The anatomy of relationship significance: a critical realist exploration

Filipe J. Sousa

The markets-as-networks theorists contend, either explicitly or tacitly, the significance of business relationships for the focal firm – that is, business relationships contribute somewhat to the focal firm’s survival and growth. I do not deny the possible existence of significant business relationships but sustain, in contrast to the consensus within the Markets-as-Networks Theory, that relationship significance should not be a self-evident assumption. Significance cannot be a taken-for-granted property of each and every one of the focal firm’s business relationships. Instead, the notion of relationship significance needs to be discussed and its causes thoroughly explained. Adopting a critical realist position, the relationship significance is claimed to be an event of the business world, rightly deserving a robust causal explanation. My main research question is thus the following: How is the relationship significance brought about?
All the business relationships that the focal firm establishes, develops, maintains, and terminates with counterparts (most typically its suppliers and customers) can be adequately considered as entities which exhibit structural features namely continuity, complexity, informality, and symmetry. Owing to that peculiar structure, business relationships are endowed with certain causal powers and liabilities (e.g., allow the access to and exploitation of external and complementary resources and competences). Where those powers and liabilities (i.e., functions and dysfunctions) are put to work, inevitably under certain contingencies (namely the markets and networks surrounding the focal firm), effects (i.e., benefits and sacrifices) result for the focal firm – and the relationship significance is likely to be brought about. Two of those relationship powers – the ‘access’ and ‘innovation’ ones – are especially consequential, for their activation is likely to affect the delimitation of the focal firm’s vertical boundaries. The relationship significance can be brought about owing to the overall benefits in excess of sacrifices (i.e., relationship value) accruing to the focal firm as well as the dual influence that business relationships have on what the focal firm does and gets done by others. For the business relationships contribute respectively both (i) to the access to and exploitation (and on occasion the development) of the external, typically complementary competences and resources needed by the focal firm and (ii) to the creation of new, and the modification and enhancement (or impairment) of the extant, internal resources and competences of the focal firm. What the focal firm comprises
within its vertical boundaries (chiefly resources and competences) and what it does and gets done (activities) are both strongly shaped by the business relationships in which it is deeply embedded. The relationship significance can result from the influence of business relationships on the nature and scope of the focal firm.

Keywords: Markets-as-Networks Theory, relationship significance, business relationships, firms, resources, competences, activities

Development of new technology in a network context: The embedding process

Svein Minde

The thesis conceives the embedding process as it did appear for several cooperating companies involved in the international space industry when new technology in terms of a production system and various associated products was conceived to form a feasible techno-economic concept for development. The embedding process comprises what has been dubbed courses of actions, which the companies may employ cooperatively over successive stages when new technology is connected to and integrated with its resource-related context consisting of an intricate web of industrial companies, funding organizations, and technological artifacts. The chosen courses of actions are carried out in relation to the idea world, and they may focus on one or a few aspects of the ideas about the new technology such as development costs. The possible courses of actions seem to be the adding, removal, substitution, and adaptation of technological and organizational resources as well as the ignoring of any connecting and integrating problems. The courses of actions are applied particularly to address the problematic or difficult-to-establish contact points between the new technology and its resource-related network context. Characteristics of the problematic contact points seem to affect the choice of courses of actions.

As the subject of the thesis has not been studied as such previously, the conceiving of the embedding process together with some of its important aspects and relationships is the main contribution to the research community and in particular to the IMP school. As the embedding process is assumed to be part of the process of developing new technology, the thesis may also contribute to the innovation literature in general. However, due to the single case research design, the potency of the results of the thesis is dependent on further studies.

The research associated with the thesis was carried out as a qualitative single case study. The data was analyzed by the adoption of a resource-related perspective or, more specifically, the 4R model of the IMP school.

Customer portfolio management – The construct and performance

Harri Terho

Customer portfolio management (CPM) is an important area in theories of relationship marketing and customer relationship management. It focuses on the whole portfolio of customer relationships, from transactions to strategic partnerships and their management based on the value of the various customers to the selling company. The academic research so far has produced a wealth of conceptual knowledge about CPM in terms of proposing and testing a large number of relationship portfolio models. However, almost no empirical research about implementation of this concept in business or its effect on performance exists.

Consequently, the purpose of this research was to analyze companies’ CPM practices and performance in business markets. More specifically, there were three more specific aims: 1) to conceptualize customer portfolio management in B-to-B settings, 2) to form and validate a measure for studying CPM practices in business, and 3) to study contextually the relationship between CPM practices and performance.

The dissertation builds on several streams of research, including theories of relationship marketing and customer relationship management, interaction and network theories, and theories of information processing and market orientation related to organizational learning.

A definition of CPM was developed by synthesizing theory-based and field-based views of CPM (a qualitative pilot study in seven firms) in order to reach an operational definition that would explicate CPM activities and allow the empirical study of the practices. Further, a CPM measure was formed and validated based on the operational definition, the 17 interviews, and the survey data of 500 largest B-to-B companies in Finland (N=212).

The quantitative part of the study examined the relationship between companies’ customer portfolio management practices and performance in various business environments. The results indicate that CPM activities are connected to customer profitability and to overall customer performance but only weakly to firm performance. Further, the context formed by customer relationships was found to be pivotal from the perspective of portfolio management. Tailoring of the customer portfolio management style and activities to companies’ context of exchange with their customers was found to be connected to performance,

In the research, the companies were divided into two distinct groups representing market- and network-like exchange contexts. The market-like exchange context is characterized by the large customer base size, more transactional customer relationships, and lower dependency on individual customers, higher customer turnover and heterogeneity of customer base. In network-like exchange context, on the other hand, the size of customer base is smaller, customer relationships are stronger, dependency on the largest customers is greater, customer turnover is lower and the customer base is more homogeneous.

In market-like exchange context, the challenges of customer relationship management are connected with the structure of the customer base. What is pivotal in customer analysis is the ability to compare and group customers on the basis of their value. From the perspective of performance, cost-effective treatment of customers is emphasized. At the same time, the formal planning and implementation of customer portfolio management improves its performance.

In a network-like exchange context, the challenges of management rest in the complexity of customer relationships and exchange as well as in the interdependency on such relationships. The analysis of individual customer relationships instead of customer grouping becomes the central factor for performance. Further, the development of customer relationships becomes pivotal to the performance of customer portfolio management. In other words, it is essential to make low-value customers more valuable, to develop worthwhile customer relationships, and in certain situations to give up bad relationships and to acquire new ones.

Keywords: Customer portfolio management, customer relationship management, exchange context, markets and networks, formative measurement, PLS modeling.

Rethinking adoption - Information and communications technology interaction processes within the Swedish automobile industry

Decisions made regarding information and communications technology (ICT) are strategic and embedded in complexity, change and a dynamic and competitive environment. For the business manager, ICT paradoxically poses both potential promises and potential problems that need to be considered. Just as a “right” decision on ICT adoption can be fortunate, a “wrong” decision can have unfortunate consequences and affect the ability for a firm to develop and fulfill market needs. This thesis proposes that ICT adoption in an industrial context needs to be understood and evaluated through a processual and longitudinal approach, thereby considering the embedded nature of ICT applications. The empirical material in this thesis was collected through in-depth interviews with key actors and through observations and documentation, with a focus on capturing rich descriptions concerning five cases of organizational level ICT adoption processes. Through an analysis of ICT adoption in the industrial context, it is concluded that prevalent theory often fails to function as a foundation for understanding adoption and the dynamics and complexity found in the industrial context. Through its approach and empirical foci, this thesis contributes with an alternative view on adoption in the industrial setting with its focus on adoption as a process of interaction.

Inter-firm interaction for technology-based radical innovation

Anne Vercauteren

The central aim of this PhD research is to study how inter-firm interactions contribute to the technology-based radical innovation process. The aggregated research gradually demonstrates the importance of business networks in the innovation process. A first study provides a rich account of how customer firms contribute to technology-based radical innovation in every phase of the innovation process. The second study indicates that such interaction can evolve into a relatively balanced cooperation between a customer and a supplier that share innovation as a joint aim. This study analyses how radical technological innovation benefits from uncertainty reducing effects in the customer/supplier cooperation. A third study is devoted to an investigation of the involvement of business networks in technology-based radical innovation.

The general methodology of the PhD is case-based research. The cases are radical technological innovation projects that are situated within large firms and that involve inter-firm interaction in the context of the innovation process. For data collection, semi-structured interviews are complemented with observations and the analysis of business documents. The first study relies on a multiple case study design comprising eight cases. The base technologies in the cases relate to electronics, metal transformation and chemicals. The application industries are very diverse: examples are the construction, the consumer electronics and the automotive industry. The second study constitutes a single, fully retrospective case of customer/supplier cooperation for the development of radically innovative fishing trawls for the fishing industry. Thirdly, the involvement of business networks in radical technological innovation is studied in a longitudinal, embedded single case research. In the case, a development team builds a business from a radically innovative laser additive technology and engages in multiple inter-firm interactions in doing so.

The aggregated research is characterised by a distinct learning process from one study to the next. The theoretical and methodological approach to the central problem evolves considerably. Methodologically, depth of the research results is enhanced by engaging in single case study research. The empirical validity of the research results is improved by an increased reliance on inductive, instead of deductive, reasoning during the case analyses. For theory, the aggregated research indicates the importance of surpassing a supplier-centred approach to innovation. Only by including the larger context of an innovation process can the role of the business network be identified. The results of this research clearly indicate that inter-firm interactions between supplier and customer as well as other kinds of firms, i.e. suppliers of complementary products and competitors, influence and contribute to technology-based radical innovation.

Turbulence in Business Networks - A Longitudinal Study of Mergers, Acquisitions and Bankruptcies Involving Swedish IT-companies

Peter Dahlin

The end of the twentieth century, and the beginning of the twenty-first, was a revolving period with many mergers, acquisitions and bankruptcies among Swedish IT-companies. Such events are likely to affect more than just the companies directly involved, i.e. the bankrupt and consolidating parties, and this thesis considers the contextual embeddedness of mergers, acquisitions and bankruptcies by studying them in a business network setting.
The primary aim of this thesis is to further the understanding of business network change and its underlying dynamics. A business network is a conceptual description of the interrelatedness of companies, which makes them problematic to describe and understand. This thesis suggests a force-based approach to business network change, which focuses on the forces underlying the change rather than the actual alterations of the business network. The suggested approach emphasizes the change and enables an exploration and description of business network change based on its underlying forces, linked to form a change sequence. The events that occur and the forces they give rise to can be used to describe the character of such business network change sequences.
To enable a study of a change sequence within the Swedish IT-related business network, this thesis will use a technique designed to gather information about events and parts of the business network structure by systematizing data from news items describing mergers, acquisitions and bankruptcies involving Swedish IT-companies during the years 1994-2003. This data structuration technique enables a longitudinal and retrospective study of a business network change sequence. The analysis indicates a high possibility of inter-linkages between mergers, acquisitions and bankruptcies involving Swedish IT-companies, and describes a business network change sequence with high intensity and wide extension, which is the type of business network change with the highest potential impact, here referred to as ‘turbulence in business networks’.

Buyer-Seller Interaction Patterns During Ongoing Service Exchange

Wendy van der Valk

This dissertation focuses on the ongoing interactions that take place between buyers and sellers of business services after the contract has been signed. This ongoing interaction is important since services are produced and consumed simultaneously; therefore, both buyer and seller have to make an effort to ensure that the ongoing service exchange is successful. The Interaction Model originally developed by the Industrial Marketing and Purchasing Group for studying buyer-supplier interactions in marketing and purchasing of industrial goods, is adopted and adapted to business services. As such, a classification is brought forward that differentiates between various business services and the required customer-supplier interface and interaction patterns on the basis of how the service is used in the buying company’s business process. The classification distinguishes four types of services: component, semi-manufactured, instrumental and consumption services. The usability and validity of this classification is investigated in two subsequent series of theory-building case studies at various buying companies. As such, distinctive effective patterns of interaction were developed for the different types of services. Subsequently, theory testing research is conducted to investigate whether these effective patterns represent necessary conditions for successful ongoing service exchange. Furthermore, the usefulness of the classification for providers of business services is explored, and a link between ongoing interaction and initial purchasing is established.

Incremental Product Development - Four essays on activities, resources, and actors

Nina Veflen Olsen

Most innovations are incremental, and incremental innovations play an important role for the firm. In spite of that, traditional NPD studies most often emphasize moderate to highly innovative product development projects. In this dissertation the overall objective is to increase our understanding of incremental innovation.

The dissertation is organized around four essays that emphasize different aspects of incremental innovation. NPD in hotels, retailers and food manufacturers (e.g. dairy and fish) have been investigated. The different essays vary in accordance to both methodology and theoretical platform, and illustrate how my own understanding has evolved throughout the research process. Open- and closed-ended questions, emerging and predetermined approaches, and quantitative and qualitative data and analyses were utilized.

The theoretical frame of reference is first and foremost traditional NPD research (here labeled the Cooper school). In addition to this school, literature from the IMP approach has been utilized. Other theories, such as transaction cost analysis (TCA) and the resource-based view of the firm (RBV), have been drawn upon in particular cases.

One theoretical contribution of the dissertation lies in its attempt to illustrate how the different actors’ access to resources influences incremental innovation. In essay two and three we highlight that actors with access to different resources conduct different NPD activities, thus access to resources influences how actors organize the NPD process.

Another contribution of the dissertation is the attention drawn to an actor’s utilization of resources in incremental innovation. We emphasized the manager’s role in incremental innovation by exploring resource friction. The numbers of resource combinations possible are infinite, and the opportunities offered are only limited by the manager’s thoughts. Accordingly, a manager’s lack of imagination is a strong restrictor of innovation.

Finally, one contribution of the dissertation lies in its identification of the interplay between activities, resources and actors in incremental innovation. Resources in NPD can be created, not only allocated and utilized. The conventional perspective of resources as scarce and limited is broadened to include the possibilities associated with new resource combinations. Incremental innovation is a dynamic process where access to resources, utilization of resources, and creation of new resources influence what activities are conducted, and visa versa.

Learning Across Firm Boundaries - Learning Across Firm Boundaries The Role of Organisational Routines

Lena E. Bygballe

The main purpose of the study is to contribute to the understanding of learning across firm boundaries. Such learning has often been associated with so-called knowledge-intensive firms engaged in formal learning collaborations in order to develop new products and technology. In this study, on the other hand, I look at learning in ongoing relationships between customers and suppliers in industrial settings. I argue that these relationships entail just as much learning as relationships set up with more explicit learning objectives. However, this type of learning is as yet unspecified in the literature. Building upon an adaptive perspective of organisational learning and an industrial network approach to business relationships, I address the topic by linking learning and relationships through the means of routines. Routines embed interaction between two relationship parties, co-ordinating the use and combination of resources involved in the relationship. When the parties interact through engaging in various routines, new experiences are gained, providing possibilities for learning and changes in routines and resource interfaces. As such a main role of routines in relationships is that they not only store existing knowledge but provide further possibilities for learning as well. An important dimension of routines is that they intersect, not only within a relationship but also between relationships. This implies that learning resulting in changes in one routine may propagate, leaving imprints beyond the original learning location. The organisational learning literature, here represented by the adaptive perspective, informs us about the learning process itself. However, the main focus within this perspective is on learning related to individual routines. The industrial network approach on the other hand, informs us about the relationship context in which the learning takes place, and directs our attention to the connectedness of routines and relationships, and subsequently the implications of learning. A single, qualitative case study with three sub-cases is used to investigate learning in business relationships in this thesis. The empirical study concerns one focal customer company and three of its supplier relationships. Combining the insights from the two theoretical perspectives referred to above forms the basis for analysing learning in these relationships. Learning is here related to changes in the inter-organisational routines embedded in the relationships.

Value Co-Creation in Industrial Buyer-Seller Partnerships – Creating and Exploiting Interdependencies. An Empirical Case Study

Relationships between buyers and sellers on industrial markets are often long term and catachterized by interaction and involvemement between companies over time. The parties are working together in solving problems and creating new ideas and innovations. One of the core concepts in the study is value. The argument is that value is something relative, and can be understood only at a specific time in a specific context. In the study value is seen as a subjective assessment of the trade off between benefits and sacrifices at a specific time in a specific context. Further value in the context of industrial buyer-seller partnerships is seen as something that is the parties are creating together. The concept of value co-creation is introduced, and by this is meant that value is created jointly through interaction between the parties. This view opposes the traditional view of value creation - where the supplier is seen to be creating something of value that the customer is consuming or destroying.
The study is an empirical case study based on interviews, participant observation and document analysis. The analysis method is qualitative. The object of study is a buyer-seller dyad in the marine industry. The story presented in the thesis is an illustration of how a buyer-seller partnership has developed over a period of 30 years, and how the parties create value, through interaction, over time, in the relationship.
The case analysis supports the initial notion of value being relative and something that is co-created in the relationship. The case demonstrates both the difference in how value is perceived by the involved parties, and illustrates what is perceived as value. The study concludes with a discussion on interdependencies between the parties - that value co-creation potential is realized through developing and exploiting interdependencies - with the ultimate aim of achieving efficiency in transactions and/or more efficient resource use. The main theoretical base for the thesis is the Industrial Network Approach and more specifically the initial works of the IMP group, namely the interaction approach.

Strategic management of customer relationships. A Network Perspective on Key Account Management

Customers have progressively become undeniably core elements, and indeed often represent a passage obligé, in the marketing literature. Such is their importance that to discuss marketing strategy and derived marketing methods and approaches without giving a central role to the customer component would seem inconceivable. The notion of customer itself translates a certain vision of the market, and specifically the demand market, from a conceptual point of view.
Fundamentally the way the market is conceptualised leads to the adoption of specific approaches to handling the market. These approaches thus dictate marketing behaviour of the firm. This behaviour consequently affects marketing outcomes. As a conclusion, inadequate or inappropriate conceptualisation of the market will inevitably result in unsatisfactory and/or unexpected outcomes.
Existing approaches in marketing strategy relating to the customer dimension – namely market segmentation, CPM (customer portfolio management), CRM, and KAM (Key account management) – are still very much based on a conceptual approach which considers markets as atomised in nature - with the customer as predominant or sole entity - and static. These approaches are moreover more often than not considered as stand-alone issues rather than holistically.
Alternative conceptualisations of markets have however emerged which provide scope for and, we would argue here, demand a revised approach to handling the customer dimension of the market. These alternative conceptualisations are discussed.
The thesis then takes a closer look at the approach issues mentioned above. Starting with a general discussion of the customer dimension of marketing strategy, the literature in the fields of segmentation, CPM, and CRM is subjected to a brief critical review. Focus is then placed specifically on the state of the art of the literature in the area of KAM, in industrial markets. In simple terms this sees KAM as the largely stand-alone task of organising the supplier firm’s internal resources in such a way as to optimise sales to those large multi-site, multiple buying-centre, customers perceived as demonstrating high economic returns to the supplier firm.
This critical review is then related to empirical findings in the six published contributions to the thesis. The first three of these contributions address issues which examine and support a rather different conceptualisation of markets and the nature and role of customers and thus, accordingly, the need for revised approaches to the market in general. The last three, building on the first three, address specifically the need for a revised approach to KAM.
As a result an alternative model to KAM is proposed, that of SMCR – Strategic Management of Customer Relationships – which views KAM firstly as an indissociable part of the strategic dimension of customer management, and indeed corporate strategy, necessitating a holistic approach integrating segmentation, CPM and KAM. Secondly KAM is seen to be a rather more complex issue than organising supplier resources to match large, important customers’ requirements and optimise on economic returns. Rather it translates as the identification of multiple forms of return on investment of different forms and origins, and as the handling of potentially complex internal and external networks of relationships. Moreover, and perhaps more importantly, the customer dimension is itself seen to be embedded in a network context which goes beyond simple management of relationships with customers. This encourages a vision of KAM as a means to an end, rather than an end in itself, hence the SMCR model.

Exploring the Interplay between Standard Products and Customer Specific Solutions

Daniel Hjelmgren

This thesis deals with how a company may handle the interplay between the development of standard products and customer specific solutions. There are three aims of the thesis. The first aim concerns how a buyer and a supplier in interaction arrive at a solution involving a mix of standard and customer specific product features. The second aim concerns how the supplier can manage the balance between exploitation of standard products and exploration of new product features during the development of a particular solution. The third aim concerns how the development of specific solutions affects the development of the standard product.

The frame of reference is primarily based on the Industrial Network Approach, and deals with utilization and development of products within networks of interdependent resources. While resource utilisation is seen as dependent on how the resources are embedded into the network, resource development takes place when their features are changed in order to make the resources fit into new combinations.

The thesis is based on a case study focusing on a Swedish ERP-system provider’s development of new product features. The main part of the case deals with the company’s development of a customer specific solution in interaction with one particular buyer whose requirements could not be met by existing product features. The buyer is a subcontractor on the second tier in the automotive industry and implemented the ERP-system in order to improve the coordination of certain sequentially dependent operations. To understand how the products have developed over time, a series of preceding and subsequent customer interactions and their influence on the use and development of the product features is also part of the case.

The thesis concludes that when developing specific customer solutions the supplier must exploit on existing resource features while adjusting to the customers’ particular resource constellations. Likewise, the customer needs to maintain most of its resource constellation while adjusting some parts of it to the new resource. Different strategies that a supplier and a buyer may apply in order to deal with the effects that a certain change may have on other parts of the resource network are suggested. Furthermore, it is concluded that a company, in order to balance between exploration and exploitation, needs to manage three interrelated aspects of resource embeddedness. First, it needs to economise on existing product features when developing customer specific solutions. Second, the company needs to identify similarities among different customer specific solutions when developing the standard product. Third, it needs to deal with a large number of interdependent interfaces, both within the product itself and towards different customer solutions. Finally, it is concluded that separating the issue of efficiently developing customer solutions, and the issue of developing standard product features, into different organisational units may benefit the balancing between exploration and exploitation.

Keywords: interaction, resource, dependence, network, utilization, adaptation, exploitation, product development, exploration, standardisation.

Product Development – Effects on a Company’s Network of Relationships

Product development is of great importance to many companies. Development of relationships is also of great concern to many companies. This thesis connects these two development processess by focusing on how a company through product development can influence the development of its network of relationships. The thesis makes use of a research tradition referred to as the industrial network approach. The empirical material takes an electronics company and its network of relationships as a point of departure.

The Role of Personal Contacts of Foreign Subsidiary Managers in the Coordination of Industrial Multinationals. The Case of Finnish Subsidiaries in Portugal.

This study attempts to extend current knowledge of inter- and ultra-firm relationships in industrial markets. In particular, the study seeks to illuminate the distinction between individual and organizational actors in business-to-business markets as well as the coexistence of formal and informal mechanisms of coordination in multinational corporations. The main questions addressed are: 1) what factors influence the occurrence of personal contacts of foreign subsidiary managers in industrial multinational corporations? and 2 j how such personal contacts enable coordination in industrial markets and within multinational corporations?
The theoretical context of the study is based on: 1) the interaction approach to industrial markets, 2) the network approach to industrial markets, and 3) the process approach to multinational management. The unit of analysis is the foreign subsidiary manager as the focal actor of a contact network. A contact network is conceptualised as encompassing "formal"" and "informal"" contacts within the multinational corporation as well as "private" and "business" contacts in the industrial market. The study is empirically focused on Portuguese sales subsidiaries of Finnish multinational corporations, which are managed by either a parent country national (Finnish), a host country national (Portuguese) or a third country national.
The study suggests eight scenarios of individual dependence and uncertainty, which are determined by individual, organizational, and/or market factors. Such scenarios are, in turn, thought to require personal contacts with specific functions. The study thus suggests eight interpersonal roles of foreign subsidiary managers, by which the functions of their personal contacts enable inter-firm coordination in industrial markets. In addition, the study suggests eight propositions on how the functions of foreign subsidiary managers' personal contacts enable centralization, formalization, socialization and horizontal communication in multinational corporations.

Keywords: coordination, industrial markets, multinational corporations, foreign subsidiary managers, personal contacts, qualitative research

New Uses of an Agricultural Product? – A case study of development in an industrial network

This thesis in business administration at Norwegian University of Science and Technology (NTNU) deals with a certain resource, goat milk. How this resource was used in Norway in the 1980s and how this use changed in the 1990s is described through some more or less interconnected case stories. The Industrial network approach is applied in order to understand this use and change. The interaction taking place between various actors in a certain industrial network, ‘The Norwegian milk network’, is emphasized. This interaction affected the resource and resources it was tied to. More specifically, over time various resources had been mutually adapted across organizational borders in order to facilitate certain economic uses. The actors in the network undoubtedly judged use of cow milk, a much ‘bigger’ resource in the network in terms of physical and economic volume, as most important in the 1980s. This had the effect that the various resources in the network were adapted primarily for the utilization of this resource (product), while goat milk was handled more or less as a residue. However, in the 1990s, driven by some enthusiastic and critical actors, among them a goat farm couple, a series of interactions took place in the network. This led to a new view of how goat milk could economically be used. Gradually a number of small changes were made in the way resources were combined. This facilitated new and ‘improved’ uses of the goat milk, not at least in the form of new white goat cheeses.

Hence we can say that in the network, over the period of two decades which we study, goat milk changed from a ‘cost’ to a ‘value.’ It is argued that this change is difficult to explain and understand unless one takes interaction and (industrial) networks into consideration.

The thesis was made at the Department of Industrial Economics and Technology Management, NTNU and was financed by Interreg II and III Sweden - Norway (1998-2003).

Keywords: Agricultural resources; new economic uses; industrial network


A more refined download of the thesis can be done at the NTNU Library at:

http://publications.uu.se/ntnu/theses/abstract.xsql?dbid=37

The thesis can be ordered as printed Report no. 05/03 from:
Centre for Rural Research, Norwegian University of Science and Technology, N-7491 Trondheim; Tel. +47 7359 1729; E-mail: post@bygdeforskning.no

When Information Technology Faces Resource Interaction. Using IT Tools to Handle Products at IKEA and Edsbyn

This thesis investigates the interplay between information technology (IT) and the other resources in business networks. IT tools and systems are important facilities that firms utilize in several managerial tasks. Investments in IT have been massive for the last 40 years, even if the actual effects of using IT tools seldom correspond to the expectations. Therefore, this thesis addresses two main issues: (1) how does IT affect the surrounding resources? and (2) how does the value of IT emerge in relation to these resources? This study applies to these issues a business network theoretical framework that relies on four core concepts: resources (viewed as heterogeneous and interacting within “resource networks”), information (viewed as a meta-element that represents “concrete” resources), IT systems (viewed as facilities that digitalize information into “digital meta-networks”), and managerial tasks (the restricted arenas where IT is applied to handle certain specific resources).

The empirical setting consists of two “twin” case studies that present how the furniture retailer IKEA and the furniture producer Edsbyn use IT tools to handle various tasks concerning the products of these two firms. More precisely, the empirical material concerns IKEA’s coffee table Lack and Edsbyn’s electrically adjustable table El-Bord. Personal interviews (130 in all) and many visits to the premises of several firms were used to create a detailed picture of the resources, information patterns, and IT tools intervening in twelve managerial tasks (six for each product) that were selected for a deeper analysis. The effects and the value of IT in each of these managerial tasks are viewed as emerging from the interplay between IT and the other resources (products, facilities, business units, and business relationships) that embed the IT facilities.

The effects of IT on the above resources vary greatly across the twelve managerial tasks that were grouped into two categories, exploitative and explorative. In exploitative tasks (aiming to efficiently utilize given resources), the informative and the concrete effects of IT are comparatively stronger, thanks to highly relevant digital models embedded within IT systems and thanks to highly routinized and structured information patterns (the input required by IT facilities). Conversely, IT has restricted effects in explorative tasks, because (1) IT tools are unable to model non-given resources and untried resource combinations, (2) IT tools are unable to handle highly network-embedded information, and (3) IT is unable to steer the non-linear development processes typical of explorative tasks. However, IT produces some (mostly informative) effects that stabilize exploration, such as formalizing ex ante and freezing ex post the involved resources: IT creates “islands of certainty” in “a sea of uncertainty”.

As for the value of IT, there exist no perfect IT tool in relation to the many and conflicting resources handled within managerial tasks – tasks that stretch across the boundaries of firms, embracing external resources. Even technically downscaled IT systems can act as highly proficient tools if favourably embedded by the other resources. The value and contribution of IT appear more evident in exploitative tasks, where IT can more easily model the involved resources and digitalize the needed information: in such tasks, IT structures resources and automates activities, as required for maintaining efficiency in resource utilization. In explorative tasks, instead, the stability created by IT entails a conservative force, because IT only displays established resource combinations, while blocking wholly new ones.

Variety in Distribution Networks: A Transvection Analysis

In recent years, the debate concerning changes taking place in distribution structures has been intense in both academia and in practice. One main standpoint is that distribution is subject to considerable reorganisation. Furthermore, some observers point to an increasing degree of variety in the distribution 'reality', both in how production and distribution structures are organised and in end-user needs.

In this thesis, the overarching phenomenon dealt with is variety in distribution. The theoretical framework is based on two main sources of inspiration. First, the Industrial Network Approach (e.g. Håkansson, 1987), highlighting the interdependencies between actors, activities, and resources in industrial systems, is applied. Second, as a means to deal with interdependence in distribution networks, the transvection concept (Alderson, 1965), based on two main types of activities, transformations and sortings, is used to describe and analyse the 'entire process' from raw material to the delivery of the end-product to a specific end-user. Combined, they provide a framework for analysing variety in distribution, where distribution networks are conceptualised as 'sets of crossing transvections'.

To explore variety in distribution networks, the framework is applied on distribution of PCs. Variety is analysed by identifying and analysing a number of transvections, and how they are interconnected. The analysis focuses on how objects, starting as raw material and ending up as an end-product, are changing in different dimensions as they are sorted and transformed.

The thesis concludes that the key to understanding variety in distribution networks is sorting. Sorting directs objects to different resources and actors and is therefore essential for how variety in the objects' features is created. Sorting by a mix of postponement and speculation strategies allows efficient resource utilisation to be obtained at the same time as end-user needs can be taken into consideration.

The study indicates that the focus in mainstream distribution literature on 'channels' only captures a limited part of the inherent complexity, owing to interdependence, in distribution structures. The transvection is brought forward as an analytical concept, taking into consideration both the producer and the user side in distribution networks, and their different kinds of logic. Furthermore, the thesis suggests that a network perspective brings about a more profound understanding of variety in distribution compared to a 'channel' perspective.