

5

6

Airline B

Former travel agency

Industrial enterprise

7

Hotel chain

Industrial enterprise

8 Present travel agency

9

1. Industrial enterprise – Former travel agency 2. Industrial enterprise – Airline A 3. Former travel agency – Airline A

Fig. 11.

Airline A

Present travel agency

1 0

Airline B

4. Industrial enterprise – Airline B 5. Former travel agency – Airline B 6. Industrial enterprise – Hotel chain 7. Former travel agency – Hotel chain

Present travel agency

1 1

Hotel chain

8. Industrial enterprise – Present travel agency 9. Present travel agency – Airline A 10. Present travel agency – Airline B 11. Present travel agency – Hotel chain

The Units of Analysis: The Six Core Triadic Relationship Settings and the 11 Core Dyads.

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(Halinen, 2007, lecture, June, 14). The commonly used perspectives are the actor-network perspective, where the researcher views a business network from a certain actor’s viewpoint, and the dyad-network perspective, which observes the core dyad as a part of a wider industrial network (Halinen & To¨rnroos, 1998). Selecting the Cases and Access to Data The study applies purposive sampling. The study includes selecting information-rich cases appropriate for an in-depth study. The strategy comes close to intensity sampling, which involves collecting informationrich cases that are excellent or rich examples of the phenomenon of interest, but not unusual or extreme cases (cf. extreme or deviant case sampling; Lincoln & Guba, 1985; Patton, 1990). When searching for suitable cases, the first organization consulted was the Finnish Business Travel Association (FBTA). The executive director of the association was convinced that the topic is extremely relevant and actually happening and she helped to find the case firms, and to get access to them. The buyer organization, a firm with enough business travels to maintain relationships with its main suppliers, and a person responsible for the travel management function was the starting point. Access implies getting close to the object of the study, and being able to really find out what happens. Access includes several dimensions: physical access, which is a basic condition for research, and continued access. Mental access refers to how to understand what is actually happening in the setting, how to get people to describe what happens, how to observe, or how to experience the happenings through the researcher’s own involvement (Gummesson, 2000). My experience in the business travel industry, and the relationships established during those years guaranteed all these dimensions of access. Furthermore, the FBTA gave access to specific information by opening their membership data bank and their seminars for the study. The corporate buyer informant (the travel manager) is the key informant (cf. Patton, 1990, p. 263). She acted as a ‘‘gate opener’’ that paved the way to the other informants. She suggested the informants, and from her own initiative, she made contact with them. After her generous help, I had no difficulties to make the appointments. None of the contacted persons refused being interviewed. The travel manager chose two to three informants from the buyer firm and from the business travel agencies. Many empirical studies on interfirm relationships rely on data collected from one informant at each of the participating organizations, even though interfirm

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relationships involve active participation of several individuals within each partner organization. Palakshappa and Gordon (2006, p. 391) emphasize the importance of including several individuals from an organization in the study, because individuals may have varying perceptions of the role and performance of the relationship. However, only one informant represents each of the three service supplier organizations, because these individuals are the main, and practically the only contacts to the buyer organization. The informants view the focal phenomenon from different perspectives (cf. Eisenhardt & Graebner, 2007) because they are high knowledgeable individuals from different from different hierarchical levels. Traditionally, in business relationship studies use, CEOs and top management informants. Including informants that are involved in daily contact with the other companies provides insights into the short-time interactive processes and their outcomes (Holmlund, 2004). Interview Process The empirical data were gathered with the help of the critical interview technique, which bases on Flanagan (1954), but assumes a phenomenological approach in contrast to the more positivistic approach that was dominant in Flanagan’s time (Chell, 2004). I asked the informants to express specific events that had initiated adaptations in the focal business triad. The aim of the technique is to capture the thought process, the frame of reference, and the feelings about a happening that has meaning to the respondent. Chell (2004) defines the critical interview technique as ‘‘a qualitative interview procedure, which facilitates the investigation of significant occurrences (events, incidents, processes, or issues), identified by the respondent, the way they are managed, and the outcomes in terms of perceived effects. The objective is to gain an understanding of the incident from the perspective of the individual, taking into account cognitive, affective and behavioral elements’’ (Chell, 2004, p. 48). The qualitative interview is an exclusively sensitive and powerful method for capturing the experiences and lived meanings of the informants’ everyday world. Interviews allow the informants to express to others their own perspective in their own words (Kvale, 1996, p. 70). An advantage of the critical interview technique is that the linkage between context, strategy and outcomes is more readily teased out because the technique is focused on an event, which is explained in relation to what happened, why the event happened, how the event was handled, and what the consequences were. The interviews were tape-recorded and transcribed word by word.

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The transcribing was time consuming, but it was an important phase in the analysis. While rewinding the tape, the researcher listens very carefully to what the informants said, and in what tone of voice. Furthermore, doing the transcriptions after each interview brought forward insights for the following one. Ten interviews were conducted in April, May, June, and August 2005 with two informants from the industrial enterprise, five informants from two different business travel agencies, and three informants from three different service supplier organizations. Two different airlines companies and a hotel chain represent service suppliers, because, in general, more than 50% of a company’s travel budget consists of flight tickets, accommodation costs being the second largest travel related cost. Two different business travel agencies took part in the research, one of them being the industrial enterprise’s new partner, and the other one the former partner, with which the relationship ended not long before the interviews. All the informants have more than 10 years of experience in the business travel industry. The first interview with the key informant was more conversational and open-ended than the other ones, allowing maximum flexibility and responsiveness. The key informant produced a lot of information that I added to the interview guide to be discussed in the following interviews. The interviews lasted from 1 to 2.5 hours, the first one being the longest, indicating its conversational nature. The purpose of interviewing is to see the research topic from the perspective of the interviewee, and to understand how and why they have this particular perspective (King, 2004). The quality of the information obtained during the interview is largely dependent on the interviewer (Patton, 1990, p. 279). As Gummesson (2005) states, the researcher often creates data in interaction with a respondent in the interview situation. I opened up the interview with a question that the informant could answer easily, and posed the difficult and sensitive questions later when both me and the informant felt relaxed and had had the possibility to get to know each other a little bit first (King, 2004, p. 17). The interviews started by asking the informant to describe his or her own career in the business travel industry. Thereafter, the discussion led to the relationships in the focal business triad. I prepared some probe questions in case the informant would not raise them first (cf. Perry, 1998, p. 792). The critical interview technique, unlike the unstructured interview, enables the researcher to probe appropriately, by asking, for example, ‘‘what happened next, why it happened, how it happened, and what the consequences were’’ (Chell, 2004, p. 49).

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Chell (2004) suggests using a visual aid to get informants to think about the sequence of events that have emerged over time. The visual aid helps to focus the interview, exercise the memory, and enables the researcher to get a sense of the nature and chronology of the events. In the beginning of the interview the informant received two empty diagrams with two axes (see Fig. 12). I advised the informants to visualize the development of the two interfirm relationships in which they were involved. On the time axis, they illustrated the events, and on the vertical axis, the consequences of each event in terms of closeness and distance to the relationship. In, the Fig. 12, the events are marked in the horizontal axis, and their consequences regarding the strength of the relationships in the vertical axis. The informants memorized the events in their own terms, and determined which of them were the most relevant, describing mainly the same events, colored with their own perspectives and experiences. Some of the informants chose to tell a chronological story, starting from the early 1980s, and ending up forecasting the future trends. However, some of the informants worked backwards, marking events along the length of the axis, and some of them remembered the events out of order. The illustrations helped to structure the interviews, and to trace the events and their consequences. A good interview lays open thoughts, feelings, and experience not only to the interviewer, but also to the informant. An interview is a reflective process, which affects both the interviewer and the informant. Patton (1990, p. 354) argues that a good interview leaves the informants knowing things about themselves that they did not know, or that they were not aware of

The development of the TMC – corporate buyer relationships from the TMC informants perspective

Distant relationship

Distant relationship

airline deregularisations globalisation low-cost airlines contracts

Close relationship

travel manager

Time

2000

Fig. 12.

The development of the TMC – service supplier relationships from the TMC informants perspective

selfbooking service centers

chaging buying behaviour

globalisation low-cost airlines contracts

e-tickets

BSB oursourcing IT deregularisation commission cutting -01 -02 -03 -04 -05 -06

airline deregularisations

Close relationship

Time

IT travel manager 2000

chaging buying selfbooking behaviour service centers

e-tickets

oursourcing BSB commission deregularisation cutting

-01 -02 -03 -04 -05 -06

An Example of the Visual Aid Used in the Interviews.

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before the interview. Interviews allow reciprocity and provide time for interviewees to engage with another person. This opportunity would perhaps not have occurred otherwise (Jennings, 2005, p. 108). According to Patton’s criteria, my interviews were successful. The informants enjoyed reflecting on their professional career, and ‘‘how the times have changed from the good old days,’’ referring to today’s busy business life, where you neither have time to memorize the past, nor think about today, but you have to be busy planning the future strategies. The informants had all been involved in the travel industry for a long time, and they were happy for the attention the industry got. The Research Cycle The phases of the research process I described above are parts of the hermeneutic research cycle. As Hudson and Ozanne (1988, p. 513) put it, ‘‘An interpretive research is an emergent process, where ideas, meanings, questions, and data-collection techniques are cooperatively developed.’’ With the help of theoretical studies and case studies, I created an initial conceptual framework of adaptation in the triadic relationship setting. This framework shaped up during the process. The study included reviewing the framework continuously, and refining the framework over the life of the research process. The research cycle (Cepeda & Martin, 2005) began with selecting the case, planning the research design, and the methods for collecting and analyzing the data. The plan guided the data collection, and the analysis went on throughout the interview process, and continued until the report was finalized. A formal stage of reflection occurred at the end of the analysis. This stage involved reviewing the research process and the methods to collect and analyze data. I evaluated the outcomes of the analysis, and challenged the current interpretations by seeking disconfirming data for tentative findings. The emerging themes required sometimes reevaluation and explanations from the literature and from practitioners and experts, leading to an ongoing process of meaning construction (cf. Cepeda & Martin, 2005). Eisenhardt (1989) and Yin (2003) encourage considering any relevant implications of the findings. Thus, the researcher has a constant need to ‘‘look beyond data to build theory’’ (Cepeda & Martin, 2005, p. 860). Finally, each research cycle included changing the conceptual framework, and iteration between the data, tentative findings, and inputs to the conceptual framework (Dubois & Gadde, 2002).

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Data Analysis I elaborated the interview data in two stages, within-case analysis and crosscase analysis (Yin, 2003). Within-case analysis provided a description for each side of the case. These descriptions were central to generating insight (cf. Pettigrew, 1987) and coping with the great volume of data. I organized the data into categories of themes with the help of the NVivo software package. Within case analysis implies comparing the data to prior studies. Each case analyses included a three-stage interactive process as suggested by Miles and Huberman (1994): data reduction, data display, and conclusion drawing. During the interpretation process, the data were condensed, trying, ‘‘to make the same information more compact and manageable but not lose weight’’ (Gummesson, 2005), and ‘‘to make each concept, model and theory progressively denser with knowledge’’ (Gummesson, 2006). The data display phase included creating tables, matrices, charts, and network diagrams to organize data and facilitate the analysis process. The study applies cross-case analysis to compare the embedded cases. According to Eisenhardt (1989), cross-case analysis improves the likelihood of developing theory that fits with the data and increases the possibility of capturing innovative findings. The drawing of conclusions and verification was the final analytical step (cf. Miles & Huberman, 1994). The case analysis consists of description, analysis and interpretation. Gummesson (2003, p. 484) argues that all research, especially in the B2B context, relies heavily on interpretation. Furthermore, these three ways are not mutually exclusive (Wolcott, 1994, p. 12). Patton (1990, p. 375) advises to separate description from interpretation. Interpretation involves explaining the findings, attaching significance to particular results, and putting patterns into an analytic framework. He sees interpretation as the creative work, and warns not to rush to do interpretations before doing the detailed work of putting together sound answers to major descriptive questions. According to Wolcott (1994, p. 12), description concentrates on the question ‘‘What is going on here?’’ Analysis addresses the identification of necessary features and the systematic description of interrelationships among them. Analysis answers the question ‘‘How things work?’’ Interpretation addresses processual questions of meanings and contexts, answering the question ‘‘What is to be made of it?’’ In this case report, adaptation impulses are described. Analysis concentrates on how the adaptation process progressed, and how the informants perceived the nature of adaptations. Interpretation of the adaptation outcomes is a combination of multiple

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perspectives of interrelated changes in three dyadic relationships. Interpretation occurs because of an ongoing, reflective process (Wolcott, 1994, p. 260). Kvale (1996, p. 201), inspired by hermeneutical philosophy, uses the term interpretation for more general and deeper interpretations of meaning. The interpreter goes beyond what is openly said to work out structures and relations of meaning, which are not apparently observable in the text. This requires a certain distance from what is said, which is achieved by a methodological or theoretical stance, and reconceptualizing what is said in a specific conceptual context (ibid.). Interpretation is an iterative process. A hermeneutic circle that requires a detailed ‘‘reading of the text,’’ which in turn leads to new interpretations, which in turn are tested on the text, features the interpretation process (Easton, 1995). The hermeneutical circle implies continuous back and forth process between the parts and the whole. In the hermeneutical tradition, this circularity is not regarded as a ‘‘vicious circle,’’ but the possibility of a continuous deepening of meaning (Kvale, 1996, p. 48). A triadic approach provided multiple perspectives to data analysis. The main sources of data were the in-depth interviews. I used also industry specific literature; industry reports, trade magazines, and scientific research on travel industry for triangulation. I refer to these industry specific sources in the text, and they are listed in the reference list.

Interplay with Empirical Data and Theory A standardized conceptualization of an interpretive research process consisting of a number of planned succeeding phases and cycles is not adequate in a systematic combining approach. However, Fig. 13 aims to show the movement between the theory and the empirical world. The empirical case study and the theoretical framework proceeded simultaneously, and the process was influenced by my preunderstanding. Deepening concurrently the theory studies and interpreting the interviews helped me to focus the study. I conducted the literature review simultaneously with fieldwork, thus permitting an innovative interaction among the process of data collection, literature, and researcher introspection (cf. Patton, 1990). Although the process is emergent, I have distinguished five main phases: (1) preunderstanding, (2) preliminary theory development, (3) preliminary results, (4) actual theory development, and (5) the final results. I designed preliminary research questions before the data collection, and specified them during the process. The data collection and initial

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Empirical setting Preunderstanding

Preliminary theory development

Practical experience in the business travel industry

Series of case studies in the business travel industry Focus on co-operation and change in triadic relationships

Final results

Fig. 13.

Service marketing and management

Interaction and network approach Service marketing and management approach

Focus turned to iadaptation: Content and process of adaptation

Preliminary results

Actual theory development

Theoretical setting

Data analysis

Interaction and network approach Service marketing and management approach Small group research, triad

Framework of adaptation in triadic business relationship settings

Research Process: The Movement between the Theoretical and Empirical Setting.

deskwork went on hand in hand, and writing begun while still having access to the field, as Wolcott (1994, p. 21) recommends, allowing me to expand understanding on both theory and empirical phenomena. I also had occasionally the need to redirect the current theoretical framework (cf. Dubois & Gadde, 2002). The size of the pentagons in Fig. 13 aims to illustrate the share of empirical and theoretical knowledge in each of the phases. The horizontal arrows illustrate the continuous movement between the theories and the case studies. The vertical arrows on the left hand side of the figure show the feedback loops in the process, and the hermeneutical nature of the research. Matching, which means going back and forth between the theoretical framework, data sources and analysis is one of the foundations of systematic combining. Direction and redirection of the research are important features for attaining matching (Dubois & Gadde, 2002). The process of building theory from case studies requires a continuous process of reflection and questioning of meaning about the findings, alternative

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explanations, disconfirming evidence, and relating the findings to the prior research cycles. The final stage was the evaluation of the quality of the research, which I will discuss in detail in the concluding part of this paper. Some stumbling blocks occurred along the way. For example, the original aim was to create a tentative framework, and complement the framework with the empirical findings. However, during the process, the theoretical and empirical insights went hand in hand, and I found it more natural to fill in the gaps in the tentative framework concurrently with the theoretical and empirical discoveries. Thus, the empirical findings influenced the analytical framework (see Table 7).

ADAPTATION IN TRIADIC RELATIONSHIP SETTINGS IN CORPORATE TRAVEL MANAGEMENT The case study analysis that follows consists of five main sections (see Table 8). The first two sections describe the empirical context of the study, and the remaining three sections concentrate on the actual case analyses. The Empirical Context: Corporate Travel and Travel Management For the corporate buyer, the purpose of business travel is to facilitate the travelers to complete work related tasks outside home offices. Business travel incorporates a variety of forms, generally divided into individual business travel and business tourism. Individual business travel engages people working away from their normal place of employment for a short period of time, which means trips taken within the normal framework of professional activities. This implies one-to-one meetings, giving consultations or presentations, or conducting investigations. Individual business travel is nondiscretionary travel, because the traveler may not be able to decide over the destination, or over other details of the trip (Davidson, 1998; Page, 1999). Business tourism implies larger group meetings, trade fairs, exhibitions, conferences, and congresses. Furthermore, business tourism includes corporate hospitality and incentive travel (leisure travel that is awarded as a motivational bonus to qualifying employees or salespeople). Business tourism entails features of both nondiscretionary and discretionary travel because the choice of where the events are to be held is open to negotiations (Davidson, 1998; Davidson & Beulah, 2003). Business travelers represent all the organizational levels. The travelers have often the authority to negotiate on behalf of their companies, and their

Answers to the third research question: How do adaptations change the structure of a triadic relationship setting and the nature of its relationships?

Answers to the second research question: How do adaptations spread over time in a triadic relationship setting? Nature of adaptations

Progression of adaptations

Summary and analysis of the adaptation processes

Actor outcomes

Dyads outcomes

Triad outcomes

Summary and analysis of the outcomes

Adaptation outcomes in the studied triadic relationship settings

Content of adaptation

Adaptation process in the studied triadic relationship settings

Analysis and summary of adaptation impulses

A convergence of business and leisure travel

Adaptation initiation in the studied triadic relationship settings

Explains the selection of impulses. Answers to the first research question: Nature of how do adaptations initiate in a triadic business relationship setting? A new earning logic

Actors of the case study

Presents the actors of the case study and the levels of analysis.

A new sales channel

Corporate travel and travel management Travel management process

Presents the empirical context.

A cost saving campaign

Name of the Section

The Structure of the Analysis.

Aim of the Section

Table 8.

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work can only be carried out face-to-face with others. Business travelers are not always white-collar workers in high positions, but very often those in possession of technical or specialist skills, travelling in order to carry out tasks away from their normal working environment (Whitford, 1999). In a broad sense, business travel is all about facilitating communication. A large part of business travel associates with negotiations, marketing and sales. Face-to-face meetings are often a necessity, partly because the uncertainty and ambiguity of communication, particularly in new relationships. Furthermore, personal contacts are essential in establishing trust and commitment. Also internal communication, that is contacts between various units within the same company group, generates business travel. However, internal contacts are not generally as complex as external contacts, and employees can replace them easier by other means of communication than face-to-face contacts (Lian & Denstadli, 2004). Basically, business travelers use the same services as leisure travelers, but they have particular expectations, for example, concerning reliability and punctuality of the services, a fact that makes them a distinct market for the various service suppliers. In addition to the core service, the business trip may include a number of enabling services, and enhancing services (cf. Gro¨nroos, 2007). During a business trip, the core services are, for example, the flights, and the hotel rooms. Enabling services, for example, a booking system to book the flights or the hotel room, make the service available for the client. Enhancing services increase the value of the service. For example, airlines and hotels provide business class lounges, and travel agencies 24 hour booking services for their clients. For business travelers and their employers, all these elements of the service are important. The travel agency helps in packaging these services for the corporate clients. The objectives of the interaction between buyer and seller put demands on the organizational resources available for the interaction. These resources mean the required buyer and supplier capabilities and the optimal buyersupplier interaction in terms of the representatives involved at the supplier and the buying firm (Cunningham & Homse, 1986). The basic service offering is important, but what is essential is the capability and interest to adapt and develop the contents and delivery conditions in a process together with the buyer (Edvardsson, Holmlund, & Strandvik, 2008). Corporate travel management implies the maximization of travel services by a corporation to its employees and the minimization of the cost of providing those services. Corporate travel management is a dedicated business function that balances employee needs with corporate goals, for example, financial goals. Travel management is a significant support

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function in many companies, and an important part of many company’s business strategy, because business travel related costs are generally the second largest controllable cost in a company after wages, constituting of about 30% of companies’ indirect operating costs (American Express & Kearney, 2008; Upton, 2005). The most important tool in managing corporate travel is travel policy. In many companies, senior management has realized the considerable benefits that can be reached by applying stronger management disciplines. The trend in the majority of the companies is toward tighter travel policies, meaning that business travelers do not make independent decisions or choices as the corporation directs so much (American Express & Kearney, 2008; Hall, 2000; McCartney, 2008). A travel policy should aim to reach a balance between savings to the organization, and increased productivity and traveler satisfaction (American Express & Kearney, 2008). Traditionally, a travel policy is a key to cutting travel costs. Travel purchase include, besides the direct costs of the services, a number of indirect costs related to the service delivery (cf. Gadde & Snehota, 2000), for example, booking the travel. A travel policy also helps to direct the travel purchase to the preferred suppliers. A successful corporate travel policy encourages compliances among travelers by setting actual and reasonable guidelines, explaining the rations behind them, describing the penalties for noncompliance, identifying guidelines for making travel arrangements, and establishing parameters for business travel related costs. The majority of the companies worldwide have created a corporate travel policy. Some companies have unofficial policies toward business travel (Douglas, 2008; Mason, 2002). The major advantage in centralized travel management is the consistent administration of policy throughout an organization, because of a single point of control for monitoring all travel functions and managing supplier and travel agency relationships. Another advantage is the maintenance of specialized employees who are devoted to administer policy and support travel operations. Centralized travel management allows consolidating volume and management information for use in supplier negotiations. However, company policy may not adequately address local conditions or problems, and communication from headquarters to field divisions may isolate divisional employees and result in poor general policy compliance (Runzheimer International, 2000). Business travel in small companies with small travel budgets has generally no need for the centralized and managed travel function (Douglas & Lubbe, 2006, p. 1131). In decentralized travel management, the managers can easier delegate budget responsibilities and policy administration to unit

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managers, which may increase policy compliance. Furthermore, review of exceptions at a unit level may allow for flexibility within individual circumstances, and makes it is easier to negotiate customized services to meet a unique problem. However, the advantages can lead to an inconsistent treatment of policy for different branches and differing levels of attention to travel by unit managers. In decentralized administration, the buyer looses negotiating power with suppliers, and multiple corporate contacts may delay changes. Multiple corporate contacts may also diminish supplier concessions or service improvement. Monitoring total costs and performances is challenging in decentralized travel management (Runzheimer International, 2000). Some international companies have a system of international travel management where the whole company has the same rules that are applied locally by a contact person in each unit. Usually firms implement international travel management gradually, starting from the countries with similar cultures and infrastructures. Buyers may obtain big savings by negotiating contracts based on the worldwide volume. However, gathering international data, on which the negotiations are based is challenging. Another challenge may be in creating and enforcing a corporate travel policy for employees with different cultural backgrounds and preferences (Runzheimer International, 2000). The travel management process is the core activity chain that the firms of the current study are cooperating on to accomplish. The services the business travel agencies and service suppliers offer to the corporate buyer organization are related to the travel management process, and the adaptations concern this process. An established practice is to describe the process with the tasks carried out before, during, and after the business trip (See Fig. 14). Travel management is a chain of activities in ‘‘a business trip life cycle.’’ Before the business trip, the buyer organization negotiates contracts, and implements travel policy and strategies. Business travel agency, or the corporate buyer, arranges practical travel arrangements with the service suppliers. During the business trip, the traveler consumes the prearranged services. He/she may also arrange them on the spot. After the business trip, he/she settles the payments. Suppliers, travel agencies, and credit card companies provide the buyer organization with managerial and expense reporting. The process is not a one off, but an ongoing process. Reports and managerial information obtained after the trip help in new contract negotiations, and act as budgeting tools. Basically, the traveler accomplishes only the ‘‘during’’ phase of the process,

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Travel arrangements Travel policy

The trip

During

Before

Planning

Travel management process

Review & analysis

Management reporting Settlements

Fig. 14.

Payment

After

A Visualisation of a Travel Management Process from the Buyer’s Perspective.

the buyer may outsource the other phases of the process to the travel agency and the suppliers. Travel management is a cross-functional process, which involves internal departments in the organization, and exploits the resources of partner organizations. FBTA divides the main sectors of corporate travel management into four different areas: strategy and policies, purchasing and contracts, process, and reporting and follow up (see Table 9). Each of the areas includes a number of different tasks. The buyer organization generally develops strategies and policies internally, and roots them into practices with the help of the business travel agencies and the service suppliers. Business travel agencies provide consultancy in travel management issues. Purchasing, contracts, process and reporting require cooperation between the travel agency, corporate buyer organization and various service suppliers. Travel management is a cross functional process, and belongs often to the purchasing department. Other departments may be management, financing, corporate services, and human resources departments (Mayer, 2007).

Mapping out cost savings, suggestions for actions, follow-up Developing a follow-up system for monitoring travel structure, costs and volume.

Developing payment systems Acting as a coordinator between travel agents and service providers Developing and implementing action plans and process models Developing and monitoring customer satisfaction Creating and developing a booker network (travel planners, coordinators and other actors)

Defining and implementing purchase strategy for TM Negotiating purchase contracts, guidance and follow-up Developing supplier relations and service concepts (travel agent’s, other service providers and producers)

Coordinating TM, defining strategies and aims Creating and developing policies and practices Follow-up of authority regulations and directives Enhancing travel safety Keeping abreast with current affairs and development in TM, suggestion for action

Tasks

Communications Training Networking Information Technology

Levels Analyses Conclusions Advising/Consulting Budgeting

Reporting Follow up

Means of payment Integration (direct/ intermediaries) Service Quality Management

Process

Designated suppliers Concept of contract negotiations Contract models

Purchasing Contracts

Collective bargaining Travel Policy Instructions and legal regulations (taxation, VAT) Service Concept Risk management

Strategy and Policies

The Sectors of Responsibility and Related Tasks in Corporate Travel Management (TM) as Defined by the Finnish Business Travel Association.

Area

Table 9.

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Corporate buyers are increasingly concentrating their business travel purchase to a small number of partners. The emphasis on the company side is traditionally on saving money by concentrating purchase and negotiating good contracts. For the corporate buyer, selecting reliable travel agencies and suppliers can be one of the most important decisions, and potentially one of the costliest mistakes the buyer can make (cf. Day & Barksdale, 1994). Business travel purchase is exceptionally complex with a great number of distribution channels selling a perishable service whose pricing changes all the time (Cohen, 2001b). Business travel services have also several reverse features, for example, they may be long term and short term, simple and complex (Axelsson & Wynstra, 2000). Furthermore, the suppliers direct their services both to the individuals and to the buying organization. The need to satisfy a larger number of affected travelers complicates the purchasing process (cf. Fitzsimmons & Noh, 1998), because business travel purchase involves a high degree of emotionality. According to Cohen (2001b, p. 36), ‘‘in the world of corporate purchasing, travel is different from anything else.’’ Buyers need a broad range of skills and sensitivity to buy business travel: in addition to purchasing skills, human resources skills are important as firms send ‘‘human cargo’’ around the world (Cohen, 2001b). When the components of travel manage to minimize stress, the traveler will arrive at the destination being able to function to the best of his or her ability (Gilbert & Morris, 1995). The traveler has psychological needs (e.g., safety and comfort) while travelling on behalf of his company as well as specific functional needs regarding technology, accommodation and transportation. The travel manager generally balances between the requirements coming from two fronts; management’s requests for cost savings and travelers’ desires for more convenient and comfortable travel (Bell & Morey, 1997; Douglas & Lubbe, 2006). Travel management deals with the company’s most valuable asset, its employees, thus travel safety is an important issue in corporate travel. Terrorist attacks, wars and epidemics have directed growing attention to the security precautions. For safety reasons and for economic reasons as well, corporations are looking for alternatives to traditional business travel. Video-conferencing and web-conferencing possibilities where participants can create and modify documents in real time are competing with business travel (Cohen, 2001a; Goodridge, 2001; Mc Dougall, 2002). In many companies, the alternatives to business travel are replacing specifically internal meetings. Another motivation to cut down all unnecessary business travel is the corporate social and environmental responsibility, which is gaining growing

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attention in the corporate travel sector. For business travel agencies, restricting business travel is both a treat and an opportunity. In addition to travel related services, some of them have diversified into services that help their clients to travel less by providing meetings without travelling (Advito, 2008; Caamano, 2008). The current study focuses on adaptation in relationships between an industrial enterprise, its business travel agency, and service supplier partners. Management of the corporate travel function in an organization is ideally the responsibility of the corporate travel manager. However, the corporate travel management cannot be successful without the support of all other actors involved in the process; the appointed business travel agencies, and the various service suppliers. The organization depends on the interactive relationships between these actors in realizing the goals of an effective corporate travel management (Douglas & Lubbe, 2006). Each of the actors involved in the corporate travel management has their own values that they consider important. Generally, the management of the company wants to keep expenses as low as possible while achieving business goals. The travel agency wants to be guaranteed a firm stream of business and revenue. Furthermore, the supplier wants the highest possible yield for its services. Challenges may exist when the values and objectives of the different actors are in conflict with each other. Ultimately, they all strive to reach one common outcome: a successful, effective travel management program that will satisfy all the actors taking part in the process (Bell & Morey, 1997; Douglas & Lubbe, 2006). Generally, buyer organizations need a wide assortment of service suppliers, depending on the scale and scope of business travel. Corporate buyers have a portfolio of relationships with the suppliers based on the importance and complexity of the service (cf. Ford et al., 2003). The preferred service supplier relationships generally require high involvement and major adaptations. The relationship with the business travel agency partner is commonly a high involvement relationship (cf. Ford et al., 2003) because of the complexity of the services provided, and the high integration in the travel management process. However, some simple services, for example, return flights to a regular destination, may require high relationship involvement because of the integration of self-booking tools. Outsourcing travel management to a business travel agency, or to a consultant company, represents the deepest level of relationship involvement. The best business travel agencies are almost extensions of the client organization, in tune with the climate and culture. However, both buyers and suppliers admit that they need a person

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in the corporate buyer organization with the right to make decisions, and to take the responsibility of the travel management function. Although many corporations are limiting resources for travel managers because travel is not a core business, issues such as traveler health, safety and productivity are managed internally (Mayer, 2007). Actors of the Case Study The industrial enterprise, its three preferred service supplier, and two business travel agency partners form six triadic relationship settings, which are the focus of the current case studies. Fig. 15 (See also Fig. 11) is an attempt to illustrate this rather complicated research setting. Ten informants represent the firms involved in these relationships: two industrial enterprise informants, five informants from two different business travel agencies, and one informant from each of the three different service supplier organizations. The informants are actual cooperating partners at the time of the interview process. Their relationships are contractual, and the triadic

Travel agencies Former

Present

District manager

Nordic manager Clerk

General manager

Service suppliers Airline A Account manager

Operation manager

Industrial enterprise

Airline B

Director Hotel chain Sales manager

Fig. 15.

Travel manager

Traveller

The Firm-Actors and their Informants.

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relationship settings they form are continuous triads (cf. Caplow, 1968), denoting that they are established for a certain period. The industrial enterprise has several business sites in more than 50 countries. The employees carry out a great deal of work outside home offices, which requires a lot of travelling. The industrial enterprise has centralized travel management and a strict travel policy. All the informants agree that the industrial enterprise’s business travel is very demanding because of its wide scope of destinations, and travelers at different organizational levels. Because of the large purchasing volume, and the ability to direct travel purchase to the preferred partners, the industrial enterprise is an attractive client for any partner. The key informant, the travel manager negotiates the contacts with partners. She acted as a gatekeeper, paving the way to the other actors. First, she suggested another informant to represent the industrial enterprise. Second, she handpicked the cooperating firms and the individual informants. The motivation for her to select these specific firms and individuals was the long cooperation with them, both at the firm level, and at the individual level. An exception is the present business travel agency that entered the triadic relationship setting in a later phase. However, the informants from the present travel agency were familiar to the travel manager from earlier business relationships (cf. relationship energy, Havila & Wilkinson, 2002). The travel manager was convinced that these informants have the knowledge and ability to reflect the core relationships. The other industrial enterprise informant is a business traveler, who has a twofold role in this study. Besides being a regular business traveler, he has been responsible for implementing travel management in the industrial enterprise. The industrial enterprise aims at concentrating its purchase to a few reliable partners. The case service suppliers all operate internationally, and they are among the industrial enterprise’s most important supplier partners. The travel manager negotiates contracts with the supplier’s account/sales managers. The travel agency clerks arrange the practical travel according to the terms of contracts. The airline informants, the account manager and the sales director, and the hotel chain informant, the sales manager, are the travel manager’s contact persons with whom the cooperation is arranged. The industrial enterprise concentrates its business travel to one business travel agency at a time. The agency partner has to belong to an international alliance that covers all the countries where the industrial enterprise operates. Not long before the interview process started, the industrial enterprise changed its travel agency partner for reasons that I will discuss later in the

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analysis. I will address these two agencies as ‘‘the former travel agency’’ and ‘‘the present travel agency.’’ The general manager and the district manager represent the former business travel agency. The present travel agency informants are the Nordic manager, and the operation manager. One of the informants, the sales clerk/ account manager (later: travel agency, clerk) worked first for the former business travel agency, and moved to the present business travel agency when the relationship with the former agency ended. Thus, the clerk represents both the agencies, and comments for them both. The clerk also acts as a link between operational and managerial levels, and she has direct contact with the business travelers. This study focuses on relationships between firms. However, the individuals represent the firms. The analysis moves at different levels: at the individual level, firm level, and occasionally at the ‘‘group of firms’’ level (see Table 10).

Adaptation Initiation in the Studied Triadic Relationship Settings The aim of this section is to answer the first research question: Nature of how do adaptations initiate in a triadic business relationship setting? The focus is on impulse types and impulse sources.

I chose four major adaptation impulses to look at the adaptations. Before going deeper into the analysis, I will explain the reasoning behind these four specific impulses. Adaptation impulses emerged from the interview themes that arose from the interviews. They were themes by which the informants described what has made them or their counterparts to make adaptations.

Table 10.

Levels of Analysis. Actors

Group of firms Firms

Individual informants

Business travel agencies Industrial enterprise

Former business travel agency

Present business travel agency

1

3

5

2

4

6

7

Survice suppliers Airline A

Airline B

Hotel chain

8

9

10

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The informants marked some of the themes in the visual aids (see Fig. 12). Some more themes emerged from the interview transcripts. I labeled these themes as: (1) the saving campaign, (2) the new sales channel, (3) the change in earning logics, and (4) the convergence of business and leisure travel. To specify the themes, I categorized them in the following way: First, I listed the frequently mentioned themes. Second, I categorized the themes into the four above mentioned impulses. These were impulses that had an impact on the relationships. They led to adaptations that changed the dyadic relationships, and thereby the triads. Some of the themes are intertwined, for example, deregulation in the airline industry led to competition in the travel industry, and is thus a force of change behind a number of impulses. Fig. 16 aims to illustrate the approximate timing of the impulses. Two adaptation impulses: (1) the saving campaign and (2) the change in earning logics have a rectangular form, because they led to time-framed and planned adaptation processes. The (3) change in earning logic and the (4) business and leisure travel convergence led to evolving adaptation processes whose beginning and ending is difficult to estimate. Therefore, I have illustrated them with elliptical shapes. I excluded some of the themes from the analysis. These were themes that the informants raised, but after considering them closer, the conclusion was that the specific theme was not essential for the development of the core

4 2 1

Time

3

1999

adaptation 1 processes = Saving campaign

2005

4

2

3

= Business/leisure travel convegence

= Internet bookings

= Removal of sales commissions

time frame for analysis

Fig. 16.

A Visualisation of the Adaptation Impulses’ Time Frames, Simplified.

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relationships. An example is the industrial enterprise’s new business site. Because the core actors operate internationally, the disappearance of an individual business site, or the birth of a new one, does not cause major adaptations. Small, local service suppliers, on their part, would be more likely to introduce adaptations: As a whole, our travel [industrial enterprise’s] is so spread out around the world that small changes have an impact on the local hotels, for example, if the flow of travelers stop coming y if we have filled the hotel, let’s say 70%, it is a big issue for the hotel y But to the airline carriers, because we have divided our flights between several carriers, because our destinations cover the whole world, it is not a big issue. (Travel manager)

The impulses are rather generic and universal. The findings include no sudden impulses, or impulses arising from individual specific, or firm specific occasions. The impulses describe rather the general developments of the relationships than partner-specific developments. The informants concentrated on the more generic impulses because of their vast experience in different positions in the business travel industry, and because their interest in the development of the industry. Also the present travel agency informants regarded these impulses important, even though the saving campaign and the change in earning logics occurred when their present employer was not involved in organizing the industrial enterprise’s travel management process. The present travel agency informants had had contacts with the industrial enterprise in other connections during the years (cf. relationship energy by Havila & Wilkinson, 2002). Even though adaptations in triads would be relationship specific, some of them facilitate cooperation also in the future relationships. Furthermore, the informants were cooperating partners at the time of the interviews, and they might have discussed these generic issues rather than individual specific or firm specific issues in order not to harm the relationship. However, even though the impulses are generic, some confrontations and disagreements of the need for and the scale of adaptations appeared. Thus, the impulses lead to different processes and different relationship outcomes, giving thus a diverse picture of adaptations in triads. I used adaptation impulses as ‘‘the window’’ to look at adaptation; its content, its specific features, the process of how adaptation spreads in the triadic relationship settings, and its impact on the relationships. By choosing the impulses the informants regarded as important, I ensured that a view opened from the window. The research setting provides multiple

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perspectives. For example, airline informants think that the airline alliances are important, but the travel manager disagrees: Airline alliances are useful when it comes to the bonus-systems and lounges and marketing. But all the basic things never came true. Each of them [the airlines] has built an identical organization in every country in which they are operating. Therefore, an airline is competing with itself [in different countries] because all the countries want the sales. (Travel manager)

Furthermore, the perceptions of a specific impulse’s importance may differ. For example, the travel agency clerk is often worried for the travelers’ safety and security, meanwhile the travel manager looks at the safety problem from a different perspective: The most devastating event was probably the twin towers [September, 11, 2001], that was a shock to the whole world y Then there are, for example, civil wars taking place when you have to get travelers home from the country as soon as possible. It is nearly as if you were there yourself y Then you will cooperate [with the airlines and the client] to get the traveler back home. We only talk about money later on when everybody is safe. (Travel agency, clerk)

However, a differing view is that, Employees who deliver newsletters and security plans of risk areas and areas where travelling should be restricted, are the right source y a travel agency is not the right place to take on the responsibility for the lives of the travelers. (Travel manager)

A Cost Saving Campaign We had to somehow concentrate on all the countries to which we were travelling. To get it managed in a reasonable way, to get a common policy, common partners, and common reporting. (Traveler)

The industrial enterprise started an extensive cost saving campaign in the late 1990s. This was due to the internationalization of its operations, and thereby growing business travel. Before the saving campaign, the industrial enterprise’s business travel purchase was unorganized, and transactional. Travelers and their secretaries made practical travel arrangements with a local travel agency, and they used several service suppliers. (See Fig. 17 for a simplified illustration.) Business travelers were more or less free to travel as they wished, and no attention was paid to the costs. Those booking travel decided which suppliers and agencies to cooperate with. Furthermore, the business travel agency clerks could influence the travelers’ choices, or make the choices for them. Many people were working with the administration around travel

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Traveler 1 Service supplier 1

Traveler 2 Traveler 3

Service supplier 2

Travel agency

Traveler n

Service supplier 3

Secretary 1 Secretary 2 Secretary 3

Service supplier n

Secretary n

= travel arrangements

Fig. 17.

The Industrial Enterprise’s Business Travel Arrangements, Simplified.

advances and expense reports, but no integrated guiding or reporting existed. The industrial enterprise had contracts with tens of business travel agency chains and private business travel agencies around the world, and hundreds of contracts with the same partners in different cities. According to a supplier informant, the travel management was a traditional distribution channel, service supplier-intermediary-end user channel y travel management wasn’t very advanced, and travel agencies acted as gatekeepers, and the roles were quite clearly divided so that buyers were buying and relaying on the travel agency’s objectivity to distribute the best and most inexpensive services from the providers. (Airline, director)

Other companies with large travel budgets had already organized their travel management many years ago, and the industrial enterprise was ‘‘famous for flying in business class, and wasting money’’ (Traveler). A New Sales Channel We do not have time to surf the internet, it is too expensive, and we do not find all the rates there. (Travel manager)

The possibility for internet bookings was a new opportunity for all three firms. However, in order to be able to understand the development of the sales channels, a brief history of business travel distribution, and an introduction of an additional actor, namely computer reservations system

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(CRS) is in place. Airlines created and operated CRS, which is a system used to store and retrieve information, and to conduct transactions related to travel. Major CRS operations that book and sell tickets for multiple airlines are known as GDSs (Be´dard, 2002; Thretheway, 2004). From the early 1980s onward, business travel agencies adopted CRSs and afterwards GDSs. For suppliers, CRSs and GDSs provided two key development opportunities. First, suppliers needed no more large numbers of employees to deal with telephone bookings, because the suppliers were able to display availability directly to business travel agencies via the system. Second, CRSs and GDSs created an opportunity to develop effective yield-management techniques. Until late in the 1990s, the traditional travel business evolved with an integrated group of players: service suppliers, CRSs, and travel agencies. Their success was interdependent, for example, if an airline sold a seat and made money, so did everyone else in the chain (Be´dard, 2002; Thretheway, 2004). A Change in the Earning Logics The airlines wanted to sell each possible seat at the highest possible price. And at the other end the corporate buyer wanted to have the seat at the cheapest possible price, and for years we have been somewhere in the middle. (Present travel agency, Nordic manager)

Traditionally, airlines used travel agencies as a distribution channel for selling flight tickets, because of the lack of other alternatives. They paid the agencies a percentage-based commission on the issuance of a ticket. The main factor affecting travel agencies’ income was the level of commission the airlines paid, including override commissions (additional commissions paid when a certain volume level is achieved). Naturally, also traffic volumes, the share of business class and economy class tickets, and the prices of airline ticket had an impact on the agencies’ revenue (Mason, 2002). For the airlines, ticketing, sales, and promotion were the second largest cost after labor. Industry wide, commission costs made up the largest proportion of distribution costs (approximately 10%) (Mason, 2002). In the beginning of the 2000s, airlines gradually removed their sales commissions, and the travel agencies were forced to change their earning logics in order to compensate the missed commissions. Airlines started to charge service fees from their clients. New models, management fee models and transaction fee models replaced the commission-based contracts with corporate clients. For the corporate clients, two basic contract practices emerged, those based on

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management fees and those based on service fees (The Nordic Competition Authorities, 2002). In a management fee model the corporate client pays the agent all costs involved with handling the account, and a predefined profit. The business travel agencies add commissions received from the suppliers, and deduct direct costs, overheads and profits. Any positive balance goes to the client organization, and the client organization pays any negative balance to the business travel agencies. In a transaction fee model, the client organization pays for each transaction according to a precalculated service fee, and the business travel agency keeps the revenues. The business travel agency will return all airline commissions to their clients. In return, the agent will charge clients a transaction fee for every service they provide, including bookings. The level of the transaction fee will be based on the costs to the agent for supplying the services. The fee will also depend on the service concept, for example, dedicated teams, 24-hour service, and customized management information (Mason, 2002). Small and medium sized clients are more likely to emphasize value for money, as the cost of the travel is important to these companies. Large corporate customers are looking for efficiency, value, accurate data supply, understanding of travel policy structures, and assistance in policy control. Independent small agents were under threat due the commission cuts unless they were specialized in niche markets, and had a good understanding of their clients’ needs. Those agencies that were prepared for the change survived, and joined their forces through mergers and consolidations with large agencies (Alamdari, 2002; Be´dard, 2002; Mason, 2002; Hatton, 2004; The Nordic Competition Authorities, 2002). A Convergence of Business and Leisure Travel The whole travel business should go through a major structural change y there are a lot of leisure travelers who have the money, and who do not want to have the cheapest seats y they [service suppliers] should change their services so that they would obtain the expensive class for those travelers who want to pay, and they are not necessarily business travelers. (Travel manager)

Traditionally, suppliers direct their services to two customer segments, business travellers, and leisure travelers. The corporate buyers negotiate corporate discounts with service suppliers. The discounts are based on purchasing volume, and provided off published fares. However, when published fares raised and the economy fares went down, corporate buyers noticed that negotiating contracts was no profitable as long as everyday

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leisure travelers got better rates – without negotiations, and without bargaining power (Teichert, Shehu, & von Wartburg, 2008). Airlines assumed that business travelers place high value on ticket flexibility and low value on cost. Traditionally, airlines have proposed high cost, fully flexible tickets at this market. The airlines had a revenue management system, which allowed them to sell the same seat for 15–20 different prices, depending on which market segment the traveler belonged to: business traveler, leisure traveler, price sensitive, or not price sensitive. Requirements to stay over Saturday nights (Sunday rule) and to buy the ticket two weeks in advance kept business travelers away from the low fares (Mason & Gray, 1999). Furthermore, the tickets were return tickets, nonrefundable, and nonchangeable. However, corporate buyers’ buying behavior has changed, and sometimes price goes before flexibility, specifically in short-haul travel (See also Archambault & Roy, 2002; Lindsta¨dt & Hauser, 2004; Mason, 2005). Leisure tourists are traditionally regarded as less demanding and more price conscious. However, travel becomes cheaper, and people become richer. Demographic, geographic, and political trends shape leisure travelers who are more sophisticated, knowledgeable, and demanding as prosperity, education, and choice raise expectations. Growing leisure traveler groups, such as active seniors, who are taking more holidays and short breaks to relax and enjoy freedom, are an interesting challenge to service providers (Amadeus, 2007; Rubin & Joy, 2005). In addition to leisure travelers who demand high quality, and business travelers who require lower prices, a growing number of leisure travelers are still more price sensitive and less service and convenience sensitive. This is a situation that challenges specifically airlines. Lindsta¨dt and Hauser (2004) argue that full-service airlines ‘‘deliver an over engineered product that is neither able to satisfy the business customers quality and service demand, nor the price expectations of the leisure customers.’’ Business travel features elements of both consumer and industrial markets, and suppliers have difficult to specify whether services consumed for business-related reasons are consumer or business services. Businessrelated travel is a consumer service, as the individual consumer, the business traveler, uses the service as a completed product. For instance, a business traveler may see the flight as a consumer, and look for consumer benefits (duty free, seat comfort). However, the employer usually pays for the trip. Therefore, business travel is also a B2B service. Airlines do not distinguish between travelers if a leisure traveler wishes to purchase a ticket directed to business travelers, or vice versa (Mason & Gray, 1999).

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Analysis and Summary of Adaptation Impulses The major impulse behind the saving campaign was endogenous, originating from the industrial enterprise. The internationalization of the industrial enterprise’s operations, and thereby the growing of business travel, motivated the starting up of the campaign. Travel management is an important support function for the industrial enterprise, and one of the major saving targets. The impulses for the new sales channel and the change in the earning logics were mainly exogenous, originating from the primary network. The impulses were intertwined, and enabled by technological development. These impulses also relate to increasing competition in the travel industry: It is not only the other business travel agencies that are our competitors. Today, everybody is a competitor with each other, airline companies and all the partners are competitors with each other. (Former travel agency, district manager)

The airline industry has been traditionally extremely regulated with national quotas on flight capacity and fixed prices. Along with deregulation, certain types of discount fares came into markets (Alamdari & Mason, 2005; Lindsta¨dt & Hauser, 2004; Mason, 2005; Mason & Alamdari, 2007). Furthermore, in the early 2000s, fierce competition forced service suppliers and business travel agencies to reevaluate their strategies and processes. New entrants with new service concepts (lowcost airlines and internet travel agencies) were another reason to look at the cost structures (Alamdari & Mason, 2005; Mason & Alamdari, 2007). Technological development facilitated the adaptations. External industry shocks (wars, terrorist attacks, epidemics) decreased travelling, and created strong downward pressure on average fares and specifically on airlines’ yields. The cost to the suppliers of linking their own reservation systems to the GDSs was high, and every booking had a high cost (Alamdari & Mason, 2005; Lindsta¨dt & Hauser, 2004; Mason, 2005; Mason & Alamdari, 2007). The impulse type for the convergence of business and leisure travel is exogenous. The source is in the macronetwork; the changing consumption habits, and business travel becoming an everyday routine. Table 11 summarizes the impulse types and impulse sources and their motivators. The impulses were both endogenous and exogenous. None of them originated from the dyadic relationships.

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Table 11. Adaptation impulse

Impulse type Impulse source Motivator

Summary of the Adaptation Impulses.

Saving campaign

Endogenous Actor (industrial enterprise) Internationalization, Growing travel budget

New sales channel

Exogenous Primary network

Change in earning logics

Exogenous Primary network Technological development, Competition, new entrants, Deregulation, Industry shocks

Convergence of business and leisure travel Exogenous Macronetwork Changing consumption habits

Adaptation Processes in the Studied Triadic Relationship Settings The aim of this section is to answer the second research question: How do adaptations spread over time in a triadic business relationship setting? The focus is on the content, nature and progression of adaptation.

Content of Adaptation The content of adaptation is important to understand for two main reasons: First, to understand what adapting implies in practice, and second, to see if adaptation in the service sector differs from adaptation in the manufacturing sector. The content of adaptation describes what is adapted, referring to adaptations in ARA. Actor Adaptations. Adaptations in organizational structures in all the firms were inevitable when the industrial enterprise organized its travel management to an international function. For example, in the business travel agency: We were two persons [clerks] in the city office, then the travel manager wanted to have the travel agency here [in the buyer’s premises]. (Travel agency, clerk)

The change in earning logic, together with the new sales channel, forced the business travel agencies to adopt a new role in the triads, and to create new services for their clients, for example, information provision and consulting. Also industrial enterprise got more involved in technology development. Convergence of business and leisure travel did not cause major actor adaptations. Resource Adaptations. Adaptations in resources imply human and physical investments, and adaptations in human interaction. During the saving

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campaign, the industrial enterprise took the control over the travel management process, and involved more employees in the process. This concerned also business travel agencies and service suppliers, denoting adaptations in physical and human resources. For the clerks, delivering economy class tickets was more demanding and time consuming than delivering business class or first class tickets: We were three to four persons, then we were nine, so it [personnel] expanded. (Travel agency, clerk)

Furthermore, suppliers and travel agencies appointed dedicated account managers and sales managers. Human interaction increased both internally and between the organizations. The new sales channel, in turn, led to adaptations, because technology partly replaced employees, as the travel manager points out: Because today travelling is a ‘‘mass movement,’’ it would require a crowd of personnel to handle it both within the buyer and the business travel agency. (Travel manager)

An entire relationships level practically disappeared from the service suppliers, the relationship level where, for example, airline clerks answered to the travel agency clerks, or to customers’ enquiries. Information was available on the internet (see Fig. 18). Besides accessibility to the different rates, business travel agencies started to offer different service concepts to their clients: ‘‘high-touch,’’ ‘‘lowtouch,’’ and ‘‘no-touch’’ service delivery, and charge accordingly. The client does no-touch bookings him/herself. High-touch reservations may be more complicated, and require travel agency clerk’s expertise. Low-touch reservations position themselves in between high-touch and no-touch reservations. These service concepts enable resource sharing between the travel agency and industrial enterprise in an efficient way. The present business travel agency, for example, provides booking tools for its clients according to the following description: So it is actually that we provide them [corporate clients] with the tools that our agency is sitting with, but with a user-friendlier interface. There are of course some limitations, there are some things you cannot do yourself, which is regulated by law. But other things you can do precisely as if you are a real agent, but with easier commands. If you took a skilled agent, and give this tool to them, it would take them a little less time, because we use all these shortcuts and abbreviations, and things like that. As a non-agent, it’s not your core thing, so it should be more user-friendly. (Present travel agency, Nordic manager)

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Industrial enterprise

Business travel agency

Operational level

Operational level

Managerial level

Managerial level

Technology Operational level Managerial level

Service supplier

Fig. 18.

Changes in Human Interaction.

The change in earning logics required adaptations mainly in back office functions. The convergence of business and leisure travel employed human resources when striving for cost savings. Activity Adaptations. Activity adaptations denote adaptations in services and service processes, and in buying, delivery, and marketing strategies. In the cost saving campaign, the buyer changed its purchasing strategy from transactional to relational. As a response, the service suppliers and the business travel agency were willing to adapt their relationship strategies, and to build long-term relationships. The travel manager analyzed the industrial enterprise’s needs regarding business travel, and created a new strategy of how to meet these needs. She rearranged travel management to being a global function. The new travel policy downgraded business travel to economy class: Then we got this project [to organize business travel], which was a part of a big savingproject, and we started to figure out where we could save money. We did some benchmarking, and noticed that we couldn’t succeed without a travel manager y It was then that when we got these rules of travelling only in economy class. (Traveler)

Service suppliers adapted their services toward the industrial enterprise’s downgraded travel. In the airlines, the number of economy class seats

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increased, and business class remained with fewer seats. Furthermore, the industrial enterprise identified the travel management process and its subprocesses, and the business travel agency and service suppliers’ started to adapt their service processes accordingly. The new sales channel facilitated a number of different adaptations that were quite naturally related to technology. Delivery became less expensive for the service suppliers, which facilitated adjustments in the services, including new, less expensive fares, and fares that were only available on the internet. The secretaries and travelers were able to do some of the bookings themselves. Adaptations in purchasing, delivery, and marketing strategy are important forms of adaptation in the core triads. Specifically the industrial enterprise informants regard strategic fit of utmost importance. For example, the travel manager feels that service suppliers sometimes make strategic decisions without listening to their clients: We are not ready to spend more money because of somebody [service supplier] makes strategic decisions that are unfavorable for us. That is the wrong strategy for our company. (Travel manager)

The adaptations due to the change in earning logics mainly concerned the service process, for example, payment handlings, contractual terms, administrative routines, and other back and middle office routines. Airlines themselves introduced booking fees to their clients. Airlines’ adaptations concerned mainly internal procedures regarding back-office functions. Adaptations implied also strategic adjustments in the business travel agencies’ and suppliers’ earning logics and delivery strategies. In the convergence of business and leisure travel, the adaptations concerned mainly the core service offering; the flight rates and their rules. For the industrial enterprise and the business travel agency, the adaptations concerned also service delivery. The industrial enterprise adapted its buying behavior and travel habits in order to take advantage of the cheaper fares directed to leisure travelers. The new buying behavior required adaptations from both business travelers and those making travel bookings. Travelers learned to plan their travel well in advance, and to use the tickets with different restrictions. Service delivery became complicated, and the travel agencies trained travelers and secretaries to utilize these tickets. Business travelers’ also learned to be flexible, and they used increasingly services directed to leisure travelers, because the corporate rates were often more expensive: We notice that there is no use in centralizing purchase. Why do it when there are cheaper rates available? If it is possible for me to travel for 100 h to the same destination where

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I earlier travelled for 1000 h, with the same plane and time as before, I just have learn to use a ticket that I can’t change y it is just a matter of learning. Everybody understands that it is not worth paying 900 h extra for the freedom y we just have to learn to plan. (Travel manager)

The business travel agencies learned to do their best to excavate all the possible rate alternatives for their clients. For instance, they issued two tickets instead of one, and saved their client’s money by doing so. The business travelers did not want to travel over the weekend, and the innovative way to use the tickets with the Sunday rule was to buy two return tickets that could be used crosswise: And then the creative people found out that you could then use two tickets instead, one for the outbound and one for the homebound, and basically buy two journeys and in that way saving money. (Present travel agency, Nordic manager)

The number of no-show rates was high because travelers were not always able to use the flights they booked. The airline companies noticed the loophole in crosswise tickets, and started to offer budget tickets with easier applicable rules. Furthermore, the industrial enterprise and business travel agencies welcomed with open arms one-way budget fares. The Nordic manager points out that: We see a tendency now that once more the airlines are creating fare types where you get rid of this system [crosswise tickets]. If you are away for only two days, for instance, you can do that in economy class in the same week and on one ticket only. (Present travel agency, Nordic manager)

Nature of Adaptations The Scale and Formality of Adaptations. The scale of adaptation refers to the scale and formality of physical and human resources invested in the relationships. The number of organizational units and key decision makers that participate in adaptations describes the perceived scale of adaptations (cf. Brennan & Turnbull, 1999). Adaptations due to the saving campaign were large-scale investment processes within all the firms. A great number of adaptations occurred in order to learn how to interact with each other (cf. Brennan & Turnbull, 1999). Many employees at different organizational levels within all three firms were involved in the process. Furthermore, small-scale tactical adaptations occurred at all the levels, denoting political processes. The local travel agency that served the buyer before the saving campaign could not supply the industrial enterprise globally. Therefore, the industrial enterprise made contract with a travel agency that belonged to an

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international alliance. The new business travel agency (the former business travel agency) had a call center in each of the countries where the industrial enterprise had a business site. International cooperation required extensive organizational rearrangements also within the preferred service suppliers. Service suppliers involved new contact persons, account managers and sales managers, in their global organizations. At the individual level, many local business relationships ended, and new relationships emerged. The adaptations due to the new sales channel were large-scale investment processes for the service suppliers and the travel agencies. The adaptations are constant, and require significant physical investments in technology. The change in earning logics required major adaptations in the travel agencies’ and airlines’ strategies at the industry level. The convergence of business travel and leisure travel started as a socialization process in the travel agency–industrial enterprise relationship. The travel agency clerks discovered the creative ways to use the tickets directed to leisure travelers, which established as an evolutionary process, leading to major changes in the business travel industry. For the airlines, this specific impulse meant large-scale strategic investments due to the extensive rate reform. Reciprocity of Adaptations. In a triad, a firm can adapt unilaterally toward one or two actors, or firms may make reciprocal adaptations in dyads, or adaptations may be threefold when all the actors make adaptations to benefit the common goals. Adaptations may also be voluntary or coerced. In the saving campaign, the adaptation impulse came from the industrial enterprise. However, the adaptations were voluntary and threefold. All three firms saw the benefits of the rationalized processes, and they were motivated to commit to the relationships. It was good when the client [industrial enterprise] got a travel manager who said how they would like to have it, what was good and what was not good. She had suggestions of how to make it easier for them to work. (Airline A, account manager)

Organizing business travel purchase enhanced relationship orientation. The business travel agency and the suppliers were willing to make adaptations because the industrial enterprise is an attractive client with large purchasing volume. Well-organized travel management practices direct the purchase to the preferred contract partners. Thus, to create trust and commitment was important to the suppliers and to the travel agency in order to get the preferred partner status. For the industrial enterprise, an important motivation for the adaptations was obtaining tangible benefits,

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for example, cost savings, and economic efficiency that would help to reach its final goals, and to concentrate on the core competencies. Building long-term relationships was possible with a contact person in the industrial enterprise. Specifically the service supplier informants highlighted the importance of a dedicated contact person: It all started with the contact person [travel manager], it is difficult to start negotiating contracts without a contact person. (Airline A, director)

The new sales channel encouraged the industrial enterprise to put more demand on the former business travel agency partner’s technological development. The increasingly complicated and fragmented distribution was the motivation, and the industrial enterprise required that the travel agency should be able to find all the rates, easily and cost effectively, meaning that the supply has to be ‘‘on one screen’’ (travel manager). Thus, the adaptations were both coerced and voluntary. For the business travel agencies, the new sales channel was a threat, and adapting was a lifeline. For the service suppliers the new sales channel was a new opportunity, and adaptations were voluntary. The buyer as well, was willing to develop cooperation, and make adaptations, but on its own terms. The adaptations were threefold, just like adaptations connection to the change in earning logics and the convergence of business and leisure travel. The change in earning logics was coerced, because business travel agencies tried to fight against commission cuttings. The account manager at the Airline A points out that: We [airlines] were not very popular when we removed the commissions to travel agencies. Many of them thought it was the end for them. (Airline A, account manager)

The convergence of business and leisure travel is emergent, and the adaptations are ongoing. The buyer and the business travel agency primarily coerced the adaptations. According to the travel manager, Today travel is commonplace, it is like taking a bus y there are a lot of companies that see business travel as a tool, it is done businesslike and safe, but it does not have to be luxurious. This implies all the travel related services, car-hire, hotels, ferries, flights, and so on. (Travel manager)

Progression of Adaptations The progression of adaptations explains how adaptations occur, implying the phases of adaptation, and its spread in the triadic relationship setting. The focus turns to two adaptation processes: processes initiated by the saving campaign and by the change in earning logic. These two processes were time-framed and carefully planned and coordinated processes with

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intrafirm and interfirm adaptations. Both of them include information exchange, negotiation, communication, and execution phases (cf. Canning & Brennan, 2004). The remaining two processes, due to the new sales channel and the convergence of business and leisure travel, are evolving adaptation processes. Both these processes have different periods of adaptations, whose progression is difficult to define and divide into phases. Adaptation may evolve without planning and observable phases cannot be distinguished. Sometimes these adaptations develop to established practices, and they will be included in the controlled functions. An example is the convergence of business and leisure travel, where the travel agency clerks discovered an innovative way to use the economy class tickets, and gradually implemented these tickets as a savings measure. The Phases of Adaptation. In the cost saving campaign, information exchange between three actors was intensive. The buyer appreciated the business travel agency clerks’ expertise and their knowledge of the travelers’ specific needs. The quality and the familiarity of the service personnel are essential (cf. Tyler et al., 2006): They [travel agency clerks] understand our travel needs, which are very demanding ... We don’t want to be served by a call-center with 2000 clerks who serve all their clients. They do not understand the difference between our board members’ and the mechanics’ travel needs y we need to have a certain amount of clerks who know our company extremely well, they have to know the places we are traveling to, the factories, and so on. (Travel manager)

The change in earning logic was also a time-framed and controlled process. However, commission cutting was a part of the airlines’ competition strategy. Thus, the airlines approached travel agencies somewhat differently and with different timetables. An airline informant describes an information meeting with agencies in the following way: It was one of the most difficult moments to inform about this [commission cuttings] in the meeting, but luckily the things were taken as such, and I told them already then that this is probably going to save you, because living on commissions when the flight rates, and other travel related services, are going to go down, is not profitable any more. (Airline B, director)

In the cost saving campaign, the business travel agency personnel felt they were left outside when the travel manager started to negotiate directly with the service suppliers: When service suppliers started to negotiate deals directly with the client [industrial enterprise], we in the travel agency felt a little like outsiders. We did not communicate with the service suppliers any more. In some companies, the travel agency takes part in

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the negotiations, but in our case it was not so. We just got to know later on what they had agreed, but we didn’t take part in the meetings. (Travel agency, district manager)

Service suppliers agreed that getting direct access to the industrial enterprise was a new opportunity: That was when service suppliers noticed that they [business travel agencies] could be passed by y Business travel agencies were at that time very jealous of so called direct contacts between end users and service suppliers. This caused anger at every level. (Airline B, director)

The change in earning logics had no genuine negotiation phase. The meetings concerned informing the travel agencies about the forthcoming change (see the airline B informant’s comment related to the information exchange phase). In the saving campaign the business travel agency clerks facilitated the daily service delivery, because they were familiar with the industrial enterprise, and the business travelers themselves. The new travel policy brought many changes for travelers and travel agency clerks. The clerks were the ones to answer questions regarding changes in practical travel arrangements, and to receive a lot of feedback. Feedback was important, and specifically the end users’ comments were crucial: They [travelers] know how things work, or don’t work. We [travel agency clerks] get a lot of feedback, its good. It is because of our long lasting relationships. It is easy for them to give feedback, both positive and negative. (Travel agency, clerk)

The communication patterns changed radically due to technology. Earlier, the telephone was a common booking tool. Talking on the phone, or face-toface, is an easier way to ask for personal favors. For example, if the hotel was fully booked, a room could be arranged, or a waiting list could be bypassed (Hotel chain, sales manager). The travel agency clerk states that: Today, all the information is in the computer y we very seldom have to phone to get further information or to get help. (Travel agency, clerk)

During the saving campaign, the travel agency clerks were the central actors in executing adaptations in practice. The new travel agency hired them, and they followed the industrial enterprise, which made the adaptations easier for all the parties, as the traveler states: They have always followed us, these persons [travel agency clerks]. It is not that we would always have taken new clerks, first it was the local travel agency, then this one [the former business travel agency] y it is good service when you can always phone to the same person. (Traveler)

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The saving campaign led to numerous new practices, and their execution got a lot of attention in the interviews. The industrial enterprise made a number of intrafirm adaptations, for example, appointed the travel manager. The travel manager organized the travel management process gradually, starting from Europe, and finally worldwide. Instead of a company credit card, business travelers obtained a credit card with personal responsibility. The travel manager reduced supplier base radically, and implemented the new travel policy with the help of the human resources department and the business travel agency. The finance department administered the policy, and named a contact person in each country. The travel manager was responsible for process development, and acted as a contact person for both external and internal functions of travel management. In the industrial enterprise, internal communication did not reach every employer, and the change resistance was notable. Downgrading travel caused confrontations, and the new payment procedures did not please the travelers. The clerks were the ones who were in the firing line when forbidding the travelers to travel as they had been used to doing for years, and sometimes travelers got frustrated: They [the travel agency clerks] had to face a lot, every time when something didn’t work, the travelers blamed the travel agency. They thought all the changes were due to the new travel agency. (Former travel agency, district manager)

The Spread of Adaptation. The spread of adaptation describes the ways of how adaptations initiate and extend to incorporate the triadic relationship settings. Any one of the three firms initiates connected adaptation. Derived adaptation refers to an adaptation where the initiator is one of the three dyads. The three firms plan and implement agreed adaptation in cooperation. Adaptations due to the saving campaign were connected. The industrial enterprise was the initiator. The suppliers and the travel agency responded, one by one, as Fig. 19 illustrates. The arrows describe the direction of the spread of adaptations, and the numbers 1–3 denote how the adaptations spread to concern the entire triad. The industrial enterprise negotiated contracts with the service suppliers, and with the business travel agency. The travel agency was the one to realize the terms of the contracts between the suppliers and the industrial enterprise. The travel manager and the suppliers’ contact persons informed the travel agency of the conditions of the contracts. Therefore, the travel agency is marked with the number 3. All the three triadic relationship settings acted in a similar way.

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3. Former travel agency

1. Industrial enterprise

1.

2. Airline A

= the actor initiating adaptation

Fig. 19.

3. Former travel agency

1. Industrial enterprise

2.

2. Airline B

= the actor responding

3. Former travel agency

1. Industrial enterprise

3.

2. Hotel chain

= the actor responding

Connected Adaptation Initiated by the Industrial Enterprise (1).

The development of new sales channels requires ongoing adaptations from all the actors. A number of accumulating adaptation processes regarding, for example, service processes, booking solutions, and the entire travel management process are going on repeatedly. Instead of phases, the process of adaptation includes several periods with ongoing adaptations and readaptations. I will accommodate three sequential periods in this analysis, during which the adaptations are mainly connected and agreed adaptations. In the first period, adaptations were connected. Service suppliers, specifically the airlines, initiated adaptations. Airlines were the most eager to take the opportunity to save distribution costs, and to bypass intermediaries, at least to some extent. Airlines offered internet bookings and internet fares to the industrial enterprise. In this phase, the hotels were not ready to offer self booking solutions. Fig. 20 illustrates the spread of adaptation, where the airlines are the initiators and the industrial enterprise the one to respond. The arrows describe the direction of the spread of adaptations. The numbers 1 and 2 denote how the adaptations spread in the triad. The travel agency is marked with number 2 instead of number 3, because the agency was actively seeking solutions to respond to the airlines attempt to bypass them. The industrial enterprise was not ready to adapt to the suppliers’ terms, because, according to the travel manager, they would lose time when ‘‘surfing the internet.’’ The travel manager wanted to continue cooperation with the business travel agency, because she regarded the rate structure and the booking channels too fragmented and complicated. Furthermore, the industrial enterprise wanted to keep control over the travel purchase. However, the buyer is dependent as well on the suppliers as on the travel agency, which was a reason to go on with the second period of adaptations.

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Adaptation in Business Contexts: Working Triadic Relationships

2. Former travel agency

2. Industrial enterprise

1.

2. Industrial enterprise

1. AirlineA

= the actor initiating adaptation

Fig. 20.

2. Former travel agency

2.

1. Airline B

= the actor responding

Connected Adaptation Initiated by the Airlines (1).

Also in the second period, the adaptations were connected. The industrial enterprise needed a booking channel that would facilitate the control of travel bookings and provide management reports to calculate the cost of travel. In other words, the industrial enterprise went on with the adaptation process by requiring adaptations in booking technology from the business travel agency and the suppliers. The former business travel agency failed to offer a solution that would have satisfied the industrial enterprise. The relationship ended, and a new relationship with the present travel agency led to cooperation in booking channel development and a self-booking system to be applied in simple point-to-point travel. This kind of cooperation allows the buyer to keep control over travel purchase. In this phase, the cooperation with the hotel chain was less extensive. Fig. 21 illustrates the spread of adaptation. The arrows and the numbers 1–2 describe the direction of the spread of adaptations. In the third period, cooperation increased, and adaptations were mainly agreed. The industrial enterprise wants to support the travel agency’s technological development also financially: We are willing to pay the travel agency for their technological development. When we get, for example, these kick-backs from Amadeus (Global Distribution System), we don’t need them; we are willing to give them to the travel agency so that they can develop their own systems, because it has an impact on our prices. (Travel manager)

Adaptations in technology imply integrated data solutions. Because the process of adaptation is ongoing, adaptation naturally implies constant implementation of new solutions that replace the old ones, involving all

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2. Travel agencies

1. Industrial enterprise

2. Airline A

1.

2. Travel agencies

1. Industrial enterprise

= the actor initiating adaptation

2. Travel agencies

2. Airline B

2.

1. Industrial enterprise

2. Hotel chain

= the actor responding

Fig. 21. Connected Adaptations Initiated by the Industrial Enterprise (2).

the in the travel management process. Service suppliers feel responsible for developing their own IT in order to make cooperation easier both for the business travel agency and for the industrial enterprise: Our role as a generator of the different systems is very important in order to make it easier for the client company’s budgeting and also in order to make the travel agency’s work easier. (Airline A, account manager)

According to the travel manager, the ideal situation would be if, All of us [the actors involved in the travel management process] would be in the same database y creating standards instead of developing our own solutions. (Travel manager)

Fig. 22 illustrates agreed adaptation. The three actors are cooperating to make the travel management process work. The hotel chain sees also the benefits of technological development to make the booking procedures more proficient and cost-efficient. However, the travelers still make a great deal of the hotel bookings directly with the hotels. Change in earning logics led to connected adaptations, which the airline companies initiated. The travel agency and the industrial enterprise responded in cooperation. For the hotel chain, this specific adaptation was of minor scale. Fig. 23 illustrates airline initiated adaptation. The arrows and the numbers 1–3 describe the spread of adaptations. At the time of change in earning logics, the present travel agency did not have a relationship with the industrial enterprise; therefore, I have excluded the present travel agency from the illustration. The convergence of business and leisure travel led to two sequential emerging periods of adaptations and readaptations. Generally, buyers

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Present travel agency

Industrial enterprise

Present travel agency

Present travel agency

Airline A

Industrial enterprise

Airline B

Industrial enterprise

Hotel chain

= adaptation initiated in co-operation

Agreed Adaptation.

Fig. 22.

2. Former travel agency

3. Industrial enterprise

1.

1. Airline A

= the actor initiating adaptation

Fig. 23.

2. Former travel agency

2.

3. Industrial enterprise

= the actor responding

1. Airline B

3.

= the actor responding

Connected Adaptation Initiated by the Airlines (2).

expect the suppliers to adapt to the buyers’ needs (Brennan et al., 2003). However, in the core triads, the industrial enterprise initiated the first period of the adaptations by adapting to the suppliers’ service offering, as Fig. 24 shows. With the help of the travel agency, the industrial enterprise used tricks to utilize the cheaper airline tickets that were directed to leisure tourists. The industrial enterprise made a coalition against the airlines with the travel agencies. The hotel pricing was not as complicated as that of the airlines, and hotels had no need to join the coalition. Therefore, in the Fig. 24, in the triad with the hotel chain, the arrow from the industrial enterprise points only to one direction. The industrial enterprise and the business travel agencies perceived that suppliers did not respond to their requirements. Furthermore, the service suppliers had different perceptions of the client’s needs than the client itself. An additional

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1. Travel agencies

1. Industrial enterprise

1. Travel agencies

2. Airline A

1.

1. Industrial enterprise

1. Travel agencies

2. Airline B

2.

= initiating

1. Industrial enterprise

2. Hotel chain

= responding

Derived Adaptation Initiated by a Coalition of the Industrial Enterprise and the Business Travel Agency.

Fig. 24.

1. Travel agencies

1. Industrial enterprise

1. Travel agencies

2. Airline A

1.

1. Industrial enterprise

= the actor initiating adaptation

Fig. 25.

1. Travel agencies

2. Airline B

2.

1. Industrial enterprise

2. Hotel chain

= the actor responding

Connected Adaptation Initiated by the Suppliers.

constraint for the airlines to adapt was the restrictions by the competition authorities: We are too often forced to tell our corporate buyers and business travel agencies that we would like to offer something, but the competition authorities don’t allow us. Sometimes it is hard for the travel agencies to believe it. (Airline B, director)

However, in the second period, the suppliers adapted their services to the industrial enterprise’s and the travel agencies’ needs by creating new rate structures that were more advantageous to the buyer, which in turn led to adaptations in the travel agencies delivery terms, and in the industrial enterprise’s contract terms (sees Fig. 25). The motivation to coerce adaptations was cost savings, which highlights the contradicting goals of the actors: by providing cheaper travel to the client, the supplier’s revenues

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235

go down. Ultimately, for the airlines, this specific adaptation process had to do with the balancing of the adaptations at the relationship level and macronet level (cf. Fig. 1). Summary and Analysis of the Adaptation Processes The saving campaign, the new sales channels, and the change in earning logics required both major and minor actor adaptations within all the firms, and in their activities and resources. Even though technology played a major role, human interaction was important: Technology is a good instrument when developing processes, rationalizing functions and taking care of routines, but it never replaces human beings. (Travel manager)

All four adaptation processes I analyzed above have features of an investment processes (see Table 12). The saving campaign was an investment process with large-scale strategic adaptations for all the firms. The new sales channel as well implies large scale investments for travel agencies and for the suppliers, and minor political processes for all the firms. However, the investments in technology may benefit also their other clients. For the industrial enterprise as well, the self-booking tools and the travel management process integration led to investments, but compared to the investments in the core operations, they remain minor in scale. Technological adaptations, specifically in the airline companies and travel agencies, were of the largest scale. Technological adaptations are also those that bind the firms together. The saving campaign was a socialization process, because many new business partners had to learn to cooperate. All the adaptations include some kind of political adaptation processes with relatively minor tactical adaptations. The two evolving processes, the new sales channel and the convergence of business and leisure travel have features of an evolutionary process with tacit adaptations emerging as the accumulation of small changes that create large adaptations. The adaptations analyzed in this study are mainly threefold where all three firms adapt to each other in order to benefit the common goals. When the adaptation process continues, the aim is to reach a profitable solution in the frames of existing relationship. However, when applying multiple perspectives, contradictory opinions of the scale and mutuality of adaptation appeared. An organization generally perceives its own adaptations as larger scale than those of its counterparts (cf. Brennan et al., 2003). For example, regarding the convergence of business and leisure travel,

Organizational structures

Physical and human Human interaction

Purchasing, marketing, delivery strategies. Services and service processes

Investment Socialization Political

Threefold

Voluntary

Information exchange, negotiation, communication, execution.

Actors

Resources

Activities

Scales

Reciprocity

Voluntariness

Phases

Investment (AL) Evolutionary Political

Investment (TA) Political/investment (AL) Political (IA)

Evolving

Voluntary/coerced (3) Spread

Threefold

Information exchange, negotiation, communication, execution.

Coerced

Threefold

Evolving

Coerced

Mutual Threefold

Services and service processes Delivery strategies

No remarkable actor adaptations Human interaction

Convergence of business and leisure travel

Service processes Delivery strategies Purchasing, marketing, delivery strategies.

Human interaction

Roles

Change in earning logics

(2) Reciprocity and voluntariness

Technology Physical and human resources Human interaction Purchasing, marketing, delivery strategies. Services and service processes Political Investment Evolutionary

Roles

(1) Content and scales

New sales channel

Summary of the Content and Nature of Adaptations.

Saving campaign

Table 12.

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Actor Resource Activity

Adaptation chain

Actor Resource Activity

Connected adaptations (AL initiated) Connected adaptations (IA initiated) Agreed adaptations Actor Resource Activity

Connected adaptations (AL initiated)

TA ¼ travel agency, IA ¼ industrial enterprise, SS ¼ service supplier, AL ¼ airline, SS ¼ service supplier.

Connected adaptations (IA initiated)

The ways of spread

Resource Activity

Derived adaptation (TA and IA initiated) Connected adaptations (SS initiated)

Adaptation in Business Contexts: Working Triadic Relationships 237

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the travel agency and the industrial enterprise criticize suppliers for the complicated rate structures, as the following quotation shows: Corporate fares have been useful for a period of time, but now we see that typically they are based on flexibility, which is fine, of course. But it has its costs. And if a company has a policy saying you need to travel as cheaply as possible, you need to plan, because planning is the golden key to making savings. (Present travel agency, Nordic manager)

The airlines believe that flexibility is the client’s major criteria when selecting flights: From the corporate buyer’s point of view, the accessibility decides what is the best rate for them y Corporate buyers want to have inexpensive rates y but with inexpensive rates you don’t get the flexibility, and the accessibility varies flight by flight. (Airline B, director)

In the hotel sector, the corporate rates are valid seven days a week. However, the weekend rates are usually cheaper, but with stricter rules and less benefits, which sometimes lead to confrontations, for example, Sometimes the corporate buyers think they can get the cheaper rate, but with all the positive benefits the corporate rate includes. (Hotel chain, sales manager)

Power distribution has an impact on the voluntariness of adaptations. The travel agency informants agree that, it is the industrial enterprise who steers this boat. (Present travel agency, Operations manager), because, They [corporate buyers] were the ones to make the decision that we wouldn’t travel business class any more. And if it had been up to the airlines, the economy class would have disappeared. (Present travel agency, Nordic manager)

The adaptations during the saving campaign enabled long-term relationships. These voluntary adaptations were important for all the actors. Adaptations due to the new sales channel went through voluntary and coerced periods. Ultimately, all the actors had the desire to develop the travel management process and service delivery with the help of technology. The industrial enterprise restrained using power in order to find ways to develop travel management. The suppliers coerced travel agencies to change their earning logics. Airlines removed commission with no discussion about its fairness. In its first period, adaptations that the travel agency and the industrial enterprise made due to the convergence of business and leisure travel were mutual. In general, all the adaptations were to some extent threefold.

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The convergence of business and leisure travel has also features of coerced adaptation. The roles were ‘‘reversed,’’ because generally the supplier adapts to the buyer’s needs. This process also features coalition formation, because the buyer and travel agencies coerced adaptations to the airlines. However, the major rate reform was inevitable for the suppliers. They became aware of the changing consumer behavior, which was important in order to earn profits from a service that is perishable. Thus, even without coercion from the buyer’s and the business travel agency’s side, the airlines would have been forced to adapt their pricing. Within the saving campaign, connected adaptations that followed through the whole travel management process helped to establish new relationships. The adaptations due to the new sales channel implied connected and agreed adaptations. Also change in earning logic caused connected adaptations. Convergence of business and leisure travel consisted of two periods. The first period implies derived adaptations, which the industrial enterprise and the travel agency coerced. The second period contains connected adaptations when the travel agency adapts its delivery to be able to employ the new rates. The spread of adaptation reveals interesting differences in the connections (direct and indirect connections) between the same firms in different situations, and even during the same adaptation process. In the saving campaign, contracts were negotiated in the industrial enterprise–suppliers and the suppliers–travel agency dyads, and the travel agency felt being excluded. Due to the new sales channel, connections varied from indirect to direct, and agreed adaptation is featured by direct connections and direct communication. Change in earning logic implied indirect connections, as well as the convergence of business and leisure travel. Furthermore, in the two evolving processes, in the new sales channel and the convergence of business and leisure travel, I could not distinguish the phases of information exchange, negotiation, communication and execution. Instead, these processes had evolving periods. Adaptation impulse generally sets in motion an adaptation chain, or several adaptation chains. The activities are linked to each other, and usually coordinated and adapted to fit the other actor’s activities, and a change in one activity can be expected to have an impact on the other activities (Rosenbro¨ijer, 1998). Fig. 26 provides a simplified illustrative example of an adaptation chain that goes through the whole travel management process. The impulse is the saving campaign which leads to the activity adaptation chain. The content of adaptation is the flight. In order to save in costs, the industrial enterprise decides to downgrade travel from

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= activity More personnel/ technology

= travel agency’s adaptation

Downgrading from business to tourist class Travel arrangements

= Industrial eterprise’s adaptation = suppliers’ adaptation

More personnel/ technology

Travel policy Communication

The trip

Longer trips

Purchasing strategy Personnel policy

Stricter payment terms

Lower quality

Planning Seat reallocation

Stricter payment terms Payment Stricter payment terms

Lower ticket costs Declining profits

Review and analysis

Declining profits

Stricter follow-up Increase in daily allowances

Outof policy reports

Management reporting

Settlements Increasing hotel occupancy

Fig. 26.

An Illustrative Example of an Activity Adaptation Chain, Simplified.

business class to tourist class. The dark circles in the middle describe the activity that is adapted. The elliptical shapes in the innermost circle indicate the industrial enterprise’s adaptations. Rectangular shapes outside the activity circles denote the travel agencies’ adaptation, and finally, the pentagon shapes illustrate the service suppliers’ adaptation. The adaptation chain may develop in the following way:  Travel arrangements become more time consuming both for travel agency clerks and employees in the buyer organization, and they need more personnel, and/or more advanced technology.  The trip may become longer due to minimum stay requirements that the tourist class tickets have.  Payment terms may become stricter, because generally the cheaper the ticket, the more restrictions regarding advance payment and reimbursement.  Management reporting: The industrial enterprise may implement stricter follow-up procedures to ensure the use of cheaper tickets. Compliance

Adaptation in Business Contexts: Working Triadic Relationships









241

requires out of policy reporting from the travel agency because of possible misuse. Travel settlements: Longer stay due to the minimum stay requirements in the destination may increase daily allowances, and lead to higher occupancy rates for hotels, which in turn impacts personnel recruitment. Review and analysis of travel costs may reveal reductions in flight costs. However, hotel costs and total travel costs may increase. For airlines and for business travel agency this may lead to declining profits. Planning: Tourist class travel influences the quality and security of travel, a fact that has to be taken into account in planning. For example, long waiting times in airports are security risks. Long flights in tourist class may also reduce the business traveler’s efficiency at the destination. Airlines may need to reallocate plane seating. Travel policy: The buyer needs to update purchasing and delivery strategy and personnel policy. The business travel agency generally takes part in monitoring and communicating the changes in travel policy to the travelers.

Any adaptation impulse may activate a similar kind of adaptation chain. Fig. 26 illustrates an activity adaptation chain. Resource adaptation, for example, a new self-booking solution, and actor adaptation, for example, a change in the industrial enterprise’s organizational structures, may activate resource adaptation chains and actor adaptation chains, respectively. Every adaptation chain involves a number of departments and individuals within all the firms. Schmidt et al. (2007) discovered ‘‘secondary adaptations,’’ which are dependent on existing adaptations. Adaptations in human resources followed other adaptations, for example, in logistics, products and production. However, in the current case study, adaptations in services and service processes may not be possible without adaptations in organizational structures and human interaction. An adaptation chain generally starts with human interaction. Human interaction is important in all the travel management process phases, and specifically in new relationships. In the connection of the industrial enterprise’s saving campaign, the first adaptations occurred in the organizational structures, specifically in physical and human resources in order to be able to agree upon adaptations in the service processes. In the service context, where the service process is at the focus of the cooperation, adaptations are not possible without a contact person with whom to discuss the details of adaptations. Thus, adaptations in organizations and in human interaction are primary adaptations and not secondary adaptations.

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An important element in human interaction is communication and learning. This implies products as well as services. However, communication and learning may be of even greater importance in the service context. The buyer is an active participant in the process, and needs information and training in order to be able to use the service. Travel management is complicated by the fact that the end user is not directly involved in planning the service processes. Thus, every adaptation chain includes a lot of communication and human interaction, specifically in the beginning, in order to make all the involved parties aware of the adaptations. For the continuance of the relationships, and the quality of them, the adaptation process itself is at least as important as its outcomes. The ups and downs during the process were always at the forefront of the minds of the informants. An example is the importance of listening to all the actors and involving them in the process (e.g., in the saving campaign).

Adaptation Outcomes in the Studied Triadic Relationship Settings The aim of this section is to answer the third research question: How do adaptations change the structure of a triadic business relationship setting, and the nature of its relationships? The focus is on adaptation outcomes.

Actor Outcomes During the cost saving campaign, the industrial enterprise’s actual travel costs turned out to be much higher than estimated. However, with the measures taken during the process, the industrial enterprise managed to cut down its travel costs even though business travel increased. The industrial enterprise reached the goals set for the saving campaign, and the travel manager created a globally centralized travel management network together with the new travel agency partner and the preferred service suppliers (See Fig. 27). The industrial enterprise started to coordinate and control the travel management process, and both internal and external relationships within it. The decision power moved from travelers to the industrial enterprise. The savings are obtained by centralizing purchasing, and standardizing operations, which means less freedom for the individual travelers. For the airlines, the saving campaign led to reducing yields, because they sold each seat at a lower price: When business travel was downgraded from business class to economy class, our yield went down, of course. It led to a saving campaign for us as well. (Airline A, account manager)

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Traveler 1 Traveler 3

Travel agency

Traveler 2 Service Service supplier 1 Service supplier 2 supplier 3

Traveler n Secretary 1 Secretary 2 Secretary 3

Corporate travel manager

Secretary n Travel responsibles in each country

= travel arrangements = management

Fig. 27.

Industrial enterprise’s internal network

International Travel Management Network.

The travel manager negotiated contracts with the hotel chain. The contracts brought more clients to some of the hotels, even though with some lower room rates. For the travel agencies, downgraded travel meant reduced incomes because commissions were based on ticket price. Generally, growth in traffic volumes would have a positive impact on the agencies income. Earlier, business class and first class passengers were the major source of income and the growth in that sector would affect their income much more than the growth in tourist class. Actor outcomes of the new sales channel, and the change in earning logics were intertwined. The outcomes were positive for all the actors, because they straightened the processes, and reduced the booking and distribution costs. Technology development enabled commission free rates. When the business travel agency earns its profits from the industrial enterprise, and from the other client organizations, the agency sees itself as an information provider and supervisor of their clients’ interests. When the agencies are not paid by suppliers, the advice they give is neutral, and for the industrial enterprise’s best: We have been in the industry where we used to receive our payments from our suppliers, and we have seen the change over the last couple of years y we personally feel it is

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the right way forward. We see our role as that of an adviser. (Present travel agency, Nordic manager)

The new sales channel and the new earning logics turned out to be advantageous to the travel agencies, because they led to major changes in the business travel agencies’ roles. Instead of being a ‘‘ticket dealer’’ (former travel agency, general manager), they regard themselves as a marketplace. The travel agency informant’s own words describe best the change in the agency’s role, There are a lot of possibilities for companies to book. But we still see the travel agency as the marketplace. You can go to the market and you can look at the various tables and see where you want to buy your vegetables. Where do they look the best and where are the prices best? You can do that by making comparisons, but you can only do that on the market. But if you leave the market and go down into the smaller streets where there are specialist shops, you can find a good price, but they won’t tell you if the shop next door has a similar product put at an even better price y to find out, you would have to spend time looking at all the different small shops. And we see it the same way, that when you need a trip from A to B and back again, you need to find out how to do it in the most efficient and convenient way. Well, we can go to airline a, and then go to airline b and ask what the price is. Of course, it takes you some time to get used to the process. Also, there is, of course, the question about money stream. You may need a travel account with airline b, a card with airline a, and so on. But if you used an agency, there is, so to say, only one stop shopping; it is a password. I think it is really a good idea. We see ourselves as a marketplace and that is what we are being paid for nowadays. (Present travel agency, Nordic manager)

When the travel agencies started to charge service fees, they had to open up the rate structures for the industrial enterprise. Knowing how the costs are structured means that you can challenge the costs. This, however, requires that the buyer is knowledgeable because, We [in the industrial enterprise organization] have to understand what they [in the business travel agency] are talking about so that we can commit ourselvesyit is good to have good cooperation, but it can’t be based on their understanding only. (Travel manager)

The industrial enterprise is prepared to pay the service fees, but the travel manager requires value for the money. According to the travel manager: If you call yourself a business travel agency, you have to have something to give, something that the buyer is willing to pay for. If you have nothing to give, it does not mean that you should make your transaction fees lower, or develop the technology, or get the moon from the sky. It means that you have to have something concrete to offer the buyer, something that is worth paying. If you don’t have it, you don’t survive. (Travel manager)

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Simultaneously with the commission cuttings, competition pushed the flight rates down, and a percentage-based commission would not have been favorable for the travel agencies anymore. A predetermined service fee ensured the agencies earnings. Ultimately, the new earning logics saved many travel agencies’ lives, because, Flight fares have gone down by 30% during five years. If we were still getting sales commissions, our revenue would also have gone down by 30%. (Former travel agency, general manager) 7% on today’s ticket fare is much less than it was in 2000. Now they [travel agencies] are earning the same money, no matter if the ticket costs 40 h or 400 h. (Airline B, manager)

The travel agencies became less dependent on service suppliers. Commission free sales clarified the rate structures, and made the competition between travel agencies more straightforward. The airlines eliminated override commissions (the additional commissions paid when the travel agency achieved a certain volume): At those times when all the airlines had different commissions, it was unclear y Many travel agencies probably gave away [to the client firms] a big part of their commission to be able to keep a client. (Travel agency, clerk)

For the industrial enterprise, the adaptations were profitable, because of the increased transparency in the rates, which, in turn, made cost control easier: Removing sales commissions was not at all a bad thing y It all became clearer and fairer for the clients, when we have the zero-line, and know where to start. (Travel agency, clerk)

For the suppliers, specifically for the airlines, commission cuttings, and advancements in booking technology naturally meant reducing distribution costs. However, suppliers still needed business travel agencies as a distributor. As stated earlier, the hotel chain was less dependent on distributors, and the actor outcomes were not as remarkable as with the airlines. However, also hotel distribution advanced along with the new technology. Earlier in the analysis, I divided the convergence of business and leisure travel into two periods. During the first period, the travel agencies sold crosswise tickets (two tickets, of which the traveler used one for the outbound and one for the homebound journey). In this way travelers could bypass the minimum stay requirements. Issuing crosswise tickets was time

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consuming and frustrating for the clerks. Crosswise tickets caused problems for the other actors as well: Their [airlines] price politics has led to crosswise tickets, even though nobody likes them y airlines do not want to sell them y it makes no sense. (Travel agency, clerk)

Travelers were aware of the risks when buying crosswise tickets. Sometimes the tickets – and the savings ended up in the dustbin, and the industrial enterprise’s money was wasted. The traveler illustrates this by pointing out that: We can use the crosswise tickets quite efficiently. However, quite often the other half of the ticket ends up in the dustbin because you were not able to plan, and there was the wrong date on the ticket. (Traveler)

Furthermore, sometimes the other ticket was a fake ticket. Cancelling these tickets would have been laborious for travel agencies, and so they decided not to do it, which led to a number of no-show seats on the planes. The operation manager points out that, We as an agency have decided that when we book these [crosswise] tickets we don’t cancel the fiction ones, because we see it this way that the client has actually bought a product that can be used. Weather the client is going to use it or not, that’s not our business. So we book it and leave it there. And this is of course not very popular among the suppliers, because they have all these no-shows. But there again, we see it this way, if they have been paid for these seats, they shouldn’t cry over it. But what they want to do, of course, is sell the same seat twice. (Present travel agency, operation manager)

When the agreed corporate rates started to overrun the general rate level, the travel manager perceived that the preferred suppliers neglected the industrial enterprise’s purchasing power and commitment. For the hotel chain, the industrial enterprise’s tendency to book leisure and weekend rates for business clients caused confrontations. Business travelers were not always aware of the differences in the services included in the rates, and required higher quality services but with a lower price. Dyad Outcomes The cost saving campaign and the change in the industrial enterprise’s purchasing strategy did not have a directly favorable impact on the service suppliers and on the former business travel agency. However, all the actors saw the benefits of the long-term cooperation. In all the dyads, the actors committed to long-term relationships, which led to increased

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Adaptation in Business Contexts: Working Triadic Relationships

interdependency, and created trust and commitment both at the organizational and individual levels: Partnership brings the firms closer to each other. You bind yourself to one firm, to one service supplier, you chose the airline. (Former travel agency, manager)

Contract negotiations were tight with hours of discussions. Actor bonds became strong (see Fig. 28: ab+, rt+, al+). Fig. 28 does not aim to measure the findings. The purpose of the figure is to give a general picture of the direction to which the relationships developed. When the situation is challenging, there is a lot of discussion y It is not only about putting your name on the paper, but there are a lot of discussions, which strengthen the relationships, also personal relationships. (Hotel chain, sales manager)

During the information exchange phase, the business travel agency informants felt that they were left outside. However, in the execution phase, the clerks played a significant role, and interaction with the travelers and those making bookings for them increased. Travel management process became the primary activity chain, and resource ties and activity links emerged between all the actors (Fig. 28: rt+, al+). Ultimately, the changes in the nature of the dyadic relationships were generative. For the service suppliers and for the former business travel agency, getting the preferred partner position was important. For the industrial enterprise, to find reliable partners to take care of the important travel management process was crucial. Adaptations regarding the new sales channel turned out to be the turning point in the relationships between the industrial enterprise and the former

Former travel agency

Former travel agency ab+

ab+

rt+ al+ Industrial enterprise

ab+ rt+

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Fig. 28.

Saving Campaign, Dyad Outcomes.

Hotel chain

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business travel agency. The relationship ended, as noticed earlier in the analysis, meaning that actor bonds, resource ties, and activity links at the organizational level ended (see Fig. 29: ab, rt, al). However, the travel agency sales clerks stayed with the industrial buyer, and the social bonds that had been created at the individual level continued (cf. Havila & Wilkinson, 2002). The other two dyads remained unaltered (ab0, rt0, al0). Thus, there were both ending and unaltered relationships, as Fig. 29 illustrates. Because of the fragmented distribution, travel purchase became extremely complicated for the industrial enterprise. The business travel agency’s value in the distribution network was reevaluated, and actor bonds between the present business travel agency and the industrial enterprise became stronger. Advanced technology was the key to success for the business travel agency, as the travel manager states: And then we got these internet rates, and the value of the travel agency returned to the same level it was in the 1980s when they were able to find all the best rates for their client, provided that they had the right equipment [technology]. (Travel manager)

The business travel agency informant confirms that, Because of the jungle of rates, we are needed even more than earlier. (Former travel agency, district manager)

Besides the ‘‘jungle of rates,’’ the industrial enterprise relies on the business travel agency’s expertise in a number of other services. The agency informant gives an informative example of the complexity of the services they are providing, Because of the market pricing, we don’t have price lists any more y to update information is the core thing. For example, we have a group in our back office that

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New Sales Channel, Dyad Outcomes (1).

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updates the flight rates for sales clerks y Believe or not, 210 000 flight rates are updated every single day. And the same goes with hotels, ferries, car-hire, and still one interesting thing, namely visas y We Finns do not need visas that often. But we have a client whose employees consist of 55 nationalities that need an unbelievable number of visas only when traveling inside Europe. Only to update visa database is a reasonable challenge. (Present travel agency, general manager)

Also the hotel chain needed the business travel agency’s services, despite the opportunities the internet provided: Very few of our corporate clients use our internet reservation system because those of the intermediaries [travel agencies and booking agents] are better and quicker. (Sales manager, hotel chain)

Technology helped in developing the travel management process to a total process with integrated payment handlings and management reporting. This strengthened resource ties and activity links (see Fig. 30: rt+, al+) in all the dyads, and made the actors more interdependent. Despite the attempts to bypass business travel agencies, the suppliers are deeply dependent on them. The airlines forced their customers to turn to the business travel agency regarding services they earlier provided themselves, for example, flight reroutings, as the account manager at the Airline A illustrates: We do not have the resources to do anything ourselves y earlier they often phoned from the travel agency, saying that there is a client coming to change his ticket y we can’t do it any more y the travel agency is doing it for us. Travel agencies are still our most important distributors y We do not have the capacity to serve all our clients directly. (Airline A, account manager)

In sum, the business travel agency–industrial enterprise and the industrial enterprise–supplier relationship development was both generative and degenerative (ab+/–). The open rate structures increased mutual

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Fig. 30.

New Sales Channel, Dyad Outcomes (2).

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understanding. However, access to the variety of alternatives led to fading loyalty (degenerative development) as, The clients are shopping more and more. They are not as faithful as they used to be. (Present travel agency, Nordic manager)

The travel manager wanted to understand profoundly how the partner organizations functioned. On her initiative, the industrial enterprise educated its personnel in business travel related issues because, People [buyers] have understood that they cannot trust on a partner who makes their profit on your travel. (Travel manager)

However, even though the industrial enterprise gained more alternatives to book travel, and the suppliers more channels to deliver business travel services, the process integration, and the tailor-made self-booking channels bound the companies together, and made them interdependent. The supplier–business travel agency relationship development was generative, even though the travel agency moved ‘‘from the supplier’s side to the buyer’s side,’’ as the business travel agency informant puts it: Earlier, we were the service suppliers’ functional supply chain. Of course, that’s what we still are, but now when we do not get commissions, we have become the buyer organization’s partner, in other words, and we have changed from the supplier’s side to the buyer organization’s side. (Former travel agency, general manager)

Due to interdependence, the change in earning logic did not cause major alterations in the industrial enterprise–service supplier and business travel agency–service supplier relationships (see Fig. 31: ab0, rt0, al0), even though commission cuttings tightened the airline - travel agency relationships.

Former travel agency ab+

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Fig. 31.

Changes in Earning Logic, Dyad Outcomes.

Hotel chain

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The business travel agency’s increasing commitment and the new services they provided, strengthened the resource ties and actor bonds between the business travel agency and the industrial enterprise (ab+, rt+). The business travel agency’s new services created new links in the activity chain (al+), as Fig. 31 illustrates. The present travel agency partner is not included, because the agency had not yet established a relationship with the industrial enterprise. In sum, the business travel agency–industrial enterprise relationship development was generative. The business travel agency–supplier and the supplier–industrial enterprise relationships remained relatively unaltered. Delivering crosswise tickets strengthened the industrial enterprise’s and the business travel agencies’ relationships. The cooperation also made them more interdependent, and created stronger actor bonds, activity links and tied the resources. (Fig. 32: ab+, rt+, al+). The industrial enterprise was disappointed with the service suppliers’ way of treating their key customer, giving thus a sign of weakening actor bonds between the industrial enterprise and the airlines (c): The benefits of the contract with the service suppliers have clearly faded; meanwhile the value of the contract with the travel agency has strengthened. (Travel manager)

However, the industrial enterprise and the suppliers were still interdependent, and the resources were firmly tied, and the activities were linked (rt0, al0). Both the industrial enterprise and the business travel agency blamed service suppliers for not listening, and for not understanding the industrial enterprise’s needs. The business travel agencies were disappointed because the suppliers provided services that they could not deliver,

Travel agencies ab+

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Fig. 32. Convergence of Business and Leisure Travel, Dyad Outcomes (1).

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Rates are mixed up, they [airlines] have services they don’t want us to deliver y they should adapt their services to meet the clients’ needs. (Travel agency, clerk)

Bypassing the agencies is a signal of weakening actor bonds between the business travel agencies and the airlines (ab). However, even though the relationships had signs of degenerative development, they remained unaltered because of the mutual interdependence, and the lack of alternatives. From the hotel chain’s perspective, the outcomes were not critical. Therefore, in Fig. 32, the dyad outcomes regarding hotel chain–industrial enterprise and hotel chain–travel agency relationships (both the former and the present travel agencies are included) are marked with ab0. The final outcomes of the second adaptation period were generative for the business travel agency–industrial enterprise relationships. The adaptations in utilizing tourist class tickets brought them closer to each other, as Fig. 33 illustrates (ab+, rt+, al+). Actor bonds, resource ties and activity links between the service suppliers, and the industrial enterprise, and between the suppliers and the business travel agencies remained unaltered (ab0, rt0, al0). Triad Outcomes The triad outcomes were primarily structure-reinforcing, and the triad became more cooperative. During the investigated period, some of the triads also changed to new triads. Furthermore, occasional structure-loosening outcomes appeared. Structure-Reinforcing Development. The saving campaign, the new sales channel, and the change in earning logics had structure-reinforcing

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Fig. 33.

Convergence of Business and Leisure Travel, Dyad Outcomes (2).

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Former travel agency

Industrial enterprise

Local travel agency

Service suppliers

Industrial enterprise

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Fig. 34.

Service suppliers

Serial triad

From Bridge Triad to Serial Triad.

outcomes. Before business travel was organized, the local travel agency served as a booking agent for the industrial enterprise, but despite of the three actors, the interactions were mainly dyadic. The triad reminded a bridge triad (cf. Stern & El-Ansary, 1992). In organized travel management, the relationship took a serial triad (cf. Havila, 1996) formation, where the three actors have direct connection with each other (see Fig. 34). The business travel agency had a predefined role between the industrial enterprise and the suppliers to ‘‘accomplish the contracts the client has negotiated’’ (former travel agency, general manager). The tasks were divided clearly between the travel agency and the suppliers: Service suppliers’ goal was to bind corporate buyers with long-term contracts. The travel agency’s goal was to realize the contracts. (Former travel agency, general manager)

Along with the new sales channel, and with the change in the earning logics, the roles of the actors mixed to some extent. The industrial enterprise took a more active role. Some of the business travel agency’s work moved to the industrial enterprise, and the expert tasks remained within the business travel agency. The complicated business environment and the wide assortment of rates made the industrial enterprise more dependent on the travel agencies, and increased the agencies’ power. The present business travel agency obtained a new kind of position between the industrial enterprise and the suppliers, and the triads transformed to unitary triads. The development toward unitary triads started gradually already with the former travel agency. Therefore, in Fig. 35, I have illustrated both the travel agencies in the unitary triad arrangement. The thicker lines between the firms illustrate the increasing cooperation.

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Former travel agency

Industrial enterprise

Former/present travel agency

Service suppliers

Serial triad

Fig. 35.

Industrial enterprise

Service suppliers

Unitary triad

From Serial Triad to Unitary Triad.

In the unitary triads, the tasks the travel agency was supposed to maintain were not predefined, but they were adapted according to the industrial enterprise’s and service suppliers’ needs. Suppliers, specifically airlines, increased direct sales of simple point-to-point travel, and forced the travel agency to find new ways to serve its clients, Within this industry, you have to be a chameleon. You have to shed your skin every morning, and do things in a new way y there are no limits, there is no ceiling to finding new ways to serve clients, all of them need their own solution. (Former travel agency, general manager)

Structure-Loosening Development. The triad changed from ‘‘more unitary’’ to ‘‘less unitary’’ and vice versa (cf. Havila, 1996). The actor outcomes were occasionally structure-loosening, for example, when airlines were looking for ways to bypass travel agencies. However, the triadic structure of the relationship settings did not change, even though, Service suppliers saw a lot of possibilities to bypass delivery channels. (Airline B, director)

The new sales channel was at first sight a serious threat to the travel agency, and also to the industrial enterprise, because of the fear of losing control over travel costs. The suppliers knew that, In a buying company, there are at least four groups of employees that feel her/himself as a decision maker in business travel purchase: the traveler, travel secretary, travel manager, the one responsible for the contract y All of them see themselves as the main decision maker in business travel purchase. (Airline B, director)

Due to major disagreements regarding airline prizing, the agencies and the industrial enterprise formed coalitions. For example, the clerks worked hard

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to make the tourist class rates available for business clients. The travel manager points out that, We are not interested if the car we hire is meant for company use or leisure use y Service suppliers suppose that companies are prepared to pay for the maintenance of the hotel or the airline carrier. (Travel manager)

A New Triad. Due to insufficient adaptation in technology, the industrial enterprise changed its business travel agency partner. A minor impulse, for example, a service failure or a high service fee, would not have been a reason to end a relationship. The change of the travel agency partner was a carefully considered decision, as the travel manager points out: We noticed that the relationship with the first partner did not develop in the direction that would have been beneficial to us. So we had to make the decision [to change the business travel agency] y to keep on with a long-term relationship because it would be difficult and troublesome to end it y we would lose money and nobody would develop. Therefore, we were not afraid to change the partner [business travel agency]. (Travel manager)

Summary and Analysis of Adaptation Outcomes Analysis of adaptation outcomes consist of three levels: actor outcomes, dyad outcomes, and triad outcomes. I will divide these levels further into long-term and short-term outcomes. Short-term actor outcomes are seldom positive for all the actors. However, an adaptation may turn out to be positive when taking a long-term perspective. For example, getting a committed client by helping her to save costs, even though the yield would decrease, may lead to bigger sales volumes in the long-term. By adapting and ‘‘re-adapting’’ the actors may reach positive long-term adaptation outcomes. Even a coerced adaptation may have positive long-term actor outcomes; an example is the change in earning logics. The new sales channel, as well, proved to be a source of innovation for the travel agency, even though it required extensive and costly adaptations, and was seen as a threat by the industrial enterprise and the travel agency. Short-term adaptation outcomes regarding the convergence of business and leisure travel were mainly negative. In the long-term, however, the airlines’ rate reform was unavoidable. The saving campaign was generative to all the dyadic relationships. The relationships had based largely on personal contacts. Due to the saving campaign, actor bonds, activity links, and resource ties strengthened at the organizational level, despite short-term negative actor outcomes (see Table 13).

Outcome dyad Industrial enterpriseformer travel agency Industrial enterprisepresent travel agency Industrial enterpriseairline A Industrial enterpriseairline B Industrial enterprisehotel chain Former travel agency-airline A Former travel agency-airline B Former travel agency-hotel chain Present travel agency-airline A Present travel agency-airline B Present travel agency-hotel chain

Impulse

Long-term (Short-term) Ending (Degenerative)

Generative (Degenerative)

Generative (Degenerative) Generative (Degenerative) Generative (No change) Ending (Generative) Ending (Degenerative) Ending (Degenerative) Generative (Degenerative) Generative (Degenerative) Generative (Degenerative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

Generative (Generative)

New sales channel

Unchanged (Unchanged)

Generative (Degenerative)

Unchanged (Degenerative)

Unchanged (Unchanged)

Unchanged (Degenerative)

Unchanged (Degenerative)

Unchanged (Unchanged)

Unchanged (Unchanged)

Unchanged (Unchanged)

Generative (No)

Long-term (Short-term) Generative (Generative)

Change in earning logics

Summary of the Dyad Outcomes.

Long-term (Short-term) Generative (Generative)

Saving campaign

Table 13.

Unchanged (Unchanged)

Unchanged (Degenerative)

Unchanged (Degenerative)

Unchanged (Unchanged)

Unchanged (Degenerative)

Unchanged (Degenerative)

Unchanged (Unchanged)

Unchanged (Degenerative)

Unchanged (Degenerative)

Generative (Generative)

Long-term (Short-term) Generative (Generative)

Business and leisure travel convergence

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The new sales channel led to ongoing adaptations with generative relationship developments and to an ending relationship between the industrial enterprise and the former business travel agency. The former agency had an established position in the triads, and the newcomer took the role with some better technological fit. The industrial enterprise’s fading loyalty was a sign of short-term degenerative development. However, the long-term outcomes are generative with increasing mutual cooperation in the dyads with the present travel agency. The change in earning logics was generative to industrial enterprise–travel agency relationships. Relationships between the suppliers and travel agencies remained unchanged, despite short-time degenerative relationship development. Adaptations in the industrial enterprise – the former travel agency relationship also benefited the present travel agency that entered the triads later. The long-term outcomes of the convergence of business and leisure travel were generative to the industrial enterprise–business travel agency relationships, meanwhile the other relationships remained unchanged. Shortterm degenerative outcomes in Table 13 refer to the occasional disagreements during the process. In the long-term, adaptations made both in the connection of the saving campaign and the change in earning logics were beneficial to the present travel agency–industrial enterprise relationships, even though the present travel agency had no relationship with the industrial enterprise at the time of the adaptations. The well organized travel management process made adapting easier for the present travel agency. The change in earning logics benefited all buyer–travel agency relationships. When we take a long-term perspective, triad outcomes are mainly structure-reinforcing because the tendency is toward a more unitary triad and toward more cooperations. The saving campaign transformed the bridge triad to a serial triad, and in the later phases to a unitary triad, as Fig. 36

Former travel agency

Industrial enterprise

Local travel agency

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Fig. 36.

Service suppliers

Industrial enterprise

Service suppliers

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Industrial enterprise

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Structure Reinforcing Triad Outcomes.

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illustrates. The strength of the line denotes increasing cooperation in the triads. The industrial enterprise organized its business travel purchase with the help of the local travel agency already before the saving campaign. However, first after the saving campaign, the industrial enterprise, former travel agency and service suppliers all had direct connection with each other. The role of the travel agency was then that of a distributor. The new sales channel and technology development in general changed the triadic relationship structure. Surprisingly, the change of the travel agency did not have a dramatic impact on the triads, because of two main reasons. First, business travel management relies more on the functions than on specific actors. Thus, the adaptations made in the prior relationships benefit the successors. Going back to Gersick’s (1991) metaphor of the rules of the game; a player changes, and the new player learns the rules. Experienced travel agencies belonging to international travel agency chains are all qualified to serve international clients, and capable to learn the new rules. According to the travel manager, the intermediary does not necessarily have to be a travel agency. The key issue is the buyer organization’s well-organized travel management, a travel policy, and an experienced and knowledgeable travel manager: The buyer might choose to cooperate with an information technology provider, or a credit card company, instead of the business travel agency, provided that the buyer has extremely good knowledge of the industry. (Travel manager)

A change of an important service supplier, on the contrary, might cause major adaptations. To open a new flight route or a hotel to meet the clients’ needs may be demanding and risky for a supplier. One challenge is the geographical location and the lack of competing suppliers. This concerns specifically airlines: There is a problem y we have too few alternatives when flying outbound from Finland. What are the alternatives? From London, you can fly wherever [and choose the airline]. (Traveler)

Second, a great help to the continuance of the triads was the travel agency clerks that changed from the former business travel agency to the present agency. This made the change easier for all the parties: The contacts I have with the persons who sit there [business travel agency clerks in the industrial enterprise’s premises] are extremely important. It is very good that they followed with the new travel agency. (Airline A, account manager)

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In fact, the majority of the clerks followed the industrial enterprise from the local travel agency to the former travel agency, and from the former travel agency to the present travel agency. Following the client is quite common in business travel industry, and highlights the importance of personal contacts and social bonds (cf. personality related trust and performance related trust, cf. Coulter & Coulter, 2003). Following the client also reveals the relationship energy that continues, and helps to form new relationships with other organizations and contexts (cf. Havila & Wilkinson, 2002). Furthermore, despite the importance of technology, the human touch is valued. The agency informant concedes that the internet has not reduced the need of personal relationships, and that, There is actually something that has not changed; it is still a human being doing this work. The internet has not reduced the need of personal relationships, or the interactions between human beings. Rather, on the contrary, it has even increased the need. (Former travel agency, general manager)

The industrial enterprise makes it clear that both are needed, technology and humans, but it is important to use these resources in a reasonable way. Simple bookings are suitable for online channels, but more complicated travel requires an expert: Employees should not be made to take care of routines, because it costs too much, and we cannot afford it in the travel business. (Travel manager)

The change in earning logics strengthened the unitary triad nature of the relationships (ab+ in Table 14). The business and leisure travel convergence did not break the triads despite occasional disagreements. The same relationship setting and the same actors continued their cooperation. This is quite natural, because the adaptation impulses were universal, and changing the suppliers would not have changed the situation. Furthermore, the occasional degenerative dyad outcomes (ab–) indicate short-term structureloosening development. Thus, even though the long-term development is structure-reinforcing, short-term development may be structure-loosening. In sum, the structure-reinforcing development describes long-term relationship development. However, at the same time degenerative development in the dyads, a coalition formation between the industrial enterprise and the business travel agencies, and even a breakdown in one of the relationships led to occasional disagreements and weakening actor bonds in the supplier relationships.

(not active)

(not active)

(not active)

Reinforcing: Bridge to serial triad

Reinforcing: Bridge to serial triad

Reinforcing: Bridge to serial triad

Saving Campaign

Reinforcing: More unitary (ab+)

Reinforcing: More unitary (ab+)

Reinforcing: More unitary (ab+)

(not active)

(not active)

New triad Reinforcing: unitary triad, Agreed adaptations

(not active)

Industrial enterprise – present travel agency – hotel chain triad

New triad Reinforcing: unitary triad, Agreed adaptations

Industrial enterprise – present travel agency – airline B triad

New triad Reinforcing: unitary triad, Agreed adaptations

Industrial enterprise – present travel agency – airline A triad

Reinforcing: Serial to unitary triad

Industrial enterprise – former travel agency – hotel chain triad

Reinforcing: Serial to unitary triad

Industrial enterprise – former travel agency – airline B triad

Reinforcing: Serial to unitary triad

Industrial enterprise – former travel agency – airline A triad

Change in Earning Logics

Summary of the Triad Outcomes.

New Sales Channel

Table 14.

Unchanged

Short-term structure loosening development (ab)

Short-term structure loosening development (ab)

Unchanged

Short-term structure loosening development (ab)

Short-term structure loosening development (ab)

Convergence of Business Travel and Leisure Travel

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Triad outcomes include short-term and long-term outcomes. In other words, degenerative development in dyads may have an impact on the shortterm relationship development, but does not necessarily hinder long-term structure-reinforcing development in the triads. In Table 14 (ab+) denotes that even though a triad would become more unitary, the dyads development may be degenerative. (ab) denotes the opposite. We can compare this kind of development to the equilibrium periods with incremental changes (cf. Gersick, 1991). Why did the triadic relationship setting remain the way to manage the industrial enterprise’s business travel? One reason is the interdependencies that emerge when actor bonds, activity links, and resource ties develop. In Gersick’s (1991) terms, there were equilibrium periods when the basic activity patterns remained the same with some incremental changes. The stronger the bonds, links, and ties are, the deeper the interdependence is. Along with the structure-reinforcing development, the actors became more interdependent. Generative relationship development requires that the actors have significant and ‘‘roughly the same dependence upon the relationship’’ (cf. Anderson & Narus, 1990), as in the current case study. The clerk judges the interdependence from all the actors’ perspectives: We are all dependent on each other. The buyer organization needs us, and we need the buyer organization more than it needs us, whereas the airline needs both of us, very much. And it specifically needs us to deliver its services. (Travel agency, clerk)

The new booking channel would have enabled the industrial enterprise to arrange its business travel without an intermediary. The triad would then have changed to a dyad. The industrial enterprise could also have replaced the travel agency with another actor. However, the reasons behind switching a partner are thoroughly considered. The travel manager emphasizes the value of long-term relationships: We have no need to change the partner just because of the cost of an individual transaction, there has to be a clearly a more pressing reason to make a change. (Travel manager)

The business travel agency could not offer the technology that the industrial enterprise required: The new partner has the technology we are not able to offer. (Former travel agency, district manager)

Furthermore, with contract negotiations and realizing the contracts, the power is with the industrial enterprise. Holmlund and Hobbs (2009)

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discovered that the one to end the relationship may as well be the seller. However, in the current case, the suppliers claim that the suppliers and the travel agencies never end the relationship with a client. According to the service suppliers: We never break the relationship. In the contracts, there are these conditions of our notice of termination, but it never happens. (Hotel, sales manager) The contracts do not bind the buyer organizations. (Airline B, director)

The travel agency and the industrial enterprise informants agree that changing a partner is laborious, and there has to be a good reason to end a relationship. However, to keep the quality high, the industrial enterprise evaluates the relationships constantly: It is a long process to change a partner. There has to be a reason, a remarkable reason to changeyIt is not an individual happening that breaks a relationship. On the other hand, the bidding rounds are going on quite often and regularly. It is a way to keep us [business travel agencies] awake. (Former travel agency, district manager)

The reason for the industrial enterprise to end the relationship was insufficient technological adaptation: Instead of starting to surf the internet ourselves, we needed a partner who can give us all the rates. It meant that our travel agency partner wasn’t the best for us anymore, but we had to get a partner equipped with the new technology and skills y they were not able to offer us the right equipment. (Travel manager)

CONCLUDING DISCUSSION This section summarizes the study and its main findings. Furthermore, this section elaborates on the theoretical and methodological contributions and managerial implications. The concluding discussion also addresses the trustworthiness of the research. Finally, this section reflects on the research’s limitations, and provides propositions for further research.

Summary of the Research B2B relationships form complicated networks that function in an increasingly dynamic business environment. This research is conducted in the area of relationship marketing, and the study addresses the complexity of business relationships, both when it comes to the core phenomenon under

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investigation, adaptation, and the structural context of the research, a triadic relationship setting. Business researchers generally regard adaptation as a dyadic phenomenon, even though they recognize that dyads do not exist isolated from the wider network. The purpose of this research was to build a comprehensive framework of adaptation in triadic relationship settings, and three research questions were posed. The questions address the context, process and content (Pettigrew, 1990) of adaptation in triadic relationship settings: (1) Nature of how do adaptations initiate in a triadic business relationship setting, (2) How adaptations spread over time, and (3) How do adaptations change the structure of a triadic business relationship setting and the nature of its relationships? The focus was on the triads as such, and on the connections between its actors. I base the study primarily on the industrial network approach by the IMP group (Ha˚kansson, 1982; Ha˚kansson & Snehota, 1995a). The SMM approach (Gro¨nroos, 1995) underpins the service perspective in the research. Theories from sociology (Caplow, 1956; Simmel, 1969) that study how individuals act in small groups helped in understanding the triadic relationship setting. The empirical context of this study is the business travel industry. The triadic relationship settings consist of the relationships between an industrial enterprise, its service supplier and business travel agency partners. The triads cooperate to organize the industrial enterprise’s business travel purchase. The triadic relationship setting consists of three independent actors (firms) that are either directly or indirectly connected to each other for business purposes. Adaptation in this specific context is defined as: Proactive or reactive adjustments in actor bonds, resource ties, and activity links in triadic relationship settings that take into account the contextual setting and changes in it. Adaptations are not transferable as such to other relationships. The study creates the analysis framework with the help of the systematic combining approach (Dubois & Gadde, 2002), which is based on abductive logic. Retrospective case studies with in-depth interviews and critical interview technique (Chell, 2004) were the main source of information. Data gathered from actual counterparts in specific triadic relationships provided multiple perspectives to adaptations. I applied a triadic approach, where I investigated each of the three dyadic relationships in a triad in the context of the other two dyads to which it is connected, and from both ends. A continuous movement between the theory and the empirical findings characterizes systematic combining. Accordingly, the theory development in

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the research evolved through hermeneutic circles, where I gathered and analyzed data, and reflected on them simultaneously. I challenged existing interpretations and searched disconfirming data in an ongoing process of meaning construction. The theory became more understandable along with the empirical observations, and vice versa. I chose the processual perspective to describe how adaptations change relationships (Halinen, 1996). However, I constructed the report in a traditional way with a separate theory part and empirical part, even though this is not how the research process advanced in reality. The empirical part of the report, as does the theory part, follows the structure of the analysis framework and the themes of the three research questions: adaptation initiation, the proceeding of adaptations, and the outcomes of adaptation. The study uses adaptation impulses as windows to look at adaptations. Four adaptation impulses surfaced from the interview themes: (1) a cost saving campaign, which deals with the industrial enterprise’s internationalization and thereby growing travel costs; (2) a new sales channel, describing the emergence of internet bookings and technology development; (3) a change in earning logic describing the suppliers’ sales commission removals from travel agencies; and (4) a convergence of business and leisure travel, which has to do with business and leisure travelers changing buying behavior. Adaptation emerges from three impulse sources: the firms, the primary business network (the travel industry), and the macronetwork. The cost saving campaign was endogenous, originating from the industrial enterprise, and leading to an organized travel management process and contractual relationships. The three other impulses were exogenous and they had their origins in primary network, and in the macronetwork. Actor adaptations, resource adaptations and activity adaptations demonstrate the content of adaptation. Adaptations in human interaction were specifically important in the beginning of the relationships, and during the entire lifetime of the relationships. Thus, adaptations in human interaction are primary adaptations, which enable adaptations in organizational structures, and in resources and activities. This is so, even though the entire travel management process is based on adaptations in technology. Furthermore, the firms made major adaptations in organizational structures, purchasing, and marketing and delivery strategies. Each adaptation process included adaptations of different scale and formality. All four impulses led to large scale investment processes. However, the scale of adaptation cannot be directly compared between the different actors, because travel management is a support function for the

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industrial enterprise, and the core activity for business travel agencies, and for service suppliers. The findings imply both coerced and voluntary adaptations, and an interesting coalition formation, where the industrial enterprise and travel agencies united their forces against airlines. The adaptations were mainly threefold, where the actors all made adaptations to benefit the common goals of the triadic relationship setting. The saving campaign and the new earning logics contained information exchange, negotiation, communication, and execution phases (cf. Brennan & Canning, 2002; Canning & Hanmer-Lloyd, 2002). The remaining two processes were evolving, leading from one period of adaptations to the following period. However, the phases discovered in the prior research (Brennan & Canning, 2002) do not describe what happens after the execution phase. Thus, I added a fifth phase, the phase where adaptations spread to incorporate the triadic relationship setting. Adaptations spread in three different ways, based on who initiates adaptations: (1) one of the firms initiates connected adaptation and (2) a dyad initiates derived adaptations. (3) All three firms plan agreed adaptations in cooperation. In this study, the service suppliers and the industrial enterprise initiated adaptations. The travel agencies did not directly initiate adaptations, but they were active in responding and creative in finding new solutions specifically for their client’s needs. The different ways of adaptation spread also show that the actors in a specific triadic relationship setting may have either a direct or indirect connection with each other, depending on the nature of the adaptation. Thus, how the actors of a specific triad are connected to each other is context specific. The content of adaptation is connected with the process nature of services. In close cooperation, all the actors joined the travel management process, and adaptations go through the entire process, constituting adaptation chains. Adaptation chain may relate to ARA, and they may activate actor adaptation chains, resource adaptation chains and activity adaptation chains. In order to get a comprehensive picture of how adaptations affect the triadic relationship settings, I investigated adaptation outcomes at the actor (firm) level, dyad level, and triad level. Actor outcomes imply positive and negative outcomes for the firms. In the core triads, the firms have, besides the common goal, their own goals. Thus, an adaptation that is beneficial to one of the firms may have negative outcomes for another firm. However, long-term cooperation may compensate short-term negative outcomes. Furthermore, a coerced adaptation may have positive outcomes for the coerced firm.

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In the current study, the dyad outcomes were both generative and degenerative, depending on the impact of adaptations on actor bonds, resource ties, and activity links. The industrial enterprise – travel agency relationships became closer, and the relationships with service suppliers became somewhat more distant. However, the triads’ structure strengthened. Despite the occasional degenerative development in the dyads, the triads became more cooperative. Thus, the outcomes had both short-term and long-term consequences. The triads strengthened even though technology would have enabled direct access to the suppliers without the intermediation of a travel agency. A main reason is interdependence between all the actors. Furthermore, the firms recognized the benefits of long-term cooperation, which motivated them to make adaptations. The relationship between the industrial enterprise and the former business travel agency ended. The main reason was the inadequate technological adaptation. The succeeding agency adapted its resources and activities to those of the other firms. The change was seemingly uncomplicated for two reasons. First, travel management depends rather on functions than on specific actors. Thus, an actor may be changed, but the role remains, and the details of the role may be learned by another professional actor with the same competencies. In triads, the functions and the adaptations stay even though actors would change. Second, the travel agency’s service personnel followed the industrial enterprise, which was of great help to all the firms in the triadic relationship settings. Thus, in triadic relationship settings, the service personnel play a central role in implementing and executing adaptations.

Theoretical Contributions This research integrates theories and concepts from two approaches, from the industrial network approach by the IMP group (see, e.g., Ha˚kansson & Snehota, 1995a), and from the SMM approach by the Nordic School (see, e.g., Gro¨nroos, 1995). Sociological theories help to understand the triadic relationship setting. Primarily, this research contributes to adaptation research and research with business triads. Furthermore, some of its findings can be utilized in business network, and in business relationship dynamics research. The main theoretical contribution of this research concerns opening a new research area in relationship marketing by investigating adaptation in

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business relationships with a new perspective, and in a new context. Thus, this research fills in two major research gaps in relationship marketing. First, the study extends the adaptation research perspective from the traditional dyadic perspective to incorporate three actors. Second, the study shifts the focus of adaptation research from the manufacturing industry to business services. Adaptation has mainly interested IMP Group researchers who have treated adaptation as a dyadic phenomenon. Furthermore, in the IMP tradition, the service industry has gained limited attention. This study provides a comprehensive framework to analyze adaptation in triadic business relationship settings. Furthermore, researchers may make more detailed analysis with the help of the framework by studying the subprocesses, for example, (1) the progression of adaptation with its different phases, (2) the adaptation chains, and (3) the adaptation outcomes. 1. Prior researchers (Brennan & Canning, 2002) have discovered four adaptation phases: information exchange, negotiation, communication and execution phases. However, this does not take into account how adaptations reach the third firm in a triad. Adding the fifth phase, the spread of adaptation, allows the investigation of the entire adaptation process from the very beginning to the phases that occur after the execution. 2. Actor adaptation, resource adaptation and activity adaptation chains are useful tools when studying adaptation in service processes at actor, resource and activity levels. This adds the dynamism of the ARA model by the IMP Group. 3. Furthermore, actor outcomes, dyad outcomes and triad outcomes help in evaluating the impact of adaptations. Depending on the change in the strength of actor bonds, resource ties and activity links, dyad outcomes may be generative or degenerative, which in turn has an impact on the triad outcomes. Based on dyad outcomes, and using the conceptualization of bridge triads, serial triads and unitary triads, the researchers may evaluate triadic outcomes. Together dyad and triad outcomes may reveal short-term and long-term adaptation outcomes. The main findings regarding the triadic relationship setting contribute (1) the discussion of the approach itself, (2) the interesting variations in the connections between the actors, and (3) the function vs. the actor specificity of the cooperation. 1. This research has a triadic approach to adaptation. I have investigated each of the specific triadic relationship setting from all the three firms’

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perspectives, and in the context of the other two relationships, and from both ends. The triadic relationship settings consisted of actual cooperating partners, providing thus multiple perspectives to specific adaptations. The approach can be used to study, besides adaptation, other relationship specific features in triadic relationship settings. 2. During the different adaptation phases, and in the same triadic relationship setting, the actors may have both direct and indirect connections. The same triad may act as a bridge triad (Stern & El-Ansary, 1992), a serial triad, or as a unitary triad (cf. Havila, 1996), depending on the timing and the contextual setting. 3. The travel management function become dependent on functions performed rather than on specific actors, which makes it easier to change an actor, and specifically the intermediary. The notion of function specific and actor specific triads is important when investigating, besides adaptations, also other features in business triads. The structural context of this study, the triadic relationship setting, and the key concept, adaptation, both emphasize the dynamics and the embedded nature of business relationships. Thus, the study has implications for relationship dynamics research and business network research. Ritter (2000, p. 319) argues that analyzing triads, when addressing the interconnectedness between relationships in a network is adequate. We can deconstruct a network into triads for analytical purposes, and reveal network effects by using a triad. The analysis framework that I created in this study may be useful when studying different relationship features, not only in dyads and triads, but also in larger business networks. Finally, the current study investigates ongoing service processes, and the major turning points within the relationships, thus contributing research on relationship dynamics. For example, the models and conceptualizations this study provides can be used to study, besides adaptations, other dynamic relationship features both in dyadic and triadic relationships.

Managerial Implications I conducted this research in the business travel industry. However, other industries featured by triadic relationships may take advantage of the results of this study in their relationship development, for example, in service supply and sourcing. A number of B2B services include three actors. The third actor exists, for example, between a constructor, construction

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company, and an architecture firm. The service triangle (Gutek et al., 2002; Phillips-Carson et al., 1997), a relationship setting with a customer, service organization, and individual service provider in any service context needs adaptation. A number of other B2B services, where a unit or an individual employee has an important role between the end user and the service supplier, for example, contracted health services, training services, office equipment, and car leasing services may benefit from the results of the current study. Even though technological adaptations are of the highest importance, the current case studies provide much evidence of the importance of dedicated contact persons and the social bonds between them, both at the managerial level and at the operational level. In the service context, adaptations in services and service processes are not possible without a dedicated contact person who has the information of his/her own organization, of the counterpart, and of the history of the cooperation. In triadic relationship settings, the dedicated frontline employees have an important role in implementing the adaptations. The frontline employees are the ones to communicate the adaptations and to put them into practice. The dedicated contact persons’ role as information providers is specifically important in centralized support services where the end user needs the information in order apply the terms of the contracted services. Furthermore, the course an adaptation process takes is itself at least as important as its outcomes. The ups and downs and specifically the setbacks along the way were on the minds of the informants all the way through the process. For example, the actors’ perceptions that they were treated unfairly, or that they were not listened to, gained more attention than the fact that the process ended up positively, and the adaptations were beneficial. The process itself may be a reason for deterioration of a relationship, even though the final outcomes of adaptation may be profitable and mutually agreed. Thus, the importance of involving all the firms, communicating and sharing information cannot be emphasized too much. Corporate travel is a high cost item for many companies. Even though corporate travel is a company specific function, the researchers can use the results of this study to evaluate the core relationships in travel management. For example, the results may give some conceptions of how to cope with the impulses that put forward adaptations, and how to make adaptations that lead to desired relationship development. The adaptation impulses analyzed in this study are generic. Thus, the analysis framework may provide tools to analyze corporate travel

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management in companies with organized travel management, and to plan beneficial adaptations. Schmidt et al. (2007) notice that firms do not generally use adaptations for explicit relationship building purposes, and a great deal of adaptations ‘‘just happen’’ without formal planning. Managers can systematically plan adaptations, and evaluate outcomes with the help of the concepts and visualizations provided in this study. Furthermore, managers may pay attention to the direct and indirect connections between the cooperating firms. Travel managers can utilize the findings when planning to organize, or reorganize business travel management. The models and conceptualizations in this study can be useful when evaluating and developing relationships in similar triadic relationship settings. For example, when planning adaptation in travel management process, the firms may consider the actor adaptation chain, resource adaptation chain, and activity adaptation chains. Travel management is more function based than actor based. Prior research has noticed the importance of customer’s knowledge of, or familiarity with the service industry with which she/he deals with (Coulter & Coulter, 2003). In travel management, the buyer organization is in the first place responsible for the function. Thus, well organized travel management and knowledgeable travel manager enhances cooperation and helps in requiring and implementing successful adaptations. Finally, technology is important when developing the travel management process. So are the travel agencies’ dedicated contact persons, and specifically the dedicated clerks that are the link between the suppliers and the buyer organization. The study proves that technology has not reduced the need for personal contacts; quite on the contrary. Travel management is still people intensive, and personal contacts are important.

Judging the Quality of the Research The researchers traditionally evaluate the quality of the study in terms of internal validity, external validity, reliability, and objectivity (e.g., Denzin & Lincoln, 1994; Lincoln & Guba, 1985; Silverman, 2000). This quality criterion has its foundations in the dominating positivistic research tradition and objectivistic ontology. I base the current study on the interpretive approach and realist ontology. Interpretive researchers face a dilemma when they want to claim that the knowledge they produce is true. Therefore, it would not be consistent to justify knowledge produced within the interpretive tradition using criteria based on an objectivistic ontology and

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epistemology. However, researchers lack a common tradition of how to assess the quality of qualitative research and to justify the knowledge produced. Even though interpretive research does not have a predetermined set of criteria, it does not follow that we do not need standards by which to judge the results of the study (Cepeda & Martin, 2005; Klein & Myers, 1999; Sandberg, 2005; Spiggle, 1994). An interpretive approach assumes that a person and the world are inextricably related through lived experience of the world. The ontological and epistemological assumptions underlying the interpretive research tradition eliminate the existence of an objective knowable reality beyond the human mind. Instead, the assumptions stipulate that knowledge is composed through lived experience of reality (Cepeda & Martin, 2005; Sandberg, 2005). Healy and Perry (2000) assert that the quality of a research in each paradigm should be judged by its own paradigm’s terms. Researchers should apply the criterion Lincoln and Guba (1985) suggest: credibility, transferability, dependability, and conformability. Furthermore, researchers should include an additional criterion, that Morgan and Smircich (1980, p. 491), Gummesson (2000) and Healy and Perry (2000) emphasize, namely the appropriateness of the method (see Table 15). The Appropriateness of the Method The appropriateness of the method implies the fit between the assumption of the nature of knowledge and the method to obtain the knowledge (ontological appropriateness). This entails different assumptions of the nature of knowledge and the methods through which to obtain that knowledge (Healy & Perry, 2000; Morgan & Smircich, 1980, p. 491). The exploratory nature of the current study speaks for the case study method. The research setting is unique, complex and contextual, and this kind of setting could not be understood through any other methods. Credibility Credibility corresponds with internal validity of the positivistic research tradition. The interpretive tradition believes that multiple realities exist in the minds of people, and the purpose is to understand the phenomena of interest from the participating actors’ viewpoint. The research process should be dynamic, and the readers should be able to follow it, and draw their own conclusions (Gummesson, 2000). The study here promotes the credibility of this study by making the reasoning behind the theory development as transparent as possible.

How well the results fit in the context of the research (Lincoln & Guba, 1985).

Auditability; a clear decision track to assume that the conclusions drawn are reasonable (Lincoln & Guba, 1985).

The objectivity of the data.

Transferability (external validity)

Dependability (reliability)

Conformability (objectivity)

Credibility (internal validity)

Fit between the assumption of the nature of knowledge and the method of obtaining the knowledge (Healy & Perry, 2000). How the phenomena of interest is understood from the participating actors’ viewpoint (Gummesson, 2000).

Definition

Strategy

Pre-understanding, ‘‘personal multiple perspective’’ to the investigated triads. The researcher’s qualities: Training, education, practicing the interviews.

Profound presentation of the research setting, research context, and changes in it. Stating the purpose of each section, stating the findings at the end of the section. Using quotations to support the analysis.

Detailed description of research situation and methods. Explanation of the choice of adaptation impulses. Profound clarification of informants and the levels of analysis.

Research diary, transcribing the interviews, visual aids. Opening up the research process and the steps and levels of analysis. Peer reviewers in academic conferences. Multiple sources of evidence; interviews, industry reports, trade magazines. Multiple perspectives form the three ‘‘angles’’ of the triad. Triangulation. Prior theory to define concepts.

Subjectivist epistemology and case study method as explained in section.

Quality Criterion of the Research.

The appropriateness of the method

Quality Criterion

Table 15.

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Regarding method trustworthiness (Healy & Perry, 2000; Yin, 2003), the study here includes using relevant quotations in the case analysis. Furthermore, the data collection included making notes during and after each interview, and created a case study database in the form of a research diary. The notes include the atmosphere of the interviews, nonverbal communication, and the ideas for the next interview. I also transcribed the interviews word-by-word right after each interview, and summarized the visual aids. Construct validity (Cepeda & Martin, 2005; Gummesson, 2000; Healy & Perry, 2000) denotes utilizing peer reviewers, multiple sources of evidence, multiple perspectives, triangulation, chain of evidence, and prior theory to define the concepts. Different parts of this study were presented in several academic conferences and doctoral colloquiums. Most of them had a double blind review process. The comments obtained on these occasions improved the quality of the research substantially. Furthermore, I presented some findings to travel management experts. Unfortunately, the key informants were not able to review a draft of the report due to lack of time. The study applies multiple perspectives (cf. Ghauri & Gro¨nhaug, 2002; Healy & Perry, 2000) because the informants represent all the three ‘‘angles’’ of the triads. Furthermore, the study triangulates the empirical data, and uses multiple theories, and perspectives to interpret and explain the data. Throughout the research, the study uses prior theory to define the concepts. Transferability Interpretive research seeks to understand a moving target. (Klein & Myers, 1999, p. 71)

Transferability refers to the degree to which the results of qualitative research apply in other contexts or settings. The discipline and rigor of qualitative analysis depends on presenting solid descriptive data, the ‘‘thick description’’ (Geertz, 1973) in such a way that readers can understand and draw their own interpretations (Patton, 1990). A thick description gives the context of an experience, states the meanings that organized the experience and reveals the experience as a process (Denzin & Lincoln, 1998, p. 324). Transferability improves when the researcher describes systematically the research context and the assumptions that were central to the research, and judges how well the results fit in the allocated context (Klein & Myers, 1999; Lincoln & Guba, 1985). The reader can then make judgments of how transferable the results are. In other words, the reader transfers the results of a study to another context. To be able to do this, the reader needs to know

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about the original research situation in order to determine whether the situation is similar to his or her own. Therefore, the researcher must supply a highly detailed explanation of their research situation and methods, and a critical reflection of the historical background of the research setting (Klein & Myers, 1999). The detailed nature of the results, however, makes them ideal for transferability. The study here provides a profound clarification of informants and the levels of analysis. However, the study does not aim to give all-inclusive answers to given situations. Transferring the results of other researchers’ may help us expand and adjust these practices, but we cannot always transfer the results as such. It is important to consider differences between situations and modify the research process accordingly, because of ‘‘the moving target’’ (cf. Klein & Myers, 1999). Dependability Instead of reliability, qualitative researchers employ the idea of dependability. In the positivistic tradition, reliability would mean that the same research could be replicated resulting in the same conclusions found in the original study. This criterion is not relevant within realistic ontology. The research findings are produced in interactions with the informants, and in constant movement between the theory and the empirical data. Dependability emphasizes the need for the researcher to explain the dynamic context in which the research occurs. The researcher is responsible for describing the changes that occur in the setting, and how these changes affected the way the researcher approached the phenomenon studied. Auditability comes true when we can follow the decision track and assume that the conclusions drawn are reasonable (Lincoln & Guba, 1982). The reader may not be able to follow the long and winding road that led to the analysis framework in the current study. However, I tried to structure the report so that the dynamism of the research would unfold by explaining the research setting, research context, and changes in the context in detail. Furthermore, I stated the purpose in the beginning of each section, and the findings at the end of the section, aiming to demonstrate how I found the answers to the research questions. Conformability As it appeared through my own eyes, filtered through my own background, my likes and dislikes, qualified by my own strengths and weaknesses. (Read, 1965, in Geertz, 1990)

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Conformability refers to the test of neutrality, which in turn relates to the objectivity criteria in the positivistic research tradition, and the notion of descriptive validity. However, qualitative research assumes that each researcher brings a unique perspective to the study, and that human beings cannot be objective. In interpretive research, the informants’ perceptions provide a window to a reality beyond their perceptions (Healy & Perry, 2000, p. 120). Even though the researcher would consciously try to bracket personal beliefs and views, it is impossible to see the world through the eyes of another (Hudson & Ozanne, 1988, p. 510). The advice that Easton (1995, p. 486) gives is to put ourselves in the position of the others when attempting to understand not only the phenomenon studied, but also the process that leads to understanding of the phenomenon. Geertz’s (1973) interpretation of understanding highlights that the researcher cannot live the subject’s perceptions, feelings, or meanings, but she/he can interpret them. Reflexivity refers to the researcher’s ability to critically reflect on her role in conducting the research and analyzing the data. Gummesson (2000) claims that the researcher should have adequate access to data, and possess certain personal qualities. I have an extensive experience in the business travel industry, and thus preunderstanding of the research setting. However, when making interpretations, extensive preunderstanding may guide your thoughts. Gummesson (2000) warns of not to ‘‘become the slave of your preunderstanding,’’ in other words not to let your preunderstanding block your innovative thinking. When analyzing the current case study, I kept in mind a guiding question suggested by Wolcott (1994, p. 21): ‘‘Am I attending as carefully to what is going on as I am attending to what I think is going on?’’ The researcher’s experience and training has both a positive and negative influence when conducting the analysis (Gummesson, 2000). I had continued physical and mental access to the informants (Gummesson, 2000), and was able to understand their ‘‘language.’’ Furthermore, my preunderstanding is based on multiple perspectives as I have myself acted as a buyer and a seller of business travel related services. Furthermore, before entering the field, I used a guinea pig who had been working in the industry. Even though each interview was different, the test interview gave confidence, and helped in conducting the real interviews.

Limitations and Avenues for Further Research Every research has its limitations, which provide avenues for further research. In this section, I will discuss the limitations and suggestions for

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further research regarding the current study. Some limitations are intentional and concern the qualitative orientation of the research. To conduct this research, I used qualitative methods, and in-depth interviews. Thus, the current case studies do not allow generalization in the statistical way. I could have researched a number of areas by quantitative methods, for example, quantifying the amount of emergent adaptation (cf. Canning & Brennan, 2004), the costs and benefits of adaptation decisions (cf. Schmidt et al., 2007), and evaluation of returns on investment once the adaptation process is completed (cf. Brennan & Canning, 2002). A number of limitations concern the research setting. First, the empirical setting of this study represents one industry and one type of triadic relationship setting. Findings from other kinds of service industries could bring out new aspects, and give additional value to the research. Second, the core triads consist of an industrial enterprise, its service supplier, and business travel agency partners. Each of them has their own roles, and besides their common goal, these three actors have their own goals, which may be even conflicting. Thus, in another context, with a different triadic setting, adaptations may obtain different features. Third, the function that is the core of the cooperation in the triadic relationship settings, corporate travel management, depends on functions rather than on actors. The industrial enterprise has a well organized travel management, and a knowledgeable travel manager. Without these qualities, travel management would be more actor dependent. Even though firms cannot transfer adaptations as such to other relationships, adaptations in the existing relationships may benefit the succeeding relationships, and make it easier to change a partner. In an actor specific triad, the change would probably require more adapting, and the process would look different. The difference between adaptations in these two types of functions would be an interesting topic to study. Business research with a triadic approach is rare, thus the researchers have numerous avenues for further research with three-party relationships. First, this research supposes that adaptations are triad specific, and made to facilitate cooperation in the specific triads. However, as I stated above, business travel management is dependent on functions. An interesting issue to study would be to what extent the adaptations made in the former triadic relationship constellation facilitate the cooperation in the new constellations. The second suggestion goes one step further, to the investigation of industry specific development with the help of adaptations in triads. In the current study, travel agencies, service suppliers, and buyer organizations develop their own functions by adapting. A study of how triad specific

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adaptations can favor the development of the industry in which the triad is embedded would be interesting (cf. Walter & Ritter, 2003: network effects). For example, the industrial enterprise created a successful international travel management concept with the help of its partners. Service suppliers and business travel agencies have other clients that need similar arrangements. Do adaptations in one triad have an impact on the development of international travel management in general? How can firms take advantage of technology development and the integration that happens within the travel management process when cooperating in other contexts. Third, the role of the frontline personnel in business services is important, and deserves further investigation. In the current case study, the travel agency clerks’ role in executing adaptations was crucial. The clerks implement the adaptations in their daily interactions, and the clerks are the ones that get the feedback of how the quality of the adaptations. Fourth, in this study, I used adaptation impulses to look at the adaptations. The adaptation impulses were both endogenous and exogenous, and I discovered three ways of how adaptations reach the entire triad: connected, derived and agreed. An analysis of a larger number of both kinds of impulses could raise several interesting questions: Is agreed adaptation easier to realize when the impulse is exogenous? When is connected adaptation in place, and when would agreed adaptation be more favorable? Also the fifth suggestion concerns adaptation outcomes. Can a firm adapt too much, and what are the outcomes of such adaptive behavior? What would be the best way to reach structure-reinforcing development? Would the best way be, for example, restraining the use of power, making agreed adaptations, or coercing adaptations? Finally, the study provides a comprehensive analysis framework, and applies all its components to the empirical study. The study could have focused on analyzing only a few components in depth. Such an approach remains for future researchers to do. Researchers can place each of the components of the framework in a similar context, or to a new and different context, and by doing so find more nuances in adaptations.

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HOW DO MANAGERS SEE IT? CAPTURING PRACTITIONER THEORIES VIA NETWORK PICTURES Carla Ramos and David Ford ABSTRACT Companies inevitably interact and entrench in complex organic systems of business relationships with other. These business networks are not objectively defined, instead they are shaped by the subjective perception of actors. This inherent subjectivity is associated with the notion of network pictures, that is, a research tool that researchers or managers can use to grasp practitioner theories. In this chapter, we discuss how the importance of identifying these theories results mainly from underlying principles of sense-making theory, as well as from the idea around performativity. Drawing on these theoretical groundings, this chapter has two objectives: to explore how practitioners actually perceive their business surroundings and to assess the extent of overlapping between (IMP Group) academic theories and practitioner theories. To achieve these objectives, the researchers use a dimensional network pictures model previously developed in the literature to analyze the network pictures of 49 top-level managers across 17 companies from two very distinct

Deep Knowledge of B2B Relationships within and across Borders Advances in Business Marketing & Purchasing, Volume 20, 293–375 Copyright r 2013 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-0964(2013)0000020008

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contexts or networks: a product-based network and a project-based network. Among other practices, findings illustrate how practitioners tend to simplify what is going on in their complex surroundings, to personalize their relationships with those surroundings, and to think in a stereotyped way. Moreover, the juxtaposition between the captured practitioner theories and academic (IMP Group) theories show that these are not always overlapping, and are in some cases quite the opposite. This research contributes to the ongoing discussion of the importance of grasping actors’ views of the world, arguing that sense-making theory and the notion of performativity are the two main conceptual drivers justifying the urgency in making those views more visible. This research also adds to the research on the impact and suitability of IMP Group theories on managerial thinking and practice. Finally, this research reinforces the current call for further practice-based research in business network contexts. Keywords: IMP Group; business networks; sense-making; performativity; network pictures; practitioner theories; academic theories

INTRODUCTION Researchers in the industrial marketing and purchasing (IMP) Group posit that firms embed in complex and dynamic networks of interconnected business relationships (Axelsson & Easton, 1992; Waluszewski, Snehota, Gadde, Ford, & Ha˚kansson, 2008). Within these networks actors have access to the resources they need to develop and augment their business activities (Ha˚kansson, 1982; Pfeffer & Salancik, 1978). However, views of these business networks are not given objectively; instead, they are subjective and dependent on how actors perceive them, or on how they want them to be (Ford, Gadde, Ha˚kansson, & Snehota, 2003; Ha˚kansson & Snehota, 1995). Based on organizational sense-making theory (Weick, 1979a, 1995), actors’ subjective views of their surroundings guide their decisions and interactions with business partners (Henneberg, Mouzas, & Naude´, 2006; Shotter, 1993). The recognition of relationships among the mental frameworks held by actors on the one hand, and actors’ actions on the other, as set by sensemaking theory (belief drives action and vice versa; Weick, 1979a), has led to an increasing interest in the construct of network pictures, that is, a research tool useful for researchers and practitioners for grasping how actors

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understand their business surroundings (Ford & Ramos, 2006; Ramos, Naude´, & Ford, 2005). Thus, according to sense-making theory, to comprehend or predict what takes place in industrial systems, understanding how actors in those systems perceive their surroundings is fundamental; network pictures can help grasping those views. Associating with using this tool, literature is growing within the IMP Group on performativity (Araujo, Finch, & Kjellberg, 2010; Kjellberg & Helgesson, 2006). The literature describes the performative effect of theories over actors’ business landscape, that is, how (academic or practitioner) theories about this landscape condition the capacity of an actor to manage within the landscape, thus structuring actors practices in such setting (Kjellberg & Helgesson, 2006; Mattsson, 2005a; Mattsson, 2005b). Theories are thus expected to shape or configure the business landscape. Making practitioner pictures of the network more visible, which is possible with the tool of network pictures, allow better understanding the shaping of that business landscape, as well as assessing if academic theories portray managerial thinking and practice. These discussions overlap considerably with the underlying tenets of the concept of network, particularly the relationship between actor subjective views vis-a`-vis actor actions and interactions in networks. The network picture construct, as well as network theories and performativity are important developments in the context of the IMP Group. Recent criticism on research by IMP Group members includes the charge of not giving enough attention to what practitioner (or managerial) theories are about, instead focusing merely on representing how practitioners interact with others (Mattsson, 2005a). Such efforts result in (IMP) academic theories; however, these academic theories may not match practitioner theories about the same issues. The starting point of this research is developing further knowledge on practitioner theories, in particular through using the concepts of network pictures, in order to assess and bridge the (potential) gap between academic and practitioner theories. Moreover, by making practitioner theories more visible, the study of how practitioner theories may shape the business landscape becomes possible. The study here uses network pictures as the research tool that allows grasping, in a structured and analytical way, such practitioner theories (Ramos & Ford, 2011). This study has two objectives: to use network pictures to develop an understanding of practitioner theories and to compare the practitioner theories and academic theories of IMP. The study accomplishes this objective by using in an empirical setting a dimensional model of network pictures (Ramos, Henneberg, & Naude´, 2012) and analyzes the network pictures by 49 managers from diverse

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companies in two specific and unrelated business networks (one productbased network and one project-based network). A juxtaposition of the resulting practitioner theories with some core theories from the IMP Group informs the analysis. This research adds to the growing discussion on the relevance of individual cognition in business networks, namely by looking into the content of the views that individuals hold using network pictures as a research tool. Prior research on network pictures focuses mainly on the operationalization of the construct, as well as on using network pictures as a tool to understand network dynamics. Some work on the contextual factors which condition their content is available. Initial steps empirically address the relationship between network pictures and actors’ interacting choices, that is, networking behaviors. However, no substantive body of investigation is available around the actual content of network pictures (i.e., on practitioner theories). Additionally, the study here shows that network pictures can be useful as a research tool to grasp practitioner theories. The chapter makes a contribution to the discussion about the relationships that exist between academic theory (e.g., business science) and business practice, and more specifically to the debate about the appropriateness of IMP theories to understand (and guide) practitioners theories and practices. The study here focuses solely on the IMP Group research tradition and associated industrial network approach (INA) to look into this question of academia versus practice, for two main reasons: first, because including other traditions would make the research too complex, and second because this research group’s fundamentals build from platforms of managerial practice, that is, by investigating how industrial systems work in practice to be able to portray those systems (Ha˚kansson, 1987; Johanson & Mattsson, 1994). As Turnbull, Ford, and Cunningham (1996, p. 58) state, ‘‘Our continuing work is to try to understand the patterns of meanings and the beliefs that guide managers in their interactions with others in the increasingly complex networks in which they operate.’’ The IMP Group seeks to make substantial contributions to managerial practice (Brennan & Turnbull, 2002). The chapter has the following structure. After shortly presenting some of the cornerstones of the INA approach in section two, the academic theory chosen to be juxtaposed to practitioner theory, section three explores the theoretical grounding core to the concept of actor views or pictures of the business network. In this section, the researchers look at the characteristics of actors’ subjective views in organizational network settings and explore the reasons making actors’ views of the network more visible is so important. Sense-making theory explains how beliefs (i.e., actors’ views) drive behavior

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(i.e., networking and the network). Performativity reinforces this idea by showing how practitioner theories (i.e., actors’ views) shape the business landscape (i.e., the network). Performativity also highlights the importance of understanding the overlap between academic and practitioner theories. This research is thus grounded in sense-making theory and performativity. Section four puts forward network pictures as a research tool that allows grasping those views of the business network, that is, practitioner theories; this qualifies the tool as a viable means to explore the performativity of those theories. Section five is a brief summary of the most relevant advances over the last years on the construct of network pictures, pointing to the gap between the content of actual actors’ views of the world and academic theories. After justifying the methodological choices for the empirical investigation, section six presents the main findings of the study. Section seven concludes with the main contributions and avenues for future research; section seven also covers the limitations of the study.

A BRIEF INTRODUCTION TO THE IMP GROUP TRADITION For the reasons presented above this research uses the IMP Group theory to address the difference between academia and practice. The purpose of this section is to provide an overview of the IMP Group research tradition, and more specifically of the INA. A discussion of detailed reasons why business networks are complex follows the discussion of INA. The ontology and epistemology underlying the IMP research tradition are introduced, heading the discussion toward the subjective nature of business networks (i.e., the core of the research). The INA (Ha˚kansson & Johanson, 1992) was developed by the IMP Group in the early 1990s, providing researchers with a tool for understanding the role played by actors in industrial development and stability (Axelsson & Easton, 1992; Ha˚kansson & Snehota, 1995). The INA is grounded in the resource dependence theory (Pfeffer & Salancik, 1978), as well as in concepts from the social exchange and network theory (Cook & Emerson, 1978). The underlying principle to the approach is that ‘‘no business is an island’’ (Ha˚kansson & Snehota, 1989); instead, companies embed in networks of interconnected (long term and relatively stable) business relationships (Axelsson & Easton, 1992; Ha˚kansson & Snehota, 1989). Business actors participate in (networks of) activities with other (networks of) actors, which

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allow for the transfer or transformation of resources (within networks of resources) (i.e., the AAR Model; (Ha˚kansson & Johanson, 1992). Several authors substantiate the methodological suitability of adopting networks for analyzing and understanding B2B systems and related phenomena (Henders, 1992; Low, 1997). Since the inception of the IMP Group, researchers have drawn on the INA to develop new models and consider better ways of looking at interaction in a complex world (Ritter, Wilkinson, & Johnston, 2004). Organizational networks are traditionally associated with complexity. This complexity results from (1) the underlying interconnectedness of business networks and (2) the central role that positioning within the network plays. Interconnectedness manifests itself in the direct or indirect ways that companies are connected to each other and the multiple roles actors play (Anderson, Ha˚kansson, & Johanson, 1994; Axelsson, 1992; Havila, 1996; Laager-Hellman, 1989). This feature of interconnectedness has two important consequences. First, if a relationship between any two companies and their resources and activities is always feasible, then a single network that includes every actor, resource, and activity in the world exists, that is, ‘the’ network (Anderson et al., 1994; Easton & Araujo, 1992; Ford, Gadde, Ha˚kansson, & Snehota, 2003). This singularity confers upon ‘the’ network substantial complexity that is beyond the capacity or will of any actor to fully understand ‘the’ network in its entirety. Given the impossibility of considering ‘the’ network as a whole, practitioners choose (or are only able) to see certain aspects of it (Anderson et al., 1994); they see a smaller, more manageable network. However, objectively establishing where a specific network begins and ends is not possible (Ford et al., 2003, 2002b). Network boundaries – and therefore networks themselves – are subjectively determined based on what a specific actor chooses or is able to see. The second implication of interconnectedness is that strategies of companies are interdependent, that is, outcomes from the actions of one company influences actions of other companies and vice versa (Ford et al., 2002b). These ‘‘multiple, sequential and interrelated strategic actions’’ (Mattsson, 2002b, p. 417) constitute what Hertz (1998) defines as the ‘‘domino effect.’’ Actors will act, react, and interact based on what they choose or are able to see, again revealing the subjective nature of business networks. The second aspect that explains the complexity of organizational networks is the concept of the position occupied by actors within those networks. Each actor occupies a specific position in the activity pattern, web of actors, and resource constellation of a network, depending on the portfolio of

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relationships held by each actor (Ha˚kansson & Johanson, 1992). Position can therefore be used to analyze the strategic situation of an organization (Salmi, 1996), as well as eventual opportunities or constraints for future strategic activities (Mattsson, 1987; Salmi, Havila, & Anderson, 2001). However, since each actor is directly or indirectly connected to other actors and adopts different roles for each of those actors, the same actor may simultaneously occupy several positions and play diverse roles within the network. Therefore, the position held by an actor in a given business network depends upon the interpretations or perceptions of that actor as well as those of surrounding actors such that all of these perceptions should be considered (Ford & Thomas, 1995). Johanson & Mattsson (1992) support the influence of positioning on business network subjectivity and assert that an actor wanting to change his position in a network may do so by either changing his actual position or by simply changing the perceptions of his position held by surrounding actors. In recent years, some of the principles set by the IMP have been challenged. The principle of the stability of the network (Anderson et al., 1994; Dubois, Gadde, & Mattsson, 2003; Gadde & Mattsson, 1987; Sutton-Brady, 2008) and the long-term character of relationships (Lambe, Speckman, & Hunt, 2000) have lost some of their original traction, but the AAR Model together with other network assumptions continues to be widely applied by IMP researchers. IMP researchers view industrial systems as complex networks of organizational relationships and focus on preparing and nurturing managers to integrate network thinking into their everyday practices (Brennan & Turnbull, 2002; Gemunden, 1997; Turnbull et al., 1996). Several authors identify the research traditions underpinning the INA (Easton, 1995; Easton, Zolkiewski, & Bettany, 2003; Johanson & Mattsson, 1994; Mo¨ller, 1994). In comparison with other contemporary marketing mainstream research, the INA approach presents several basic distinctive and innovative features. These distinctive characteristics originate from the Swedish industrial environment and schools of thought from the 1970s, where and when this approach arose (Johanson & Mattsson, 1994). The Swedish context nurtures the development of this distinctive, however scientifically reliable, stream of research. Mo¨ller (1994) claims that because this framework is used to understand systems of relationships from a positional or a network perspective, the INA is primarily descriptive in its purpose. Moreover, because relationships cannot be understood without being integrated in their business contexts, contextuality and the time factor are essential elements for any research conducted on networks.

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Using the network of relationships as the primary unit of analysis, the INA may assume either a relativist or a realistic ontology, and it may draw on either objective or subjective orientations (Mo¨ller, 1994). When the issue under analysis is either economic or technological in nature, the approach tends to be objective; when social in nature, subjective (Mo¨ller, 1994). The dual dimensionality of organizational networks explains a differentiated use of methodologies. The hard economic and technological dimensions are associated with an objective perspective, and the softer social-organizational dimension is associated with a more subjective viewpoint. In summary, when comparing the INA with other contemporary marketing research streams, the former is said to be less quantitative and more qualitative, less deductive and more inductive, more concerned with theory building than theory testing, less prescriptive and more descriptive, less focused on marketing management and more holistic in its expectations (Johanson & Mattsson, 1994). Philosophically speaking, INA has traditionally undertaken an inductive and an interpretative or a social constructionist approach. IMP research focuses on the nature, role, and dynamics of interactions, relationships, and networks. That the perceptions held by actors play an important role in understanding any network-related phenomena is an aspect of this research that has been highlighted in almost every study. Due to its complexity, the network is to be understood as something subjective and that is dependent on what actors are able or choose to see (Ford et al., 2002b; Ha˚kansson & Snehota, 1995). As Ford and Havila (2003) express, instead of defending the creation of partnerships in which ‘‘overall mutuality of interest, appropriate attitudes and good management can overcome any problems of different assessments and aspirations [y], business relationships are perhaps better viewed as an arena in which numerous interaction-episodes are played out [yandy] driven by the separate assessments of a number of individuals in each of the participating companies’’ (p. 2). The subjective character of business networks has been mentioned by IMP researcher in the past (Anderson et al., 1994; Mattsson, 1987), but only recently has it conceptually materialized in this body of literature (Ford et al., 2002b). The relevance of actors’ subjective views can also be traced to strategic management research on competitive groups (Hodgkinson & Johnson, 1994; Osborne, Stubbart, & Ramaprasad, 2001; Porac, Thomas, & BadenFuller, 1989) or organizational behavior (Langfield-Smith, 1992; Meindl, Stubbart, & Porac, 1994; Walsh, Henderson, & Deighton, 1988), where concepts such as cognitive groups, cognitive maps, causal maps, or belief structures are applied. These concepts are associated with the managerial and organizational cognitive field of research.

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Therefore, IMP researchers draw on the principle that each actor holds an idiosyncratic and evolving view of the surrounding network, interacting ‘‘on the basis of their perceptions’’ (Ha˚kansson & Snehota, 1995, p. 34). The cognitive structures held by managers are considered relevant to understanding managerial activity and subsequent interactions between companies (Mattsson, 1985), and actors are recognized as having pictures of the world; this recognition is reflected in the growing body of literature on network pictures and is at the core of the study presented here. The following section explores the theoretical fundamentals underpinning the notion of actors’ views of the world.

NETWORK PICTURES AS THE PICTURING BY ACTORS OF THE BUSINESS NETWORK The concept of network pictures was suggested for the first time in the IMP literature by Ford et al. (2002b) and defined as ‘‘the views of the network held by the participant’’ (p. 5), ‘‘the basis for their perceptions of what is happening around them and of their actions and reactions in the network’’ (p. 4). The term ‘‘network pictures’’ was introduced to describe the subjective views held by actors regarding their business surroundings; this definition corresponds to what Henneberg, Mouzas, and Naude´ (2010) describe as ‘‘the picturing by actors of the network.’’ The study here adopts a different definition where network pictures are used as a research tool (Ramos & Ford, 2011) – the definition that corresponds to ‘‘the picturing by researchers of the pictures of the business network held by actors’’ (Henneberg et al., 2010; Ramos et al., 2012). To avoid misunderstandings, the study here employs the expression ‘‘actor pictures’’ (or views) when talking about the picturing of the network by actors; conversely, we adopt the expression ‘‘network pictures’’ to refer to the picturing by researchers of the pictures of the business network held by actors. The purpose of this section is to explore the theoretical groundings underlying the picturing of the network by actors, as well as to understand why this picturing should be made more visible. Actor Pictures in the IMP Literature Actor pictures is one of three dimensions in the Model of Managing in Networks suggested by Ford et al. (2002b) (see Fig. 1); the other two dimensions are networking and network outcomes. This model aims to

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Network Pictures

Networking

Fig. 1.

Network Outcomes

Model of Managing in Networks. Source: Ford et al. (2002b, p. 5).

represent how actors work within relationships. Gadde, Huemer, and Ha˚kansson (2003) consider that actor pictures can be used to access the strategizing activities developed by companies (Smircich & Stubbart, 1985; Spender, 1998; Stubbart, 1989; Thomas, Clark, & Gioia, 1993). The integration of actor views in a Model of Managing in Networks conceptualized what other researchers had been mentioning for a long time that is, how actors’ subjective pictures of the world play a fundamental role in organizational networks and therefore are critical for understanding these networks (Ha˚kansson & Snehota, 1995; Mattsson, 1985, 1987). Networking is defined as ‘‘all of the interactions of a company or individual in the network’’ (Ford et al., 2002b, p. 7), including all activities concerning the management of the existing relationships of a company, the management of the position that that company occupies in the surrounding network, and the strategies on how to network adopted by that company (Ford et al., 2002b; Ha˚kansson & Ford, 2002). ‘‘All the companies in a network are simultaneously networking, by suggesting, requesting, requiring, reacting, performing and adapting activities’’ (Ford & Havila, 2003, p. 8). Networking activities result in network outcomes; the latter are created both at the individual level (i.e., for the company) and the collective level (i.e., for relationships and for the network). Ford et al. (2002b) explicitly state that the three dimensions of the model are closely interconnected. On the interconnection between actor pictures and networking, the authors claim that the former are affected by the latter in the sense that actor pictures are formed through interaction with other

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companies (i.e., through networking) so that whatever happens in this process is certain to affect how the actors perceive the network (Ford et al., 2003). On the other hand, actor pictures also affect networking by either restricting the activities of the company or by driving the company to a greater innovation level (Anderson et al., 1994; Gadde et al., 2003; Johanson & Mattsson, 1992; Mo¨ller & Halinen, 1999; Ritter, 1999). The interconnection between actor pictures and network outcomes can be explained as follows. On the one hand, actor pictures of the network can be reinforced or adjusted, depending on the perceived outcomes (i.e., comparison between the expected and the real outcomes). On the other hand, actor pictures affect network outcomes, in the sense that the pictures are used by the actor to ‘‘observe, assess and respond to only a subset of networking outcomes that affect it, based on its particular network picture’’ (Ford et al., 2003, p. 184).

Actor Pictures and Sense-Making Theory Actor pictures are recurrently referred to as sense-making devices or tools held and used by actors (Henneberg et al., 2006; Henneberg, Rohrmus, & Ramos, 2007; Mouzas, Henneberg, & Naude´, 2004) which links the concept of actor pictures to sense-making theory (Weick, 1969, 1979b). Organizational sense-making can be defined as the process through which individuals try to make sense or try to find logic for their encompassing working scenario (Weick, 1969). Organizational sense-making corresponds to the process by which individuals inflict structure and meaning on particular situations by unconsciously developing frameworks that then guide the behavior of those individuals. These frameworks, also known as ‘‘cognitive structures’’ (Johanson & Mattsson, 1992, p. 186) or ‘‘frames of reference’’ (Cantril, 1941, p. 20), consist of the ‘‘set of ideas and outlooks we generally use in viewing things [yor they] set of unspoken assumptions, expectations, and decision rules’’ (Zaltman, Lemasters, & Heffring, 1982, p. 21). The two main aspects of sense-making are: (1) the process of sensemaking, which relies on how individuals draw on past experiences and access to information to structure the unknown and (2) the outcome of the sense-making process, that is, the individual frameworks developed. Weick (1995, p. 13) focuses mostly on the first element of sense-making (i.e., sensemaking processes and corresponding effects), considering that the most relevant issue in sense-making consists of understanding ‘‘how [actors]

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construct what they construct, why and with what effects’’ (p. 4) and that ‘‘sense-making is about the ways people generate what they interpret.’’ The concept of actor pictures of the network is very close to that of the framework that results from a sense-making process. This close association comes across quite clearly in the initial definition provided by Ford et al. (2002b) in which an actor picture is the views (frameworks) an actor holds of the world. This framework is the basis for the actor’s perceptions of the surroundings that subsequently influence action. Actor views, therefore, can be defined as the frameworks held by network actors, which help those actors understanding and dealing with the complexity and diversity of their business surroundings. These frameworks also guide actions, reactions, and interactions in the business network. The concept of sense-making is congruent with the social constructionist approach of reality (Berger & Luckmann, 1966; Berger, Zelditch, & Anderson, 1966; Shotter, 1993). Berger and Luckmann (1966) claim that ‘‘reality is socially constructed’’ (p. 13) and ‘‘over time, people act in pattern ways and take these patterns for granted as their reality, thereby socially constructing their reality’’ (in Weick, 1995, p. 67). Individual frameworks developed as sense-making tools are the basis for individual’s interpretations of reality (Weick, 1995). ‘‘In the absence of any objective reality [y] knowledge reflects the interpretation of reality by individuals’’ (Palmer & Ponsonby, 2002, p. 173). While sense-making is about enactment and invention (i.e., about the process of sense-making and generation of frameworks), the social constructionist perspective is more about perception and interpretation of what has already been created through the process of sense-making (i.e., frameworks) (Geersbro, 2004; Weick, 1995). The frameworks that result from sense-making processes have been metaphorically defined by Zaltman et al. (1982) as the lens between an event and its interpretation. Under the interpretative perspective, decisions and consequent actions result from actors’ interpretation and perception of their surroundings, and that interpretation is based on actor frameworks (Zaltman et al., 1982). This relationship between interpretation and frameworks held justifies why several authors have devoted their research to the understanding of organizational sense-making processes (Johanson & Mattsson, 1992). This social constructionist perspective of reality also underlies the body of literature of the INA (Hagg & Johanson, 1988; Henders, 1992; Welch & Wilkinson, 2002). According to this approach, given that things have a dynamic and heterogeneous nature and everything is somehow interconnected, actors play a crucial role in the construction of their own reality

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(Anderson, 1988; Hagg & Johanson, 1988; Henders, 1992; Hudson & Ozanne, 1988). The construction of the reality by an actor relies on the interpretation of the surroundings, which draws on the frameworks that result from sense-making processes. The analysis of sense-making processes and resulting frameworks (i.e., actor pictures) is thus central to understanding organizational behavior (Weick, 1979b, 1995), as well as interorganizational relationships within the complex networks where those relationships are embedded (Geersbro, 2004).

Actor Pictures and Performativity Theory Interest in performativity has grown within the IMP body of research (Araujo, 2007; Kjellberg & Helgesson, 2005; Kjellberg & Helgesson, 2006). The basic idea behind performativity is that extant theories (namely marketing theory) influence the shaping or configuration of markets (Kjellberg & Helgesson, 2006). The concept of markets traditionally corresponds to a set of similar things (e.g., similar customers, products, or segments). According to the IMP Group, however, networks are characterized by diversity and not by similarity (Ford et al., 2003). For example, each customer may have specific requirements and particular problems that they want to see solved, and those customers’ counterparts have to find ways to deal with that specificity. Drawing on this principle, instead of talking about performativity of markets as it has been introduced in the literature (e.g., Kjellberg & Helgesson, 2006, we talk about the performativity of business landscapes or settings. In summary, performativity investigates the relationship between theory and practice within business networks, namely how theory conditions practice (Mattsson, 2005b). Performativity relates closely to sense-making theory in that both examine the processes of linkage between the world of ideas and the world out there (Kjellberg & Helgesson, 2006), that is, how cognition conditions action and vice versa (Weick, 1979a). The process through which theories or ideas influence managerial practice is complex and involves a chain of translations that reflect a cycle of abstracting/ idealizing and concretizing/actualizing (Kjellberg & Helgesson, 2006). Until recently, performativity research has focus on specific business scenarios (e.g., deregulating markets), but now, researchers carry out theoretical and empirical work in a broader context (Hagberg & Kjellberg, 2010). Previous research did not focus on how marketing and other theories

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could shape the business landscape, but was mainly concerned with the difficulties involved in linking theory and managerial practice (Kjellberg & Helgesson, 2006). According to Kjellberg and Helgesson (2006), multiple theories (e.g., accounting, marketing, strategy) influence managerial practices, therefore shaping the business landscape. Understanding this influence process requires an understanding of business practices in a particular context. Authors of this stream of research intend to develop ‘‘a practice-based framework that deals with the multiple theoretical influences that can be expected to take part in the shaping of markets’’ (p. 839). This framework includes all the activities that can participate in the configuring of business landscapes and includes three dimensions: exchange practices, normalizing practices, and representational practices. The outcome of this model elucidates how multiple theories shape business landscapes (i.e., how knowledge of business settings help configure those settings). The research presented here highlights the representational practices dimension. The representational practices dimension is very close to the notion of actor pictures; representational practices represent all activities that portray business settings and/or how these settings work. A set of actor beliefs (i.e., actor pictures) about how the network works drives each description. Actor pictures are therefore a central element to understand performativity. The increasing focus on managerial practices within the social sciences is illustrated by the work of the IMP Group. Researchers from this group have always argued that networks can only be understood by researching and describing how things work in practice (Ha˚kansson, 1982; Mo¨ller, 1994). IMP research concerns all four concepts relating to performativity (i.e., academic and practitioner market theory, managing in markets, market practice, and (real) markets) (Mattsson, 2005b). Although IMP research has ‘‘more than other market theory perspectives, an inherently performative flavor’’ (Mattsson, 2005a, p. 4), it has ‘‘not considered enough the contributions that a more explicit performative approach could make’’ (Mattsson, 2005a, p. 13). Instead, this research group has ‘‘more generally represented how [practitioners] interact with managing activities’’ (2005a, p. 13), requiring further research on what practitioner theories are about (Kjellberg & Helgesson, 2005). Mattsson (2005b) suggests that IMP researchers explore further issues regarding the relationship among the four performativity concepts, namely between market theories and managing in markets. The mainstream IMP Group researchers couch their conversations in terms of networks or business landscapes rather than markets. Extending Mattsson’s views, the research here expounds upon the differences between academic researchers’

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and practitioners’ understanding or theories about appropriate actions to be taken within given business settings (Kjellberg & Helgesson, 2006; Mattsson, 2005b). The extent to which academic theories and managerial practice overlap is an aspect that has been considerably discussed throughout the years, not only regarding management science in general (Astley, 1984; Calder & Tybout, 1999; Cunningham, 1999), but also the IMP Group theory in particular (Brennan & Turnbull, 2002; Gemunden, 1997). The statement, ‘‘theory provides an unrealistic characterization of markets’’ (Kjellberg & Helgesson, 2007, p. 140) may be true to some extent. However, to assess the extent to which theories portray reality requires understanding and considering practitioner theories in this assessment. Characteristics of Actor Pictures The properties that characterize the organizational sense-making process (Weick, 1995) can also apply to the frameworks resulting from individuals’ sense-making processes (i.e., actor pictures of the business network). These features are presented below. Actor Pictures are Retrospective and Prospective The frameworks that result from sense-making are retrospective given that they are a product of individual past experiences and access to information (Cantril, 1941; Weick, 1969, 1979b). Actor views of the network are also built on participant experience, relationships, and positions held in the network (Ford et al., 2002b). Actors understand and interpret their surroundings based on past experiences and memories, reflecting retrospective techniques through which they look back on situations that have already produced an output (Mattsson, 1985, 1987). On the other hand, the frameworks that result from sense-making are also prospective because they offer explanation for future events, allowing for making predictions, framing possible scenarios, and creating expectations regarding the future (Shotter, 1993; Stubbart, 1989). The same can be said for actor pictures of the network which condition and affect decision processes and actors’ future actions and reactions (Ford et al., 2002b), structuring the unknown to deal with uncertainty (Ford et al., 2003). Actors interpret their surroundings based on beliefs about the future (Mattsson, 1985, 1987). Actor Pictures are Enacted The outcome of a sense-making process is the result of an enactment or creation process, reflecting the interpretative character of resulting frameworks (Berger & Luckmann, 1966; Weick, 1969).

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Actor pictures of the network are not objectively given but are instead inferred from cues extracted from the information available in their surroundings (Henneberg et al., 2006). Weick defines these cues are defined ‘‘simple, familiar structures that are seeds from which people develop a larger sense of what may be occurring’’ (in Porac et al., 1989, p. 50). Actors materialize structures and set them in action (Weick, 1979b) creating the surroundings in which organizational life develops, that is, actors enact their perceived network (Anderson et al., 1994; Low, 1997). A single abstract or correct picture of the world does not exist (Ford et al., 2003); moreover, the enacted pictures of actors simultaneously affect and are affected by ongoing sense-making processes. Actor Pictures are Idiosyncratic The frameworks resulting from sense-making processes are conditioned by individual previous experiences and access to information and result from individual enactment processes (Weick, 1969, 2001). Therefore, these frameworks are subjectively held by individuals and not by companies or networks (Ford et al., 2002b; Hedaa & Tornross, 1997; Henneberg et al., 2006). ‘‘The real world is actually the world that is idiosyncratic, egocentric and unique to each person’’ (Weick, 2001, p. 71). Actor pictures of the business network are also individual, idiosyncratic, and atomized; they are ‘‘managers’ subjective mental representations’’ (Henneberg et al., 2006, p. 408) of their surroundings, or ‘‘the different understanding that players have of the network [y] based on their subjective, idiosyncratic sensemaking’’ (Henneberg et al., 2006, p. 409). Because each individual has singular experiences, memories, and access to information (Mattsson, 1987) – as well as goals, interests, and philosophies – distinct individuals are expected to hold different views (Ford et al., 2003; Salmi et al., 2001), that is, different understandings of the extent, content, and characteristics of the network (Ford et al., 2002b, p. 2). Each company is expected to comprise distinct, dispersed, and maybe contradictory views of the world (Mouzas et al., 2004) which correspond to the views held by the different individuals or functions within the organization (Ford & Thomas, 1995; Ford et al., 2002b; Mattsson, 1987). Actor Pictures are Intersubjectively Generated Despite the individual, subjective character of sense-making frameworks, these frameworks are also a product of social interaction (Weick, 1995). Individuals cannot be dissociated from the social dimension (and vice versa), as these elements of the network are fundamental aspects of each

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other. Walsh and Ungson (1991) emphasize this interconnection when they define an organization as a ‘‘network of intersubjectively shared meanings that are sustained through the development and use of a common language and everyday interaction’’ (p. 60). If individual frames-of-reference are intersubjectively generated, then they must be affected by the context in which they are developed (i.e., the organization or the network). Therefore, actor pictures of the business network are also expected to be intersubjectively or socially created despite being individually constructed and resulting from subjective (Anderson et al., 1994) and indeterminate (Gadde et al., 2003; Mattsson, 2002a) sense-making mechanisms. Individuals ‘‘acquire their personal identity and position toward others as they learn and develop in conjunction’’ (Ha˚kansson & Snehota, 1995, p. 34). Even though actors’ pictures of the network are socially constructed with other participants in their (company or) network (Henneberg et al., 2006), a shared view among network actors may not exist (Geersbro, 2004) given that at the interorganizational level, ‘‘actions, shared in the sense that they involve two actors, not necessarily synchronic in time and or in space, allow actors to create that which is shared: the relationship [y]; relationships come from shared actions rather than shared goals’’ (Berger & Luckmann,1966, p. 6). Actor Pictures Serve Specific Ends In the sense-making framework generation process, actors are believed to include only a part of the network in their frameworks. This process is variously called framing (Callon, 1997) or bracketing (Weick, 1995). Practitioners naturally and unconsciously select elements from the network and limit what they see or consider as being part of the network. The limited cognitive capacity of actors with regard to the complexity associated with the business environment (Holmen & Pedersen, 2003), by their ignorance and conditioned understanding of some network relationships and connections (Anderson et al., 1994), and by actors’ problems, uncertainties, and abilities (Ford et al., 2002b; Henneberg et al., 2006) justifies the process of limiting the perception of the network to what is cognitively manageable. Due to these cognitive limitations, only a restricted amount of situations and actors can be identified and acted upon (Anderson et al., 1994; Ha˚kansson & Johanson, 1993; Holmen & Pedersen, 2003; Salmi et al., 2001). The unconscious selection is carried out by practitioners according to the particularity of the situation and purpose of analysis and always depends on (a) actors’ perspectives (Spender & Eden, 1998) of what they consider

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relevant for achieving a specific purpose related to their own function or to the aims of their company, and (b) actors’ access to information. The latter point is mostly dependent on the theories-in-use (Zaltman et al., 1982), past experiences, and position occupied in the network by actors (Mattsson, 1985). Consciously or not, practitioners generate specific views of the world to reach particular ends (Ford et al., 2002b; Henneberg et al., 2006) to ‘‘assist in coping with specific demands, to secure defined outcomes’’ (Henneberg et al., 2006, p. 412). ‘‘A company has an element of choice in its network pictures and it can choose to enhance particular aspects as a basis for its networking’’ (Ford et al., 2002b, p. 20).

Concepts Close to that of Actor Pictures Concepts such as network theories (Johanson & Mattsson, 1992; Mattson, 2003; Mattsson, 2002b), network horizon (Anderson et al., 1994; Haimala & Salminen, 2004; Holmen & Pedersen, 2003; Salmi et al., 2001), network maps (Borders, Johnston, & Rigdon, 2001), ideas or schemas (Welch & Wilkinson, 2002), and network insights (Mouzas et al., 2004; Mouzas, Henneberg & Naude´ 2005) are the most relevant examples of concepts introduced in the IMP literature that are conceptually close to actors’ pictures of the network (Ford et al., 2002b). Although these terms relate to similar idea and can all be applied to organizational networks, the conceptual differences among them are noteworthy. Table 1 provides definitions and central themes of each of these concepts. Table 1 shows how the concept of actor pictures of the business network encompasses all the other concepts – actor theories (i.e., the cause-effect relations they think about and how they perceive their positioning), horizons (i.e., how far they see and actors or relationships they think about), their maps (i.e., how to get from one place to the other and where to go considering actors’ perceived features and existing or potential relationships), and ideas or schemas (i.e., overall idea of how they perceive the world) of the network. The concept of actor pictures is more complete than and encompasses all of the other concepts. Clearly, the concept of actor pictures is closer to the definition of ideas and schemas than to any of the other concepts. Only the concept of network insights (Mouzas et al., 2005; Mouzas, Henneberg, & Naude´, 2008) transcends that of actor views of the business network. Network insights are amalgamations of actor views of the networks. Actor pictures of the business network play distinct functions: they can be considered a horizon, a map, a blueprint or plan, a theory, a process, a

‘‘A Theory is a formal set of ideas that is intended to explain something.’’

‘‘The Horizon is the line in the far distance when the sky seems to meet the land or the sea’’; ‘‘the limits of what you want to do or of what you are interested or involved in.’’

‘‘A Map is a drawing of a particular area [y] showing its main features as they

2. Network horizon (Anderson et al., 1994)

3. Network maps (Borders et al., 2001)

Dictionary’s Definition of the Underlying Concept (Dictionary, 2003)

1. Network theories (Johanson & Mattsson, 1992; Mattsson, 2002b)

Concept

‘‘ymap the networks in which the manager’s company participatesy’’ (Borders et al., 2001, p. 202); ‘‘ymanagers must collect

‘‘yhow extended an actor’s view of the network isy’’ (Anderson et al., 1994, p. 4).

How ‘‘yactors’[y] view the networky’’ (Johanson & Mattsson, 1992, p. 186); ‘‘ythe actors perceived mediated connections between relationshipsy’’ (Johanson & Mattsson, 1992, p. 189); ‘‘ythe actor’s set of systematic beliefs about market structure, processes and performance and the effects of its own and others’ strategic actionsy’’ (Mattson, 2003, p. 417).

Definition of the Concept Provided by IMP Authors

Table 1. Concepts Previous to that of Network Pictures.

 Information about the companies that play major roles in the network;

 The idea of boundaries;  The line that limits what one can see;  Not physical but perceptual distance;  Actors’ perception of the network’s extendedness (the network that actors think about);  Implicit views on what the actors’ interests, concerns and tasks.

 Theories about surrounding ‘reality’: what works and what does nor work in the sense of what leads or not to success;  Perceived positions occupied in the network;  Conditioner of actors’ strategic decisions.

What are the Main Ideas the Concept Comprises

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‘‘A Picture consists of lines and shapes which are drawn, painted, or printed on a surface and show a person, thing or scene’’; ‘‘If you have

5. Network pictures (i.e., actors’ pictures of the business network)

‘‘ythe views of the network held by the participant’’ (Ford et al., 2002b, p. 5), forming ‘‘ythe basis for their analysis and actionsy’’ (Ford et al., 2002b, p. 5).

 ‘Picture’ of the extent, content and every other possible feature of the surrounding network;

 Perceptions on actors’ structural features and of relationships;  Includes Network Theories;  Moral stands;  Condition behaviour.

‘‘Schemas are the way managers make sense of their world and the interactions taking place with other organisations and represent a very different kind of dynamical force shaping relationships and network development’’ (Welch & Wilkinson, 2002, p. 27); ‘‘Ideas encompass the perceptions individuals and organisations have about self and others, their beliefs or ‘‘theories’’ about how the world functions, norms about appropriate behaviour, attitudes toward particular issues as well as values concerning what is desirabley’’ (p. 29).

‘‘An Idea is a thought that you have about how to do something or how to deal with something; it is the information of knowledge you have about something’’; ‘‘A Schema is a plan that just shows the main parts of something’’

 Encompasses the idea of routes (what is the actual position of the subject and how can it get to another desired position).

information on all of the firms that play major roles in each network or value chain. What functions does each member perform for the larger network? How is each member vulnerable? Aside from the manager’s own firm, what are the contact points between networks?’’ (p. 202);‘‘examining their own role within each network’’(p. 203).

would appear if you looked at them from above ’’; ‘‘a drawing that gives special information about an area.’’

What are the Main Ideas the Concept Comprises

Definition of the Concept Provided by IMP Authors

Dictionary’s Definition of the Underlying Concept (Dictionary, 2003)

4. Ideas or Schemas (Welch & Wilkinson, 2002)

Concept

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‘‘An Insight is a chance to understand something or to learn more about it’’; ‘‘the ability to notice and understand a lot about people or situations.’’

a picture of something in your mind, you have a clear idea or memory of it in your mind as if you were actually seeing it’’; ‘‘If you picture something in your mind, you think of it and have such a clear memory or idea of it that you seem to be able to see it’’;

Source: Ramos et al. (2005, adapted).

6. Network insights (Mouzas et al., 2004; 2005)

(Ford et al., 2002b)

‘‘y a managerial process of integrating dispersed pieces of atomised network pictures through multilateral interactions in communities of practice that leads to organisational learning and differential knowledge for positioning and acting within a network’’ (Mouzas et al., 2004, p. 2).

 Result of an amalgamation of actors’ actor pictures at the network level;  Presumes actor pictures are useless when it comes to identifying what can actually be done in the network and what are the ‘network competences’.

 Individual constructs which condition individual and organizational interactions;  Includes the concepts of Network Theories, Network Horizon, Network Maps and Ideas or Schemas;  ‘‘Quasi-visual’’ images;  Perception on actors (their resources, problems and aspirations are), relationships and positioning.

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framework, or a moral philosophy. As a horizon, actor views of the business network define how far and how much actors are able or willing to see their surroundings (Anderson et al., 1994; Holmen & Pedersen, 2003), that is, their boundaries. As a map, actor pictures reflect the structure of the surrounding network, the layout of the available resources, and the graphic representation that locate actors in relation to their surroundings (Fiol & Huff, 1992). As a blueprint, actor views may be considered as a plan, a schema, a design, or a proposal and they assume a strong normative nature, reflecting what actors should or should not do. As a theory, they reflect what actors perceive to work or not work in the network to guarantee success for those involved, that is, what should be done or avoided in the network (Johanson & Mattsson, 1992; Mattsson, 2002a; Weick, 1979b). As a process, actor views of the business network reflect how actors perceive what happens in their surroundings, and depending on actor theories-in-use (Zaltman et al., 1982), actor views can be centered on actor bonds, activity links, or resource ties (Ha˚kansson & Johanson, 1992). As a framework, actor views reflect the predefined ideas or stereotypes of actors of the surrounding network. Finally, as a moral philosophy, actor views of the network reveal their understanding of the ethical principles that each actor, including the actor himself, should live by when interacting with others.

NETWORK PICTURES AS A RESEARCH TOOL Actor Pictures Versus Network Pictures IMP researchers draw on the principle that business network actors hold pictures of their surrounding network. Therefore, actor pictures or views have an ontological status (i.e., they exist). However, individuals never need to nor are able to articulate those views because individuals do not consciously think about them. Actors develop their business activity by unconsciously filtering what is going on in the network and in accordance with the pictures they hold. If actor pictures of the business network of the world are important for understanding organizational networks, and if they have an ontological status, learning about actor pictures is fundamental to understanding networks. A concept that cannot be objectively measured, however, poses a challenge for developing valid research. The notion of network pictures, introduced in earlier research, aims to provide a valid way for researchers to see or grasp what those views are (Ramos & Ford, 2011).

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Very briefly, the difference between actor pictures of the business network explored in the previous section and network pictures as a research tool introduced above is discussed here. Actor pictures of the business network are (unconsciously) created and used by actors and result from a sensemaking process in organizational networks. On the other hand, network pictures a research tool allows researchers to (consciously) create their own pictures of actor views. The actor pictures concept provides the theoretical foundations for the network pictures construct. Further conceptual development of network pictures as a research tool is carried out in the following section.

Characteristics of Network Pictures as a Research Tool Because actors are not aware that they hold pictures of their surroundings, they do not aggregate the dimensions of those pictures. Researchers must carry out the aggregation process. Network pictures result from researcher analysis and interpretation of what actors claim to see in their surroundings. Network pictures are ‘‘a conceptualisation by the observer of the network views of the participants, [y] a representational technique that aims to capture or illustrate views that specific actors have of the networked environment within which they operate’’ (Ford & Ramos, 2006, p. 2). Since researchers create network pictures, as a theoretical construct they are without ontological status. Network Pictures can never be either objective, complete, or correspond to objective representations of the network (Ford et al., 2002b). They are never objective, because they reflect the understanding and interpretations by researchers of subjective actor views and of the way those actors claim to see the network. Also, network pictures will always be incomplete since actors are not able to identify and characterize all the dimensions they think about when looking at their surroundings (not even when asked about each dimension separately). Finally, and as a result of actor pictures corresponding to subjective impressions (and not the objective representation) of the surrounding network, the researcher is not preoccupied with getting (nor can he or she get) an objective description of the surrounding network with the network pictures construct. Instead, the researcher’s interest lies in capturing the actors’ subjective views of the network. Although the device of network pictures is subjective, incomplete, and unable to represent objective features of the business network, it is still a

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useful device as it captures actors’ perceptions of surroundings and facilitates the investigation of differences among actors in diverse contexts. In other words, network pictures are not expected to be accurate. Network pictures are analogous to impressionist paintings (versus photographs), where the researcher is the painter and the painting includes the idea that the actor holds of the surrounding objects and relations between those objects (Ramos & Ford, 2011). ‘‘Impressionism’’ is ‘‘a style of painting [which focuses] in showing the effects of light on things rather than on clear and exact detail’’ (Dictionary, 2003, p. 556). Impressionism is also a specific kind of literature that draws on the use of mental associations to evoke subjective impressions and not to recreate the objective reality. Any research device that tries to capture actor pictures of the business network can never reify those views held by different individuals. The views are held by individuals and not by companies or networks, and as such they must always be considered at the individual level. However, neither analysis at the organizational or network level nor the existence of commonly shared views at either or both levels can be precluded. The network pictures research tool infers actor views of the business network by eliciting their expression of explicit knowledge, making actor mental constructs become more visible (tangible). Eliciting individual knowledge to make individual cognitive constructions more visible has motivated researchers in recent decades to develop new tools for organizational cognitive mapping (Anderson et al., 1994). By making actor pictures more visible, the interconnections among actor pictures, networking, and network outcomes can be addressed more objectively, and actors’ perceptions of the business network may be used for understanding managerial practices and the dynamics of networks. Welch & Wilkinson (2002) support the need for such a research tool in stating that ‘‘research is needed to identify and measure the key dimensions of the mental maps used by firms to understand their relations and networks’’ (Welch & Wilkinson, 2002, p. 44) and ‘‘more generally, there is a need to develop ways of measuring the dimensions of business actors’ mental models, theories-in-use or schemas’’ (Welch & Wilkinson, 2002, p. 43). Welch & Wilkinson (2002) further assert that dimensions ‘‘are difficult to capture in the form of the usual multi-item scales used in most empirical studies of firm relationships, [yrequiring a morey] interpretative approach to the study of interfirm relations and networks’’ (p. 43), and suggest ‘‘one specific approach to measuring the characteristics of the schemas underlying a firm’s relationship and network behaviour is through the use of techniques developed to study managers’ mental maps and the shared cognitions of organisations’’ (p. 44).

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Research on the performative perspective of business landscapes (Kjellberg & Helgesson, 2006; Mattsson, 2005a, 2005b) also points to the potential benefit that may result from such a research tool as network pictures. Network pictures facilitate comprehending practitioner theories that shape business settings. (Informal) practitioner theories may turn out to be distinct from (formal) academic theories, so these differences ought to be considered. Using network pictures as a research tool may fill the gaps in this area of knowledge. The Dimensional Model of Network Pictures Henneberg et al. (2006) first attempted to operationalize network pictures. The Henneberg et al. (2006) model includes eight dimensions: boundaries, directionality, power, time/task, environment, focus, actors/resources/ activities, and center/periphery. Ramos and Ford (2011) claim that the suggested structure of this model makes restrictive assumptions such as that the network has a predetermined boundary and direction, a characteristic that is incompatible with empirically derived concepts on business networks (Ha˚kansson, Ford, Gadde, Snehota, & Waluszewski, 2010). Moreover, the suggested model corresponds to an ‘‘open concept’’ (Henneberg et al., 2006, p. 416), that is, all the identified dimensions in the model do not need to be considered to capture the pictures held by an individual actor. The operationalization adopted in this study was instead empirically derived (Ramos & Ford, 2011) and does not present the restrictive assumptions underlying the Henneberg et al. (2006) model. The structure adopted in this research emerged primarily from the actual data about the way respondents described their surroundings. The model encompasses a comprehensive set of dimensions that allow for descriptions of individual pictures and is, therefore, more deterministic than the Henneberg et al. (2006) model. Briefly, the method undertaken to develop this new structure for network pictures consisted of two-stages: (1) operationalization and (2) quality testing of the construct (Ramos & Ford, 2011). To operationalize the research tool of network pictures, the authors began by empirically identifying the dimensions that reflected what and how individuals saw the surrounding business network. The authors theoretically derived a preliminary structure for the construct of network pictures based on prior research (Anderson et al., 1994; Easton, 1992). This structure was used to develop an interview guide for data collection. The empirically derived dimensional model of network pictures resulted from content analyzing the interviews and the visual representations of the

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business network (Meyer, 1991; Tufte, 1983) provided by respondents in several companies and in two distinct business networks (Krippendorff, 2004). Visual and verbal data gathering techniques were combined (Zuboff, 1989) to assure greater reliability of the collected data (Denzin, 1978) and to provide researchers and respondents with a more structured and clearer idea of what was being said (Henneberg et al., 2010). The second stage in development of the research tool was to test the quality of the construct that results from the operationalization stage. To test for construct quality, the empirically derived construct developed in the previous stage was used to assess if the metric captured individual pictures of the network as well as diversity and similarity between individuals. This was the case and so the derived tool was classified as a useful and usable research instrument for the study of business networks (Ramos & Ford, 2011). The theoretically built structure of network pictures used for collecting relevant data encompassed the three (interrelated) core elements of a network (i.e., the elements that parsimoniously encapsulate what individuals are able or choose to see from the whole network) (Anderson et al., 1994; Easton & Araujo, 1992; Ford et al., 2003): (1) scale and structure, (2) processes, and (3) personal positioning. (See Fig. 2.) A brief explanation of each of these elements appears below. Scale and Structure of the Network The ‘‘scale of the network’’ is the (limited) number of actors an individual identifies in the surrounding network (Anderson et al., 1994; Ford et al., 2002b; Holmen & Pedersen, 2003; Holmen & Pedersen, 2001). The structure

1. Scale & Structure (Number; Nature)

ELEMENTS OF A NETWORK

2. Processes (Nature of Relationships)

3. Personal Positioning

Fig. 2.

Theoretically Derived Structure of Network Pictures. Source: Ramos & Ford (2005, p. 14, adapted).

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or constitution of the network is defined by the individually perceived nature of the actors and resources (Ford et al., 1998): their resources (Gadde et al., 2003; Ha˚kansson & Johanson, 1992), aspirations (Johanson & Mattsson, 1985; Wilson & Jantrania, 1993), and problems (Ford et al., 1998; Ford & Havila, 2003). Processes of the Network The processes of the network are its dynamics corresponding to actor bonds, resource ties, and activity links (Ha˚kansson & Snehota, 1995). The substance of relationships becomes visible through these three dimensions of the network: ‘‘the essence of the network function of business relationships is that as they arise they form a structure of actor bonds, activity links and resource ties where third parties are integrated’’ (Ha˚kansson & Snehota, 1995, p. 41). ‘‘Actor bonds’’ are the extent to which the following qualities can be found in a relationship (Ha˚kansson, 1982; Sutton-Brady, 2000): power (Emerson, 1962; Hallen, Johanson, & Seyed-Mohamed, 1991), commitment (Hardwick & Ford, 1986), closeness (Ford, 1980; Nielson, 1998), trust (Moorman, Zaltman, & Deshpande, 1992; Nielson, 1998), cooperation (Anderson & Havila, 1993; Easton & Araujo, 1992), expectation (Gross, Mason, & McEachern, 1957; Hedda, 1993), and understanding (Hallen & Sandstrom, 1991) that exists in the dyad or relationship. ‘‘Resource ties’’ refer to the transfer or transformation of resources between actors in the network, and these ties may assume distinct natures: human, informational, relational, financial, organizational, legal, or physical (Hunt & Morgan, 1995). Finally, activity links relate to the transfer, or a transformation, of resources between actors (Ha˚kansson & Johanson, 1992). Positioning in the Network Finally, a particular actor’s positioning in the network is determined by his surrounding and coexisting web of actors, resource constellation, and activity patterns, and by assessing the actor bonds, activity links, and resource ties in which that particular actor is involved (Ha˚kansson & Snehota, 1995). The Ramos and Ford (2011) model refines these three elements of a network into a set of 21 empirically derived network picture dimensions further divided into 4 groups (Krippendorff, 2004, p. 167): focus, weight, specificity, coherence, and overall view of the surroundings. These 21 dimensions capture in a systematic way individual perceptions of the

Weight

Dimensional group 2

Focus

Dimensional group 1

Groups

Reflects whether an actor perceives the surroundings network as a set of relevant actors or/and in terms of relationships between those actors; It is related to those structural features of the surrounding actors that an actor thinks more intensively about; It addresses which distinct periods of time an actor thinks more intensively; Reflects whether an actor thinks in terms of a particular departmental function or not, and if so, if in the terms associated to his/her current function or if in terms of others’ functions. Allows characterizing actor perceptions in terms of whether he/she knows what should or should not be done to achieve success in business practices; It is about whether there is an moral philosophy underpinning the way an actor perceives the world; Reflects if an actor considers important or not to be aware of what is taking place in the surroundings, no matter how much related to his/her activity;

Characterizes an actor view with regard to his/her perception on who is the ‘focal’ actor or groups of actors in the network; It is about the element(s) of relationships that an actor thinks more intensively about;

Definition

Definition of Network Pictures Dimensions.

2.3 Know What is Going on

2.2 Moral

2.1 Normative

1.6 Function

1.5 Time Span

1.4 Actors’ Features

1.3 Actors/Processes

1.2 Processes

1.1 Actors

Dimensions

Table 2.

Important Knowing What is Going On/Not Important Knowing what is Going On

Sense of Should/Just a View

Normative Weight/NonNormative Weight

On Actors’ Resources/On Actors’ Problems/On Actors’ Aspirations On Past Events/On Present Events/On Future Events On Own Function/On Others’ Function

On Themselves/On the Company/On the Surroundings On Actor Bonds/On Activity Links/On Resource Ties On Actors/On Relationships

Subdimensions

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4.8 Actors as Providers

4.7 Conflict/Collaboration

4.6 Comprehensiveness

4.5 Broadness

4.4 Stasis

4.3 Structuredeness

4.2 Consistency

4.1 Stereotype

3.3 Actor Specificity

3.2 Situation Specificity

It is about the extent of detail to which an actor thinks about situations; It is about the extent of detail to which an actor thinks about actors; Characterizes the view held by an actor in terms of the distinct forms of visual representation or framework that he/she uses to represent the surrounding network; Reflects if an actor sees things in a more or in a less coherent way; It is about whether an actor perceives the world in a more or less structured and organized way; It is associated with the extent of dynamism that an actor perceives; Characterizes an actor view with regards to the scope of an actor perception of the surrounding network; It is about the extent of specificity associated with an actor view; Characterizes an actor view in terms of whether he/she sees the surrounding in terms of conflict/collaboration situations; Defines how an actor perceives surrounding actors as services provided.

Reflects whether an actor agrees with the principles that his/her company’s board explicitly states for the organization;

3.1 Coherence with Board Identity

Source: Ramos and Ford (2011, adapted).

Overall view of surroundings

Dimensional group 4

Specificity/ Coherence

Dimensional group 3

Addresses the extent to which an actor considers important knowing about actors’ internal processes.

2.4 Internal Procedures

Customized Offers/ Standardized Offers

Comprehensive/NonComprehensive Power, Conflict/ Collaboration

Broad/Narrow

Evolving/Static

Structured/Unstructured

Relevance of Internal Procedures/Non Relevance of Internal Procedures Coherence with the Board’s Explicit Identity/NonCoherence with the Board’s Explicit Identity General Situations/Specific Situations Groups of Actors/Specific actors A Network/A Supply Chain or Other Stereotyped View Consistency/In Conflict

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surrounding business network. Table 2 includes a short description of each dimension and subdimension identified in this model of network pictures.

PREVIOUS RESEARCH ON NETWORK PICTURES Interest in the subject of network pictures is growing. Initially research focused on the operationalization of the construct (Henneberg et al., 2006; Ramos & Ford, 2011; Ramos et al., 2005). Other studies have applied the concept to address the change in organizational networks (Abrahamsen, Naude´, & Henneberg, 2009; Ford & Redwood, 2005; Kragh & Andersen, 2009; O¨berg, Henneberg, & Mouzas, 2007), segmentation of potential clients (Henneberg, Mouzas & Naude´ 2009), mobilization of counterpart perceptions toward a specific end (Holmen, Aune, & Pederson, 2008), measuring the complexity underlying actor pictures of the business network (Ramos et al., 2012), and investigation of the relationship between actor pictures and their networking activity choices (e.g., Corsaro et al., 2011). Purchase et al. (2010) suggest adoption of a cinematographic metaphor to describe the picturing by actors of the business network and to replace the photographic metaphor used so far. The new metaphor promotes the significance of language (i.e., a more narrative approach which draws on discourse analysis) (Lowe, Ellis, & Purchase, 2008) and reinforces the role played by verbal descriptions to capture actor pictures (Ramos et al., 2005). The process underlying the development of actor network pictures, the factors that condition the way an individual perceives the surrounding network (Henneberg et al., 2009; Leek & Mason, 2009; Ramos & Ford, 2007; Rohrmus & Henneberg, 2006) has also been addressed. Building on insights from cognitive science, social psychology, organizational behavior, and strategic management, Rohrmus and Henneberg (2006) put forward several propositions on the structure and content of the resulting network pictures. They highlight the potential role that some contextual factors, namely hierarchy and function of an individual manager within a company, or the position of a company within a network, have on individual perceptions of the business network. Ramos and Ford (2007) discuss how the features of a business network affect the views of actors that interact within the network, and Leek and Mason (2009) analyze within-company features and conclude that hierarchical position affects perception of the surrounding network. The actual content of actor pictures (i.e., practitioner theories) and how they relate to IMP Group theories has scarcely been explored. The purpose

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of this chapter is to further enrich this discussion by conducting an in-depth analysis of the substance of a set of actor pictures using the model of network pictures developed by Ramos and Ford (2011) described above. The choices made regarding the research design are presented in the following section.

RESEARCH DESIGN AND METHOD Empirical Research Strategy and Method A social constructionist approach underpins the sense-making processes of organizational actors as well as how actors approach and enact realities. According to this ontological approach, ‘‘‘reality’ is not objective and exterior, but is socially constructed and given meaning by people’’ (EasterbySmith, Thorpe, & Lowe, 2003, p. 29). As a result of the ontology and epistemology underpinning organizational actors – and of the main purpose of this research project (i.e., to analyze the substance of actor views) – a social constructionist and inductive approaches supports this research project (Guba & Lincoln, 2000; Hudson & Ozanne, 1988; Schwandt, 2000). The adopted approach is congruent with the philosophical assumptions traditionally associated with INA-driven research and the definition of network pictures as a research tool. This tool is not used to ‘‘gather facts and measure how often certain patterns occur, but to appreciate the different constructions and meanings that people place upon their experience’’ (Easterby-Smith et al., 2003, p. 30), that is, to grasp actor pictures. The social constructionist approach integrates a broad range of research methods, but in most situations case-study research is the selected method. Woodside and Wilson (2003) broadly defined case-study research as ‘‘inquiry focusing on describing, understanding, predicting, and/or controlling the individual (i.e., process, animal, person, household, organization, group, industry, culture or nationality)’’ (p. 493). The definition given by Yin (1994) also includes organizational and managerial processes as potential objects for this method but it is not as broad as the definition given by the former authors. The main aim of the adopted method consists of achieving a deep understanding of processes and other concept variables, the ‘‘understanding of the actors, interactions, sentiments, and behaviors occurring for a specific process through time’’ (Woodside & Wilson, 2003, p. 497).

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The holistic nature of case-studies (Goode & Hatt, 1952), the fact that they always take a social entity as their object of analysis (Hakim, 1987), and their suitability for conducting business-to-business marketing related research (Woodside & Wilson, 2003), result in most research in this field concerning the thinking-doing processes of people, that is, the individuals’ and groups’ decisions and behaviors, within or between organizations (Westgren & Zering, 1998), led us to choose this methodology for this study. Researchers use case-study research commonly in INA-based studies (Henders, 1992). The high interconnectedness of networks implies the need to analyze several nets and respective actors (Easton, 1995), and the casestudy approach allows for this. The case-study approach is consistent with the IMP Group research tradition of carrying-out several in-depth (and mostly descriptive) case-studies of business relations and networks (Easton, 1995). Welch & Wilkinson (2002) also suggest that in-depth case-studies may be useful to conduct research on the sense-making frameworks held by actors, highlighting how previous IMP Group case-studies do not devote much attention to the ideas or subjective views of actors. The study here uses a qualitative research approach because of the nature of the research problem and because the main intention of this research was ‘‘to uncover and understand what lies behind [yay] phenomenon about which little is yet known’’ (Strauss & Corbin, 1990, p. 19). IMP researchers consistently use qualitative data to capture the richness of the observed phenomena.

Research Design The primary unit of analysis was the individual manager (Yin, 1993) and the research included only one level of analysis – the individual level. We focused on the substance of individual network pictures because we were not interested in assessing the level of network picture commonality or diversity at the company or network level. Each individual network picture corresponded to one case-study. Case-study research does not allow for statistical inference, so the decision to include 49 case-studies in the analysis should not be seen as an attempt to increase sample size in the conventional statistical sense. As such, cases were chosen to gather information that was interesting, rich, and detailed (Easton, 1995), not as an attempt to represent the population. In general, cases are used to ‘‘expand and generalise theories (analytic generalisation) and not to enumerate frequencies (statistical generalisation)’’

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(Yin, 1994, p. 10). The plausibility of the sampling technique that relates to this method includes two factors (Easton, 1995). First, although case-studies integrate several variables, their measurability or replications are low, reflecting a lower level of demand on the theory and having only to fit the facts in the particular case-study. Second, the richness of the data in casestudies allows for a process of explanation building (Yin, 1994), that is, a depth-detailed identification of existing relationships among the facts that build up the theory. Yin (1994) argues that a single case-study research design is only appropriate if the case is unusual, rare, critical, or revelatory. For this research, neither of the case-studies chosen appeared to possess these features and hence a multiple approach was chosen. Moreover, because multiple case-study design allows for the achievement of theoretical replication and is considered more robust than a single case, a multiple case-study design was applied. Because of the interconnectedness of organizational networks, empirical analysis was restricted to a specific part of the global network. Two networks were selected to be part of the empirical research. The features of the selected networks, as well as the process through which the companies and the individuals that were included in each network were selected, are now addressed. Forty-nine respondents that played a key role in the decision-making processes in their companies were included in the study (i.e., performing management roles, namely CEOs and directors). These individuals were selected from various departments in eighteen companies and in two particular networks that presented distinct features regarding their relational structure (Lambe et al., 2000): one was a product-based network; the other, a project-based network. The diversity underlying the selected individuals, companies, and networks aimed to control for effects of contextual factors over individual pictures. Below, the two networks are briefly characterized. The Product-Based Network The product-based network associates with a long-term relational exchange situation in which most of the companies associate with a hole-through-thewall production and delivery system. According to this system, the supplier is physically present with his own machinery and personnel at the house of the client for a (usually) long period of time. The production and delivering takes place within the facilities of the client and is known as in-house or integrated outsourcing. The in-house plants usually have local management that is responsible for the supervision of raw materials, machinery

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maintenance, and the production process while sharing central services, support, and R&D that are provided by the headquarters and shared with other units. The usually long term agreements that are established between the supplier and buyer are a consequence of the high and tailored investments in machinery and equipment that are made for single-client units. Collaboration between the technical and technological areas of supplier and client – as well as joint planning to assure a just-in-time delivery made directly to the point in the production line where it is required (e.g., in the rigid plastic containers activity, the plastic bottles are delivered directly into the machinery that does the filling of the bottles with the product of the partner, and the dedicated units of the suppliers are located next to the filling equipment of the clients) – is tight. Quality and communication between supplier and buyer usually improve as a result of this tight collaboration. Instead of a normal supplier-buyer relationship, the involved parties claim to be involved in a partnership that is characterized by highly stable, very close relationships. This partnership results in very particular relationship features between supplier and buyer. From a time perspective, this situation corresponds to the most relational part of the relationship exchange continuum. Time plays an important role for relationship-building interactions. In this partnership situation, more time is available for more interactions and more opportunities for relationship building to take place than in a normal relationship where the client is supplied from outside his facilities (Lambe et al., 2000). The high adaptation and transaction-specific investments carried out at the beginning of the relationship form a strong impulse for trust building, and previous experiences of the supplier in other in plant solutions may assume a central role as a substitute of trust. Because interdependence is obtained throughout several relationshipbuilding stages as the parties invest in the relationship and establish common achievable goals, the in plant situation is be expected to be associated with a high level of interdependence between the parties. Furthermore, as a consequence of the intensive information exchange and the expected long length of relationships, relational norms probably emerge naturally (i.e., implicit or tacit norms). Cases chosen for this study were in a network of companies connected to the production of plastic containers. The hole-through-the-wall production and delivering system is an increasingly central feature of the plastic containers supply/production/delivery sector, and one of the companies

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included in the study (i.e., Alpha) was even the European pioneer of this system. The product-based network included producers of plastic containers (i.e., Beta, Alpha, Gamma, Omega, and Omicron), their suppliers (i.e., Delta, Zeta, and Lambda), and their clients (i.e., Theta, Kappa, and Sigma). Case companies were identified by a snowballing or chain process (Gray, 2004; Ritchie & Lewis, 2003) beginning with Alpha. The first company in the chain, Alpha, was relatively easy to access, had extensive media coverage, and was the European pioneer for the hole-through-the-wall production and delivery system (see Table 3 and Fig. 3). The Project-Based Network The project-based network can be characterized as a network with short-term relational exchanges. For the project-based network, companies involved in the transportation sector, namely to the conception, construction, and operation of a Metro system, were included (see Table 4 and Fig. 4). What typically happens in a project situation is that a group of companies gets together for a (usually) short period of time with the sole purpose of delivering or having delivered one final product or service. Once the project is finished or once the contribution of each specific actor is complete, each company goes back to their normal activity or may get involved in other projects with the same or other companies. In cases where more than one project is lined up or where there are plans for supplying or being supplied with equipment or other deliverables after the project has been concluded, both parties may continue to be involved with each other after the conclusion of a particular project. Contractors are constrained by time, cost, and quality (Cova & Hoskins, 1997) so that this form of ‘‘interimistic’’ exchange is highly complex and present several distinctive features not expected to be found in a long-term relationship. In a project situation, the existence of long-term business relations cannot be taken for granted (Cova & Salle, 2000). Contractors must deal with discontinuity in relationships with clients (Cova & Hoskins, 1997; Cova, Mazet, & Salle, 1994, 1996; Cova & Salle, 2000). The length of transactions and frequency of contacts between the parties are expected to be considerably low, so that little opportunity for increasing interdependence between the involved parties exists (Cova et al., 1994; Cova & Hoskins, 1997) and less time is available for trust to evolve than in a long-term relationship. To overcome the time constraint, the parties are believed to extensively and commonly rely on prior exchange relationship interactions,

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Table 3.

Respondents from the ‘product-based network’.

Hole-Through-Wall

Company’s Name

Providers for ‘holethrough-the-wall’

Alpha

1. 2. 3. 4. 5. 6. 7.

Beta

1. CEO and other direction functions

Gamma

1. Financial Director 2. International Director 3. Production Director

Lambda

1. In-Plant Director

Delta

1. CEO 2. Logistics Director 3. Production Director

Zeta

1. CEO 2. Commercial Director 3. Production Director

Theta

1. Production Director

Kappa

1. Production Director

Sigma

1. Production Director

Omega

1. 2. 3. 4. 5. 1.

Suppliers of providers for ‘hole-through-the-wall’

Clients of‘hole-throughthe-wall’

Omicron

Function in the Company Commercial Director (Portugal) Commercial Director and KAM (Italy) Operations Director RM Purchasing Director LPTD Director (R&D) International Technical Director Technology Director

CEO Commercial Director Financial Director Production Director IT Director Commercial Director

on the reputation for fair dealing held by the parties, as well as on those relationship-specific investments that are made in the early stages of the relationship (Lambe et al., 2000). Also, a large number of actors, on both the client and the contractor side of the relationship, are involved in definition and execution of the relationship (Cova et al., 1994). The additional number of actors adds complexity to the project and implies a commonly complex coordination of the activities

329

Capturing Practitioner Theories Via Network Pictures Suppliers for the Providers of Hole-Through-The-Wall

Providers of “Hole-Through-The-Wall”

In-Plant Clients

Rigid Plastic Producers Beta Theta

Alpha

Kappa

Delta Gamma Sigma

Zeta Flexibles Plastics and Plastic Film Producers Omega Lambda Omicron

Fig. 3.

Companies and Direct Relationships Included in the Product-Based Network.

between companies. Actors on the client’s side include stakeholders, regulatory bodies, government departments, and other parties; on the contractor’s side, consultants, subcontractors, and other parties. In project-based networks, each project is unique and distinctive (Cova & Hoskins, 1997). Opportunities are almost impossible to anticipate as demand (and offers) are not standardized, leading to considerable uncertainty for contractors (Cova et al., 1994). Furthermore, projects usually involve considerable specific investment by the involved parties (Cova et al., 1994). Preparing a proposal, winning it, and executing the project usually imply a considerable investment of resources on the contractor’s side. A final interesting feature of project-based relationships is that given the particularity (i.e., distinctiveness/uniqueness) of project, the possible absence of preexisting relationships, the value of the contract, the difficulty in predicting cost, and the high uncertainty associated to projects, the negotiation and execution processes of the project are likely to be highly

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Table 4. Respondents from the ‘project-based network’. Project Providers

Client

Company’s Name

Function in the Company

Chestnut

1. 2. 3. 4. 5.

CEO Construction Coordinator Planning and Controlling Director Commercial/Contractual Director Technical Director

Willow

1. 2. 3. 4.

CEO Planning Director Commercial Director Production Director

Aspen

1. CEO 2. Project Director 3. Operations Director

Hazel

1. CEO 2. Production Director

Pine

1. CEO 2. General Coordinator

Elm

1. CEO 2. Operations Director 3. Technical Director

Oak

1. Operations Director 2. Communication & Image Director 3. Infra-Structures & Production Director

formalized (Cova et al., 1994). Relational norms, or the expectations about the behavior of the other party, emerge during several stages of the relationship development period (Dwyer, Schurr, & Oh, 1987; Ha˚kansson, 1982; Wilson, 1995) and interaction leads to the materialization of relational norms which can be more or less tacit (Dwyer et al., 1987). However, since the relations involved in a project situation are usually short-term, mutual relational norms usually do not have time to emerge. One of the solutions that the parties may implement is the one presented here (i.e., that of relying on explicit norms that are established by the contractual terms). Because complexity and time constraints make development of interdependency between the involved parties difficult, negotiated contracts are expected to be as comprehensive as possible (Cova et al., 1994).

Capturing Practitioner Theories Via Network Pictures Sole Client

331

Sole Supplier Consortium CONSTRUCTORS Willow Consortium Hazel

Oak

Chestnut Consortium

Elm

Pine

OPERATOR Aspen

Fig. 4.

Companies and Direct Relationships Included in the Project-Based Network.

For this case, the network of companies involved in a project related to the transportation sector was included: the Porto Metro Project. The Porto Metro Project was associated with the conception, construction, and operation of a Metro system in the city of Porto as part of this city’s urban and local transportation services. The project involved complex and difficult relations between the public and private sector. The first stage of execution of the project was about to finish and its operation was already underway when data were collected for the projectbased network. Included in this network were the sole client of the project (i.e., Oak), two consortia of companies (i.e., Chestnut and Willow), and companies that belonged to these consortia (i.e., Hazel, Elm, and Aspen). All companies in the study associate directly with this project and with the consortium of companies that was the sole supplier for the project of the client. Another company, Pine, had a back-to-back agreement with one of the companies that were part of the consortium. The company selection process for this network was similar to that used for the product-based network. Note that neither of the figures in this section (i.e., Figs. 3 and 4) represents the respondent pictures of their business network. Instead, they are merely simplified representations of the two included networks. The reason for including these two figures in this section is to provide initial structure – to help describe and provide visualization of the structure of

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the network – for the companies included in data collection and analysis. The figures do not represent any specific perspective or network picture of the considered network since this would restrict or condition the views held by respondents or demarcate the network boundaries for its participants. Moreover, only direct relationships among organizations were included. In order to better understand the context where individuals and companies were developing their business activity and their views of the world, multiple sources of information were used. This usage of different sources of information was a form of triangulation that more than ‘‘checking the validity of data [result of helping] to confirm and to improve the clarity, or precision, of a research finding,’’ it was ‘‘a means of widening or deepening understanding of a subject’’ (Ritchie & Lewis, 2003, p. 275). Triangulation is essential for achieving deep understanding in a case-study and involves using multiple sources of information (Denzin, 1978; Stake, 1994; Yin, 1994). Both primary and secondary data were collected, a common practice in case-study research. The primary data were collected following the technique developed by Ramos and Ford (2011), that is, open semi-structured interviews were conducted and visual representations were solicited from individuals from both networks. The interview guide can be found in the appendix. The secondary data were collected from press articles, news, and industry reports regarding the included companies and networks. Institutional information provided by the researched companies was also used. All primary data were collected at the workplace of each respondent. The workplace location was selected for practical reasons and also to ensure that respondents felt comfortable. Respondents were in an environment that was very familiar to them and represented the context about which they were being questioned. The data analyses were carried out in three stages. In the first stage of data analysis, we used the research tool of network pictures (Ramos & Ford, 2011) to capture each respondent’s pictures of the business network. This process involved classifying each respondent’s transcript and visual representation along the twenty-one dimensions and corresponding subdimensions of the adopted network pictures model. In the second stage of data analysis, the substance of the network picture of each respondent was analyzed and a comparison was made between what the majority of respondents perceived regarding the business network (i.e., practitioner theories) and what the IMP Group had to say regarding the business network (i.e., academic theories).

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The outcome of this analysis is presented in the following section. As with the original project on the development of network pictures as a research tool (Ramos & Ford, 2011), we tested for the replicability of the conducted content analysis to assure the reliability of the developed construct, that is, to assure that ‘‘data are obtained independent of the measuring event, instrument or person’’ (Kaplan & Goldsen, 1965, p. 83). Two researchers coded the transcripts and representations and no significant differences were found between the two researchers’ classification of respondent views. This (internal) replicability provided a good indicator that the conducted analysis was reliable or sound (Krippendorff, 2004; Ritchie & Lewis, 2003).

MAIN FINDINGS AND DISCUSSION Analyzing the 49 network pictures that obtained with the dimensional model developed by Ramos and Ford (2011), two main groups of findings emerged. First, analysis of the 49 network pictures points to considerable differences (and also to some similarities) between well-established (IMP Group formal) academic theories and (informal) practitioner theories. Second, we identify a set of practices among most respondents associated with the way they thought about their surrounding business network. These two groups of findings are explored below.

(IMP Group) Academic Theories Versus Practitioner Theories Egocentric View One of the underlying principles for the IMP Group is that no company owns a network, so a center or hub for the business network cannot be identified or defined (Ford et al., 2002b). The network cannot have an objective center because positioning is a perceptual concept and as such the network is viewable differently by different actors. A network may therefore have many perceived hubs – as many as the number of actors that perceive themselves as being the center of everything (Ford et al., 2003). According to Ford et al. (2002b) ‘‘any view of a network centered on a single company, or defined by the company itself is inevitably restricted and biased and gives an incomplete view of the world surrounding that company’’ (p. 3). Furthermore, ‘‘a company that only sees the network from its own perspective will fail to understand its dynamics and the interface between the well-being of others and itself’’ (Ha˚kansson & Ford, 2002,

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p. 138). An actor who holds an egocentric view is expected to act upon the conviction of being the objective center of the network, not considering that other actors may think differently and also perceive themselves as being the objective center (Ford et al., 2002b). The literature therefore posits that companies are advised against having self-centered perspectives of the network. However, the empirical study shows how most respondents do perceive themselves and/or their company as the center of the network, revealing an egocentric perspective of the industrial system. This egocentric perspective comes across in the analysis of the network picture dimensions Focus on Actors and Weight – Knowing What is Going On. Respondents who position their company as the hub draw a big circle representing their company right in the middle of the provided A3 sheet of blank paper and use expressions such as ‘‘I think that Chestnut Consortium is in the center since it has direct relationships with the sole client Oak’’ (Chestnut Consortium, Construction Coordinator), or ‘‘I don’t know what these companies are doing in business terms, probably because my function is much more oriented toward the company than for the exterior. There are other people here that deal much more with the exterior, but that is not my function’’ (Sigma, Production Director). Most respondents frequently show a strong sense of belonging to their company, speaking in ‘‘we’’ terms to refer to the business activity of their company and relationships with other actors, and appearing to align themselves with most of the explicit cultural values of their companies. This sense of belonging comes through in statements such as ‘‘because unlike others of our competitors, we do not have dedicated machinery; we do not have an agreement with a machinery producer’’ or ‘‘we believe that at this moment we have the right formula, so that it works’’ (Alpha, International Director). One respondent speaks exclusively in ‘‘we’’ terms throughout the interview: ‘‘We have the clients. We have the results, somewhere over here y Theoretically, we have Theta and our suppliers for raw materials, technology and services, and these are fundamental y We supply product and service to our clients y’’ (Theta, Production Director). However, this sense of belonging is not always the case. For example, at Omega, one of the respondents claims, ‘‘I can’t tell you in great detail what Omega is doing because I do not really know. I do know that they are moving and that the commercial part is now being changed y because for years the commercial existed a bit ‘outside the factories’ and they just wanted to sell, no matter how or at what price. But this is now changing’’ (Omega, IT Director).

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This lack of a sense of belonging to this company appears to be related to several factors. First, the group implemented an internal competition policy among its companies; second, the headquarters of this group were geographically quite distant from the company, in a different country; third, the group set out in an almost unilateral way the strict rules and policies which guided the business operations of its companies; and fourth, all respondents were already working in the company when it was bought by the Omega Group and perhaps unsurprisingly respondents showed a sense of belonging to the company and not to the group. This form of takeover also occurred when the Beta Group acquired Beta. Interestingly however, whereas in the Beta Group case respondents demonstrated a sense of belonging to the group as a whole, in the Omega Group case the identity of the interviewees was seen to be largely with the company. This demonstrates that respondents from two different companies, notwithstanding the fact that they have been involved in similar business activities (e.g., being taken over), can have different mind-sets as a result of their experiences with a company and with a group of companies. On some occasions, directors also speak in the first person and talk extensively about those actors or processes that are directly connected to their current or past activity. This stance is visible in expressions such as ‘‘my clients are also supplied by my competitors’’ (Alpha, International Director). This shows how managers tend to personalize what is going on around them. According to Ford et al (2002b), the belief held by any actor of being the center of the network can easily be challenged by simply asking any other actor from the same network (as perceived by the focal actor) to define his position in the focal network. In all probability, the second actor would not view himself as a mere element from the network of the first actor, but instead as having his own network to which other actors belonged (including the first one that considered himself/herself/itself as being at the hub of the network). Clients and suppliers of a certain actor would therefore be expected to hold diverse views of the network relative to the view held by the focal actor (Ford et al., 2003). In this research, frequently respondents from both networks, working at different companies and in the same network, were observed to position their own company at the center with other companies positioned somewhere around the hub of the network (i.e., perceived to be their own company). Therefore, each network has several perceived centers, and actors do seem to have the notion that they and their company possess their own network, though this observation may not be generalizable to all networks.

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Some respondents, nevertheless, perceive their company as being integrated into a whole, a network that is not controllable by the company. These respondents hold a contextual (not egocentric) view of the world, and say things such as ‘‘we are within this universe’’ (Alpha, International Director), or ‘‘this industry suffers the pressure of modern distribution which has a strong negotiation power y and this leads multinationals to look for savings with their own suppliers, and that includes packaging which is the Alpha Group’s core business activity’’ (Alpha, Commercial Director and KAM). These respondents also show great interest in knowing what is happening in their sector in general, in relationships with and among other parties, activities that the competition is involved in, and the role played by environmental organizations. For example, one respondent said that ‘‘I think this is a lacuna for the company, we don’t know what goes on beyond this’’ (Alpha, Operations Director). Such managers use their perception of interconnectedness to get access to information regarding what is going on in their surroundings, for example, ‘‘and we know about this competitor, many times through the companies that we supply’’ (Alpha, International Director). Respondents from the project-based network also commonly show interest in knowing what is going on but only regarding the actors and relationships directly related to the project and not showing much interest in activities that were not directly associated with the project. For example, one interviewee said ‘‘no, honestly I do not know what is the business activity of those companies directly involved in the project are about when it comes to activities outside the project. As you must have realized by now, this area is very oriented toward the interior of the consortium and the contact that I have with people is much more on a daily basis, on the basis of what is happening today; it’s also much more in the production area than in the strategic area: what the companies do or want’’ (Chestnut Consortium, Construction Coordinator). This lack of interest reflects a relatively simplified and egocentric view, and with such an attitude, interviewees may overlook potentially important entities. This attitude is related to the short duration, time pressures, and complexity of the project that led respondents to focus solely on issues directly related to it. Interestingly, one respondent represents the clients and their relationships as the center and the company he works at as a mere supplier of a specific part of the internal value chain of the clients. Only after representing and describing the internal value chain of the clients did this respondent introduce the role of his own company in the network by saying ‘‘the way Alpha inserts itself into this world is as followsy’’ (Alpha, Commercial

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Director and KAM). Unlike all other respondents, this one stepped back and thought about how other actors might perceive the world. These respondents, as well as those described in the previous paragraph, perceive their company as being part of a bigger picture and whose practitioner theories, in this respect, are more similar to the IMP Approach. The Substance of Relationships One of the underlying ideas of the AAR Model (Ha˚kansson & Johanson, 1992) is that actor bonds, activity links, and resource ties are useful descriptors of relationships when taken together. According to Ha˚kansson and Snehota (1995), these three dimensions ‘‘add up to a relationship’’ (p. 28), defining its profile and thus, ‘‘if we are to assess, predict or explain the importance and role of a relationship, they need to be examined’’ (p. 29). Relationships are believed to be ‘‘not single dimensional and the business marketer needs to analyse them multi-dimensionally’’ (Ford et al., 2002a, p. 44). While some relationships consist mostly of actor bonds, others will be mostly about activity links and/or resource ties. Nonetheless, all relationships integrate to a greater or lesser extent into these three (actor bonds, activity links, and resource ties) strongly interdependent dimensions (Ford et al., 2003; Ha˚kansson & Snehota, 1995). However, respondents from both networks commonly thought about relationships solely in terms of one or two of the three AAR Model dimensions. This was evident from the data analysis especially for the network picture dimension (Focus on) Processes. Given that most companies included in the product-based network were somehow associated with the hole-through-the-wall system, respondents from this network were expected to think about relationships mostly in terms of activity linkage or resource tying. However, strong interpersonal contact (i.e., actor bonds) associated with the particular production and delivery system, especially on the plant floor, is found in the product-based network. As one respondent puts it, ‘‘this is very relational y and so there is a common language and a natural empathy [and] these are all small aspects which contribute to facilitate’’ (Alpha, Technology Director); or even, ‘‘y the contact between specific people is essential for us; those men that are there, on the shop floor, dealing with all the pressure of the shop floor, facing planning changesy’’ (Alpha, Purchasing Director). The majority of respondents in this network appear to be preoccupied with the importance of the interpersonal dimension of relations, perceiving business relationships in terms of actor bonds. They perceive different elements of actor bonding for relationships of a different nature (e.g., when talking about relationships with clients, they spoke in terms of honesty and openness of

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the relations, closeness, cooperation and power, leadership, intensity, expectations, professionalism, or lack of it, and the important role of personal contacts). As one respondent put it when talking about a specific client and then about clients in general, ‘‘what makes more sense from my point of view is the trust relationship that one has with companies and people. Because they know that they can come over y The fact that our behavior with them has always been clear and honest makes them y probably giving us their preference. The relation that there is with a client has more to do with people and not exactly with companies’’ (Zeta, Commercial Director). This same interviewee reinforced the focus she placed on the importance of actor bonding when she said ‘‘because talking with people, making those connections, is fundamental y it’s not by chance that when our former colleague left the company, a colleague that had been in Zeta for forty years and who visited customers for more than twenty years, we had some problems as a result of most our clients being a friend of his. y I had the idea that companies were cold things, which operated blindly and also that products were similar and thus he was the party who won whoever had the best price y this is also true [that] the ability to manage this and the relationship between people, ends up prevailing’’ (Zeta, Commercial Director). In this network, most companies had been in the business for decades and according to one of the respondents, ‘‘everyone knows each other’’ (Alpha, International Director); personal contacts were considered essential for conducting business (i.e., deals were believed to be strongly dependent on personal connections): ‘‘y it is about old relations, old influences y It’s the contacts y It’s an industry [that] requires a lot of personal contacts, of vision; it is about the person that ‘I already know’’’ (Alpha, International Director). The importance of old, personal contacts, is an idiosyncrasy of this network and might explain the focus on actor bonds. Respondents from the product-based network frequently describe their surroundings in terms of specific individuals and specific interactions among them, highlighting the important role those interactions played in the relationships between companies and for the success of the hole-throughthe-wall system. Instead of thinking solely about companies or groups of companies, they thought about particular individuals, again showing how they personalized the business environment. The focus in the project-based network is most commonly on actor bonds and activity links. For example, respondents from this network speak frequently and in some detail about the regular coordinating meetings that take place between the consortiums and the grouped companies on each of

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the following levels of coordination for the project: planning, technical, and construction. They also speak about the coordination meetings that take place between Chestnut Consortium and the sole client Oak, understanding the important role played by Consortium as the sole interlocutor between all grouped companies and the sole client. As one respondent from Oak says, ‘‘for us at Oak, Chestnut Consortium is materialised by its CEO. When we speak with that director, we are talking to Chestnuty’’ (Oak, Production Director). Given the multiple entities involved in the project, coordination of activities is perceived as the overriding concern. For example, as a result of the natural interfaces of a project of this nature, in a number of situations a company cannot begin operations until someone else completes his/her part of the project. Also, a significant number of respondents see their world not only in terms of an intensive activity linkage between actors, but also as actor bonding. ‘‘Happily, the relationship with everyone is very good and I honestly have to say that it would not be possible do this construction if this good relationship hadn’t been reached. I can’t avoid talking about Chestnut Consortium’s previous CEO who tried to implement that spirit and was able to; I got this heritage, and so did my interlocutors’’ (Chestnut Consortium, CEO). Knowing the right person in each company is important. These respondents believe that good relationships among certain people involved in the project are fundamental for ensuring the project’s success. They appear to believe that the good sense of these groups of people facilitate the achievement of reasonable agreements, create a spirit of collaboration, and get this extremely complex project up and running. The relations among some of the companies involved in the project (e.g., between the two construction companies) could have been quite difficult to manage because outside of the project these companies were direct competitors. However, all respondents understand that the physical proximity existing among parties directly involved in the project is fundamental to the project’s success. The daily contact and personal relations the companies promote results in a better communication flow. As one respondent put it ‘‘I do not think that it would be possible to do things in a different way. Most of the times we have some kind of problem when the decision is not taken here at this location, [y] and very often this blocks some processes. Therefore, it is a good thing that the companies are here concentrated, all represented in the same locationy’’ (Willow Consortium, CEO). Informal communications are also perceived to be a key resource because they enhance personal bonds. As one respondent put it ‘‘I would thus say that the importance of informal communication for the success of

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the project is huge, both internally as well as with relations with the client Oak’’ (Willow Consortium, CEO). What emerges from the data is that respondents perceive their surroundings either as a Global Actor Network or as a Global Activity Network, but are hardly ever able or willing to see it as a Global Resource Network or the whole pattern combining all three networks. This practice considered to be a more or less a deliberate technique, simplifies the reality of relationships. A Set of Processes Between Actors The INA was put forward for understanding the roles played by actors in the stability and development of the surrounding industry (Ha˚kansson & Johanson, 1992). According to the model, actors should not be seen as atomistic elements since they are embedded in a network of interconnected relationships (Axelsson & Easton, 1992; Ha˚kansson & Johanson, 1992), connected to other actors by direct or indirect relationships (Anderson et al., 1994; Axelsson, 1992). The outcome of action by any actor is always affected by and affects the networking activities of other actors, reflecting the interdependence between the activities of different actors (Ford et al., 2002b). Companies develop relationships with other organizations in order to have access to other relationships and associated resources (Pfeffer & Salancik, 1978). The portfolios of relationships, actor bonds, activity links, and resource ties of actors define their positions in the overall network (Mattsson, 1985). Application of the network picture dimension Actors/Processes to the collected data indicates many respondents perceive their surroundings in terms of relationships between actors. In the product-based network, the hole-through-the-wall production system presumes intensive and usually continuous relationships between actors, and respondents are frequently thinking about these processes (usually as actor bonding). As a consequence of longevity in business and experience with multiple functions and a variety of situations, most respondents accumulated a strong understanding of the processes involved. For example, as one interviewee who was directly involved in hole-through-wall put it, ‘‘well, Lambda technically accompanies company Omega 24 hours per day because the printing machines don’t stop and obviously we have that duty of accompanying them 24 hours per day. Aspects that are more linked to technical issues, planning and stock management are usually handled by me’’ (Lambda, In-Plant Director). Moreover, some respondents do not think in the interconnection terms defined by the INA but in a much more simplified manner. In the project-

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based network, despite perceiving the surroundings in terms of relationships between actors, most respondents show a limited sense of interconnectedness since most of them were only interested in actors and relationships directly related to the project. As one respondent stated ‘‘undoubtedly, I know much more about what is going on with companies and their relationships if these are within the project’s boundaries’’ (Aspen, Operations Director). Each member of the supplying consortium took responsibility for managing their part of the project (including the subcontractors accountable to them), and as a consequence, had little time to concern themselves with their counterparts’ complementary activities. Every participant was aware that the legally contracted consortiums would be dissolved once the project was completed. As one respondent put it ‘‘and it is predicted that as soon as the project finishes, every one leaves and Chestnut Consortium disappearsy’’ (Chestnut Consortium, CEO). Therefore participants lack incentives to learn more about other business actors with whom they have no direct relations, for example, subcontractors of their counterparts in the project. ‘‘I know perfectly well that Hazel and Palm Tree have subcontracted teams, but to me that is secondary, I also know that Elm gets a lot of support from Pine y We know all about this, as a result of the discussions we maintained throughout the processy but I don’t want to know if it’s a certain company which produces the doors and if it’s some Spanish company which builds the air conditioning; that is not important for me; my interlocutor is Bombardier and that is ity’’ (Aspen, CEO). The sole aim of the interactions among members of the consortium is delivering the project successfully. In addition to noticing processes between actors, most respondents perceive their surroundings as a collection of significant actors with interesting internal resources. For example, a respondent from Alpha described one of its clients as being ‘‘a centralised organisation, with common objectives and perfectly defined aims in what concerns the bargaining processes; y all companies are moving in the same direction, becoming more demanding, but this company is further ahead’’ (Alpha, International Director). Regarding this same company, the respondent claimed ‘‘by working with this company we have been learning a lot, renovating our structures, our procedures, our rules, our working methodologies; we learn with the direct and daily contact and with this company. y Obviously it leads the relationship and we don’t even argue about that. They are very important for us.’’ Respondents that perceive the learning value of these relationships hold a more complete and clearer view than those who only think about processes with the resultant possibility of better

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understanding the benefits and threats that can result from interacting with specific parties. They also believe they know which individuals performed functions more effectively for the company. On the other hand, where the relationships drift into old boys’ networks, nepotistic situations can give certain entities advantages they may not deserve. As a consequence of old boys’ networks, opportunities for forging new and more profitable relationships can be missed. A Dynamic View Relationships are made up by a series of episodes involving exchange and adaptation processes between the engaged parties along the several stages of development of a relationship (Ford, 1980; Ha˚kansson, 1982; Johanson & Mattsson, 1987). Each interaction that takes place within a relationship is merely one episode of the global relationship (Ford, 1980; Ravald & Gronroos, 1990). The continuity of relationships is frequently considered a fundamental precondition for relationship exchange and development (Ha˚kansson & Snehota, 1995) and reflects the dynamic nature of these relationships. Sometimes discontinuous situations still present the features of a relational exchange, for example, interimistic relations (Lambe et al., 2000). The IMP literature emphasizes the importance of dynamism in network related studies since it reflects the interconnectedness of network relationships which in affect companies’ strategies (Ha˚kansson & Johanson, 1992). Analysis of the Time Span and Stasis dimensions reveals an evolving respondent view of the environment that focuses mostly on the past and present events and situations. For example, one respondent from the product-based network said ‘‘I was here when for environmental reasons, among others, PET replaced PVC; and that was a big change for this industry y I remember that before, there were many quality problems in production due to the poor quality of raw materialsy’’ (Alpha, Purchasing Director). The same respondent also said that ‘‘today things are very different, the stability is very different; it’s an industry that can dedicate itself to a stabilised production, very commoditised, and therefore, it dedicates more time to innovationy’’ (Alpha, Purchasing Director). Respondents describe how things used to be in the past and what they had become. As one respondent said, ‘‘in the past, this industry had many players y and nowadays y with the concentration trends there are fewer’’ and also ‘‘We constantly try to convince our suppliers to adopt this ‘open book accountancy policy’ but they are not willing to do it’’ (Alpha, International Director). One respondent from the project-based network, Elm, described the relationship between his company and Willow Consortium in the following

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terms: ‘‘it is a situation that has been changing. All projects have different phases. The relationship with Willow Consortium was always excellent; not always organised and coordinated as Oak would like it to be, but a good relation. As the project is approaching the end, there is not much money to left and the relations have been deteriorating a little. But, there was never a need to get to an extreme situation, one of direct and aggressive confrontation’’ (Elm, Technical Director). Management’s recognition of the dynamic nature of the network enables timely and efficient responses to change. Even though the future is an essential element in strategic planning, respondents rarely consider the future as a key time dimension. One respondent that did place focus on the future said, for example, ‘‘but when the competitors that compete on a price base need to renovate their machinery, on that occasion, they will call us asking if we want to buy them and the answer will be no; some of them are thus destined to disappear’’ (Alpha, Commercial Director and KAM). This company’s high level of entrenchment in the plastics industry may account for this high degree of complacency. The evolving or dynamic perspective of respondents in the productbased network may relate to continuity underlying that network and specifically to the hole-through-the-wall production system with its longterm relationships. In the project-based network, several adaptations were certain to be introduced during the course of the project’s execution because of the 11 year time span between the initial contractual agreement and its forecasted conclusion. As expected, ongoing amendments were added to the Consortium Agreement. Some of the most frequent modifications included changing the initial route of some of the lines, adding new lines not initially planned, eliminating lines initially planned but that ended up being excluded from the project, and proceeding to urban requalifications. Most respondents consider knowing which actors are directly involved in each of the several phases of the project and knowing the role and level of participation each plays during each phase of the project to be important. Furthermore, some respondents even expressed interest in events in the final stage and after completion of the project. Respondents show great interest in being kept informed about changes occurring throughout the project because of their heavy reliance on the contractual terms. Interestingly, the interviewees often thought about specific dates for events, again reflecting how much they relied on what was legally established by the contract. ‘‘So we had a pre-agreement which was signed in 1996 y the contract was signed in

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1998 after the adjudication y Then the Fifth Amendment to the contract was made in 2004, and it was about the duplication of the Metro Line T’’ (Chestnut Consortium, Project coordinator). Respondents try to maintain an updated view of the contractual terms. However, not all respondents think about the network in dynamic terms; some see it as static, a snapshot. These respondents portray relationships in episodes or specific situations observed at a given point in time; they see situations as isolated events and do not seem willing or able to perceive interactions between actors as part of a relationship development process. Respondents with this orientation very often hold internally oriented functional positions (e.g., the production directors). Simplified Version of Interdisciplinary Interaction Interactions and networks are complex and interdisciplinary in nature and simultaneously involve economic, technological, social, political, or other issues of a different nature (Easton, 1995). In order to avoid possible conflicts between different theories or disciplines, researchers must predefine dimensions or issues of interest to address when conducting a study on an industrial system. Despite the necessity to predefine constructs, reflecting researchers’ choices when conducting studies, networks always maintain their interdisciplinary nature and complexity (Easton, 1995). Despite the underlying interdisciplinary nature of business networks, some respondents in both networks think about the world only from the perspective of a particular departmental function as captured with the network picture dimension Focus on Function. As one respondent puts it, ‘‘it is obvious that my view is conditioned by my area (very technical), an area very much directed toward the plant, the project and development of bottles’’ (Alpha, International Director). Among other things, this respondent explains the normal procedure for project development, the differences between clients’ propensity to suggest or follow suggestions for technical modifications, and the freedom that he as a technical project developer to shop around when purchasing machinery. For example, he said, ‘‘and then, whenever there are projects, there are multi-disciplinary project teams that conduct the project by themselves’’ (Alpha, International Director). Respondents often disregard other perspectives or rich ways of looking at interorganizational relations. Therefore, the practice of seeing networks from a specific angle is not restricted to researchers; practitioners also seem to do it in a more or less conscious way. Practitioners choose single perspectives in order to be able to focus on their real interests or to avoid confronting potentially contrary versions of the same fact (e.g., the

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perspective and goals of the production departments are frequently different from those of the purchasing departments). Respondents without a multidisciplinary view are expected to be more reluctant to scan for information to get a clearer, more specific view of the world or take a more defensive position because of fearing the unknown or risk of exposure. However, not all interviewees exhibit a singular functional focus as some include other functions they consider to be of comparable importance. For example, the Purchasing Director for Alpha pointed: ‘‘I know that to put through a new raw material in this company, it is a real drama’’ (Alpha, Purchasing Director), and also that‘‘y we know who the most demanding clients are y’’ (Alpha, Purchasing Director). The International Director, despite claiming that his view was conditioned by his current function, also spoke extensively about aspects related to functions he had previously been involved in and other functions he had not been involved with. The International Director’s considerable experience in the business can perhaps explain his multidisciplinary vision, understanding the importance of seeing the world from several perspectives. In addition, Alpha implemented several internal mechanisms aimed at instigating a multidisciplinary world view among its directors. The company’s board promoted a culture that encourages managers to be specialists in their own fields while simultaneously developing a multidisciplinary understanding of the company and its surroundings. Unfortunately, this goal does not appear to have been achieved because several management respondents express themselves mainly in terms of one specific function. Holding Network Theories Network theories are an ‘‘actor’s set of systematic beliefs about market structure, processes and performance and the effects of its own and others’ strategic actionsy’’ (Mattsson, 2003, p. 417). They reflect the normative beliefs of what actors should or should not in the network to assure successful business practices and reflecting perceptions of causal relationships among specific actions and corresponding consequences. The concept of positioning strategy is closely related to the concept of ‘network theories’ (Mattsson, 2002b). An actor can change positioning by either trying to actually change it or by influencing the perception held by surrounding actors regarding their positioning by changing their network theories (Johanson & Mattsson, 1992). Analysis of the network picture dimension Normative Weight shows that most respondents do perceive the network in prescriptive terms either based on implicit rules (i.e., norms developed throughout relationships) or explicit

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ones (i.e., rules formally established by contract). In either case these appear to strongly condition how respondents see the network. In the product-based network, most of respondents, as well as companies, had been interacting in this sector for many years (decades, for the some of the companies). Possibly as a result of this longevity in the sector, some implicit developed over time that people more or less complied with. For example, when describing what clients look for, one interviewee said ‘‘PET is nowadays a commodity and therefore the clients are not loyal; they buy from whoever gives them lower pricesy In the fiber area the situation is quite different and here we are talking about long-term partnerships. It is not very easy for our clients to swap suppliers, because there is a vast range of machinery tuning for the type of fiber that is bought and that the clients uses in their machinery. And although the price is also important, there is a bigger notion among potential clients with regards to the importance of the service and of having partnerships’’ (Delta, Logistics Director). What comes across in this quote is this respondent’s perception of the following rule: in order to be competitive in the plastics sector, the company must provide low prices to its clients; in the fiber sector, on the other hand, it must be willing to get involved in a partnership type of relationship. One other interviewee said ‘‘for the equipment suppliers, it is paramount to know raw materials and to be able to transform them’’ (Alpha, RM Purchasing Director), whereas another respondent said ‘‘we are an interesting solution only for companies that have important sustained volumes;y if it does not have enough volume, it’s not justifiable in term of costs that we set a structure for a small production unit’’ (Alpha, Technological Director). These two sentences also contain a strong prescriptive content. Most respondents in the project-based network also see the world in prescriptive terms. They accept and follow contractual specifications about how they should work and so they pay significant attention to their previous experience with this matter. In other words, they live by are explicit rules and largely ignoring implicit rules. The terms of the contracts define each party’s obligations and rights and ensure that the interests of actors are safeguarded throughout the life of the project as well as after its completion. One of the interviewees said ‘‘when I think about the surroundings, I don’t think about people or companies; instead I just think of the contracty We have relationships with the people and we may all go for lunch or dinner together, but on the working basis what we have is a contract’’ (Pine, CEO). Another respondent from another company stated that ‘‘there is a contract and that has to be followed’’ (Elm, Operations Director), reinforcing the

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strong conviction shared by actors in this network that the contract was the basis for everything. Moreover, many of the interviewees frequently referred to the terms of the contracts for matters regarding the processes for solving potential problems between the parties, development of communication flows, the role of each party in the overall project, and who should take part in which specific meetings. The project was short term and very intensive and the respondents did not appear to have enough time to think about or to develop norms. Moreover, given that nearly all projects are unique the interviewees did not see the benefits in developing implicit rules since they would probably not be applicable in other environments. Prescriptive views can act as an obstacle to change because actors may not be willing to scan and interpret information that defies some of the rules by which they live. On the other hand, prescriptive views my facilitate openness and willingness to scan for more information that may complement and update what the actor believes will or will not work in the business world. Despite the considerable number of respondents who appeared to think in normative terms, several interviewees do not seem to hold strong theories about the network. The latter group of respondents appear to rely on mere impressions or on the expertise of colleagues for clarification about what to do. That is, not all of the respondents held network theories. Going Back to Basics – the Relevance of the Internal Processes Both the Buyer-Seller Interaction Approach (Ha˚kansson, 1982) and the INA (Ha˚kansson & Johanson, 1992) highlight the relevance of processes between actors for understanding organizational settings and the development and stability of industrial systems. In either approach (on a dyadic or network level), the ability of companies to enhance their performance is dependent, not only on themselves, but also on their relationships with others and on how their direct counterparts manage relationships with other parties (Ha˚kansson & Snehota, 1989). Thus, the performance of companies is understood to be a direct function of their relationships. In both networks, however, analysis of the network picture dimension Weight of Internal Procedures indicates some respondents are more concerned about the processes that take place within each company (including their own) than those that take place between companies. The majority of respondents in the product-based network are very willing to explain the complexity and importance of their own as well as other actors’ internal processes and structure. Most respondents think about their own

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enterprise in terms of internal structures and procedures. As one of the respondents described, ‘‘Alpha is like a satellite structure, which has the corporate, the national and regional structures and y the plants. Alpha is organised in the following this way y’’ (Alpha, Technology Director). More interestingly, instead of perceiving each surrounding company as a single unit, respondents commonly think of them as a number of sections or departments and the processes within and/or between them. For example, one respondent from Alpha company said about its clients that ‘‘multinationals traditionally had very strong technical departments, with people with quite a vast experience y called Packaging Departments’’ (Alpha, International Technical Director). As another respondent put it, ‘‘the clients have a value chain, one that always has support activities such as purchasing, technical and technological support, finance, IT and others such as human resources. But in operational terms, they have inbound logistics, and these traditionally consist of bringing trucks with plastic containers from a faraway location whose suppliers are at a distance and with whom the relationship type relies on a pure price competition. These empty bottles go into the storehouse and are stocked and then they manually feed the client’s production line where he then fills them, packages and then sends them to the market accordingly, at the marketing and sales required volumes. The way the Alpha inserts itself into this world is that the client’s purchasing area studies alternatives to glass, carton, and plastic for its containers, and activates dialogue when it has to make decisions in order to sign plural-annual contracts’’ (Alpha, Commercial Director and KAM). Interestingly, most interviewees envision relationships as being between them and specific departments in other companies, rather than between the enterprises as a whole. These relationships are perceived with a considerable level of specificity and detail. An illustration of this is as follows: ‘‘at the corporate levely we have a connection to what we call KAM and that has relationships with the business units (BU) and with the technological units y’’ (Alpha, Technology Director) and also ‘‘there is a tendency for the Packaging Departments to disappear and this is a huge advantage for Alpha: it can talk directly to marketing and is able to be responsible for the entire process; sometimes, the Packaging Departments people didn’t quite understand what the marketing people were saying and their role as filter didn’t work’’ (Alpha, International Technical Director). This view of the world is not particularly surprising given the intensive activity linkage that is traditionally associated with hole-through-the-wall production and the complexity of the internal structure of Alpha. Therefore, many respondents

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think about the internal procedures of companies to explain activity linkage between them and other organizations. As for the project-based network, most respondents also show a considerable internal focus, thinking about the internal structure and processes of each company and how those involved in the project are linked through their internal organizations. Respondents from this network also place great emphasis on the activity linkage, explaining the importance placed on interdepartmental linkages. Conflict with Own Company’s Explicit Identity Organizational identity, a basic notion in the IMP literature, is associated with the concept of strategic positioning (Ha˚kansson & Johanson, 1992; Ha˚kansson & Snehota, 1995). An organization’s identity is about how surrounding companies perceive the attractiveness of a specific organization as a potential partner (Mattsson, 1985). This attractiveness is a direct function of the relations of a company with other actors, and organizations often promote a particular identity to become appealing to others. To simplify the data analysis, this research used organizational identity as defined at the company’s board level since that definition is usually more explicit and visible than the company’s overall identity. Curiously, in the product-based network a significant number of the respondents appear to disagree with some of the elements of their board’s explicit identity. Very often, these managers are not willing to disseminate the entire company identity to the outside world, making strategy implementation more difficult for the organizations. To avoid internal conflict, some respondents kept quiet about their disagreement with certain aspects of the company’s identity, choosing to put company loyalty first. Others did not hide their feelings and were critical of the policy of their company to other actors, both internal and externally. The company is in danger of missing errors if actors do not express their disagreement. On the other hand, actors may jeopardize their company’s leading position by openly pointing out faults and criticizing the company. In other words, the lack of total coherence among managers, and not simply workers, of an organization can tarnish the company’s reputation and encourage competitors to seduce that company’s clients away from them. For example, most respondents from Alpha describe the firm as a packaging solution provider, an expert in hole-through-the-wall supply, and a very good manager of client and supplier relations. Alpha is also cited as having a strong orientation toward clients as reflected in a can do approach when it comes to solving problems. Perceived to be a strong state-of-the-art

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company, Alpha benefits from a strong reputation that leads to a high level of respect and trust. However, respondents disagree about some aspects of Alpha’s identity. The board’s desired image for Alpha is a decentralized and informal organization with a low profile, strong team spirit, and the desire to make the most appropriate decisions to satisfy the needs of both suppliers and clients. Some respondents, however, said the company had achieved supplier and client satisfaction from an outside perspective but did not feel that way themselves while working for the company. Much more formality and control over the workforce occurs than managers claim. Alpha respondents consider management to be too domineering and that the best interest of the client or supplier is not always the priority. As one respondent reported, ‘‘ythe negotiation for raw materials within our company is very limitedy the company’s board and purchasing area impose certain suppliers on us and we have to work with those who were selected y don’t ask me why we still have relations with them, ask our managersy’’ (Alpha, Commercial Director). On the other hand, the effort made by the company’s board to disseminate its desired identity regarding supplier and client satisfaction comes through in the following sentence: ‘‘there are antagonistic interests: the production people never got along well with the commercial people because the production managers want to produce well and the commercial people want to sell well y we try to negotiate and try to convince them that that is the best solutiony’’ (Alpha, RM Purchasing Director). On the other hand, in the project-based network nearly every respondent fully agrees with the explicit company identity espoused by his or her boards. For example, the board of Chestnut Consortium clearly tried to communicate, both internally and externally, its ideal structure and possession of the means to accomplish the aims for which it was created (i.e., coordinating the activities of all those directly involved with the project, acting as sole mediator between the client and the grouped companies, and providing the client with a tailored solution). All respondents concur with the view that the consortium successfully portrays this image. Some interviewees, however, had a problem with the level of formality that the board of the consortium tried to impose on proceedings and expressed a preference for informality as their modus operandi. Respondents comply with contractual agreements, and furthermore, each company’s role and is comprehensively stipulated in these jointly agreed upon contracts. This specificity and compliance helps explain the prevailing coherence between respondents’ world views and their companies’ identities as envisioned by their company boards.

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Looking at Specificities and Ignoring the More General Picture The Interaction Approach, using the dyadic relation between buyer and seller as its unit of analysis, is based on the isolated analysis of the relations (Ha˚kansson, 1982). Therefore this perspective was complemented with the INA once researchers realized that companies are embedded in a network of interconnected relationships and that the network should be analyzed as a whole (Axelsson & Easton, 1992; Ha˚kansson & Snehota, 1989; Ha˚kansson & Johanson, 1992). Under this approach, both specific direct and indirect relations, as well the companies involved in those relations, are examined, but the system as a whole cannot be neglected (Ha˚kansson & Johanson, 1992). The Interaction Approach remains important because of its specificity, dyads, and actor interactions. The IMP, therefore, promotes research conducted at the network level of analysis, which in most cases includes a large number of actors or groups of actors. In this research, respondents in either network hardly thought about the whole but chose instead to talk mainly about specific situations or specific actors. Instead of looking at and thinking about the network, respondents preferred or were only able to look at dyadic relations. That is, a considerable number of the interviewees appeared to think about the network mostly in terms of the Interaction Approach and not the INA. In the project-based network, most respondents talked about specific actors and situations and did not make any generalizations, so they did not develop or make use of archetypes of actors or processes they could have come across in previous projects. Instead of drawing on their past experiences, respondents preferred to work in the present, focusing and limiting their views of the world to the current project. Given the unique properties of a project, actors assume quite distinct roles or attitudes for each one so that previous experience is rarely transferable en masse. Given the limited time span for most of the conception and execution of the project, actors do not have the required time or the required experience to develop preconceptions about the surrounding actors or processes. Additionally, generally the number of actors directly involved in a project is greatly restricted to simplify management and to facilitate the ability of its participants to keep the names and processes of other actors in their heads, so they do not need to simplify things or create archetypes. For example, the number of actors directly involved in the project was kept to a minimum with one client (Oak), one provider (Chestnut Consortium), and a reduced set of four grouped companies. One exception was where Oak respondents referred to the Metro system’s final users as the company’s clients. This generalization was expected because these clients, namely members of the public, are numerous.

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In the product-based network, the situation was for most respondents quite different. Respondents thought about groups of actors instead of (or as well as) specific ones. One of the respondents who did not speak about any specific actors, spoke instead about the company’s internal structures, and when referring to external entities, also spoke about groups: ‘‘I rarely speak with suppliers y I speak with them when there is a quality complaint and the supplier wants to know what was the impact at the plant level’’ and also ‘‘I don’t have much direct contact with clients but we know, more or less, what the customer wants y the client gives us some input through their complaints and this helps us a bit’’ (Zeta, Production Director). Some respondents talked about general situations and/or groups of actors then provided specific examples. For example, one respondent spoke in general terms about clients saying that ‘‘in some units within the partners, we have an over capacity and our partners suggest and give us permission to use that over capacity to 3rd parties’’ (Alpha, Commercial Director); then spoke in specific terms by providing an example: ‘‘for example, at YZZ in Portugal where I produce margarine packages, I also produce butter packages for one other client, ABC’’ (Commercial Director). Interestingly, those who aggregated actors also aggregated processes. Companies involved in the product-based network generally had a considerable number of direct counterparts. In addition, numerous other actors were directly or indirectly connected to the network. This large number of actors and linkages may explain respondents’ preferences for seeing groups rather than individuals. Most respondents had considerable business experience that allowed them to trace commonalities and develop archetypes, and by extrapolation, to view entities in an aggregated form. In other words, respondents were not particularly interested in specificities and believed their interpretative powers would lead to accurate generalizations that will speed up their company’s assessment and decision processes. The drawback is the risk of treating everything or every entity from the same group in the same way when different treatment techniques may be required. Their company may be blind to specific actors, processes, and the appropriate actions to take. Stereotyped Frameworks To portray the reality of industrial systems, IMP Group researchers suggest that relationships should be analyzed as part of other relationships in an overall network system (Ha˚kansson, 1982). The network metaphor better represents and elucidates the dynamics of business exchange. Previous research suggests that even though managers may not always articulate their

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views of their surroundings as a network structure, most do think in network terms (Mattsson, 1987) – this observation was inferred by the authors after analyzing several interviews carried out over the years by researchers from the interorganizational area of interest (Mattsson, 1985); networks are part of their theories-in-use (Zaltman et al., 1982). Perceiving the world in networks terms is one of the key assumptions underlying INA, inherent in the network model, and a requirement for strategizing from an industrial network perspective (Gadde et al., 2003). These authors claim that strategizing ‘‘implies that the heterogeneity of resources and interdependencies between activities across company boundaries, as well as the organised collaboration among the companies involved, must be considered simultaneously’’ (p. 357). Nevertheless, even though the majority of respondents in both networks saw the world in terms of a network, in most cases they claimed to see something else: a supply chain, a value chain, a competition business model, a distribution channel, a technological chain, or another framework, as the network picture dimension, stereotyping, captures. Respondents from the product-based network claimed they saw a supply chain but talked in network terms. For example, among other things one respondent said ‘‘ythere is a very strong interconnection in all of this, in such a way that the containers that we produce are in accordance with what the society expects from usy,’’ ‘‘ywe have heard about this competitor many times through the companies that we supply,’’ or ‘‘in a very general way, this is the environment where we are inserted; obviously, our strategic positioning depends on the positions of these companies’’ (Alpha, International Director), showing how he was able to perceive the interconnectedness and importance of company’s positioning in the network. However, the same respondent also said ‘‘here we have all the suppliers which will be within a group and that whatever material they supply us with; they are within the supply chain perspective’’ (Alpha, International Director). A supply chain, a traditional stereotypical framework of business relationships, is a simplified and less representative way of representing network activity. Claiming to see a supply chain or some other stereotypical form, but actually perceiving a network, can be understood as a technique unconsciously that respondents use to simplify reality and to achieve a sense of control over their complex surroundings. This unconscious process may relate to the academic experience of respondents: they may not being familiar with the INA to industrial systems but are familiar with other terminology used in economic textbooks. This stereotypical and simplified view of business may be the result of institutionalization efforts on the part of the company’s board.

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Finally, visualizing the network as a supply chain may be the norm in this sector of the plastic containers industry. In the last two decades IMP researchers have demonstrated that the network viewpoint is the most appropriate way to portray business activity in industrial systems (Ha˚kansson et al., 2010). However, some other models are still strongly rooted in a number of industrial sectors as would appear to be the case in the plastics industry where the supply chain is still seen as a valid representation of organizational systems. Most respondents in the project-based network did not perceive their surrounding world as a network but instead as hierarchies or as functional matrices. When describing the project, one respondent said ‘‘This model functioned well, it was only the possible one: a matrix type organisation. This type of organisation is complicated to manage because people are dependent to a double hierarchy. And here it also exists a Consortium Protocol, that was made by me and where are included what I thought that were the duties of the people’’ (Pine, CEO). Regarding the matrix, the rows include the functions that make the project feasible and the columns contain the companies. Those who see the system hierarchically generally included all companies directly involved in the project in its illustration or representation. Nevertheless, a few respondents do see the world in terms that can be described as those of a network, perceiving interrelated relations and the interconnectedness of the surrounding relationships. For example, one of these respondents said ‘‘there are several interfaces: one that is pronounced involved direct contact between Elm and the partners of the Chestnut Consortium, and then simultaneously there are relationships with those same companies but that have to go through Chestnut’’ (Elm, CEO). That interviewees frequently illustrate their surroundings in such a formalized fashion (i.e., organigrams and matrices) is not surprising given the tight structure of terms of the contracts. ‘‘The way I represent this is as a representation of the relations, starting with the client Oak which is the owner, followed by Chestnut Consortium which is the only one who has authority to have formal relations with Oak, and then Chestnut’s four partners: the construction group, Elm, Olive Tree and Aspen. This could be an extremely formal representation of the scope of a contract, with rules, and this is the only representation I believe it’s accurate’’ (Elm, Operations Director). Such high degree of formal positioning by respondents was further reinforced by the fact that the contracts clearly stated the power relations and interrelation of functions among participants. Such an arrangement, although potentially restrictive, does permit simplicity and so facilitates a

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shared understanding of actors’ roles. Participants in the project-base network agree that adherence to a formal contractually based perception of the environment is necessary to achieve goals. Even though some respondents did not see their surroundings in terms of an organizational network does not invalidate the use of network pictures as a research tool in this study. The tool was developed drawing on the IMP theory, and although it can bring out perceptions that are not associated with what the IMP body of literature would predict, the construct, network pictures, is still closely associated to IMP literature. Perceiving Different Levels of Comprehensiveness and Broadness Companies should have a broad view of the surrounding network and think about their direct relationships and connections as well as about other actors and respective relationships when strategizing (Gadde et al., 2003). This comprehensiveness principle draws on the idea that actors need to ‘‘identify, read, and interpret moves or changes in the network, in order to direct the conduct of a company’’ (Holmen & Pedersen, 2003, p. 412) and to be able to understand different perspectives of the network. Companies ought to have a ‘‘broader horizon when it comes to monitoring the behaviour of other actors’’ (Ha˚kansson & Snehota, 1989, p. 282), reflecting the idea that a broad and comprehensive perspective is a necessary condition for strategizing. Expanding the boundaries or horizon and deepening the extent of analysis likely increase the awareness by actors of the network. Broad or comprehensive actors’ views of the network do not guarantee that these views will lead to correct insights regarding the network or achievement of the desired network outcomes (Ford et al., 2003). Sometimes actors who intend to have a broad and comprehensive view of the world have difficulty accomplishing their aims. Anderson et al. (1994) argues that often actors have a restricted view of the world ‘‘due not only to the network extending further from the actor but also to the basic invisibility of network relationships and connections.’’ According to Holmen & Pedersen (2001, 2003), companies are myopic mostly because they have limited available resources (including managers’ cognitive capacity) which have to be well managed. This limitation forces the company to select relevant relationships that have to be dealt in more detail and with more intensity. Another reason why companies are myopic is because the amount of knowledge available in a network increases with specialization, forcing companies to limit their relationships to other companies that are likeminded and with whom they establish a coordinative relationship.

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Different levels of broadness and comprehensiveness are appropriate for different situations (Wilkinson & Young, 2002). Given that only a restricted set of opportunities and constraints can be identified and acted upon and since an actor incurs risks when trying to consider every effect its actions may have on others (Wilkinson & Young, 2002), companies are sometimes advised to have a relatively narrow or myopic view of the network. Wilkinson & Young (2002) claim that the networks often become too richly interconnected and companies incur additional costs to maintain a high level of awareness. Some actors choose a narrow view and are successful; others need a broader perspective to guarantee their viability (Wilkinson & Young, 2002). Practitioners usually only think about companies they are aware of and the ones they consider relevant to their activity (Anderson et al., 1994; Ford et al., 2002b; Holmen & Pedersen, 2001). When companies place too much importance in their own business (a common practice), they often ignore the existence of other actors and processes. This noncomprehensive view is not necessarily an oversight. In some situations, a narrower view is the result of an individual strategy to rely on other actors’ knowledge (e.g., from more specialized entities) or pictures of the world to know more about their surroundings. This way, actors can focus their attention on specific matters knowing that others can provide detailed information on other fields when needed. The extent of broadness or narrowness of any actor views of the network can therefore never be perfect. The network pictures dimensions of Broadness and Comprehensiveness captured from both networks this variety of viewpoints among respondents: some hold a broad view of the network; others, a narrow view. The same variety was observed for comprehensiveness: some respondents considered it important to know what was going on in their surroundings even if it did not directly relate to their activity, others did not. For example, all Delta respondents (from the product-based network) held a broad view of the world, speaking about entities they did not have business relations with and highlighting the importance of relations with the local social and political community. Delta is a chemical company and people usually associate this industry with pollution and negative effects on the local community. The business activity of the company has a strong impact upon and is strongly affected by these local entities so Delta has invested a considerable amount of resources to improve its relations with the local community and thus improve its public image. As one respondent put it, ‘‘then we have interactions with the local community and which I consider to be very important. These concern not only our close neighbors, but also the local authority (council, firemen,

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schools, and others) and other entities that are not as close such as labor inspection, health centers and governmental entities which manage the environmental area, the industrial treatments) y I think that these interactions must be and have been incremented because there are many people around this plant y and some do not have any notion at all of what we do while others have the wrong notion y for the last 3 or 4 years we have been doing excellent work and the people that are around us have already begun talking with a some knowledge when they talk about our company’’ (Delta, Production Director). This idea was reinforced by what one interviewee from Zeta, another company related to the chemical industry, said when listing the entities from his surroundings: ‘‘Then, and although it is not related to this whole, but that is very important for Zeta, there is the community. So, I would draw a little circle herey mainly in the chemical industry where the environmental part is very importanty and these are related to perceptions that we want Zeta to have y since the chemical industry is considered as a noxious industry. So, we must know y we must find a way to manage that perception’’ (Zeta, Production Director). Companies with fewer environmental and public image issues adopted a fundamentally business-oriented perspective of their surroundings (e.g., their view was narrower than Delta’s more comprehensive view of its environment). At Alpha, for example, not all respondents were able or willing to see the same number of actors and relationships. Those who talked about large numbers of actors usually also did so for relationships. While almost every respondent thought about the company’s direct business actors and its relationships with them, more perceptive managers also thought about entities (e.g., European and Local Plastic Commissions, the State, Recycling and Environmental Organizations, the Press, and competitors) and relationships that only indirectly affected them or not at all (e.g., they were aware of the interactions of companies who were neither clients nor suppliers). For example, one respondent talked about the relation among some of Alpha’s clients and their filling suppliers and how there was a business opportunity here for Alpha to expand its business activity: working with the filling suppliers could provide the client with a more complete product. If not for envisioning this relationship, this respondent would not be able to identify this opportunity for collaboration. Some Alpha respondents perceived the surrounding world in rich and detailed terms but others did not, mostly because they lacked the wealth of experience of their more established counterparts and had a restricted level of access to useful information. Given the high priority of communications

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and cooperation for the company, dissemination of rich knowledge flows throughout the company would be expected to be a priority. However, the evidence suggests that this was not the case and such a process was not talked about, perhaps because people were protective of their knowledge and did not want to share it. Interestingly, respondents from this company that had a broad view also held a comprehensive view – those who looked further also looked deeper. Thinking Solely in Win/Lose Terms Three main streams of thought within the body of strategic management include traditional strategic management (Ansoff, 1965; Porter, 1980), competence-based strategic management (Hamel & Prahalad, 1994; Prahalad & Hamel, 1990), and the INA to strategic management (Ha˚kansson & Snehota, 1989; Johanson & Mattsson, 1992). The INA is considered to be the one that best relates to practitioners and researchers’ views of business reality today (Tikkanen & Halinen, 2003). According to the first two approaches, companies enhance their business performance solely by competing; according to the network approach, competition and cooperation are simultaneously important and companies are always involved in both practices. With the INA to strategic management, the importance of competition has decreased to make room for the notions of interdependence and coevolution (Ford et al., 2003). Relations between companies are thus understood as involving simultaneously ‘‘elements of cooperation, conflict, integration and separation in the companies’ relationships’’ (Ford et al., 2002b, p. 2). However, in both networks not many respondents attribute the same extent of importance to competition and collaboration between actors. The world is perceived by most respondents as being predominantly split between a constant struggle for power or as collaboration between parties. Only a few respondents perceived the world as a combination of both. The respondents with a polarized view could be described as having a simplified view of business relationships. Respondents often perceive their surroundings in terms of conflict and power relations. For some respondents, power-based principles associated with traditional strategic management theories and with competence-based strategic management are still quite present and very valid. For example, a respondents who perceived the surrounding in terms of conflict said ‘‘the contact between these suppliers and my clients is less threatening than the contact between clients and raw materials suppliersy’’; the same

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respondent also said ‘‘sometimes, we also win and it feels great beating that competitor’’ and also ‘‘y it is quite obvious that Alpha is nowadays a seriously important player, both in the world and the markety’’ (Alpha, International Director). This perception of power may be related to the sector within which his company was involved. The plastic containers sector is highly competitive, and even though few companies are as large or larger than Alpha, competition is still very tight. Moreover, the director believes that numerous smaller companies usually offer their services and products at lower prices, to the detriment of quality. Given the director’s considerable experience in the business, he is expected to perceive the surroundings as being both power-driven and collaborative. Also, the nature of the company’s production and delivery system (i.e., holethrough-the-wall) presumes strong collaborative relationships or partnership agreements. For example, ‘‘y in these plants that we are supplying through-the-wall, frequently there are some unexpected situations, peak situationsy We also count on our suppliers’ flexibilityy’’ (Alpha, International Director). Another example is that of Gamma where all respondents thought about their surroundings in terms of conflict between actors. Interestingly, this took place in a company positioned, as some of the respondents put it, ‘‘somewhere in the middle between the big and the small sized competitors’’ (Gamma, Financial Director). Gamma does not have the scale of operations necessary to compete with the big companies, as neither has the negotiating power essential to getting good deals on raw materials, can it compete on a price basis like most of the small competitors are able and willing to do. Gamma is in a somewhat permanent state of tension precariously balancing between the low price strategies practiced by small competitors and the realization that at any time big competitors may steal some of their most important clients. As one respondent put it ‘‘We are not in a situation of ‘small is beautiful’, or are a big company with independent structures to invest in development and with well-structured techniques in which there are always available resources. Not here! Here, since these advantages are not present, people have to work a lot, and this is a growing trend’’ (Gamma, Financial Director). While the company is in constant danger of losing capacity and falling back into the category of the smaller competitors, as opportunities present themselves, they do aspire to become a major player. In the project-based network, a small majority of the respondents perceived the world simultaneously as an arena for collaboration and for conflict. On the one hand, they believed the project would never be feasible

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without actors’ joint efforts. They were mindful of the grouped companies that are direct competitors outside the project and of time pressures associated with successful project completion. As one interviewee expressed, ‘‘Chestnut plays the role of maestro of this band so that everyone plays the same tune. But it is normal that at different moments, different people are playing different tunes. Everyone must nevertheless work with the same aim otherwise this project will never be feasible’’ (Willow Consortium, CEO). Everyone was expected to work toward the same goals and not to destabilize progress. The importance of companies agreeing and collaborating appears to be ingrained into the project’s structure, and any potential conflict needs to be resolved swiftly. In order for this to happen, Chestnut Consortium had a special committee created with the aim of formally resolving such conflicts between the parties involved. Conflict is an inherent property of contracts with such a hierarchical structure because the potential for jockeying for position and the need for arbitration are always present. A potential source of conflict in this project that failed to materialize was the contractually established relations of power. Respondents said that during the project’s lifetime day-to-day conflicts were rare, but they did exist and were resolved through this special committee. Moreover, the legal aspects of the contract were generally accepted and not contested. As one interviewee put it, ‘‘we have a contract covering many areas and that defines our intervention space. And the role of a director is always based on that contract, to fulfil the set objectives. And although we work with people, basically the objective of the contract is that I have to fulfil my activities (especially within a consortium) and the others have to fulfil theirs’’ (Elm, Operations Director). The existence of these factors meant that small conflicts did not escalate into major disagreements.

Commonly Identified Practices Taking the analysis to a higher level of aggregation, what do the nature of network pictures and variations among people tell us? Analysis of all the network pictures supports the proposition that people more or less consciously frequently adopt certain practices. People appear to adopt stereotypes of different orders, simplify reality, possess a self-centered view of the world, and unconsciously envision some framework to help them to understand the world and to guide their actions.

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Stereotyping Stereotyping, an important part in individual frames of reference, plays the role of safety net. Analysis identified stereotyping of a diverse nature (e.g., adopting an egocentric view by positioning one’s own company at the center of everything, seeing the surroundings as a supply chain or a hierarchy, and considering the clients as the reason for being of the company). People appear to naturally undertake these stereotyped and institutionalized views of the world and not make any effort to understand what is going on in the network. When adopting these stereotypes, individuals adapt ways of looking at things that have already been used and tested before by other people, ways that are widely accepted among practitioners that apparently work. What individuals may fail to realize is that a stereotype that works and can be applied to some situations may not work in other situations. Stereotyping may appear to individuals to be the safe option when in fact it may not be the most appropriated alternative. Although one correct or complete representation of surroundings does not exist, stereotyping may mislead individuals in their understanding of the world. Simplifying Reality This research frequently included observations of respondents’ predisposition to simplify reality. The network is by definition and nature multidimensional, but in numerous situations the interviewees appeared to think about it without considering part of its complexity. For example, most individuals saw their surroundings solely in terms of actor bonds, not mentioning any activity links or resource ties between actors, and described their surroundings solely as a scenario for collaboration, not mentioning any manifestation of conflict between parties. By simplifying reality, individuals feel a sense of greater control over their surroundings and this control may make them more daring when carrying on their activities. Hence, the simplification of reality does not have to be understood as something to avoid, given that it does not reflect in a ‘‘complete’’ way what is going on in the network. Instead, simplification can be understood as a way of looking at reality that confers on individuals’ greater practicality. This observed myopia may result from individuals’ conscious choice or it may simply be the result of the incapacity to see the complexity of the world where companies are embedded. In the latter case, some aspects of the network may appear to be so obvious and so ingrained into an individual’s daily life and frames of reference that they may not realize they are there. Using an analogy with a picture or a painting, individuals are not able to see

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the frame of the picture when it is the former that determines the size of the latter. Anyway, actor mental representations are never perfect and can be considered as a mere simplified description of a complex reality. Self-centric View of Own Company Most individuals do not appear to be able or interested in stepping-back and looking at the network to take into account their own as well as the perspective of other actors. Individuals are so embedded in their own reality and perceptions that they are not able to consider that other actors may see things (including their company) differently than they do, and by so doing, they may be missing out on opportunities or incurring unnecessary risks. For example, although networks do not have an objective center, in these analyses individuals usually perceive themselves as being the center of everything. By not considering that other actors probably think differently, individuals’ perceived objective center is one that may not actually exist or may take a different shape for the surrounding actors. Many respondents are not interested in knowing what is going on in the network. Given that individuals are believed to see their own views as being objective and not perceptual, they are expected to behave with the conviction that only their perspective of the network matters. Unconsciously Making Efforts to Develop a Framework Most respondents express consistent and structured views of their surroundings, leading to the belief that individuals are usually concerned about and put some effort in developing an informal framework of their surroundings – something that can help them understand what is going on in the network. This framework can be more or less complete and more or less realistic. The same logic underlies the theoretical construct of network pictures developed here with the intention of capturing what individuals see in their surroundings. The main difference between individuals’ informal frameworks of their surroundings (that they consciously or unconsciously try to construct) and the theoretical construct of network pictures is the level of formality and consciousness associated with each of them. Whereas the theoretical construct is a tool that results from a formal exercise and that can be consciously used by researchers (and practitioners) to represent as complete a structure as possible of actors’ perceptions of the network, the informal network picture is most probably unconsciously developed. Outcomes from this research suggest that individuals make an effort (in a conscious and structured way) to understand their own views as well others’ views of the

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world. The theoretical construct of network pictures can be used as the tool for accomplishing that aim.

DISCUSSION AND CONCLUSION The use of the research tool of network pictures allows for grasping, in an analytical and structured way, how and what respondents perceive in their surrounding business network (i.e., the tool grasped practitioner theories). The importance of knowing what practitioner theories (i.e., actor pictures) are about is twofold. First, according to sense-making theory and theory on performativity, in order to understand network-related phenomena, those pictures or theories must be made more visible. As cognition drives action and managers perform their business landscape (Kjellberg & Helgesson, 2006; Weick, 1995), practitioner theories are a fundamental piece of the overall puzzle. Second, comparing the grasped practitioner theories and academic (IMP Group) theories becomes possible (Brennan & Turnbull, 1999; Mattsson, 2005b), a point that adds to the growing debate on the relationship between academic research and managerial practice (Astley, 1984; Calder & Tybout, 1999). As Mattsson (2005b, p. 4) puts it, ‘‘to apply a performative perspective we need to make a distinction between ‘‘academic theories’’ and ‘‘practitioner theories’’ of markets within and between wish there might be implicit or explicit controversies or ambiguities.’’ The study reveals the terms managers use to think about their business surroundings, and more importantly, how they commonly seem to engage in some practices in order to deal with the complexity of those surroundings (e.g., simplifying reality, personalizing business relationships, and stereotyping). The research also shows how many of the theories underpinning the INA and the IMP Group do not reflect how managers actually perceive the business network. For example, while INA says that business relationships are about the interconnections between actor bonds, resource ties, and activity links, most of the respondents in this research thought about business relationships solely in one or two of these set of dimensions. Also, while the IMP Group principles say that an (objective) hub to a business network cannot be defined, respondents frequently perceived their own company to be the center of the network. Moreover, while managers commonly stereotype what is going on in their surrounding by claiming to see supply chains or Porter’s 5 forces model, the IMP Group describes the industrial systems in terms of business networks. These findings point to a

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certain degree of incoherence between (IMP Group) academic theories and practitioner theories. Brennan and Turnbull (2002) discuss the gap between practice and IMP theory captured in this research. Drawing partly on Gemunden’s (1997) research on the IMP work, Brennan and Turnbull (2002) argue that IMP researchers are too descriptive and not prescriptive enough, they are not worried about the performance of companies, and they are disconnected from reality, having not realized or been able to keep up with the changes that have been taking place in the business environment. These authors call for additional effort to improve collaboration between practitioners and researchers, which involves effective means of communication and technology transfer (i.e., transfer of techniques between the two communities). This last point is perhaps the most pertinent one – IMP Group researchers should in fact invest in finding ways to improve the both-ways transfer of technologies techniques. After all, ‘‘IMP research proposes concepts, models of interdependencies and frameworks that are aimed at improving managers understanding of opportunities, restrictions and consequences of various action alternatives’’ (Mattsson, 2005a, p. 12). By providing researchers with an understanding of how managers perceive their surroundings, and by identifying several areas where practitioner theories are not congruent with IMP theories, the research put forth here strives to contribute to the call put forward by Brennan and Turnbull (2002) for an improved communication strategy between the two communities.

Limitations and Future Research One of the limitations of this research lies in considering only IMP academic theories. The complexity that would result from including other bodies of research and the managerial grounding that underlies the IMP theory justify this choice (Johanson & Mattsson, 1994; Turnbull et al., 1996). As Mattsson (2005b, p. 5) expresses, ‘‘The IMP research has, more than other market theories perspectives an inherently performative flavor with its emphasis on interaction within and between dynamic, interconnected exchange relationships.’’ Nevertheless, the extent to which other specific theories are incorporated into practitioner theories, as well as the reasons underpinning that presence, are worthy of future consideration. Additionally, as Mattsson (2005b) suggests, future research could also attempt to provide an explanation for how different and sometimes contradictory theories coexist within the same network, within the same

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company, or even the same individual regarding different moments in time or different areas. While Mattsson (2005b) points out conflicts and contrasting aspects between IMP theories and other theories, he does not explore the consequences of their coexistence. Another area related to performativity that is yet to be explored is the bridge between exchange practice and representational practice (Kjellberg & Helgesson, 2006). The present research shows how network pictures are useful as a research tool to grasp actors’ representational practice, so the next step would be to find a way to analyze actors’ exchange practices and to study the interconnection between the two practices (i.e., how exchange practice informs and is informed by representational practice). Such research would add to the growing body of literature on performativity in a business-to-business marketing context by putting forward a more explicit performative approach. Another limitation relates to the specificity of the two networks that were selected as the settings or sources for the data collection. Productbased networks and project-based networks correspond to the two opposite conditions in the situational exchange continuum (Lambe et al., 2000). One corresponds to an interimistic situation; the other, a relational exchange situation. If networks with other features had been included in the data collection, different practitioner theories might have been identified. In any case, the purpose of this research was mostly exploratory – aimed at raising issues regarding the discrepancy between practitioner theories and (IMP Group) academic theories and that can be extended in future research. Another interesting direction for research would be to attempt to understand if practitioners exposed to the IMP theory choose/are able to represent the world in IMP terms or in different terms in order to allow controlling for practitioners’ knowledge or acquaintance with IMP theory. Performativity theory is in need of further development. The way representational practice conditions, and is conditioned by exchange practice is yet to be fully understood, this lack of knowledge calls for further practice-based research.

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APPENDIX: TEMPLATE OF THE GUIDE USED FOR THE DATA COLLECTION (IN RAMOS & FORD, 2011) Introductory Section We want to talk about the entities that are around you: about the people, companies or groups of companies that you have business with and the ones that, although you do not have business relations with, appear to influence or to be influenced by you or by your company and by your activity. We also want to talk about the relations that you have with those entities and about the relations that these entities have with other.

Visual Data Collection If we give you some blank paper, can you please try to draw the entities that are around you as well as the relations that you see? Feel free to draw whatever you feel being appropriate. We just want to know what your view on this set of entities and relations is. Please identify clearly the names of the entities or groups of entities that you choose to include in this representation. You can use arrows, lines and circles, squares, whatever you desire and feel as most appropriate. There is no time limit for this task and let us just remind you that there is no correct way to do this drawing or representation.

Follow-up Discussion After finishing your representation, can you please try to explain what you have drawn?

Verbal Data Collection 1. Scale and Structure of the network (Element 1 of network pictures) Can you please name the entities that are somehow important for you or for your company’s activity? Can you also include those with whom you or your company does not have direct contact with, but that somehow condition your or your company’s activity?

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Tell me about the entities you have identified: What are they doing? What are they trying to achieve? What problems do they seem to have? What makes them interesting? 2. Processes of the network (Element 2 of network pictures) Tell me about the relation that exists between you or your company and the entities you have identified. Can you also tell me about the relationship that exists between the entities you have identified? For how long have the relationships been going on? Will there be any changes in a near future? How did the relationships get to the current situation? Who was responsible? What seems to be happening nowadays? Is there something in particular you want to talk about? What do these people talk about? And how frequently do they talk? Are these people trying to do something or trying to change something in the relationships? Who is it that usually takes the initiative to change something in the relationship? Does every company get and give the same ‘treatment’? Why is that? Do any of these relations make a difference for your activity? Was there any particular investment in these relations? If so, of what nature? What is it that these entities apparently do or develop together? 3. Positioning in the network (Element 3 of network pictures) Where would you place yourself/your company within the group of entities you have identified? From your understanding, what is the most important entity? And why is that? Would you say that there is any entity with the capacity to influence the others? Why is that?