A Framework for Analyzing Interconnectedness of Relationships

doi:10.1016/S0019-8501(00)00108-5

Industrial Marketing Management

Volume 29, Issue 4, July 2000, Pages 317-326

https://doi.org/10.1016/S0019-8501(00)00108-5 Get rights and content

Abstract

Relationships between organizations do not exist in isolation. Impacts of relationships on relationships are frequently noted but analytical tools to deconstruct this connectedness are still missing. In this paper the effects of inter-organizational relationships on other inter-organizational relationships are analyzed in detail. A framework is developed which can be used as a tool to analyze interconnections in business networks. Some established managerial tools need to be revised to reflect interconnections between relationships.

Introduction

“No business is an island” [1]. Each firm is dependent on resources controlled by other firms. Thus, firms are interdependent with each other through inter-organizational relationships. A growing body of literature is dealing with describing, understanding and improving those inter-organizational relationships 2, 3.

Companies are not monogamous; they do not develop only one relationship with one other organization. “Each company has a portfolio of buying and selling relationships in which it is enmeshed” [2]. Business markets become even more complex as “ … firms access resources not only through suppliers and customers but also through banks, shareholding institutions, government, distributors, consultants, associations, etc.” [4]. This leads to the notion that firms are part of a network of relationships.

Within those networks, relationships do not exist independent from each other—they are interconnected because a given relationship does not only affect itself and the two actors involved. A relationship may also have an effect on other relationships. This has been called secondary, indirect or network function of relationships 5, 6. The following examples illustrate interconnectedness of relationships:

• System selling: Within the process of system selling, heterogeneous contributions of more than one company are brought together in order to provide a “complete” or “complex” solution to the customer. Taking computer systems as an example, hardware, software and installation as well as customizations or adaptations will be offered in one package to the customer by different, but cooperating companies.

• Combination advantages: Combination advantages occur when companies allow access to, or pool, one another's (homogenous) resources. By establishing the Star Alliance, Air Canada, Lufthansa, SAS, ThaiAir, United Airlines and Varig were able to offer a larger variety of flights (through code sharing) and a better ground service (through the joint use of launches and check-in facilities). The full potential of this alliance was basically exploited by moving beyond a dyad. We can observe the same logic in Research & Development consortia where development projects can only be started when several companies commit resources to the project.

• Exclusive rights: The logic of exclusive rights can only be understood if there is a third party to be excluded. With that, the existence of an exchange (or a relationship) between two organizations excludes the exchange between those organizations and others (at least in particular areas). After developing an anti-blocking system (ABS) for cars, Bosch was selling this system exclusively to Mercedes-Benz for two years while other car manufacturers were left without the system.

• Mediation: Companies can mediate inter-organizational relationships through actively promoting the relationship initiation process between two companies (e.g., the European Commission pays mediators which initiate inter-organizational cooperations within the SPRINT network). Also suppliers might wish to establish relationships among their customers and the customer's customers in order to ensure the supplier's sales. Apart from those direct mediations the reference function of a relationship can support other relationships.

• Competition: Competition can only be understood when at least three parties are analyzed, in general, two parties competing for resources controlled by a third party. From a focal company's perspective, competition can occur in different settings (e.g., purchasing a limited product, selling in a competitive environment, or competing for technology or innovation partner).

• Lobbyism: Through lobbying, a group of actors tries to influence (political) decision making. Recent examples include the U.S. tobacco industry and producers of genetic food. The European Program ESPRIT (European Strategic Programme for Research in Information Technology) is a result of the lobbyism by major European information technology companies. Thus, the relationships between several firms affect the relationship(s) between these firms and the European Commission.

• Surety: Like the previous examples, surety can only be understood by analyzing at least three parties. In an industrial setting, a surety can be given by one actor for enabling two other actors to do business together. For example, newly founded companies sometimes face the situation that a customer demands a surety for the warranty because the customer is convinced about the company's technological competence but unsure about the long-term future of the company.

The examples illustrate that interconnections between relationships exist. Given the importance of interconnectedness in understanding business networks, tools for analyzing effects of relationships on relationships need to be developed. Conceptually, interconnections between relationships have so far been analyzed in terms of activity patterns, web of actors and resource constellation 5, 6. However, these studies refer to the outcome of interconnectedness and not to interconnectedness itself 7, 8. But how can we describe interconnectedness between relationships? Can we distinguish different cases of interconnectedness?

In this paper, a framework is developed which enables the analysis and classification of interconnectedness by discussing different constellations of interconnectedness. The next section is dedicated to the development of the framework. The remainder of the paper addresses managerial implications and further questions.

Section snippets

Interconnectedness of inter-organizational relationships

In order to address the issue of interconnectedness between relationships it is sufficient to analyze triads because every greater system (the network) can be deconstructed into triads for analytic purposes and network effects can be demonstrated using only a triad 9, 10, 11. Therefore, we will discuss a triad consisting of a focal organization (F), two other organizations (A) and (B), and their (possible) relationships (x), (y), and (z). The following picture, Figure 1, illustrates this

Managerial implications

Before we can develop some managerial implications it is important to stress that “ … it is a false picture to see a company as the master of its own destiny, building its independent strategy and trying to get favorable reaction from the market” [18]. Firms are dependent on what other firms do. With that “ … both the consciousness of the actor and the random factor are integrated aspects of the network” [19]. But the existence of a random factor does not mean that managers do not have to care

Outlook

In this paper, the interconnectedness of relationships was addressed. Although this issue has been widely recognized, only a few attempts have been made in order to derive managerial implications. The paper tries to fill in this gap by developing a framework for structuring and analyzing relationship interconnectedness. The framework allows a manager to analyze the “black-box” of interconnectedness. Further research is needed in order to develop managerial tools which could help alliance

THOMAS RITTER is a Lecturer in Marketing at the School of Management, University of Bath, United Kingdom. He received his Ph.D. in Business Administration at the University of Karlsruhe, Germany. His publications and interests center on the management of inter-organizational relationships and networks.

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A Framework for Analyzing Interconnectedness of Relationships

Abstract

Introduction

Section snippets

Interconnectedness of inter-organizational relationships

Managerial implications

Outlook

Scandinavian International Business Review

Industrial Marketing Management

Industrial Marketing Management

Industrial Marketing Management

No Business is an IslandThe Network Concept of Business Strategy

Scandinavian Journal of Management Studies

Understanding Business Markets

Industrial NetworksA Review

Developing Relationships in Business Networks

Business Networks and Cooperation in International Business Relationships

Journal of International Business Studies

Triaden- und Triplettzenzus als Mittel der Strukturbeschreibung