Managing collaboration within networks and relationships

Peter J. Batt

a,

*, Sharon Purchase

b

a

Agribusiness Marketing, Curtin University of Technology, GPO Box U1987, Perth 6845, Australia

b

Marketing, School of Business, University of Western Australia, Crawley 6009, Australia

Received 1 September 2003; received in revised form 1 October 2003; accepted 1 November 2003

Abstract

Building on the central theme of the inaugural meeting of the Industrial Marketing and Purchasing (IMP) Group in Asia in Perth 2002, we

have selected those papers that best reflect our current thinking on managing collaboration in networks and relationships. In the nine papers
that follow, we examine the impact of time, market orientation, culture, communication, and trust on relationships and examine these within
the context of both the manufacturing and service industries using a variety of alternative approaches.
D 2004 Elsevier Inc. All rights reserved.

Keywords: Relationship communication; Customer intimacy; Key network

1. Introduction

Networks were born amid market turbulence. Networks

have risen to prominence due to industrial restructuring,
large-scale downsizing, vertical disaggregation and outsourc-
ing, and the elimination of management layers. Replacing
them are leaner, more flexible firms focused on core tech-
nology and processes. These firms are closely aligned in a
network of strategic alliances and partnerships with custom-
ers, suppliers, distributors and competitors

(Achrol, 1997)

.

Business networks are forming around knowledge bases

such that the maximisation of knowledge is obtained
through network collaboration rather than through individ-
ual business units. Such knowledge-driven networks rely on
external actors to acquire the desired resources for the firm
to grow and survive. Knowledge has been recognised as a
strategic asset and a source of competitive advantage
especially in multinational enterprises and their subsidiaries

(Nonaka & Takeuchi, 1995)

. Whereas tangible assets such

as land, labour, machinery, and raw materials are relatively
easy to access, to achieve a sustainable competitive advan-
tage, the firm must focus on those assets that are rare,
durable, not easily traded, and difficult to imitate.

Gulati, Nohria, and Zaheer (2000)

contend that the

conduct and performance of firms can be more fully
understood by examining the network of relationships in
which they are embedded. As networks potentially provide
the firm with access to information, resources, markets, and
technologies, relationship building may not only be the most
important resource for the firm

(Gadde, Huemer, & Hakans-

son, 2003)

but also the source of a sustainable competitive

advantage.

Firms seldom survive and prosper solely through their

individual efforts. Each firm’s performance depends upon
the activities and performance of others and hence upon the
nature and quality of the direct and indirect relationships a
firm develops with its counterparts

(Wilkinson & Young,

2002)

. Reliance on other network actors ensures that col-

laboration between internal and external actors requires
expertise and competence if the relationship is to be suc-
cessfully maintained (Ritter et al. this edition). Reciprocity
and reliance on other firms ensure that firms are required to
both give resources to the network and take resources from
the network to collaborate. ‘‘Give and take’’ is important as
this ensures that no one actor gains all the network resources
to the detriment of other network actors.

Developing this argument further, firms within the net-

work are not free to act according to their own aims

(Hakansson & Ford, 2002)

. Firms do not operate in isolation

but must seek to collaborate with other network actors to
achieve their goals. As the key factor in the successful

0019-8501/$ – see front matter

D 2004 Elsevier Inc. All rights reserved.

doi:10.1016/j.indmarman.2003.11.004

* Corresponding author. Tel.: [phone]; fax: [phone]-

3063.

E-mail addresses: [e-mail] (P.J. Batt),

[e-mail] (S. Purchase).

Industrial Marketing Management 33 (2004) 169 – 174

implementation of strategy is how the goals of the individ-
ual firm relate to the ambitions and activities of relevant
others, collaboration between firms is required for the
individual firm to develop an overall understanding of the
network goals

(Gadde et al., 2003)

.

2. Network collaboration

A firm’s position in the network is dependent upon the

nature of the direct and indirect relationships it has with
other actors in the network

(Johanson & Mattsson, 1992)

.

As firms are as much the product of their relationships and
network position as they are the result of the firm’s own
strategic actions and intentions

(Hakansson & Ford, 2002)

,

attention is gradually shifting from the control of business
networks to one of greater participation and adaptation in
which the participating firms must be more flexible and
adaptable

(Wilkinson & Young, 2002)

.

As a network is a set of connected relationships between

firms

(Hakansson & Johanson, 1993)

, effects will flow

through the various relationships that the focal firm has
established with other connected actors. Connectedness is
the extent to which exchange in one relation is contingent
upon exchange in another

(Cook & Emerson, 1978)

. More-

over, two connected relationships can be directly or indi-
rectly connected to many other relationships that may have
some bearing on each firm as part of a larger business
network

(Anderson, Hakansson, & Johanson, 1994)

. Thus,

collaboration within one relationship will affect relation-
ships with other closely connected actors, making the
collaboration process and its outcomes contingent upon
the goals of the network rather than the dyad.

Hakansson and Ford (2002)

describe how firms embed-

ded in business networks are interdependent on other firms
in the network. This interdependence implies that firms have
limited discretion to act or to build independent strategy

(Gadde et al., 2003)

. As a result, the outcomes of the firm’s

actions are strongly influenced by the attitudes and actions
of those firms with whom the focal firm has relationships.

But who are the relevant others and how can they be

determined? Network structure and network position affect
how network collaboration will occur and between which
network actors’ collaboration will take place. Developing an
understanding of network structure will enable firms to
consider with whom they may be directly or indirectly
affected and affected by. However, a business network does
not have a natural centre or clean borders making network
structure a fluid concept that invariably changes over time

(Hakansson & Snehota, 1995)

.

3. Collaboration in network organizations

Network organizations can be described by the density,

multiplexity, and reciprocity of ties, and a shared value

system that defines membership roles and responsibilities

(Achrol, 1997)

. If the overall collaborative efforts of the

network are well directed, the network may become more of
a network organization than a network of linkages. Exam-
ples can be derived from technology networks where R + D
organizations, producers, and distributors closely coordinate
their activities to provide new products to the market in a
timely manner.

Networks have both economic and social dimensions that

are important for the optimal operation of the network. This
implies that many aspects of business relationships cannot
be formalised or based on legal criteria (contracts)

(Gadde et

al., 2003)

. Collaboration involves both aligning the eco-

nomic goals and aims of the network and the development
of the social dimensions—in particular, mutual trust and
commitment.

Trust is the critical determinant of a good relationship

(Dwyer, Schurr, & Oh, 1987)

.

Anderson and Narus (1990)

view trust as the belief that the partner will perform actions
that will result in positive outcomes for the firm and not to
take unexpected actions that may result in negative out-
comes.

Moorman, Deshpande, and Zaltman (1993)

define

trust as the willingness to rely upon an exchange partner in
whom one has confidence. They describe trust as a belief, a
sentiment, or an expectation about an exchange partner that
results from the partner’s expertise, reliability, and intention-
ality. However, trust also relates to the focal firm’s intention
to rely on their exchange partner.

Ganesan (1994)

describes

this as benevolence because it is based on the extent to which
the focal firm believes that its partner has intentions and
motives beneficial to it. A benevolent partner will subordi-
nate immediate self-interest for the long-term benefit of both
parties

(Geyskens, Steenkamp, & Kumar, 1998)

.

While trust has received much attention within the

Industrial Marketing and Purchasing (IMP) Group, trust
has both active and passive dimensions that may prove
instrumental in providing the driving force for change
within the network

(Gadde et al., 2003)

. Firms in the

network will lie somewhere along the continuum between
active and passive. Whereas passive firms adapt to the
routines established, active firms are ambitious and want
to change routines. However, the ability of the firm to act
will depend upon the nature of its relationships with other
firms and the extent to which these can be mobilised.

Power is an essential characteristic of social organization

and an inevitable instrument for interorganizational coordi-
nation. While the power to coordinate is the prerogative of
the dominant firm, the use of reward power, coercive power,
and legitimate authority is seldom conducive to the evolu-
tion of network organizations

(Achrol, 1997)

. Furthermore,

the more a single firm seeks to control the network, the less
effective and innovative the network will become

(Hakans-

son & Ford, 2002)

. Where development processes are

directed by just one firm, there is a greater risk that the
network will become a hierarchy with the reduced potential
for innovation

(Gadde et al., 2003)

.

P.J. Batt, S. Purchase / Industrial Marketing Management 33 (2004) 169–174

170

As

Macneil (1981)

observes, the more relational exchange

becomes, the less likely firms are to exercise legitimate or
coercive power. The kind of power that is consistent with
interorganizational influence in networks is that which builds
social bonds and close relationships—that is, expert, reputa-
tional, and referent types of power

(Achrol, 1997)

. However,

expertise is something that must be constantly regenerated,
promoted, and communicated because expert power, once
expended, is often lost. This demands an ongoing program of
innovation, training, and communication.

Communication has been described as the glue that holds

together a channel of distribution

(Mohr & Nevin, 1990)

.

Communication in marketing channels serves as the process
by which persuasive information is transmitted

(Frazier &

Summers, 1984)

, participative decision making is fostered,

programs are coordinated

(Anderson & Narus, 1990)

, power

is exercised

(Gaski, 1984)

, and commitment and loyalty are

encouraged

(Anderson & Weitz, 1992)

. Communication

enables information to be exchanged that may reduce certain
types of risk perceived by either one of the parties to the
transaction

(McQuiston, 1989)

. Any uncertainty about a

customer’s or supplier’s organizational structure, viability,
methods of operation, technical expertise, or competence can
be resolved by communication between the parties. Commu-
nication not only improves a firm’s credibility but may also
provide a convenient and simple means of gaining knowl-
edge about the market

(Cunningham & Turnbull, 1982)

.

Communication may also facilitate other elements of the

interaction, such as adaptations by suppliers and customers
to the design or application of a product, or the modification
of production, distribution, and administrative systems by
either party. While effective communication may enable the
firm to differentiate its product from the competitor’s offer-
ings

(McQuiston, 1989)

, meaningful communication and

cooperation between firms is a necessary antecedent of trust

(Anderson & Narus, 1990)

.

4. Reviewing concepts on collaboration

The contributions within this special issue are intended to

extend our current thinking on collaboration within net-
works and the subsequent impact of the various strategies a
firm may employ in its relationships with subsequent others.
While the papers may not necessarily reflect our own
thoughts, the papers selected are expected to contribute to
the debate in this area.

In an increasingly dynamic and turbulent market envi-

ronment, a firm’s ability to develop and successfully man-
age its relationships with other firms is emerging as a key
competence and source of sustainable competitive advan-
tage. Ritter, Wilkinson, and Johnston recognise that firms
are embedded in a network of ongoing business and
nonbusiness relationships that both enable and constrain
the firm’s performance. While many business managers may
perceive that they are in total control of these relationships,

most inevitably discover that they themselves are subject to
the control and influence of others.

Ritter, Wilkinson, and Johnston propose that firms and

networks of firms are complex adaptive systems that cannot
be centrally directed. In business networks, firms participate
in a self-organizing process that emerges from the interac-
tions taking place among the individual firms involved. As
all firms are simultaneously involved in the ongoing man-
agement of the network, business networks can neither be
controlled nor directed by an individual firm. Rather than
attempting to manage the network, firms must learn to
manage the interactions that take place within their relation-
ships both internally and externally.

Interaction is the key construct at the heart of relationship

marketing and the network paradigm. As interfirm interac-
tions occur in time, the interaction process can only be fully
understood by examining time, for time is the means by
which humans perceive their world. Medlin describes how
to interact humans must relate time to the present and to
position events in the past, present, or future. In any
relationship, the present will be conditioned both by the
past and future expectations.

In conceptualising a moment as ‘the time taken for a

thought to emerge and be acted upon,’ Medlin describes
how an interaction will take at least two moments. While the
past may provide various interpretations of the interaction
and the future holds potential interactions, it is only in the
present where perception and interaction occur. Interaction
therefore can only occur in those moments that make up the
present. Furthermore, an interaction in the present will only
continue when some presumption of the future is made, for
without a future, there is no need for continuing interaction
between firms. Inasmuch as time limits potential interaction,
not only is correct timing an issue in business relationships
but managers will always be faced with continually chang-
ing business relationships. To create value, management
must therefore continuously reposition the future of the firm.

While there is much debate in the IMP literature about the

relative merits of adopting a portfolio approach to managing
relationships, Ojasalo describes an innovative approach for
managing business networks. Derived from a synthesis of
network theory and key account management, the key net-
work management approach proposes that the focal firm
should create a defined subnet or key network. The focal
firm must decide which actors (organizations and individu-
als) are within the key network and identify through which
access points it will interact with the more extensive network.

In deciding which actors are to be included within the

key network, the focal firm must consider the ability of each
actor to mobilise, access, and mix resources. To create a
competitive advantage, the capabilities brought into and
developed within the key network should not only be
difficult for competitors to replicate but should also com-
plement the existing capabilities of the network. Further-
more, while the focal firm may wish to exert some control
over the key network to protect its position in the market,

P.J. Batt, S. Purchase / Industrial Marketing Management 33 (2004) 169–174

171

control is not synonymous with command. Rather, the focal
firm must learn to manage the key network, adopting a more
facilitatory approach to joint learning, innovation, knowl-
edge transfer, and the provision of technical support. Oja-
salo then proposes that the focal firm should manage each
member of the key network in terms of four main strategies:
grow, develop, maintain, or abandon.

Utilising a somewhat different approach, Tuominen,

Rajala, and Moller propose that competitive advantage is
derived from the alignment of the business logic, company
culture, market orientation, market capabilities, and nature
of customer relationships. Firms establish relationships with
those firms who deliver superior customer value. Invariably,
as the firms become closer, more selective, and more
familiar, they become more intimate. Customer intimacy
refers to the tailoring of the focal firm’s offer to match its
customers expressed and latent needs. To achieve customer
intimacy, a relationship orientation must pervade the values
and norms of the organization. The firm must keep deep-
ening its knowledge of the customers and put this knowl-
edge to work through the organization. Finally, the key
business processes must be internally integrated and exter-
nally aligned with the corresponding processes in the
customer’s organization.

Moller and Svahn recognise that differences in the

cultural orientation of the firms participating in the network
can have a significant impact on the ease with which
knowledge is shared both within and between firms. Cul-
tural factors are known to influence communication and to
shape the behaviour of actors in cross-cultural business
relationships and networks. Culture, however, is a very
complex phenomenon that impacts upon business relation-
ships and networks at a multitude of levels including
national culture, the organizational or business culture,
and the professional culture.

Utilising the individualist – collectivist dimension pro-

posed by Hofstede and the vertical – horizontal dimension
proposed by Triandis, Moller and Svahn demonstrate how
culture influences the kind of information people prefer and
the manner in which that information is processed. In
collectivist cultures, communication tends to occur primar-
ily with in-group members, whereas in individualist cul-
tures, people communicate more readily both within and
across organizational boundaries. Within vertical cultures,
information processing and knowledge sharing are expected
to take place along more hierarchical lines, whereas in
horizontal cultures, cross-hierarchy and cross-organizational
communication should meet less resistance.

In successfully managing multicultural alliances and busi-

ness nets, Moller and Svahn identify the critical role that
boundary spanners provide in minimising communication
failures. Boundary spanners should not only be culturally
sensitive but should also match their counterparts in terms of
authority, age, and preferably gender. Especially in high-
context cultures, building trust and personal friendships is a
precondition for an efficient and effective business net.

Taking the communication theme a step further, Lind-

berg-Repo and Gronroos describe a case where a commu-
nication strategy provides the basis for creating a greater
value in customer relationships. Turbulent environmental
conditions and greater competition increase the need for
more integrated communication strategies. After presenting
a trimodal conceptualisation of relationship communication,
Lindberg-Repo and Gronroos then apply it to Finnair. Value
creation occurs when consumers integrate communication
processes with their relationship to the brand. In the service
sector, communication takes place through brand contact,
where the customer has an active role in coproducing value.
The case highlights how two-way communication processes
in a relational context both create and transfers value within
the dyad. As the parties become closer, they become more
interconnected, thereby creating a greater value.

Value creation through relationship management is an

important job function for business-to-business managers.
Leek, Turnbull, and Naude´ investigate current relationship
management practices within two industries. Three methods
of relationship management are considered: formal docu-
mented systems, personal judgement, and meetings. Each
method allows users to evaluate different types of informa-
tion within different contexts creating greater flexibility in
the transfer of information within the relationship.

Relationship management practices varied between the

industrial sectors, with financial services more likely to use
each of the three methods than manufacturers. Both indus-
tries reported that regular meetings were the most useful of
all three communication methods due to the ability to allow
problems to be explored, provide opportunities for both
parties to bring their experience to bear, enable coordination
of activities, and ensure that the same rules and goals within
the relationship are maintained. When comparing suppliers’
relationship management practices between the industries,
financial services relied more upon all three communication
methods, while manufacturers tended to use two methods:
meetings and personal judgement. Buyers also differed
between the industries with financial buyers using formal
documented systems and meetings more than manufacturing
buyers. Differences in management practices could be due
to the intangible aspects of information regarding services
versus the objective information utilised within manufactur-
ing industries. As a consequence, service industries require
a more thorough transfer of subjective information through
the use of all three communication methods.

If learning and innovation is to thrive, relationships need

both stability and variety. To achieve this, Huemer inves-
tigates the importance of both trust and identity in the
context of balancing stability and variety within business
relationships. Stability allows the actors to think and act as
they learn, while variety improves the conditions under
which learning takes place. Trust develops in both active
and passive forms. Passive trust gives relationships a
stabilising force, while active trust develops forces in favour
of variety.

P.J. Batt, S. Purchase / Industrial Marketing Management 33 (2004) 169–174

172

Huemer also highlights the differences between an

organization’s identity and its links to stability, and be-
tween network identity and its links to variety. When
balancing stability and variety within the relationship, trust
and identity have important implications to the overall
strategy pursued. While Huemer highlights a number of
traps and tradeoffs that are present as firms consider how
to balance relationship stability and variety, relationships
must be stable enough to endure in the longer term and
dynamic enough to ensure that the learning process can
continue. To achieve this balance, managers need to
understand how trust and their identity operate within the
network.

Trust within relationships is important for all firms to

operate within their networks. While the use of written
contracts within relationships is sometimes interpreted as a
legalistic tool that is used to handle a lack of trust between
the actors, Roxenhall and Ghauri present a contrary view
where contracts are used primarily as a communication
tool. Contracts communicate production requirements
(what, when, where, and how), what to do when unfore-
seen events occur, and the expected traditions and rituals
that have to be performed. The authors describe a number
of factors that influence the use of contracts, the type of
contract developed, and the format of negotiation under-
taken to develop the contract. Through the presentation of
three cases, the authors describe how different factors lead
to the different uses of the contract. While contract nego-
tiations have no direct effect on the use of the contract, the
extent to which the respective parties refer to the contract is
influenced by the nature of the relationship: transactional or
relational.

Furthermore, the type of contract developed has the

greatest influence on how it is used. Detailed contracts are
developed for routine products and tend to be used for
fulfilling the contract requirements in a nondifferentiated
manner. Products that are complex and uncertain have
contracts that tend to lack detail and are used in a more
differentiated way. Conflicts that arise within the relation-
ships tended to be resolved informally without the use of
contracts.

Acknowledgements

In bringing you this special edition, we take this

opportunity to acknowledge the various reviewers who
provided their expertise and independent judgements: Luis
Araujo (University of Lancaster), Keith Blois (Oxford
University), Alexandra Campbell (York University), Anna
Dubois (Chalmers University), Susan Freeman (Monash
University), Laurids Hedaa (Copenhagen Business School),
Elsebeth Holmen (Norwegian University of Science and
Technology), Anton Kriz (University of Newcastle), Sheena
Leek (University of Cardiff), Raymond McDowell (Bristol
Business School), Lars-Gunnar Mattsson (Stockholm

School of Economics), Kristian Moller (Helsinki School
of Economics), Ann-Charlott Pedersen (Norwegian Univer-
sity of Science and Technology), Catherine Sutton-Brady
(University of Western Sydney), Jan-Ake Tornroos (Abo
Akademi Business School), Judy Zolkiewski (Manchester
School of Management), and the Executive Editor (Peter La
Placa), who so graciously provided us with this opportunity
to share our knowledge.

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