What managers really think about networks?

by Katri Valkokari & Tiina Valjakka

“Business relationships are neither bright nor dark, but rather represent a combination of the two”*

Business networks as well as other collaborative settings, such as partnerships and alliances, are characterized by the co-existence of negative effects (several tensions, uncertainties and opportunism) and positive elements (trust, commitment, win-win).

We were interested in managers’ perspectives related to these advantages and disadvantages of relational business practices associated with the operations in business networks. Thus, we built and tested a set of metrics through interviews, thematic group discussion, and a pilot survey with 22 companies participating in an industry academia research program that develops relational practices in business networks in the context of the manufacturing industry. (see REBUS). The survey questionnaire, with 18 statements presented below, was designed based on the preliminary data and the research framework.

Positive Negative
Performance of network 1) strengthen growth of business and profitability

2) enhance access to new markets

1) increase the risks of our business

2) increase the expenditures of our business

Practices – networks as goal oriented entities 1) enhance an effective division of labor with our partners

2) increase available resources and capabilities

3) enable more flexible contracts

1) hamper new business ideas and innovations

2) decrease willingness to renew and develop

3) increase dependency on network members

Information – networks as knowledge creating platforms 1) enhance integration of ICT systems with our partners

2) enhance access to knowledge that is critical to our business

1) lead to the concealment of information and information-dependency

2) cause  knowledge leaks and the risks thereof

Socialisation – networks as controlled social systems 1) increase mutual trust in our business relationships

2) enhance comradery with our partners

1) hamper our independent decision-making

2) weakens our position in business relationships

Business networks was defined in the survey as “a set of companies and potentially other organisations (a minimum of three network actors) connected to each other for the purpose of doing business on a relational basis” (e.g., Halinen and Törnroos, 2005).

The networks are considered an especially important means to access new markets, knowledge and resources

Based on the answers, it can be concluded that the respondents have distinctively positive view on networks and their effects on business performance. In the positive statements the average value of all the respondents’ answers was over 4 (agree), in 1-5 Likert scale whereas in the negative statements the average remains under 2,5 (between 3= don’t know and 2= disagree).

scale

The three most supported statements were positive statements: business networks 1) enhance access to new markets, 2) enhance access to knowledge that is critical to our business, and 3) increase available resources and capabilities.  This support a more general conclusion that potential drivers of networking – based on relational practices – lie more in intangibles, i.e., the effects on future competitiveness. The technical or tangible enablers in turn, are assigned lower importance by the respondents. From the negative aspects side, the results indicate that managers, while believing in the growth-boosting effects of networks, also acknowledge that this may be associated with specific costs of ‘losing’ something valuable. However, networks do not seem to weaken a firm‘s position or the ‘incentives’ for business development

When comparing the negative and positive statements, it can be concluded that the respondents consider knowledge and resource sharing an important reason for operating in business networks. On the other hand, the risks related to knowledge leaks were considered an important issue, which also highlights the importance of joint rules for knowledge management practices in business relationships and networks. While the respondents in our case recognized the potential hazards, they clearly have a positive view of the influence of networks on business performance, i.e., the managers perceive the overall outcome of networks and relational business practices as clearly positive.

*Abosag I., Yen, D.A. & Barnes, B.R. 2016. What is dark about the dark-side of business relationships, Industrial Marketing Management, Vol. 55, May 2016, pp. 5-9

Valkokari, K., Valjakka, T., Viitamo, E. & Vesalainen, J. Management over boundaries in the network era – what do managers really think about networks? 32th Annual IMP conference, “Change and transformation of markets, networks and relationships, 30 August – 3 September 2016, Poznan, Poland, IMP Group.

 

 

 

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