0019-8501/99/$–see front matter

PII S0019-8501(99)00086-3

Industrial Marketing Management

28

, 413–427 (1999)

© 1999 Elsevier Science Inc.

All rights reserved.

655 Avenue of the Americas, New York, NY 10010

Business Relationships

and Networks:

Managerial Challenge of Network Era

Kristian K. Möller

Aino Halinen

The competitive environment of firms is undergoing a funda-

mental change. Traditional markets are being rapidly replaced
by networks. This poses major managerial challenges for in-
dustrial and high technology companies. From a conceptual
point of view, this means that we have to look beyond ordinary
customer and supplier relationships into intricate webs of
firms forming R&D networks, deep supplier networks, and
competitive coalitions. This introductory article of the special
issue of IMM focuses on the management capabilities required
in network environments. We propose a network management
framework that is used for discussing the current managerial
implications of the emerging industrial network theory influ-
enced heavily by the Europe originated IMP Group research.
The framework also is used for positioning and describing the
articles of this special issue. We conclude by presenting a brief

synthesis of the dualistic nature of network management and a
research agenda.

© 1999 Elsevier Science Inc. All rights re-

served.

INTRODUCTION: EMERGENCE OF A
NETWORK ERA

We have two goals with this introductory article for the

special issue of

Industrial Marketing Management

, on

managing business relationships and networks. First, we
propose a conceptual framework covering the core issues
in managing business networks and relationships. This
framework then is used to discuss these managerial chal-
lenges. We intend to develop a research agenda by indicat-
ing what issues have been well attended to and which need
more research attention. The second purpose is to offer a
guideline for the articles in this special issue. Each contri-
bution is discussed briefly, with the help of the framework.

Address correspondence to Kristian K. Möller, Helsinki School of

Economics and Business Administration, P.O. Box 1210, FIN-00101 Helsinki,
Finland.

414

As an introduction, the character of business relation-

ships and networks is briefly described, and the drivers
for what we call a network era are identified. The next
section presents the construction of a Network Manage-
ment Framework, where we identify the managerial is-
sues related to business relationships and networks and
discuss briefly the core research. The third section covers
the presentation of the articles in this special issue, and in
the concluding section, we provide a brief synthesis and
present a research agenda for the future.

Although the management of the supplier and buyer

relationships is by no means a new issue in marketing (it
has been examined since the early 1980s) [see 1–6], it
can justly be called a “hot topic” in both academia and
business, when examined from a network perspective.
We seem to be entering an era where traditional markets
are being replaced by networks of interrelated firms and
other actors, such as research and governmental agencies
[6–13].

This development is manifested in several ways,

which are briefly discussed with the help of Figure 1, de-
picting the different business relationships forming the
network context of a focal firm. The vertical and horizon-
tal relationships, although described and discussed sepa-
rately, are obviously interrelated forming intricate net-
works of organizations. This is reflected in the figure
through the double-headed arrows connecting various
vertical and horizontal actors. The major driving forces
of the network era are positioned at the outer corners of
the framework (within arrows).

Let us first look at the supplier side of a modern firm.

Manufacturing companies are increasingly outsourcing
their business activities, except those providing core
competencies. This externalization of value activities is
dependent on creating strong supplier partnerships in
those activities that have high strategic relevance for the
customer firm. The externalization process is well docu-
mented and has led to hierarchical structures consisting
of several tiers of suppliers forming complex supply
chain networks [14–16]. This process is driven by several

factors. The global competition, enhanced by the removal
of regulative barriers, forces firms to increase their oper-
ational efficiency. Customers are demanding shorter and
more flexible delivery times at very competitive prices.
Quality is taken for granted after a decade of total quality
management. In response to these demands, firms are
creating streamlined supplier networks where each mem-
ber specializes in the activities (components, parts, and
services) where it has a strong core competence. With the
help of efficient logistics, enhanced by electronic corpo-
rate interfaces, this kind of concerted action leads to shorter
lead times. Combined with a Total Quality Management
approach, covering the whole supplier system, these value-
creating networks can offer better products and services
cost-efficiently and with shorter delivery terms.

Another manifestation of the network era is the chang-

ing character of marketing-distributor and marketer-cus-
tomer relationships. The globalization of competition has
increased the difficulty of getting access to end custom-
ers. This enhances the position of distributors, who have
rapidly organized themselves into powerful chains. The
distributors’ role is strengthened further by the evolution
of customer database management and the implementa-
tion of category management, Efficient Customer Response,
and customer loyalty programs, giving the distributors a
gatekeeper position between the producers and the end
customers. Wal-Mart’s intensive supply relationships in
the United States and the similar operational strategy by
Marks & Spencer and Tesco in the United Kingdom pro-
vide examples of relational practices that have a wide im-
pact on supplier and distribution networks. To reach the
global customers, marketers are increasingly trying to
build distributor partnerships where the access and infor-
mation about the end customers are shared between the
marketer and the distribution network [17, 18].

A novel factor in this struggle over the access and

management of end customer relationships is the Inter-
net. The Internet can be used to establish direct contact
over a widely dispersed set of customers. Dell Com-
puter’s well-documented direct marketing experience in-
dicates how the clever use of an interactive electronic
channel allows an industrial marketer to bypass tradi-
tional distributors. In this sense, the Internet and the
emerging e-commerce solutions may rapidly change the
power position between current distributors and market-
ers and facilitate the appearance of virtual firms that have
externalized all value activities (product development,
production, and logistics) except branding, customer cre-
ation, and customer portfolio management through data-

KRISTIAN K. MÖLLER is a Marketing Professor and
Department Head at the Helsinki School of Economics and
Business Administration in Helsinki, Finland.

AINO HALINEN is an Associate Professor of Marketing at the
Turku School of Economics and Business Administration in

Turku, Finland.

415

bases. And the standard aspects of even these “virtual
competencies” probably will be handled through supplier
partnerships when there are competitive service providers.

The previous discussion has addressed the emerging

network character of the management of supplier rela-
tionships and distributor and customer relationships. Be-
sides these vertical relations, several types of horizontal
relationships are becoming increasingly important [18–
21]. A specific type of horizontal relationship is the alli-
ance between competitors. There are several reasons for
the increase of alliances, in spite of their difficulties. The
globalization of competition requires a strong presence in
the three major markets, the Americas, the Asia-Pacific
region, and Europe. This demands very high investments
in marketing and distribution. Another aspect increasing
the cost of operation is the advancing technological com-
plexity. Most industries are becoming more knowledge
intensive. Multiple technological platforms are needed to
master the development of, for example, the next genera-

tion of telecommunication systems and services, Internet
services, and pharmaceuticals; even automobiles are
turning into computer controlled vehicles. These pres-
sures on resources and capabilities have led companies to
seek strategic alliances with such competitors with whom
they have joint interests in some markets and/or product
fields, and such goals and competence profiles which are
mutually compatible. The VCR assembly alliance be-
tween JVC and the French Thomson company and the al-
liance between GM and Toyota are a few examples [17].

Another perspective of alliances is coalitions estab-

lishing industry standards, very important in the telecom-
munications and electronics fields, as the recent struggle
over the third generation “global media phone” is show-
ing. An even larger scale trend is the creation of coali-
tions by former competitors, to compete against such ma-
jor players as Microsoft, or against other coalitions, as
the development of global coalitions in the airline busi-
ness (e.g., One World by British Airways, American Air-

FIGURE 1.

Business relationships and networks—a focal firm perspective.

416

lines, and Quantas as anchors versus Star Airlines by
United Airlines, Lufthansa, and Singapore Airlines as an-
chors) demonstrates.

In their quest for learning new competencies and get-

ting access to markets and resources, companies also are
increasing the development of horizontal relationships to
noncommercial actors such as governmental agencies,
universities, and other research and social institutions.
Some of these are targeted for R&D purposes, as the col-
laboration with universities and other research agencies,
some to influence legislation for the norms and guidelines
regulating industrial and commercial action, and some
for getting access to regulated markets or industries [22].

In the above discussion, we have handled separately

the various vertical and horizontal relationships indicated
in Figure 1. In reality, however, companies form intricate
webs of relationships that form networks containing sup-
pliers, customers, competitors, and noncommercial ac-
tors [8, 11, 19, 23, 24]. Complex R&D projects, for ex-
ample, may involve pilot customers, core suppliers,
competitors, and different research institutes [25, 26].

The described emergence of a network era is rapidly

transforming our view of a firm. The global scale of op-
erations, enhancing competition, and the complexity of
technology have increased even the resource linkages be-
tween multinational corporations, to say nothing of
SMEs, into true interdependence. The electronic chan-
nels, together with powerful databases, have facilitated
the management of organizational interfaces. No firm
can afford to be a self-contained “island” anymore; learn-
ing through relationships is crucial for the battle over the
future. What does the network era demand from the man-
agement of firms conducting business marketing? This
issue is addressed next.

MANAGEMENT OF BUSINESS
RELATIONSHIPS AND NETWORKS

Levels of Network Management

Following the ideas of managerial domains (interre-

lated clusters of managerial issues), and the domains of
scientific “explananda” (clusters of interrelated issues fo-
cused by researchers, see Hunt [27]), we propose that it is
useful to distinguish between four levels of issues in the
complexity of managing business networks and relation-
ships. These four levels, and the managerial issues identi-
fied in each, form our network management framework,
depicted in Table 1. Next, each level is outlined briefly.

I

NDUSTRIES

AS

N

ETWORKS

—L

EVEL

O

NE

.

Industrial

and social networks form the contextual domain for the
individual organizations that comprise it. To understand
the behavior of firms in this kind of environment, manag-
ers need a workable theory that describes industries as
networks and how they operate. Network theory [11]
provides a conceptual framework that depicts industries
through three key constructs: actors, resources, and activ-
ities. Actors do not have to be firms, they can be any type
of organization or even individual who is relevant for un-
derstanding the network. A key notion is the value activi-
ties through which networks produce the value perceived
by actors, especially end customers. Network behavior and
firm behavior are obviously highly interrelated, a net-
work being an aggregated system of participating organi-
zations in a time and spacebound technosocial system.

M

ANAGING

F

OCAL

N

ETS

AND

N

ETWORK

P

OSITIONS

—

“F

IRM

IN

A

N

ETWORK

”—L

EVEL

T

WO

.

”Firm in a net-

work”, the second level, points to our need to understand
how the firm relates to its environment. What roles and
positions does a firm maintain? How do the forces of
technology, competition, and cooperation influence the
firm and how can the firm create, defend, and change its
position within the network, also influencing the net-
work? A focal net is a central construct that describes the
environmental context of actors. From the perspective of
an individual firm, a focal net consists of those actors that
the management perceives as relevant, that are within its
network horizon. It has been shown that the focal net me-
diates the effect of such “macro” forces as technological
change and economic fluctuations on individual actors.
In the same fashion, the acts of firms or dyads are medi-
ated to the greater network environment through focal
nets. From strategic perspectives, the focal net concept
also is used to refer to an interrelated group of actors pur-
suing a joint strategy within a network [8, 19, 20, 28, 29].

M

ANAGING

R

ELATIONSHIP

P

ORTFOLIOS

—L

EVEL

T

HREE

.

How a firm manages its exchange relationships

is the focus of level three. The perspective of a firm as a
nexus of resources, discussed above, concerns the internal
management of resources, capabilities, and activities in the
context of exchange relationships. Although these issues
are related to the firm’s network position (level two) and
the management of individual relationships (level four),
we find it useful to deal with these interrelated domains
separately. For the efficient management of a company’s
customer or supplier base, portfolio thinking is a powerful
tool. Different types of customers/suppliers require differ-
ent managerial approaches for profitable action.

417

M

ANAGING

E

XCHANGE

R

ELATIONSHIP

—L

EVEL

F

OUR

.

The dyadic exchange relationship, the last domain in the
framework, is a basic unit of analysis the in interaction
and network theory. This domain is characterized by con-
tent issues such as the core elements of exchange rela-
tionships and the basic contextual factors influencing the
dyadic business interaction. From a process perspective,
attention has been given to both to the forces influencing
a relationship, especially how it can be controlled, as well
as to the subprocesses constituting the exchange process
itself.

In brief, the network management framework proposes

that we can conceptually distinguish four interrelated do-
mains of managerial capabilities that a firm must master
to compete successfully in a modern network environ-
ment. In the following, these capabilities are briefly de-
scribed, and relevant studies are referred to.

Network Management Capabilities

We start our discussion at the network level and then

proceed to the management of individual business relation-
ships. Obviously, this does not indicate any particular order
of importance. Actually, understanding individual cus-
tomer and supplier relationships forms the prerequisite of
the management on all the other three layers. All manage-
ment issues identified on the four levels are interrelated.

N

ETWORK

V

ISIONING

C

APABILITY

.

Network vision-

ing capability refers to management’s skills and compe-
tencies in creating valid views of networks and their po-
tential evolution. This is an essential strategic capability
without which the opportunities embedded in the net-
work value activity configurations cannot be perceived.
The network visioning capability has received very lim-
ited research attention. Within the IMP Group, the issue
is related to a few studies on how networks evolve and
how they are governed [30–35]. The visioning capability
is closely related to the organizational learning construct
and is manifested in a firm’s capability to systematically
generate and evaluate the information of different net-
works, relevant for its current and future operations [36–
39]. Knowledge generation about networks is not un-
problematic, as networks are highly nontransparent. Gen-
erally, in-depth level information and knowledge only
can be generated by participating in the activities of the
networks or through having relationships with actors
knowledgeable about the networks [40].

N

ET

M

ANAGEMENT

C

APABILITY

.

Net management ca-

pability refers to a firm’s capability to mobilize and coor-
dinate the resources and activities of other actors in the
network. It is a necessary capability to establish and man-
age such value-creating nets as supplier nets, customer
nets, and R&D nets. Net management capability also is
manifested in a firm’s actions when entering new net-

Table 1
Network Management Framework

Level of Management

Key Issues

Key Managerial Challenges

Level 1. Industries as
Networks—Network
Visioning

Networks, as configurations of actors carrying out value activities,
form the “environment” the firms are embedded in. They are not
transparent but must be learned through enactment. Understanding
networks, their structures, processes, and evolution is crucial for
network management

How to develop valid views of relevant networks and the
opportunities they contain? How to develop valid views of
network evolution for identifying strategic development
opportunities? How to analyze strategic group of firms,
forming focal nets, for understanding the network
competition?

Level 2. Firms in
Network—Net
Management

Firms’ strategic behavior in networks can be analyzed through the
focal nets they belong to and through the positions and roles they
play in these nets. Positions are created through business
relationships. Capability to identify, evaluate, construct, and
maintain positions and relationships is essential in a network
environment.

How to develop and manage strategic nets (supplier nets,
development nets, customer nets)? How to enter new
networks (market area entry, new product/service field)?
How to manage network positions?

Level 3. Relationship
Portfolios—Portfolio
Management

Firm is a nexus of resources and activities. Which of these activities
are carried out internally and which through different types of
exchange relationships is a core strategic issue. A capability to
manage a portfolio of exchange relationships in an integrated manner
is required.

How to develop an optimal customer/supplier portfolio?
How to manage customer/supplier portfolios—from
organizational and analytical perspectives?

Level 4. Exchange
Relationships—Relationship
Management

Individual customer/supplier relationships form the basic unit of
analysis in a network approach to business marketing. Capability of
creating, managing and concluding important relationships is a core
resource for a firm.

How to evaluate future value—customer lifetime value of
a relationship? How to create, manage and conclude
relationships efficiently—from organizational and
analytical perspectives? How to manage relational
episodes efficiently?

418

works, as in a foreign market entry, and in its capability
of managing net positions. Also, this capability has re-
ceived relatively scant programmatic attention within
marketing. Important early research on managing net-
work positions has been conducted by Mattsson [41, 42].
See also Jüttner and Schlange [43] who developed “a
how-to” approach to network management in a public
utility case context, based on the assessment of relevant
actors and their roles, and on the subsequent derivation of
the influence potential of the focal firm. Other IMP
Group-related studies have addressed such issues as
product development through networking [25, 28, 44],
getting a market entry [45, 46], and managing network
relationships in different cultural contexts [8, 21, 35].

Although not always using a network, perspective is-

sues pertaining to the net management have been ad-
dressed within other research traditions, such as the stra-
tegic alliance literature [17, 47, 48], and supply chain
management studies [14, 15]. The core issues handled in-
clude the evaluation of risks and the benefits of forming
strategic alliances and supplier partnerships and the iden-
tification of factors influencing the potential success of
alliances and supplier nets.

Portfolio Management Capability

This capability refers to a firm’s competence in man-

aging supplier and customer portfolios. It includes ana-
lytical aspects, such as competencies in creating and us-
ing databases and conducting supplier and customer
evaluation, and organizational aspects, such as capabili-
ties to develop organizational solutions for handling ex-
change relationships. Management of supplier and cus-
tomer portfolios has attracted considerable research since
the early 1980s. Only a brief summary of the key issue
can be provided in this context; for a more detailed
discussion see Ford et al. [49], Gummesson [18], Turn-
bull and Zolkiewski [50] and Turnbull and Zolkiewski
[16, 50].

The idea of managing customer/supplier relationships

as portfolios pertains to the aim of optimizing the re-
sources of the firm. The number and type of customers
that a firm has can be viewed as assets, as they influence
directly current and future sales volume, knowledge in-
put, cost structure, and margins, which in turn influence
profits. The efficient management of a customer portfolio
refers to the development and maintenance of such cus-
tomer relationships that ensure the stable long-term prof-
itability of the firm. Management time and other scarce
resources need to be allocated carefully between poten-
tial and current customers to ensure both current and fu-
ture cash flows. Customer portfolio management involves
two basic levels: strategic level portfolio management,
which focuses on the allocation and acquisition of strate-
gic resources and concerns key customer types; and the
operational management of major customer types [50–55].

Special care should be given to such potential custom-

ers through whom the firm can accrue special resources
or access to other actors, markets, and technology. They
may be customers with a high reference value or access
to distributors in new export markets, or customers in
new product application areas that have been opened up
as a result of technical development. Technological lead-
ers generally make important potential customers be-
cause supplying them offers a vehicle for developing the
marketer’s own product technology. Other important
customers are firms that either buy an important share of
products or have become a partner with the business mar-
keter. Examples of these special customer relationships
are just-in-time supply partnerships, product or process
development relationships, and marketing and distribu-
tion-oriented cooperation. Because the development and
maintenance of special relationships may require consid-
erable resources, the direct revenue from this kind of cus-
tomer can be low or even negative. Successful relation-
ships return the investment through increasing revenue
gained from improved production technology, customer
know-how, distribution capability, or gaining market access.

Although the idea of optimizing a customer or supplier

portfolio sounds straightforward, it contains several man-

Traditional markets are being replaced

by networks.

419

agerial challenges. It presumes that a firm can assess both
the future value of a particular customer or supplier and
the investments needed in the development and mainte-
nance of that relationship. Management also should be
able to identify the potential interdependencies between
various customerships and supplierships. Gaining a par-
ticular customer may have a strong positive impact on
gaining other customers through a reference signal, but it
also can have a negative impact by rendering some po-
tential customer relations impossible because of a com-
petition effect. The same issue concerns supplier rela-
tionships. Relationships of strategic status, like major
customer and supplier partnerships, are especially diffi-
cult to analyze; these can impact the whole industry net-
work and produce long-term effects that are very difficult
to foresee [56].

In addition to these kinds of analytical issues, portfolio

management also requires organizational capabilities.
Different types of customers should be managed differ-
ently, according to their needs and value generation po-
tential. This presumes organizational solutions that take
into account these issues. Generally, firms have to create
and manage hybrid systems where such organizational
solutions like key account management, sales representa-
tives, the Internet, and various distribution channels are
operated in parallel [57–59].

R

ELATIONSHIP

M

ANAGEMENT

C

APABILITY

.

This ca-

pability refers to a firm’s competence in handling indi-
vidual exchange relationships. An important subissue is
the evaluation of the value of major relationships dis-
cussed in the previous section. This forms a prerequisite
for the efficient management of exchange portfolios.
Also, the relationship management capability is a multi-
dimensional construct comprising aspects of analytical
competence and organizational competence. The man-
agement of customer and supplier relationships has at-
tracted research since the early 1980s; this attention has
intensified during the 1990s with the relationship market-
ing approach [3, 6, 16, 18, 49, 60–62]. The logic of rela-
tionship management capability greatly resembles our

discussion of portfolio management. Basic issues include
questions such as how to produce customer value, how to
evaluate customer life-time value and investments
needed in a specific relationship, and how actually to
manage a relationship, that is, to establish, develop,
maintain, and sometimes also dissolve a relationship. Re-
lationship management also has a strong organizational
aspect, including issues like account management, cus-
tomer or supplier specific teams, and utilizing customer
databases. Only a brief account of the core contributions
can be given here.

We discern four relevant traditions in the relationship

management research [62, 63]. Research into marketing
channel relationships for some time has tried to establish
efficient governance forms for relationships on the basis
of transaction cost economics and behavioral channel
theory. The major suggestions concern the contingency
conditions (asset specificity, degree of market competi-
tion, and degree of exchange uncertainty) under which
more competitive and cooperative modes are more effi-
cient [1, 63–65].

Within business marketing the IMP-related studies

have focused on how customer and supplier relationships
evolve, that is, an attempt to uncover their process char-
acter and identify factors influencing the process. The
roles of attraction, trust and commitment, and relational
investments and adaptations, have received attention [61,
66]. Also, the issue of customer value has been ad-
dressed, revealing the multidimensionality and cross-
relational character of this core phenomenon [56, 67].

These research interests are shared by North American

researchers using primarily the social-exchange theory
for analyzing working relationships. Their studies have
produced corroborative evidence on the importance of
information sharing, trust, and commitment to the per-
ceived satisfaction and other performance aspects of the
business relationships [12, 68–70]. The role of trust also
has been examined in a recent meta-analysis by Gey-
skens et al. [71]. Woodruff and his colleagues recently
have used a cognitive mapping-based technique to ana-

Internet may rapidly change the power

positions of distributors and marketers.

420

lyze the value perceived by customers that looks very
promising [72, 73].

Another research stream concerns the organizational

arrangements for managing customer relationships. Key
account management, or KAM, has attracted the most at-
tention although it can be shown that, at least in high-tech
companies, even more complex interfunctional and inter-
organizational teams are needed in managing complex
customer interfaces [57, 74–77].

Other contributions for understanding and managing

customer relationships come from more marketing re-
search of services and consumer-oriented relationships.
Availability of customer databases has facilitated the ex-
amination of customer value from a quantitative perspec-
tive, providing much-needed bases for evaluating the cur-
rent status and profitability of a customer. This valuable
work however, does not take into account the cross-rela-
tional impact or network effects of particular customer
relations [54, 78, 79]. Another issue is the management
of the episodes or encounters with customers. These
events form the micro units that constitute the entire rela-
tionship. The role of both well-planned procedures and
personnel who can match the other party’s expectations
and interaction style have been emphasized in a smooth
management of relationship episodes [60, 66, 80].

In summarizing our review of the research into busi-

ness relationships and networks, a few issues can be dis-
cerned. First, a considerable amount of research exists
addressing the customer and supplier relationships, espe-
cially at the relationship portfolio level. This research,
however, comes from many traditions [62, 63], which
has both positive and negative consequences. The distri-
bution channel studies, the industrially oriented work by
the IMP Group, the social exchange-driven analyses of
relationships, and the services and consumer-driven rela-
tionship marketing studies all focus on somewhat differ-
ent aspects of relationship management. When they ad-
dress the same issues, they examine them from a
different perspective. In this respect the multidisciplinary
character of relationship research can provide us with a

better view of the complexity of relationship manage-
ment. As this research is still very fragmented—a nega-
tive aspect—we would need integrative work to realize
the normative managerial potential embedded in these
studies. A few recent textbooks and articles look promis-
ing in this respect [60, 62, 81].

Another issue is the very limited managerial work

available on the network management issues (level 2),
and especially on the network perception and visioning
issues (level 4). How to create and manage network posi-
tions, how to develop strategic nets, and how to gain en-
try into new networks are clearly highly topical manage-
rial issues where more research is needed, and where the
existing results should be developed into more useful
managerial texts. Next, we examine how the articles in
this special issue meet these identified needs.

OUTLINE OF THE SPECIAL ISSUE

This special issue on managing business relationships

and networks includes 10 articles, besides this introduc-
tion. These are primarily based on papers presented at the
1998 IMP Conference in Turku, Finland and, as such, re-
flect the current work inspired by the IMP tradition em-
phasizing the network context of business marketing.
The articles are grouped into three interrelated sets. The
first, containing the articles by Ford and McDowell, Hå-
kansson, Havila and Pedersen, Loeser, and Ritter, ad-
dresses the issues of network operations and their man-
agement. The second, constituted by the Brennan and
Turnbull, Araujo, Dubois and Gadde, and Campbell and
Cooper articles, examines how resources are created and
managed in buyer and supplier relationships. The third
group, containing the work of Möller and Rajala, Walter,
and Helfert and Vith, focuses on the organizational and
implementation aspects of managing business relation-
ships. A brief positioning of each article and group is
provided with the help of our network management
framework.

Network visioning is an essential

strategic capability.

421

Networks and Network Management

Ford and McDowell address the issue of value creation

and management, in a relationship and network context,
in their article entitled “Managing Business Relation-
ships by Analyzing the Effects and Value of Different
Actions.” The authors first discuss the value concept
from a relationship perspective and propose that value
should be examined from the perspective of the actions
that suppliers and customers conduct in a relationship, as
these actions produce or reduce perceived value for each
party. The authors argue convincingly that the actions
and their value effects should be studied on four levels:
effects in a relationship level restricted to the supplier
and customer, effects on the relationship, effects on the
portfolio of relationships, and finally, effects on a net-
work level. The relevance of this scheme then is demon-
strated through a case analysis. The proposed four level
value effect scheme is very useful in addressing many of
the managerial issues depicted at levels one through three
in our own Network Management Framework (Table 1).
As such, the Ford and McDowell article provides a valu-
able conceptual tool for reading all the articles in this issue.

The next article illustrates how the actions conducted

at a firm and relationship level are related to a larger net-
work of firms. “Learning in Networks” by Håkansson et
al., shows how the number of linkages between suppliers
in the construction industry has a positive impact on the
level of learning that takes place in the supplier network.
“The more each single relationship is a part of a network
the more the company on average seems to learn from
it.” These two articles primarily address the management
issues of level two in our Network Management Frame-
work (Table 1) but also shed light on the portfolio man-
agement problems at level three.

The next article, by Loeser, entitled “How to Set up a

Cooperation Network in the Production Industry,” pro-
vides a “hands-on” illustration of the development of an
international value system net by using the TELEflow, an
interaction system designed for creating and managing

value cooperation networks. As such it addresses the
level two issues in our framework. In the concluding arti-
cle of this group, entitled “The Networking Company:
Antecedents for Coping with Relationships and Net-
works Effectively,” Ritter derives the determinants of
what he calls “network competence,” the skills and quali-
fications that a firm must master to manage relationships
effectively. Drawing upon a sample of over 300 German
mechanical and electrical engineering companies, Ritter
shows that the availability of company resources, the net-
work orientation of human resource management, the in-
tegration of intraorganizational communication, and the
openness of corporate culture are required for the devel-
opment of network competence within a firm. This piece
provides an important contribution to the challenge of
how to manage network relationships, level two in the
framework.

Managing Resources through Customer and
Supplier Relationships

Brennan and Turnbull demonstrate the importance and

incremental character of firm adaptations in business re-
lationships in their article entitled “Adaptive Behavior in
Buyer-Seller Relationships.” Through an extensive
study, comprising 13 buyer-seller relationships, the au-
thors propose a novel categorization of adaptations and
show that adaptations are necessary for an efficient trans-
fer of resources in a relationship. Yet, without the careful
management of adaptations companies, because of the
“emergent” character of adaptations, can end up with a
high and unintended dependence on the other party.

“Managing Interfaces with Suppliers,” by Araujo et al.,

proposes a four group categorization of supplier relation-
ships, according to the nature of the supplier-customer in-
terface. The authors provide evidence through a case analy-
sis that the efficiency of the relationships is greatly
dependent on matching the management of the interface
with its requirements. Productivity-targeted relations re-
quire a different management than relations established

Acquisitions can result in unintended and

often negative outcomes.

422

for creating innovations. The results contribute clearly to
the portfolio management of supplier relationships.

In the final article of the set, entitled “Do Customer

Partnerships Improve New Product Success Rates?”,
Campbell and Cooper evaluate the effects of customer
partnering for new product development by comparing
the performance of partnership versus in-house develop-
ment projects. Their results demonstrate that overall,
partnership projects were no more successful than in-
house projects, regardless of the performance metric
used. Partnering, however, did result in products that had
a greater competitive advantage in meeting customer
needs and providing tangible benefits for customers.

All articles in this set shed new light on how to man-

age customer and supplier relationships successfully. As
such they primarily contribute to the portfolio manage-
ment, or level three in our network management frame-
work. Besides portfolio management, the articles provide
information on the management of individual relationships
(level four). The study by Araujo et al. also reflects the
larger network setting of the relationships under focus.

Implementing Relationship Management

The three articles in the final set discuss and examine

various organizational and implementation arrangements
for the management of customer relationships. In “Orga-
nizing Marketing in Industrial High-tech Firms: The Role
of Internal Marketing Relationships,” Möller and Rajala
show that the dismantling of traditional marketing de-
partments in global corporations has led to the creation of
several specialized subunits responsible for product man-
agement, customer sales and service, and marketing com-
munications. The number of these units and their decen-
tralized character creates a great pressure on interunit
coordination and communication. The authors contend
that the efficient management of these internal marketing
networks is a prerequisite for the successful management
of customer relationships.

Walter examines the role boundary spanners, labeled

as “relationship promoters,” in developing and maintain-
ing customer relationships in his article entitled “Rela-
tionship Promoters – Driving Force for Successful Cus-
tomer Relationships.” Drawing on a study of 191
supplier-customer relationships, he shows that promoters
are powerful predictors of relationship effectiveness.
They support interactive learning processes and solve in-
ter-organizational conflicts. Relationship promoters are
of special importance in enhancing international cus-
tomer relationships.

In the final article, “Relationship Marketing Teams:

Improving the Utilization of Customer Relationship Po-
tential Through a High Team Design Quality,” Helfert
and Vith examine the role of teams and team design in
the management of customer relationships. They argue
that the quality of customer management teams, in terms
of the team composition, group processes, and the orga-
nizational context of the team, is essential for tapping the
potential available in complex customer relationships.
Their study, based on over 230 personal interviews of
customer team leaders of French and German companies,
shows that team design quality systematically improves
the realization of the relationship potential in terms of
sales, product/service development, and market access.

The two last articles in this set provide quite concrete

contributions on the operational management of individ-
ual customer relationships (level four in our framework).
The organizational solutions suggested are highly rele-
vant for constructing and implementing systems for cus-
tomer relationship management. As such they are also
relevant for addressing the portfolio management issues
(level three).

SYNTHESIS AND A RESEARCH AGENDA

Several conclusions can be drawn on the basis of the

reviewed literature and the articles in this special issue.

Teams are essential in complex customer

relationships.

423

We start by presenting some core aspects of the IMP per-
spective on network management.

• Companies are deeply interrelated through their mutual

resource dependence. Any single firm is dependent on
its customers, suppliers, personnel, etc. This means
that firms cannot individually control their own activi-
ties or futures. The network positions and roles of
firms are dependent on the relationships they have with
other firms. This basic network notion of how individ-
ual actions and relationships are embedded in the
larger network is very well described in the Ford and
McDowell article. This interdependence has several
management implications.

• To navigate in a network, management must develop

an understanding of the relationships that constitute the
network. The better the network vision a firm has the
better its chances of foreseeing the strategic changes
initiated by specific actors—competitors, major cus-
tomers, suppliers, and government agencies. Network
vision also facilitates the in advance evaluation of the
effects of actor’s own actions on the network. As net-
works are not transparent, deep understanding and vi-
sion can primarily be achieved through participating in
those networks that are relevant for the firm.

• Network relationships are not free. All relationships

are the results of investments of management time and
financial resources, and the development of relation-
ships takes time. As resources are scarce, the firm
should try to develop an “optimal set of relationships.”
This, however, by definition is impossible because a
firm’s actions are dependent on the actions of other
actors in the network. This means that traditional stra-
tegic planning is not very useful. More important is be-
ing able—through visioning, through relevant relation-
ships, and through having flexible resources—to utilize
the windows of opportunity that open in the network.

• The dynamic character of networks emphasizes the im-

portance of developing such organizational structures

that support the learning capability of the firm. This
means establishing relationships with a reasonably
large set of other actors and being sensitive to the in-
formation and knowledge to be accrued through these
relationships. Variety breeds novel insights and ideas.
This aspect ties the network perspective closely to the
topical knowledge-management view of the firm.

• To be able to develop a strategic net (supplier net, dis-

tributor net, R&D net), a firm has to be able to mobi-
lize other actors; why should they comply? A firm that
has new and interesting resources to offer—products/
services, process know-how, access to technology—
can more easily attract equally qualified partners in the
network. Success breeds success, also in the network
world. On the other hand, companies with very strong
positions, like Microsoft at present and IBM previ-
ously, also attract antagonism, coalitions of firms try-
ing to change or at least balance the power distribution
in the network.

All the above points emphasize the situational and his-

torical grounds for the activities of firms in a network en-
vironment. This means that it is very difficult to provide
any kind of fixed managerial toolkits for handling the
network management issues. In a sense, all major situa-
tions are unique and only can be understood in the con-
text of the network situation and from the perspective of
the history that has produced the current relationships
and positions. Firms and their positions are historically
constituted. This does not mean, however, that a network
theory is managerially empty. It provides, as we have
tried to show, well-developed conceptual tools for ana-
lyzing the networks and network management issues. It
does not provide “rules.” However, the conceptualiza-
tions must be combined with managerial wisdom includ-
ing the contextual and historical understanding.

Our discussion has emphasized the unique and dy-

namic character of networks and network management.

Traditional strategic planning is not

very useful.

424

This is not the only perspective of network management.
We suggest that it is useful to view business networks,
and especially relationships, as a continuum ranging
from high interrelatedness between a limited number of
actors to relatively low interrelatedness of multiple ac-
tors, see Figure 2.

At the right-hand side of our relational continuum

management is dealing with unique, and often strategic,
issues, as discussed previously. The left-hand side of the
continuum describes situations where we have to manage
a large number of customer or supplier relationships,
which can be segmented into reasonably homogeneous
groups, and where the behavior of these actors is rela-
tively predictable. These two modes of relationships rep-
resent the ends of the continuum, in reality many cases
fall in between positions. Important, however, is that
these different modes of relationships require a different
type of relationship management. In fact, we contend that
network management should not be seen as a holistic do-
main because of its the described dualistic character. In
the following, a few notions of managing more simple
and repetitive relationships are given.

• When customer or supplier relationships can be seg-

mented into reasonable homogeneous sets, the man-
agement is facing a traditional portfolio management
problem. It must assess the demands of the various

customer groups and develop organized ways of han-
dling the relationships in an efficient fashion.

• A particular issue of portfolio management is the chan-

nels used in handling customers. The choice of chan-
nels, ranging from KAM, sales representatives, and
value-added resellers to interactive electronic media,
depends primarily on the complexity and value of the
relationship. That is, how much specialized informa-
tion is needed for a satisfactory handling of the rela-
tionship. We are dealing with an optimizing issue
where the requirements of the customer relationships
must be matched with the characteristics of the avail-
able channels. Efficient solutions should convey com-
petitive customer care on a cost-efficient basis.

We suggest, in a nutshell, that the management of sim-

ple business relationships can be approached through the
portfolio management approach described above. First,
the management must derive the criteria for segmenting
its customer relationships into meaningful segments.
With the availability of advanced databases these can be
as small as the management sees appropriate. These must
then be handled through carefully planned programs. An
important subissue is the development of a channels or
media portfolio through which the needs of the customer
groups are taken care of in an efficient fashion. These is-
sues have not been very popular among the network re-

FIGURE 2.

Dualistic character of network management.

425

searchers, in spite of their managerial relevance. Many
companies, however, are developing sophisticated cus-
tomer care systems grounded on databases, and involving
the use of multiple contact channels. We expect to see
much more research on these issues in the near future.

A striking aspect in the current articles is the lack of

discussion of the role of the Internet in the networking
among business firms and in the management of cus-
tomer and supplier relationships. Interestingly the article
by Loeser, describing the construction of a complex co-
operative network, is the major exception. It seems that
we IMP researchers will lose much of the important man-
agerial reality unless we pay much more attention to the
various uses of the Internet in network formation and
management.

Finally, in spite of the “nonruled” character of com-

plex network relationships, we believe that there is much
to be done in developing good managerial guidelines on
the basis of the already existing network research and
theory. Good managerial texts also would be important
from a theoretical perspective, as the validity of the con-
ceptual tools provided is primarily tested through their
usefulness in interpreting the managerial realities of net-
working firms. To conclude, we believe that this special
issue contains many invaluable contributions to the man-
agement of business networks and relationships and do
hope that these collective efforts can inspire future re-
search in the area. There is still much to be done.

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