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Commitment in Regional Strategic Networks
Edith Andresen*,
[email protected] Helene Lundberg*,
[email protected] Tommy Roxenhall*,
[email protected] Department of Social Sciences, Mid Sweden University
Abstract The importance of relationships and networks for business development is now widely acknowledged. As a result, establishment of networks supporting business development among firms within a particular region has become a prevalent international, national, and sub-national strategy for supporting business competitiveness and regional development. The efficacy of these networks is, however, disputed and this paper aims to highlight some important success factors and stimulate further research. Keywords: Commitment, networks
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Commitment in Regional Strategic Networks
Introduction The importance of relationships and networks for business development is now widely acknowledged (Bessant, 1995; Håkan Håkansson, Henjesand and Waluszewski, 2004; Rosenfeld, 1996). As a result, establishment of networks supporting business development among firms within a particular region has become a prevalent international, national, and sub-national strategy for supporting business competitiveness and regional development (European Commission, 2002; ISA, NUTEK and VINNOVA, 2004). Significant sums are invested and expectations are high on the part of sponsors and official institutions. The efficacy of these networks is, however, disputed (Chell and Baines, 2000; Curran, 2000; Huggins, 2001; McDonald, Tsagdis and Huang, 2006), and this paper aims to highlight some important success factors and stimulate further research. The object of the study is denoted Regional Strategic Networks (RSNs), and, in line with Jarillo’s (1988) definition of strategic networks, we define RSNs as encompassing three or more organisations that remain independent but interact under a common objective or purpose. Our addition to the RSN definition, and what separates RSNs from the strategic networks discussed by most researchers, is that RSNs are arranged to stimulate increased regional business exchange and learning for regional development purposes, receive state aid and have a regional delimitation. Furthermore, RSNs are administered by a hub unit that usually has no business relationships with the other network participants and the members at first are very loosely linked. Designing a setting that is to develop into a network structure with certain outcomes is undoubtedly a complex and challenging task. Initially, few investments are made by the participants in the networks and their level of commitment when joining the network in many cases is fairly low. However, it will not be possible for the network aims to be met without active and committed participation. We have therefore chosen to focus on some structural network factors that can be thought to have great influence on the degree of commitment, and therefore the result achieved in networks: goals and the goalsetting process and the number of participants (Brito and Araujo, 1993) as well as the makeup of actors in the form of complementary/competitive resources (Human and Provan, 1997). The chosen method is a longitudinal case study of two Swedish RSNs. The next section describes the theoretical basis of the commitment concept and discusses in further detail structural factors and activities characteristic of RSNs. Thereafter, the methodological approach and empirical findings from two RSNs are presented and discussed. Finally conclusions are presented.
Commitment in Regional Strategic Networks Commitment is regarded in the marketing literature as a key concept (Morgan and Hunt, 1994), but opinions differ on how it should be defined. It has been viewed as an implicit or explicit statement that the relationship between the parties is to continue (Dwyer, Schurr, & Oh, 1987) or as a lasting decision to retain a valuable relationship (Moorman, Zaltman, & Deshpande, 1992). Regardless of what definition is chosen, marketing researchers seem to regard commitment as a psychological force that links together parties to a relationship (Fullerton, 2005). However, this definition is based on studies of dyadic relations between 1
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firms, while a network can be regarded as sets of connected firms or as sets of connected relationships between firms. In network contexts it is not a case of a company tying itself to someone else in the network (the network hub or other network companies) but rather of psychologically binding oneself by making a commitment or efforts to retain the relationship with the network (Johanson & Roxenhall, 2009). Factors affecting commitment Commitment is affected to a greater or lesser degree by a number of factors. In network settings is the added factor that the design of the network is of crucial significance to how the network develops. The design affects the activities undertaken within the network, which in turn affect the network commitment. The following four aspects of the network’s design have been found to be of crucial significance to network collaboration and commitment (Johanson, Klint, & Sjöberg, 2009; Klint & Sjöberg, 2003): 1) The network’s goals and goal-setting process. General goals for the network’s activity are set by initiators to attract financiers and participants. However, goals and goal-formation processes are generally regarded as powerful governing tools in organisations as joint goalsetting renders acts of responsibility and a development of shared values and commitment among actors (Cyert and March, (1963)1992; Scott, 2003(1981)). The network participants therefore tend initially to draw up specific goals of their own. 2) Number of actors. Collaborative intentions are often the essence of RSNs. However, with a large number of members it becomes difficult to reach consensus, to collaborate, to coordinate and to organise the network’s activities (Human and Provan, 1997). Furthermore, as the number of actors increases, it becomes more difficult for each member to assess and evaluate its own contribution (Araujo and Brito, 1998). A network cannot, however, consist of fewer participants than are required for active commitment to arise. In other words a critical mass of actors is needed. A greater number of actors can additionally increase the legitimacy of the network, which can simplify the financing of its activity. 3) Make-up of actors. Heterogeneous resources are combined in networks to develop resources and competencies (Håkansson and Snehota, 1995). Complementarity in a network cooperation perspective, signifies vertical collaboration in which resources, capabilities, and activities of the network actors complement each other. These actors have dissimilar resources and capabilities and perform dissimilar activities (Richardson, 1972). Competition prevails when actors have similar resources and capabilities and perform similar activities and thus compete with one another to some extent (Richardson, 1972). A network composed of competing actors will probably have a different focus, different activities and achieve different results than a network consisting of complementary actors. 4) Activities in the network. In business networks activities are undertaken by actors who activate their resources in a process in which other resources are refined (Dubois, 1994). The important feature of activities is that they are enacted “in the sense that actors develop and organise their activities in response to how their counterparts, such as customers and suppliers, perform and organise theirs” (Dubois, 1994, pp. 27). In RSNs, however, activities are arranged by the hub in order to provide arenas for interaction, knowledge development and opportunity recognition. Method A longitudinal case study has been conducted on two RSNs, the Competitive Network and the Complementary Network, acting in different areas of business in northern Sweden. While the
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Competitive Network comprised 15 large organisations representing the same lines of trade, the Complementary Network comprised 56 actors of varying size but with complementing resources from the same line of industry (several were subcontractors to the largest member firms), representatives from related businesses and researchers from the local university. The case study was the most suitable method to use as networks are “embedded in different spatial, social, political, technological and market structures and thus somewhat unique and context specific” (Halinen and Törnroos, 2005, p. 1286). The study is comparative, qualitative and primarily based on observations during frequent network activities (1-2 per month) for a period of five years from 2003 to 2008. Observations were made during activites such as network-meetings, group meetings, seminars, lectures and events. Formal and informal notes were taken during these activities by the researchers and/or the hub. A total of 16 interviews were conducted of which eight were held with network hubs and the other eight with representatives of firms in the Complementary Network. The hubs were interviewed in 2004, 2006, 2007 and 2009. Representatives of firms were interviewed on two different occasions in 2006 and in 2008. Data was also collected through conversations with representatives and hubs during network meetings. In the Competitive Network these conversations took place every other week during the period 2006-2008. In the Complementary network similar conversations were held at intervals of a month in 2005-2006. In addition data has been gathered from written documents. In this study the level of commitment was determined from records of member participation at network activities and from the reported extent of spontaneous interaction between the activities arranged by the hub. We consider network commitment as low when less than half (50%) of the members participate in arranged activities or otherwise undertake action as a result of their network membership and as high when more than half of the members are active in this way.
Cases The Competitive Network The Competitive RSN was established in May 2003 in order to stimulate cooperation between the participants, even though they were competitors. The majority of the firms had their head offices located elsewhere, in the Swedish capital, and network participation was spurred by the local managers’ fear that their business operation would be relocated to another region. Many of the representatives were acquainted before entering the network. The network’s operation was financed by the county. The local science park, which was in charge of the network initiative, was therefore able to assign one temporary, part-time individual to the hub function. The Complementary Network The Complementary RSN started in January 2004. The initial ambition was to start a process that would strengthen the participating multinational companies’ subcontractors in terms of collaboration and skills to be able to meet increasing market demands. Network participation was thus spurred by the opportunity to become subcontractors to the large firms, but also by a threat of losing a contract. The network had a hub of three individuals assigned part-time by the local science park which was in charge of the initiative. The network operation was
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financed by the county, the municipality, for part of the time by the European Union Objective One and through membership fees related to the local science park.
Commitment and its Influencing Factors The commitment in the Competitive Network has fluctuated over the years. It was low in 2003 but increased sharply in 2004 before declining at the start of 2005. It increased again a little at the end of 2005 but then fell sharply over the next few years. In 2008 the level of commitment was back at the same low level it was at when the network started in 2003. The competing network
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The commitment in the complementary network was initially quite low but then rose sharply in the summer of 2005 and has since steadily developed in a positive direction. Commitment in relation to the networks’ goals and goal-setting processes The goals in the Competitive Network were competition-neutral, not business-related, and were intended to develop the competencies of the participants and create the necessary conditions for meetings between them. The competition-neutral and social goals nevertheless were a strong driving force and increased the commitment to the Competitive Network in 2003. When important social relationships were broken by several of the enthusiasts for various reasons leaving the network in the autumn of 2007, it was found, however, that the competition-neutral goals did not represent a sustainable incentive, and commitment weakened in 2007 and 2008. In the Complementary Network the goals were concerned more with participants’ own business benefit and with creating new business relationships. These business-related goals appear to have inspired ever greater commitment over the period 20062008. The existence of goals has thus increased the commitment in both networks, although persistence was greater where the goals were directly linked to the participants' own activity. The goal-setting process was more time-consuming in the Complementary Network than in the Competitive Network. This was a result of the hubs’ strategic choices and in the Complementary Network was based on there being many and differing members who needed time to get to know each other. The process carried out, like the experience of possible, future business benefit, cleared the way for the development of relationships and increased commitment in the network in 2004. Goals thus seem to have a general positive impact on commitment, but the goal-setting process appears to be of minor significance as long as the participants are able to identify with the goals on a personal or business basis.
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Commitment and the number of actors In the Competitive Network the number of actors was limited, which affected commitment in purely general terms as the critical mass of participants was not reached if a number of people were absent. As social relationships were forged in this network, it is reasonable to assume that the participants may have experienced the absence as personal dissociation. Lack of critical mass with regard to commitment and pro-active participants created a work situation in which many tasks were expected to be carried out by a small number of enthusiasts, which appears to have induced the dramatic weakening of commitment in 2008. In the Complementary Network, on the other hand, the number of members was high and increased further during the studied period, and this had a general positive impact on commitment. The individual actors found it difficult to obtain an overview of the network and therefore could not relate to the percentage of the total number of members present at the various meetings. As the level of participation in the network meetings was felt to be high, neither the absence nor the presence of the participants was the object of any discussions. Unlike in the Competitive Network the number of participants, and therefore the level of commitment, increased over the period 2007-2008 as many network members committed themselves to business development programmes and other projects. Commitment and make-up of actors The difference in the composition of actors clearly shows how competition/complementarity affects the commitment in networks of this type. The participants in the Competitive Network were competitors and unwilling to link work in the network to their own activities. In other words there is no clear direct business benefit for the participants, so that network activity was secondary, particularly after the start of the great financial crisis in the autumn of 2008. When the senior managers who had been involved in establishing the network were additionally replaced by people in lower positions, and thus with less power to take decisions, in the latter part of 2007 and 2008, the negative trend was reinforced. In the Competitive Network there was a focus on increased business benefit, and when this started to become more concrete for many, during the period 2006-2008, commitment rose further. Success was additionally achieved in this network in retaining the network’s key individuals, which created continuity and further strengthened the network commitment. Commitment and network activities Activities in the Competitive Network were largely created and financed by the participants themselves. Many activities were organised in the autumn of 2004, contributing to an increase in commitment. The activities decreased in 2004, as the business development programme had ended and the goals that had been set had been largely met. As a consequence, the network commitment fell dramatically. The favourable impact of the business development programme in 2004 can be explained by the continuity of the meetings and the fact that the programme aimed to develop the individuals as well as the social and business relationships between them. In 2007 a number of activities began that increased commitment again. However, when the list of activities became too large and in addition was not sufficiently linked to the participants’ own benefit, network commitment was adversely affected.
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From the start in 2004, the Complementary Network focused on exchange of information between the participants. The aim was to create new knowledge and social relationships between them. The weakening of commitment in 2005 was probably due to the participants no longer regarding it as meaningful only to meet in order to get to know each other. When the business development programmes were started in the autumn of 2005 the sense of meaningfulness among the participants increased. The commitment increased further in 2006 as the business development programmes continued and marketing and coaching programmes were started. Knowledge that new business had been developed among participants spread and reinforced commitment during the latter part of 2006. In summary, we find that RSNs can be used in support of business development. In the case, the presence of network goals was found to have a general positive impact on commitment, but the goal-setting process appeared to be of minor significance as long as participants were able to identify with the goals on a personal or business basis. With few members initial commitment was achieved but there was insufficient dynamism and too little basis for exchange of information to keep up commitment in the long run. On the other hand, with a greater number it took longer to get to know everyone, and this slowed the development of commitment. Heterogeneous resources proved a steadier basis for commitment than the commitment based on social relationships. Finally, network activities were found necessary for commitment but must not become too extensive and demanding. However, further studies of these and other factors affecting network commitment will be needed if we are to understand and develop this commonly used tool for regional development.
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