a project network: an approach to creating emergent

Brett Fifield

A PROJECT NETWORK: AN APPROACH TO CREATING EMERGENT BUSINESS

HELSINKI SCHOOL OF ECONOMICS

ACTS UNIVERSITATS OECONOMICAE HELSINGIENSIS

A-2??

© Brett Fifield and Helsinki School of Economics .

ISSN ISBN

E-version:

Helsinki School of Economics – HSE Print 2007

ACKNOWLEDGMENTS

This dissertation is the result of theory development and an emergent technology development project over the last seven years. It has been influenced and supported by a number of people and institutions to which I would like to express my gratitude. I would like to thank Kristian Möller from The Helsinki School of Economics, for agreeing early on in the research and project development to be my supervisor, and Kimmo Alajoutsijärvi from The University of Oulu for agreeing to be the commenter, and Kjell Grønhaug from The Norwegian School of Economics for agreeing to be my official thesis examiner. Also, I would like to thank Anna-Mari Järvelin from Tampere University, Janna Tähtinen from the University of Oulu, Aino Halinen from The Turku School of Economics, and Kirsimarja Blomquist from the Lappeenranta University of Technology, for their early support in getting me involved in research. Much of the preliminary direction for this research resulted from discussions in the “1st Nordic Workshop on Dissolution of Relationships” in September, 2000 where my commentator Jan-Åke Törnroos from Åbo Akademi University discussed the topic of temporary relationships as a working paper. The author wishes to express sincere appreciation to Tampere University of Applied Sciences, Lahti University of Applied Sciences and The University of Helsinki for providing funding for travel and housing for the KATAJA courses and required courses at the Helsinki School of Economics. Also, I would like to truly thank the KATAJA people for organizing the courses in English which allowed me to complete my course work in Finland and allowed me the opportunity to work with David Silverman from The University of London, Dean Driebe from the

University of Austin, Lars-Gunnar Mattsson from The Stockholm School of Economics, and Jason Owen-Smith, from The University of Michigan, and Bengt Johannisson from Växjö University, Sweden. I would also like to thank my fellow researchers and teachers that have become friends over the four years of coursework. I had the pleasure of collaborating with two companies during this research, therefore. I would like to specifically thank Tuomas Saloranta of Toyme Labs Oy and Laura Aho of Access International Consulting Ltd. for allowing me access to their companies for the pilot study and the resulting empirical research. I would also like to thank Arja Raatikainen for sharing her home in Helsinki, and Soile Tommola from Lahti University of Applied Sciences for assisting me in the interview process and the transcription of the interviews, and to Jouko Tamminen for his electronic translation of the data files, from Finnish to English. I would like to thank Monice Barbero for editing and proofing the rewritten manuscript. A second set of eyes was greatly appreciated. Also, I need to both thank and make apologies to my wife, Eeva-Kaarina Heino and my daughter, Aurora for the time away from our family. It was hard to lock myself in the workroom for the final push of completing this manuscript. I would like to thank my parents for developing a curious mind and a strong, independent work ethic or this work would never have been completed. The mistakes remain my own. This work is dedicated to Aurora, the next generation. Helsinki, November 1, 2007. Brett Fifield

ABSTRACT This study describes and analyzes the intentional formation of a project network as an approach to creating an emergent business. The aim of the study is to extend the conceptual discussions of developing emergent business by creating a multi-party project as a business network. The conceptualization of the project network is introduced by focusing on network capital and network capabilities as strategic resources in the context of an inter-firm project. The framework for describing the project network focuses on three forms of network capital and the network capabilities of those firms involved in creating an emerging business opportunity. The study focuses on the early processes and expectations of actors investing in an inter-firm project and the actors’ perception of the potential of the emergent business. In support of describing the context of the project network and the expectations of the actors, a cognitive systems approach is utilized. The purpose of this study is to contribute to the emerging theory of a project network as a contemporary approach to creating an emergent business and to provide a better understanding of the factors influencing network capabilities and network capital of firms involved in creating an emergent business as a business network. To better understand these processes, the study specifically focuses on a micro entrepreneurial firm intentionally creating an emergent business opportunity as a multi-party project network developing an open platform smart card solution combining both public and private sector service providers. The theoretical language used in this study builds on the resource-basedview of the firm, business network literature, entrepreneurship literature,

and more specifically social capital literature. These literatures were initially selected because they provided different perspectives during the analytical discussions. However, none of the existing research traditions provided a complete systematic language to describe and analyze the evolving issues specific to the intentional formation of a multi-firm project as an emergent business network. This study uses abductive logic as an approach to support theoretical and conceptual development. The theoretical vocabulary evolved during the analysis of the case as did the emphasis of the analysis. To further support the conceptual discussion of a project network, a two part empirical study was conducted. First, an exploratory pilot study was made with a single small entrepreneurial firm from the ITC industry from January, 2001 to January, 2002 in order to complement the overall understanding of the focal phenomenon. Second, the main empirical study was made in cooperation with a single project network consisting of several firms from the information technology industry from January, 2002 to July, 2004. Particularly, a longitudinal case analysis of the intentional formation of a project network was completed. The case was selected because it was highly representational of the focal phenomena. KEY WORDS: business networks, cognitive systems, project network, network capital, network capabilities

i TABLE OF CONTENTS ACKNOWLEDGEMENTS ABSTRACT 1

2

INTRODUCTION and DEFINITION...........................................................1 1.1

A project.....................................................................................................5

1.2

Networks..................................................................................................10

1.3

The aim of the study ..............................................................................12

1.4

Focus of the study ..................................................................................13

1.5

Research strategy and design ................................................................16 1.5.1

Research strategy: abductive case analysis...................................16

1.5.2

The framing research questions ....................................................20

1.5.3

Structure of the study......................................................................21

THEORETICAL PERSPECTIVE LITERATURE.....................................23 2.1

Resource based view of the firm and learning ..................................25

2.2

Systems theory and cognitive systems ................................................33 2.2.1

Types of organizational systems ...................................................35

2.2.2

Types of organizational environments.........................................39

2.3

Projects .....................................................................................................40

2.4

Business networks ..................................................................................43 2.4.1

2.5

Entrepreneurship and social capital ....................................................47 2.5.1

2.6 3

Relevant network literature for the study....................................44 Social capital .....................................................................................54

Summary of the conceptual discussion ..............................................59

PRELIMINARY CONCEPTUAL FRAMEWORK OF A PROJECT

NETWORK.................................................................................................................63 3.1

Reminder of the focal phenomenon and the three framing

questions ................................................................................................................64 3.2

An overview of the preliminary conceptual framework of a

project network.....................................................................................................64

i

ii 3.2.1

The network capabilities element of the preliminary

conceptual framework of a project network ............................................73 3.2.2

The network capital element of the preliminary conceptual

framework of a project network .................................................................74 3.3

Phases of a project network in the preliminary conceptual

framework..............................................................................................................74

3.4

3.3.1

The pre-project phase of a project network ...............................77

3.3.2

The pilot phase of a project network ...........................................78

3.3.3

The product development phase of a project network.............79

3.3.4

The new business model phase of a project network ...............80

3.3.5

The commercialization phase of a project network ..................80

The concept of value and the evaluation of value in a project

network ..................................................................................................................81

4

3.4.1

Value of intellectual capital in a project network.......................81

3.4.2

Value of social capital in a project network ................................81

3.4.3

Value of financial capital in a project network ...........................82

3.4.4

Commercial value in a project network .......................................83

eTAMPERE SMART CARD PROJECT: PROJECT NETWORK

CASE.............................................................................................................................84 4.1.1

The eTampere program ..................................................................84

4.1.2

Case selection of the eTampere smart card project...................85

4.1.3

Data collection .................................................................................90

4.1.4

Case analysis......................................................................................91

4.2

Perspective – a person ...........................................................................93

4.3

The context..............................................................................................93

4.4

Reminder of focal phenomenon and framing questions.................95

4.5

Discussion of the pre-project phase....................................................95

4.6

Pre-project phase ....................................................................................97 4.6.1

4.7

Network capabilities........................................................................98

Pilot phase..............................................................................................105 4.7.1

Network capital ..............................................................................107 ii

iii 4.7.2

Why firms invested in the eCard project ...................................115

4.7.3

Network capabilities......................................................................118

4.7.4

Network capabilities build network capital...............................122

4.7.5

Critical findings from the study about social value creation

for the entrepreneur....................................................................................133 4.8

Discussion of the potential product development phase..............135 4.8.1

Network capital ..............................................................................136

4.8.2

Network capabilities are constrained by the context which

embeds the project ......................................................................................142 4.9

Discussion of the potential new business model phase ................143 4.9.1

Scope and functionality ................................................................144

4.9.2

Value of reference..........................................................................149

4.9.3

National attention increases perceived value and risk for

the project manager and the project network ........................................150 4.10

Discussion of the potential commercialization phase....................157

4.10.1

Future roles in an emerging network.....................................160

4.10.2

Expectations and strategic fit for the individual firms

with respect to the commercialization phase .........................................161 4.11 5

The formation of access international value network....................190

SUMMARY

OF

FINDINGS,

CONTRIBUTIONS

AND

EVALUATION OF THE STUDY ......................................................................193 5.1

Summary of phases of a project network.........................................194 5.1.1

Pre-project phase ...........................................................................194

5.1.2

The pilot phase...............................................................................198

5.1.3

The product development phase ................................................200

5.1.4

The new business model phase ...................................................203

5.1.5

The commercialization phase ......................................................207

5.2

Summary of findings for network capital.........................................210

5.3

Summary of findings for network capabilities ................................213

5.4

Summary of findings for a cognitive system ...................................217

5.5

A refined conceptual framework .......................................................218 iii

iv 5.6

5.7

Discussion of contribution .................................................................223 5.6.1

Theoretical contribution...............................................................223

5.6.2

Managerial recommendation........................................................228

Evaluation of the study .......................................................................232 5.7.1

Quality of study..............................................................................235

5.7.2

External validity of study..............................................................237

5.7.3

Limitations ......................................................................................238

5.7.4

Future research...............................................................................239

6

LIST OF FIGURES ..........................................................................................240

7

LIST OF TABLES.............................................................................................241

8

INTERVIEWS ...................................................................................................242

9

LITERATURE ...................................................................................................243

iv

1 1

INTRODUCTION AND DEFINITION

Collaborative projects in business networks are an increasingly relevant approach to creating value in today’s society.

Firms

collaborate as a response to larger societal trends to integrate data, communications, and lifestyles. The need to have various technologies work together in coherent, complex integrated systems has pushed firms to reevaluate working independently and to consider a more collaborative, business network, approach when creating new, emergent business opportunities. The collaborative project, used to create an emergent business opportunity, represents an area of managerial interest, because it is an insufficiently understood contemporary, business model. Even though projects are by no means a new business approach, the study of a collaborative project network presents an area of interest, as project networks are a contemporary and active form of doing business that has received recent academic interest. For example, Maurer and Ebers (2006) 1 build on Nahapiet and Ghoshal, (1998) dimensions of social capital focusing on the structural, cognitive, and relational view of social capital during the early start-up phase and business development phase of a new venture. Maurer and Ebers (2006:270-272) use the Early Start-up Phase to describe the dynamics of social capital through three dimensions: the structural dimension as a small network confined to fellow scientists; the relational dimension of strong scientific norms

Unfortunately, the Maurer and Ebers (2006) study was competed too late in the research process to be built on and utilize in this study. The researcher was unaware of this study until the final stages of completing this manuscript. 1

2 and mutual trust; and the cognitive dimension as a homogeneous set of scientific goals and orientations. As another study, Sydow and Staber (2002) focused on collaborative projects being “an organizational form of production and exchange among functionally interdependent but legally autonomous firms and individuals. Although these networks are of limited duration, co-ordination of partners and activities (does take) place with respect to past experiences and future expectations” (Sydow and Staber, 2002). Building on Sydow’s and Staber’s (2002) description of a collaborative

network,

this

study

develops

a

theoretical

conceptualization and description of the expectations and potential outcomes of a collaborative project network. In this study, a project network is a collaborative network of autonomous firms and individuals, created to learn about an emergent business opportunity as an intentionally exploratory combination of actors, resources, and knowledge, invested in a temporary relationship, to develop commercialization opportunities. Project Networks can be purposeful vehicles for creating new business technologies. Some firms purposefully invest capital and capabilities in collaborative project networks as a more coherent approach to creating emerging technologies. For example, the Bluetooth project (www.bluetooth.com) is an example of a collaborative project between firms in a business network creating emergent business opportunities. The Bluetooth project was an intentionally formed network where many firms, from several industries, cooperated to develop short-range digital communications protocols to be used, originally, between household appliances, by a single microchip.

3 The subsequent Bluetooth technology has a wide range of possible future applications beyond the commercial scope of the original Bluetooth project. Bluetooth technology has continued to develop, and some of the original firms may, or may not, continue to collaborate on further projects. The relative success of “Bluetooth” was based on the value created by the technology in an emergent, business network. Successful technological innovation, created by a multi-party collaborative project like Bluetooth, has forced firms to examine their resources as well as the resources potentially available from their customers, suppliers, competitors, and alternative technological resources. The performance requirement to integrate different technologies has increased the pressure on firms to find innovative solutions through inter-firm relationships. By using an inter-firm relationship to create new solutions, the firms can provide and share specialized skills and capabilities to collaboratively explore new commercial areas. The initial exploratory processes of inter-firm relationships form the basis of a project network which may be within a particular industry, or link firms from different industries, as the firms look to expand possible business and market synergies. These firms may compete in one arena, but need to collaborate in others (Brandenburger and Nalebuff, 1996; Hamel, Doz, and Prahalad, 1989) in order to develop win-win, coherent technology systems. A coherent technology system requires resources and orchestrated innovation to take advantage of global commercial markets (Ohmae, 1989; Hertz and Mattsson, 2003). In Finland, Nokia and TeliaSonera both use extended inter-firm networks for product and service enhancement. These inter-firm project relationships allow these two firms to go further or deeper in the value creation process, as part of a network, than they could be

4 expected to go on their own. Even a very large firm is often unable to control all of the components in the innovation process (Birou and Fawcett, 1994; Bower, 1993). Previously, a larger firm might have had the resources to competitively research, create, and distribute new products, processes, or methods of controlling technological solutions. However, this assumption is no longer valid in most technology intensive industries (Bower, 1993). For example, small firms, in exchange for sharing their conceptual insights into new opportunities to create value, share the larger firms’ capabilities and market access (Blomqvist, 2002). Emergent business networks face different managerial challenges than stable business networks. To support creating and managing more integrated service platforms required by recent societal trends, firms are now using collaborative projects to develop emergent technologies, coherent standards and approaches to potential areas of development and to make future developments possible in new network structures. These new network structures vary by industry specific needs (Möller and Svahn, 2006). However, coordinating these network structures has also brought new challenges for the firms managing the projects that can be described as emergent business networks. These challenges have given rise to the need to better understand the managerial issues of collaborative projects in a network context. For example, a firm’s ability to identify and create emergent business opportunities requires different forms of investment and capabilities than managing an existing business, as an existing business may have a clearer set of managerial variables. The capabilities and the investments required in an emerging business opportunity are

5 ambiguous and entrepreneurial. The capabilities and investments required to create an emerging business opportunity in the context of a business network are even more amorphous and complex. This study describes the forms of network capital and network capabilities by focusing on the roles of individual actors and their cognitions. Over time, the efficiency of network capital and network capabilities can be described through individual roles and the individual managers’ perceptions. The shift of perception indicates how the manager interprets their future business development opportunities based on participation in this project network. A brief introduction of relevant research supporting this study provides a theoretical background. There are two lines of discussion in the introduction, a project and a network. 1.1 A project In general, projects represent an organizational form that can have multiple economic purposes. The type of project is directly tied to the firms’ goals. Therefore, some distinction in describing a project is necessary because there are many activities which can be described as projects. Corresponding to the variety of projects are the related forms of investment and outcome. The forms of investment in a project, and the outcomes from the project, are conceptually tied to the firms’ objectives. In some cases, projects are fairly routine processes (Pisano, 1994) and they simply represent a temporary focus of resources towards a specific purpose described as the temporary nature of a project organization (Lundin and Söderholm, 1995). As projects become a common form of managing work flow for the firms, then the firm

6 may evolve to build more stable forms of organizational structures and cultures that use projects as an approach to work, for example, communication patterns (Allen, 1977; Ancona and Caldwell, 1990) innovation capacity (Katz and Allen, 1982), cross-functional structures (Ford and Randolph, 1992), and group dynamics (Ekwall, 1993). In these cases, projects may be temporary combinations of resources, but the ongoing nature of the firm provides a stable structure for resources management. For example, multi-project organizational structures (Engwall, 2001), are focused on bridging the gap between temporary organizational structures and more permanent organizational structures. Temporary organizational structures are creating more permanent routines, and permanent organizations are moving to more flexible approaches of organizing their work (Anell and Wilson, 2002). In other cases, projects are more exploratory in nature and may involve more extensive forms of investment and learning (Keegan, 2001). These projects represent different forms of investment and expectations as the processes and results may be initially less clear. The emergent natures of the results or outcomes from an exploratory project are inherently more difficult to predict, evaluate, or measure.

Managing and coordinating an existing process is

relatively more measurable than managing an unknown process. These projects might be approached as strategic learning, knowledge creation (Nonaka and Takeuchi, 1995), or team processes studies (Gersick, 1989; Hoegl and Gemueden, 2001) In other cases, projects are purposefully undertaken with respect to open or hopeful expectations that represent future interests to the firm (Teece and Pisano, 1994; Teece, Pisano and Shuen, 1997; Von Krogh, Ichijo and Nonaka, 2000). In these cases, the potential benefits are more strategic (Shenhar, 2004) in nature. For example, a

7 project between firms could represent a strategic approach to a perceived need to responds to societal trends and to create new forms of business that fill more complex requirements by linking different capabilities between firms using the resources and knowledge as a network. Here, the context influences on interorganizational innovation projects, for example, the analysis of the stickiness and leakiness of knowledge, information and resources (Bengtsson and Eriksson, 2002:82) support the organization’s goals. According to Sahlin-Andersson and Söderholm, (2002) the organizational context has to be included in the project analysis, and more contextualized studies are needed as well as developing a more field based analysis of organization theory, (See Powell and DiMaggio, 1991; Scott, 1995 Scott et. al., 2000) Sahlin-Andersson and Söderholm, (2002:19). Within project management literature there is a tendency to rely on organizational theorists to illustrate the point that projects are part of a larger system. For example, “All project teams are embedded in a complex web of people, resources, organizational structures, market conditions etc. and the activities inside them are always affected by the characteristics of that web (Granovetter, 1985), and there is always an ongoing competition about the allocation of resources and attention (March and Olsen, 1976; Pfeffer and Salancik, 1978)”. In general, there are two main approaches to describing a project. The first approach is substantive and is generally understood to focus on efficiently managing processes involved in the project. This approach to describing a project is more normative. The second approach focuses on a theoretical conceptualization and description of the purposes, expectations, and outcomes of a project.

8 The study of collaborative projects is subject to managerial interest. Many factors should be considered when looking at the role of inter-firm relationships within the project network. The weights assigned to individual criteria, and in which sequence to invest resources, is dependent on a company’s circumstances. Balancing processes and stages of a firm’s commercialization effort is related to how a firm attracts, interacts, as well as enters and exits from their portfolio of temporary project networks. Many firms need to maintain their competitive position, or attempt to control industry standards through inter-firm, collaborative projects. The firm’s ability to attract or separate from other firms in collaborative projects is critical for their future role in the marketplace. Managing these processes will affect the firm’s performance and consequently gives rise to theoretical and managerial interest. For example, SahlinAndersson and Söderholm (2002) see the projectification of society, the project portfolio of firms, the temporary and the permanent organizations, and the concerns of boundaries of a project as necessary areas for further study. The very nature of investing in an intentionally formed temporary structure, a project network, raises questions of value creation. By participating in an inter-firm project, firms may be strategically attempting to create value by implying that these activities are a form of investment. An attempt to create strategic value for a firm, by investing in a collaborative project network, gives rise to the focal area of the study. By stipulating that the project results are subject to evaluation, it is implied that the project itself is a form of investment. This begins to form a basis for describing the types of investment and return. However, because an emergent business

9 network combines multiple actors, with different perceptions and expectations of an emergent business opportunity, the return on investment may be subject to a multiple forms of return, several types of subjective interpretation, as well as subject to different criteria, schemas, or mental models within the context or system at large. An open question remains; what are the forms of return that occur based on those investments, and where does the potential value accrue? The study focuses on actors’ perceptions and expectations of emergent opportunities for value creation from the Project Network. Perceptions about the relationship will significantly influence how the parties consider their interactions and their responses in the relationship. This assessment and interpretation of the interaction should have a great deal to do with how change is managed within the project network. The firm’s actions should be a considered strategic response. The relative evaluation of the firm’s strategic choices is subject to the forms of return on the investments made in the project network. Performance valuation is subject to the approach for measuring the forms of return. The very nature of investing in an intentionally formed project network raises questions about evaluating its relative value. If we stipulate that the project can have a positive value or a negative value with respect to individual or group perceptions, then by inference, the concept of value is complex. The concept of value is not transparent to others’ perceptions. Actors may perceive value in the project, and even appreciate the importance of other actors’ perceptions, but these simply remain perceptions.

10 For example, by describing a project’s value as social, the description implies that evaluation could be influenced by outside awareness of the project. By stipulating that a project occurs as part of a larger context or a system, then, by inference, it can be stipulated that evaluating a project extends to the wider context. Therefore, the strategic value of the project maybe redeemed in the larger context, beyond the scope of the participants in the project. This proposition brings up the area of interest for firms participating in a project; in what context does the value accrue, from the market and/or from a network? 1.2 Networks According to (Grabher and Powell, 2005), there are four main perspectives or approaches to describing networks. The first approach focuses on networks as a governance structure between firms, for example, the firm’s boundaries. The second approach focuses on network governance as conceptual descriptions of the perceptions within the network between the actors, for example, forming trust, reputation, embeddedness, and power. The third approach, which is an extension of the second approach, focuses on network dynamics by describing processes and outcomes of the network, for example, leverage, learning and innovation. The fourth approach to a network study focuses on networks formation, for example, informal networks, project networks, and business networks. In general, networks have multiple economic forms (Axelsson and Easton, 1992; Jarillo, 1993). Similar to projects, these forms are tied to the purposes and the benefits sought by the firms utilizing networks. Just as projects vary by reflecting the firms’ purposes, there are many types of business networks. The forms of inter-

11 organizational networks are tied to the purpose of the network (Nohria 1992; Zettinig, 2003; Möller, and Rajala, and Svahn, 2005). Network formation has been studied from multiple academic perspectives, such as social science, economic sociology, and organizational studies. These studies comprise, as an aggregate, the emerging areas of network research (Axelsson and Easton, 1992). The literature explores emergence, functioning, and forms of networks as roles in the economy. The descriptions of network processes vary with the perspective of the academic study. For example, (Möller et al, 2005) in some cases the network is stable and develops routines and organizational cultures similar to an established organization. Set expectations and cultural norms are used to describe the relationship between the actors within the network. These studies focus on communication patterns, social norms of behavior, or organizational dynamics (Child and Faulkner, 1998; De Rond and Faulkner, 2000). In some cases, the network study focuses on learning processes and forms as well as knowledge creation and how it is transferred between the firms in a network (Ahuja, 2000; Anand and Khanna, 2000; Von Krogh, Ichijo, Nonaka, 2000; Von Krogh, Nonaka, and Nishiguchi, 2000). The outcomes and the dynamic activities between the actors are used to describe the network. These descriptions of the network build on organizational learning and knowledge management literature. In some cases, the network is emerging, and the roles and expectations evolve over time. For example, different actors tend to specialize in different stages of innovation (Johnsen and Ford, 1999; Benson-Rae and Wilson, 1999). The stage of innovation will have a direct affect on the actor’s ability to find a role in the

12 commercialization process. When inter-firm project collaboration is involved in the commercialization process, then the emergent processes of forming the network becomes a valid concern. By approaching a collaborative, inter-firm project network, it becomes possible to focus on a specific area or a specific phase of the network development processes according to the evolution of the emerging business opportunity.

Specialization has made it

possible for firms to enter or exit an emerging technology at different stages. Thus, it is possible to focus one’s effort on the emergent phase of a technology, or partner with other larger firms during the downstream stages of commercialization. This flexibility in entering into an emerging technology later in the development process implies that not all firms must invest throughout the entire development process, nor expect the same form of return on their investments. The ability of a firm to enter later in the development process is tied to the availability of the specialized firm. It requires balancing the interests (Thorelli, 1986), not simply a straight cost evaluation of the financial benefits of both parties. The actor’s perceptions are an evolutionary processes and, and those perceptions are more ephemeral, so the processes of sensemaking become relevant to describe the social interaction in the network (Weick, 1993, 1995; Möller and Svahn, 2006). 1.3 The aim of the study This study was undertaken because project networks are a contemporary approach to creating value for firms and their customers. This study describes and analyzes the intentional formation of a project network as an approach to creating an emergent business.

13 The specific, expected outcomes of the study are to extend the conceptual

discussions

of

developing

emergent

business

opportunities via a project network. There are three main aims of this study. First the previous literature used in looking at the focal phenomenon focuses on various aspects of the focal phenomenon, but does not provide a comprehensive theoretical foundation. These literatures and perspectives will be discussed in Chapter Two. Specifically, the first aim of the study is to draw from appropriate literatures to build a more integrative, holistic description of a project network. Second, the expected outcome of the study extends existing theories by building a conceptualization of the focal phenomenon. The theory development extends beyond the existing models of the complex, focal phenomenon. Specifically, the second aim of the study is to create a conceptual language of a project network. Third, this study aims at conceptual integration by combining theoretical discussions and the empirical findings. Specifically, the last aim of the study will be to analyze the empirical case by using the newly created, conceptual language of a project network. 1.4 Focus of the study The focus of this study is to contribute to the emerging theory of a project network as a contemporary approach to creating an emergent business and to provide a better understanding of the factors influencing network capabilities and network capital of firms involved in the project. As previously stated, a collaborative project, formed to create an emergent business opportunity as a business network, represents an area of managerial interest, because it is a

14 contemporary business model that is not well understood. Even though projects are by no means a new form of doing business, collaborative projects that focus on creating emerging business opportunities, new technology standards, and new approaches to technological challenges are transforming the ways in which firms approach these challenges. A key process in collaborative projects is the firms’ response to evolution as the business opportunity emerges and is understood. These complex projects are used as vehicles to target a business opportunity and approach this opportunity with a strategic and coherent team of actors. The firms remain autonomous yet collaborate to create a competitive advantage for both the project network and the individual firms. The outcome, the required technology, and the investments are not clearly understood at the outset of the project. The roles evolve, extend, or decrease in response to the path of the technological solution the network creates and the appropriateness of that emergent solution in the marketplace. These are not routine projects that the actors can understand clearly and as a result simply apply their current capabilities and resources. These complex projects reflect the increased demands from society to integrate different technologies in novel ways. Over the course of the project, the innovation necessary to bring the project to fruition becomes clearer to the participants. This is a relatively new approach to creating competitive advantage. As such, the study of a project network is interesting to firms, because project networks are a contemporary business activity that has not been extensively explored from an academic perspective. There are two reasons for pursuing this research gap. First, this study will approach creating a new business model as a project network from the perspective of the potential role of an entrepreneurial micro firm. This choice was made because there

15 have been very few academic studies focusing on the potential role of a micro firm, intentionally creating a business network, as it is more common to describe the interactions between firms in a business network by focusing on the interactions between the actors from larger organizational structures. Specifically, this study focuses on a micro entrepreneurial firm intentionally creating an emergent business development opportunity as a project network. And second, the micro firm perspective was chosen because of the relatively high percentage of the small and medium sized enterprises established in Finland, and the relatively high rate of innovation which is generated from the small firms in the high technology sectors in Finland. The intentional creation of a project network to develop emergent business for a business network in Finland represents a viable strategic approach to creating a value added role in the high technology sector and as such represents the potential for a managerial contribution resulting from this study. These two positioning choices are tied to the two expected contributions of the study. It is hoped the study will provide an approach to theoretically describe the emergent processes and capabilities of actors pursuing an emergent business opportunity by using a project as vehicle to achieve their strategic objectives creating value. It is also hoped that this study will provide managerial recommendations for a small entrepreneur in developing emergent business potential and thereby create a value- added role with respect to social capital, intellectual capital, and network capabilities used to create and manage projects. Because there are two expected outcomes of the study, there are two parallel levels of analysis. The first level of analysis is from the firms’ perspective with respect to their roles in the project network and expectations of the potential those roles represent in the future

16 emergent businesses. The second level of analysis is the individual’s perceptions about the project, the entrepreneur, and the other actors in the project network. The second, level of analysis has two lines of discussion. One line of discussion focuses on perceptions about the entrepreneur’s role. The other line of discussion focuses on the roles, the risks, and the potential conflict of those roles with the other actors/firms in the network. The two levels of analysis will help provide a richer understanding of the case material. 1.5 Research strategy and design The research strategy describes the choices made over the course of the study. It includes a description of the central issues that arose during the project life-span to better help the reader understand how choices were made and what process occurred. 1.5.1

Research strategy: abductive case analysis

Given that the study focuses on emerging issues, inductive or deductive logic would not provide the interaction between the emergent properties of the focal phenomenon and the theoretical discussion and analysis. According to Miles and Huberman, (1994) a case study is a suitable method for providing new perspective to the focal phenomenon. Qualitative method, instead of quantitative, was selected because the purposed aim of the study is to understand a complex focal phenomenon without locking into a predefined setting. A single case was selected as an approach to the study, because a single case would support theory building rather than theory testing. This is particularly true as the focal area of study is the emergence of a business network. Because cases studies are often abductive (Peirce, 1902; Ryder, 1995; Dubois and Gadde, 2002), abductive logic was

17 chosen for this study. Abductive logic sees theory building as a dynamic discussion between existing theory and the empirical data (Alvesson and Sköldberg, 1994:43-45). Abductive logic means that the theoretical choices of the study can evolve of the course of the data analysis as different emphasis needs to be supported with respect to theoretical importance. Many qualitative studies, which aim at theory building, have used this form of logic. Dubois and Gladde (2002) see abductive logic as suitable for theory development. The original source of abductive logic comes from an application to Carnegie for support of Research in Logic by Charles Sanders Peirce in 1902. Peirce was not content with inductive and deductive approaches to theory building. As stated previously, in section 1.3, there are three main aims of this study which argue for choosing abductive logic as an approach for this study. First, the breadth of the previous literature utilized in looking at the focal phenomenon focuses on different aspects of the focal phenomenon, but does not provide a comprehensive theoretical foundation. The focal phenomenon involves emergence so the relevance of theory should evolve over the case data. Second, it aims at theory building by conceptualizing the focal phenomenon, and the area of theory development would go beyond the existing models of the complex focal phenomenon. Again, theory building would be facilitated by choosing an abductive approach. Third, this study approaches conceptual integration by combining theoretical discussions and the empirical findings. The integration of theoretical discussion and the empirical case data may evolve given the focal phenomenon is one of emergence. Therefore, it can be argued, all of these expected outcomes can be addressed through abductive logic.

18 In support of using abductive logic as an approach to the case analysis, Pettigrew described the linking of process to outcome, in five guiding assumptions (Pettigrew, 1997:340). The first assumption focused on embeddedness and is understood to describe a project in a larger context. This study focuses on a project embedded in multiple contexts and levels which will be developed later in the document. This first assumption supported the choice to include systems theory and more specifically cognitive systems in the preliminary conceptual framework to support the analysis of the empirical case in larger context. The second assumption, studying processes across a number of levels of analysis is described through the activities and processes of the actors in the project. There are two levels of analysis in this study, the perspective of the individual and the perspective of the firms. These two perspectives will provide a fuller understanding of the empirical case and support the two purposes of this study. The third, the temporal interconnectedness is described through time elements of the project, studying process in the past, what was done, the present, what is being done, and the future, what is expected.

The empirical data focuses on the individual actors’

perceptions of what has occurred, their perceptions what is going on during the potential transition of the pilot project in the empirical case to the next phase, and the actors’ perceptions of the future potential and expectations of the emergent business opportunity for their firm and the project network. And fourth, the explanation of context and action as a search for a more holistic rather than linear explanations of process is composed by using different theoretical literatures. The theoretical language that is created in the preliminary conceptual framework in Chapter

19 Three draws from multiple research traditions and theoretical languages in an attempt to create an integrated language. It is hoped that this integrated language provides a more holistic approach to the analysis of the empirical case. This study draws on business network literature from a network capabilities perspective, the resourced-based-view of the firm for a capital and capabilities perspective, the entrepreneurship literature for social capital perspective, and systems theory. Cognitive systems perspective provides a context for the study. And finally, process analysis is linked to the location and explanation of outcomes. This analysis is found in the managerial recommendations. One of the two purposes of this study is to provide managerial recommendations for micro firm entrepreneurs or small and medium enterprises because these actors are so important with respect to creating innovation in the Finnish high technology sectors. A pilot study can support an abductive approach to understanding the focal phenomenon and the interaction between theory and the case data. The pilot case was initially selected because it was expected to be highly representational of the focal phenomena. Specifically, a longitudinal case analysis (Pettigrew, 1990) of an intentionally formed project network was completed as a pilot study because it is suitable for theory development (Dubois and Gadde, 2002; Yin, 2003). The pilot study explored how the firm was going to use relationships to create and build project networks between the clients and the local firms in the Tampere region of Finland. After spending a year in this longitudinal case study, it was determined that the empirical case would better serve the study as a pilot study.

20 The case material was suitable to develop the information necessary to construct the preliminary conceptual framework, but was insufficient for the purposes of the study. Ultimately, the expectation that the case would be highly representative of the focal phenomenon turned out to be untrue, so the case was changed and used as a pilot study to support the development of the preliminary conceptual framework. The conclusions from the pilot case2 supported developing this study in three ways. The relative emphasis of the theoretical discussion was clarified to focus on network capital and network capabilities, the three research questions that frame the study were developed, and the initial version of the preliminary conceptual framework was developed. The preliminary conceptual framework provides the initial structure for the empirical data, and over the course of the study, the preliminary conceptual framework was modified to reflect the changes in thinking of the researcher. Therefore, the empirical study consists of two parts. First, an exploratory pilot study was made with a single small entrepreneurial firm from the ITC industry from January, 2001 to January, 2002 in order to complement the overall understanding of the focal phenomenon. Secondly, the main empirical study was made in cooperation with a single small entrepreneurial firm from the ITC industry from January, 2002 to July, 2004. 1.5.2

The framing research questions

As a result of the pilot study, a more complete preliminary conceptual framework was developed. The preliminary conceptual 2

See Appendix 1: The Pilot Study.

21 framework is framed by three research questions which are consistent with Pettigrew, (1990). The framing questions help to guide the construction of the research preliminary conceptual framework and support the aims of the study with respect to the purpose of the study. By making the aims of the study, the purpose of the study, and the research questions explicit, the goals of the study can be understood and evaluated if the study achieved its aims and purposes. The study is framed by three research questions: Which theoretical concepts form a viable language for describing and analyzing the creation of a project network targeted as an emergent business opportunity? What are the perceptions and capabilities used to develop and manage project networks targeted for an emergent business opportunity? Which contextual factors have a perceived influence on the early processes of an emergent project network? 1.5.3

Structure of the study

Chapter One provides the focus of the study, briefly introduces previous relevant, supporting research, lays out the research strategy, and finally explains the structure of the study. Chapter Two introduces theoretical concepts from selected research to help develop the preliminary conceptual framework. Chapter Three presents the preliminary conceptual framework and develops the conceptual building blocks as an integrated model to assist with the empirical data analysis. Chapter Four discusses the empirical data with respect to the preliminary conceptual framework.

22 Chapter Five provides a summary of elements of the preliminary conceptual framework, evaluates the preliminary conceptual framework, proposes a refined conceptual framework, discusses the theoretical and managerial contributions, discusses the quality and limitations of the study and proposes areas for future research.

23 2

THEORETICAL PERSPECTIVE LITERATURE

This chapter provides the theoretical antecedents of relevant interorganizational research that will help the reader understand the previous theoretical discussion as well as point out the limitation of this study and lay the ground work for the theoretical contribution of the study. The theoretical perspectives that could be used to describe a project network each provide a form of language to describe the issues. These languages offer both a form of consistency and a form of locking in the method of describing the issues. The matter of where to position a study is one of the researcher’s challenges. This issue demands that the researcher understand previous research alternatives and is able to articulate the relevance and the failings of the previous research to adequately describe the issue under consideration. Being able to identify this opportunity helps position the contribution of the study.

Figure 1: Research Traditions

24

Figure 1, shows the relevant research used in this study. The different ellipses indicate different research traditions or lines of literature. Each of these literatures addresses an aspect of a interfirms projects with a different vocabulary. One of the aims of this study is to integrate these languages into a more holistic vocabulary that combines the strengths of these literatures into a more integrated conceptual framework. The top two ellipses show the resourced-based-view of the firm and the cognitive systems drawn from systems theory. These are used as an over-arching structure, in the study. The resourced-based-view ellipse provides a capital perspective because it links the study to the managerial outcomes which result from the study. It is also a common way for managers to understand an inter-firm project. The cognitive systems literature helps to provide a larger context for the study and supports the discussion line pertinent to perceptions, expectations and sensemaking of those perceptions in the case analysis. The next level of ellipses relates to literature that is directly related to the focal phenomenon. Project literature draws on other research traditions for its vocabulary. The business network literature supports issues of emergence, network capabilities, and resources invested in collaborative networks. This literature supports the description of the main focal phenomenon of a project as a vehicle for investment in learning about an emerging business opportunity. The last ellipse, the entrepreneurship literature, more specifically the social capital literature, supports the two levels of analysis and connects to the cognitive systems literature.

25 The literature chapter will follow the ellipses in Figure 1 as it helps build an understanding of how the literatures are related. The theoretical discussions included in this study have been driven by two factors, first, the ability and fit of the research tradition’s tools to describe the focal phenomena, and second, the contribution value of this research with respect to the research tradition. Additional theoretical reference may be made, when appropriate, to support or criticize the theoretical discussions. 2.1 Resource based view of the firm and learning

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. The resource-based-view of the firms provides a capital and capabilities perspective to the study and supports the creation of managerial recommendations. The focus on a micro firm intentionally creating and managing the emergent network helps position the study by building on the resourced based view of the firm investing their resources and capabilities as a process of creating and sustaining competitive advantage. By extending the resource based view to include learning in combination with other firms in collaborative project networks, new market spaces may be created representing emergent business opportunities. The resource based view looks at what resources the firm possesses internally, assesses their potential to create value and define a strategy that will allow the firm to capture the maximum value in a sustainable way. For the resource based view, the firm will begin

26 with a stock of resources and capabilities in order to determine the appropriate strategy (Grant, 2005). According to Grant (2005) resources are what is input into the production processes and understood as basic categories; financial, physical, human, technological, reputation, and organizational. Capabilities (Grant, 2005) are understood by how for a team of resources is able to perform some task or activity. Capabilities (Grant, 2005) constitute the main source of competitive advantage. Routines (Grant, 2005) are regular and predictable patterns of activity which are made up of as sequence of coordinated actions by individuals. They are the result of repeated interaction (learning) between people and other resources of the firm. Resources can be seen as stocks that depreciate with time and that have to be replaced, augmented and upgraded (Grant, 2005). The only way to stay competitive in the market is by upgrading the resource pool, similar to Porter’s innovation as force creating competitive advantage (Grant, 2005). Extending the boundaries of the firm through a collaborative project network, is one approach to learning about emergent business opportunities. A project network is also an approach to augmenting the firm’s resources and capabilities in new areas which may support strategic learning and the internal development of core capabilities and resources for the firm. This approach to learning through project networks as temporary organizations moves in the direction between industry position and innovation (Porter, 1980) and internal resources and capabilities of the firm being updated, (Grant, 2005) as a perspective for creating and sustaining competitive advantage.

27 A review and classification of the streams of literature from the resourced based view of the firm with respect to international business has been completed by Peng (2001). The resource based view defines the competitive position of the firm by the rate of return on the investment in resources and relationships, and it is management’s responsibility to adjust and renew these resources and relationships in response to environmental changes. The resource based view does not emphasize the distinction between technical and institutional environments. In this study, the foundation work of the resource based view of the firm (Grant, 2005; Pfeffer and Salancik, 1978; Pfeffer, 1987; Peteraf, 1993; Penrose, 1959; Wernerfelt, 1984; Barney, 1991; Wernerfelt, 1984) has been extended (Grant, 1996; Grant and Baden-Fuller, 2004) through the learning organization perspective (March, 1991; Prahalad and Hamel, 1990; Von Krogh, Ichijo, and Nonaka, 2000; Teece and Pisano, and Shuen, 1997) and the recent developments in the knowledge based literature (Von Krogh, Ichijo, and Nonaka, 2000) including the absorptive capacity view (Cohen and Levinthal, 1990). Initially, the Resource Based View proposed resources as valuable, rare, inimitable and non substitutable (Barney, 1991) and it was the combination of those resources and the related capabilities of how to invest the unique combination of resources that made it possible for business to develop and maintain superior performance (Wernerfelt, 1984) in achieving economic returns.3 This managerial focus on efficiency has led firms to specialize and to transact with

This initial resource based view was felt to be too static for Ghemawat. The resource based view of the firm may be a more historical and not a fully dynamic forward looking model as it answers the questions of what was done to date (Ghemawat, 1999:119). The ability to create value in the future is strategic, and it requires that the firm be able to build on its existing capabilities. 3

28 others in the environment in order to obtain additional resources for survival. (Pfeffer and Salancik 1978:43) Configuring the available or unavailable resources as tangible and intangible assets, in combinations that are difficult to imitate, represent the firms’ core competency and support the ability of the firm to create commercial value (Prahalad and Hamel, 1990; Prahalad, 1993). Core competencies are comprised of the combination of technology, the managerial governance processes, and the ability of the firm for collective learning. The need to adapt organizational strategy to environmental changes gives rise to the question of when and how to adapt? For example, does the organization foresee opportunities in the environment, or do they react? Organizations should be proactive in creating the future technological opportunities before the environment requires the firm to respond (Eisenhardt, 2000). Management needs to have the foresight to creatively stretch their imagination (Kao, 1997) and leverage their resources to provide the energy for proactive and advantage building and industry reengineering (Hamel, 1991). Extending core competencies through partner selection If we consider the trend for firms to strategically combine their resources through inter-organizational collaboration and, if the changes in the environment with respect to the demand and supply for the specific core competency alters the firm’s economic value in the marketplace, arguably it is not only the firm’s own core competencies that are subject to changes in valuation, but the partner firm’s valuation may have an effect on their economic valuation as well. Therefore, selecting partner firms not only plays a role in extending the firm’s core competencies, but should also be

29 understood as strategic behavior. Changes in the valuation of the firm and the valuation of firms’ partners extend the core competency for value creation and the perceived value of the firms in the network. Therefore,

actively

building

the

core

competencies

and

complementary resources of other firms must not be a haphazard attempt to be the best at everything. Systematically developing resources supporting a firm’s own core competencies can help to augment firm’s capacity to reach a focused goal. If the resources and capabilities are not available in-house, then some of the needed resources and capabilities can be acquired from the market. Managers must be able to develop these resources from a network of complementary resources. The process of learning about other organizations in the environment involves exploration and experimentation (March, 1991). “Understanding the choices for improving the balance between exploration and exploitation are complicated by the fact that returns for the two options vary not only with respect to their expected values, but also with respect to their variability, their timing, and their expected values, but also with respect to their distribution within and beyond the organization. Processes for allocating resources between them; therefore, embody intertemporal, inter-institutional, and interpersonal comparisons, as well as risk preferences (March, 1991:71).” To continue, in order to align complimentary resources from the network, a firm must start an active process of monitoring other organizations. Therefore, linking literature from the network perspective, the firm’s ability to identify and invest in relationships in the business environment can be based on management’s ability to recognize the critical resources, and to control access, through

30 social contracts (Grabher, 1993). By using social contracts with actors that control access to external resources, a manager is able to respond to changes in the environment (Borgatti and Everett, 1992). And by logical extension, the ability to identify potential commercial concepts by scanning firms and individuals from both inside and outside the firm’s network is a critical competency. Related, is the concept of absorptive capacity (Cohen and Levinthal, 1990:128) and “prior related knowledge confers an ability to recognize the value of new information, assimilate it and apply it to commercial ends.” A critical component of the requisite absorptive capacity for certain types of information, such as those associated with product and process innovation, is often firm-specific and therefore cannot be bought and quickly integrated into the firm (Cohen and Levinthal, 1990:130-135). The development of absorptive capacity, and in turn, innovative performance are historyor path-dependent and argue how lack of investment in an area of expertise early in the process may foreclose the future development of capabilities in that area. This is an assumption of flexible adaptation which builds on the core competencies of the firm, The premise underlying the concept of absorptive capacity is that the organization needs prior related knowledge to assimilate and use new knowledge.4 Absorption capacity is tied to the firm’s ability to apply the learning opportunities from the previous investments. As a consequence, experience or performance on one learning task may influence and improve performance on some subsequent learning task. The prior possession of relevant knowledge and skill is what gives rise to creativity, permitting the sorts of associations and

This is similar to the concept of associative learning in which events are recorded into memory by establishing linkages with pre-existing concepts. (Cohen and Levinthal 1990:129) 4

31 linkages that may have never been considered before. Intensity of effort is critical. Knowledge diversity also facilitates the innovation process by enabling the individual to make novel associations and linkages (Cohen and Levinthal, 1990:130-135). The firm’s absorptive capacity depends on the individual positioned as the gatekeeper of either the firm, or the external environment, or at the interface between subunits within the firm. A firm’s absorptive capacity is not simply the sum of the absorptive capacities of its employees, and it becomes useful to consider what aspects of absorptive capacities are distinctly organizational. Organizational absorptive capacity will tend to develop cumulatively and this progressive improvement in the learning performance is referred to as “learning to learn”. (March, 1991). Discussion of the resourced-based-view of the firm with respect to a project network A theorist from the resource-based-view of the organization would see an emergent project network as a way to acquire extra resources. This is an important issue for a newly established entrepreneurial firm that has limited resources (Dyer and Singh, 1998) because a project

network

could

provide

opportunities

for

small

entrepreneurial firm to create strategic value for larger firms by utilizing their resources and capabilities to create new forms of value by creating a new competitive space. “Creating new market space requires a different pattern of strategic thinking. Instead of looking within the accepted boundaries that now define how we compete, managers can look systematically across them. By doing so, they can find unoccupied territory that represents a real breakthrough in value” (Kim and Mauborgne, 1999:83). A small entrepreneurial firm may have a different perspective about creating value through new business models.

32 A small entrepreneurial firm has more flexibility to align the appropriate combinations of external capabilities and resources according to the new opportunity than a larger firm. A small firm would have limited expectations about being able to create and emergent opportunity alone, so it starts to build this emergent opportunity by looking for external resources and capabilities to share in the development efforts.

Nor does a small firm have

extensive investments in internal resources and capabilities that need to be applied and justified internally. In contrast a larger firm, having a more extensive prior investment in capabilities and resources would be looking for way to utilize and capitalize on those earlier investments. The dominant logic (Krogh and Grand, 2000) of how a larger firm views the world is internalized to the corporate culture. The emergent idea would be subject to fitting in a larger understanding of how the world works or would need to have enough support internally to be accepted as a possible different view of the world that could be useful. The larger firm would have more preconceptions about the emerging opportunity and the level of required incremental investment. The internal development costs would be subject to many more internal hurdles and approvals. A project network would be a viable and attractive mode to explore new emergent areas without committing extensive internal resources for the exploration and development of potential emergent areas. A project network would allow a larger firm to explore a new market space. The ability of the firm to create new competitive spaces requires that the firm not only defend the existing market, but actually create new markets; by conceptually moving from satisfying needs to anticipating needs (Podolny, Stuart, and Hannah, 1996. The firms should focus on growth and not restructuring the existing resources,

33 but focusing the technological resources of the organization and thereby radically rethinking the current management paradigms (Teece, 1998). It is important for the individuals representing the firm’s interest to have enough vision (Weick, 1995) to conceptualize the new market space, and the relative ability to understand and attract additional resources and capabilities. Neither the small entrepreneurial firm nor the larger firms have sufficient resources and capabilities to create the new market space alone, but combined they may be able to contribute to building the new space through value added activities in a project network. It should be pointed that because developing relationships in project networks precedes the emerging combined resources, measuring the potential commercial gains of these value added activities is difficult. 2.2 Systems theory and cognitive systems

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. The embeddedness of the project as an aspect of the focal phenomenon draws from the systems theory, specifically the concept of a cognitive system to help provide a larger context in the analysis of the case. The use of systems theory helps provide different levels of analysis and provides theoretical structure to approach the empirical case material. An open systems’ perspective provides a vocabulary to describe the case material from different levels in response to a call to study projects bounded in time and space (Engwall, 2002). As a theoretical element of the open systems approach to the case material, the conceptual element of the cognitive system will be introduced. The use of a cognitive system to include symbols and

34 perceptions allows for the case material to be approached from different perspectives which is useful with respect to the issues of emergence, changes in perceptions, and the new business model being the focal area of the study. The concept of sensemaking and enactment (Weick, 1995) support the discussions of perceptions in the cognitive system and the concept of attunement relates to how the boundaries of a cognitive system are relative to the perceptions of the actor. One of the aims of this study is conceptualizing a business project network within a context. In this study, the context is conceptually described as a system and an environment. The conceptualization of this context heavily relies on the work of Scott (1999) and his classifications of the type of organizational systems and types of organizational environments. A Systems Theorist would see any individual, organization, or network as embedded in a system. The organization or network would be considered systems embedded within systems. By extension, for a systems theorist a project network is an embedded relationship between the firms within a larger system. “Every organization exists in a specific physical, technological, cultural, and social environment to which it must adapt. No organization is selfsufficient; all organizations depend for survival on the types of relations they establish with the larger system of which they are a part” (Scott, 1999:20). In a sense, a system together with its environment makes up the universe of all things of interest in a given context. There are subdivisions of this universe that fall into two sets, the system and the environment.

The system and

environment can be developed in many ways, which are in fact quite arbitrary. Ultimately it depends on the intentions of the one who is studying the particular universe as to which possible configuration

35 of objects is to be taken as the system. (A. D. Hall and R.E. Fagen (1956) in Scott 1999:95) 2.2.1

Types of organizational systems

According to Scott there are three forms of organizations which are described as forms of systems: the rational system, the natural system, and the open system (Scott, 1999). The rational system perspective would see organizations as collectives oriented to the pursuit of relatively specific goals and exhibiting highly formalized social structures. A natural systems perspective would see organizations as collectivities whose participants share a common interest in the survival of the system and who engage in collective activities, informally structured, to secure this end. An open systems perspective would see organizations as systems of interdependent activities linking shifting coalitions of participants; the systems are embedded in – dependent on a continuing exchange with and constitute – the environment in which they operate. (Scott, 1999:23-25) A project could fit within any of these three types of organizational systems. It is not the aim of this study to capture the entirety of the multiple meanings of the word project or the multiple meaning of the phenomena of projects, in any systems or environmental context. For the purposes of this study, it can be stipulated that the project in the empirical study is initially contextually embedded in an open system. Schwab (1960) has termed this perspective rationalism, the opposite of reductionism. Rationalism occurs when explanations are derived

36 by looking outside an entity to the environment or a higher system in which it is embedded. In many ways, the open system perspective points to the significance of the wider environment (Scott, 1999:86). In support of this choice to focus on a project, as contextually embedded in an open system and building on the earlier discussion in the project literature, Engwall, writes, “Studies with a more open systems approach to projects are rare. … This calls for an ontological change; instead of lonely closed systems, projects have to be conceptualized as contextually embedded open systems, open in time and “space”. (Engwall, 2002:2-3) Therefore, accordingly, the boundaries of the project are stipulated to be embedded in an open system where the boundaries are seen as amorphous; the assignment of actors or actions to either the organization or the environment often seems arbitrary and varies depending on what aspect of systematic functioning is under consideration. (Scott, 1999:92) However, it should be remembered, the open system perspective stresses reciprocal ties that bind and relate the organization with those elements that surround and penetrate it (Scott 1999:93). A study of a project embedded in a network embedded in Finland could be described as multiple open systems. To continue, there are two schools that exemplify the open systems approach. The systems design approach, or contingency approach, (Lawrence and Lorsch, 1967; Mintzberg, 1979) and Weick’s social psychological model of organizing. The Design Approach to Open Systems Theory of Organizing Collectives The design approach (Lawrence and Lorsch, 1967) sees systems theory as a way to improve the design and structure of organizations

37 to make them more efficient by streamlining and looking to the interrelatedness of the organization’s discrete parts. Different environments place different requirements on organizations; specifically, environments characterized by uncertainty and rapid rates of change in market conditions or technologies present different demands – both constraints and opportunities – on organizations than do placid or stable environments. (Lawrence and Lorsch, 1967) “The challenge facing a systems designer is how to create structures that will overcome the limitations and exploit the strengths of each of the systems components, including the individual participants” (Scott 1999:88). The Social Psychological Approach to Open Systems Theory of Organizing Collectives The social psychological approach (Weick, 1969) sees open systems theory as an attempt to shift perspective from structure of the organization to understanding processes between individuals. Weick’s major concern was to spell out the implications of the open systems perspective when applied to the level of the individual participants and the relationships among them. Weick took a phenomenological stance, assuming the primacy of subjective experience over objective reality. (Scott, 1999:90) Weick’s concept of enactment emphasizes the role of perceptual processes but also recognizes that organizational members not only selectively perceive but also directly influence the state of their environment through their own actions. Attention and interpretation processes are highlighted, and whereas conventional wisdom asserts that goals precede activities, that intention precedes action. Scott, referring to Weick (1969:37) insists that behavior often occurs first and is then interpreted – given meaning (Scott, 1999:92). Since human beings actively create the world around their perceptions, organization

38 members do not merely react to an objectively accepted physical environment but enact their environment through information and the creation of meaning (Kreps, 1987:116). This point, that humans actively create the worlds around their perceptions and enact their environment through the information and meaning gives rise to the cognitive maps5. Cognitive maps are used to create and filter the information and opportunities from the open system. Relevance is a form of filtration for the cognitive map, subject to the specific attention and interpretation of the individual at a particular moment in time. It should be remembered that each of the individuals is simultaneously attending and interpreting information. Usually there is no single shared mindset (Searle, 1995) as a cognitive map for all of the individuals in a project embedded in an open system. Therefore, in an open system approach, influencing is a critical factor for the project manager; as social connections between the organization’s and environmental bodies are often influencing each other. For example, the project manager needs to gain power by association with political parties and membership in official organizations. This point is taken up by Stuart, Hoang and Hybels, (1994) as they link the performance of the firm to the endorsements of more powerful actors that can provide credibility to a lesser known entrepreneurial firm. They point to the need of a project manager to influence the criteria of the external bodies, while being

Cognitive maps are also referred to as schema and scripts in the psychology literature. These schemas and scripts are based on cognitive memory theory Anderson, (2003). See Morecroft, J. D. W., (1992) “Executive Knowledge, Models and Learning”, European Journal of Operational Research. Peter Senge, (1990) refers to cognitive maps as mental models in learning organizations. Also, this has been referred to as a cognitive system, by Lawrence Barsalou, Department of Psychology at Emory University. Transcript of Lecture on “The Human cognitive system” 5

39 on good terms with them. The influential ability of the project manager in the open system and the environment is viewed as important in this study. 2.2.2

Types of organizational environments

According to Meyer and Scott (1983) there are two types of organizational environments: technical and institutional. Technical environments are those in which organizations produce a product or service that is exchanged in a market such that they are rewarded for effective and efficient performance. In the purest case, such environments are identical to the “theoretical” competitive market. In contrast, institutional environments are characterized by elaborate rules and requirements which individual organizations must conform in order to receive legitimacy and support. In institutional environments, organizations are rewarded for utilizing correct structures and processes, not for the quantity and quality of their outputs (Scott, 1992:132). According to Scott, (1992) the institutional environment includes symbolic elements of interest including elements from both normative and cognitive systems. Cognitive systems have received less attention from social analysts than normative systems, although they are arguably significant in their effects. Berger and Luckmann (1967) have forcefully called attention to the processes by which individuals, in interaction, create definitions of social reality: first investing distinctions or “typifications”, then these productions as something objective and external to their own actions (Scott 1999:136). The conceptualization of the business project network, using the work of Meyer and Scott (1983) and their two types of organizational environments: technical and institutional, makes a distinction that is also useful in the study because the institutional

40 environment includes the symbolic elements of both the normative and the cognitive systems, and for the purposes of approaching the description of the project network in a larger theoretical context of a cognitive system, the distinction will be used to supply different approaches to describing the empirical case. In summary, this study builds on the work of Scott (1999) and his classifications of the type of organizational systems and types of organizational environments. Specifically, this study assumes that the cognitive maps of the individuals involved in a project network are embedded in an open system. These individuals will enact the environment

according

to

their

subjective

attention

and

interpretation of their cognitive map. The collective cognitive maps of these individuals comprise a cognitive system. The evolution of the project network within the embedded open system and the cognitive systems would be a result of the attempts of actors to actively enact their strategic interests and influence other actors’ strategic interests. Thereby, we have aimed to conceptualize the study of a project network as contextually embedded in an open system, open in time and “space” (Engwall, 2002:2-3). 2.3 Projects

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. However, because recent project literature tends to rely on other literatures, for example organizational management, to support the conceptual descriptions and analysis, the original theoretical and conceptual approaches will be utilized when approaching the empirical case. Generally, the primary theme of the literature focusing on projects tends to be normative, focusing on the prescriptive of how to plan,

41 organize, run, and control projects better. This literature focuses on the processes of a project and focuses on the idea of efficiently running a project as well as the preparation and execution of the plan. The most famous are the PERT (Program Evaluation and Review Technique) and the CPM (Critical Path Method) developed in 1960. These approaches tend to assume the project manager has control and can act in the best interest of the project and has a comprehensive management system. An extension of the literature focusing on how to manage projects efficiently is project literature focusing on project businesses and project networks (Artto, 2001) as organizational structures that manage and sell services as projects as either individual firms or inter-organizational structures. The second theme of project literature is that projects are unique events that are hard to capture and describe. According to Engwall, 2002:5 the previous literature was too limited by focusing on single projects as unique and by focusing on specific issues, for example, communications patterns (Allen, 1977; Ancona and Caldwell, 1990) innovation capacity (Katz and Allen 1982) cross-functional structures (Ford and Randolph, 1992, group dynamics (Ekwall, 1993), knowledge creation (Nonaka and Takeuchi, 1995) and team processes (Gersick, 1989; Hoegl and Gemueden, 2001). There is a third emerging area, which is really more of a call for research by Sahlin-Andersson and Söderholm (2002), introducing the need for research due to the projectification of society: the project portfolio of firms, the temporary and the permanent, and the concerns of project boundaries. For example, the temporary nature of project organizations (Lundin and Söderholm, 1995), multi-project organizational structures (Engwall, 2001), or focused on bridging the gap between a temporary organization creating more permanent routines and a permanent organization moving to

42 more flexible approaches of organizing their work (Anell and Wilson, 2002).

And finally, the contextual influences on inter-

organizational innovation projects, by analyzing the stickiness and leakiness of knowledge, information and resources (Bengtsson and Eriksson, 2002:82). Each of these works point at issues of a project being embedded in a larger context. As stated earlier, Sydow and Staber (2002) focused on projects being embedded into a larger context, and had a useful definition of a project network, “as an organizational form of production and exchange

among

functionally

interdependent

but

legally

autonomous firms and individuals. Although these networks are of limited duration, co-ordination of partners and activities (does take) place with respect to past experiences and future expectations” (Sydow and Staber, 2002). According to Sahlin-Andersson and Söderholm, (2002) the organizational context has to be included in the analysis of the project, and there would be a need of more contextually designed studies. Additionally, developing more field based analysis of organization theory, (See Powell and DiMaggio, 1991; Scott, 1995 Scott et. al., 2000) Sahlin-Andersson and Söderholm, (2002:19); and within the project management literature, there is a tendency to rely on the organizational theorists to illustrate that projects are part of a larger system. For example as stated earlier, “All project teams are embedded in a complex web of people, resources, organizational structures, market conditions etc. and the activities inside them are always affected by the characteristics of that web (Granovetter, 1985), and there is always an ongoing competition about the allocation of resources and attention (March and Olsen, 1976; Pfeffer and Salancik, 1978)”. In general, these themes for project studies are relevant to this study, but it was respectfully felt by this researcher that the project

43 literature, offered at the point in time the researcher was looking at possible research traditions for this study, was more academic positioning of the need to study these areas, as opposed to a substantial body of work on which to build this study. However, the agenda of the available literature supports the aim of the current study and the selected approaches. Therefore, this study will not be building directly on the project management literature as a research tradition; however, it will be making several parallel choices that are within the recommendations for study. For example, to position the project as embedded in a larger context. 2.4 Business networks

The study of a collaborative project network strategically targeted to create an emergent business opportunity is the focal phenomenon. The collaborative project aspect of the focal phenomenon draws from the business network literature, specifically the issues of emergence and network capabilities. Because of the inclusive nature of network literature, which is based on multiple organizational literatures, there is a wide conceptual vocabulary to draw from when approaching this study. Much of the conceptual description used in the analysis of the case material is drawn from the business network literature. Within network literature, there are multiple organizational perspectives (Easton, 1992; Grabher and Powell 2005). Authors have drawn from sociology, economics, geography, organizational sociology, and organizational economics. A rather comprehensive compellation of academic articles from 1957-2002, some major representative works has been compiled by Grabher and Powell (2005). They segmented the organizational network studies as: governance structures, the governance of networks, network

44 dynamics, and varieties of network forms. In this last category, the variety of network forms, there is a further segmentation of informal networks, project networks, regional networks, and business networks. 2.4.1

Relevant network literature for the study

The concept of types of networks, types of network ties, network size, and roles or position in the network, embeddedness, network boundaries, distribution of rents within the network, and social capital have worked their way into the analysis of this study. For example, both individuals and firms use weak ties (Granovetter, 1973) for gaining access to information and attempting to influence the

cognitive

maps

through

signaling.

The

concept

of

embeddedness (Granovetter, 1985) of the project in a context and a larger professional network, and the potential affects embeddedness has on the perceptions about the actors and the project is directly relevant to the study. Building on Granovetter, the relationships between the firms embed them to one another when the project network is forming, and over the course of the project the firms mutually adapt to each other according to the specific capacities of the partner firms thus further embedding the technological solution. Therefore, the Paradox of Embeddedness (Uzzi, 1997) becomes directly relevant for the project manager attempting to manage the transition of the roles in the business model over the course of the project.

The Paradox of Embeddedness shows that the very

relationships that bring access to new information and resources and capabilities, over time restrict awareness and access to new alternative forms of information, resources and capabilities (Uzzi, 1997).

45 Focusing on roles in the study, brings up the issues of reputation and status of the firms as they are important with respect to the level of attractiveness (Podolny, 2001) within the cognitive system of the institutional environment and how the firms evaluated the contribution value of the partner firms. The issue of how firms achieve economic rents (Burt, 1992; Coleman, 1988; Kogut, 2000) is relevant to the study. The accrued value brings up the issues of entrepreneurships and social capital in collaborative networks Ahuja (2000). These authors are discussed more fully in the entrepreneurship and social capital literature section of this document. Distribution of rents in a network One theoretical issue that becomes relevant in the study is the strategic self-interest of the firms (Thorelli, 1983). Networks are more than just relationships that govern the diffusion of innovation and norms, or explain the variability of access to information across competing firms. Because they are the outcome of generative rules of coordination, networks constitute capabilities that augment the value of firms Kogut (2000). “However, since it is the firm, not a network, that is the unit of accrual and selection, there exists, a potential divergence between the distribution of the rents and the contribution of the individual firms” Kogut (2000:417 - 423). The issue that some firms benefit more from the network collaboration during the commercialization process, than others is relevant to the study because not all relationships are symmetric (Sharma, 1997; Blomqvist, 2002), and network connections and the distribution of power (Yamagishi, Gillmore and Cook, 1988) can affect the distribution of economic rents in a network.

46 Social capital and roles Network relationships should be understood to be mutually interesting to the other firms. This point is taken up by Macdonald, Assimakopoulos, and Marchan-Piekkari, (1999) in looking for partners that have similar agendas about development. How an actor uses social capital rather than power in managing a network work is relevant to the study (Tsai and Ghoshal, 1998). If the actor has enough social capital as a critical resource, it can equal a base for power; however, in the study, the micro firm does not come into the relationships with high amounts of social capital or power. Social capital is discussed later in the document under its own heading. Boundaries of the network It is very difficult to decide when an element is inside or outside a system boundary or a network horizon (Dubois and Gladde, 2001). By acknowledging that the element is in the cognitive system, we know that it exists. The potential for it to be attuned as relevant is subject to the focus of the individual defining its relevance. If the element is outside the cognitive system, how do we know if it might become relevant later? Simply because it was not accounted for in the description of initial condition of the open system does not mean that the element was not there or is not relevant. The boundaries of networks and systems move according to awareness of the actor determining (Möller, Rajala, and Svahn, 2002) the network or the system. In the discussion on the boundary of a business network this point is made by Lauman, Marsden and Presky (1983). In short, their point is the boundaries of the network are often very difficult to identify (Seppänen, Alajoutsijärvi, Eriksson, 1999) as the interconnected members of the network may extend well beyond the awareness of the core members of the network.

47 2.5 Entrepreneurship and social capital

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. The social capital aspect of the focal phenomenon draws from the entrepreneurship literature, specifically the issues of social capital and network capabilities. Entrepreneurship

literature provides several descriptions of

entrepreneurial skills and conceptual language used in managing a network that would be helpful in this study.6 The position of an actor in a network and their ability to manage a network of actors, resources and capabilities to build on the resource based view and the business network literature and extend it to include the role of the entrepreneur. The entrepreneurship literature focuses on the entrepreneur and their ability to create and capture value by their position in a network to include the intentional creation of an emergent business network. The entrepreneurship literature focuses on social networks and business networks. However the entrepreneurship literature can be extended by the business network literature as it also supports the theoretical discussion of the network capabilities of the actors in the project network by focusing on the knowledge resources, roles, and the network capabilities of the firms. The organizational management literature focuses on the perceptions about the project and the entrepreneur and therefore can support the analysis focusing on the entrepreneur as a micro firm creating and managing an emergent business network. And finally, returning to the business network and learning literatures focusing on the commercialization

See Hoang and Antoncic (2003) for a review on network based research in entrepreneurship. 6

48 activities as an emergent business model and change in the perceptions of the social capital and network capabilities of the entrepreneurial firm. The social capital, business network and entrepreneurship literatures have similar conceptual vocabulary, focusing on the same focal phenomenon, from slightly different perspectives, and are often associated with different theoretical schools. For example, the entrepreneurship literature focusing on social capital and social network theory could have easily been associated with the network approach to describing a project network. Kogut (2000) discusses the concept of network capabilities as a source of value creation for the firm. Kogut views the social network capabilities of the entrepreneur as a strategic capability of the firm. The strategic use of network capabilities may derive economic rent and thereby accrues value for the firm. Kogut (2000:406) viewed several types of economic rents that could accrue to the firm through network capabilities: one that accrues to a broker, the other to members of a closed group. His conceptual development focuses on three central ideas that help define the firm: a unit of accrual, governance structure to resolve agency problems through residual claims, and a repository of coordination capabilities and social identity. His desire was to focus on how the capabilities of the firm could promote variety yet coordination within a specific industry setting. Kogut builds his concepts of network capabilities on the theoretical work of Burt and Coleman. Both of these theoreticians describe the ability of the entrepreneurial manager to create value through network capabilities. They will be discussed briefly as network capabilities are relevant to the study. Both Burt and Coleman feel

49 that the coordination of the network generates a form of economic rent. According to Burt there are three types of capital: financial capital, human capital, and social capital (Burt, 1992:8). These three forms of capital are invested in the marketplace as a production equation and the rate of return is determined where the capital was invested. Assuming that there is a functioning market, “the market production equation predicts profit: invested capital, multiplied by the going rate of return, equals the profit to be expected from the investment.” (Burt, 1992:8) According to Burt, financial capital is cash, reserves in the bank, investments coming due, and lines of credit. Human capital is your natural qualities, charm, health, and intelligence and looks combined with the skills you have acquired in formal education and job experience. Social capital is relationships with other players that provide opportunities to utilize financial and human capital. Burt is attempting to understand the investments in network formation as a competitive approach to describe entrepreneurial behavior. “This approach is a zero-sum game and does not comply with most definitions of social capital” (Kogut, 2000:414). Burt (1992) discussed the entrepreneurial manager’s ability to accrue rents for the firm through brokering opportunities within a single network or between separate networks. Burt states that a firm occupying a strong structural position in a network occupies a powerful brokering position, because they arbitrate the information flows between groupings of firms who have loose ties with each other. Such networks have a hierarchical structure, even if there are many hierarchies. In this network, the rent accrues to the firm bridging the structural hole.

50 A brief description of a structural hole might be helpful to understand the focal points according to Burt. A structural hole is a relationship of non-redundancy between two contacts. A contact can be non-redundant in either of two ways. First, they are nonredundant contacts if they have no direct contact with one another. Second, they could be disconnected because a prior contact may block or exclude the possibility of forming a relationship. There are two conditions necessary to indicate if there is a structural hole. The first is cohesion. Under the cohesion criteria, two contacts are redundant to the extent that they are connected by a strong relationship, as measured through strength frequency of contact and emotional closeness, and they have a direct connection. The second criterion is structural equivalence. Structural equivalence is determined to the extent that two individuals share the same contacts and they have an indirect connection. (Burt, 1992:18-19) Burt is really focusing on the management and investment of social capital as benefits accrued through information and control (access, timing and referrals) and how an individual is able to exploit these benefits through entrepreneurial behavior in structural holes as described in his discussion of structural autonomy (Burt, 1992:44). Burt develops the concept of structural autonomy in order to measure the efficiency of the entrepreneur. The basic issue is that it takes time to create contacts and maintain them as a relationship. The more contacts that you make the less time you can spend with each of them. The question quickly gets reduced to how many contacts can be efficiently maintained, and which are the correct contacts to maintain maximization on the rate of return for the time invested in identifying, accessing, and managing the various potential contacts.

The level of indirect contact is counted by

51 looking at the number of contacts you can access through the direct relationships. These secondary or indirect contacts are similar to Granovetter’s (1982) weak ties. The strategic decision of who can be accessed as a secondary contact is a critical factor of choosing who should be maintained as a primary contact. The relationship must be viewed as reciprocally valuable or there is no real level of value in the relationship. This is mutually valuable perception is referred to as reciprocal trust. Reciprocal trust drives the level of the information benefits to be derived from the contacts. And information benefits are how you create the opportunities to broker the structural hole for economic benefit for the firm. This equation of selection and maintaining the relationships is supported by the concepts of efficiency and effectiveness (Burt, 1992:22-23). Balancing a network’s size is a question of optimization of structural holes by balancing efficiency and effectiveness. For Burt, efficiency maximizes the number of non-redundant contacts as indicators of structural holes per contact and therefore access to different information benefits with respect to the cost of access and maintaining the relationship. The costs of maintaining all contacts are measured in terms of the time and the energy it costs to access and maintain the contact. All relationships are viewed in terms of opportunity cost, as a finite amount of time is available for maintaining the different contacts accessing the various networks. Effectiveness measures the contact as a port of entry to additional social networks that may in turn, supply incremental network benefits through these contacts (Burt, 1992:22-23) According to Pfeffer and Salancik, (1978) the concepts of efficiency and effectiveness help to provide an approach to evaluation of a relationship. The concept of efficiency refers to the input and the

52 output of a process with respect to how something is completed, and effectiveness is looking at the output with respect to the worth of the output according to the market price. Effectiveness through social capital is the ability to achieve the goal or make the deal. Efficiency refers to the relative cost of achieving the goal or making the deal. If a person is perceived to have limited social capital but is able to achieve the goal or get the deal, they would be deemed as efficient. If the person with a potentially large amount of social capital and were not able to make a deal, then they would be deemed as inefficient. This precept gives rise to the perception of what social capital is with respect to efficiency and effectiveness. Social capital is not rendered as value until it is executed, either efficiently or effectively, and it maybe as much a question of the relative perception of who actually has social capital, or who simply is perceived to have social capital. This distinction gives rise to the questions surrounding the active process of accumulating social capital as an investment. But more importantly it brings social capital forward as an active concept that has value when it is used, not as a passive concept of self-perception. Social capital is given value by the network or the firms in the environment in which it is used, not by self-perception of the individual (Coleman, 1988). An alternative approach to Burt for creating value through network formation would be more collaborative in nature and has been discussed by Coleman (1988) as the ability of the entrepreneurial manager to accrue value for the firm through network capabilities as a collective action. Factors of coordination create value through repeated exchange, learning and trust, because “the emergent properties of networks ride on self-organizing processes that tend to freeze the structure among firms over time into stable patterns of

53 interactions.” (Kogut, 2000:415) A study by Walker, Kogut and Shan (1997) explored both the Burt and the Coleman types of networks. “The analysis of subsequent relationships revealed that a Coleman network based on coordination, inclusive of mutual knowhow exchange, emerged. Because of the social capital, firms belonging to the same groups tended to cooperate with each other subsequent to the initial cooperation. Network structure began to replicate itself in stable patterns of enduring cooperation, (Kogut, 2000:415).” The economic rent accrues for membership in the group not because of a brokerage of position within the network even though the entrepreneurial manager is creating coordination efficiency for the network. Coleman views the rent as a benefit of trust supporting coordination in long-term relationships, not as something due for informational efficiency. However, Coleman does not view the role of the entrepreneur creating an emergent network as a competitive process with the accrual of the economic rents going only to the individual entrepreneur, as with Burt, but to as an aggregate cooperative rent to the network as a whole. Coleman associates rent with the benefits of trust supporting coordination in long-term relationships. The Coleman rents are not due to informational efficiencies which is in contrast to Burt’s, (1992) view of achieving economic rent. Dense relationships have the attribute of supporting, and monitoring and coordinating by matching incentives to contribution. One could argue that dense networks also foster a sense of collective identity that supports coordinated

exchanges.

Coleman

(1988)

emphasized

that

“redundant ties among firms (or actors) result in a resolution to collective action problems. Coordination improves through repeated exchange among stable members to the group. This network tends

54 to be flatter. In this case, depending upon the quality of the interaction, the rent accrues to the membership in the group; the actual allocation to the individual members is determined by rules of adjudication and relative bargaining power.” (Kogut, 2000: 414) The “Coleman network claims that the gains to superior coordination must be distributed in ways to assure participation”, (Kogut 2000, 414 – 415). Burt’s view of social capital may work in a dispersed market or unconnected networks. However, Coleman’s view of social capital is more relevant in a smaller interconnected community like the Finnish high-technology sector (Mcpherson, Smith-Lovin and Cook, 2001; Grabher, 1993). The Finnish high-technology sector has political agendas, but overall it is so small that it tends to be more collaborative than competitive (Brandenburger and Nalebuff, 1996), focusing on long-term relationships. Therefore, the Coleman view of social capital is more appropriate in the Finnish environment for this study. Therefore, even though Burt (1992) uses the same three types of capital for developing entrepreneurial opportunities and would first appear to be relevant to this study, Burt’s approach is probably not as appropriate as Colman’ (1988) because this study is embedded in the Finnish high technology sector. In summary, to extend the conceptual discussion of Coleman’s entrepreneurial view of social capital, a deeper development of social capital will be explored as it has emerged as a critical focal area of this research. 2.5.1

Social capital

A social capital network theorist would view inter-organizational relationships of a project network through social contacts. For

55 example, according to Nahapiet and Ghoshal, (1988) there are three dimensions of social capital: the structural, the relational, and the cognitive

dimension.

The

structural

dimension

refers

to

organizational structure and network configuration. The relational dimension refers to the social norms of behavior. The cognitive dimension refers to trust, norms obligations and identification. The cognitive dimension shared codes, language and narratives. As stated previously, Maurer and Ebers (2006) build on Nahapiet and Ghoshal, (1998) dimensions of social capital focusing on the structural and cognitive and relational view of social capital during the early start-up phase and business development phase of a new venture. Maurer and Ebers (2006:270-272) use the Early Start-up Phase to describe the dynamics of social capital through the same three dimensions: the structural dimension as a small network confined to fellow scientists; the relational dimension of strong scientific norms and mutual trust; and the cognitive dimension as homogeneous set of scientific goals and orientations. The Business Development Phase looks at the structural dimension as a continuum between access to distinct external networks and focusing and on the scientific networks; the relational dimension is a continuum that describes relationships outside the scientific community layered with trust and focusing on contractual agreements; and finally, the cognitive dimension is described through a continuum of integration of business orientation and a focus on scientific orientation. Their findings on social capital looked at the inertial consequences of social capital and how it was locked in on two levels, relational lock-in and cognitive lock-in; and how it affected the inertia in social capital as rooted in the early start-up phase of an entrepreneurial

56 firm’s social capital. The Maurer and Ebers (2006) study was conducted and written after empirical research for this study was completed, and unfortunately the researcher was unaware of their study or framework until this report was almost complete. Results from some earlier studies of social capital suggest that accumulation of prior alliances between firms creates an important social structural context that influences which pair of firms are likely to tie up with each other” (Gulati and Zajac, 2000:367; Gulati and Gargiulo, 1999). The previous experiences of the individual will shape future interactions or the willingness of the firm to seek out partnerships and develop future inter-organizational relationships such as project networks. Firms belonging to the same groups tended to cooperate with each other subsequent to their initial cooperation. Network structure began to replicate itself in stable patterns of enduring cooperation. (Coleman type of relationship) This finding is supported by Gulati (1998) who shows that partners tend to ally with those close to them in the network and with those whom they have previously allied, Kogut (2000:415). Prior organizational ties can either broaden or restrict an actor and/or network awareness of environmental trends as we tend to focus on what we know and whom we know. Exploration implies risking existing ties (Uzzi, 1997), so the entrepreneur will first look to their own network before exploring outside of their existing network and the extended network of the previous relationships of ties. The need to explore new relationships must exceed the opportunity cost of fostering new relationships at the expense of the existing relationships. It is the level of perceived mutual dependency, that in fact, helps to bind the partners together (Macauly, 1963). Intimate knowledge about project network partners

57 helps to understand partner’s problems, capabilities and knowledge and therefore contributes to better solutions (Uzzi, 1997). However, if one firm continually represents their commitment to the network to act as a free agent (Pfeffer, 1987), then it will of course have a detrimental effect on the willingness of the other parties to openly share their resources.

This is understandable,

because it is only a matter of time before the firm could exit the network and compromise the remaining firms in the network (Gulati and Singh, 1998). However relying on existing ties restricts awareness of new information and may reduce new opportunities for creating new relationships. In order to limit the types of selfinterested behavior, social capital involves social controls to limit opportunistic partnering (Coleman, 1988; Pfeffer and Salancik 1978; Gulati, 1998; Gulati and Zajac, 2000). The

very

nature

of

the

collaborative

inter-organizational

relationships requires, to some extent, a form of conflict due to interdependence (Bower and Keogh, 1997), but “interdependence has an important impact on the organization’s ability to achieve a desired outcome for two reasons: first, interdependence varies with the availability of resources relative to the demand for them (Pfeffer, 1987), and second, interdependence characterizes individuals transacting in the same environment, with the connection being through the flow of transactions. Therefore, any major conflict between the collaborating firms could also harm the reputation of the firms (Podolny, 2001). If the firm wishes to trade their own resource capabilities through collaborative efforts, one of the first attempts at making this extension will come from the social network within the environment. Therefore, reputation is particularly important with respect to economic value creation or the commercialization aspect

58 of the project network, because it directly influences the willingness of other individuals to work together, and share their own cultivated image. The reputation of the firm and the reputation of the initial choices of partners can play a strong role in getting other firms to invest in the emerging project network (Podolny, 2001). Choosing the wrong individuals in a network can signal the level of the expectations to others in the network. Therefore, the process of partner identification, through projects, can greatly influence the type of opportunities that can be developed, simply because of which

individuals emerge

as relevant

when

scanning the

environment to determine who is currently doing interesting work, or who has developed useful solutions in the past. This builds on the idea that trajectories (François, et. al., 2004) of the firms previous results, based on reputation of performance (Hagedoorn and Schakenraad, 1994) alone, may be sufficient in bringing the firm forward as an attractive partner or making the firm unattractive as a potential partner when forming a project network. When facing an uncertain environment, firms maybe less willing to explore new relationships. Firms may substantially increase their chances of successful adaptation by forging strong cooperative ties with similar peers. By using more trusted partners, the firm is able to limit the perceived risks of being dependent on another unknown firm; however, this continued reliance on trusted previous partners also creates a lock in effect by limiting new information and new approaches to problem solving. The “Paradox of Trust” (Granovetter, 1985) is one of the drawbacks of strong ties (Granovetter, 1973) and a stable network. Strong ties to other organizations should promote mutual adaptation (Anand and Khanna, 2000; Andersson, 1993; Nonaka and Teece, 2001) and increased communication between the firms in the project network.

59 The managerial implications are that small networks, networks with more density, provide greater opportunity for frequent interaction than larger networks (Watts, 1999). More frequent interaction should increase the inherent network benefit of access to information and the ability to lobby strategic interests with respect to changes in the environment. Given that a project network’s effort is of limited duration with respect to the relationships, would the same level of mutual investment in the relationship apply? Given the required ability to lobby strategic interest within a variety of organizations requires strong communication and boundary spanning skills in order to build an emergent project network, the amount of mutual investment may need to extend beyond the initial time limits of a project. The processes of intentionally forming a project network, supports the idea that cross-border knowledge transfer (Hargadon, 1998) requires personnel transfers, visits and face-to-face contact in order to overcome the complexity and distance (Inkpen, 1996) or in order to promote an increase in the level of mutual adaptation. 2.6 Summary of the conceptual discussion As a reminder to the reader, this is a study of a collaborative

project network strategically targeted to create an emergent business opportunity. A project is embedded in a context, and this context can be described as a system. The embeddedness of the project in a system helps to provide a larger context to position the study of the micro firm, the project network, and the emergent business model. The use of systems theory helps provide different levels of analysis and provides theoretical structure to approach the empirical case

60 material. An open system perspective provides a vocabulary to describe the case material from different levels in response to a call to study projects bound in time and space (Engwall, 2002). As a theoretical element of the open systems approach to the case material, the conceptual element of the cognitive system has been introduced. The use of a cognitive system to include symbols and perceptions allows for the case material to be approached from different perspectives which is useful with respect to the issues of emergence, changes in perceptions, and the new business model being the focal area of the study. The concept of sensemaking and enactment (Weick) support the discussions of perceptions in the cognitive system and the concept of attunement relates to how the boundaries of a cognitive system are relative to the perceptions of the actor. The study specifically focuses on intentional formation of an emergent business opportunity through a project network. Building on the resource based view of the firm, the conceptualization of network capital and network capabilities as strategic resources for the firm, in the context of a project between firms, is introduced as a conceptualization of a project network. The framework for describing this project network focuses on three forms of network capital. The dimensions of network capital and the network capabilities are used to focus the descriptions over the emergent processes of network formation during the intentional creation of a project network. The forms of capital investments and the expected returns on those investments is a classical approach to describe the performance of the firm. This study describes the value of network capital by focusing on the individual’s perceptions.

61 As stated earlier, this study describes the forms of network capital and network capabilities by focusing on the roles of individual actors and their cognitions. Over time, the efficiency of network capital and network capabilities can be described through roles and the perceptions of the individual managers. The changes of perception would indicate how the manager interprets their future business development opportunities based on participation in this project network. This study contributes to the theoretical literature by extending the conceptual discussions of a project network as a vehicle to create emergent business opportunity. It focuses on the role of a micro firm in an intentionally established network in the context of constructing an emergent business opportunity via a business network. The theoretical discussions in this study are drawn from several research traditions. The specific literatures have similar conceptual vocabulary, focusing on the same focal phenomenon, from slightly different perspectives, and are often associated with different theoretical schools. As previously stated, project literature tends to rely on other literatures to support the conceptual descriptions and analysis, and in combination with the inclusive nature of network literature being based on multiple organizational literatures, there is a wide conceptual vocabulary to draw from when approaching this study. For example the entrepreneurship literature provides several descriptions of entrepreneurial skills and conceptual language used in managing a network that would be helpful in this study. The actor’s position in a network and their ability to create and manage a relationship portfolio comprised of actors, resources and

62 capabilities builds on the resource based view and the business network literature and extends it to include the role of the entrepreneur. This includes the ability to create and capture value through their position in a network including the intentional creation of an emergent business network. The entrepreneurship literature focuses on social networks and business networks support the theoretical discussion of the network capabilities of the actors in the project network by focusing on the knowledge resources, roles, and the network capabilities of the firms.

63 3

PRELIMINARY CONCEPTUAL FRAMEWORK OF A PROJECT NETWORK

In an attempt to answer the research question framed by the three secondary questions, an exploratory pilot study and subsequently developed a deeper understanding of the potential theoretical discussions in order to answer the research question. By working back and forth between the data in the pilot case and the various literature tracks, the pilot study evolved into a preliminary conceptual framework. This process involved multiple false starts and forced choices. Similarly, the focal issues evolved over the course of the study, as a simple change in perspective, either by changing the wording of a question, or looking for an interesting linkage in the literature or an extension of a line of thought, reopened the structure of the preliminary conceptual framework. As previously stated, the purpose of the preliminary conceptual framework is to open the idea of the study and clarify the assumptions of the author for the reader. The study both utilizes and creates a form of language to conceptually describe a project network. The elements of the preliminary conceptual framework draw on different research areas in order to look for a more integrative conceptualization of a project network. The attempt to integrate the different research requires the reader to adjust theoretical perspectives with respect to the preliminary conceptual framework and the analysis because the different theoretical perspectives and the associated vocabularies overlap when describing the case.

64 3.1 Reminder of the focal phenomenon and the three framing questions

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. The study is framed by three research questions: Which theoretical concepts form a viable language for describing and analyzing creation of a project network targeted as an emergent business opportunity? What are the perceptions and capabilities used to develop and manage project networks targeted for an emergent business opportunity? Which contextual factors have a perceived influence on the early processes of an emergent project network? 3.2 An overview of the preliminary conceptual framework of a project network The preliminary conceptual framework (PCF) in this study has three elements. These elements are interrelated conceptually and analytically, so similarly to the difficulties of defining a system, or a network, the choices of how to separate the elements may appear to be arbitrary during analysis of the empirical data. For example, in the case, the choice to discuss network capabilities and the creation of social capital could focus on social capital or network capabilities since the two concepts are interrelated. The manuscript structure follows the elements of the preliminary conceptual framework. The first element introduces the study environment using systems theory and cognitive systems. The

65 second element focuses on the network capabilities of the actors. The third element focuses on the forms of network capital. The elements are combined in the preliminary conceptual framework as Table One to assist the reader in following the conceptual discussion. The preliminary conceptual framework builds on the resource based view of the firm, and focusing on resources and capabilities. The focal resource areas of the study are described through the three dimensions of network capital: financial capital, intellectual capital and social capital. The related concept of network capabilities, from the network literature, is included because it may support the analysis of the focal area of emergence of a business network. The Cognitive System The Technical Environment of the Market Project Network Phases

Pre-Project Phase

Pilot Phase

Product Development Phase

New Business Model Phase

Commercialization Phase

Processes

Conceptualization

Investment

Accumulation

Evaluation

Commercialization

Intellectual Capital

Resource, role and agenda identification

Share core capabilities and market knowledge

Modify roles, creating new knowledge

Strategic selfinterest

Conceptual Value

Social Capital

Reputation

Commitments

Expectations

Dynamic roles

Social Value

Financial Capital

Proposals

Opportunity cost investments

Expected value

Internal strategy

Financial Value

Network Capabilities

Vision, identification and alignment of strategic interests

Exploring capabilities and resources developed and extended through synergies

Coordination of perceived roles, resources and capabilities

Expanding expectations for exploitation of emergent business model

Commercial Value

Table 1: Summary table preliminary conceptual framework, forms of network capital and network capabilities

The preliminary conceptual framework (PCF) and the forms of network capital and network capabilities in Table One above

66 provide an introduction to the flow of this study. It has evolved considerably over the course of the study, and is by no means intended to represent the researcher’s preliminary thinking when beginning this study. The table had multiple false starts and has been discarded only to be resurrected as an approach to the case material. The conceptual elements of the PCF are being drawn from different theoretical research literatures. The conceptual elements have complementary and historically competing vocabularies. The PCF is not intended to solve these competing conceptual vocabulary issues and historical discussions between the research traditions. It is simply a starting point to approach the empirical data; certain elements are integrated although they have been drawn from different research traditions. In some cases, combining the various literatures into a single table has proven to be as complicated. These various literatures and their embedded concepts remain important to analyzing the empirical study, but there are places of conceptual overlap which are accepted as overlapping for the purposes of the study. These concepts are not tidy little elements have a single meaning, in any context or any environment. Several of these concepts are emerging in their own right as theoretical concepts, and as such they remain messy as various researchers reach to include them as possibly relevant in a new context or as a complement or component to a conceptual description of a focal phenomenon. For example, the question of social capital (Adler and Kwon, 2002) and where it comes from has been discussed for more than twenty years, and there are still divergent views on the topic as discussed in the theoretical section of this manuscript.

67 A short description should help to clarify the relationship between these concepts. A firm has resources that are made up of assets and capabilities. These assets include stocks and forms of capital that can be invested by the firm to achieve economic rents. Capital equals an asset which equals a resource. The firm utilizes these forms of capital as investments in the firm’s future activities and these investments also require capabilities. Some of those capabilities are utilized internally to the firm and some of these capabilities are utilized externally to the firm. A capability includes learning, dynamic capabilities, and absorptive capabilities which are utilized by investing the forms of capital. Let us begin. The left side of the table contains the proposed forms of network capital and network capabilities as the focal elements of the study. The three forms of network capital: financial capital, intellectual capital and social capital draw from the resource based view of the firm. The network capabilities in this study draw from the resourced based view of the firm, the network literature, the social capital and social network literature, and the entrepreneurship literature. Determining whether the actor is using network capabilities or using social capital is a distinction between the literatures and the theoretical descriptions of the resources and capabilities of the firm. Over the course of the project, different literatures and conceptual discussions become relevant, because the network dynamics and the managerial requirements of the emerging business network change both the focus of the discussion and which literatures are relevant to the discussion. In summary, social capital, social networks and network capabilities, each with different associated literature, are expected to play a role in the focal issue of emergence of the

68 business model and the emergence of a business network, so they are included in the preliminary conceptual framework The preliminary structure of the discussion In order to focus the discussion on perceptions of the actor’s resources and capabilities, a series of phases are introduced. These phases are provided to guide the reader during the case analysis. The proposed phases of a project network are enumerated across the top of the PCF table. The proposed phases of a project network are: pre-project phase, the pilot phase, the product development phase, the new business model phase, and the commercialization phase. The case stops during the transition from the pilot phase and the product development phase. The project was never approved by the City of Tampere to progress beyond the pilot phase. Therefore, the case analysis is described utilizing future phases which never actually occur. Because case analysis focuses on the actors’ perceptions and expectations, those future perceptions and expectations, affect their overall expectations of the project. These perceptions were expected to be important aspect of the case. The pre-project phase covers developments that occurred before the initial discussions of the project and the movement of resources and capabilities toward creating the project. In the pre-project phase the firms’ resources and capabilities are being developed and utilized as the firms pursue their primary line of business and pursue their individual competitive advantage. The conceptual elements and the related discussion in the pre-project phase draw on social network literature, social capital for network formation, (Walker, Kogut, and Shan, 1997) emotional intelligence, (Goleman, 1995), vision, (Weick, 1995),

business

network

literature,

structuring

cooperative

69 relationships between organizations, (Ring, and Van de Ven, 1992, 1994; Podolny, Stuart and Hannah, 1996), entrepreneurship literature, (Kogut, 2000; Coleman, 1988, 1990) emergence literature, (Hite, 2003 and Hite and Hesterly, 2001). The pilot phase of the project preliminarily aligns the firms’ resources and capabilities focusing on the emergent opportunity. During this phase the roles and capabilities are aligned by sharing core capabilities and market knowledge. Social commitments are made as actors invest time and energy to the project. During the pilot phase, the perceptions of capabilities are critical, and choices are made based on the perceptions of the capacities. A determination about the perceived resources and capabilities helps to influence future roles in the emerging business network. Literature exploring the resource based view of the firm becomes relevant literatures in the pilot phase. For example, the following themes support development in the pilot phase, the core capabilities of the firm (Prahalad and Hamel, 1990); network literature focusing on networks as centers of innovation (Powell, Koput and SmithDoerr, 1996); and co-opetetive capabilities, (Afuah, 2000). During the product development phase, firms modify their resources, roles, and capabilities through learning and creating new knowledge in the merging process of network formation. Expectations imposed on the partner firms become more critical as they co-create around each other’s resources and capabilities. This form of collaborative investment in each other’s processes create a social lock-in as social network (Halinen and Salmi, 2001; Hite, 2003, 2001), and a technical lock-in with respect to investments in the emergent technologies and approaches to the emerging business network (Mäkinen, 2001). The expected value of contribution and the associated future revenue stream moves from a pilot phase that

70 tests resource alignment and capabilities to a more stable understanding of perceived roles and resource allocation in line with capabilities in the network. The literature that comes into play during the product development phase is from learning literature (March, 1991; Hamel 1991), knowledge management literature (Inkpen, 1996; Lenard, 1998; Lenard and Sensiper, 1998; Nonaka and Teece, 2001) and the business network literature (Möller and Svahn, 2005, 2006; Larson, 1991; Gulati and Nohria, 2000; Gulati and Singh, 1998). During the product development phase of a project network, there is a move in the network capabilities from creating an emergent business network (Möller and Svahn, 2006) to managing an emergent business opportunity with respect to the dynamics of the emerging business network. During the new business model phase the firm’s strategic interests firm will be evaluated with respect to the learning and new knowledge creation resulting from the emerging business model and the new tacit knowledge that can be applied as dynamic capabilities to the firm’s internal strategy. During the new business model phase the processes are focused on directly applying firm’s resources and capabilities to pursue opportunities for competitive advantage. These activities may be pursued with the emerging business network or individually, or as a combination of both strategies. Discussions in relevant literature are based on the strategic choices and the relative perceptions that the firms understand as their strategic position in the emerging business model. Strategic literature may come from various theoretical perspectives. Support for the firm’s dynamic capabilities (Teece, Pisano, and Shuen, 1997) and absorptive capacity (Cohen and Levinthal, 1990) comes from the learning literature and the business networks literature, and the social network literature supports the firm’s position in the network

71 and the firm’s potential roles in the focal project network, and in the context of larger extended business networks. The commercialization phase is outside the focal area of this study, but the firms’ expectations, in both the new business model phase, and the commercialization phase, determine how the firms evaluate their strategic interests and their attempts to create a sustainable competitive advantage. Perceptions about the future are tied to the firm’s sensemaking abilities (Weick, 1995). The perceptions of the relative success of the emergent business network, with respect to future roles, with respect to the perceptions of the larger business networks, and with respect to the environment in which the project network is embedded are also tied to sensemaking. The environment as an element of the preliminary conceptual framework The first element of the preliminary conceptual framework, the cognitive system, builds on the work of Scott (1999) and his classifications of the type of organizational systems and types of organizational environments. Specifically, this study assumes the cognitive maps of the individuals involved in a project network are embedded in an open system of an institutional environment and a technical environment. The “institutional environments including symbolic elements of interest include both normative and cognitive systems” (Scott, 1992:132). The actors enact the environment according to their subjective attention and interpretation of their cognitive map. The individuals’ cognitive maps comprise a cognitive system. If we follow the logic of Scott, “All systems are made up of subsystems and are themselves subsumed in larger systems – an arrangement that creates linkages across systems and confounds the

72 attempt to erect clear boundaries around them” (Scott, 1999:83). The intention of the one studying the particular universe, as to which possible configuration of objects is to be taken as a system, captures the main foundation of a cognitive map. The attention and interpretation of all possible configurations of objects requires the ability to scan, prioritize, and evaluate data and intentions. Theoretically, a person with a larger set of weak ties and unrelated networks would have a stronger set of potential elements to identify and choose from when solving a problem. (Möller and Svahn, 2006) By extending the number of potential elements and approaches to linking these elements, the individual is expanding his or her cognitive map to include more alternatives for learning. For example,

initially,

concepts,

ideas

and

potential

areas

of

development occur in a context, and it makes sense to discuss or develop them in that context. However, if we continue, a cognitive system is not controlled, or even readily identifiable. It is a more open conceptual space (Håkansson and Waluszewski, 2002) of potential concepts and technologies that could emerge. However, who ultimately develops those potential concepts, ideas into a commercial application may not be the initial source or owner of the concept. Theoretically, if an individual was exposed to a new concept or idea, and identified a business opportunity, he or she might be able to mobilize interest from the collective cognitions. If an individual with entrepreneurial intention (Kogut, 2000) can focus other actors’ attention in the cognitive system, a new business model may emerge. As with any form of creativity, a certain amount of awareness and understanding that the problem can be approached outside the circle of established solutions creates the potential for a novel approach to the specific task. Another individual would combine an

73 alternative set of elements from their cognitive map, or sequentially approach the task from another vantage point. There is no single correct combination of elements or a common cognitive map for all of the individuals. To some extent, the serendipity of the cognitive system and the attunement and interpretation of the information is subject to an individual’s cognitive map being fixed in time and space. The initial condition of the cognitive systems for each individual can not be identical in time and space. In this study, the cognitive maps of the individuals, the collaborative cognitive system and the perceptions of the project embedded in an open system, will all directly influence each other. 3.2.1

The network capabilities element of the preliminary conceptual framework of a project network

The second element of the preliminary conceptual framework is the individuals’ networking capabilities operating in the cognitive system. This study approaches network capabilities (Coleman, 1988; Möller and Svahn, 2006; Ritter and Gemünden, 2003; Kogut, 2000) by focusing on how actors perceive network capabilities in the project network. Because the Finnish high-technology sector is so small, it tends to be more collaborative than competitive (Brandenburger and Nalebuff, 1996). Therefore, focusing on the actor’s perception of network capabilities should focus on long-term relationships, which may extend beyond the scope of the project, even though the focal area of the study is a temporary relationship, specifically the project. Consequently, the Coleman (1988) view of social capital is more relevant in a smaller interconnected community like the Finnish high-technology sector (Mcpherson, Smith-Lovin and Cook, 2001; Grabher, 1993). Because analyzing perception involves how the actors interpret network capabilities, Weick’s (1995) the concept of sensemaking is important. It is also

74 important for the individuals representing the firms’ interest to have enough vision (Barney, 1991; Weick, 1995) to conceptualize the new market space and the network capabilities to understand, attract, and mobilize additional resources and capabilities. 3.2.2

The network capital element of the preliminary conceptual framework of a project network

The third element of the preliminary conceptual framework is network capital. Building on the stocks approach of resources and capabilities from the resourced based view of the firm, the concept of network capital is proposed. Network capital focuses on three integrated forms or dimensions of capital: financial capital, intellectual capital, and social capital. The capital perspective was chosen because it was consistent with the researcher’s previous understanding of the focal phenomenon and provides a clear structure to approach the empirical data. The forms of capital investments and the expected returns on those investments is a classical approach to describe the performance of the firm. This study describes the value of network capital by focusing on the individuals’ perceptions. The dimensions of network capital are used to focus the descriptions over the emergent processes of network formation. 3.3 Phases of a project network in the preliminary conceptual framework In the preliminary conceptual framework of this study, a project network is described via five phases: pre-project, pilot, product development, new business model, and the commercialization of network capabilities and network capital. Including the phases in the preliminary conceptual framework is an evolution in the analytical process.

75 Initially, it was not felt by the researcher that the data could be parsed into clearly discrete phases of emergence of a business network. The initial analysis focused on parsing the data by network capital and network capabilities, and allocating the case material into processes described as activities. The initial analysis of the case showed the rate of change in network capabilities does not appear to occur at the same rate as changes in network capital. The rate of change does not occur for all of the actors at the same time, because each actor started the process with different combinations of resources and capabilities and would have to accomplish different levels of change over the course of the project. The choice to analyze the empirical case using phases was made after the first iterations of data analysis. After the first draft of the analysis of the empirical data, it was too difficult for the reader to gain a useful perspective on the case data; therefore, the analysis was redone after making the choice to describe the network capital and network capabilities over phases rather than attempting to identify phases of network capital and network capabilities. In hindsight, the choice would appear self evident, because it made the flow of the study more comprehensible. In practice, three of the phases used in the preliminary conceptual framework come directly from the data: the pilot phase, the product development phase, and the business model phase are terms the actors themselves use to describe the project network. The preproject phase is proposed because this study focuses on emergence, and the case data reflected activities that occurred prior to the pilot phase of the project with respect to investments in network capital and network capabilities. Additionally, because the study focuses on the emergence of a network, the commercialization phase would occur after the empirical case concluded and is outside the study.

76 The commercialization phase was implied, and added, as an expectation

after

the

business

model

was

ready

for

commercialization. There is some risk in making this choice as the data was gathered through interviews during the transition between the pilot phase and the new business model phase where expectations moved between the expectations for the new business model and the potential for commercialization. As such, the discussion and perception about the perceived value of the new business model is linked to the commercial potential of that model. Even though the phases provide more clarity for the reader by structuring the document, the phases should remain soft delineations. There are no clear transitions from one phase to another, as the activities do not progress from one phase to another at the same rate for each of the firms. Each of the firms’ capabilities emerges at different rates, both because they have started with different resources and capabilities, and because the pace of development, learning, and emergence is not locked to the project network. However, over the course of the study and by classifying the interviews and focusing on the data analysis, people involved in the eCard project network used phases to describe the emergent processes of the eCard project. These phases represent processes in the project network, but the elements of network capabilities and network capital may not progress equivalently. The pace of change in these phases of the project network is tied to the specific project. The actual time line of the project, and the expected goals for the project would clearly have a strong affect on the timing of the phases of the project network.

77 3.3.1

The pre-project phase of a project network

There is a period of time prior the conceptualization of a project that falls into the pre-project period. During this period it would be premature to describe it as pre-project phase as there may not even be a project or an understanding that there should be a project. However, given the limitations of time and space, this study will include the period of time prior to the project inception as the preproject phase. The pre-project phase of a project network focuses on exploration and learning. The time perspective is open, actors are learning about resources and capabilities of other firms and trends which may be developed to represent emergent business opportunities. This exploratory period is extremely open as the conceptualization of the project may not occur. The processes and the relationships are explorations of the potential resources and capabilities. During this pre-project phase a change in attunement and the interpretation of information leads to a conceptualization or a vision of a potential project. The relative level of completeness of this vision is tied to the cognitive map of the individual. In short, the individual needs to be able to recognize the entrepreneurial opportunity. During the pre-project phase of a project network, investments in intellectual capital consist of learning technical capabilities and market trends. During the pre-project phase of a project network, social capital is used to identify and access potential resources and capabilities. During the pre-project phase of a project network, financial capital is an opportunity cost. An opportunity cost is the foregone rate of return, if the time, resources, or capabilities had been invested in the next best alternative.

78 3.3.2

The pilot phase of a project network

The pilot phase begins with a signed contract with the client. The pilot project phase focuses on the initial project requirements and the initial investment requirements. The processes and the relationships are, initially, temporary explorations of the potential commitments of resources for the project network. During the pilot phase of a project network, investments in intellectual capital consist of sharing competencies, technical capabilities, or market knowledge. The potential benefits of these investments in intellectual capital are based on the expectation of future learning opportunities from the project network. The firm must be able to justify these investments as strategically interesting for the firm. In some cases, the justification for investing in intellectual capital may be path dependent if it is feared that the investments can not be recaptured if excluded from the network, a sort of lock-out effect (Cohen and Levinthal, 1990). During the pilot phase of a project network, social capital is invested in reputation sharing (Podolny, 2001). The relative value of social capital is embedded through previous investments, or is borrowed through the implied credibility of other relationships (Larson, 1991). If no previous relationship existed, the social capital investments are usually unilateral (Faulkner and De Rond, 2000) because the other actors may not wish to enter into an exchange of market knowledge or core capabilities with an actor that can not demonstrate his or her value added capabilities or resources in the exchange. During the pilot phase, financial capital for the most part is limited to small investments of seed money. There is limited expectation of financial returns. The financial investments are as seen as expenses in the sense of preparing the firm for some level of future activities.

79 The financial investments in the form of opportunity cost investments. An opportunity cost investment is the forgone rate of return, if the financial resources had been invested in the next best alternative. 3.3.3

The product development phase of a project network

During the product development phase of a project network, the time perspective is short-term. The processes are temporal with respect to expected value of the project network. During the product development phase the project network focuses on developing the potential products, services, and delivery platforms. The alignment processes imply that the members of the project network have a clear role to ensure their future interests in the emerging network. During the product development phase of a project network, the accumulation of intellectual capital focuses on exploring potential business opportunities. During this phase, the firms are modifying their roles and capabilities with respect to the future expectations of the potential of an emerging business model. The accumulation of social capital focuses on building mutual attraction and shared expectations. During this phase, the firms are learning which individuals are effective. During the product development phase of a project network, the accumulation of financial capital is related to the future potential business model and the associated roles. In some cases the product development phase will generate positive cash flow. During the product

development

phase,

incremental

requirements

for

investments of time, resources, and capabilities may be fairly large.

80 3.3.4

The new business model phase of a project network

The new business model phase is an important transition for the project network as it changes from how the partners “feel” about the potential of the project network to a more formal review and internal evaluation by the firm. During the new business model phase of a project network, the time perspective is long-term. The new business model phase has a more formal alignment and evaluation of capabilities and roles. The capabilities and roles are formally evaluated for strategic fit within the new business model. Incremental investment is both required and expected by the members. This incremental investment represents the expectation to continue beyond the scope of the initial project to exploitation of the emerging business model. The new business model phase of a project network represents a formal evaluation of the project network. 3.3.5

The commercialization phase of a project network

During the commercialization phase of a project network, the time perspective is long-term for the emerging business network. The long term time perspective implies the relationships from the emerging business network and the alignment of their combined resources and capabilities is no longer temporary. The relationships of the emerging business network are expected to continue beyond the scope of the initial temporary project network. The requirements of larger incremental investments are expected by the members of the emerging business network. This incremental investment represents the expectation to continue beyond the scope of the initial project to exploitation of the emerging business model.

81 3.4 The concept of value and the evaluation of value in a project network The expected value of the project network is one of the primary concerns of the partner firms. Generally, value and expected value are very difficult to describe and measure as a phenomenon. In order to limit discussing all of the possible forms of value and all of the potential forms of value and value creation this study will focus on the descriptions of value and expected value creation, through the perceptions of the actors. Specifically, the primary line of discussion of the three dimensions of value creation will be the perceived change in the role of the entrepreneur/micro firm. The secondary line of discussion will include a fourth dimension of value creation and will focus on the changing roles of the other firms. The last column on the right in Table One, titled, Commercialization Phase, includes all four dimensions of value creation. 3.4.1

Value of intellectual capital in a project network

The conceptual value of intellectual capital is subjective in relation to the strategic fit. The future conceptual value is perceived in both public and private strategic interests for the actor and their ability to commercialize new knowledge beyond the scope of the project. 3.4.2

Value of social capital in a project network

The value of social capital is subjective. The change in social value is subject to two forms of perception. First, does the actor perceive themselves as efficient and effective? Second, are the other actors in the cognitive system attuned to perceive the actor to be efficient and effective? The perceived change in dynamic roles of the individual will focus the evaluation of social capital.

82 3.4.3

Value of financial capital in a project network

As stated earlier, the financial value of the project network ultimately comes down to the return on investment in the technical environment. The perceived attractiveness of the actor may occur in the cognitive system, but the commercial value of the change in financial capital is rationally understood in terms of money in the technical environment of the marketplace. “Each project should be evaluated at its own opportunity cost of capital; the true cost of capital depends on the use to which the capital is put (Brealey and Meyer, 1984:187). The opportunity cost of capital is the expected return that is forgone by investing in a project rather than in comparable financial securities (Brealey and Meyer, 1984:814). This obviously gives rise to the question of what was actually invested and what the return on investment is measured against. Evaluating the success of an emergent business opportunity is very subjective, and this evaluation is made more difficult because the business opportunity is emerging. “Projects as investments for new products or ventures are most likely to depend on intangibles. The first project in the area may not have positive Net Present Value if they are considered in isolation, yet the firm may choose to go ahead in order to establish a position in the market and pave the way for profitable future projects. The first projects are not taken for their own sake, but because they give the firm a valuable option to undertake follow-on projects (Brealey and Meyer, 1984:241). Also, because this project is occurring in a business network, the firm is evaluating their own performance and the performance of the partner firms in the project network with respect to the business model and the firms’ ability to generate an appropriate rate of economic rents in future projects in the marketplace.

83 3.4.4

Commercial value in a project network

The commercial value of the project network is one of the primary concerns of the partner firms. The commercial value of the project represents potential and measurable creation of value in the market for the actors associated with the project network. Did the actor learn to be efficient in the cognitive system? With respect to the commercial value of the project network, efficiency means bringing in the future deals by changing the network capabilities of the actor and the perceived value of their network capabilities in both the cognitive system and the technical environment.

84 4

ETAMPERE SMART CARD PROJECT: PROJECT NETWORK CASE

The empirical case material comes from the eTampere Smart Card Pilot project. As stated, this study follows the single longitudinal case of the eTampere Smart Card project network. The eTampere Smart Card project is a sub-program of the eTampere Program (eTampere). 4.1.1

The eTampere program

The eTampere program (http://e.finland.fi) was developed to build an integrated electronic society supporting the welfare of the local citizens of Tampere, Finland. The initial model for the eTampere program was based on the eEurope model that started in December, 1999 with the intent of creating and promoting a knowledge society (eTampere 2004e). The initial preparation for the eTampere project started in Spring, 2000, because Tampere wanted to be positioned as a European research and development community. The program would run from 2001 to 2005 and have a total budget of 132 million euros (eTampere, 2004e). Several sub-projects comprise the eTampere project and directly involve multiple organizations. The underlying concept is to create the basis for an information society that can evolve and support cooperation between the business, the research, and the public sectors to incorporate the information society into citizens’ daily life (eTampere 2004e). The program has three themes (eTampere 2004e). The first theme is to develop technological networking services so that peoples’ daily lives are easier. The second is to strengthen fundamental research

85 and education in the academic community. The third is to create a new, innovative business opportunity. The eTampere program is part of the City’s business strategy to support regional economic development. The program cooperates with the Tampere region’s Center of Expertise and the Hervanta EU project to improve the information society skills of the citizens. There are six sub-programs in eTampere. The sub-programs are Infocity, Information Society Institute (ISI), eAccelerator, research and Evaluation Laboratory (ReLab), Technology Engine Programs, and the eBusiness Research Center (eBRC). The eTampere office coordinates the overall program. 4.1.2

Case selection of the eTampere smart card project

Laura Aho was a former student and a friend of the researcher. During the course of social conversation, we discussed her activities and what she was doing with respect to her transition to becoming an entrepreneur and how she was networking with the various firms in the Tampere region. During one of our conversations, she described her intentions to approach the City of Tampere with the eCard concept. She briefly explained the main idea. The eCard project represented a project that was being intentionally created to create an emerging business and it would require multiple actors to create the electronic platform and the services. It would require that the various firms learn how to integrate the technologies, since the service platform and different forms of user groups did not have a prior inter-organizational structure. Because it appeared Laura was about to begin the creation of the eCard as a project network and the previous efforts with the previous company were not developing as expected, the researcher decided to focus on the eCard project as the empirical case

86 The eTampere smart card project network was selected because it could be a representational case of the focal phenomena. Access to the empirical case was granted because of a previous relationship with the founding member of Access International. Laura, as the project manager, would provide access and documentation about the project, as well as discuss the case in English. A single longitudinal case (Pettigrew, 1990) was used, as it appropriate for theory development (Dubois and Gadde, 2002; Yin, 2003). The eTampere smart card project (eCard) is a sub-project of the Infocity program. During 2003-2004 a smart card with a dual interface (contact and contact-less) multi application smart card system was developed. The eCard provides public sector services for the citizens of Tampere. The City of Tampere coordinates the eCard project. Tampere City Transportation has a central role in the eCard project, because the eCard was based on the Tampere regional travel card. There are several private companies involved in providing technical consulting for the eCard project. These companies are Access International Consulting Oy Ltd (AIC), Aldata Smart Card Ltd and VTT, the Technical Research Center in Finland. The objectives of the project are, for example, creating tools for using electronic services, increasing the utilization of smart cards, increasing the number of Internet access points, increasing the cooperation for electronic services and electronic payments and piloting new smart card applications and platforms (eCard – City of Tampere, 2003).

87

Company

Role

Access International Consulting Oy

Project Manager of eCard

(AIC) VTT

Technical Consultants

Seudun Osuuspankki of Tampere

Registration Authority

Sonera PLC

Identity Certification

Miotec Oy - / Aldata Oy

Manufacturer of Smart Cards

TietoEnator PLC

Information Processing Systems

InterMarketing Oy

Electronic Ticketing Services

Pusatec Oy

Producer of Smart Card Readers

Tripla Oy

eCard implementer of Services

Rafsec Oy

eCard supplier of Transponder

Mainoscraft Oy

eCard Planning and Realization

Table 2: eTampere Smart Card Project Network

Table Two, above, contains the companies and the roles of the firms that were involved in the eTampere Smart Card Project. Access International Consulting (AIC) was responsible for coordination of the project. Aldata was responsible for the entailing the smart card technology – the initial company was Miotec. Rafsec was responsible for the smart card chips and antennas. Sonera handled the certification issues and TietoEnator provided the information systems as an electronic backbone. The Tampere City Transportation provided the travel card system and Tampereen Seudun Osuuspankki provided the registration for the cardholders. Technical development and research was carried out by VTT. The

88 Tampere Polytechnic tested the eCard’s voting function in a student organization pre-election and provided the testing of workstation login, internet access, and ePurse purchasing. Soon developed the eTicket sales functionality (eCard – Tampere City 2005a) The project got started as a pilot project in the beginning of 2003. There were altogether 5,500 cards delivered to people participating in the pilot: 4,500 cards to the students of Tampere Polytechnic, 500 cards to the students of Tampere Technical University, and 500 cards to the officials of Tampere and Nokia Cities. The pilot phase took place during 2003 – 2004 (eCard – Tampere City 2004). The cards that were delivered during the pilot phase are still in use except for the Public Key Infrastructure (PKI) certificates. The eTampere smart card is a new generation multiple use smart card. It is simultaneously a contact and a non-contact card at the same time. The chip, which is used for non-contact transactions, has a remote reading function. It can be used for payments and access control by just showing the card to the reader (eCard – Tampere City 2005a). Payment happens quickly, which may be important in some functions for example, public transportation services. The chip with the contact functionality was used during the pilot phase for networking transactions by putting the card into a reading device and giving the cards personal identification numbers (PIN). The electronic transactions are safe because the electronic identification information is encrypted by a certificate and a PIN (eCard – Tampere City 2005a). The secure certificate provides the users authentication for the electronic transaction which might be important, for example with a person’s personal health care information. The concept for the eCard is the card itself does not contain the applications, but works as a key to different services, and the

89 applications are in the service’s own systems. In this way, the service applications do not tie up the card and are not tied to the card. Additional services may be created for the card or similar devices, for example a mobile phone. Conceptually, the eTampere smart card provides multiple uses on a relatively open system that service providers can access directly (eCard – Tampere City 2005). The eCard operates as a means of payment, access control device, and it can be used for authentication when entering services. The card offers a technology for developing individualized services without being dependent on a specific service provider. It creates a common standard for the service providers to access an existing electronic system for coordination of the personal activities of the citizens of Tampere. There are a wide variety of services supported by the eCard. The card can be used for payment of travel fees in the Tampere City Transportation System within Tampere and Nokia. It may be used to access the city’s swimming halls. It is possible through the ePurse function of the card to make small payments debited from the card. The card holder can load travel tickets and eCash at the City’s Transport service points on the eCard. The eCash function makes it possible to pay for student lunches at Tampere Polytechnic and Tampere University of Technology. The PKI certification allows the same card to be used to access public heath care and provide secure personal identification for medical services. This PKI certification also can be used to access login for computer access to the internet and to make different forms of transactions in the public libraries. One of the newly tested services for the eCard is the area of eTicketing and electronic elections (eCard – Tamper City, 2004).

90 4.1.3

Data collection

The data collection process migrated over the course of the study. Initially, the empirical data for this research was provided by the entrepreneur and project manager of the eTampere smart card project network. Originally, the project manager agreed to send weekly notes and copies of the meeting notes as email attachments to the researcher. However, within two months the notes became more infrequent and the continued attempts to get the notes only created stress in the relationship. Sporadic GSM phone calls between friends would soon replace the project manager’s weekly written notes. Written notes were taken when possible. The researcher

found

this

method

of

oral

history,

although

methodologically more uneven with respect to documentation, to be much richer with respect to the early case data and the relevant background to be more productive in the more formal in-depth interviews. There have been two in-depth interviews of the entrepreneur by the researcher. The first interview occurred in the middle of the smart card pilot project, May 22, 2003, and focused on the eTampere smart card project network and the business developments for the firm. The second in-depth interview occurred on July 12, 2004, at the end of the eTampere smart card pilot project. This session was used to clarify the perceptions of the researcher. Both of the indepth interviews were tape recorded and selectively transcribed to provide for data validity. In practice, this data was used to provide the history of the project and to develop a fuller understanding of the study. Ultimately, the primary empirical data that was used for writing this study comes from in-depth interviews of five members of the project network completed from March 1, 2004 to March 9, 2004 by

91 a research assistant. These interviews lasted from one to two hours. The interviews were tape recorded and transcribed by the research assistant. The transcriptions have been lettered and numbered to identify the data source. The data were then categorized according to the preliminary conceptual framework and analyzed according to the proposed elements in the preliminary conceptual framework and attention was paid to see if new issues emerged during the classification and analysis of the data. 4.1.4

Case analysis

A longitudinal method was chosen because the focal issue was the emergence of a network formation. A single longitudinal case (Pettigrew, 1990) was used, as it appropriate for theory development (Dubois and Gadde, 2002; Yin, 2003). The focal areas for interviews emerged over the pilot case, the preliminary conceptual framework and the previous oral history of the project. The study is retrospective because the interviews were conducted only once. However, because of the use of multiple sources of evidence, there is only small risk of an idealized version of past events. Documents such as the meeting notes from the eCard project and additional reports about the eCard were gathered and reviewed. The people interviewed were the point of contact for each of the firms during the pilot project, and they had been in their role for several years. Their view of future expectations would be representative of the expectation of the firm. In the analysis of the empirical case, there are large sections of transcribed discussion included in the document to assist the reader in understanding the focal phenomena. The transcription codes (by letter to identify the interview and then question number to allow the reader to see the flow of the conversation) have been left in the document to provide data validity. This choice was made for two

92 reasons, first, to provide the context of the analysis as clearly as possible, and second to allow for subsequent data analysis in further study.

When parsing the data for analysis, the shorter quotes

became more editorial examples taken out of context. It was decided to provide full text when appropriate. If several people have similar or opposing views on a related area, they will be discussed and the quotes will be available sequentially. It should be remembered that the interviews were conducted in the Finnish language, so the quotes are transcriptions and translations of discussions in Finnish translated by a research assistant to English. On occasion there may be some phrasing appearing less than fluent. When it was likely that the reader might become confused, a word may have been (added) for clarity. There were additional forms of documentation provided by the entrepreneur about the eTampere smart card project in the form of internal company documents, company project reports to the City of Tampere, and other academic research works focusing on the eTampere smart card project. Many of the supporting documents provided by the project manager about the eCard Project such as the meeting notes have been provided in electronic form in Finnish language and these files have been electronically translated into English by TranSmart. TranSmart is an electronic language translation software package. The combination of electronic data, the ongoing oral history of the project, the in-depth interviews of the five members of the eTampere smart card project network, the written documentation of the project, and other academic research have provided a rich database for this study. The researcher accepts full responsibility for errors.

93 4.2 Perspective – a person Over the course of this study, the entrepreneur, Laura Aho was the project manager for the eTampere smart card project. In the descriptive analysis of this study, she will be called, Laura as a person, project manager in accordance with her role managing the eCard project and the entrepreneur in accordance with her role as the founder and sole employee of the micro firm Access International Consulting Oy (AIC). These names will be used to discuss different perspectives, and possible issues, agendas and roles for the same person over the narrative descriptions in this study. 4.3 The context The intention of the eTampere smart card project (eCard) was to create an electronic platform that would allow the inclusion of all of the various communities of the Tampere region into a single nonproprietary electronic service delivery platform. The open platform system would be created specifically to allow for multiple service providers to access and participate in delivering the service backbone for the electronic network.

The eCard project was

intended to combine both public and private sector service providers into a new delivery possibility for electronic business transactions, and it represented an emergent business opportunity. Previously, the City of Tampere had built an electronic bus pass system to make public transportation easier to use. Based on the experience gained from the bus card, the city of Tampere had learned one thing that promoted use, and thereby customer loyalty. Customers would be given a per trip discount if they purchased either a monthly pass or loaded more money on the card (Aho, 22.05.2003). Providing the customers a trip discount by volume ticket purchases helped promote customer acceptance of using the

94 card. The more money loaded on the card the less expensive the per-trip cost was for using the card. The original electronic bus pass system was a closed proprietary system, so for the eTampere smart card (eCard), the city wanted to develop a non proprietary system to allow for more integration into the system. By moving to an open platform electronic backbone, no one service provider or participant could control the access or the cost structure of the program. In effect, there is no predefining control of the electronic network or the service on offer, or hidden costs for the local infrastructure to the service providers. Generally, there are two common features for this type of regional loyalty card program. First, the services are repetitive, and second they are provided locally. This type of loyalty card would be most successful in a region with a strong sense of local community and a large commuter population. The card ties the loyal customer to local services that are of a repetitive nature and hopefully creates customer loyalty. The usual repetitive services for this card would be the small transactions which would occur during a typical work day. The scope of the services that could be included in this eCard would be limited by the scope of the service sector that would be willing to participate in the loyalty program. The main requirement to participate in the loyalty program was that the potential service provider would agree to provide the services at a modest discount (based on the bus card experience) and bill the services through a non-proprietary electronic backbone. So building on the experience with electronic bus card, the business model for the eCard includes other forms of electronic transactions. For example, small cash transactions, tickets, access to the library, pool or gym, lunch, drinks or a movie could all be handled with a single card

95 4.4 Reminder of focal phenomenon and framing questions

This is a study of a collaborative project network strategically targeted to create an emergent business opportunity. The study is framed by three research questions: Which theoretical concepts form a viable language for describing and analyzing creation of a project network targeted as an emergent business opportunity? What are the perceptions and capabilities used to develop and manage project networks targeted for an emergent business opportunity? Which contextual factors have a perceived influence on the early processes of an emergent project network? 4.5 Discussion of the pre-project phase The initiative to create the eTampere smart card project came from Laura Aho, a young female living in Tampere. Laura had been working in the Tampere region for several entrepreneurial start-ups that required general management, marketing and consulting services. During her professional tenure, she built a support system of people to consult. In a short period of time, she had developed a solid reputation as someone who worked hard, had good ethics, and an unrelenting source of energy. Laura collected people, resources and ideas. She was very resourceful, and generally people tried to support her efforts which ultimately led to her starting her own consulting firm, Access International Consulting, Limited (AIC). Although she did not have a strong technical background, as a consultant, Laura had started specializing in marketing consulting

96 services for the small technical companies in the Tampere region. As part of her efforts to develop her consulting business, she was actively learning about firms in the Tampere region. Through a long series of discussion with these firms she learned about which firms were working on specific areas and interests they were developing. Over time, she began to develop a picture of the needs and trends as well as the future expectations of the various firms in the region. The public announcement of the eTampere program changed how Laura thought about these firms. Previously she was thinking about how these firms could hire her for consulting services. After the eTampere program was announced, she was thinking about how she could hire the firms. After the announcement of the eTampere program, Laura recognized how the resources of the various firms in the Tampere region could be combined to create something in line with the expressed goals of the eTampere program. Specifically, there were three factors that changed how Laura recognized an entrepreneurial opportunity. First, she was looking for a new entrepreneurial challenge within an emerging area of electronic business. Second, there were already several small technology based firms that previously cooperated with each other, the universities, and several of the larger ITC firms in the Tampere region, and she was already developing a relationship with these firms. Third, the announced eTampere program, to promote lifelong learning and electronic communities, needed public sector projects demonstrating to the public that the city administration was being proactive in developing the region and the community’s electronic infrastructure. This public initiative represented a client in the public

97 sector which had not previously been available to the local firms. After the recession in Finland in the early to mid 1990s, there had not been a lot of public sector projects for the local firms, so this initiative also represented a new opportunity for the firms as well. In short, Laura as an entrepreneur, proposed an emergent business opportunity for creating an electronic community supporting local services and developing linkages with the public sector. The City of Tampere accepted the proposal as it directly supported the eTampere program. In summary, the City of Tampere needed someone neutral to manage the project because of the strong interest groups that exist within the community. The City of Tampere has multiple actors with strong political interests. This young entrepreneur seemed to be knowledgeable about the issues inherent in building an electronic community, and she could apparently span the boundaries between the various interest groups. This entrepreneur was aware of potential regional resources and more importantly the regional firms were aware of her. Due to the timing of the proposed emergent business opportunity, the entrepreneur was not directly affiliated with any of the interest groups or firms. Therefore, this entrepreneur could neutrally represent the City’s interests. 4.6 Pre-project phase As a reminder for the reader, the pre-project phase focuses on learning about concepts, trends and capabilities. This exploratory period is extremely open as the conceptualization of the project may not have occurred. The processes and the relationships are explorations of the potential resources. During this pre-project phase a change in attunement and the interpretation of information leads to a conceptualization or a vision of a potential project. The

98 relative level of completeness of this vision is tied to the individual’s cognitive map. In short, the individual needs to be able to recognize the entrepreneurial opportunity. During the pre-project phase of a project network, investments in intellectual capital consist of learning technical capabilities and market trends. The initial exploration of resources and capabilities are supported and positioned by potential interests and agendas of the actors. During the pre-project phase of a project network, social capital is used to identify and access potential resources and capabilities. Social capital is incrementally built by borrowing on personal relationships to gain introduction to the next person, thereby extending the individual’s own social network through other people’s prior relationships (Larson, 1991). During the pre-project phase of a project network, financial capital is the opportunity cost of time spent learning. 4.6.1

Network capabilities

In this case, there were particular activities and skills that this young entrepreneur used to support her entrepreneurial interests. Through these activities she became aware of the potential capacities in the Tampere area. These activities also allowed other individuals to be aware of her potential capabilities. Generally, it is difficult to identify or measure skills without a context or a reference point. In this study, some specific skills describe the entrepreneur’s actions with respect to this project. These

descriptions

are provided to

guide

the reader

in

understanding the element of network capabilities during the preproject phase and pilot phase of the eTampere Smart Card project.

99 The specific skills and activities of the entrepreneur are influenced by the entrepreneur’s cognitive map and her perceptions of the other individuals in the project. Over the course of the study a certain skill may be emphasized and over the course of the project different skills and activities maybe required. Using weak ties for learning capabilities Laura Aho had started learning about various firms in the Tampere region about a year before this potential opportunity became relevant to her or any of the firms that ultimately participated in the project. She had recently founded her own micro firm and was out in the business community speaking with other firms about their capabilities and how they wanted to grow and develop. By using weak ties, she was looking for opportunities to collaborate or to consult with these firms. Usually, these conversations were very informal meetings extending social connections. However, by having these preliminary conversations, a year before the actual project started, Laura had learned about the capabilities of the various firms, before a clear need was established. By learning about the firms before a project was announced, there was no agenda or external political pressures during the conversations. These conversations were between professional individuals learning about each other and their firms. Using questions for learning trends During these informal visits Laura was asking questions about what the firm saw as the direction of the information technology industry and the critical factors for their firms. During the late 1990’s and early 2000, there was a trend toward integrating information and cash transactions over a mobile

100 electronic network, but there was no established working business model. Identifying the trend of converging electronic transactions for services over a mobile network was not a problem for these Finnish, high technology firms during 2000. The Finnish firms involved in this study were each working independently at producing the technology to make mobile electronic transactions possible. Occasionally, some of these firms had work previously with each other on other projects. However, no one had identified the business model of how all these firms could work together to do business in the public sector. Active listening and boundary spanning Laura was working independently between the firms looking for capabilities and potential areas of collaboration. Because Laura did not have a strong technical background, during these informal conversations Laura was actively listening. By actively listening, she was exposed to a more comprehensive picture of the trends and the firms’ capabilities. Making sense of how things work, specifically in complex technical systems, requires the ability to critically listen. Because complex technical systems often have very specialized language, it requires the individual to change perspectives quickly to ensure they have actually understood how the specific capabilities can be used and the limitations of the current technologies. To continue, the need to find the points for potential collaboration required that she be able to span the boundaries of the firms and the technologies. This boundary spanning ability is linked to putting people at ease and speaking about their issues using their language. Emotional intelligence (Goleman, 1995) is important in being able to calibrate the style of the interaction, and is important to be empathetic as a way of thinking when meeting people. Using the

101 other person’s language, to make them feel at ease, opens up communication and supports working between different groups. Finding out about previous efforts There had been a previous attempt in Vaasa, Finland to build an integrated backbone for mobile electronic transactions, but this earlier attempt had focused on a proprietary system which never gained public acceptance. The other smart card projects in Finland are proprietary systems with much less ambitious goals. These closed systems have yet to generate a viable commercial business model for a wider network. They are simply closed systems contractually provided to a client. Proprietary systems are simpler to build because the variables are more controlled. The whole system refers to a wider electronic community that has a multitude of services and transactions that are readily expandable. The eTampere smart card project would ultimately be designed as an open system; the other attempts in Finland have been closed systems. An open system needs to have protocols that can be accessed or expanded. These protocols are an initial standard for the firms to use to access the electronic backbone. Future functionalities have to be designed according to the standard forms of data, access control and validation that the network has agreed to require. For example, a hospital would need different levels of security than a swimming pool or a bus company. Conceptually attuning the cognitive map Simply put, Laura recognized by using an open platform as a nonproprietary system, multiple firms could participate in the creation and development of a new electronic platform. She also realized that by integrating services from multiple sectors and firms it would

102 defray the development expenses for the project. Also, by focusing on local needs and the capabilities of the local firms and combining them into the prototype of the business model, it would be possible to use the new system immediately. The local firms would invest in the development expenses of the service platform because by being included in the development of the system, once the pilot project was completed, the local business could potentially benefit from the electronic platform immediately. By focusing on the capabilities of the local firms as suppliers, she was able to get the local firms interested in building a new business model. Simultaneously, she could approach the City of Tampere to invest in the pilot project as part of the new eTampere initiative. The inclusion of the service providers as part of the business model and designing the electronic backbone as an open platform was a departure from the previous attempt. This would mean no single company would control the architecture or the revenue stream associated with the process, but also no single firm would have to make all of the necessary investments in attempting to build this kind of a complex integrated system. Aligning the strategic agendas The opportunity to learn about how to link the various public and private services over a non proprietary mobile electronic backbone was a new and potentially very exciting opportunity for the firms in the Tampere region. Laura was able to align the strategic agendas (Davenport, De Long, and Beers, 1998) of the firms and the city of Tampere by showing the firms that by collaborating in the eTampere program as a pilot project they would be able to create a new business model. Positioning the eTampere project as a hook to attract the investments from the firms came in the form of learning

103 about extending the core capabilities of these firms and/or implied access to this project and thereby future business opportunities. Vision and cognitive maps It is usually easier to look back and explain how the connections were made. It is much more difficult to identify how to go forward without a working model. This is tied to the cognitive maps of the individuals and how they act in a context. Subsequently they explain and interpret how their actions were intentional. For more discussion on cognitive maps (Scott, 1992) and enactment (Weick, 1995) see section 2.3 of this study. The ability to conceptually attune her cognitive map and be able to align the firm’s strategic agendas and the City of Tampere is an example of visioning (Weick, 1995). The visioning ability is part of entrepreneurial thinking, but it was particularly important for Laura when aligning strategic interests for the eTampere project, because she had a limited prior technical reputation. Laura succeeded in this project to a great extent on the basis of her pre-project ground work involving the various firms in the Tampere region. She had been in touch with these firms and was active in learning about them before she need to align them or expected to use them in the project. She had created an interest in working together in a future project, even thought the project had not been identified. Written proposals create expectations Once Laura was able to conceptualize the new business model, and understood how to align the agendas of the firms and the City of Tampere, she needed to be able to clearly write a complete business plan, including all of the various capabilities. The proposal clearly identified the roles and responsibilities and the purpose of the project. It provided a common point of reference as a shared vision

104 of the expectations of the project. A clear conceptualization of the emergent business opportunity was important for aligning the strategic agendas of the firms and the City of Tampere. The firms and the City were enticed by the business model. However, because this business proposal was also subject to external review and approval by the City of Tampere, it was embedded in the political and economic processes of the City of Tampere. Embedding the eCard project to a larger context of the City of Tampere helps provide a framework for the project network. Being tenacious in creating vision To create a more credible description of the business and the expectations required a thorough understanding of the related technologies. The ability to be tenacious in gaining a personal understanding and having a strong sense of personal curiosity helps support the ability to create a shared vision. The entrepreneur needs to be able to articulate how these concepts actually could be combined in practice. Because the convergence of the technologies included alternative potential solutions, a clear understanding about the reasons for choosing specific technological approaches to building the business model needed to be thought through, and credibly argued as a written proposal. The proposal given to the City of Tampere would be subject to attack, both politically and technically. The proposal would need to withstand these attacks in order to support the entrepreneur’s credibility. This written proposal, once accepted, would represent a shared vision of the project network and the City of Tampere. The shared vision, once constructed and accepted by the group, becomes the individuals’ understanding. The individuals will enact their behavior according to their acceptance of this shared vision, (Weick, 1995). The entrepreneur needs to be tenacious but fair in building a shared

105 conceptualization of the project expectations. Over-selling will injure reputations later in the process. Perception of credibility within context Solving a business problem in a complex system is complicated by the fact that most of the firms in the information technology sector have been trying to establish a revenue stream based on their vision of the future. In order to enroll the firms into an emerging business opportunity by investing in the proposed project the entrepreneur needs to be able to design a plausible solution, and to sell it forward to get the various interest groups, firms, and a client to invest their time and resources. Establish trust through details In the process of speaking with these firms Laura also established herself as someone who understood these issues. Establishing trust is a tenuous endeavor in most contexts; it is particularly difficult in the business environment of the information technology industry because of the competing technological capacities. Laura needed to be comfortable discussing technical issues clearly and honestly admitting she did not know something. Openness to learning is required for building confidence. Part of building trust and credibility requires that the person pay attention to detail and that they get the information across accurately, without glossing over the difficult points, or misrepresenting the capacities of others. 4.7 Pilot phase The Pilot Phase of the eTampere Smart Card project began formally with a contract between Access International Consulting and the City of Tampere in June of 2002.

106 As a reminder to the reader, the pilot phase of a project network in the preliminary conceptual network focuses on the initial investment of resources and capabilities by the actors and the initial project requirements. The processes and the relationships in the emerging business network are temporary explorations of the potential combination of resources and capabilities for the project. During the pilot phase of a project network, investments in intellectual capital are suggested to consist of sharing core competencies (Prahalad, 1990), technical capabilities, or market knowledge. The potential benefits of these investments in intellectual capital are based on the expectation of future learning opportunities from the project network. The firm must be able to justify these investments as strategically interesting. In some cases, the justification for investments in intellectual capital may be path dependent if it is feared these investments could not be recaptured if excluded from the network, a sort of lock-out effect (Cohen and Levinthal, 1990). During the pilot phase of a project network, social capital is expected to be invested in reputation sharing (Podolny, 2001). The relative value of social capital is embedded through previous investments, or is borrowed through the implied credibility of other relationships (Larson, 1991). If no previous relationship existed, the social capital investments are usually unilateral (Faulkner and De Rond, 2000). During the pilot phase of a project network, financial capital for the most part is expected to be limited to small investments of seed money.

There is limited expectation of financial returns. The

financial investments are as seen as marketing expenses in the sense of preparing the firm for some level of future activity. The financial investments are more in the form of opportunity cost investments.

107 An opportunity cost investment is the forgone rate of return, if the financial resources had been invested in the next best alternative. 4.7.1

Network capital

Similar to an entrepreneurial venture, the various forms of investment in the eTampere smart card project network and the expected forms of return were difficult to access directly. As stated earlier, expectations drive the investment decision for the firm. However, similar to an entrepreneurial venture, actors make investments based on their expectations. For example, in an entrepreneurial venture, the initial expectations of the founding members would include an understanding that a certain form of investment is required before gaining any returns. Also, during the original formation of the team, the entrepreneurs must agree on the forms of investment.

Some entrepreneurs may invest financial

capital. Other entrepreneurs may invest alternative forms of capital, such as intellectual capital or social capital. Generally, entrepreneurs understand these investment forms are difficult to compare and directly evaluate or measure prior to founding the firm. In an entrepreneurial venture, the questions of who invests what and what amount of stock they should be awarded for their investment is one of the basic issues of ownership. However, usually a project network is not a separate legal entity, so “stock” would not be issued. Usually, the initial investments in a project network are made because of future expectations for returns. In a project, it is generally understood that all the members do not make the same form of investment, nor do they obtain the same form or level of returns. However, it is generally understood that the various forms of investment in time, knowledge, social connections and money are expected to bring an increased rate of return.

108 -CEO, Access International Oy “There sure have been challenges and in my opinion, what comes to ambitiousness, it has not been a bad thing at all. It more likely paints a picture of the real situation where we are heading at in the future. Even though it not always starts with a full power, there surely is potential enough.” Painting a picture of the real situation is part of the sensemaking (Weick, 1995) process for the firm. The use of metaphor helps to capture and understand the critical issues facing the firm. Where we are heading in the future is part of the visioning of sensemaking and is very important with respect to the continued participation in the project network. Sensemaking (Weick, 1995) for the firms is a social interaction between individuals. The role of communicating between the partner firms is part of the supportive identification of the sensemaking process and critical to the network capabilities because it aligns the intentions of the firms and keeps the project network in the cognitive systems of the individual firms. During the pilot phase strategic moves by the firm may ensure that they will have a future commercial role in the technology implementation in this platform of another one. For TietoEnator the eCard project was an opportunity to field test its technology. What kinds of intellectual investments have you made? – E17 –Sales Manager, TietoEnator Oyj The whole knowledge that we have about building systems has surely been influenced and then our own, large, internal network, that will surely also utilize this kinds of project. You really need many kinds of knowledge, also from the field of IT. TeliaSonera invested in this project to learn about working in a new sector and to understand a new business model. TeliaSonera understood that they would be more attractive in the cognitive

109 system by being associated with a particular capability, and it made strategic sense to invest in the current project and technology. This is a strategic investment in intellectual capital and social capital in the cognitive systems for potential future gains in the institutional environment. What in this project made it so attractive that you wanted to become a part of it? – A4 -Director Business Development, TeliaSonera “Of course, in some sense, there were purely commercial attractions involved, since we had a competitive pilot offer. These types of certificate based solutions are coming strongly and what comes to the extent, this project was so big that it was worth of staking in it. There have been several experiments in an extent of a few dozens of cards in universities and other environments. This though was one of the first broader projects utilizing PKI and the certificate part and there was also the basis that any kind of citizen certificate was not required, but the card itself and its services from the city’s point of view were prepared. The certificate includes far more possibilities than the old citizen certificate did, meaning that there has been built up possibilities in advance for example for e-mail, but there will not be necessarily time enough to test them all. Here, something more advanced was tried to be created. That might have been our strength. It actually is quite an interesting case.”

Teaching as strategic approach to maintain credibility Teaching is a form of sharing core competency7. From the data, it became apparent that TeliaSonera was willing to use teaching as a form of creating a value role in the project. Additionally, these investments in teaching are long term investments which may be expected to make returns on investment after the termination of the

Teaching as an activity may also be referred to a consulting. Teaching as a form of investment in strategic alliances was taken up by Heller (2002). The focus of the discussion is on the change in perceived contribution value by the partner firms once the initial lessons had been learned and the value of incremental learning was not viewed as necessary. 7

110 project. Teaching creates attraction and credibility in the cognitive system. It may be strategically important for the firm to participate in the current emergent project simply to be maintaining a presence in the cognitive system and signaling capabilities. Teaching and seminars are opportunity cost investments in social and intellectual capital in the cognitive systems as they signal competency. What kind of investments has TeliaSonera done for this project? – A10 – Director Business Development, TeliaSonera “They have mostly been work related investments. The technical environments have been that kind of activities, where we have been involved for a longer time already. But it has mostly been the personal resources that have been tied up in this project. Still, this has not been any ordinary company solution, for which we have gained long-term experience. In this way we can talk about an investment. The social investment side has in our case been that we have been using quite a lot of time for the dialogues, for example I personally have been using a lot of time for that. So if we think about financial, intellectual and social capital… Actually, we have been delivering intellectual capital already a year and a half before this project. If the university had some kind of a problem, then we told them that we had already solved the matter, and so on. In that sense, even though not all the members of eTampere Card know it, but many people in the background do, this kind of dialogue had already been done.” Could you give some examples about these work related investments, what kind of work has it been? – A11 Well, for example, we have organized a few seminars for the members and that way have been offering the facilities. What else could I say about these investments? … Of course the fact that we have from our side been spreading the word on a national level, told about experiences, advertised, marketed, brought different kinds of organizations related to the theme to the project and that way we have been helping with the matter. Another investment, even though talking about a commercial contract, has been our pricing – it surely was made in a “pilot spirit”. Otherwise, I suppose, we would not have got the deal.”

111

Expectations and strategic fit From the outset, there was little expectation that the initial eCard pilot project would generate significant financial revenue for any of the firms. However, over the course of the project several firms began to realize that the business model resulting from the eTampere Smart Card project network, if completed into a functional system, could potentially be sold in other markets both domestically and abroad. This observation changed how the firms felt about the project. This project has the possibility to expand a lot? – B128 – CEO, Access International Oy Yes, and what one has to remember, the timetable in a project this big is the kind that a year is a very short period of time. I think that the city does not totally realize that. We are not talking about any 10,000 Euro project here, nor 100,000 euros, but a million euros is more close to the truth. Of course, our knowledge has been growing by doing we have also strong conceptions about where we are heading and how the things should be handled. Within the empirical study, none of the partner firms were expecting to accumulate financial capital from the eCard pilot project. All the firms were willing to forgo the financial rate of return because it was only a pilot project, and it was strategically more important to learn about how this business model would work. So in that point there was no information about the other organizations? – E7 –Sales Manager, TietoEnator Oyj

The data coding is included in the manuscript to help preserve the integrity of the data. Quotes included in the manuscript can be placed and sequentially and reconstructed by the company classification code and the question number. For example, B is Access International Consulting and 12 is the twelfth question during the interview resulting in the above code of B12. 8

112 “Well it started to take shape; these players were formed right in the beginning. We knew who the ones were delivering cards and who the reading devices, so it was actually created in a natural way. As I see it, Laura got this idea of network exactly for the future visions, in case this is going to be sold to other places. That way she assures that we all are involved.” By describing the future vision organized as a project network, “in case this is going to be sold to other places”, the entrepreneur has raised the level of expectation about participating in the project. The firms are no longer simply investing in this one project. As part of a network that is building a business model, the firm may be able to strategically establish a future role and hopefully benefit from the future revenue streams associated with their role in an emergent business model. By creating an image of the financial future, she has enticed people to participate in the project. In creating an emerging business opportunity that may take some initial investment, the sales ability of the entrepreneur as a network capability is not a skill to be underestimated because his or her sales ability helps to align the resources and the capabilities of the firms in the emergent business model. The entrepreneur is selling concepts that are aligned to the agendas of the various actors. In the pilot phase, each firm is assessing their expectations with respect to the strategic fit of the firm for the emerging concept. For two firms there were very large future expectations from the project, but for another firm the relationship appears to be more of a contractual relationship with limited future expectations. What about these figures, would you like to mention some or are they still so distant that they are hard to be determined? –C24 -Former Sales Manager, Miotec Oy “Here we are talking about things quite far in the future, so that the next… is going to be, that has been discussed already that it should get started this year already, but that is

113 not going to happen. It is hard to say, what the price level is going to be, as well as the number of products and things like this. But sure we are expecting millions of euros9. The matter is still so open. It is hard to say, what to expect. In budgeting we live depending on what works out and period. It is no longer so that you draw big amounts on the wall and look if the other person is smiling. If not, then you draw even bigger amounts. So what I want to say, this is a very honest game, what is promised is done well.” But then, in the beginning, this financial return and benefit was not that big of an interest to you, but I suppose it has still been quite a remarkable factor, since this is a commercial business? – C25 “Of course, but in that point this was just a pilot10. Sure we had in mind that later the production phase starts, in business life you need to look what is profitable and what not.” Here I have these different return types, how would you put them in the order of importance? – C26 “Of course it is this financial return, because as we get a good reference and have delivered well, it sure has its effect on the turnover. And of course the intellectual return, sure. All of these types you mention here, they apply and there are big expectations on each and every one of them.” Especially this financial type might come from the expansion possibilities; I mean if this concept will be exported outside Finland, I suppose it awakes expectations on your side as well? – C27 “Yes, sure” In which time scale are you expecting to get some returns from this project? – C28 “Well, tomorrow of course, but if we concentrate only on Tampere, then there should be some returns coming within the next year.” So in one year from now – C29 “Yes, at the latest.”

The rate of return for millions of euros would be well outside the scope of the eTampere pilot project. 9

The interview occurred later than the pilot phase so the reference is to an earlier point in time when the project was in the pilot phase so it has been include in the pilot phase of the analysis. 10

114 There were high expectations for all the three forms of network capital arising from the eCard pilot project, but for Miotec they would arrive too late. Miotec would be bankrupt within the year. Miotec’s bankruptcy occurred after the close of the eTampere Smart Card pilot project. For TeliaSonera, the eCard project had high strategic potential. If we sum up, which of these returns is the most important one for your company? I suppose the know-how side? In which order would you put them, according to the profitability? - A22 -Director Business Development, TeliaSonera “I think I would still say that the social capital is the most important, because now we have taken part into the public sector’s solutions. The situation originally started with the Population Register Center’s, or the citizens’ certificate’s exclusive rights in public sector and what has happened is that here we have the first remarkable project where a card with a great potential – because it has been build around the travel card, 150 000 pieces – and its services have been created, this sure is the greatest return of all. So in this relation, the social return. Here we are involved with the dialogue, which is building on the public sector. As was mentioned, the technical side here is in the other end of importance, because we already had the commercial readiness to deliver. And in the middle I would put the financial side, or this kind of a business model, from that we have gained more knowledge. So first comes social, then financial – and as a financial value especially this business model, not that much the money – and last the technical side. What I could add here is that the opportunity of this kind of a project lies with the fact that the technology had to be ready, meaning that here we have not been able to do testing that much anymore.” So that existed already? Development, TeliaSonera

–

A23

-Director

Business

“Yes and it has clearly been shown that the Tampere travel card and its technology – in principle here we are utilizing the same technology as in remote reading – is going to be a big thing in the future.”

115 The perspective expressed by TeliaSonera supports Ekambaram’s, (2001) proposition that learning occurs on two levels, first learning from within the project and second learning from a larger systems perspective. The firm is looking to move strategically into the new market, and this project may make that movement possible. Strategically, it is also good business to extend the life cycle of prior technologic investments by exploiting it in incremental markets. The cross selling opportunity for these additional services can represent a substantial incremental income stream beyond the scope of the current project if the marketing channel can be developed. However, this brings up the issue that expectations are subject to very different evaluations. For example, one of the biggest software firms in Finland, TietoEnator, understood that it was participating in a project that was creating a business model. Their expected role in this pilot project was critical, because TietoEnator provided the electronic backbone for the entire business model. As a potential future business model, this role was critical. They understood that this business model might have multiple forms and applications globally. However, their view of the eCard project was that it was billable contractual relationship. The eCard project was simply a contract with limited future expectations. Then about the return on investment expectations, what kind of returns are you expecting from this project for your investments? - E24 - TietoEnator Oyj “Well, we do not expect any other returns, than what comes from our work. We are purely just making our work for them. That is our task. As we have not been making any investments, then we can also not expect any of that kind of extra returns.” 4.7.2

Why firms invested in the eCard project

The eCard project was only intended to be a pilot project for the City of Tampere, and it was never expected to generate substantial

116 cash flow. For TietoEnator, the desire to participate in the eTampere Smart Card project was based on their previous experience with the City’s bus card system. The eTampere card was simply an extension of a prior business relationship. A secondary expectation included learning about extending their backbone application to include new services. TietoEnator was extending their core competency to include other services by learning about open source coding. Extending prior relationships and competencies What made this project attractive for you? – E4 –Sales Manager, TietoEnator Oyj It was attractive for us because of these new techniques. Sure we have done smart card systems earlier as well. The second attraction there was that we could clearly see continuation, as we have made that Tampere City Transport card system, especially that background system, management system, so we saw these to have junctions. So if this kind of eTampere Card comes, then surely the Tampere City Transport’s ticket products will be on that card as well, as they are at the moment. We saw very clear linking aspects. The City was already familiar? – E5 Yes. And that is exactly the reason, why we got involved in this project so early, because we had had those card activities in Tampere already. Sure we do not sell or produce cards, but the information systems. Then we get to these investments, what types of investments has TietoEnator made for this project, have they been financial, intellectual and/or social? – E16 Well, we have not made any financial investments, because we are not partners in this project in that way, we do not invest in this system. The investments that we have made have been intellectual and if we have been able to bring something social, then that is a good thing as well. If we think about these three types of returns, which one is the most important for you, which one do you want to receive from this project or wanted to receive? In which order of importance would you put them? – E28

117 “I would say that sure the financial returns are important, what we get for the job done and as we are a public company, we have to continually work profitably. Then comes this intellectual side. We every time try to learn something new in those projects, according to possibilities, to use new techniques or else. In this one too we got to use new things.” For Miotec (Aldata), the eCard project was an opportunity for learning how to integrate the technologies. Miotec was extending the core competency. -Former Sales Manager, Miotec Oy “We mostly knew about the technology-level, but of course the services, because they develop all the time, the service deliverers were not at all in the network that time, it was just a PowerPoint-show on the wall, what (it) could be and what could be exploited.” -Former Sales Manager, Miotec Then about the investments, first about Miotec and then about Aldata, what type of investments have these companies made for this project? Have they been financial, intellectual or social? – C17 “The biggest investment has been intellectual. If we talk about financial investments, it has been mostly raw materials that are invested in this. Because we had the equipment components quite far ready-made, as the function in question is produced. But as investment the biggest part was to link this data communication together with the authentication center. And it’s linking up, so that it fulfills all the security requirements and functionalities.” And this has been basically the same in both companies, mostly intellectual investments? – C18 “Intellectual, yes, and especially now in Aldata it has been intellectual investment”

Developing new market sectors For TeliaSonera, the decision to become involved in the eCard project was based on a strategic desire to learn about the public sector electronic transactions. They also expected to learn about

118 integrating different forms of services requiring different forms of personal certifications and verification. Do you have any concrete expectations from the know-how side, maybe you learn something specific from this project that you will be able to utilize later on, for example in another equivalent project? – A18 – Director Business Development, TeliaSonera If we think about the public sector and its changes, then yes. This is quite a big pressure for the public sector to develop the means of electrical transactions and things like that. Of course the knowledge capital grows here as well. This knowledge sure has been important And it is feasible too? – A19 Yes, sure. What has been going on at a national level is that different cities, different organizations, different municipalities approach to this matter very differently. Maybe this is one good piece in a puzzle, others start doing completely different things than the others and as you are able to put these pieces together, what you get is the overall competence. An additional strategy of TeliaSonera, beyond learning about public sector transactions, was the desire to maintain a presence in the project by sharing their core competency with other firms. Because of their prior experience with the City of Nokia, they were able to use teaching as a form of sharing their core competency. 4.7.3

Network capabilities

Similar to the skill necessary in the pre-project phase of a project network, the project manager needs to be very focused in pushing the project forward. However, in the pre-project phase, there is a strong emphasis on conceptualizing and learning about new capabilities and how they would fit together. Initially in the pilot phase of the project, the entrepreneur is expected to focus more on problem solving and positioning the

119 expectations of the parties and subsequently, her focus is expected to shift to finding and coordinating information and processes. When looking from Laura Aho’s perspective, how has she been coping with the project and her tasks? - E28 -Director Business Development, TeliaSonera “Very well, especially when one remembers that basically she alone has been the company and that of course limits her opportunities being involved and only doing (only this) all the time. In this kind of things, when we deal with large entities – as it will be in the future, if this becomes a permanent way of doing (things) and there will be several projects – one has to be able to separate the technological part and make more of these tracks, or how you want to call them, what each and every party is doing. But if you stay in a highly consulting role, it should not set any special requirements. But luckily this has been an honest pilot project; no one has been trying to tell that we have something ready here. But if you think about these descriptions, documentations, projects and so on, especially among the big organizations you can see it, how the customers are going to demand as well. In this case the customer is even a bigger organization, a huge sized organization, very administrative and therefore they require the information to be well analyzed.”

Investing in personal, intellectual capital supports the entrepreneur’s network capabilities. In the study, the entrepreneur would require extensive learning in order to maintain her credibility in building the emergent business network. This learning was a form of investing in her intellectual capital in order to improve her network capabilities. For example, the entrepreneur needed to develop her technical background to maintain her credibility with the other actors. The entrepreneur had a previous background in business studies, but lacked a strong technical background, which might better prepare her for working in the high technology sector. She enrolled in the University of Technology to build her understanding of these technologies (Aho,

120 05.22.2003). She had to interact with the firms to learn about how their technologies worked and where they did not work. She also needed to learn how these technologies would interact, where the problems of building the complex technical system would lay, and how to discuss and position actors’ expectations. The network capabilities of the project manager However, there is an increased need for more traditional project managerial skills in a pilot phase in accordance with the role of project manager. Traditionally, a project manager’s role includes being a driving force for the project. – Chief Executive, Pulsatec Oy “It is vital that there is someone who is pushing it forward, otherwise it stops. That someone needs to be a strong personality, who looks for information and knows how to coordinate it and understands that the information is not only in one place.” “She has done well, and if she had not, the whole eTampere Card –pilot would have never started. That says a lot, because it started and more or less in its schedule. The start up was mostly Laura’s merit. The know-how, if she did not know something, then she found that out, mostly on the client’s conditions, what the client wants and what kinds of visions have been created. Those things were completed so that they could be accomplished.” - Former Sales Manager, Miotec Oy As described in the pre-project phase of this study, part of the network capabilities of the project manager are utilized prior to the formation of the project network. Once the project has been approved, the role of project manager requires delivering the project through these relationships. The investments in the prior relationships will help to coordinate the capacities of the firms as resources for the project. If the project manager is not able to draw

121 on these prior relationships, to deliver these resources for the project, his or her overall ability to deliver the project will come into question. The pressure on the project manager to deliver the project is reflected in the network capabilities of the project manger in both the cognitive systems of the institutional environment and the technical environment. The reputation of the project manager is subject to the other individual’s perceptions. The actors’ perceptions of the project manager directly affect how they behave in the project. There is a fair amount of pressure on the project manager to manage his or her role symbolically with respect to these perceptions or risk injuring his or her reputation and credibility in the institutional environment. The individual’s perceptions may be formed and interpreted in the cognitive system, but he or she enacts his or her behavior based on those perceptions, in the technical environment. If the project manager is able to align the various firms’ agendas and capacities, and deliver a functional complex system, then her social capital will increase both in the cognitive system and potentially in the technical environment. The relative efficiency of the project manager is partially measured by the ability of the project manager to deliver the project. Delivering the project would at first, appear to focus on the client’s needs, so if the project is delivered, then the project manger is deemed successful and has an increase in social capital. However, in this study, the project manager is not only subject to evaluation by the City of Tampere. The partner firms are also evaluating the project manager, both as a project manager during the course of the project, and additionally as an entrepreneur. Failure to deliver, or a

122 negative perception of the project manager’s skills, would influence the attractiveness of the entrepreneur as a future partner and would indicate a loss in social capital. This loss of social capital in the cognitive system of the institutional environment would also, by implication, directly affect the entrepreneurs’ own firm in the technical environment. Therefore, it is not effective if the client is satisfied at the expense of the partner firms. 4.7.4

Network capabilities build network capital

In this study, the primary line of the discussion, with respect to network capabilities, focuses on the entrepreneur’s perceptions and the perceptions about the entrepreneur. In this study, the pilot phase lasted approximately six months. During this period, identifying the firms and understanding how to integrate the technological issue and communicating between the firms and the City of Tampere was the primary responsibility of the project manager. As stated, the initial investment made by the project manager

in

the

pre-project

phase

helped

promote

open

communication and trust between the firms and the project manager. In the beginning, the project manager was not strategically forming a business model with the expectation of exploiting it during a commercialization phase. The business model was being developed for the City of Tampere. Over the course of the project, the project manager and the firms realized that the business model could actually be used and sold beyond the scope of the eCard pilot project. Initially, the project manager was looking for vendors that could provide an integrated solution for the City of Tampere. This role required a lot of energy and the ability to understand where it was possible to integrate the various technologies and where it was not possible to integrate them. The initial challenge facing the project

123 manager was coordinating communications and boundary spanning between the different firms and the City of Tampere. Over the course of the project it became apparent to the project manager and the firms that it might be possible to commercialize the emerging business model. Without going through this initial investment process, it would have been very difficult for the project manager to complete the pilot phase of the project network. However, by not making any prior commitments to the firms, the project manager gained a certain amount of flexibility in selecting the combination of firms. If the entrepreneur had made the initial selections before considering the combination of roles, the initial commitments would have started to define the final combination of firms thereby locking in subsequent choices for the entrepreneur as to which firms and which roles could be combined and how. However, limiting her initial discussions with firms to information gathering, she was still able to refer to these firms as potential partners. These firms had not officially committed to the project, but the project manager was signaling their interest to other firms, based on the earlier discussions. Through this process she was able to attract several of the largest and most attractive information technology firms in Finland to the project. In the beginning, what kind of expectations did you have for this project network and its co-operation? – B9 – CEO, Access International Oy “I do not know if there were any in that point. In the beginning it was mostly done only for Tampere city, during the first six months there were no organizations involved yet, it was purely kind of adjustment work that we did. In that point there were no organizations there. Later on we started dealing with the organizations. Actually we are in a role of an outside worker of the city; we are like one of the organizations as well. It has been working quite naturally,

124 even though it has required us a lot of integration work and this kind of coordinating, sure it has been a lot of work. But I can not recall thinking about the expectations; we were more concerned about the technological challenges.”

Change in the Role and the Capabilities of the Project Manager Over the course of the phases of the project network the skill set of the project manger needs to evolve. Initially, the conceptual abilities of the individual are critical in identifying the business opportunity and identifying the capacities and resources. As the project begins to become more of an organizational structure with more clearly defined roles, the skill set of the project manager becomes more managerial. This change in role demands a different set of skills and is subject to a reevaluation process by the member firms in the project network. How about the potential of the project nowadays, how do you see it? – B10 – CEO, Access International Oy “Well now we have put “the big gear on”. Of course, we are such a small company that we can not be the only organization in this. Nor can we take the total responsibility about the project; we simply do not have the resources for that. In that point of view, we are out of the game, it is such a huge technological system –project. Surely we are involved in it, but our role will be changing in a certain way. We will be building it in the next phase, but we will no longer be building it with the city, we will kind of move to the other side of the fence. This means that we will be building it with the integrators to the city and not the way that we would be on the city’s side coordinating it. We have in a way jumped to the other side, but in this sense we will surely be involved in the consulting business still for a long time. As a project it surely has a big potential. Actually by doing this we have discovered what a big project this really is. I personally did not have that kind of experience that I could have foreseen, how big a thing this really is.”

125 Laura is changing her role in the cognitive system of the institutional environment. Before the eCard project she was the sole employee in a small company with limited activity. After starting the eCard project she has developed, social capital, intellectual capital, and self confidence. She is not sure about her future role, but she has learned to make sense of her position with a positive outlook. In short, “I have created something big, in combination with the biggest companies in Finland, so I will be attractive for future activities.” –

CEO, Access International Oy

“We have been thinking, what exactly is our role in it. One thing is sure, the customer does not pay for us only for coordinating this work, but on the other hand it has also been proven that projects without a coordinator do not succeed. I think the main point there after all is, who takes the responsibility of the project. They are financially challenging as well. But these are that kind of things that here we are dealing with the utmost questions, how this thing really goes, all the other things compared to that are minor. This network is a fine thing and it is kind of our network, since we were the ones who formed it. Everyone works as cooperation partners nowadays. Finland is a small country, everyone knows each other and as funny as it is, everyone cooperates with each other. You might be dealing with one company here and with another company there, there are actually no strict limits in that sense.”

Project Management vs. Network Management The distinction between project management and network management was made by the entrepreneur. In this case, the entrepreneur understood that her success in building the emergent business network, during the pilot project, was related more to her skill in managing the dynamics of the partner firms in the network and less with her ability to integrate the required technologies. This represents a change in role from focusing on the technological

126 issues of project management to the network issues within the project. Initially, project management focuses more on coordinating roles and capabilities for the project (exploration). Network management focuses more on managing agendas of the project network and the agendas of the individual firms (exploitation). For example, as the project progressed from managing the technology to managing the roles discussed with respect to commercializing the business model, the difference in roles between project management and network management became apparent to Laura. She noticed that initially the project manager needs to be able to coordinate the various capabilities within the project network, so that the pilot processes are successfully completed, (project management).

Later in the

process the managerial skill focused more on coordinating the roles with respect to the business model and the firms’ agendas (network management). The difference in managerial focus is necessary, because during this transition to the business model phase it may become evident to some of the partner firms that they may not be able to participate in the business model. Therefore, the forms of return on investment would be relevant to those more able to commercialize the business model. Personal self-interest Strategy is not limited to the firm. An individual may also have individual strategic interests in the project. For example, the firm’s project coordinator may have different objectives than the publicly stated objectives of the firm. Personal agendas should not at all be underestimated as motivation. At certain points, it may be necessary for the project manager to be able to identify the distinction

127 between the individual representing the firm and the individual representing their own interests. Just because it may be difficult for a firm to behave opportunistically within a project network, does not imply that an individual may not be investing in the emerging project network opportunistically. They may be looking for future opportunities outside their current firm, and emerging opportunities of the project network may represent an exit strategy for the individual from their current firm. Perceptions of Laura’s role It is interesting to note that at the end of the interview, the entrepreneur was also interested in how the partner firms viewed her respective roles within the project network and how her roles might be best described. -CEO, Access International Oy “I would personally like to hear, what these people as organizations think of our role, as we have been acting as this kind of a coordinator in this project. I do not know if you want to or would like to, and of course this is not a part of your study, but I personally wonder about their opinions, if they see a role here for a coordinator-consult like me. We have looked for analogy… as for example in construction business there are builders, who do not necessarily do anything by themselves, but they coordinate and watch that the work gets done. That way it would be interesting to hear from these organizations, how they see the role of AIC here. I have been involved in this personally and I do not think that anyone would really be against me, but if we think of our business and the future, I would really like to know, do they see any role for a coordinator or for a consult in a project like this one. This kind of a network and working as a network, the customers do not see its value, but do the organizations involved see it.” There are different perceptions of Laura’s role from the same company. Each of these perceptions entails different capabilities.

128 Non technical: Financial investments maybe not, but has it been intellectual / social? – E23 –Sales Manager, TietoEnator Oyj “I think less this intellectual. The intellectual side has been coming through these network members, so maybe it has been more the social side then.” Determining the goals and objectives: The cooperation has been going smooth, all organizations have had common visions or have there been any conflicts or differences in points of view? – E33 –Sales Manager, TietoEnator Oyj “At least I do not know about any conflicts. We deliverers are not the ones anyway, who are putting up the goals that comes from the customer. In that way Laura has been in control, the aims and wishes what there has been, have been coming to us through Laura.” A spider: Then we get to the role of Laura Aho in this network, how do you see her role? – E34 –Sales Manager, TietoEnator Oyj “That is the spider, the net maker. So far that is how it has been, although I do not know which way it is developing now. I guess that is one of the issues they are discussing tomorrow. But she has been exactly this kind of a coordinator and that has been her task as well.” Working in a network needs this kind of a central person? – E35 “Yes. The City of Tampere has specifically bought these coordinating services from Laura and that has been her task, even if there were no network at all. However, this network has been quite a virtual one.” The conflicting perceptions of the project manager’s role are partially tied to the conflicted agendas of the individual. Laura is tied to the role of project manager, and even though she has learned the technological lexicon, she is not technically adept. Even though she

129 has set the aims of the project, she is reflecting the City’s requests. Even though she has created the business model, she is not the entrepreneur. She is Laura, the project manager, with ambiguous capabilities. In the eCard case, the various perceptions of Laura shift with respect to her capabilities. Laura is selling a vision of the future, through ambitious

agendas and

PowerPoint

slides.

Representing capacities is different than maturity of experience grown from having brought a new product to market. In the case, straddling between the role of a consultant project manager, focusing on developing the product development effort and the role of being an entrepreneur participating in the commercialization of a business model is difficult for Laura. It is entirely possible that the project network will outgrow the network capabilities of the entrepreneur. How about the project network, if you think about its potential, does it have a clear future in this kind of a project or is this a new way of doing things for you? – B13 – CEO, Access International Oy “This is the way most of these kinds of projects are done, meaning that different organizations make different parts. It is very common and even juridical companies have been formed like this as a network. It is challenging and inspiring and this is how it should be done, everyone can concentrate on those things that one knows the best. Sure there are challenges. It is a precondition that one can work like this, nowadays everyone does things like this. The challenge is that from the customer’s point of view, the customer needs someone who takes responsibility that the things will work. Think about a situation, where every organization delivers something and nobody takes responsibility about the result, when you combine five peaces, what will it become? The customer does not know how to do it, someone needs to look after that things work, and someone needs to be responsible. The customer does not want to do that. These are the kind of challenges in working with a network, I must say, it has been mostly our role to be dealing with the network management.”

130 Business risk and the ability to participate In the case, as the eCard project grows it becomes more of a management issue for Laura and less of a sensemaking or visioning issue. Creating the emerging business model also creates traditional forms of business risk. These business risks may be better allocated to the larger partner firms. In the case, the partner firms may have had years of experience in related areas, so this would be a project or service extension and have limited or incremental risk. These larger firms have the financial ability to protect themselves from financial and legal liability. For AIC, a small micro firm, these increased forms of business risk may be more substantial than AIC can manage. The larger firms are aware of this limitation for AIC to participate in the commercialization efforts.11 Because of this ambiguity in the future role of the micro firm, the product development phase, the new business model phase, and the commercialization phase, may be limited to the larger firms that have the resources to participate in the future development efforts.

Theoretical note: This brings up a theoretical point raised earlier in the study. If the Coleman view of social capital is valid in this case, then the larger firms would need to recognize Laura’s changing social capital in the institutional environment and shelter Laura from the expense of the increased business risk and ensure that she has a valid role in the commercialization process so that she can share in the economic rents of the technical environment. These larger firms would need to decide to absorb the business risk for AIC as micro firm. 11

If the firms do not choose to include AIC in the commercialization process, then Laura may have been better off economically by brokering the opportunity to participate in the emerging business opportunity, according to Burt’s view of an approach to gaining economic rents through informational efficiencies. In the eCard case, it is not clear that Laura would have been able to broker economic rents using Burt’s view of informational efficiencies approach. Given her limited prior resources and capabilities with respect to this specific emergent business opportunity, it may have been difficult for Laura to attract the necessary investments of resources and capabilities. But at least theoretically she might have made the choice to attempt to build the project network by brokering resources and capabilities to build the emergent business model.

131 The larger firms may be more able to create the emerging business model than the micro firm, even if the micro firm created the initial business model. The emerging concepts from the exploratory processes of the project network are being structured into a functioning business model with product and services that may require incremental investments beyond the means of a micro firm. This would be similar to recognizing a good investment opportunity and having the ability to make the necessary investment. The emerging business model may be able to be sold forward as an entity or it may be able to be divided up and developed independently. There is no assurance that because the emerging business model is conceptually developed with particular roles in mind, that these roles will both materialize and/or

be able to

participate in the commercialization phase of the business model. –

CEO, Access International Oy

“It has been under control, but now the next step, where we are starting to talk about such big things, the technical work there, building the systems and so on, for doing that we do not have the knowledge or the resources to define, what all it could be. We will definitely be a part of it and will be able to describe it in a general level, this is how this goes and this is how the different systems will work together. But the main responsibility of the project will surely change our role in it.”

Paradox of project management Generally, it is a fairly common practice for a project manager to not fully bill the hours necessary to run the project. Omitting their time makes the project look more profitable because there were fewer hours eating the budget. In project management, the client is not always aware of the problems. In fact, it increases the reputation of the project manager if the client and the other firms are not

132 aware of the problems, because the traditional view of project management literature focuses on efficiently running a project as a good indicator of the project manager’s abilities (Wickenberg, 2004). Good management requires that everything go smoothly. In order to accomplish this, most difficult situations are handled before the meeting, so the difficulty does not get addressed in an open forum. The issues must be handled discreetly, and the lobbing happens prior to the meeting, not in the meeting. –

CEO, Access International Oy

“In a certain way that is also challenging, who shall pay for it? It is not visible work that we are managing this kind of a network, or at least the customer does not see it. Of course, we are not able to add it into our working hours like “network management” or “coordinating between all the organizations”. That is how it is. You just need to sort of hide it somewhere within project management.” In the case, effectively managing the image of the project in the cognitive system of the institutional environment triggers the paradox

of project

management

and

has

direct

financial

consequences for AIC in the technical environment. It should be remembered that AIC had no other source of revenue, and during the course of managing the project Laura was not billing sufficient hours. If the project manager manages the image of the project to the extent that their own fees are not covering the expenses of their firm, they run the risk of extending the paradox of project management (Wickenberg, 2004) into bankruptcy. Working alone as an entrepreneur is another area of consideration. An entrepreneurial venture is usually fairly demanding of the entrepreneurs’ time and energy. In this case, because there are no other sources of income, the entrepreneur is in a very difficult position. The entrepreneur can not bring in someone to help,

133 because the current form of the business model is not yet generating sufficient cash flow. Could you give some examples, what kind of investments you have made? Your know-how is one, but what kind of know-how has it been? – B15 –CEO, Access International Oy “That is very hard to say. I do not think that any of these organizations involved with the project have been able to make a big profit; the whole thing has been more like ‘let’s show them’. Since we have been talking about these things so much here, electrical transactions and so on, then we just wanted to make it and show that it works and that it is possible to make it work. This has not really been a profitable business for anyone. Of course, for a small company it is even more challenging as there are no other resources to cover for the profits needed. In that sense, this has gone a lot to the product development side.” In summary, a larger firm may be able to incur the losses from a project as part of their project portfolio, but a micro firm can not incur the same type of expenses and still remain solvent. 4.7.5

Critical findings from the study about social value creation for the entrepreneur

It is important that the other firms accept the project manager’s dual role as an entrepreneur as part of the business model agenda. If the firms do not accept Laura’s role in the business model, then Laura may have increased her social capital as a project manager in the institutional environment, but not have increased her social capital as an entrepreneur in the technical environment. Laura is trying to find a balance between the role of project manager and the role to being an entrepreneur. Her main responsibilities as the project manager will change when the pilot phase terminates. If the City of Tampere decides to invest in developing a business model, they will invest further. If the City of Tampere does not go

134 beyond the pilot phase of the eCard, then there is no need for a project manager. Because the City’s intentions are not clear, Laura’s future role is also unclear. For example, is she going to be able to create a clear value added role for developing the business model and the subsequent commercialization efforts or not? If not, how and where can she exchange what she perceives as an increase in both intellectual and social capital? She will need to test the efficiency of her social capital in an institutional environment in order to benefit financially in the technical environment. Laura has invested a lot of time and energy in this project with an expectation that it will develop into something big for her. It should be remembered, at the time of the interviews, Laura is waiting to find out if the project will be approved by the City of Tampere to proceed to the product development phase. Currently, during the potential transition from the pilot phase to the product development phase, she believes that she has increased her social and intellectual capital, but neither of the forms of capital has been tested outside of her role as the project manager for the eCard project. Once Laura steps away from her official role as the project manager and representative of the client, her role in the cognitive network will be subject to acceptance of the other individuals and their firms in the institutional environment. Has she actually increased her perceived value in the cognitive system and institutional environment? In summary, the network capabilities of the project manager during the pilot phase of this study, focused on the coordination of information and processes to deliver the project. Her ability to align the capabilities and resources were directly supported by her previous investments in her relationships to the other actors. Her personal and professional reputation was subject to others actors’

135 perceptions which, in turn, directly affected the other actors’ behavior towards the project manager and the project. The network capabilities of the project manager were reflected in changes in her social capital in the cognitive systems. 4.8 Discussion of the potential product development phase The interviews were conducted during the transition between the pilot phase and the product development phase, so the actors’ expectations are related to the how the actors perceived the future with respect to the product development phase, the new business model phase and the commercialization phase. These phases are all related to future expectations and can only be described and analyzed through these perceptions because the project was never approved by the client to proceed to the product development phase. Therefore, the analysis of the case material must be handled through the descriptive narratives of the expectations and not through the structure of the preliminary conceptual framework, focusing on network capital and network capabilities as activities, for these remaining three phases. These phases are discussed in the case material as expectation and remain relevant to the analysis of the case. The specific firm’s ability to commercialize this business model is tied to their role through the model and is discussed and understood through the actors’ perceptions and their understanding of potential future roles of the other actors in the emerging business model. During the product development phase the project network is focusing on developing the potential products and service delivery platforms. These potential products and service delivery platforms are organized as an alignment of the accumulated resources and

136 capabilities. These processes imply that the members of the project network have clear roles to ensure their future interests. 4.8.1

Network capital

During the product development phase of a project network, the firms are modifying their roles and capabilities with respect to the future expectations of the potential of the future emerging business model phase. During the pilot phase the firms are learning about their roles for the future, new business model. Based on how they interpret the signals of their future role, the firms may enact their behavior differently in the project. The firm’s expectations when assessing an opportunity of a specific project, is directly related to their capability to understand the signals in the cognitive system. If the firm does not have sufficient network capabilities to parse the cognitive systems, they may not appreciate that they might need to invest differently in the current project to gain the requisite experience for the next opportunities. In the study, several firms understood the project was attempting to create an emergent business opportunity. The partner firms would be evaluating each other as participants in an emerging business network yet these particular firms did not feel the project should be managed as anything more than a contractual relationship. They did not expect the emergent business model, comprised of the relationships established during the eCard project network, to extend beyond the scope of the original project. By not investing in the current project network, these firms may have closed either a technical door in terms of learning or a relationship door in terms of the other actors’ willingness to work with them on future projects.

137 Intellectual capital In this study, investment in intellectual capital played a very strong role in the internal sensemaking process of some of the firms entering into the project network. These firms understood even if they were not making any money on this project, they were able to benefit through opportunities for learning.

These learning

opportunities needed to fit with the core competencies of the current business model of the firms. The future business development synergies for the firms were reflected in their understanding of the potential of the complimentary services or product extensions for future business. The eCard project was a strategic investment in learning by these firms. Social capital During the product development phase of a project network, the accumulation of social capital focuses on building mutual attraction and shared expectations. During this phase, the firms are learning which individuals are effective. The attention of individuals is shifting from the potential capacities to effective capabilities with respect to the other individuals in their cognitive maps. Unilateral investments were assumed to be necessary for the micro firm in the preliminary conceptual framework. However, in this study, a larger firm also made unilateral investments. In order to gain experience in a new sector and to establish communications with the sector; TeliaSonera felt investment in the eCard made strategic sense. For TeliaSonera, there were two clear expectations for investing in the eCard project. First, they wanted to learn about connecting the public and private sector services. Second, they wanted to understand the new business model of mobile electronic transactions in an open platform.

138 How about the social capital returns, do you see any utilization for it? You are a large company, so I suppose you have had plenty of connections already? - E20 – Director Business Development, TeliaSonera “Even though it may be more difficult for a large company to benefit from these kinds of less formal networks, I still think it has been useful. … I think I would still say that the social capital is the most important, because now we have taken part into the public sector’s solutions. The situation originally started with the Population Register Center’s, or the citizens’ certificate’s exclusive rights in public sector and what has happened is that here we have the first remarkable project where a card with a great potential – because it has been build around the travel card, 150,000 pieces – and its services have been created, this sure is the greatest return of all. So in this relation, the social return - here we are involved with the dialogue, which is building on the public sector. As was mentioned, the technical side here is in the other end of importance, because we already had the commercial readiness to deliver. And in the middle I would put the financial side, or this kind of a business model, from that we have gained more knowledge. So first comes social, then financial – and as a financial value especially this business model, not that much the money – and last the technical side. What I could add here is that the opportunity of this kind of a project lies with the fact that the technology had to be ready, meaning that here we have not been able to do testing that much anymore.”

Individual vs. collective An interesting issue that emerges when looking at the empirical data was how some firms operating in a small network chose to remain isolated or relatively more removed from the network interaction. This was counter to the theoretical assumption of Watt (1999) that small networks were denser and would consequently promote better communication. Some of the firms understood that the investments in social capital were important, but they were not directly pursuing these investment opportunities for the firm.

139 For example, Pulsatec took a more passive view to investing in social capital or signaling in the cognitive system. Pulsatec was generally aware of the other firms in the project, and had a positive opinion of working with these other firms, but was not actively trying to develop relationships with other firms. Even though Pulsatec understood that a previous relationship would lead to future projects because it “it is always easier to offer something together or to build the cooperation or to search for a subcontractor, if you know each other already”, they preferred to let the project manager handle the communication in the project. In these cases, the interaction between the partner firms was in fact limited to the project manager. Then about the cooperation within the network, how has it been going? – E31 –Sales Manager, TietoEnator Oyj It has been going alright, as we have not seen them that often, ha-ha… There is nothing bad to say. We are willing to use any of the organizations in this network, if it only fits with our deliveries. And surely it is always easier to offer something together or to build the cooperation or to search for a subcontractor, if you know each other already.

Financial capital During the product development phase of a project network, the accumulation of financial capital is related to the future potential business model and the associated roles. In some cases, the product development phase will generate positive cash flow. It was expected that during the product development phase, that there was more likely to be a requirement for additional opportunity cost investments. Additionally, during the product development phase of a project network there may be the need to look outside the project for additional financial capital investments.

140 As expected, within the scope of the research period, there was not sufficient revenue generated to pay for the product development costs of the business model. Financial return is generally understood to be the most important form of return for the firm: however, in the eCard pilot project it was not possible to invoice for all of the development costs. By reading the following narrative from the interview of the Chief Executive of Pulsatec, the reader can see the firm is clearly aware of the need for financial results. However, in the eCard case, the firm covered some direct equipment costs, but they have not been able to invoice for the development expenses. Pulsatec is clearly investing in learning because they see that as the business model becomes viable as a functioning system, there are wide future possibilities. -Chief Executive, Pulsatec Oy “But if a city pilot project like this expands to be city-wide, then there will be a lot of financial interests for many companies. That is why this is so interesting. But it is not possible to estimate the figures. And also, as we are just one of the organizations and we deliver a part of the systems – it is an open system, free for competition – that only creates possibilities.” Now it is a bit difficult to ask, how do you see the potential of the project network nowadays, as you have had no contact at all during the last six months, but what kind of an image did you get from it? – D20 The idea is good. Now of course it requires that someone needs to push it and change it into a concrete project and in some point it should, at least from a point of view of a commercial business, turn into money. It is the only reason why we are involved.”

141 Then about the investments that Pulsatec has made in this project, have they been financial, intellectual or social or all of them? – D2112 “I think it must have been all of them. During the first year that the project was running, or actually even nowadays, we have been concentrating on product development. We have made devices, demos, taken part in those presentation seminars, all on our own costs. And then this product development that we have been doing, their implementations, accomplishments, those we have never been able to invoice, it has been on our own expenses. The delivered devices we have invoiced.” So which one of these three investment types has been the main one? – D22 “It has been this product development.” Meaning that it has mainly been the know-how? – D23 “Yes.” Then about the expected returns on investment, what type of returns do you expect? Again these same three types, financial, intellectual and/or social – D28 “Of course this financial side is the first and the most important one for a company. Sure if intellectual side is received and social contacts are made, they are also a benefit for us and (I am) sure there will be both of them. But the financial side is the one where we are aiming at.” Do you have any figures or examples to give? – D29 “These are very hard to estimate, but if a city pilot project like this expands to be city-wide, then there will be a lot of financial interests for many companies. That is why this is so interesting. But it is not possible to estimate the figures. And also, as we are just one of the organizations and we deliver a part of the systems – it is an open system, free for competition – that only creates possibilities.”

It is understood that the direct style of questioning around the three dimensions of network capital has been perhaps too direct with respect to methodology. The researcher accepts responsibility for this mistake. 12

142 4.8.2

Network capabilities are constrained by the context which embeds the project

With respect to delivering a project, it should be remembered that a project is embedded in a context. The context may influence the project. For example, it should not be assumed that because certain individuals representing the City have requested the project, that all of the City personnel or the members of the community support the project. The levels of embeddedness and the individuals’ intentions in the larger systems that embed the project can influence the project. These influences can be very problematic for the project manager and his or her ability to deliver the project. The City contracted with Laura and the eCard network to deliver the project through the pilot phase. The eCard network would like to develop the project further; however, this commitment is directly contingent on approval from the City of Tampere. How about this project, are the expectations mostly directed to Tampere or to the fact that this could also be sold to other regions? – E40 –Sales Manager, TietoEnator Oyj It would surely be a good thing, if it could be spread into other regions as well. But it is clear that this needs to be developed in Tampere, it can not stay as it is now, it has to have a remarkable amount of different services in it within the next two, three years. Otherwise it will die and then all the investments made for it will be for nothing. But I do not see that kind of a possibility, unless there will be a conscious decision made that from now on this will no longer be developed. There has been that kind of opinions from Tampere as well that everybody is not exactly totally unconditionally behind this project. But it seems like the city’s management is at least at the moment. Then about the expectations of this project and project network, what kind of hopes, wishes, and expectations does TeliaSonera have? – A27 – Director Business Development, TeliaSonera

143 “Of course there are hopes and interest and we do want to be part of the project in the future as well. The challenges still exist, especially how we are able to produce the services and solutions. Could I say, even a bigger challenge and aim is that how some other organizations than the city itself can benefit from it. Here, I believe, one should be a bit more brave, have less fear for the formality and encourage on it, because it is clear that the city has its hands full of work with its own processes, development projects and they also do not have the kind of resources… They are having big changes right now what concerns information network center … Somehow one would expect that one would actively search for these other, could I say third sector13 or why not also the private sector SME (small and medium sized enterprises) entrepreneurs, who would then aim for benefiting from this card. Now in one way many of the easy and self-evident solutions have been carried out, but then for the potential ones and the ones which would be new in this theme, more concentration is needed. Maybe also because the city quite understandably has not got the kind of financial and maybe other possibilities to carry out all these experiments as priorities in this short time period - it is long-range activity- the more important it is to look for the application objects from the outside, who really are able to benefit from it.” The City of Tampere never approved the eCard project to go beyond the pilot phase. 4.9 Discussion of the potential new business model phase Evaluating the value of a new business model is a complex process for the firm. Initially, perceiving value may be described through several components representing value. It should be remembered the project did not actually progress beyond the pilot phase, so the discussion is analyzed through expectations and perceptions. The first component focuses on the level of strategic fit with the firm’s The third sector would represent a public/private form of inter-organizational structure. 13

144 long term strategy. How each firm evaluates the project is relative to the firms’ previous expectations, current expectation and the firms’ internal criteria for evaluating projects in their project portfolio. The project portfolio is optimized according to the firms’ long-term strategy (Turnbull, 1990). It should be remembered, the project results may not be the same as originally envisioned by the firm. Also, the firm’s role in the business model will affect the commercial value of participation. If the firm was attempting to extend is product or service area by participating in the project, and the firm’s intentions are not achieved with respect to their ability to extend their business capabilities, then there may be an adverse effect on the firm’s evaluation of the project. In this study, regardless of the strategic intentions of the individual firms, the accumulation of intellectual capital occurred at both the firm level and at the aggregate level of the project network as the partner firms combine new forms of knowledge. In the case, there were both intentional and unintentional tradeoffs in network capital that was not strategically identified by the firms prior to investing in the project network. These tradeoffs have revolved around issues of the level of functionality of the system and the potential value of a system and the project as a commercial reference. 4.9.1

Scope and functionality

The initial scope of the project would define the aims of the level of functionality. The level of functionality represents the functional level of the system as a goal. For example: how complete is the system for sale, how developed is the user interface, how seamlessly does the program work; and, how secure is the data? The relevant questions to completing a project would need to specify the functionality and the scope of the requirements for the various resources and capabilities for the actors. For example, the level of

145 functionality in a project’s scope might be a pilot business model that needs more substantial development, a prototype of a business model that may require some incremental investment prior to commercialization, a customizable product or service that can be adapted to client’s requirements, or a standard product or service that is ready for commercial exploitation. The resulting level of functionality is going to be compared against the expectation outlined in the scope of the project. Functionality is important as a criterion during the evaluation process because it can offset the overall evaluation of the project network. An actor can feel that the network dynamics went well, the actors have the capabilities to complete the emerging business model, but the emerging business model is not complete with respect to functionality. If the firms were expecting one level of functionality and the results of the project were evaluated at a lower level, then the expectations for the project would not have been met. For example, Pulsatec does not feel eCard is a fully functional system ready for commercialization. Pulsatec favorably evaluated the communications between the firms and the partner firms involved in the eCard project. However, a positive evaluation of the members and the communications is not the same as a positive evaluation of the project results. As with most forms of evaluation, various criteria can be positive and the overall evaluation can still be negative. The relative forms of evaluations for the firms should be attributed to specific criteria. According to Pulsatec, their evaluation of the current business model is that it is not ready for other applications. So far, the eCard project remains a pilot project and requires further product development. According to Pulsatec, it may be possible to sell the concept, but currently, the eCard business model is not a functioning system. A functioning

146 system

requires

a

complete

business

model

ready

for

commercialization and they feel the eCard system was sold on the basis of hype, so the eCard project has not delivered what was promised. –

Chief Executive, Pulsatec Oy

In the eTampere card project it has been discussed too that this concept can be sold to other cities. Do you have any expectations concerning that, expanding possibilities? - D36 Not really, not before Tampere is in that condition that is functionally ready and as a project too. There has to be something new and concrete before it is possible to expand easily or to be sold. I think that in this point it is not that far yet. But what practice shows, the most amazing projects have been sold though. So it requires a lot more time or do you find that the concept itself is that kind that it is not a good idea to sell it forward? – D37 “There is nothing wrong with the concept, but it takes time and very good references, before it can be sold.” With references you mean what? – D38 “A functioning system, these kinds of attempts has been made all over the world, several of them in Finland as well, which have then never started rolling as was expected.” How has the cooperation been working within the network? –D39 “There have been no problems at all; the discussion has been very open. All the parties in it have been good. I do not see that there have been any problems.” Have you been involved a lot with the other organizations? – D40 “Yes we have. Most of them or actually all of them have already been familiar to us. And I find that they are the best in business in Finland.” The atmosphere has been that you have found the common aims and goals and there have been no conflicts or disagreements? – D41 “No, there has not.” So you have no negative things to say about this? – D42 “We have had good members in this project.”

147 What kinds of expectations do you have for this project and the network from now on? – D46 “The expectations have not been that high during the last few months, but sure you always hope that the project would be fulfilled so far that we could be a part of that project and that the deliveries would take shape after this pilot phase. This network itself is very interesting, because if you have a reference, meaning a functioning, good model city, where good services and benefits for this kind of a system have been accomplished, then it is quite simply possible through this kind of a network to take it to other places. It sure has a lot of ideas in it. What the network really means is hard to say. Sure with it we are able to show entities to the next users, it is easier for them that they get entities. What we are able to show that we are offering entities. What has been happening lately is that these few city projects that have been done in Finland in this field, there has been one deliverer, who delivers only some smart card know-how or only the functions of the card, but that is still far from a whole system, since there are so many different parts in a system and all of them need to be accomplished and planned so that it works. The network thinking supports the possibility that it turns into a service, I mean that know-how accomplished on an eCard. If the service does not ease the users, or concretely that what the user gets, then it never ends up in the hands of the customer. That is the point where it should be started to develop... Technology and everything above it, it is very simple; there are no wonders.” The conflict in functionality is tied to the relative expectations of the actor. For example, one of the eCard project goals was creating an open platform electronic community of services including resources from both the public and private sectors. By creating an electronic platform as an open system, the entire system would be developed by and be available to all of the actors. If components of the system were not completed, it would undermine the success of the entire project and affect the level of functionality of the business model. The reduction in functionality would affect the value of the

148 business model as the firms evaluated if and how to commercialize the business model. The more services that are integrated at a higher level of functionality in the business model, then, by implication, the higher potential commercial value. -

Director Business Development, TeliaSonera

“But what comes to challenges, (currently there) are too many things tied (together) to be produced for one card… Surely it was not a surprise for many members, but disappointments in one way that the readiness’s to utilize the card were not quite equivalent. It is understandable, when the information system was started to develop in the same time, the time quickly goes by. As a whole, the objective that the information system that enables the services would have been completed in the same time was challenging, but not everyone quite honestly believed in it. I do not know about the city’s objectives about it. The main thing about it was that the largest usage areas, meaning traveling and small payments were possible to use on the spot, so it has not been a wasted project. But those more interesting things to us, matters utilizing the certificate side, with those we would have been glad to work on even more. It has seemed to be left a bit aside.” For TeliaSonera, investment in the pilot phase was made with the strategic intent that as the eCard project scope unfolded, they would learn about other potential commercial sectors. If these other areas never materialize, then the investment and the rate of return will be affected with respect to the firm’s agenda and strategy. Different levels of investment in the project would indicate that not all of the firms shared the same view of the eCard project with respect to their priorities. There may have been strategic differences for the firms and how they contributed to the project. However, the level of contribution to the project was clearly being evaluated by the other firms and lower levels of contribution may have an affect on the level of attractiveness in future projects.

149 It should be remembered that the value of the current project is reflected in the cognitive system and the market, but the potential value of this project is also reflected in the level of attraction for future projects. Not all returns for value creation are given in the current period. For example, serial projects would be perceived as an increase in value during future periods. Doing a job well or investing in the current project is a form of investment to be included in future projects. This perspective may be helpful in attempting to reposition the agendas and the actors’ perspectives by the project manager. Different levels of commitment with respect to the level of investment in the project would say that not all of the firms viewed this project as strategically significant in their prioritization of future business development opportunities. This observation indicates that the firms that may have viewed this project simply as a contractual relationship and less of a strategic move to establish emergent business opportunities and would not have made the same level of intellectual contribution or intellectual investment for future returns on these investments. The level of investment of partner firms is clearly being evaluated by the other partner firms. Lower levels of participation reduce the level of attractiveness or negatively influence the evaluation of the other firm. It should be remembered the reference value from a project does not only come from the client, but also from the partner firms, in the cognitive systems and the marketplace. 4.9.2

Value of reference

Another influence in how a firm is going to evaluate a project is the reference value of the project. In this study, the reference value is

150 the value of a client reference with respect to developing future business. A positive reference value implies that the firm can identify opportunities to utilize the reference in business. The positive reference could be used to support a competitive bid for future projects. A reference would be subject to how directly applicable it might be in supporting the competitive bid. In general, positive references tend to be cumulative with respect to winning future competitive bids. The more directly related experience a firm can accumulate, the more attractive a firm would be in the market. This accumulation of positive references leading to new business represents a positive trajectory of a firm. Conversely, a negative reference value for a project would imply the firm is unable to gain support from the previous reference in wining future business in the market. Additionally, a firm may not be able to use a reference because the reference is inappropriate for the future business opportunities. The value of a reference is tied to the context and the type of system the reference was completed in. The reference value is tied to the other actors within the cognitive system through both strong and weak ties. 4.9.3

National attention increases perceived value and risk for the project manager and the project network

In Finland, Tampere is considered a high-technology community. The eTampere Smart Card project was used as an example of a positive outcome from the eTampere project. If the project gained national attention, then the partner firms, the City of Tampere, and the project manager would all potentially achieve an increase in social capital.

151 If these firms were able to deliver the regional eCard at a national level, it would further increase their social and intellectual capital at a higher level of attention in a higher abstraction of a system. The increase in social and intellectual capital should theoretically produce larger opportunities for projects, and by implication, larger potential levels of financial returns. Now that you have been a member of this project for a longer time, how does the potential of the project look like? –A6 – Director Business Development, TeliaSonera “Well, this project has already gained even national attention, of course as a part of eTampere –project, but in its extent this card project has been very positive and it has a lot of elements that create possibilities. Here, no nationwide models have been tried to be created, instead it has been recognized that the needs and utilization objects are regional.” In the case, it was the project manager’s perception that national attention represented very positive public relations for the firms, the City of Tampere, and herself. She understood that by changing the level of attention from a regional level to a national level, the members of the eCard pilot project had gained an increase in social capital. She understood that there was no current national system of electronically linked communities between public and private services. A project extending the scope of the pilot project on a regional level to a fully functional business model on the national level represented a dramatic potential increase in intellectual capital, social capital, and financial capital for the firms and herself. She understood her project management skills would be accepted as efficient. She also understood that if by aligning with her the City of Tampere loses social capital at a national level, it is very unlikely that another public administration would take a chance and hire her as a project manager.

152 Creating a commercial business model could be viewed as risky for the public administration of Tampere in the larger system of public administrators, and by implication it can be viewed as risky for the project manager. As a project manager, Laura’s social capital is tied to her ability to deliver projects. Specifically, her social capital is tied to the completion of the eCard pilot project for the City of Tampere. If she delivers the project, she will potentially gain an increase in social capital as a project manager at the local level with respect to the City of Tampere and her ability to deliver projects in the Tampere region. If she delivers the project, she will potentially gain an increase in social capital as a project manager at the national level because of her ability to deliver projects for a public administration. Failure to deliver the project would result in a decrease in her social capital at all of those same levels. The accumulation in social capital is tied to the person in a context and a type of system (Nahapiet and Ghoshal, 1998). This social capital can not be transferred readily to another person or type of system, but the perceptions of the social capital can be transferred to another environment or system. Then we get to the return on investment –expectations, what types of returns do you expect, will it be only financial or intellectual and social as well? - B17 – CEO, Access International Oy If we consider the time invested in the project here in Tampere and what we have been able to charge, we will surely stay on minus. It has been more like a paid field for training for us. Of course, we have been working seriously and we can not afford to fail this, since it is a vital reference for us. The reference value is in that way irrecoverable; especially on the public sector’s side references are absolutely vital. The challenge is that this kind of a consulting business is likely to be personified. That, what I have been doing here, how to transform it into knowledge or into that kind of a wholeness that someone else is able to do it somewhere else in some other market.” The most important thing in these different returns –types is…? – B19

153 “This is such a big reference value for us, so that we will be able to make money with the next case, and then we will be able to do better pricing. Now we have the knowledge and we have shown that we are able to make a project like this and then the price can also be totally different than what it is now. On the other hand, if we sometime will start doing technological development, then we can see that we have a few cases running. Then we can start considering ourselves, how to be able to bring consultation even further. Then we might have more changes as a technology based organization. But at the moment, at least with these resources, we do not have the possibility as I work here alone.” In this study, the City of Tampere’s public administration is also embedded in a larger system of other public administrations in Finland. With respect to this larger system of public administrations in Finland, references are more critical than in the private sector. A failure in the private sector may be accepted as bad chemistry between the firms or conflict between the firms. Failure in the public sector means the community did not get what it paid for. It is bad publicity for the people involved in the public sector whose job it is to ensure the public interest is represented. In the case, if the project manager is unable to deliver the project, it can reflect negatively on the project manager’s social capital. The project’s failure can also affect the public administration’s social capital both within the region, but also within the larger system of public administrators in Finland. This project has gained national and international attention? – B29 – CEO, Access International Oy “Yes, that has been a good thing. I do not know why it is every time with the public administration so that they are not only doing business, but there are always these political and individual interfaces… It is never that simple that you just sell something and they buy it, but after buying they start to think what they just bought and if they even need it. Well, you get used to it that there are many layers to deal with. In a way it is interesting, but I think they are lacking the

154 courage to do this kind of new things, or then they want to do these e-services in some other way. But let us see, I am very hopeful and committed to this project.” “Mostly the city itself was trying to work for that. There, a bit more concentration would have been needed. Still, one has to remember that here we are dealing with the public sector and there things happen a bit differently.” – Director Business Development, TeliaSonera I suppose here is also a dream - if we consider the national level and other cities, who could become a part of this project - which this concept could be sold forward? – A28 – Director Business Development, TeliaSonera “Let us say, in my opinion it is more important that we gladly offer these certificates, but especially those services and operation models, which benefit from them. It is still a service business that is remarkable here. We believe in it that not everyone should start building these technical environments – and not even those services that benefit from them – because it is very valuable and requires a lot of new kind of skills and therefore it becomes very slow. Tampere is the size of a city that if it wants, it is able to concentrate on this kind of technical development. But here we believe we have been able to deliver quite quickly to smaller cities and municipalities this kind of solutions, services, solutions for electrical transactions. These certificates and this kind of intelligence cards or PKI’s people will surely have a lot. There will be national ones, there will be electronic identifications of a person, there can be this kind of regional (Tampere) ones, there can be a football team, and there can be a lot of things… Employers’, banks’… what ever the kind of organizations there are. It will not necessarily be solely this kind of a card, especially a fixed card as everyone knows the problems with the reading device that will not be the essential part. Maybe the essential part here has been the thought and idea that an entity related to electrical transactions, payments and transactions in a regional level has been created. Then the technical implementation, there may be and there will be many of them. Of course, it may be that this kind of a card like eTampere Card will be developed as a virtual card and I

155 believe that Laura & co. have been considering it in some cases. So it may be that eTampere Card will be partly in a mobile phone, partly in a fixed card. But maybe those services, service models – we like to talk nowadays, as many other as well, about user-basis– have the card services really been well enough considered from the point of view of individual, different users. Now what has been done is that the city’s organization’s and other organizations’ possibilities to benefit from this card have been strongly searched, but who in the first place was the real user of the card. If I sum up here a bit, maybe this kind of a card is not able to be duplicated as one-on-one, but the conception model and the way of carrying out these services – there one could find elements to be duplicated, which of course is for us, as for many other commercial quarters as well, essential.” Conceptually, the more services that can be shown to work effectively on the electronic backbone of the eCard, the stronger are the perceived possibilities of the application. When selling the business model forward, it is much easier to show that these types of service applications have been included. From the viewpoint that the community has realized benefits from utilizing the service platform indicates to other administrators that they may also find value in creating regional loyalty card programs. By coordinating the development of these regional loyalty programs as electronic platforms, there is potential to electronically link these regional communities into a national electronic backbone. The adoption curve of the business model would indicate ongoing interest in creating regional or national loyalty electronic communities. This would represent one approach for the project manager and the firms involved in the project to exploiting the intellectual and social capital. The public administration in Tampere would also have an increase in social capital as the reference case for the other public administrators in Finland.

156 The eCard loyalty pilot program for the City of Tampere was conceptualized to be an open electronic system. The boundaries of this open electronic system had the conceptually ability to be extended by integrating new services into the electronic backbone. Theoretically, because the eCard electronic system was an open platform, it is entirely possible that emergent services or applications would be designed to utilize the electronic management protocols. If other new services were not created and integrated, then the open electronic system would not evolve and it would become a closed system. The evolution of the electronic system requires the ongoing commitment of resources and capabilities to develop and integrate new products and services from the local firms. These incremental resources and capabilities are tied to perceptions about the pilot project and the firms’ perceptions both internal to the pilot project. These perceptions also extend to the firms that are embedded in the local context, but are not part of the original project network. If Tampere should officially shut down the project after the pilot phase, then it would preclude further development. This point raises the question of the client’s role. Because this is only a pilot project, the firms would need to decide if they were willing to develop the commercial applications independently of the relationship with the City of Tampere. This decision would be subject to their individual commitment to learning from the ongoing development as well as their perceptions of the other firms. However, if the client is not clearly behind the project or provides conflicting signals about the project to either the partner firms or the larger institutional environment, it could undermine the commitment of other firms to continue with the development of the project. Firms will feel uncomfortable being associated with a project that has a mixed reputation or worse a negative one.

157 Negative signaling could have a detrimental influence on the social capital of the project manager, the firms, and the City of Tampere in the larger system of public administrators. Negative signaling from the City of Tampere could represent the project’s failure. This would be a failure for the City of Tampere, by committing public funds to something that did not work; failure for the firms for not developing a working, fully integrated electronic transaction system; and failure for the project manager. Failure of the project is a shared failure with respect to social capital the larger system. 4.10

Discussion of the potential

commercialization phase The eCard concept of an open platform electronic community can be transferred to other delivery platforms. In this study, the current eCard business model is a base concept that can be modified and extended through market segmentation and changing firms’ roles firms during the commercialization process. The business model was developed to access the public sector; however, the new business model also represents commercial value in the private sector. In the case, it was possible for firms to enter into the commercialization process later. The business model represents a conceptual base that can be modified, extended and redirected according to the capacities of the firms and the level of development of the technology. The project has resulted in the opportunity to learn about the new business model. The new business model has potential commercial value for specific roles identified over the course of the eCard project.

158 Serial projects are a means of extending the relationships initially explored during the project network.14 These relationships are evaluated for their attractiveness, based on the perceptions and capacities of the firms in the current project network. Because of the current limitation of the fixed card readers and the mobile environment, adapting the business model to include a mobile phone would reduce one of the technical limitations. Technical limitations of the physical card reduce the amount and the forms of electronic data that can be economically handled, segregated and validated securely over the electronic backbone. By changing the delivery platform from an eCard to a mobile phone, more possible solutions can be supported. In the case, the forms of technology and the limits of that technology were understood. The partner firms were aware of these limitations, but voicing them too loudly might stop the development work of the project. These firms were willing to be involved in the project, investing in technology that they knew would become obsolete because they knew that they needed to learn how to deliver this type of complex integrated electronic system. Participating in the project would allow them to understand the limits of the entire complex, integrated electronic system. They might understand the limits of a specific technology, but they wanted to learn the limits of an operating system that attempted to integrate a variety of technologies. The bus card system worked as a transit card, the project was an extension of this model and was intended to include other transactions and also incorporated the need to keep data and transactions secure. This higher level of security had not been accomplished over the mobile network.

There was a serial project in St. Petersburg, Russia, utilizing the eCard business model and the emergent business network that was established during the eTampere 14

159 Building a technology system is an evolutionary process. These firms wanted to learn how this type of system worked in practice. The eCard pilot project represented an area of strategic interest for the firms. A second reason for potentially changing the business model to a mobile phone solution is the cost of the card reader. The card reader itself would need to be purchased by each store or service outlet in order to access the electronic backbone. The readers would be similar to a bank card or credit card swipe reader and retail for approximately 100 euros. However, because this is not a proprietary system, the possibility to use multiple vendors for the readers is an inherent feature of the system. In the focal case, there were discussions about changing the delivery platform from a fixed card reader to a mobile phone. This change in the delivery platform would change the commercialization opportunities and the associated revenue stream.

This change

would most clearly affect the manufacture of the smart cards and the smart card readers. The need to access the electronic backbone and authenticate a transaction would remain as roles even if the delivery platform used mobile phones. So a change in the delivery platform would affect some of the firms more than others with respect to their ability to commercialize the current version of the business model. Therefore, regardless of the choice to use an eCard or a mobile phone as the access device to the electronic backbone, TeliaSonera’s role as the authentication certifier and TietoEnator role as the electronic backbone provider would remain unchanged. By segmenting the market sectors and target groups for marketing efforts for the commercialization of the business model different smart card project. This project would be outside the scope of this study.

160 roles would be opened for commercialization. The potential applications for this business model have substantial revenue streams associated with the roles during the commercialization phase. This business model can be adapted to a variety of commercial applications and allows for a wide variety of commercial market segmentation depending on the combination of firms building the community. By changing the application requirements, it may change the combination of firms participating in the subsequent projects. These serial projects represent new project networks but, prior knowledge of the abilities of a firm to satisfactorily to fulfill a specific role in the business model, and the tendency of firm to work with other firms form prior network relationships (Gulati, 1995) support the proposition that network structures tends to replicate over time and supports the finding of Walker, Kogut and Shan, (1997). The stabilization of the eCard network is discussed in section 4.10, the Formation of the Access International Valuenet. 4.10.1 Future roles in an emerging network In an emerging business opportunity it is not always possible to discuss the specifics of the conceptual issues, so often the technical issues are handled through discussions of roles. Roles simplify the accountability but they are also territorial as they represent business income. By clarifying the roles in a project, the firm should be able to identify their potential income stream. It should be noted that the roles and the business model are subject to change over the duration of the project. What may initially be a very attractive opportunity may evolve into a role which may appear to be, or in fact be, a reduced role.

161 Let us get back to the project network – we already talked a bit about the cooperation – would you still like to comment on this functioning model? – A24 – Director Business Development, TeliaSonera “As an objective, this project did not start up as a network, but because of Laura’s and AIC’s and a few other organizations’ and the city’s card group’s actions. The continuation will show whether this network really works and how it will work. Thinking about the continuation, there will be these challenges that we talked about, whether each organization will find its role and if they will gain undertakings from this. The network actually is quite a large one and therefore it is challenging, whether each organization finds its own role in the wholeness. Everyone shares the same objective, not only to deal with this kind of pilot projects, but strictly commercial functions, and is everyone then able to find that kind of a commercial model.” –

CEO, Access International Oy

“I actually commented this same matter in one event last autumn. There I said that it is the task of the member of this network themselves to show, if there are members with whom things get done more easily, then of course they want to try again with that same cooperation. The network can not be such that all the members constantly are aware of everything. It can not work like that, but the main point is that some kind of dialogue is going on all the time and also that each member with his own actions tries to create the attractiveness. Quite often in this kind of networks people expect that it creates something on its own and forget that each and every one has to do their job for it.” 4.10.2 Expectations and strategic fit for the individual firms with respect to the commercialization phase The expectations and the strategic fit is rather extensively described and analyzed in this section of the manuscript because it represents such a critical component of how the actors perceive and explain their involvement in the eTampere smart card project network and how they perceive the future of the emerging business model with respect to the potential of the commercial phase.

162 Pulsatec Oy For Pulsatec, the eCard project has been interesting conceptually as an approach to developing electronic communities. They viewed this conceptual approach to building a system for commercialization as the correct approach, because it focused on including services. The firm positively evaluated the partner firms and the group dynamics of the members during the project, and they would probably be willing to work again with the firms in future serial projects. However, the evaluation of the results of the project with respect to the functional business model would indicate that they felt that further product development would be necessary before the business model could be commercialized and exploited in other markets. Having a functional business model is partially tied to having a valid customer reference to use in future business development efforts. The reference value for the client is critical to how the firm will evaluate the relative success of the project. Pulsatec is not expecting very much change in future opportunities for the firm because of their participation in the eTampere smart card project. They would like to be passively included in future opportunities, but they are not expecting very much. Their evaluation of the eCard project indicated limited potential commercial value to the firm. However, it is more likely that the firm understood that if the business model utilized mobile phone technology, instead of smart cards, their role as a producer of smart card readers might be unnecessary. As a result, they have taken a more passive role in developing the eCard project network. Pulsatec’s passive approach was reflected in their communications with other firms. The firm had said that they had not had any communications or interaction with the other partner firms or the project manager for the past six months. They also admitted that

163 they had not made any attempts to contact the partner firms, so theirs was a feeling of passivity about participating in the project network. This raises the issue of the need for ongoing communication to keep the participant firms focused and moving in the project. Inertia is a very important in group dynamics in a business network (Halinen, Salmi, and Havila, 1999) and positive inertia is influenced through positive communications between the actors. The ability to get the participating firms mobilized and to keep them moving is part of the network capabilities of the project manager. Pulsatec hopes to be included when the project moves from the pilot project to the commercialization phase. This is a fairly passive approach to the continue participation. If the business model moves to include the mobile phones instead of the smart card readers Pulsatec produces, they would clearly have a diminished role. They are aware of this risk and there is not much that can be done strategically until the roles of the future business model have been clearly identified. Miotec Miotec manufactures the smart card, so their role was to ensure the capacity for retaining the data on the chip(s) embedded in the cards worked and could be accessed by the card reader in a mobile environment. This firm was working within the scope of its core competency and extending its knowledge to include more sophisticated forms of data transitions and the ability to segregate data for specific applications. Miotec feels that investing in the eTampere Smart Card project network was a good investment because it conceptually integrated the services in the beginning stages of the project. Miotec views the eCard business model as

164 functional, and that it could be exploited for commercial opportunities in new market segments and additional applications. Miotec felt that the group dynamics of the project network went well and that the members of the project were very good firms. The initial conceptualization of the business model was ambitious and accordingly the expectations justifying the ambitious goals were linked to the expectations for the potential rate of return. These ambitious goals have been fulfilled and the product development process has been successfully completed. This represents a positive view of the group dynamics of the partner firms in the project network. Building a complex technical system requires firms to collaborate while specializing in the different roles (Pfeffer and Salancik, 1978) necessary to support the system. This point would support (Kogut, 2000) the position that networks are self-organizing around specific needs and not externally driven. Miotec feels the eCard project has developed according to their expectations, and they are clearly satisfied with the project network. If we think about today, has your opinion about the project’s potential changed from those days, when you joined the project, and if yes, what kinds of changes? – C12 -Former Sales Manager, Miotec “It has remained on the same scale as what it was, when the project was introduced. Considering the starting point, all the promises have been fulfilled one for one.” This firm clearly has positive expectations for changes in the firm’s trajectory based on participating in the project network. Miotec understands that a network of firms can provide more value as a package than as independent firms. They also understand that not all of the firms may be able to move forward as part of the project network. Some firms will still be able to generate commercial value from the project. The project represents multiple business

165 opportunities for exploitation. This has been a good investment for the firm with respect to how they view the potential changes in the firm’s trajectory. One aspect of the initial conceptualization of the eCard project that Miotec was particularly satisfied with was the inclusion of service firms into the design of the business platform. This requirement has allowed for a stronger approach to building an integrated complex technical system than fitting the services into the technological framework afterwards. By including the service providers from the beginning of the project network, their specific needs could be taken into consideration when designing the backbone of the electronic communications system. What kind of expectations did you have for the cooperation within the network? – C9 -Former Sales Manager, Miotec “Of course the expectations were really high and they have been fulfilled as well. The network has been working well. And this kind of an entity, that requires certain sectors to be operational – you can not do it alone, but so that the services, deliverers and technologies get into a network – and we have been able to make it a functioning package.” Their concerns focused on the potential evolution of the business model to a different delivery platform, the mobile phone technology. Miotec would like the commercialization process to proceed with the current technological approach and the current form of the business network because they would benefit from their prior investments in the pilot project. Miotec went bankrupt shortly after the eTampere smart card pilot project, and the technology and some of the personnel were transferred to Aldata where they have voiced a continued interest in participating in the future serial projects.

166 The technology that was previously owned by Miotec was transferred to Aldata when Miotec went bankrupt. So the role and the value of the technology that Miotec previously contributed to the business model would now be subject to evaluation by a second firm (Aldata) that had not previously been associated with the pilot project. The person being interview for this study previously managed the Miotec role (former Sales Manager, Miotec) in the eCard project and was currently employed by Aldata. In their current role for Aldata they would also be responsible for activities related to the eCard project. Aldata’s decision to continue would again be subject to the Aldata’s potential role within the business model and the associated roles according the technology in the model used in the commercialization efforts by the project network. The technical capabilities and Aldata’s prior network capital, as a new firm participating in the project, would also play a role in Aldata’s

attractiveness

as

a

firm

entering

later

in

the

commercialization process. Then the last point, (what are) your expectations on this project and its network in the future? – C36 -Former Sales Manager, Miotec “The expectations that we have here are that it goes forward as a functioning solution, and that the existing technology from the pilot-phase is utilized. That is what it should be based on and not to start creating something new. Of course excluding, what the card model is going to be, what technology is going to be used, but the foundation will be the work that we have been doing. Considering this, I think it will go on.” Then, if we still think about these expansion possibilities, do you think it can be expected in the near future, or is it realistic that it can be sold forward? – C37 “Yes it can be sold forward, it is a good product.” Do you think that after this pilot-phase it is in that condition that it can be sold? –C38 “Yes it is. It works fine.”

167 Also the plans of Aldata are heading the same way? Are you planning to stay in this project also in the future? – C39 “Yes, we are going to stay in this project. And as I said in the beginning of this interview, the functionality was transferred here from Miotec. And we are going to work on smart card side and on RFID15 side in the future as well. So we are working on questions, how to take the best benefit of smart card and RFID functionality.”

Self-interest is aligned, understood, and limited through roles For Aldata (Miotec), the eCard project supported their strategic interest for business development.

For them it makes sense to

utilize the project network as a virtual organization. They can be part of a team to approach to developing additional commercial opportunities and market segments. Ongoing relationships with people beyond the project represent an appreciation of social capital and the increase in Aldata’s ability to support the open platforms business model represent changes in intellectual capital resulting from the project. They feel that everything fits together, and the virtual team is ready to exploit additional market sectors. And how do you see the project from now on, do you find for example possibilities for expansion? – C13 -Former Sales Manager, Miotec “That way this is a good project, because this is possible to copy to other countries and other circumstances. - And even if not as an entity, then in certain pieces. That way it has a good potential when considering the future. Also the fact that it is based on customer service, meaning that the services determine the technology and not vice versa so that you would start with technology and then start thinking RFID would be radio frequency identification. RFID is the technology the Smart Card readers use to communicate the information or data held on the chip(s) embedded in the Smart Cards to the mobile electronic communications backbone as a system. The current example of a system in use would be the bus payment system in Tampere, Finland. 15

168 suitable services for it. So this project actually started upsidedown. That was the right direction.” And if you consider it from the project network’s point of view, what does the potential look like at the moment? – C14 “It is a good potential, because now we can utilize this project network, since the people, functions and everything else has been fitted together, from here it is easy to move on into other functionalities.” So there are many expanding possibilities? – C15 “Yes, many of them” I suppose this network works so well at the moment that it is possible to take more organizations into it? – C16 Yes, exactly” In this case, a serial project would be developed around a basic delivery platform and adjusted according to the specific needs of the client. In principal, it is similar to platform sharing in the auto industry. There is a basic platform of how the business model works, and it is adjusted or modified according to the market differentiation of the target market segment. Completion of the product development phase and a positive evaluation of the roles by the participating firms in the project network can create a base platform that can expanded and modified according to the market opportunities.

The

basic

eCard

business

model

and

the

corresponding roles make commercial sense to Aldata, and they would like to proceed onto a serial project. In this respect, their relationships are not intended to terminate at the end of the eCard project. For Aldata, the relationships and roles are very much expected to continue beyond the original eCard project network. If the current eCard solution goes forward as a functioning virtual network, the business development model would be commercialized with

the

current

roles

and

the

same

partners

in

the

commercialization processes. This would allow Aldata (Miotec) to

169 move to the exploitation of the business model. If the existing technologies from the pilot phase are used, then the roles would clearly be identified and the return on the investment would accrue to those firms that participated in the original eTampere Smart Card project network. However, if the business model evolves to incorporate alternative technologies as a delivery platform, for example the mobile phone technologies, then Aldata’s participation would be limited. They view their participation in the pilot process as laying a foundation that will demonstrate the viability of the business model and validate their participation in the commercialization efforts. Obviously, this firm would be upset if the partner firms were to ignore their initial contribution when selecting the delivery channel for the commercialization process of the business model. It is clear that over the course of the study the firms that contribute in the pilot phase may not all be able to participate in the commercialization of the

business

model.

The

firms

that

participate

in

the

commercialization process may in fact not be the same firms that developed the technology. The business model may continue, but it does not necessarily mean that Aldata (Miotec) will take part in future efforts. The conceptualization of the business model may be sold forward, but again that does not necessarily mean that Aldata will be able to participate commercially. Parallel projects It should be remembered, that the case firms are working on parallel projects and multiple project at the same time. A parallel project with the same or different partner firms may have strategically different outcomes. The difference in the institutional environment may change or influence how the projects unfold in another system.

170 Within another project context, the evolving roles may be substantially different. For example, Aldata feels that, in Tampere where the project network was a collaborative effort between the various companies to fully develop an integrated system, Aldata was not able to fully develop the card technology. However, in a future parallel project in Vaasa there would be another opportunity focusing on developing the capabilities of similar technology. They feel that they may be more able to participate in the development in Vaasa. Would you still like to add something? – C40 -Former Sales Manager, Miotec “Well, not really. This has been a good project, congratulations to Tampere for accomplishing something like this. Sure, in Vaasa there is also a similar project starting. Vaasa has actually been the first smart card city in Finland. There we are participating as well. We are just delivering the cards there now, cards with this functionality. We are also developing this card forward with Vaasa, looking for utilization possibilities. Tampere did the development in principle alone, but in Vaasa we participate in the development.”

TietoEnator Oyj TietoEnator is directly responsible for the electronic management system as the backbone of the eTampere pilot system. They viewed the eCard pilot project as a strategic opportunity for learning about open-source service platforms and how to integrate the needs of the various service providers. They were happy to learn about working in the open source environment and were ready to make internal use of the methods. TietoEnator clearly feels investing in the eTampere smart card project network was a good investment. The emergent eCard

171 business model parallels the firm’s strategic interests. TietoEnator views the eCard as a functioning business model that could be exploited for commercial opportunities in new market segments. There is some concern about the level of commitment from the City of Tampere, but overall they are glad to have participated in the eCard project. TietoEnator feels that there will be some changes in the mix of firms that will continue in the future, reflecting the type technological application. TietoEnator would like to continue in the virtual network in serial projects, but viewed their commitment to the partner firms as more flexible. The partner selection would be based on the needs of the client and market segment. They feel that the current solution can support additional applications if further development was undertaken. From their perspective, of being responsible for the integration of the data into the electronic backbone, this would make sense. TietoEnator

did not make

any references to the larger

environmental changes other than to state electronic management is the firm’s strategic direction. TietoEnator was fairly passive in its interaction with the other partner firms. Even though they shared several projects in their project portfolio, TietoEnator feels the eTampere smart card project was strategic. TietoEnator also feels the evolution of the eCard model involves some hype in the environment to get people to use the system. It should be remembered the end user in this study is not the city of Tampere, but the members of the community in Tampere. Generally, a new technology takes time to be adopted by the user group. Little by little market acceptance moves forward. The adoption curve of a new service usually involves a fairly strong

172 initial investment period. The adoption curve of the eCard service is important with respect to the ongoing nature of future investments by the City of Tampere and future serial project in other communities. Then if we think about the project’s potential nowadays, how do you see it? – E9 –Sales Manager, TietoEnator Oyj “As I said in the beginning, before the actual interview got started, this kind of a project has a life cycle, first there is a lot of talking and drumming and taking it into the press and all, and then when comes the point, like in this case as well, the piloting point, there happens actually nothing. Some people use the card, it does not show anywhere that particularly and the drumming gets less until a certain point, until things start to happen, some new services come along or something like that, and then the drumming starts again. I guess now we are living that kind of a moment that quite soon at least one new service is going to come for the eCard. Then people will be talking again.” And the usage rate will go up as well? – E10 “Well, yes.” This is the kind of a wave-effect? – E11 “Yes. That massive usage should be gained for it right from the beginning so that it would be steady and the development would be seen the whole time, that there are users and that the services are being developed. Little by little. I see the future bright in that way that at least the city of Tampere has “will mode” to bring this development into a certain point. It never ends.” Theoretically, a small network of actors would have the opportunity to communicate more often and have high levels of interaction because of the relatively small size of the network, (Watts, 1999). The small network size of the eCard project network should theoretically have had high levels of communication. However, in the study, these firms did not actually share high levels of contact with each other with respect to the eCard project network. The firms did share multiple projects with each other in different

173 contexts. Overall, they did interact fairly frequently, but for the most part, the other projects seemed to have been viewed and treated separately. However, this point would be subject to change if one of the parties desires to clearly link the separate projects with respect to their ability to negotiate a particular issue. This last point did not arise in the study. Perhaps, if the firms invoiced each other they would have a more contractual supplier or sub-contractor relationship and linking the projects would have become more of an issue. However, because the transactions were handled through the project manager, the cash flow was tied to the client, and not the other partner firms in the project network. How about this project network, now that it has become familiar to you, how do you see its functions and potential? – E13 –Sales Manager, TietoEnator Oyj “Well as a matter of fact, there have been only few contacts to the other players in the network, I mean continually. We have been, outside this eTampere thing, in cooperation with for example Avaintec and with Pusatec we make cooperation in Tampere City Transport. These are the kind that they have a bit impact on each other, but we do not directly order from Pusatec and Pusatec does not directly order from us. We have this common customer somewhere and Laura acts like a spider in the middle of the network. Laura has surely a more tight contact to the other players than we do.” The metaphor of a spider helps to make the connections between the various partner firms as nodes in the network. However, the role of spider also implies designing the web location, creating the web, maintaining the web, cleaning the web and gaining from the activities captured in the web. The spider metaphor is interesting with respect to the managing the network, because it could describe many of the entrepreneur’s roles and activities. Collaborative and competitive learning was discussed earlier in the study. TietoEnator understood that they were competitively learning

174 (Hamel, 1998; Gulati, and Nohria, 2000) and attempting to strategically extend their competency into an anticipated need (Podolny, Stuart, and Hannah, 1996) for open source type of coding. The agenda for the eCard project was based on an open source, non-proprietary architecture. TietoEnator needed to learn how to incorporate a greater amount of flexibility in their software coding, so future participants could access the electronic backbone. The firm needed to learn how to work in an open source environment. This was a strategic investment in learning about working in a new environment. How about, if we think about these other, non-financial expectations, meaning intellectual and social ones, do you have any expectations of these kinds? – E27 –Sales Manager, TietoEnator Oyj “Well, you always learn in a project that is for sure. If we do not expect that we learn something, then we are badly declining. We learn something every time, if nothing else, then project management.”

Participation in a project is a strategic opportunity for learning about working in a project relationship. The skills of managing in a project are critical to the performance of the firm with respect to the perceptions of the firm. In the study, the strategic alignment between the project network goals and the firms’ individual goals can not be emphasized enough. The firms invested in the eCard project network because would they gain a strategic return for their firm. As a form of the absorptive capabilities (Cohen and Levinthal, 1990) and dynamic capabilities (Teece, Pisano, and Shuen, 1997), the forms of new knowledge allowed TietoEnator to create new capabilities in serial projects both with the members of the eCard project and independently.

175 What kind of new things, if I may ask? – E29 –Sales Manager, TietoEnator Oyj “One of the thoughts in this was to make this EIS, meaning eTampere Information System, dependant on these kinds of open source –products. And by then we had had relatively little to do with those open source –products, so that was clearly… I could actually say that we have invested in this by learning about them, but you can not direct it in this, because as we are learning, we are investing for the future. The fact that our staff knows new techniques, utilizing them is not limited with this project.” TietoEnator views their investment in the project network as having already demonstrated a positive rate of return with respect to the accumulation of intellectual capital. The new knowledge gained from the eCard project can be directly applied in the future business development opportunities for the firm. The whole system is the business model. “Here I do not only mean the card” states that the smart card technology is one delivery channel. The “electronic management” would progress into the commercialization of the business model. This means that there are target markets for market segmentation of this model, and it is ready to move forward through several delivery channels. The results of the eCard project as a business model parallels the strategic interests of TietoEnator. The eCard project is only utilizing a small percentage of the currently available technology. To date, there is no integrated system functioning anywhere, so this pilot project is conceptually very interesting to TietoEnator as an example of how these types of open source protocols would be handled between previously unrelated user groups, for both public and private services and transactions. TietoEnator could clearly incorporate many additional forms of data transfer, and interact dynamically in real-time, as the background system becomes more sophisticated.

176 Currently, the eCard solution uses is a physical reader. The card must be passed over or near the reader for the smart card to link to the electronic backbone. However, the supporting broadband technology can support the function in the same way a mobile phone works with communications towers. A signal is being triangulated between the towers and the mobile phone. The amount of data transmission is limited to the transfer speeds of the packet formation of the digital protocols between the phone and the network. The same technology makes the proximity of the physical smart card (or memory device) a non-issue for TietoEnator. Specifically, they are more interested in moving the data over the electronic backbone, not the specific device that allowed the data into the backbone. Then the last question, (what are) your expectations for this project and the project network in the future? – E36 –Sales Manager, TietoEnator Oyj “Well, the expectations and hopes are in that direction that eTampere Card and the whole system, here I do not mean only the card, but the ”electronic management” , would go forward. Also in TietoEnator’s level, it is one of our biggest aims to improve the development of electronic management. I am sure that it will develop, but in which speed and what kind of changes of direction there will be on the way, no one can tell these things. Here we are talking a lot about the card, but the card is just one device there and one technique, with which you can take care of those things. Surely there will be some other devices in addition to the card, memory devices. In one way this is a little different smart card project, because here you are actually quite a little using the attribute of the card. There is actually nothing else on that card at the moment, but the card holder’s identifiers and certificates, when the smart card system is often aimed to develop the way that the card will hold as much intelligence as possible, applications and data reserve and that way lighten the background system. In the service points it is then no longer necessary to always have a fixed connection to the background systems, as in this Tampere’s case it is necessary. We will see how it will develop. On the other hand, technique is getting more inexpensive, capacities are getting

177 larger and everything in that way is developing. I do not believe that this concept either will have any big problems.” TietoEnator expects the relationships to extend beyond the scope of the eTampere smart card project as a virtual network organization focusing on the exploitation and commercialization of the business model. The membership in the virtual network commercializing the business model will be adapted to the specific market sector and the precise needs of the client. For TietoEnator, membership is tied to the client, not the makeup of the virtual network. TietoEnator is aware that these relationships are at least bidirectional with respect to attracting and evaluating the partner firms. TietoEnator is also aware that the cognitive system is to a certain extent regional in respect to the firms it partners with. How about the expectations for the project network? – E37 –Sales Manager, TietoEnator Oyj “I think that with the network things will go on like until now. One will look at what the others are doing and will exchange information every now and then, but I do not believe that there will be any financial consortiums between any of these network members.” Is it likely that the organizations will remain the same ones? – E38 “No, they are always likely to change, maybe not as radically as what happened with Miotec, but still. There will be new ones and maybe some will leave. I find that at the moment the network is quite a lot around eTampere, so if you start doing an equal project somewhere else like in Oulu, it can be that there are some other players too.” How about the future plans for TietoEnator, are they on the same lines with this project, do you want to stay as a member in this project also in the future? – E39 “I think that we will stay in this project as long as we are allowed to. This is absolutely that kind of know-how, what we also want to bring forward.”

178 This view of flexible collaboration is fairly common as a form of business relationship focusing on product development and commercialization of complex technical systems. There needs to be a certain amount of coordination of the technical issues and the implementation requirements of the client. That TietoEnator does not believe that there will be any type of financial consortium indicated that the firms would maintain both financial and strategic independence even though they might pursue similar strategic objectives and market segments. Accordingly, TietoEnator would consider contractual obligations between the network members. TeliaSonera TeliaSonera provides the personal identification certification and validation services to the eCard project. Their role links the transactions to the backbone and confirms the identity of the individual and the identity of the service provider to ensure both that the identity is validated and that access to the information being transferred in the transaction should be granted. TeliaSonera was very interested in participating in the eCard project as it directly supported the firm’s strategic interest.

Creating

electronic communities is part of TeliaSonera’s strategic direction, so the investments in developing the business model through their participation in the eTampere smart card project potentially represents very strong commercial value to the firm. They believe they will benefit from their investments in the project network by both their investments in network capabilities and network capital. This firm believes that there will be a positive change in the firm’s trajectory based on their participation in the project network in new emerging market opportunities with other firms.

179 When are you expecting to receive these mentioned returns, when will the project start to give its returns? -A21 – Director Business Development, TeliaSonera “I believe that right now we are in a kind of a phase, due to the pressuring actions of our governmental power that the public sector is under pressure to create electrical transactions. This is one way to proceed with things. We do believe today that if not this specific project, but as a whole this theme is that kind… Now the things are being made and built. Maybe it is impossible to say about the so called return side, but it will take several years. Still this technical environment, certificate and PKI –environment, is such large-scale functioning that it seems like the public sector is waiting for those mobile side solutions to be released before they become a big thing for the citizens. In a way we have promised to bring them up still this year. Earlier in the autumn other competitors showed up and little by little they have been promising to bring this electronic identification of a person- or citizens’ certificates for mobile phones.” TeliaSonera clearly sees a strategic benefit in further cooperation beyond the scope of the eCard pilot project. The challenge for TeliaSonera is to identify the possibilities for exploiting the business model and developing commercial value for the firm. They are aware that some of the other firms may not be able to find a commercial role in the current version of the business model. They are also aware that the City of Tampere may be having trouble evaluating the eCard project because of competing interests groups within the City administration. There haves not been any bigger problems with the cooperation? – A8 – Director Business Development, TeliaSonera “No. This network actually is like visions from the future. We (TeliaSonera) are also a big corporation, we have the certain processes and in that way we are quite likely slower to react. I think that information flow has been ok, but in the future the challenge will be, how this kind of network appears to the customer as if it was seamless or transparent and so that these different kinds of, commercial and other processes as well will work together. We (TeliaSonera) have a huge amount of processes related to sales and customer

180 service etc. How the network’s actions make it look like to the customer that is where the real challenge comes from. There has been no ready made working model and exactly in that way this project has been about aiming to the future, so that these kinds of things will be “refined” in the same time. But let us say no one has yet presented that kind of functioning, agreed models.” Then we come to the expected returns, what kind of expectations do you have? – A17 – Director Business Development, TeliaSonera “Well, as a whole this kind of an environment, where these certificates are being produced, these projects are really large financially. What has been relevant here is that we have taken part in this and now we can see if an organization like we are has a role. Right now we are in a middle of a sort of transitional phase, since earlier the Population Register Center and the organizations around it thought that they will have a monopoly in providing certificates, especially within public sector’s transactions. Because of EU and qualified certificate -thinking this attitude has been erased and also the valid legislation gives an opportunity for other organizations to provide qualified certificates. This sure is one of the most essential projects and the matters where this project and its future surely make a difference are whether we are going to be involved in this kind of actions in the future – on the non-public, corporate side, we have been working for years – and whether we are going to provide these services that we offer on the corporate side also to the public side – we have a lot of services that can utilize these certificates. I guess I could say the financial returns for our technological investments will surely not come from this project. As we talk here about intellectual and other capitals, it maybe created the base, the vision and the knowledge whether this is the kind of an environment, where we are clearly noticed as an organization and whether we have the kind of strengths that make us an organization in this kind of an environment. We sure think that we do have those strengths. We believe that due to our size and other things, we are able to provide these kinds of things in a cost effective way. Also, the certificates can be tailor-made for each individual customer, for example to meet the requirements of Tampere City.”

181 A prior project for the City of Nokia, a neighboring community to the City of Tampere, helped build social and intellectual capital which supported TeliaSonera’s bid to participate in the eCard project. The City of Nokia’s employees were included in the pilot project for the Tampere eCard project, so the community of Nokia also had a prior working relationship with TeliaSonera. Prior experience is highly effective in demonstrating capabilities during the competitive bid process. Projects that have been completed by the firm increase the perception of attractiveness and capability. These would be important factors to the evaluation committee. This is particularly important in selling intangible services or products, as they are difficult to measure or evaluate objectively. How about this social capital, you have brought new companies to this project, meaning new members have been joining in thanks to you? – A13 – Director Business Development, TeliaSonera “Yes, it is hard to say though, how different organizations have experienced or acknowledged it, we do not know that. But for example, the access control system of the city of Nokia, it was made only by us. I do not know if they recognize it themselves, but they were renewing their access control system and within this renewing, as we were aware of it, we took care that… Although, we did not deliver the system, we have not been delivering access control systems for several years anymore – but as we are frequently asked about these things, we were able to consult them and I think that it has been quite a remarkable reference in this project. This is one good example, even though it does not have any commercial interest to us personally. In addition to this, I would dare to say that what comes to the universities, their access control and other projects… Even though they do not yet utilize the eCard completely, we have taken care that as we are still being asked about these things, like in Nokia’s case, we have been able to consult them – this is worth of remembering. Even though they are not the same as eCard, but still those are the same kinds of cards.” Access control systems are one of TeliaSonera’s core competencies. Their problem solving skills are being incrementally developed, and

182 they understand it may take years for a return to come from an investment. This long term perspective of an investment period indicates how long the business cycle is for these types of technology systems. Therefore, TeliaSonera understands how important it is to continuously seek out projects to develop future business opportunities and competencies. TeliaSonera has used teaching as a form of investing in weak ties in order to create stronger ties to different actors and to make themselves cognitively relevant in future projects. The ability to consult requires the ability to solve the problem for the other organization. When establishing a new market space, it is good strategy to help other institutions or be available for consultation. TeliaSonera is aware of their usefulness in serial projects. They are looking for the potential synergies between the firms as emerging business opportunities. TeliaSonera is aware that the other firms will also be looking for emergent opportunities. TeliaSonera uses weak ties with other organizations as a means to identify potential projects. TeliaSonera is using weak ties and projects in Finland to build attraction and capabilities to compete in the potential emerging markets for the individual certification and authentication in the European Union. Over the course if the study, it became evident that other firms besides Access International were able to leverage network capabilities. The members of the project network can also develop strategic opportunities independently. TeliaSonera understands the strategic value of the eCard project. … “In time, when the roles in this area have been found, they can in principle be united.” – Director Business Development, TeliaSonera

183 Another issue that was discussed briefly was the issue of pricing in a network context. The question of how price is established and transferred between the members of a collaborative network is usually a challenging issue. The individual firms would like to maintain independent market pricing. If pricing was independent, the aggregate market pricing would be too high to interest a client to invest in the project. As a result, other forms of return need to be considered with respect to the expected rate of return when looking at pricing in the context of collaborative network pricing in exploratory projects. Let us get back to the project network – we already talked a bit about the cooperation – would you still like to comment on this functioning model? -Director Business Development, TeliaSonera As an objective, this project did not start up as a network, but because of Laura’s and AIC’s and a few other organs’ and the city’s card group’s actions. The continuation will show whether this network really works and how it will work. Thinking about the continuation, there will be these challenges that we talked about, whether each organization will find its role and if they will gain undertakings from this. The network actually is quite a large one and therefore it is challenging, whether each organization finds its own role in the wholeness. Everyone shares the same objective, not only to deal with this kind of pilot projects, but strictly commercial functions, and is everyone then able to find that kind of a commercial model. One interesting question is that what kind of an image others have about the price and how it is formed and what the chain really is. Here it is not worth of talking about value-added chain, but the commercial model needs to be clear, when an offer request arrives with clear outlines who are doing what. And return expectations can be really different. Some parties come from a traditional service business, some from a technical environment – just as we have our own environment – it quite often comes up that people have unrealistic expectations about what is each person’s slice. And especially when a large network is in question, it is clear that today the business models are quite thin, many local companies delivering devices are passed. Here we are still talking about such diverse service

184 environments that it is not relevant that it is not about a package, but that everyone has a slightly different role.”

Access International Consulting For Access International Consulting, the eCard project was a strategic investment. The eCard project business model resulted from this micro firm’s initiative and efforts in creating the project network examined in this study. All these firms had strategic, purposeful intent when they formed a loose alliance to explore a potential opportunity.

In a sense, the culmination of the project was a

merging of intentional choice, even if for a temporary project. The level of intent and commitment varied depending on the perception of the project’s potentiality. A project network, in a sense, is the outcome of that merged intent. . In the study, it became apparent that the responsibility for managing a project as a project manger is different than acting as an entrepreneur in the same project. The project manager’s role had very clear responsibilities for running the project for the City of Tampere. However, the role as an entrepreneur with respect to the emerging business model was less clear. There is potential for a conflict between the dual roles. For example, the choices made by Laura based on expectations for her potential role as the entrepreneur in the emerging business model might conflict with her responsibilities for running the eCard project. In the study, Laura also makes a reference to the potential for exponential growth which refers to both the potential of the emerging business model and the potential expenses for building the business model and the commercialization efforts. Financial support for this growth has to come from somewhere, and in this case it is not coming from the pilot project. This is the reality a small

185 entrepreneurial firm faces when building an emergent business opportunity. The reality is that a small entrepreneurial firm needs to have either the ability to draw upon resources, such as a project portfolio, to financially support this type of business development, If not the entrepreneur is going to need to create an exit plan. If we consider, how the cooperation has been working, what kind of experiences have you faced and are there some things that should be improved or should have been handled otherwise? – B20 – CEO, Access International Oy “The cooperation has been working very well. Of course these questions are also depending on the persons involved. We have had good persons involved here, that way it is a joy and interesting to work with them and above all to learn. I must say I was quite a junior and still am. I did not know anything about this world when I started doing this. But I have been able to adopt those things quite well, which was very challenging and interesting. There have been no problems at all with the cooperation. There are some organizations, which do not exactly belong to this deliverer network, so in that way they are not involved, but have been for example deliverers for some people here earlier, with these organizations there has been some problems. I mean, not with me personally, but other things like for example things concerning copyright. But as I said, they have not been involved with this project, but have had some actions earlier. Sure, it is understandable; they have thought that we are stepping into their market area here and on their toes. So with some of their people there have been problems. Otherwise the cooperation has been working very well and in that way I can say, we have chosen good organizations, what concerns this pilot. I think that the actual implementation, there we will be with some consultation offering it to the city of Tampere. It will be a consultation offer, and there will be several different organizations. It will be a real network offer, but then someone needs to take the juridical responsibility, for that we are too small a company. Everyone is truly exited and sees that we are doing really interesting things in here. This is quite challenging and the challenge is that as the size of this whole thing expands, the expenses expand as well. This is no cheap fun to organize something like this.”

186

Roles evolve to a more stable network configuration in order to pursue in serial projects. In the study, an open platform, open architecture business model is a bit of a misperception. In reality, the open network configuration evolved and became more a more stable network configuration, at least with respect to the entrepreneur’s perceptions. By identifying roles for the firms and pre-selecting them for the client, it reduces coordination expenses for the client, and for future serial projects. This is particularly true for the core team of partner firms in a complex technical solution. Additional firms can be added to adjust the capabilities to the specific requirements of the client, but the main, core partner firms will come as a recommended package. This is not only a form of embeddedness; it is a form of mutual adaptation in the core partner firms’ abilities. This core group of partner firms will be responsible for the ongoing development of the emergent business model in the commercialization processes. Then about the expectations about this project and project network in the future, what kind of expectations do you have? – B22 – CEO, Access International Oy We are like “everybody’s pal” here, the customer decides with whom he wants to work and we go in it. But that’s not exactly how it goes. We have to fix the certain network, certain cooperating partners. It is not totally like that, but with them we need to bring this thing forward, they are in a way the main cooperating partners, with them we do these things, it cannot work with everyone, otherwise it gets too complicated. We are surely able to approach the customers better with our cooperating partners as a network, not alone so that “we would like to consult you with this and that”, but so that we have also the accomplishers with us. We kind of get, well a bigger package, which includes the accomplishment. That way our cooperating partners are a vital condition to us, why would we consult something like this, if no one would be willing to accomplish it? Why would we go to the city and say that this kind of a system and these

187 kinds of cards you should have, if no one is willing to make them. I believe this is about the way it will go. But these have been like separate cases – we have a new project starting and there are the same organizations as now in Tampere. That is the way it goes, they are selected in one way or another, mostly they have been selected by us, as we have cooperation with them in many other things as well. These partnerships do not exactly fall from the sky” As stated, the reference is a critical component of creating a project network. The reference is a collaborative return for the firms investing in a project network. However, one finding is that the market segmentation of the emerging business model may require a key customer reference for each sector. If each market sector has a clear client reference during the commercialization processes, then the ability to identify a customer that has a need paralleling the strategic self-interest of the project network is critical. The reference value is a major part of evaluating the project’s relative success. This reference should support the potential market segmentation of the commercialization processes in order to be efficient. The reference is tied to the functionality of the business model for the firms. However, the termination process of the project is also critical for the firms and for Laura. In the study, Laura’s future role as a project manager is tied to the prospective development of the eCard project. If the City of Tampere is not willing to proceed to the product development phase, then Laura’s role as a project manager is unnecessary. This may limit Laura’s future as an entrepreneur, because the level of functionality of the business model may not be ready for commercialization. One could assume that the increase in social capital from running the pilot project would allow for the transition from project manager to entrepreneur. However, another perspective might imply that Laura

188 did not generate enough social capital to make the transition to an entrepreneur. The issue of role delineation is critical to Laura’s network capabilities, or she may not be able to participate in the future business model(s). From the narrative, Laura seems to believe that her future role is not going to terminate with the pilot project. However, it is unclear from the statement below, if Laura is referring to her ongoing participation for x number of years as a project manager working for the City on this project or as an entrepreneur developing the business model. It is easy to continue, once you have had a good start. – B23 – CEO, Access International Oy “Yes, that is how it goes, as you start to have joint customer cases. There is a lot of talking that one could think more of this and that, but as we have this kind of a customer, it seldom goes further than that, because we do not have any incentives to do it unless there are these kinds of potential customers. We know a lot of these directions and now we are starting to have the know-how also. We think a lot, what exactly in all this still is our business activity. That is another thing, which is not crystal clear here. I mean what we really do. As a matter of fact, we need to define it to the city of Tampere still this week that here is the entire picture and here is the piece, which we are doing and that is why we will be involved in this project still for x (number of) years.” In the study, the product development phase, which never occurred, would be subject to a commercial bid process for the firms and for Laura. So by extension, the risk of a role terminating in the project development phase is not limited to Laura. The scope of the next phase of the project will potentially attract incremental attention in the cognitive system. It is assumed that the previous members of the project network would be able to efficiently compete in a competitive bid process, because of their prior investment in the pilot project. However, this may not be a safe assumption. Because the project has received national attention, the level and scope of the project

189 changed in the product development phase, firms outside of the current project network may become attracted to the project. The increased attention in the cognitive system may change the level of attention of the other firms. For example, Nokia, as a mobile phone manufacturer, might become interested in the project as they clearly have an interest in the alternative approach to the business model. Nokia was not initially part of the eCard project, but as the business model evolves, the scope of the project changes, and the project’s attractiveness in the cognitive system changes, and then Nokia could potentially become more interested. This supports the theoretical point that firms can enter into the commercialization process at different stages of development. Will the organizations remain the same or is there going to be changes? – B27 – CEO, Access International Oy “That is hard to say. It depends, how the city will organize this and how they want to make the competition between offers. I personally hope, they would make the competition for this as a bigger entity, because then the entity would be handled by someone and this someone would take responsibility. If the city wants to have a piece from here and another one from there, then I must say, I do not understand, how they imagine that someone will integrate it.” How about the card itself, is there going to be big changes? – B28 “Technically there will be some changes, also in the content, but that we have not started to define yet. Here are many parts, there is the card, the readers, background systems, which actually are the biggest work, and then there are different kinds of services, systems of the organizations, adjusting them together… There is still a whole lot to do. The direction, however, is the right one, I am sure about it. The city has been putting some brakes on here, the situation there at the moment is that they are wondering a bit, what they would do with this. In this way it is a bit difficult, as everything is still open.”

190 4.11 The formation of access international value network Because the eCard project never progressed beyond the original pilot phase for the City of Tampere, the project’s outcomes with respect to the change in the perceived value of the entrepreneur can be described beyond the scope of the original project. Two years after the pilot project of the eCard was completed, the firms working together on the eCard did not remain a loosely structured organization of firms working together. Between 2002 and 2004, the firms signed a formal agreement creating the AIC Value Network. The AIC Value Network focused on building and delivering the integrated electronic community management programs. Two years after the eCard pilot project was completed, the AIC Value Network agreement signaled that Laura had increased her social capital in the market and was considered efficient by these firms. Her future role was now tied to building business opportunities for the AIC Value Network. These firms created a formal collaboration agreement to pursue the commercialization efforts and business model which emerged over the course of the eTampere smart card pilot project. This would support Kogut’s (2000:415) view that “the emergent properties of networks ride on self organizing processes that tend to freeze the structure among firms over time into stable patterns of interaction.” Initially, these firms represent the core competencies of a virtual network. The main cooperating partners are a virtual organization that will adapt to the new context presented by the future clients and market segmentation. There were clear roles in the network for product development, and these roles reflected the firms’ strategic interest. This is an open source, open platform business model that

191 has a preferred list of vendors. As such, the ongoing nature of the AIC Value Network as a business network provides a reduction in coordination costs and the search costs associated with the next serial project represent a form of return. In fact, there was a serial project proposal that resulted from the eTampere Smart Card pilot project for the St. Petersburg City Card. The St. Petersburg City Card was conceived as a regional loyalty card similar to the eTampere card developed in 2004. The pilot phase was scheduled to end in the Summer of 2006 (Salonen, 2006:18). Additionally, there were a series of bilateral contractual agreements signed with the partner firms in the eCard project network and AIC to further develop the software and the back office of the eCard system based on the eTampere case. The eTampere smart card case attracted international attention and increased Laura Aho’s visibility as an entrepreneur and as an expert in developing electronic communities using different forms of delivery systems, on open networks, and incorporating various forms of product and services utilizing secure electronic identification protocols. Laura was also given a consulting role with the Finnish government focusing on forming an electronic community using the eTampere smart card case as a reference study. As a result of the eTampere smart card pilot project, Laura had increased her social capital, her intellectual capital, and her network capabilities in the cognitive systems. Laura Aho has strategically changed her social capital, her intellectual capital, and her network capabilities by investing in a project network. In three years she has become an international expert in her area of specialization which clearly represents a change in her network capital and her network capabilities. Currently, she is working at a very professional different level in the market.

192 In 2006, two years after the completion of the eTampere Smart Card project, Access International Consulting was purchased by Insta DefSec. Insta Group (formerly Instrumentointi) is a growing high-tech company focusing on: Defense and Security Technology (Insta

DefSec),

Industrial

Automation

Technology

(Insta

Automation) and Information Technology (Insta Visual Solutions). http://www.insta.fi/home/ As part of the purchase and sale agreement Laura was given a role as Manager of Partnership Development with Insta DefSec.

193 5

SUMMARY OF FINDINGS, CONTRIBUTIONS AND EVALUATION OF THE STUDY

This was a longitudinal case study of a single collaborative project network strategically targeted to create an emergent business opportunity. The purpose of this study was to contribute to the emerging theory of a project network as a contemporary approach to creating an emergent business and to provide a better understanding of the factors influencing network capabilities and network capital of firms involved in the project. Taking an abductive approach to the study, the two focal areas of network capital and network capabilities were developed as a result of the initial pilot study’s exploration of the role of social capital in constructing a project network. The conceptualization of a project network is viewed as a strategic process, which in the case study, aimed at creating an emergent business model with the intent of developing commercial opportunities for exploitation for the partner firms. Subsequently, the conceptualization of a project network was introduced as three dimensions. The first dimension is the cognitive system, where concepts, resources, and capabilities maybe attuned and enacted for participation in the project network. The second dimension is determining whether the actors have the network capabilities necessary to realize their strategic intentions. And the third dimension is network capital which is subject to change over the course of a project in both the cognitive system and the marketplace. Subsequently, a longitudinal case study was completed focusing on the perceptions and expectations of the actors about the past,

194 present, and future potential of the project network. As a result of the initial analysis of the empirical case data, the project network was described using five phases to provide a structure to these discussions about these perceptions and expectations. These phases supported further development of the preliminary conceptual framework. 5.1 Summary of phases of a project network As stated, the phases used in the preliminary conceptual framework were a result of the first level of analysis of the empirical case. These phases helped provide a structure discussing the perceptions and expectations of the potential emergent business created through the efforts of the project network. The discussion line in each of the phases is broken down into three sub-sections, the main focus from the preliminary conceptual framework, a summary of findings from the case, and a selection of specific findings that emerged during the analysis. 5.1.1

Pre-project phase

According to the preliminary conceptual framework, in the preproject phase the entrepreneur focused on future possibilities, the resource requirements and how to conceptualize these possibilities into active roles (Macdonald, Assimakopoulos, and MarchanPiekkari, 1999) for an emergent business plan. During the preproject phase the entrepreneur was required to make unilateral investments (Faulkner and De Rond, 2000) in network capital to accumulate the necessary network capabilities or network capital. The network capabilities (Kogut, 2000; Coleman, 1998) are described by the ability to understand the firm’s resources and

195 capabilities (Grant, 1996) and by the ability to create common spaces for exploration and or exploitation (March, 1991). In the case, Laura needed to be realistic, focused, and have very strong listening abilities. She needed to think conceptually and understand the different levels of public and private self-interest both in the cognitive system and marketplace. Through questions, she was able to identify the contribution value as roles which reflect the firms’ strategic self-interest (Thorelli, 1983). Additionally, Laura needed to have enough network capabilities in order to create credibility and get things done through others. Her ability to be persuasive supported her credibility. Taking the initiative to propose future activities and being proactive with respect to follow-up also reinforced her credibility. The ability to make decisions and take action implied self-confidence and tended to support trust if the action reflects considered interests. By focusing on the strategic self-interests during the pre-project phase, Laura needed to be open to the potential of various business opportunities. Social capital was identified through signals in the cognitive system as people she met shared their contacts. A fair amount of emotional intelligence (Goleman, 1995) was required in the collective cognitive system to align the firms’ strategic selfinterests. To progress from the pre-project phase to the pilot phase in the project, Laura needed to not only identify the emergent business opportunity, but conceptualize the emergent business model with respect to the firms’ roles (Macdonald, Assimakopoulos, and Marchan-Piekkari, 1999) in the project network. The ability to create the firms’ roles was linked to Laura’s identification of the potential partner firms’ strategic self-interest. The ability to successfully identify these self-interests as roles in the conceptualization of the

196 emerging business model helped Laura secure the required resources from the firms. Laura needed to be able to clearly align these strategic self-interests when forming the initial project network and writing the business plan. Summary of findings from the case during the pre-project phase In addition to the findings with respect to the entrepreneur’s network capabilities in the pre-project phase outlined in section 4.6.1 - 4.6.11 of this manuscript, there were three specific findings during the analysis of the case data using the preliminary conceptual framework during the pre-project phase. These three findings are related to the dimension of network capabilities. Conceptualization extends visioning When evaluating the preliminary conceptual framework with respect to the entrepreneur’s network capabilities, the initial focus was limited to the entrepreneur’s role and that individual’s network capabilities when forming the project network. This view focused on the entrepreneur’s abilities to identify an emerging business opportunity. Over the course of the analysis, it became apparent that the entrepreneur’s visioning ability remained important, but the ability to identify an emergent business opportunity should be replaced with the ability to conceptualize the business model that would ultimately be appropriate as an emerging business opportunity. The differences between these abilities are that the entrepreneur needs to be able to solve the problem, not just see it as an opportunity, and he or she needs to manage in a network context.

197 Cognitive systems are subject to strategic intent Also with respect to the network capabilities, the concept of the system architect, as project manager, that designed and built the conceptual environment and the emerging business opportunity by boundary spanning gave way to the idea that identifying the strategic interests of the partner firms and aligning them through roles helped the firms commit to the project network. The ability to align these firms involves boundary spanning, but the strategic self-interest (Davenport, De Long and Beers, 1998) was clearly important. The ability to span the boundaries of network capabilities is demonstrated by identifying these self-interests and pulling them to a common space through the conceptualization of the business model. For the firms in this study, the project network was a means reaching their strategic goals. Rational partnering As an aspect of network capabilities, the ability to distinguish the public and private agenda of potential firms would be helpful in aligning the project and firm agendas. This approach to network participation might be referred to as rational partnering (Williamson, 1985). Most firms are using some level of rational partnering when choosing to invest their resource and capabilities in a project, because they understand the project helps them strategically This is a subtle distinction to make in firm selection. In practice, it would be fairly difficult to distinguish the private and the public agendas of the partner firms with respect to the emerging agenda of the project network. In short, did the firm first start investing in creating the emerging opportunity as part of the project network, or did they recognize that the project network could be instrumental in getting them where they wanted to go, and determine that the investments

198 in the project network might be cost effective, or a more efficient use of the firm’s resources. 5.1.2

The pilot phase

According to the preliminary conceptual framework, during the pilot phase, the initial discussions focused on the initial project requirements and the initial investment requirements. The processes and the relationships are, initially, temporary explorations of the potential commitments to invest project resources. In the case, the pilot phase represented by Laura’s initial business plan, discussed earlier during the pre-project phase, aligned the firm’s self-interests and the actors’ roles with respect to the deliverables for the City of Tampere. For most firms, the investments were made because of some form of positive change was expected to accrue to the firm in either network capabilities or network capital. For other firms it was simply a commercial contract with limited expectations beyond the contract. Summary of the findings from case during the pilot phase During the pilot phase, investments were real with respect to a person’s time, money, and resources. The assessed value was arguably calculated through the opportunity cost principle. Financial capital investments were made through opportunity costs as forgone revenue for almost all of the firms. Intellectual capital was invested in both learning and teaching according to firms’ specialization. Investments in intellectual capital consisted of sharing core capabilities, technical capabilities, or market knowledge. Sharing the core capabilities, technical capabilities and market knowledge were often difficult because they are embedded in the actors’ tacit knowledge. The potential benefits of these reciprocal investments

199 were described by the expectation that future learning opportunities from the project network would be strategic for the firm. Social capital was invested in relationships that may have been initiated in the pre-project phase. The transition from the pilot phase to the product development phase represented changes in both network capabilities and network capital in the cognitive system and by implication potential change in the marketplace of the future business model. A secondary issue arose during the case analysis. Laura was committing all of her time to managing this project, but she was unable or unwilling to bill for the additional hours the project required which led to one finding of the study in the pilot phase with respect to network capital, in this case financial capital. And a second finding of the study during the pilot phase related to a form of network capital, specifically intellectual capital. Opportunity costs need to be offset in a project portfolio When evaluating the preliminary conceptual framework the element of network capital, with respect to financial capital, it was initially understood that opportunity cost pricing would have to be taken into consideration as a form of forgone revenue. The role of cash flow was critically underestimated in the preliminary conceptual framework. The ability of all the firms to have sufficient alternative sources of cash flow can not be understated. A financially balanced project portfolio needs to exist for all of the firms investing in the project network targeting a new innovation which does not yet have imminent earnings potential, including the micro firm. The unilateral investments of the entrepreneur notwithstanding, the business model that resulted from all the entrepreneurial efforts did not emerge as a commercial product, but remained as a pilot for

200 further development. The members in the network need to be financially stable enough to survive until the business model is commercially exploitable. Otherwise, only the firms that remain solvent will be able to commercialize the business model. Teaching was used as a network capability The element of intellectual capital was clearly very important in the preliminary conceptual framework. During the study it became apparent that firms were not only making investments in intellectual capital through opportunities for learning, but teaching was also viewed as a strategic investment. For some firms, the ongoing strategic investment in intellectual capital was clearly as important in the cognitive system of the institutional environment as in the technical environment of the marketplace. 5.1.3

The product development phase

According to the preliminary conceptual framework, with the transition from the pilot phase to the product development phase comes investment risk. Because there is a substantial required investment in time, resources and capabilities, that could be allocated to other activities during the product development phase, some firms may be less able to participate during the product development phase of the project. In the case, during the product development phase the activities of Laura and the firms are represented by changes in their accumulation of network capabilities and network capital. The discussions focused on project’s potential with respect to dynamic roles. One line of discussion centered on alternative projects and/or alternative business models that could be explored or exploited. The ability to access current resources, as well as explore and propose

201 future projects was a strong justification for the alternative forms of investment and accumulation of network capital. Here, the dynamic role of social capital should not be underestimated with respect to the level of attraction to participate in the emerging project network. The actor’s changing role with respect to the product development processes represents a potential change in the expectation of potential financial capital in the future business model. The investments and the expectations of the rate of return are relative to the initial capabilities of the individual and the firm. Summary of findings from the case during the product development phase There were two specific findings from the case with respect to the product development phase. The first finding focuses on a conflict of interest in Laura’s dual roles, the second finding focused on substitution risk for two of the firms. It should be remembered the pilot case was never approved by the client to proceed to the product development phase. Conflict of interest represents transition risk One issue that arose during the study warranting further attention is the conflicting roles of the individual acting as both project manager and entrepreneur. The accumulation of intellectual capital and social capital of the entrepreneur with respect to both network capabilities and network capital is tied to the project manager. As a project manager, the individual was learning and accumulating intellectual capital and social capital during the evolution of the project through each phase of the project network. Initially, the entrepreneur envisioned the business opportunity.

202 However, the individual acting as the project manager has defined the discrete roles in the business model. The project manager coordinated the project from conceptualization through the product development phase. Over the course of these processes, the project manager has accumulated both intellectual and social capital. However, in this study, as the project progresses toward the product development phase, the individual attempted to change roles and act as an entrepreneur again. This means the individual is attempting to move from the project manager role, representing the client, to the role of an entrepreneur working with the partner firms creating a business network for commercial exploitation. There is a conflict of interest in this transition for both the client and the entrepreneur. For the entrepreneur, the transition in role represents very clear risk if no suitable future role can be identified for the entrepreneur in the business network. So far, they have done a good job as a project manager and they may have accumulated intellectual capital and social capital. But their future revenue stream is tied to their role in the emerging business model. If no clear role can be identified, their ability to participate in the economic commercialization is subject to risk. Unless the entrepreneur can identify a contribution role, they may be limited to selling the conceptualization of the business model. This would function as a glass ceiling for the project manager. The entrepreneur can participate in the commercialization process only if the other partner firms let them. The project manager may have accumulated both intellectual capital and network capital, but does the accumulation result into sufficient capabilities that are valuable, rare, and non-tradable. The question remains whether the accumulation is valuable enough for the future partner firms to allow the individual to transition from project manager

to

entrepreneur

and

thereby

commercialization of the business model.

participate

in

the

203 The client’s conflict is that the project manager has a dual agenda and may not always be looking out exclusively for the client. Substitution risk during the product development phase Another issue that emerged during the study was tied to the changing roles in the evolving business model. During the transition from the pilot phase to the product development phase, it became apparent that the changing roles in the business model could leave some of the partner firms in very vulnerable positions with respect to a return on their investments. These firms may have invested in the project network to create an emergent business model, but over the course of the evolution of the business model it became apparent that their role might be better performed by another partner firm during the further levels of commercial development. The changes in the business model allow for competitive technologies to challenge the roles of several of the firms. This change directly affected their ability to participate in the commercializing and exploiting the emerging business model. This might be referred to as substitution risk. 5.1.4

The new business model phase

According to the preliminary conceptual framework, during the new business model phase the processes focuses on evaluating the future potential of the business model. Evaluating changes in the business model reflects the firms’ strategic self-interests. Evaluating the success of an emergent business opportunity is very subjective. The firms are looking for an emergent business opportunity in the form of new business models, new markets, or internationalization opportunities as potential changes in the firm’s trajectory.

204 In the case, the new business model phase never occurred. Discussions focused on the future long-term potential of the business model. The accumulation of intellectual capital was tied to the perceived expected value of the business model and the associated roles of the various firms in the project network. The firms discussed modifying the future business model which meant they would need to determine if the modified business model would correspond to their expected return on investment. Summary of findings from the case during the new business model phase There were four specific findings from the case with respect to how the actors perceived the future business model and the project network. The findings focused on evaluating the business model, level of functionality, future roles in the business model, partner evaluation, and reference value of the project. It should be remembered these perceptions about the evaluation of the business model were provided while the client was deciding if they would proceed from the product development phase. However, because these issues were related to the new business model, they are included here. The level of functionality The evaluation of the business model was influenced by the firms’ own internal criteria for the expected outcome of the project and the strategic fit of the resulting business model and how it supported the firms’ strategic goals. The form of investment in the project network and the forms of return in network capital were determined by the firms with respect to their own strategy. The level of functionality clearly influenced how the business model was evaluated, especially if it did not support the firm’s strategic goals. If

205 the product is not ready for market acceptance, because it requires special skills or modification to use the product, then the product or service would require additional investment in order to make it accessible in the marketplace. Potential future role in modified business model Evaluating the project network is influenced by the firm’s ability to clearly identify a role for commercial exploitation in the business model with respect to market segmentation and the appropriateness of the business model to compete in those segments. If the partner firms were not proactive enough with respect to the levels of contribution or expectation by the other partner firms, then there may be a negative affect on the future role of the less proactive firm or the firm that was not able to deliver according to their role with respect to the future serial projects and commercialization efforts of the business model. The change from the new business model phase to the commercialization phase represents a clear change in the roles. Once again, the change represents risks and rewards as the business model is commercialized. The future commercialization process brings an entirely different set of requirements than were necessary in the previous phases of the project network. Partner evaluation During the new business model phase, the firm would evaluate its own performance and the performance of the partner firms in the project network. Expectation of performance of the other partners would not be a small issue with respect to the willingness of the partners to share their incremental resources, time, or capabilities. The expectations of other the partners would be based on perceived

206 capacities and tend to support the other firms’ trajectory. Those trajectories tend to be reinforcing. Positive perceptions can lead to better opportunities and willingness to collaborate and negative trajectories can diminish and/or limit the future options for the firm. The reference value The reference value of the project network was one of the primary concerns of the partner firms. A negative reference from the client would potentially reflect negatively on all of the partner firms. A negative reference would not necessarily be allocated to a single firm. If the project did not progress as expected, or the final outcome was not perceived to have been worth the investment by the client, then the reference value would be negative, or at least qualified, and reflect negatively on the project and the associated firms participating in the project. The evaluation from the client may be complicated if the client was not internally clear about what was expected, or has unclear expectations about the project. The reference value of the project can be positive or negative, and the level of functionality is subject to comparison against the level functionality expected in the initial scope of the project. If there is a conflict between the functionality of the business model and the original scope of the project, then the clarity of the evaluation may be subject to several conflicting voices. The reference value of the project is subject to the client’s evaluation and their clarity of voice with respect to the internal organizational issues and the corresponding agendas. Clear support from the client would play a very strong role in how the firms evaluate their investments in the project network. If the client does not, or is unwilling to clearly express the success of the

207 project, then the partner firms may try to distance themselves from the project. 5.1.5

The commercialization phase

According

to

the

preliminary

conceptual

framework,

the

commercialization phase focuses on exploiting the emergent business model in targeted market segments. The commercialization process focuses on the relative competitiveness of the new business model. In the case, the commercialization phase never occurred. It should be remembered these perceptions and evaluations, as well as the opinions expressed about the potential for commercialization of the business model, were provided while the client was deciding if they would proceed from the product development phase. However, because these issues were related to the commercialization of the new business model, they are included here. Summary

of

findings

from

the

case

during

the

commercialization phase There were five findings from the case with respect to the expectations of the commercialization phase; the entrepreneur may need an exit plan, different forms of value creation were achieved in network capital, there was an expected change in the trajectory of the entrepreneur and the firms, a project portfolio or larger firm size maybe required for growth, and network capabilities were strategic for serial projects. The entrepreneur may need to explore exit options During the commercialization phase, the entrepreneur may wish to explore potential exit strategies. There is a logical point of transition

208 in

the

commercialization

phase

and

the

financial capital

requirements may make it more attractive for the firm to sell their investments to a larger organization, which could more readily exploit the potential value. The entrepreneur, selling their interest in the new business model will look to the technical environment for valuation. The successful sale of the business is a measured by the return on investment and reflects the change in the value from the cognitive system of the institutional environment to the technical environment. Changes in intellectual capital will have conceptual value measured in the technical environment and will be reflected in the cognitive system. Changes in social capital will have social value measured in the technical environment and will be reflected in the cognitive system. Form of returns of value creation The strategic choice as to the form of economic return will be subject to the exploitation of the business model and the relative value of social capital, intellectual capital and network capital of the actors. Ultimately, the value of having participated in the project network will be reflected in the change in financial capital for the actors, based on perceptions of both the future potential and the future roles of the actors. With changes in the social capital, new markets, new sectors, new clients and new levels of participation will be potentially available in the cognitive system and the market. Changes in network capital will have commercial value. The commercial value will be determined in the market, reflected in the cognitive system, and paid in the market.

209 Change in the trajectory for the entrepreneur’s firms The future trajectory of the entrepreneur or their firm will be reflected as changes in the firm’s project portfolio and their ability to develop business in the technical environment. With a positive reference in hand, the entrepreneur should be able to develop future business opportunities. Profits in the commercialization phase should reflect a measurable rate of financial return. The change in the firm’s trajectory, as result of a “successful” project represents a relative pay back for the forms of investment in network capital. The payback may come in the form of a positive reference from the project or a functioning business model for the partner firms. Ultimately, the perceived value occurs from changes in expectations of the entrepreneur’s role in the cognitive systems as potential for value creation and is reflected in perceptions of the entrepreneur’s network capabilities with respect to how the potential for value creation is actually utilized. A project portfolio or larger firm size maybe required to support growth With the transition from the new business development phase to the commercialization phase comes investment risk. Because the commercialization phase requires substantial investment to create and build market awareness, substantial investments in channel and market development may exclude some firms from being able to participate during the commercialization phase of the project. The risk of growth outstretching the cash flow of the business model represents serious commercial risk for some of the firms in the network. Each of the partner firms may have substantially different project portfolios and financial resources to pay for the growth in emerging markets.

210 The more established, larger firms maybe able to extend their financing to reach a viable business market while the smaller entrepreneur may not remain solvent long enough to reap the rewards of their investments. The larger partner firms were using this project network as an extension of their current business activities. These firms could rely on their other sources of revenue in their project portfolio to support their capital investments in this project network. However, the financial capacities to commercialize are substantially different depending on the target market and the segmentation efforts of the different firms. Therefore, larger firms would be more able to participate in the future commercialization processes. Network capabilities were strategic for serial projects For most of the firms in the case, their network capabilities had strategic value in relation to the ongoing operations and could be described as strategic investments in their future role in the cognitive system. These firms believed that the emerging business model, and/or the reference value from the project, would open new business opportunities. These firms were also aware that investments in the current project would change perceptions about their intellectual capital in the larger professional system as part of an extended cognitive system that embeds the current project. 5.2 Summary of findings for network capital In general, the value of network capital was determined through the evaluation of the business model, the partner firms and their levels of commitment and contribution to the goals of the project, and the reference value of the project. The criteria for evaluating network

211 capital was very subjective and influenced by both public and private criteria at the individual, firm and system level. Network capital can change at the actor or network level. There were six specific findings of this study of a project network with respect to the element of network capital. The accumulation of social capital is tied to the person in a context and a type of system. Social capital is tied to a context based on perceptions about the person with respect to that context. This social capital can not be transferred readily to another person or type of system, but the perceptions of the social capital can be transferred to another environment or system. Similarly, the perceptions of intellectual

capital

may

be

transferable

to

another

environment, but will be subject to confirmation of value in the new context when it is utilized. There needs to be alignment between the project network goals and the actors’ self-interested goals, because actors invest in a project network in order to gain strategic returns. The forms of capital invested, the forms of capital expected, and the forms of capital returned to the firm are subject to interests or goals that the firm perceives as strategic. How the firms evaluate the rate of return as a form of capital is linked to their strategic self-interest. These capital returns may be transparent or hidden. Just as strategic self-interest may be transparent or hidden, the capital returns are tied to these self -interests. The project’s reference value is tied to the functionality of the emergent business model and the termination phase of the

212 project network with respect to the level of completeness. The reference value signals the intellectual capital of the actors in serial projects. The responsibilities of an individual managing a project as a project

manger

are

different

than

that

individual’s

responsibilities acting as an entrepreneur in the same project. The two roles require different forms of social capital in the pre-project phase and pilot phase of a project network than in the new business development phase. Social capital in the pre-project phase is a time investment in learning and assessing the potential resources and capabilities. Social capital requires investing time in developing relationships, understanding agendas, negotiating in the cognitive system, and forming goals and domains within the cognitive systems. Social capital during the pilot phase is tied to the project management role, and builds on the perceptions and the relationships formed during the pre-project phase. In the case, social capital in the business development phase is increasingly tied to the entrepreneur’s role rather than the project management role. Social capital is tied to the actors’ accepting the individual as an entrepreneur. The actors will adapt their behavior to the person according to the perceptions of the individual’s social capital and the role the actors understand with respect to the context. A change in the project manager’s role to that of an entrepreneur requires a change in how the social capital is understood and accepted by the other actors. The others must attribute the social capital for the new role based on their perceptions of the old role, and their expectations of the transferability of the social capital to the new role. If they do not have a positive

213 perception about the old role, or do not believe that the social capital is transferable to the new role, they will not accept the new role as valid, based on the former role’s social capital. When

intentionally

creating

an

emergent

business

opportunity, a small entrepreneurial firm should either have the resources and capabilities to financially support the business development and commercialization of the emerging business model, or they need to create an emerging business model with an exit plan. 5.3 Summary of findings for network capabilities In the study, it became apparent that some of the firms clearly understood they were investing in network capabilities by making strategic investments in the eCard project. Other firms were more passive about their strategic intent. In the study, the firms’ network capabilities played a strong role in their choice of strategic investments in a project network. The awareness of the strategic value of those investments in the network capabilities was certainly important in how those same firms evaluated the strategic returns on their investments with respect to the network capital in the project network and the cognitive system. In the analysis, it became apparent that some of the partner firms clearly understood their proactive investments and the importance of the network capabilities with respect to the attractiveness in the cognitive system and other firms were more passive with respect to their future potential business.

214 One challenge that became apparent during the case analysis was the question of whether the emergent business network would find a valid role in the emerging commercial business model for the entrepreneur. Failing to identify this future role may create some inequity for the investors in the project network. In other words, the opportunity cost of investing in a project network may be too extreme or even terminal for a smaller firm. In this study, the micro firm created the emergent business opportunity. In fact, the conceptualization and the resulting business plan could have come from any of the firms, but it did not. By approaching the City of Tampere and proposing a development area linking the public and private sectors as service providers, Access International aligned the City of Tampere’s need to support local business with community service needs. Simultaneously, while developing the eCard project, AIC aligned the possibility for the firms to be selling local services and hardware into the public sector. By organizing the various resources to create a need as a new market space, and virtually simultaneously developing a platform for discussing options to solve the emerging need, the entrepreneur created and aligned the potential for emerging business opportunity on a fairly large scale. The technology for the complex electronic system could easily be adapted on a national level, domestically or abroad. This was an attractive business idea that emerged and evolved over the course of the project. There are six specific findings of this study of a project network with respect to the element of network capabilities.

215 Cognitive systems are subject to public and private strategic intent, and the actors’ strategic self-interests need to be aligned through boundary spanning skills to link the various distinct resources and capabilities into a common space by conceptualizing an emergent business model that serves these self-interests. These self-interests are not transparent and it requires insight, from the project manager, to identify and work with the actors’ network capabilities. That self-interest is not always transparent makes coordinating these interests difficult. Some actors may simply fail to deliver capabilities or resources which the entrepreneur anticipated would be available. The actors’ network capabilities are different during the developing stages of an emergent business network. As the emergent network progresses from exploring to exploiting resources and capabilities, different network capabilities are required. Emergent business networks require different network capabilities than stable business networks because the roles and capabilities have not been utilized. Perceptions about the entrepreneur’s network capabilities are being created and formed as the network emerges. The emerging network

initially

requires

more

conceptual

network

capabilities in identifying and aligning the resources and capabilities of the various actors. As the project progresses through its phases towards commercialization, the network becomes more stable and requires more traditional managerial skills, such as coordinating deliverables and resources. Stable networks have more clearly defined roles and expectations which enforce or are challenged through perception and new information.

216 Network capabilities are based on perceptions about the entrepreneur and are reciprocal and self-enforcing in an emergent business network. Early perceptions about the entrepreneur will either increase the support and the level of willingness to further invest in the project goals as expressed by the entrepreneur, or will undermine their credibility. Straddling between the role of a consultant project manager and the role of an entrepreneur participating in the commercialization of that business model should be avoided. Straddling between the dual roles of the entrepreneur and the project manager complicates participation for the client and the other actors because they have to adjust their behavior to accommodate the requirements of the conflicting roles. In an emerging business network, conflict of interest between roles, resources, and capabilities represents strategic risks for the actors. This conflict of interest needs to be managed through the actors’ network capabilities and the context in which the project is embedded, not just the entrepreneur. There has to be a shared solution that is acceptable to the actors, or they may undermine the ability of the entrepreneur to deliver the project through the various phases of the project until commercialization. Conflicts are handled by social contracts, and the perceptions about the conflict of interest are subject to gossip which can undermine the effectiveness of the individual actors. When completing a market segmentation of an emerging business model, a key customer reference for each market sector may be required. The entrepreneur needs to have

217 sufficient network capabilities to attract and deliver the required client(s) to the network, and sufficient network capabilities to deliver the project to the client(s). These network capabilities may need to extend the boundaries of the network to include new clients from outside the initial network. A wider connection base of potential clients will help support new levels of investment as the project progresses from one phase to the next if a client chooses not to proceed. The entrepreneur may need to align several clients for different phases of the project. 5.4 Summary of findings for a cognitive system In the study, none of the firms specifically focused on the cognitive system, although three firms (Sonera, Miotec, and AIC) were very aware that changes in the intellectual and social capital, in combination with developing their network capabilities, would make them more attractive as participants in future projects. They hoped these changes would positively change their ability to win contracts in the market. When evaluating the project network, firms were aware of, and did consider, the strategic value of investing in the cognitive system. Two actors (Sonera and AIC) made a deliberate choice to support strategic returns on their investments with respect to the network capital in the cognitive system. As previously stated in the analysis, it became apparent that some of the partner firms clearly understood their proactive investments, and the importance of network capabilities with respect to attractiveness within the cognitive system. Other firms (Pusatec and TietoEnator) were more passive with respect to future potential business opportunities.

218 Both cognitive system theory and systems theory added a usable approach to describe the case, and served the function of positioning the project in a larger context, embedding it in a system. In this study, Access International created the emergent business opportunity by conceptualizing the emergent business model. This was accomplished by aligning resources and capabilities from a cognitive system in the Tampere region. The firms were all aware of each other, and in several cases were working together on other projects. By approaching the City of Tampere with the project idea, the micro firm introduced a different perspective to the cognitive system by making the public sector an active participant, both as a client and as a reference. The entrepreneur organized the various public and private resources to create the need for a business solution, and virtually, simultaneously developed a platform for discussing options to solve the emerging need, thus creating the potential for an emerging business opportunity. The specific finding of this study of a project network with respect to the element of a cognitive system is: It is possible to have an increase in social capital and intellectual capital in the cognitive system, which is not immediately reflected in the technical environment. 5.5 A refined conceptual framework A refined conceptual framework represents a development in the conceptual model based on the analysis and reflection from the empirical case data.

219 As a reminder to the reader, the preliminary conceptual framework was created and developed, because the researcher wanted to have a preliminary conceptual structure to analyze the case. However, after two years, the eCard case for the City of Tampere has not progressed beyond the original pilot project that was approved by the City of Tampere. Because of this, the case actors could provide experience based knowledge only about the collaborative processes and perceptions of the eTampere Smart Card project network. The initial preliminary conceptual framework of a project network provided a useful conceptual language to describe a project in the context of an emergent business network. The empirical case material supported and substantiated the forms of network capital and network capabilities and the phases of a project network embedded in a cognitive system as useful dimensions when analyzing the case data. Focusing on the network capabilities and the forms of network capital as proactive investments of resources and capabilities for value creation did support critical description and discussion of the actors’ perceptions in the case. The description of the project network embedded within the cognitive system (Scott, 1999) extends the conceptualization of a study of project into time and space (Engwall, 2002) and supported the study of a project network. By focusing on the perceptions about the past, present and future, the analysis of the case material provided a time perspective of the project. The phases of the project helped to further demark the time perspective of the case data. The boundaries of a cognitive system, similar to the boundaries of a business network, are difficult to identify as the interconnectedness of the actors, elements, and concepts may extend well beyond the

220 awareness of the core members of the network (Lauman, Marsden, and Presky, 1983). By focusing on the project network as embedded within various contexts: the City of Tampere, the Country of Finland, the future, potential business in Europe and Russia, and the context of actors that were both aware of and evaluated the project, the evaluation process extends beyond the scope of the project members. The proposed elements of the cognitive system builds on the business network discussion to include elements of resources and capabilities which can be aligned by extending the awareness of the actor (Maurer and Ebers, 2006) or resources and capabilities of the business network to deliberate construction of a business network via a project. A development in the thinking about the elements of a cognitive system (Scott, 1995) in the refined conceptual framework of a project network would be that the cognitive system is subject to strategic intentions of all of the individuals in the institutional environment. It is not a passive environment reflecting a conceptual space (Håkansson and Waluszewski, 2002); it is a very active and dynamic environment that is subject to both public and private strategic choices. The outcomes of value creation are subject to strategic proactive investments by the individuals and firms. It is not serendipitous that specific individuals or firms are consistently identified over time. Their proactive intentions are enacted (Weick, 1995) to ensure that they remain relevant in the cognitive system of the institutional environment (Scott, 1995). Identifying

and

aligning

(Macdonald,

Assimakopoulos,

and

Marchan-Piekkari, 1999) the pubic and private strategic self-interests is critical to focusing and marshalling (Searle, 1995) the resources and capabilities (Grant and Baden-Fuller, 2004) to create an emergent business network. Overall the element of a cognitive

221 system as a theoretical description of part of a context was suitable for the analytical discussion of a project network. The Cognitive System The Technical Environment of the Market Project network Phases

Pre-Project Phase

Pilot Phase

Product Development Phase

New Business Model Phase

Commercialization Phase

Processes

Conceptualization

Investment

Accumulation

Evaluation

Commercialization

Intellectual Capital

Resource, role and agenda identification

Share core capabilities and market knowledge

Modify roles, creating new knowledge

Strategic selfinterest

Conceptual Value

Social Capital

Reputation

Commitments

Expectations

Dynamic roles

Social Value

Financial Capital

Proposals

Opportunity cost investments

Expected value

Internal strategy

Financial Value

Network Capabilities

Vision, identification and alignment of strategic interests

Exploring capabilities and resources developed and extended through synergies

Coordination of perceived roles, resources and capabilities

Expanding expectations for exploitation of emergent business model

Commercial Value

Table 3: The conceptual framework of a project network

Overall, the preliminary conceptual framework supported the conceptualization of a project network and provides a suitable framework for analyzing the empirical case to the extent it was able to be utilized. However, because the empirical case of the eCard project did not progress beyond the initial pilot project, the case material is limited to discussion about the expectation for investing in the project and the perceptions about the interactions of the actors in the pre-project phase and the pilot phase. The emphasis of the conceptual framework evolved over the course of the study, but the main elements of the table remain valid. The case progressed through the pre-project phase and the pilot phase.

222 The interviews occurred at the transition point between the pilot phase and the product development phase, and focused on the investment activities, perceptions about both the pre-project phase and the pilot phase, the expectations for the product development phase, the new business model phase, and the commercialization phase. There are several reflections about the preliminary conceptual framework that have emerged during this analytical process, and those reflections could represent changes that should be incorporated into a refined conceptual framework. For example, certain phases of the commercialization framework, including conceptual value, social value, intellectual value, and commercial value, remain undetermined as concepts in the conceptual framework. The current empirical case neither supports nor detracts from the conceptual language, but the concepts maybe useful in subsequent study. Another observation is that intellectual capital and social capital as forms of network capital are useful concepts, but the processes of creating, accumulating, and evaluating these forms of capital are created through processes. In this case, these processes are described as perceptions about the network capabilities of the actors. This may be a bias of this study because of the strong focus on network capabilities during the case analysis. This issue is approached from social capital, social networks, and business networks literatures each pointing to the origins of social capital, and the organizational learning and knowledge management literatures for the sources value creation for intellectual capital. This inter-relationship can be subject to discussion and reflection when using the framework in subsequent empirical cases.

223 The conceptual framework of a project network can be used to analyze different empirical cases and can support further conceptualization, through further critical evaluation in different empirical cases. 5.6 Discussion of contribution This study contributes to the emerging theory of a project network as a contemporary approach to creating an emergent business and to provide a better understanding of the factors influencing network capabilities and network capital of firms involved in creating an emergent business opportunity. Specifically, this study contributed to theoretical development by extending the existing literatures into an integrated conceptual framework introduced as a project network. The study then approached an empirical case study to analyze the appropriateness of this new conceptual framework. The results of this framework were used to analyze an empirical case, and this analysis has provided both theoretical contributions and managerial recommendations for a small or medium sized entrepreneurial firm interested in creating an emergent business opportunity. The following sections describe the specific contributions of this study. Specifically the theoretical contributions, the managerial recommendations, and the evaluation of the study with respect to the aims and the purpose of the study are presented. Finally, the valuation of the study is offered. 5.6.1

Theoretical contribution

Building on the conceptual work of Scott’s description of organizations as systems, in two types of environments, and extending those discussions to include the creation of value in those

224 environments, extends the work of Scott and systems theory to develop the discussion accruing value (Coleman, 1988; Kogut, 2000) with respect to the network capabilities of an entrepreneur and how and where value is created during emergent network processes for the actors. Linking the conceptual discussion of the visioning abilities and the sensemaking abilities (Weick, 1995) of the entrepreneur to the discussion of the network capabilities of the individual (Kogut, 2000) into the cognitive maps of the institutional environment and the technical environment (Meyer and Scott, 1983) provided a more coherent approach to describe the accrual of value for actors and firms in a project embedded in an open system (Scott, 1999). Business network theorists and the entrepreneurship theorists provided many of the concepts used in the analysis of the phases of the project network. The initial conceptualization of forms of network capital builds on the theoretical discussions of the resource based view of the firm (Grant, 2005). Developing financial capital to include opportunity cost financial investment as a form of pricing and forgone revenue by a firm represents a contribution with respect to forms of network investments. Financial capital, intellectual capital, and social capital represent the forms of network capital in a project network. The processes of conceptualization,

investment,

accumulation,

evaluation,

and

commercialization represent the focal activities within the phases of the project network. The conceptual framework describes the phases of a project network as the pre-project phase, the pilot phase, the product development phase, the new business model, and the commercialization phase. The conceptual framework represents

225 a structure that can be used to describe the intentional formation of a project network aiming at the development of new business. The transition from one phase to the next represents change and transitional risk with respect to perceptions and roles in the project network. In summary, the refined conceptual framework, of a project network, specifically focuses on network capital and network capabilities of the actors over five phases. The conceptual discussion of the network capabilities as a proactive and strategic activity of the individual extends the managerial discussions of the firm’s performance to include the cognitive maps of managers embedded in a cognitive system, not only the marketplace. The development of the entrepreneur’s ability to not only recognize resources, building on visioning and sensemaking (Weick, 1995), but the ability to conceptualize a business model that aligns the firms’ strategic self-interest with an emergent business opportunity, supports the conceptual discussions of social capital (Coleman, 1988) and network capabilities (Kogut, 2000) of the individual. There are three main theoretical contributions as a result of this study. Social capital as an approach to entrepreneurship There is one specific theoretical contribution that developed during the analysis of the empirical case. Earlier in the manuscript there was an extensive discussion about the distinction between Burt’s form of social capital and the entrepreneur’s ability to broker their role through informational efficiencies to gain an economic return. In contrast, Coleman viewed the role of the accumulation of social capital as a collaborative process for the network and that participation in the network would lead to economic rents based on

226 the network’s performance. In theory, the entrepreneur could make a choice as to which approach (Burt or Coleman) they would like to utilize when forming a network for economic rents. In practice, this option was not possible in the Finnish high technology sector for Laura. In the case, these firms would not have paid for her informational efficiencies. She did not have enough social capital for them to value her insight about the emergent business opportunity. Laura needed to find a third party, the client, to align the actors’ resources and interest in investing in the emergent business opportunity. Perhaps in a serial project, or because she will be perceived to have accumulated enough social capital and network capabilities in this project, she may be able to broker her role to create a subsequent project network. But it would not have been possible in the Finnish high technology sector, as a young entrepreneur with no prior experience in the technology sector and no external support to borrow against, for Laura to leverage an immediate economic return. For Laura, given her relative amount of social capital, intellectual capital, financial capital, and network capabilities at the beginning of the eTampere program, there was no choice between the Burt or Coleman approach. The Coleman approach was her only option. A project network vs. project in a network A second distinct theoretical contribution is the difference between a project network and a project in a network. A project in a network can simply be a project between firms. A project of this type can focus on collaborative innovation. In the case of a project network, the resources and capabilities are aligned as a collaborative effort. The business network is created as an approach to delivering the

227 project. In short, constructing the emergent opportunity helps the actor align the interests, the resources, the capabilities of the other actors, to coordinate those resources and capabilities to creating the potential pursue that emergent opportunity. A change in social capital or intellectual capital may be reflected in the cognitive system without being reflected in the marketplace A third theoretical contribution is that social capital may accrue in the cognitive systems as a change for a specific role in the network, but the change in the perceptions within the cognitive system is not necessarily reflected as a change or opportunity for a new role in the marketplace. Because social capital, and to some extent intellectual capital, is tied to the context and the role of the individual, it is possible for a positive change to occur in the relative level of a person’s social capital or intellectual capital in one context, reflected in the change in social capital or intellectual capital in the cognitive systems, but tied to the original context, and not be accepted or transferred to the new role or context immediately. The transition of social capital or intellectual capital into the new role or context requires the actors in the new context to accept the transfer of social capital or intellectual capital before they will financially acknowledge this change. The serial project, or new position, may bring different financial capital returns although the change in social capital or intellectual capital occurred in the previous project.

228 5.6.2

Managerial recommendation

General managerial recommendations When constructing an emergent business opportunity there are several issues to keep in mind. First, the individual needs to understand how to align the common self-interests towards an emergent business opportunity; ensure that agendas match the phases of the project with respect to the self-interested roles; conceptualize the emergent business model to reflect the phases of the project from the pilot phase all the way to through the commercialization phase; and find a client to provide a reference and funding. If the client will only commit to a lower level of functionality than is required for commercializing the business model, then sequential clients will be required. Second, the strategic self-interest must be aligned with the relative forms of evaluation for the firms and their expected roles in the emerging business model. For example, if the firm is only interested in the commercialization phase, and the project will result only in a pilot phase or a product development phase, then the initial project will not allow the firm to participate in the commercialization phase. By focusing on the strategic self-interest, the firm must be willing to accept returns in the cognitive system and hope the roles in the business model will advance to the commercialization phase through serial projects in the technical environment. In this instance, serial projects or the path of the evolution of the business model would need to be proposed early on, perhaps in the preproject phase or certainly during the pilot phase. Third, the expectations resulting from participation in the project network reflects the actor’s perceived contribution and a required

229 rate of return. Over time, people tend to feel they contributed more than others and should have a larger reward for their contribution. In short, their expectations for the rate of return increases over time. Investments are not static. They are subject to perceptual change with respect to the potential rate of return, and the evaluation of those investments over time. If the returns are not reflected in accordance with the new expectations, the evaluation will suffer. Specific managerial recommendations The specific managerial recommendations are written for an entrepreneur. The entrepreneur needs to be able to conceptualize and problem solve in an emerging context. The ability to think conceptually is critical for the entrepreneur. Conceptualization requires a critical mind that enjoys the conflicting dialogues in the cognitive system(s). The entrepreneur needs to be able to listen critically to the various conceptual elements and identify linkages. The ability to listen and identify concepts and limitations of various approaches within an emerging space is important in identifying the strategic self-interests of the firms, the potential clients, and the potential user groups. The entrepreneur needs to be able to sell. “Sales” is not a dirty word. Once the emergent business model is conceptualized the entrepreneur needs to be able to sell an initial version of the emergent model to focus the interest of the various actors. The initial focus aligns resources and capabilities and induces the potential actors to participate in the emergent project network. If the entrepreneur can not sell the conceptual version of the evolving business model, or the emerging business opportunity, to the various potential partner firms, the will not invest.

230 The

entrepreneur’s

visioning

ability

is

linked

to

their

conceptualization and sensemaking abilities. Their vision needs to be appropriate to the context and the relevant community. Inability to communicate the vision in a specific context will limit the community’s involvement. Sensemaking ability is critical with respect to linking the various strategic self-interests of the firms and the client. The processes involved in emerging business opportunities, by definition, require the ability to work with limited information and make decisions and proactive investments with other people’s resources. If the entrepreneur does not have enough sensemaking ability, they will not be able focus the larger picture for the firms and the client. The

entrepreneur

needs

enough

emotional

intelligence

to

communicate and influence the various strategic self-interests to influence a temporally appropriate community which embedded the project. This community is constantly changing, as are their interests. If the entrepreneur is not sensitive to the potential of these changes, they can not influence them. The ability to span the various boundaries of the technologies and the interest groups is strategically important to accessing the concepts. If the entrepreneur can not access the various cognitive systems and work within them, they will be limited in the combination of possible solutions they can craft in order to create the emerging business opportunity. The entrepreneur needs to be very proactive and personally accountable.

By

holding

themselves

and

their

community

accountable, they can ensure the standards required for continued involvement in the project network. If they fail to make these

231 commitments, the other members will exit or reconfigure the project network. The entrepreneur needs to think in terms of systems. The resources and capabilities that are focused into an emergent project network are embedded in multiple networks and multiple systems. The systems hold the competing strategic self-interests of the various groups and individuals. Failing to understand how the elements move in relationship to each other will restrict their ability to influence the changes. It should be emphasized that the relationships and the strategic self-interests are not transparent and are subject to opportunistic behavior. The entrepreneur should not reveal all of their understanding, or they risk pushing potentially covert behavior even deeper. The entrepreneur needs to be multicultural, multilingual and communicate clearly. Failure to be sensitive to the various cultural or language requirements is not limited to the international context, but also within the organizational dynamics of the various strategic self-interests. Empathy and language skills play a big part in communication, and the ability to work in the various contextually appropriate languages and cultures seamlessly supports the boundary spanning skills and access to the cognitive systems of the various people. The form of work the entrepreneur will focus on is creating shared agendas of strategic self-interests. The ability to compel people toward a strategic direction through motivation is accomplished through aligning the resources of the groups. The entrepreneur will need to leverage the resources of the groups to create emerging opportunities in the cognitive systems of the institutional environment. The ability to reconfigure several cognitive systems to

232 focus on emerging opportunities requires continuous learning and forgetting, so they could be open to new combinations of cognitive systems or elements from different cognitive systems to recombined in a novel approach. 5.7 Evaluation of the study Evaluation of the aims of the study As a reminder to the reader, the aims of the study were to describe and analyzes the intentional formation of a project network as an approach to creating an emergent business. The specific aim of the study was to extend the conceptual discussions of developing emergent business opportunities via a project network. Specifically, there were three main expected outcomes of this study. First, the previous literature used in looking at the focal phenomenon

focused

on

different

aspects

of

the

focal

phenomenon, but did not provide a comprehensive theoretical foundation. Specifically, the first aim of the study was to draw from appropriate literatures to build a more integrative, holistic description of a project network. Second, the study aimed at theory building by conceptualizing a project network. Specifically, the second aim of the study was to create a conceptual language of a project network. The first and second aims of this study were completed with the conceptual frameworks which were both presented and evaluated. Third, this study aims at conceptual integration by combining theoretical discussions and the empirical findings. Specifically, the third aim of the study was to analyze the empirical case by using the newly created, conceptual language of a project network. This aim was accomplished through the analysis of the empirical case using

233 the conceptual framework. The resulting discussions and analysis combined both theoretical and empirical findings, and resulted in both theoretical and managerial contributions. Evaluation of the focal purpose of the study As a reminder to the reader, the purpose of this study was to contribute to the emerging theory of a project network as a contemporary approach to creating an emergent business and to provide a better understanding of the factors influencing network capabilities and network capital of firms involved in the project. As previously stated, a collaborative project, formed to create an emergent business opportunity as a business network, represents an area of managerial interest, because it is a contemporary business model that is not well understood. These complex projects are used as vehicles to target a business opportunity and approach this opportunity with a strategic and coherent team of actors. The firms remain autonomous yet collaborate to create a competitive advantage for both the project network and the individual firms. These complex projects reflect the increased demands from society to integrate different technologies in novel ways. This is a relatively new approach to creating competitive advantage. As such, the study of a project network is interesting to firms, because project networks are a contemporary business activity that has not been extensively explored from an academic perspective. There are two reasons for pursuing this research gap. First, this study will approach creating a new business model as a project within a business network from the perspective of the potential role of an entrepreneurial micro firm. This choice was

234 made because there have been very few academic studies focusing on the potential role of a micro firm, intentionally creating a business network, as it is more common to describe the interactions between firms in a business network by focusing on the interactions between the actors from

larger organizational structures.

Specifically, this study focuses on a micro entrepreneurial firm intentionally

creating

an

emergent

business

development

opportunity as a project network. And second, the micro firm perspective was chosen because of the relatively high percentage of the small and medium sized enterprises established in Finland, and the relatively high rate of innovation which is generated from the small firms in the high technology sectors in Finland. The intentional creation of a project network to develop emergent business for a business network in Finland represents a viable strategic approach to creating a value added role in the high technology sector and as such represents the potential for a managerial contribution resulting from this study. Firstly, this study provided an approach to theoretically describe the emergent processes and capabilities of actors pursuing an emergent business opportunity by using a project as vehicle to achieve their strategic objectives creating value. And secondly, this study provided managerial recommendations for a small entrepreneur in developing emergent business potential and thereby creates a value-added role with respect to social capital, intellectual capital, and network capabilities used to create and manage projects. In this study there were two levels of analysis. The first level of analysis was from the firms’ perspective with respect to their roles in the project network and expectations of the potential those roles

235 represent in the future emergent businesses. The second level of analysis was the individual’s perceptions about the project, the entrepreneur, and the other actors in the project network. The second, level of analysis has two lines of discussion. One line of discussion focuses on perceptions about the entrepreneur’s role. The other line of discussion focuses on the roles, the risks, and the potential conflict of those roles with the other actors/firms in the network. The two levels of analysis have provided a richer understanding of the case material. 5.7.1

Quality of study

The quality of the study can be measured through four factors: Construct quality, internal validity, external validity, and reliability (Yin, 2003). To help provide validity, the research process is described in detail, including the research strategy and the changes in the research process, and a clear chain of evidence in the main study. Construct validity in the data collection phase can be obtained by establishing correct operational measures for concepts studied (Yin, 2003). One way to increase the validity of the study is to use multiple sources of evidence in data collection, which makes the findings and conclusions more convincing and accurate. The multiple sources used in this study were meeting notes of the eCard Project, the business plans of AIC, multiple academic studies and reports about the eCard project, and an extensive oral history provided by the project manager during the eCard project to gain an overall picture of the dynamics of the inter-firm project network. Finally, there were six interviews conducted with selected members

236 of the project network. These members were selected to be interviewed because they were the primary contacts for the firms involved in the project network. A research assistant was used to conduct the interviews in Finnish in order to avoid taking the interviews out of the interviewees’ native language. The interviews that were used in writing the study were all conducted, in Finnish, by the same person. The same person translated, and fully transcribed the interviews. Those interviews were individually coded chronologically to provide the ability to fully reconstruct the data sets. The much of the fully transcribed interviews are included in this report. The coding is included, so the reader can follow the flow of the conversation to see that the evidence is not being taken out of context to construct a particular position or interpretation of the evidence according to a bias or an agenda of the researcher. The second form of validity is maintaining the internal validity of the study by preserving the chain of evidence from the interviews, throughout the analysis and the final conclusions. Coding the interview transcriptions provides a clear chain of evidence, even in the final document of the study. The third dimension of validity is the external validity, also called transferability, which deals with the problem of knowing whether the study’s findings would be of greater significance in the overall context (Yin, 2003). This is one of the main challenges of qualitative studies. The ability to transfer the finding of the study to another context has been previously discussed in Section 5.2 of the study. The fourth test to judge the quality of the research design aims at examining the reliability of the study. Reliability ensures that another researcher, studying the same subject and following the same

237 procedures, arrives at the same findings and conclusions (Yin, 2003). In this study the researcher clearly documented and categorized all of the evidence to increase reliability. The transcribed and coded interview data is included in the study. 5.7.2

External validity of study

The context of the study was limited to make the number of moving elements manageable by focusing the discussion through a project network. The study is both case specific and project specific as described in the findings related to the actors’ perceptions. However, the extrapolation of the issues and findings of the study can be expanded readily. For example, this study could be expanded into two areas. First, this study could provide a structured approach to building measurement tools for the softer forms of network capital and network capabilities of project in an emergent business network. Second, this study could be expanded as a framework for studying a project network with a focus on multi-cultural teams and the role of different cultural issues, learning, and problem solving skills within multi-cultural teams. Additionally, the findings of this study are consistent with the (Maurer and Ebers, 2006) study focusing on social capital and how it is embedded with the entrepreneur during the early start-up phase and business development phase of six emergent entrepreneurial firms in the biotechnology industry. The study describes how social capital and the embedding network both assists the entrepreneur during the early start-up phase and restrict awareness and choice, during the business development phase of the entrepreneurial firm focusing on the performance of the firms.

(Maurer and Ebers,

2006) Their study was conducted concurrently with this study and

238 the researcher was not aware the study until December, 2006, so there was no cross-fertilization of the conceptual framework used in this study. The findings of Maurer and Ebers (2006) support the findings of this study with respect to emergence of a business network and the creation of value of social capital for a small entrepreneurial firm. They also point to the boundary spanning of early contacts outside the core area of the actor and how boundary spanning into arenas outside the core area of the actor supports cognitive awareness and therefore the subsequent performance of the entrepreneurial firms. 5.7.3

Limitations

The main limitation of this study is tied to the pilot nature of the empirical case. Because the empirical case was only a pilot project, the case material does not actually proceed through all of the proposed phases of a project network. The case analysis focuses on the emergent processes of the project network, specifically the preproject phase, and the pilot phase, after these it relies on the expectations of the actors for the product development phase, the new business model phase, and the commercialization phase of a project network. These perceptions would be subject to change and evolve over the course of the phases of the project network, as the project network actually transitioned beyond the pilot phase. A second limitation of the study is the specific forms of network capital were directly referred to during the course of the interviews. This was an unfortunate mistake in the research process as it may have guided the discussion and not allowed for other forms of capital to emerge. It does not appear to have had and effect on the discussion as can be seen from the quotes contained in the analysis, but it did occur.

239 5.7.4

Future research

There are two areas of future research that immediately come to mind when completing this study. First, the issue of rational partnering, that is, projects that are used simply as a vehicle for reaching the firm’s strategic goal by participating in the project network with little or no substantial interest in continuing to participate with the emergent business model. The distinction between intentional partnering, rational partnering and opportunistic partnering become relevant is attempting to decipher the transparent or hidden agendas of potential firms. This issue may become important with respect to how a firm behaves and the level of commitment it can be relied on when constructing the business model via the project network. The other partner firms have made contributions and investments based on the expectation of the return on investment according to the roles in the emergent business model. If this model is not going to be developed by the combination of firms as the emergent business network, some of the firms may not be able to commercialize their investments individually. Second, the issue of transitional risk, what happens to the entrepreneur (or firm) that is unable to identify a future role in the emergent business model when it is commercialized? The entrepreneur may have invested in the project network by conceptualizing the business model, created the emergent business opportunity, found the client, managed the project network, but been unable to provide a clear contribution value beyond the scope of the pilot phase or product development phase of the project. This represents a substantial transitional risk for the entrepreneur.

240 6

LIST OF FIGURES

Figure 1: Research Traditions ....................................................................23

241 7

LIST OF TABLES

Table 1: Summary table preliminary conceptual framework, forms of network capital and network capabilities ....................................................65 Table 2: eTampere Smart Card Project Network....................................................87 Table 3: The conceptual framework of a project network ..................................221

242 8

INTERVIEWS

Semi-structured full day interviews with project Manager by researcher Interview May 22, 2003 in Tampere: Ms. Laura Aho, CEO, Access International Consulting Interview July 12, 2004 in Tampere: Ms. Laura Aho, CEO, Access International Consulting Semi-structured interview carried out by research assistant. Interview 1.3.2004 in Tampere: Mr. Pekka Markkula, Director, Business Development, TeliaSonera Interview 1.3.2004 in Tampere: Ms. Laura Aho, CEO, Access International Consulting Interview 5.3.2004 in Vantaa: Jari Keski-Valkama, Sales Manager, Aldata Industries Oy, Smart Card Solutions (former Sales Manger / Miotec Oy) Interview 8.3.2004 in Raisio: Pertti Heurlin, Chief Executive, Pusatec Oy Interview 9.3.04 in Espoo: Matti Sevilä, Sales Manager, TietoEnator Oyj

243 9

LITERATURE

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269 Appedix 1: The Pilot Study The pilot case company was Toyme Labs Oy. Toyme Labs Oy was a small entrepreneurial firm established in August, 2000, in Tampere, Finland. The pilot firm provided tools and content packages for mobile phone users to create and share personal content within their electronic community. The pilot firm focused on providing large-scale proposals between firms for new software concepts for content development of mobile interactive media. The company strategy was to build mobile interactive communities that could send semi-customized messages to groups of clients as clubs or related clients. They wanted to have had four-to-five key customers, like Nokia. At the time the researcher became involved with the pilot firm, they were struggling with the problem of offering more than conceptualization to the client, “which means we would need to be on the development side of the projects as well” (Salovara, 09.01.2001). The company was initially established by strategically combining the professional skills and the personal networks of the eight founding members. The members were selected, not only because of their professional skill which included the required core competencies, but because they knew others who could provide those services. The founding members were selected because it was believed that their personal social network would be able to attract projects in the Tampere area. Because these specific individuals had personal access to a wide variety of other resource networks in the Tampere area, their combined potential social capital was part of the business logic in founding the Toyme Labs Oy. This particular strategy was used when founding the firm, because these specific individuals would be critical to a project network in the Tampere area in support of the

270 eTampere initiative (www.etampere.fi/english)16. Once the specific resource could be identified, the founding members would be expected to utilize their social capital to bring the required resources to the project network. Access to the pilot firm was granted because the researcher had a previous professional relationship with several of the founding members of the firm. The interviews were tape recorded and partially transcribed to provide a research trail. The focus of the semi-structured interviews attempted to identify changes in the strategies of the firm. There were four two-hour interviews with a single member of the pilot firm and one two-hour interview that included a second member of the founding team. Hand written notes were made to help in structuring the data. The interviews provided an overview of the direction of the firm and how the founding members identified the priorities of the firm as they attempted to strategically develop business opportunities using networks. These interviews occurred on the premises of the firm, so that informal observation also could be conducted. Firm documents were used to help triangulate data. All attempts were made to capture the managers’ perceptions as accurately as possible, and the resulting data was validated with the appropriate members of the firm. During the pilot study, there were several issues that came up with respect to how the managers strategically thought about an emergent project network. The first was the firm’s focus on identifying partners in order to find projects. “Partners are the way to get projects. Sell and market to partners. The target is not the deal, but to think of joint areas of business.” (Salovara, 09.01.2001) 16

For more information on the eTampere initiative see section 4.1.1 of this study.

271 It was the expectation that the projects and revenue would be generated by identifying partners and through them they would be lead to projects. They believed the projects would be offered to them because of who they were. This passive approach to building and working within an emergent network will be developed in the empirical study. Another issue that came up during the pilot study was the mental model of the manager when discussing the valuation of a relationship, “I have three reasons for a relationship: 1) physical, 2) financial, and 3) mental. A social network is a choice of intention. A contact may start off as a mental relationship and may go to a social relationship and then may change to a money relationship. The relationships that require social management of the contact in a network contained a mental benefit. A mental benefit could be technical content or a financial relationship.”(Salovara, 09.01.2001) The sensemaking of social capital will be developed in the empirical study. After working with the pilot firm for a year, in January, 2002, the pilot study was terminated and an alternative case was sought out. The research was terminated because it was felt by the researcher that, although the pilot case firm talked about creating project networks for strategic business development, it would remain as an unrealized potential. The members in the pilot firm expected the projects to materialize based on their self-perception of their social capital. They felt that other firms would seek them out to include them in creating an emerging business opportunity as a project network because of who they were and who they knew in the Tampere region.

272 After a year, the pilot firm could still only talk about the issues of investments in a project network. Because the pilot firm remained in the early phase of business development, the forms of investment in a project network were difficult to measure, as the project network never materialized. The efforts of the firm to generate cash flow focused on projects that were going to be delivered by the individual firm, not by establishing an emerging project network which was the focal area of the research. Since the pilot firm was not able to successfully implement their strategy of being included in an emergent project network, during the specified research period, the researcher needed to find an alternative case of an intentionally formed project network that would actually provide appropriate data for the focal research area. The conclusions from the pilot case supported the development of the preliminary conceptual framework in this study. The pilot case has been used to focus on two areas: first, the network capabilities network capital. These exploratory conceptual areas were selected, because they helped answer the framing questions and the goals of this study. These two conceptual areas are developed in the preliminary framework and are subsequently the focus of the empirical study. “If you are an entrepreneur, you should know if it is a business or not a business”. - General Manager, Toyme Labs

273 Appendix 2: The structure of the interviews conducted in Finnish for the case eTampere Kortti – projektiverkoston haastattelu 1) Taustatietoa – Yrityksen toimiala ja liikeidea? – Milloin ja miten tulitte tietoiseksi tästä projektista? – Milloin teistä tuli projektiverkoston jäsen? – Mistä syistä johtuen piditte projektia niin houkuttelevana ja lupaavana, että päätitte lähteä siihen mukaan? – Minkälaisia odotuksia teillä oli projektiverkoston yhteistyötä koskien? 2) Millaisena näette projektin potentiaalin nykyisin? 3) Millaisena näette projektiverkoston potentiaalin? 4) Minkä tyyppisiä sijoituksia yrityksenne on tehnyt eTampere Kortti – projektiin – taloudellista, tiedollista ja/tai sosiaalista pääomaa? 5) Millaisina näette Laura Ahon (Access International Consulting) sijoitukset hänen rakentaessaan projektia ja sen verkostoa? 6) Minkälaista tuottoa odotatte sijoituksillenne: taloudellista, tiedollista ja/tai sosiaalista? 7) Milloin odotatte saavanne nämä tuotot ja mitkä niistä ovat tärkeimpiä ja arvokkaimpia yrityksellenne? 8) Miten yhteistyö projektiverkoston kesken on sujunut? 9) Millaisena näette Laura Ahon roolin projektiverkostossa? 10) Minkälaisia odotuksia teillä on eTampere Kortti – projektille sekä projektiverkostolle tulevaisuudessa?

274 Appendix 3: English translation of the structure of the interviews eTampere Card – Project network Interview 1) Background information – The area of business and the business idea of the company? – How and when did you learn about this project? – When did you become a member of this project network? – What were the reasons that made the project so tempting and promising that you decided to join it? – What kind of expectations did you have regarding the cooperation of the project network? 2) How do you see the potential of the project now? 3) How do you see the potential of the project network? 4) What kind of investments has your company made into the eTampere card project? – Economic, know-how and/or social? 5) How do you see Laura Aho’s (Access International Consulting) investments when she has been building her project and its network? 6) What kind of gain do you expect to get for your investments: economic, know-how and/or social? 7) When are you expecting to get these gains and which of them are the most important and valuable for your company? 8) How has the cooperation been inside of the project network? 9) How do you see Laura Aho’s role in the project? 10) What kind of expectations do you have for eTampere card – prjoject and the project network in the future?

275

Appendix 4: Timeline of this study

The research process began in September, 2000 when entering The Helsinki School of Economics. Initially, there was a working paper for the First Conference on Relationship Dissolution in September, 2000, that discussed temporary relationships and included the preliminary ideas contained in this study which were discussed with my commentator Jan-Åke Törnroos from Åbo Akademi University. After the initial discussions, the ideas were developed as an approach to the pilot study. The pilot study began in January, 2001 focusing on social capital as a strategic investment for small entrepreneurial firms looking at networks to develop business opportunities. This pilot study was the focus of the second working paper for the eTampere Research Conference in November, 2001. The working paper “Social Capital in Value Creation in Temporal Networks” focused on developing the emerging issues for this study and helped clarify that the pilot study would not provide suitable material for this study. The conceptual thinking was then developed through a series of course/working papers. The first theoretical positioning paper for the preliminary conceptual framework was produced as a proposal titled “Value Creation in Temporal Nets” and was produced for the initial Valuenet project meeting in December, 2001. In January, 2002, an entrepreneur was approached to gain access to their company as an empirical case for this study. Because the researcher had a prior professional and personal relationship with the entrepreneur, the entrepreneur was willing to proved access to their firm.

276 The preliminary empirical study began in January, 2002. The data collection process was fairly erratic so there needed to be a more coherent discussion to gain the perspective of the entrepreneur. There was one full-day meeting on May 22, 2003 to try to capture the views of the entrepreneur to be developed in the preliminary conceptual framework. In the Fall of 2003, in a working paper “Network Capital”, written for a course, Social Networks vs. Business Networks, further developed the concept of network capital. The paper was written for Lars-Gunnar Mattson from Stockholm School of Economics and Jason Owen-Smith from the University of Michigan to help position the current study. In April, 2004, a subsequent paper, “Network Capital and Entrepreneurship” was written for a course focusing on entrepreneurship in a working environment of networking and chains for Bengt Johannisson of Växjö University. These last two papers have been used to more fully develop the preliminary conceptual framework that was used in the study. By working between the theory and the initial empirical case history it was possible to develop the preliminary conceptual framework using abductive logic. On July 12, 2004, the researcher met with the entrepreneur a second time to smooth the preliminary conceptual framework. From July to March,

2004,

the

preliminary

conceptual

framework

theoretically smoothed out to better position the study.

was

It was

determined the case data would need to be rethought, as there was not enough data about how the member firms understood the project network.

277 In February/March, 2004, an undergraduate student in the international business line (English) from the Lahti Polytechnic was asked to become a research assistant as part of her final thesis. She needed a topic for her final project, and I needed a clear data set. It was agreed that she would conduct the interviews of the selected members of the partner firms in the eTampere Smart Card project in Finnish and translate and transcribe the interviews into English. In March, 2004, a research assistant conducted the interviews of the selected member of the eTampere Smart Card project.

These

interviews were then translated and transcribed and sent as email attachments to the researcher in May, 2005. These transcriptions are the primary form of data used in this study. In May, 2005, the researcher was able to start to work with the empirical data and to analyze the data with respect to the preliminary conceptual framework. A working draft of this study was written from May, 2005 to October 13, 2005, when it was sent out for comment to the supervisor. January, 2006 comments received from supervisor. Spring, 2006 stopped working on the manuscript due to a death in the family. June 15 to August 18, 2006, rewrote entire manuscript and revised conceptual framework. August 18 – November 13, 2006 Comments from supervisor. December 18 – January 7 2007, reworked the manuscript. Sent to editor for language checking and returned to supervisor on January 18, 2007. March 28, 2007, received additional comments from supervisor. Returned to supervisor 1 April 2007, received additional comments and corrections. The commenting and corrections went through three major rounds from 18 August 2006 to 7 June 2007. 7 June, 2007 External examiners agree to review manuscript. The manuscript was accepted for defense on 22.10.2007.